MRH v. GMHnK

CACV 80/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 80 OF 2008

(ON APPEAL FROM FCMC 6620 OF 2005)

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J U D G M E N T

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Hon Cheung JA (giving judgment of the Court) :

The appeal

1.  This is an appeal from the judgment of Deputy District Judge Tracy Chan who made orders for financial provisions of the respondent wife and the child of the family. 

2.  The wife was absent from the hearing of the appeal.  On the eve of the hearing she wrote from Austria informing the Court that she would not be attending the hearing.  She had previously applied to adjourn the appeal which was originally set down to be heard in February 2009.  At her request the appeal was adjourned to the present date.  The Court proceeded to deal with the appeal in her absence. 

Background of the parties

3.  The parties are Austrians.  They were married on 7 July 1989.  The marriage lasted for 16 years.  On the husband’s petition for divorce, a decree nisi was granted on 7 September 2005.  By consent, custody of the child of the family was granted to the wife with reasonable access to the husband. 

4.  The husband was employed by an international hotel chain (‘the hotel’) based in Hong Kong.  The wife has been a housewife throughout the marriage.  She has been suffering from emotional illness and gynaecological problems.  The wife has since returned to live in Austria together with the child. 

5.  The husband took up his employment with the hotel in 2001.  According to the updated information provided by the husband, his employment was terminated on 15 April 2009.  He remarried on 7 March 2008 and a daughter was born on 21 December 2008.

6.  The evidence before the Judge was that the husband’s salary was HK$130,000 per month with HK$70,000 as housing benefit which would be reduced to HK$40,000 upon the pronouncement of the decree absolute.  The husband received a discretionary annual bonus from his employer which ranged between HK$270,000 and HK$1,050,000 for the years between 2003 and 2006.  He also received medical benefits for the family and an education allowance.  They covered the major part of the medical and education expenses of the child.  The husband has a share in a family property in Vienna registered in the name of the wife.  The husband had bank accounts, investment in shares, share options from the employer, pension and saving plans. 

7.  At the time of the hearing in August 2007 the husband was 50 years of age.  He is due to retire in July 2017 at the age of 60.  The wife was 44. 

Family assets

8.  The Judge’s finding on the parties’ assets and liabilities are summarised at paragraph 28 of her judgment :

9.  The total net assets is HK$4,966,557.  This, however, was not the basis of distribution.  Instead the Judge arrived at the figure of HK$5.5 million which she considered to be the worth of the family assets.  This figure is the total of the net assets plus the liability of HK$681,195.54.  As the liability is not available for distribution, one would have thought that the amount of net assets should be used instead.

The distribution

10.  The Judge considered that the wife should have half of the family assets together with the whole of the Vienna property.  The Judge further ordered 40% of the husband’s pension fund and half of his share option to be given to the wife. 

11.  As to periodical payment, the Judge held that the wife should receive 30% of the husband’s income including his fixed monthly salary and annual bonus.  The Judge ordered an additional HK$15,000 as rental subsidy for the wife and the child.

The orders

12.  The Judge made the following orders :

‘ 1.  the Petitioner (husband) do pay to the Respondent (wife) 30% of his annual income including his fixed monthly salary and annual bonuses.  The Respondent is to receive two periodical payments, a monthly one from the Petitioner’s salary and an annual one from the Petitioner’s annual bonus.  The Respondent is to receive a monthly maintenance of not less than HK$45,000.00 per month and any payment over 30% of the Petitioner’s monthly income to make this HK$45,000.00 should be accounted for when the Respondent receives her share of the annual payment.  The first payment is to take effect upon the pronouncement of the Decree Absolute and then on or before the 5^th day of each and every succeeding month thereafter until the 5^th September 2017, or until the Respondent’s re-marriage whichever is the earlier;

2.  the Petitioner do pay to the Respondent half the balances available as at the Trial date in the following bank accounts within 30 days the Decree Nisi being made Absolute,

「1)  Three accounts in Credit Suisse Bank identified in the Judgment below

2)  Two accounts in HSBC identified in the Judgment below」

3.  the Petitioner do transfer half the 7,500 share options offered by the Petitioner’s employer within 30 days of the Decree being made Absolute,

4.  the Petitioner do pay off one half of the outstanding mortgage on the Property known as A-1130 Vienna, Paccasistrasse 39 top 5, within 30 days of this Judgment;

5.  in the event that the Petitioner is required to pay over and above his half share of liability for the mortgage as stated in paragraph 4 above to the mortgage bank due to the default on the part of the Respondent of instalment payments due in respect of the mortgage, such payments made by the Petitioner shall be deducted from the periodical payments paid to the Respondent by the Petitioner due in the following month;

6.  the Petitioner do pay 40% of the retirement fund he receives from his employer on his retirement to the Respondent;

7.  the Petitioner do pay health insurance for the Respondent until the 31^st July 2017 or the Respondent’s re-marriage whichever is earlier;

8.  the Petitioner do pay to the Respondent the sum of Euros 7,500.00 in respect of her costs, this an order nisi and shall be made absolute and final within 21 days;

9.  the Petitioner do pay to the Respondent HK$25,000.00 per month for the benefit of the Child of the family, ……, a boy, born on the 1^st May 1992, until he attains the age of 18 or finishes full time education whichever occurs last.  Upon the Child’s attaining 18 years then HK$10,000.00 of such periodical payment is to be paid to the Child direct every month, and the remaining sum is be paid to the Respondent for the benefit of the Child.  Such payments are to be index-­linked;

10.  the Petitioner do set aside his share options offered by his employer in the sum of HK$580,000.00 for the tertiary education of the Child;

11.  the Petitioner do set aside an amount of HK$198,403.00 in the FundsProvident saving plan for the tertiary education of the Child;

12.  the Petitioner do continue to pay or cause to pay the school fees and other demands from school of the Child;

13.  the Petitioner do provide air tickets for the Child to visit the Petitioner;

14.  the Petitioner do pay health insurance for the Child until he attains 18 or finishes full time education whichever is earlier;

15.  the Petitioner do made the child the sole beneficiary to the Petitioner’s estate including the group life insurance maintained by his employer before the Child attains the age of 18 or finishes full time education whichever is earlier;

16.  the Petitioner do pay HK$15,000.00 as rental subsidy for the Respondent and the Child until his admission to university;

17.  the interim maintenance Order shall continue until 1^st periodical payment made to the Respondent and the Child pursuant to paragraph 1 above;

18.  there be liberty to apply in relation to the implementation of the terms of the above Order;

19.  the marriage and inheritance agreement concluded in March 1995 resolved.’

Capital distribution

13.  Despite the problem associated with the basis of distribution, the appeal falls on a narrow compass.  In terms of capital distribution, the husband does not challenge the Judge’s decision to award half of the cash and investments in his bank accounts (the Judge excluded $154,018.87 which was savings by the husband after the decree absolute) to the wife.  This is in accordance with the principle of equality set out in DD v. LKW [2008] 2 HKLRD 523. 

14.  The husband is also not challenging the order giving the whole of the Vienna property to the wife.  The order exceeds the principle of equality.  While the Judge made this order no doubt to provide for a home for the wife and the child, in so doing the wife indeed has received a substantial portion of the parties assets of $4,966,557. 

15.  The husband is also not challenging that a portion of his pension should be given to the wife.  He is, however, asking for 30% instead of 40% to be given to the wife.  The husband is entitled to pension from his employer calculated on the basis of a full eight year service notwithstanding that his employment was terminated about one month short of the eight years.  The exact figure of the pension has not finalized.  It was valued at US$126,000 at the end of 2007 and US$117,000 at the end of 2008.

16.  The husband is challenging the order requiring him to transfer half of the 75,000 share options from his employer.  According to the husband the options that remained and that he was allowed to keep until year end of 2009 are 37,500 share options.  The options have no present value : the current value of the shares is apparently below the price of the option.

17.  In my view, given the rather generous order for the whole of the Vienna property (of which the husband had also complied with the order on mortgage payment) to be given to the wife together with payment of half of his bank savings and investments the Judge was wrong to further order a substantial portion of the husband’s future capital which may come into being after the divorce to be given to the wife as well.  The Judge found that the husband had made full disclosure of his assets (by contrast the wife did not file any financial statements for the ancillary relief application).  The husband must be given enough to re-establish himself and his new family.  For this reason, as a matter of principle, the wife’s entitlement to the pension must be reduced and she should not be entitled to a part of the share option even though it may be worthless at the moment.

18.  I will reduce the wife’s entitlement of the pension from 40% to 30% and will further order that the wife will not be entitled to any share in the share option.

Income

19.  The husband had offered to pay $45,000 per month to the wife and $25,000 to the child.

20.  The Judge ordered 30% of the husband’s monthly salary and bonus to be given to the wife.  This order will only work if the husband indeed has a monthly salary.  If he ceases to have a monthly salary then technically he is not required to pay the periodical payment.  But irrespective of this technical problem, more fundamentally it is wrong in principle to order a percentage of the husband’s income which in fact can be determined to be given for such a long period of time, namely until 2017.  The husband has a fixed salary and on the basis of his income capacity, a fixed and pre-determined monthly payment order is more appropriate.  The Judge adopted her approach probably to cater for the bonus that may arise in the future but the amount of which may vary from time to time. 

21.  I am of the view that a total of $65,000 per month as periodical payment is sufficient for the maintenance of the wife and child.  Given the sufficiency of this amount and the capital provision, the wife should not be entitled to a further share in the future bonus of the husband.  Furthermore, the additional $15,000 rental subsidiary for the wife and child should not be ordered given the sufficiency of the periodical payment.

Other matters

22.  Paragraphs 4, 7, 10, 11, 12, 13, 14 and 15 of the Judge’s order are not matters which the Court can order.  They should be expressed in the form of an undertaking by the husband which he is willing to give. 

23.  The husband asked for the periodical payment of HK$25,000 per month to the child after he attained 18 or completed his secondary education to be made directly by him to the child until such time as he finishes full time university education.  I agree that the payment does not need to go through the wife.

24.  Further the periodical payment to the wife ought to be dismissed upon the wife’s remarriage or when the husband reaches age 60.  The Judge accepted that there should be a clean break when the husband retires at age 60 in 2017.

Orders 

25.  Hence the appeal will be allowed and the orders made by the Judge will be varied and replaced by the following :

(1)  Paragraphs 4, 7, 10, 11, 12, 13, 14 and 15 of the Judge’s order will be replaced by way of undertakings from the husband to the Court and the wife.

(2)  Paragraphs 5, 8 and 19 of the Order will not be changed.

(3)  The husband is to pay the wife 30% of his pension with his employer, within one month after it has been quantified.

(4)  The husband is to pay the wife periodical payments of HK$45,000 per month until 31 July 2017 or the wife’s remarriage whichever is the earlier and that in any event the wife’s claim for periodical payments to stand dismissed on 31 July 2017.

(5)  The husband is to pay the wife HK$25,000.00 per month by way of periodical payments for the child of the family, until such time as the child attains the age of 18 years or ceases full time secondary education, whichever occurs last.  Thereafter the husband do directly pay $25,000 per month to the child until the child ceases full time university education or further order.

(6)  The husband do pay the wife a lump sum of HK$1,029,128.50 being 50% of the following bank accounts as identified in the judgment below :

Credit Suisse Bank
(Account No. 1)		HK$171,873
(Account No. 2)		HK$527,182
(Account No. 3)		HK$1,135,995
HSBC
Account No. 1	HK$19,216
Account No. 2	HK$185,991	HK$205,207
		HK$2,040,257

Costs

26.  Each party is to bear its own costs of the appeal.

Hon Wright J :

27.  I agree.

Hon Saw J :

28.  I agree.