WAN v. LAI

[English Translation – 英譯本]

FCMC 11943/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 11943 OF 2003

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(The two cases were heard together in Chambers pursuant to the order
made by Master Tracy Chan of the District Court on 20 March 2006)

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JUDGMENT

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1. This trial concerns two sets of proceedings:

                   (1) Matrimonial Causes No. 11943 of 2003 (“FCMC 11943/2003”);

                   (2) District Court Civil Action No. 5186 of 2005 (“DCCJ 5186/2005”).

2. As the two sets of proceedings involved the same subject matter, Master Tracy Chan of the District Court ordered on 20 March 2006 that the two cases be tried together.

3. Before the trial commenced, the legal representatives of the relevant parties prepared two different sets of bundles, which will be referred to hereinafter as “FCMC bundle” and “DCCJ bundle” respectively.

FCMC 11943/2003

4. The petitioner in FCMC 11943/2003 is Madam Wan (hereinafter “the wife”), and the respondent is Mr. Lai (hereinafter “the husband”).  The husband is also the defendant (judgment debtor) in DCCJ 5186/2005.

5. The wife and the husband got married in 1979.

6. Following their marriage, they gave birth to two sons, who are now aged 24 and 18 respectively and residing together with the wife at a flat in Lung Poon Court, No. 8 Lung Poon Street, Kowloon (hereinafter “the former matrimonial home”).

7. On 6 October 2003, the wife issued a petition for divorce on the ground of the husband’s unreasonable behaviour.  The petition was not contested by the husband.  On 17 May 2004, the Court granted a decree nisi of divorce and, as she was seeking maintenance for herself and the two sons as well as an order for the transfer of the former matrimonial home, adjourned the hearing of her application for ancillary relief.

8. Following a number of call-over hearings, the ancillary relief being applied for is now confined to the following two items:

                   (1) nominal maintenance of $1.00 per annum; and

                   (2) transfer of all the husband’s title to and interests in the former matrimonial home to the wife for no consideration.

The former matrimonial home

9. The former matrimonial home is a flat under the Home Ownership Scheme administered by the Housing Authority.

10. In 1986, the parties applied for the purchase of a flat under the Home Ownership Scheme by way of a “Green Form” (for use by tenants of public housing units) and successfully purchased the former matrimonial home at $292,800, which they hold as joint tenants.

11. The wife made a downpayment of $29,280 for the purchase of the former matrimonial home, whereas the balance of $263,520 was paid with a mortgage loan obtained from the Hong Kong Bank.  It is not in dispute that the mortgage loan has now been repaid in full.

12. The parties agreed at the hearing that the current market value of the former matrimonial home is $1,500,000.

13. The wife is at present residing at the former matrimonial home with her two sons, both of whom are still attending school.

DCCJ 5186/2005

14. On 29 September 2005, the husband borrowed a sum of $230,000 from a finance company (hereinafter the “finance company”).  The parties executed a loan agreement (see page 114 of the FCMC bundle), which shows that the agreed repayment period was 14 days, meaning that the entire loan and interest totalling $233,659.80 was to be repaid on 13 October 2005 at one go.

15. On the basis of the husband’s alleged failure to repay the loan on 13 October 2005 pursuant to the agreement, the finance company by writ of summons commenced proceedings in the District Court against the husband on 21 October 2005, claiming the following:

(1)     the loan amount together with the agreed interest, totalling $233,659.80;

(2)     interest from 14 October 2005 to the date of  judgment at the rate of 3.227% per month (or 38.72% per annum) and thereafter at judgment rate until payment; and

(3)     costs on an indemnity basis.

It is this District Court action that DCCJ 5186/2005 is about.

16. The husband did not file a defence in DCCJ 5186/2005.  On 4 January 2006, the District Court entered judgment for the finance company (hereinafter “the DCCJ Judgment”) and ordered the husband to pay:

(1) $233,659.80;

(2) interest on the principal of $230,000 from 14 October 2005 to 4 January 2006 at the rate of 3.227% per month (or 38.72% per annum);

(3) interest thereafter at judgment rate until payment; and

(4) costs of $9,200.

17. On 1 February 2006, the finance company obtained a charging order nisi (Charging Order: Notice to Show Cause) against the former matrimonial home.

18. Upon becoming aware of the action in DCCJ 5186/2005, the wife opposed the finance company’s application for a charging order absolute.  In the circumstances, the Master of the District Court ordered that the finance company’s application for a charging order absolute and the wife’s opposition thereto be heard together with the wife’s application for ancillary relief in FCMC 11943/2003 in the Family Court.

The issues

19.  Having regard to all the evidence in the two sets of proceedings, I am of the view that the issues to be determined are as follows:

(1)     whether the husband has any beneficial interest in the former matrimonial home;

(2)     whether the charging order nisi in DCCJ 5186/2005 should be set aside or made absolute; and

(3)     how the interest in the former matrimonial home should be distributed between the wife and the husband in FCMC 11943/2003.

The wife’s evidence

20. The wife elected to give evidence in court.  She made it clear at the outset that she was merely requesting her husband to do two things:

(1)     pay her nominal maintenance of $1 per annum; and

(2)     transfer all his title to and interests in the former matrimonial home to her for no consideration.

21. The wife made it clear that she was not seeking payment by the husband of the living or educational expenses of the two sons.

22. According to the wife, she has been a teacher for the past 30-odd years, enjoying stable working conditions and earnings.  On the contrary, the husband is an unrealistically ambitious person.  He is preoccupied with running a business and becoming a boss and is not interested at all in taking up an ordinary job.

23. Shortly after the marriage, the wife helped finance the husband’s stationery business by giving him $10,000.  She also lent him $60,000 in 1989 to enable him to go to Singapore to learn the trade of jewellery.  Both of these attempts, however, failed in the end.

24. Since their marriage, the husband had never given living expenses to the wife on a regular basis.  Between 1988 and 1989, when he worked as a taxi driver, he seldom gave the wife living expenses and sometimes had even borrowed money from the wife’s mother in order to sustain a livelihood.

25. In early 1986, the wife decided to apply, by means of the green form, for a flat under the Home Ownership Scheme so as to better protect herself and the children.  As the application was made by means of the green form, the public housing unit, of which the husband was at that time the registered tenant, had to be surrendered.  The husband did not object to the application but made no financial contribution whatsoever for the purchase of the flat under the Home Ownership Scheme.  In other words, the downpayment and all expenses, decoration fees and mortgage payments were borne by the wife alone.  The wife said that life was rather hard for her during that period as her monthly income then was only $8,000-odd and, apart from the monthly mortgage repayment of $2,000, she had to bear all the household expenses.

26. In 1993, the husband carried on a jewellery business in Mainland China.  He asked the wife for money to fund his business whenever he returned to Hong Kong.  As a result of these constant demands, the wife gave him more than $160,000 between February and December 1993.

27. The wife further said that when she found out the husband’s extra-marital affair in 1995, their relationship turned sour.  She forbade the husband to return home and went as far as changing the door lock.  Initially, the husband repeatedly attempted to return home to cause disturbance.  As all those attempts failed, he no longer returned to the former matrimonial home, but on 1 September 2003, he began to cause disturbance at the school where the wife worked.

28. The wife contends that during the subsistence of the marriage, the husband had never fulfilled his responsibilities as a husband and father, nor had he made any contribution to the family or the former matrimonial home.  More importantly, when she purchased the former matrimonial home with her own resources in 1986, she and the husband had no common intention to hold the beneficial interest of the property jointly.  Hence her view is that the husband should not be entitled to any beneficial interest in the former matrimonial home.  She also submits that the finance company’s application for a charging order should be dismissed as the husband has no beneficial interest in the former matrimonial home.  Furthermore, she contends that the judgment that the finance company has obtained in DCCJ 5186/2005 is invalid and therefore, even if the husband does have a beneficial interest in the former matrimonial home, the finance company’s application for a charging order should still be dismissed.

The husband’s evidence

29. The husband elected to give evidence.

30. The husband described himself as a rather reticent person.  He said that the wife played a dominant role during the subsistence of the marriage as she possessed better academic qualifications and earned a higher income than he did.  He also agreed that all the downpayments, decoration fees, mortgage payments, etc were solely borne by the wife.  However, he disagreed with the contention that he had made no contributions whatsoever to the family.  He said he had made the following contributions:

(1)     he often took the children of the family to and from school when they were young;

(2)     when he was working as a taxi driver (he was referring to the period between 1986 and 1989), he did contribute to the living expenses of the family with his income; and

(3)     he and the wife successfully purchased the former matrimonial home via green form application because the husband surrendered the public housing unit of which he was the principal tenant.

31. On the basis of the said contributions and the fact that he and the wife hold the former matrimonial home as joint tenants, the husband contends that he is entitled to one-half of the beneficial interest in the former matrimonial home.

32. Regarding the finance company’s application for a charging order absolute, the husband has indicated that he has no objection thereto.

33. When cross-examined by counsel for the wife on the debt he owed the finance company, the husband testified as follows:

(1)     in September 2005, he decided to borrow $230,000 from the finance company for the purpose of helping a female friend;

(2)     the former matrimonial home was “mortgaged” as security for the loan;

(3)     the “mortgage loan” was to be repaid by 48 instalments of $9,487 each;

(4)     although the loan amount was $230,000, he only received $220,000 when he drew down the loan as the finance company had withheld $10,000;

(5)     since he obtained the loan, he had repaid three instalments in the total sum of $28,461;

(6)     when he applied for the loan, he was interviewed by one Mr. Law, the general manager of the finance company.  He signed certain “mortgage” documents upon instructions by Mr. Law, but Mr. Law never told him that the loan period was 14 days, and all along the agreement between the parties had been that the “mortgage loan” was to be repaid by 48 instalments.

The finance company’s evidence

34. The finance company called two witnesses at trial:

(1)     one Mr. Chan, formerly a clerk of the solicitors acting for the finance company; and

(2)     Mr. Law, a general manager of the finance company.

Mr. Chan’s evidence

35. Mr. Chan is a former litigation clerk of Messrs. Hagon Wai & Partners, solicitors for the finance company.  He mainly testified on how he served the writ of summons in DCCJ 5186/2005 on the husband.  His evidence includes:

(1)     On 21 October 2005, he personally put into the mailbox of the former matrimonial home an envelope which contained: the writ of summons in DCCJ 5186/2005, an attached letter, three copies of the acknowledgment of service of the writ of summons and the guide for filling out the form.

(2)     It was the finance company’s view that the husband would be aware of the writ of summons seven days after the service thereof.

36. Mr. Chan was subject to meticulous cross-examination by counsel for the wife.  The questions put by the counsel show that the wife challenged the validity of the service of the writ of summons in DCCJ 5186/2005 by the solicitors for the finance company on the husband.  If this challenge succeeds, the legality of the DCCJ Judgment will be called into question, and the court should set aside the charging order obtained pursuant to the questionable judgment.

Mr. Law’s evidence

37. Mr. Law is the general manager of the finance company.

38. Mr. Law made and filed an affirmation on 18 November 2005 (which was less than one month after the writ of summons was issued) in support of the finance company’s application for judgment in its favour in DCCJ 5186/2005 (see DCCJ bundle pages 1-5).  His main evidence includes:

(1)     The salient terms of the loan agreement (contract no: X20050929-1-48) that the finance company and the husband entered into on 29 September 2005 were as follows:

(i)    loan amount $230,000;

(ii)   interest rate 3.227% per month (i.e. 38.72% per annum);

(iii)  repayable on 13 October 2005 (i.e. the loan period was 14 days);

(iv)  amount repayable on the due date $233,659.80 (principal of $230,000 plus interest of $3,659.80);

(v)   if the husband failed to repay the loan on the due date in accordance with the agreement, interest on all outstanding sums calculated on the aforesaid rate would accrue until full repayment.

(see paragraph 3 of the affirmation)

(2)     By reason of his failure to make repayment pursuant to the agreement on 13 October 2005, the husband is indebted to the finance company for the following sums:

(i)    $230,000 being principal as at 13 October 2005;

(ii)   interest in the sum of $3,659.80;

(iii)  further interest on the principal of $230,000, calculated at the rate of 3.227% per month until judgment;

(see paragraph 5 of the affirmation)

(3)     Pursuant to Order 83A of the Rules of the District Court, Mr. Law made the following statements of fact:

(i)    the loan was made on 29 September 2005;

(ii)   the actual loan amount was $230,000;

(iii)  the interest was at the rate of 3.227% per month (i.e. 38.72% per annum);

(iv)  the loan agreement was executed on 29 September 2005;

(v)   no principal or any part thereof had been repaid as at the relevant date (i.e. 18 November 2005);

(vi)  as at 13 October 2005 when the loan became due, the husband was indebted for $230,000 in principal and $3,659.80 in interest;

(vii) the due date of the loan was 13 October 2005;

(viii)the interest accrued and outstanding on the due date, i.e. 13 October 2005, was $3,659.80.

(see paragraph 6 of the affirmation)

(4)     Despite repeated demands for repayment, the husband had not repaid the said outstanding principal and interest or any part thereof.

(see paragraph 8 of the affirmation)

(5)     As at the date of the affirmation (i.e. 18 November 2005), the said principal and interest had not been repaid in whole or in part.

(see paragraph 9 of the affirmation)

39. I have set out the contents of Mr. Law’s affirmation in considerable detail because, as can be seen from the evidence he gave under cross-examination in court, what he stated in his affirmation is incorrect in many respects.

40. Under cross-examination, Mr. Law said when the husband and a friend approached the finance company to apply for a loan, the husband did indicate that he was the owner of the former matrimonial home.  Mr. Law made an inspection at the housing estate in which the former matrimonial home was situated, although he did not actually go inside the former matrimonial home.  He firmly denied the statement that counsel for the wife put to him, namely that the agreement initially entered into between the finance company and the husband was for a loan repayable by instalments spanning 48 months.  He insisted that the loan period was 14 days and that the former matrimonial home was not intended to be pledged as security for the loan.

41. Mr. Law further explained that, when the loan became due on 13 October 2005, the husband failed to repay the loan and interest accrued thereon in the sum of $233,659.80 pursuant to the loan agreement.  On 21 October 2005, after the finance company had commenced proceedings in DCCJ 5186/2005, the parties entered into a composition whereby the husband was to repay the outstanding loan by 48 instalments in the sum of $9,487 each, such repayment to commence from 28 October 2005 and thereafter on the 28th day of each month until 28 September 2009.

42. This so-called composition plainly came into being before 18 November 2005 when Mr. Law made his affirmation.  More importantly, as Mr. Law conceded in court, the husband had paid the monthly instalments of $9,487 pursuant to the composition.  According to Mr. Law, the husband had paid three instalments on 31 October 2005, 2 December 2005 and 10 February 2006 respectively.  In other words, when Mr. Law made the affirmation on 18 November 2005, not only did he fail to truthfully disclose that the finance company had made a new agreement with the husband regarding repayment, he also did not disclose that the husband had at least paid one instalment of $9,487 by then.  Rather, Mr. Law still deposed that the husband had not repaid any part of the loan and that the total sum owed by the husband was $233,659.80.

43. Concerning this discrepancy, Mr. Law’s explanation was that when he made his affirmation on 18 November 2005, he did not see anything wrong with its contents, and that he did not consider it necessary to disclose to the court the relevant composition and the fact that the husband had started to repay part of the loan pursuant to the composition.

44. Mr. Law’s explanation is in my judgment hardly convincing.  He is a senior executive of a finance company, and presumably this is not the first time he deals with legal actions against debtors.  Coupled with the fact that he was assisted by the solicitor acting for the finance company, he could not possibly be unaware of his duty to provide the court with truthful and accurate information in respect of the debt recovery action.  More importantly, Mr. Law not only concealed some of the information (namely the said composition), but also stated categorically in paragraphs 6(e) and 9 of his affirmation that the husband had never repaid any part of the loan up to the date of the affirmation (i.e. 18 November 2005).  This, in my view, was obviously done to mislead the court.

The law regarding an application for a charging order

45. Having obtained the judgment from the District Court in the absence of the husband, the finance company applied for a charging order pursuant to section 52A of District Court Ordinance, Cap. 336 of the Laws of Hong Kong, the relevant provisions of which are extracted below:

“52A.   Power of [District] Court to impose charging order

(1)        The Court may by order impose a charge for securing the payment of any money due or to become due under a judgment or order of the Court on a judgment debtor’s property specified in the order.

(2)        In deciding whether to make a charging order the Court has to consider all the circumstances of the case and, in particular, any evidence before it as to ―

(a)     the personal circumstances of the debtor; and

(b)     whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.

(3)        …”

46. As can be seen from the aforesaid provisions, the fact that the finance company is the judgment creditor in DCCJ 5186/2005 does not mean that it can obtain as of right a charging order against the property of the judgment debtor (i.e. the husband).  In deciding whether to exercise its discretion to issue the relevant charging order, the court is under a duty to consider all the circumstances of the case.

47. Furthermore, section 52AA of the District Court Ordinance makes provisions as to the property which may be charged:

“52AA. Property which may be charged

(1) Subject to section 25 (which provides that a writ of execution shall not issue against any partnership property except on a judgment against the firm) of the Partnership Ordinance (Cap 38), a charge may be imposed by a charging order under this Ordinance only on ―

(a) an interest held by the judgment debtor beneficially ―

(i) in an asset of a kind mentioned in subsection (2);

…

(2) The assets referred to in subsection (1) are ―

(a) land;

…”

48. In other words, the finance company can only request the court to exercise its discretion to issue a charging order against the interest held by the husband beneficially in the former matrimonial home.

49. All the three parties to the present case have not disputed the interpretation of the aforesaid provisions.  Therefore, in determining the finance company’s application for a charging order, I have to consider the following:

(1)     whether the husband holds any beneficial interest in the former matrimonial home;

(2)     how I should exercise my discretion in determining whether to issue a charging order absolute.

50. As is clear from the House of Lords decision in Pettit v Pettit [1970] AC 777, the following legal principles are to be applied in determining whether the husband holds any beneficial interest in the former matrimonial home:

(1)        In the absence of evidence to the contrary, the general principles of trust apply to properties held in sole names or joint names between a couple.  In other words, whoever has contributed financially to the properties will hold the beneficial interest therein.

(2)        However, apart from considering who has made the financial contributions, the court has to further consider any agreement between the couple on the beneficial interest when they purchased the property in question.

(3)        Where the beneficial interests of both parties are clearly set out in the legal documents for the purchase of the property, that will be conclusive on the issue of beneficial interests.

(4)        Where there is no mention of the beneficial interests in the legal documents, the court has to decide on the evidence what agreement was entered into by the parties on beneficial interests when the property was purchased.

(5)        If the parties did not enter into any agreement on beneficial interests or did not give any consideration to the distribution of the beneficial interests when they purchased the property, the court shall infer, from their conduct in purchasing the property and all other circumstances, what their agreement was.

(6)        If the court is unable to draw any inference as aforesaid, it can still make a conclusion by relying on the legal principles on the presumption of advancement.

51. Applying the abovementioned legal principles, I will now consider the husband’s beneficial interest in the former matrimonial home.

Does the husband hold any beneficial interest in the former matrimonial home?

52. On this issue, I set out below the salient facts which are not subject to serious dispute:

(1)     The former matrimonial home is a flat under the Home Ownership Scheme which the wife and the husband purchased in 1986 from the Housing Authority and held in joint tenancy;

(2)     At the time of the purchase, the wife and the husband did not consider or discuss the distribution of the beneficial interests in the property;

(3)     Prior to the purchase of the former matrimonial home, the wife, the husband and the two sons resided at a public housing unit of which the husband was the principal tenant;

(4)     The wife and the husband purchased the former matrimonial home by way of the green form (for residents of public housing units), which implied that they had to surrender the public housing unit at which they originally resided;

(5)     The wife was a primary school teacher before she got married and has been in this occupation for over 30 years, earning a modest but very steady income.

(6)     The husband had run many businesses but they all failed.  Between 1986 and 1989, he worked as a night shift taxi driver, earning a meager income, although he still gave a small part of his income to the wife as living expenses.  Neither party has a clear recollection as to how much money the husband gave to the family as living expenses during those three years.  According to the wife, the husband occasionally put cash of not more than $100 into a tin can when he returned home after work.  If, therefore, he worked 25 days a month, the money he put there would not exceed $2,500.  However, the wife added that he did not do it every day and that he took money from the can for his own use from time to time.

(7)     The downpayment and decoration fees of the former matrimonial home were borne by the wife personally.

(8)     The wife made all mortgage payments of the former matrimonial home directly until the mortgage loan was fully repaid.

(9)     During the subsistence of the marriage, the husband had borrowed large sums of money from the wife and her family members.  As can be seen from page 6 of the exhibits section of the FCMC bundle, the husband has admitted that he borrowed $224,380 from the wife between February 1993 and April 1994.

53. A clear conclusion that can be drawn from the above facts is that the funds needed for purchasing the former matrimonial home, including the downpayment, decoration fees and mortgage payments, were all supplied by the wife.  The husband argued in court that when he worked as a taxi driver between 1986 and 1989, he did give part of his income to the wife as living expenses.  For the following reasons, however, I am not satisfied that he had made direct financial contributions to the purchase of the former matrimonial home:

(1)     As a matter of fact, all the expenses on the purchase of the property, including mortgage payments and decoration fees were met the wife from her income or funds which were directly paid out of her bank account.

(2)     Even if the husband did bring money home, it was in paltry sums of less than $100 a day and in any event did not exceed $2,500 per month.

(3)     During that period, the husband also lived and ate at home.  Coupled with the fact that he had taken from the wife an aggregate sum of hundreds of thousands of dollars, the meager sums he provided as living expenses can hardly be regarded as financial contributions to the family or the mortgage payments.

54. It follows that, judging solely from the amount of money he contributed, I am of the view that the husband is prima facie only a trustee notwithstanding the fact that he was a joint owner of the former matrimonial home.

55. Nevertheless, as has been pointed out in Pettit v Pettit, in most cases where assets are held jointly by a couple, it is difficult for the court to resolve all disputes by relying solely on the concept of trust.  A more important consideration is the agreement or common intention between the parties at the time of purchase of the property in question.  If there was an express agreement between the parties at the time of purchase, the court should rule on the issue of beneficial interests in accordance with that agreement.  However, as is very often that the case, when a couple purchase a matrimonial home in joint names, they will not make any express agreement in respect of the beneficial interests or may even take no heed of this issue at all.  In such a case, the court must look at the objective facts of the case as a whole and consider whether any agreement between the parties can be inferred.

56. In considering the agreement between the parties, I shall first consider the contents of the conveyancing documents executed by the parties when they purchased the former matrimonial home, in order to ascertain whether they made any arrangement regarding the beneficial interests at the time of the purchase.

57. The conveyancing documents produced by counsel for the wife upon the request of the court include:

(1)     the Agreement (exhibit P1) executed by the Housing Authority and the two parties to this case;

(2)     the Assignment (exhibit P2) executed by the Housing Authority and the two parties to this case; and

(3)     the Legal Charge (exhibit P3) executed by the mortgagee bank (Hong Kong Bank) and the two parties to this case.

58. Clause 4 of the Legal Charge (exhibit P3) executed by the mortgagee bank and the two parties to this case provides as follows:

“4.        In consideration of the loan and as security for the repayment thereof the borrower as beneficial owner THEREBY CHARGES the Property to the Lender.”

59. It is clear from the above clause that, upon purchasing the former matrimonial home, the husband and the wife as beneficial owners thereof charged the property to the mortgagee bank.

60. Counsel for the wife submitted that in Po Kwong (China) State Limited v Cheung Wai Wah trading as Axis Zone Interior Design (CACV no. 157 of 2004, date of judgment: 16 November 2004), the Court of Appeal held that where the relevant claim was not founded on the deed, the principle of estoppel by deed would not apply.  In the present case, as the action is not founded on the relevant Legal Charge, the finance company cannot rely on the contents of clause 4 of the document to prove that the husband is one of the beneficial owners.

61. Counsel for the wife also submitted that all documents and details relating to the sale and purchase of the former matrimonial home, which was a flat under the Home Ownership Scheme, were prescribed by the Housing Authority.  As can be seen from the Deed of Guarantee (exhibit P5) executed by the Hong Kong Government and Hong Kong Bank, the Government had stipulated the contents of the document of the Legal charge of the property under the Home Ownership Scheme (see exhibit P5, annex 3).  Clause 4 of the document expressly provides that the borrowers as beneficial owners charged the property to Hong Kong Bank.  Furthermore, there is evidence that no one explained to the wife the contents of the legal charge in detail when she executed it, and that she was unaware of clause 4 of the document pertaining to beneficial interests.  For these reasons, counsel submitted that the contents of the legal charge provided limited assistance in determining whether the husband held any beneficial interest in the former matrimonial home.

62. I agree that the principle of estoppel by deed does not apply in the present case.  However, the undisputed fact is that the wife and the husband charged the former matrimonial home to the mortgagee bank in the capacity of beneficial owners.  I appreciate that the wife might not be aware of this particular fact when she executed the legal charge and that, even if she was aware of that fact, she might not understand what that capacity meant.  However, it does not follow that she is not bound by the contents of the document.  In my view, the contents of this document must be taken into account together with all the other circumstances of the case in resolving the issue of beneficial interests.

63. Having considered all the circumstances of the case, I arrive at the inference that the husband does hold beneficial interests in the former matrimonial home.

64. Apart from the fact that both the husband and the wife claimed in the legal charge that they were beneficial owners, I also notice the wife’s testimony in which she admitted that when they purchased the former matrimonial home in 1986, although there was no discussion on the beneficial interests in the property, she was on relatively good terms with the husband and had never contemplated a divorce.  She further admitted that the purchase of the former matrimonial home was made in order to provide both parties with protection in future.  In paragraph 18 of her affirmation dated 14 August 2006 (see page 65 of the affirmation section of the FCMC bundle), the wife deposed as follows:

“18.      At that time [i.e. in 1989 or so], we contacted each other through correspondence.  I wrote to the respondent asking him to return to Hong Kong to be with me whether for weal or woe.  I did not mind what his job was, I just hoped we could be together both in joy and in sorrow. …”

65. If in 1989 the wife wished to maintain a relationship with the husband whereby he would “be with [her] whether for weal or woe” and they would “be together both in joy and in sorrow”, then it is difficult to imagine that in 1986 she would have objected to co-owning the beneficial interests in the former matrimonial home jointly with the husband.

66. From the said objective circumstances, I can infer that the common intention between the parties at that time was to jointly hold the beneficial interests in the property.

67. Having found that the husband does hold beneficial interests in the former matrimonial home, I now proceed to consider the extent of the husband’s beneficial interest.

68. In the above-cited case of Pettitt v Pettitt, Lord Morris of Borth-y-Gest applied a principle established in other cases, namely: where it is not possible to calculate the precise ratio of the husband’s and wife’s beneficial interests, it will be fair to rule that such interests are held by the two of them in equal shares (see 803 to 804B).

69. In the present case, as the husband and the wife are joint owners and their common intention has been “to be together in weal”, I hold that the aforesaid legal principle applies.  Accordingly, I hold that the husband holds one half of the beneficial interests in the former matrimonial home.

Should the charging order nisi be set aside or made absolute?

70. In deciding whether the charging order nisi obtained by the finance company against the former matrimonial home should be set aside or made absolute, I must first consider whether the judgment obtained by the finance company in DCCJ 5186/2005 is a regular judgment.

71. Counsel for the wife has challenged the regularity of the judgment on the following two grounds:

(1)     The solicitors for the finance company failed to serve the writ of summons in DCCJ 5186/2005 on the husband;

(2)     The finance company filed a false declaration with the court in applying for judgment in DCCJ 5186/2005.

72. The wife’s case is that she is not seeking to set aside the judgment in DCCJ 5186/2005, as she is not a party to that case.  She is merely seeking to establish to the satisfaction of the court that the judgment in DCCJ 5186/2005 is not a regular judgment, in the hope that I will then exercise my discretion to set aside the charging order nisi.

Service of the writ of summons in DCCJ 5186/2005

73. On the issue of the service of the writ of summons in DCCJ 5186/2005, the finance company has called Mr. Chan, a former litigation clerk at the solicitors’ firm acting for that company, to give evidence.

74. Mr. Chan was subject to in-depth cross-examination by counsel for the wife.  His evidence is essentially that he put the relevant litigation documents into the mailbox of the former matrimonial home on 21 October 2005.

75. I noticed that when Mr. Chan was cross-examined by counsel on the exact location of the housing estate in which the former matrimonial home was situated and the route he took, he was unable to give detailed evidence.  That said, I also have to take into account that, as the service of the writ of summons in DCCJ 5186/2005 took place more than one year ago, the omission by Mr. Chan of certain geographical details should not be surprising.  Furthermore, I can see no motive for Mr. Chan to give false evidence, and the husband has not disputed the service of the writ of summons.  I am satisfied on a balance of probabilities that the writ of summons in DCCJ 5186/2005 was successfully served on the husband.

Did the finance company make any false declaration?

76. I now turn to the question of whether the finance company made any false declaration in applying for and obtaining judgment in its favour in DCCJ 5186/2005.

77. The bulk of the evidence of the finance company comes from its general manager Mr. Law.  I have referred to his evidence from paragraphs 37 to 44 of this Judgment, and I am satisfied that, in his affirmation that has been filed with the court, he misled the court on the question of whether the husband has repaid the loan (see paragraph 44).

78. Having considered and analyzed all the evidence including that of Mr. Law and the husband, I am further satisfied that when the husband contacted Mr. Law and executed the relevant loan documents on 29 September 2005, their agreement was that the husband was to repay the loan of $230,000 by 48 monthly instalments in the sum of $9,487 each.  In other words, the husband’s loan was not one which merely covered a period of 14 days.

79. The husband’s stance in these proceedings is obviously that he will not contest any application made by the finance company, including its application for a charging order.  His only objective in the divorce proceedings is to seek an order for sale of the former matrimonial home and obtain part of the proceeds of sale.  I do not see any reason for him to give false evidence by insisting that the loan was repayable by 48 monthly instalments when it should be repayable in 14 days.  I therefore also accept the husband’s evidence that he did not have a clear idea of the contents of the loan agreement (page 114 of the affirmation section of the FCMC bundle) when he executed it.

80. The above conclusion is also supported by a letter which the solicitors for the finance company prepared and arranged for the husband to sign on 29 September 2005, i.e. the date of the agreement between the husband and the finance company (see page 118 of the affirmation section of the FCMC bundle).  The letter states as follows:

“Date: 29-Sep-05
[A Finance Company]
Mongkok, Kowloon

Dear Sirs,

Re:	Loan Agreement No:	X20050929-1-48
	Property:	Room X, Block X,
		Lung Poon Court,
		No 8 Lung Poon Street,
		Kowloon
	Borrower:	L

I/We refer to the Loan Agreement No. X20050929-1-48 in respect of the Loan Amount HK$230,000 secured by the above premises made between me/us as the Mortgagors and your company as the Mortgagee of even date.

I/We hereby authorize your company to issue two cheques for the loan money advance to me/us under the said Loan Agreement made payable to the following manner: -

	Made Payable to	Purposes of Disbursement	Amount (HK$)
1)	Hagon Wai & Partners	Legal & Search Fee	10,000.00
2)	L	Balance of Loan Money	220,000.00
		Total :	230,000.00

(signed)

Borrower:         L

I.D. No.           E53XXXX(8)”

81. I would first like to discuss the loan agreement number.  The loan agreement and the above letter show that the loan agreement number is “X20050929-1-48”.  Obviously, this is not a random number, but one which serves to reflect some information about the loan.  For example, the figure “20050929” after “X” indicates that the loan agreement was executed on 29 September 2005.  By the same logic, what does the last figure “48” in the loan agreement number represent?  Although none of the three parties has adduced any evidence in this respect, that figure is in my view at least consistent with the husband’s evidence that the loan agreement is one for a duration of 48 months.

82. I also note that, in the aforesaid letter, the address of the former matrimonial home appears under the item “Property”.  This is consistent with the husband’s evidence that it was a mortgage loan, but not with Mr. Law’s version that the loan had nothing to do with the former matrimonial home.  More importantly, the letter specifies that the loan of $230,000 was “secured by the above premises”, namely the former matrimonial home; and the letter describes the finance company and the husband as “mortgagee” and “mortgagor” respectively.

83. Furthermore, the loan agreement was executed on 29 September 2005.  The finance company issued a repayment schedule (pages 116 to 117 of the affirmation section of the FCMC bundle).  This document does not bear a date of issue, but states that the first instalment was to be paid on 28 October 2005 (i.e. a month after the loan was drawn down) and that thereafter the loan was to be repaid on the 28^th day of each month, totalling 48 instalments.  This is entirely consistent with the husband’s evidence.  The document also states (see page 117) that “the minimum loan period is 12 months”.  This serves to establish that the repayment schedule was issued at the time of the granting of the loan, namely 29 September 2005, and to refute Mr. Law’s testimony in court that the agreement of repayment by 48 instalments was merely a composition arrangement entered into on 13 October 2005 after the husband had violated the original loan agreement.

84. In conclusion, I do not have the slightest doubt that the loan in question is a “mortgage loan” repayable in 48 instalments.  I also find that Mr. Law has lied in court.

85. Apart from claiming falsely that the loan was repayable in 14 days, Mr. Law has, as explained in paragraph 44 hereinabove, misled the court as to the outstanding sum at the relevant time.  Mr. Law claimed in his affirmation that the husband had never repaid any outstanding sum.  It is clear, however, that the husband had at least paid one instalment in the sum of $9,486 by 18 November 2005 when Mr. Law made his affirmation.  This means the amount owed by the husband at that time could not possibly be $233,659.80 as stated in paragraph 7 of the affirmation.  By the time of delivery of the judgment in DCCJ 5186/2005 (i.e. 4 January 2006), the husband had paid at least two instalments, and therefore the amount owed by the husband at that time was definitely less than $233,659.80.

86. As Mr. Law has supplied false information, the judgment obtained by the finance company on 4 January 2006 is an irregular judgment.

Setting aside of the charging order nisi

87. As the above judgment is irregular, the charging order nisi is in my judgment unsound and hence should be set aside.

Distribution of interests in the former matrimonial home between the wife and the husband

88. Finally, I have to consider the applications by the wife and the husband for ancillary relief (FCMC 11943/2003).  Put simply, the question before me is the proper approach in distributing the interests in the former matrimonial home between the two parties.

89. In considering this issue, I have to take into account the provisions of section 7 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 of the Laws of Hong Kong:

“7         Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6

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

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

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

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

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

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

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

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

(2)        Without prejudice to subsection (3), it shall be the duty of the court in deciding whether to exercise its powers under section 5, 6 or 6A in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say ―

(a)        the financial needs of the child;

(b)        the income, earning capacity (if any), property and other financial resources of the child;

(c)        any physical or mental disability of the child;

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

(e)        the manner in which he was being and in which the parties to the marriage expected him to be educated;

and so to exercise those powers as to place the child, so far it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a) and (b) of subsection (1), just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him.

(3)        …”

Income, earning capacity, property and other financial resources

90. The wife is a teacher earning a monthly income of $37,773.

91. Apart from the former matrimonial home and the money owed to her by the husband, her assets include:

Bank deposits	$904,544.01
Funds	$281,584.76
Insurance benefits	$6,280.00
Provident fund	$2,464,336.35
Total:	$3,656,745.12

92. Calculated on the basis of one half of the beneficial interests in the former matrimonial home, the wife’s interest in the property is $750,000 (the parties have agreed that the net market value of the former matrimonial home is $1,500,000).

93. The wife also said the husband has borrowed a total sum of $300,000 from her.

94. Adding up all the aforesaid items, the gross value of the wife’s assets comes to $4,706,745.12.

95. As far as the husband is concerned, his financial statement shows that his only asset is half of the beneficial interests in the former matrimonial home which he allegedly holds, the value of which is $750,000.  His monthly income is $3,500.  As the wife merely disputed the husband’s beneficial interest in the former matrimonial home and did not cross-examine him in detail on his income, I am satisfied that the husband’s current monthly income is $3,500.

Financial needs, obligations and responsibilities

96. The wife is at present residing at the matrimonial home together with the two sons.

97. Although the elder son is already 24 years old and has obtained a bachelor’s degree in Mainland China, he will continue to study for a master’s degree and therefore still need the wife’s support.

98. The younger son is 18 years old and studying at the Hong Kong Academy for Performing Arts.  He is also dependent on the wife.

99. The wife’s financial statement shows that the monthly household expenses are $27,724, which I consider reasonable for a family of three.

100. However, as can been seen from item 4.4 of her financial statement (page 17 of the affirmation section of the FCMC bundle), the wife anticipates spending $300,000 on the sons’ education in the coming year, i.e. an average of $25,000 per month.  The husband has not mounted any challenge to the wife’s evidence in this respect.  Taking into account the said monthly expenses of $25,000, I am satisfied that the wife’s monthly expenses will increase to approximately $52,000, which means the wife will incur an overdraft of approximately $15,000 per month.

101. As for the husband’s expenses, his financial statement (page 41 of the affirmation section of the FCMC bundle) gives a figure of $3,400.  The statement also mentions that there will be an additional rental expenditure of $2,000 in future, which means the total expenses will be $5,400.  I do not think that the expenditure of an individual can be anything below that figure.

102. Quite apart from this, the husband is still indebted to the finance company for approximately $230,000.

Standard of living before breakdown of the marriage

103. I am satisfied that during the subsistence of the marriage, the wife was the major breadwinner of the family.  They initially resided at a public housing unit and subsequently moved to a flat under the Home Ownership Scheme (i.e. the former matrimonial home) with an area of 579 square feet.  They enjoyed a medium standard of living.

Ages of parties and duration of the marriage

104. The wife and the husband are both 52 years old.

105. They got married in 1979.  In 1995 the husband moved out of the former matrimonial home, which marked the commencement of the couple’s separation.  The marriage lasted 16 years.

Physical or mental disability

106. There is no evidence that either the wife or the husband suffers from physical or mental disability.

Contributions

107. As regards contributions to the family, from a purely financial point of view I do not think there is serious dispute.  The husband agreed in court that all downpayments, decoration fees and mortgage payments of the former matrimonial home were directly borne by the wife.  I have also found that during the subsistence of the marriage, the husband’s only contribution was that he might have brought home $1,000 to $2,000 per month between 1986 and 1989 when he worked as a night shift taxi driver.  In my view, however, the money was not even sufficient for meeting the cost of his own meals and other sundry expenses at home.  Coupled with the fact that he sought financial assistance from his wife from time to time, I am satisfied that the husband made no substantial financial contribution to the family.

108. As regards other contributions, I note that during the subsistence of the marriage, the husband was in Singapore for a few years to do business.  Since he left home in 1995, the wife has on her own shouldered the responsibility of taking care of the family.  I also note that both of the sons, who were merely 13 and 9 years old when the husband left the family in 1995, are brought up by the wife single-handed.  For these reasons, I find that the wife has made significant contributions to the family and, on the contrary, the husband’s contributions have been minimal.

Behaviour and all other circumstances

109. Taking the evidence as a whole, I find that the husband is an irresponsible spouse.  Rather than making significant contributions to the family, he has in fact become a burden to the family.

110. As can be seen from the documentary evidence, the husband has frequently asked the wife or her family members for money.  The debts which he has by his own signature acknowledged include:

(1)        $228,980 borrowed from the wife between February 1993 and April 1994; and

(2)        $35,000 borrowed from the wife’s younger sister on 27 September 1994.

111. There is even some evidence (page 15 of the exhibits section of the FCMC bundle) that the husband had appropriated $70 which belonged to the son.

112. Furthermore, he “mortgaged” the former matrimonial home to the finance company for the purpose of obtaining more money for himself.

113. In my judgment, the husband’s said behaviour falls into the “obvious and gross” behaviour referred to in Wachtel v Wachtel [1973] 1 All ER 829.  I shall take this into account when dealing with the applications for ancillary relief.

Judgment

114. I have thoroughly considered the above factors, in particular:

(1)     the contributions made by the parties to the family and the former matrimonial home;

(2)     the wife’s responsibility to support the two sons in the next few years;

(3)     the need of the wife and the two dependent sons to have a stable home; and

(4)     the husband’s behaviour during the subsistence of the marriage and thereafter.

115. In my judgment, a fair approach is to transfer all the title and interests of the husband in the former matrimonial home to the wife at no consideration.

116. It is in my view appropriate for the parties to have a clean break.  I will therefore not make an order for periodic payment or nominal maintenance.

Orders

117. For the above reasons, I now make the following orders:

          DCCJ 5186/2005

(1)     That the charging order nisi obtained by the finance company be set aside;

(2)     That the registration of the charging order nisi at the Land Registry be vacated;

          FCMC 11943/2003

(3)     That, with the permission of the Housing Authority, the husband shall within 3 months from the date of this order transfer all his title to and interests in the former matrimonial home to the wife at no consideration, and that all the expenses for the transfer be borne by the husband;

(4)     That, if the husband refuses to co-operate, the wife is entitled to request the Registrar of the High Court to sign all relevant conveyancing documents on behalf of the husband.

Costs

118. I also order that the finance company and the husband shall jointly and severally pay all costs of the wife in DCCJ 5186/2005, including all costs reserved.  The husband is to pay all costs related to ancillary relief in FCMC 11943/2003, including all costs reserved.  As regards the costs of this 6-day trial, which involves two sets of proceedings, I consider it fair to order the finance company and the husband to pay - of such costs jointly and severally, and to order the husband to pay the remaining ¼ of such costs.  All the aforesaid costs are to be taxed if not agreed.  This is an order nisi which will become absolute in 14 days in the absence of any application for variation.

The behaviour of the finance company

119. Finally, I must point out that the finance company’s behaviour in DCCJ 5186/2005, in particular the conduct of the general manager, is highly questionable.  Such conduct includes:

(1)     insisting that the agreed loan period was 14 days when in fact the loan was repayable in 48 instalments;

(2)     he might have misled the court when he applied for judgment;

(3)     he might have committed perjury at trial.

120. I now request the Registrar of the Family Court to deliver a  copy of this Judgment to the Registrar of Money Lenders and the Secretary for Justice for consideration and follow-up.