KCMA v. ABC AND OTHERS

  HCMC 1/2019

[2020] HKCFI 1078

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO. 1 OF 2019

________________________

_______________________

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D E C I S I O N

(Variation Application of Maintenance Pending Suit)

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1.  This Court has earlier in these proceedings handed down a decision on 21 May 2020 in relation to W’s application for litigation funding (“Litigation Funding Decision”).  I shall continue to use the abbreviations in that decision, save where otherwise indicated herein. 

2.  The AR Trial (for W’s AR Application and her 2^nd 17 Application) has been scheduled for a 10 day trial to take place about a year from now, from 3 – 14 May 2021, and there was a direction hearing on 3 June 2020 for the fixing of a FDR hearing.  W’s Disclosure Application has been fixed for a substantive argument on 17 June 2020.

3.  The present application before this Court is H’s Variation Application made by a summons issued on 19 March 2020, and H is seeking a downward variation of the MPS Order on an urgent basis during GAP[1] (“Variation Summons”).

4.  The MPS Order was an order made by consent of H and W[2]. Pursuant thereto, H is to pay W a total sum of HKD 105,800 per month, being maintenance pending suit for W of HKD 26,450 per month and interim maintenance for the Children of HKD 79,350 per month (HKD 26,450 each) with effect from 1 January 2019.  In addition thereto, H has provided the following undertakings to pay direct on monthly basis, expenses totalling about HKD 149,978 at the time (“Undertakings”) :

(i)  Rental (then HKD 70,000);

(ii)  School Fees (then HKD 48,358);

(iii)  Extra Tuition of HKD 6,000 for all the Children;

(iv)  School Bus (then HKD 3,500);

(v)  Car Insurance (then HKD 4,620 if applicable);

(vi)  Cricket Club (HKD 7,500);

(vii)  Medical and Dental Insurance provided by his company;

(viii)  Uninsured Medical and Dental (primarily for the Children’s therapy of HKD 10,000)

5.  As seen above, the monthly payments to W for her and the Children under the MPS Order were HKD 105,800 plus the Undertakings of then estimated amount of HKD 149, 978.  The total of these would be HKD 255,778 per month.

6.  In the Variation Summons[3], H seeks as follows:

(i)  The maintenance pending suit for W be varied from HKD 26,450 per month to HKD 13,600 per month (paragraph 1 of the MPS Order);

(ii)  The interim maintenance for the Children be varied from HKD 13,600 per month totalling HKD 40,800 (paragraph 2 of the MPS Order);

(iii)  The Rental Undertaking be reduced to HKD 60,000 per month (or less subject to the actual amount of rent) upon expiration of the current lease or until May 2020, whichever is the earlier (Recital C(a));

(iv)  School Fees Undertaking (Recital C(b)) – no change;

(v)  The Extra Tuition Undertaking is to be varied for the extra tuition expenses to be paid directly by H and all tuition classes are to be agreed by both parties in writing before it is incurred, with no proposed change on amount (Undertaking in Recital C(c));

(vi)  School Bus Undertaking (Recital C(d)) – no change;

(vii)  Car Insurance Undertaking (Recital C(e)) – no change;

(viii)  The Cricket Club Undertaking to be varied that the expenses are at a maximum of HKD 2,500 per month and any overspending by W to be paid by W within 7 days of receiving the bill, failing which the overspent amount to be deducted from the cash MPS payment on the following month, and for the avoidance of doubt monthly membership dues will be borne equally between both parties (Recital C(f));

(ix)  Medical and Dental insurance provided by H’s employer (Recital C(g)) – no change;

(x)  The Uninsured Medical and Dental expenses Undertaking be varied to HKD 2,500 per month and all medical treatment for the Children to be agreed in writing by both parties before it is incurred (Recital C(h)).

7.  According to Mr Marwah, Counsel for H, what H seeks is to reduce the total amount of monthly maintenance for W and Children, from about HKD 255,778 per month[4] under the MPS Order to a total of HKD 188,975 per month, namely by about 26%.

Ground for variation

8.  Essentially H’s ground for variation is that there has been a material change in H’s income, in that there has been a 40% decrease in his total income.

Legal principles

9.  Section 11 (1) of the Matrimonial Proceedings and Property Ordinance, Cap 192 sets out the Court’s power to vary a periodical payment order and section 11(7) set outs out how this power is to be exercised. 

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.”

10.  As set out by Cheung JA in AEM and VFM [2008] 3 HKLRD 36, CACV 261/2006[5]:

“14 3. The traditional approach to variation was not to re-fix afresh the amount of maintenance but to consider the amount of change in the actual means of the parties so that the new order should merely be increased or decreased roughly in proportion to the change in the means : Foster v. Foster [1964] 3 All ER 541, Jackson’s Matrimonial Finance and Taxation 7^th Ed. Ch. 3. 131.

4. The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh : Flavell v. Flavell [1997] 1 FLR 353 at 357B following Lewis v. Lewis [1977] 1 WLR 409 and Garner v. Garner [1992] 1 FLR 573.

5. Any change in any of the matters to which the Court was required to consider when making the original order was one of the circumstances to be considered.

6. Almost invariably, an application to vary an earlier periodical payment order will be brought on the basis that there has been some changes in the circumstances since the original order was made, for example, continuing inflation; the increased costs in supporting a growing child and that one party may be more adversely affected than another by the increase in the costs of living : Garner v. Garner.

7. An increase in the wealth of the husband was a relevant factor to be taken into account : Primavera v. Primavera [1991] 1 FLR 16 and Cornick v. Cornick (No. 2)[1995] 2 FLR 490.

8. At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order : Boylan v. Boylan [1988] FLR 282.”

11.  There is no dispute in relation to the above general principles.  It is not disputed that the above principles similarly apply to a variation of a maintenance pending suit order/interim maintenance order: LL v WMFV [2017] HKFC 135, FCMC 12799/2016, 14.12.17.

The evidence

12.  The Variation Summons was supported by H’s 6^th affidavit filed on 18 March 2020, and in reply to W’s 8^th affirmation filed in opposition, H filed his 7^th affidavit.

13.  Also before the Court were the parties’ respective 1^st and 2^nd Form Es, the parties’ relevant affirmations/affidavits at the time when the MPS Order was made, and also H’s 5^th affidavit and W’s 7^th affirmation in respect of the W’s litigation funding application.

H’s disclosure

14.  W has complained over H’s financial disclosure.

15.  First, attached to Mr Marwah’s Submissions is a letter dated 29 April 2020 from H’s solicitors to W’s solicitors enclosing a copy of a HSBC statement and 3 cheques, one dated 28 April 2020 to the Children’s school fees for their school fees, one dated 26 April 2020 to H’s friend (“AW”) of HKD 1,080,000, and a transfer advice to H’s solicitors on 29 April 2020 for HKD 250,000, alleging that after clearance of those payments, H’s bank balance would be reduced to HKD 129,435 (“29.04.20 Letter”). As pointed out on behalf of W, H’s evidence should not be produced by way of a letter attached to counsel’s submissions.

16.  Second, W has produced a chronology of H’s disclosure in relation to his income/bonus, to show that H’s financial disclosure has been piece-meal[6]. According to this chronology, in a letter dated 20 February 2020 from his solicitors (“20.02.20 Letter”), H confirmed that he was expecting that he might receive a cash bonus of around USD 50,000 – 100,000 for 2019.  It was only in H’s 7^th affidavit of 23 April 2020 that he produced (i) a letter from his employer dated 22 April 2020 confirming that the bonus for the year ended 31 December was HKD 780,000 or USD 100,000[7], and (ii) a copy of his HSBC account statement of 10 March 2020 showing that the bonus was credited into his HSBC account on 4 March 2020[8].

17.  Third, in the 20.02.20 Letter, H’s solicitors had also enclosed an unsigned letter dated 14 February 2020 from H’s employer as to the deferred shares/fund units (“Fund Units”) awarded to H from 2012 to 2018[9]  but there was no information set out as to what was awarded to H for 2019. Looking at the past, the vesting date is always 28 February of each calendar year, and thus H should know by 28 February 2020 whether there were any Fund Units awarded to him for 2019, ie for the tax year 2020/2021.  The letter dated 14 February 2020 appeared to be the last letter disclosed by H as to the award of the Fund Units.

18.  Fourth, it would appear from the 14 February 2020 Letter that 299,390 units had been sold on unknown date/s for an unknown amount/s.  It was not until H’s 7^th affidavit of 23 April 2020 that he explained that he received USD 207,080 on 22 October 2019 for the sale of his Fund Units and produced a copy of the relevant 9 November 2019 HSBC bank statement, and the relevant supporting email.  He disclosed that 84,390 Fund Units were sold some time ago in 2014 without disclosing the amount and the whereabouts of the sale proceeds[10].

19.  Fifth, as mentioned earlier, a hearing for W’s Discovery Application has been fixed for argument on 17 June 2020, and that W has complained that H has not accounted for the funds removed by him in breach of the Injunction Order.  The orders sought by W in the Discovery Application regarding the US Trusts are, amongst other things, the following:

(1)  trust accounts from the inception of the US Trusts;

(2)  audited or unaudited financial statements and management accounts of Bremen and Intero from 2014 to 2018;

(3)  a list of assets ever held and/or still held in the US Trusts whether in the names of the US Trusts, Bremen or Intero, and for bank accounts, a list of authorized signatories and power of attorney given under the account;

(4)  details of transactions of over HK$80,000 in or through which any of the US Trusts’ assets were dealt with;

(5)  documentary evidence of certain withdrawals from Intero’s Standard Chartered Bank Private Bank Portfolio and USD savings account and HKD Savings account from April 2017 – 21 December 2017;

(6)  to account for and provide documentary evidence of the HK$1.5m received from the Education Trust;

(7)  to account for and provide documentary evidence of the US$ 250,000 from the Family Trust;

(8)  to provide all communications between H and the Trustees of the US Trusts concerning certain requests by H made to the Trustee of the Family Trust and a meeting, as set out;

(9)  The creation of the Charge Deed on 1 September 2017.

20.  Further, in the Discovery Application, in relation to the Indian Property, the orders sought by W are, amongst other things, the following:

(1)  The trust accounts of the Indian Trust;

(2)  Documentary evidence of the rental income for the Indian Apartment since 1 August 2016 and all outgoings and expenses

21.  Having considered all the above, I agree with W that H’s financial disclosure has been piece meal and has not been satisfactory so far.

H’s income

At the time of the MPS Order (11 December 2018)

22.  In H’s 2^nd Form E (Limited) filed on 12 October 2018, ie 2 months prior to the MPS Order, he disclosed his income to be a total average per month of HKD 330,429, being HKD 264,570 being his basic salary + HKD 65,859 for housing allowance + bonus unknown[11], ie HKD 3,965,148 a year.

23.  As seen in the H’s Table in the Litigation Funding Decision[12], according to H’s Employer’s Returns, H’s income for the year 2018/2019, namely 1 April 2018 to 31 March 2019, was HKD 4,833,022 before tax and MPF deductions and HKD 4,189,316 after tax and MPS deductions.

24.  H has now produced a Salaries Tax Demand for Final Tax 2018/2019 and Provisional Tax for 2019/2020[13] (“2018/2019 Final Tax Demand”).  His final tax for 2018/2019 was assessed at a total income of HKD 4,394,964, being his final income of HKD 3,995,422 and the value of residence of HKD 399,542.  The value of residence of HKD 399,542 averaged only about HKD 33,300 per month, and it would appear that, for tax purposes, it was assessed at 10% of his final income. 

H’s current income

25.  As seen in H’s Table in the Litigation Funding Decision, there are 4 components of his income, namely (i) wages; (ii) rental allowance or housing allowance; (iii) bonus (ie cash); and (iv) other rewards (ie awards of the Fund Units)[14] (“4 Components”). 

26.  In H’s 6^th affidavit, the supporting affidavit for his Variation Summons, he did not set out any figures for the 4 Components for 2019/2020, save the 2018/2019 Tax Demand, which included the provisional tax for 2019/2020[15]. As seen therein, his provisional tax for 2019/2020 was simply assessed on the same amount of his final income and value of residence for 2018/2019, namely a total of HKD 4,394,964 as mentioned earlier. 

27.  In H’s Table, item (ii) of the 4 Components, namely for rental allowance was HKD 1,180,000 for 2015/2016, HKD 1,247,198 for 2016/2017, HKD 790,316 for 2017/2018 and HKD 837,600 for 2018/2019.   Thus, it would appear that for 2018/2019, he received an average of about HKD 69,809 per month (HKD 837,600÷12), for his housing. 

28.  In his 7^th affidavit, in reply to W’s 8^th affirmation, H had said he had already explained to W that separate funds for “rental allowance” were not actually received and that a portion of his regular salary happened to be designated as rental allowance for tax reasons[16].

29.  In her 8^th affirmation, W had invited H to make disclosure and produce the relevant documentary proof with regard to the total amount of the rental allowance paid and refunded for 2019/20 (ie as seen in his Employer’s Return of 2019/2020)[17].

30.  A table was submitted on W’s behalf and attached to W’s Submissions, setting out H’s total income for 2015/2016 to 2019/2020[18] (“Table A”), and in this Table A, item (ii) rental was stated to be “unknown”.

31.  Thus, at this stage, W has not accepted H’s explanations.  Yet, it did not seem that H has provided any further documentary evidence in support of his allegation in relation to the rental allowance.

32.  H has also provided copies of his pay slips from August 2017 – July 2019[19], and September 2019 to February 2020[20], to show his current net pay to be HKD 313,750 per month (“Pay Slips”). The Pay Slips also showed that he has been voluntarily contributing HKD 9,750 per month towards MPF, in addition to his mandatory contribution of HKD 1,500 per month, from August 2017 to July 2019 and from September 2019 until February 2020.

33.  Based on the Pay Slips, item (i) wages of the 4 Components would be HKD 3,900,000 for 2019/2020, but item (ii) rental, is unknown.  Item (iii) bonus, is now known and is HKD 780,000.  As for item (iv), it appears to be 0, as seen in the unsigned letter dated 14 February 2020 from H’s employer[21].

34.  It thus appears that H’s income for 2019/2020 should be at least HKD 4,680,000 before tax and MPF deductions, but with the exact amount of item (ii) rental being unknown.  

H’s assets and liabilities

At the time of the MPS Order

35.  In his 2^nd Form E, H disclosed his interest in his bank accounts to be HKD 1,703,425 and liabilities of HKD 11,731,159[22]. His net assets appeared to be – HKD 10,027,734.

H’s current assets and liabilities

36.  In his 3^rd affidavit of 17 September 2019, H had produced a “Net Worth Spreadsheet” as at August 2019 which showed that he had total assets of HKD 11,403,449, of which HKD 1,148,399 was liquid assets and total liabilities of HKD 11,793,157[23].

37.  In his 7^th affidavit of 23 April 2020, H disclosed total assets of HKD 8,590,591, of which HKD 2,234,510 was liquid assets, and total liabilities of HKD 10,485,296, with net assets of – HKD 1,894,705[24].

H’s expenses/reasonable needs

38.  As pointed out on behalf of W and set out in a table which I reproduce below, H’s expenses seem to have varied between November 2018 and April 2020:

Period	H’s own expenses	MPS/Direct Payments for W and Child.	Total
Nov 18	300,775 (435,778-135,000) [B1/164]	264,800 (105,800+159,000) [B1/164]	565,575
Sep 19	140,000 [B1:167]	260,050 [B1/167]	400,050
Nov 19	174,350[B1//244]	252,800 (147,000+105,800) [B1/244]	427,150
Mar 20	272,350 [A164]	259,800 [A163/16]	535,650
Apr 20	168,149 (§32)	253,975 (§29 of H’s Submissions)	422,124

39.  In paragraph 4 of Mr Marwah’s Submissions, H’s own expenses were said to have similarly been reduced to HKD 119,939 per month excluding taxes.  This suggests that H’s own reasonable needs can be reduced to around HKD 120,000 per month excluding taxes.

W’s income

40.  As stated in the Litigation Funding Decision, W has always been a homemaker and is financially dependent on H.  There is no sufficient evidence of any income on the part of W other than the maintenance she receives from H.

W’s assets and liabilities

41.  In her 1^st Form E, W disclosed her net assets to be HKD 103,537.

42.  As stated in the Litigation Funding Decision, H has alleged that W is expected to receive inheritance from her family and that there is a property held in trust by W’s father for the benefit of W.  As seen in that decision, H has issued a summons for joinder of W’s parents.  Anyway, at this interim stage, there is no sufficient evidence that these alleged assets are financial resources for W.

W’s and Children’s expenses/reasonable needs

43.  The petition was filed by W on 21 November 2016.  W had said in her 10^th affirmation filed in September 2018 prior to the MPS Order, after the parties’ separation, H had through his solicitors’ letter of 17 November 2016 proposed to pay W a sum of HKD 229,000 per month to cover her and the Children’s interim needs including Cricket Club expenses of HKD 10,000 per month, but with rental and school expenses separately paid for by H.

44.  In W’s 1^st Form E, ie in January 2017, she had set out the expenses/needs of herself and the Children to be about HKD 264,974 per month. 

45.  Later, H had proposed in his solicitors letter of 12 April 2017,  to pay W HKD 101,100 per month and that H was to pay directly rental, the Children’s school fees and school bus fees, Cricket Club expenses and car related costs etc[25].

46.  According to W’s 2^nd Form E, W’s and the Children’s expenses/needs were HKD 255,778 per month, and net of the direct payments by H/H’s employer, the amount was a total of HKD 105,800. 

47.  It was under the above circumstances that the parties eventually agreed to the MPS Order.  The MPS Order commenced in January 2019, and it was an order by consent.

48.  In his 7^th affidavit, H has alleged that some items of W’s and the Children’s expenses were unreasonable.  H takes the view that the current monthly rent of HKD 74,000 for the residence of W and the Children (2,300 sq ft) in South Bay is too high, and that H had contacted the landlord who refused to reduce the monthly rental despite a 20 – 30% decline generally in rental (of which there is no sufficient evidence).  H had proposed to W to terminate the lease (which expires in April 2021 but contains an early termination clause of two months’ notice), and that H’s proposal was for W and the Children to move into a 1,500 sq ft apartment in Tai Hang at HKD 54,000 per month. 

49.  W and the Children have lived in their current residence for past 3 years since 2017 and the monthly rent of HKD 70,000 was increased to HKD 74,000 in April 2019 which was accepted by H who signed the new lease for 2 more years. 

50.  H’s own rental originally for a serviced apartment in Park View was HKD 69,800 per month, but he said he has now moved to a new apartment in Tai Tam near the Children’s school with rental of HKD 57,329 per month.  As W had said if H wanted to reduce expenses, he could have moved to a flat in Tai Hang at HKD 54,000 per month.

51.  I understand that the former matrimonial home was in Repulse Bay and thus, it would appear that the parties and the Children have always lived in the south side and this would appear to be the living standard they have been used to, and in any event, a flat in South Bay/Tai Tam is much nearer to the Children’s school.  I do not find H’s proposal reasonable, and see no reason for W and the Children to be uprooted to Tai Hang during this interim period.

52.  As for the domestic helper, W had explained that the helper had 15 years of work experience and that her contracted salary was HKD 8,000 per month, and plus other costs, total HKD 10,000 per month and that previously, W and the Children had one full time helper and one part-time helper.  

53.  Now that W and the Children have no car for their use, W suggests that she spends no less than HKD 8,000 per month for transportation, H has put forward HKD 4,800 per month, and H had suggested that as a compromise the middle figure of HKD 5,750 per month.

54.  H has also complained about W’s Cricket Club expenses and other items of her expenses, in particular in relation to “holidays” in that the previous item was based upon 4 trips a year and a total of HKD 276,000 a year for holidays, and due to Covid-19, they would not be travelling in the next year.

55.  As for uninsured medical and dental expenses, it would appear that H’s main complaint is that W had not consulted him over those costs insured for the Children.  In this respect, I agree that W should have discussed with H.

56.  As seen in a table annexed to W’s Submissions (“Table D”), the present reasonable needs of her and the Children, are said to be around HKD 263,975 per month. 

57.  Although Covid-19 has caused a lot of uncertainties in everyone’s life, at this stage, it is too early to tell what the consequences will be, and all this should be clearer by the time of the trial.  At this stage, the Court can only take a broad brush approach, and for W and 3 Children of 16 ½, 14 ½, and 10 ½, I find their reasonable needs should be at more or less the same amounts as at the time of the MPS Order.  

58.  I am of the view that the MPS Order should cover the reasonable interim needs of W and the Children until the determination of W’s AR Application.

Discussion

59.  As quoted earlier, Cheung JA, in his judgment in the VEM v VFM case and citing from Boylan and Boylan, has said that the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order.

60.  H said there has been a 40% decrease in H’s total income, and that due to Covid-19, it is unlikely that H will be receiving a bonus from now until the trial in May 2021, and that he has recently paid about HKD 1.9m from his bank accounts which will result in a bank balance of HKD 129,434 in his HSBC savings account as seen in the 29.04.20 Letter.

61.  If one compares H’s disclosed income at the time of the MPS Order (tax year 2018/2019) and his current income (tax year 2019/2020) as seen in Table A, the gross amount of the first two items of the 4 Components came to the same, ie HKD 3,900,000.  As for the 3^rd item bonus of the 4 Components, it was 0 at the time of the MPS Order, namely 2018/2019, and HKD 780,000 for 2019/2020.  In relation to the 4^th item Fund Units, in Table A, W adopted a figure of HKD 1,339,284 for 2019/2020.  This is in fact an average taken by W over the past 4 years.  According to the letter of 14 February 2020 from his employer, no award was made for 2018 (the tax year 2019/2020).  As I have mentioned earlier, there was no supporting evidence as to whether any award was made for 2019 (the tax year 2020/2021), which should have vested on 28 February 2020. 

62.  As I have said earlier, H’s financial disclosure has been piecemeal and unsatisfactory.  At this stage, there has been no clear documentary evidence as to item (ii) of the 4 Components, namely the rental allowance or on item (iv), whether any Fund Units were awarded to him for 2019.

63.  In the above circumstances, I do not find that there has been sufficient evidence to support H’s allegation that he has suffered a 40% decrease in his income since the MPS Order.

64.  The evidence indicated that H has always relied on his bonuses and/or other financial resources to meet the family expenses, since it would appear that even at the time of the MPS Order, his basic wages and rental allowances would not be sufficient to cover his own expenses plus the MPS Order[26].

65.  It can be seen in H’s own Net Worth Statement (August 2019)  or the table of his assets and liabilities in his 7^th affidavit[27], he has regarded his tax liability as a capital liability to be deducted from his assets.  There was no monthly savings for tax from his income that could be seen in his bank statements, nor were the school fees paid on a monthly basis.  In fact, the Children’s school fees are paid in advance of each semester.

66.  The evidence shows that apart from bonuses, H has since the MPS Order obtained loan/s and also further cash from the sale of the Fund Units.

67.  H has explained that he is not practically able to sell any more Fund Units without risking his career, but there has been no supporting evidence to show this.  In fact, as seen in the email exchanges of 17 – 18 October 2019 between H and his employer[28], it would appear that on 17 October 2019, the original proposal was to sell 342,473.02 of the Fund Units- “ex wine”, and it was H who decided to request a sale of 215,000 Fund Units only, and that he later received net sale proceeds of USD 207,080.29 on about 21 October 2019, after deducting the loan and interest due to his employer, ie about HKD 1,615,226.26.

68.  Thus, there does not appear to be anything to stop H from selling at least another 127,473.02, should such need indeed arise.  It was not clear what “ex wine” referred to.

69.  As mentioned earlier, attached to H’s Submissions was the 29.04.20 Letter setting out 3 payments made by H around that date. 

70.  It was revealed in the 29.04.20 Letter that H had repaid a loan of HKD 1,080,000 from Cottonwood Investments Limited (“Cottonwood”). In H’s 5^th affidavit of 27 February 2020 in relation to W’s litigation funding application, H had disclosed a credit line of up to HKD 1,020,000 for funding of his legal costs, which H said he borrowed from his friend AW, a director of Cottonwood, and H had produced a “Memorandum of Understanding” signed by him[29] (“MOU”).

71.  There was no actual loan agreement produced by H, and the “Lender” in the MOU was stated to be Cottonwood, and maturity date of the MOU was the “earlier of 10 days from when a demand for repayment was made by the Lender or 2 years from the date of the first drawdown of the loan”. According to H there were 2 drawdowns, (i) on 12 September 2019 and (ii) on 18 January 2020[30]. H claimed in his 5^th affidavit that he owed a total of HKD 1,080,000 including interest to Cottonwood.  This was on 27 February 2020, the date of his 5^th affidavit.

72.  In H’s 5^th affidavit, he had also produced an email of 17 February 2020 from his friend AW to say that he could not lend H any further amounts.  He had asked H when H thought he would be in a position to pay him back[31].

73.  In my view, the above email was only an enquiry from AW and it was not a “demand for repayment” from Cottonwood.  Further, as the 1^st drawdown date was 12 September 2019, according to the MOU, the maturity date should be 12 September 2021 unless there was an earlier demand for repayment.  

74.  In any event, what H then said in his 7^th affidavit of 23 April 2020 was very different.  H said the loan was from AW “via Cottonwood” and that the 1^st amount of HKD 520,000 was on 12 September 2019 transferred to his solicitors [of which there had been no evidence as to whether it was direct from H or from AW or from Cottonwood], and the 2^nd amount of HKD 520,000 was received the next day on 13 September 2019 and credited into his personal account.  It was not clear whether those drawdowns were backed by “valid legal invoices” as stated in the MOU or not.  Clearly the 2^nd amount received on 13 September 2019 did not appear to have been used for his legal costs.  Further, not only the 2^nd drawdown date was different, the total amount had become HKD 1,040,000, instead of HKD 1,020,000, and also it was not sure what happened to the “Line Fee” of 1% pa, or interest of the 7.5% pa, since according to H, the total interest was about HKD 40,000 to make up the loan to Cottonwood of HKD 1,080,000.  No detailed calculations were provided by H in relation to the HKD 40,000.  

75.  Although H had referred to an email of 20 April 2020 from AW, all this email said was one word “reminder” while forwarding the earlier email of 17 February 2020[32], ie all his friend was doing was to remind H to let him have a reply to the question “when do you think you will be in a position to pay me back”. In other words, it would appear that all AW was doing was to ask H for an indication of the time for repayment.  In my view, this was not a “demand for repayment” from Cottonwood, or AW, as set out in the MOU, as no deadline for repayment had been imposed.

76.  As there was no signed copy of the MOU produced, it was not sure whether it was actually signed by Cottonwood/AW in the end. Suffice to say, it was misleading for H to produce the MOU, when it appeared that at most, he simply borrowed a personal loan from his friend AW and he did not use all of it for litigation costs, but also for his personal expenses.  In any event, I am not satisfied that there was any urgency in repaying his friend on 29 April 2020.

77.  Also, there was no explanation or clarification provided by H as to why he had referred to the 2^nd drawdown amount being received by him on 18 January 2020. 

78.  H and his solicitors were fully aware that in relation to W’s 2^nd Summons, H’s own position in February 2020 was that both he and W should each be entitled to request a distribution from the Trustee of the Family Trust for the purposes of litigation funding, and that this Court’s decision in relation to that matter was pending.  I again see no sufficient evidence that there was any urgency in H’s payment of HKD 250,000 to his solicitors on 29 April 2020.

79.  In my view, H decided to make the above payments just to reduce the balance in his bank accounts.

80.  As for the cheque for HKD 360,350 for payment of the Children’s school fees, it would appear from the relevant invoices[33] that this amount covers the 1^st Semester until 10 January 2021.  This means between now and 10 January 2021, the direct payments pursuant to the Undertakings will be reduced by a monthly sum of HKD 55,000 for the school fees.

81.  W had said that the extra tuition was actually 0, and so was the car insurance[34], and the uninsured medical and dental expenses were only HKD 2,000, and thus until 10 January 2021, H’s payments pursuant to the Undertakings should be less than HKD 90,000 per month, instead of HKD 149,978 per month.  This means that H’s total payments to W and the Children under the MPS Order will actually be only about HKD 195,800 per month until January 2021.

82.  It can also be seen in H’s 2018/2019 Final Tax Demand that H’s salaries taxes would have been paid on 13 January 2020 and 14 April 2020.  Hence, his next tax payments will be in January 2021.

83.  By January 2021, the number of Fund Units awarded to H for the year 2020/2021 should be known by then, as well as whether H will receive any bonus for 2020/2021.

84.  In the meantime, with his net pay of HKD 313,750 per month, H should be able to afford to continue to meet the current payments under the MPS Order.  After payments of about HKD 195,800 per month for W and the Children, H should have at least HKD 117,950 per month to meet his own expenses, and if necessary, the cessation of his voluntary MPF monthly contribution of HKD 9,750 will give him further cash. 

85.  H tried to explain that he did not know or expect the effect of the MPS Order would have lasted as long as it has, and that he thought that the final hearing would be 12 months away.  However, at the time the MPS Order was made, the matter was still in the Family Court, and before the transfer up, and nowhere near to being set down for a final hearing.  Further, as pointed out, the MPS Order was made by consent based on the parties’ agreement and consideration of, amongst other things, H’s average income of at least 3 years, and that there was no evidence that the parties had intended that such agreement was to be re-visited or varied on a year to year basis.

Conclusion and Order

86.  Having considered all the above, I have come to the conclusion that there was no urgency in H’s application and in any event, there is no merit for his application at this stage.

87.  I therefore dismiss H’s Variation Summons and order him to pay the costs W’s costs of and incidental to this application, to be summarily assessed.  W is to lodge her statement of costs within 7 days, H to lodge his list of objections, and H to pay within 14 days of summary assessment.