KCSFA v. KPF

FCDJ 12967/1997

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 12967 OF 1997

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BETWEEN

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DECISION

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1.  This is an application by the wife of a former marriage (“the Wife”) to vary the order made by the late HH Judge Day on 1 February 1999 to the effect that her former husband (“the Husband”) shall continue to make periodical payments for her support and maintenance after she has attained the age of 55.

Background of the application

2.  The parties married in 1977 and they have a son born in 1978. Unfortunately, the marriage broke down and the Wife filed a petition for divorce in December 1997 on the ground of 2 years’ separation, which was not defended by the Husband. In the divorce proceedings, the Wife was represented by solicitors whilst the Husband acted in person. On 1 February 1999, a consent order was made by HH Judge Day (“the Order”) in the following terms:

“………

AND UPON the Respondent undertaking to procure the release of the Petitioner’s liability under a Guarantee dated 21^st May 1985 jointly given by the Petitioner and the Respondent for purpose of securing such banking facilities granted by Shanghai Commercial Bank Limited to the P (a company limited) on or before 30^th June 1999.

AND UPON the Respondent undertaking to indemnify the Petitioner against any of her loss or liability arising from or in connection with the said Guarantee.

AND UPON the Respondent undertaking to assume full financial obligations as regards the education and related living expenses of the child of the family ……… until the said child shall cease to receive full time education.

AND THE JUDGE UPON THE MAKING OF THE DECREE NISI HEREIN BY CONSENT ORDERED THAT :-

(1) The Respondent do pay or cause to be paid to the Petitioner one lump sum payment of HK$1,000,000.00 on or before 31^st August 1999 and a monthly payment of HK$25,000.00 for the support and maintenance of the Petitioner on the 1^st day of each and every calendar month with the 1^st payment to commence on 1^st September 1997 until the Petitioner reaches the age of 55;

(2) The Petitioner do transfer at least 20% of her shares in P to the Respondent within 30 days after the Respondent has fully paid the said sum of HK$1,000,000.00 referred to in clause 1 hereof and the Respondent do bear and pay for all costs and disbursements (including stamp duty) arising out of the said transfer; and

(3) There be no order as to costs of this action.

………”

3.  The Wife and the Husband had been the shareholders and directors of the company mentioned in the Order, P (a company limited), since 1985, and P has all along been engaged in the business of producing food containers. The former matrimonial home at Waterloo Road, Kowloon was also an asset owned by P. At the time of the divorce, the Wife was holding 30% of the shares of P.

4.  After the divorce, the Husband made monthly periodic payments to the Wife in accordance with the provisions in the Order. Regarding the lump sum payment, the Husband only made an initial payment of $100,000 in 1999, and the parties then agreed that the balance of $900,000 would be made by way of monthly instalments of $10,000 to the Wife. The Wife received the last instalment of the lump sum payment including interests in 2008. Pursuant to the terms of the Order, the Wife transferred 20% of the shares in P to the Husband. She also transferred the remaining 10% of her shares to her son in 2005.

5.  The relationship between the parties was actually quite harmonious in the first few years after the divorce. In 2000, the Wife started her own food packaging business but was not successful. As the Wife had no work to do, the Husband employed the Wife to work in P in 2004 with a monthly salary of about $20,000. In 2005, the Wife requested the Husband to continue to pay monthly maintenance to her after the age of 55. The Husband refused and the relationship between the parties soon deteriorated. After the Wife’s solicitors had sent a formal demand letter for maintenance payment dated 21 February 2008, the Husband terminated the Wife’s employment in the end of the same month.

6.  The Wife reached the age of 55 on 10 July 2008 and this variation application was made on 27 June 2008.

7.  The issues in the present application are therefore:

(i) whether there is justification for the court to vary the Order for maintenance payment made in 1999?

(ii) if the court were to vary the Order, what is the appropriate amount of monthly maintenance for the Wife in this case?

I will deal with these issues in turn.

Justification for the variation of the Order

8.  According to the information provided in the Form E filed by the Wife, her expenses were about $53,500 a month. Since she has no gainful employment at this moment, the Wife contends that the Husband should continue to pay monthly maintenance to support her living even after she has attained the age of 55. In fact, at the time when the Order was made in 1999, her then solicitors had explained to her that she had the right to apply to vary the Order at any time, and it was only based on such advice that she gave her consent for the making of the Order.

9.  On the other hand, Mr. Li, counsel for the Husband, argues that there is no justification for the court to vary the Order. The Husband has fully complied with the terms in the Order in making all the payments, and there has been no change of circumstances of the parties that justifies any variation. Mr. Li further submits that the only reason for the Wife to make the present application is that she has reached the age of 55. However, the fact that she would not receive any more maintenance payment after such age was something that was within the contemplation of the parties when the Order was made in 1999, and yet the parties agreed for the Order to be made in those terms. In such circumstances, the Wife should not be allowed to challenge the spirit of the Order which was made with the consent of the parties. In so far as the Wife is relying on the losing of the job as a change of circumstances, Mr. Li argues that the court should not take such matter into account because the termination of the employment was caused by the Wife’s own decision in seeking to vary the Order. The losing of the job, says Mr. Li, should not therefore be viewed as the cause of the present application.

10.  The approach of the court in dealing with variation application is summarised in the following passage in Jackson’s Matrimonial Finance and Taxation, 8 ed., at p. 155:

“The modern approach is that the court has to consider all the circumstances of the case, and the court is not hide-bound by the existence of a previous order; the court must look at the matter de novo and make an order that is reasonable in the current circumstances. The usual basis on which a variation of an order for periodic payments is founded is that there has been a material change in the circumstances of one or both the parties. On application for revision, the court, as it was put in one case, has ‘regard to all the circumstances of the case in the same manner as if those circumstances had existed at the date of the original order.”

11.  However, Mr. Li submits that change of circumstances is actually a prerequisite for the variation of a maintenance order, and he refers the court to the decisions of HCTT v TYYC [2008] HKEC 1105 and AEL v MRL, unreported, FCMC 2902 of 2007 (decision of HH Judge Melloy on 2 December 2008).

12.  In HCTT, a consent order was made on 24 March 2006 under which the husband agreed to pay the wife $4,500 a month as maintenance. By a summons dated 28 July 2006, the husband applied to reduce the amount of monthly maintenance to $1,000 and to limit the payments to 6 months only. After hearing the application, the Deputy District Judge ordered the husband to pay $4,500 a month but only until 1 February 2008. Upon the appeal by the wife, the Court of Appeal set aside the order of the Deputy District Judge and restored the original consent order made by the court.

13.  In the appeal, it was accepted by the parties that there had been no change of circumstances since the making of the consent order. Tang VP, whilst agreeing that the court has a wide and unfettered discretion in dealing with an application for variation of maintenance payment, held that proper weight should be given to the earlier order of the court. After referring to the case of Garner v Garner [1992] 1 FLR 573, the learned judge said the following:

“16. Thus, although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in circumstances.”

Lam J also made the following observation about the requirement of change of circumstances:

“49. Even though we are only dealing with a consent order, I also agree with the observations of the Vice President regarding the approach of Cazelet J in Garner v Garner on applications for variation generally. Application for variation should not be pursued when in substance the grounds advanced for variation tantamount to re-argument of the same issues that have been argued before the court before the making of the original order. If a party is aggrieved by the terms of the original order, the proper course is to appeal against that order.”

14.  In AEL, an order for maintenance pending suit was made by a Deputy District Judge on 24 July 2007. On 20 October 2008, the wife made an application to increase the amount of such monthly maintenance pending suit. In the hearing before HH Judge Melloy, the learned judge identified the following issues for determination by the court:

(i) what weight should be attached to the order in July 2007?

(ii) is there a material change of circumstances necessitating a variation on a short-term basis?

(iii) in the circumstances, should the order be varied pending a final hearing on ancillary relief?

(iv) is the application an appeal through the back door?

Based on the facts of that particular case, the learned judge refused the wife’s application to vary the earlier order.

15.  It is clear that the respective applicants in these cases applied to court for a variation within a short period of time after the making of the original order. Within such a short period of time, the circumstances of the parties might not have changed and the application for variation could properly be regarded as an appeal through the back door. For this sort of application, unless there is material change of circumstances in the case, there is certainly very little justification for the court to vary the earlier maintenance order made not too long ago.

16.  In the present case, there was a time lapse of about 10 years between the granting of the original order and the lodging of the variation application, and so there is no question of an appeal through the back door or re-litigation of the same issues. In fact, the existing circumstances of the parties favour the variation. The marriage of the parties lasted for about 20 years. At least starting from 1985, the Wife assisted the Husband in setting up the business now operated by P, and she had no other stable job or income apart from working in P. With the business now fully established, the Husband continues to receive a handsome income from the business. On the other hand, the Wife has no income or gainful employment now. She received education only up to Form 7 level. Although the Wife does have some money in the bank accounts, she still needs to have reasonable maintenance to support her living. Hence, even if there is no change of circumstances in this case, I would exercise my discretion to vary the Order by ordering the Husband to continue to pay monthly maintenance to the Wife beyond the age of 55.

17.  Further, I am of the view that there were significant changes in the circumstances of the parties to justify the variation. Firstly, the Wife has lost her job and as a result she does not any income to support her living after she has reached the age of 55. This was indeed a significant change of circumstances after the making of the original order. Although the Wife might be able to keep her job at P had she not made the present variation application, one cannot ignore the existing fact that, by losing such job, the Wife has no means to support her living. Hence, the court has to take into account such factor in the decision process. Secondly, the Wife had not received the lump sum payment under the Order in one single payment before 31 August 1999 in accordance with the terms in the Order. By agreeing to receive the monthly instalments of $10,000, the payments were actually made over a time span of about 8-9 years. This might have a significant impact on the financial position of the Wife. By continuing to hold on the shares of P, the Wife had no actual benefit as she had not received any dividend or profit from P throughout the years. On the other hand, had the Wife received the whole lump sum payment of $1,000,000 in 1999, there might be a better opportunity for her to accumulate her wealth with the use of such lump sum payment as capital for investment. Yet, the parties agreed for the lump sum payment to be made by way of instalments. To me, such instalments served more like monthly maintenance payments rather than a lump sum payment arising out of the division of family assets after a divorce.

18.  In his evidence, the Husband claims that it was his understanding that his obligation to pay the monthly maintenance would end after the Wife has reached the age of 55. This may be a fair understanding on the part of a layman like the Husband. However, since the Order does not provide for the dismissal of the application for maintenance after the Wife has attained the age of 55, the Wife is still entitled, as a matter of law, to apply for a variation of the Order after she has reached that age. Hence, even Mr. Li for the Husband concedes that the Wife is entitled to make the present application for variation.

19.  In considering the Wife’s application, I have certainly taken into account the financial positions of the parties as further elaborated in the latter part of this Decision. As all these facts favour the Wife’s application, I would exercise my discretion to allow the variation by ordering the Husband to continue to pay monthly maintenance even after the Wife has attained the age of 55.

Amount of the monthly maintenance

(i) The Wife’s financial position

20.  I then turn to assess the amount of the monthly maintenance payments. The Wife has a flat in Sham Tseng in the New Territories. The market value of the flat is about $3,000,000. The flat is subject to a mortgage with a monthly loan repayment of about $20,000. The mortgage repayment was originally in the amount of about $12,000, but some time in 2008, the Wife obtained a further loan of $850,000 from the bank in order to finance the purchase of a golf membership in the Mission Hill Golf Club in the Mainland, the price of which was about $1,300,000. The monthly repayment of such additional loan is about $8,000, and that is why the present loan repayments add up to $20,000 a month. The Wife has about $838,000 in her bank accounts and the value of her golf membership is about $600,000 to $700,000. She has a car for transportation purposes. The values of her stock holdings and valuable personal items are not significant.

21.  The Wife has no income or gainful employment now, and the total amount of her monthly expenses is about $53,500, including $20,000 as mortgage loan repayment, $10,000 as entertainment expenses including golfing expenses and $3,000 as contribution to her parents.

(ii) The Husband’s financial position

22.  The Husband is the majority shareholder of P holding 90% of the shares, and P is the holding company of 1 more company in Hong Kong and 3 companies in the Mainland. He is now living at the former matrimonial home at Waterloo Road which is a company asset of P, and the company also owns 12 other real properties in Hong Kong. Further, P provides a private car for use by the Husband, and he also has a leisure boat with a value of about $300,000. According to the information provided in the Form E, the Husband has about $443,000 worth of stocks in a public-listed company and about $160,000 in his bank accounts. The total amount of his monthly expenses is about $46,300.

23.  In the Form E, the Husband claims that he has a monthly income of $32,000. According to the financial reports of P, the net profits of the company in the years 2007 and 2008 were $836,702.73 and $776,973.87 respectively. Although there is no evidence about the actual value of the Husband’s shares in P, it is clear that the business of the company is performing well. Further, P would take care of most, if not all, of the expenses of the Husband. Even the monthly maintenance payments and the instalments of the lump sum payment to the Wife were paid out of the bank accounts of P. Formerly, P had been paying the Wife about $53,000 a month, including $25,000 as the monthly maintenance payment, $10,000 as the instalment for the lump sum payment and $18,000 as the Wife’s salary working in P. In his oral testimony, the Husband frankly admits that P would have no difficulty in continuing to make monthly payments in the same amount to the Wife.

(iii) Determination of the amount of monthly maintenance

24.  Mr. Chow, counsel for the Wife, is only asking the court to assess a monthly maintenance which is able to satisfy the “reasonable requirements” of the Wife. The Wife is not seeking to increase the amount of the periodic payments adopting the principles of “compensation” and “sharing” as laid down in the English decisions of White v White [2001] 1 AC 596 and Miller v Miller and McFarlane v McFarlane [2006] 2 WLR 1283 and approved in the local Court of Appeal’s decision in DD v LKW [2008] HKLRD 523.

25.  In determining the reasonable amount of the periodic payments, the court has to take into account the factors listed out in s. 7(1) of the Matrimonial Proceedings and Property Ordinance, Cap. 192.

26.  From the evidence in the present case, it is clear that the Wife has spent a considerable amount of money on golfing-related expenses: $8,000 monthly repayment for the additional loan to financial the purchase of the golf membership and $10,000 entertainment expenses mainly related to golfing. These are certainly very extravagant expenses. Further, I find it quite surprising that when there was then uncertainty about the payment of monthly maintenance after the age of 55, the Wife still proceeded to spend about $1,300,000 to purchase a golf membership in the end of 2007 and early 2008. I agree with the Wife that she should be allowed to enjoy some sporting activities, but even she agrees that one needs not spend so much money on golfing each month. For example, there is a public golf course in Hong Kong and there are other golf clubs in the Mainland with a much lower membership fee. Further, the Wife picked up golfing after the divorce. As the Husband should only provide maintenance to the Wife to maintain a standard of living which is comparable to that before the divorce, I do not accept that the Husband should bear the burden of paying for these extravagant expenses. I therefore deduct these expenses in the total amount of $18,000 from the monthly maintenance. As I see it, the amount of $6,000 as expenses on food and meals out of home would probably take care of the reasonable entertainment expenses of the Wife.

27.  The Wife’s reasonable monthly expenses should therefore be reduced to about $35,000. As the Wife is receiving $2,000 a month from his son and she may be able to receive some income by taking up part-time jobs for her friends, I find that the reasonable amount of monthly maintenance is $30,000. I therefore vary the Order by ordering the Husband to continue to pay monthly maintenance in such amount to the Wife after the latter has reached the age of 55 and during the lives of the parties, while the Wife remains unmarried and until further order.

28.  I also make an order nisi in the following terms:

(i) the Husband shall pay the monthly maintenance on the 1^st day of each calendar month;

(ii) the payment of monthly maintenance shall be back-dated to the time when the Wife has attained the age of 55 and the Husband shall make the back-dated payment within 28 days of the service of this order;

(iii) the costs of the application be to the Wife with certificate for counsel.

The order nisi shall be made absolute 14 days after the date of the handing down of this Decision.