CYC v. WMS

FCMC 11250 / 2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 11250 OF 2004

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BETWEEN

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J U D G M E N T
(Ancillary Relief)

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BACKGROUND

1.  This is the ancillary relief proceedings between the Petitioner and Respondent.

2.  The parties were married on 19^th October 1989 in the United States of America (“USA”) and there are 2 children of the family, namely D who was born on 2^nd June 1990 (now 20 years old) and E who was born on 18^th May 1992 (now 18 years old). Both of them are receiving full time education in the universities in USA.

3.  The parties established an education fund at US$600,000 (about HK$4,680,000), which was deposited into the joint name account of the parties with Taifook Securities for the purpose of the present and future education and living expenses of the children. Hence, there is no need for the court to make any financial provision for the children and no order in this regards will be sought by the parties.

4.  The Petitioner (“Husband”) is aged 53 under the employment of F XX Ltd. earning about $100,000 per month (including bonus and benefit). Between 1994 and 2004, he earned about HK$200,000 per month.

5.  The Respondent (“Wife”) is aged 48 who has been a housewife since 1991 and is now unemployed. She has a college degree and passed the CPA examination in USA.

6.  In July 2004, the Wife transferred nearly all the money from the joint name account with the Husband into her personal account and left for USA with the children. The Wife said that the Husband had an affair but he denied.

7.  The divorce proceedings were commenced by the Husband in October 2004 on the basis of “unreasonable behaviour” and were subsequently amended on the basis of “2 years separation” in 2007. The marriage between the parties lasted for nearly 19 years when the Decree Nisi was granted on 22^nd July 2008 on the basis of “2 years separation”.

THE LAW

8.  The governing principles in relation to the distribution of the family assets in the dissolution of marriage are set out section 7 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, which states as follows:

(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

9.  The Court of Final Appeal in LKW v DD[1] set out 4 principles as to how section 7 shall be approached, which are stated briefly as follows:

a. The first is that the implicit objective of a section 7 exercise is to arrive at a distribution of assets which is fair as between the parties[2];

b. The second is that the concept of fairness requires the refutation of any gender or role discrimination[3];

c. The third principle is that, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a “yardstick of equal division” which should be departed from only for good, articulated reasons[4];

d. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement[5]. 

10.  The Court of Final Appeal further laid down 5 steps for a section 7 exercise briefly as follows:

a. The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing[6];

b. The next step is for the court to assess the parties’ financial needs[7];

c. If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the “needs” question previously considered to be dealt with under that principle[8];

d. The fourth step therefore involves considering whether good reasons exist for departing from the principle of equal division[9];

e. When deciding the outcome, the court is not bound to depart from equality in the division of the parties’ assets even if one or more of the factors considered are engaged on the facts.  The weight to be given to such considerations is a matter of discretion for the court[10].

INDENTIFICATION OF ASSESTS

11.  The first step is to identify the assets of the parties and the family.

12.  On 12^th January 2011, I directed, inter alia, that the parties do file an agreed and signed statement of issue in dispute and list of the parties’ agreed assets and liabilities on or before 15^th January 2011. But, the parties failed to comply with my direction.

13.  Only after the completion of the 1st day trial on 18^th January 2011, the parties’ Counsel, Mr. Kenneth Wong for the Husband (“Mr. Wong”) and Mr. Enzo Chow for the Wife (“Mr. Chow”), were able to agree the assets of the parties and the family as set out below.

14.  One of the main family assets is the TTD Property which is located in USA and held by the parties in joint name. Originally, its value is agreed at HK$7,410,000. At the last day trial on 20^th January 2011, the parties’ Counsel on their respective clients’ behalf agreed in writing, inter alia, that the Wife do buy out the Husband’s half share in the said property at the valuation agreed by the parties within 5 months. Therefore, I will herein below make an order in terms of the same.

15.  There are several joint name bank accounts of the parties in the total sum of $45,649.55.

16.  The RP Property located in Hong Kong has been sold by the parties and the balance of the sale proceeds for the sum of $10,776,921.33 has been paid into court.

17.  The parties also have no dispute that they are holding the following assets in their respective sole names:

a) The SH Property in USA owned by the Wife, value of which is agreed at HK$5,850,000 subject to the outstanding mortgage loan for HK$3,398,296;

b) Balance in bank accounts held by the Wife for HK$22,479.83;

c) Balance in securities accounts held by the Wife for HK$10,009,566.95 (after adjustment according to the most updated statement);

d) Other assets held by the Wife for HK$115,500;

e) Personal loan due to Shanghai Commercial Bank by the Wife for HK$780,00;

f) Balance in bank accounts held by the Husband for HK$438,479;

g) Balance in securities accounts held by the Husband for HK$809,140;

h) Policy held by the Husband for HK$450,000;

i) MPF/retirement fund of the Husband for HK$4,220,226;

j) Northwest Mutual Policy Loan owed by the Husband for HK$400,000.

18.  At the 2^nd day trial, the parties’ Counsel were further able to agree 6 issues in dispute (“Agreed Issues”) as follows:

a. Liability of the Wife regarding an alleged loan from Winnie (“her sister”) for the sum of US$80,000 (or the equivalent sum of HK$624,000);

b. Whether the family assets shall be reduced by a sum of US$19,934 (or the equivalent sum of HK$155,485), which was paid by the Wife to her sister;

c. Whether the Wife had engaged excessive trading with high margins and if so, whether this amounts to “obvious and gross” conduct on the part of the Wife so that it would be in the opinion of the court inequitable to disregard it and thus, whether it is a good reason to depart from the principle of equal division;

d. Whether the alleged sum of HK$350,000 borrowed by the Husband from his mother is in existence or not;

e. Whether the Husband has hidden a sum of HK$1,044,000 (ie $29,000(equivalent to RMB$25,000) X 36 months) being the alleged rent paid by him to the landlord in PRC for 36 months;

f. Whether the compensation paid to the Husband by his ex-employer XXX for the net sum of US$148,857.7 (or the equivalent sum of HK$1,161,090) shall be added back to his assets.

19.  On 10^th February 2011, the Wife filed a Notice to Act in Person and also filed a written closing submission signed by her.

20.  On 14^th February 2011, the Husband’s solicitors wrote to the court seeking leave to file supplemental written submission on the ground that the Wife’s written closing submission contains a lot of irrelevant issues.

21.  I agree that in the Wife’s written closing submission, she tried to raise and re-open a lot of factual issues which are not covered by the Agreed Issues. More important is that most of these factual issues were never been put or raised by Mr. Chow at the trial. It would be totally unfair and prejudicial to the Husband who had no opportunity to testify on these factual issues. I fully understand that the Wife being a layman who has not received any formal legal training but has to prepare a written closing submission. She may not be able to realise that she is not allowed to give further evidence by way of her closing submission. However, for unknown reason, she chose to be legally unrepresented after the trial and prepare the written closing submission by herself. In view of the substantial assets owned by her, I can see no reason why she has to do so.

22.  Accordingly, I grant leave to the Husband to lodge a written submission in reply concerning the irrelevant issues raised in the Wife’s written closing submission. In short, I will reject and not consider those matters in her written submission unless they are related to the Agreed Issues or matters raised by Mr. Chow at the trial. For instance, the Wife stated in her written submission that the Husband hid 1/3 of his income and concealed a total sum of HK$1,276,935 since 2007. The argument of “one third ratio” was never raised at the trial. So I will not consider it.

Alleged loan from Winnie for US$80,000

23.  Concerning this issue, the Wife’s case is that in order to defray the necessary expenses, such as property tax for TTD Property at US$17,000 per year, monthly repayment for SH’s mortgage in the sum of US$4,046, the school fees of D for the sum of US$17,813, one on 29^th December 2009 and another on 26^th March 2010, she had to borrow and did borrow a total sum of US$80,000 from her sister. Altogether there were 7 cheques drawn in favour of the Wife by her sister for the period from June 2009 to March 2010. The Wife said that she did not have to pay any interest to her sister and that up to this date, she had not yet repaid this sum to her sister.

24.  The Wife admitted during the cross examination that TTD Property was let out at an annual rental of US$54,000 from July 2008 up to June 2009.

25.  Mr. Wong for the Husband submitted that the Wife made up these loans to reduce the family assets.

26.  It is not in dispute that the Wife is all along unemployed and after June 2009, there was no rental income from TTD Property. In order to defray the living expenses every month after June 2009, I consider that she had to either borrow money from other or withdraw cash from the securities accounts or bank accounts. It is also undisputed that a total sum of US$80,000 by way of 7 cheques drawn by her sister was paid into the Wife’s bank account. Therefore, she did receive this sum from her sister. However, the Husband had not pointed out any suspicious drawings from her securities accounts or bank accounts after March 2010 and put to the Wife that she had already used such sum to repay her sister. Thus, I am of the view that the Wife had not yet repaid the sum of US$80,000 to her sister and the equivalent sum of HK$624,000 shall be deducted from the Wife’s assets.

Payment of US$19,934 to Winnie

27.  The Wife explained that these payments were made by her to her sister by 6 cheques drawn for different sums during the period from October 2003 to June 2004 for purchase of clothes as her sister was the chief designer of a very famous fashion company and got some discount on the purchase.

28.  Mr. Wong for the Husband submitted that the total sum of US$19,934 was lent by the Wife to her sister.

29.  I notice that there are 3 cheques for the respective sums of US$2,850, US$2,260 and US$3,824. The figures themselves suggest that they shall be some kind of repayment rather than loan from the Wife to her sister. I think it would be quite unusual for someone lending a sum like US$3,824 to the other. Besides, all these cheques were drawn before the commencement of the divorce proceedings. Thus, I consider that the Wife’s explanation is more reasonable than the submission by the Husband and that the sum of US$19,934 will not be added in the Wife’s assets.

Alleged loan of HK$350,000 by the Husband from his mother

30.  In the Husband’s Form E dated 14^th December 2004, it was stated in Part 2.13 that he had a personal loan for HK$156,000 from his mother to finance his living expenses and legal expenses for this case. At that time, he was working on a consultant project and was required to establish a leasing joint venture (“JV”). His income was solely from the profit of the JV income.

31.  In his 2^nd Form E dated 22^nd May 2009, such personal loan increased to HK$350,000. The Husband explained in his Answer dated 28^th December 2009 that he had to borrow such loan for HK$350,000 from his mother to pay for his living expenses from July 2004 to April 2007 during his unemployment. He said in his evidence in chief that he received no payment from JV because it failed at the end and that this loan had not yet been repaid to his mother.

32.  Mr. Chow for the Wife did not ask the Husband any question on this loan. Nonetheless, the Wife challenged this loan in her written closing submission by saying that this sum of HK$350,000 was not deposited into any account disclosed by the Husband and that it is suspicious as to why the Husband failed to repay even a penny to his mother in the past 6 years.

33.  The Wife submitted that either it is a gift from his mother or the alleged loan is merely a scheme set up by the Husband to undermine the value of his assets.

34.  I cannot accept the Wife’s challenge and submission in this regards as no such questions were put to the Husband during the cross examination by Mr. Chow. It would be extremely unfair to the Husband since he had already lost the opportunity to answer or reply to all these challenges.

35.  In the circumstances, I conclude that the Husband did incur such liability and that the sum of HK$350,000 will be deducted from his assets.

Whether the Husband has hidden a sum of HK$1,044,000 being the alleged rent paid by him to the landlord

36.  In the Wife’s Questionnaire dated 15^th October 2009, the Husband was asked if his employer provided housing to him. He replied negative in his Answer dated 28^th December 2009 and enclosed therewith copies of 3 months rental receipts. He further said that he could claim tax allowance in PRC for income tax purpose.

37.  In the cross examination, the Husband referred to his salary slips from October to December 2009 which showed that RMB$25,000 was deducted from his salary in calculating his taxable income in PRC.

38.  3 rental receipts for the same period produced by the Husband all showed that the payee is WKP (English translation) who is the landlord. The Husband produced bank statements to show that a cash sum of RMB$25,000 was withdrawn by him for payment of rent every month.

39.  Regarding the invoices for the same period, the Husband explained why the payee stated therein is not the landlord. He said that the payee must be stated as his employer in order to enjoy the tax deduction for being an expatriate working in PRC. He also explained that the invoices could only be obtained by way of an application to the PRC tax authority by a registered body. Thus, the invoices were not issued in the name of the landlord.

40.  According to the Husband’s employment contract dated 3^rd March 2008, there is no provision as to the housing allowance or benefit by his employer. According to the Husband’s tax return for the period from 1^st April 2009 to 31^st March 2010 signed by his employer, there is no housing allowance or benefit provided by his employer.

41.  Mr. Chow for the Wife did not put any case to contradict the Husband’s explanation during his cross examination.

42.  The Wife in her written closing submission said that the practice alleged by the Husband is uncommon in tax law in most countries and to most multinational company policy relating to housing allowance. She invites the court to draw adverse inference against the Husband that the said cash withdrawal of RMB$25,000 (equivalent to about HK$29,000) every month was hidden by him.

43.  I refuse to accept the Wife’s submission in this regards on the same basis as mentioned in above paragraph 34. On the other hand, in the absence of the contrary evidence on the part of the Wife such as expert evidence in respect of PRC tax law, I am of the view that the Husband’s explanation is reasonable. Based on the evidence available, I am satisfied that the Husband’s employer did not provide him with any housing allowance or benefit. Hence, I consider that he has to pay the rent by himself and no adverse inference will be drawn against him in relation to the rental payment.

Compensation paid to the Husband by his ex-employer XXX

44.  It is not disputed that the Husband did receive compensation for US$167,895 from his ex-employer XXX in about 2006. The Wife submitted that after deduction of tax liability for US$19,037.3, the net sum is US$148,857.7 and that the Husband failed to account for the present whereabouts of such sum.

45.  The Husband explained that as shown in 2006 Tax Year Interest Computation, the tax deficiency and penalty subject to interest was in the total sum of US$26,651.34 instead of US$19,037.3. He also admitted that he made a mistake by omitting to disclose the Affinity Federal Credit Union account in his previous Form Es and only disclosed it in his last Form E dated 15^th December 2010. He further explained that the legal costs for lodging the claim against XXX (“XXX case”) was US$75,000 and he had spent about US$50,000 on the children and buying air tickets in visiting them in USA and also some on living expenses. As shown in his last Form E dated 15^th December 2010, there was only HK$19,328 (equivalent to about US$2,478) left in the Affinity Federal Credit Union account.

46.  Mr. Wong also submitted that Mr. Chow did not put any case against the Husband and therefore, his evidence shall be accepted. In the absence of contrary evidence given by the Wife, I accept that the Husband did pay the tax of US$26,651.34 and use a sum of US$75,000 for legal costs of XXX case and US$50,000 on the children, buying air tickets in visiting them in USA as well as some on living expenses.

47.  Nonetheless, I find that in the Husband’s last Form E dated 15^th December 2010, he stated that he had borrowed not just a loan for HK$400,000 from Northwest Mutual Policy in order to finance XXX case and living expenses in 2004 but also another loan for HK$350,000 from his mother for living expenses during unemployment. Obviously, there is an overlapping of expense or double counting for the same purpose.

48.  In the Husband’s Form E dated 5^th January 2007, he did not mention about the compensation from XXX which he had already received in 2006. The sum of US$167,895 is not a small amount of money that he may forget to disclose in his Form E. In the Wife’s Request for further and better particulars dated 13^th January 2005, the Husband was asked to provide details of the legal proceedings against XXX but he failed to do so. I am of the view that he did not make full and frank disclosure of his financial position at that time.

49.  Besides, I consider it unacceptable for the Husband to spend almost entire sum of US$167,895 within 2 years, namely from 2006 up to March 2008 when he started to work for F. I have to draw adverse inference against him in this regard. As I accept that he did incur US$75,000 for legal costs of XXX case and that he had borrowed HK$400,000 (equivalent to US$51,000) from North West Mutual Policy, the balance of legal costs payable in 2006 shall be about US$24,000 (ie US$75,000 – US$51,000). I conclude that he is only able to account for the expenses incurred for about US$103,129.34 (ie US$24,000 + US$26,651.34 + US$50,000 + US$2,478[11]). I take the view that he failed to account for the balance for about US$64,765.66 (ie US$167,895 - US$103,129.34) which is equivalent to about HK$500,000. I take the view that such sum shall be added back in the Husband’s asset.

50.  To sum up the above, the value of the Wife’s assets is HK$11,195,250.78 (ie $5,850,000[12] - $3,398,296[13] + $22,479.83 [14]+ $10,009,566.95 [15]+ $115,500[16] - $780,000[17] - $624,000[18]). The value of the Husband’s assets is HK$5,667,845 (ie $438,479 [19]+ $809,140[20] + $450,000[21] +$4,220,226 [22]- $400,000[23] - $350,000[24] + $500,000[25]). Excluding the Tall Timber Property and the joint name bank accounts, the total value of the matrimonial assets is HK$27,640,106.33 (ie $11,195,250.78 + $5,667,845 + $10,776,921.33[26]).

Financial Needs of the Parties

51.  After the identification of assets, the court has to assess the financial needs of the parties. Since the parties have set up a fund for about HK$4.68 million for the children education and living expenses, I do not have to consider the parties’ financial needs concerning the children. I believe that such fund is sufficient to defray all the necessary expenses of the children until they complete the full time education. From the parties’ respective updated Form Es, the Wife stated that her monthly expenses excluding the children’s expenses are about HK$130,000 whereas the Husband stated that his monthly expenses are about HK$70,000. I think that the Wife’s monthly expenses for about HK$130,000 for her own is on high side although this issue is not discussed by the parties’ Counsel at the trial. Regarding the earning capacities of the parties, the Husband is much higher than the Wife.

52.  In any event, as the family has the assets valued over HK$27 million excluding the TTD Property and the joint name accounts, I am of the view that the available assets are sufficient to cater for both parties’ needs. Generally, the court will decide that sharing principle applies to the total assets, so that they should be divided equally between the parties unless good reasons exist for departing from the principle of equal division. Mr. Justice Rebeiro PJ in LKW v DD[27] said:

84.  What then are potentially good reasons for such a departure?  The answer is to be found in the terms of section 7 and the implicit objective of a fair distribution of the assets.  Any of the matters listed in paragraphs (a) to (g) of section 7(1) may provide an appropriate reason, as may the “conduct of the parties” and “all the circumstances” referred to in section 7(1).  The catch-all category of “all the circumstances” makes relevant any matter which bears on the fairness of the financial outcome in a matrimonial context. 

85.  It is important to stress that while such factors, individually or cumulatively, are potentially capable of resulting in a departure from an equal division, a finding that one or more of those factors are engaged does not necessarily mean that a departure must occur.  The weight to be given to such factors is in the court’s discretion to be exercised in Step 5 as described in Section E.6 below.  It cannot be over-emphasised that the matter is fact-specific and discretionary.  The sharing principle must not be mechanistically applied.

Any good reasons exist for departing from the principle of equal division.

Excessive Margin Trading on Stocks by the Wife

53.  This is in fact one of the Agreed Issues as stated in paragraph 18 above. The relevant legal principle can be found in the judgment of LKW v DD as follows:

104.  Conduct, or more accurately, negative conduct, is therefore only to be regarded as a material factor if it is “obvious and gross” in the sense explained in Wachtel v Wachtel or, which comes to the same thing, if it is such that it would in the opinion of the court be inequitable to disregard it.

54.  The Husband’s case is that margin trading on stocks by itself is a risky investment because portion of the investment money was borrowed and there was the need to pay interest.  Furthermore, more injection of money was required when the stocks’ value dropped and there was the risk for margin calling. 

55.  Mr. Wong submitted that the following illustration was given by him during the cross examination of the Wife to show the high risk of margin trading in which the Wife did not dispute it on principle:-

“If an investor uses 10% money and borrows 90% margin to buy $100 shares. If the shares’ value drops by 5%, then the investor needs to pay up the 5% margin difference. If the shares’ value drops by 10% and no money was injected, then there will be a total loss of investment. If the shares’ value drops by more than 10%, then the investor would be chased for making up the balance.”

56.  It is further submitted by Mr. Wong that the Wife was not right to compare margin trading on stocks with buying a flat with mortgage as the Husband pointed out during his cross examination that buying a house is different because as long as the mortgage is paid up, there is no margin call even the value drops. If there is a loss on margin trading on stock, it means a loss on capital and there is no way to recover.

57.  Mr. Wong submitted that the Wife tried to justify her margin trading by saying that she invested mostly on blue chips. During the Husband’s cross examination, he disagreed on this by saying that even though the Wife could invest 100% on blue chips, she should not borrow 75% as she was making an investment of 175%.

58.  Mr. Wong further submitted that this negative conduct of the Wife was clearly obvious and gross because:-

a. The Wife took away almost all the family assets when she left the Husband with the children in 2004 which included transferred shares into her sole name’s investment account and made a transfer of the fixed deposit at USD290,312.18;

b. In 2007/2008, the children were still young (17 and 15 years old) and studying.  The family had no income since 2004; yet the Wife did not see fit to set aside portion of the family money for their living and education expenses but invested not only all the family money but also borrowed on margin to trade;

c. In October, 2007, the statementshowed the family net asset at HK$14,923,426.95 which the Wife admitted that it represented a substantial portion of all the family assets at that time; yet the Wife not only used all the said sum but also borrowed HK$8,945,459.27 (about 60% margin borrowing) to trade;

d. In November, 2008, the family net asset had dropped to HK$2,758,250.37, that is, the Wife made a loss at HK$12,165,176,58 in the margin trading between October, 2007 and November, 2008;

e. The Wife also engaged in USD margin trading in 2 different investment accounts, namely Charles Schwab and Oppenheimer. There was a loss made at Oppenheimer USD investment account.  Between January and October, 2007, the Wife made a loss at USD61,617.34 (or HK$480,615.252). 

59.  Mr. Wong also submitted that the Wife’s claim for borrowing money from her sister to maintain the living expenses of her and her children only serves to show how obvious and gross the negative conduct of the Wife was in engaging heavily on margin trading.

60.  Mr. Wong invited the Court to depart from the principle of equal division and to increase the share of the Husband and correspondingly to reduce the share of the Wife. He submitted that there should be an adjustment to 60% of the total assets to the Husband with 40% of the total assets to the Wife.

61.  The Wife explained that she took away almost all the family assets when she went to USA with the children in 2004 because she suspected the Husband had an affair. She said what she had done was to protect the children’s interest.

62.  In respect of her habit in margin trading, she said that the securities companies had their own risk control in the sense that for the high risk stocks, no sum can be borrowed whereas for the blue chips, up to 75% of the invested sum can be borrowed. In any event, she said that she had never been called by the securities companies for margin in the past. 

63.  I think the main issue is not whether the manner of the Wife’s margin trading on stocks is risky but whether she did make the family assets suffered from any financial loss.  On the evidence available to the Court, it seems that the Wife did make a loss at about HK$12million between October, 2007 and November, 2008.  However, I do not think that it is fair and equitable for the court to just look at a specified period of time in order to determine whether the Wife did make the family assets suffered from any financial loss.

64.  At the time when she left with the children to USA in July 2004, the balance in the account of Tai Fook Securities (“the TF account”) was about $3.5million. Thereafter, she was in sole control of this account. The balance therein increased to almost $15million in October, 2007. She therefore made the family assets increase by nearly 4 times. If these ancillary relief proceedings take place at that time, no doubt the Husband will not make any complaint. But, can the Wife argue that since the Husband makes no contribution to the increase of $11.5million, such sum shall not be considered as the family assets or it is a good reason to depart from the principle of equal division? Obviously, the answer shall be negative.

65.  In short, the Husband just wants to share the profits by half but shift all the loss to the Wife. In view of the first principle mentioned in LKW v DD, namely the implicit objective of a section 7 exercise to arrive at a distribution of assets which is fair as between the parties, I reject the submissions made by Mr. Wong in this regard.

66.  Although between January and October, 2007, the Wife made another loss at USD61,617.34 at Oppenheimer USD investment account, the sum at the current balance of the TF account in January 2011 is about $6.8million which is still about $3.3million high than that in July 2004. The court shall not ignore the fact that it is necessary for the Wife to withdraw from time to time some money from the TF account to defray her and her children’s living expense in USA during the period from 2004 up to this date. Thus, if I am wrong in the above, I still come to the conclusion that the Wife did not make the family assets suffered from any financial loss.  I consider that it would be totally academic for the court to determine whether the Wife’s conduct in engaging trading with margins on stocks amounts to “obvious and gross” conduct so that it would be in the opinion of the court inequitable to disregard it.

67.  If I have to make such determination, I take the view that the answer is negative. It is because there is no reason why the Wife would deliberately make the family assets depreciated. On the contrary, I accept what the Wife is doing is trying to make the family assets appreciated by way of margin trading on stocks. I understand the Husband’s complaint is that such activity is subject to the extremely high risk. Nevertheless, I would think if a businessman engages in a legal but very risky business and eventually, he suffers great financial loss due to this business, will the court hold such conduct amounting to the gross and obvious conduct so that it would be good reason to depart from the equality principle in distribution of the family assets? Answer must be negative.

Source of assets

68.  Parties have no dispute on this matter. I consider all the assets no matter held jointly by the parties or in their respective sole name are matrimonial assets.

Duration of marriage

69.  As already mentioned above, the marriage between the parties is nearly 19 years. It is undoubtedly a long marriage.

Contribution to the welfare of the family

70.  It is a classic case that before the separation, the Husband made almost full financial contribution to the family whereas the Wife was a housewife looking after the home and caring for the children and family. By applying the concept of refutation of any gender or role discrimination, I consider that the parties have more or less the same contribution to the welfare of the family.

Compensation

71.  The parties have no dispute on this issue.

Physical or mental disability of either of the parties

72.  No evidence that the parties do not suffer from any physical or mental disability.

CONCLUSION

73.  As the total value of the matrimonial assets is assessed at HK$27,640,106.33[28] and there is no good reason to depart from the equality principle, I decide that each party shall have half of the said value, namely HK$13,820,008.16. The value of the Wife’s own assets is HK$11,195,250.78[29]. Hence, she can get HK$2,624,757.38 (ie $13,820,008.16 - $11,195,250.78) from the payment into court and the Husband can get the balance thereof for HK$8,152,163.95 (ie $10,776,921.33 - $2,624,757.38).

74.  In the circumstances, I make the order as follows:

a. By consent, the Husband do transfer his half interest or share in the TTD Property to the Wife upon receiving from the Wife a sum equivalent to the half of its valuation to be agreed by the parties within 5 months from 20^th January 2011;

b. The necessary expenses for effecting the above transfer including but not limited to legal costs, tax payable to the USA Government, if any, shall be borne by the parties in equal share;

c. All the joint name accounts of the parties be closed and the sums deposited therein be divided and distributed to the parties equally after deduction of necessary charges, if any;

d. The sum of $8,152,163.95 be released to the Husband from the payment into court for $10,776,921.33 forthwith;

e. The balance of the said payment into court in sum of $2,624,757.38 be released to the Wife forthwith;

f. 75% of the interest accrued on the said payment into court be released to the Husband and the remaining balance of such interest be released to the Wife;

g. Upon compliance with paragraphs (a), (b) and (c) above, all claims which each party may have against the other for ancillary relief be dismissed; and

h. The parties have liberty to apply to the court in relation to the terms and implementation of paragraphs (a), (b) and (c) above.

COSTS

75.  In CACV196/2009, Hon Kwan JA said in paragraph 123 of the judgment:

“In matrimonial cases, as in other cases, costs should normally follow the event. The court also retains a discretion to deprive successful litigants of costs under the principles in In re Elgindata Ltd. (No. 2) [1992] 1 WLR 1207 (L v C, CACV 169/2006, 19 March 2008, paragraph 23, per Yuen JA). The general rule that costs follow the event does not cease to apply simply because the successful party raised allegations on which he failed, but where that has caused a significant increase in the length or costs of the proceedings, he may be deprived of the whole or a part of his costs. As the Judge had remarked, the wife had taken an over-inflated view of the merits of her case and the assets she should be awarded. The approach she took in relation to the valuation of O Ltd. and the accounts caused a significant increase in the length and costs of the proceedings. It is not fair she should be awarded all of her costs at trial. I would exercise the discretion to reduce the award of the costs of the trial to the wife by half.”

76.  First, I find that the Husband has not fully and frankly disclosed the details of the compensation by XXX whereas the Wife did make full and frank disclosure as to her assets. However, I am of the view that both parties here caused significant increase in the length or costs of the proceedings as they raised a lot of factual disputes which I consider unnecessary or even I find against them. Hence, I would exercise the discretion to make an order nisi that there be no order as to costs for the ancillary relief proceedings including all costs reserved. Such costs order nisi will become absolute unless any of the parties apply to vary the same within 14 days.