LAM KWAI HING v. TSANG SIU SHING and YIM KAM (Intervener)

CACV 259/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 259 OF 1997

(ON APPEAL FROM DJ 1813 OF 1994)

-------------------

----------------------

J U D G M E N T

-----------------------

Liu, J.A.:

1. The appellant, Tsang Siu Shing (the husband) and the respondent, Lam Kwai Hing (the wife) were married on 4 December 1990. There are no issues. The husband is 45, the wife 43. The parties had regarded themselves as previously married after a Chinese wedding banquet held in 1984. Cohabitation followed. The wife petitioned for a divorce in March 1994 and sought maintenance pending suit later in that year. In August 1995, a decree nisi was made unopposed by the husband. In December 1995, the husband applied under s. 17(1)(b) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to avoid a transfer by the wife of a property in Mongkok to her mother (Madam Yim). In mid January 1996, Madam Yim applied to intervene in the divorce proceedings. Madam Yim had, earlier in 1994, obtained an injunction restraining the husband from trespassing in or upon the Mongkok property. That injunction was lifted in December 1994. In the divorce proceedings, the wife applied for ancillary relief including financial provisions and the husband sought an avoidance of the transfer of the Mongkok property to Madam Yim. Decree was made absolute on 13 February 1996.

2. The properties involved were three: first, the Shun Ning Road flat which was acquired in 1984 for cohabitation and sold in 1986 by an Agreement for Sale and Purchase dated 5 August 1986. Completion of the sale was delayed by the presence of some illegal structures, and the assignment was executed only on 20 January 1987. The sale of the Shun Ning Road flat was to pave the way to the parties moving into a new home. They had looked for accommodation and found one in the Shumshuipo area for $283,000. The father of the wife was to lend the husband $200,000 but the sale fell through and the husband compensated the wife's father $460 for loss of interest in having to shift $200,000 from his deposit account to his savings account in anticipation of realising his promised loan. The $200,000 was never lent.

3. In October 1986, a flat in Mongkok was acquired and put in the name of the wife. That is the second property. In September 1991, the wife transferred the Mongkok property to Madam Yim without actual payment but a consideration was stated in the transfer documents for stamp duty purposes. The Mongkok property was used as the matrimonial home until the wife moved out in January 1994 to a flat in Tseung Kwan O. That is the third property. The Tseung Kwan O property had been brought for $500,900. It is common ground that the purchase price and related expenses were paid for from a loan of $650,000 made by the wife's father. The Tseung Kwan O property was taken in the joint names of the parties.

4. His Honour Judge de Souza held that the net proceeds of sale of the Shun Ning Road flat were not used in payment towards the purchase price of the Mongkok property and that the Mongkok property was purchased with funds wholly provided by Madam Yim. Therefore, the husband's application to avoid the 1991 transfer of the Mongkok property by the wife to Madam Yim failed. For a clean break, the judge further ordered the husband to transfer his joint ownership interest in the Tseung Kwan O property to the wife. It was also ordered that the husband was to pay the wife $5,000 per month for interim maintenance for six months from 1 June 1997. From these orders, the husband appeals.

5. At the hearing of this appeal, the husband seeks to produce five further documents. The husband claims that after he was evicted by Madam Yim's injunction from the Mongkok matrimonial home, arson was committed whereby his documents were damaged. After the lifting of the injunction and his return to the Mongkok home, he was unable to sort out and isolate from his belongings then in disarray these five documents until well after his re-marriage in March 1997.

6. These five documents are: first, an Agreement for Sale and Purchase dated 5 August 1986 for the Shun Ning Road flat, in which the balance of purchase price was scheduled to be paid on completion. Completion date was 6 September 1986. The husband was not personally involved with the conveyancing but on the force of this Agreement for Sale and Purchase, he maintains that the sale must have been completed on 6 September 1986, on which date he must have received the balance of the purchase price.

7. In the husband's answer to interrogatories, the net purchase price of the Shun Ning Road flat was put down as $20,000. It is the husband's claim that the wife's father had lent him $200,000 for the purchase of the Mongkok property and that the balance to pay was slightly over $97,000. The husband told the judge that the balance of the Mongkok property was paid from the net proceeds of sale of the Shun Ning Road flat, but obviously, $20,000 was hardly sufficient for meeting $97,000 odd. What was more against the husband is that the Mongkok property was acquired in October 1986 and the sale of the Shun Ning Road flat was not completed until the execution of its Assignment on 20 January 1987, some three months later. Illegal structures caused the delay in completion. The husband overlooks the delayed completion. It was clearly impossible for the husband to use whatever net proceeds in the sale of the Shun Ning Road flat to pay for the balance purchase price of the Mongkok property. The first document sought to be adduced by the husband cannot be relevant.

8. The second document, which the husband proposes to introduce, is the official receipt for the installation of a telephone in the Mongkok property at the end of October 1986. It is not disputed that the Mongkok property was acquired in October 1986 and put in the name of the wife, and the husband and wife then moved into the Mongkok property as their matrimonial home. The installation of a telephone in October 1986 can prove or disprove nothing. The second document is, therefore, also not material.

9. The third document tendered is the payment records allegedly in the handwriting of the wife's father for a period of 12 years. The document contains a reference to $200,000 linked to a lending date of 1 December 1986 which was later in time than the purchase of the Mongkok property in October 1986. Another entry is for a loan of $50,000 made on 1 April 1987. Neither of these recorded loans referred to the Mongkok property. The judge accepted that the once pre-arranged $200,000 loan was to be used on a property the parties found in the Shumshuipo area. There is nothing in the document to show that the recorded $200,000 loan given on 1 December 1986 related to this pre-arranged loan which was never made. Of itself, this document has no relevance. Insofar as this document purports to bear upon the monthly payments of less than $2,000 per month to the wife's parents, which were found by the judge to have been given for food as a sign of showing filial respect, these monthly payments had commenced long before 1 December 1986, the date associated with the $200,000 in this document. The third document is, therefore, also irrelevant.

10. The fourth document is a note from the wife's father to the husband suggesting that the former owner of the Mongkok property was looking for the husband in respect to the new owner's outstanding split telephone charges and rates. The parties were then in occupation of the Mongkok property which was also in the name of the wife. The contact sought by the former owner with respect to these charges and rates, could only be neutral. Therefore, this document is, again, unhelpful.

11. The last document is the husband's Return for Profit Tax for 1994/95 ending 31 March 1995. On record, the husband sustained a loss of $41,785 for that assessment period. The document clearly establishes, so the husband maintains, that he derived no income from his other dance establishments, but clearly, one year's tax assessment does not give the whole picture. The husband has never claimed that any of these organizations is closed. On its own, the Inland Revenue Profit Tax Assessment for one year can take the matter no further. Therefore, this is not the document which may materially affect any factual determinations of the judge.

12. None of the five documents sought to be produced by the husband would undermine the judge's decisions. This court reads the five documents de bene esse. It is quite unnecessary to consider whether the other conditions in Ladd v Marshall [1954] 1 WLR 1489 have been compiled with. Clearly , none of these documents should be admitted in this appeal.

13. Turning to the Mongkok property, the husband failed to substantiate his initial allegation that the balance of the purchase price of the Mongkok property was met by the net proceeds of sale of the Shun Ning Road flat. On 14 March 1994, Madam Yim served on the husband a Notice to Quit the Mongkok property, which the husband did not challenge. On 1 May 1991, in an application for a credit card, the husband categorically stated that the Mongkok property was owned by a relative. In June 1994, he said in opposition to the wife's application for maintenance pending suit that he "was required by the landlord to quit and deliver up vacant possession of the premises which [he was] occupying, therefore [he had] to look for an alternative accommodation, which [he estimated] that the rental would be around HK$7,500 per month." Initially, the husband did not assert to have incurred a liability in form of his later alleged $200,000 loan from the wife's father for purchasing the Mongkok property. These were all, in various ways, declarations against interest. He was clearly not the owner of the Mongkok property and the judge so found. There was no presumption of advancement to the wife by Madam Yim. Having held that Madam Yim provided the purchase money, the judge, in my view, rightly concluded that she was the owner of the Mongkok property and refused to set aside the 1991 transfer by the wife to her mother. The transfer was admittedly effected for fear that in the divorce proceedings the husband might falsely lay claim to the Mongkok property then in the name of the wife, but the frank admission did not assist the husband.

14. As to the Tseung Kwan O property, it is common ground that it was acquired with a $650,000 loan from the wife's father. It is not suggested that the current market value of the property exceeds this $650,000 plus accrued interests. The husband is correct that in the overall analysis, there was no available asset after taking all his debts into account. The Tseung Kwan O property was not, therefore, an asset freely at the husband's disposal for making a clean break with the wife. In reality, the husband had nothing to give away. In the circumstances, as found by the judge, a clean break could not be achieved or achieved in practical terms.

15. The husband is earning below $35,000 a month as a Recreation and Sports Officer with the Urban Services Department. After 1 April 1998, he would enjoy an increment of some $2,000. The judge found the husband to have access to the bank accounts of Dance and Music Service, the International Folk Dance Association and the Folk Dance Association of Hong Kong. It is not suggested that any of these organizations has collapsed. The judge was not able to ascertain the extent of the husband's earnings from these establishments, but he was able to draw "the irresistible influence" that the husband derived an income from them. The husband was at least in a position to incur substantial debts: he had overdrawn $200,000 on his credit card. His overdraft with the Hong Kong Bank was $40,500, and his American Express Bank account also carried a deficit of $30,000. The husband had managed to repay other bank loans but he claimed to be indebted to his brother and sister to the tune of $200,000. The husband allegedly owed his friend some $80,000 and of course, the wife's father $650,000 with interests. The husband had just re-married and his wife was, so he claims before us, unemployed. The husband supported a 17-year old son studying in America with, as the judge found, a remitted monthly sum of $3,000. The husband claimed that additional expenses had been laid out by his brother to be settled after his divorce proceedings. The husband had it on affirmation that he would need $10,095 for himself. Including his son of the first marriage in America and his new wife, his claimed monthly commitment must be commensurately heavier.

16. The wife had been out of employment for some time and gave occasional part-time dance tuition, earning about $2,000 per month. She told the judge she would need slightly over $13,000 per month for herself. The judge was able to say that the wife's claim was overstated. The wife was indebted to her father in the sum of $35,000. In a compromised defamation action brought against the wife by the present wife of the husband, the wife agreed to contribute $120,000 towards legal fees. She has no other assets or resources. She is indebted to the Legal Aid and owes legal fees in the region of $100,000. Having failed initially to make a full disclosure, the wife offered explanations for some of these shortfalls. The judge was finally satisfied with her "complete and substantial disclosure". There exist reasonable prospects of the wife's career change and re-marriage.

17. Clearly, this is not a fit case for ordering a clean break. It was unreal for the husband to effectually assign his joint ownership interest in the Tseung Kwan O property which was acquired entirely on the $650,000 loan from the wife's father. The loan remained outstanding. The judge found that the wife contributed substantially to the husband's career, but he gave no indication as to how the division of the family assets, if any and if realistically available, was to be gauged by her contribution. The judge made no complaint of any or any appreciable concealment of assets on the part of as well the husband as the wife. On the findings the judge was able to make, a clean break was difficult to achieve. In real terms, the husband has little to give. This case cries out for periodical payments. This court is obliged to have regard to the reasonable needs of the wife and the husband's ability to satisfy them. On the facts found by the judge and for the considerations encapsulated in s. 7(1) of the Matrimonial Proceedings and Property Ordinance, this court must strive to quantify the periodical payments if only to avoid remitting the matter to the family judge. The hearing before the judge took eight days and it would be monstrous to send the parties back to the family court for further proceedings.

18. The wife is not likely to become homeless, taking a realistic view of her father's $650,000 loan, but as a precautionary measure, this court would allow the wife to remain in the Tseung Kwan O property for a period of one year from today. The secondary property market is stagnant and the husband will not be unduly hampered by the wife's one-year stay. As the wife has heavy liabilities to meet, it would appear sensible that she should be given a slightly more generous monthly payment for some years. Evidently, we need to keep in mind the husband's financial capability. He, too, has run into substantial debt. Not enough is known of the husband's potential, but it has not been suggested that his business undertakings are collapsing or that his credit lines will be cut. It would seem appropriate that for three years the wife should be allowed $6,500 per month as maintenance plus an extra monthly $7,500 towards clearing up some of her liabilities, making a total of $14,000 per month. The husband's monthly pay is close to $37,000 which could comfortably accommodate an outlay of $14,000. The extra $7,500 to the wife would provide her with $90,000 a year or $270,000 for three years. $270,000 could probably see her through her existing debts. After 3 years and with about 6% annual increment, she should receive $8,000 per month for maintenance as from 15 July 2001. Doing the best this court possibly could, I would make the following orders:

(1) That the wife be permitted to remain in the Tseung Kwan O property rent free until 14 July 1999;

(2) That the wife do transfer her joint ownership interest in the Tseung Kwan O property to the husband at his expense on 15 July 1999;

(3) That in default of the wife so transferring her joint ownership interest within the time specified in (2) above, the Registrar of the High Court be authorised and empowered to sign or execute, at the husband's expense, such papers, documents, instruments or deeds as would be necessary or expedient for the effectual transfer to and vesting in the husband the joint ownership interest of the wife in, of or to the Tseung Kwan O property;

(4) That the husband do pay the wife $14,000 per month on the 15th day of each month for 36 successive months, commencing from 15 July 1998 and expiring 14 July 2001;

(5) That the husband do thereafter pay the wife $8,000 per month on the 15th day of each month, commencing from 15 July 2001;

(6) In the event of any sale of the Tseung Kwan O property by the husband, the husband shall deposit into the family court as security for payment of the monthly periodical payments to the wife one-third of any surplus over $650,000 in his net proceeds of sale;

(7) That the judge's order for payment of $5,000 per month by the husband to the wife for six months from 1 June 1997 to 30 November 1997 shall remain in force;

(8) For the period between 1 December 1997 to 14 July 1998, a period of 71/2 months, the husband do pay the wife $37,500, that is to say, at the rate of $5,000 per month, such sum to be payable on or before 15 October 1998;

(9) The orders made by the judge be otherwise set aside;

(10) Liberty to apply to the family judge by the parties for the implementation of the orders made today.

19. I would, therefore, allow the appeal to the extent I have indicated. The judge's orders refusing to avoid the 1991 transfer of the Mongkok property by the wife to her mother and ordering the husband to pay 6 months maintenance would, therefore, stand. As between the husband and the wife, I would make an order nisi that there be no order as to costs. As between the husband and Madam Yim, I would make an order nisi that the husband to pay her costs of the appeal.

Leong, J.A.:

20. I agree. In the particular circumstances of the wife and the husband, both being in some financial difficulties, an order for periodical payments, being capable of review from time to time, would be best in their interest.

Nazareth, V.-P.:

21. I also agree.

22. The husband is plainly in debt. He does not have the assets or funds upon which a clean break can be founded. Moreover, there are uncertain aspects of the circumstances, particularly as to the future, in relation to which the court's power to review periodic payments make such payments the even more desirable and appropriate option. The orders made below, except to the very minor extent of the exception identified by Liu JA, cannot be sustained. I have no doubt that the orders he proposes embody the best that can be done for the parties in the particular circumstances. To the extent that the orders may prove to be wanting with reference to future developments, the Family Court may be resorted to. I hope, however, the parties should by now be able to see that if they do not end their litigation none of them will in the end profit by even more of what assets are or may become available being swallowed up by legal costs.