C v. C

Headnote

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JUDGMENT

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Hunter, JA :

1. This is an appeal from a decision of Mortimer J given on 27th January 1989, and perfected by Order dated 28th April 1989, whereby he made various Orders regulating the financial position of the appellant and the respondent, whom for convenience I shall continue to call husband and wife, after divorce. The most contentious aspect of the judge's provision was his order that the wife paid to the husband a lump sum of HK$19 million. This part of the final order the husband now challenges on appeal.

2. The parties' marital history was summarised by the judge thus.

"The parties were married in 1957. The husband was aged 27 and the wife 23. After 29 years the marriage broke down. They parted finally on 10th February 1987, but effectively the marriage had broken down after August 1986. The husband petitioned; the wife cross-petitioned; and a decree nisi was granted on his admitted adultery. This was made absolute on 12th August 1987."

3. During the marriage the husband had pursued a successful career as a solicitor and entrepreneur which had brought him great wealth.  Much of this wealth was put into the wife's name, and a substantial part was the subject-matter of dispositions made by her consequent upon the breakdown of the marriage. Also at the end of the marriage the wife had benefitted substantially from her father's estate. The result was that out of the total assets assessed by the judge at $90.338 m, $60.424 m was controlled by the wife and $29.914 m by the husband. This meant that in form the applicant was the husband for the setting aside of certain dispositions by the wife, which in the event was unopposed, and for lump sum provision for himself which was. The interests of the two sons of the marriage did not fall to be considered. They were adults, and very well qualified, established and endowed.

4. The court is empowered to order a lump sum by s 4(1)(c) of the Matrimonial Proceedings and Property Ordinance, MPPO, Cap 192, but before exercising such power it has to discharge the duty imposed by s 7 (1) to "have . regard to ... all the circumstances of the case" including the circumstances set out in paragraphs (a) to (g) inclusive. This is the first time that this court has had to consider the impact of this section in relation to very wealthy parties, where the usual constraints of insufficiency or of illiquidity of assets do not apply. The judge was persuaded that authority was of little assistance. Mr Singer QC for the wife argued for equality and a 50:50 division. Mr Ching QC for the husband argued for no fixed proportion although when pressed in evidence the judge regarded the husband as asking for not less than a 60:40 division. In the event after considering the provisions of section 7 and without further explaining his reasoning, the judge awarded what was the equivalent of a 55:45 division.

5. Mr Ching has invited our attention to a small number of decisions of the Court of Appeal in England where the problem of very wealthy parties has been considered under the parallel English legislation which was first section 5 of the Matrimonial Proceedings and Property Act 1970 and is now section 25 of the Matrimonial Clauses Act 1973. Mr Ching invited us to follow and apply the guideline advice offered by this authority, subject only to such qualification as was necessary by reason of major difference between our section 7 and England's section 25. In answer Mr Singer made two major submissions. First we were invited to construe section 7 for ourselves in the light of our perception of Hong Kong's need, and to ignore all English authority. Secondly he subjected the English authority to a critical analysis with a view to persuading us that it was unpersuasive, inconsistent and in certain respects erroneous. Collectively the authorities constituted, he suggested, a shaky jerry built edifice where each decision took the court farther from the words of the section. His main purpose was to show that the court should obtain no assistance from the pattern of awards in these cases which fell within the range of 25% - 35% of total assets.

6. Mr Singer's first submission ignores history. From as early as the Divorce Ordinance of 1932, the original Cap 179, where section 29, dealing with what was then called permanent alimony, precisely followed section 190 of the Supreme Court of Judicature (Consolidation) Act 1925, the Hong Kong legislature has followed the example of the English Parliament. Thus section 5(1) of the English Matrimonial Clauses Act 1963, which by subsection (c) first empowered the court to order "the husband to pay to the wife such lump sum as the court thinks reasonable" was enacted in Hong Kong in identical terms in section 28(1) of the Matrimonial Clauses Ordinance Cap 179. Section 7 of the MPPO was taken almost verbatim from section 5 of the 1970 UK Act. The important difference is that between 1970 and October 1984 the UK statute required the court: -

"So to exercise those powers as to place the parties, so far as it is practical and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsibilities towards the other."

This "target" provision, as it was conveniently called in argument, was omitted by the Hong Kong legislature from section 7(1). Part only of it, the reference to the "conduct of the parties" was adopted and inserted as part of the opening words of the section. In section 7(2) on the other hand the English target provision was included intact. This leaves no room for doubt that the omission was deliberate.

7. Subject to this change, the history of matrimonial legislation, and more particularly of that relating to financial provision, demonstrates a legislative intent in Hong Kong to use English experience and to follow England's example. This has inevitably and properly led to the repeated use in the Hong Kong courts of English authority and of English textbooks. I therefore have no hesitation in rejecting Mr Singer's first submission.

8. In order to consider Mr Singer's second submission, it is necessary to put into context the guideline advice which emerges from the English authorities namely: O-D v O'D [1967] Fam 83: S v S unreported in the Court of Appeal, but the first instance judgment of Balcombe J is reported in Times Newspaper 10th May 1980. Page v Page (1981) 2 FLR 198: Preston v Preston [1982] Pam 17, where Ormrod LJ took the opportunity to summarise the effect of the earlier decisions' at pps 24-25. More recently there is Gojkovic v Gojkovic (1990) 1 FLR 140 in the Court of Appeal, and two decisions at first instance referred to by Mr Singer, namely of Ward J in B v B (1990) 1 FLR 20, and of Stephen Brown J in Richards v Richards (1989) unreported.

9. It seems to me that the guideline advice or principles which can be extracted from these authorities can be summarised in this way: -

10. In my view the courts of Hong Kong can and should derive considerable help from the much wider experience of the English courts in this field. The English courts seem to me faithfully and carefully to have construed their section 25 and I am unimpressed by Mr Singer's criticism. For my part I gratefully accept and follow the guidance of these decisions.

11. A much more difficult question remains, which is to assess the impact of the target provision in the English statute and its absence in Hong Kong. I think there is force in Ormrod LJ's suggestion in Preston p 26 that the target provision stemmed from dicta of Lord Merrivale in N v N (1928) 44 TLR 324 when he said: -

"I conceive that I must take into consideration the position in which they were and the position in which she was entitled to expect herself to be and would have been, if her husband had properly discharged his marital obligation."

When section 5(1) of the Matrimonial Clauses Act 1963 first empowered the English court to award a lump sum, it turned for guidance to the same source. Thus in Brett v Brett [1969] 1 WLR 487 Willmer LJ held that the same principles applied to the assessment of lump sum payments and said: -

"I do not propose to depart from Lord Merrivale's test, that is to say, the test of taking into consideration the position in which the wife was entitled to expect herself to be, and would have been, if the husband had discharged his marital obligation - the marital obligation being, of course, an obligation to maintain her on the scale appropriate to his station in life" p 493.

12. It seems to me that after Hong Kong adopted this provision in section 28(1) of the Matrimonial Clauses Ordinance, this statement represented the law of Hong Kong and provides the background to our section 7. The difference as I see it is this. In England from 1970 to 1984 a court was under a duty to exercise its powers with the object of seeking to achieve the result specified in the target provision. In Hong Kong the position is and has always been that the legitimate expectations of the wife have to be "taken into consideration" in assessing her section 7 position. I am minded to think that this puts a lower duty on the court and lowers the significance of this element. It may thus diminish a wife's claim and operate marginally in favour of husbands.

13. Beyond this very tentative conclusion I find it unnecessary to go because it seems to me impossibly difficult to assess what effect the presence of the target in England has had upon the awards in the cases above considered. From the language of the decisions it played a very significant part, notwithstanding the difficulty the courts felt in giving literal effect to the provision see for example Ormrod LJ in Preston p 25. but if it can be said to have produced a marginal increase originally, I am unable to detect any apparent sign of a decline in awards since the provision was removed from the English statute in 1984, cp Gojkovic. Abolition therefore has not detestably altered the pattern; non constat its original absence would have had no effect.

14. With these considerations and principles in mind I return to the facts. The judge's first task was to ascertain and value the total assets. Much was agreed, but certain disputes were left to him to resolve. Only the following have been challenged on appeal.

15. The judge derived these figures from values listed by the parties but which were not in fact spoken to by either valuer by reason of the total agreed value.

16. The judge was not directly invited to deal with this jewellery in this way by Mr Singer. We have read the transcript of his submission. It seems to me that both here and below Mr Singer had to accept that at the first stage of asset identification and valuation the agreement bound. What he was seeking to suggest to the judge was that at the second stage of his enquiry, when he fell to consider the effect of the wife's possession of this jewellery, its convertibility, and its income generating capacity, he might properly conclude that the wife could not readily be expected to realise some part of it.

17. Very unfortunately in my view the judge never reached any second stage in his enquiry. He later considered all the paragraphs in section 7 (1) and referred to the parties' reasonable financial needs and requirements. But he attempted no quantification. This I think is because he was wrongly persuaded to the conclusion that this was not required under section 7(1) and that he was simply engaged in what Ormrod LJ called "a re-distribution of capital as such" with a view to doing "justice" between the parties. This approach enabled him to make what was tantamount to a "free" distribution of these excepted items of jewellery to the wife, and exclude them from further consideration in his capital distribution. In this respect I think he erred in principle. The second or quantification stage in this inquiry is essential. At the first this deduction was wrong.

18. The remaining criticisms of the judge's findings can be dealt with more briefly. Over about a twelve month period after the parting, the wife lost rather more than $1 m gambling in Macau, and between $0.5 m and $1 m speculating on the Hang Seng futures exchange. On the basis of this financial irresponsibility the judge brought into account $1 m of the Macau losses, but no part of the futures losses. I find this distinction unconvincing, and think he should also have brought in a proportion, say $0.4 m of the futures losses.

19. Against what was in effect an agreed value of the wife's interest in her father's estate of $11 m, the judge deducted $1 m for future costs and contingencies. This was attacked as too generous, and the supporting evidence was indeed tenuous. But from my part I do not think it unreasonable for these contingencies so to be assessed

20. Finally it is said that the judge took insufficient account of the wife's admitted misconduct in the course of the proceedings. I think that this was quite sufficiently reflected in the stringent Costs Order the judge was invited by the wife's advisers to make and made, which taxed at over $3 m.

21. It follows that the judge's findings at the first stage have to be qualified by adding back into those assets which were or ought to be in the wife's control a further $5 m. This brings the true total to $95.338 m and the wife's total to $65.424 m.

22. This total falls into three broad categories.

23. Here there was much common ground. Both parties were in their 50's, and neither suffered in the judge's view any relevant disability. The husband had effectively retired from his practice but retained a residual earning capacity. Much more significantly the standard of living set and enjoyed by the parties during the marriage was agreed to have been of the highest. They wanted for nothing. It was against that very high standard that the wife's reasonable requirements fell to be assessed. They were quantified by her in her evidence in terms of income at $900,000 pa. Putting her inheritance on one side, the wife did not fall into that special category who have actively participated in the creation of wealth by working or by the provision of capital. But during nearly 30 years of married life she had made a major contribution to the family welfare in her role of wife, mother and hostess.

24. In these circumstances it seems to me that the wife required: -

25. Of these the wife had:

26. The crucial question then is what further sum should the wife receive by way of retention. In assessing it regard must be had to a number of special factors beyond the general considerations above noted. It is the fund to which she must initially look for the production of the bulk of her necessary income. Secondly she cannot take advantage of any liquidity problem created by her taking of the jewellery, but I think that two pieces, the presents from her mother on marriage, out of the so-called family jewels should be regarded as non-convertible. Thirdly the fact that part of her fund is notional, and that she had incurred substantial past and future liabilities in costs, cannot be directly reflected, but equally cannot be wholly ignored.

27. I think that the appropriate sum for the wife to have by way of retention in addition to the flat and to her inheritance is the sum of $17 m making a total of $35.175 m. Rounding this up to $35.424 m, this leaves a balance of $30 m which ought to be returned to the husband by way of lump sum award.

28. For my part therefore I would allow this appeal and vary that part of the judge's order which directed the payment of a lump sum to the husband by increasing the amount from $19 m to $30 m.

Fuad, V-P :

29. I agree and have nothing to add.

Clough, JA :

30. I agree. Although we are varying the order of Mortimer J made in the exercise of his statutory discretion, there is nothing I can usefully add to the judgment given by Hunter JA which I gratefully adopt.

31. In handing down this judgment we made an order nisi that the Respondent pay the appellant costs of this appeal.