F v. F

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 7746 OF 2004

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J U D G M E N T

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1. This is the parties’ application for ancillary relief upon the dissolution of their 7 years childless marriage, basically over their joint property in New Zealand where the Petitioner Husband has made his home since about late 2002.  The parties are in fact agreed in principle on a clean-break settlement by the Respondent Wife transferring all her interests in the Property to the Husband for a lump sum payable by him to her, but are unable to agree on the amount of the lump sum, as the Wife takes issue of the Husband’s calculation of the net value of the Property upon which the lump sum is based, including whether some of the maintenance and expansion costs and expenses which he has allegedly made to the Property should first be deducted from the capital value of the Property, and whether her various contribution to the Property have been properly taken into account in the calculation of her entitlement.

Background

2. The Husband, who was born in the Isle of Man, is a 43 years old motor technician and director of a company known as R Ltd that provides services for motor car racing events in Asia.  He met the Wife, who was from England, in Hong Kong where she has lived and worked since 1989.  She is a 39 years old part time teacher and paralegal.  The parties were married on 9^th March 1996 in the Isle of Man and thereafter made their home in Hong Kong where they would share their household expenses equally including the rental for their flat in Sai Kung.

3. In June 2002 they jointly purchased the said Property in New Zealand in Christchurch during a visit with the intention to apply for residency there.  The Property comprises of 8 hectares and is planted in walnut trees with a residence.  It was purchased for NZ$550,000, with NZ$100,000 contributed by the parties and £20,000 from the Husband’s mother, with the balance of NZ$390,000 by means of a mortgage from ANZ Bank, for which the parties opened a joint account with the Standard Chartered Bank in Hong Kong into which each would deposit HK$10,000 per month towards the mortgage payments and other relevant expenses.

4. The parties’ plan then was for the Husband, whose job was more flexible, to move into the said Property in New Zealand to fulfil the residency requirements, with the Wife following later in the year after she had sorted out matters in Hong Kong such as her jobs and the shipment of their pets including a dog and 3 cats to New Zealand.  Accordingly, the parties returned to New Zealand in Christmas 2002 to take possession of the Property where the Husband stayed behind while the Wife returned to Hong Kong about 2 weeks later.

5. However in March 2003 while the Husband was visiting the Wife in Hong Kong, he heard rumours that she was having an affair, which she denied at that time, but one month later in April 2003 she informed him that she no longer wished to live with him and moved out of their matrimonial home in Sai Kung into another flat in the same neighbourhood.

6. Thereafter the Husband made several trips to Hong Kong between April and October 2003 in an attempt for reconciliation, during which the parties spent a short holiday together in UK in September 2003.  They also took out a second mortgage for NZ$70,000 to finance the building of a barn on the Property in New Zealand.

7. Unfortunately the attempt for reconciliation turned out unsuccessful, and in October 2003 the Husband returned to New Zealand by himself, with little contact between the parties since.  In July 2004 the Husband filed for divorce in these proceedings, and about one month later in August 2004 the Wife stopped paying her monthly contribution into their joint mortgage account.

8. At about the same time the parties started to discuss about the divorce proceedings during which they had a dispute over the shipping of their pets to New Zealand, ended with the Wife’s announcement of her intention to go to New Zealand and to stay in their joint Property, apparently against the Husband’s wishes.  This led him to apply in the Family Court in Christchurch in August 2004 for an injunction restraining the Wife from entering the said Property.  As a result the Wife did not go to New Zealand.

9. On 7^th October 2004 the Husband was granted the decree nisi of divorce in these proceedings, with the question of ancillary relief adjourned for argument.  The decree nisi has since been made absolute.

10. By a letter of 13^th January 2005 from his solicitors to the Wife’s, the Husband proposed to pay her a lump sum of HK$900,000 in return for her transferring her interest in the property to him in full and final settlement of the parties’ financial claims against each other.  This proposal was on the basis that the value of the property had gone up since its purchase to about NZ$1 million, or the equivalence of HK$5,500,000 according to the valuation report obtained by the Husband on 27^th July 2004, which should then be set off against the following outstanding mortgages and charges :

Value of Property	HK$ 5,500,000
Less :
ANZ mortgage	HK$ 1,497,925
Second Charge	HK$ 450,000
Loan from the Husband’s mother	HK$ 300,000 (£20,000)
net :	HK$ 3,252,075 ===================

11. This sum should, proposed by the Husband, be further reduced by HK$1 million being the maintenance and improvement costs incurred by him on the Property, and by some HK$575,000 being the estate agent’s commission, legal fees and GST sale tax payable on the sale of the Property, bringing the net equity down to about HK$1.7 million to be divided between the parties.  Since he would like to retain the Property and hence to have the same transferred into his sole name, the Husband therefore proposed to pay the Wife the sum of HK$900,000, representing about 55% of the net equity in the Property.

12. The Wife however claimed that she was unable to consider the Husband’s proposal until after he had complied with her very extensive request for further and better particulars, which was eventually done in April 2005, but by then the Wife believed that the market value of the Property should have gone up and suggested that an updated joint valuation report be obtained.  When this was not agreeable to the Husband, the Wife went ahead to obtain her own valuation report which was only available on 18^th October 2005, only a week before the start of this trial.  The report valued the Property at NZ$960,000, some NZ$40,000 less than the one obtained by the Husband in 2004.

13. On the same day of 18^th October 2005 the Wife through her solicitors rejected the Husband’s offer of lump sum of HK$900,000 for the transfer of her interest in the Property to him as she did not agree with the deduction of various sums in his calculation of the net value of the Property save for the outstanding mortgage as they were either exaggerated or unsubstantiated such as the alleged maintenance and running expenses, or unreasonable such as the alleged loan from his mother or the GST sale tax, or that it was solely for the Husband’s benefit and hence should not be included such as the 2^nd charge for the building of the barn.  She therefore proposed that the updated market value of NZ$960,000, equivalent to HK$5,196,595.20 at the then exchange rate, should only be reduced by the then outstanding ANZ mortgage of HK$1,497,925, giving a net equity of HK$3,698,670.20, from which she was prepared to accept a lump sum of HK$1,850,000 in return for her transfer of her interests in the Property to the Husband, which was 50% of the net equity, in full and final settlement of the parties’ respective claims for ancillary relief against each other.  This counter-proposal is not acceptable to the Husband who now believes that the market value of the properties has dropped even further to only NZ$800,000 according to the 2^nd report recently obtained by him, and that it is unfair for the Wife to ignore the monies that he has paid out towards the maintenance and improvement of the property, without which it would not have reached the value it has.

14. The Husband also believes that the further expenses that he has borne exclusively over the past year without any further contribution by the Wife should be taken into account when calculating the net equity of the Property.  On the other hand, he argues that the Wife’s proposal does not do justice between the parties, as she ignores all running and operating expenses and takes no account of the work he himself has put in to maintaining and improving the property, while her own financial contribution as well as her effort and work on the Property have all been limited compared with his.  Nevertheless the Husband increased his lump sum offer to $1 million at the trial which was again rejected by the Wife.

The Issues

15. The central issues between the parties are clearly over the Property, in particularly as to its valuation and what deductions, if any, should be made to arrive at its net equity, which must first be resolved before I am to consider the other relevant matters and circumstances of the case in deciding what lump sum should be payable to the Wife.

The Valuation

16. There is no dispute that the 1^st valuation report (B1: 64), obtained by the Husband in July 2004, is now outdated as to its valuation of the Property at NZ$1 million which is no longer relied on by either party.

17. The Wife’s valuation (CB : 45) was obtained shortly before the trial and must therefore be more up-to-date.  It is lower by NZ$40,000 at NZ$960,000.  The Husband’s 2^nd valuation (CB : 74) was also obtained at about the same time but puts the Property at only NZ$800,000, some 16% less than the Wife’s valuation which is quite significant.  The Husband puts the GST sales tax as the reason for the difference as it was included in his 2^nd valuation but not in the Wife’s.  According to his evidence, GST is charged at the rate of 12.5% and is paid by the seller of the Property.  If it is to be applied to the Wife’s valuation, he says it would bring the value down to NZ$840,000, much closer to his at NZ$800,000.  He therefore proposes to take the mid-point between the 2 valuations inclusive of GST at NZ$820,000 or the equivalence of HK$4,428,000 at the then exchange rate of $5.4, as the correct valuation of the Property for the purpose of these proceedings, as it is necessary to take into account the GST since if he cannot afford to keep the Property and has to sell it now, he will incur this tax, and that as GST reduces the available equity in the Property, and therefore whenever it is sold, it must be taken into consideration when determining the actual value of the Property now.

18. While the Wife does not appear to dispute that GST is the essential difference between the 2 valuations, she argues that it does not need to be a factor to be taken into account as there is no intention on the part of the Husband to sell the Property.

19. She also submits that her report is a more accurate reflection of the market value as the comparables used are of a more similar nature to the subject Property than those used in the Husband’s valuation report which all relate to much smaller properties of considerably lower value.

20. All 3 reports clearly indicate that values of properties within the city of Christchurch, including the subject Property, have increased significantly in the last 2 to 3 years.  The Wife’s valuation was prepared for matrimonial settlement purpose (CB : 46), whereas the Husband’s 2^nd valuation was for mortgage purposes (CB : 76), which may tend to be more conservative and may account for the difference between them.  Although the difference is not significant, I am inclined to accept the Wife’s valuation on the Property at NZ$960,000.  The next issue is whether I should take into account of GST and accordingly reduce the net equity by 12.5% as proposed by the Husband.

21. GST, or Goods and Services Tax, is a tax on the supply of most goods and services in New Zealand, which includes the sale of real properties, and is generally charged at a rate of 12.5% on the seller.  It is not clear, nor is it argued between the parties, whether GST is chargeable in the event of the Wife transferring her interest in the property to the Husband as proposed by him.  The issue before them is whether GST, which is chargeable to the Husband in the event of the sale of the Property, should be taken into account in determining the value of the Property for the purpose of these proceedings.

22. The 3 reports made their valuation based on the market or sale value of the property, and according to the Wife’s report, market value is defined as “the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.  In other words, if the property is put in the open market for sale, the estimated amount that it would normally and fairly get, in which case the GST would be chargeable to the seller.  The Wife argues that the Husband may not sell the Property in the future, and the evidence is clearly that he likes the Property and has no intention of selling it, but such a possibility can never be dismissed, as people do change in life, and as pointed out by the Husband, he may have no choice but to sell the property after all if he cannot afford the kind of lump sum which the Court may order him to pay to the Wife.  It is unfortunate that it is not clear in similar situation in New Zealand whether GST would normally be included in the valuation of properties to be divided between divorcing couples in their divorce proceedings, but I am inclined to agree with the Husband that GST should be included in the valuation of the Property, and by adopting the Wife’s valuation, it would be NZ$840,000 inclusive of GST, or the equivalence of HK$4,620,000 at the current exchange rate of $5.5.

23. The next issue is what deductions, if any, that the Husband should be allowed to make before arriving at the net equity of the property, and there are quite a few according to the Husband.

The Outstanding Mortgage

24. The outstanding mortgage due to ANZ Bank stood at HK$1,479,925 at the time of the Husband’s Financial Statement.  This is agreeable to the Wife to be deducted from the value of the Property, and is the only one that she is prepared to agree.

The Second Charge

25. This is for HK$450,000 borrowed for the construction of a fairly big barn of about 420 square metres on the Property.  The Husband’s evidence is that as the Property is planted with walnut trees which in a few years will start to produce a large crop, hence the barn is required for processing the nuts including harvesting, washing and storing them before they can be sold.

26. The Wife argues that the barn is in fact intended entirely for the Husband’s garage business for which she will receive no benefit and hence it would be wrong and unjust to have her equity in the Property reduced accordingly.  In any event, she argues, that there is no evidence that the barn adds any value to the Property and as such should not be deducted from the overall equity.  She in fact commented that the barn would be “a bit of an eyesore” for someone looking for a nice property in the area.

27. The Husband denies that the barn is intended for his garage business, and argues that in fact in order to build this barn he required an Agricultural Resource Consent and hence it would be illegal for him to operate a garage business on the farm.  In his evidence he said he had been investigating working from a nearby garage as it is quite clear that an agricultural building may not be used for a garage business.

28. Whatever purpose the barn was built for, it is not in dispute that the Wife did agree to it bring built, or at least to the Husband obtaining the second charge for it, as she had signed on the relevant documents for the charge.  The question therefore is whether the barn adds value to the Property.

29. The Husband’s 1^st valuation report clearly stated that the barn did add value to the Property as follows : -

“The improved block is that of a very well developed block by way of the superior nature of the dwelling, good landscaping together with outbuildings there has been developed on this block the large building containing a total floor area of award 420 m².

While this could be considered a relatively specialist building for such a smaller rural block, we believe that it certainly does add significant value”.  (B1 : 64 – 65).

30. While the Wife’s report does not specifically say so, it did include the barn in its valuation, whereas the Husband’s 2^nd report called the barn as part of the improvements made to the Property upon which it arrived at its apportionment of the valuation.  The evidence is that the barn does add value to the Property, the 2^nd charge required for the building of the barn, in the same sense of the original mortgage for the Property which is not opposed by the Wife, should therefore also be allowed as part of the deductions.

The £20,000 from the Husband’s Mother

31. It is not in dispute that the parties needed the money from the Husband’s mother to meet the deposit payment in June 2002.  The Husband’s evidence is that it was a loan from his widowed mother and that he has been repaying her interest at 4% per annum which she would have earned if the money had remained in her bank account.

32. The Wife argues that it was a gift from a mother to her only son, as there is no loan documentation or timeframe for repayment, and that even if it was a loan, the mother has left it up to the Husband to decide whether or not to pay her back.

33. The mother, who lives in UK, has filed an affidavit alleging that she lent the money on the understanding that she would be repaid if and when her son felt able to do so or if the Property was sold.  She has also acknowledged that interest at 4% has been paid to her.  She was not called by the Wife for cross-examination, probably because of where she lives and also because of her age, but in any event there was no evidence to the contrary from the Wife who has acknowledged that interests were being paid to the Husband’s mother which goes to support his case that it was not a gift from her.  It is also his evidence that if his mother dies before he could afford to repay her or to sell the Property, he would then pay the interest and eventually a share of the capital to his sister, his only other sibling who would be entitled to share in the mother’s estate.

34. I agree with the Wife that given the good relationship between the Husband and his mother, barring the happening of either of the 2 conditions mentioned in her affidavit that would require repayment to her, the mother probably would have left it up to the Husband when to repay her, but it is also entirely possible that during her lifetime, one of the 2 conditions may actually occur that would trigger the repayment, it is also worth stating another fact of life which is this : in the absence of evidence to the contrary it is natural to assume, now that the Husband’s mother knows about his son’s divorce and that her loan would have an impact, albeit not significant, on the amount of lump sum to be paid by him to his divorced wife, it would be a simple matter for her to insist on repayment of the loan before the division of the parties’ interest in the Property.  For the reasons aforesaid, I agree with the Husband that his mother’s loan of £20,000, or HK$270,000 at the exchange rate of $13.50 should be allowed in the deductions.

Maintenance and Upkeep Expenses

35. In his offer letter of 13^th January 2005, the Husband put the total maintenance and upkeeping costs that he had then incurred at HK$1 million.  Since then he claims to have incurred further maintenance costs of about HK$260,000 in mortgage and insurance payments, plus further running costs.  The Wife disputes all these expenses either as double accounting, unnecessary or unsubstantiated by evidence, and that it is wrong and unfair to allow her equity in the Property to be reduced by them accordingly.

36. The Husband submits that it is unrealistic to imagine that such costs would not be incurred on a property of this size, and given that he is obliged to be away from New Zealand when he is working, it is inevitable that costs are going to be incurred in doing work on the Property, such as regularly cutting down grass and weeds, irrigation and planting, which previous owners might have done themselves.

37. The simple fact is, the Husband argues, that the Wife has no idea at all of what is required on this Property as she has spent less than 2 weeks there and has played no part in the day-to-day running of it.  What is clear, he says, is that not only has he paid for this maintenance over the years, he has also done a lot of work on the Property himself, the particulars of which he says have all been already set out in his Answer to the Request for Further and Better Particulars.

38. In his Answer (B2 : 438) given on 12^th April 2005, the Husband gave a breakdown of these expenses as follows : -

		HK$
(a)	ANZ loan interest payments	81,697.62
(b)	Quantum Policy HQU5000035 payments	324,497.38
(c)	Friends Provident policy 12579430 payments	24,778.31
(d)	Out Building balance of payments (over and above loan)	117,380.92
(e)	Toyota Hilux Deposit	100,299.17
(f)	Mortgage set up costs	10,457.87
(g)	Farm Operating expenses Year end March 2003	57,106.50
	Total	HK$716,217.44
		==============

39. This total has fallen short of the HK$1 million claimed by the Husband, but he explained in the Answer that he had not included other expenses such as the costs of shipping household goods to New Zealand, or the costs of maintaining the migration requirement or the farm operating expenses for 2004.

40. For the alleged expenses under items (a) to (d), the Wife argues that during the period up to August 2004 when they were incurred, she did regularly pay her monthly contribution of HK$10,000 into the joint account for the Property as well as half of the living expenses on the matrimonial home in Sai Kung, as was the parties’ agreement, it is therefore incorrect for the Husband to claim such as the expenses incurred by him and that it is wrong to reduce her equity in the property by these amounts.

41. Furthermore, she argues, to have such payments of the insurance policy listed as a deduction from the overall equity is fundamentally wrong as it amounts to double accounting as the policy secures the mortgage and that the Husband will ultimately get the benefit of this policy when the property is paid for.

42. She does accept that US$640 has been paid by the Husband per term towards the Scottish Provident Policy since September 2004 when she stopped her payments, but they amount only to HK$68,992 which is considerably less than HK$324,497.38 as claimed by the Husband, and that in any event, she argues, that they were not paid by him but rather by his company and that he will retain the benefit of this policy alone.

43. It is not in dispute that throughout the marriage the parties would contribute towards their family expenses about equally, including the rental and household expenses of the matrimonial home in Hong Kong, as well as the costs and expenses of the purchase of the Property in New Zealand, and the mortgage payments thereafter until August 2004 when the Wife stopped her payment of HK$10,000 into their joint mortgage account.  It is her evidence, and as there is no evidence to the contrary from the Husband, I agree with her that these expenses under items (a), (c), (d) and (f) were of and incidental to the Property in New Zealand and would have already been covered by the parties’ equal monthly contribution of HK$10,000 up to at least August 2004, while item (b) would also have been paid for jointly by the parties throughout the marriage, it would therefore not be right or proper for the Husband to deduct them from the value of the Property, at least not for the period up to August 2004.  I agree only those payments made by the Husband after August 2004 should be taken into account, including HK$58,000 for further mortgage payments, HK$69,888 for the Quantum Policy, HK$15,000 for Friends Provident Policy, and HK$117,936 for the Second Charge Instalments, totalling HK$260,824.  However he would have paid his own half share of these expenses anyway, hence it is only for the other half share which he has paid on behalf of the Wife since August 2004 that should be allowed for the deduction i.e. HK$130,412.

44. As for item (e), the Toyota Hilux Deposit, the Wife says it is outrageous to suggest that this should be taken from her equity in the property as it is a large sum of money for a luxury vehicle that is totally for the Husband’s benefit and is not necessary for the Property since the parties had already purchased a tractor specifically for the purpose of maintaining the Property, and that it was the Husband’s evidence that a retired farmer runs the tractor and does the mowing.  Hence she says this expenses is totally not justified as necessary or as adding any benefit to the Property.

45. While the evidence is not clear whether the purchase of the Toyota was necessary for the running of the Property, I agree with the Wife that unlike the other items of expenses, the vehicle does not add any value to the Property and hence it would not be proper to allow its purchase to be deducted from the equity of the Property.

46. As for the Farm Operating expenses of HK$57,106.50, plus additional updated expenses of NZ$47,730 claimed by the Husband which is supposed to take the total expenditure to HK$1 million, the Wife argues that before the Court can begin to consider adjusting the equity in the Property to take into account this expenditure, the Husband must show and the onus is on him to do so (i) that he actually spent the money as alleged, (ii) that the money went toward improving the overall value of the Property to her benefit and (iii) that there was an agreement between the parties that this would be done.

47. It is submitted for the Wife that the Husband has failed to do so on all 3 accounts.  Firstly, she argues that he has failed to produce any receipts to substantiate such expenditure and the accounts which he has produced are heavily qualified and accordingly unsafe for the Court to rely on, as it was stated in the report that it was a special purpose report prepared for taxation purposes only and not in conformity with acceptable accounting principles.

48. Furthermore, she argues, that the Husband has acknowledged in his evidence-in-chief that the expenditure he is claiming as shown in the accounts to March 2004 for NZ$47,730 should not be counted entirely as related to the Property as some of them may be related to his business or his personal expenses and hence should not all be counted as expenditure on the Property for the purpose of these proceedings.

49. There is no evidence, suggested by the Wife, that any of the alleged expenditure actually adds any value to the Property or what value it would add, she therefore does not accept that it has been necessary for the Husband to expend large amounts of money on maintenance and upkeep in order to maintain the value of the Property, as there was no agreement between the parties to do anything that go above and beyond simple maintenance and that it is the Husband who derives the entire benefit of such as he is living in the Property and will continue to do so.  It is therefore wrong to suggest that her equity should be reduced in order to pay for his household utilities, his motor vehicle expenses and tolls, his accountancy and legal expenses, interest paid on hire-purchase agreement, unspecified insurance, his stationary and printing costs or for his protective clothing which made up the bulk of his claimed expenses.

50. The alleged farm operating expenses for 2003 and 2004 are set out in the financial statements on B2 : 479 and B2 : 687 respectively prepared by a chartered accountant for taxation purpose for the parties as partners in equal share.  While some of the expenses listed in the accounts such as mowing walnuts, plant hire, repair and maintenance are clearly related to or of and incidental to the running and maintaining the Property, others such as motor vehicle expenses, accountancy and legal expenses, electricity, light and heat do appear, as pointed out by the Wife, unrelated to the Property, while the figures attributed to the depreciation of the building and plant and equipment are merely for accounting purpose and are not real expenses.

51. I accept the Husband’s evidence that these accounts were necessary for taxation purpose in relation to the Property and I have no reason to doubt the accuracy of the figures therein.  I also agree that had the parties gone on to live in this Property as husband and wife, they would still have prepared these accounts with all these expenses included.  However, for the purpose of ascertaining the net equity of the Property in these proceedings, the Wife is correct to say that it is not fair to include some of the expenses which appear to be totally unrelated.  Unfortunately, in the absence of any further details in the evidence before me, I can only take a broad brush approach in allowing a sum of NZ$10,000 for 2003 and NZ$20,000 for 2004, and adopting a similar figure for 2005, the total amount for the Farm Operating Expenses up to date should be NZ$50,000 which, at an average sum of NZ$20,000 per year for the past 2 years for a property of this size, cannot be said to be unreasonable or excessive, in particularly in view of the fact that the Husband does have to travel quite a lot over his business and therefore has to hire others to do the maintenance while he is away.

52. The total maintenance and upkeep expenses that I would allow are therefore as follows : -

(i)	Further mortgage and insurance payments since August 2004 paid by the Husband on behalf of the Wife	HK$ 130,412
(ii)	Farm Operating Expenses (NZ$50,000)	HK$ 275,000
	Total :	HK$ 405,412
		===========

53. In conclusion, a summary of the deductions that I would allow to be made from the value of the Property is as follows : -

	Value of Property (NZ$840,000 inclusive of GST)	HK$ 4,620,000
	Less :
	ANZ Mortgage	HK$ 1,497,925
	Second Charge	HK$ 450,000
	Loan from the Husband’s mother (£20,000 at $13.5)	HK$ 270,000
	Maintenance and Upkeep Expenses	HK$ 405,412
	Net Equity :	HK$ 1,996,663
		=============

54. I shall next deal with the other less contentious matters under section 7 and I shall start with the parties’ financial position.

55. The Husband puts his average total income at about HK$35,000, including basic salary of HK$9,000 plus housing and entertainment allowances from his R Ltd as well as income from servicing about 8 race meetings per year.  The Wife however believes that he has in fact earned a great deal more than the average sum of HK$5,000 per month that he has declared from race meetings, as his bank statements show that he has received the equivalent of over HK$1.5 million as payments for race meetings, and that although some of these payments were used to cover expenses related to his work including purchasing spare parts for his customers, she believes that a substantial part of these payments should be treated as his income, as many of them ended up being transferred into his personal bank accounts.

56. In addition, the Wife argues that as much as HK$607,000 of the Husband’s credit card payments over the same period were paid with these payments through “personal transfer”, while many of his personal expenses are also paid for by his company including his medical and dental expenses, meals out of home, clothing and shoes as well entertainments expenses, all of which show, the Wife says, that the Husband has received a lot more income and benefits then he has declared.

57. Ms Irving for the Husband however argues that while the section 7 criteria need to be borne in mind, in this case, because the matter in hand is simply how to deal with the New Zealand Property, and not periodical payments, the criteria do not, by and large, require minute examination, therefore although it was suggested to the Husband in cross-examination that he is in fact earning much more than he has stated, he explained in his oral evidence how finances work in his car business, that sums of money are transferred to him and used by him for purchasing of parts needed, based on trust.  Counsel argues that he was never asked to clarify or explain the movement of funds in and out of his accounts associated with the motor racing business following the comprehensive disclosure in his Reply to the Wife’s Questionnaire, nor was he asked to produce any evidence from any of the car owners as to their financial arrangements, which he would have done if she was to require proof but which she had not prior to the trial.

58. While it is true that there were substantial transactions and activities in the Husband’s bank accounts that appear to support the Wife’s allegation that his income from race meetings appear to be more complicated and substantial than a mere average of only HK$5,000 per month as alleged by the Husband, I do agree with his Counsel that as periodical payment was never an issue between the parties, it would not be fair for the Wife to now argue that as the picture about his dealings from race meetings is not clear, which she could have sought for clarification at the discovery stage, therefore the Court should draw inferences that he has failed to properly disclose all his income.

59. I have heard the Husband’s evidence under cross-examination as to the income he has received from these race meetings, and although he has not produced any documentary evidence in support, given the circumstances mentioned, I find no valid reason to doubt his explanation.  After all, the Wife has accepted that throughout the marriage the parties would share all family expenses equally including the purchase of the Property, and if the Husband was in fact earning a lot more than he has declared, I doubt that she would have agreed to such an arrangement.

60. In his Form E the Husband also put his savings at more than HK$330,000 which has since been reduced substantially due mainly to payment for legal costs, and other personal assets worth slightly over HK$400,000 including 2 Porche 911 vintage sport cars which the Wife suspects may now be worth a lot more than the NZ$17,000 – NZ$18,000 each as estimated by the Husband, but has not produced any evidence in support.

61. There are also the 2 insurance policies referred to above in relation to the Property in New Zealand which the Wife has agreed to transfer to the Husband upon the divorce.  The only remaining meaningful asset of the Husband are his shareholdings in R Ltd and another company known as E Promotions Ltd, neither of which the Wife takes any issue and that it is not necessary to deal with their value here other than the fact that they, or at least R Ltd is the main income source of the Husband and hence its disposition is not part of the consideration.

62. The Wife admits that she has a maximum income of HK$39,000 per month although she does not always earn this much as all of her work is on a part-time basis, nor does she agree that she has any greater earning potential and has explained in her evidence why it is unlikely that she will be able to go beyond being a paralegal to become a qualified lawyer.  There is no dispute that she receives no pension provision apart from her MPF and has no medical or dental benefits or insurance.  It is however noted that she has been taking yoga teacher training courses and has spent HK$50,000 for such courses which may enhance her future earning capacity.  There is no evidence to suggest that she has any other assets with virtually no savings but more than HK$100,000 in credit card debts and tax liabilities.  I agree that her assets situation appears much less favourable than the Husband’s and that she is totally dependent upon the settlement that she will receive from these proceedings.

63. It is further submitted by Ms Rattigan for the Wife that her position is markedly different to that of the Husband that there is a great disparity in their living standards which must be taken into account, of which she refers to his evidence when asked why he was so keen to keep the Property and when he replied that it was “a dream come true, a great property, a great country.  I intend to spend the rest of my days there”.

64. Ms Rattigan argues that it was also the Wife’s dream property and the Court should take into account that she has lost the opportunity to live there, nor will she be able to purchase a home like this for herself, and further that she has also lost the opportunity to live in New Zealand as her right to do so has now lapsed as a result of the divorce, and that the Court should take into account the fact that she stayed behind in Hong Kong to work to continue paying for the Property and as a result, when the marriage broke down and the parties divorced, she lost out in terms of living in the Property as well as living in New Zealand, as she was always keen to move there, but was prevented from doing so by the Husband’s injunction proceedings in New Zealand which was wrongly initiated as the matter was already dealt with in this jurisdiction.

65. In all the circumstances, it is submitted for the Wife, that the Husband’s earning capacity is far greater then that of the Wife as is his entire standard of living.  These are both factors that the Court should take into account and balance in the equity to be awarded to the Wife who is therefore not being unreasonable in asking for a 50% share of the Property.

66. While it is also agreed by the Husband that during the marriage the parties shared common expenses equally but otherwise had separate finances, it is submitted on his behalf that had they separated before the purchase of the Property, they would have had nothing to discuss, as there were no joint investments, the finances had been kept separate and there was no other investments, as it was on purpose that they managed their finances in this way, there being no intention to prove income and resources in the way that may be common in many marriages.  That being so, he says it is appropriate that this Property is viewed not as the family home where both resided and which was a home to them both, since that was not what happened, but as an investment, the parties’ respective beneficial interests in which should be assessed by reference to their respective contributions, more by way of partnership, not on the basis of 50 : 50 interest, as he says this was how finances were dealt with during the marriage, by the evidence of the both, and this is how finances now ought to be dealt with also, as in effect they operated as simple people, not as married couple, and it is submitted that the Court should treat the division of the equity of the Property in this way.  He relies on the case of Springette v DeFoe [1992] 2 FLR 388.

67. In that case where the parties lived together as man and wife and bought a house jointly with the aid of a mortgage for which by agreement they each contributed half of the mortgage instalments, with the balance of the purchase price provided mainly by the plaintiff.  Later the relationship broke down and the defendant left.  The plaintiff then issued an originating summons claiming that she was entitled to a 75% share of the proceeds of sale of the house as representing nor contribution to its purchase.  The Court decided that the beneficial interest in the Property was held by the parties in equal shares, on the basis that although neither of them had ever said anything to the other as to the proportion of their beneficial interests, there was evidence from both parties that each of them had in his or her own mind an uncommunicated belief or intentions that they were to share the property equally.  The plaintiff appealed.

68. In allowing the appeal and awarding the plaintiff 75% of the sale proceeds, Dillon LJ said this :

“ …… the fact that after the purchase the mortgage was paid in equal shares is not evidence that they had a common intention that the property itself should belong to them in equal shares beneficially.  It is merely evidence that, as the recorder found, they had agreed that they would each pay half of the mortgage payments; it goes no further than that.

Accordingly, the case for equal beneficial shares must rest on the uncommunicated belief / intention of each that they would he sharing benefit as well as burden equally.

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The common intention must be founded on evidence such as would support a finding that there is an implied or constructive trust for the parties in proportions to the purchase price.  The Court does not as yet sit, as under a palm tree, to exercise a general discretion to do what the main the street, on a general overview of the case, might regard as fair.  But the common intention of the parties must, in any judgment, mean a should intention communicated between them.  It cannot mean an intention which each happened to have in his or her own mind but had never communicated to the other”.

69. I have no difficulty in finding such common intention between the parties in this case.  It is the Husband’s own submission that during the marriage they shared common expenses equally.  They then jointly purchased the Property with about equal contribution towards its initial deposits and expenses, and then opened a joint account into which they were to contribute equally towards the mortgage payments and other relevant expenses, with the joint intention to settle in New Zealand and to live in the Property.  I cannot imagine that such common intention would not have been discussed between the parties and communicated to each other.

70. This does not, of course, necessarily follow that the parties, now that they are divorced, should automatically be given their beneficial half interest in the Property, at least not according to the Husband, hence this exercise of my consideration of the relevant section 7 matters.

71. One of the matters relied on by the Husband against the Wife is over her contribution financially and otherwise, made to the Property to justify her claim for half of its equity.  According to the Husband, the Wife’s total contribution in cash terms was HK$116,615 to the deposit, then from August 2002 to July 2004, a period of 24 months, she deposited sums of money into the joint account which he believes to be an average of only HK$7,500 per month and comes to a total of HK$180,000 over a period of 24 months.  On the other hand, the Husband says, as he had paid the Wife’s rent of HK$5,000 per month until January 2004, which comes to HK$90,000, and deducting this from the sums paid by her, the balance is therefore HK$90,000.  Adding this to the payment made to the deposit, the Husband argues that the Wife’s financial contribution was only HK$206,615, much less than what he had paid including all other outgoings on the Property, plus all the expenses including mortgage, insurance, maintenance, etc since August 2004 when the Wife withdrew any sort of financial contribution.  This the Husband submits, plus the fact that the Wife did not make other contribution to the Property by being there, doing work on the Property, care for the house or the garden, doing all of the tasks that a property of this sort requires, after she left New Zealand in January 2003 and never went back to the Property again and decided not to fulfil the original plan of jointly migrating to New Zealand, leaving him to do everything in regard to the Property on his own, clearly do not justify the Wife’s claim.

72. Whilst it is true that the Wife stopped her financial contribution to the Property since August 2004, I agree with her that it is not fair for the Husband to simply rely on incomplete bank statements to allege that she paid only HK$7,500 per month when her evidence at the trial was that sometimes she would pay more, sometimes less, but it would always amount to an average of HK$10,000 per month, and as the Husband had never raised this issue until during cross-examination of her, it was then not possible for her to produce all her bank statements in rebut.

73. Furthermore, the facts that the Husband had also stopped his contribution towards the Wife’s rent much earlier in January 2004, and that his financial contribution to the Property since August 2004 have already been allowed in the various deductions to be made from the valuation of the Property, I do not think it is fair that he be entitled to rely on this matter again to argue against the Wife’s entitlement.

74. On the other hand, I believe it is equally unfair for the Wife to blame the Husband for her lost opportunity to emigrate to New Zealand as it was she who changed her mind about joining him in New Zealand in 2003 or thereafter, and failed to inform him properly of her future plan including about her emigration to New Zealand, and that although the Husband’s subsequent injunction application in New Zealand could be said to be an overblown reaction on his part, I do not think it was the main reason that caused her to lose her emigration.  Had she really wanted to do so, she should have properly informed the Husband so that some arrangement may possibly be made for her, but there is simply no evidence to suggest that it was the case.

75. What remains of the relevant issue between the parties is the Husband’s criticism of the Wife’s conduct of the litigation as he argues that she refused to participate in these proceedings until such time as she was ordered by the Court to do so which, he says, was clearly nothing to do with any belief that the marriage could be saved, as she had not even wished to see him when he was in Hong Kong as evidenced in Exhibit P – 2, and when he tried to raised the matter of settlement with her, she again refused to do so thereby caused escalation of legal costs, as evidenced by the fact that his offer of 13^th January 2005 was not responded to until 18^th October 2005, shortly before trial.

76. If the Wife had wished to obtain her own evaluation of the Property, it is submitted for the Husband, there is no reason why that should have taken so long.  To say, as she did, that she did not realise she was being slow as she has never done it before, is simply not credible, especially since she was legally represented.  The Wife by her conduct of the proceedings has escalated costs, and that she failed to negotiate as she was obliged to do, are matters, according to the Husband, which must be taken into account by the Court.

77. Whilst I agree that the Wife could have done better and sooner in responding to the proceedings or the Husband’s offer, I also accept that she was entitled to seek and obtain her own valuation of the Property, and to challenge or at least to seek further clarification by way of cross-examination of the Husband’s assessment of the net equity of the Property in particularly his calculation of the various deductions at the trial, the result of which cannot be said to be wholly without merits or unsuccessful.  It is unfortunate, as pointed out by the Husband, that a case like this with straightforward issues over mainly one property, that costs and time appear to have escalated, but even though the Wife’s conduct may deserve some criticism, it is in my view not severe enough to justify being taken into account against her claim.

Conclusion

78. This has been a 7 years marriage with no children where the parties have many things in common in terms of age, earning capacity and financial situation, and that, as submitted by Ms Irving for the Husband, had they not jointly purchased a property, they would have gone their separate way after the breakdown of the marriage without any financial claims against each other.

79. The facts that they used to share their common family expenses equally and had about equally contributed towards the purchase and the maintenance of this property until about April 2004 when for all intents and purposes their marriage was near the end, in my view, goes to support the argument that it would be natural and appropriate for the net equity of the property be divided equally between the parties.  I have already found that the net equity of the property at HK$1,996,663.  The Husband has offered to pay the Wife HK$1 million, just slightly over 50% of the net equity, for her share in the Property as he wishes to be able to continue to live in it.  This offer is in my view fair and reasonable in the circumstances and given my findings that his assets situation is slightly better than hers but has continue liabilities and outgoings to meet in future in respect of the Property.  For the reasons aforesaid my order is therefore the Husband shall pay the Wife a lump sum of HK$1 million within 28 days of this judgment whereupon the Wife shall transfer all her share and interest in the New Zealand Property to the Husband absolutely but subject to the existing mortgage and charge.  There may be some joint bank accounts and insurance policies which I understand are of no issue between the parties and can be dealt with by themselves.  The above arrangements shall be in full and final settlement of the parties’ claims against each other which claims shall stand dismissed.

80. Lastly, on the question of costs, notwithstanding the offer of the Husband made before the trial, for the reasons given above, I believe it would be appropriate in this case to make no order as to costs which is an order nisi to be made absolute at the expiration of 21 days.

81. I must not end without expressing my gratitude to Counsel for both parties for their valuable assistance without which my exercise in dealing with so many figures involved in this case would have been insurmountable.