L v. C

FCMC 5952 /2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5952 OF 2012

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JUDGMENT
(Spousal and child maintenance; assets distribution)

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Introduction

1. The parties of this case was already divorced long ago in 2012. Solely for convenience, I shall still refer the petitioner as the “wife” and the respondent as the “husband”.

2. By my written judgment dated 3 July 2015 (“2015 Judgment”), I allow the husband's application to discharge the undertakings given by him under a consent order dated 25 July 2012 which purportedly settled the custody and ancillary relief matters of the parties (to be elaborated below).  The relevant undertakings relate to 2 landed properties which were purchased during the marriage, namely:

(1)   a Shenzhen property registered in the wife’s sole name (“Shenzhen Property”);

(2)   a Hong Kong property in Sheung Shui registered in the husband’s sole name (“Hong Kong Property”).

3. This is the trial subsequent to the 2015 Judgment on 3 main areas:

(1)   The distribution of the Shenzhen and Hong Kong Properties;

(2)   The wife’s application for variation of her nominal maintenance to $15,000 - $20,000 per month; and

(3)   The wife’s application for maintenance of the son in the sum of $6,000 per month (which is revised up to $7,353 in her closing submission).

Background

4. The wife was born in 1984 and is now 33 years old. She says that she is now a full time mother and does not have any income. Before March 2015, she was an insurance agent with an average monthly income of $25,000.

5. The husband was born in 1978 and is now 39 years old. He is an estate agent by occupation. He worked for a big and reputable realty agency in Hong Kong at a rough and average income of over $50,000 per month.[1] However, he quitted this job and went to work as an estate agent in Shenzhen in/about April 2016. Since then, he alleges that his income has significantly dropped to about RMB8,000 per month, inclusive of basis salary and commission.

6. The couple first met in 2000 and within months, they started cohabitation in China until they finally got married in March 2006. In April 2012, the wife filed a petition for divorce on the ground that the husband had an extra marital affair, which was not disputed by him. Decree absolute was granted in October 2012. Their relationship lasted for about 12 years.

7. During their marriage, the wife gave birth to a son in September 2008. He will soon be 9 years old. He is now living with the wife in Shenzhen but studies in Hong Kong.

8. The parties had either solely or jointly owned various landed properties (altogether 8 of them) in China or Hong Kong at different stages during the cohabitation period as well as during their marriage. At the time of the divorce, their assets consisted mainly of the Shenzhen Property and the Hong Kong Property. There is no serious dispute that at the time of the divorce, the husband and the son were living in Hong Kong, while the wife herself lived in Shenzhen.

9. By a consent order made on 25 July 2012 (“Consent Order”), the parties reach a global settlement on the custody and ancillary relief matters. In gist, the Consent Order provides that:

(1)  Custody, care and control of the son be granted to the husband, with reasonable access to the wife;

(2)  The husband do pay nominal maintenance of $1 per annum to the wife. 

10. The above terms are said to be subject to the following undertakings of the husband (collectively the “Undertakings”):

(1)  An undertaking to continue to pay for the monthly mortgage repayments of the Shenzhen Property;

(2)  An undertaking that (i) if the Hong Kong Property is to be sold before the son reaches 18, all net sale proceeds (after deducting the mortgage and all relevant sale costs) will be given to the wife save that the husband will keep $200,000 to himself; but (ii) if the Hong Kong Property is to be sold when the son is or after 18, the husband will give the whole net sale proceeds to the son. 

11. However, the husband later found out in early 2013 that the son is not related to him by blood. This was confirmed by a DNA test. The son was actually born by the wife after a one-night stand relationship with a stranger in 2007. All these were not disputed by the wife.

12. The husband thus took out a summons dated 6 November 2013 for setting aside the Consent Order in its entirety.  In so far as custody of the son is concerned, the parties have agreed by way of a consent order dated 1 April 2014 that the custody of the son shall be varied and granted to the wife and that reasonable access shall be granted to the husband. The son is now living with the wife in Shenzhen.

13. As to the setting aside of the ancillary relief matters under the Consent Order, this court at some stage raised the question of whether setting aside a consent order should be done by way of an appeal or a fresh action (See: Wong Oi Han v Sin Wai Chung [2012] 3 HKLRD 142). As a result, the husband instructed his counsel, Mr Kevin Li, to apply for amendment to his summons, in that he sought to discharge the Undertakings only; he did not seek to set aside the nominal maintenance order any more.

14. As said, I handed down the 2015 Judgment allowing the husband's application to discharge the Undertakings. My reasons of doing so have been sufficiently set out in that judgment, and thus I shall not repeat them here. There is no appeal to that judgment.

The wife’s case & open proposal

15. According to the wife, she started to work in a factory in Shenzhen when she was 15 years old and developed into a romantic relationship with the manager of the factory.  When they broke up a few years later, the manager gave her RMB100,000 and told her to return to her hometown to marry a good man. This, the wife says, is the “seed money” which was subsequently used by her to invest into various properties bought during the cohabitation or marriage in Hong Kong and China. She further says that the down payment of the Shenzhen and Hong Kong Properties were all paid by her out of her moneys and the profits made by her over the years from property investment. She thus argues that she has a greater contribution to these assets so that she should be awarded a larger share.

16. The wife further says that upon divorce, the husband had never fulfilled his undertaking to pay any of the mortgage instalments of the Shenzhen Property. And since she has to take care of the son whose custody, care and control started to rest with her since 1 April 2014, she can no longer take up any work and has to quit her job as an insurance agent in/about March 2015.  She had to sell the Shenzhen Property in order to cover daily expenses and repay her debts.

17. Therefore, she needs the financial support of the husband for herself and for the son (who was treated by him as the child of the family) way forward. In her case, the husband has high earning ability including his commission, but he exaggerates his expenses, He unreasonably spent his money by treating his colleagues with dinners and gifts in the total sum of about RMB100,000 which should be added back into the asset pool. To be added back also includes the legal costs to be received by him pursuant to the 2015 Judgment in the sum of about $240,000.

18. Hence, her latest open proposal through the closing submission of her solicitor, Mr Chun Tim Chan, is this:

(1)   the husband shall pay her periodical maintenance of $15,000 - $20,000 per month (exact figure to be determined by this court);

(2)   the husband shall pay her for the maintenance of the son in the sum of $7,353 per month;

(3)   the Hong Kong Property should be sold and the net sale proceeds be shared in the ratio of 74.2% : 25.8% (wife : husband);

(4)   The husband’s share of the net sale proceeds of the Hong Kong Property shall be paid into court in order to secure his payment to the maintenance of the wife and the son.

The husband’s case & open proposal

19. It is the husband’s latest case from his oral evidence that the “seed money” is the wife’s money and he has no idea where she got the money from. However, he adamantly points out that ever since their cohabitation, he had regularly given household expenses to the wife, but let her keep all the sale proceeds of various properties. Hence, the husband thinks that the sale proceeds were actually the fruits of their joint efforts. And by virtue of the Consent Order, the wife had already received and retained the Shenzhen Property. If to let her now share in the husband’s Hong Kong Property, that would give her double distribution and defeat the equality principle.

20. Further, the husband does not believe that the Shenzhen Property was sold by the wife at RMB1.45 million. He advances an alternative case that either it was actually sold at about RMB2.3 million (but the wife lied that it was sold at RMB1.45 million), or that it was sold at an undervalue (because the market value should be RMB1.9 million).  In either situation, the husband submits that the wife is unable to explain the whereabouts of the sale proceeds. Thus, he says that at least a total sum of RMB1.9 million (RMB1.45 million + RMB450,000 price difference) should be added back into the pool.

21. In addition, he suggests that the wife has other undisclosed financial resources and unexplained dissipations of assets, such as her Chinese Agricultural Bank account (中國農業銀行), her Qian Baba account (錢爸爸) and her investment of RMB600,000 into a delivery and logistics company in Dongguan in January 2013 (“X Company”) and her investment of RMB300,000 into a PRC investment company on/about 15 January 2015 (“Y Company”).  

22. When all the alleged missing/unexplained sums are added back to the wife’s balance sheet, her total assets become $3.78 million or so, which is much more than the husband’s $2.68 million odd, in the result of which she should not be entitled to share the Hong Kong Property at all.

23. On the question of maintenance to the son, the husband argues that the son is not his true blood, but born by the wife out of her negative conduct with a stranger in 2007. She has not made reasonable efforts to locate the natural father to fulfill his duty to support his own son. More importantly, the husband is of the view that she has the financial means to support herself and the son.

24. His open proposal is thus as follows:

(1)   He shall continue to keep the Hong Kong Property without sharing it with the wife;

(2)   The wife’s application for varying up her nominal maintenance should be dismissed;

(3)   The wife’s application for maintenance for the son should also be dismissed. But if this court finds that the son is the “child of the family”, the husband would offer to pay $2,000 per month as his maintenance.

The issues & starting points

25. By a joint lists of issues dated 30 June 2016 and duly signed by their respective legal representatives, the parties have agreed the issues to be tried. Based on the joint list of issues and upon considering all the evidence/submission, I am of the view that the major issues of this trial are as follows:

(1)   whether the Shenzhen Property was really sold at RMB1.45 million or other consideration? The whereabouts of the net sale proceeds?

(2)   whether the wife has undisclosed or dissipated any of her assets that needs to be added back into the pot?

(3)   the respective alleged debts of the parties;

(4)   the earning capacity and reasonable needs of the parties;

(5)   whether there should be a departure of equality in the distribution of assets? How the assets should be shared?

(6)   should the wife’s nominal maintenance be varied up, and if so, how much?

(7)   Whether the husband should pay any maintenance for the son? If yes, how much?

26. On instruction, Mr Kevin Li, counsel for the husband, suggests in his closing submission that whether the son is the “child of the family” is an issue for determination. I do not agree that this should be an issue, and even assuming that it was, I have the following to say.

27. First, the husband, legally represented all along, is fully aware of the relevant legal principles in relation to the definition of “child of the family”. In the call-over hearing(s) leading to the trial on the discharge of the Undertakings, this court has referred him/his legal team to what the learnt authors of Rayden & Jackson: Divorce and Family Matters (18^th ed) said in Vol 1 at §10.130,

“ Now, to establish that such a child is a child of the family it is sufficient to show that the child was treated by both parties as a child of the family. There must be ‘a family’, and there must be ‘treatment’ as a child of the family. The family as a social unit comes to an end when the parties regard their marriage as at an end. In deciding whether a child has been treated as a child of the family the court should look at the question broadly, avoiding the finer points of analysis. The knowledge, or lack of knowledge, possessed by one or both parties of the facts relating to the child (for example, as to the identity of his parents) is no longer material in determining whether he is a child of the family. Thus a child who is the child of a wife and a man other than the husband would be a child of the family if he had been treated as such by both husband and wife, although the husband erroneously believed that he was the father, and it would seem to be equally immaterial that the wife deliberately deceived the husband into such a belief. ”

28. Hence, his lack of knowledge that the son was born by the wife with a stranger and thus not related to him by blood is totally irrelevant in deciding if the son is the child of the family or not.

29. Secondly, the husband never disputes that he and the wife had, during their marriage, treated the son as the child of the family. The 2015 Judgment has expressly recorded that the child is treated by the parties as the “child of the family”.[2] That part of the 2015 Judgment is not challenged by him by way of an appeal, and he is thus bound by it. 

30. Thirdly, the husband is also bound by what he has clearly and unequivocally confirmed through his counsel, Mr Kevin Li, in the call-over hearing(s) as well as during the trial of the discharge of the Undertaking that a decision allowing the discharge of the Undertaking would not prejudice the wife’s right to make further ancillary relief claims for herself and the son.  

31. There is another area which I wish to touch on before I go into the applicable law and analysis. Mr Chun Tim Chan, solicitors for the wife, attempts to disclose several new documents by way of his closing submission, such as the wife’s Chinese Agricultural Bank records. No prior notice has been given for this late disclosure, nor is there any prior attempt to try to obtain leave from this court. The documents are simply attached to the closing submission, but not by way of an affirmation of the wife. No reason is provided why the disclosure is made so belatedly. It comes as no one’s surprise that the husband objects to the documents, which in my view is perfectly justified. I conclude that I am not going to take any regard or place any weight on these documents.  

Applicable law

32. It is not in serious dispute that in any application for asset distribution or periodical payment and the variation thereof under section 11 of the Matrimonial Proceedings and Property Ordinance (“MPPO”), Cap 192, the court is required to consider all the factors set out in section 7 of the MPPO as follows:

“ (1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g)  in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.”

33. The Court of Final Appeal in its landmark judgment of LKW v DD [2010] 13 HKCFAR 537 has enunciated 4 guiding principles as to how section 7 of MPPO should be approached, namely (i) objective of fairness, (ii) rejection of sex or role discrimination, (iii) yardstick of equal division, and (iv) rejection of minute retrospective investigation.

34. It has further laid down 5-step approach as follows:

(1)   to ascertain the financial resources of each of the parties calculated as at the date of the hearing;

(2)   to assess the financial needs of the parties;

(3)   to apply the sharing principle to the parties’ total assets (if surplus assets would remain after the parties’ needs have been catered for);

(4)   to consider whether there is/are good reasons for departing from the principle of equal division;

(5)   to decide the outcome.

35. With these principles in mind, I shall proceed to the analysis of the issues and evidence.

The Shenzhen Property

36. The Shenzhen Property was purchased in 2009 during the marriage in the sole name of the wife at RMB906,000. A mortgage of RMB630,000 was raised with Bank of China (Shenzhen). There is no dispute that the wife sold it in/about December 2014 and that the outstanding mortgage as at the sale was about RMB570,000 - 580,000. The major issues are:

(1)   Whether it was really sold at RMB1.45 million, or at a gross undervalue or some other higher value;

(2)   The whereabouts of the net sale proceeds;

(3)   Whether the net sale proceeds should be added back.

What is the sale price?

37. According to the wife, she sold the Shenzhen Property pursuant to a sale and purchase agreement dated 12 November 2014 at RMB1.45 million.[3] She received a deposit of RMB40,000 upon signing the sale and purchase agreement, leaving a balance of about RMB1.41 million to be paid on completion.  So, the net sale proceeds (after deducting the outstanding mortgage of about RMB570,000 odd) would be about RMB830,000 – RMB 840,000.  On 14 January 2015, she received from the purchaser RMB860,000, representing the net balance of the purchase price and a sum of RMB20,000 odds which was the reimbursement of property tax that she had paid on behalf of the purchaser.

38. The husband does not dispute that the Shenzhen Property was already sold by the wife. His complaint lies with its sale price. His primary position is that it was sold at a gross undervalue, because according to the single joint expert report, the market value of the Shenzhen Property as at December 2014 should be RMB1.9 million.[4] His secondary position is that the actual sale proceeds might have exceeded RMB1.45 million, and might actually be RMB2.3 million.

39. I shall deal with the husband’s secondary position first, for he is making a very serious allegation akin to one of fraud on the part of the wife. He premises his argument on the following points:

(1)   The wife’s ICBC account shows that she received from the sale RMB540,000 and RMB860,000 on 4 January 2015 and 14 January 2015 respectively. If the outstanding mortgage (about RMB570,000-580,000) is also taken into account, what she had received is thus at least RMB1.98 million (RMB540,000 + RMB860,000 + RMB 580,000), which is much more than the claimed sale price of $1.45 million;

(2)   She has also failed to explain the source of a sum of RMB300,000 which was allegedly invested by her into Y Company on 15 January 2015;

(3)   If the sums of RMB1.98 million and RMB300,000 were added together, one would arrive at roughly RMB2.28 million, a figure which closely resembles the sale price of the comparable property listed under item no 4 in the single joint expert report (“Comparable 4”).[5] The said Comparable 4 is coincidentally a property with identical description and size sold on the same day at RMB2.3 million;

(4)   The evidence shows that there was an arrangement to submit a reduced sale and purchase price (at RMB1,124,952) to the relevant land administration bureau in China (國土局) for tax purpose.[6] This shows that the wife was in the position “to conjure up incorrect information to avoid legal obligation”.  Therefore, it is not extraordinary if the wife and the purchaser had in fact entered into a different or supplemental agreement for sale and purchaser of the Shenzhen Property at a higher price than that is documented.

40. I notice that in his closing submission, Mr Li for the husband has dropped his queries about different signature of the purchaser in the sale and purchase agreement and Sale and Purchase Agreement of Shenzhen Second-hand Property dated 25 December 2014 attached to the Notarial Letter dated 25 December 2014.  He has made no further queries about different property licence numbers (房產證) in his closing submission, either.[7] In such circumstances, I do not find it necessary to expend on the same. But solely to avoid any doubt, I accept the wife’s explanation on these areas. She explains that the Sale and Purchase Agreement of Shenzhen Second-hand Property was submitted to the land administration bureau of China (國土局) and the contracting parties (ie the wife and the purchaser) were required to write their full names in legible strokes. The difference in property licence numbers, the wife clarifies, is due to the change in her citizenship from a PRC resident to a Hong Kong citizen. As a result, a new property licence number was given to her in order to show that she is now a Hong Kong citizen. 

41. By way of background, it is indisputable that the wife did receive 2 sums of RMB540,000 and RMB860,000 from the purchaser on 4 and 14 January 2015 respectively.[8] Equally indisputable is that after the said sum of RMB860,000 was paid into her ICBC account, the whole amount was then transferred from her ICBC account into her BOC account on the same day.[9] Then, on the following day of 15 January 2015, a sum of RMB540,000 was withdrawn from her BOC account.

42. The husband previously raised requisition to this withdrawal of RMB 540,000, to which the wife replied on 31 August 2015 that the said sum was transferred to her Qian Baba account. However, in the trial, she gives another version that the said RMB540,000 was returned to the purchaser on 15 January 2015.  Mr Li for the husband adamantly submits that her evidence is shifting and implausible.

43. Essentially, the wife admits that she had made a wrong recollection about the said sum of RMB540,000 when she gave her reply to the husband’s questionnaire. She further provides these explanation and oral evidence:

(1)   Initially, the purchaser wanted to obtain a mortgage for paying the balance of the sale proceeds of the Shenzhen Property, but found that the interest rate was too high. In the end, the purchaser decided not to apply for the mortgage;

(2)   Moreover, they agreed between themselves, and without the knowledge of the estate agent, that the purchaser would pay the wife RMB540,000 first in return for her giving the keys to the Shenzhen Property to the purchaser before the completion of the sale and purchase. This explains why the wife received RMB540,000 on 4 January 2015. She then withdrew the money for various purposes (to be discussed further in the latter part of this judgment);

(3)   The private agreement between the wife and the purchaser was later discovered by the estate agent, who told the wife that this arrangement was risky and that she should return the said RMB540,000 to the purchaser at once. However, she had already or almost spent the money, and thus could not afford to return the money to the purchaser at that time. So, she had to pledge her car as security for payment. It was further agreed that she would return the said sum of RMB540,000 to the purchaser on completion;

(4)   If by way of setting off, the purchaser would have to pay her RMB320,000 (RMB860,000 - RMB540,000) on completion. However, this was not advised by the estate agent because the contract terms provided that payment of the purchase price should be made into her designated bank account. The estate agent said that if only a sum of RMB320,000 was paid into her bank account, they were not going to be responsible for any risk and consequences (「中介話：如果打$320,000(入銀行)，(他們)不負責任， 因爲打咁多比咗我，怕有風險」).

(5)   Therefore, no setting off was done in the end. Rather, she returned RMB540,000 to the purchaser on 15 January 2015 after the latter paid her RMB860,000 on 14 January 2015.

44. Upon considering all the evidence and having observed the demeanour of the wife when she is in the witness box, I believe in her explanation and oral evidence that the said sum of RMB540,000 was returned to the purchaser on 15 January 2015. Her response given in the witness box is spontaneous and logical. Moreover, the relevant clause (Clause 4) of the sale and purchase agreement supports her claim that the payment method and amount of the purchase price are squarely defined in the contract, which further reinforces her evidence that the estate agent advised her that it would be risky not to follow the contract terms.  

45. As to the arrangement of submitting a reduced sale price of the Shenzhen Property to the land administration bureau of China for property tax purpose, the wife explains in this way. In China, in assessing the property tax to be paid, the land administration bureau (國土局) would give its own valuation to the price of the property in question. Its valuation would usually be lower than the actual price, and thus would often be adopted by the purchaser for the purpose of property tax assessment. That, according to the wife’s case, explains why a reduced price (RMB1,124,952) was stated in the Sale and Purchase Agreement of Shenzhen Second-hand Property dated 25 December 2014 attached to the Notarial Letter dated 25 December 2014.

46. Again, I find the wife’s explanation stated above plausible. She is not shaken under cross examination. Notably, the husband confirms in his oral evidence that in assessing the property tax to be paid, the land administration bureau would give its own valuation of the price of the property in question. He has no serious dispute that the valuation of the land administration bureau would usually be lower than the price stated in the sale and purchase agreement(s), which in turn makes the wife’s explanation even more plausible. I thus accept her words on this point.

47. Mr Li’s bold suggestion that Comparable 4 in the single joint expert report may well be the Shenzhen Property is not accepted. He has to accept that cogent evidence from the husband is required if he is to allege fraud on the part of the wife. In any event, he confirms on day 2 of the trial that he is not pitching his case as high as to one of fraud. As such, it is not helpful to repeat, directly or indirectly, similar line of argument in the closing submission.   

48. The above analysis, in my view, is quite sufficient to rule against the submission that the Shenzhen Property might have been sold at a price higher than RMB1.45 million or at RMB2.3 million. There is no need for me to dwell on the other points or argument advanced by Mr Li.  I thus find that the Shenzhen Property was truly sold by the wife at RMB1.45 million. I also find that she returned RMB540,000 to the purchaser, which was paid out of RMB860,000 from the purchaser to her on/about 14 January 2015.

49. The husband’s primary argument that the Shenzhen Property was negligently sold at an undervalue will be discussed later in this judgment, after I have considered the whereabouts of the sale proceeds.

Sale proceeds to repay her debts?

50. Following from the aforesaid findings, this court has to consider the whereabouts of the sale proceeds of:

(1)   RMB540,000 received on 4 January 2015; and

(2)   RMB320,000 (RMB860,000 – RMB 540,000) received on 14 January 2015.

51. The bank statements disclosed by the wife show that these sale proceeds were first paid into her ICBC account, which were then either transferred to other 3^rd parties’ accounts or her own BOC account. According to the wife, these sale proceeds were all spent by her for 3 main purposes:

(1)   the daily living expenses of herself and the son;

(2)   repayment of various debts owed to her relatives and friends;

(3)   investment of RMB300,000 into Y Company.

52. For the purpose of this judgment, I do not find it necessary to go through each and every subsequent bank withdrawal made by the wife for the purpose of, for example, repaying her credit card bills or paying the sons’ school fees. After all, it cannot be disputed that since the custody of the son was varied in favour of the wife, her monthly expenses (inclusive of the son’s) must have increased. The real dispute is those transfer/withdrawal allegedly for repayment of debt owed by the wife to her relatives/friends. I shall set out below those relevant transfer/withdrawal from either her ICBC account or BOC account for easy reference: [10]

Date	Amount (RMB)	Purpose
4/1/2015	$150,000	To repay Mr Lui for his loan made in 2013 to buy furniture/electrical appliances for the Shenzhen Property.
- ditto -	$180,000	To repay her younger brother for his loan made in 2012 for buying her car (mercedes benz).
- ditto -	$ 64,000	To repay the wife of her younger brother for her loan in 2012 for buying her car.
13/1/2015	$ 56,000	To repay debt owed to Mr Lui.
- ditto -	$120,000	To repay debt owed to her elder sister.
TOTAL:	$570,000

53. It is the husband’s case that there were never such loans owed by the wife, to which she denies.

54. I will simply say these. The burden of proof lies on the wife to explain the existence of such loans. The mere evidence that she has transferred these sums to the relevant persons is insufficient to establish that these loans are true loans.  It needs to be pointed out that she has not provided any loan document(s) which she says in her oral evidence are in her possession or control. Her attempted explanation that she had to borrow from her brother and his wife way back in December 2012 (for the purpose of buying her car) does not sit well with her own allegation that she had made profitable returns from property investment all these years. According to her affirmation evidence, she had accumulated assets/profits in the sum of RMB750,000 by the time by the time when the 7^th property was sold by her in 2010.[11] She simply cannot explain why she needed to borrow from them if her property investment was that profitable, bearing in mind that at that time, the son was living with the husband’s side in Hong Kong and thus her living expenses were yet to flare up.

55. In such circumstances, I find myself unable to accept the wife’s case on the existence of these loans, and thus the purpose of the withdrawal of the sale proceeds of RMB570,000.

Vanished sum of RMB238,374.33

56. A balance sum of RMB280,959.61 (rounded down to RMB238,000 for convenience) was recorded in the wife’s BOC account as at 26 February 2015, which was reduced suddenly to RMB42,585.28 on 1 March 2015.  That is to say, a sum of RMB238,000 was vanished from this account within 2 to 3 days.

57. A more detailed examination of her BOC account records will tell that part of this missing fund is more or less originated from the sale proceeds of the Shenzhen Property. Before the partial sale proceeds of RMB140,000 was transferred from her ICBC account into her BOC account on 5 January 2015, her BOC account balance is merely RMB1,940.44.  It is thus my view that a substantial part of this vanished sum is sourced from the sale proceeds of the Shenzhen Property.

58. Very strangely, the wife’s BOC bank records do not show that there was any debit or withdrawal in whole or in part of this vanished sum of RMB238,000. When questioned, she effectually says that she does not know why this would happen. She confesses that she has not taken any effort to find out where this money went. Plainly, she is not able to articulate any reason for the disappearance of this sum from her own bank account. I am thus bound to add back this vanished but yet unexplained sum into the pot for sharing.

Sale proceeds be added back?

59. According to the single joint valuation report, the market price of the Shenzhen Property as at the date of the sale and purchase agreement should be RMB1.9 million. Yet, the wife sold it at RMB1.45 million. It is thus the husband’s primary position on the Shenzhen Property that the wife sold it at an undervalue, and thus the price difference of RMB450,000, on top of its sale price of RMB1.45 million, must be added back into the pool.

60. If one only considers the valuation of the single joint expert, the Shenzhen Property was prima facie sold at an undervalue. However, it would fall into over-simplicity to take the view that once a property is sold at an undervalue, there must be an automatic adding back of the price difference into the pot. In my view, the court needs to consider if there is any negligence on the part of the wife in selling the property at a price lower than the reasonable market price.

61. The starting point of my analysis is that I do not believe the wife sold the Shenzhen Property to the purchaser at a price other than RMB$1.45 million. In other words, I accept that the sale is a bona fide transaction to a 3^rd party at arm’s length at RMB1.45 million.  In so saying, I take into account that the wife signed an estate agency agreement in August 2014 under which she agreed to sell the Shenzhen Property at RMB1.45 million and this offer would be valid for 3 months, ie until November 2014.  There is no contrary evidence to suggest that way back in August 2014, RMB1.45 million was an under-stated asking price.  Rather, there is the unchallenged oral evidence of the wife that when fixing the asking price at RMB1.45 million in August 2014, she took into account that her sister had purchased another similar flat in the same development at RMB1.2 million in June 2014.

62. The wife also tells that from August to November 2014, there were a number of potential buyers coming to view the Shenzhen Property, but no one gave a formal offer, not until about 12 November 2014 when this purchaser offered to buy at RMB1.45 million, to which she accepted. Before she accepted the offer, she learnt from a security guard in the neighbourhood that a flat within the same block of building was recently sold at RMB1.6 million, but that flat was of higher level and good renovation.  The wife had also the advice of the estate agent that the price of RMB1.45 million was about right. Again, such evidence is not seriously challenged during the trial.  In any event, I have no reason to doubt such evidence of the wife.

63. During the trial, Mr Li attempts to prove that the wife has sufficient, if not abundant experience, in realty market because she used to run her own realty agency with her friend and invest in properties. She should have known that the then reasonable market price should be RMB1.9 million.  In my judgment, this line of submission has omitted the indisputable fact that (i) the wife, on the husband’s own case, has been a housewife between 2008 and 2013, and (ii) the last time she took part in property investment in China was way back in 2010 when she bought a property in Futian area, Shenzhen. Under such circumstances, one cannot expect the wife to have kept instant and/or timely knowledge of the market trend. The fact that the wife’s brother is an estate agent is also considered but fails to disturb my view on this point.   

64. Having considered the totality of all evidence, I do not accept that the wife has any negligence in selling the Shenzhen Property at RMB1.45 million, which is RMB450,000 below the reasonable market price opined by the single joint expert. In such circumstances, I would reject Mr Li’s submission to add back the price difference of RMB450,000 into the pool.

65. However, I do hold the view that the wife is unable to explain the whereabouts of the sale proceeds of the Shenzhen Property to the amount of RMB570,000. Put it in another way, I am not persuaded that these debts ever exist. It is more likely than not that she has parked these moneys with those 3^rd parties.  This sum of RMB570,000 must be added back into the pot to the wife’s balance sheet. Further, she is unable to explain the whereabouts of the vanished sum of RMB238,000 which sourced mainly from the sale proceeds, in the result of which it should also be added back into the pot. The total sum to add back is thus RMB808,000.

Other add back & debts

66. Apart from the sale proceeds of the Shenzhen Property which I have already dealt with earlier in this judgment, Mr Li for the husband seeks to add back other sums into the pool, which are listed out below:

Amount (RMB)	Items
$600,000	Investment into X Company made in/about January 2013.
$300,000	Investment into Y Company made in/about January 2015.
$ 70,000	Repayment from Ms Qian (錢) for the wife had paid school expenses on her behalf.

67. As to the wife’s allegation that some of her investment was made possible by loans from her relatives and friends, the husband does not agree with such allegation and is of the view that the alleged debts never exist.

68. On the other hand, the wife argues that 2 items should be added back into the pool for sharing, namely:

(1)   the legal costs to be paid by the wife to the husband pursuant to 2015 Judgment (estimated to be $240,000);

(2)   the alleged entertainment expenses and gifts provided by the husband to his subordinates paid out of his union pay account (in the sum of RMB100,000).

69. She also submits that the husband’s credit cards debts in the sum of 286,302 should not be taken into account for the purpose of capital sharing.

70. I shall now discuss the above items one after another.

Investment of RMB600,000 in X Company

71. According to the wife, she invested a sum of RMB600,000 into X Company in January 2013. The company specialised in delivery and logistics. However, business was not good from the start and it was running at a loss from the beginning. In the end, it was closed down in September 2013.

72. In order to invest into X Company, the wife claims that she borrowed RMB600,000 from her siblings and friend in January 2013, including RMB100,000 from her younger brother; RMB300,000 from her elder sister; and RMB200,000 from Mr Tang. In support, she provides 3 loan invoices.[12] She had since then repaid RMB150,000 to her elder sister. As at the day of the trial, she still owes them a total of RMB450,000. She asks that her debts of RMB450,000 should be taken into account and be paid out of the pot before distribution.

73. On the other hand, the husband submits that this sum should be excluded from the pot because the wife has failed to prove her case. Furthermore, he is of the view that the said investment of RMB600,000 should be added back into the pot.He is not seriously disputing that the wife had made such an investment into X Company. It is his case that he does not believe the company had dissolved. Alternatively, he argues that the wife was negligent, if not reckless, in pursuing that investment.

74. Having considered all evidence, I do not believe that the wife borrowed RMB600,000 to invest into X Company. This allegation does not sit well with her own case and her own submission that she has made handsome profits in property investment over the years. I reiterate what I have said in §[54] of this judgment. The alleged loan of RMB300,000 from the elder sister does not sit well with the fact that her elder sister is merely a worker at the McDonald’s and lives in a public housing unit only.

75. The wife says that X Company is now dissolved, but this is her bare oral assertion only. She is not able to produce a single piece of document to support her allegation. She has not called any witness to corroborate her allegation.  In the premises, I cannot accept this part of her evidence.

76. To sum up, I conclude that the said RMB600,00 came from a financial source not disclosed by the wife.  I further find that she still has an interest in X Company. It is trite to repeat the duty for full and frank disclosure of one’s financial means in any ancillary relief proceedings, failing of which adverse inference would be drawn against the defaulting party (See: LKW (supra) at §73; Rayden and Jackson on Divorce and Family Matters, 18^th edition at Chapter 17.28).  Be that as it may, I am of the view that the correct approach under this circumstances is not to add back RMB600,000 into the pot (as suggested by Mr Li for the husband), for the value of her interest and/or the returns (if any) in/from X Company is unknown. The best I can do is to draw an adverse influence against her (to be elaborated below).

Investment of RMB300,000 into Y Company

77. It is the wife’s case that she paid RMB300,000 out of the sale proceeds of the Shenzhen Property to invest into Y Company in/about January 2015. She received several payment of yields out of this investment until it suddenly stopped in/about May 2015. So, she went up to the office of Y Company but to find out that its office was closed down. As a result, she, together with other investors of Y Company, went to make a report to the police in China. In a word, she says that she has been cheated and the investment is now a total loss.

78. Mr Li for the husband submits that despite the bank records show that an application for transfer from the wife’s BOC account for RMB300,000 was made on 15 January 2015, there is in fact no such records shown in the bank statements. There is also no documented record as to where this sum of RMB300,000 came from. It therefore begs the question: where did this RMB300,000 come from?

79. The wife is unable to provide any explanation to the above point raised by Mr Li in the cross examination. She resorts to the convenient excuse that the said RMB300,000 was paid out on several occasions in smaller sums. Yet, she is unable to identify from any of her disclosed bank accounts the relevant transactions. Therefore, I do accept the submission of Mr Li that all these only lead to one possible answer, ie the investment of RMB300,000 into Y Company was transferred by the wife from some other financial source(s) not disclosed by her to this court. Having said so, however, I do hold the view that the wife is telling the truth when she says that Y Company was closed down and report to the police was made by the investors, including the wife. I have the opportunity of observing the wife while she is in the witness box.  She is firm and unshaken in cross-examination on this point. There is insufficient evidence to support that she is negligent in this investment.

80. Accordingly, I will not add back RMB300,000 into the pot, but shall draw adverse influence against the wife for her failure to disclose her other financial source from which this RMB300,000 came from (which will be further elaborated below).

RMB70,000 from Ms Qian

81. In her reply to the husband’s questionnaire, the wife initially says that the sums of RMB30,000 and RMB40,000 (totalling RMB70,000) that were paid into her BOC account on 28 November 2014 and 1 December 2014 respectively were loans from Ms Qian to her.[13]  However, she changes in oral evidence to say that she has not borrowed from Ms Qian. On the contrary, it was Ms Qian who owed her money for some school expenses that the wife made on her behalf. And it is the money that Ms Qian repaid her.

82. The husband submits that this sum of RMB70,000 should be added back to the pot. I do not agree, because the bank records show that after the deposits of these 2 sums, the same were withdrawn from time to time for use. For example, a sum of RMB30,708.61 was paid out on 29 November 2014 to settle the wife’s BOC credit card, which is not challenged by the husband. Besides, the withdrawal pattern does not support any sign of dissipation of assets. It is clear from the bank records that the RMB70,000 was spent without obvious suspicion. I reject any suggestion to add back this sum.

Legal costs of $240,000

83. I think I can easily dispose of the wife’s request to add back the legal costs to be received by the husband for sharing.

84. Under the 2015 Judgment, the wife was the losing party and thus she was ordered to bear the husband’s costs. Although under the section 7, this court has to take into account “all the circumstances” of the case and the financial means of the parties, it does not occur to me that the amount to be received by the winning party (ie the husband in this case) pursuant to a court order within the same proceedings should be shared under the equality principle. If that was endorsed, it would mean that the husband would be deprived of his rightful entitlement to the fruits of his winning the litigation.  I do not accept this line of submission. Mr Chan’s argument is thus rejected.

Entertainment & gifts of $100,000

85. The husband says in his updated Form E (dated 15 June 2016) that he owes the credit card debts/loans of $286,302, of which $278,243 is owed to the Standard Chartered Bank. He explains that part of the credit card debts (about $100,000) was incurred because he had to take his subordinates to meals or give them presents (mainly smart phones which costs almost $10,000 each) from time to time in order to show his appreciation for their hard work or to boost their morale.

86. The wife’s solicitor submits that these treats and gifts from the husband are totally unnecessary, unreasonable and extravagant, which amounts to dissipation of family assets recklessly. She thus asks that this sum of $100,000 be added back into the pot.

87. My overall impression is that this sum of credit card debt of $100,000 was accumulated after their marriage ended. I therefore cannot see how the wife can successfully argue that the husband was siphoning off the family assets. I refuse to add this sum back into the pot.  But on the other hand, I have serious doubt that the husband would be spending $100,000 to treat his colleagues, bearing in mind that it is his case that he had to raise a loan to fund his litigation. In any event, it is not fair to ask the wife to share out this unreasonable debt caused by the husband in the post-divorce period, either.

Non-disclosure of the wife

88. Mr Li, counsel for the husband, submits that the wife is guilty of not disclosing the details of her accounts at the Chinese Agricultural Bank and at Qian Baba, as well as her investment in X Company and Y Company. Counsel invites me to draw an adverse influence against her in accordance with recognised principles in ancillary relief proceedings that each party has the duty to fully and frankly disclose his/her financial means, to that extent that she should not have any further sharing in the Hong Kong Property and that she would be able to meet her and the son’s needs in the future.

89. I have already dealt with the wife’s investment in X Company and Y Company earlier in this judgment and thus would not repeat the analysis again.

90. On the Qian Baba account, the wife’s oral evidence shows that she is a friend of Ms Qian, who is the sister of the general manager of Qian Baba, an investment company. The wife explains that her Qian Baba account was linked to her BOC account, in that any money from her Qian Baba account to her would be transferred into her BOC account. So far, she had invested about 2 times into this Qian Baba account. Since she is not very sure as to how to operate this account on the internet, she would enlist the assistance of Ms Qian who would use a test code to help her enter into the Qian Baba account on the internet.

91. Counsel for the husband invites the wife to provide the records of her Qian Baba account and to bring them to court on day 2 of the trial. On the following day, the wife produces exhibit “P1A” and “P1B”, which are the screenshots of her Qian Baba account captured by Ms Qian by using her smart phone. Counsel queries that the screenshots do not say that there is “no money” in her Qian Baba account, to which the wife explains that since she has not made any further investment into the Qian Baba account, it is natural that the screenshots show that there is no operation record.

92. Upon due consideration, I believe in the wife’s explanation/evidence. The screenshot (exhibit “P1A”) shows that there is no transaction, whether deposit (「收入金額」) or withdrawal (「支出金額」) ，during the period from 26 October 2015 to 19 October 2015. The screenshot also shows that there is no entry under the item of “usable balance” (「可用餘額」). The wife’s evidence, in my view, is supported by documents, which leads me to the conclusion that there is no non-disclosure on her part in relation to the Qian Baba account.

93. As to the Chinese Agricultural Bank account, the wife concedes in her oral evidence that she has never disclosed it. She explains in the trial that the account does not have much money. Her solicitors attempted to disclose the same through his closing submission without any prior notice to the husband’s side or to this court, let alone prior permission from this court.  I have already ruled that I would not place any weight on these belated documents.

94. Therefore, I find that there is non-disclosure on the part of the wife in respect of:

(1)   the source of feeding the investment of RMB600,000 into X Company and/or its returns;

(2)   the source of feeding the investment of RMB300,000 into Y Company; and

(3)   the bank records of her Chinese Agricultural Bank.  

95. What adverse influence should be drawn against the wife? In my view, I need to consider the non-disclosure against the indisputable backdrop that the wife was a housewife between 2008 to 2013, and that in the husband’s own case, she (as well as the son) was totally and financially supported by him. There is no suggestion that he had given her a lot of money to spend, because it is also his case that the living standard during the marriage was “average”. As such, it can be logically deduced that the wife would not be able to save up any material sum out of the household expenses provided by the husband. In such circumstances, all that can be made available for her disposal would be the sale proceeds (and any further but unknown investment returns generated therefrom) that she has kept over the years from property investment, which she confesses to be about RMB750,000 by the time when the 7^th property was sold in/about 2010.

96. I do not accept her assertion that the sale proceeds were already and/or totally spent on the daily expenses of the parties during their cohabitation or marriage. [14] It is very telling that despite the financial constraint that she is allegedly suffering, she made offer on 2 occasions to buy a flat near Shenzhen Property at around RMB1 million (but the offer was not accepted in the end). 

97. Doing the best I can, I shall draw the adverse influence against the wife that she shall be able to take care of her needs way forward.

The husband’s earning capacity & expenses

98. It is the husband’s case that he now works as an estate agent in Shenzhen. He earns a very modest basic salary of RMB4,000, and even if commission is added, his average monthly income is about RMB8,000 (or HKD9,200) only. His expenses, according to his updated Form E (15 June 2016) is $19,786. He simply does not have the financial means to pay any periodical maintenance sought by the wife for herself and for the son.

99. The wife is unable to accept what the husband claims. She is of the view that he took a strategic move to quit his higher-income job in Hong Kong to take up a much lower-income post in China, merely with an ulterior intention to defeat her ancillary relief claim.

100. In my view, it is undeniable that the husband is an experienced estate agent who has accumulated over 16 years of experience in the field working for the same reputable realty agency in Hong Kong. He has produced 2 employers returns of the years of 2013-14 and 2014-2015 to disclose his income. [15] In his updated Form E of 15 June 2016, he says that his commission for the past 12 months is $45,000 per month (ie $540,000 annually). He further tells in his oral evidence that his declared taxable income of the year (ie 2015-16) is $600,000-$700,000.[16] He confirms that though as at the trial, he has left the Hong Kong realty agency for about 10 months, there is still commission in the total sum of over $100,000 to be collected from his former employer because the completion dates of the relevant transactions have not been due.

101. I set below in a table a summary of his income (of his Hong Kong job) as reflected from his employers return or his updated Form E or his oral evidence:

Year	Salary	Commission etc	Total
2013-14	$91,182	$357,720	$448,902 ($37,408.50 per month)
2014-15	$86,103	$241,398	$327,501 ($27,291.75 per month)
2015-16	No breakdown provided		$600,000-$700,000 (say $650,000) ($54,166 per month) [17]

102. The above table clearly shows that the husband used to earn a steady income in Hong Kong. Importantly, he was already a Branch Manager in the Sheung Shui district since the year of 2014-15, and his income doubled from the previous year immediately before he left his job in Hong Kong. He needs to explain why he abruptly quitted his Hong Kong job to take on the PRC job with a significant reduction of his income to RMB8,000 (or HKD9,200) per month. The reduction is over 80% of his original income.

103. The husband explains that in his updated Form E and his examination in chief like this. He has incurred bank loan in order to fund his litigation for discharging the Undertaking. Despite that he is the winning party under the 2015 Judgment, the wife has not settled his legal fees. In the result, he is unable to repay the bank loan. The bank chased him for repayment of loan at his office, and thus he was persuaded by his former employer to leave the job (「勸籲離職」) on 31 December 2015.

104. I do not accept the husband’s explanation due to the following reasons/observation.

105. First, the husband took out his application for discharge of the Undertaking in March 2014. The trial took place one year later in March 2015. He says in his oral evidence that he has incurred legal costs of about $250,000 for the trial relating to the discharge of the Undertaking.  On the other hand, he concedes that he is no longer paying any expenses of the son since the variation of the custody on 1 April 2014. At that time and according to the above table in §[101], he was earning an average of $27,000 odd per month, which was increased to over $54,000 in the year of 2015-16. Even when his claimed expenses are taken into account, he certainly should have the ability to repay at least the minimum monthly payment of his bank loan. It is thus not believable that the bank would go to his office to chase him up for repayment.

106. Second, I express grave reservation that his former Hong Kong employer would persuade him to leave his job. At the material time, the husband was already the Branch Manager who performed excellently in his job, reflected by the fact that his annual income was doubled in the year of 2015-16 from the previous year.  It is pertinent for me to also point out that he was awarded prizes consecutively in the years of 2013-14 and 2104-15.[18]

107. Third, on the assumption (just assuming) that he was really chased up by the bank’s debt collector at his office (in Sheung Shui area), he is unable to explain why he could not have changed to work in another branch/another district within the jurisdiction but took the bold move to quit the job altogether to work in China. Pausing here, I take note that in his reply, the husband is not rejecting the suggestion that he could have changed to work in another district within Hong Kong. Neither is he suggesting that his income would suffer a significant cut if he had really changed to work in another branch/district of Hong Kong. What he essentially explains (and in doing so, he has actually changed his evidence) is that he wishes to have a change in work environment. He offers further to say that if compared with local PRC estate agents, he has an advantage over them, in that PRC customers would find him (being originated as a Hong Kong estate agent) more trustworthy and professional. He concludes that he would be able to establish himself in a year and his income would be able to increase to RMB20,000 - $30,000 within 6 months.[19]

108. It is thus my conclusion that the husband unnecessarily and unreasonably quitted his Hong Kong job on his own motion, thereby self-inflicting a significant reduction of his income. This self-engineering act cannot be accepted by this court. To acknowledge that his commission may be subject to fluctuating, I shall adopt a medium figure of his average monthly income in the years of 2014-15 and 2015-2106, and rule that his earning capacity should be at least $40,000 per month.

109. In his updated Form E, the husband claims his monthly expenses are $19,786 (of which $5,100 and $547 are the mortgage repayment and management fees of the Hong Kong Property).  Putting aside the expenses solely related to the Hong Kong Property, his claimed monthly expenses are about $14,139 only. I accept these are reasonable expenses. I would remind myself that according to his own evidence, he would have a housing need of about $8,000-$9,000 per month if the Hong Kong Property needs to be sold at the end of the day, which will then bring his monthly expenses to about $22,000 - $23,000 per month.

110. Though he also claims that he has credit cards debts/loans of $286,302, he has not included the monthly repayment of such credit cards debts/loans in the monthly expenses of his Form E. But given this court’s ruling that his earning capacity should be at least $40,000 per month, it is my judgment that he should be able to cover his needs and repayment of his debts/loans way forward, bearing in mind that he himself confesses in the trial that he is yet to receive commission of about $100,000 from his former Hong Kong employer, the sum of which should logically be paid to settle part of his outstanding loans/debts.

The wife’s earning capacity and expenses

111. The wife worked as an insurance agent from 2013 up to March 2015. She claims that her then monthly income was $25,000 per month. Since she had to take care of the son, she had to quit the job since March 2015, after which she becomes a full-time mother relying mainly on her savings and subsidies from her elder sister in the sum of about $20,000 per month.

112. Her updated expenses are claimed to be in the sum of $57,647.50, including general expenses of $14,237.50 (approximately); personal expenses of $32,125.00, and the son’s expenses of $11,285.00. [20]

113. The husband challenges the expenses claimed by the wife, commenting that what she now claims are extravagant and does not commensurate with the average living standard during the subsistence of the marriage. In particularly, he argues that her expenses in car and her insurance, as well as the son’s expenses of extra-curricular activities, holidays and insurance are excessive. He advances that her reasonable expenses should be around $20,000, apportioned as to $12,500 to the wife and $7,500 to the son.

114. Upon considering all evidence, I tend to agree with the observation of Mr Li for the husband due to the following reasons.

115. It is the wife’s own case that the living standard during the marriage was “average”.[21]

116. Importantly, a spending of $57,647.50 per month would have incurred around $576,000 in a span of 10 months for the period between the 2 Form Es of the wife, ie between 24 July 2015 and 9 May 2016. The wife says that she is out of job since March 2015. One would then expect that the only sources of financial assistance that she would have drawn on would either be her own savings or assistance/loans from 3^rd parties.  When her 2 Form Es are compared, it is noted that her savings in her bank accounts dropped from $193,166.30 to $42,830.73, representing a diminishment of $150,335.57 only, ie at the rate of $15,033.60 per month.

117. There is however no increase in liabilities in this period.

118. When questioned with this contradiction, the wife says that her elder sister would give her around $20,000 per month for living expenses since about 2014. Mr Li submits that this explanation is unbelievable, which I accept. As already pointed out by this court, her elder sister is merely a worker at the McDonald’s and is residing in a public housing unit with her own family. It is against common sense that the elder sister would be able to provide the wife a sum of $20,000 per month in such circumstances.

119. On specific items of expenses in her updated Form E (dated 9 May 2016), the wife says that she has to spend $2,500 per month on her car. I agree with Mr Li for the husband that this is unreasonable and unnecessary, since she claims that she is now a full-time mother and is not working.

120. A large part of her personal expenses is her insurance premium which costs $21,250 per month. This, if true, already amounts to more than 1/3 of her claimed total monthly expenses (of $57,072), which, in my view, is not proportionate and thus unreasonable. In any event, she confesses that the majority of her policies has investment returns factored into the terms. I am also of the view that the husband should not be made to fund her investment by way of periodical maintenance after the conclusion of their marriage. She claims that her holiday and entertainment expenses are $3,125 in total, but the husband submits that $800 is the reasonable sum without noticing that he himself says that his is $1,500 per month. After due consideration, I will say $1,500 to cover her entertainment and holidays is reasonable. Overall, I hold that her reasonable personal expenses, in view of the average living standard during the marriage, should be around $8,000 per month.

121. On the son’s expenses, I accept the husband’s evidence that the claimed expenses for tutorial classes, extra-curricular activities, holidays and insurance are excessive. He has no serious dispute to the son’s travelling expenses, though. Obviously, the son needs to travel between Shenzhen and Hong Kong during for school. Upon taking into account his counter view and the living standard during the marriage, I conclude that the son’s reasonable expenses under part 4.3 of the wife’s Form E is about $6,000.

122. To conclude this part, I set out the summary of the wife’s and the son’s expenses as follows:

(1)   General expenses :	$11,737 (approximately)
(2)   Personal expenses:	$ 8,000
(3)   Son’s expenses  :	$ 6,000
	$25,737

123. Therefore, the wife’s total expenses are about $13,868 per month, while that of the son are about $11,868 per month (rounded up to $12,000 per month for convenience).

124. I shall now turn to the wife’s earning capacity.

125. In his closing submission, Mr Li for the husband is not, fairly and rightly so in my view, arguing against the wife’s reason for quitting her job. For the records, she explains that after the custody was reverted to her, she was still working full time, because she was able to enlist the assistance of her sister-in-law at first and then later a baby-sitter. However, the son got acquainted with some classmates who attempted to steal at the convenient store near the border. There were also a few occasions that the son almost got lost near the border. As a result, the school called the wife and suggested her to collect the son direct. Her explanation is logical and reasonable. I have no reason to doubt her evidence on this point.

126. Nevertheless, it is also the wife’s evidence that while the son is at school, she can work part time as a saleslady of beauty products store in Hong Kong, such as Sheung Shui area, and earn about $4,000 per month. It is well known that since 1 May 2017, the minimum pay rate guaranteed by the law is $34.5 per hour. It should be noted that the wife had previous experience of working as beauty/cosmetic apprentice. It is more likely than not that she will be paid at a rate that is more than the minimum hourly rate.  I am thus of the view that she will be able to earn about $7,000 - $8,000 per month at this stage. She should apply this sum to partly support the son.

Summary of assets

127. Due to the above analysis, I set out the assets of the parties as follows:

	Wife	Husband
HK Property (net value)	N/A	$2,720,000
Bank savings	$42,830	$2,600
MPF	N/A	$195,014
Insurance	$7,975	$7,700
Car	$162,500	60,000
Add back: Sale proceeds of Shenzhen Property RMB(570,000+238,000)	RMB$808,000 (HKD929,200)[22]	N/A
TOAL:	$1,142,505	$2,985,314

128. The total assets of the parties are roughly $4,127,819.

129. The alleged loans/debts of the respective parties, in my view, can be absorbed by their share of the assets upon distribution of the capital.

Any reason for departure?

130. In the closing submission of the husband, he has not proffered an argument that there should be a departure from the equality principle.

131. The wife, however, argues that there should be a departure from the equality principle.  The major reason for departure, Mr Chan says, is due to the contribution of the wife in terms of the “seed money” of RMB100,000 which had made the purchase of various properties possible and which was not attributed to any financial contribution from the husband.

132. While in the witness box, the husband does not dispute that the “seed money” came from the wife.[23] But his counsel points out that according to the wife’s own evidence, she accepts that the husband had contributed financially to the family (including the son) in the form of household and living expenses. He also took part in taking care of the son. The wife was out of work between 2008 to 2013. It is thus unrealistic for her to suggest that the husband had not made any contribution to the family and thus the property investments. Further, counsel submits that given the long relationship between the parties since their cohabitation in 2000 to their divorce in 2012, it is not necessary for the court to countenance any attempt to engage in minute examination of the parties’ contribution to the family (See: LKW (supra) at §§62-70).

133. I agree with the above submission of Mr Li.

134. In LKW (supra),  Ribeiro PJ pointed out that although the court is duty bound by section 7(1)(f) of MPPO to have regards to the contributions made by each of the parties to the welfare of the family, our courts ought to proceed on the footing that the parties’ respective contributions to the welfare of the marriage are implicitly recognised within the sharing principle itself and that it will only be in “rare and exceptional” cases where an issue on “special” or “stellar” contribution can properly be raised in favour of departing from equality. Here is what His Lordship said:

“ E.5.e Contributions to the welfare of the family as a material factor

110. The court is duty-bound by section 7(1)(f) to have regard to the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family….

111. The parties’ contributions are generally factored in as an intrinsic part of the sharing principle. The yardstick which favours equal division unless some good reason exists to the contrary implicitly gives equal recognition to the parties’ respective contributions, though different in kind. This was put graphically by Coleridge J in RP v RP:

‘...the parties made a life-choice early on in their marriage; that they would have children and so the wife would cease to work. That was a life-choice made by them both with all its pros and cons. From then on her contribution has been just as full as the husband's but different. At the end both are entitled to a full share of the fruits of their combined and equal contribution; she to ensure that she has a secure future both with and later without the children and the husband so that he can re-establish himself. She has earned it (as Lord Nicholls of Birkenhead stressed in Miller), and so has he. This is not largesse by the husband, it is her entitlement deriving from her valuable contribution.’

112. A number of problems may arise however, if an attempt is made by one of the parties to persuade the court that his or her contribution to the family’s welfare is so significantly greater than the other party’s (sometimes called a “special” or “stellar” contribution) as to justify departure from an equal division.

113. Assuming that during the marriage the parties occupied the traditional roles of breadwinner on the one hand and homemaker or child-carer on the other, there is, as Thorpe LJ said in Cowan v Cowan, the obvious difficulty “of assessing contributions which are largely of a different character and are therefore inherently incommensurable”. Any attempted assessment would necessarily be highly subjective and unsatisfactory.

114. Secondly, an attempt to decide whether the contributions of one of the parties during the marriage were or were not “stellar”, is likely to require highly objectionable retrospective investigations of the kind discussed above in connection with the fourth underpinning principle.

115. While recognizing that the court must assess each and every one of the section 25(2) criteria that may affect the outcome, Thorpe LJ stated:

‘...I do not accept that the duty requires a detailed critical appraisal of the performance of each of the parties during the marriage. Couples who cannot agree division are entitled to seek a judicial decision without exposing themselves to the intrusion, indignity and possible embarrassment of such an appraisal. I fully agree with Coleridge J that any other approach encourages a vain endeavour to recreate historic situations, choices and failings which in the context of a long marriage can never be recaptured fully or accurately.’

116. Thirdly, since, as noted above, the parties’ respective contributions are already factored in as an intrinsic part of applying the sharing principle, a real risk of double-counting exists if one of the parties is to be awarded some additional sum in recognition of some allegedly special contribution.

117. Given such difficulties, it is unsurprising that the English courts have shown a marked and growing reluctance to accept “special contribution” as a basis for departing from equal division. The bar for raising the issue has been set very high. As noted above, Lord Nicholls and Baroness Hale adopted a standard equivalent to the “obvious and gross” standard in connexion with “conduct” and held that a premium for “special contribution” would only be considered where the circumstances are of such an exceptional nature that it would very obviously be inconsistent with the objective of achieving fairness for them to be ignored. Expressing his wariness of the issue of special contribution, Thorpe LJ in Lambert v Lambert, stated:

“... for the present, given the infinite variety of fact and circumstance, I propose to mark time on a cautious acknowledgement that special contribution remains a legitimate possibility but only in exceptional circumstances.”

118. In my view, our courts ought to proceed on the footing that the parties’ respective contributions to the welfare of the marriage are implicitly recognized within the sharing principle itself and that there will, if at all, only be rare and exceptional cases where an issue can properly be raised in favour of departing from equality on the basis of “special” or “stellar” contribution.” (my emphasis added)

135. In the premises, the submission of the wife to attempt to argue for a departure from the equality principle is doomed to fail.

Deciding on the outcome

136. This is a relationship of about 12 years starting from cohabitation in 2002 leading seamlessly to the marriage of the parties. Sadly, they divorced in 2002. The son, which is the only child born by the wife during the marriage, though not the true blood of the husband, was treated by the parties as the child of the family. As this court has pointed out, the knowledge of the husband of whether the son is his natural child is irrelevant. In the circumstances, he has a duty under the law to make financial provision for the son, subject to the financial means of the parties. It is untenable to argue that the wife is in a position to locate the natural father of the son for financial support. She was pregnant as a result of a one-night-stand relationship and is unaware of the identity of the natural father.

137. The husband is an experienced estate agent with 16 years of working experience in Hong Kong. It is unreasonable for him to quit his Hong Kong job to take on a much lower income job in China. This court does not endorse this self-massaged act of the husband, and thus find that his earning capacity should be at least $40,000 per month. His reasonable expenses, including his housing needs in the case that the Hong Kong Property needs to be sold, should be around $22,000 - $23,000 per month. As at the trial, he admits that he has about $100,000 commission to be paid by his former Hong Kong employer, which can be used to pay off a substantial part of his credit card debts/loans.

138. The wife worked as an insurance agent from 2013 to March 2015. She claims that her average monthly income was $25,000. She has failed to make full and frank disclosure in relation to the source of funds of X Company and Y Company, as well as her Chinese Agricultural Bank. Doing the best I can, I shall draw an adverse inference that she has the financial means to meet her needs way forward. Her application for varying up her nominal maintenance is doomed to fail.

139. On the other hand, it is accepted by this court that since she has to take care of the son, she cannot be expected to take up any full time job at this stage. She can only work part time at this stage, eg as a saleslady of beauty products shop earning about $7,000-$8,000 per month. This amount should be utilized for the benefit of the son. I have ruled that the son’s monthly expenses are about $12,000 per month.  The husband shall thus have to pay $4,000 per month to support the son.

140. The total assets of the parties are worth $4,127,819.  There is no accepted reason to depart from the equality principle. Due to the reasons set out above, they should each bear their own alleged debts/loans which can be paid out from their own share upon distribution of the assets.  The Hong Kong Property (which is now occupied exclusively by the husband’s family) has to be sold. Since the wife is found to have kept the sale proceeds of the Shenzhen Property and/or the vanished sum in the total sum of RMB808,000, the husband would need to pay her about 35% of the net sale proceeds of the Hong Kong Property as the equalization money in order to achieve equal division of the assets.

141. Mr Chan for the wife insists that the husband should pay his share of the sale proceeds into court in order to secure his periodical payment for the benefit of the son. I am not persuaded to so order in the overall circumstances of the case.

Costs

142. On the question of costs, I take into account the following factors:

(1)   Judging from the outcome of the assets sharing, neither the wife nor the husband can be said as the winning party;

(2)   Although the wife’s application for variation of her nominal maintenance is dismissed, the time spent on her application and related evidence is not substantial. Time is mainly spent on identification the size of the pot.

143. Upon due consideration, I shall make a costs order nisi that there be no order as to costs of the wife’s summonses and this trial. This nisi order shall be made absolute within 14 days from today, unless there is any application to vary the same.

Conclusion

144. Due to the reasons set out in the above, I shall make the following order:

(1)   The husband shall sell the Hong Kong Property in the open market at market price within 3 months from this order;

(2)   Upon deducting the outstanding mortgage and all necessary expenses of the sale, the net sale proceeds shall be distributed between the parties in the following ratio:

(a)  Husband: 65%;

(b)Wife: 35%.

(3)   For the purpose of carrying out paragraphs (1) and (2) of this order, the following directions apply:

(a)  The market value of Hong Kong Property shall be agreed between the parties within 7 days from the date of this order, failing which they shall engage a single joint expert (the fees to be shared equally) to give an updated market value of the Hong Kong Property; such report shall be ready within 14 days thereafter;

(b)The husband shall make arrangement for the purchaser(s) to pay the sale proceeds, including but not limited to the deposits, by way of cashier order(s) or cheque(s) payable to the conveyancing solicitors (to be chosen by the wife) who shall hold the same as stakeholder pending completion and distribution of the sale proceeds in accordance with this court order;

(c)  The husband shall continue to pay the monthly mortgage, management fees, government rates and rent and utilities of the Hong Kong Property up to and inclusive of the date of completion;

(4)   The husband shall pay to the wife for the maintenance of the son in the sum of $4,000 per month starting from 1 October 2017 and thereafter on the 1^st day of each succeeding month until the son reaches 18 years of age or completes his full time education, whichever is the latter. Such payment shall be made into the wife’s designated bank account (details to be provided in the draft order);

(5)   The wife’s application for variation of her nominal maintenance is dismissed;

(6)   There be no order as to costs of and incidental to the wife’s summonses and this trial, including all costs reserved. This nisi order shall be made absolute within 14 days from today;

(7)   A penal notice will be endorsed;

(8)   Personal service of this court order shall be dispensed with.

(9)   There be liberty to apply in respect of the implementation of this order.

145. This court order shall be drawn up by the wife’s solicitors for approval.

[1] Husband’s Form E dated 15 June 2016 [A/363 &375].

[2] See §18 of the 2015 Judgment.

[3] [B/775-776]

[4] [C/948]

[5] [C/944]

[6] According to the Sale and Purchase Agreement of Shenzhen Second-hand Property dated 25 December 2014 attached to the Notarial Letter dated 25 December 2014, it was recorded that the wife sold the Shenzhen Property to the purchaser at a price of RMB1,124,952.

[7] [C/954] & [C/898]

[8] [A/306]

[9] [A/306] & [A/309]

[10] See the wife’s reply to the husband’s questionnaire [B/597/(a)] & [B/598]

[11] [A/27/§24]

[12] [B/755-765]

[13] [B/599/10(b)(ix) & (xi)]

[14] The wife’s affirmation [A/27/§24]

[15] [A/274-279]

[16] Husband’s oral evidence on day 3 (PM session).

[17] The commission in the sum of over $100,000 to be due and collected by the husband is not included in this table.

[18] It is unclear if the husband won any prizes for the year of 2015-16 because he has not disclosed the employer’s return for that year.

[19] Husband’s oral evidence on day 3 at around 4 pm and thereafter.

[20] The wife claims that her rental has increased by RMB500 as at this trial.

[21] Wife’s Form E [A/347/part 5.3]

[22] Adopting the currency conversion in the husband’s closing submission at §43 (RMB:HKD=1:1.15).

[23] Husband’s oral evidence on day 3 (AM session).