LEMS v. LCTN

FCMC14731 / 2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14731 OF 2010

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DECISION
(Leave to appeal)

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Introduction

1.  This is an application by the petitioner wife for leave to appeal against my written judgment handed down on 13 February 2014.  The Respondent husband objects her application.  In my judgment the wife was allowed to retain her car and personal properties valued at about HK$1.4mil and jewelleries from the husband’s grandmother’s legacy (value unknown and not included in the family assets schedule) that were in her possession and further awarded a lump sum of HK$38mil, equivalent to about 74% of the bigger family pot and about 90% of the smaller family pot (i.e. excluding the husband’s inheritance received about 9 months after the unsuccessful FDR) to achieve a clean break between the parties and I dismissed the wife’s claim for periodical payment.  The wife seeks only to replace the dismissal of the claim for periodical payments with an order for nominal maintenance. 

Background

2.  The couples were both in the age of 46 at time of the trial.  They emigrated to Canada with their family at different times and received their education there.  They met in Canada and married in May 1993 in Hong Kong and have two children during the marriage:

· The son born in April 1994, aged 19, studying in Canada;

· The daughter born in November 1998, aged 15, studying in Canada.

3.  The couples started working since they graduated in 1990. The wife was a Certified Chartered Accountant but she ceased working when the son was two and a half years old. The husband worked a Canadian corporation before returning Hong Kong for assisting his father’s business in 1993 and has been given the title of CEO since 2005.

4.  After the couples got married in 1993, they first lived with the grandparents, and later moved out and lived in rented premises until they purchased the matrimonial home with the parental grandparents’ financial assistance. During the marriage the parental grandparents had given some cash gift to the couples and on occasions the couples were allowed to use the grandparents’ cars and property.  Thus the couples were able to lead a living standard over and above their own income.  However, the wife conceded that at present and in the foreseeable future the parental grandparents’ financial assistance is no longer available.

5.  During the marriage the husband’s salary and the cash gift from the parental grandparents were deposited in the couples’ joint account, and the wife was the person who responsible to handle the family-related expenses and investment by using the fund in the joint account. The last cash gift from the parental grandparents was $5mils to the husband and $0.5mils to the wife in the Lunar New Year 2010.  

6.  The couples’ relationship because of various reasons had long been very tense and riddled with conflicts.  Upon the receipt of the $5mils, they had disagreement as to the disposal of the same.  By then the parties were at the brink of separation, and the disagreement related to the $5mils was only a triggering point.  After the husband withdrawn $2.5mils for his own disposal, the couples had a heat quarrel in March 2010 and they started to separate under the same roof since then.  

7.  In November 2010, the wife issued divorce proceedings on unreasonable behaviour.  The husband took out a summons for interim share care and control of the children in December 2010 while the wife took out a summons for the children’s permanent removal in January 2011; thereafter the parties had several children related applications.  Guardian ad Litem and independent lawyer was arranged for the children.     

8.  Time being the husband moved out from the Matrimonial home in May 2011 and stopped the deposit of his monthly salary into the parties’ joint account since then.  The Decree Nisi was granted on 1 June 2011.  The length of the marriage prior separation is 17 years and 18 years at the time of the Decree Nisi.

9.  There was a long drawn out battle over the wife’s relocation application, during which the relationship between the husband and the children had broken down and no access was taking place.  Getting close to the trial the son was approaching 18 and planned to take his degree course at university in America while the daughter expressed her wish to study in Toronto.  The children arrangement was ultimately resolved on the trial date.  Leave for permanent removal was granted on 12 March 2012 by consent. 

10.  After relocation to Toronto in August 2012, the son enrolled with a university in America but returned to Toronto studying at a college after his first year in the university while the daughter enrolled and continued her education in a private school and is now a grade 9 student in Toronto.  The relationship between the husband and the children is yet to improve, the husband resumed access with the son after the relocation but it is said to be sporadic and there is still no contact between the husband and the daughter. 

11.  The couples failed to reach agreement upon financial arrangement, after the FDR failed on 28 May 2012, the matter was transferred to trial.  The husband inherited a sum of$10.89mils in February 2013.  On 25 November 2013, upon the application of the wife and after hearing from both parties, the court ordered the husband to pay $1.2mils legal costs provision to the wife.  The trial for the wife’s ancillary relief application was set down on 3 December 2013 with 8 days reserved.  

12.  Time being the husband has started another relationship with his girlfriend with whom he has fathered a son born in March 2012. The girlfriend gave birth to their second child shortly after the trial in December 2013.  The husband remains in the same employment and is the sole source of income of his new family.

13.  The wife’s application was for financial provision upon divorce including a claim for lump sum and maintenance for her and the two children of the family, while the husband requested a clean break.  Ultimately this court is required to consider whether this is an appropriate case for clean break.  After due consideration of all the circumstances, I considered this is an appropriate case for clean break, the wife was awarded about 74% of the bigger family pot (including the inheritance received after separation) and her claim for periodical payment was dismissed.  Maintenance was also awarded for the children.

14.  The wife took out the present summons to apply for leave to appeal for the dismissal of the claim for periodical payment and have this be substituted by nominal maintenance. 

The Law

15.  Section 63A (2) of the District Court Ordinance Cap.336 provides that:

“(2) Leave to appeal shall not be granted unless the judge, … hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b) There is some other reason in the interests of justice why the appeal should be heard.”

16.  The provision was introduced by the Civil Justice Reform.  It is set out in paragraph 59/2A/4 of the 2014 Hong Kong Civil Procedure, that “For leave to appeal the conditions of which are set out by the CJR, the “reasonable prospect of success” test or the “interest of justice” test set the threshold for granting of leave to appeal (see High Court Ordinance s.14AA(4); District Court Ordinance s.63A(2). … In SMSE v KL [2009] 4 HKLRD at para.17,Le Pichon JA observed:

“… In granting leave, the judge must have considered that the test set out in(the) section had been met. The section requires that the court be satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard before granting leave. Reasonable prospects of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’”.

In Wynn Resorts (Macau) SA v Mong Henry (unrep., [2009] HKEC 1293), Chu J (as she then was) observed that:

“To meet the ‘reasonable prospect of success’ test, an applicant is required to show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed.”

Discussion

17.  One of the argument put forward by Mr Chan for the husband in opposing the wife’s application being no application for “nominal maintenance” was made by the wife at trial and it would be wrong to allow the point to be raised now or for leave to be granted, because evidence as might have been appropriate to the point sought to be raised for the first time on appeal was not canvassed at trial and the granting of nominal maintenance might have affected the division of assets in due course.  And as a matter of principle it is wrong just to appeal against the dismissal of periodical payment but not the lump sum, which is part and partial the judgment of clean break.  Even if this court was wrong, which is not accepted, this cannot simply be answered by nominal maintenance.  I am with the view that the an application for periodical maintenance would necessary include nominal maintenance where the family assets are not sufficient to cater the future needs of the receiving party and/or the paying party is not in a position to provide substantive maintenance.

18.  I now turn to the grounds of the intended appeal of the wife.  The grounds as per the wife’s draft notice of appeal being:

1) This court erred in law by ordering a clean break when there are insufficient assets to ensure that the wife can be maintained, by reference to the standard of living enjoyed during the marriage, for the rest of her life on the assets available.

2) In order to achieve a clean break within the limited assets available, this court underestimated the wife’s expenses and standard of living, failed to provide any sums for capital expenditure going forward, and failed to take into account the resources available to the husband.  By failing to provide for periodical payments, even on a nominal basis, this court has thereby limited the wife to this under-provision for the rest of her life, with no mechanism by which she can seek to remedy it.

3) Given the limited assets available, this was wrong in law.

4) This ground consists 21 paragraphs of alleged error in assessing evidence and wrong consideration related to the decision of clean break.

5) This ground consists 10 paragraphs of alleged error in assessing evidence related to the wife’s monthly expenses.

6) The dismissal of the wife’s application for periodical payment is not a fair outcome.   

19.  In her Draft Notice of Appeal, the wife proposes to appeal against my decision on clean break.  As stated on page 21 of my judgment, there were 9 issues required to be determined in the trial and the wife seeks to appeal my findings on almost all the issues, more particularly on the following:

1) I erred in finding that an average net take home income of $156,000 plus benefits in kinds would represent the norm of the husband’s future earning capacity.

2) I failed to take regard to the prospect of much improved income if the husband worked hard.

3) I failed to take regard to the husband’s possible inheritance in the future.

4) I erred in making finding related to the living standard of the parties.

5) I erred in finding/assessing that the wife’s need on accommodation to be $10million

6) I erred in finding/assessing the other needs of the wife to be $60,000 per month and the future needs to be $28million.

7) I failed to consider the impact of emotional and financial responsibility related to the elder son upon the wife.

8) I erred in making finding related to the needs of the children.

9) I erred in exercising my discretion in relation to clean break.

10) I erred in giving weight to the husband’s reasons for clean break.

20.  Mrs Irving for the wife argues that the calculation by this court was on a wrong premise and manifestly low figure was used to fit into a calculation that would allow a clean break, requested by the husband.  The result is that the wife, after a long marriage, is left with no fallback position, no cushion and no way to support herself for the rest of her life and she is left without the option of seeking maintenance should her circumstances require it.  This is wrong in law and is not a just outcome.  The dismissal of periodical payment should be substitute at least by nominal maintenance.  Further the imposition of a clean break in such circumstances is an important legal point that should be examined by the Court of Appeal and the wife seeks leave to do so.   

21.  Mr Chan submits that section 7 does not concern speculation, financial assistance, inheritance and earning capacity had been considered and finding made.  Children’s maintenance is separate from spousal maintenance, and the husband will continue to take responsibility of the elder son’s financial needs.  During the trial, exhaustive evidence was heard and the parties were comprehensively cross-examined (the husband’s witnesses were not challenged and their evidence being accepted in full).  As is apparent from the comprehensive reasoned judgment, this court has balanced all the relevant factors, and the court of appeal will not be interested in interfering with the finding and decision and to impose ‘nominal maintenance’.  Even if the point had been raised during the trial, the evidence which was adduced and heard does not support imposing ‘nominal maintenance’.

Earning capacity and financial resources of the husband

22.  The first three issues could be grouped under this heading and is related to Ground 2 and 4 of the intended appeal. Mrs Irving submits that this court failed to consider the employer reimbursement on occasions covered the husband’s personal expenses.  And this court ignored entirely the prospect of much improved income by way of bonuses if he worked hard, and the possibility of future inheritance from very wealthy parents. 

23.  All the above points were examined/cross-examined in the trial and submissions were made thereon by the parties.  These points have been fully considered and the reasoning was set out in paras 41 – 47, 81 – 87 of my judgment.  In my judgment I find that an average net take home income of $156,000 plus benefits in kinds would represent the norm of the husband’s future earning capacity.  Reimbursement of business-related spending is one of the benefits provided by his employer and common ground that the husband had taken advantage of this to claim personal expenses was noted and considered (para. 59).  The view of the wife and the grandparents as to the husband’s attitude towards his career has been considered together with other evidence before I came to the conclusion that the future earning capacity of the husband would not have any significant increase (para.45).   

24.  Again, the possibility of future inheritance has been considered.  It is common ground that the husband has very wealthy parents but this alone does not mean the husband would entitle any inheritance from the parents in the foreseeable future.  There is unchallenged evidence that the husband is only one of the many issues of the grandparents, that the grandparents have set up a discretionary trust for their issues, and that the grandparents were very disappointed with the husband.  I agree with Mr Chan that section 7 does not concern speculation. Where the phase “possibility of future inheritance” used by Mrs Irving meant inheritance in the foreseeable future, there is simply no evidence suggest this is the case.  

25.  I agree with Mr Chan the evidence related to the husband’s earning capacity and financial resources does not support imposing ‘nominal maintenance’.  To conclude, I do not see any prospect of success on these arguments.   

The living standard of the parties

26.  This issue 4 is related to Ground 1, 2, 4 and 5 of the intended appeal, that this court has underestimated the standard of living and erred in assessing the spending.  Mrs Irving submits that this court erred in assessing the family’s living standard with reference to average monthly spending $146,000 of the family from April 2009 to January 2010, as this figure took no account of the benefits received from N Ltd and figure also took no account of expenses paid directly through the husband’s employment.    

27.  The needs of the wife and the children should be considered in light of the living standard before the breakdown of the marriage (s.7(1)(c) MPPO).  The parties separated in March 2010, and the Decree Nisi was granted on 1 June 2011.  The family spending and living standard were examined/cross-examined in the trial and submissions were made thereon by the parties.  These points have been fully considered and the reasoning was set out in paras. 48 - 74.  All of the wife’s Form E (before and after relocation) had been considered together with other evidence as a whole.  The remuneration package of the husband was acknowledged and considered (para.46, 72).  It is common ground that the monthly housing allowance in the sum of $50,000 was paid into the parties’ N Ltd, and that part of the general expenses were paid by N Ltd is acknowledged and considered in the judgment when reference was made to the figure $146,000 (para.63).  In assessing the monthly spending of the wife would not have exceeded $50,000 during the marriage, and the family spending (apart from the accommodation related and car expenses) during the marriage was taken to be that of the wife and the children (para.74).  

28.  Further, it is argued that this court took no account of the extensive financial support given to the husband via reimbursements from his employer.  However, it should be noted that the parties paid everything out of their joint account, and the husband cash withdrawal had been included in the “$146,000” and that the husband would received reimbursement for his spending has been considered.   

29.  To conclude, I do not see any prospect of success on these arguments.

The needs of the wife

30.  The issues 5 and 6 could be grouped under this heading is related to Ground 2, 4 and 5 of the intended appeal, that this court has underestimated the standard of living.  The overall needs of the parties were considered under accommodation and future needs.  Mrs Irving argues that the $10million for housing, the monthly needs at the rate of $60,000 and not have required another car in the next 10 years was much below the standard during the marriage.  The needs of the parties were comprehensively cross-examined in the trial and submissions were made thereon by parties. These have been fully considered and the reasoning was set out in paras103 – 122 of my judgment.  I do not propose to repeat them here.

31.  Mrs Irving argues that while this court agreed that the husband had an obligation to arrange his finances appropriately to meet his responsibilities and that it was a matter for him that he had decided on having a new family, this court was wrong to draw any parallel between this and the wife’s decision of relocation; and the husband’s consent to removal was given knowing that the wife had estimated her financial needs would be greater after relocation.  Yet it should be noted that the husband never agreed with the wife’s estimation and it is the husband’s case that the wife has grossly inflated her expenses.  It is my judgment that the wife has inflated/increased her estimated needs on monthly spending and accommodation by 3 times (paras.68 and 107).  

32.  Further, Mrs Irving submits that, as part of the living standard, this court erred in the numbers of cars driven during the marriage of 18 years.  Yet it is not disputed that the last car in Hong Kong driven by the wife during the marriage was a Mercedes CLK500 from 2002 to 2011, she only got herself a new one after relocation.  Further, despite it was conceded by the wife that there was no further financial assistance from the grandparents in the future, in assessing her monthly needs I still made reference to the standard she had during the marriage, the full index on all categories of daily consumption between two cities, the overall utilities and household expenses would be expected to be higher for a house worth $10 million in comparing the one of the maternal grandparents and generously assessed at the rate of $60,000 to cover any possible contingency and further took a generous approach with Duxbury table and awarded the wife a capital sum of $28million equity to secure the future needs of the wife, including her need for a car every ten years.

33.  As Mr Chan observes and submits, the wife’s needs were assessed by this court based upon the evidence, making findings of fact and credibility.  The Court of Appeal will not be interested in disturbing the same.  To conclude, I do not see any prospect of success on these arguments.

The children

34.  The issues 7 and 8 could be grouped under this heading and is related to Ground 5 of the intended appeal.  Mrs Irving submits that this court erred in assessing the reasonable needs of the children, the wife and the children are currently live with the maternal grandparents. Although the wife was paying a sum of money to her parents each month in recognition of their generosity to her and the children, this sum was far lower than the increased expenses she would incur when living apart.  Further because of the psychological problems the elder son is experiencing, there is the real risk that he may not be able to resume his university studies and would remain living with his mother for the long term.  The emotional and financial responsibility then falls onto her.

35.  The needs of the children were examined/cross-examined in the trial and submissions were made thereon by the parties.  These points have been fully considered and the reasoning was set out in paras123 – 126.  I do not propose to repeat them again.  However, I do wish to emphasiz that (1) though the wife was 46 at time of the trial and with professional qualification as certified accountant, and on her own case a very career-minded designer, the husband does not require her to work for hers and the children’s financial provision in the future; (2) on top of the current financial provision, the children each has an account being held by the wife on trust for them, the balance of the account related to the son and the daughter as at August 2013 was $842,423 and $782,938 respectively; and (3) the father though has reservation as to the son’s psychological problems claimed by the wife, is prepared to financial support the son until he becomes independent.  

36.  I agree with Mr Chan that children’s maintenance is a different matter from spousal maintenance (or nominal maintenance).  There can be an application for variation of children’s maintenance (if justified on the facts and changing circumstances).  This does not support any argument for spousal nominal maintenance.  Should the children’s needs increase and no agreement can be reached the wife can apply for variation.  To conclude, I do not see any prospect of success on these arguments.

Clean break

37.  The issues 9 and 10 could be grouped under this heading and is related to all the grounds of the intended appeal.  Mrs Irving submits that this court adopted a low figure just to achieve a clean break that the husband wanted and rather than properly assess the needs of the wife and the children and reach a conclusion based on that and the proper application of the section 7 MPPO factors.  This court erred in giving regard to unsubstantiated family relationship considerations.  The result is that the wife, after a long marriage, is left with no fallback position, no cushion and no way to support herself for the rest of her life and she is left without the option of seeking maintenance should her circumstances require it.  This is wrong in law and is not a just outcome.

38.  All the above points were examined/cross-examined in the trial and submissions were made thereon by the parties.  The points have been fully considered and the reasoning was set out in my judgment, that related to family assets, and how the parties and the children should be provided for was set out in paras 94 – 102, 127 – 134).  I do not propose to repeat them here.

39.  The arguments related to living standard, the needs of the wife and the children have been dealt with in the above paragraphs. Whilst this court recognised and noted the husband’s submission as to his reason for clean break, this was not a factor this court relied on in dealing with “clean break or ongoing spousal maintenance’.  The wife was not expected to work, while in the husband’s case, his future income was taken into account. As Mr Chan observes and submits this court has assessed both parties’ needs and performed Duxbury calculations according to the evidence.

40.  As mentioned above, the needs of the wife has been generously assessed, the award to her is a very significant departure from equality: to allow her $10 million for her accommodation need, to ensure her future needs during her life span be secured by the income generated from the $28million equity, and on top the wife was allowed to retain valuable personal property valued about $1.4 million. To conclude, I do not see any prospect of success on these arguments.

Conclusion

41.  The essence of all the grounds proposed by the wife being that: in light of the circumstances, this court has exercised her discretion wrongly and that the discretion was plainly wrong, this court ought to have exercised the section 7 discretion differently by awarding the wife the lump sum together with nominal maintenance.  In this connection, I would like to refer to the following often-quoted passages which succinctly set out the well established principles on appeal against the exercise of discretion:

“When the intended appeal is an appeal against the exercise of discretion of the judge below, the applicant would have to show that he has an arguable case with reasonable chances of success that the relevant decision exceeds the generous ambit within which reasonable disagreement is possible, and is in fact plainly wrong, and not merely the appellate court would prefer a solution which the judge had not chosen (RS v YS unrep., HCMP1969/2002, 1 November 2012, CA); para.59/2A/4 of The Hong Kong civil Procedure (vol.1) 2014; and

It is, of course, not enough for the wife to establish that this court might, or would, have made a different order.  We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable.  It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere. Per Asquith LJ in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345.”

42.  In the circumstances of this case, it is my judgment that it will be difficult for the wife to convince the appeal court that the discretion so exercised in my judgment has gone beyond the generous ambit within which reasonable disagreement is possible or is plainly wrong.

43.  While Mrs Irving submits that the imposition of clean break in the present case is a clear departure from settled legal principles, she argues that the imposition of a clean break in such circumstances is an important legal point that should be examined by the Court of Appeal and seeks leave on the second limb.  Mr Chan submits that the present case is not a suitable case for leave under the second limb.  I do not consider there to be any important legal point or any other reason in the interests of justice that the intended appeal should be heard.

44.  For the reasons mentioned above, I do not consider the wife has any reasonable prospect of success in the intended appeal.  Accordingly I dismiss the wife’s application for leave to appeal.

Cost

45.  Minimal time was spent on the legal argument raised by the husband.  I consider the general principle that costs follow the event should apply.  I will make an order nisi to be made absolute in 14 days time that the husband shall have the costs of this application, with counsel certificate, to be taxed if not agreed.