LMM v. LKKV

FCMC 13934 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 13934 OF 2011

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BETWEEN

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J U D G M E N T
(Maintenance Pending Suit)

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Introduction

1.  This is an application by a Petitioner wife for maintenance pending suit pursuant to s.3 Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO).  The wife also seeks provision for her legal fees and asks that the payment for both be backdated.

2.  This has been aptly described as a very acrimonious piece of litigation. It centres on the care arrangements for the only child of the family, a little boy K who is now 7 years of age. This aspect of the case is proceeding and a full trial on custody, care and control and access is expected next year. Initially the husband also sought to defend the proceedings. The wife had issued a petition based on what is normally the least contentious ground namely two years separation. It is however now agreed that the parties will proceed on the basis of one year separation with consent. There was some concern expressed by counsel for the husband, when the matter was last before me that this aspect of the case was not proceeding as quickly as they would like. Suffice it to say that I will expect whatever outstanding issues that there are on this to be resolved by the time the matter is next before me in December.

3.  In so far as the finances are concerned, each party makes serious allegations against the other. In particular each accuses the other of material non disclosure. The husband maintains that his finances are stretched and that he cannot afford to pay the wife the maintenance pending suit that she seeks, especially given that he is almost solely responsible for K’s expenses. He also alleges that the wife received a substantial share of the assets in 2008 and that she should therefore be able to maintain herself from these funds. He also says that she should work full time. Each also accuses the other of forming an extra marital relationship. The husband takes this a little further. He maintains that the wife is cohabiting with her boyfriend and asks that this be taken into account on the maintenance pending suit application. He has produced a Private Investigators report in support of this assertion. The wife vehemently denies this allegation. She says that she is living on her own and that she is not being supported financially by anyone else. The husband has not disclosed the cost of the Private Investigators report. I will expect that information to be provided in due course.

4.  The wife on her case has been a full time wife since the marriage and a full time mother since K’s birth. Although well educated she says that she has not worked by agreement. Even had she wanted to work, given that she is a Malaysian national and has for the most part travelled around Asia because of her husband’s employment, she says she would not have been able to because she was on a dependant’s visa which precluded that as a possibility. I accept what she says in this respect.

5.  There is a dispute concerning the funds received by the wife in 2008. The wife says that she had loaned the husband money at the beginning of their marriage and that in 2008 she asked that these funds be returned to her. She says that she did so because she had discovered that the husband was having an affair.

6.  There is a dispute concerning the exact amount of money and shares received by the wife. In any event she says that she has had to use this money for her own support and legal fees and that this money has now almost run out. Consequently she filed an application for maintenance pending suit on the 11 June 2012. She asks that payments be back dated to the 8 October 2011, which was the date of the original petition.

7.  The summons for maintenance pending suit first came before me on the 6 August 2012. On that occasion it was eventually agreed that the parties would attend a private Financial Dispute Resolution hearing with a senior SC with a view to trying to resolve matters. The husband paid the wife HK$75,000 as an interim payment to cover the two month intervening period. Unfortunately the private FDR was not successful and I am now asked to adjudicate on the matter.

The issues

8.  The central issue is how much should the husband now pay to the wife as maintenance pending suit, bearing in mind his ability to pay and the reasonable needs of the parties. In addition there is an issue over the provision for legal fees. Should the husband make such provision for the wife? And should both payments be backdated to the 8 October 2011?

9.  The wife was originally seeking HK$90,000 per month as maintenance pending suit. As at the 3 October 2012 this was broken down as HK$50,000 per month for her own maintenance plus provision for her legal fees which stood at an additional HK$42,000 per month. The husband made an open offer as at the 29 September of HK$25,000 per month. This is based on the wife returning to work full time and also recognises that on the husband’s case she is receiving support from her boyfriend, with whom the husband says she lives. The husband says that this proposed payment is already beyond his ability to pay and that he will have to borrow additional funds in order to meet such payments.

Background

10.  The parties married in 2001. They are both Malaysian nationals. The husband is an accountant and has held senior positions throughout the marriage both in house as a Chief Financial Officer and as a Chief Executive Officer with one of the magic circle accountancy firms. This was apart from a brief period of nine months in 2009 when he was inbetween jobs.  The couple travelled around the region in order to pursue various job opportunities of the husband. In 2003 they moved to Shanghai, in 2005 they moved from Shanghai to Hong Kong for a brief period and from there to Beijing, which is where K was born and then in 2007 back to Hong Kong. Although the wife worked prior to the marriage both in the finance field and as cabin crew, she has not worked in a full time capacity since the parties married. In August 2005 K was born.

11.  It seems that the marriage was not a happy one and by 2008 it was in serious difficulty with the wife alleging that the husband had formed a relationship with a work colleague. Consequently in November 2008 the husband transferred certain assets to the wife. As indicated above there is a dispute about why this took place and the amount of money and other assets that were infact transferred. It is however agreed that the husband transferred stocks and shares valued at HK$598,420 as set out in a schedule referred to as “Agreement A” dated the 12 November 2008. In addition it is agreed that the wife received two cheques in September and October 2008 respectively totalling HK$500,000. There is a dispute over a second schedule – i.e. “Agreement B”, which is an agreement that certain other monies and stock continue to be held on a 50:50 basis. The wife however in her 6th affirmation dated the 30 July 2012 puts it thus:

23.  As mentioned in paragraph 16 of my 3^rd affirmation, the Respondent transferred HK$598,420 worth of stocks to me in November 2008, according to Agreement A … .  The monies and shares (i.e. 2,000 shares of HKEX and 2,000 shares of China Mobile) listed under Agreement B … remained with the Respondent.  However, the Respondent was not being honest in paragraph 16 of his 4^th Affidavit again.  Under exhibit “VLKK-8”, he claimed that these two stocks (item 3 and item 7 respectively) were also transferred to me on 18 November 2008 but this is not true.  Together with the partial repayment of loan to me HK$500,000 and the returning of my shares (i.e. 1,000 shares of HKEX on 31 October 2008 and 4,000 shares of China Mobile in 31 October 2008 worth HK$324,000 as on 23 October 2008 being claimed by the Respondent, I should have HK$1.42 million in the year 2009.  By September 2011, the total amount of my asset is HK$1.69 million.  This amount of money is shown clearly in the enclosed bank statements (Hang Seng bank (account no.XXX-XXXXXX-XXX) and UOB (account no.XXXXXX-XXX) in October 2011) attached to my Form E.  However at that time, over 99% of this amount of money was in the form of securities rather than cash.  I therefore had to sell the stocks since October 2011 in order to cover my expenses as shown in my Form E.

12.  Thus the wife accepts that she had HK$1.69 million in her accounts as at September 2011 – a month before the divorce petition was issued. The husband maintains that infact she had a greater sum at her disposal.

13.  In October 2011 the wife moved out of the matrimonial home. Again there is a dispute over this. The wife says that she was forced out whereas the husband says that she moved out voluntarily in order to live with her boyfriend. In either event the wife did not take K with her. The husband has not maintained the wife since that time save for the HK$75,000 referred to above.

14.  As at the 28 July 2012 the wife said that she had spent HK$481,000 on legal fees, 235,000 on a car, HK$157,000 on rental and approximately HK$100,000 on a piano and furniture for her new flat. In addition she needed money for her daily living. She said that she only had HK$230,000 left.

15.  The husband for his part says that his income is stretched and that he has no assets to speak of. The wife accuses him of material non disclosure especially in relation to what appear to be a number of small limited companies, certain bank accounts and bank and credit card statements. She takes issue in particular with a number of transactions for very significant sums made by the husband in the run up to the divorce petition being issued and since. She says that the husband depleted monies held in bank accounts and refers to certain sums held in joint names in 2008.      

Maintenance pending suit

16.  The ordinance states that the only governing principle is that the court shall make such order, as it considers reasonable in all of the circumstances of the case.  (See s. 3 MPPO Cap 192). Consequently applications such as these are approached on a broad-brush basis. A detailed examination of the parties’ means may be examined at a later date at a full ancillary relief hearing if there is no agreement in the meantime.

what really matters is the immediate and reasonable requirements of the wife balanced against the ability of the husband to pay for them, assessed using a broad-brush approach. (See also paragraphs 16.17 of Rayden, 18^th edition).

Further

In practice, as oral evidence is rarely given, it will be unusual for the court on an application for maintenance pending suit to be in a position to make findings of fact on issues in dispute sufficient, for example, to deal with conduct or allegations of non disclosure.  However, if it is demonstrated that the paying party has not performed his duty to make full and frank disclosure of his financial resources, then the court can take a broad and robust view of his means, and it does not have to accept and proceed on the basis of the assertions of the paying party as to his means and and inability to pay.  The court can look at the reality of the situation …… Any under provision or over provision in the order for maintenance pending suit can always be corrected when the account comes to be taken at the substantive hearing when there are every opportunity to do fairness by set off ……”

(Ref paragraphs 16.18 of Rayden, 18^th edition).

17.  Likewise the court may look to the assertions made by the wife and take a similar approach when looking at her means and alleged reasonable requirements. The court should look to the reality of the situation, in so far as it can, in relation to the bare assertions made by either the husband or the wife.    

Litigation costs

18.  In so far as the law on the funding of litigation costs is concerned reference will be made to Currey v Currey [2006] EWCA Civ 1338.

The Evidence

19.  I must now turn to consider the issues, the law, and the parties’ evidence as set out in the affirmations filed together with their Form E’s and the submissions made by their respective counsel.

Discussion

How much should the husband now pay to the wife as maintenance pending suit, bearing in mind his ability to pay and the reasonable needs of the parties?

The Husband’s ability to pay  

20.  The husband says simply that he cannot afford to pay the wife. Although he has an income of approximately HK$200,000 per month he says that this is fully utilized as set out in his Form E dated the 11 July 2012 as follows:

Item	Amount
Rent	HK$50,000
Utilities (electricity, gas, rates, telephone & water)	HK$3,500
Food	HK$20,000
Household expenses	HK$3,850
Car expenses	HK$13,663
Domestic helpers	HK$4,517
Total monthly household expenses	HK$95,530
Personal
Item	Amount
Meals out of home	HK$5,200
Transport	HK$8,439
Clothing / Shoes	HK$3,200
Personal grooming (including haircut and cosmetics	HK$3,774
Entertainment / presents	HK$4,950
Holiday	HK$4,167
Medical / Dental	HK$1,000
Tax	HK$28,650
Insurance premia	HK$8,982
Contribution to parents	HK$20,000
Total monthly
Personal expenses	HK$88,362
Children
Item	Amount
School fees	HK$10,000
Extra tuition fees	HK$2,450
School books and stationery	HK$500
Transport to school (including school bus)	HK$1,500
Medical / Dental	HK$200
Extra Curricular Activities	HK$1,500
Entertainment / presents	HK$200
Holidays	HK$2,083
Clothing / Shoes	HK$700
Insurance premia	HK$30,796
Lunches and pocket money	HK$200
Total	HK$50,129
	HK$234,021

21.  Of those items he says that the following are fixed and are not capable of reduction:

Item	Amount (HK$)
Rent	$50,000
Tax	$28,650
Insurance (including for K)	$39,580
K’s expenses (excluding insurance)	$17,834
Car expenses	$13,663
Domestic helper	$4,517
Contribution to parents	$20,000
TOTAL:	$174,244

22.  The difficulty with the husband’s schedule is that I do not accept a number of items as being either fixed or of being reasonable. In particular I do not accept the necessity for taking out an insurance policy to cover K’s future tertiary education expenses at this stage in the sum HK$39,580 per month (as stated in the husband’s 4^th affidavit). It seems to me that this is an entirely self serving expense designed to deliberately inflate the husband’s current outgoings. I will not allow it in its entirety. Similarly I accept the submission made by the wife’s counsel in relation to the contribution of HK$20,000 per month in relation to the husband’s parents. The wife says that the husband did not make a contribution towards his parent’s expenses whilst they were living together. It seems that they have since moved into the former matrimonial home. Whatever the private arrangement between the husband and his parents, the fact remains that he does not have a legal obligation to maintain his parents, whereas he does have a legal obligation to maintain his wife. His moral obligation towards his parents cannot take precedence over his legal obligation towards his wife. Consequently I will also disallow this expense in its entirety.

23.  It has also been suggested that the husband’s estimate for food is inflated because it includes food for the entire household. In addition he claims HK$5,200 for meals out of the home for himself. I accept that both these expenses are capable of reduction. I will allow HK$10,000 for food and HK$2,500 for meals out of the home. Other expenses also seem a little on the high side – in particular household expenses, transport, clothes/shoes, personal grooming, entertainment and holiday expenses. I accept that they could all be trimmed back a little. I also note that the husband is buying his car on hire purchase and that he only has a few more months to go. I have taken this into account also and have marked this expense with an *. Thus a more realistic schedule of expenses on a broad brush basis would probably look something like this:

Item	Amount
Rent	HK$50,000
Utilities (electricity, gas, rates, telephone & water)	HK$3,500
Food	HK$10,000
Household expenses	HK$1,500
Car expenses	HK$13,663 *
Domestic helpers	HK$4,517
Total monthly household expenses	HK$83,180
Personal
Item	Amount
Meals out of home	HK$1,500
Transport	HK$5,000
Clothing / Shoes	HK$1,500
Personal grooming (including haircut and cosmetics	HK$1,500
Entertainment / presents	HK$2,000
Holiday	HK$1,500
Medical / Dental	HK$1,000
Tax	HK$28,650
Insurance premia	HK$8,982
Contribution to parents	Nil
Total monthly
Personal expenses	HK$51,632
Children
Item	Amount
School fees	HK$10,000
Extra tuition fees	HK$2,450
School books and stationery	HK$500
Transport to school (including school bus)	HK$1,500
Medical / Dental	HK$200
Extra Curricular Activities	HK$1,500
Entertainment / presents	HK$200
Holidays	HK$1,000
Clothing / Shoes	HK$700
Insurance premia	Nil
Lunches and pocket money	HK$200
Total	HK$18,250
	HK$153,062

This would still mean that the husband was living at a very reasonable standard.

24.  As stated above in paragraph 16.8 of Rayden, the court is charged in applications such as this to look at the reality of the situation. In this case I intend to proceed on the basis that the husband has sufficient funds at his disposal to meet a reasonable claim made by the wife. As indicated during the hearing he also has the ability to borrow.

The wife’s reasonable needs

25.  The wife has set out her expenses in both her 3^rd affirmation in support of her summons dated the 8 June 2012 and in her Form E dated the 12 June 2012. The only difference in the two schedules is that in her Form E she includes a monthly figure for legal fees of HK$42,000 per month.  In both she set out her expenses as follows:

General expenses

Item	Amount
Rent	14,300
Utilities	1,400
Food	6,000
Household expenses	3,500
Car expenses	7,250
Others (house cleaning)	1,710
TOTAL monthly household expenses	34,160

Personal

Item	Amount
Meals out of home	1,600
Transport	1,200
Clothing/shoes	6,000
Personal grooming	4,000
Entertainment / presents	1,000
Holiday	2,500
Medical / dental	700
Insurance Premia	1,800
TOTAL monthly personal expenses	18,800

K’s expenses

Item	Amount
School books and stationery, including educational software and apps. Toys	1,000
Holidays	1,250
Clothing / shoes	1,000
Lunches and pocket money	600
Snacks	600
TOTAL monthly expenses for K	4,450

TOTAL 57,410

26.  Most of these expenses seem reasonable. Some of her personal expenses are perhaps a little on the high side and are capable of reduction. Consequently just as I have allowed the husband HK$1,500 per month for clothing and shoes and personal grooming, likewise the wife will be allowed the same. Similarly I have also allowed a slightly reduced amount for household expenses.

27.  The following expenses will therefore be allowed:

General expenses

Item	Amount
Rent	14,300
Utilities	1,400
Food	6,000
Household expenses	3,000
Car expenses	7,250
Others (house cleaning)	1,710
TOTAL monthly household expenses	HK$33,660

Personal

Item	Amount
Meals out of home	1,600
Transport	1,200
Clothing/shoes	1,500
Personal grooming	1,500
Entertainment / presents	1,000
Holiday	2,000
Medical / dental	700
Insurance Premia	1,800
TOTAL monthly personal expenses	HK$11,300

K’s expenses

Item	Amount
School books and stationery, including educational software and apps. Toys	1,000
Holidays	1,250
Clothing / shoes	1,000
Lunches and pocket money	600
Snacks	600
TOTAL monthly expenses for K	4,450
TOTAL	HK$49,410

28.  For the purposes of this application I am not going to make any adjustment with respect to the allegation that the wife is cohabiting. If this is later found to be incorrect or if the situation changes then I would certainly expect any permanent cohabitant to at least be making a contribution towards the general household expenses in the short term. Likewise in so far as the husband’s parents are concerned – if they are infact living with the husband that raises the question of whether or not they should also be making a contribution towards the general household expenses.

29.  The husband also maintains that the wife has an earning capacity. At present the wife is working part time for the tutorial group Kumon. On average she is earning HK$3,000 per month. Previously she had indicated that she would try to work in either a full time capacity or at least in a greater part time capacity. Consequently whilst I accept that she does have a current earning capacity that is likely to be in excess of the HK$3,000 per month admitted to, the reality is that this lady has been out of the workforce for a considerable period of time. Both parties are also in the midst of time consuming and what appears to me to be overly aggressive litigation. Although I hold both sides to blame for this, it seems to me to be unrealistic to expect the wife to be able to earn a significant amount of money in the short term. Notwithstanding that this order is made on the premise that she increases her income to at least HK$10,000 per month. The wife will need to make every effort to ensure that this takes place.

30.  As for the suggestion that the wife should have other assets at her disposal which she can rely upon, only time will tell if this is true. If that is found to be the case then an adjustment can again be made at a later date.

31.  Thus in broad terms it seems to me that the husband, on the face of it, should be able to adjust his finances so that he is able to pay the wife HK$40,000 per month for her own maintenance, with effect from the 1 December 2012 and thereafter on the 1 day of each succeeding month until further order. This will mean that he will need to close down the fund for K and make other significant adjustments. I appreciate that this is more than he says he can afford to pay and less than the wife says that she needs. As I have said the wife will also need to look to her own earning capacity to make up the difference if, as she says, all of her savings are now shortly to be depleted.             

Should the husband also be ordered to make a contribution towards the wife’s litigation costs?

32.  The wife also asks for HK$42,000 per month as a contribution towards her litigation costs.

33.  The Family Court in Hong Kong has consistently relied on the guidance provided by Currey v Currey in this respect.  I will therefore adopt to approach identified by Wilson LJ.

(1)    That the applicant spouse has no assets, or none that can reasonably be deployed (at para [19], [20]).

(2)    That she can provide no security for borrowing, or none which can reasonably be offered (at paras [19], [20]).

(3)    That she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation (at para [20] and see Sears Tooth, per Wilson J).

(4)    That she cannot secure publicly funded legal help ‘at a level of expertise apt to the proceedings’ (at para [20])”

34.  On the wife’s evidence it seems to me that although she has used the funds available to her in the past to meet legal costs, that on her evidence that is a resource that is now almost depleted. The difficulty however is that on the face of it the husband does not have any other assets at his disposal that can easily be deployed for that purpose either. On his case he is largely relying on his salary and his borrowing capacity. This is of course challenged by the wife, who believes that the husband has other assets at his disposal. I would accept however that for the purposes of this exercise, the wife has no assets or none that can easily be deployed for the payment of legal costs. Subject to further disclosure being obtained from the husband, especially in relation to a number of transactions for large sums of money, the small limited companies in which he apparently has an interest and the bank and credit card statements, I would also accept that as things stand at the present, the same could be said of him. I also accept that the wife is not in a position to provide security for borrowing and that 3) is not really an option open to her in these circumstances. Counsel for the husband has suggested that the wife should at least apply for legal aid. However it seems to me that once I make an order for maintenance pending suit, that that will also become a fruitless exercise.

35.  Turning next to the overarching enquiry, it seems to me that looking at this case as a whole that it would be appropriate to make a small order with respect to the provision for legal costs.   

36.  Consequently I will grant the wife HK$10,000 per month as a contribution towards her legal costs with effect from the 1 December 2012 and thereafter to be paid on the 1 day of each succeeding month until further order. This will be subject to the normal undertaking that such funds are to be paid directly to her lawyers. I appreciate that given the way in which this litigation is presently being conducted that this will be but a drop in the ocean. I would therefore strongly urge the parties to consider returning to either mediation or the private FDR process. As foreseen by Mr Clough for the husband in his opening

The obvious truth is that what has happened and what is happening in this case is a tragedy that is running out of control.

I agree wholeheartedly with this comment.

Backdating of the order

37.  Given that the wife did have significant resources at her disposal in September 2011 and that the husband paid her an additional HK$75,000 in August, I do not intend to backdate these sums. This is a factor that the parties can return to at either a FDR hearing or at a final ancillary relief trial at which stage I would expect the financial disclosure of the parties to be more complete.

Costs

38.  I will reserve costs.