MKW v. LLY

FCMC 15680/2017

[2022] HKFC 151

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 15680 OF 2017

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J U D G M E N T

(Final Ancillary Relief and Application for Variation of Undertaking)

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A.   Introduction

1.  This is a judgment to determine the following matters:

(1)  the issue of final ancillary relief, including maintenance for the two children of the family going forward; and

(2)  the Respondent-husband’s (“Husband”) summons dated 28 February 2022 (“Variation Application”) for, inter alia, “variation” of his undertaking contained in an order dated 18 December 2020 that starting from 1 January 2021, he shall pay the Petitioner-wife (“Wife”) an amount of HK$35,000 as interim maintenance per month and he shall continue to pay in the same manner on the 1^st day of every succeeding month, until further order of the Court (“2^nd MPS Undertaking”).

2.  Also included in the Variation Application is a request that the Court releases the Husband from complying with earlier orders to produce an expert report from an Approved Medical Examiner by the Civil Aviation Department of Hong Kong (“AME”; “AME Report”) for purposes of the ancillary relief trial. The relevant orders (collectively, the “AME Orders”) are set out as follows:

(1)  Order dated 14 July 2020 directing that the parties shall jointly appoint an AME for preparing an expert report on the Husband’s capacity to resume working as a captain pilot, and the costs of such appointment shall be shared by the parties equally;

(2)  Order dated 18 December 2020 containing further directions on nomination of the parties’ respective AME as single joint expert, with costs to be shared initially and be in the cause of the ancillary relief matters;

(3)  Order dated 14 April 2021, directing that (i) unless the Husband do lodge and serve his nomination before 4pm on 27 April 2021 as per the order dated 18 December 2020, the candidate proposed by the Wife be appointed as the SJE for preparing the AME Report, and (ii) the Husband do provide the SJE with all necessary documents for the purpose of preparing the AME Report and attend the medical examination to be conducted by the SJE if so requested by the SJE.

3.  As will be seen below, the Husband did not comply with any of the AME Orders.

4.  This judgment shall address the applications in the following order:

(1)  Whether the AME Orders providing for an AME Report should be discharged and the parties be released from further compliance;

(2)  Final ancillary relief;

(3)  “variation” of the Husband’s 2^nd MPS Undertaking, in respect of which there is no dispute that the Husband has made no payment since June 2021.

B.   Factual Background

5.  The Husband (now 41 years old) and the Wife (now 40 years old) married on 24 February 2008.

6.  They have 2 daughters, LTC (born on 6 August 2008 and now nearly 14 years old) and LTL (born on 26 November 2009 and now 12 years old) (the “Children”). The Children are currently attending Secondary 2 and Primary 6 respectively at a local school in Hong Kong.

7.  On 30 November 2017, the Wife petitioned for divorce on grounds of unreasonable behaviour, citing various particulars including the Husband’s extra-marital affairs and his moving out from the former matrimonial home since October 2017.

8.  In his Form 4 dated 24 December 2017, the Husband indicated that he does not intend to defend the main suit, but wishes to be heard on the claims made in the petition for ancillary reliefs and children matters.

9.  A Decree Nisi was granted on 8 February 2018.

10.  By consent order dated 26 September 2018, the parties were granted joint custody of the Children, with sole care and control to the Wife and reasonable access to the Husband. However, the Husband reported that he was not able to enjoy any access to the Children since around 21 July 2019.

11.  The Husband was previously a pilot, having attained the rank of Captain in 2018. Since August 2020, the Husband has been employed as a full-time lecturer at a college in Hong Kong, teaching a bachelor degree related to aviation. His income (less MPF) is HK$48,500/month.

12.  The Wife became a full-time housewife in August 2009 when she was pregnant with the younger daughter. She re-entered the workforce in June 2018, working as an executive assistant in an asset management company. Her current income (less MPF and taking into account 13^th month pay) is around HK$19,550/month.

13.  The Husband has a new partner (“Partner”) with whom he has a daughter named LSY, now 3 years old.

14.  Both the Wife and the Husband gave evidence. I find both of them to be well-educated, articulate and generally truthful witnesses. I accept their evidence, save to the extent identified in my judgment below.

C.   Procedural Background

15.  Whereas the focus of the present hearing is final ancillary relief and the Variation Application, it is relevant to set out a high-level summary of the main interlocutory applications made by the parties:

(1)  The Wife’s application on 30 May 2018 for maintenance pending suit (“MPS”), resulting in the first MPS order dated 26 September 2018 that upon the Husband’s undertaking to pay the Wife’s rental expenses and the Children’s school fees, by consent the Husband is to pay MPS for the Wife and the Children in the sum of HK$25,000/month starting from 1 October 2018, and he shall continue to do so on the 1^st day of every succeeding month, until further order of the Court (“1^st MPS Order and Undertaking”);

(2)  The Wife’s ex parte application on 5 August 2019, resulting in an ex parte injunction order dated 5 August 2019 (“Ex Parte Injunction”) restraining the Husband from disposing of his assets in Hong Kong up to HK$1.6 million;

(3)  The Husband’s application on 13 August 2019 to discharge the Ex Parte Injunction;

(4)  The Wife’s application on 31 October 2019 for variation of the Ex Parte Injunction to release funds for the Husband’s compliance with the 1^st MPS Order and Undertaking, resulting in a consent order dated 5 November 2019;

(5)  The Husband’s application dated 31 December 2019 for downward variation of the 1^st MPS Order and Undertaking and discharge from the undertaking to pay the Wife’s rent and the Children’s school fees;

(6)  The Husband’s application dated 31 December 2019 for variation of the Ex Parte Injunction to release funds for certain out-goings;

(7)  The Wife’s application dated 30 June 2020 for variation of the Ex Parte Injunction to, inter alia, release funds for the Husband to meet his obligations under the 1^st MPS Order and Undertaking;

(8)  The above culminated in an order dated 18 December 2020 that, inter alia, upon (i) the Husband’s undertaking to pay HK$558,560 to the Wife being arrears under the 1^st MPS Order and Undertaking for the period from March 2020 to December 2020 and (ii) his 2^nd MPS Undertaking, the Ex Parte Injunction be discharged, and the 1^st MPS Order and Undertaking be stayed pending full compliance with the 2^nd MPS Undertaking or until further order of the Court.

16.  The Wife has also sought leave to commence committal proceedings against the Husband for his failure to comply with an order dated 15 February 2019 to provide his answer to the Wife’s questionnaire and to file and exchange updated Form E. Leave was granted on 20 June 2019, and it is directed that committal proceedings be dealt with after this ancillary relief trial.

17.  Albeit acting in person at this final hearing, both parties had previously been legally represented. The Wife was legally represented since 30 November 2017, being the date of her petition, until 4 December 2020. She also gave evidence that she intends to enlist assistance from legal representatives to litigate the committal proceedings in due course. The Husband was legally represented from 26 August 2019 until 17 January 2020.

18.  From their latest Forms H, the Wife reported to have spent over HK$1.7 million on legal costs, whereas the Husband has spent over HK$432,000. In other words, the total legal costs incurred to date is in excess of HK$2,132,000.

19.  This is an exceptionally disproportionate sum to have been spent on legal costs, which has nearly decimated the limited family pot of around HK$889,000 as I find below. I can only echo the sentiment expressed by the Hon Lam Acting CJHC (as he then was) in Court of Appeal’s decision of LLC v LMWA & another [2019] 2 HKLRD 529 at §§30-37 on the problem of how legal costs incurred by the parties drained away an unreasonably large proportion of the family wealth, resulting in “ruinous expense to the parties”.

20.  I cannot agree more with the observations of Munby J in KSO v MJO and MJO (PSO intervening) [2009] 1 FLR 1036, cited with approval in LLC v LMWA §33 as follows:

“[80] The picture is deeply dispiriting. And it is not as if it is only the adults who suffer from the consequences of such folly. The luckless children do as well. The present case is a sobering, and for me deeply saddening, example. If, instead of spending – squandering – over £430,000 in costs, the wife and the husband had been able to resolve their differences at a more modest and, dare I say it, more seemly level of costs, there might very well have been enough left in the matrimonial 'pot' to house the wife and children and to enable the children to remain at their school, whilst still leaving something more than a mere consolation prize over for the husband. As it is, it is hard to see much being left from the wreck, not least after the trustee in bankruptcy has had his costs, expenses and remuneration. It is difficult not to be reminded at this point of Jarndyce v Jarndyce (see the Appendix). And the wife and the husband – and for this purpose I refer to them as the mother and the father, for that is what they are – are faced now with the wretched and thankless task of trying to explain to their daughters how it has all come to this.”

D.   Discharge of AME Orders

21.  The Husband was employed by Dragon Airlines (now known as Cathay Dragon) as a pilot from 30 May 2005 until 23 July 2019. He rose through the ranks from his initial position as Second Officer, and was eventually promoted to Captain in 2018 when his income increased from HK$110,000 to an average of about HK$150,000 per month.

22.  It is his case that after the parties separated in October 2017, he was under a lot of stress and felt depressed most of the time. He said his conditions deteriorated without treatment. He failed his annual flying proficiency test in July 2019, albeit he also attributed this to his poor relationship with colleagues. He was therefore forced to resign from Cathay Dragon on 23 July 2019 and was paid a termination fee which was his 3-month worth of salary.

23.  The Husband stated he had a serious mental breakdown on 8 August 2019 and was admitted to the Accident & Emergency department of Ruttonjee Hospital. He had produced medical certificates of diver dates from August to November 2019 with a diagnosis of depression of mild to moderate degree and was put on medication. It was his case then that because of his condition and the medication he was put on, he would not be able to renew his flying licence which would expire by the end of 2019. Without such flying licence, it is unlikely that he would be able to secure a job as a pilot. Also, if he was not employed to fly any commercial flights for more than 12 months, his chance of getting employed again as a pilot will be very slim as that is the basic requirement for most airlines.

24.  In his 6^th affirmation dated 7 November 2019, the Husband sought release of funds from his account that had been frozen by the Ex Parte Injunction to obtain a medical report and a report from an aviation expert which the Wife asked for. The same request was repeated in his 8^th affirmation dated 30 December 2019.

25.  By the Husband’s summons dated 31 December 2019, he sought to vary the Ex Parte Injunction to release a sum of HK$10,000 for the purpose of obtaining a medical report from an aviation psychiatrist.

26.  It was against this background that the AME Orders were made. The issue identified for the AME Report was framed in the order dated 14 July 2020 to be “the Husband’s capacity in resuming working as a captain pilot”.

27.  In his affirmation dated 20 April 2022 made in support of the Variation Application, the Husband relied on the following grounds for discharge of the AME Orders:

(1)  He does not have any savings to pay his half-share of the medical report, being HK$15,000 out of the total sum of HK$30,000;

(2)  There is no meaning to undergo any medical check as his applications had previously been rejected by Hong Kong Express and Hong Kong Cargo in 2018-2019 even when his medical licence was valid;

(3)  it is unrealistic to assume the Husband can become a pilot again given the aviation industry was very hard-hit by COVID-19. There are around 400 unemployed pilots, many with a more current flying day than the Husband, who are competing for around 40 vacancies in the job market in Hong Kong.

28.  The Husband further confirmed with this Court on the 1^st day of trial that whereas he cannot say whether he remains medically depressed or not, he is no longer relying on any assertions of depression as a reason as to why he cannot resume his former occupation as a pilot (the “Confirmation”). In other words, he is no longer taking any issue with his physical or mental capacity to resume working as a captain pilot, but wishes to rely on other factors elaborated below in support of his argument that it is unlikely he can resume that occupation.

29.  Upon the Husband’s Confirmation, the Wife agreed that it is no longer necessary for the AME Report to be produced. I therefore order that by consent, both parties be discharged from further compliance with the AME Orders.

30.  Given the Confirmation was only given by the Husband in answer to this Court’s question on the 1^st day of trial, I also make an order nisi that the Husband do pay the Wife any cost incurred in compliance with the AME Orders, to be taxed if not agreed.

E.   Ancillary Relief – Overview

E.1  Relevant Legal Principles

31.  Pursuant to section 7 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) (“MPPO”), the Court is tasked with having regard to the following factors in deciding what ancillary relief orders to make:

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

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

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

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

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

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

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

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

32.  The Court of Final Appeal has laid down 4 principles in its landmark decision of LKW v DD (2010) 13 HKCFAR 537 on how section 7 should be approached, namely fairness, rejection of discrimination, the upholding of the concept of the yardstick of equality and the rejection of minute retrospective investigation of the parties’ finances (see §§56 to 70 per Ribeiro PJ).

33.  In addition, the Court of Final Appeal has identified a five-step approach to be adopted in all ancillary relief trials (see §§71 to 132 per Ribeiro PJ), namely:

(1)  The identification of the assets;

(2)  Assessing the parties’ financial needs;

(3)  Deciding to apply the sharing principle;

(4)  considering whether there are good reasons for departing from equal division; and

(5)  deciding the outcome.

Material non-disclosure and adverse inferences

34.  It is the Wife’s case that the Husband has not made full and frank disclosure of his assets. In Rayden and Jackson’s Relationship Breakdown, Finances and Children, the proper approach is set out as follows:

“Duty of disclosure

[13.101] The importance of the duty of both parties to make disclosure of their assets which is full, frank and clear cannot be overemphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under the MCA 1973, s 25 [the English equivalent of s. 7 MPPO], it is required to have regard, it cannot lawfully or, properly exercise its discretion in the manner ordained by that section. The duty on each party is absolute, and it must be discharged regardless of whether the application for a financial remedy is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one: a party must not mislead the other party and the court into assuming that his financial situation is unchanged if in fact it has changed. Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default. In NG v SG (appeal: non-disclosure) Mostyn J reviewed the authorities concerning the drawing adverse inferences and assessing a non-discloser’s wealth. He stated:

‘[16] Pulling the threads together it seems to me that where the court is satisfied that the disclosure given by one party has been materially deficient then:

(i) The court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden.

(ii) But such inferences must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got.

(iii) If the court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in the broadest terms.

(iv) In making its judgment as to quantification the court will first look to direct evidence such as documentation and observations made by the other party.

(v) The court will then look to the scale of business activities and at lifestyle.

(vi) Vague evidence of reputation or the opinions of beliefs of third parties is inadmissible in the exercise.

(vii) The Al-Kbatib v Masry technique of concluding that the non-discloser must have assets of at least twice what the claimant is seeking should not be used as the sole metric of quantification.

(viii) The court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than that the court should be drawn into making an order that is unfair to the claimant.” (emphasis supplied)

Add-back

35.  The Wife also suggested that certain sums or spendings of the Husband be “added back” into the family pot. I understand that such add-back is proposed to be done notionally, as it is not the Wife’s case that the spendings or withdrawals can or should be set aside pursuant to section 17 of MPPO against third parties.

36.  The Court of Appeal has laid down the requirements for notional add-back (also known as Norris add-back from the English decision in Norris v Norris [2002] EWHC 2996 (Fam)) in MKKWH v RKSH (Ancillary Relief Addbacks and Claw Backs) [2013] HKFLR 540 per Lam VP (as he then was):

“11…The Norris route can be regarded as a means to deal with such misconduct. But it suffers from the drawback that one may lose sight of the overall assessment on fairness in light of other factors since in adding-back one would usually focus on the nature of the expenditure. For this reason, a higher threshold is adopted for this approach in the English cases where the frittering away of assets was described as “wanton”, “reckless” or “extravagant”. Thus, the English cases suggested a cautious approach is to be adopted: Vaughan; H-J and BJ. The rationale was explained by Mostyn J in N v F (cited at para 50 of BJ) in terms of the separate ownership of property between husband and wife,

“ In this country we have separate property. If a party disposes of assets with the intention of defeating the other party’s claim then such a transaction can be reversed under s 37 of the MCA 1973. Similarly, where there is ‘clear evidence of dissipation in which there is a wanton element)’ then the dissipated sums can be added back or re-attributed … But short of this a party can do what he wants with his money. …” (emphasis supplied)

…

54. Further this Court held in ARAV v VP [2011] 3 HKLRD 759 at paragraph 7 that if conduct is one of the factors to be taken into account then the Court is not hamstrung in the precise way in which it will recognize this factor. Hence the Court can either add back the wasted fund to the joint assets before distribution or it can depart from equality in the distribution. ARAV is an example where there was departure from equality because of a spouse’s financial misconduct. Examples of adding back by reason of a spouse’s financial misconduct can be found in Norris v Norris [2003] 1 FLR 1142 and Vaughan v Vaughan [2007] 3 FCR 533. See also Jackson’s Matrimonial Finance 9^th Ed. Para 3.71. Although BJ v. MJ [2012] 1 FLR 667 at paragraph 51 described re-attribution as a process of penalisation and should be applied cautiously and truly where the dissipation is demonstrably wanton, it is nonetheless a well recognized approach.” (emphasis supplied)

37.  See also the Court of Appeal’s decision in ARAV v VP [2011] 3 HKLRD 759 per Fok JA (as he then was) at §§48-58, in particular:

“53. It is clear that, where a spouse has frittered away assets due to his or her extravagance or reckless speculation, the court can take this into account in ancillary relief proceedings by notionally re-attributing (or adding back) the value of the assets so squandered to that spouse’s side of the list of matrimonial assets. By doing so, the reckless spouse is deemed still to have those assets and, depending on the division of assets, to share them with the other spouse.

…

58. It does not therefore follow that there is a unitary concept of misconduct that inexorably leads to the conclusion that expenditure made by a spouse guilty of any type of misconduct must inevitably be added back to the pot of assets for the purposes of ancillary relief proceedings. Moreover, in Vaughan v Vaughan [2007] 3 FCR 533 at §14, Wilson LJ (as he then was) noted that the re-attribution of assets by way of add back:

“… has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) …”.

(emphasis supplied)

Third party financial support

38.  The issue of third-party support by the Wife’s father to the Wife and the Children has been repeatedly raised by the Husband. To that end, the Court of Final Appeal’s has laid down the following principles in KEWS v NCHC(2013) 16 HKCFAR 1, as summarised in the headnotes therein:

“(1) For the purposes of considering an application for ancillary relief under s.4 of the Matrimonial Proceedings and Property Ordinance (Cap.192), the court was guided only by s.7(1), in particular s.7(1)(a). The width and wording of s.7(1)(a) included financial assistance made by third parties to the parties of a marriage and accordingly this could be taken into account in the computation of that party's overall financial resources. In every case where this was involved, the two critical evidential questions for the court were: (a) the extent of the financial assistance provided by the third party to the husband or wife; and (b) the likelihood of such assistance continuing in the foreseeable future. (See paras.33-36, 52.)

(2) The court had to look at the reality of the situation and have regard to matters of substance and not just form. In looking at reality, it could take into account not only what a party actually had, but what might reasonably be made available to him or her if a request for assistance were to be made. As to what might occur in the foreseeable future, past conduct was often a useful guide (O'D v O'D [1976] Fam 83, SR v CR (Ancillary Relief: Family Trusts ) [2009] 2 FLR 1083 applied). (See paras.37-38.)

(3) Having ascertained the extent of the third party financial assistance and then finding on the evidence on a balance of probabilities that there was a likelihood of the continuation of such assistance in the foreseeable future, the court was then in a position in law first, to take this into account in the identification of the financial resources of the parties and second, in determining the appropriate ancillary relief to be granted. This approach was entirely consistent with the court's duty under s.7(1). (See para.39.)

Concept of "judicious encouragement"

(4) The concept of "judicious encouragement", which might be taken to mean that the court could encourage third parties to provide financial assistance, had led to confusion among judges and practitioners. If its true ambit was really no more than a restatement of the proper approach as set out above, there was no difficulty. However, if it meant a form of pressure on non-parties to add to the relevant spouse's resources which, on the evidence they would not do or were unlikely to do, the concept should be rejected. Such approach was consistent neither with principle nor with the authorities. It was better if the term "judicious encouragement" were no longer to be used (Howard v Howard [1945] P 1, B v B (Financial Provision) [1982] 3 FLR 298, Browne v Browne [1989] 1 FLR 291, TL v ML (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263, Charman v Charman [2006] 2 FLR 422 applied; Thomas v Thomas [1995] 2 FLR 668 considered). (See paras.40-53.)” (emphasis supplied)

E.2  Issues

39.  The following issues now fall to be determined by this Court:

(1)  Identification of the assets:

(a)  The Wife’s assets and liabilities

(b)  The Husband’s assets and liabilities

(c)  Any add-back to be made?

(2)  Assessing financial needs;

(a)  The Wife and the Children’s needs;

(b)  The Husband’s needs;

(3)  What is the earning capacity of the Husband and the Wife?

(4)  Third-party financial support;

(5)  Deciding the outcome:

(a)  the parties’ ancillary relief claims;

(b)  the Children’s maintenance;

(c)  Arrears of interim maintenance.

E.3  The parties’ open proposals

40.  I set out the Wife’s open offer as follows:

“(i)     The Respondent shall immediately comply with the Court Order dated 18^th December 2020 and shall immediately pay for the outstanding interim maintenance for the months of June, July, August, September, October, November and December 2021 and from January, February, March, April and May 2022 in the total amount of HK$385,000.00 (i.e. HK$35,000.00 x 11 months) and all the interests incurred during the period, at the interest rate of 8% p.a. (according to the interest rate with effective from 1^st October 2021) (“Interest Rates on Judgement debts”), for the Respondent for not paying the interim maintenance on time, starting from the period of 1^st June 2021 until the outstanding interim maintenance is paid. This outstanding interim maintenance payment shall be paid by the Respondent into my HSBC account on or before 30^th June 2022, with Penal Notice endorsed on this order;

(ii)    The Respondent shall immediately comply with the Court Order dated 18^th December 2020 and shall immediately pay for the interim maintenance of HK$35,000.00 for the month of June 2022 on or before 30^th June 2022, if on the day of trial on 2^nd, 6^th and 7^th June 2022, the June 2022 interim maintenance payment is not yet received from the Respondent, with Penal Notice endorsed on this order;

(iii)   In regard to the Respondent’s contumelious disregard to Court Orders and his failure in providing AME reports to access his earning capacity, the Respondent shall immediately pay a sum of HK$1,341,600.00 (i.e.HK$55,900.00 x 24 months) for securing the children’s financial needs for the next 24 months, on or before 1^st August 2022, for the period from July 2022 to June 2024, failing which will incur an interest rate based on the Interest Rates of Judgements debts, with Penal Notice endorsed on this order; 

(iv)   The Respondent shall pay a secured periodical payments of maintenance payment to the children, i.e. to pay a monthly maintenance of HK$55,900.00 starting from 1^st July 2024, until the children of the family reaches the age of 18 or until the children finish their first full time education, whichever is the latter, with the attachment of income order to be imposed on the enforcement of such secured periodical payments. Failure to pay the secured periodical payments on this shall regarded as contempt of Court and may result in imprisonment;   

(v)    This secured periodical payments of maintenance payment shall be reviewed annually on or before 1^st July, starting from 1^st July 2024, until the children of the family reach the age of 18 or until the children finish their first full time education, whichever is the latter, with the attachment of income order to be imposed on the enforcement of such secured periodical payments. Both parties shall file the updated Form E, all the applicable attachments related to the submission of the updated Form E and the updated employment situation 28 days before the annual review of the maintenance payment, with Penal Notice endorsed on this order. Both parties shall have the right to vary the maintenance amount only with proper and appropriate application to the Court and the adjustment of maintenance payment can only be enforced after the relevant order or directions is granted from the Court;

(vi)   The Respondent shall pay to me a lump sum of HK$1,200,000.00 to put an end to this divorce proceedings. This payment shall be paid by the Respondent in 2 instalments of HK$600,000.00. 1^st instalment shall be paid by the Respondent on or before 31^st August 2022 and the 2^nd instalment shall be paid by the Respondent on or before 31^st October 2022; and

(vii)  The Respondent shall be ordered to be responsible for all the legal costs incurred during the entire divorce proceedings because of his insufficient disclosure and uncooperative attitude throughout the entire divorce proceedings process.”

41.  On the other hand, the Husband made a much simpler open offer on the 1^st day of trial, namely that he would pay HK$2,000/month as maintenance for the Wife and both Children, until each of the Children reaches the age of 18 or until each of them finishes her first full time education, whichever is the later. Although at one point the Husband suggested that no award should be granted in the Wife’s favour, and that the HK$2,000/month maintenance should be for the Children only, he later confirmed that his final position is the same as that proposed in his Variation Application as described immediately above.

42.  The Husband provided an undertaking on the 2^nd day of trial, that he would (i) inform the Wife if his earning capacity improves in the future, and (ii) discuss with her an upward variation of maintenance payments in those circumstances (“Undertaking to Inform”). He suggested that the exact increment or mechanism by which the upward variation is to be determined should be discussed or negotiated with the Wife in the future.

43.  The Husband also provided an undertaking that he would set up a direct debit authorization to enable the maintenance to be paid from the account to which his salary is deposited to an account identified by the Wife (“Direct Debit Undertaking”).

44.  In response, the Wife stated that she is prepared to accept the Direct Debit Undertaking in place of her original request for secured periodical payments.

F.   Identification of the assets

45.  The parties were unable to agree a schedule of asset and liability. The Wife has filed and served her version before trial commenced. Despite the Court’s direction that the Wife do update this schedule, and the Husband to comment on the updated version, the Husband only remarked on the earlier version instead of the updated version (“W’s Updated Schedule”) during the adjournment after the 1^st day of trial.

46.  A copy of W’s Updated Schedule is attached to this judgment as Annex 1. The Wife invited this Court to find, with the add-back she proposed, that the family pot is around HK$3.14 million, where HK$4.82 million is on the Husband’s side of the balance sheet, and -HK$1.68 million on her side. As will be seen, this is not accepted.

F.1  W’s assets & liabilities

47.  The Husband did not challenge the value of assets in the Wife’s name, totalling HK$268,187.

48.  The Wife has disclosed 2 items of liabilities as follows:

(1)  a loan from Citibank which was taken out in March 2020 in the sum of HK$210,000, with outstanding balance of HK$150,010 as at 5 October 2021;

(2)  a loan of HK$1,800,000 owed to her father (“Father”), with current outstanding balance of HK$1,300,000.

49.  She claimed that the Citibank loan was necessary to meet the Children’s and her living expenses as well as the Children’s school fees, and that she would have to make monthly repayments of HK$4,046 for 60 months (thus 5 years). The Husband did not dispute the loan was a genuine one.

50.  However, the Husband took issue with the HK1.8 million said to be borrowed from the Father. The Wife said this was to meet her legal cost expenses and also to maintain herself and the Children especially when the Husband fell short of his obligations since June 2021. The loan is interest free, only to be repaid when the Wife is financially able to. As such, the only repayment she has made was a sum of over HK$500,000 when she received maintenance arrears in the sum of HK$558,560 from the Husband under the 18 December 2020 order. The current outstanding liability is therefore HK$1.3 million on her case.

51.  It is the Husband’s case that the Father had always generously supported the living of the Wife and the Children. Even if he were not to contribute any maintenance, it is his belief that the Wife and Children’s needs can be met by the generosity of the Father. In other words, he considers the HK$1.8 million sum representing continuous financial support from the Father over the years.

52.  I understand the issues to be (i) whether the Father’s advancements were actually loans and (ii) if so, whether they are merely “soft loans” which should not be regarded as a real liability of the Wife.

53.  On the first point, I have not been taken to any contemporaneous documentary evidence which supports the Wife’s contention that the advancements were loans. The Wife had never disclosed any liability owed to the Father in any of the 4 Form Es she has filed in these proceedings, some of which were prepared when she was legally represented. The first time she stated she borrowed “a total sum of over HK$1.8 million” from her family was in her 8^th (narrative) affirmation dated 3 January 2022. This is said to be the outstanding balance as at 3 January 2022, but no reference was made to the repayment of HK$500,000 which the Wife first introduced in her oral evidence.

54.  Although I accept that lending between family members may lack the formality usually expected of commercial parties, I have grave doubt as to whether the evidence before me can support the Wife’s belated assertion that the Father’s advancements to her were in the nature of loans.

55.  Even if they were, in the Wife’s own words she need only repay them if she is financially capable of doing so. This suggests that there is no pressing need for her to make any repayment. I therefore find the Father’s advancements are in the nature of “soft loan” and will not regard them as a real liability of the Wife. In this regard, I draw from the Court of Final Appeal’s decision in WLK v TMC (2010) 13 HKCFAR 618 (§41).

56.  As such, I find that the Wife’s net asset is HK$118,177.

F.2  H’s assets & liabilities

57.  The Husband invited the Court to accept his latest Form E dated 20 October 2021, which disclosed total net worth of around HK$526,000, of which only HK$230 is liquid asset (cash).

58.  The Wife did not accept this as a complete depiction of his financial position. She considered his Form E dated 30 November 2020 as a more accurate document because that was prepared before the Ex Parte Injunction was discharged by the 18 December 2020 order. The Husband disclosed net asset of HK$2,171,203 in his 2020 Form E.

59.  However, as seen in W’s Updated Schedule, the Wife’s case is in fact the Husband has assets of HK$4,865,810, of which HK$3,448,774 is said to be found in bank or account balances as of various dates in 2019 and 2020, namely:

(1)  HK$894,399 in a Standard Chartered Bank account (“SCB Account”) as at 30 November 2020;

(2)  HK$655,956 in the Allianz Income and Growth investment fund account (“Allianz Fund”) as at 19 September 2019;

(3)  HK$1,898,479 in an ORSO fund account as at 15 October 2019.

60.  She invited this Court to adopt these historical balances instead of those of a date closer to trial on the basis that the Husband has failed to confirm or disclose updated information supported by statements relating to those accounts.

61.  The Wife also asked that I accept the following value / estimates:

(1)  HK$292,174.90 being the value of Husband’s AIA policy no. B322979330 (“AIA Policy”) as at 19 August 2019;

(2)  Personal valuables totalling HK$395,000, which she said in her oral evidence is based on the online valuations she has obtained from https://www.chrono24.hk/, albeit without documentary support.

62.  As set out in LKW v DD §71, the first step in the exercise which this Court tasked with is to ascertain the financial resources of each of the parties calculated as at the date of the hearing.

63.  The Husband’s high-level response was that much of the assets disclosed in his 2020 Form E have been spent to meet his daily and other reasonable needs. Specifically:

(1)  The Husband pointed out that the Allianz Fund in fact subsumes within the SCB Account, as is made clear in statements of September 2019 attached to his 2019 Form E[1]. The Wife did not dispute this when put to her in cross-examination. The Husband also said in oral evidence that he cancelled the SCB Account and sold the Allianz Fund to pay, inter alia, the HK$500,000 odd arrears under the 18 December 2020 order.

(2)  As for the HK$1.8 million ORSO fund, the Wife accepted that HK$501,000 has to be preserved and only paid to the Husband at his retirement age. The Husband pointed out this sum is to be found in his Manulife account, with the value of HK$488,287 as at 20 October 2021. The rest of the fund had been liquidated and spent.

(3)  It is his case that all the personal valuables have been sold during his unemployment, albeit without records of receipt of the cash payments. The total sale proceeds were HK$86,000, which had also been spent.

64.  As to insurance policies:

(1)  it was the Husband’s oral evidence that he did not surrender any policy since his 2019 Form E, although he might have taken money out from some of them. He accepted he (and/or his Partner) would have given documentary evidence of the AIA Policy and its value to his legal representatives who prepared his 2019 Form E, although he said in answer to this Court’s questions that he no longer has any record of this policy to show its existence. For the avoidance of doubt, I find that the AIA Policy remains the Husband’s asset and I am prepared to adopt the value of HK$292,174.90 in the absence of evidence that it has changed;

(2)  He also accepted that the value of 2 policies identified in his 2021 Form E[2] should be in US$ rather than HK$, thus bringing the value disclosed in Part 2.8 therein to around HK$189,778[3].

65.  Although his 2020 Form E disclosed liabilities of around HK$500,000 and W’s Updated Schedule suggested a figure of HK$1.23 million, the Husband confirmed in his oral evidence that all liabilities had been repaid as disclosed in his 2021 Form E.

66.  The Husband urged me to consider his list of major expenses made from August 2019 to date, which I attach to this judgment as Annex 2 (“H’s Expenses Analysis”). As set out above, the Husband resigned from his employment as a pilot on 23 July 2019 and was unemployed for 13 months until he became a lecturer in August 2020. It is his case that his assets were about HK$3.26 million at the time of his resignation, but he has spent or made repayment of loans in the sum total of around HK$3.62 million, and thus he not only expended all his resources, but had negative equity of around HK$360,000.

67.  Based on H’s Expenses Analysis, the Husband said it is unnecessary to produce evidence of closure of bank accounts or their last balance despite the Wife’s repeated requests and my invitation to do so on the 1^st day of trial.

68.  The Court is of course not tasked with unravelling years of matrimonial finances: LKW v DD §72. The Wife did not take specific issue with figures set out in H’s Expenses Analysis, though her general complaint is that the Husband’s disclosure is messy and not full or frank.

69.  I set out my observations on H’s Expenses Analysis as follows:

(1)  I note a number of the expenses listed are not supported by documentary evidence, such as the Husband’s own expenses of HK$416,000, repayment of loan of HK$300,000 to the Husband’s parents, and another HK$50,000 to friends;

(2)  I have not been provided with evidence of how funds raised from the various loans (from bank, family and friends) have been spent, and whether there is any overlap with the expenses already listed therein, such as the Husband’s own expenses and payment of maintenance fees to the Wife. It is not clear whether there is double-counting; 

(3)  I do not agree that the HK$501,000 to be found in the MPF account should be counted as an expense. As described in paragraph 63(2) above, this is what became of the HK$1.8 million ORSO fund and remains the Husband’s asset.

70.  In any event, I do not consider H’s Expenses Analysis adds much to Step 1 of the exercise laid down in LKW v DD save to say I accept, as the Wife did in answer to my question, that the Husband would have to dip into his savings to meet his reasonable expenses during his period of unemployment.

71.  Based on the above, I find on a broad-brush basis that the Husband’s net worth is around HK$1,015,489, comprising of:

(1)  HK$5,230 cash in bank[4];

(2)  Receivable of HK$40,000 being rental deposit;

(3)  HK$481,972.90 in insurance policies, being HK$189,778 as disclosed in his 2021 Form E plus HK$292,174.90 in the AIA Policy;

(4)  HK$488,287 in the MPF Manulife account.

72.  In other words, the Husband’s net worth fell from around HK$2.1 million as disclosed in his 2020 Form E (which the Wife accepted is accurate) to around HK$1 million now. The change can be explained by the meeting of expenses since the discharge of the Ex Parte Injunction, which the Husband sought to explain in part by H’s Expenses Analysis. In any event, there is no serious dispute that the following “big ticket” expenses or payments were made, totalling HK$963,279:

(1)  It is not disputed that the Husband paid maintenance arrears in the sum of HK$558,560 pursuant to the 18 December 2020 order;

(2)  The Husband has adduced documentary evidence of his tax payments in the sum total of HK$212,083 in December 2020 and January 2021 which was not challenged;

(3)  The Wife does not dispute that the OCBC loan of HK$1.2 million taken out on 9 September 2016 has to be repaid in 60 months at HK$21,404/month[5], thus by August 2021. I accept 9 instalments (for December 2020 till August 2021) had to be made, and thus HK$192,636 in total.

73.  In the premises, I am unable to accede to the Wife’s invitation to draw adverse inferences on the Husband’s resources based on his alleged material non-disclosure. Although I accept there is much room for improvement in the way the Husband presented his financial disclosure, I do not see any basis to draw inferences that the Husband has net assets in much excess of the HK$1 million which I have found. I have reminded myself that “inferences must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got”:  NG v SG (appeal: non-disclosure) §16. Based on the available evidence, I am unable to find the Husband is guilty of material non-disclosure, such as that he actually has HK$3.6 million worth of net asset as suggested in W’s Updated Schedule.

F.3  Any add-back to be made?

74.  The Wife has invited the Court to “add-back” the sum of HK$1,171,796[6], which comprises of the following:

(1)  The Husband’s unexplained withdrawals from his accounts since June 2015, totalling HK$911,396.69;

(2)  Sale proceeds of a Leica camera lens, which the Wife attributed HK$10,400 as its value, but the Husband said it was worth about HK$8,000 in his 3^rd Answer and he cannot recall whether it was sold or if so, the whereabouts of its sale proceeds in his 4^th Answer;

(3)  Sale proceeds of a Benz, which the Wife said is sold for HK$250,000 based on the Husband’s asking price in a car sale advertisement, but the Husband’s 4^th answer to questionnaire provided the figure of HK$150,000 and he further asserted that it was mostly used to repay the car loan on 9 August 2019 and the remaining used on childbirth of his newborn daughter.

75.  Firstly, in respect of the HK$911,000 odd withdrawal, it is noted that the Husband simply stated that he “cannot recall” their purposes in his various answers to questionnaires. In her oral evidence, the Wife explained she considered it unacceptable that the Husband cannot recall the purpose of such frequent withdrawals spanning June 2015 to July 2019.

76.  The Wife referred to a business named “Call Me Juice” which the Husband’s Partner started in August 2017, and suggested that payments out since early 2017 are likely to have gone there. In answer to this Court’s questions, she accepted that there is no evidence to support such withdrawals were the Husband’s dissipation of family asset, but that was her suspicion.

77.  It was the Husband’s evidence that he only invested HK$20,000 into the “Call Me Juice” business, which his Partner has fully repaid. He has never received any dividend from that business.

78.  I have no hesitation in rejecting this proposed item of add-back. The law has been stated above, in particular the stringent requirement of “wanton, reckless or extravagant” frittering away of assets, and that a cautious approach has to be adopted. Clear evidence of dissipation is also required. It is obvious that even on the Wife’s own case, these requirements are not fulfilled.

79.  I do not accept that spending of around HK$911,000 over 4 years (around HK$18,000/month) is “wanton, reckless or extravagant”, particularly when the Husband was making relatively good earnings as a pilot until July 2019. As stated above, his monthly salary as a Captain since 2018 was around HK$150,000, and previously HK$110,000 as a First Officer.

80.  There are a small number of transfers totalling HK$40,000 between August 2017 and February 2019 which the Husband had stated as being made to his Partner. It is trite that non-marital spending on a mistress without more is not a ground for add-back: MKKWH v RKSH (Ancillary Relief Addbacks and Claw Backs) [2013] HKFLR 540 at §§61-68. See in particular paragraph 66:

“The Court is of course not a court of morals. If the husband chose to be a philanderer and have mistresses and children born from these relationships, it is not for the Court to condemn his behaviour as being immoral. But when these activities caused funds (which should be in the matrimonial pot) to be depleted, then clearly the Court is entitled to ask whether unfairness has been caused to the other spouse because of the non-marital expenditure. If this matter is considered under the ambit of conduct, then one has to examine whether the financial misconduct by way of depletion of the matrimonial funds (and not the husband’s moral conduct in respect of his association with other women) is obvious and gross or inequitable to disregard. The amount, the duration and the number of non-marital relationships involved are some of the relevant considerations. The distinction may be a fine one but nonetheless a real one. The reliance by the husband of comments in Roberts v Roberts [1970] P1 that ‘…. no hard and fast line can be drawn between “legal” and “moral” obligations …’ is not helpful and does not advance his case. When the Court referred to ‘wanton’, ‘reckless’ or ‘extravagant’ financial conduct or ‘wastage’ of matrimonial assets, they are merely descriptions or illustrations of conduct which fulfilled the threshold requirement. These terms do not constitute separate categories of misconduct. This does not require elaboration.” (emphasis supplied)

81.  Thus, even if some of the other unexplained withdrawals were in fact paid to the Husband’s Partner or her business as the Wife suspected, I do not accept there is any proper basis in the circumstances of this case for notional add-back of the sum.

82.  Similarly, I am not persuaded that the sale proceeds the Leica lens (if any) or the Benz or should be added back.

83.  It is obvious that the value of the Leica lens, being HK$10,400 on the Wife’s case, does not come close to satisfying the requirement of “wanton, reckless or extravagant”, even if it were sold and the proceeds spent.

84.  As for the sale proceeds of the Benz, it is the Husband’s evidence that he purchased the car for HK$480,000 in 2014. It was then sold in 2019 and the net sale proceeds of HK$27,800 was received on 7 August 2019 after repayment of the outstanding car loan as evidenced by a pay-in slip[7].

85.  I am prepared to accept the Husband’s evidence on net sale proceeds of the car as supported by contemporaneous evidence. In any event, it was not disputed he was unemployed between July 2019 and August 2020 and LSY was born in May 2019. Although he received termination fees being 3-month worth of his salary, I do not consider it can be a subject of real complaint for the Husband to have deployed the net sale proceeds, even if it were higher as suggested by the Wife, to meet expenses arising from a growing family. I do not accept there is sufficient evidence to support the Wife’s assertion that the sum was frittered away as dissipation of family assets.

86.  In sum, I do not accept that any of the sums proposed by the Wife should be added-back to the family pot.

F.4  Conclusion

87.  Of the Husband’s net worth of around HK$1,015,489, it should be noted that HK$488,287 is his pension to be found in the MPF Manulife account. It is not disputed that this can only be realised at retirement age, usually at 65, and thus in another 24 years.

88.  The issue of illiquid asset as such has been considered by HHJ I Wong in SSLT v. SMFC[2019] HKFC 250 at §§41-48. The learned Judge said at §44 and I agree that “it must be correct that a distinction must be drawn between an asset, which can be realized for cash and thus freely available and one, that is not realisable and non-transferrable. Regardless of whether it is in the form of a provident fund or a pension (ie a lump sum or an income stream), the money that the parties would receive on retirement is not an available capital asset.”

89.  In accordance with the broad-brush approach and in the absence of any professional actuarial assessment, I apply a 50% liquidity discount on the value of the Husband’s pension: see SSLT v. SMFC §48.

90.  To conclude, I find, on a broad-brush basis, that the Wife’s net worth is HK$118,177 and the Husband’s net worth is around HK$771,345. The family pot is therefore around HK$889,522.

G.   Assessing financial needs

G.1  Wife’s and Children’s Needs

91.  In the Wife’s latest Form E dated 5 October 2021, she set out the monthly expenses of herself and the Children as follows:

Part 4 Current Monthly Expenses

4.1 General

Item	Amount (HK$)
Rent	23,800
Mortgage Instalments	0
Utilities (electricity, gas, rates, telephone & water)	2,950
Management fees	0
Food	16,000
Household expenses	2,500
Car expenses	0
Insurance premia	0
Domestic helper(s)	5,200
Ohers (specify)	0
Total monthly household expenses	HK$50,450

4.2 Personal

Item	Amount (HK$)
Meals out of home	6,000
Transport	600
Clothing/Shoes	1,500
Personal grooming (including haircut and cosmetics)	1,500
Entertainment/presents	500
Holiday	0
Medical/Dental	1,500
Tax	0
Insurance premia	1,900
Interim maintenance	0
Contribution to parents	0
Dependent family members	0
Others (specify) – repayment of Citibank loan until March 2025	4,046
Total monthly personal expenses	HK$17,546

4.3 Children

Item	Amount (HK)
School fees	3,225 (LTC) 2,100 (LTL)
Extra tuition fees	0
School books and stationery	1,200
Transport to school (including school bus)	1,200
Medical /Dental	1,600
Extra Curricular Activities	6,000
Entertainment/presents	400
Holidays	0
Clothing/Shoes	1,800
Insurance Premia	0
Lunches and pocket money	250
Other Transport	200
Child-minding fees	0
Uniform	1,200
Ohers (specify)	0
Total monthly expenses for children	HK$19,175

Total monthly expenses (4.1+4.2+4.3)

HK$87,171

92.  In her oral evidence, the Wife accepted that the total sum of HK$76,850 / month more accurately represented the reasonable needs of herself and the Children, having arrived at that figure as follows:

(1)  Rental expenses of HK$23,800/ month;

(2)  All other expenses of HK$53,050/ month, to be met from the 2^nd MPS Undertaking of HK$35,000/month, and the Wife’s earnings of HK$18,050/month (without taking into account the 13^th month pay).

93.  She also accepted that her current earnings is sufficient to meet her own personal expenses, but it is her case that she would require maintenance from the Husband to meet the rental outgoing in addition to the sum of HK$35,000/month pursuant to the 2^nd MPS Undertaking.

94.  The Wife and the Children currently live in a 600 sq ft leased apartment at South Horizons, equipped with 3 bedrooms and 2 toilets. The tenancy commenced on 5 July 2021 with a 2-year term at HK$23,800/month, and either party to the agreement may give a one-month notice to terminate the tenancy after 4 July 2022.

95.  The Husband sought to challenge the reasonableness of the Wife and the Children’s accommodation needs, asserting that they do not need a 600 sq ft flat with 3 bedrooms and in any event rental expenses of HK$23,800/month is excessive. It is his position that a smaller 2-bedroom apartment at a farther location such as Aberdeen would sufficiently cater for their needs.

96.  The Wife did not accept that her current rental expenses are unreasonable. She explained that 2-toilets is a “must” as the elder daughter occupied the toilet for a long period of time on a daily basis. When the Husband asked how she intends to afford the rent if the ancillary relief award is less than what she requested, she replied she would consider moving farther away such as to Tsuen Kwan O which offers cheaper rent, but she is concerned that transport fees may increase. She has also considered moving to Tung Chung where her parents live, or Ma On Shan where her brother lives, but neither place is close to the Children’s school.

97.  The elder daughter, LTC attends secondary school at Mid-levels, whereas the younger daughter, LTL, currently attends primary school at Wong Chuk Hang. She is expected to join the elder daughter at the Mid-level secondary school campus in the coming academic year. Travel time from the South Horizons flat to the secondary school campus is around 35 minutes.

98.  Neither party have produced any documentary evidence on the level of rent of what they consider to be suitable apartments at locations other than the current one which they say can reasonably address the Wife and the Children’s accommodation needs.

99.  Given the family used to live in a rented flat at South Horizons as their former matrimonial home prior to the parties’ separation in late 2017, and coupled with the fact that the Children would be familiar with its locality and means of transport to and from school, I do not consider it reasonable to expect the Wife and the Children to move away from that area. I note the last matrimonial home rented by the parties at South Horizons is described to have a gross area of 631 sq ft with 3 bedrooms, 2 living rooms, 2 toilets and 1 kitchen in the Wife’s 1^st Form E dated 12 January 2018. I consider the current accommodation commensurate with the marital standard of living, and thus the rental expenses of HK$23,800/month is reasonable.

100.  However, I find some of the items listed as general expenses excessive:

(1)  No documentary evidence was produced to support utilities (electricity, gas, rates, telephone & water) of HK$2,950. I note from the tenancy agreement provided by the Wife that the landlord is in fact responsible for government rates. For a flat of 600 sq ft, I consider utilities of HK$1,500 reasonable.

(2)  Food expenses of HK$16,000 also appear excessive, especially when the Wife also suggested she spends HK$6,000 on meals out of home. I consider HK$8,000 a more reasonable sum.

(3)  It is not obvious what household expenses there are that amount to HK$2,500/month. I consider HK$1,200/month a more reasonable figure.

101.  The Husband does not challenge the reasonableness of the Children’s expenses, save to say that more school fee remission should be available. Both Children have been enrolled into the fee remission and financial aid scheme of their schools for the academic year of 2021/22, resulting in 40% and 60% school fee remission respectively. I have been shown a copy of the relevant policy, which introduces a tiered system for up to 100% fee remission where disposable family income falls below HK$828,800.

102.  The school also offers single parent relief measure, which increases the number of family members for single parent families by 1. As such, in the present case, it is the Wife’s evidence that she and the Children would be taken as a family of 4. She also explained that her disposable family income is calculated by reference to her earning of HK$20,000/month, plus the HK$35,000/month under the 2^nd MPS Undertaking less rental expenses of HK$23,800, thus HK$31,200/month.

103.  The Husband pointed out that at that level, the Children should have been eligible for a 80% fee remission. I do not consider it necessary for me to make a finding on school fees payable in the future, given the Wife confirmed that she has already applied under the scheme for remission and the result will be available in around mid-August 2022. She has also confirmed that she would inform the Husband of the applicable school fees for the coming academic year once that information becomes available.

104.  I am prepared to adopt a generous interpretation of the Children’s needs and I therefore accept other items of Children expenses as reasonable.

105.  The Wife invites me to accept the following as the Children’s share of the general expenses:

Item	Amount
Rent (HK$23,800/4 x 3)	HK$17,850
Utilities (HK$2,950/4 x 3)	HK$2,212.50
Food (HK$16,000/4 x 3)	HK$12,000
Household Expenses (HK$2,500/4 x 3)	HK$1,875
Domestic Helper	HK$5,200
Personal Loan (For meeting family expenses because no interim maintenance was received since Mar 2020) (HK$4,046/3 x 2)	HK$2,697.33
Total General Expenses:	HK$41,834.83

106.  She explained that there are 4 people in her household, namely herself, the 2 Children and a domestic helper. She considered the domestic helper’s expenses attributable to the Children’s share save for repayment of personal loan which she suggested was taken out for the benefit of herself and the 2 Children and thus should be divided into 3 parts. It was the Wife’s evidence that hiring a helper is a necessity for the Children’s benefit, given the Wife works and children below 16 cannot be left at home alone.

107.  I do not consider it reasonable to apportion the whole of the maid’s expenses to the Children’s share. The helper would have carried out chores common to the Wife and her household in general in addition to looking after the Children. I therefore do not accept the Wife’s argument that the whole of the maid’s expenses should be attributed to the Children, as I believe that in reality she works for both the Wife and the Children in her household. See L v W[2006] 2 HKFLR 410 at §§53-58 per HHJ Bruno Chan.

108.  A fair way to apportion general expenses is to take the household as having 3 members, namely the Wife and the 2 Children, and to exclude the domestic helper. See LCTK v TKKP (Interim Maintenance) [2010] HKFLR 442 at §36 per HHJ B Chu (as she then was). As such, I find the Children’s share would be 2/3.

109.  The Wife took out a personal loan with Citibank in the sum of HK$210,000 in mid-March 2020 to meet family expenses. Given my decision below on arrears of maintenance, it is not necessary to deal with this item when considering the Children’s share of general expenses.

110.  In sum, I find that the Children’s reasonable expenses as follows:

General Expenses

Item	Amount
Rent (HK$23,800/3 x 2)	HK$15,867
Utilities (HK$1,500/3 x 2)	HK$1,000
Food (HK$8,000/3 x 2)	HK$5,333
Household Expenses (HK$1,200/3 x 2)	HK$800
Domestic Helper (HK$5,200/3 x 2)	HK$3,467
Total General Expenses:	HK$26,467

Children Expenses

Item	Amount (HK)
Extra tuition fees	0
School books and stationery	1,200
Transport to school (including school bus)	1,200
Medical /Dental	1,600
Extra Curricular Activities	6,000
Entertainment/presents	400
Holidays	0
Clothing/Shoes	1,800
Insurance Premia	0
Lunches and pocket money	250
Other Transport	200
Child-minding fees	0
Uniform	1,200
Ohers (specify)	0
Total monthly expenses for children	HK$13,850, exclusive of schools fee to be updated

111.  The monthly sum total is therefore HK$40,317, exclusive of school fees which the Wife would provide information on in due course. If school fees remain at the current level, the sum total would be HK$45,642 per month.

112.  As for the Wife’s personal expenses, I consider a number of items excessive, especially in the absence of documentary support and in light of the much lower figures supplied in her 1^st Form E dated 12 January 2018 which I set out before for reference.

113.  I find the following to be reasonable expenses of the Wife:

General Expenses

Item	Amount
Rent (HK$23,800/3 x 1)	HK$7,933
Utilities (HK$1,500/3 x 1)	HK$500
Food (HK$8,000/3 x 1)	HK$2,667
Household Expenses (HK$1,200/3 x 1)	HK$400
Domestic Helper (HK$5,200/3 x 1)	HK$1,733
Total General Expenses:	HK$13,233

Personal Expenses

Item	Reasonable Amount (HK$)	Amount (HK$) in 2021 Form E (for reference)	Amount (HK$) in 2018 Form E (for reference)
Meals out of home	3,000	6,000	1,035
Transport	600	600	620
Clothing/Shoes	1,000	1,500	500
Personal grooming (including haircut and cosmetics)	1,000	1,500	870
Entertainment/presents	500	500	0
Medical/Dental	500	1,500	0
Insurance premia	1,900	1,900	1,067
Total monthly personal expenses	HK$8,500	HK$13,500	4,092

114.  As such, the Wife’s reasonable needs are around HK$21,733/ month.

G.2  Husband’s Needs

115.  Although the Husband’s latest Form E of 20 October 2021 supplied a sum total of HK$94,650 as his monthly expenses (inclusive of his HK$35,000/month payment under the 2^nd MPS Undertaking and LSY’s expenses), he accepted in cross-examination that his current expenses are around HK$48,350/ month as follows:

(1)  HK$4,350 being direct payment for LSY’s school fees;

(2)  HK$40,000 to maintain his new family, inclusive of rental payment of HK$20,000;

(3)  HK$4,000 for his personal expenses.

116.  This is in line with his current earnings of HK$48,500/month as a lecturer.

117.  The Husband currently lives in a 400 sq ft 2-bedroom rented apartment in Wanchai with his Partner, LSY and a dog. The Wife asked whether the Husband has any plan to move, to which the answer was no as that would ensue further expenses and the Husband’s mother was said to have refused to permit his return to her place. I do not think it can be said that the Husband’s accommodation expenses are unreasonable.

118.  The Wife sought to challenge the Husband’s decision to enrol LSY into pre-nursery classes starting from September 2021, saying it was unnecessary and therefore the HK$4,350/month school fees were unreasonably incurred. The Husband pointed out that the Children also attended pre-nursery classes, and the school has indicated that it would take LSY on for kindergarten K1-K3. I do not agree the pre-nursery school fees were unreasonably incurred, and in any event the Wife does not challenge LSY should attend kindergarten in the future.

119.  The Husband has failed to provide any break-down of his current spending of HK$48,350/month in an itemised form as required in a Form E.

120.  He was also decidedly opaque in his disclosure of his Partner’s financial resources and contribution to family expenses. He simply stated in answer to my questions that his partner used to work at the Hong Kong Club as a receptionist for 5-10 years earning HK$17,000-18,000/month until she quitted that job in May 2021. She then started an online yoga apparel shop in May 2021 and a yoga studio at Wanchai in October 2021, both being her own businesses. The Husband said there are 8-10 freelance teachers working at his Partner’s studio, which can host classes of up to 8 people. The Wife has adduced evidence from social media identifying the names of these businesses which the Husband did not challenge.

121.  The Husband accepted in cross-examination that his Partner would contribute to family expenses. If his new family needed more than the monthly sum he contributed, his Partner would cover the shortfall. Yet, it was his evidence that he did not know how much she is supporting the family, and whether she has any income. All he was prepared to say was that should he reduce his contribution to the new family’s expenses by HK$10,000, they would have to move somewhere else.

122.  The Wife has adduced photo evidence of the Husband’s staycations with his new family at a number of 5-stars luxury hotels, namely Four Seasons Hotel, JW Marriot Hotel and Auberge Discovery Bay Hotel from May 2021 to January 2022. The Husband did not dispute that his family has gone on such staycations, which he said was organised by the Partner.

123.  The Wife has also adduced photo evidence of the Husband’s travels with his new family in 2019, such as to the Mainland, Taiwan, Japan and Los Angeles. She was keen to emphasize that the photo showed the Husband and his Partner flew on a business class flight to Los Angeles.

124.  The Husband said he and his Partner deliberately put up those travel photos on social media to confuse the Wife. He first said in answer to the Wife’s cross-examination that he did not recall those holidays now nor who paid for them. In answer to my questions, he said he paid for the travels when he was employed, but his Partner funded the trips/ staycations when he was unemployed. I do not think it is necessary for a finding to be made on who paid for which trip or staycation, but I accept that the Husband’s new family is accustomed to some luxury discretionary spending. They also enjoy a certain lifestyle, such as welcoming a pet dog into the family.

125.  The Partner went through a divorce with her ex-husband in 2017. There is no reason to think that the Husband, as indeed his Partner, are unaware of the requirement for full and frank disclosure in divorce proceedings. And yet, it was the Husband’s evidence that the Partner deliberately chose not to inform him of her earnings and financial position, in order to save him the trouble of having to make any disclosure in this regard to this Court.

126.  The legal principles on drawing of adverse inference have been set out above. In short, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default. It can be readily seen that Part 5.6 of Form E requires disclosure of a cohabitant’s income and assets. I do not accept that information on the Partner’s financial resources and her contribution to family expenses would not be available to the Husband had he made proper enquiries and used his best endeavours to comply with his duty of full and frank disclosure.

127.  See also the principles set out by Lord Sumption in Prest v Petrodel Resources Ltd [2013] 2 AC 415 at §45 where he said:

“The modification to which I have referred concerns the drawing of adverse inferences in claims for ancillary financial relief in matrimonial proceedings, which have some important distinctive features. There is a public interest in the proper maintenance of the wife by her former husband, especially (but not only) where the interests of the children are engaged. Partly for that reason, the proceedings although in form adversarial have a substantial inquisitorial element. The family finances will commonly have been the responsibility of the husband, so that although technically a claimant, the wife is in reality dependent on the disclosure and evidence of the husband to ascertain the extent of her proper claim. The concept of the burden of proof, which has always been one of the main factors inhibiting the drawing of adverse inferences from the absence of evidence or disclosure, cannot be applied in the same way to proceedings of this kind as it is in ordinary civil litigation. These considerations are not a licence to engage in pure speculation. But judges exercising family jurisdiction are entitled to draw on their experience and to take notice of the inherent probabilities when deciding what an uncommunicative husband is likely to be concealing. I refer to the husband because the husband is usually the economically dominant party, but of course the same applies to the economically dominant spouse whoever it is.” (emphasis supplied)

128.  Given the state of evidence, although I am prepared to accept that the Husband’s actual expenses are around HK$48,350/ month, I do not agree that his reasonable needs are to be assessed at the same level.

129.  It seems to me that the Husband made a conscious decision to cease any payment of HK$35,000/month under the 2^nd MPS Undertaking to his first family since June 2021, and to allocate all his earnings to meeting the expenses of his second family although his Partner is able to make greater contribution to meeting those expenses. I note that the 2^nd MPS Undertaking was embodied in a consent order, and the Husband was able to comply with it for 5 months.

130.  It is trite that an ex-husband’s moral obligation to a cohabitant had to be brought into account in assessing the level of his obligation to maintain the first wife. However, it would be wrong to give such “priority” to the claims of the cohabitant (or second wife) as virtually to ignore the claims of the first wife. Indeed on general principle, a spouse must on marriage be presumed to take the other subject to all existing encumbrances, whether known or not, for example an obligation to support the wife or child of a dissolved marriage.

131.  See CSH v. LS[2020] HKFC 143 §§91-93, where HHJ Tse-Ching considered Vaughan v Vaughan [2010] 2 FLR 242 (following Robert v Roberts [2970] P.1), and set out as follows:

“92. In that case:

…

(9) During the trial, the deputy judge notionally allocated assets and income to the second wife. The appeal raised a question about the proper treatment of the hypothetical claims of a second wife against the husband in the assessment of any obligation on his part to continue to make periodical payments to a first wife. It was held on appeal that:

“[37] In Roberts v Roberts [2970] P.1, the Divisional Court of the Probate Divorce and Admiralty Division allowed an appeal by a wife against an order of the justices that, out of a net income of £22 per week, her husband should pay only £2.50 per week for the maintenance of herself and their son. The reasoning of the justices was that the husband needed to apply the balance of his income to the support of himself and, in particular, of his cohabitant and two of her children. The court (Sir Jocelyn Simon P and Rees J)

(a) decided, at 3E, to survey the relevance not only of a husband’s moral obligation to support a cohabitant but also of an ex-husband’s legal obligation to support a second wife (on the basis that the claim of the former could not rank higher than that of the latter);

(b) held, at 6E to 8B, that not only an ex-husband’s legal obligation to a second wife but also a moral obligation of a husband or ex-husband to a cohabitant had to be brought into account in assessing the level of his obligation to maintain the first wife; but

(c) held, at 8G, that “on general principle, a spouse must on marriage be presumed…to take the other subject to all existing encumbrances, whether known or not - for example…an obligation to support the wife or child of a dissolved marriage”; but

(d) considered, at 8H to 9F, that English law did not, as did some Commonwealth courts, take the principle to its logical conclusion by affording “primacy” or “priority” to the claims of the first wife; yet nevertheless

(e) concluded, at 5D and 10D, that a decision, such as that of the justices, to give such “priority” to the claims of the cohabitant (or second wife) as virtually to ignore the claims of the first wife was plainly wrong.

…

[39] In my view the judge in the present case wrongly gave priority to the claims of the second wife. He lost sight of the principle in the case of Roberts. His fourth attribution to her was unprincipled. Whatever the length of the second marriage in relation to the first; however substantial the non-financial contribution made by the second wife to it; and whatever the extent to which the pension fund was built up out of the husband’s earnings during its subsistence; it remained as illogical for the judge to attribute one half of the husband’s pension income to the second wife as it would have been for the judge to attribute one half of the husband’s substantial earnings to her while he had remained in receipt of them. All the judge should have done was to take into account the husband’s obligation to maintain the second wife to the extent to which she could not maintain herself out of the income already judicially attributed to her”. (emphasis supplied)

132.  Based on the above, I draw the adverse inference that the Partner is in fact able to make greater contribution to meeting their family’s expenses. Doing the best I can with the available information, I find that on the basis the Partner pulls her full weight, the Husband’s reasonable needs, being his personal expenses and his share of the new family’s expenses, is HK$24,000/ month.

H.   Parties’ earning capacity

H.1  Wife’s Earning Capacity

133.  The Wife obtained a bachelor’s degree at the University of Hong Kong in Geography and Japanese studies. She was employed as a cabin crew by Cathay Pacific in 2004 to 2007. After leaving that position, she worked as a clerk in a law firm briefly for 3 months in 2007, and then joined Dragonair as an operations officer in October 2007 to 2009, earning HK$8,500 to HK$10,000.

134.  The Wife said the Husband asked her to quit her job to care for the family in August 2009 when she was pregnant with the younger daughter. Other than a brief stint as a property agent for 2-3 months in 2012-2013, the Wife was a full-time housewife until she re-entered the workforce in June 2018, having petitioned for divorce on 30 November 2017.

135.  Since June 2018, the Wife worked as an executive assistant in a small-sized asset management company comprising of 2 portfolio managers and 15 employees in total. Her starting monthly salary in 2018 was HK$15,000, which has now increased to around HK$19,550/month (less MPF and taking into account 13^th month pay).

136.  The Wife has been seeking to improve her earnings. She did not think there is much chance for promotion with her current employer, and therefore she has been looking for new job opportunities as an administrative assistant with the assistance of headhunter agencies in both public and private sectors. She has passed the government’s common recruitment examination.  The jobs which she has been applying for offer monthly salary between HK$25,000 to HK$30,000. However, she has not yet received any job offers yet.

137.  While the Wife’s attempts to increase her earning capacity is laudable and must be encouraged, I accept there is no evidence to suggest that the Wife’s foreseeable earning capacity is significantly more than her current earnings of around HK$19,550/month.

Husband’s Earning Capacity

138.  It has already been said that the Husband was previously employed as a pilot from 30 May 2005 until 23 July 2019. He was promoted to Captain in 2018 with monthly income of about HK$150,000.

139.  After the Husband resigned from on 23 July 2019, he was unemployed for 13 months until he was employed as a full-time lecturer at a college in Hong Kong, teaching a bachelor degree related to aviation since August 2020. His current income (less MPF) is HK$48,500/month.

140.  As detailed in Section D above, the Husband previously relied on his depressive state and asserted that it would not be reasonable to expect he can resume his former occupation as a pilot. Pursuant to the Confirmation given on the 1^st day of trial, he no longer maintained this position, but instead relied on the following which he said leads to the same conclusion:

(1)  the aviation industry offers extremely limited job opportunities and is very unstable given it was very hard-hit by COVID-19;

(2)  competition for job is very fierce and it is unlikely he would be able to find a job given the requirement for a valid flying licence (which he does not have) and also a recent last flying date (but the last time he flew was nearly 3 years ago);

(3)  his previous applications to HK Express and HK Cargo in 2018-2019 had been turned down when his medical license was still valid;

(4)  his recent application to Air Hongkong in May 2022 to be a First Officer is without success so far.

141.  While the Husband stated he will try to increase his income and look for jobs as a pilot, he also cautioned that the re-entry salary would be significantly less than his previous earning as a captain. He asserted that even if he were to be re-employed by his last employer, he would only be retaken as a First Officer at the first instance, earning around HK$48,125/month.

142.  The Wife did not take issue with the Husband’s assertion that he would only be taken on as a First Officer now, but was keen to point out that there are other subsidies on top of the basic salary such as extra pay for overtime, subsidies for education and housing etc. She was of the view that those subsidies would amount to around HK$30,000/month, thus the actual remuneration package would be HK$78,000/month.

143.  The Wife also adduced evidence from the website of Air Hongkong which states that “projected annual earnings (basic pay, fixed/ outport allowances, productive pay) for our entry level First Officer 1 is US$139,840, assuming a normal productive flying hour target of 55 block hours per month is met (except for months with leave and ground training)”[8]. This is roughly HK$1,097,744/ year, and thus HK$91,479/month[9]. The website also sets out a number of benefits which pilots enjoy, such as medical and life insurance. The Husband does not dispute these information.

144.  The Wife’s case is that the Husband has not fully maximized his chances to re-enter the aviation industry as a pilot, given he only applied to local airlines related to his previous employer, but had not ventured further to mainland or other Asian airlines, which she said have great demand for freight plane pilots. She fully accepted the Husband should work somewhere other than in Hong Kong if that meant he could maximise his earnings as a pilot, although she alluded to possible difficulties with enforcement of maintenance orders in other jurisdictions.

145.  The Husband explained that he chose to apply for a flying post in May 2022 because the aviation market was improving with COVID coming under control. He did not wish to risk or forgo his current job as a lecturer previously given the dim prospect of the aviation industry in the past years. He emphasized that he is a non-current licence holder, and he is unsure whether he can renew the flying licence himself. Also, he has not flown the type of aircraft deployed by Air Hongkong.

146.  Based on the above, I accept there is much uncertainty as to whether the Husband would be able to re-enter the aviation industry as a pilot. I do not think it can be said that he has been deliberately stifling his earning capacity in maintaining his current position as a lecturer. I find on the evidence before me that the earning capacity he has or is likely to have in the foreseeable future is around the same level as his current income, and thus HK$48,500/month.

147.  As stated in paragraph 42 above, the Husband has provided an Undertaking to Inform, namely he would (i) inform the Wife if his earning capacity improves in the future, and (ii) discuss with her an upward variation of maintenance payments in those circumstances. This should give some comfort to the Wife in light of possible changes to the Husband’s employment.

I.   Third Party Financial Support

148.  The Husband accepted he has the responsibility to support his Children, and if he has the financial ability, he is prepared to share such responsibility with the Wife. However, the Husband urged me to accept that the Wife and the Children would be fully supported by the Father in any event, and therefore their needs can be fully met from their own resources.

149.  As stated above regarding third-party support, the two critical evidential questions for the Court are (a) the extent of the financial assistance provided by the third party to the husband or wife and (b) the likelihood of such assistance continuing in the foreseeable future: KEWS v NCHC §36.

150.  On the first issue, it was the Wife’s oral evidence that the Father had never “lent” any money to her prior to the HK$1.8 million “loan” incurred during the course of these proceedings. Such sum was used to pay her legal fees and maintenance of herself and the Children, the latter being a monthly sum of HK$58,800 (HK$35,000 plus HK$23,800 for rental payment) since June 2021 when the Husband’s 2^nd MPS Undertaking fell into arrears, thus around HK$700,000. The only other instance of financial support from the Father was in the form of a gift of HK$700,000 which was the down-payment for purchase of the parties’ former matrimonial home at Coastal Skyline, Tung Chung in 2009.

151.  The Husband agreed that other than the HK$700,000 gift which he said was for renovation of the former matrimonial home, the Father had never supported the family during marriage.

152.  I have dealt with the nature of the Father’s “loans” in Section F above.

153.  As to the second issue, in answer to this Court’s question on whether the Father’s financial support would continue in the future, it was the Wife’s evidence that the Father loves her and the Children and therefore if it is within his ability, he will continue to provide such support.

154.  The Wife stated that whereas her mother has retired as a former government subsidized school teacher, now earning a pension of HK$5,000-6,000/month, the Father now works part-time at a government department. He has remortgaged one of his 2 properties in Hong Kong, and made some investment in US bonds to raise liquidity in order to provide financial support to the Wife and the Children.

155.  As will be seen in Section J below, the Wife’s and Children’s expenses currently unmet from the contribution from both the Husband and the Wife is around HK$18,000 plus school fees. I find on the evidence on a balance of probabilities that there is a likelihood of the continuation of financial assistance from the Father in the foreseeable future to meet these expenses.

156.  I therefore take this into account in the identification of the financial resources of the parties and also in determining the appropriate ancillary relief to be granted.

J.   Deciding the outcome

157.  By way of summary, I have found that:

(1)  the Wife’s net worth is around HK$118,177 and the Husband’s net worth is around HK$771,345. The family pot is therefore around HK$889,522;

(2)  the Children’s monthly expenses is HK$40,317, exclusive of school fees which the Wife will supply information on in due course;

(3)  the Wife’s reasonable needs are around HK$21,733/ month;

(4)  the Husband’s reasonable needs are around HK$24,000/ month;

(5)  the Wife’s earning capacity is around HK$19,550/month;

(6)  the Husband’s earning capacity is around HK$48,500/month.

Wife’s ancillary relief claims

158.  The Wife’s open offer seeks a lump sum payment of HK$1.2 million. The basis for that claim is said to be for repayment of the “loans” made available by the Father to meet the needs of the Wife and the Children.

159.  In Section F above, I have expressed my doubts as to whether the Father’s advancement to the Wife were in the nature of loans, and even if so, they are to be considered as “soft loans” and not a real liability of the Wife.

160.  Of the Husband’s HK$771,345, it should be noted that HK$488,287 (with 50% liquidity discount to be applied) is locked up in his MPF Manulife account which has to be preserved until his retirement age. His main asset is to be found in his insurance policies worth around HK$481,972.90.

161.  Given the Wife accepted that she is capable of meeting her own needs, the next step is to decide to apply the sharing principle. In light of my decision on payment of arrears of maintenance by the Husband in the sum of HK$343,000 below, I consider it unnecessary to make any further order for ancillary relief.

162.  The payment of arrears is sufficient to repay the Citibank loan with outstanding balance of HK$150,010 as at 5 October 2021. The Wife would have HK$461,177 in her name, whereas the Husband is left with HK$428,345.

163.  I consider this a fair result, where the Wife ends up with 51.8% of the family pot, and the Husband has 48.2% thereof. The slight departure from equality is justified on the basis of the Wife’s needs, given she is left with more onerous responsibilities involving care of the Children than the Husband. Her ability to improve her earning capacity is also weaker than that of the Husband. See LKW v . DD §107. I therefore make no order for ancillary relief as between the parties.

Children’s maintenance

164.  Given the Husband’s earnings of HK$48,500/ month and his reasonable needs of HK$24,000/month, I order that he provides HK$24,500/ month to the Wife as maintenance of the Children.

165.  In light of the Wife’s acceptance of the Husband’s Direct Debit Undertaking in place of her original request for secured periodical payments, I make no order for secured periodical payment, lump sum payment or attachment of income order.

166.  I consider sufficient safeguard is provided in these circumstances by the Direct Debit Undertaking. See YY v. CHOA(unrep) FCMC 7598/2010 (15 August 2012) per HHJ Melloy at §§12-14. In any event, it is not clear the Husband has the ability to put up security or a lump sum for the periodic payment.

Arrears of interim maintenance

167.  It is not disputed that the Husband has ceased to pay anything to the Wife since June 2021 despite his 2^nd MPS Undertaking to pay interim maintenance of HK$35,000/month on the 1^st day of every month. The Wife therefore sought to enforce arrears, which would have accrued for 14 months by the time of this judgment (June 2021 to July 2022).

168.  It is trite that an over or under payment of maintenance pending suit can be adjusted at the final trial.

169.  However, it is important to note that the Court only has power to accept or discharge an undertaking, but not to vary it: D, M v. D, R [2021] HKFC 48 at §§19-23 per HHJ Melloy.

170.  Paragraph 2 of the 18 December 2020 order provides that execution of interim maintenance order dated 26 September 2018 be stayed pending full compliance with the 2^nd MPS Undertaking or until further order of the Court.

171.  The order dated 26 September 2018 provides that by consent, the Husband was to pay HK$25,000/month as interim maintenance for the Wife and the Children until further order, in addition to his undertaking to pay the Wife’s rental expenses and the Children’s school fees.

172.  I therefore release the Husband from compliance with his 2^nd MPS Undertaking from 1 June 2021 onwards, and direct that the order for maintenance pending suit be varied to HK$24,500/month in light of my findings above.

173.  As such, the relevant arrears to be paid is in the sum of HK$343,000 (HK$24,500 x 14 months).

174.  The Wife sought interest at the rate of 8% p.a. on the arrears. However, I am not minded to order the Husband to pay interest for the following reasons:

(1)  it is not obvious the Court has jurisdiction to order payment of interest on a breach of undertaking for interim maintenance, and in any event the Husband has been released from the 2^nd MPS Undertaking;

(2)  the Wife has not in fact sought to enforce the 1^st MPS Order dated 26 September 2018. For completeness, the Court has no jurisdiction to order interest on arrears of maintenance pending suit awarded under s.3 MPPO: KJ v. KMLM(unrep.) HCMC 4/2010 (21 May 2014) per To J at §§88-95;

(3)  to the extent it is said that part of the HK$25,000/ month payment under the 1^st MPS Order was made for the benefit of the Children under s.5(2) MPPO and therefore it is a maintenance order which is now being revived to which s.28AA MPPO is applicable:

(a)  under s.28AA(8) MPPO, the Court is to take into account all circumstances of the case should a judgment debtor apply to be relieved from interest payment. Such factors include his ability to pay;

(b)  It is important to notice the difference of the Court’s approach in ancillary relief matters and ordinary civil action. See KJ v. KMLM§62:

“Similar considerations apply in awarding interest. It may be unfair to burden a party to a marriage which has broken down with the exceedingly high rate of interest applicable to payment of debt or damages which are compensation for a wrongful act. There are no wrongdoers, no debt, or damages, but division of the family pool. The court is more flexible in fixing the interest rate for outstanding payment of the lump sum ordered. Section 28AA of the MPPO provides for a regime for the paying party to make application not to pay interest if he has reasonable grounds. The loss of interest to the receiving party or the benefit to the paying party in retaining the use of the money should be considered as the starting point rather than judgment rate.” (emphasis supplied)

(4)  I consider my dismissal of both parties’ ancillary relief claims upon the Husband’s payment of arrears a fair result in these proceedings. It would not be appropriate to burden the Husband with high interest payment in light of that conclusion.

175.  I therefore make no order for the Husband to pay interest on the arrears.

K.   Order

176.  In the circumstances, I shall make an order as follows:

(1)  Upon the Husband’s Confirmation, I order that by consent, both parties be discharged from further compliance with the AME Orders;

(2)  The Husband do pay the Wife the sum of HK$343,000, being arrears of interim maintenance from June 2021 to July 2022, within 56 days to a bank account to be nominated by the Wife;

(3)  The Husband do pay the Wife HK$12,250/month for maintenance for each of the 2 Children, and thus a total of HK$24,500/ month, starting from 7 days from the date of this Order, by depositing the sum into a bank account to be nominated by the Wife, and he shall continue to pay in the same manner on the same day of every succeeding months, until each Child turns 18 or completes full time education, whichever is the later;

(4)  For the avoidance of doubt, the Husband be released from his 2^nd MPS Undertaking. Paragraph 1 of the interim maintenance order dated 26 September 2018 is also discharged, and the Husband be released from the 1^st MPS Undertaking therein. Upon payment of the interim maintenance arrears, any outstanding maintenance due and owing under the 1^st and 2^nd MPS Undertakings and the order dated 26 September 2018 shall also be discharged;

(5)  Upon the Husband’s full compliance with payment of interim maintenance arrears or the grant of the Decree Absolute, whichever is the later, the Wife’s ancillary relief claims be dismissed;

(6)  Upon it being deemed that the Husband has made a claim for ancillary relief, all such claims shall also be dismissed upon the grant of the Decree Absolute;

(7)  A section 18 declaration to be issued;

(8)  Liberty to apply.

177.  In making the above order, I have accepted the following undertakings and/ or confirmation from the parties, which should also be reflected in the order:

(1)  the Husband’s Undertaking to Inform, that he would (i) inform the Wife if his earning capacity improves in the future, and (ii) discuss with her an upward variation of maintenance payments in those circumstances;

(2)  the Husband’s Direct Debit Undertaking, that he would set up a direct debit authorization to enable the Children maintenance to be paid from the account to which his salary is deposited to an account identified by the Wife; and

(3)  the Wife’s confirmation that she would inform the Husband of the applicable school fees of the Children for the coming academic year of 2022/23 once that information becomes available.

178.  Neither party emerged as the victor in these proceedings. I also bear in mind the importance to take into account both parties’ needs on the issue of costs. I consider the order I made reflects a fair division of the family assets and it would not be appropriate to have it further adjusted as a result of a cost award.

179.  As such, there shall be an order nisi to be made absolute in 28 days’ time that:

(1)  there be no order as to costs of and occasioned by the ancillary relief proceedings, save that the Husband do pay the Wife any cost incurred in compliance with the AME Orders, to be taxed if not agreed;

(2)  there be no order as to costs in respect of the Husband’s Variation Application.