N v. L

FCMC 10789 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10789 OF 2012

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J U D G M E N T
(Maintenance Pending Suit)

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The wife’s application

1.  This is hearing of the Petitioner (hereinafter called the “Wife”)’s application dated 27 March 2013 for maintenance pending suit (hereinafter called “MPS”) and for payment of a sum of $221,353 being expenses she has paid for herself and her son, a child of the family, for the period from May to December 2012.  It is noted that the 1^st Respondent (hereinafter called the “Husband”) has been paying a sum of $5,000 per month as interim MPS, pursuant to an order made by Deputy District Judge Yim dated 11 January 2013.

2.  By way of a Notice of Application for Ancillary Reliefs dated 22 March 2013, which is followed by a Summons dated 16 April 2013, the Wife also took out an application for setting-aside certain transactions having been made by the Husband including the transfer of a fruit trading business (hereinafter called “HFL”) under section 17 of the Matrimonial Proceedings and Property Ordinance (hereinafter called the “MPPO”), Cap. 192 and an injunction order.  The hearing of both applications was fixed to take place on 9 July 2013 with 3 hours reserved.  The hearing was re-fixed to 27 September 2013 due to legal aid application.  At the hearing dated 27 September 2013, leave was granted to the Wife to withdraw her s.17 application (save and except the part relating to HFL) and her injunction application with costs reserved.  The hearing of her application for MPS was adjourned to 15 November 2013.

3.  A call-over hearing on the Wife’s application to set aside the transfer of the HFL is fixed to take place in January 2014.

4.  At this hearing, Mr Leung appearing for the Wife did not pursue her application for the payment of the said sum of $221,353.

Undisputed Facts

5.  The parties met at work in 1995.  Subsequently, the Husband went to work for his father’s business of selling fresh fruits.

6.  The parties were married in 2000.  The Husband and Wife are both 36 years old.

7.  The Wife has run her own beauty centre for the period from 2002 to 2009.

8.  The only child of the family, a son, was born in July 2008.  He is now aged 5 years old.

9.  In mid 2008, due to the Husband’s fathers’ poor health, the father’s fruit trading business namely HFL was transferred to the Husband.  The Husband has run his fruit selling business through HFL from mid 2008 to mid 2012 as a sole proprietor.

10.  The parties separated in about September 2009, as the Husband moved out of the matrimonial home which is held in joint names of the parties free of mortgage.

11.  The Husband paid the Wife about $25,000 per month for maintenance until June 2012 when he ceased making maintenance payment except meeting the son’s school fees by auto pay.

12.  As per the Business Registration records, the Husband transferred his interests in the business of HFL to a third party on 9 July 2012.

13.  The Wife’s Petition for divorce (Two years separation) was filed on 26 July 2012.

14.  There has been a MPS order of $5,000 against the Husband since January 2013.

15.  The Decree Nisi was granted in April 2013.

16.  By an Order dated 30 April 2013, it is ordered that the custody, care and control of the son be granted to the Wife with reasonable access to the Husband.

17.  The son is now studying K3 and is living with the Wife.

The Application Principles

18.  Ms Tsang appearing for the Husband contended as the Wife wants an increase in the interim periodical payments now paying by the Husband, she is required to show that there is a change of circumstances in order to be successful in the present application.  Mr Leung responded this is not an application for a variation of a MPS order.  I agree with Mr Leung in this regard.  The “interim” MPS Order made by Deputy District Judge Yim was made as a stopgap measure without considering any of the evidence including the affirmations and questionnaires filed by the parties.  It was made entirely on a temporary basis.  This is the first time that the Court will have to consider the merits of the Wife’s MPS application.

19.  The Wife’s application for herself is governed by section 3 of the MPPO.  Provision for the child is under section 5 of the MPPO.

20.  The court has a wide discretion in the matter, subject to the result being reasonable.  In TL v ML  & Ors (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263, Deputy High Court Judge Mostyn QC (as he then was) stated at 1289:-

“The sole criterion to be applied in determining the application is ‘reasonableness’ (s 22 of the Matrimonial Causes Act 1973), which, to my mind, is synonymous with ‘fairness’.”

21.  The court will consider all factors that may influence the outcome of the application so as to make such order as it regards reasonable in all circumstances of the case.  In C v F [2006] HKFLR 41, HHJ Bruno Chan stated at 45:-

Although the sole statutory guideline in considering maintenance pending suit is that the award shall be ‘reasonable’, the court will nevertheless bear in mind all the factors drawn to its attention relating to the marriage and the parties to it and perhaps the two most outstanding matters in every case, as in this one, are the standard of living of the parties, and the ability of the husband to pay.”

Discussion

The Wife and Son’s Reasonable Needs

22.  As stated in her Form E, the Wife and the son’s current monthly expenses are as follows.  For general expenses she needs $12,584.99 per month.  For personal expenses, she needs $8,993 and for the son’s expenses she needs $18,264.37. Altogether, she needs $39,842 per month.  By a letter dated 13 November 2014, the Wife made an open offer of $18,000 as her MPS, pending the final disposal of the question of ancillary reliefs.

23.  Ms Tsang contended that the Wife should cut back on her expenses to face the reality in view of the Husband’s alleged inability to pay for her and the son’s expenses and so it is submitted on behalf of the Husband that their monthly expenses could be reduced to general expenses of $8,775, personal expenses of $1,400 and the son’s expenses of $5,880, i.e. $15,755 per month in total.

24.  As submitted on behalf of the Wife, during the marriage, the parties’ standard of living and the Husband’s financial support are as follows:-

(a) The parties lived in a self-owned apartment of 600 sq. ft.

(b) They hired a domestic helper.

(c) The Husband had taken money from HFL to pay for the maintenance to the Wife and son.

(d) The Husband said to the Social Welfare Officer that the Wife and son’s expenses were around $15,000 to $40,000 per month.

(e) On the day of separation, the Husband agreed in writing that he would be solely responsible for the living expenses of the Wife and the son while the Wife would take care of the son.

(f) After separation in September 2009, the Husband continued to pay maintenance of the Wife and the son.

(g) The Husband actually paid $25,000 per month until June 2012.  From October 2009 to June 2012, he has paid about $800,000 to the Wife for maintenance.  This is roughly equivalent to $25,000 per month for the 32 months period.

25.  On account of the matters aforesaid, I am prepared to accept that the reasonable needs of the Wife and son are not less than $18,000 per month.

The Wife’s Earning Capacity

26.  The Wife was a beautician and she ran a beauty centre.  Since she was assisted by a domestic helper in the care of the son, Ms Tsang contended the Wife has earning capacity and can always resume working as a beautician.  Mr Leung responded that it is highly unlikely she can earn an income as a beautician now, pending her claim for ancillary relief, or in the near future, even though she was a beautician.

27.  In this regard, I am prepared to accept Mr Leung’s submissions for the following reasons:-

(a) It would be unrealistic for her to start up a beauty business now provided that it would require capital that she does not have.

(b) In the past, the Wife’s beauty centre business was not profit generating.  It is far from clear as to whether she can earn an income even if she starts up a beauty centre business again.

(c) The Wife closed her business in June 2009.  Given that she has left the industry for more than 4 years, probably it is necessary for the Wife to take up some skills upgrading and enhancing courses for retraining purpose so as to broaden her employment opportunity before she can put up herself for hire even if she wants to resume working as a beautician.

(d) The Husband believes that the Wife has never stopped working as a beautician since their separation but he does not produce any creditable evidence in support of such belief.  For the present purpose, I consider I should disregard his bare assertion in this respect.

28.  Notwithstanding that for the purpose of the present application it is not appropriate for the Court to conclude a finding of fact as to the parties’ disputes on the Wife’s earning capacity, I regard it is justifiable in the instant application to discount the Wife’s earning capacity, if any.

29.  MPS applications are approached on a broad brush basis.  Further affirmation will be filed and witnesses will go to the box and be cross-examined, when a detailed examination of the party’s financial resources and needs will be taken, at the substantive hearing.  With the further evidence and a detailed examination, the Court will make its conclusion in the matter and any under provision or over provision in the MPS order may be set off if it is fair and just so to do.

30.  I now turn to the question as to the Husband’s ability to pay.

The Husband’s ability to pay

31.  In the present application, the core of the Husband opposition is that he does not have the ability to pay.  Also he says no longer can he use the funds of HFL after the transfer of the business.  He asserts he is working as a fruit market worker for HFL earning a salary of $15,000 per month.  According to his Form E, he does not have any substantial asset (apart from his interest in the matrimonial home and his interest in some insurance policies).  On his own assessment of his current monthly expenses, he needs $15,000 per month.  His assessment does not include any contribution to the Wife and son’s expenses.

32.  In spite of his financial difficulties, the Husband has made an open offer of a MPS in the sum of $6,000 per month.  He said he has to tighten the belt by living on $9,000 a month if he will be required to make a MPS of $6,000 per month.

33.  It is submitted on behalf of the Wife that the Husband’s claim that he is only an employee of HFL earning $15,000 per month   is dubious to say the least and the Court should be incredulous to the Husband’s bare assertion.  The Court is invited to consider to the followings:-

(a) HFL was a business that was passed down from the Husband’s father to him.  During the Husband’s ownership, although he purportedly was never paid a salary, he was able to pay for all the expenses of the family including mortgage repayments for the matrimonial home.

(b) HFL being a sole proprietorship was a direct asset of the Husband which he could use as he pleased (including all income from sales).  This is in fact exactly what he had been doing.

34.  The Husband claimed that HFL was trading at a loss over the years.  He relied on the Profit/Loss Accounts which were recently provided by the Husband in his 3^rd Affirmation.  According to the accounts prepared by the Husband, HFL was trading at a net loss of $502,554.49 in 2009, $136,068.92 in 2010 and $583,372.30 in 2012 but made a net profit of $79,539 in 2011.  After having carefully considered, I agree with Mr Leung’s submission that these Profit/Loss Accounts should not be taken at face value for the following reasons:-

(a) The Profit/Loss Accounts were recently prepared at the Husband’s request.  It must therefore be kept in mind that these Profit/Loss accounts were created mainly for the purposes of the Wife’s claim for ancillary reliefs.

(b) For the year ended 2009, there was a retained profit of $2,882,632.  That means previously HFL was making money hence there are retained profits. 

(c) It can be seen that there are significant write-offs for “bad debt” in each of the said financial years.  These are unexplained and the Court presently does not know the basis of why significant sums were suddenly written off as bad debt.

(d) Now, there is no way for the Court to verify the Profit/Loss Accounts.  In the Wife’s Questionnaire, she asked the Husband to produce the tax returns of HFL.  In reply, the Husband says he does not have such tax returns.

(e) In any event, according to the Profit/Loss Accounts, it can be readily seen that HFL is a big business and there are significant cash transactions taken place over the years.  In 2009, HFL had sales of $20,421,562.55 and purchases of $18,721,624.14.  In 2010, HFL had sales of $20,955,360.81 and purchases of $19,091,951.30.  In 2011, HFL had sales of $25,310,676.83 and purchases of $23,349,650.08.  In 2012, HFL had sales of $22,761.658 and purchases of $20,983,845.48.  It is clear that HFL has been a high volume trading business with lots of cash in hand generated from the cash transactions.

(f) Prior to the separation, there was not a shred of evidence or any sort of inkling to suggest that the Husband wanted to transfer away his sole proprietorship to the 2^nd Respondent.  In January 2012, the Husband suddenly did not want to operate the business any further and in July 2012, he disposed of HFL to the 2^nd Respondent.

(g) It could not be by coincidence that the Wife’s Petition for Divorce was issued only 2 weeks later in July 2012.

(h) Despite the Husband’s claims that he is only an employee earning $15,000 per month, he has continued to be an authorised signatory of the cheques of HFL.

(i) Despite the assertion that by July 2012, HFL has already been transferred to the 2^nd Respondent, the Husband continued to deposit significant amounts of money from his personal account into the account of HFL in August, September and October 2012.  At first sight, it is devoid of common sense if the HFL was no longer his he would continue to deposit his own money into the account of HFL.  The Husband’s explanation at paragraph 16 of his 2^nd Affirmation is unconvincing.  It is inexplicable that the 2^nd Respondent was required to use the Husband’s personal account for the business of HFL when (a) she very likely has her own personal account and (b) HFL has its own bank account.

(j) It does not make commercial sense that the customers of HFL would pay the Husband knowing that purportedly he is no longer its owner.

35.  It is the Wife’s position that the Husband is still the beneficial owner of HFL. The parties’ contention on the beneficial ownership of HFL will be substantively dealt with in the Wife’s s.17 application.  It is inappropriate for the Court to make a fact finding in this respect in a MPS application.  However, the court is entitled to take a preliminary view on the matter, approaching the issue on a “broad brush”.  Having carefully considered all evidence now presented before me, for the time being I am prepared to accept that even after the alleged transfer of HFL, the Husband has continued and probably will continue to have access to the funds and resources of HFL so much so that he can use its funds for his personal uses.

36.  It is worthy of noting that the Husband has undertaken many transactions involved large sums of money in his personal bank accounts.  In the year 2012, from February to October there were deposits of US$650,988.65 (equivalent to HKD5,077,711) in to his personal multicurrency bank account (hereinafter called the “BoC Multicurrency Account”).  Over the same period, there were deposits of $1,138,824.74 into his personal HKD bank account (hereinafter called the “BoC Personal Account”)

37.  It can be seen from the various bank statements that the Husband withdrew large amounts of cash from both the BoC Multicurrency Account and the BoC Personal Account during the period of February 2012 to October 2012. There were (1) withdrawals of US$730,000 (equivalent to HK$5,659,398) from the BoC Multicurrency Account and (2) withdrawal of $1,208,492.57 from the BoC Personal Account.

38.  Apparently, the Husband could use these funds as he chooses:-

(a) First, there are payments to HFL’s bank account.

(b) Second, there are purported repayments of loan, payments to the Wife for her expenses and payments of his expenses.

(c) Third, there are huge withdrawals made to a third party company.  The Husband claimed that the payments to the third party company were made on behalf of his friends who due to currency control in PRC, could not settle those payments from PRC by themselves and so he was asked to do it on their behalf.  This is very dubious as:-

(i) There is no evidence by way of affirmation from these “friends” supporting his claim;

(ii) The Husband has shown no evidence of what he is to gain from this arrangement.  He says that he was given some “business opportunities” but there has been no evidence provided by him of these purported “business opportunities”.

39.  In addition, it is submitted on behalf of the Wife that the Court must take into account the following non-disclosures on the part of the Husband:-

(a) The non-disclosure of the disposition of HFL to the 2^nd Respondent.  It was only by the Husband’s Form E that the Wife came to know that HFL was transferred to the 2^nd Respondent at nil consideration.

(b) Non-Disclosure of Bank Accounts

(i) In Part 2.3 of the Husband’s Form E, he disclosed that he had 3 accounts.

(ii) It was subsequently discovered that the Husband has 21 other bank accounts which he has failed to disclose.  The Court is referred to paragraph 31 of the Husband’s 2^nd Affirmation and paragraph 23 of the Husband’s 3^rd Affirmation for a list of the bank accounts which were not disclosed by him.

(iii) Some of the bank account statements have been provided to the Wife but not all of them.

(c) Pursuant to the Husband’s Answer to the Wife’s 1^st Questionnaire dated 27 March 2013, the Wife filed a 2^nd Questionnaire dated 6 May 2013 which includes questions relating to issues including HFL and undisclosed bank accounts.  Up to present, the Husband has not provided his Answers to the Wife’s 2^nd Questionnaire.  Nor has he provided any of the documents requested under the 2^nd Questionnaire (except the documents he has disclosed in his 3^rd Affirmation).

(d) The Husband’s undisclosed businesses:-

(i) In part 2.4 of the Husband’s Form E, he disclosed that he was 51% shareholder of a Company Limited.  It was later discovered that he was in fact a 99% shareholder.

(ii) The Husband failed to disclose that he was also the owner of another sole proprietorship. The Husband explained that the business was established to order fruit from overseas companies for HFL.  Up till now there is no documentary evidence provided by the Husband in support.  In the Profit/Loss Accounts of HFL, there is no mention of such business.

40.  In HJFC v KCY CACV 127/2011 (Date of Judgment 28 October 2011), Hartman JA said in paragraph 37 of the Judgment as follows:

“The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it. For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i. …

ii. …

iii. …

iv. Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.”

41.  It has been my preliminary view that for the purpose of the present application, the Husband should be taken as still having access to the funds and resources of HFL.  During marriage, the Husband has been able to pay maintenance to the Wife and son in the region of about $25,000 a month with the funds of HFL. Therefore, for the purpose of the Wife’s application, I am prepared to hold that the Husband has had and will have the ability to continue to make a drawing of about $25,000 per month from HFL, inclusive of his alleged current monthly salary of $15,000.  I should take into consideration of the fact that now the Husband has to maintain 2 households.  He has to pay his rent of about $6,000 per month and other general expenses.  The Husband has indicated that he is ready to tighten his belt and live on $9,000 per month.  It seems to me it is reasonable to allow him $10,000 a month for his monthly expenses.  Thus, I conclude that the Husband has the ability to pay an interim maintenance for the Wife and son in the sum of $15,000 per month.

42.  Be that it has been my view that the reasonable needs of the Wife and son are not less than $18,000 a month, the Court has to consider the Husband’s ability to pay.  As suggested by Ms Tsang, the Wife might have to reduce her expenses to face the reality of the Husband’s limited resources or to make up the short-fall with the help from her mother, as she did in the past, to tide her over until the question of ancillary reliefs is substantively dealt with.

43.  In conclusion, I regard that an order that the Husband shall pay the Wife interim maintenance in the sum of $15,000 per month for the benefit of the Wife and son would do broad justice to the situation.  The Court may order an interim maintenance payment be back dated to the date of the application.  I take notice that the Husband has already paid his former solicitors legal fees in the sums of $57,000 and $80,000 respectively.  No doubt legal expenses have been a heavy burden on both parties.  Both parties are now on Legal Aid.  It has been my preliminary view that the Husband can draw about $25,000 per month from HFL.  With $25,000 per month, he needs to meet his expenses, periodical payments in the sum of $5,000 per month to the Wife and son and the above-mentioned legal expenses.  It is unlikely that the Husband has the means to meet a back dated order.  Like so, it is ordered that the 1^st payment of the interim maintenance in the sum of $15,000 per month shall be paid on or before 10 December 2013, and thereafter on the 10^th day of each succeeding month, until further order of the Court.  The said payments are to be paid by the Husband to the Wife’s designated bank account.  There shall be no back dating.

44.  The main issue in this application is the question on the Husband’s ability to pay, and so the question of the costs of this application should be left to be decided at the same time of the substantive hearing of the question of ancillary relief when the Court will make a fact finding on the Husband’s resources.  Tentatively, it is ordered nisi that costs of this application be reserved.  The order nisi becomes absolute after 14 days hereof, unless a party has made an application for a variation of the order.  It is ordered the parties’ own costs of this application be taxed in accordance with Legal Aid Regulations.