CCL aka L, CC v. JRC aka C, JR

FCMC No. 1548/2020

[2021] HKFC 21

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 1548 OF 2020

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J U D G M E N T

( Maintenance Pending Suit and Legal Costs Provision )

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The Application

1.  This is the petitioner wife’s application for maintenance pending suit (“MPS”) and Currey legal costs provision against the respondent husband.

2.  In this judgment, for the ease of reference, I shall refer to the petitioner as the wife and the respondent as the husband.

Background

3.  The parties are Mainland Chinese residing in Hong Kong.  They married in 2011 in Richmond, British Columbia, Canada.  They have 3 young children.  They are now 8 years old [gender], 6 years old [gender] and 3 years old [gender] respectively. 

4.  There is no dispute that the parties separated in September 2018 when the husband moved out of the former matrimonial home at [an address] (“the AA Property”). 

5.  On 13 March 2020 the wife petitioned for divorce on the grounds of the husband’s unreasonable behaviour.

6.  At this juncture, I need to digress to mention two matters. 

7.  The first is shortly after the marriage in Canada the parties married again on 31 December 2011 in [a city]. This marriage was also pleaded by the wife in her petition in which she prayed for the dissolution of first and the second marriages. 

8.  The fact that the parties had married twice was picked up by the court in the mention hearing of 25 May 2020.  The view taken was that the wife could not lawfully ask for the dissolution of the two marriages between the same parties for the simple reason that if the first marriage is a valid one, the second cannot be.

9.  The wife has since sought to have the second marriage to be declared as null and void.

10.  The second matter is that the wife alleges that the husband has been guilty of extremely serious dissipations of his assets.  He has, behind the wife’s back, dissipated about $2.3 billion worth of publicly listed shares to his relatives (mainly his younger brother).  The wife therefore took out an injunction to prevent their further dissipation in respect of publicly listed shares within Hong Kong.  The wife’s injunction application has been heard on 20 October 2020 and the judgment will be handed down in due course.

The Parties Present Situation

11.  Turning back to the parties, the wife, aged 33, currently resides with the children at the AA Property.  The wife is taking care of the children with the assistance of 3 domestic helpers, a nanny and 2 drivers.  At all material times the wife - a homemaker - and the children have been financially reliant upon the husband and/or her parents-in-law (ie the husband’s parents).

12.  The husband, aged 32, and a businessman, currently resides in a 5-star luxurious hotel in Shenzhen owned by his father.  He said it is by reason of COVID-19 that has prevented him from returning to Hong Kong.  This has attracted doubts from the wife who said, according to her understanding, by virtue of the husband’s position in some publicly listed companies, he is exempted from quarantine when returning to Hong Kong and in fact the husband did return at least once in June last year.

13.  Broadly speaking, the husband has been running his business through a web of corporate entities in Hong Kong and in the Mainland whose names include the title “CC”.  Together with his father and younger brother, the husband holds various shareholdings and directorships in these companies. 

14.  On 25 May 2020, this court made an interim-interim maintenance order that the husband pays $850,000 per month, commencing from 1 June 2020, of which $425,000 is for the benefit of the wife and the balance of $425,000 for the benefit of the 3 children in equal shares.  I am told the husband has been making payments in compliance with this order.  On the top of that, he is making mortgage payments of the AA Property and another property which, in this judgment, is referred to as the “BB Property”. 

The Wife’s Case

15.  The wife says the husband is undoubtedly a multi-billionaire. In the words of Mr Chan who appeared for the wife, to describe this case as a ‘big money case’ would be a gross understatement.  Apart from the fact that the husband has already dissipated $2.3 billion worth of shares in favour of his relatives as mentioned above, Mr Chan draws upon the following facts in order to illustrate the scale of wealth involved and the level of luxury and affluence of this family:

16.  First, the AA Property, owned in the name of the wife, is a ‘conjoined unit’ spanning over 3,200 ft² and is believed to be worth about $75 million.

17.  Secondly, the BB Property was purchased in the sole name of the husband in 2017 for $1.2 billion.  It is also a “conjoined unit” with approximately 8,000 ft² and was intended to be the parties’ new matrimonial home.  The wife took the charge of its interior design and renovation.

18.  Thirdly, during the marriage, the wife was provided with a Supplementary AE Centurion “Black Card”.  On this card alone, her own spending exceeded $3.37 million in 2016, $3.29 million in 2017 and $5.66 million in 2018.  It has also been emphasized by Mr Chan that much of the wife’s and the children’s expenditure did not necessarily appear on credit cards; moreover, some of the big ticket items (such as meals out, luxurious holiday spending, travelling expenses, expensive gifts and designer brand purchases) appeared on the husband’s own credit cards rather than the wife’s supplementary card.

19.  Fourthly, the husband moved out of the AA Property in September 2018 and unilaterally cut off the wife’s Supplementary “Black Card” in December 2018.  For a period of 18 months from October 2018 to March 2020, in the absence of financial support of the husband to the wife and the children, his father provided the wife with more than $21 million for living expenses, averaging more than $1.1 million per month. 

20.  Before separation, the couple had the use of a Ferrari, a Lamborghini, a Bentley and a Toyota “Vellfire” 7-seater.  Upon separation, the husband took the Ferrari and the Lamborghini away, leaving the other 2 vehicles for use by the family.  The family used to have the service of 3 domestic helpers, a nanny and 3 drivers (now reduced to 2).  This family has been living the lifestyle commensurate with the husband’s wealth, viz, that of a multi-billionaire.

21.  In support of her application, the wife says the husband is guilty of failing to give a full and frank disclosure of his financial situation.  His Form E was only signed off as late as on 4 August 2020 and it was under the threat of an Unless Order that the husband finally filed his Affirmation in Opposition to the present application on 7 August 2020.  Given that the husband is exempted from quarantine and he did return to Hong Kong in June last year there is no justification for the husband to have failed to give a full and frank disclosure in a timely manner.  It is argued by Mr Chan that in any event even the husband himself admitted in his affirmation that he has not completed his financial disclosure yet.  Mr Chan emphasizes that there are serious deficiencies in the husband’s financial disclosure and many matters simply make no sense at all. 

22.  Both the AA Property and the BB Property are heavily mortgaged for the benefit of the husband or his business. 

23.  Mr Chan highlights the fact that the husband obtained mortgage funds in excess of $480 million on the BB Property but there is no clarify as to what happened to that money and where it has gone. Similarly, the husband says there is $80 million owed under the AA Property mortgage; again, there is no clarity as to what happened to that money and where it has gone.

24.  By her summons, the wife seeks

(1)  a monthly maintenance of $1.1 million for her and the children; plus

(2)  legal costs provision of no less than $250,000 per month up to and including the hearing of any Financial Dispute Resolution hearing. 

25.  In addition, the husband should continue to pay:

(1)  all monthly mortgage payments, all government rent and rates and management fees in respect of the AA Property and the BB Property; and

(2)  all expenses related to the two cars and two drivers being used by the wife and the children.

The Husband’s Case

26.  The husband opposes the application.  He denies this is a “big money” case.  He says even though the family had been maintained by his parents during the subsistence of their marriage, it was a matter in the past: the support ceased since their separation in September 2018 and his parents have indicated that they will no longer maintain him.  Any MPS orders will have to be met by him using his own assets, and not his parents with their assets.

27.  Further, the husband has been in financial difficulties.  He currently has a monthly receipt of $128,000 only.  Whilst he has around $22,922,000 in his bank accounts, he has enormous liabilities.  He is in the red in the region of -$3,070 million.

28.  It is also his contention that the wife has sufficient financial means.  Her application is not justified at all. 

29.  That said, the husband is prepared to continue to pay the mortgage payments in respect of the AA Property and the BB Property which are in the region of $4.25 million monthly.  He, however, declines to give any undertaking for this as requested by the wife. 

30.  The husband is prepared to undertake to make payments for (i) utilities; (ii) management fees, and (iii) children’s school fees subject to the wife’s provision of satisfactory proof.  He values these at about $220,099. Further, he is prepared to pay a monthly sum of $201,008, inclusive of the cars’ and drivers’ expenses, as the wife and the children’s maintenance.  Out of this $201,008, $47,258 is for the wife and the remaining $153,750 is for the children.  He says inclusive of the value of the undertaking this would mean a monthly sum of $421,107.

Legal Principles

31.  Under section 3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“the MPPO”), the court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of presentation of the petition or the making of the application and ending on the date of the determination of the suit, as the court thinks reasonable.

32.  The Court of Appeal in HJFG v. KCY [2012] 1 HKLRD 95 summarised the established principles,

“33.  Jurisdiction to award maintenance pending suit to a spouse is statutory, being governed by the provisions of s.3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.  By that section the court is given a discretion to make an order requiring either party to the marriage to make to the other such periodical payments for his or her ‘maintenance’ as the court thinks ‘reasonable’, subject to the condition that the duration of any such order is limited to the period of what may broadly be called the divorce litigation.

34.  By definition, therefore, maintenance pending suit is restricted to payments which constitute ‘maintenance’, which are reasonable in the circumstances and which will endure for no longer than it takes to determine the divorce litigation. ‘Maintenance’ is a broad concept.  I do not seek to define its exact meaning but it seems to me that it must be restricted to those payments necessary to meet the recurring costs of living at whatever standard of living is appropriate.  That being the case, no matter how great the wealth of the parties and how unevenly distributed that wealth may be at the time an application for interim maintenance is made, the court has no jurisdiction to make orders which for all practical purposes result in a form of pre-trial capital re-balancing.  In the present case, the judge recognised the long-established approach of looking to the “immediate and reasonable needs” of the wife and son.

35.  As to the amount of maintenance pending suit that may be paid, the Ordinance provides only that it must be ‘reasonable’, that is, having regard to the circumstances of the case, that it must be fair. 

36.  An important factor in determining fairness is a consideration of the marital standard of living.  In this regard, each case must be considered according to its own circumstances.  It is not simply to be assumed that great wealth equates to great extravagance. Some married couples who enjoy great wealth spend with comparative modesty and with a discipline born of discretion, others enjoy consumption on a grand scale.

37.  The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness.  This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it.  For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i.  The sole criterion to be applied in determining the application is ‘reasonableness’, which is synonymous with ‘fairness’.

ii.  A very important factor in determining fairness is the marital standard of living.  This is not to say that the exercise is merely to replicate that standard.

iii.  In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing.  That budget should be examined critically in every case to exclude forensic exaggeration.

iv.  Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.

38.  Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a ‘broad-brush’ basis.” (emphasis added)

33.  Further, Rayden and Jackson on Relationship Breakdown, Finances and Children (Lexis Nexis), said the following,

[11.78] There is no hard and fast rule, and no fixed proportion: each case depends on its own facts. The approach to maintenance pending suit should be empirical, and that 'in the ordinary sort of case the district judges who deal with these applications will have to take a broad view of means on the one hand and income on the other and come to a “rough and ready” conclusion', or take a 'broad brush' approach. The overriding consideration is the actual needs of the parties pending suit. Although the provisions of the MCA 1973, s 25 are expressed to arise only when the court is deciding whether to exercise its powers under s 23, 24 or 24A, the court may nonetheless have regard to the criteria listed in s 25 on an application for maintenance pending suit.

[11.79] In practice, as oral evidence is rarely given, it will be unusual for the court on an application for maintenance pending suit to be in a position to make findings of fact on issues in dispute sufficient, for example, to deal with conduct or allegations of non-disclosure. However, if it is demonstrated that the paying party has not performed his duty to make full and frank disclosure of his financial resources, then the court can take a broad and robust view of his means, and it does not have to accept and proceed on the basis of the assertions of the paying party as to his means and an inability to pay. The court can look at the reality of the situation and take into account voluntary funding from third parties (see TL v ML above).

34.  As for the interim maintenance for the children, the empowering provision is section 5 of the MPPO.  In DX v LN (Maintenance Pending Suit & Coss Provision) (FCMC 7870/2014; 21 September 2015), Bruno Chan DJ said,

27.  As the Wife’s present application is not just for her own reasonable needs but also those of the 2 children of the family whose care and control has earlier been granted to her, it would also be relevant to note that s 5 of MPPO gives the court much wider powers in dealing with financial provision for children both in terms of both the time for making orders which is before (hence maintenance pending suit) or on granting the decree of divorce, and the range of orders that the court can make including periodical payment, secured periodical payment, as well as a lump sum for the benefit of the children or for the purpose of enabling any liabilities or expenses reasonably incurred by or on behalf of the children before the making of the application, and that the court may exercise such orders from time to time, and to make further orders from time to time.

28.  Furthermore, when considering such application albeit interim on behalf of the children, s 7(2) of MPPO requires the court to exercise those powers as to place the children, so far as it is practicable and just to do so, in the financial position in which the children would have been if the marriage had not broken down and each of the parties had properly discharged his or her financial obligations and responsibilities towards them. This would in my view be particularly relevant when the court comes to consider the standard of living which the children used to be able to enjoy and the parties’ proposed financial provisions for them.   (emphasis added)

35.  Guided by the above principles, I now turn to the application.

Issues

36.  The wife’s case is premised on the ground that the husband undoubtedly has the ability to maintain her and the children at a level commensurate with the standard of living enjoyed during the relationship.  The husband has failed to give a full and frank disclosure of his financial situation.  On this basis, Mr Chan invites the court to draw an adverse inference against the husband regarding his financial ability.

37.  In response, the husband says the wife has her own financial resources in the form of financial assistance from his parents and she has at least $11 million in her pocket.  Hence, there is no immediate need for any maintenance pending suit.

38.  The husband is essentially insolvent. Financially speaking, the wife is in much better shape than him.

39.  Therefore, as far as the liability issue is concerned, the grounds of the parties can be broadly categorized into two main issues:

(1)  the financial resources of the husband; and

(2)  the financial resources of the wife.

The Financial Resources of the Husband

40.  The husband’s case, in essence, is that he has run into financial difficulties.  He simply does not have the means to pay the MPS as requested by the wife.

41.  The husband explained in his affirmation that he has been dragged into 3 sets of civil proceedings as a defendant in Hong Kong by reason of his business dealings and interest.

42.  Apart from the above, the husband said he owes various personal debts; in particular, he owes his father’s company “CCCL” $454.9 million.  He also has liabilities by way of acting as a personal guarantor on 16 occasions, totalling $2,659 million. 

43.  To make his situation worse, the husband said after his father had learned that he had acted as personal guarantors on so many occasions (a total of 16 personal guarantees), and that he had dragged himself into at least 3 sets of civil proceedings, he became very disappointed in him.  Further, his father, being a traditional Chinese, is particularly unhappy about his divorce and has been angry with him since the commencement of the present proceedings.  His parents have thus decided and made it clear to him that they would no longer provide further financial assistance to him.

44.  The husband reported that he has assets of about $606.6 million; they are essentially comprised of 3 components. First, the BB Property which is worth $575.64 million, secondly, his stocks and securities which are worth $8.01 million and thirdly, the balance of $22.9 million in his bank accounts; so his reported liquid assets are about $30 million.

45.  The husband said he has been making mortgage repayments in respect of the BB Property and the AA Property in the total of about $4.25 million per month, out of his monies and by his company “CEHK”. He has to pay $850,000 to the wife in compliance with the interim-interim maintenance order and for his own living expenses.  It is stressed by Ms Yip, SC, who appeared on behalf of the husband, that with liquid assets of about $30 million, the husband can only last for about 5 months.

46.  The outstanding mortgage sum in respect of the BB Property is $379 million. The husband has mortgaged the BB Property at its maximum capacity so no extra cash could be extracted.  As the AA Property, which has an outstanding mortgage of $80 million, is in the name of the wife; there is nothing the husband can do on his side to obtain a further mortgage on it.

47.  The husband is the shareholder of 26 companies (previously 54 companies) but they are all worthless; none of these companies are profitable.  They are all making a net loss and operating at a deficit.  He is the director of 22 companies but he receives payment of $28,000 per month from one of them only for acting as such.

48.  Since he has been prevented from returning to Hong Kong due to COVID 19, he has sublet his apartment at the Repulse Bay for $100,000 per month.  Thus, currently he has a monthly receipt of $128,000 ($100,000 + $28,000). This has somewhat alleviated his financial pressure. However, this money would no longer be available once he returns to Hong Kong when the situation permits.

Discussion

3 Sets of Civil Proceedings

49.  The first set of proceedings involves not only the husband and his company but also his father and the father’s own company in which they are being sued for breach of contract.  At the substantive hearing, the court was referred to several judgments given by the Court of First Instance on the interlocutory matters of these proceedings. It seems quite clear to me that these proceedings are still pending and it is unknown as to when the case will go to trial and for that matter, the likely outcome.

50.  The second set of proceedings relates to a guarantee given by the husband in favour of a finance company up to $300 million for securing a loan granted to a third party.  The husband successfully resisted the plaintiff’s application for summary judgment and has been granted unconditional leave to defend.

51.  The third set of proceedings is one in which summary judgment has been entered against the husband in May 2019 for $45.7 million plus costs.

52.  Despite the eloquence of Mr Chan that the husband and his father are a team, I am not able to come to this conclusion at this stage.  What I could see from these proceedings is that the husband and father are co-defendants in some of these actions and they are separately represented.

Personal Guarantees

53.  There are altogether 16 personal guarantees.  The wife pointed out that on all occasions the borrowers are companies that are owned by the husband and/or his family.  And on all occasions except for 2, personal guarantees were made by the husband jointly with his brother and/or his father.  Specifically, the husband’s father also acted as personal guarantor in 11 of these 16 loans. 

54.  In this regard, Ms Yip accepts that out of the 16 personal guarantees, 14 were made by the husband with his father and/or his brother and the remaining 2 are in respect of loans essentially for the mortgage of the AA Property.

55.  As it is, it is hard to see how the father had not known about this when his father was the co-guarantor on many such occasions.  

56.  Mr Chan points out that out of the “billions” that the husband alleged is owed by him, apart from the 2 personal guarantees in respect of the AA Property which amount to $80 million only, his father and/or brother are jointly liable for the rest of the guaranteed liabilities. These must be business transactions to which they have provided personal guarantees and are quite simply not the husband’s debs as represented.  It is inconceivable that the husband alone is responsible for all these loan and there is no suggestion that his brother and his father are not good for the money.

57.  I agree.  I consider that the husband’s version that his father was angry about his having entered into so many personal guarantees is unsupported by objective evidence and is a mere say-so on his part.

The Husband’s Alleged Financial Difficulties

The Husband’s Case

58.  It is emphasized by Ms Yip that the husband has given positive evidence that his parents are no longer willing to maintain him financially by reason of the divorce and the financial trouble that he has plunged himself into. There is no evidence of his parents continuing to financially support him.

59.  Ms Yip argues that notwithstanding that a broad-brush approach is to be adopted, it is unfair not to look at how much the husband is able to pay.  She draws the attention of the court to the husband’s Form E of 4 August 2020 where it is stated that whilst the husband has assets of about $606.6 million, his liabilities are way above his assets and are standing at $3,676.8 million; hence, the husband in fact is in the red in the region of -$3,070 million. 

60.  That said, Ms Yip accepts that not all the entire liabilities are crystalized; some are merely potential liabilities (for instance the husband’s obligations under the 16 guarantees that he has given) which may or may not be crystalized.  She highlights that even where merely crystalized liabilities are taken into account, they are at a staggering figure of about $659 million and this still puts the husband in the red up to about -$53 million.

61.  The husband disclosed in his Form E that he has shareholdings or beneficial interest in 26 private companies.  Of these 26 companies, he reported 21 of them as worthless and the value of the remaining 5 “to be confirmed”.  He said he is “still retrieving the relevant records and particulars”. 

62.  Therefore, as I see it, when the husband said he is in the red, it is on the basis that his companies are worthless. 

The Wife’s Case

63.  The wife complains of the “drip-fed” manner in which the husband provided supporting documents which related only to part of his inter-related commercial structures as well as his alleged obligations for personal guarantees which he made along with his brother and/or his father. Most of the documents were attached to his Form E, yet some related documents were only attached in his affirmations and many documents have still yet to be provided. All documents have to be read together in order to attempt to understand the complex web of his repeated transactions of many millions, sometimes billions of dollars.  This made it difficult, time consuming and costly for the wife and her lawyers to follow.  The husband’s disclosure, said the wife, remains deliberately confusing, incomplete and inaccurate.  

64.  Mr Chan therefore invites the court to draw adverse inference against the husband regarding his ability to pay.

Discussion

65.  As reported in one of the judgments in the first set of civil proceedings, the husband and the father hold various shareholding and directorship in a group of corporate entities which may be called the “CC”.

66.  According to the wife, the husband has been self-employed as an active investor in private and publicly listed companies, making investments and buying and selling stocks. The family was never financially dependent upon or supported by merely an insignificant regular monthly income.  All that she knew is the husband, his father and his brother are intimately tied up in relation to their finances. 

67.  In support of his assertions that his companies are worthless, the husband exhibited the management account for the year ended 31 March 2020 for each of them and some with their audited statements for the year ended 31 March 2019.  Leaving aside the value of the 5 companies that are yet to be confirmed, as I see it, the question is whether the other 21 companies are really worthless.  Take CEHK as an example.  CEHK is one of the 21 ‘worthless’ companies.  The husband said currently the mortgage payments in respect of the AA Property and the BB Property are being made by him out of his savings or by this CEHK.  He added that he has to repay the sums to the company subsequently.  However, according to the annexure to one of the judgments by the Court of First Instance[1] and according to his Form E, the husband is the sole shareholder and director of this company so it is apparent that what he owes is a pure book debt. The question is, how CEHK could have managed to pay all these monies. 

68.  The BB Property was bought in May 2017 free of mortgage. The husband claimed in view of his financial difficulties, in about January 2020, he created 2 mortgages over the property.  However, the borrower in the first mortgage is a company of which his brother is the sole director and with which he appears to have no relationship whatever.   There is no explanation as to why the loan in favour of an unrelated company could have alleviated his financial difficulty. 

69.  As for the mortgages over the AA Property, the wife’s evidence is that as its owner she was asked to sign the relevant mortgage documents.  The are two mortgages in favour of the same bank, in November 2017 and June 2018 respectively.  As pointed out by the wife, these mortgages appear to create liquidity for corporate use and not for the husband’s personal use.  Further, it appears that the husband has no relationship with one of the two borrowers under the mortgages.  According to the husband’s Form E, the GROCCS Limited, being one of the two borrowers, is not listed as one of the many companies that the husband has a shareholding / beneficial interest, nor is he a current or past director. 

70.  As rightly pointed out by the wife, notwithstanding the husband’s claim that his private companies are “worthless”, in this affirmation in reply he conveniently did not mention the multi-millions of listed companies shares those private companies hold.  

71.  I mentioned in [10] above that the wife alleged the husband, has behind her back, dissipated about $2.3 billion worth of publicly listed shares to his relatives (mainly his brother).  The wife therefore took out an injunction to prevent their further dissipation in respect of the publicly listed shares within Hong Kong the value of which, according to the wife, is $581.8 million.  Although there is some dispute over the actual value of the shares, I have no doubt that whatever the amount it is still a vast sum of money. The question is how the husband’s companies could have been able to hold billions and billions of shares or assets when at the same time they are or most of them are “worthless” in the sense as claimed by the husband? 

72.  It was observed by Dunn J in B v B (Matrimonial Proceedings: Discovery) [1978] Fam 181; [1978] 3 WLR 624; [1979] 1 All ER 801, at 191E/G that,

It is another feature of such proceedings that one party, usually the wife, is in a situation quite different from that of ordinary litigants. In general terms, she may know more than anyone else about the husband's financial position; she will know at first hand of the standard of living of the family during the marriage; she will know about the furnishings and equipment of the matrimonial home, and of the physical possessions of the husband, and perhaps the approximate amount of cash kept in the house. She may also know, from conversations with the husband in the privacy of the matrimonial home, the general sources of his wealth and how he is able to maintain the standard of living that he does. But she is unlikely to know the details of such sources or precise figures, and it is for this reason that discovery now plays such an important part in financial proceedings in the Family Division.

73.  The mortgage repayments of the AA Property and the BB Property were paid by the husband or his family. The wife said in Part 2.6 of her Form E that she was asked by the husband to have signed some documents relating to the latter’s business. She was aware that she may be a director of some of the husband’s companies but she did not have the details. The outstanding mortgage as at 30 April 2020 in respect of the AA Property was around $80 million.  The wife did not know the details or the specific payee accounts.  Notwithstanding the property is in the wife’s name, the evidence plainly suggests that the financial matters were in the husband’s hand.

74.  I believe the wife’s present predicament that she finds herself in is not much different from that of the wife described in Dunn J’s judgment.

75.  I agree with Mr Chan’s complaint outlined above about the manner in which the husband made his disclosure.  The husband just dumped voluminous audited / unaudited financial statements, loans agreements, public notices and other documents, leaving them to be mesmerized by the wife’s legal team and forensic accountants in order to make some sense out of them. 

76.  I am told the companies involved are inter-related in terms of shareholders, directors, loans and debts.  This complex web of companies is a labyrinth for outsiders of whom the wife is one.  I consider it is the duty of the husband, as part of the duty to give full and frank disclosure of his financial situation, to outline the labyrinth of his business in a comprehensible fashion.  However, I was not taken to any part of the husband’s affirmations or Form E where he made any attempt at all to give an overall picture of:

1.  The nature or type of his business or investments;

2.  The overall structure of his business;

3.  How the companies are related to one and other;

4.  How the “worthless” companies have been able to hold assets worth billions of dollars; and

5.  What went wrong, in other words, how the husband has fallen into financial difficulties? 

77.  I agree with Mr Chan that the husband’s disclosure remains deliberately confusing and incomplete.  I am sure the husband was in a position to give a much clearer picture with just some paragraphs, tables and/or charts in his affirmations or Form E.  This would have helped the wife and the court to navigate through the myriad of documents.  It is not in anyone’s interest and certainly not in the husband’s interest if the wife does not see the wood for the trees.  I believe if the husband had done so, it could have readily been seen whether the companies are “worthless” or not.  This could have saved a lot of time (including court’s time) and costs.  This is, in my view, the deplorable “catch me if you can” tactic and a “wait and see” approach with the hope that the wife may fail to ask the right question.

78.  This reminds me of L v L [2006] 1 HKFLR 121 where Hon Lam J (as he then was) gave heavy criticism over the manner in which the wife in that case had disclosed her financial situation. At [197] and [198] he said,

197.  I do not wish to rehash all the details set out in the chronology of non-disclosure prepared by the solicitor for the Husband.  The manner in which the Wife chose to deal with request for information regarding KH in her answer of 11 May 2004 and then supplied bundles of documents in October 2004 for those advising the Husband to digest was singularly unhelpful.  Given the level of professional advice the Wife could have obtained if she so wished, I find it hard to believe that she could not provide a more intelligible and meaningful answer in a timely and orderly manner.  The party who gives disclosure also carries the obligation to present the information in a way that could be readily comprehensible to his opponent.  Straightforward and direct answers could have been given by the Wife to questions like how much has been invested into a business and what were the sources of fund.  A good litmus test for distinguishing a bona fide fulfillment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party.  I regret to say that having regard to the way in which the Wife had given disclosure of her means throughout the course of these proceedings, it is clear to me that she deliberately chosen not to give meaningful disclosure of her means.

198.  It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek.  Too much legal costs and judicial time had been spent on such wasteful exercise.  As stressed by Mr Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means.  To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored.  That by itself is a breach of the positive duty to give disclosure.  As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.”      (emphasis added)

79.  The husband was the director of 54 companies (now 23 companies).  The husband said he earns $28,000 per month. This is the remuneration from being the director of one of his companies.  It is significant to note that counting from the date of his Form E, this employment only started about ½ month ago.

80.  When one looks at the crystalized liabilities of $659 million, the main item is $504.5 million that is claimed to be owed to CCCL of which his father is the majority shareholder (90%).  There is no evidence of pending action by CCCL against him.

81.  As for the litigation debts that the husband said he has been dragged into, it is true that there is currently a summary judgment against him for $45.7 million.  Given the colossus of the husband’s business, this sum can be considered as ‘modest’. As for the remaining litigation cases, they are still pending in interlocutory matters.  I agree with the wife that the husband has produced no documentary proof whatever in support of his claim that he is liable to pay in these remaining litigation proceedings.  There is no way that the truth and accuracy of the husband’s assertions can be ascertained.

82.  If the husband truly has had no income or if he is in as serious debt as he alleged, he could not possibly have met the repayments for the AA Property and the BB Property, nor could he have been able to afford the eminent legal team with senior counsel and multiple junior counsel. 

83.  Counsel agree that the BB Property has been mortgaged to its maximum capacity and the AA Property is in the name of the wife.  Apparently, there is no other resources that the husband may tap into for cash. However, as I referred to in [29] above, the husband is prepared to continue to pay the mortgage payments in respect of the AA Property and the BB Property in the region of $4.25 million per month.  I have some difficulty in reconciling this position with the husband’s allegation that he has been in financial difficulties.  Where does the husband have the money to pay all these?   The only logical answer is from the husband himself and/or his family.  On the above analysis and having rejected the assertion about the father’s reaction to the personal guarantees the husband has entered, I have come to the view the claim that his parents have decided and made it clear that they would no longer provide further financial assistance to him is a mere ‘say-so’.  The conclusion is that either the husband can pay from his own assets or borrowings, or he can request financial assistance from his father or family companies.

The Financial Resources of the Wife

84.  It is argued by Ms Yip on behalf of the husband that the wife has sufficient financial means; her request for interim maintenance is not justified at all.  Ms Yip relies upon 2 main grounds: (1) the wife has undisclosed or hidden assets; that being the case, she failed to give a full and frank disclosure of her financial situation; and (2) the wife has the financial support from the husband’s parents.

Does the Wife have Undisclosed or Hidden Assets?

The Husband’s Case

85.  It is Ms Yip’s submission that even on the wife’s own case, and giving her the maximum benefit of the doubt, at least as much as $3.511 million that went into the wife’s Bank of East Asia (“BEA”) account remained unexplained.  Ms Yip’s analysis is this.

86.  First, the wife’s Form E shows as at 27 April 2020 she had $6.36 million worth of securities and $1.693 million in her bank accounts.

87.  Secondly, the wife said in her affirmation of 20 May 2020 that she believed from October 2018 to March 2020 her father-in-law had given her approximately $21,246,000.  This amounted to approximately $1.18 million a month.  These monies came in by 6 direct transfers to her bank account and the others by way of cash gifts from time to time.  She deposited most of these cash gifts into her bank account in tranches but she kept some in her safe at home.  She said as at the date of her affirmation she had approximately $200,000 to $300,000 in her safe.  Since March 2020, the father-in-law made 2 further transfers to the wife’s Mainland account: RMB100,000 on 27 March 2020 and RMB300,000 on 6 May 2020.

88.  Therefore, so submitted by Ms Yip, according to the wife’s own affirmation evidence, there are two locations where her funds are.  The first is her securities accounts that disclose $6.36 million and the second is her safe.  As for the securities account, though the current situation is known, what is unknown is how much were deposited into it for investment previously.  As for the latter, it is unknown how much was and is in the safe.  On that basis, Ms Yip argues that the wife is guilty of significant financial non-disclosure and that she has other sources of income or hidden assets.

89.  At the hearing, Ms Yip produced 5 Annexes in aid of her arguments.  Annex 1 sets out the deposits that went into the wife’s BEA account from March 2019 to March 2020.  According to the husband’s reckoning, out of a total of $28,814,733 deposits, $6,700,456 ($6.7 million) are unexplained.  It seems clear to me that how this figure is arrived at is that the husband only accepts those deposits as “explained” when they are shown on the statements to be “Intra-account deposit” or transfers with transferor’s name shown, notably the name of the husband’s father.  All the other deposits are categorised as “unexplained” for the reasons that either the wife’s explanation is considered by him as a bare assertion without documentary proof or without explanation. 

90.  Out of this $6.7 million, there are two sums in total of $1.85 million that the wife explained are loans from friends.  In response, Ms Yip criticises that this is bare assertion and has not been disclosed by the wife in her Form E of 27 April 2020.

91.  As regards the money kept in the safe, the wife reckoned, in her affirmation of 20 May 2020, that her father-in-law had given her cash gifts in total of $3.189 million.  Ms Yip submits that even if this entire sum had been deposited into the wife’s account, there still remained a sum of about $3.511 million unexplained ($6.7 million - $3.189 million). 

92.  Ms Yip further points out that even on the wife’s own version some of the expenses were not paid by her, eg car expenses, drivers, insurance premium, flights and accommodation. The husband reckoned that over the 20-month period (ie from October 2018 to May 2020), on the wife’s own case, she spent a total of $18,602,888 only, or on average $930,144.  On that basis, it is Ms Yip’s submission that the wife has been able to keep at least $3.35 million to herself.  Ms Yip adds that since the wife did not travel from February to May 2020 her total monthly spending would have been just $16.8 million only.  In that case, the wife would have kept a total of over $5 million.

93.  Based on the above analysis, Ms Yip suggests that the wife has assets worth at least $11 million (inclusive of those already disclosed in Form E).

The Wife’s Case

94.  In response, Mr Chan draws the court’s attention to the fact that the wife already disclosed that she has liquid assets of about $8.05 million.  As for the loans from friends, in her affirmation in reply dated 9 September 2020, the wife explained that in about July 2020 her friends loaned her insignificant sums as her cash was low and she did not want to draw down on the only investment capital she had as the cushion for her entire family expenses.  Mr Chan submits that questions about loans from friends would be dealt with in the wife’s Answer to the Questionnaire.

Discussion

95.  I accept the wife has the duty to give a full and frank disclosure of her financial situation.  This duty applies to an applicant as much as to a respondent.

96.  It is not in dispute that during the marriage, the wife was not working and apparently her source of finance came from the husband and/or his parents. 

97.  I take note that the wife has given some explanations on some of the unexplained items; for example, the loans from friends but, as rightly pointed out by Ms Yip, these have not been disclosed in her Form E.  The wife’s own evidence is that starting from October 2018 she had been in receipt of $1.1 million per month from the father-in-law so one wonders why she would have had the need to borrow $850,000 on 12 April 2019 and $1 million on 15 May 2019.

98.  As regards the security investments, in her affirmation of 20 May 2020, she said all the funds received from her father-in-law since October 2018 had been used to defray her own and the children’s living expenses, the school fees, the government rates, rents and management fees of the AA Property and the BB Property and her credit card bills.  It would appear that the wife would not have been able to retain any excess for investment. 

99.  However, in her affirmation of 9 September 2020 filed in reply to the husband’s affirmation in opposition, she seemed to have retracted to say while she had used a large part of the monies to defray her expenses, a lesser part was invested in stocks since the end of 2019 so that monies would not just be deposited in bank account which yielded very low interest or be placed as cash in her safe.

100.  It seems to me clear that there is some inconsistence on the part of the wife in this regard.  The fact that she was able to save up the excess does not sit well with her claim that she needed to borrow.  This is relevant not only to the issue being considered here but is also relevant to the assessment of her monthly needs which I will come to in due course.

101.  Whilst I have no means to verify whether the “auditing” conducted by the husband’s legal team is correct or not, I do not think the court is required to conduct a forensic examination of this issue at this interim stage.  I think probably there could be some overlapping in figures which should be left for trial. There might have been some income / profits from her investments, too. Whether there are actually as much as $6.7 million unexplained and, depending on the finding, whether this is indicative of some hidden financial resource to the extent of at least $3.511 million should be matters to be determined at the trial on the ancillary relief when by then the parties should have completed the disclosure exercise and the court would have the opportunity to hear the oral evidence of the parties.   

102.  As of now, assuming the husband’s scrutiny is correct, even on the wife’s case and if the wife has really obtained loans in total of $1.85 million, it appears that on the figures advanced by Ms Yip, there is still at least $1.661 million unexplained ($3.511million - $1.85 million).

103.  For these reasons, I find the wife is not as forthcoming as she should have been in the disclosure exercise for the purpose of the application.  I should be mindful of this matter when it comes to whether and to what extent should the court exercise the power in favour of the wife.

Financial Support from the Husband’s Parents

The Husband’s Case

104.  The husband’s case in a nut shell is that during the subsistence of his marriage, his father was quite generous in gifting sums of money to his family and maintaining them through paying various household and children expenses.  This situation, however, has long ended: the father, and for that matter, the mother as well, have made it clear that they would not continue to maintain the husband. 

105.  Ms Yip emphasizes the fact that the wife’s relationship with her parents-in-law has been good.  The wife has been generously provided for by the husband’s parents directly in the post-separation period.  As admitted by the wife, from October 2018 (ie 1 month after separation) to May 2020, she received a total of at least $21 million from the husband’s father. She draws the court’s attention to the fact that since October 2018 these payments were made to the wife directly, and not through the husband.  Since May 2020, although the husband’s parents have ceased giving cash gifts as before, they have been paying for some household expenses such as the management fees, rates and government rents of the BB Property, 2 drivers’ salaries, car expenses and insurance premium which are about $340,000 per month.  This is a source unrelated to the husband and there is no indication that the financial support from parents to the wife will terminate. 

106.  This case, so argued adroitly by Ms Yip, represents a reverse of the KEWS-situation.  The financial provision by the husband’s parents is a kind of third party’s financial provision under KEWS v NCHC [2013] 2 HKLRD 314; (2013) 16 HKCFAR 1.  The husband’s parents’ financial assistance ought to be taken into account when assessing the wife’s financial resources as opposed to the husband’s financial resources. 

107.  In this regard, Ms Yip refers to what Ma CJ said in KEWS v NCHC (supra), at [36],

36.  In every case where third party assistance is involved, there are two critical evidential questions for the court to consider: -

(1)  What is the extent of the financial assistance provided by the third party to the husband or wife?

(2)  What is the likelihood of such financial assistance continuing in the foreseeable future?

108.  Ms Yip contends that the two questions posed above should be answered as follows:

(1)  The wife used to receive financial assistance from the husband’s parents to the extent of at least $1.1 million per month; and

(2)  There is a real likelihood of such financial assistance continuing in the foreseeable future.

109.  She further submits that with this financial assistance, the financial resources on the wife’s part would be sufficient to cover the monthly needs of herself and the children.

The Wife’s Case

110.  Mr Chan contends that the parents’ financial support for the husband has never ceased as is evidenced by the facts that the husband has been able to pay the mortgage repayments, the monthly $850,000 interim-interim maintenance or for that matter, the lesser sum that the husband considered as reasonable for the maintenance of his estranged wife and children.  In terms of business, the husband and his father are in reality a team.  Last of but least, the husband has been staying rent-free in his father’s luxurious hotel in Shenzhen. 

111.  Further, the wife said it is not true that the family’s expenses were solely funded by the husband’s father.  Her evidence is that the husband provided her with substantial sums to be used as petty cash and that her supplementary “Black Card” bills were footed by the husband, in addition to dinning outs and luxurious overseas holidays.

112.  Lastly, the wife was forced to make the present application because the father stopped the cash payments.

Discussion

113.  To begin with, Ms Yip accepts that before the parties’ separation, it was a KEWS case in the sense that there was financial support from the parents in favour of the husband for his family. 

114.  An order for maintenance pending suit is a kind of ancillary relief pursuant to rule 2(2) of the Matrimonial Causes Rules (Cap 179).  The Court of Final Appeal decision in KEWS v NCHC (supra) is binding on this court. As such, the questions posed by Ma CJ above should in principle apply to the present situation.  However, it is important to note that in that case the Court of Final Appeal was dealing with final ancillary relief orders where evidence had been heard in full in the court below. 

115.  Whether at the subsistence of the marriage the family was entirely maintained by the parents-in-law as contended by the husband or only in part as contended by the wife should be dealt with at trial.  In any event, as I read it, the husband certainly did not suggest that at the relevant time his father gave cash sums directly to the wife for the purpose of the family’s living. 

116.  In respect of the 1^st question, it is true that prior to May 2020 there were cash from the parents-in-law to the extent of about $1.1 million per month but this has ceased.  The wife said in her affirmation in reply dated 9 September 2020 that it was the husband’s parents view that the husband should be responsible for maintaining his family and it was at the parents-in-law’s suggestion that the wife issued a solicitors’ letter in about April or May 2019 seeking maintenance.

117.  Later on, when the wife informed the father-in-law that she was running low on cash, the reply was he would not give any further funds to support her and the children.  This fact has not been challenged by the husband. 

118.  The wife accepted that although since May 2020 (the interim-interim order) the parents-in-law ceased providing cash as before, when the husband refused to pay the management fees, rates and government rents of the AA Property and the BB Property, the mother-in-law stepped in and arranged payments.  Likewise, when the husband intimidated that he would no longer arrange his company to pay the salaries of the 2 drivers, the mother-in-law stepped in and reassured the wife that they (ie the husband’s side) would continue to pay.  The mother-in-law also arranged a replacement car for the children’s use when one of the cars broke down.

119.  I am told these payments amount to about $340,000 per month.  Looking at the figure alone, this is way below what was before May 2020. 

120.  The evidence is that it was when the husband refused to pay that triggered the intervention of his parents.  In other words, it was when the husband failed to fulfil his primary obligation that his mother stepped in.  On that view, can it be said to be the financial assistance from the mother for her son?  The same reason may apply in respect of the cash given by the parents-in-law after the parties’ separation.  It is to be remembered that the husband once mentioned his father is a traditional Chinese. The court must look at the reality of the situation and have regard to matters of substance and not just form:  see KEWS v NCHC (supra), at [37].  In the present case, neither party has adduced any evidence from the parents/parents-in-law on whether the cash sums and payments for household and children expenses were made qua the parents of the husband or the parents-in-law of the wife.  I therefore consider that this KEWS question should be reserved for trial.

121.  With the conclusion I have come to regarding the 1^st question, it is not necessary to deal with the 2^nd question for the purpose of the present application.

Whether the Husband should be ordered to pay Interim Maintenance?

122.  I have found the husband has failed to give a full and frank disclosure of his financial situation.  Likewise, I have found the wife has not been forthcoming as regards her financial situation too.  The discovery exercise is still going on.  At the present moment, as far as I can see, the husband’s failure, in terms of the scale, concerns multi-millions and even billions of dollars while on the wife’s part, it was a matter of several millions dollars.  I said so based on the analysis articulated by Ms Yip and the undisputed fact that the wife is a homemaker.  Save and except some profits that she might have been able to gain from the stocks investments the wife has had no independent source of income.  On the totality of evidence before me, the husband is way much more resourceful that the wife.

123.  I also take into consideration that there is a legal obligation on the part of a person to maintain his or her spouse and on the part of a parent to maintain his/her children.  WGL v ASB (Child Maintenance under the GMO) [2013] HKFLR 391 was a case concerning the maintenance of a child born out of wedlock.  Deputy High Court Judge Chu (as she then was) said it was the primary responsibility of the father to provide reasonable maintenance for his child.  I see no reason why the husband in the present case, as father, does not have the same primary obligation.

124.  Having regard to all the above matters in the round, I am prepared to exercise the discretion to order the husband to pay interim maintenance for the benefit of the wife and their children.

125.  I am aware the wife has liquid assets of about $8 million.  I take the view that she should be allowed to retain it for her own use and for the litigation which I shall come to in due course.

Quantum

The Wife’s Case

126.  The financial arrangement before separation was that the husband provided petty cash to the wife from time to time. The wife reckoned that from September 2016 to February 2018, during this 18-month period, the husband gave her approximately $333,333 per month just as petty cash for the household. The wife also had unlimited use of the supplementary AE Black Card. Many other expenses such as meals out, most of the holiday spending and expensive gifts from luxury brands were paid by the husband.

127.  At all times the mortgage repayments, the government rent and rates and management fees of the AA Property and the BB Property were paid by the husband or by one of his companies.

128.  One of the husband’s or his family’s companies paid all the expenses related to the drivers and the cars as well as most flights for the family holidays. The family travelled in business class or sometimes private jets.  For other flights and accommodations booked via travel agents, the mother-in-law either reimbursed the wife or paid directly to the travel agent. They usually spent 3 months every year out of Hong Kong on holiday staying at five star hotels or at the parents-in-law’ s luxurious mansion in Vancouver, bringing 3 helpers and 1 driver with them.  They also went to Maldives and Niesko, Japan every year.

129.  The mother-in-law also reimbursed the wife or paid directly the insurance policies premiums.

130.  The wife claimed historically their monthly outgoings were about $1.5 to $1.7 million, but currently they are approximately $1.3 to $1.4 million.  Her Form E stated a total sum of $1,335,823, inclusive of the government rents and rates and management fees of the AA Property and the BB Property but exclusive of their mortgage repayments. 

The Husband’s Case

131.  By and large, in his affirmation of 7 August 2020, the husband criticized the wife for having inflated the expenses. As said above, he assessed the wife and the children’s needs at $421,107 per month only.

132.  Ms Yip reminds the court of the risk of injustice arising from “over-provision”.  The court is urged upon to adopt a more cautious approach when considering the wife’s budget. 

133.  At this juncture, it is necessary to deal with a preliminary issue concerning an accountant’s report adduced by the wife. 

134.  In reply to the husband’s allegations that the wife’s expenditure was grossly inflated, the wife, in her affirmation in reply of 9 September 2020, produced a report by her forensic accountants MDD (“the Report”) who conducted an analysis of her expenditure based on her credit cards and bank accounts.  She tried to use the Report to justify her asserted needs and expenses.

135.  It has been argued by Ms Yip that the Report came in an extremely unfair manner.  There is no reason why the wife could not have included it in her affirmation in support of the application or soon thereafter.  The fact that the Report was only included in her affirmation in reply was an ambush and deprived the husband of any opportunity to file proper evidence in reply, which is grossly unfair.  She draws my attention to Sze Ching Lok v China Resources Power Holdings, HCMP No 1655 of 2013 (date of judgment: 31 December 2013) where it was held by Hon Poon J (as he then was) that to allow the filing of new evidence in the pretext that they are evidence in reply would be an ambush on the other side and should not be allowed: see [29]. 

136.  She also relies upon Brand, Farrar, Buxbaum LLP v Samuel-Rozenbaum Diamond Ltd & Anor, HCA No 5191 of 1998 (date of judgment: 8 May 2002) where Ma J (as he then was) said at [24],

24.  I start with the applicable legal principles.  One of the facets of equality before the law (a fundamental right guaranteed under Article 25 of the Basic Law) is that no order ought to be made by a court against anyone without his first being given a reasonable opportunity of being heard.  An exception to this fundamental rule is where ex parte orders are made by the court.  At the risk of repeating the obvious, ex parte orders are only made “where the situation is of such extreme urgency that there is literally no time to warn the defendant of what is proposed or where the purpose of the injunction will or may be frustrated if the defendant is informed of what is proposed or where the defendant simply cannot be found” : see TRP Limited v. Thorley, unreported, 13 July 1993, English Court of Appeal, per Bingham LJ….             (emphasis added)

137.  On that basis, Ms Yip argues that the wife’s application should be adjourned in order for the husband to properly respond to the report. Alternatively, she invites the court to expunge or exclude the Report from its consideration. 

138.  The wife, in her affirmation in reply, also included another report prepared by MDD to try to suggest that the husband had not disclosed the financial information for 14 companies.  Similarly, for the same reasons, Ms Yip invites the court to expunge or exclude from consideration this report as it was only produced under cover of the wife’s affirmation in reply. 

139.  I agree with Ms Yip.  The husband should not be deprived of an opportunity to give a reply.  I would further add that the wife’s unilateral move to conduct an exercise akin to auditing is, in my view, undesirable.  The present situation is not one where a single joint expert has been appointed by the court.  Where it is a unilateral move, the instructions given to the expert are inevitably one-sided and very often than not without notice to the other side. This naturally would attract criticism for being blinkered or even biased and the outcome would be seen with scepticism and subject to scouring by the captious legal team on the other side for any minuscule discrepancy or mistake.  All these would end up in unnecessary bitter and lengthy arguments.  Very often, this tends to muddle rather than clarify.

140.  This is the case here.  It is Ms Yip’s submission that the Report lacks of utility and probative value.  She points out that the Report was prepared on the basis of the wife’s main bank account and main credit card statements reviewed against the expenses that she set out in the Form E.  Notwithstanding that the wife had prepared a spreadsheet of expenses (ie exhibit “LCC-4-4”) based on her records and there were some invoices and receipts, apparently the forensic accountant was not provided with these documents.

141.  The findings in the Report actually do not support the wife’s case.  MDD found that from October 2018 to May 2020 the total monthly outgoings were $1,089,206 but of these, $375,808 were categorised as “Outgoings yet to be identified”.  It is unknown on what basis MDD accepted or assumed these cheques or payments as outgoings.

142.  Further, there were items paid directly by the husband or his family such as the car expenses and the insurance premiums which MDD simply would not have been in a position to verify.

143.  Ms Yip says according to their own examination of the figures verified by MDD and from there with the sums paid by the husband’s company or the parents-in-law being deducted, the monthly sum paid by the wife was merely $470,515. 

144.  Whilst I have no means to verify whether the “auditing” conducted by the husband’s legal team is correct or not, for the time being, it is to be noted that the wife also accepted that the figure of $1,089,206 as the monthly total for the period October 2018 to May 2020 needs to be adjusted as there were expenses directly paid by the husband or his family.

145.  For all the reasons I have said, I would give little weight to the Report.

Discussion

146.  The wife was able to condescend into some details about the very high standard of living during the marriage such as meals out, luxurious holiday spending, travelling expenses, expensive gifts and designer brand purchases.  The husband was no doubt the ‘head’ of his own family at least as far as the financial side is concerned, that being so he should know in his bones about his family.  One would expect that he should have been able to give some substantial or ‘positive’ responses to the wife’s assertions; particularly when the wife said her supplementary Black Card bills were taken care of by the husband.  The husband could have easily caused a check on his records for the amounts.  The husband apparently did not deny the wife’s assertion that her credit card bills and many expenses, such as meals out and purchases on luxury brands were paid by him.  It is rather puzzling to note that most of the responses that he gave were vague ones - that the expenses were grossly inflated, excessive or unsupported by documentary proof. 

147.  I have no doubt this family is of great means. Its members enjoyed a very high standard of living during the subsistence of the marriage.  In assessing the immediate and reasonable needs of the wife and the children, this marital standard of living must be borne in mind while at the same time the wife’s budget must be examined critically.  In doing so, I have carefully considered the figures proposed by the husband which have been helpfully set out by Ms Yip in Annex IV of her submissions.

148.  Apart from the matters said by the parties in their affirmations, I also have regard to the following.

149.  First, the fact that the wife was able to set aside part of the monthly sum of $1.1 million for security investment clearly shows she did not have to exhaust the entire sum for living expenses.

150.  Secondly, in the foreseeable future, there would not be any or much expenses on WeChat / Alipay (ie expenses in the Mainland). There was not much travel these days but I accept the wife has arranged more activities and summer course and camps and also staycations and boat-trips for the children. 

151.  Thirdly, there is a significant sum in relation to the children’s extra tuition fees on which the wife claimed $75,360 per month.  I do take note of Ms Yip’s submission that the children’s extra tuition should not be solely decided by the wife and that the wife should endeavour to obtain the consent or agreement of the husband.  I do not know what has been the post-separation situation between the parties in this regard but it seems to me that the husband has little idea as to the types and frequency of tuitions that the children have had since his departure from the family.  I make the same observation as regards the children’s extra circular activities. It is hopeful that the parties could communicate and make a joint decision for the children.  This would definitely be to the best interest of the children. Section 7(2) of MPPO requires the court to exercise the powers as to place the children, so far as it is practical and just to do so, in the financial position in which the children would have been if the marriage had not broken down and each of the parties had properly discharged his or her financial obligations and responsibilities towards them; see also DX v LN (Maintenance Pending Suit & Costs Provision) (supra) at [28].  In the meantime, with the children’s best interest in mind, and considering the significant resources and the high standard of living that the children enjoyed, I shall err in favour of the wife’s figures. 

152.  Doing the best I can and taking a board-brush approach, the reasonable needs of the wife and the children are assessed as follows.

General expenses	Amount (HK$)
Utilities (electricity, gas, telephone, water, etc)	2,500
Food (5 adults and 3 children)	42,000
Household expenses	4,000
Petty cash for drivers	3,000
Petty cash for taxi, etc	1,000
Insurance premiums	460
Domestic helpers and nanny	61,000
AMC membership	25,000
Household appliance maintenance etc.	1,000
Computer repairs, agency fees etc.	1,000
Sub-total	140,960
Personal expenses
Meals out of home	5,500
Transport	150
Clothing/shoes	80,000
Personal grooming	10,000
Holidays (Staycation and boat trips, etc for the wife and the children)	40,000
Entertainment/presents	3,000
Medical/dental	1,250
Miscellaneous spending on credit cards	3,000
Sub-total	142,900
Children expenses
School fees	47,000
Extra tuition fees	75,000
Medical/dental	3,750
Extra-curricular activities	30,000
Entertainment, presents, clothes, toys	11,000
Lunch & pocket money	1,530
Uniform	1,042
Annual school fund	2,500
Miscellaneous items (school photos, PTA, library donation, presents for teachers	1,000
School annual Capital Levy ($28,000 per annum)	2,333
Sub-total	175,155
Total	459,015

153.  The totals are $459,015.  To this a sum of $340,000 being the management fees, rates and government rents, 2 drivers’ salaries, car expenses and insurance premiums should be added, hence the total is $799,015.  I round it down to $799,000.

154.  Reference can be made to a letter dated 15 May 2019 by the wife’s former solicitors where it was stated that she needed a total of $855,000.  It should be noted that at that time, COVID-19 was still non-existent and overseas vacations and travels to the Mainland were still the family’s routines.

155.  I am satisfied that this sum should be sufficient for the immediate and reasonable needs of the wife and the children.

156.  Taking a board-brush approach, out of this $799,000, $400,000 is for the interim maintenance of the wife and the remaining $399,000 is for the maintenance of the children, in equal shares.

157.  The husband should also continue to pay the mortgage repayments of the AA Property and the BB Property.

Adjustment / Set-off

158.  Ms Yip argues that any over-payment of the interim-interim maintenance should be repaid by the wife immediately over a period of 6 months instead of having the adjustment to be made at the final ancillary relief hearing.  She relies upon the following grounds.

159.  First, the marriage in this case, being of 7 years only, is a short one. The wife’s ancillary relief claim is thus likely to be a ‘needs’ based case.  While at this stage the court is not supposed to make any definitive finding of fact, it cannot ignore the husband’s liabilities. Since the husband is financially in a negative position and given that he can last for a few months only, there is a real likelihood that at the end of the ancillary relief litigation there is nothing to be paid out, whether it is a sharing or a needs case.  Any over-payment of the interim-interim maintenance would stand the risk of not being able to be set-off. 

160.  Secondly, the parties have two pieces of substantial family assets only, namely, the AA Property and the BB Property. They were purchased with funds from an external source, ie funds of the husband’s family.  Even if this is a sharing case, this case is not one of a lengthy marriage where the wife will surely get at least one half of the assets. She reminds the court of the opinion made Riberio PJ said in [108] & [109] of LKW v DD (2010) 13 HKCFAR that a short marriage is a well-recognised departing factor from equality. 

161.  In response, Mr Chan submits that there are no authorities supporting adjustment at this stage. 

Discussion

162.  Apparently, the argument that the wife would not have the ability to repay or set-off does not sit well with Ms Yip’s argument that the wife has hidden assets. 

163.  In support of her argument that the wife in this case is likely a ‘needs’ case, Ms Yip refers the court to WYSL v FHCBA & Ors (Ancillary relief; Section 17; Trusts) [2019] HKFLR 345 where it was a 10-year marriage and the wife’s case was confined to one on a “needs” basis. Although it is axiomatic that the facts of every case are different, it should be noted that WYSL v FHCBA & Ors (supra) is a childless marriage case. In the words of Holman J in Murphy v Murphy [2014] EWHC 2263 (Fam) at [35], “the fact of having children … changes everything”, in that the economic impact on the wife is likely to endure not only until the children leave school but for the rest of her life. This phrase was also cited in [65] of WYSL v FHCBA & Ors. WYSL v FHCBA & Ors (supra).

164.  LKW v DD was a childless case too. The parties married in 1996 and issued a joint application for divorce in June 2003.  Hence, it was marriage of 7 years. Notwithstanding the trial judge described the marriage as “not a long marriage”, the Court of Appeal’s decision, ie DD v LKW [2008] 2 HKLRD 523 (in which Ms Yip was the amicus curiae) to overturn the trial judge’s award and ruled in favour of equal division was upheld by the Court of Final Appeal: see: LKW v DD (2010) 13 HKCFAR 537; at [133] – [134] & [138].

165.  I therefore decline to make the adjustment at this stage.

Legal Costs Provision

166.  On the principles under which litigating funding may be ordered, the English Court of Appeal in Currey v. Currey [2007] 1 FLR 946 set out certain guiding principles on how legal funding as interim maintenance may be granted. The principles set out there have been cited and relied upon in the courts of Hong Kong.  Hon B Chu J helpfully summarised these principles in WGL v ASB (Litigation Funding) HCMP 489/2013 (date of judgment: 30 November 2017),

“6.  …

(i)  A fundamental requirement is that the applicant has to supply a sufficiently detailed breakdown of anticipated costs;

(ii)  The overarching enquiry is into whether the applicant for a costs allowance can demonstrate that he/she cannot reasonably procure legal advice and representation by any other means, and the enquiry will include:

•  To the extent that the applicant has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services;

•  Whether the applicant cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

•  Whether there is public funding available to the applicant as would furnish the applicant with legal advice and representation at a level of expertise apt to the proceedings.

(iii)  In the broad exercise of discretion, satisfying the above condition alone may not be sufficient, and a judge may consider that other factors must come into play, including that :

•  The subject matter of the proceedings;

•  The reasonableness of the applicant’s stance in the proceedings, insofar as it can safely be assessed at so early a juncture;

•  The period over which an allowance for legal costs is to be paid, and that applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order.”

167.  Mr Chan submits that while the husband is lavishly funding his legal team (he has been represented by 3 counsel, including 1 senior counsel and 1 senior junior), there must be equality of arms afforded to the wife. 

168.  Mr Chan seeks, on behalf of the wife, a monthly sum of no less than $250,000.

169.  According to the wife’s Costs Estimates, from January 2020 to July 2020 when during this period the husband did not file his Form E, Form J or any response with respect to the present application and the injunction application yet, the costs incurred were $1.729 million, approximately $247,043 per month.  From August 2020 up to the conclusion of the applications for MPS and for injunctions hearing in October 2020, the estimated costs incurred were $1.694 million; and from 21 October 2020 up to the FDR hearing, the estimated costs to be incurred are $1.71 million.  All these added up to $5.133 million.

170.  Assuming that this spreads out over a period of 16 months it would mean $320,831 per month.

171.  As for the husband, according to his Form H, as at the date of the hearing of this application (ie 23 September 2020), he incurred $2,717,000.  It is estimated that a further sum of about $1,417,000 will be incurred up to the FDR hearing. The total comes up to $4,134,000.

172.  Therefore, as far as arithmetic goes, the wife’s total costs up to the FDR hearing are roughly $1 million more than that of the husband’s ($5.133 million - $4,134 million) but as far as the costs to be incurred up to the FDR hearing are concerned, they are roughly the same (ie the wife’s $1.71 million and the husband’s $1.417 million).

173.  While I accept that this case has some complexities due to the potential enormity of the assets involved and the complex web of the husband’s business, I must say these figures are on the high side.  It is unnecessary for me to say further for the purpose of the present application.  I now turn to Ms Yip’s grounds of opposition.

174.  The husband suggested that he may act as a guarantor so that the wife may obtain money by further mortgaging the AA Property.  Given that both parties estimated that the property’s current values to be around $73 to $75 million and the current mortgage loans are already $80 million, together with the husband’s assertion regarding his precarious financial situation, I fail to see how this could be a viable option.

175.  Mr Chan accepts that the wife still has some investments.  He argues that it is all a question of reasonableness and fairness.  The wife should not be asked to use up every cent or sell all her properties.  She should be allowed some buffer.  As can be seen in the 3 sets of civil proceedings and in these matrimonial proceedings, the husband has had the best legal team and has been represented by a senior counsel and a senior junior.  Hence, looking at that level, it is reasonable for the wife to be without financial worry.  Mr Chan, however, does not specific what the buffer is for.

176.  In advancing her opposition, Ms Yip raises 3 grounds, viz, (1) the wife has assets, (2) she has the ability to borrow and (3) she has not given any evidence that she cannot obtain a charge on the outcome of these proceedings.

177.  I agree with Ms Yip that the wife has assets to fuel the litigation, at least up to the FDR hearing.  As I have discussed under the part “Does the Wife have Undisclosed or Hidden Assets?” above, leaving whether the wife has any undisclosed or hidden assets aside, her Form E shows as at 27 April 2020 she had liquid assets of about $8.053 million.  While I recognize that in all likelihood these might have gone down somewhat but it should not be by a very great margin since she has been in receipt of $850,000 per month as her interim-interim maintenance since May 2020. 

178.  It has been repeatedly pointed out in judicial authorities that if an application was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing.  If the FDR fails, it would be for the new judge, on the basis of the material properly before him, to determine whether a new allowance for legal costs should be granted and if so, in what amount: see HJFG v KCY (supra) at [80] – [83]; Currey v Currey (supra), at [6] and WW v LLN formerly known as LSM [2020] HKCA 178, CACV 524/2019, at [20]. 

179.  The present application is one made before the FDR hearing. The costs to be incurred up to the FDR hearing are estimated to be about $1.71 million only.  The wife should have the ability to pay without hampering her living standard.

180.  With the conclusion that I have come to I do not really need to go to the 2^nd and the 3^rd ground. Suffice for me to say is that I agree with Ms Yip that the wife has the ability to borrow at least some money for her litigation.  She borrowed $132,000 and RMB 300,000 from friends to pay legal fees in May 2020 and some “insignificant sums” from late July to early September from friends.  She also borrowed a total of $1.85 million from friends: see [97] above.

181.  As for the 3^rd ground, I must disagree with Ms Yip.  I do not see how the wife may obtain a charge on the outcome of these proceedings.

182.  Be that as it may, for the reasons that I have said, I decline to make a legal costs provision order at this stage.

Order

183.  For the reasons aforesaid, I make an order that the respondent do pay the petitioner interim maintenance in the sum of $799,000 per month, of which $400,000 is for the interim maintenance of the petitioner and the remaining is for the interim maintenance of the 3 children, in equal shares, with the first payment to be paid on or before 1 February 2021 and thereafter on the 1^st day of each and every month.  The respondent do continue to pay the mortgage repayments of the AA Property and the BB Property. 

Costs

184.  I have not heard counsel’s submissions on costs. I reserve this issue accordingly and I so order.  It is hopeful that parties may be able to come to an agreement on this issue so that further time and costs could be saved.