X v. Y

FCDJ536/1997

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

DIVORCE JURISDICTION NO. 536 OF 1997

__________________

R U L I N G

__________________

1. This is a judgment summons. It derives from the outcome of an ancillary relief application brought by the respondent wife against the petitioner husband as a consequence of his petition for divorce leading to a dissolution of their marriage.

2. The ancillary relief was contested and the hearing ran for 16 days during the latter part of 1999. The judgment was handed down on 6 December 1999. In the course of it the judge dealt with the relevant history in some detail, only the bare essentials of which I need to repeat here.

3. Suffice to say the husband's mother was known as the second wife of a man the judge described as "well known as an extremely wealthy and influential businessman". Notwithstanding her title as wife, there was no form of marriage. When the co-habitation began she was already pregnant by another man. When the child, the petitioner, was born her co-habitee agreed to have his name recorded on the register as father though he was not. Brought up in the embrace of family of considerable wealth, the petitioner led a comfortable existence which included education abroad; but he received no particular largesse.

4. When he was adult he was given the opportunity to make his mark in one or other of the family companies, but he failed to do so. In fact, he attempted various ventures of his own of an entrepreneurial nature which more or less failed. One was particularly disastrous. The petitioner found himself central in a scheme to supply Russian-made AK-47s to Yugoslavia in the war with Croatia. The arms were routed through the USA. This amounted to a criminal offence there. The petitioner flew to the USA but was arrested on arrival, charged and found guilty. He was sentenced to 6 months' imprisonment and a fine of US$100,000. On each of these occasions he was bailed out with cash from family resources, including $2 million for legal fees incurred during the debacle in the USA.

5. At the time of the ancillary relief hearing there was a dependent child in the custody of the respondent. Her claim was for maintenance for the child and a lump sum of sufficient quantum to provide a home for herself and the child and a capital fund for investment to meet her ongoing expenses. The figure sought was just under $15 million. The judge decided that the clean break associated with a lump sum award was appropriate in the circumstances. In considering what the petitioner could afford he wrote:

"I am satisfied that the husband's current income, $31,360 per month, fully represents the extent of his earning capacity. His previous independent business ventures have ended in either failure or disgrace. He has no intention of trying again. He has no worthwhile assets and I cannot see there being any real possibility of there being any change in his financial situation in the foreseeable future.

But what he does have and what I cannot overlook is that he comes from an extremely wealthy family. This does not mean that I am to make any award that the wife seeks on the assumption that it will be underwritten by the family. But at the same time I cannot overlook the wealth. On two occasions, firstly the husband's losses at ECEC and Fival and, secondly, on his arrest in the USA he has been financially bailed out by his family. His resources include his ability to obtain loans, whether on a commercial basis or on an informal family basis, which may or may not need to be repaid."

6. The judge proceeded to order maintenance for the child in the sum of $5,000 per month and a lump sum to the respondent of $5 million. He gave the petitioner six months to raise this, thus that it be paid by 6 June 2000; pending payment the petitioner was ordered to pay $17,500 per month to her as periodical maintenance.

7. The petitioner did not pay the lump sum. Given leave to do so the respondent issued this judgment summons in February 2001. The amount sought includes the sum of $446,290 being interest at the judgment rate from the due date, being 6 June 2000, to the date of the praecipe, being 2 February 2001.

8. There were other claims for arrears of periodical maintenance but these have since been paid. The petitioner is continuing to pay $17,500 per month and that and the $5,000 per month for the child is up to date. Indeed, there is now in place an attachment of income order made in November 2001.

9. Before going to the hearing itself it is appropriate to quote again from the judgment. The judge was giving consideration to the petitioner's prospects of inheriting capital from his parents, or rather his mother and the man registered as his father. The judge said:

"It is quite impossible for me to find that the husband in this case has any real possibility of receiving any capital in the foreseeable future. The only suggested source of such capital is inheritance from his parents. ...... What we do know is that relations between the husband and his father have never been good. [The father] clearly feels disappointed that his son did not properly apply himself in the family businesses. Relations were strained by the debts incurred by the husband at ECEC and the Fival fiasco. On top of that came the husband's arrest and detention in the USA. Not only did these wrongdoings, as they were described, result in considerable expense to [the father], but they must have caused acute embarrassment. Now there are these proceedings necessitating mother and father and others being subpoenaed. It is clear that that itself has resulted in embarrassment to [the father] and has not done anything to heal the rift between himself and his son. A change of attitude is, I suppose, possible but I cannot use that as a basis for finding that the husband has a real possibility of acquiring a capital sum on the death of his father whenever that might be. Again, there is no evidence that the husband's mother has any substantial assets that she is likely to leave her son. Assuming the father dies first, I can well imagine that he will provide sufficient funds to maintain his wives but I cannot take it further than that."

10. It is apparent from the two excerpts from the judgment that I have reproduced that after 16 days of evidence and submissions, the judge formed the following views:

(a) There was a rift between father and son rendering capital coming from the former to the latter during or after the former's lifetime unlikely;

(b) the husband has had to be financially bailed out when commercial misadventures have resulted in financial loss and his arrest;

(c) he had no worthwhile assets and no realistic prospect of acquiring any.

11. It was nevertheless the judge's finding that the petitioner's resources included: "an ability to obtain loans, whether on a commercial basis or on an informal family basis, which may or may not need to be repaid." It was as a consequence his finding that the petitioner could raise $5 million and he ordered that he do so.

12. It is not for me to deal with the merits of that judgment. I might add the petitioner appealed the decision and that appeal was dismissed by the Court of Appeal. However, given the judge's own findings it is hard to conceive of the respondent obtaining a loan on a commercial basis. That of course requires there to be repayment, together with interest and almost invariably security. The judge found he had no assets to offer as security, no means to repay, no prospective guarantor. And even an informal family loan by definition requires repayment if it really is a loan.

13. Realistically, the only resource was then and remains a gift, euphemistically referred to by the judge as "an informal family loan that may not need to be repaid", and the only realistic donor, the father.

14. Money has been forthcoming in the past. But a bailout forced upon the benefactor to avoid or reduce family embarrassment is not in the category of meeting an ex-wife's alimony, herself out of favour because she has forced the father and other family members to attend court and there be examined. And there is the finding that the rift between the husband and the father was in fact made worse by the divorce and their enforced participation by subpoena.

15. It follows that in reality the only way the judge could have found that the husband was capable of meeting the judgment debt was for there to be a drastic improvement in the father/son relationship; so drastic in fact that he would do a complete about face and give him $5 million. The judge gave him six months to pay. So six months for the father to cough up.

16. Against that background I come to the hearing and the examination of the petitioner's, now judgment debtor's, means.

17. By the time he entered the witness-box the petitioner had filed several affirmations setting out his financial circumstances post-judgment. The first was made in June 2001, a year after the lump sum was due. At that time he stated:

".....Since after the hearing of this cause in August and September 1999, all my family members have decided to turn their back on me. I lost all my goodwill and/or credit whatsoever as my family members were subpoenaed in the hearing and the hearing was widely reported by local newspapers and magazines and as a result thereof I can raise no money at all from either my family members or friends or from any commercial institution."

18. He went on to state he was still employed by the same family company earning $31,600 per month and struggling to meet the $22,500 per month. The result was that the existing loans earlier raised and other debts were still outstanding.

19. There was a further affidavit in October 2001. This is more detailed but told the same story; that he was hard pressed to make ends meet and had no resources to meet even a part of the $5 million. By then he had applied to ten banks and institutions without success. He had also approached his father, realistically the only family member whom he could expect to front up. That proposal was rejected out of hand and the result was the same when he let it be known that he had lost his appeal and was facing a judgment summons and possible incarceration.

20. The affirmation went on to record how fruitless his various requests just for an audience with the father were. He produced letters sent to the father which went unanswered. The only sympathetic ear was that of his mother. But the $5 million is far above her resources to meet. She is totally reliant on the father.

21. The petitioner filed a further affirmation in December 2001 which stated that he owed over $2 million in outstanding legal costs in addition to debts disclosed earlier.

22. Finally, there is an affirmation of 17 June 2002 filed thus four days ago. In addition to his regular income, the petitioner was paid a consultancy fee last month for activity which amounted to moonlighting. This netted him RMB 60,000. From time to time he may earn similar sums but cannot do more than hope that this will happen. He has not told his employer about this. This particular RMB 60,000 has gone towards the cost of defending the judgment summons, costs which total about $200,000. The balance was raised from friends and business colleagues to be paid back "when I can".

23. In the witness-box the petitioner confirmed the truth and accuracy of his four affirmations. He was cross-examined at some length by Mr Johnson for the respondent, whose theme was that he had resources beyond those disclosed and the ability to call upon the family and others closely associated to meet the judgment debt. He denied that was so. Tellingly, he was not challenged on the veracity of his evidence set out in his affirmation of October 2001, which outlined the steps he had taken to try to borrow or raise the $5 million commercially and from family.

24. I come now to my ruling.

25. Under Rule 87(5) of the Matrimonial Causes Rules, I may effectively do one of two things, namely, (1) make a new order for payment of the amount due by giving time or by ordering payment by instalments, or (2) if I find the judgment debtor has failed to show cause why he should not be committed, commit him, either forthwith or suspended on terms that he pay the sum due by instalments. Mr Johnson invites me to invoke Rule 87(5)(c), that is find that the judgment debtor has failed to show cause why an order of commitment should not be made against him and then make such order either forthwith or suspended.

26. To incarcerate a judgment debtor is a remedy of last resort. As Nazareth NPJ said in Gray v Servino FACV 8 of 2001, "In family cases it should be the very last resort." I take that to mean reserved for the debtor who has shown contumelious disregard for his court-ordered obligations to those dependent on him.

27. In my view, the petitioner's conduct is far removed from putting him in that category. The petitioner's affirmations outline the steps he has taken to try to raise the money. I accept he took those steps without result. It was, in my view, a hopeless cause to try to raise the money commercially. But at least he tried.

28. The only practical way in which he might feasibly have satisfied the judgment debt remains steadfastly behind a closed and locked door, that which would lead to an audience with his father. The petitioner has failed even to achieve that; but he tried. Whatever remedies the respondent might have to get this debt paid, the committal of the petitioner is not one of them. He has, as I find, shown cause.

29. So what order to make? The petitioner has invited me to amend the order so that he be permitted to pay by instalments. The maximum he can afford is a small surplus from his income of about $6,000 per month. One does not need to be a mathematician to work out that including accruing interest, this would take more or less 100 years. It is not a practical solution.

30. I propose in the circumstances to make no order. That is my ruling.

(Discussion re costs)

31. I find, in the circumstances, on the issue of costs that although through counsel she says otherwise, I am satisfied that the respondent was alive to the efforts made by the petitioner per media of the various affirmations filed since the judgment summons was issued with leave, and that at an early stage he was able to demonstrate that he would be able to defend these committal proceedings. Yet she persisted and, in the circumstances, I think it appropriate that she should have to meet the costs of the petitioner; I so order. Those costs will include any costs reserved, taxed if not agreed and in anticipation that you would be asking for this, Ms Yip, certificate for counsel.