AEM v. VFM

FAMV No 31 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 31 OF 2013 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV NO 216 OF 2011)

_______________________

______________________

______________________

REASONS FOR DETERMINATION

______________________

Mr Justice Tang PJ:

1.  On 6 December 2013, we dismissed, with costs, the husband’s application for leave to appeal against the decision of the Court of Appeal given on 28 January 2013.  These are our reasons.

2.  The petitioner wife and the respondent husband divorced in 1991 after 20 odd years of marriage.  On 27 August 1991, judge Bruno Chan made what he called “a comprehensive and detailed settlement with terms and conditions covering all the parties’ assets and properties as well as their future and longterm needs and obligations and those of the children.”  (The 1991 order)

3.  There are two children of the marriage but this application does not concern them.  

4.  The 1991 order has been varied twice.  First, on 30 July 1998 and then on 12 May 2006.  As a result of the 2006 variation, the husband was ordered to make periodical payments of £50,000 per annum, payable monthly to the wife. 

5.  By summons dated 19 February 2009 the husband applied for a downward revision or discharge of the periodical payments.  At the time, the application was made inter alia, “due to decline in my income/assets.”  The husband was employed by a listed company and was able tobuy shares in the company with loans to be repaid by bonus received.  It appears from the Form E he filed in May 2009 that since the 2006 variation, the value of the shares had declined to approximately HK$38,000,000 compared with a loan of approximately HK$34 million, as opposed to about $85 million at the time of the 2006 variation. But by the time of the hearing in May 2011, the emphasis had changed to the wife’s change in circumstances, namely, that, as a result of the death of her mother, the wife has inherited more than £610,000 and she was sharing a home with a man.  That was because by May 2011 when the application was heard, the value of his shares had more than fully recovered.  Judge Bruno Chan allowed the husband’s application and reduced periodical payments to £24,000 for annum subject to the same annual increment dated back to 1 March 2009.

6.  The Court of Appeal allowed the wife’s appeal and set aside the order so that the periodical payments remain at £50,000 a year.

7.  The husband applied for leave on the ground that questionsof great general or public importance are involved and on the or otherwise ground in that the Court of Appeal’s decision was based on many errors of fact, and the Court of Appeal erred in interfering with the Judge’s exercise of discretion. 

8.  The power to vary is provided by s 11 of the Matrimonial Proceedings and Property Ordinance Cap 192 (“the Ordinance”), and that s 11(7) provides that “the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates”.  As the Court of Appeal pointed out:

“25. (sic) The approach of the Courts on an application for variation is succinctly summarised in Jackson’s Matrimonial Finance and Taxation, 8^th Edition, Chapter 3.147 – 3.159 :

‘The modern approach is that the court has to consider all the circumstances of the case, and the court is not hide-bound by the existence of a previous order: the court must look at the matter de novo and make an order that is reasonable in the current circumstances. The usual basis on which a variation of an order for periodical payments is founded is that there has been a material change in the circumstances of one or both the parties. On application for revision, the court, as it was put in one case, has “regard to all the circumstances of the case in the same manner as if those circumstances had existed at the date of the original order”. Even before White and Miller v Miller; McFarlane v McFarlane the court could increase an order for periodical payments beyond the payee’s strict budgeting requirements if the payer’s circumstances justified it. Now, as a result of those cases, it is clearly established that a payee’s “reasonable requirements” are “no more a determinate or limiting factor on an application for a periodical payments order than they are on an application for payment of a lump sum”, and those words apply just as much on an application to vary a periodical payments order.’”

9.  Cheung JA explained why he felt able to interfere with the decision of the learned judge:

“15. … I am keenly conscious that the Judge was exercising a discretion but in my view the Judges has erred on principle. Had the issue of fairness, in the light of the overall circumstances, specifically the huge disparity of the parties’ financial position by reason of the husband’s capital increase, been properly taken into account by the Judge, it would be plain that there would be no room for any downward adjustment of the wife’s maintenance …”

Factual Error

10.  By the time of the appeal, the share price had recovered so that they had a value of HK$130 million, although the husband’s evidence was that he had loans of about HK$50 million.  Mr Russell Coleman SC complained that the Court of Appeal had overlooked the fact that the husband’s net wealth was only HK$80 million.  There is little in this point.  We do not believe the Court of Appeal had overlooked the husband’s indebtedness and mistook the gross value for net value.  In any event,the disparity in their financial position was significant.

11.  As the Court of Appeal pointed out:  

“6. However, by the time of the hearing before the Judge, his financial position is stated by the Judge as follows :

‘26. At that time [i.e. May 2009 when Form E was filed] his income was stated at slightly over HK$280,000 per month while his gross capital assets, represented mainly by the VM 1995 Trust of which he is the settler and a beneficiary, were put at about HK$85.6 million but with a loan guarantee of HK$34 million. That was then but the annual report of his employer for 2010 showed that his income for the year ended 31^st December 2009 amounted to HK$14.88 million, giving an average of more than HK$1.2 million per month, while in cross-examination he also conceded his gross capital assets to have risen to at least HK$130 million. Mr Pilbrow therefore submits that the court should be entitled to draw the inference that the Husband is indeed a man of very substantial wealth and able to live a commensurate life-style.’

7. The wife accepted that there has been no change in the husband’s income but only in respect of his capital position.  The husband’s capital position is now even higher than the position when the 2006 Order was made, an increase from $110 million to $130 million.”

12.  According to the published annual report of the husband’s employer, the husband’s income from the company for the year ended 31 December 2010 was HK$14.39 million.  The bulk of his income came in the form of a bonus.  It seems that since 2011 although his monthly salary has been increased to $183,800 (with the usual corporate perks, medical, car and air tickets), his annual bonus might be less substantial.  The husband also received annual dividends of about HK$4 million.  The husband has remarried and has a young daughter.  It appears that he gave a monthly allowance of $100,000 to his present wife and that was net of the costs of housekeeping and that even during what he called a disastrous period for his employer, his monthly spending on American Express credit card, (not his only credit card) was in excess of HK$100,000.  It is not surprising therefore that the husband could not rely on his own circumstances to show that it was reasonable to reduce or totally discharge his obligation to provide periodical payment to the wife.  As for the wife, she has inherited a substantial amount from her mother and was living with a partner.  It is a question of fine judgment whether the periodical payment should be reduced. Such decisions, like an exercise of discretion, could only be interfered within the usual limited circumstances.  Cheung JA has explained in the passage quoted above why he (with the agreement of Lam and Barma JJA) felt able to interfere.

Discretion

13.  We do not agree with Mr Coleman that the Court of Appeal interfered wrongly with the learned judge’s exercise of discretion.  The Court of Appeal was entitled to take the view that Judge Bruno Chan gave undue weight to the wife’s reasonable requirements and failed to properly regard what was reasonable or fair in all the circumstances.  That being the case, the Court of Appeal was entitled to exercise its judgment on the matter.  There is no basis for this court to interfere. 

Questions of Law

14.  The suggested question of great general or public importance is that, the justices of appeal thought that a different test applies or different considerations come into play, depending on whether the application for variation is for an increase or a decrease.  Mr Coleman relied on the following passages in the judgments in the Court of Appeal:

Cheung JA:

“15. In my view the approach of the Court of Final Appeal in DD v. LKW (2010) 13 HKCFAR 537 which applies the White line of cases is to ensure fairness between the parties. This is not a case where the wife seeks an increase of her maintenance on account of the husband’s increased wealth. While the inheritance and contribution from K M may have improved the wife’s financial position, to reduce the wife’s maintenance on that basis is to hark back to the budgetary or reasonable needs approach which has been expressly disavowed by the Courts. I am keenly conscious that the Judge was exercising a discretion but in my view the Judge has erred on principle. Had the issue of fairness, in the light of the overall circumstances, specifically the huge disparity of the parties’ financial position by reason of the husband’s capital increase, been properly taken into account by the Judge, it would be plain that there would be no room for any downward adjustment of the wife’s maintenance. It is said by the husband that the parties have now been divorced longer than they were married and maintenance has now been paid for longer than the parties were married. This may be so, but in order to justify a substantial downward adjustment of the periodical payment on account of change of circumstances, the Court should look not only at the wife’s position but also at the husband’s position as well.

Lam JA:

“21. I agree with the judgment of Cheung JA and the order proposed at paragraph 19. I wish to emphasize, as my Lord did in paragraph 15 of the judgment, that this is not a case where the wife is seeking a variation by way of an increase on her maintenance due to the improvement in the financial position of the husband. This judgment focused on the fairness of making a downward adjustment (on the application of the husband) on account of the two grounds identified at paragraph 3 above. Different considerations will come into play had it been an application the other way. As my Lord observed during the course of the hearing, in the context of an application for upward adjustment, the lapse of time since the divorce and the increase in the husband’s wealth not attributable to the marital product would be weighty factors to be taken into account in the overall equation of fairness. Thus, this judgment should not be read as an encouragement to applications for variation in the other direction, whether in the context of this case or other cases.”

Barma JA :

“22. I agree with the Judgment of Cheung JA and the order he proposes at paragraph 19 above. I also agree with the views expressed by Lam JA in paragraph 21 above.”

15.  In relation to this issue, Cheung JA when refusing leave to appeal said:

“3. The first question is simply not engaged in the present case. The merits of the husband’s application to revise downwards the periodical payment was, of course, the issue we had to address in our judgment but the principles we have adopted are those which are applicable generally on variation applications. Any statement that a different test is to apply is by way of comments only.”

16.  These remarks have been taken out of context.  It is clear the Court of Appeal did not wish the result in this particular case to encourage applications for upward variation.  It remains a question of fact in each case whether it is reasonable or fair to vary an order.  This is not a question of great general or public importance. 

17.  The other suggested questions are disguised factual questions which do not require separate discussion.  Nor is it necessary to deal with Mr Coleman’s other complaints about the decision of the Court of Appeal.  Even if, which we do not accept, the complaints are made out, they are not such as would warrant leave to appeal on the “or otherwise” ground.