ZJ v. GWR

FCMC 13419/2013

[2018] HKFC 28

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 13419 OF 2013

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J U D G M E N T
(ANCILLARY RELIEF)

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1.  This is the trial of the Petitioner Wife (“the Wife”)’s claim against the Respondent Husband (“the Husband”) for ancillary relief for herself and for the child of the family after a failed Financial Dispute Resolution hearing. 

2.  The parties were married on 27^th November 2003 in Hong Kong.  Their daughter was born in 2006 (“the Child”) and is now aged 11 at the commencement of this trial.

3.  The Wife petitioned for divorce on 18^th September 2013 on the ground of 2-year separation.  On 27^th November 2013, a Notice of Application for Ancillary Relief was filed by the Wife’s solicitors. 

4.  By the Order dated 25^th March 2015, the Husband was ordered to pay monthly maintenance pending suit for the Wife in the sum of HK$25,500 and for the Child in the sum of HK$7,000.

5.  By consent, the Wife and the Husband were granted joint custody and shared care and control of the Child by the Order dated 16^th April 2015. 

6.  Decree Nisi was granted on 20^th July 2015. 

Background and salient facts of the case

7.  The parties met each other in 1998 in the mainland and got married in 2003 in Hong Kong.  The parties separated in about 2011. 

8.  The Wife is now aged 38 at the commencement of this trial.  She was born in the mainland. After finishing 3 years of junior secondary education, she pursued to a vocational school in China studying tourism and had worked in the mainland.  In 1998, she met the Husband in the mainland.  According to the Wife, the parties started cohabitation since April 1999 and she became financially dependent on the Husband since then, which was disputed by the Husband.  The Husband denied cohabitation as early as in 1999.

9.  After getting married in 2003, the Wife obtained two-way permit and spent time in both Hong Kong and the mainland.  The Child was born in 2006.  In 2007, the former matrimonial home at Island Resort (“Former Matrimonial Home”) was purchased in the Husband’s sole name. The Wife got her one-way permit and Hong Kong identity card in 2009.  The Wife has never worked in Hong Kong.   

10.  The Husband is now aged 60 at the commencement of the trial.  He was born in Hong Kong and received education in Hong Kong until he finished F.3 education.  He then migrated to Canada with his family and he continued his education in Canada. After graduation from university in Canada, he had worked in Canada for 10 years in the petroleum industry from 1984 to 1994.  In 1994, the Husband returned to reside and live in Hong Kong.  He was employed by an engineering company as a sales manager, earning a yearly income of about HK$500,000.  In 1996, he changed to work at another company as the department manager, earning about HK$900,000 per year.  In 1998, the Husband met the Wife in the mainland. In 2000, the Husband changed to work at another company as a department manager, earning a yearly salary of about HK$1 million.  According to the Husband, he has been conservative in finance and has the habit of saving, and he uses his saving to invest in stock and funds.

11.  In 2007, the Husband resigned and started his own company called Pacific Wisdom (HK) Co. Ltd (“the Company”) doing trading business and started selling yachts / speed boats in about 2011.  It is a company solely owned by the Husband.  According to the Husband, he had been buying and selling speed boats, not yachts (the value of the speed boat the Husband had kept under the name of the Company was about HK$1.3 million).  As explained by the Husband, he had much interest in speed boat because of his own experience in the past and also because of his father, who used to have speed boat related work.

12.  Regarding the operation of the Company, the Husband agrees that there is no need to rent an office, as he used to work at home and there was no need to employ any staff.  Because of the nature of the business, he had engaged agents to look for business for the Company.  The Husband also explained that not many assets were involved, as the nature of business was about buying and selling of yacht / speed boat. 

13.  Deregistration of the Company was applied for on 12^th September 2016, which was confirmed in the letter from the Inland Revenue Department dated 14^th February 2017.

14.  The Wife has always been a housewife all along.  The Husband has always been the sole breadwinner of the family.  The Former Matrimonial Home, purchased in 2007, was in the Husband’s sole name.  The Husband’s property in Calgary of Canada was purchased in 1989 (“Calgary Property”).  There is also a landed property in Zhong Zhan of China of the Husband (“Zhong Zhan Property”). 

15.  In 2011, the parties separated and the Wife subsequently moved out of the Former Matrimonial Home with the Child.  The Husband also moved out of the Former Matrimonial Home, which has then been rented out, with current monthly rental of HK$25,000.

16.  In fact, after the Wife had moved out of the Former Matrimonial Home with the Child, the Child has lived with both the Husband and Wife respectively and joint custody order with shared care and control was granted by the Court on 16^th April 2015.

Open Proposal of the Wife

17.  In the Wife’s open proposal before the trial, the counsel for the Wife, Ms Lau (“Ms Lau”), asked for equal division of the family assets.  According to the Wife, the Husband had dissipated family assets of millions of dollars, which should be added back in the calculation of the total family assets.  It is the Wife’s stance that by equal division between the parties alone, the needs of the Wife and the Child could not be met and therefore she also asked for periodic payments as well. The Wife seeks the following terms:-  

(a)  The Husband do pay the Wife the sum of HK$8,000,000 within 3 months of the Decree Absolute.  In the event that the Husband chooses to sell the Former Matrimonial Home, the Husband do pay the Wife a sum of HK$2,000,000 within 14 days of the Decree Absolute, and a sum of HK$6,000,000 within 4 months from the Decree Absolute.

(b)  Upon Decree Absolute being granted, the Husband do pay the Wife a monthly periodic sum of HK$10,000 until the death of either party or the date of the remarriage of the Petitioner, whichever is the earlier.

(c)  The Husband do pay the Wife a monthly sum of HK$7,000 as maintenance of the Child, until the Child attains the age of 18 or ceases to receive full-time education, whichever is the later.

(d)  The Husband is to undertake to pay all the education fees of the Child, including school fees, school books and stationery, extra-curricular activities and miscellaneous fees charged by the school, until the Child finishes her full-time education.

(e)  The Order dated 15^th March 2015 regarding maintenance pending suit be discharged.

(f)  All the Wife’s costs of ancillary relief, including all costs reserved, be paid by the Husband.

(g)  The Wife’s own costs be paid in accordance with Legal Aid Regulations.

18.  During trial (in fact, it was in the middle of the Husband’s giving of evidence), the Wife had revised her open proposal.  The Wife asked for HK$7,500,000 from the Husband to achieve a clean break.  In addition, the Husband do pay the Wife a monthly sum of HK$7,000 for the Child’s maintenance.  The Wife also asked for costs of ancillary relief. 

Open Proposal of the Husband

19.  The Husband did not accept the Wife’s open proposal or the revised open proposal.  The Husband asked the court to consider the needs of the parties, especially in view of the Husband’s undertaking to pay for the educational expenses of the Child in the coming years, and also asked the court to depart from the principle of equal division of matrimonial assets.  The Husband seeks the following terms :-

(a)  The Husband do pay the Wife the sum of HK$1,800,000 as clean break.

(b)  The parties should be responsible for maintenance and other necessary expenses of the Child during her stay with the Wife or the Husband and the Husband will no longer have to pay the Wife for the monthly maintenance of the Child.

(c)  All the costs of, incidental to and occasioned by the Wife’s application for ancillary relief including orders previously reserved be paid to the Husband by the Wife.

20.  In addition, Mr. Chan, the solicitor acting for the Husband (“Mr. Chan”), further submitted that the Husband is willing to undertake to pay all the educational expenses of the Child.  

The legal principles

21.  In deciding on ancillary relief claims between the parties to the marriage, the court is required by section 7(1) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to have regard to the conduct of the parties and all the circumstances of the case including the following matters :-

(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 of 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.

22.  In the case of LKW v DD [2010] 13 HKCFAR 537, the Court of Final Appeal has provided 4 principles as to how section 7 shall be approached, which are stated as follows :- 

(a)  The first is that the implicit objective of a section 7 exercise is to arrive at a distribution of assets which is fair as between the parties.

(b)  The second is that the concept of fairness requires the refutation of any gender or role discrimination.

(c)  The third principle is that, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views of distribution against a “yardstick of equal division” which should be departed from only for god, articulated reasons.

(d)  The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement.

23.  The Court of Final Appeal has further laid down the following 5 steps as to how the Court should exercise the discretion when considering section 7 as follows :-

(a)  The first step in the exercise is the identification of the assets and to ascertain the financial resources of each of the parties calculated as at the date of the hearing.

(b)  The next step is for the court to assess the parties’ financial needs;

(c)  If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the “needs” question previously considered to be dealt with under that principle.

(d)  The fourth step therefore involves considering whether good reasons exist for departing from the principle of equal division.

(e)  When deciding the outcome, the court is not bound to depart from equality in the division of the parties’ assets even if one or more of the factors considered are engaged on the facts.  The weight to be given to such considerations is a matter of discretion for the court.

Issues

24.  The Parties had identified and signed to confirm the agreed joint issues, as follows :-

(a) What should be the appropriate value of the Husband’s Company?

(b) What are the values of the matrimonial assets including the following 3 real properties?  

(i) Former Matrimonial Home

(ii) Calgary Property

(iii) Zhong Zhan Property

(c) Whether the Husband had dissipated some of the matrimonial assets, and if the answer is yes, how much should be added back to the matrimonial pot for the purpose of the ancillary relief applications.

(d) What is the earning power of the Wife and the Husband respectively?

(e) What are the financial resources of the Wife and the Husband respectively?

(f) What are the financial needs of the Husband, the Wife and the Child?

(g) Whether the matrimonial properties should be divided equally. If not, what would be the appropriate division?

(h) How much should be paid to the Wife and how much should be kept by the Husband. 

(i) Whether a clean break is possible and how to achieve the clean break. 

The identification of the assets and to ascertain the financial resources of the parties

25.  To ascertain the financial resources of the parties (as at the date of the hearing), the court must have regard to “the income, earning capacity, property and other financial resources” which each of the parties “has or is likely to have in the foreseeable future”, as stated in s. 7(1)(a) of Cap. 192. 

26.  In this case, while considering the financial resources of the parties (Issue (e)), the Court will have to consider the value of the assets (and liabilities), including the 3 real properties involved in the case (Issue (b)), the value of the Husband’s Company (Issue (a)), whether the Husband had dissipated some of the matrimonial assets, and if yes, how much should be added back to the matrimonial pot (Issue (c)).  At the same time, the Court also has to consider all matters as stated in s. 7(1) of Cap. 192, including the earning power of the Wife and the Husband (Issue (d)).

The value of the assets (issue (b))

27.  The value of the 3 landed properties are as follows :-

(a) Former Matrimonial Home, having taken into account the existing mortgage, the net value is agreed at HK$6,022,102.

(b) Calgary Property, agreed at HK$1,500,000 (or at HK$1,092,000, subject to tax reduction of about HK$408,000 if the property is eventually sold as alleged by the Husband)

(c) Zhong Zhan Property, agreed at HK$50,000

Sub-total: HK$7,572,102 (or HK$7,164,102, if the Calgary Property is to be eventually sold and tax to be paid in the sum of HK$408,000 is taken into account)

28.  Cash at various banks of the Husband agreed as follows :-

(a) HSBC a/c No. 815-00138	HK$900,037.03
(b) Hang Seng Bank a/c No. 229-248-265	HK$412,946.67
(c) DBS a/c No. 771-088-104	HK$359,682.82
(d) BEA a/c No. 015-257-88-90001-6	HK$107,766.04
Sub-total:	HK$1,780,432.56

29.  Value of the 2 vehicles of the Husband agreed as follows :-

(a) 2005 BMW 520	HK$50,000.00
(b) 2005 Mercedes Benz 280 SLK	HK$100,000.00
Sub-total:	HK$150,000.00

30.  Pension/MPF of the Husband :-

(a) MPF in Hong Kong agreed at	HK$544,825.13
(b) Pension in Canada agreed at	HK$907,135.95
Sub-total:	HK$1,451,961.08

31.  For the value of the Calgary Property, parties have agreed the value at HK$1,500,000.  It is the Husband’s case during trial that when the Calgary Property is sold, he will be required to pay tax to the Canadian Government and in which case the capital gain profit tax would be about approximately HK$408,000, and that the amount should be deducted from the agreed value of HK$1,500,000, making the value of the Calgary Property of HK$1,092,000.  This is disputed by the Wife, as there is hardly any evidence that the Husband would be selling this property at all.

32.  I notice that in the Husband’s own evidence, there is the possibility that he might go back to reside in Canada and there is the possibility that the Child may study in Canada in future.  In that case, there is the likelihood that the Husband might reside at the Calgary Property, instead of selling it.  Besides, I agree with the Wife that there is no evidence before the Court that the Husband has the intention to sell the Calgary Property in the near future.

33.  Therefore, in the calculation of the value of assets as at the date of the hearing, I adopt the agreed value of HK$1,500,000.  But I will bear in mind that there may be future financial obligations of the Husband in the payment of tax when the Calgary Property is eventually sold.

34.  The Husband asked for the liabilities in the total sum of HK$441,165 to be considered and deducted (comprising of (a) the Husband’s taxed costs to be paid to the Wife in the sum of HK$80,665; (b) the Husband’s outstanding legal costs and disbursements as from Feb 2016 up to the date of trial in the sum of HK$263,000 and (c) maintenance pending suit as from the months of March 2017 to May 2017 in the sum of HK$97,500), which was confirmed by Ms Lau in the closing submissions. 

35.  Before taking into account the amounts to be added back to the matrimonial pot, if any, and the value of the Husband’s Company, if any, the total family assets are valued at HK$10,954,495.64 (HK$7,572,102 + HK$1,780,432.56 + HK$150,000 + HK$1,451,961.08).

Whether the Husband had dissipated some of the matrimonial assets, and if yes, how much should be added back for the purpose of the ancillary relief application (issue (c))

36.  It is the Wife’s stance that the Husband had dissipated millions of dollars, which should be added back to the total value of the family assets.  According to the closing submissions of Ms Lau, a total sum of HK$8.22 million should be added back to the total value of the family assets, comprising of the following items :-

	Items	Amount HK$ Million
(1)	Money from BEA re-finance	1M
(2)	Money from disposal of the Company’s assets	0.7M
(3)	Money allegedly paid to the Husband’s relatives	0.8M
(4)	Money allegedly paid for the repair works in Canada	0.5M
(5)	Rental income of HK$25,000 per month	0.65M
(6)	Money the Husband gambled away	0.3M
(7)	Cash withdrew from various bank accounts without documentation nor explanation	2.77M
(8)	Income of HK$0.5 million that can be generated from the Company as a bench mark for the years of 2014, 2015 and 2016	1.5M
	Total:	8.22M

37.  According to the Husband, Mr Chan summarized in his closing submissions that the Husband had explained during his evidence of how the approximately HK$8,100,000 had been spent, which was almost the equivalent to the 8.22M that the Wife had alleged, and that no amount should be added back.  The HK$8,100,000 was spent in the following aspects :-

	Items	Amount HK$ Million
(1)	MPS and other maintenance order	1.3M
(2)	Legal costs	0.5M
(3)	Loss incurred in the Company	1M
(4)	Repayment of mortgage loan	0.7M
(5)	Funeral expenses of the Husband’s mother	0.8M
(6)	Loss & repair of the Canadian property	0.5M
(7)	Gambling by the Husband	0.3M
(8)	Expenses of the Husband and his daughter	3M
	Total:	8.1M

38.  Considering the background of the case and the evidence before the Court, I accept that the Husband had used the following sums :-

(a)  about HK$1,300,000 for maintenance pending suit and other maintenance order (since the Order dated 25^th March 2015, the Husband has been paying maintenance pending suit in the sum of HK$25,500 for the Wife and the sum of HK$7,000 for the Child; before 25^th March 2015, according to the Husband’s Form E, he has been paying HK$12,000 as “interim maintenance”);

(b)about HK$500,000 as legal costs;

(c)  about HK$700,000 as repayment of mortgage loan (considering the monthly repayment being about HK$17,000); and

(d)about HK$3,000,000 as expenses of the Husband and the Child at all material times (considering the amount of expenses as shown in the Husband’s Form E).

39.  According to Ms Lau, from September 2013 to January 2014, the Husband has depleted or hidden HK$5.88 million (ie. HK$10.62 million being total cash in banks prior to petition – HK$4.74 million being total cash in banks about 3 to 4 months after petition). 

40.  Ms Lau further explained that from September 2013 until February 2017, the Husband has used up HK$10.25 million (ie. HK$10.62 million being total cash in banks prior to petition + HK$0.65 million being rental income of HK$25,000 per month x 26 months + HK$0.7 million being sold off assets of the Company – HK$1.72 million being the total cash in banks as at February 2017).

41.  According to Ms Lau, even if taking into account all the expenses the Husband alleged in the sum of HK$8.1 million (refer to paragraph 37 above), the husband still gives no explanation to the sum of HK$2.77 million, as indicated in paragraph 36(7) above (ie. HK$10.25 million the Husband has used up from September 2013 to February 2017 – HK$7.48 million being expenses with explanation).

42.  Ms Lau further submitted that the expenses of HK$800,000 being funeral expenses for the Husband’s deceased mother in 2013 and the HK$500,000 payment for water seepage at the Calgary Property were incurred before the Husband’s 2^nd Answer to the Wife’s 2^nd Questionnaire dated 16^th December 2015, and these expenses were not explained.  By adding back these two items of HK$800,000 and HK$500,000, the Husband has no explanation for at least HK$4 million.

43.  During cross examination, the allegation of dissipation of money was put to the Husband, the Husband denied any dissipation of money and explained that he had spent money on various aspects.  The Husband further explained that it is impossible for him to explain each and every item of expenses, but he explained generally he spent on various aspects throughout the years, and came up with the table as submitted by Mr. Chan in the closing submissions, which is repeated in paragraph 37 above.

44.  I can see the force of Ms Lau’s submissions in looking at the figures and to conclude that the Husband could not explain satisfactorily the difference in the bank balance.  However, I remind myself the court is not to conduct forensic auditing and I also remind myself that the explanation of the Husband has to be viewed in context and with the circumstances of this case, especially with the Company solely controlled by the Husband, and that the personal or home expenses of the Husband and the expenses of the Company intertwined as will be considered in later paragraphs.

(a)   HK$ 2.77 million cash withdrawn from various bank accounts

45.  I’ll now focus on my analysis on the different disputed items in turn.  According to the Wife, there is a total of HK$2,770,000 of cash withdrawn from various bank accounts without documentation nor explanation.  I am of the view that I cannot have the amount added back simply because there is no documentation nor explanation, as the amount was accumulated throughout the years.  Besides, these amount of cash withdrawal may have overlapped with the explanation of other sums.  It is unsafe and unfair to simply adding back HK$2.77 million.  

46.  I agree with the Husband that it is impossible for the Court to investigate or for the Husband to explain each and every single item of expenses throughout the years or to request for production of documentary support for each and every item of expenses.  I remind myself the Court has to be practical in the analysis.  On one hand, I should not lose sight of the submissions made by Ms Lau in view of the amounts to be added back, especially the reasons and circumstances why no supporting documents and/or reasonable explanation is offered.

47.  On the other hand, I have to view and analyse the evidence in a practical and manageable way.  I will not take a simplified way by looking at the difference of bank balance at different dates to conclude that the difference, without explanation, is the amount dissipated and therefore should be added back.  Some allowance should be given for items of spending even without documentary proof.  Besides, in this case, there is the background that the Husband is working at home, which means various expenses of the home and the expenses of the Company may be intertwined.  Expenses spent has to be considered in this context.  Therefore, I am of the view that the sum of HK$2.77 million should not be added back.

(b)   HK$800,000 money allegedly paid to the Husband’s relatives

48.  Regarding the HK$800,000 that the Husband alleged being the funeral expenses of his mother, paid to the Husband’s relatives, the Wife pointed out that it is hard to believe as there is no single documentation regarding the spending of the sum. During cross examination, the Husband explained that the sum of HK$800,000 was his share of the expenses for his mother’s funeral and related expenses such as the buying of “tomb”.  When asked why there is no receipt or documentation and how the money was paid as his mother passed away in Canada, the Husband explained that his relatives paid in Canada first.  When the relatives came to Hong Kong, he paid them back by cash. 

49.  Without any documentation and without any further details as to how that sum of HK$800,000 in cash was allegedly paid back (such as how many relatives did the Husband pay back, on how many occasions was the sum of HK$800,000 paid back and how much did the Husband pay back by cash each time), especially in view of the restriction of the amount of cash being allowed to be brought back to Canada, on balance of probabilities, I am of the view that the Husband’s explanation is inherently implausible.  I do not accept his explanation of how the sum of HK$800,000 was used and I am of the view that it is more probable than not that the alleged sum of HK$800,000 had been dissipated.  Therefore, I am of the view that the amount of HK$800,000 should be added back.

(c)   HK$500,000 money allegedly paid for repair works in Canada

50.  About the HK$500,000 allegedly used to pay for the repair works of the Calgary Property, during cross-examination, the Husband confirmed that there is no supporting document in that regard.  The Husband could only explain the amount was paid for the water damage caused to the Calgary Property.  When being cross-examined, the Husband confirmed that there was insurance cover for the Calgary, like all houses in Canada, but he further explained that the insurance coverage is not extensive.  It is inherently implausible that with that amount of renovation done in Canada, no document support could be provided.  I am of the view that there must be at least some sort of communication of what instructions given to workers, quotation, invoice or payment etc.  It is inherently implausible that no documents are disclosed and the expenses are referred to as “personal expenses”.  On balance of probabilities, I do not accept the Husband’s explanation and I am of the view that the amount of HK$500,000 had been dissipated and should be added back.  

(d)   HK$300,000 money the Husband gambled away

51.  Regarding the HK$300,000 that the Husband said that he had gambled away, according to the Husband, the sum was spent or gambled away at the time when his mother passed away and he was in bad mood.  I notice that HK$300,000 is not a small amount and I am of the view that, with the Husband being a conservative investor with regular savings, the act of gambling away HK$300,000 is an extravagant act. The amount should be added back. 

(e)   HK$1 million money from BEA re-finance

52.  About BEA re-finance, it is admitted in the Husband’s evidence, which was supported by documentary evidence that on about 5^th November 2013, the Former Matrimonial Home was re-mortgaged with the Bank of East Asia and a sum of HK$3.72 million was lent to the Husband.  After deducting the then existing mortgage of about HK$800,000, the net amount available for the disposal of the Husband was HK$2.92 million. 

53.  It is the Wife’s stance that a sum of HK$1 million should be added back.  In the Husband’s 2^nd Affirmation filed on 11^th April 2016 (“the Husband’s 2^nd Affirmation”), he explained that out of the sum of HK$2.92 million, he took out about HK$1 million into his security account for investment, then another approximately HK$1 million for his personal use and the remaining sum of HK$920,000 was placed into his saving account in order to pay for the monthly mortgage repayment loan in the sum of about HK$17,000 per month.

54.  The Husband further explained in paragraphs 27 to 33 of the Husband’s 2^nd Affirmation that he had spent various sums in different ways.  With reference to documentary support, I accept that :-

(a)  HK$461,646.80 was used on 26^th February 2014 to purchase securities via HSBC investment account (with bank statement in support).

(b)HK$442,578.78 was used on 21^st March 2014 to purchase securities via HSBC investment account (with bank statement in support).

55.  During cross examination, the Husband also explained that he had purchased securities through BEA account, in the sum of HK$1,152,500 on 24^th February 2014 (with bank statement in support).

56.  For other sums explained in paragraphs 27 to 33 of the Husband’s 2^nd Affirmation, I notice that they are items of expenses of legal fees, for personal use, for repayment of mortgage or transfer from account to another account without explanation of the use.  As I have explained hereinabove in paragraph 38, these have been calculated and generously taken into account already. 

57.  Therefore, with the amount of re-finance, which are liquidated amount for the Husband’s disposal and which was taken out on about 5^th November 2013, shortly after the Wife petitioned for divorce on 18^th September 2013, I rule that the sum of HK$863,274.42 (HK$2,920,000 – HK$461,646.80 - HK$442,578.78 - HK$1,152,500), which was unexplained and on balance of probabilities I accept having been dissipated, should be added back.

(f)   HK$0.65 million rental income of HK$25,000 per month

58.  About the rental income of HK$25,000 per month, it is the Wife’s stance that the total sum of HK$650,000 (HK$25,000 x 26 months) should be added back in the pot.  I notice that the Husband had not been cross-examined in this area. Besides, the Husband has disclosed since his Form E in 2013 that there is the rental income of HK$22,200, which was increased to HK$25,000 as disclosed in his Form E of 2015.  There is no evidence to suggest that the Husband has been secretly withholding the rental income or hiding the rental income somewhere.  I am of the view that the rental income received has been absorbed and reflected in the subsequent bank or cash balance, and should not be taken out separately to be added back to the pot.

59.  Regarding the allegation that the Husband has disposed of HK$0.7 million being the Company’s assets, the estimated HK$500,000 profit per year of the Company and the alleged loss incurred in the Company in the total sum of HK$1,000,000, I’ll consider these in the paragraphs hereinbelow, when considering the value of the Company.

Value of the Husband’s Company (issue (a))

60.  There is no valuation of the Company.  Pursuant to the Order of Deputy District Judge A.N. Tse Ching dated 3^rd June 2014, the Husband and the Wife had been ordered to appoint single joint expert on the valuation of the Husband’s shares in the Company.  However, according to the Wife, the Husband had failed to provide the necessary documents to the joint expert, Messrs. Paul W.C. Ho & Co., causing them to decline appointment subsequently on 30^th March 2015. 

61.  According to the Mr. Chan’s submissions, the Company was not a big business and the Husband had always worked at home.  The business of the Company had continuous losses for years and the Husband then closed his business and is now retired, and therefore the Husband has no income.

62.  As there is no expert report of the valuation of the Company, I will consider the value of the Company in view of the assets of the Company and the profit making situation of the Company.

(g)   HK$700,000 money from disposal of the Company’s assets

63.  About the assets of the Company, the Husband explained in his evidence that there were not much assets of the Company.  Given the nature of the business as explained by the Husband, that he did the buying and selling of yachts / speed boats, I accept that there have not been much assets of the Company.

64.  The only valuable asset, as could be shown in the accounting documents of 2012 and 2013, is the “boat” (which according to the Wife it was a yacht, while according to the Husband it was a speed boat”) (“Boat”), which was valued at HK$1.3 million.  According to the Husband’s evidence, when the Boat was sold in about July or August 2015, it was sold in the sum of about HK$700,000, with the sum subsequently transferred into the Husband’s HKBC account. 

65.  From the bank statement provided by the Husband, I notice that a sum of HK$750,000 was deposited into the Husband’s HSBC account on 29 September 2015.

66.  I also notice that the HSBC account was the bank account the Husband used to buy securities.  I notice that, as shown in the bank statements, after the said HK$750,000 was deposited into the Husband’s HSBC account, much more securities had been bought via that HSBC account.

67.  With the evidence before me, I accept the Husband’s explanation that the Boat was sold and the sale proceeds was subsequently deposited into his HSBC account, which he had spent the amount of sale proceeds on different aspects, including the buying of securities. 

68.  From the nature of business operation of the Company, I also accept that there are hardly any assets involved.  As explained hereinabove about the whereabouts of the sale proceeds of the Boat, I am of the view that the sale proceeds had been used by the Husband and reflected in the balance of either his bank balance or the value of the securities, and therefore I do not think the sale proceeds of HK$700,000 should be added back to the pot. 

(h)   HK$1.5 million income of HK$500,000 per annum for 3 years that can be generated from the Company

69.  I’ll now consider whether HK$1.5 million should be added back to the pot.  This issue has to be viewed together with the Husband’s allegation that the loss incurred for the Company had been accumulated to the sum of about HK$1 million.

70.  According to the Husband, the Company had continuous losses for years and the Husband then applied for deregistration in about 2016.  The total loss accumulated from the Company was about HK$1 million. 

71.  The Wife could not agree with the Husband’s stance.  The Wife’s stance is that the alleged accumulated loss of the Company, if any, were not actual loss, but the way the Husband used the expenses of the Company to subsidise his personal and/or home expenses.  Ms Lau pointed out that there is no supporting evidence to show that the Company incurred accumulated loss to the sum of about HK$1 million.  On balance of probabilities, I do not accept that there is real loss in the sum of HK$ 1 million.

72.  According to Ms Lau, the Husband tried to deny the Company having paid for his personal expenses in order to show that the Company was not profitable.  However, as shown in his evidence during cross-examination, the Husband could not deny that the Company did not employ anyone and he worked at home. 

73.  According to Ms Lau, the following items showed clearly that the Company had been subsidising the Husband’s personal expenses or home expenses.  Taking the accounting record of the year 2013, it is clearly shown that the Company had been subsidising the personal or home expenses of the Husband including the following :-

(a)  rental of HK$112,800

(b)  motor vehicle expenses of HK$36,984.97

(c)  car park rental of $56,400

(d)  fines of HK$1,090

(e)  postage of $384

(f)  electricity of HK$802

(g)  gas of HK$1,801.2

(h)  telephone and internet of HK$3,943

(i)  water of HK$505.44

(j)  meals and entertainments of HK$115,602

(k)  medical expenses of HK$810 

74.  Ms Lau further submitted that from the documents provided, it is clear that in 2012, the sales turnover was HK$2.88 million and it increased by double in 2013 to HK$5.5 million.  The gross profit increased from HK$538,989.53 to HK$924,595.76.  It is shown in the unaudited accounting documents of the Company that depreciation for 2013 was in the sum of HK$200,101.63.  By removing the items in paragraph 73(a) to (k) above, which the Company had subsidized the Husband’s personal expenses, and by removing the depreciation in the sum of HK$200,101.63, the Company was making a profit of about more than half a million in 2013.  Therefore, as a bench mark for the years of 2014, 2015 and 2016, income of HK$500,000 per year (ie. a total of HK$1.5 million) should be added in the pot.  

75.  I have reservation with the Wife’s submissions and analysis in this regard.  During cross-examination, the Husband explained that he did apportion some of the home and personal expenses to be subsidised by the expenses of the Company, as he worked at home.  However, from the unaudited accounting documents for 2012 and 2013, it could be shown that apart from the items (in paragraph 73(a) to (k) above), there are items clearly distinctive and exclusive for the expenses of the Company.

76.  Apart from the total income from sales and the gross profit, it is only fair also to consider the net profit.  From those unaudited accounting documents, it is shown that for 2012, the net loss for the years of 2012 and 2013 are HK$240,946.78 and HK$1,284.10 respectively.

77.  Therefore, I do not agree with Ms Lau’s submissions that a sum of HK$500,000 should be treated as a benchmark for the 3 subsequent years so that the total sum of HK$1.5 million be added back to the pot.

Whether there is full and frank disclosure

78.  However, it is alarming to note that only unaudited accounting documents for the years of 2012 and 2013 had been provided.  No such documents are provided to show how the business of the Company had been doing since after 2013.  That means there is no document showing that the Company had been making a loss and the accumulated loss was up to about HK$1 million, which led to the Husband’s decision of having to end the business and apply for deregistration of the Company.  

79.  This is further aggravated by the non-disclosure of the Company’s documents as submitted by Ms Lau.  In the Husband’s Answer to Questionnaire filed on 4^th February 2015 and the 2^nd Answer to Questionnaire filed on 16^th December 2015, there were a number of answers under the column “purpose of withdrawal” with answers of :-

(a)  “need to retrieve from bank for details (to be provided)”;

(b)  “to purchase merchandise goods for running business, etc”;

(c)  “to pay merchandise goods”; and

(d)  “the Respondent’s business dealing transactions”  

80.  Pursuant to the Order of Deputy District Judge A.N. Tse Ching dated 15^th March 2016, it was ordered that the Husband do provide answer with all related supporting documents in a supplemental answers of the entries where the Husband answered under the column “purpose of withdrawal” with answers stated in paragraph 79 (a) to (d) above.

81.  However, no such supplemental answers or related supporting documents had been provided.  As summarised by Ms Lau, during cross examination, the Husband admitted that he has failed to disclose, inter alia, the following :- 

(a)  All the sales contract of the Company

(b)  All the sales invoices of the Company

(c)  All the purchase of boat documents of the Company

(d)  All the purchase of merchandises documents 

82.  Ms Lau further submitted that from the Husband’s 4^th Affirmation filed on 23^rd February 2017, it is clear that the Husband has failed to disclose, inter alia, (a) any bank statements of the Company opened with Hang Seng Bank Limited after March 2014 when the Company only allegedly closed down in 2015 and with the application to deregistration received by the Inland Revenue Department on 12^th September 2016; (b) any document to show that his Citigold account opened with Citibank has been closed from May 2015 and what happened to the last balance of HK$51,840.58; and (c) any document to show how the assets of the Company has been disposed of and what happened to the monies generated from the disposal of the company assets (save and except the Husband explained during evidence in trial that a sum of HK$750,000 could be shown being deposited into his HSBC account on 29^th September 2015).

83.  I remind myself the court is not to analyse each and every single transaction and expenses of the Company.  But I notice with the disclosure by the Husband, there is simply no accounting document to show whether the Company had been making a profit or a loss after 2013.  The Husband’s 4^th Affirmation was filed on 23^rd February 2017 pursuant to my order dated 16^th February 2017 to update the Court as final disclosure before trial.  The Husband chose to disclose 4 pages of documents about the deregistration of the Company, but not the accounting records for the years after 2013 or documents in compliance with the previous disclosure order made by the Court.  This is far from satisfactory, which the court is entitled to draw adverse inference in that regard. 

84.  There is also some concern about how well the business had been doing.  In relation to the Husband’s evidence, I agree with Ms Lau’s submissions that some of the Husband’s answers in both the 2 affirmations were inconsistent, untruthful and contradictory.  In the closing submissions Ms Lau, she summarized some examples as follows :-

“(a) Meaning of ‘to pay merchandise’ in the 2^nd Answer were contradictory and inconsistent. (see G/1414: Answer 1 under Answers 4.2 and 4.3 vs. D/806 Ans. 8. Sum of HK$26,500 and $33,000 were actually rental payment, not purchase of merchandise and his explanation was he did not understand why the solicitors answered like this)

(b) He claimed that he did not understand the real meaning of ‘merchandise’ and merchandise can mean stationery for him. It was a word used by his solicitors and he did not think that this is an important detail.

(c) His answers in the 2^nd Answer also contradicted or was inconsistent with his 2^nd Affirmation (D/804 Ans. 5(a) $30,000 and (b) $80,000 were loan to PW (the Company), but in G/1414 Ans. 1 ‘Under answer 4.2’ were ‘to pay merchandise goods.) It is submitted that the figures are too low for purchase of merchandise, i.e. yachts.

(d)   His answers in the 2^nd Answer also contradicted or inconsistent with his 2^nd Affirmation (D/912 Ans.27 $300,000 were payment of legal costs, but in G/1415 Ans. 5 was ‘to pay merchandise goods.)”

85.  The inconsistencies of the answers have to be viewed in the context that the Husband had failed to disclose the documents indicated hereinabove, coupled with the failure to have a joint valuation of the shares of the Company despite an express order to do so and the failure to provide any auditing documents of the Company after 2013.  I am satisfied that there is no full and frank disclosure of the Husband in relation to the Company.

86.  From the evidence before the Court, there is also much query as to the profit earning capacity of the Company or the type of business the Husband can start again, given his explanation of the nature of business.  He places order for yacht / speed boats when there are customers looking for one.  The overheads of running the business is relatively low.  The Husband could work at home, without the need to employ any staff.  Agents could be engaged to look for business for him who charges commission when there is transaction.

87.  It is trite to repeat the importance and duty for full and frank disclosure of one’s financial means in any ancillary relief proceedings.  This duty is absolute and continuing.  As explained in paragraph 73 of LKW v DD (supra) :-

“The parties have an important duty to ensure that the court has sufficient information regarding their assets. They must make full and frank disclosure and a party who fails to do so runs the risk of the court drawing adverse inferences and robustly attributing assets to him or her, or making adverse costs orders.”

88.  The next step is to consider what inference should be drawn with the non-disclosure. Having considered the background of the case and the evidence, I am of the view that the fair approach under the circumstances is not to add back the estimated profit earned or the estimated value of the Company to the pot, but to draw adverse inference as elaborated below when considering the earning capacity of the Husband.

89.  Referring to paragraph 35 hereinabove, having considered the value of the Company and how much should be added back to the pot, I rule that the total family assets are valued at HK$12,976,605.06 (HK$10,954,495.64 + HK$800,000, as explained in paragraphs 48 to 49hereinabove + HK$500,000, as explained in paragraph 50 hereinabove + HK$300,000 as explained in paragraph 51 hereinabove + HK$863,274.42 as explained in paragraphs 52 to 57 hereinabove – HK$441,165 liabilities agreed to be deducted as explained in paragraph 34 hereinabove).

Earning power and financial resources of the parties (Issues (d) and (e))

90.  The Wife, born in the mainland, now aged almost 40, with education up to 3 years of junior secondary education and a course about tourism after education, had worked in the mainland for a few years.  Despite it is disputed whether there was cohabitation before marriage, the Husband agreed that since marriage in 2003 at least, the Wife had been financially relying on the Husband.

91.  Considering the type of work the Wife had been doing before marriage, and the fact that she has not been working for at least the past 10 odd years, her earning capacity is much lower than that of the Husband.

92.  According to the Wife, her earning capacity is affected by her health.  The Wife’s evidence is that she has neck and back pain, but there is no proper medical report submitted for the court’s consideration.  Considering all the medical receipts and the Chinese medical note or record from a hospital in the mainland produced, I do not form the view that the neck and back pain or any physical condition alleged by the Wife would affect her earning capacity.

93.  It is the Wife’s evidence that she has not worked in Hong Kong and she barely knows English.  I agree that the type of work the Wife could do would be limited, but with the Wife now aged about 40, I am of the view that she could start by doing some manual work, and could even get training and accumulate her work experience.  When time goes by, she could accumulate more experience and her income would improve in future.

94.  The Wife also explains that now with the Child in her primary school, she has to take care of the Child and could not work.  I accept that the Wife has been a full time housewife all along, and now with the parties sharing care and control of the Child, and with the Child having about half of the time staying with the Wife, I accept that it will be difficult for the Wife to start working now.  However, when the Child goes to secondary school in about a year’s time, the Wife will then have more free time, and could enter the labour market, if not full time, at least with part-time work.

95.  Besides, the Wife could start equipping herself now, by learning some skills to equip herself to enter the labour market, such as learning English and learning to use computer etc.

96.  But I accept that with the Wife’s background, she has much less earning capacity compared to that of the Husband.  There was evidence that the Wife had invested some sort of investment fund, which she sold in about 2013 when there was insufficient maintenance from the Husband.  But comparing to that of the Husband, which he admitted that he had been saving money and making investment consistently in the past, I accept that with the Wife’s background, she has much less earning capacity and financial resources compared to that of the Husband. 

97.  Regarding the income, earning capacity and financial resources of the Husband, the Husband is a university graduate from Canada.  I have considered his previous work experience when he was employed and the salary he earned.  For the last employed work in 2000, the Husband earned a yearly income of about HK$1 million (ie. about HK$83,333 per month).  

98.  Later on, with the Husband starting his own company in 2007, though it was deregistered in about 2016, regarding the nature of the business, I am of the view that the Husband could continue with the same type of business.  Also with the experience and the connection that he has accumulated, he could start another company of the same nature, and like what he did before, using his residential home as office, saving much overhead expenses. 

99.  I have not lost sight of the fact that the Husband is now about 61 years old.  But considering his background and experience, I am of the view that he could continue investing in stock and funds. 

100.  During cross-examination, it was put to the Husband that apart from the pension in Canada in the agreed sum of HK$907,135.95, the Husband could also get the Canadian Pension Plan and/or the old age security.  The Husband’s answer was that he was not sure if he would be eligible, as he had not been working in Canada for many years and he is not currently living in Canada now.  I notice that whether or not the Husband will get these additional monthly pension will depend on a number of factors.  With the evidence before the Court, I am unable to conclude whether or not the Husband is eligible to these additional monthly pension.  I can only conclude that there is the possibility that the Husband could be eligible to these additional monthly pension in future, which could be financial resources of the Husband.

101.  Besides, as analysed hereinabove in paragraphs 78 to 88, with the non-disclosure of the relevant documents about the Company, I am of the view that adverse inference could be drawn.  The question is what inference should be drawn.

102.  I have considered the background of the case, about the nature of business and business operation, that the Husband could work at home, there is no need to rent a separate office and no staff needs to be employed.   The Husband could engage agents to look for business for him.  Although it is the Husband’s case that the Company has incurred loss of about HK$1 million since 2007 to the deregistration of the Company, no supporting documents had been shown. 

103.  Even if there was loss, it could be understood that at least some of the expenses of the Company had been used to subsidise the Husband’s personal or home expenses. Another example to show the Husband had used the expenses of the Company to subsidise his own expenses could be shown in the accounting documents of 2013 that the expenses for the Boat, which the Husband had been using for leisure for himself, his family and friends, amounted to at least about HK$129,442.5 for 2013 (ie. boat expenses of HK$14,322.4 + oil expenses of HK$56,366.1 + mooring fees of HK$58,754)

104.  I have also considered the background that the Husband had ceased being employed since 2007, bearing in mind the income of the last work of about HK$1 million per annum.  It was at a time when the Child was about 1 year old.  The Husband agreed that he had the good habit of saving money and had been prudent in investment.  It is not in dispute that the Husband has always been the sole breadwinner of the family, financially supporting the family without any difficulties, even after he ceased being employed in 2007.

105.  Having considered all the circumstances of the case and the background, it is fair to conclude that the Husband could start his business again anytime with little additional operating costs, as some business expenses could be shared with the household expenses.  Also considering that almost all non-disclosure of documents relating to the Company, I rule that a fair approach is to draw inference that the Husband has the earning capacity and financial resources to continue supporting his personal and home expenses in future, including the expenses of the Child.

Financial needs of the parties and of the Child (Issue (f))

106.  It cannot be denied that the Wife has accommodation needs, not only for herself, but also for the Child when she has shared care and control. 

107.  According to Ms Lau’s submissions, by considering the Wife’s needs, the court should award HK$11 million to the Wife, comprising of HK$6 million to buy a property and also HK$5 million for her needs. 

108.  It was calculated on the basis that until the Child turns 18 in January 2024, the Wife would need HK$2.52 million (ie. $30,000 per month x 12 months x 7 years).  According to the Wife’s Form E, which had not been challenged at cross-examination, the total expenses for herself and the Child per month would be HK$44,399 (with breakdown of HK$25,484 for Part 4.1, HK$14,490 for Part 4.2 and HK$4,425 for Part 4.3 of the Form E).  If the Wife buys her own property, she would not need to pay for rent. But she still needs to pay for management fees. Therefore, she asks for a monthly sum of HK$30,000 (ie. HK$44,399 – HK$15,000).

109.  According to Ms Lau, after the Child turns 18, the Wife may need to look for employment but given her age then, together with her background, education level and working experience (or the lack of it), the Wife might only be able to earn about HK$8,000 to HK$10,000, and she would need about HK$20,000 a month for the rest of her life.  Therefore, another sum of HK$2.5 million would meet her needs. 

110.  Regarding the financial needs of the Wife, I am of the view that HK$5 million for accommodation should be sufficient.  She could either buy a property to live in Hong Kong, or continue renting a place to live.  With reference to her expenses in her latest Form E that the monthly rental is HK$18,000, HK$5 million should be sufficient for her to rent a place for about 20 years. 

111.  For the other financial needs of the Wife, as I am of the view that she could start at least working part time and eventually, her experience and income would increase.  I am of the view that for about 1 to 2 years, when the Child is still in primary school and just starting secondary school, full allowance of HK$30,000 per month is considered, with a total of HK$360,000 to HK$720,000 (ie. HK$30,000 x 12/24 months).  For the coming years, when the Wife could resume working part-time and eventually full time, I am of the view that she could earn about HK$10,000 per month.  Given her age of only about 40, support should be given to her for another 4 to 5 years, with a total of HK$960,000 to HK$1.2 million (ie. HK$20,000 x 48/60 months).  I am of the view that the Wife could financially support herself fully eventually.

112.  For financial needs of the Husband, Mr. Chan submitted that as the Husband had closed his business and is now retired and has no income, he solely relies on the existing family assets for his living.  Other than the personal needs, the Husband also has to finance the Child for her expenses. 

113.  According to the Husband’s estimated expenses for himself and the Child, as listed out in a table in his 3^rd Affirmation filed on 23^rd November 2016, it is estimated that the expenses are as follows :-

(a) From now to Sept 2018 (when the Child at primary school), HK$350,000

(b) From Sept 2018 to July 2024 (when the Child at secondary school), HK$1.1 million

(c) From Sept 2024 to May 2028 (when the Child studies university in Canada), HK$1.6 million

(d) From 2017 to 2024 (with the Husband having retired and stays in Hong Kong), HK$4 million

(e) From 2024 to 2028 (with the Husband having retired and stays in Canada), HK$1.2 million

(adding together to a total of HK$8.25 million)

114.  During cross examination, the Husband’s expenses as shown in Form E are challenged, including the school fees for the Child, the expenses for 2 cars and contribution to parents.  According to the Husband’s Form E of 2015, the total expenses are HK$93,420 (comprising of HK$57,620 of Part 4.1 + HK$24,000 of Part 4.2 + HK$ 11,800 of Part 4.3).

115.  I notice that if the Former Matrimonial Home is sold, there is no need to pay further mortgage instalments.  If not, it could be rented out and rental payments could be received.  Besides, after this ancillary relief application, interim maintenance for the spouse will no longer be applicable.

116.  For the Husband, I have not lost sight of the fact that he is about 21 years older than the Wife and he had provided the undertaking that he will be responsible for the educational expenses of the Child.  While I agree that there is the accommodation needs of the Wife, it should not be ignored that the Husband also has accommodation needs.  If not buying a property, the Husband could continue renting a place to live, as he is doing now. 

117.  With my analysis above, with the Husband’s earning capacity and financial resources, including his ability to invest and the inference I have drawn, I am of the view that he is able to continue supporting himself and continue paying for the personal and home expenses, and the expenses for the Child in future, which also includes the ability of paying for his accommodation.

118.  Regarding the financial needs of the Husband and the Child, I am of the view that the expenses of the Child may not be as high as submitted by the Husband, as the Child may not study at international school for secondary education, but to continue with the same line of school for the secondary education.  In that case, no school fees will be needed, as it will be a subsidised government school.  I notice that there are no supporting documents regarding the Husband’s estimation of the educational expenses of the Child and there is no evidence that there is the real plan to do so.

119.  The financial needs of the Child to study in Canada in future are also included in the Husband’s table.  However, there is no substantive evidence that this is a real plan to be carried out, but an intention or possibility expressed by the Husband.  Therefore, with the evidence before me, I am of the view that the needs of the Husband and the Child would not be as high as HK$8.25 million. 

120.  In the event that the Child changes to study in an international school for secondary education and eventually studies in Canada, much school fees will then be needed.  If that is the case, as explained above, inference had been drawn that the Husband has the financial resources and earning capacity to continue supporting his own expenses and that of the Child.

121.  Referring to paragraphs 31 to 33 hereinabove, I have also considered that at the time if the Husband sells the Calgary Property, he may have to pay for tax.  The issue of payment of tax was raised at the trial, which was not agreed. 

122.  I notice that there is no evidence that the Husband is going to sell the Calgary Property in any near future.  On the contrary, with the Husband’s evidence that he plans to retire later in Canada, there is the possibility that he may choose to live at the Calgary Property.  The best the court can do is to bear in mind that there is the possible financial obligation of the Husband that he may have to pay tax of about HK$408,000 when the Calgary Property is sold.

123.  With my analysis above, I am of the view that both the Husband and Wife would be able to provide for the expenses of the Child (other than the educational expenses which the Husband had undertaken to pay) when the Child lives with the Husband and the Wife respectively.  

Other circumstances to consider

124.  There are other circumstances to consider, as stated in s. 7(1)(c) to (f) of MPPO, including the standard of living enjoyed by the family before the breakdown of the marriage; the age of the parties and the duration of the marriage; any physical or mental disability of the parties; the contributions made by the parties to the welfare of the family; and 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 acquiring.

(i)   Standard of living during marriage

125.  The standard of living during marriage is not disputed.  The Former Matrimonial Home at Island Resort was about 1,100 sq. feet.  A domestic helper had been employed for a short period of time only.  The parties had been member of the Club House of Island Resort and member of the Yacht Club.  The family had holiday about twice a year.  There was a yacht / speed boat bought by the Husband, which was later kept under the name of the Company, for personal, family and friends’ enjoyment of sailing.  I accept that the family enjoyed an average to a little higher than average standard of living during marriage. 

(ii)   Duration of marriage (whether any co-habitation before)

126.  The Wife is now aged almost 40 and the Husband is about 61.  The parties were married in 2003 and separated in about 2011.  There are different versions as to whether the parties started co-habitation before marriage. 

127.  According to the Wife, the parties met each other in 1998 in Wuhan of the mainland.  In April 1999, the Wife went to Shenzhen for working in a pub and accommodation was included.  But the Husband did not like the Wife working in a pub and therefore the parties removed the Wife’s belongings from the accommodation provided by the employer and started co-habitation in April 1999, renting a flat in Shenzhen, with rental and utilities paid by the Husband.  In 2001, the Husband was assigned by his then employer to work in Shanghai and they resided in a property paid by the Husband’s employer.  In 2003, the parties were married and about half a year later, the Wife came to Hong Kong with a two-way permit.

128.  The Wife had explained in great detail from paragraphs 2 to 16 of her 5^th Affirmation filed on 28^th October 2016 (“the Wife’s 5^th Affirmation”) about how she met the Husband, how they started co-habitation and where they had been living.  

129.  According to the Husband, there was no co-habitation before marriage.  In paragraphs 26 to 27 of the Husband’s 3^rd Affirmation filed on 23^rd February 2017 (“the Husband’s 3^rd Affirmation”), the Husband explained how they met.  The Husband further clarified that they were lovers since 1999.  As they lived in Hong Kong and in the mainland respectively before marriage and there was not much time to be together, there was no co-habitation.

130.  I notice that the Husband did not respond to the details explained by the Wife’s 5^th Affirmation about co-habitation and there was no cross-examination of the Wife at all regarding the issue of co-habitation at trial.

131.  When the Husband gave evidence during trial, he basically tried to disassociate himself from all connections with the Wife prior to getting married in Hong Kong in 2003, including not having co-habited with the Wife prior to marriage, having never lived in Shenzhen or Shanghai, could not remember the address of the company quarter in Shanghai, could not remember the address of the Wife in Shenzhen, having never paid for the rental or utilities of the Wife when she lived in Shenzhen and not remember if he had ever invited the Wife to come visit him in Hong Kong.  

132.  According to the Husband, he has always lived in Hong Kong.  He went to Shanghai for work and went to Shenzhen to visit the Wife.  They had been lovers since 1999, but they never co-habited as husband and wife.

133.  However, from the Husband’s evidence during cross-examination, his disassociation of himself from all connections with the Wife prior to getting married could hardly stand. 

134.  Take the example of the quarter in Shanghai owned by the company that the Husband had worked for at the material time.  It was the Husband’s initial position that the quarter was accessible by all staff of the company.  He then changed his evidence to only 4 to 5 employees may use the quarter and later qualified his evidence to the effect that application had to be made to avoid double using the quarter.  The Husband admitted he had keys to the Shanghai flat, but he did not know if the Wife got keys to the flat in Shanghai.  If the Wife had never lived in the Shanghai flat, I would have expected the Husband would have denied outright or put to the Wife.

135.  It is the Wife’s stance that the Husband had been paying for the rental and utilities expenses when they lived together in Shenzhen.  The Husband did not deny having given money to the Wife, but he explained that he paid money to anyone in the mainland, and that was very common at that time, but he had never paid for the rental or utilities of the Wife when she lived in Shenzhen. 

136.  There was detailed evidence given by the Wife of incidents and details supporting the facts of co-habitation before marriage, including the addresses when the parties resided in Shenzhen and Shanghai, photos taken of the flats, the Wife having met the relatives of the Husband, the visits to the Husband’s parents in the mainland to visit the ancestral house in Zhong Zhan and in Canada of where the Husband’s parents lived. 

137.  The Wife even produced an exhibit attached to her 6^th Affirmation filed on 23^rd February 2017, which is a birthday card to the Wife from the Husband’s parents dated May 2001, addressing the Wife as the daughter-in-law in hand written words.  The Husband did not deny his parents having sent that card with those content.  He explained that it was a beautiful misunderstanding on the parts of his parents.

138.  The Husband admitted being lovers with the Wife since 1999 and the Husband did not deny having met the Wife in Wuhan of the mainland.  The Wife then moved to live in Shenzhen, and later when the Husband stationed and worked in Shanghai, the Wife lived in Shanghai.  But the Husband had been silent on where the Wife had lived throughout the years before marriage, any work of the Wife and how the Wife could manage her living financially if without the financial support from the Husband. 

139.  I have not lost sight of the fact that the Husband had not been habitually residing at Shanghai or Shenzhen.  From the evidence before me, I accept the Wife’s version that whenever the Husband went to Shenzhen or Shanghai and at the time when the Husband worked in Shanghai, they lived together as husband and wife and the Husband had been supporting the finance of the Wife all those years.  On balance of probabilities, I accept that there was co-habitation between the parties since 1999.  

(iii)   Any physical or mental disability

140.  There is no physical or mental disability of the parties.  About the alleged neck and back pain of the Wife, I have already explained in paragraph 92 above that I am not of the view that the neck and back pain or any physical condition alleged by the Wife would affect her earning capacity.

(iv)   Contribution made by the parties

141.  About the contribution made by the parties, it is not in dispute that the Husband has always been the sold breadwinner of the family and the Wife has always been a housewife, taking care of the family. 

142.  Mr. Chan submitted that it is the Husband’s position that the Wife had not worked at all during marriage and did not contribute to any income of the family.  Mr. Chan further submitted that as the Husband mostly worked at home, the Husband also took care of the Child.  Mr. Chan also submitted that the Wife did not take care of the Child and the family well.

143.  Further, Mr. Chan submitted that as the Husband got married in 2003, at the age of 47 years old, most, or at least part of the family assets were acquired and accumulated prior to the marriage.  Therefore, in terms of contribution, the Husband had contributed substantially more than the Wife.  This point will be further considered when deciding the outcome.

144.  The Wife should not be criticised of not having been under employment during marriage.   I have to reiterate the second principle stated in the case of LKW v DD (supra).  In paragraph 57 of the case, the principle was stated clearly that :-

“The second [principle] is that the concept of fairness requires the refutation of any gender or role discrimination. Lord Nicholls reiterated this at the start of his speech in Miller/McFarlane when, referring to White v White, he stated:

‘… the House emphasised that in seeking a fair outcome there is no place for discrimination between a husband and wife and their respective roles.  Discrimination is the antithesis of fairness.  In assessing the parties’ contributions to the family there should be no bias in favour of the money-earner and against the home-maker and the child-carer.  This is a principle of universal application.  It is applicable to all marriages.’ ”

145.  From the evidence, I accept that both the parties had contributed, but in different ways in the marriage, and the contribution should not be differentiated between breadwinner and home maker.

(v)   The Canadian pension the Wife will lose change of acquiring

146.  It is submitted by Ms Lau that the Husband will be paid a monthly pension by the Canadian Government when he reaches the age of 65 and will have medical benefits as a Canadian citizen, and therefore the Wife would be deprived of these benefits after the divorce.  I had considered this matter in paragraph 100 above.  There is a possibility that the Wife would be deprived of these benefits, if the Husband is eligible to those benefits.

(vi)   Conduct of the parties

147.  When considering the ancillary relief, the court should also have regard to the conduct of the parties as required in s. 7(1) of Cap. 192.  Regarding the allegation that the Wife did not take care of the Child or the family well, examples had been given in paragraphs 33 to 36 and 49 to 52 of the Husband’s 3^rd Affirmation.  Some of the allegations are related to contribution, alleging that the Wife had not contributed much or satisfactorily to the family. 

148.  To name a few of the Husband’s allegations against the Wife, the Wife had taken the Child to the mainland to visit relatives and when the Child is back, the Child suffered from vomiting and diarrhea, the Wife used to give Chinese medication to the Child when the Child is ill, instead of taking her to see a doctor, there were incidents that the Wife left the home without informing the Husband (which the Wife explained the reason during trial), when the Husband’s mother passed away, the Wife did not console the Husband, the Wife did not cook much and had no interest in doing housework etc. 

149.  I have to reiterate the 4^th principle stated in the case LKW v DD (supra) which is applicable when the court is considering matters about conduct and contribution, as follows :-

“62. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement.

63. Such attempts have been encountered in various contexts, including disputes over the extent of a party’s assets; over the contribution made to the welfare of the family; over the parties’ conduct; over claims to be compensated for having suffered some disadvantage, and so forth……

68. Baroness Hale took the same view, holding that the question should be approached by deploying a standard equivalent to the ‘obvious and gross’ standard applicable in ‘conduct’ cases.

69. The essence of this fourth principle is reflected in Thorpe LJ’s illuminating comment in Parra v Parra:

‘… the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviates the need for the investigation of minute detail and equally the need to make findings on minor issues in dispute.  The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party.  Equally he is not bound to adopt a conclusion upon which the parties have agreed.  But this independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable.  Judgments in this field need to be simple in structure and simply explained.”

150.  It is well established legal principle that “conduct” was only relevant to financial provision if it was “obvious and gross”.  The court should refrain from permitting parties to indulge in a post mortem of their marriage and to find guilt and blame.

151.  Having considered the Husband’s allegation about the Wife’s conduct and the legal principle, I am not of the view that the alleged conduct of the Wife, even if existed as alleged, was so gross and obvious that would affect the consideration, including the division of assets, in the ancillary relief proceedings.

152.  Ms Lau also explained there is conduct of the Husband for the court’s consideration, including the non-compliance of court order and the non-disclosure of documents.  I am of the view that these relate to the conduct of proceedings, which should be considered to be reflected in orders for costs rather than directly in the scale of the awarded sum.

Deciding the outcome

153.  When deciding the outcome, I will cover issue (g) of whether the matrimonial properties should be divided equally.  If not, what the appropriate division would be; issue (h) of how much should be paid to the Wife and how much should be kept by the Husband; and issue (i) of whether a clean break is possible and how to achieve the clean break.

154.  In the closing submissions, both parties asked for a clean break of the ancillary relief between them.  The Wife asked the Court to consider her needs, and asked the Court to rule that HK$11 million should be granted to her as ancillary relief.  The Husband also asked the court to consider his needs and that of the Child, and to rule that HK$8.25 million should be granted to him.

155.  I have considered the financial needs of the parties and of the Child, as explained hereinabove.  I am of the view that the Husband and Wife could each support the Child financially when the Child stays with him/her, and the Husband had undertaken and I accept that the Husband is willing and capable to continue paying for all the educational expenses of the Child.  Having considered parties’ stance, the evidence and the background of the case, I rule that a clean break between the Husband and Wife is an appropriate order and there is no need for periodical payments. 

156.  The next question is, regarding the clean break, how much to be obtained by the parties. That is, whether the assets should be divided equally.  If not, what proportion should the Husband and Wife get respectively.

157.  In Ms Lau’s submissions, other than asking the Court to consider the needs of the Wife and the Child, Ms Lau also ask for equal division of the assets.  According to Mr Chan, the Husband asked for departure from the principle of equal division. 

158.  In support of the Husband’s position, Mr Chan submitted that the reasons for departure of equal division include the following :- (a) this is a short marriage; (b) the Wife’s conduct that she had not taken care of the child or the family well; (c) the Husband had contributed much more than the Wife; and (d) the majority of the assets were brought into marriage by the Husband.

159.  Regarding the length of marriage, the parties married in 2003 and separated in about 2011.  As explained in paragraphs 126 to 139 hereinabove, I have ruled and accepted that the parties co-habited as husband and wife since 1999.  Those years of co-habitation should be taken into account when considering the length of marriage.  Even leaving aside whether or not there is co-habitation as husband and wife before marriage, the length of the marriage by itself could not be regarded as short. 

160.  About contribution and the alleged conduct of the parties, I have explained in paragraphs 141 to 145 and 147 to 152 hereinabove. 

161.  Considering whether there are good reasons for departing from equal division, I also have to consider the source of assets, which is a material factor, which may provide a reason for excluding it form the sharing principle on the basis that it is not an item of matrimonial property.

162.  It is the Husband’s case that the bulk of the assets were bought into marriage.  I notice that the Calgary Property was bought in 1989 and the Zhong Zhan Property is an ancestral home of the Husband’s family.  The Former Matrimonial Home was bought in 2007, after the parties have married. 

163.  However, apart from the source of the assets, an important factor which also comes into play is the duration of the marriage.  The importance of the source of the assets will diminish over time.  So, where it is a short marriage, the court may well be inclined to regard as excludable non-matrimonial property, assets acquired by one of the parties before the marriage.  But after a long marriage, those factors are likely to have much less weight.

164.  Even if the source of the assets is considered, I have to step back and look at the overall impact of all the factors to ensure fairness is achieved.  Given the background of the parties, the length of the marriage, the fact that the parties have joint custody and shared care and control of the Child which will have impact on the respective accommodation needs, the financial needs, the earning capacity and financial resources of the parties, I am of the view that there should be equal sharing of assets. 

165.  I have ruled earlier in paragraph 89 hereinabove that the total amount of assets is in the sum of HK$12,976,605.06, to be rounded up to HK$13 million.  As a result, the Wife should share about half of the assets, ie. to be given a lump sum of HK$6.5 million. 

Costs

166.  Generally, costs should follow the event.  In the present case, the Wife has to come to court to apply for ancillary relief.  She did not get everything she asked for, but comparing that to the Husband and considering the parties’ respective open proposals, the Wife could be regarded as having substantially won the case. Together with the court’s finding that because of the Husband’s lack of full and frank disclosure, adverse inference had been drawn, which may have an impact on costs.

167.  But the court does have discretion in the matter of ordering costs.  At the same time, when considering the order I make that the Wife be awarded a lump sum of HK$6.5 million, it is substantially the value of the Former Matrimonial Home.  If it is to be sold, the Husband will no longer receive monthly rental income.  Considering the nature and intended use of the Calgary Property and the Zhong Zhan Property, and the onerous financial responsibility to continue paying for all the educational expenses of the Child, I am prepared to exercise my discretion to grant an order nisi that the Husband pays half of the Wife’s costs, including all costs previously reserved, to be taxed if not agreed, with counsel’s certificate.  This is a costs order nisi, which shall be made absolute within 14 days from this order.

Conclusion

168.  Based on the reasons explained hereinabove, I make the following orders:

Upon the undertaking by the Husband that he will continue paying for all the educational expenses of the Child until she reaches the age of 18 or ceases receiving full time education, whichever is the later.

(1)Subject to the First Charge of the Director of Legal Aid, the Husband do pay the Wife a lump sum of HK$6.5 million by 2 instalments, with the 1^st instalment in the sum of HK$1 million to be paid within 2 months from the date the decree nisi being made absolute and the 2^nd instalment in the remaining sum of HK$5.5 million to be paid within 4 months from the date the decree nisi being made absolute, failing which the Former Matrimonial Home is to be sold in the open market at market price within 6 months from the date the decree nisi being made absolute.  Upon deducting the outstanding mortgage and all necessary expenses of the sale, the net sale proceeds shall be used to pay the Wife the said lump sum by payment through the Director of Legal Aid.

(2)There be liberty to apply in respect of the implementation of this order, including further directions about the sale of the Former Matrimonial Home, if needed.

(3)Upon the decree nisi being made absolute, the maintenance order dated 25^th March 2015 be discharged.

(4)The Husband shall pay half of the Wife’s costs for the ancillary proceedings, including all costs reserved, to be taxed if not agreed.  Counsel certificate be granted.  This costs order nisi shall be made absolute within 14 days from this order.

(5)The Petitioner’s own costs be taxed in accordance with Legal Aid Regulations;

(6)A penal notice will be endorsed.

169.  A section 18 declaration to issue.