LSHH v. MTKK

CACV 261/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 261 OF 2008

(ON APPEAL FROM FCMC NO. 12642 OF 2005)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon. Cheung JA:

1.  I agree with the Reasons for Judgment of Yuen JA.

Hon. Yuen JA:

2.  This is an appeal by MTKK (“the Husband”) from an order for ancillary relief made by Deputy Judge (now District Judge) Wong King Wah on 23 May 2008. There is also an application by the Husband for leave to adduce fresh evidence. At the start of the hearing, both counsel agreed that the fresh evidence could be considered de bene esse. At the conclusion of the hearing, the appeal was dismissed with costs to the Petitioner (“the Wife”). These are our reasons for excluding the fresh evidence and for dismissing the appeal.

Background

3.  The parties were married in 1978 when they were both in their early 30's. The marriage had lasted some 27 years by the time the Wife presented a petition for divorce in 2005.

4.  The Husband has throughout been in practice as an architect. The Wife was working as vice-principal of a secondary school when the parties married, but gave that up a year later when the parties’ first child was born. They have 3 children, now all adult, the elder two working as architects and the youngest undergoing training in that profession at the time of the hearing before the judge.

5.  In 1989 the Wife went to live in England when the children went to school there. In 1993 the Husband went to live in Shanghai when he took up employment there. The Wife was still living in England at the time. She did not return to live in Hong Kong until 1995 but the Husband carried on living and working in Shanghai. He then set up his own practice in Hong Kong with offices in the PRC.

Proceedings

6.  After the Wife issued a petition for divorce in late 2005, both parties acted through legal advisers. However the Husband then filed a notice to act in person on 17 August 2006. He was not legally represented at the hearing for ancillary relief.

7.  The hearing took place over a period of 9 days between October 2007 and February 2008. The main issue was the extent of the Husband’s assets. Apart from the Husband and Wife, other persons were called as witnesses on that issue. I will refer to one of them later in this judgment. Written submissions were filed in February and March 2008.

The judge’s order

8.  The judge handed down an 88-page judgment in May 2008.

(1)	Essentially he found that the parties had matrimonial assets of $9.16m and on the basis of equal division, the Wife was entitled to $4.58m.  As the Wife had assets of a little more than $20,000, that sum was deducted with the result that the Husband was ordered to pay over to the Wife a lump sum of $4.56m within 3 months of the grant of the decree absolute.  In respect of that lump sum, the judge gave directions for the payment out to the Wife of a sum of $576,130.49 paid into court by the Husband.  In respect of the balance of nearly $4m, the judge gave further directions depending on whether the Husband paid that balance.
(2)	The judge also ordered the Husband to make periodical payments to the Wife of $49,600 per month, commencing from the grant of the decree absolute (falling to $33,000 per month upon full payment of the lump sum) during the joint lives of the parties, the obligation to cease if the Wife were to remarry.
(3)	There were also other directions regarding other matrimonial assets which are not relevant to this appeal.
(4)	The judge also made an order nisi that the Husband pay the Wife’s costs.

Leave to appeal

9.  The Husband applied for leave to appeal and also to vary the costs order nisi. On 8 August 2008 the judge affirmed the costs order. However he gave leave to appeal on the basis that he had made an adverse inference against the Husband on the ground of material non-disclosure, and since an inference is not a finding of fact based on credibility of witnesses, it could not be said that the Husband’s appeal had no realistic prospect of success.

Appeal

10.  On appeal, the Husband was represented by counsel Miss Elsie Yiu. The thrust of the appeal related to a sum of $5m which was part of the Husband’s gratuity from his former employers Superior Managements Ltd (“SML”). The judge found that the Husband had failed to make disclosure of that sum and that an adverse inference could be drawn against him for that failure. That sum was the subject of the application for leave to adduce fresh evidence which I will discuss later in this judgment.

The law

11.  Before going into the factual situation, it may be helpful to remind ourselves of the legal position regarding the duty of disclosure in ancillary relief proceedings. In brief, each party to such proceedings has a continuing obligation to the court to make full, frank, clear and up to date disclosure of his/her assets.

12.  The obligation was all the more important in the present case where the Wife had little knowledge of the Husband’s financial affairs. He commenced his employment with SML when the Wife was living in England.

Gratuities

13.  By way of background, the Husband had previously been employed by Sun Hung Kai Properties Ltd (“SHK”) for many years rising to the post of Chief Architect. It was his own evidence that had he stayed at SHK, he would by now have earned a place on the board of directors.

14.  However in 1993, he was tempted to leave SHK to work in Shanghai for SML. He worked for SML in different capacities from 1993 to 2000. The terms of his emoluments from SML were crucial to the judge’s findings of his assets.

15.  In his affirmations before March 2007, the Husband referred to his “earnings” from SML but did not specify what they were. In the Wife’s 6^th affirmation filed in March 2007, she said that she believed the Husband had received a salary from SML of $500,000 per month and a gratuity of $10m. That allegation put the size of the gratuity firmly in focus. In the Husband’s written submission for the original hearing date for ancillary relief in April 2007, he corrected the Wife’s allegation of his salary, which he said was $150,000 per month, but he did not correct the amount of $10m she gave for his gratuity from SML.

Understanding of Husband’s assets

16.  The case then proceeded towards the adjourned hearing in October 2007 on the understanding that as far as the Husband’s assets were concerned, he had received a gratuity from SML of $10m and no more. This was the figure used when accounting for how he had spent the money he had received.

Disclosure of second gratuity from SML

17.  However that understanding of the Husband’s assets was proved wrong on the first day of the hearing. The Wife’s lawyers had issued a subpoena to SML and Lee Mei Ha answered the subpoena on its behalf. Miss Lee disclosed that in fact the Husband had received two gratuities from SML – not only the gratuity of $10m that the Wife had revealed, but also a gratuity of $5m that the Wife did not know about and which the Husband never disclosed.

Effect of disclosure of second gratuity from SML

18.  The Husband admitted that he had indeed received two gratuities from SML, the 1^st amounting to $10m and the 2^nd amounting to $5m. However he was unable to account for them satisfactorily. From his failure to make full and frank disclosure, the judge drew adverse inferences against the Husband and proceeded to make the order which I have referred to earlier.

Application to adduce fresh evidence

19.  The fresh evidence that the Husband sought to adduce on appeal related to documents concerning the SML employment and emoluments, including the employment contract drawn up by solicitors and evidence from Miss Lee showing how and when the second gratuity was paid.

20.  Of course this being an appeal, the Husband first had to persuade the court that leave should be given to adduce the evidence pursuant to the requirements of Ladd v Marshall [1954] 1 WLR 1489. Counsel for the Husband has sought to argue that the constraints placed by this authority on adducing fresh evidence on appeal should not apply with the same rigour in matrimonial cases. She quoted the case of Zeiderman v Zeiderman (unrep) 18 June 2008, in which Wall LJ said that although Ladd v Marshall was a persuasive authority, it was not one which was automatically followed in family matters and the issue in that case (Zeiderman) was one which the interests of justice required to be resolved with the receipt of fresh evidence.

21.  However that was a very different case on the facts and one can well understand why the fresh evidence had to be permitted there. The trial judge in that case had proceeded on an assumption that a property would be transferred to one of the parties, an assumption that was unjustified and untested on the evidence. The court of appeal permitted fresh evidence from the property owner denying that she would transfer the property to the party in question, thereby refuting the trial judge’s assumption which was not justified in the first place. It was an unusual situation and in fact the court of appeal in Zeiderman said in the first paragraph of the judgment that it should not be taken as a precedent for future cases.

22.  In the present appeal, it was clear that the amount of the Husband’s gratuity from SML was in focus at the hearing and it was also clear from an examination of these “new” documents that they could all have been obtained in time for the hearing had he exercised reasonable diligence. The Husband knew before the start of the adjourned hearing in October 2007 that the Wife had issued a subpoena to SML - this could only be for the purpose of ascertaining the terms of his emoluments. Thus if he wished to adduce any evidence on that issue, he could have done so before the start of the adjourned hearing in October.

23.  Miss Lee answered the subpoena on the first day of the hearing in October 2007. Thereafter the hearing was adjourned to December 2007 and again to February 2008, so the Husband had 4 months during the hearing to make suitable queries and to adduce the evidence that he now wished to present. He had signed a contract with SML where all the terms of his emoluments had been specified. That had been drafted by solicitors. Even if he did not have the contract himself, it has not been suggested (nor could it be) that the solicitors or SML could not be located within those 4 months.

24.  Accordingly I consider that the first condition of Ladd v Marshall has not been satisfied and the fresh evidence should not be permitted on appeal.

Discussion

25.  I come then to the Husband’s arguments that the judge should not have made adverse inferences against him regarding the extent of his assets. The judge gave a number of reasons for rejecting the Husband’s allegation that he had simply “forgotten” the 2^nd gratuity of $5m. The judge found this discredited the Husband’s case on his financial position.

26.  Having read the judge’s detailed reasons for judgment, the relevant evidence and the submissions of the respective counsel on appeal, I consider the judge was justified in taking that view if only on the following points. First, it beggared belief that the Husband had forgotten the size of the gratuities he had received from SML. The Husband’s own evidence was that he had worked for many years at SHK rising to the post of Chief Architect with aspirations for a seat on the board, and he would not have left SHK if not for the very attractive package offered by SML. It was, if not a “life-changing” decision, definitely a “career-defining” one. The size of the gratuities was clearly a substantial part of the attraction. The total sum of the gratuities had been agreed right from the start, and the 2^nd gratuity was 1/3 of the total sum of gratuities, not a minimal instalment that might have been forgotten.

27.  Furthermore, the evidence was that there were some difficulties between the Husband and SML towards the end, and concern over SML’s honouring of the 2^nd gratuity must have featured prominently in the Husband’s mind. The judge was entitled on the evidence to reject the Husband’s evidence that he had “forgotten” about the 2^nd gratuity of $5m.

28.  Secondly, as the Husband said he had “forgotten” that he had received the sum of $5m, he obviously did not include it in the “credit” side of his account. But if (as he alleged at the hearing) he had spent this entire sum, then he would have included it in the “debit” side of his account. Obviously an explanation was demanded as to how he could have missed the discrepancy of $5m in his figures in the 18-month period between January 2006 and October 2007 when he was preparing his account of money received and money spent.

29.  The judge found after observing the Husband giving evidence over a number of days that he was an organized and meticulous person. Detailed figures were given even for money spent on the children. He had a clear mind on figures produced even when he was legally represented and when he was not dealing with them personally (paragraph 66). Such a person could not have failed to wonder (if it were true) how he could have spent $5m he did not have.

30.  A sum of $5m is not a small sum for anyone, including this family. If there had been a “hole” in the figures of that size, the Husband could not have failed to spot it. The judge was in these circumstances entitled to take the view that the Husband, having failed to disclose receipt of this sum, had not in fact spent it as he now said.

31.  From that, it was a logical and justified step to conclude that the Husband had not simply “forgotten” about the 2^nd gratuity, nor had spent it all, but had secreted a sum equivalent to it. It matters not whether the Shanghai properties were acquired with the 1^st gratuity or the 2^nd gratuity, or partly with one and partly with the other. The cost of the Shanghai properties remained the same throughout, and so the Husband had to account for what he did with the rest of the money. Nor does it matter whether the 2^nd gratuity was paid in a lump sum or by instalments. The fact remained that an additional sum of $5m had been received.

32.  On top of that, the judge was entitled to find the Husband’s evidence regarding his financial position unconvincing. The Husband had admitted that he would receive cash payments from PRC clients in order to evade tax. The accounts of his PRC practices were unreliable as demonstrated in the judgment. Further his lack of candour was so insidious that he persisted with the position that he had closed his Shanghai office, when in fact he had moved to a new office there just 3 months before the hearing.

Order

33.  Since there were no grounds for disturbing the judge’s findings, the appeal was dismissed with costs to be paid by the Husband to the Wife with a direction that the Wife’s own costs should be taxed in accordance with Legal Aid Regulations.

Hon Kwan JA:

34.  I agree with the Reasons for Judgment of Yuen JA.