N v. N

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DIVORCE JURISDICTION

SUIT NO. 424 OF 1994

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J U D G M E N T

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Introduction

1. By two applications in these ancillary proceedings, the petitioner wife seeks orders for financial provisions for herself and the sole child of the family, a daughter aged nearly 7 whose custody by consent vests in herself, and for avoidance of property dispositions.  As for maintenance and ancillary relief, it is now clear that she is seeking periodic payments totalling $7,260 which she says would be realistically required to meet their genuine and modest needs as particularised in her latest affirmation and a capital sum for herself in the sum of at least $800,000 viz., a third of the respondent’s capital worth conservatively assessed at $2.5m.  She proposes to leave the question of apportionment of maintenance to the good sense of the court.

2. For convenience and easy reference, page references, where appearing, relate to the notes of proceedings and the petitioner’s bundles of documents, of which there are three.  There is also a correspondence bundle but little, if any use, has been made of it during the lengthy hearing.  Thus, by way of illustration, B 1 – 3, B 2 – 33, B 3 – 333 and NP – 8 respectively refer to page 3 of bundle 1, page 33 of bundle 2, page 333 of bundle 3 and page 8 in the notes of proceedings.

The petitioner’s case

3. It is wife’s firm conviction that her husband is worth considerably more than is portrayed particularly in light of the evidence disclosed since the commencement of the hearing in the shape of documentary evidence revealing that well over $0.5m could be traced to him in 1991.  This, as the wife is at pains to point out, is in addition to the sum of $1,845,000 which the husband had admittedly received from his father by way of assistance for the discharge of huge debts that allegedly arose following the failure of his business and the $900,000, the alleged one-third share of the realised worth of the 2 properties, the subject of the section 17 application to which I shall shortly refer.

4. In advancing her claim for capital provision, the wife fully accepts the shortness of the marriage and the even shorter cohabitation of just under 6 years but, however, contends that her contribution to the family’s welfare as homemaker, wife and mother warrants adequate recognition and a fair share of the family assets, albeit that she had in no way contributed financially to the acquisition of any of the 4 properties situated at Wing Shing House.

The Section 17 application

5. As regards this application (which was hotly contested as was her claim for lump sum provision), the wife’s case is simple enough.

6. The more than coincidental timing of the husband’s transfer of his share in the 2 properties “back” to his parents in February 1994, the month following the presentation of the petition for divorce, viewed from the circumstances and the history of the case, and as a matter of fact, is consistent only with an intention on his part to frustrate any attempt by her to secure a fair distribution of the family assets.

7. In addition, the timing of the transactions, triggering as it does the statutory presumption, greatly assists her submission that these assignments could only have been effected with the nefarious motive and intention of cutting her off financially.  In sum, this traditional Chiu Chow family has closed rank against her with his parents coming to his aid.  In the process, both the respondent and his father, it is submitted, have adduced untruthful evidence.

8. In developing her case, it is contended that the disposition of the said 2 properties, unless set aside, will inevitably have the consequence of defeating her claim for ancillary relief and that the respondent must have intended such a result.

9. From the circumstances attending upon her departure from the former matrimonial home and since which must have made it abundantly clear to the respondent that the marriage was at an end and by dint of the evidence of the attempted service of the divorce papers in January 1994, the wife argues that when the transfers were made in February, they could only have been made in the knowledge that the prospect of divorce was not only real but imminent.  Put simply, the husband was consolidating his position for battle.

The husband’s case

10. The husband has sought to explain the circumstances surrounding the acquisition of all 4 properties, his limited role and participation therein, in essence as bare trustee for his aged parents, his lack of contribution of any kind towards their purchase and upkeep, and the reason for the subsequent assignments.  The evidence shows that he was paid effectively approximately a one-third share of the market value of the 2 properties, the subject of the section 17 application, which came to $900,000 but in the event, that sum has been returned to his father.

11. He disputes the existence of any concerted plan to deny the wife of her rightful share of the family assets of which there is none to speak of, he having no capital of any nature.  Rather, on account of his failed business and the ensuing crippling debts which remain to be fully discharged and his limited salary, maintenance in excess of $2,500 pm currently falls within his capital to satisfy.

12. Those then are very briefly the areas of controversy falling to be resolved.

The law

13. In any application for financial provisions the court is enjoined to balance the reasonable needs and just requirements of an applicant spouse against the other party’s ability to meet them : B v. B [1989] 1 FLR 119, Delaney v. Delaney [1990] 2 FLR 457 CA.  In other words, the proper approach is to look at need within the context of s. 7 (1) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 in terms of what is reasonably required.  The matters that I must have cognizance of under s. 7 (1) encompass such considerations as conduct, income, earning capacity, property and resources, needs and obligations, the standard of living enjoyed by the parties prior to the breakdown of the marriage, their ages, the duration of the marriage, the contributions of each spouse to the welfare of the family and prospective loss, if any, consequent upon divorce.

14. As regards the claim brought for and on behalf of the child of the family, I have to pay heed to such matters as her needs, income and resources, if any, the standard of living enjoyed by the family prior to the breakdown of the marriage and the manner in which she was being and in which her parents expect her to be educated.

15. There is a further consideration in as much as the powers of the court is to be exercised so as to place the daughter so far as is practicable in light of the matters set out in paragraphs (a) and (b) of subsection (1), just to do, in the financial position in which she would have been if the marriage continued and her parents fulfilled their financial responsibilities towards her.

16. Each party has the bounden duty to make full and frank disclosure of his or her financial position so as to make it possible for the court to achieve substantial justice between them in the balancing exercise.  Any departure from the requisite standard can and normally should be visited by the court drawing adverse inferences against the defaulter on matters the subject of the shortcomings insofar as such inferences can properly be drawn : J v. J [1955] P. 215.  Such breach may also attract an order for costs against the offending party : P v. P [1994] 1 FCR 293.

17. With these matters in mind, I turn then to examine the wealth of evidence.

The evidence

The purchase and disposal of the 4 properties

18. All 4 properties are situated at Sheung Wan, Hong Kong.  They are flats 6A, 6B, 4C and 8B.  The last 2 properties are the subject of the wife’s setting aside application.

19. Flat 6A was bought by the respondent and his parents as tenants in common on 31^st August 1990 for $795,000.  It was sold on 23^rd September 1993.  The land search is at B1 – 225.  It is as well to bear in mind that the wife left the former matrimonial home with the daughter never to return on 2^nd August 1993.

20. The petitioner admits that she did not participate in the purchase and “only knew they (the family) had such a plan” (paranthesis mine) : NP – 25.  She was not involved not because the husband did not have a real interest in it.  Rather it was, according to her, on account of her “very inferior” status as his wife : NP – 26.

21. It is wholly accepted that she has made no financial contribution to the purchase or maintenance of any of these properties.  As is clear, she disputes that his involvement had been limited to facilitating finance only.  The purchase money for Flat 6A had emanated from the father who for reasons to be set out did possess the necessary means to do so.  The elder Mr. N’s evidence was to the effect that he would deposit money into the son’s bank account so as to enable him to meet the mortgage repayments.

22. The husband’s and his father’s evidence, both oral and affidavit, was to the effect that he had not contributed financially to its purchase or to the servicing of the mortgage.  The legal charge to Chiyu Bank dated 31^st August 1993 was to secure general banking facilities.  The amount of the charge is unspecified on the search record.

23. At the time when the 1^st of the 4 properties was acquired, i.e., Flat 6B, the husband and his parents had received advice from a Mr. Ho, the then bank manager of Chiyu Bank that it was advisable for the husband to be added as a joint purchaser in light of the parents’ age and the bank’s mortgage lending regulations.  This bank manager has since about 1990 become the respondent’s friend.

24. At the husband’s request, Mr. Ho has furnished a note on unheaded paper dated 4^th May 1994 (B1 – 67), some 9 years after the advice was first given.  The wife submits that no weight should be given at all to such a document in circumstances where the maker was not available for cross-examination and the true ownership of the properties is disputed.  With that I entirely agree.  It does not follow, however, that the N family did not receive such advice or did not act upon it.  Whilst Mr. Ho may indeed have no reason to recall so vividly what he had said all those years previously, the husband and father, interested parties that they are, clearly have.

25. Having evaluated the evidence and assessed demeanour, I am quite satisfied that father and son were not misleading the court in this respect.

26. It has not escaped one’s notice that Flat 8B was not funded by a mortgage.  This was perceived as a weakness in the respondent’s case and became the subject of cross-examination of the father.  He was asked why the son’s name was added to the purchase as no mortgage was required to which he observed : “Because this had happened on 1^st few occasions and I was thinking that if I needed money for my business it would be easier to get a mortgage loan if my son’s name was there” NP – 105.  I accept that this was the intention at the time.

27. Flat 6B was acquired on 19^th December 1985 in the joint names of the respondent and his late mother, Madam Hui for $350,000 : B1 – 223.  The purchase took place some 2 years prior to the marriage of the parties in November 1987.  The flat was mortgaged to Chiyu Bank for $250,000 and the mother provided the balance of $100,000 : NP – 48.  The husband explains that because the mother was elderly, his name was duly added to obtain a mortgage pursuant to the advice that has been referred to.  It is his evidence that she had the means to acquire the property but no proof of income.  The mortgage was financed by his parents and was sold on 23^rd September 1993.

28. An account of the circumstances leading up to the sale of Flats 6A and 6B set out in the husband’s affirmation has been expanded upon in his oral testimony.  The father has also testified to a similar effect.

29. The net proceeds of Flat 6A were paid over to the respondent’s mother whereas the net worth of Flat 6B was credited to both parents.

30. The wife seems to accept that since the sale of the properties a total sum of $1.845m has made its way into the husband’s account even though it is said no attempt has been made by either him or his father to identify or explain from the exhibited bank statements the actual transfers between them.  The respondent’s father has explained that these payments were made as and when the son needed to repay his 2 creditors.

31. The respondent’s account of how he became saddled with such heavy debts is as follows.

32. He is aged about 41, having been born in 1956.  He describes coming to Hong Kong in 1979 whilst in his early twenties and working for the K C Medicine company.  At the time he was earning $600 pm.  From 1980 – 1985 he was employed by P T Co.  With the financial support and encouragement of his father, he started his own Chinese medicine business, the F H Company, in 1985.  It was then that debts began to accumulate : NP – 39.

33. B1 – 48, paragraph 3 sets out the history of the matter clearly.  At NP – 42, the respondent testified that he had borrowed about $200,000 from his father to launch the business of F H Company.  He explains how the two large loans of $1.6m and $0.5m had arisen.  The 2 creditors, Tseng senior who died in 1993 and Lam were apparently lending him money to buy stock of China ginseng and in return were offered part of the stock at a reduced rate.  The promissory note to Tseng senior is dated 24^th November 1985 (B1 – 63).  Both debts aggregated at about $2.1m.  Tseng has continued to press for repayment after his father’s demise.

34. The husband’s account of the repayment of the debts is to be found at B1 – 52.  In referring to his bank account with Chiyu Bank at B2 – 117 et seq he attributed the provenance of various deposits to his father and went on to explain how those sums were eventually used to meet his obligations : NP – 53.  He further said that both Tseng and Lam have acknowledged receipt of the amounts handed over : NP – 54.

35. It is clear from the evidence that the debts were last repaid in January 1994.

36. At NP – 52 the respondent explains that he had been pressed for repayment by T S T, the son of Tseng senior and Lam in 1991.  He further said : “I discussed with parents and they agreed property be sold so that they could lend me money to make repayments.  The properties were only able to be sold in 1993 because these premises were not office premises.  They were stores as well as residential flats …… They were placed on the market in 1991 and could not be sold until 1993.  The first reason is the quality of the building was poor.  Only those people in such need would buy such kinds of property.  They were sold in 1993 to a Mr. Lam of the same building.  It was a company called Puluck, approximately”.

37. It is, therefore, his contention that the sale of both properties in September 1993 was entirely unrelated to the wife’s departure in August of the same year.  The proceeds or a substantial part thereof went lent to him for meeting his long-standing indebtedness : NP – 52.  A significant portion of the debt owning to Tseng senior remains outstanding.

38. The wife, not surprisingly, challenges the existence of the husband’s alleged debts and does not accept these payments from father to son were to meet the son’s obligations as claimed.

39. I have no hesitation in finding that the husband did incur these debts and that his parents had advanced the proceeds derived from the sale of flats 6A and B by way of loans to him to help him meet his financial obligations.  Lam’s evidence provided significant corroboration of this part of the husband’s case.

40. O. 38 r. 2 of the Rules of Supreme Court permits the admission into evidence of affidavit evidence from deponents who are out of the jurisdiction.  However, as here, where the evidence is strongly contested and its credibility depends on the court’s view of the missing witness, it would not be right to admit Tseng’s affirmation.  It has little, if any, evidential weight in the absence of cross-examination in present circumstances.  I will exclude that piece of evidence from further consideration.

41. Flat 4C was purchased on 1^st July 1988 by the respondent’s parents as joint tenants for $368,000 and mortgaged to Chiyu Banking Corp for $250,000 : see B2 – 52.  The respondent said that the balance of the price had come from the father and that he did not contribute to the payment of the balance.

42. The Petitioner says it was financed from profits of F H Company and that no mortgage was needed : NP – 24.  She was clearly mistaken on the matter of the mortgage.  Furthermore, she admitted she was not involved and “only knew they had such a plan of buying such a flat for storing goods”.  : NP – 24.  Quite plainly she was not made privy to its purchase, funding or any family discussions.  Although she admits to not having contributed to its acquisition, she now claims a share.

43. The land search for this flat is at B1 – 218.  On 24^th February 1994 these premises were assigned into joint names of the parents.  As with Flats 6A and B and Flat 8B, the respondent says he has and has had no real beneficial interest in it.  Neither had he contributed to its acquisition or maintenance.

44. Flat 8B was purchased on 28^th August 1991.  The wife has also made no contribution to it in anyway.  There was no mortgage involved as was noted earlier.  It was transferred to the parents jointly on 3^rd February 1994.  The land search is at B 1 – 229 et seq.  It is clear from the documentation that the respondent and his parents had earlier taken title as joint tenants.

45. At NP – 55 onwards, the respondent has further elaborated why Flats 4C and 8B were conveyed to his parents.  His affirmation evidence is at B1 – 52 paragraph 14.

46. Briefly, he explains that he had already borrowed a great deal from his parents.  His siblings, all daughters, have complained that they had contributed whereas he did not.  It was deemed unfair that he should remain registered as co-owner of these 2 premises in those circumstances.  His parents “were disappointed as I didn’t pay anything and I failed in business, so appropriate for them to take back the property”.  NP – 56.  The purchase price totalling $900K were “all given back to my parents because I owed them the money” : NP – 56.  Cheques in payment of the purchase price were issued on advice of the conveyancing solicitors : NP – 56.

47. He maintains that the sale of all 4 properties had not been calculated to defeat the wife.  In particular, his lack of knowledge of her divorce petition and the instructions given to the lawyers for re-assignment on 4^th January 1994 are dealt with at NP – 57.  Completion was delayed till 24^th February because of a defect in title.  Neither he nor those acting on their behalf at the firm of solicitors were aware of the existence of the lis pendens for a second land search had not been conducted.  There was nothing untoward about this in the circumstances.  Even though the husband must have suspected that the marriage was at an end and that divorce was a real prospect for the wife’s evidence was that she had rung him soon after her departure to say she would not be coming back, the reality was and I so find that the husband never had anything other than a bare legal title in any of the 4 properties.

48. The petitioner does not accept that the respondent has not contributed to the acquisition of the 4 properties.  The extent of his involvement in the running of the family business, the control and direction he had over it, it is argued, paid handsomely and it was those profits derived from his industry and business acumen that funded the purchases.  The evidence from the respondent and his father gave a contrary impression – over time, funds had been accumulated and then subsequently remitted by his parents to Hong Kong.  In addition, after their arrival in the territory, they had continued to receive money from China.

49. The father has testified that he and his wife first came to Hong Kong in November 1979.  He was then aged 57 and his late wife, a year his junior.  Mr. N is now 74.  Both were teachers in China.  He was a researcher in fungus.  Armed with that expertise, he ran his own mushroom farm in the New Territories between 1980 and 1983.

50. With savings accumulated from remittances from an elder brother in Sydney, Australia over the years and from skilful forays into the share and currency markets, he had his wife had amassed sufficient capital to purchase their own property at Po Yan Street in July 1980 long before the petitioner arrived on the scene.

51. The respondent’s father had also operated two businesses under the names of F H Trading Company and W S Company between 1986 and 1995.  He is at present unemployed, living off his savings.

52. On the evidence, I am able to conclude that the respondent’s parents were the true provider at all material times of the moneys for acquiring these properties.  They clearly had the means to do what they said they did.  Why their son was made a party to the various purchases has been satisfactorily explained.  The presumption of advancement can readily be displaced.  That being so, the avoidance application must fail.

53. The truth of the matter is, despite the wife’s contrary assertions and strongly held beliefs and suspicions, she was sadly treated very much as an outsider by this close-knit family.  She has had to admit to having had very little direct knowledge of information about this family’s fortunes, financial dealings or background.

The needs of the wife and child and other section 7 criteria

54. The parties married in November 1987 at a time when the petitioner was 28.  She is now 37 of apparent good health and the husband nearly 41.  Although he has complained of back pain, this has in no way affected his earning ability or his lifestyle.  The child of the family is not much shy of 7.  She too enjoys good health.

55. Access was at a time problematic but matters have been satisfactorily resolved, having been defined.  Existing arrangements prove to be both viable and satisfactory.  From the social welfare report, it is plain the child’s welfare has not been compromised by the fractious and often difficult relations of her parents.  Her future upbring, care and supervision are assured.  She is in the capable hands of a devoted carer, the petitioner.  That the wife has proven herself a dedicated, concerning and loving mother is not in doubt.

56. This has been a relatively short marriage during with the wife has made tangible contribution to the welfare of the family.  In that time, she has filled the multi-faceted role of wife, mother and casual helper at the father in law’s shop for which she received no remuneration.  The marriage was brought to an end by the conduct of the husband as particularised in the petition which proceeded to nisi unopposed on 12^th October 1994.  The husband is now estopped as a matter of res judicata from challenging the particulars of unreasonable behaviour upon which the marriage was dissolved.

57. Since separation, she has managed to provide the basic necessities for herself and her young charge from the husband’s regular payments augmented by comprehensive payments that she has been receiving.  The husband has been paying $1,500 pm pursuant to a court order dated July 1994 and welfare assistance now stands at $3,232 each month.  Mother and child have been allocated a public hosing unit and their housing needs are adequately catered for.  Her actual and projected monthly expenditure has not been challenged in any way.

58. She lives on a tight budget.  The simple lifestyle that she has had to lead with her daughter since separation has afforded no luxury.  However, it was only by being frugal that they were able to make ends meet, a factor attesting to her resilience, determination and resourcefulness.  Her total monthly income is $4,732.  She has no other income, capital or other financial resources to speak of apart from a small balance left over from the $100,000 her own parents had given her when she left home to marry.  Of that more later.

59. The wife has had to make do for a time with about $4,500 pm, a situation which she would like to see some improvement on.  She has explained under cross-examination that the expenditure of $7,200 pm in her latest affirmation is what is truly needed if reliance upon welfare payments is to end.  Such a sum, it is submitted, would provide in reality only a very modest existence for herself and the daughter whilst simultaneously recognising the husband’s undoubted obligation to maintain them.  The standard of living enjoyed by the family hitherto seemed also to have been modest.

60. Having received not a great deal of education (she left school at 14 after Form 1 or 2) and with no qualifications to rely on, her earning capacity is necessarily restricted at the best of times.  Although it has been mooted by the husband that she should now consider working mornings when the daughter is at school until 3 pm, the reality is that such part-time work may not be readily available.

61. As is pointed out, arrangements would not only have to be made to ensure that she would become free by the time the child finishes school but also to ensure that third party help is available in an emergency, e.g. during illness or other emergencies.  Her expertise has always been at home, not having ever had open employment.  Taking up paid employment away from her own home even on a part-time basis is perhaps not a viable option at this point in time.  The circumstances indicate that her first responsibility and priority must be the raising of the daughter for the moment.  There is, however, nothing to prevent her working out of the home, for example, child-minding.  Such opportunities should be explored if only to raise her disposal income, thereby benefiting herself and the daughter.

62. For present purposes, her potential for earning is much restricted.  The full exploitation of her undoubted ability to earn for various practical reasons will have to be deferred until such time as the child attains greater independence and maturity.

63. Upon her marriage, the wife received a lump sum payment from her parents in recognition of her contribution and assistance in the family Chinese medicine business.  Since separation and largely because of inadequate funding by the respondent, that amount has over time been progressively depleted.

64. The wife denies that she has amassed substantial wealth through careful and repeated dealings in stocks and shares.  It is of course true that she had during the course of the marriage handled stock and share purchases for the husband and his parents.  These were always carefully and separately accounted for.  Exh. R3 are 4 deposit statements from the same bank and refer to 2 sterling, one Norwegian croner and one DM deposits in her name.  They were all dated July 1993.  She agrees the range of investments showed sophistication : NP – 30.

65. On occasions, she had made investments of her own from the $100,000 her parents had given her.  These were foreign currency and share transactions.  These were always modest, a fact of which the respondent was only too well aware.  There is, contrary to the suggestion, no hidden wealth to discover.

66. She says her disclosed financial statements and accounts bear ample testimony to that.  If further evidence be required, she adds that the lifestyle foisted upon her and the child since separation is proof sufficient to dispel any notion of hidden wealth.

67. The husband says he cannot pay a lump sum and offers instead a slight increase of periodic maintenance to $2,500 pm.

The husband’s circumstances

68. At the hearing in May 1996, the respondent had recently become unemployed but was actively seeking reemployment and was expecting to attend an interview on 1^st April at a Chinese medicine company.  He was made redundant on 18^th February 1996 as deposed in his 5^th affirmation.  When laid off, he was drawing a salary of $5,500 pm.

69. He is once more occupied in the same trade, being employed Tai Wah Company at a daily wage of $220.  He speaks of being able to earn on average $6,000 pm.  He continues to live with his father rent free and has modest outgoings.  His recurring needs are basically those pertinent to himself.  He still owes the Tseng estate money as far as can be made out.

70. He has no available capital with which to satisfy the petitioner’s request for a lump sum which he says is in any event not made out.

71. As for his business skills or more appropriately the lack thereof, his own business F H Company closed down only after one year of operation in 1986.  By that year, he was again working as a paid employee, processing ginseng from China and received a salary of $6,000 pm at his father’s F H Trading Company.  That business too collapsed in 1990.

72. For about 10 months between 1990 and 1991 he was unemployed.  From November 1991 to December 1993, he worked for his father’s new company W S Company at a salary of $6,000 pm.  According to the respondent and the father, W S Company ceased trading in October 1995 : NP – 41.

73. Prior to that I find that he started working for C C Goods Centre in January 1994 and lost that job in February 1996.  The wife does not accept that he had gone to work for C C Goods Centre.

Conclusion

74. I am satisfied that the spouses have made full and frank disclosure of their respective financial positions.  This is a case where, if sufficient resources were available, a lump sum order for the wife can be contemplated.  Such an order would no doubt address her substantial contribution and her requirement for a cushion for the future.  Clean break has not been advocated so it features not in any such assessment.  In any event, it is academic as the husband does not have the means to satisfy such aspirations.  The way forward is to continue with maintenance payments.

75. In full and final settlement of all claims between the parties, in the circumstances, the following are appropriate orders to make.  It is ordered that :

1.    The respondent do pay periodic payments to the petitioner of $4,000 pm to be apportioned equally between the petitioner and the child of the family.  Such payments are to commence on 1^st March 1997 and thereafter payable on the first day of each month until in the case of the petitioner, her death or remarriage, whichever be the earlier or further order and in the case of the child, until she shall have attained the age of 18 or ceased full-time education, whichever be the later or further order.  Such payments are to be credited into the petitioner’s bank account as previously ordered on 19^th July 1994.

2.    The wife’s claim for lump sum, property transfer and other ancillary relief do stand forthwith dismissed as are the husband’s claims for ancillary relief, it being deemed that he has applied for such relief herein.

3.    There shall be no order for costs save legal aid taxation of the petitioner’s own costs, including any costs reserved in respect of these applications.  This order shall be nisi in the first instance with liberty to apply within 14 days hereof.

4.    Section 18 certificate to issue.