L v. L

HCMC 1/2003
(Edited Version)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSE NO. 1 OF 2003

(formerly known as Family Court Matrimonial Cause No. 9860 of 2001)

______________________

____________

______________________

J U D G M E N T

______________________

1.  The parties in this case were married in 1991 although they had been together since at least 1971.  Throughout the years, they had managed to build up very substantial wealth from scratches.  According to the reckoning of the experts, their joint wealth as at December 2004 was between $947 million and $1,346 million.  Decree absolute of divorce was granted on 16 March 2002.  Despite the fact that there were two agreements in 2000 and 2001 respectively between the parties as to the disposal of some their major assets, unfortunately they were unable to reach agreement on the overall settlement regarding their financial affairs.  As a result, the matter has to be resolved by the court through a very costly ancillary relief application.  According to the estimates submitted by the parties, the total legal costs incurred for this application run up to about $50 million.

2.  In this judgment whenever reference is made to details, I would use abbreviations instead of spelling out the full names or particulars.  I believe the parties and their legal advisers should have no difficulty in identifying whom or what I am referring to. 

The court’s approach in ancillary relief applications

3.  At the outset, I would respectfully quote from two recent judgments of Thorpe LJ.  In Para v Para [2003] 1 FLR 942 at 949 Para. 22, His Lordship said,

“… the outcome of ancillary relief cases depends on the exercise of a singularly broad judgment that obviates the need for the investigation of minute detail and equally the need to make findings on minor issues and disputes.  The judicial task is very different from the task of the judge on the civil justice system whose obligation is to make findings in all issues and dispute relevant to outcome.  The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues he considers relevant to outcome … But this independence must be matched by an obligation to eschew over elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable.  Judgments in this field need to be simple … in structure and simply explained.”

4.  In Lambert v Lambert [2003] 1 FLR 139 at Para. 38,

“Whilst I accept Mr Pointer’s submission that the judge has a duty to assess each and every one of the Section 25(2) criteria that bear on outcome and equally that judges of the Family Division have great expertise in making value judgments, I do not accept that the duty requires a detailed critical appraisal of the performance of each of the parties during the marriage.  Couples who cannot agree division are entitled to seek a judicial decision without exposing themselves to the intrusion, indignity and possible embarrassment of such an appraisal.  I fully agree with Coleridge J that any other approach encourages a vain endeavour to recreate historic situations, choices and failings which in the context of a long marriage can never be recaptured fully or accurately.”

5.  In Lambert, Thorpe LJ also endorsed the following dicta of Coleridge J in G v G (unreported, cited in Para.20 of Lambert) in the context of a discussion on stellar contribution,

“… the parties are not assisted to achieve compromise when they are encouraged by the law to indulge in a detailed and lengthy retrospective involving a general rummage through the attic of their marriage to discover relics from the past to enhance their role or diminish their spouses.  Perhaps ‘obvious and gross’ has a renewed role here.  “Obvious” because it imports the concept of very easily discernible and ‘gross’ in the sense of it being abnormally large.  Unless this or something similar is soon introduced to curb these debates I fear there is a danger that the forward looking White innovations will be lost in a sea of post break-up, backward-looking mutual recrimination and the court’s task and role in this already uncertain area will thereby be set back at least a generation.”

6.  It is important to bear in mind the guidance in these passages in dealing with ancillary relief applications.  It would be inappropriate for the court to go into every minute detail concerning what had happened in the past.  In the present case, counsel have indeed exercised very sensible judgment in that regard and as a result, court’s time was spent on more useful purposes.  Further, subject to the contentions by Mr Mostyn QC on bigamy and adjustments on the basis of negative contribution, it is common ground that equal division is appropriate on the facts of the present case.  In other words, irrespective of the positions taken by the parties in their affirmations, by the time of trial, broadly speaking both sides accepted the other party had contributed equally to the welfare of the family.  Hence, it would not be necessary for this court to discuss at length as to what had happened in the past.

Background

7.  Although there is a dispute as to whether the parties had been validly married, I shall refer to them as husband and wife in this judgment.  The Husband was born in 1941 (hence he is 64 years old) and he came to Hong Kong from mainland China in 1962.  He started off as a casual labourer in the construction industry.  Later on, he became a sub-contractor in that industry.  He first set up a business in the entertainment industry in 1965 in the form of a beauty parlour.

8.  The Wife was born in 1935 (hence she is 70 years old).  Her family operated a business selling bedroom accessories and she had assisted in the running of the business.  Her mother died when she was seven and her father remarried.  She was looked after by her paternal grandmother.  When she was about 16 years old, her grandmother “married” her to LW, a staff of the family business.  There is a dispute between the parties whether such union constituted a marriage in the eyes of law.  That, as explained below, has a bearing on the validity of the subsequent marriage between the parties.  By the union with LW, the Wife gave birth to four children.  The eldest child was born in January 1953.  The youngest was born in 1960.

9.  By late 1950’s, the family business was not doing too well.  LW went to work as a tram conductor and the Wife worked as hawker and part-time maid.  LW joined the trade union and spent most of his time on union activities.  He neglected the Wife and the children.  He made no contribution to the household.  In 1962, LW went his own way and the Wife regarded that to be the end of that relationship.

10.  To support herself and the four children, the Wife became a ballroom hostess and later, a masseur.  Through someone working in the beauty parlour, the Wife came to know the Husband.  When the Husband set up his beauty parlour, she worked there.

11.  The beauty parlour was not particularly successful.  In the 1970’s, the couple operated several entertainment establishments.  There is disagreement between the parties as to when they actually started living together.  In view of what I have said above regarding the proper approach in ancillary relief applications, that disagreement is not too significant.  At the latest, they were living together when they operated the business of LWC in 1971.  There is no child borne out of the union between the couple.  They accumulated sufficient wealth from these businesses to buy a flat for their matrimonial home in Happy Valley without any mortgage in January 1976.  They also started the operation of YD Restaurant and Night Club [“YD”] in that year.  YD was run through a corporate vehicle and there were some third party shareholders.

12.  The business of YD was not plain sailing from the start.  It had a difficult time at the beginning.  In 1977, the couple had to sell the property at Happy Valley to finance a revamp of YD.  The restaurant side of the business was closed down.  The nightclub was repackaged and TV stars were invited to perform at the grand opening of the revamped YD.  That proved to be a shrewd decision and the business of YD prospered after the revamp.  By December 1977, they were able to buy a property in College Road for investment purpose.  Further properties were acquired in City One, Shatin in the early 1980’s.

13.  In December 1984, the business operation of the couple was brought to a new height with the grand opening of Club B.  It was again financed by the sale of their joint property.  This time it was the College Road property.  Again there were outside shareholders including some with good business connections.  Both of them worked hard in running Club B.  In their testimonies, both the Husband and the Wife acknowledged the other party to be an equal partner in business.  Each of them played an important role in the success of the business.

14.  Club B generated substantial wealth for the couple.  In 1988, another nightclub business called Club M was set up in the adjacent premises.  In 1989, two properties were acquired in the sole name of the Husband.  The property at Beacon Hill Road had been used as the matrimonial home since its acquisition.  The couple lived there until separation.  In August 1999, the Husband moved out.  The Wife remains there until now.  In these proceedings, both parties asked the court to make an order to the effect that he or she could have it to the exclusion to the other.  According to the valuation provided by the Single Joint Expert, it had an open market value of $65 million on existing use basis as at 1 August 2004.

15.  The other property acquired in 1989 is a unit at Village Garden.  It is the current residence of the Husband.  According to the Single Joint Expert, this property had an open market value of $10.3 million as at 1 August 2004.

16.  These properties were used to secure part of the finance for a real estate development at Lin He West Road, Guangzhou.  I shall refer to this project by the name LR.  The Wife executed a Deed of Subordination in favour of the bank against the undertaking by the Husband, inter alias, that in the event this court shall make an order transferring the properties to the Wife, the Husband shall redeem the mortgages in respect of such properties.  

17.  In late 1989, the couple joined a trip to Beijing to explore business opportunities in the mainland.  That was another turning point in the fortune of the family.  As a result of that trip, they established good connections in the mainland.  After some negotiations, an agreement was executed on 12 January 1991 for a joint venture business in Hong Kong called HKBT.  The Hong Kong party to the joint venture was a company owned by the couple.  The Chinese party was Beijing BT, a reputable and well-established Chinese medicine company that had a long history.  The business of HKBT flourished and over the years a number of shops were set up in Hong Kong.  A shop was set up in London by an associated company called BT(UK).  The licence agreement under which the joint venture operates expired in 2005.  On the evidence before me there was no written renewal agreement.  The current position is that HKBT is allowed to carry on with the business until further notice.  Parties hold different views as to how this uncertainty should affect the valuation of this business.

18.  As mentioned, the parties registered their marriage in April 1991.  I see no need to go into the details in this judgment.  Suffice to say that on the evidence, I believe it was precipitated by the Wife’s discovery of the Husband fathering a daughter with another woman.  The Husband tried to explain that the registration of the marriage had nothing to do with that and it was somehow prompted by their planned emigration to Singapore as they wished to save the fees by getting married.  Such testimony only serves to discredit him before the court.  His story was inherently improbable and I do not believe him.  On this topic, I prefer the Wife’s evidence to his.

19.  The couple also started to invest in real property developments in Guangzhou in early 1990’s.  The first project was a development under a joint venture agreement with C Construction in Guangzhou.  C Construction is one of the biggest construction companies in Guangzhou and it is owned by the provincial government.  More information about this company can be found in Exhibit P-6 and I see no need to recite the same here.  It is clear to me that the company is a key player in real estate development in Guangzhou and it obviously has the means, ability and resource to undertake large construction projects.  I was told that the couple were introduced to the project by top-level officials in the PRC government.  The joint venture project was the construction a commercial building called M Plaza near the Guangzhou railway station.  At the request of the parties, I had paid a visit to various sites.  M Plaza is one of the skyscrapers situated at the Tian He commercial district of Shenzhen.  According to the evidence of the Single Joint Expert, Tian He District experienced massive re-urbanization in the past decade and has become a major business district of Guangzhou.  Construction was completed in 1996.  It was highly successful and generated substantial profit for the couple.  They used some of the profit to purchase the premises of Club B at $186 million odd in 1996.  

20.  The couple invested in two other real estate development projects in Guangzhou.  One site is close to the site of M Plaza.  I will call it the LR site.  It is at Lin He West Road which is almost adjacent to M Plaza.  In terms of location, it is also situated at the heart of the Tian He commercial district.  The Single Joint Expert observed that the site is located in the financial and commercial centre and developments in the area are characterized by hotel and commercial buildings of modern design and construction.  Although the joint venture agreement was executed in 1993, construction works only started in 2003 after construction permit was granted on 28 October 2003.  During my site visit in March 2005, several storeys of the building had been built and the project appears to be making good progress.  The proposed development scheme is one with a total gross floor area of 152,297 square metres.  It is scheduled for completion in 2007.

21.  The other site is at a relatively more rural part of Guangzhou called Fangcun District.  It is a site primarily for residential development.  I will call it the F Seasons project.  At the time of my site visit, the project was at a more advanced stage as compared with LR.  The development is by phases and Phase 1 has been completed and the units are being sold.  Phase 2 is under construction and scheduled for completion by the end of 2005.  According to the report of the Single Joint Expert, the total gross floor area of the whole development scheme is 139,745 square metres.  There will be a commercial portion of 3,452 square metres in Phase 3.

22.  There were other properties acquired by the couple both in Hong Kong and overseas over the years.  Some had been sold.  Those properties still held by either of them have been the subject of valuation reports and there is not much dispute regarding such valuations.  I do not propose to list them all in this judgment.

23.  Despite changes being made to the operation of Club M, it did not generate any profit and in 1998, it was closed down.  After 1997, the business of Club B declined and I was told that currently it is running at a loss.

Separation and the Agreements

24.  In 1999, the relationship between the couple deteriorated.  It came to a breaking point in August 1999 when the Husband left the matrimonial home after a traffic incident.  They did not resume cohabitation afterwards.

25.  Since they were domestic as well as business partners, the breaking up caused difficulties in their business operations.  The Wife made some manoeuvres which Mr Mostyn characterized as negative contribution and conducts justifying a reduction of the appropriate share the Wife should retain out of the total family wealth.  I shall need to deal with this at greater length later on.

26.  On 21 March 2000, the parties concluded an agreement [“the 2000 Agreement”] regarding part of their financial affairs.  The negotiation for the agreement was initiated by the Husband through an unsigned letter dated 14 February 2000 from his solicitors.  It is quite obvious that the proposal in the letter of 14 February 2000 was more extensive than what parties eventually agreed.  Parties had put aside matters, which they could not agree in the meantime and focused on matters they could agree.  The agreement was drafted by solicitors for the Husband.

27.  Under the 2000 Agreement, the Wife sold all her interest in Club B and the company owning the premises at which Club B operated to the Husband in consideration of $65 million and the Husband’s interest in HKBT (both Hong Kong and UK and the companies owning the shop premises) and a property holding company called NF Development and some UK properties.

28.  The 2000 Agreement had been duly completed.  The Wife took no further part in the affairs of Club B whilst the Husband took no further part in the business of HKBT.  Pursuant to the terms of the 2000 Agreement, $65 million was paid by the Husband to the Wife.

29.  After the 2000 Agreement, the Wife started her investment in setting up a modern medicine factory called KH at Pung Yu of Guangzhou.  The process involved acquisition of land and existing medicine business.  It took a couple of years and very substantial capital injection had been made.  According to an endorsement by the PRC Foreign Exchange Bureau (Bundle E7 p. 1929) on 9 December 2004, the total authorized capital injection into KH is $230 million.  The audited financial statement up to 31 December 2004 (Bundle E7 p.2020) shows that capital injection by shareholder was RMB 113,468,650.20.

30.  On 12 June 2001, the Wife presented a Petition for divorce on the ground of desertion.  The Husband filed Answer and Cross-Petition on 10 July 2001.  These were subsequently overtaken by another Petition by the wife on the ground of 2 years separation filed on 24 September 2001 with the leave of the Family Court.  The earlier Petition and Cross-Petition were stayed (and subsequently dismissed).  Decree nisi was granted on the second Petition on 23 January 2002.

31.  On 23 July 2001, the parties reached a further agreement [“the 2001 Agreement”] as to the distribution of their assets.  It was again initiated by the Husband through a letter from his solicitors dated 6 June 2001.  In practical terms, the agreement was that the Wife would give up her interest in LR in exchange for the Husband giving up his interest in F Seasons.  The Wife was to pay an additional sum of $20 million to the Husband.  Mr Mostyn emphasized that at the time of the 2001 Agreement, there were still a lot of problems regarding the LR project.  There was a dispute with C Construction which was only resolved by a Memorandum of Understanding dated 21 October 2001 and a supplemental agreement on 8 March 2002.  I will come back to that when I discuss the effect of the agreements.

32.  After the decree absolute, on 4 April 2003 Deputy Judge Woodcock ordered the transfer of the application for ancillary relief to the Court of First Instance.

The trial and the developments in July 2005

33.  The first part of the substantive hearing took place before me between 16 February and 22 April 2005.  Unfortunately, the matter had to be adjourned part heard for reasons set out in my Ruling of 20 April 2005.

34.  Further evidence was obtained and produced to the court.  A surveyor gave evidence on de bene esse basis on 7 July 2005 and the Single Joint Expert was recalled.  On 8 July 2005, parties agreed to adopt a figure of RMB570 million as the construction costs for the LR project and revised the calculation of the Single Joint Expert on the value of the LR site by reference to that figure (as opposed to the original figure of RMB708 million provided by the Husband and adopted by the Single Joint Expert).  It was also discovered that there was a flaw in the weighting applied by the Single Joint Expert to the comparables.  The Single Joint Expert rectified that mistake and revised his valuation of the project in a completed state to RMB 1,765,687,600 (as opposed to his original figure of RMB 1,680,373,980).  Applying these revised figures to the algorithm under the residual approach espoused by the expert, the value of the LR project was, according to the reckoning of Mr Shieh, increased to RMB 470,701,571.  That calculation is subject to two outstanding issues that need to be resolved by this court.

35.  The first issue is about the total development costs.  The breakdown of the original RMB 841 million can be found in exhibit P-4 in terms of the handwritten figures at the right hand side.  Apart from the revision regarding the construction costs, Mr Shieh identified that the design, consultancy and supervision fee was quantified as 5% of construction costs.  Hence, the reduction of construction costs to RMB 570 million would lead to a correspondent reduction in the design, consultancy and supervision fee.  He worked that out to be RMB 28.5 million (as opposed to RMB 35 million in the original figures).  Thus, the total development costs is reduced to RMB 696.5 million.  I think it must be correct as a matter of arithmetic and Mr Mostyn did not suggest otherwise. 

36.  The second issue is more complicated.  It concerns the incidence and quantum of the additional land premium that is payable in respect of the LR site by virtue of the increase in the permissible plot ratio for the development from 6.6 to 15.  As far as incidence is concerned, the Wife contended that under the joint venture agreement between LR and C Construction dated 30 December 1993, it was the responsibility of C Construction to pay for the same.  On the other hand, the Husband produced evidence to show that C Construction took a different view (which the Husband also endorsed).

37.  The relevant provisions in the LR joint venture agreement are contained in Clauses 8 to 11, 16, 17, 43 and 44.  I do not propose to set them out in this judgment.  Parties can refer those clauses in the document in the trial bundles if they need to.

38.  It would also be disproportionate for me to set out at length in this judgment the chronology regarding the LR development.  Mr Mostyn had provided this court with a chronology by way of Exhibit R-12.  It is apparent from the chronology and the documents relating to the events set out therein that there had been substantial changes with regard to the project after the signing of the agreement of 30 December 1993.  In 1999, the disputes between LR and C Construction led to the involvement of Chinese lawyers.  Amongst the documents placed before me, there is an opinion from a Chinese law firm (item 14 in R-12).  Paragraph 2 of that opinion suggests that all along LR had been dealing with C Construction on the basis that the obligation of C Construction was to deliver a site with a permissible plot ratio of 6.6.  The same was reflected in a valuation report prepared by C Y Leung & Co Ltd on 26 July 1999 (Para.6 at p.4 in item18 in R-12).

39.  After some negotiations, the dispute with C Construction was resolved by a Memorandum of Understanding dated 21 October 2001.  The site was handed over to C Shine (the joint venture company) on 31 October 2001 (see item 33b in R-12).  The Land Transfer Contract was executed by C Construction in favour of C Shine on 8 December 2001.  Supplemental Joint Venture Agreement was executed between LR and C Construction on 8 March 2002.  On 4 August 2002, C Construction obtained a construction land permit for the land (item 36 in R-12).  According to the explanation in the letter dated 7 June 2005 from the Guangzhou City Land Bureau, that permit was issued for 42,042 square metres gross floor area, viz. based on a plot ratio of 6.6.  The Husband cherished the prospect of developing the land at a higher plot ratio.  He  achieved that by negotiation with the Land Bureau.  A Demand for premium was issued by the Guangzhou City Land Bureau to C Shine on 1 November 2002.  The instrument granting the land use right was issued by the Guangzhou City Land Bureau in favour of C Shine on 23 January 2003.  That grant provided for a plot ratio of 15.

40.  Mr Shieh contended that the combined effect of Clauses 9 to 11 of the joint venture agreement of 30 December 1993 was that the incidence of premium fell upon C Construction and even if there were additional premium payable by reason of increase in plot ratio, C Construction had to absorb it even though they would only get RMB 360 per square metres.  The breakdown of the premium produced by the Husband (C50/12383) shows that the premium is charged at a level well exceeding that figure.  Those figures had been verified by a letter from the Guangzhou City Land Bureau on 7 June 2005.

41.  With respect, Mr Shieh’s argument fails to take into account of the underlying factual matrix.  The joint venture agreement was governed by PRC law (see Clause 54 of the agreement).  Although parties placed some evidence from Chinese lawyers before the court, they only dealt with construction of certain expressions in the relevant clauses and no reference was made to general principle under PRC contract law.  In the circumstances, I can only assume that the same principles on construction of a contractual document apply as it would have been under Hong Kong law.  There are two points to be noted in the present context.  First, as pointed out by Mr Shieh, the joint venture agreement should be construed against the background in 1993 when the agreement was concluded as opposed to what happened subsequently.  Second, as pointed out by Mr Mostyn, one must have regard to the underlying factual matrix to ascertain what the parties had agreed.

42.  The primary obligation of C Construction under the joint venture agreement is to provide the land in such a state that C Shine could develop the same by constructing the super-structure.  The intended scale of the project was set out under Clauses 8 and 11.  Whilst it is correct that under the agreement, in particular Clause 11, the fee of RMB 2,800 per square metre payable by LR to C Construction included the premium, that premium was calculated on the basis of a plot ratio of 6.6.

43.  Although there was a provision under Clauses 11 and 16(2) governing the fee payable to C Construction in the event the plot ratio exceeds 6.6, I do not think it meant to follow from those provisions that C Construction was obliged to pay the additional premium.  I accept the submission of Mr Mostyn that those provisions were intended to stipulate the additional sum payable by LR to C Construction as the latter’s share of the pie.  It does not follow from it that C Construction was obliged to pay the additional premium.

44.  The obligation of C Construction to pay the premium stems from Clauses 9(3) and 17(4).  The extent of the obligation has to be determined by reference to the scale of the project contemplated by the agreement.  This is set out, as mentioned, under Clauses 8 and 11, viz. a development at the plot ratio of 6.6.

45.  As it turned out, C Construction did procure a construction land permit for the land based on a plot ratio of 6.6 on 4 August 2002.  Upon the issue of that permit, I am of the view that C Construction had discharged its obligation and it does not have any obligation to pay for the additional premium.  It was only after that C Shine obtained an approval for the increase in plot ratio and the obligation to pay for the additional premium falls upon C Shine.  By reason of the Clause 44, the burden in effect falls on LR.

46.  I therefore reject Mr Shieh’s submission on the incidence of the additional premium.

47.  There is also a dispute about the quantum.  As far as the RMB 38 million is concerned, it has been clarified by the letter from the Land Bureau dated 7 June 2005.  It shows that the whole of RMB 38 million were additional premium.  There were however two components.  One component is the additional premium on account of change of user (from residential to office).  The sum is RMB 9,306,233.  The other component is the additional gross floor area (viz. increase in plot ratio) and the sum is RMB 29,641,292.  On 22 April 2005, Mr Mostyn indicated to this court the Husband accepted that the RMB 9.3 million should be the responsibility of C Construction and this was reflected in the calculation handed up by him on 7 April 2005 with a gross floor area of 12,575 square metres to be surrendered to C Construction upon completion.  This position was maintained in Attachment 2 to the Final Written Argument placed before me on 12 July 2005.  I accept this to be the figure adopted for the calculation of the area to be surrendered.

48.  That additional premium was calculated on the basis of a gross floor area of 115,284.20 square metres.  The development scheme is, as stated in the SJE report, in fact for 152,297 square metres.  The Husband said a further premium would have to be paid.  Mr Robinson, the forensic accountant called by the Husband, calculated it to be RMB 17,067,507.

49.  I do not see any reason why this potential liability to pay additional premium should not be taken into account.  The end result on the current valuation of the Husband’s interest in the LR project is that it has an adjusted net value of RMB 431,960,675 arrived at as follows,

	RMB
Value of Gross Development Area	1,765,687,600
Area to be surrendered to C Construction:
at RMB13,400	168,505,000
per sq m for 12,575 sq m	1,597,182,600
Less business tax of 5.5%	87,845,043
Less sales tax of 1%	15,971,826
Value of Net Gross Development Area (A)	1,493,365,731
Development Costs	696,500,000
Expended development costs	42,744,561
Less Outstanding development costs	653,755,439
Less Interests 2.5 years @5.76% p.a. x 50%	47,397,269
Less Developer’s profit 25%	163,438,860
Residue (B)	628,774,163
Less land profit @25%	112,257,045
Less deferment @15.03%	67,488,936
Adjusted book value	449,028,182
Less additional land premium	17,067,507
Adjusted Net Value	431,960,675

50.  Another matter which was canvassed at the hearing in July was the disclosure by the Wife as to the value of KH.  I shall deal with this in the section on non-disclosure.

The impact of White v White in Hong Kong

51.  In England, the decision of the House of Lords in White v White [2001] 1 AC 596 has completely changed the legal landscape for ancillary relief in matrimonial disputes.  So much so that Mr Mostyn told me pre-White cases are now rarely cited in English courts.  In Hong Kong, Hartmann J held in F v F [2003] 1 HKLRD 836 that Hong Kong first instance courts were precluded from adopting the approach in White by reason of C v C [1990] 2 HKLR 183.  Before consideration as to its applicability in Hong Kong, it is worth re-examining what had been laid down by Lord Nicholls in White v White [2001] 1 AC 596 and, perhaps more importantly, what were rejected by His Lordship.

52.  The starting point must be the legislative framework.  Sections 4 to 6A of the Matrimonial Proceedings and Property Ordinance Cap.192 [“MPPO”] give the court the powers to grant various types of ancillary relief in favour of a party to a marriage upon divorce.  The relevant section setting out the criteria for the exercise of such powers is Section 7(1) which reads,

“	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.”

53.  The court should have regard to the conduct of the parties and all circumstances of the case in deciding firstly whether to exercise the powers under Sections 4,6 and 6A (this is what Thorpe LJ called the no order principle, to which I will return later in the discussion on the legal effects of the Agreements) and secondly, if it were to exercise the powers, how to exercise the same.  The seven specific matters in sub-sections (a) to (g) were some specific factors which may be relevant as part of the overall circumstances of the case.

54.  However, given the almost infinite possibilities as to the underlying factual matrix that ancillary relief cases may present to the court, the weight and relevance of these specific factors necessarily vary from case to case.  In my judgment, Section 7(1) gives a very broad discretion to the court to cater for this.  The section must be construed in this light and it would be wrong to regard these seven factors as some sort of mechanical formulae to be applied as a form of catechism in every matrimonial case.  There are bound to be cases where one or more of the seven factors might not be of great significance.  There are also bound to be cases where factors other than those seven factors might assume greater significance.  Although they can be useful as items in a checklist, I do not think the seven factors should be regarded as exhaustive.  The section explicitly directs the court to have regard to all circumstances of the case. 

55.  The fundamental objective of the statutory power conferred upon the court under Section 7 of the MPPO was identified by Lord Nicholls as securing fairness in the financial arrangement between the parties.  I respectfully agree.

56.  Citing Piglowska v Piglowski [1999] 1 WLR 1360, Lord Nicholls reiterated that the matters listed in Section 7(1) were not ranked in any hierarchy.  The weight or importance to be attached to these matters depends upon the facts of the particular case.

57.  Lord Nicholls regarded the reasonable requirements approach in big money cases as an unjustified judicial gloss on the wordings of Section 7.  His Lordship reminded that one should approach the exercise by reference to the statutory language and it was necessary to bear in mind that financial needs is only one of the several factors to which the court is to have regard to.  Therefore there is no proper basis for setting a maxima in the exercise of judicial power by reference to the concept of reasonable requirements even in big money cases.

58.  With regard to contribution in the context of Section 7(1)(f), Lord Nicholls concluded that there should not be discrimination between husband and wife whatever the division of labour chosen by them or forced upon them by circumstances.  “If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets.  There should be no bias in favour of the money-earner and against the home-maker and the child-carer.”

59.  Although Lord Nicholls suggested a cross-check against the yardstick of equality and opined as a general guide, equality should only be departed from and to the extent that there is good reason for doing so, it is clear that His Lordship did not introduce any presumption of equal division.  To the contrary, such a presumption or starting point is specifically rejected as being inconsistent with the legislative scheme. 

60.  Lord Nicholls cited a dicta of Sachs LJ in Porter v Porter [1969] 1 WLR 1155 and emphasized that in the exercise of the discretion under Section 7 “the law is a living thing moving with the times and not a creature of dead or moribund ways of thought.” It was the greater awareness of the value of non-financial contributions to the welfare of the family and the opportunity lost by the partner who performed the role of home-maker and child-carer that led His Lordship to conclude that the concept of reasonable requirements was not consistent with the statutory criteria laid down in Section 7.

(a) Is C v C inconsistent with White v White, and if so, to what extent?

61.  C v C [1990] 2 HKLR 183 was described by Hartmann J in F v F [2003] 1 HKLRD 836 as the defining judgment in Hong Kong on the application of Section 7 to big money cases.  Hartmann J was of the view that C v C prevented a first instance judge in Hong Kong from following the approach of White v White.

62.  In C v C, Hunter JA specifically rejected the submissions of Mr Singer (as he then was) on the incorrectness of the then English authorities on reasonable requirements.  Propositions (7) and (8) in the judgment (at p.187) are directly in conflict with the analysis of Lord Nicholls.  In essence, Hunter JA fully embraced the then English authorities on reasonable requirements and contribution.  It was held that reasonable requirements set the ceiling for the award in favour of a wife in big money cases.  As it is apparent from the judgment, the Court of Appeal adopted that approach in quantifying the lump sum award.

63.  In F v F, Hartmann J regarded C v C as settling principles of interpretation on Section 7 which are binding on courts of lower or concurrent jurisdiction and hence guidance on similar legislation from other common law jurisprudence cannot take precedence over it.  His Lordship regarded the reasonable requirements approach as a principle of interpretation concerning the effect of Section 7 as a whole (see Paras. 57 to 63).

64.  Ironically, Hunter JA also rejected the contention of Mr Singer that English authorities were to be ignored in Hong Kong (at p. 185F to 186B).  At p. 187 I, Hunter JA said,

“In my view the courts of Hong Kong can and should derive considerable help from the much wider experience of the English courts in this field.”

65.  His Lordship also stressed in proposition (1) at p.186 that the first task of the court is to consider “all the circumstances” and all the factors set out in Section 7(1).  In the light of these dicta, it may not be too difficult to project what would be the outcome in C v C if White v White had been decided before it.  The difficult question is whether the court in Hong Kong should continue to derive guidance from the English authorities after C v C (and therefore could properly take into account of subsequent English developments including White v White) or whether judges here (at least first instance judges and the Court of Appeal) should regard the law as fossilized by C v C as far as the prevalence of reasonable requirements in the operation of Section 7 is concerned and leave it to the Court of Final Appeal to restate the law if it deems appropriate. 

66.  The “big money” cases previously decided in Hong Kong could broadly be divided into two categories.  The factual matrix in C v C and F v F were different from White v White in one important aspect.  In the former cases, the wives did not need to work since the marriage.  On the other hand, in White v White, the parties were partners in the business sense as much as in the domestic sense.  Hence, in C v C and F v F the court was not faced with the problem of the inter-relationship between the concept of reasonable requirements and the determination of a fair share of a spouse who is also a business partner and how Section 7 should operate in the latter context.  In the present case, it is common ground that the two parties had been business partners and I have to grasp the nettle.

67.  It is noteworthy that on the facts of C v C, the lump sum award was in favour of the husband because a larger part of the family wealth was held in the name of the wife.  The Court of Appeal however did not examine the lump sum claim of the husband by reference to the reasonable requirements of the husband.  Because of the finding that with the exception of a $14 million inheritance by the wife and $10 million attributable to a claim in a piece of hostile litigation, the balance represented the husband’s financial contribution to family assets, the Court of Appeal asked the question what sum should the wife “receive by way of retention” with reference to her reasonable requirement (see p. 191B to H).

68.  But it is not clear how the test would be applied to a scenario where both parties had contributed financially to the family wealth and both spouses held more assets under his or her name than his or her respective reasonable requirements when the marriage broke down.  Presumably since the parties already had sufficient assets to meet his or her reasonable requirements, there should not be any adjustment on the status quo if reasonable requirements were to be the maxima for any exercise of the court’s statutory power in ancillary relief.  Obviously that might not lead to a fair result in many cases.  On the other hand, if a transfer were to be ordered, I cannot help from asking why should the question be determined by reference to the reasonable requirements of one party as opposed to that of the other party? C v C did not address these issues.

69.  Even before White v White, it was held by the English Court of Appeal in Gojkovic v Gojkovic [1990] 1 FLR 140 that in cases where the wife made exceptional contribution to the family assets, the lump sum award to her should not be confined by her reasonable requirements.  Butler-Sloss LJ said at p.144H, “Equally important as financial need is, however, the contribution made by each of the parties to the welfare of the family …” Gojkovic seems to be one of the earlier English big money cases in which the court has to deal with a wife who has worked with the husband in creating the family wealth (see Russell LJ at p. 146F to G) and in that sense she was regarded as making “exceptional” contribution.  From my experience, as far as families in Hong Kong in these days are concerned, such a phenomenon is not that unusual and Hong Kong court and practitioners have applied Gojkovic in similar situations. 

70.  The first instance decision in White v White serves as an illustration how the approach of reasonable requirements could work unfairly in the context of parties who were both business and domestic partners.  The wife in that case held assets that exceeded her reasonable need arrived at by Duxbury calculation.  Holman J also concluded that if she had to transfer the balance to the husband, it would be a net transfer which is not necessitated simply to meet the husband’s own reasonable requirements.  The net result was that the wife got only 20% of the whole and the learned judge acknowledged that to be a low percentage having regard to the length of the marriage and her contributions.  Yet Holman J attributed that to the paradox that the longer the marriage and hence the older the wife, the less the capital sum required under the Duxbury calculation.

71.  The end result was that the wife got less than what she would get as an outgoing partner if the partnership were to be dissolved.  Such an outcome underscores the problem with the reasonable requirements approach.  In the Court of Appeal, Thorpe LJ reiterated that the ultimate aim of a court in dealing with ancillary relief is to achieve what is fair, just and reasonable between the parties (see [1999] Fam 304 at 313H to 314A).  At p. 317B, His Lordship said it offended his sense of fairness that a wife who has worked for over 30 years equally in partnership should exit with anything less than her legal entitlement in the absence of extraordinary features.  Butler-Sloss LJ (as she then was) explicitly acknowledged at p.320B that for spouses in business together, the reasonable requirements approach was not the most appropriate method to arrive at the post-divorce readjustment of the family finances.

72.  The Court of Appeal in White v White suggested that a fair result could be achieved by examining the matter from the angle of entitlement as opposed to contribution.  That was encapsulated in the judgment of Butler-Sloss LJ at p. 320E to F.  Although the House of Lords rejected that approach, Mr Kotewall invited this court to adopt the same.

“In a case where the spouses were in business together, the starting point has to be their respective financial positions at the end of their business relationship.  This may in many cases be achieved by a broad assessment of the financial position and I am not advocating a detailed partnership account.  At this stage it is not a question of contribution to the family, which is to be found at subsection (2)(f) but of entitlement.  … The partnership case where the wife is found to be an equal partner, even if the assets are large, is in a wholly different category from the “big money” cases such as Dart v Dart [1996] 2 FLR 286 or Conran v Conran [1997] 2 FLR 615.  In the latter cases, the origin of wealth was clearly on one side and the emphasis was rightly on contribution not entitlement.”

73.  In that dictum, Her Ladyship identified the crucial difference between cases where the spouses were business partners and cases where they were not.  The approach of reasonable requirements was developed in the context of the latter but it does not fit well in the former.  As mentioned, C v C and F v F fall within the latter category.  Given such material distinction, I am of the view that as a matter of stare decisis,C v C does not cover a case where the spouses were genuine business partners insofar as it decided that reasonable requirements should set the ceiling for ancillary relief award in big money cases.  This was in fact recognized by Hunter JA in C v C, see the citation at p. 187B from Preston v Preston [1982] Fam 17 at p. 25 in proposition (7).  The criterion of reasonable requirements has never set the ceiling for awards in cases where the spouses were also business partners.

74.  Having said so, it must be noted that the entitlement approach was rejected by the House of Lords.  Lord Nicholls considered such approach might turn the clock back to the position prior to the Matrimonial Proceedings and Property Act 1970 as it would entail investigation of the strict property rights of the parties by the court.  At p. 611F, His Lordship said,

“The need for this type of investigation was swept away in 1970 when the new legislation gave the court its panoply of wide discretionary powers.  Since then, the courts have not countenanced parties incurring costs which would be disproportionate to the assistance the expenditure would give in carrying out the section 25 exercise.”

75.  Does that mean that I am free to follow the approach of Lord Nicholls in the present case? I think it depends on which aspects of the judgment of Lord Nicholls we are talking about.  As far as the rejection of reasonable requirements approach as the criterion to determine the award to the Wife or the Husband is concerned, I actually do not need to rely on White v White.  As analysed above, even before White v White, for cases where the spouses were also business partners, reasonable requirements could not limit the award.  However, White v White is still important in the present context.  Although I am not dealing with a wife whose only contribution was her role as a homemaker, Lord Nicholls’ analysis of the statutory scheme could have a bearing in deciding how the award to the wife should be quantified.  At the risk of oversimplification, I would identify the overriding objective of fairness, the weighing of the factors in Section 7(1) on a case-by-case basis, the principle of non-discrimination and the yardstick of equality as important elements in His Lordship’s approach.  I shall examine each of them in turn against C v C.

76.  As regards the overriding objective of achieving fairness between the parties in their financial arrangements, I cannot discern any part of the judgment in C v C that is inconsistent with the view of Lord Nicholls.  The same applies as to the weighing of the factors according to the facts of each case.

77.  The principle of non-discrimination is, however, in direct conflict with proposition (7) of Hunter JA.  Mr Mostyn contended that the non-discrimination provisions in the International Covenant on Civil and Political Rights [“ICCPR”] applied in Hong Kong by the Basic Law and the Hong Kong Bill of Rights Ordinance Cap. 383 provide the juridical basis for re-examining C v C in the light of White v White.  Mr Mostyn prayed in aid the following articles in the ICCPR,

(a)	Article 3 provides,
	“	The States Parties to the present Covenant undertake to ensure the equal right of men and women to the enjoyment of all civil and political rights set forth in the present Covenant.”
(b)	Article 23 (4) provides,
	“	States Parties to the present Covenant shall take appropriate steps to ensure [equality] of rights and responsibilities of spouses as to marriage, during marriage and at its dissolution …”

Mr Mostyn submitted that C v C and F v F were not Basic Law compliant and reference was made to Articles 8, 25 and 39 of the Basic Law.

78.  There are two possible aspects in the application of the reasonable requirements approach which may be said to be discriminatory.  The first aspect is the one alluded to by Lord Nicholls at p. 605C to E, viz. the discrimination between the different roles undertaken by husband and wife in the family.  This problem does not arise on the facts of the present case since both the Wife and the Husband contributed to the financial wealth of the family as equal partners.

79.  A second aspect which may arise in the application of the reasonable requirements approach is to apply it in setting the ceiling for award in favour of the wife but not when it is the husband who has claims against the wife.  In the context of the present case, it is quite obvious that the assets currently held respectively by the Husband and the Wife exceeds their respective reasonable requirements.  If one were to apply reasonable requirements to one of them and award the balance to the other even though both of them contributed financially, that would clearly be discriminatory and unfair.  However, I do not think C v C mandated this sort of approach.  The better view is to confine C v C to cases where a party to the marriage did not take on the role as money-earner in the family.  

80.  Hence, I do not need to resolve the interesting question whether C v C is consistent with ICCPR and the Basic Law in the present case.

81.  The yardstick of equality is more complicated and I will now discuss it at greater length.

(b) The yardstick of equality: post-White developments

82.  Although Lord Nicholls expressly eschewed from adopting equal division as a presumption or starting point, the yardstick of equality has been applied in practice in cases after White in a way that gives rise to a perception that it operates not only as a mere cross-check, especially in cases where the resources well exceed needs and children were well taken care of.  In F v F, Hartmann J observed in Para. 42 that even though White had not laid down a presumption of equality, equality had since become the starting point.

83.  Perhaps it is useful to refer back to what Lord Nicholls actually said in his judgment.  At [2001] 1 AC 596 at p. 605H, His Lordship emphasized, after advising judges to do a cross check by reference to the yardstick of equality,

“This is not to introduce a presumption of equal division under another guise.”

84.  Then His Lordship referred to the exercise of the discretion by reference to current perceptions of fairness and the greater awareness nowadays of the value of non-financial contributions.  At p. 606C, Lord Nicholls said this,

“Despite these changes, a presumption of equal division would go beyond the permissible bounds of interpretation of section 25.  [Comparison was made with Section 10 of the Family Law (Scotland) Act 1985] A presumption of equal division would be an impermissible judicial gloss on the statutory provision.  That would be so, even though the presumption would be rebuttable.  Whether there should be such a presumption in England and Wales, and in respect of what assets, is a matter for Parliament.  It is largely for this reason that I do not accept Mr Turner’s invitation to enuciate a principle that in every case the ‘starting point’ in relation to a division of the assets of the husband and wife should be equality.”

85.  Lord Cooke did not think there is much practical difference.  At p. 615D, His Lordship said,

“I doubt whether the labels ‘yardstick’ or ‘check’ will produce any result different from ‘guidelines’ or ‘starting point’.”

Then at p. 615E,

“The most important point, in my opinion, in the speech of my noble and learned friend, Lord Nicholls, is his proposition that, as a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so.”

86.  Subsequent developments in England show that the yardstick of equality has assumed great practical importance in the resolution of ancillary relief.  Counsel cited to me many post-White English cases.  Mr Mostyn helpfully summarized those in an unpublished paper written by him in December 2003.  I do not propose to conduct a similar exercise in this judgment.  The most significant post White authority is Lambert v Lambert [2003] 1 FLR 139.  It was a decision by the English Court of Appeal in November 2002.  Apparently, it had not been brought to the attention to Hartmann J in F v F.

87.  In Lambert, Thorpe LJ said at paras. 38 and 39,

“I do not consider that the approach which has been adopted by Coleridge J amounts to an impermissible judicial stride towards a presumption of equality.  A distinction must be drawn between an equality of contribution and an order for equality of division.  A finding of equality of contribution may be followed by an order for unequal division because of the influence of one or more of the other statutory criteria as well as the over-arching search for fairness.

A formula for the equal division of assets on divorce is justly criticized for producing crude and unfair outcomes.  It might be unfair to the one who inherited those assets years before the marriage.  It might be unfair to the one who needs all the available assets to provide a secure home for the children.  However a formula for the equal division of whatever surplus there may be having made fair provision for the assessed needs of each of the parties before the court would produce a fair outcome in many test cases.  … In the absence of legislation [creating a rebuttable presumption of equal division of any surplus] and given the encouragement expressed by Lord Nicholls (and more strongly by Lord Cooke of Thorndon) in White v White, Coleridge J is, in my judgment, entitled to regard the crosscheck of equality as an important duty.”

88.  A similar approach can be found in the judgment of Hale LJ (as she then was) in Foster v Foster [2003] 2 FLR 299 at Paras. 20 and 21.

89.  Mr Mostyn also surveyed in his article the extent to which White v White had been adopted in other common law jurisdictions.  In Australia, the Chief Justice of the Family Court in Figgins v Figgins [2002] FamCA 688 Paras. 112 to 134 considered the lesson to be learnt from White.  His Honour observed that whilst many points made by Lord Nicholls were apposite to Australian cases,

“… his references to equality of division as a starting point do not represent the law in Australia.  Similarly, in this country there is no requirement upon a trial judge to give reasons for departing from equality of division.” (Para. 115)

After referring to researches on desirability of equality of division, His Honour concluded,

“For our part we see little value in adopting equality of division as a starting point.  The legislative recognition it would give to the principle of gender equality in marriage would be outweighed by the dangers and possible unintended consequences to which we have referred.

In cases such as this one, involving short marriages and a substantial imbalance of financial contribution, equality of division is again likely to produce substantial injustice.  Its value as a starting point is therefore highly questionable.

It really only has value in cases involving long marriages like White, where there are substantial assets and contributions on both sides.  In such cases we consider that courts usually arrive at just and equitable results in any event.  If they do not, errors can be corrected on appeal.” (Paras. 128-130)

Hence, there was a specific rejection of the universal application of the yardstick of equality in Australia.

90.  It is also worth quoting from the Chief Justice’s judgment on what should be learnt from White at Paras. 132 to 134,

“… We think that the important concept that can be said to emerge from White is that, in order to test whether a result is fair … it is important to ask whether the husband and wife are being treated equally.  It states in the clearest terms the modern recognition of equality of the sexes and the need to abandon all forms of discrimination.

In the present case we think that the emphasis given by White to gender equality is important in testing the overall result.  We think that the lesson to be learned from White is that it is a major error to approach these cases upon the basis that one arrives at a figure that is thought to satisfy the needs of the wife and give the balance to the husband.

In some cases that may produce an appropriate result but in many others it is likely to be productive of a grave injustice.  We reject the concept that there is something special about the role of the male breadwinner that means that he should achieve such a preferred position in relation to his female partner.  To do so is to pay mere lip service to gender equality.  Marriage is and should be regarded as a genuine partnership to which each brings different gifts.  The fact that one is productive of money in large quantities is no reason to disadvantage the other.  …”

91.  Hartmann J obviously had these passages in mind when His Lordship held in F v F [2003] 1 HKLRD 836 Para. 42 that equality of division does not represent the law in Hong Kong and there is no requirement to give reasons for departing from equality.

(c) The implications, if any, for the present case 

92.  In the present case, as I said at the beginning of this judgment, both sides primarily embraced equal division as the fair distribution of the family wealth although the Husband said he should get slightly more than half on account of negative contribution by the Wife.  Neither Mr Kotewall nor Mr Mostyn contended that reasonable requirements should set the limit on the claims of their opponent.  I therefore do not need to decide whether equality of division, be it a crosscheck or starting point, is part of the law in Hong Kong.

93.  In deference to submissions by counsel on the topic, I would set out some observations of my own,

(a)	The overriding objective in the exercise of discretion under the MPPO is to achieve fairness;
(b)	To attain a fair result, equality of treatment seems to me to be the more universally applicable concept than equality of division;
(c)	Section 7(1) of the MPPO does not require the court to adopt equality of division either as a cross-check or a starting point;
(d)	As pointed out by Nicholson CJ in Figgins v Figgins [2002] FamCA 688 Para. 120, there is an inherent danger that no matter how one describes this reference to equal division (be it yardstick or cross-check or starting point), the notion might eventually be developed or extended to become the end point of any distribution;
(e)	Given the infinite varieties of factual matrix that may be presented to the court in matrimonial cases, with the greatest respect to Lord Nicholls and Lord Cooke, it might perhaps be too inflexible and a fetter on the broad judicial discretion conferred under the MPPO to require the court to consider equality of division in each and every case and give reasons for departure.  A starting point of equal division had been rejected by the High Court of Australia in Mallet (1984) 156 CLR 605, see also Nicholson CJ in Figgins v Figgins [2002] FamCA 688 Para. 116;
(f)	Even giving due regard to gender equality, there must be cases where it can readily be appreciated that equal division may result in injustice.  To require the court to perform the cross-check against equal division in such cases and to give reasons for departure may result in lengthening of proceedings, additional legal costs and extra burden on judicial resources;
(g)	I venture to suggest that it may be better to leave it to each judge to decide for himself or herself on the facts of the particular case whether it is useful to do a cross-check by reference to equal division and to give reasons for departure therefrom;
(h)	I therefore respectfully agree with Hartmann J that as far as Hong Kong courts are concerned, there is no duty to carry out a cross-check against the yardstick of equality and to give reasons for departure from equal division in each and every case;
(i)	However, I can see the force of the argument that the reasonable requirements approach could readily lead to unfair treatment of a spouse who played the role of homemaker.  Sooner or later, C v C would have to be reviewed.

94.  I agree with Mr Mostyn that given the criticism by the House of Lords, I should not accept the invitation of Mr Kotewall to adopt the approach of Butler-Sloss LJ in the Court of Appeal in White.  On the other hand, I would not fully embrace the approach of Mr Mostyn since I conclude that the yardstick of equal division is not part of the law in Hong Kong.  Instead, I should be guided by the overarching principle of fairness by reference to all the circumstances of the case bearing in mind the guidance of Section 7(1).

95.  The most substantial disputes in the present case revolved around the valuations of assets currently held by each party.  Insofar as necessary, I shall deal with those disputes later.  However, one can say for sure irrespective of the findings on the disputed valuations, both the Wife and the Husband currently own assets much more than that she or he would require to maintain a high standard of living for the rest of their respective lifetime.  The Wife is now 70 whilst the Husband is 64.  Although the marriage only lasted for about 10 years, the parties had been together for a much longer period.  More importantly, it is now acknowledged by both parties that each of them had made equal contribution to the building up of the family wealth since the days of YD.  Neither party has presented this court with any evidence of any disability on the part of either of them.  Against this background, subject to what I have to say on the effects of the agreements and the allegations of negative contribution and bigamy, I see no reason why I should not endorse the position adopted by the parties that equal division is a fair distribution in the present case.

The effects of the agreements

96.  At this juncture, I need to consider the effects of the two agreements made by the parties for the distribution of some, but not all, of their assets in 2000 and 2001.  In this respect, both the Wife and the Husband have taken different stances at different stages of the proceedings.  Mr Mostyn referred to Mr Kotewall’s volte-face in his submissions.  At the same time, he anticipated Mr Shieh’s criticism of he himself jumping on the bandwagon in view of the substantial changes in the figures brought about by developments in July.

(a) The relevant facts

97.  I can perhaps start with some common grounds.  First, these agreements did not cover all the assets of the parties and they were therefore not intended to be full and final settlement of all possible claims by way of ancillary relief.  Second, both the Husband and the Wife were legally represented and had received legal advice from his or her own lawyers when these agreements were negotiated and concluded.  Third, both parties had acted on the agreements and arranged their affairs accordingly.  Time, energy, efforts and money were spent by each of them in respect of the businesses or projects distributed under the agreements.  Fourth, the agreements were made after the parties had separated with each other.  Although a petition for divorce had yet to be issued at the time of the 2000 Agreement, given the relationship between the parties at that stage, it must have been within the contemplation of the parties.  There was an explicit reference to settlement of ancillary relief in the letter dated 14 February 2000 from the Husband’s solicitors to the Wife.  Fifth, it was the Husband himself who divided the relevant assets into two groups and invited the Wife to choose therefrom.  He himself suggested in paragraph 6 of the letter of 14 February 2000 that there should be no valuation of assets.  Sixth, no comprehensive valuation had been carried out by each party on the assets before the agreements were concluded.  However, there was a valuation of the premises of Club B available, albeit for another purpose.

98.  The Husband claimed that he was forced to enter into those agreements due to the Wife’s uncooperative stance regarding the affairs of the businesses.  In Paragraphs 86 to 88 and Paragraphs 93 to 94 of his affirmation of 21 June 2002, the Husband set out his case as to the circumstances leading to the execution of these agreements.  He further commented on the wife’s evidence about the agreements in Paragraphs 112 to 116 and 120 to 123 of his Second Affirmation although a large portion of what he said were submissions as opposed to evidence.

99.  As far as undue pressure is concerned, I am not satisfied that the Husband was subject to so much pressure that he could not exercise his judgment properly in deciding whether to accept the terms of the agreements.  It is fair to say that there was some pressure in resolving the deadlock regarding the financial affairs of the parties.  The Wife had opposed to the reduction in rent for the premises of Club B.  She presented a winding up petition regarding EPD which owned the premises.  That precipitated the 2000 Agreement.  There was also a need to proceed with the real estate projects in mainland China.  Whilst the couple were at loggerheads with each other, business decisions were difficult.  There was therefore a need for the parties to come to some agreements sensibly to minimize the damage that their breaking up would cause to their commercial interests.  Although the winding up petition against EPD was presented by the Wife, the pressure to have at least part of their joint business ventures re-organized amicably and orderly was a pressure on both parties.  There were threats of presentation of winding up petition against HKBT and its associated company by the Husband in the course of negotiations leading to the 2000 Agreement.

100.  Throughout the process of negotiations, the parties were legally represented.  As demonstrated by Mr Kotewall in the course of cross-examination, the Husband had the benefit of valuation reports regarding the premises of Club B prior to the 2000 Agreement.  I must say the way in which the Husband dealt with this line of cross-examination has cast serious doubt in my mind as to his credibility.  At first he tried to give an impression that he had nothing to do with these valuation reports and they were commissioned by his staff without his knowledge.  As he came to realize that such assertion was incredible, he said he had forgotten about it.  When pressed further, he finally admitted that the reports were prepared to facilitate the division of assets between him and the Wife.

101.  RW2 Mr Kan testified that the contents of the reports were also made known to the Wife.  He also said the purpose of the reports was to deal with the proper rent for property in the wake of the dispute between the Husband and the Wife on the subject.  On this point, I do not think Mr Kan had given the court the full picture.  The valuation reports covered both the market rent and market price of the property.  The dispute on rent was a skirmish between the couple.  It is quite apparent to me that, as testified by the Husband, the division of assets was on his mind and the reports also served as a reference for him in terms of the negotiation leading to the 2000 Agreement.  The Husband divided certain assets into two groups and proposed to the Wife to choose one through his solicitor’s letter of 14 February 2000.  He also suggested no valuation was to be carried out.  In cross-examination, he initially denied he had made such suggestion.  When he was shown the letter, he explained that it was because there was no time to make any valuation.

102.  The correspondence between the solicitors from 14 February to 20 March 2000 evidenced substantial haggling between the parties with the assistance of their legal advisers.  The monetary consideration was increased from $60 million to $65 million.

103.  Of the two groups of assets, the Husband said in Paragraph 116 of his Second Affirmation that he felt at the time of the 2000 Agreement the HKBT group was more valuable but he hoped that Club B would be restored to its former profitability and that the value of its premises would increase.  Subsequently, he realized that he had underestimated the disparity between the two groups of assets.

104.  The disparity had been over-emphasized.  In the valuations by the forensic accountants, both Mr Robinson and Mr Tam opined that Club B and EPD were of nil value whilst they were able to put some values on HKBT.  The experts also put a nil value on NF Development.  At the time of the 2000 Agreement, both EPD and NF Development were owners of substantial landed properties.  NF Development held a piece of land in Tai Wai, Shatin on which a 6-storey residential building (with a shop at the Ground Floor) was subsequently erected.  The property was sold on 28 November 2003 at the price of $7.7 million.  The Single Joint Expert valued the property on vacant site basis at $5.4 million as at March 2000.

105.  EPD was the owner of the club premises of Club B.  The Single Joint Expert valued that property at $153 million as at March 2000 and at $170 million as at August 2004.  The property was subject to a mortgage of about $8.2 million in March 2000.

106.  However, both EPD and NF Development were financed substantially by directors’ loans.  EPD’s accounts showed a liability towards the Husband in the sum of $155 million odd whilst NF’s accounts showed a liability to its director in the sum of $12 million.  The accountants were technically correct to conclude that on a break-up basis, the net asset values of these companies were nil.

107.  But it seems obvious to me that at the time of the 2000 Agreement, the parties did not contemplate cessation of the business of Club B and the development of the land at Shatin or to sell these companies on a break-up basis.  In the course of negotiation, the Wife had through her solicitor requested the Husband to continue to assist in the supervision of the development of the Shatin project (see Rider 1 to the draft attached to a letter dated 2 March 2000 at C49 at p. 12162).  The Husband requested the Wife to render assistance in the business of Club B in return, see letter of 6 March 2000 at C49 p. 12168).

108.  These director’s loans were due to the Husband and the Wife respectively.  Given their intention to continue the businesses as going concerns, it was unlikely that the loans would be called.  The terms of the 2000 Agreement provided for the mutual assignment of loans in respect of the companies distributed to the other party.  Given the recognition by the parties that they were equal partners in the business as well as domestic sense with equal contribution to the building up of the family wealth, for the purpose of considering the fairness of the 2000 Agreement, I do not think one should place much weight on the identity of the creditors under whose names the loans were booked prior to the agreement. 

109.  In the circumstances, it would not be right to assess the fairness of the 2000 Agreement on a strict net asset value approach.  Such an assessment fail to reflect the true intent of the parties, viz. each of them were to get parts of the family business with a view to continue the respective business operations.  In my judgment, it is more likely than not that although they might not have given any specific thoughts about the matter, if either the Wife or the Husband were asked about these directors’ loans at the time of the 2000 Agreement, he or she would say that, “Of course these loans would not be called and they were just our investments into the company.” What they were actually interested in were the underlying properties and businesses.  The mutual assignment of loans under the agreement was simply a measure to achieve clean break.  In so saying, it has not escaped my mind that there were minority shareholders in Club B.  However, there was no minority shareholder in EPD.  Taking a broad-brush approach, I see no reason why my analysis above should be adjusted on account of the minority shareholding. 

110.  The net asset value approach also suffers from the drawback that implicit in that approach, the director loans were taken on their face value.  In other words, the loans booked under the name of the Husband were treated as the Husband’s absolute properties whilst those booked under the name of the Wife as hers.  Whilst that must be correct in dealing with strictly commercial partners, I do not think one can apply the same approach in the context of an ancillary relief application where both Husband and Wife acknowledged the other had made equal contribution to the family wealth, in particular in assessing the fairness of an agreement intended to achieve a distribution of family assets upon the separation of the couple.

111.  A good illustration of the problem is by reference to the valuation of LSH, the company holding the office premises of Club B.  Both experts had written it off as the loan due to the Husband exceeded the market value of the property.  The shares of this company were held by nominees and there was no express provision for the same under the 2000 Agreement.  However, the parties had proceeded on the basis that it had been distributed to the Husband as he had effective control over the property through the nominees.  Neither party included it in their lists of undistributed assets.  As a matter of reality, the Husband could derive rental income from the office.  The Joint Single Expert valued the property at $6 million as at 31 March 2000 and $9.8 million as at 31 December 2004.

112.  Putting aside the directors’ loans, I do not think the values of the two group of assets distributed under the 2000 Agreement are of such a big difference to warrant a conclusion that the agreement was inherently unfair.  The premises of Club B, deducting the mortgage, had a value of $146.8 million.  After deducting the monetary consideration of $65 million, the net figure was $81.8 million.  The NF Development site was $5.4 million.  The UK Property was, according the Single Joint Expert, £2.8 million.  The UK Bonds was £750,000 and the UK bank balance was £111,960.  The total value of the UK assets was about £3.7 million.  Adopting the market exchange rate of 12.24910 (see Appendix 12 of the Report of Mr Robinson dated 31 January 2005), the HK dollar value of the UK assets in March 2000 was $45.3 million.  That leaves about $31.1 million for HKBT and its shops.  In March 2000, the shops at Happy Valley and New Mandarin Plaza were owned by companies transferred to the Wife under the 2000 Agreement.  The respective market values of these shops in March 2000, according to the Single Joint Expert, were $6.1 million and $21.5 million, with a mortgage on the New Mandarin Plaza shop at $9.5 million.  Hence, in terms of underlying landed properties, the Husband got about $13 million more than the Wife even taking into account of the $65 million payment.  If LSH is taken into account, the figure becomes $19 million. 

113.  Of course that is not the complete picture.  Under the 2000 Agreement, the Wife got the business of HKBT and the Husband got Club B.  The corporate structure of the businesses were not simple and it is not easy to assess their values.  There were substantial disagreements between the experts as to the correct values of HKBT (by that I include all companies within the business group).  In summary, Mr Robinson valued the operation as at March 2000 at $75.429 million whilst Mr Tam valued it at $5.152 million.  Different methodologies were adopted by the experts.  But that should not lead to such a large variation in the final outcome.  I shall have more to say about these valuations.  On the whole, I do not feel confident to accept the valuations of either Mr Tam or Mr Robinson.

114.  The experts assessed the value of Club B to be nil.  The audited accounts between 1999 and 2004 showed that the company operating Club B sustained losses throughout these years.  However, Mr Robinson suggested in Annexure 5 to his report that there should be adjustments on account of excessive rent and salary paid to EPD and the Husband.  After the adjustment, the company had a profit of $11 million in 2000.  Although the results of subsequent years were not good even after adjustments, the Husband had reasons for his optimism for the business at the time of the 2000 Agreement.  Mr Tam felt that the business is sustainable after adjustments in rental and director’s remuneration, both of which are subject to the control of the Husband.  Despite the downward trend of the profitability of the business, the Husband has not yet wound it up.

115.  As regards HKBT, the financial statements show that the profit in 2000 was $4.7 million odd.  Whilst the profit had increased significantly in subsequent years (EBIT for 2004 was $10 million) and a comparison with the figures of Club B shows that the prospect of HKBT is better, no-one could have predicted that at the time of the 2000 Agreement.

116.  In a crude sense, the parties themselves in effect put a figure of $19 million as representing the difference in value between the business of HKBT and Club B.  The parties had run the businesses and they must have had some idea as to the worth of the same.  Given the inherent uncertainties as to the prospect of these businesses and the lack of reliable evidence on valuations, I am not satisfied that such a price tag give rise to unfairness to either party.

117.  The subject matters of the swap under the 2001 Agreement are the two real estate projects in Guangzhou.  The Husband again said that this agreement was executed under pressure.  He mainly relied on the refusal of the Wife to allow funds from M Plaza being invested into F Seasons and LR.  Given the animosity and distrust between the couple by that time, I do not find the Wife to be acting unreasonably in exercising caution instead of subscribing to whatever suggestions coming from the Husband.  As a matter of fact, the minority shareholder also raised queries.  It was simply impossible for the two of them to carry on as partners and a split was inevitable.  This echoes what the Husband said in paragraph 123 of his Second Affirmation.  Provided that there was no question of unfair advantage being taken by one party over the other, I do not consider this sort of pressure, by itself, a good reason for not giving effect to the 2001 Agreement.

118.  He also suggested that the Wife had chosen the better option.  A lot of emphasis was placed upon the difficulties facing LR and the dispute with C Construction at that time.  It was urged upon this court that a nil valuation should be given to the LR project as at the date of the 2001 Agreement.  Reliance was placed upon certain recitals in a draft agreement.

119.  I have no hesitation in rejecting this suggestion.  The recitals were self-serving draft produced by solicitors for the Husband and the draft did not materialize into an executed agreement between the parties.  I attached no weight to the same.  Exhibit R-12 is a chronology of the LR project prepared on behalf of the Husband.  The agreement with C Construction was executed on 30 December 1993.  Deposit in the sum of about RMB11.8 million was paid on 27 January 1995.  Although the progress had been delayed, the evidence showed that the parties had taken steps to perform the agreement.  The site was cleared and C Construction indicated in a letter of 20 August 1997 that the site was ready for handover.  There were disputes about the site area and encroachment of part of the site.  The disputes had yet to be resolved at the time of the 2001 Agreement.  However, it would be wholly wrong to suggest that the Husband had written off the project altogether.  Valuation reports were obtained in 1999 and despite a reduction in value, CY Leung & Co Ltd put a market value of $1,883 million upon the completed project as at June 1999.  Of course, construction costs and other charges had to be deducted.  Even so, there was still a very good profit margin.

120.  Mr Leung, a minority shareholder had expressed some views on the discontinuation with the project in 2000.  With respect, I do not find his reasons sound.  In any event, his position was quite different from the couple.  Being a minority shareholder, his investment was not so great as theirs.  He did not have much say in deciding how the project was to be managed and how the negotiation would be conducted.  I do not believe for one moment that the Husband had ever seriously considered the abandonment of the project altogether.

121.  To start with, substantial investment had been made by way of deposit (and the commitment to the project by the minority shareholder was less).  The site was available and the dispute was about the site area.  Negotiations were protracted, partly due to change of personnel in C Construction.  However, in the correspondence, C Construction appeared to be sincere in trying to reach a solution.  It was rather unlikely that the issue could not be resolved amicably.  C Construction was also the partner in M Plaza and that project was highly successful.  Given the proximity of the LR site, there was every reason for everyone involved to believe that the LR project would also be a success.  It was in the common interest of C Construction as well as LR to resolve their differences.  According to the Husband, the couple was first introduced to C Construction by the Vice Premier of China.  That certainly meant a lot in mainland China.  Further, given the background of C Construction and the co-operation between the parties regarding M Plaza, the prospect of enforcing the agreement of 30 December 1993 should not be too dismal.  The legal opinion by Guangzhou lawyer in June 1999 was not pessimistic.

122.  In my judgment, a reason for the delay in the progress as to the LR project was the insufficiency of fund to pursue this project and F Seasons at the same time.  This was the evidence of the Husband.  Although there were uncertainties until the memorandum of understanding of 21 October 2001 between LR and C Construction, I find that as at the time of the 2001 Agreement, subject to financial arrangement, there was no insuperable difficulty regarding the LR project.

123.  On the other hand, for the purpose of assessing the inherent fairness of the 2001 Agreement, I have reservations about the valuation of the contractual right by Mr Tam in Paras. 4.3.8 to 4.3.10 of his 16 March 2005 report as a fair figure.  He deducted co-operation fees and ancillary fees from the Single Joint Expert valuation of the land to arrive at a figure of about RMB 169 million.  That approach fails to take into account of the difficulties in procuring finance for the project.  As I said, I believe finance was an important reason in the delay in progress.  The Husband’s difficulties in that regard was evidenced by the terms of the 21 October 2001 Memorandum of Understanding.  That provided for the conversion of the fees payable to C Construction into certain units in the completed building.   If the Husband had ready funds to make such payments, it would not be necessary for him to resort to payment in kind.  This depended upon the agreement of C Construction to accept the same and at the time of the 2001 Agreement, this was uncertain.

124.  Further, the Husband also needed to procure finance to cover the construction costs and other expenses to be incurred prior to the completion of the project.  Given the financial state of Club B in 2001, the Husband had to undertake considerable cash flow risk in relation to the LR project.  Subsequent developments show that it was not easy to procure finance.  It was only after repeated applications and sustained efforts made in the course of the trial that the necessary bank loan was in place.  At the same time, one should not over-emphasize the difficulties.  The Husband’s interest in M Plaza was considerable and he had other resources available to him.

125.  In contrast, although F Seasons is a project of different class and situated in a location much less central than Lin He West Road, in mid 2001 its development was less costly and less complicated.  The Wife apparently was not having too much cash flow difficulties as she was able to undertake substantial investment in KH since 2001 and transfer a sum of GBP 80,000 to her child on 2 August 2002.  The Wife referred to some difficulties encountered by her regarding F Seasons in her Second Affirmation.  I took those into account.  Be that as it may, it could not be gainsaid that the Wife was not facing the same difficulties in financing as the Husband.  Construction for F Seasons was commenced in September 2002.  Phase 1 is now completed and Phase 2 is under construction. 

126.  The Wife said in paragraph 137 of her Affirmation of 17 December 2002 that “the deal was an arms length deal”.  It reflected her belief at that stage.  That was said in 2002 without the benefit of the valuations by the Single Joint Expert.  Of course, we now know a great deal more about these two projects than what were known to the parties at the time of the 2001 Agreement.  On the face of it, there was substantial difference in the values of the two projects, even on a bare land basis as at July 2001.  In addition, the Wife had to pay the Husband RMB 20 million by instalments under the 2001 Agreement.  However, I do not think the inherent fairness of the agreement should be decided solely by reference to the monetary values of the two projects as the experts put on the same.  There were other considerations like the financial sustainability and the other risks pertaining to the projects that simply cannot be quantified in monetary terms.

127.  Even so, if I were required to consider the 2001 Agreement in isolation, the prima facie discrepancy in monetary value of the two projects (at about $100 million according to the figures of Mr Tam) plus the RMB 20 million payment did trouble me.  In the end, I come to the conclusion that on proper construction of Section 7, in deciding the weight to be attached to the agreements of the parties, the court should not examine the agreements or one of the agreements without taking into account of the other factors on a broad brush basis.  Like other options, in deciding whether to adopt the no order approach, all relevant circumstances have to be taken into account.  To elaborate on this, I need to turn to a discussion on the law.

(b) The relevant law

128.  Counsel referred this court to a number of cases on the legal effects, if any, of an agreement for distribution of assets pending divorce.  A convenient starting point is the case of Edgar v Edgar [1980] 1 WLR 1410.  The husband in that case entered into a deed of separation with his wife after several months of negotiations between their solicitors.  Under the deed, the husband made certain financial provision for the wife and the wife agreed that in the event of divorce she would not claim lump sum or property transfer orders.  On the other hand, the Wife did not covenant not to claim any periodical payments.  Hence, that agreement was not a full and final settlement of all the claims that could be advanced by the husband or the wife in ancillary relief.  The issue before the Court of Appeal was the effect of the deed.

129.  Ormrod LJ referred to some earlier cases and held that such an agreement should be taken into account under the heading of conduct.  His Lordship reiterated what he had said in the unreported case of Brockwell v Brockwell,

"when people make an agreement like this it is a very important factor in considering what is the just outcome of the proceedings."

130.  And then, His Lordship gave the following guidance,

"To decide what weight should be given, in order to reach a just result, to a prior agreement not to claim a lump sum, regard must be had to the conduct of both parties leading up to the prior agreement, and to their subsequent conduct in consequence of it.  It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel; all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage.  So the circumstances surrounding the making of the agreement are relevant.  Undue pressure by one side, exploitation of a dominant position to secure an unreasonable advantage, inadequate knowledge, possibly bad legal advice, an important change of circumstances, unforeseen or overlooked at the time of making the agreement, are all relevant to the question of justice between the parties.  Important too is the general proposition that, formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement.  There may well be other considerations which affect the justice of this case; the above list is not intended to be an exclusive catalogue."

131.  Commenting on the approach of the trial judge in that case regarding disparity of bargaining power, Ormrod LJ said,

"I used it as a shorthand way of describing a situation with which all experienced practitioners are familiar, where one spouse takes an unfair advantage of the other in the throes of marital breakdown, a time when emotional pressures are high, and judgment apt to be clouded...The crucial question, however, for present purposes is not whether the husband had a superior bargaining power, but whether he exploited it in a way which was unfair to the wife, so as to induce her to act to her disadvantage."

132.  On the facts of the case, the Court of Appeal held that the wife should be bound by the terms of the deed and her application for lump sum should be dismissed.  The case was remitted to the trial judge for determination of periodical payments.

133.  In Camm v Camm (1983) 4 FLR 577, the Court of Appeal held that the wife should not be bound by an agreement made when the relationship broke down.  In that case, the wife was anxious to leave the husband with the children but the husband made it clear that he was not prepared to made periodical payments to the wife although he would provided for the children generously.  Solicitors were consulted.  The wife was obviously under strain and hoped to have the matter resolved for the sake of the children.  Her solicitor advised her to accept the terms of the husband in view of the likelihood of protracted proceedings and even though she might receive a more favourable award by litigation, it was not certain.  Under the agreement, the wife agreed to a divorce on the ground of her admitted adultery and the matrimonial home was to be sold with the proceeds divided between the husband and the wife equally.  The husband also agreed to contribute from his share of the proceeds towards the purchase of a home for the wife.  The husband would also provided for the children.  Apart from that, the parties agreed not to make any further financial claims.  The wife subsequently changed her mind and sought periodical payments for herself.

134.  The Court of Appeal distinguished Edgar v Edgar and considered that the wife had entered into an agreement which, on the face of it, was unfair and unjust.  The wife had to undertake the sole responsibility for taking care of the children without any provision for her own support and her earning capacity was very limited.  In contrast, the husband was a consultant radiologist and had a successful practice.  The court also took the view that, against the pressure the wife was facing, she did not receive adequate advice from her solicitors. 

135.  After reiterating the court should attach considerable importance to the fact that there was an agreement and it would not lightly permit parties to depart from an agreement unless some good reason was shown, Sir Roger Ormrod elaborated on what he had said in Edgar.  On the question of legal advice, His Lordship said at p. 580,

“I still think it was right to refer to bad legal advice, although in that passage I was not thinking in terms of negligence by the solicitor … I was thinking in terms of exactly what I said, ‘bad legal advice’, and we are all familiar with cases in which parties are badly advised.  That is to say, it is not necessarily negligent advice to take a course or permit a client to take a course which a more experienced, or a stronger minded legal adviser would have discouraged.  It seems to me plain if one compares the facts of this case with the facts in Edgar v Edgar that the quality of legal advice on which parties act is of some relevance to the justice of the case.”

136.  On the question of undue pressure, His Lordship had this to say at p. 583-4,

“Without meaning to criticize anybody, the fact is, and it is obvious from the wife’s letter, that she was under extreme pressure, coming partly from herself and partly from the fact her husband was refusing to concede anything about periodical payments, and so she accepts, in a position of great stress, an arrangement which is manifestly unsatisfactory from her point of view.”

137.  Fairness was the ultimate objective.  At p. 585D, Sir Roger Ormrod referred to the conclusion of an independent bystander that the agreement was unfair to the wife.  His Lordship summarized the conclusion at p. 585E to F,

“There is no question of the wife getting what she required [under the agreement].  It is a clear case where she acquiesced in a proposal which she recognizes from her point of view was unsatisfactory.  It may be that she herself had feelings that she was responsible to a considerable extent for the breakdown of the marriage.  She may have had all sorts of other feelings.  But, none the less, it is clearly a case where the agreement should not be held to be conclusive so far as periodical payments are concerned.”

138.  One should also note that apart from disparity in earning capacity, there was also a large disparity in terms of living standard as a result of the agreement, see p. 585-6.

139.  Eveleigh LJ also gave some guidance as to the matters that the court should take into account.  At p. 588B to D,

“One has to ask in relation to the wife, how far did she know what she was doing, and what her choices were and in what circumstances did she make the agreement? Then one has to ask whether it is just to allow her to ignore the agreement, to go behind it, and one might say in a given case that the agreement was made in such circumstances that it should be binding unless a radical change of circumstances could be shown.  On the other hand, one might in another case say that the circumstances in which the agreement was made were such that it would be wrong to hold the party … to it or for it to affect the case at all.  One should also consider whether the husband has altered his position for the worse on the strength of the agreement.”

140.  Smith v Smith [2000] 3 FCR 374 and Beach v Beach [1995] 2 FLR 160 are two further instances where the court did not hold the parties to their agreements.  One must however have regard to the underlying facts of the cases.  In Smith v Smith [2000] 3 FCR 374, the court was dealing with a short marriage without any children.  The wife gave up her job in South Africa, sold her home and realized her pension rights to join the husband.  She spent her independent capital on the husband’s house.  There was an agreement that the husband was to pay the wife a lump sum by way of clean break.  There was some evidence that the wife had a clinical depression at that time.  The amount of the lump sum payment was so small that Thorpe LJ observed that he was doing no more than paying for the improvements to the house done at her expenses.  Unfortunately, contrary to her wish, the wife could not retain financial independence on her return to South Africa due to prevalent market condition.  There was also evidence on misrepresentation as to the husband’s means.

141.  Against such background, one can readily understand why the Court of Appeal concluded that there was an obvious need to reconsider the case by reference to the Section 7 criteria instead of holding the parties to their agreement.  But it does not follow from that decision that in cases where the court concludes on a broad consideration of the relevant circumstances, including the matters set out in Section 7, that there was nothing unfair between the parties to uphold the agreement, the court is still required to conduct a full scale inquiry at considerable costs of the parties.   Recently, in A v B [2005] EWHC 314 (Fam), Black J held that Smith did not alter the time-honoured principles laid down in Edgar and Camm and it was a decision on the facts of the case. 

142.  Beach v Beach [1995] 2 FLR 160 is a case where there had been radical change of circumstances since the agreement which compelled the court to depart from agreed arrangement.

143.  On the interface between the duty of the court under Section 7 and an agreement on financial arrangement, Bush J made the following observations in Dean v Dean [1978] Fam 161 at p. 172E,

“The court must, in performing its duty under [Section 7] in circumstances where there is an agreement between the parties, adopt the broad rather than the particular approach.  On the one hand, the court has a duty under [Section 7], but at the same time the court owes a duty to uphold agreements validly arrived at and which are not on the face of them, or in fact, against public policy.  In general terms also, it is wrong for the court to stir up problems with parties who have come to an agreement.”

144.  Even though there are passages in the judgment of Thorpe LJ in Smith   suggesting that the court must carry out a review under Section 7 in all cases, I do not think His Lordship laid down as an immutable rule that a full scale inquiry under Section 7 is necessary.  This is clearly borne out by dicta of Thorpe LJ in other cases.  In Xydhias v Xydhias [1999] 1 FLR 683, Thorpe LJ said,

“Therefore the purpose of negotiation is not to finally determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its function.  … If the court concludes that the parties agreed to settle on terms then it may have to consider whether the terms were vitiated by a factor such as material non-disclosure or tainted by a factor within the parameters set in Edgar v Edgar.  Finally in every case the court must exercise its independent discretionary review applying the section 25 criteria to the circumstances of the case and to the terms of the accord.”  (my emphasis)

“It is well-recognized by all experienced practitioners, whether solicitors or counsel, that contested ancillary relief proceedings are expensive … There have been innumerable examples over more than the last decade of cases in which the legal costs incurred have been quite disproportionate to the assets available for division.  This perception has engendered the Calderbank procedure and more recently the interdisciplinary development of modern procedures designed to excise much of the elaboration and waste that has become the hallmarks of the old procedure.  Litigants in ancillary relief proceedings are subjected to great emotional and psychological stresses, particularly as the date of trial approaches.  In my opinion there are sound policy reasons supporting the conclusion that the judge is entitled to exercise a broad discretion to determine whether parties have agreed to settle.  The court has a clear interest in curbing excessive adversariality and in excluding from trial lists unnecessary litigation.”

145.  More recently, in Parra v Parra [2003] 1 FLR 942, Thorpe LJ emphasized that the court should only intervene by exercising its adjustive powers over assets that had been distributed where fairness demands the same at Paras. 26 and 27,

“	[26]	… If there is a principle it should I think be this: that in comparable cases the division of assets for which the parties have themselves elected should not be adjusted by judges on the grounds of speculation as to what each may achieve in the years of independence that lie ahead.
	[27]	… The parties had, perhaps unusually, ordered their affairs during the marriage to achieve equality and to eliminate any potential for gender discrimination.  They had in effect elected for a marital regime of community of property.  In such circumstances what is the need for the court’s discretionary adjustive powers? The introduction of the ‘no order’ principle into s.25 of the 1973 Act might contribute to the elimination of unnecessary litigation.  As a matter of principle I am of the opinion that judges should give considerable weight to the property arrangements made during marriage and, in cases where the parties have opted for equality, reserve the exercise of adjustive powers to those cases where fairness obviously demands some reordering.”

146.  It is wholly inconsistent with these sentiments if the court were required to go through a comprehensive full scale Section 7 investigation notwithstanding the existence of a settlement agreement.  Even though the court must have regard to the other matters set out under Section 7, without any specific aspects which call for concern, the court should adopt a broad approach instead of conducting an inquiry in the same way as in a case without any settlement agreement.  Otherwise, the objective highlighted by Thorpe LJ could not be achieved.

147.  In X v X (Y & Z intervening) [2002] 1 FLR 508, after reviewing the authorities, Munby J set out several useful propositions at Para. 103.

“	(a)	In exercising its duty under s 25 the task of the court is to reach a just result, what Lord Nicholls of Birkenhead in White v White [2001] 1 AC 596, [2000] 2 FLR 981 at 599H and 983H respectively called the ‘fair’ outcome.  Fairness, of course, involves the principle of equality, for as Lord Nicholls of Birkenhead pointed out at 605B and 989H respectively there can be no place for discrimination between husband and wife and their respective roles, whatever they may be in the circumstances of the particular case.
	(b)	The fact that the parties have made their own agreement is a ‘very important’ factor in considering what is the just and fair outcome.  The amount of importance will vary from case to case.
	(c)	The court will not lightly permit parties who have made an agreement between themselves to depart from it.  The court should be slow to invade the contractual territory, for as a matter of general policy what the parties have themselves agreed should, unless on the face of it or in fact contrary to public policy or subject to some vitiating feature of the type referred to by Ormrod LJ, be upheld by the courts.
	(d)	A formal agreement, properly and fairly arrived at with competent legal advice, should be upheld by the court unless there are ‘good and substantial grounds’ for concluding that an ‘injustice’ will be done by holding the parties to it ...
	(e)	The mere fact that one party might have done better by going to court is not of itself generally a ground for permitting that party to resile from what was agreed.
	(f)	The court must nonetheless have regard to all the circumstances.  The circumstances are to be judged in their totality and with a broad perspective rather than individually one by one.
	(g)	In particular the court must have regard to the circumstances surrounding the making of the agreement, the extent to which the parties themselves attached importance to it and the extent to which the parties themselves have acted upon it.
	(h)	The relevant circumstances are not limited to the purely financial aspects of the agreement: social, personal and, I would add, religious and cultural considerations, all have to be taken into account.
	(i)	The court should bear in mind the undesirability of stirring up problems with parties who have come to an agreement.
	(j)	On the contrary the court should if possible, and consistent with its duty under s 25, seek to bring about family peace and finality.”

(c) Conclusions on the agreements

148.  I see no reason why these considerations should not be applied to a case where parties have reached agreement on part but not all of their assets.  I see no justification for suggesting that the Edgar principles are only applicable to cases where the settlement was intended to be comprehensive.  Edgar itself is not a case of full settlement of all potential ancillary relief claims.  It only dealt with lump sum payment.  The agreement did not bar the wife from claiming periodical payment and the Court of Appeal remitted the case for consideration of such a claim.  Mr Mostyn cited Parra as an instance of the application of the principles to partial settlement.  In the submissions of Mr Shieh SC advanced in the July hearing, it is accepted that as a matter of principle, there could be “partial Edgar” agreement.  However, counsel contended that it is a matter of evidence as to whether parties had intended such an agreement, and in the present case such evidence is absent.

149.  In my judgment, the requisite intention is supported by evidence in the present case.  As mentioned above, the Wife testified that the arrangements under the Agreements were meant to achieve clean break.  I rejected the Husband’s evidence as to the interim nature of the Agreements.  There cannot be any clean break unless the arrangements were not to be re-opened.  That is sufficient, in my view, to support a partial Edgar as put by Mr Shieh.  It would be too legalistic to prescribe that the parties had to show they had specifically addressed their mind to the question whether the assets distributed would be subject to the court’s adjustive power and whether they would be excluded from the family pool.  To a lay person, the concept of clean break already has these connotations.

150.  Mr Shieh alluded to the lack of investigation in that respect by reason of the way in which the parties chose to conduct the case.  With respect, there is no merit in the argument.  The effects of these Agreements have always been a major issue in these proceedings.  In the written opening submissions of the Wife, the Edgar principles were highlighted.  In paragraph 46 of Mr Kotewall’s Comments on Husband’s Opening, the court was urged to give due weight to the Agreements.  A partial Edgar was certainly a possibility that the parties had pondered from the beginning of the trial.  Mr Kotewall adopted such a position in the course of his opening without using this expression.  Although he subsequently retracted from it, this court is entitled to consider such option given the quasi-inquisitorial nature of these proceedings.  Questions were asked about the intention of the parties in the cross-examination of the Wife and the Husband.  This court adverted to the option again in the course of closing submissions in April.  Evidence had been led after April but neither party asked for leave to adduce further evidence on this particular issue.  In these circumstances, there is no unfairness to any party occasioned by this court’s conclusion that the evidence available was sufficient to warrant a finding of partial Edgar.

151.  In my view, the present case is a far cry from cases like Camm, Beach and Smith.  I see nothing unfair in the circumstances leading to the conclusion of the Agreements that justify either party to completely re-open the terms thereof.  On the other hand, I can see the unfairness if this court were to re-distribute what had been allocated under the Agreements On the Husband part, he had obviously invested a lot in terms of time, efforts and money in LR.  Similarly, the Wife had put a lot in the consolidation of the business of HKBT and the establishment of the KH factory (I would need to come back to the question whether KH was acquired solely by assets distributed under the Agreements).

152.  Although the Husband said in the course of his testimony that the Agreements were meant to be interim measures, that was not accepted by the Wife.  Mr Kotewall challenged the Husband’s evidence in this regard (see p. 47-49 of the Transcript of 2 March 2005).  The Wife’s testimony suggested that these Agreements were intended to achieve clean break (see her evidence on 25 February 2005, transcript p. 12).  I agree with Mr Kotewall’s proposition in cross-examining the Husband that if these Agreements were meant to be interim measures, it could not solve the problems between the parties.  The Husband tried to fudge the issue when Mr Kotewall confronted him.  On the balance of probabilities, I find that at the time of the Agreements, the parties intended the arrangements under the Agreements to be irreversible and permanent.  They were not interim measures.

153.  I have also considered two further points before deciding what weight I should give to the Agreements.

(a)

The disparity in the values of the assets distributed: it is quite clear from the authorities that disparity by itself cannot be a ground for disregarding the Agreements.  This is particularly so in the present context as the valuations of businesses are problematic and the businesses have changed much on account of efforts of the parties after the Agreements.  On the evidence, I am not satisfied that there was such a large disparity that the court is driven to conclude that unfair advantage had been taken of a party under the 2000 Agreement.  As observed in the authorities, the benefit derived from an agreement of this nature should not be measured purely from a monetary angle.  Further as regards the discrepancy in terms of the 2001 Agreement, I think a fair way to deal with it is, in the present circumstances, to treat whatever discrepancy there might be as being set off by various assets held or to be transferred to the Wife.  I will elaborate on it later;

(b)

The lack of comprehensive valuations before the Agreements: this might have a bearing on the adequacy of knowledge of the parties before entering into the Agreements.  However, it would defeat the purposes of settlement if one must have left no stone unturned in the valuation of assets before an agreement can be regarded as binding.  Under the law, parties are free to settle even though there was no valuation by either or both parties.  It is a question of balance.  Valuation exercises can be costly.  Parties should decide for himself or herself whether he or she should go through such exercises before settling or waiving the same.  In the present case, the evidence shows that it was a deliberate decision on the part of the parties not to obtain comprehensive valuations.  Ultimately, it ties in with the disparity point.  Without valuations, the risk of a large disparity between two groups of properties is higher.  It may also be easier for the court to discern unfair advantage being taken by one side.  However, if the court concludes that the overall justice of the case does not require the agreed distribution to be disturbed, I do not think the mere lack of valuations should dictate otherwise.

The valuation by the forensic accountants

154.  I would digress a little at this juncture to explain briefly why I do not feel able to attach much weight to the valuations of the various businesses by the forensic accountants.  To begin, it is necessary to appreciate some limitations of valuations by the accountants.  First, as explained by the experts, valuation is an art instead of a science.  A lot of assumptions or projections are built into each valuation exercise and very often these assumptions or projections cannot be tested accurately and may even turn out to be inaccurate with the benefit of hindsight.  A slight adjustment in one of the variables could have a great impact on the final result.  This was demonstrated by Mr Mostyn in his able cross-examination of Mr Tam regarding the valuation of HKBT.  Second, a valuation may depend on the veracity of information supplied by the party.  A good example of the latter is the change in the valuation of LR as a result of the reduction in the figure of construction costs as evidenced in the July hearing.

155.  By reason of the first limitation, the court must to some extent depend on the sound and impartial professional judgment of the accountant in their valuation.  There are always rooms for disagreement between experts and in the present case, the disagreement between Mr Tam and Mr Robinson regarding valuations for KH and HKBT is substantial.  One important consideration the court will bear in mind in resolving the difference between the experts is the impartiality of the expert.  When it can be demonstrated that an expert had been partial to his client in giving his opinion, the court would inevitably have serious misgivings about attaching great weight to his evidence in areas that depend a lot on his judgment which is not verifiable objectively.  The court will naturally be reluctant to accept opinions from an expert who has permitted his zeal in putting forward a plausible theory that serves his client’s interest to override his duty of impartiality.

156.  Regrettably, there is evidence suggesting to this court that Mr Tam had adopted a blinkers approach in assessing the Wife’s assets.  I shall refer to his evidence on the non-disclosure by the Wife later on.  Regarding the valuation of KH, Mr Tam in his report of 8 March 2005 at Bundle HB2 p. 188 para. (viii) made reference to a document by KH to support the assertion that the company had no new product.  However, he failed to mention that new products were disclosed in documents of similar nature which could not have escaped his attention as that was in the same file adjacent to the document mentioned.  When Mr Mostyn cross-examined Mr Tam about the misleading picture presented in the report, Mr Tam clung onto some unimpressive excuses to justify his statement in his report.  The essence of that paragraph was to portray KH as a company with uncertain prospect without new products facing fierce competition. 

157.  The belated discovery given by the Wife shortly before the July hearing further belied that statement of Mr Tam.  At Bundle E7 p. 1764, there is a document issued by the State Scientific Technology Bureau dated 10 November 2004 setting out a list of significant new medical products.  Item 6 was a research undertaken by KH.  The cash flow projection of KH (which Mr Robinson had requested for repeatedly but was not supplied with) at Bundle E7 p. 1876 gave a rosy prediction regarding the profitability of the business in the next few years.

158.  It may be that Mr Tam had no opportunity to peruse the documents in the latest round of discovery.  To comply with her duty of full and frank disclosure, the Wife should have supplied the documents to Mr Tam.  Further, those documents were supplied by the Wife to the Bank of East Asia in support of her loan application.  The bank loan should not be something unknown to Mr Tam because solicitor for the Husband had specifically requested for disclosure of loan documents to facilitate cross-examination of Mr Tam in a letter dated 22 March 2005.  It would be ignoring the obvious if Mr Tam did not ask the Wife to supply to him a full set of documents supplied to the bank for the purpose of the loan application before he went into the witness box for cross-examination.

159.  Mr Tam adopted the net asset value approach in the valuation of KH.  As pointed out by Mr Mostyn, that valuation took no account of the value of the research and development efforts of the company.  Given that KH was a new pharmaceutical manufacturing business, it is to be expected that the first couple of years might not be that profitable and a lot had to be incurred by way of initial investment.  However, there is every indication that the Wife had much confidence as to the future of the business and the discovery in June shows that it had a good business prospect.  Otherwise, the Wife would not increase her capital injection by RMB 7 million odd in 2004 and then about further RMB 5 million within the first three months of 2005.  She also acted as the guarantor for the Bank of East Asia loan.

160.  Indeed, with a capital injection of RMB113 million odd up to 31 December 2004, the valuation by Mr Tam at $67 million odd implied that quite substantial part of the capital injected was written off.  That does not strike me as realistic given the continued investment and expansion of the business around the same time.  Unfortunately, I do not have the benefit of Mr Robinson’s assistance regarding adjustments to his valuation in the light of the belated discovery on KH made in June.

161.  Mr Robinson built into his valuation of KH a premium of RMB 39 million (US$5 million) based on the advice of a pharmaceutical expert.  That expert was another Mr Tam (I shall identify him as “Mr T” to distinguish him from the forensic accountant giving evidence for the Wife) who had been a chief executive of the Asian operation of a US pharmaceutical company for 23 years.  I regret to say Mr T did not impress me as a reliable expert.  He gave evidence about the significance of GMP certification.  Yet he had not even read the GMP guidelines which were readily available to those interested.  The way he increased the premium on the account of marketing network when he was examined by Mr Mostyn demonstrated lack of careful analysis.  He insouciantly gave three different figures for the increase: US$2 million, US$3 million and US$4 million.

162.  Notwithstanding that he had not even inspected the factory nor met with its staff and the sole source of information was three documents and some photographs, he told this court that he was comfortable to give an advice to a purchaser as to the level of premium to be paid on account of what he described as the software value of the factory.  On second thoughts, he said he would want to have more information.  He quite gratuitously suggested, in cross-examination, that he would ask for US$ 3 to 7 million more in addition to the US$5 million he originally stated in his opinion.  The following answers given by him to Mr Kotewall as to how he came up with the premium of US$5 million gave a good illustration of his approach,

“My valuation is based on my experience and knowledge and also a certain percentage from my experience of those tangible value.  In other words, the tangible value of this plant is US$20 million including land, building and equipment.  It has a US$20 million – then of course my estimation is about 25 per cent of those.  It would not be far out of the limit of being unreasonable.”

“From all this assembling of these fixed things into the wellbeing of a plant, it needs a lot of intangibles.  So those intangibles, in my opinion, are estimated as 5 million, irrelevant – only a small percentage.  25 per cent of the total fixed asset, so 5 million here I put on.”

163.  In his report, Mr T identified five elements which made up the so-called software value and he ascribed US$1 million to each of those.  Under cross-examination, he admitted that the figure of US$1 million could be adjusted and it could be US $1.5 million or US$ 0.5 million.  Thus, his so-called calculation in his report is nothing but a farce.  Mr T was frank enough to tell the court that he gave his report on a “without responsibility” basis.

164.  I have great reservations as to whether Mr T had a proper understanding as to the duty of an expert.  Not only must an expert give the court his honest opinion, if the materials available to him were insufficient for him to express a reasonably fair and accurate opinion, he must also inform the court of such inadequacy.  I cannot see how Mr T could give the court any useful assistance regarding the reasonable level of premium and it seems to me what he said was basically guess works.  I attach no weight to his evidence.

165.  Mr Robinson had taken the precaution of seeking advice from another person in the pharmaceutical industry, a Mr Luke Chau.  He had interviewed Mr Chau on 4 April 2005, two days before Mr T gave evidence on 6 April.  However, his interview with Mr Chau was not disclosed until 7 April 2005 and his attendance note was only produced on 8 April 2005.  Mr Chau not called as a witness.  Those acting for the Wife did not have the opportunity of cross-examining Mr T in the light of what was said by Mr Chau nor the opportunity of cross-examining Mr Chau.  Mr Chau, according to Mr Robinson’s note of attendance, said it was difficult to put a value to the premium.  He thought a lot depends on the new products and he did not have sufficient information in that regard.

166.  In my judgment, that attendance note should have been disclosed before Mr T went into the witness box.  To say the least, questions should have been put to Mr T on the basis that another expert expressed a view that it was impossible to give a valuation of the premium without in-depth consideration as to the new products.  As the lead expert for the Husband in the valuation, Mr Robinson owed the court a duty to inform the court materials which come to his knowledge which cast doubt on matters he previously relied upon.  Although Mr Robinson did disclose the interview with Mr Chau, that was only done after Mr T had given evidence.  That at least give rise to an impression that the disclosure was only made due to the unsatisfactory performance of Mr T as a witness in the box.  This creates a doubt in the court’s impression on the impartiality of Mr Robinson.

167.  Another shortcoming of the valuation by Mr Robinson (and I must emphasize it is a shortcoming not due to any responsibility on his part) is that he was not given any opportunity to consider the documents disclosed by the Wife in June.  Those documents provided more information regarding the financial position of KH and its prospect.  A cash flow projection, a document repeatedly asked for by Mr Robinson, was amongst those documents.

168.  Having regard to the evidence as a whole, whilst I accept that it is likely that a premium would be paid by an interested buyer, I do not accept that the premium would be US$5 million.  If this court has to adjudicate on the level of premium and the current value of KH, I would have directed further inquiry and, subject to submissions from the parties, further reports by the experts in the light of the discovery in June.  However, given my conclusions on the effects of the Agreements and how my discretion under Section 7 should be exercised, I do not find it necessary to engage in the notional exercise of putting a figure on the premium and I would not do so in this judgment in view of the unsatisfactory evidence we have.

169.  Another controversial area is the valuation for HKBT.  An obvious point regarding this business which must be apparent to everyone concerned is the expiry of the licence from the Chinese party in mid 2005.  Yet both experts conducted valuation on the basis that there would not be problem as to renewal and it seems to be their assumption that the renewal would be on terms similar to the existing licence.  Mr Robinson said he was instructed to adopt such assumption.  But Mr Robinson did not explain why he was happy to adopt such assumption without any query.  If it is a factor that could materially affect the valuation, he should take step to verify the assumption.  Mr Tam did not explain why he did not take into account of the uncertainty as to the renewal licence in his exercise.

170.  On the other hand, the Wife raised the uncertain prospect of HKBT in her Fourth Affirmation.  She further elaborated on such uncertainty when she was cross-examined by Mr Mostyn.  She referred to the fact the Chinese party had started its own company in Hong Kong and it co-operated with Hutchison in some ventures.

171.  Since April, the parties have been requested to keep the court posted as to developments on renewal of the licence.  The latest information placed before the court suggested that there has not been any formal renewal and HKBT continued to operate in the meantime.  Some evidence was filed after April and there is a dispute as to whether there was any oral agreement.  However, the parties did not seek to cross-examine the deponents.  In any event, the evidence was not precise as to how long the licence would continue.  I do not think that could remove all the uncertainty regarding the future operation of HKBT in terms of licence.

172.  Hence, I am of the view that the evidence of the experts is deficient in that respect.

173.  Mr Tam adopted the direct capitalization method while Mr Robinson adopted the price earning method in the valuation of HKBT.  Mr Tam tried to explain the difference of the two methods in a document produced in the course of his evidence (at Bundle HB4, tab 8).  Both methods are used by financial analysts and the result derived from one could serve as a check against the result from the other.

174.  Not being an expert in the field, it would be presumptuous for this court to comment generally on the utility of either method.  But it cannot be denied that a lot more variables are involved in the direct capitalization method.  It works on the projected income stream by reference of the net cash flow of a business and capitalization of the same into a present value to arrive at the current value of the business.  It involved very sophisticated calculations by reference to a number of variables, the most notable ones being the weighted average cost of capital (WACC) and marketability discount.

175.  WACC is itself derived from a formula applied to variables including cost of equity, market value of equity, cost of debt, market value of debt and corporate taxation rate.  Cost of equity is in turn derived from another complicated formula called the Capital Asset Pricing Model (CAPM).  Built into CAPM is a factor called beta β representing the systematic risk of a particular asset relative to the risk of a portfolio of all risky assets.  Another factor in CAPM is a factor called alpha α representing company specific risk factor. 

176.  Marketability discount is to tackle the lack of a ready market for shares in private companies.  Mr Tam explained this in another document produced by him at Bundle HB4 Tab 9.  He referred to various studies conducted in the United States which yield a discount ranging between 21.5% and 40%.  One of the studies was based on comparison of price earning multiples, the factor used in the method adopted by Mr Robinson.  Mr Tam adopted a marketability discount of 35% in relation to the valuation of HKBT. 

177.  Since it is not a matter of simple arithmetical calculations, there is much room for disagreement in how objective data should be interpreted and analyzed in coming up with the resultant figure for each variable.  These factors have to be worked out with expertise which the court does not possess.  Hence, the court has to rely substantially on the expert.  Further, as demonstrated by Mr Mostyn by reference to exhibits R-19 and R-20, given the number of variables involved, a slight alterations in each or some of them would give rise to a very different result.  In such circumstances, the independence and impartiality of the expert is of vital importance.  I have expressed my misgivings in this regard in the context of the valuation of KH.  

178.  Personally, I am not aware that the direct capitalization method has ever been employed in the valuation of private companies in the context of matrimonial disputes.  In England, according to what I was told by Mr Mostyn (whose vast experience in this field has proved to be of great and valuable assistance to this court), the Family Court invariably accepted valuations arrived at by the price earning method or net asset value.  He has not encountered direct capitalization method in ancillary relief applications.  I do not think the reason for that is the one suggested by Mr Mostyn.  Rather, it is probably because in the context of ancillary relief, as Thorpe LJ observed, the court should approach the matter by a broad brush and normally, the simpler methods of valuation should be able to give the court the necessary information concerning the resource available to and the earning capacity of a party.

179.  A valuation by direct capitalization, or for that matter, the discounted cashflow method, could in most cases unduly complicate the issues before the court.  Such valuations could generate disputes between the experts as to each variable built into the formulae and the resolution of such disputes could, if the parties could afford it, lead to experts like economists or financial analysts being called.  Although no economist or financial analyst has been called as a witness in the present case, the parties placed before the court several articles written by experts about some highly technical aspects on equity risk premium: exhibits P-13 “Using Ibbotson Associates Cost of Capital Data” and P-14 “Ibbotson Associates’ Discussion of Arithmetic versus Geometric mean for Calculating Expected Equity Risk Premium for Estimating Cost of Capital (Discount Rate)” and as attachments to Mr Robinson’s evidence in Bundle HA3 Tab 7 “A response to Dr Shannon Pratt’s critique of my work on marketability discounts” Tab 8“Equity Risk Premium Forum, Nov. 8, 2001 summary comments” and Tab 9 “Firm value and marketability discounts”.  I would find it extremely unsatisfactory if the court were required to form its own views on the merits of the arguments advanced in these literatures without full assistance from the experts and counsel.

180.  The resolution of such disputes is at best a conclusion of the court as to its preference between the competing views of two experts.  I respectfully quote the following dicta of Litton VP (as he then was) in Chan Pui-ki v Leung On [1996] 2 HKLR 401 at p. 419-20, albeit in a different context, as an apt statement of the limitations of the exercise,

“Experts, be they economists, accountants or other professional persons, can of course testify in a court of law as to past events, and their views and opinions can sometimes be helpful in assisting the court in interpreting data.  Thus, it was perfectly proper for the judge to receive evidence from Mr Wyatt with regard to Hong Kong’s economic development over the past decade or so, and to allow into evidence what has been called the MIP (the Wyatt measurement of investment performance) as a rough and ready guide to investment returns for the past 12 years or so.  The object of such evidence – the only legitimate object – was to test the validity of the basic Cookson v Knowles assumption in the Hong Kong context.  If necessary both facts and opinions on such matters could have been challenged; these were therefore justiciable issues.  But the opinion evidence in the court below was allowed to stray far beyond proper realms.

[Reference was then made to the opinion evidence about the economic conditions in 20, 30 or 40 year’s time.] This, with respect to the judge, was of no evidential weight in a court of law and ought never to have been entertained.  There is no way by which the judge could have tested the validity of the assertion.”

181.  Whatever one may say in another context (and I do not intend to express any view in this judgment on the use of the direct capitalization or discounted cashflow methods in other context), the proliferation of issues in valuation is not consistent with the overall approach a court should adopt in ancillary relief proceedings.  It is not in the interest of the parties to incur substantial costs and time in dealing with disputes between accountants or economists about the variables in the formulae unless it is absolutely necessary.  Insofar as such disputes can be justiciable in a court of law, the proper resolution of the disputes requires not only the engagement of the relevant experts, it also involves pre-trial time spent on studying and understanding the expert evidence by the lawyers and trial time spent on explaining such evidence, either through the testimony of the expert or submissions by counsel, to the judge.  The judge also needs to spend substantial time in digesting and analyzing the competing arguments in order to deal with it in his judgment.

182.  Mr Tam highlighted the difficulty in finding comparable companies as the drawback in the price earning method.  However, I note that some of the variables in the formula of Mr Tam were worked out by reference to figures from comparable companies, e.g. unlevered beta and proportion of debt in the WACC calculation at Bundle HB 1 p. 124.  Hence, at least to that limited extent, there have to be available data from comparable companies for reference.  It may be a matter of degree.  However, in a textbook quoted by Mr Tam, it was said, “Obviously finding a business exactly the same as the enterprise to be valued is an impossibility.  The standard sought is usually one of reasonable and justifiable similarity.  This degree of likeness is attainable in most cases.” (Valuation and Valuation Planning for Closely Held Businesses, Frank Burke Jr).  Mr Tam was able to identify 14 TCM stocks listed in the Hong Kong Stock Exchange for comparison purposes in his report of 8 March 2005.  Of course, I understand that there is a difference between a private company and a listed company in terms of its marketability and thus, the price earning ratio for a private company is generally smaller.

183.  In fact, Mr Tam cross-checked by working out the implied PE ratios of his resultant figures from the direct capitalization method.  The implied PE ratios of Mr Tam’s figures ranged between 1.1 to 4.4 if one works on equity value and ranged between 6.1 and 7 if one works on equity plus shareholder’s loan.

184.  The valuations arrived at by Mr Tam were substantially below the net asset values based on management account of HKBT.  Mr Tam tried to explain for that in exhibit P-15.  In essence, adjustments were made to the net asset values in the management accounts by discounts on various items.  I can see the logic of those discounts if the valuations were to be conducted on the basis of a sale of the assets in a winding up situation.  However, for reasons already given above, I do not think this is the right approach to adopt in comparing the value HKBT with that of Club B to assess the fairness of the 2000 Agreement.

185.  In my judgment, it would not be right to adopt the valuations of Mr Tam for HKBT in the context of these proceedings.

186.  On the other hand, Mr Robinson used a PE ratio of 23.  Mr Tam regarded that as exceptional since in his experience, PE ratios for private companies have always been single digit figures.  To support his contention, Mr Tam referred to an Irish article from Accountancy Ireland Vol.37 about the valuation of small and medium businesses and some 2003 statistics produced by International Network of M&A Partners.

187.  Mr Robinson in turn referred to an article from Mergerstat Review and the Private Company Price Index published by BDO in Spring 2005 to show that it is not unusual to have PE ratios for private companies exceeding single digit.  Whilst there is no information placed before me as to the scale of the underlying transactions set out in the statistics of Mergerstat Review, there is a note at the last page of the BDO study stating that the deals taken into account had a mean deal size of £15 million and a median deal size of some £5 million.  It further cautioned that for company of smaller size, a further discount should be applied.  Reference was also made, through Mr Mostyn’s closing submissions to the acquisition of Pacific Coffee chain at $205 million reported by the South China Morning Post on 11 April 2005.  According to the newspaper report, the price earning ratio for that transaction was 22.

188.  It seems to me it is not helpful to generalize.  A lot of factors are in play and obviously the size of the business, the sector in which it operates must have impact on the price earning ratio.  The economy of the country concerned will also be relevant.  Hence overseas statistics might not be too indicative of the position in Hong Kong.  Nor would the statistics compiled by reference to transactions regarding large businesses (and for that matter, the sale of the Pacific Coffee chain) be of much relevance in the present context.

189.  Although I will not rule out double-digit price earning ratio for private companies, I find Mr Robinson’s approach in arriving at a price earning ratio of 23.7 unorthodox and tenuous.  He used the price earning ratio (33) of the Beijing licensor as a comparable.  Then he adjusted it by dividing the difference between that figure and the average price earning ratios of the Hang Seng index (14.06) to arrive at 23.7.  With respect, it is quite obvious that the Beijing licensor, which is actually listed in Shanghai, is not a comparable for present purposes.  As Mr Robinson said in his evidence, the Beijing licensor operated in the mainland with a couple of thousand outlets.  Apart from retails, it also involves in manufacturing.  The scale of operation, the economy in which it operates is materially different from HKBT.  As the licensor, it is not subject to any constraints in its development stemming from licence conditions.  Also it does not face competition from other business selling products with the same licensed brand name as HKBT has to face.

190.  The second stage of Mr Robinson’s approach is also problematic.  I fail to see any sound basis for adjustment by reference to the average price earning ratios of the Hong Kong Hang Seng index.  I agree with the observations by the author of the Irish article quoted by Mr Tam.  Using an overall price earning ratio from the Stock Exchange simply fails to reflect the idiosyncrasies of the particular sector in which the business in question operated.  I also fail to see any sound basis for the way in which Mr Robinson made the adjustment, viz. taking the mean difference between the ratio of the Beijing licensor and the average ratio of the Hong Kong Hang Seng Index.

191.  The flaws in Mr Robinson’s price earning ratio can also be demonstrated by the payback calculation in exhibit R-21.  Even assuming a compound annual growth rate of 25%, the figures of Mr Robinson implied that it takes 8 to 9 years for an investor to recoup its acquisition price from the net profit generated by the business.  With the uncertainty surrounding the licence renewal aspect and competition from other licensees, this does not seem to me to be an attractive proposition.  Moreover, I agree with Mr Tam that it is not realistic to assume the profit from the business will grow continuously for the next 8 to 9 years at 25%.

192.  Therefore, I do not adopt the valuation of Mr Robinson for HKBT.

Non-disclosure by the Wife

193.  The next question is what are the assets held by the parties which were not the subject matters of the Agreements.  Since the distributions under the Agreements, some of the assets had been sold and re-invested.  In the light of my conclusions as to the effects of the Agreements, the distributed assets should not be re-distributed again even though they had been converted to other assets.

194.  In this connection, Mr Shieh submitted that there was insufficient investigation in the evidence by reason of the manner in which the parties had conducted themselves regarding the effects of the Agreements.  I do not agree.  Even though Mr Mostyn had, prior to 12 July 2005, steadfastly maintained that the Agreements should not be given their full effects, he also contended right from his Opening that one should draw a distinction between marital product and separate property.  The gain derived from the distributed assets after separation, counsel said, should be treated as separate property.  That was the underlying plank supporting the Husband’s case that the increase in the value of LR since the 2001 Agreement should not be ploughed back into the pool of family asset for distribution under Section 7.  Put in another way, it is implicit in Mr Mostyn’s argument that the 2001 Agreement has the effect of segregating post agreement increase in the value of LR from overall assessment.  By the same token, if KH was derived solely from assets distributed under the Agreements, it should be treated differently from undistributed assets.  On the other hand, the stance of the Wife in written opening was that each side would prima facie keep what had been distributed under the Agreements and financial redistribution should be effected by payment of cash or transfer of “left out” assets.  To deal with such arguments, it was necessary to examine to what extent KH represented assets distributed under the Agreements.  Hence, in my judgment, whatever lack of investigation there may have been has nothing to do with the stances taken by the parties.

195.  The issue of non-disclosure had also been canvassed in the Opening of Mr Mostyn. The Wife’s Affirmation of 17 December 2002 was clearly deficient in a number of material aspects insofar as it purported to give full particulars of her financial position.  She was completely reticent about her plan and acquisitions leading to the establishment of KH in that affirmation.  Bearing in mind the extent of her investment in KH (by that I include Si Qiu) the non-disclosure is significant.  Also, the St John Wood property was not mentioned.

196.  As early as 16 July 2003, the Husband had raised by way of Questionnaire query as to the source of funds for the Wife’s investment in KH as well as F Seasons.  Regrettably, the Wife had not been forthcoming and discovery of some significant documents were made haphazardly in the course of the trial.

197.  I do not wish to rehash all the details set out in the chronology of non-disclosure prepared by the solicitor for the Husband.  The manner in which the Wife chose to deal with request for information regarding KH in her answer of 11 May 2004 and then supplied bundles of documents in October 2004 for those advising the Husband to digest was singularly unhelpful.  Given the level of professional advice the Wife could have obtained if she so wished, I find it hard to believe that she could not provide a more intelligible and meaningful answer in a timely and orderly manner.  The party who gives disclosure also carries the obligation to present the information in a way that could be readily comprehensible to his opponent.  Straightforward and direct answers could have been given by the Wife to questions like how much has been invested into a business and what were the sources of fund.  A good litmus test for distinguishing a bona fide fulfillment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party.  I regret to say that having regard to the way in which the Wife had given disclosure of her means throughout the course of these proceedings, it is clear to me that she deliberately chosen not to give meaningful disclosure of her means.

198.  It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek.  Too much legal costs and judicial time had been spent on such wasteful exercise.  As stressed by Mr Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means.  To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored.  That by itself is a breach of the positive duty to give disclosure.  As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.”

199.  Although the financial affairs of the Wife were complex involving accounts relating to a number of businesses, there is all the more reason for her to give clear and meaningful disclosure of her affairs as early as possible.  Understandably, she needed to engage the services of professional advisers to assist her in the exercise.  But she should appreciate that the primary duty rested on her to see to it that the exercise was done properly and satisfactorily in a timely fashion.  She should have enlisted the necessary help from the professionals and supply them with all the necessary information soon after the commencement of ancillary relief proceedings.  It is no excuse, as the Wife had tried to mitigate in the witness box, to say one had no idea as to how such an unsatisfactory state of disclosure has arisen because the job had been left to others.

200.  If the court shall come to the conclusion that a litigant has been recalcitrant in failing to come clean in giving full and frank disclosure of his or her means, it should not hesitate to draw adverse inference against such a litigant, see Baker v Baker [1995] 2 FLR 829.

201.  A blatant example of attempts by the Wife to frustrate proper evaluation of her means is in regard to the Husband’s request for information and documents pertaining to bank loans obtained by her to finance construction of KH factory.  A request for such information had been made as early as 16 July 2003 in the Husband’s Questionnaire.  Loan was obtained from Bank of China in April 2004 but no discovery was given until 31 March 2005, long after she had given evidence in the witness box.

202.  From 28 August 2004, solicitors for the Husband wrote a series of letters asking the Wife to confirm that she had disclosed all her landed properties in the list of properties sent to the Single Joint Expert.  It culminated in a letter dated 5 November 2004 by the solicitors putting the Wife on notice that the court will be invited to draw adverse inference against her.  Despite that, the Wife chose not to respond to the request.  As it turned out at a very late stage of the trial (on 11 July 2005), she had used the proceeds of sale of a warehouse in Wembly held in the name of her son for capital injection into KH.  Mr Shieh valiantly argued that it was simply a case of gift from the son.  The son did not give evidence and given the circumstances under which the document was disclosed, Mr Mostyn had no opportunity to cross-examine the Wife about the same.  No evidence had been tendered before me to show that the warehouse was purchased by the son with his own fund.  Against such background, this court is entitled to draw the inference that the warehouse in Wembly was actually held by the son as nominee for the Wife and she had deliberately concealed it from the Husband.

203.  On 12 April 2005, the Wife through her solicitors gave belated disclosure of certain documents relating to KH.  One of the documents was a Business Licence of KH issued by the Industry and Commerce Administration Bureau of Guangzhou showing an authorized capital of $130 million.  As a matter of fact, as subsequently disclosed by discovery made shortly before the July hearing, the board had passed a resolution for the increase of authorized capital to $230 million on 27 October 2004.  That increase was approved by the Government authority in November 2004 and duly registered on 9 December 2004.  Mr Mostyn justifiably complained about the failure of the Wife to disclose the same earlier.  No explanation had been offered on behalf of the Wife as to why outdated material was supplied in April without qualification.  It has to be remembered on 12 April 2005, the parties expected the trial to be completed on 22 April and the July hearing was not contemplated.  Having regard to what I have said in paragraph 7 of my Reasons for Decision of 25 May 2004 on the continuing obligation of a party to give discovery, I am of the view that the Wife should at least mention in her belated disclosure in April that some of the information contained in the documents had been overtaken by subsequent developments.

204.  Mr Robinson raised the issue of undisclosed assets held by the Wife in his report.  The Wife’s forensic accountant stated in his own report that he did not carry out any fund tracing or investigation exercise.  Under cross-examination, Mr Tam made it clear to this court that he regarded it as outside the scope of his duty in preparing his report to question the accuracy of figures appearing in the documents supplied to him.  The following answers given by him in his evidence presented a fair picture as to how he perceived his role in this piece of litigation,

(a)	On 6 April 2005, pages 145 of the transcript,
	“	Q.	You know Mr Robinson has expressed a significant caveat that he does not believe he has been given a full account of all the petitioner's assets at any given time, are you satisfied that you have?
		A.	I think that is a question outside the scope of this exercise.
		Q.	If you are going to giving a report as to what her assets were at any given date, I am perfectly entitled to ask you whether you felt satisfied that you were giving an accurate report for each of those dates.
		A.	As I said, based on the information I have seen, yes, these are the correct balances.
		Q.	It is only as good as the information you have received?
		A.	Correct.”
(b)	On the same date, at pages 147-8 of the transcript,
	“	Q.	… But you were not given an explanation as to where 2.3 million in the DBS Kwong On savings account went?
		A.	I think we have asked the question but we have not been provided with the information.
		Q.	The question was going to be: did you ask?
		A.	Yes, we asked.
		Q.	You have not been given it?
		A.	But the important thing for our exercise is to determine the value as at those different valuation dates.  That is our main task.  You appreciate, as you mentioned at the beginning, that we are under very tight time schedule.
		Q.	Of course if, focussing on 2.35 million has disappeared, you have not been told where this has gone and it is not in DBS in July 2001, it might not be reasonable to assume that it has ceased to exist.  It might have been put in an account about which you do not know, is that not right?
		A.	I do not want to speculate.
		Q.	It might have gone to Vaduz possibly.
		A.	Possibly.
		Q.	And you have asked and you have not been told.  It is not a very satisfactory state of affairs.
		A.	As I said, the main task of our exercise is to value the net worth of the petitioner and the respondent as at those dates.  So I think, obviously if we do not have the bank statement which show the balances as at that date we would be concerned, but apart from that – subsequently how that money was used, I consider that as outside the scope of the exercise.”
(c)	On 7 April 2005, pages 21-22 of the transcript,
	“	HIS LORDSHIP:		Would it be fair to say, Mr Tam, that the position is that you simply are not in a position to say whether that is the maximum figure because you were not instructed to undertake an exercise to verify that?
		A.	I did say I think that the – based on evidence available to me, which is this list, which adds up to $138 million.
		HIS LORDSHIP:		Basically you just are acting on information supplied to you?
		A.	That is right.
		HIS LORDSHIP:		And you did not carry out an independent exercise, whether by way of audit or investigation?
		A.	That is correct.”

205.  I must say this is not satisfactory.  In the context of ancillary relief proceedings, when there is allegation of non-disclosure of assets by a party, a forensic accountant is expected to assist the court in analyzing the financial information supplied by the parties with a view to determine whether the allegation has any substance.  If his client is subject to such an allegation, he should also advise his client to provide the court with proper information to dispel whatever unjustified suspicion the other side might have raised.  The court would deal with the case on the basis that he or she has the benefit of professional advice in meeting such allegation.  Failure to come up with full and adequate explanation might lead to adverse inference being drawn.  Therefore an expert taking his client’s instructions on its face value despite the same being challenged by the other side is not going to take his client’s case very far.

206.  To be fair to Mr Tam, he was only instructed by the Wife in December 2004 and he had to work under a very tight schedule.  However, as I have stressed above, it is the personal duty of the Wife to ensure proper disclosure was made in good time.  If she required professional assistance in the exercise, such duty encompasses proper and adequate instructions be given to the professionals in good time.  Therefore the Wife must bear responsibility for deficiencies in the report of Mr Tam when he was not given the time necessary for him to perform his task adequately.  Moreover, the Wife was assisted by another accountant prior to the engagement of Mr Tam.  There is no excuse for her inadequate disclosures.

207.  Mr Mostyn made forceful submissions in his Closing submissions in April 2005 about undisclosed assets held by the Wife.  Counsel tried to demonstrate that with the resources she had disclosed, the Wife simply would not be able to make the necessary investments in KH, F Seasons as well as paying the Husband the consideration under the 2001 Agreement.  The court was invited to infer that the Wife had other resources which are yet to be disclosed.  Mr Mostyn was able to come up with a figure of $115 million as the value of undisclosed assets.

208.  Whilst I accept that based on the materials available, the court could draw an inference that the Wife had some undisclosed assets, I do not agree with the figure put forward by Mr Mostyn.  There are flaws in his methodology in arriving at the figure in Paragraphs 178 and 179 of his Closing Submissions.  I do not think one can just take the difference of the assets between two points in time as the only funds from her disclosed assets that could be invested by the Wife in the projects.  That fails to take into account of appreciation of value of the assets during that time and income generated from the assets.  It also fails to take into account of the possibility of the Wife using resources of companies distributed to her under the Agreements to finance the other projects.  The impact of these can be gauged by reference to the sources of capital injection into KH disclosed in Bundle L, which of course was not available to Mr Mostyn at the time when he made his Closing Submissions in April.  Bundle L was only supplied to solicitors for the Husband on 11 July 2005.

209.  Further, in Paragraphs 178 and 179 of Mr Mostyn’s submissions, he proceeded on the basis that regarding KH, the Wife had to invest a total of RMB 170 million minus the bank loan of $47 million.  This was also shown to be inaccurate in the audited balance sheet of KH up to 31 December 2004.  The total capital injected by the Wife was, according to the balance sheet, only RMB 113 million odd.

210.  I would not draw the inference that the Wife held undisclosed funds in the sum of $115 million.  Having said that, the manner in which the Wife dealt with discovery as to her assets does give rise to justifiable concern that she holds undisclosed assets, perhaps not under her own name.  Although the Wife would not admit it, I do not believe her trip to Liechtenstein was solely for sightseeing and purchase of stamps.  She is not unfamiliar with the use of off-shore companies in holding assets.  Times and again she revealed under cross-examination companies which she failed to disclose as she should have, e.g. Able Talent, DKSC and Sui Qiu.  The significance of these goes beyond the values of these businesses.  It demonstrated a propensity not to give full and frank disclosure.  Mr Mostyn had pinpointed gifts made by her in favour of her children in his written Opening.  In the present context, I will highlight two transfers of fund on 2 June 2000 and 2 August 2002 respectively.  They were transfers made after the separation of the couple.  Mr Mostyn worked that out to be about $3.9 million odd.  The Wife said the transfer on 2 June 2000 was for the purchase of another property in St John’s Wood in the name of her son.

211.  It would not be possible to put a precise figure on the value of the undisclosed assets.  However, I do not think it comes anywhere near the figure of $115 million suggested by Mr Mostyn.  If the Wife has hidden resource of that scale, I believe she would not have agreed to give up LR in exchange for F Seasons in 2001 and F Seasons would have developed at a faster pace than it had been.

The equation

212.  Taking a broad overview, I think the following equation represents a fair distribution of the assets involved in terms of giving effect to the Agreements plus compensation to the Wife for the discrepancy under the 2001 Agreement (on pure monetary reckoning a difference of $120 million, subject to what I said above as regards non-monetary considerations).  On the Wife’s part, she would keep KH, F Seasons, HKBT as well as her jewellery and paintings and the Beacon Hill Road property.  On the Husband’s part, he would have LR and Club B.  In effect, the Wife gets the jewellery and paintings (estimated by Mr Robinson to worth about $5.5 million, disputed by the Wife on the value of the paintings), Beacon Hill Road property ($69 million as at December 2004), the investment into KH derived from undistributed asset (based on information in Bundle L, that is about $20.5 million) and her undisclosed assets as compensation for the discrepancy under the 2001 Agreement.  Since I intend to give effect to the Agreements insofar as it is equitable to do so, the difference in value under the 2001 Agreement should be considered by reference to the values as at 2001.  Hence the Husband shall enjoy the exclusive benefit of the increase in value of LR since 2001 and the Wife in turn enjoys exclusively whatever profit she might reap from HKBT and KH.  The Wife will not be required to pay back the Husband anything on account of her occupation of Beacon Hill Road property since separation. 

213.  Although there are elements of imprecision in the above equation in terms of the value of undisclosed asset, the discount attributable to the non-monetary considerations for the value of LR in 2001, the value of the paintings, I am satisfied that it is appropriate in the circumstances of the present case to exercise my discretion under Section 7 to re-distribute the assets and give effect to the Agreements in such a manner.  Whenever the court draws adverse inference on account of lack of proper disclosure, there is always a risk of imprecision.  However, the Wife could hardly complain as this is occasioned by her own default.

214.  With the major assets being dealt with by the above equation, the remaining assets can be readily identified and the process of equalization would not be difficult.  I can adopt Para.23 of Mr Mostyn’s Final Written Argument as the starting point.  On the Husband’s side, the Beacon Hill Road property should be deleted from Mr Mostyn’s list as I have dealt with that under the equation.  The sum payable to the Wife should also be deleted because that was part of the considerations under the Agreements and again covered by the equation.  The balance of the assets adds up to $42,478,947.

215.  On the Wife’s side, I shall take out the St John’s Wood property because it had been sold and the proceeds injected into KH, as such covered by the equation.  The same applies to the paintings and jewellery and undisclosed assets.  The two sums written off under the 2001 Agreement were also part of the equation and should not be taken into account again.  The balance of the assets under the Wife’s name adds up to $64,516,545.

216.  By way of equalization, the Wife shall have to pay a sum of $11,018,799 to the Husband.  On the other hand, under the above equation, the Husband shall transfer the title of the Beacon Hill Road property to the Wife.

217.  This equation has not taken into account the outcome or the lack of outcome from the liquidation of Guangzhou Excellence.  As indicated on 13 July 2005, this court will leave this issue aside for the time being and parties will have to address this court further in the light of the latest round of evidence filed recently on this topic.

218.  I will explain in the sections below why I do not think there should be any adjustments on account of (1) bigamy; (2) negative contribution; and (3) Norris add back.

Should the share of the Wife be reduced by reason of bigamy?

219.  Notwithstanding that a decree of divorce was granted on 23 January 2002 and made absolute on 16 March 2002, the Husband invited the court to say that the Wife was guilty of bigamy and for that reason, her claim for ancillary relief should be dismissed.  Counsel relied on a line of cases starting from Whiston v Whiston [1995] Fam 198.  It is the case of the Husband that the Wife was validly married to LW and they had not been divorced in 1991 when the Wife and the Husband married.

220.  That contention does not sit well with the decree of divorce.  If the marriage between the Husband and Wife is invalid in law, the proper course is to set aside the decree of divorce and seek a decree of nullity, see Rampal v Rampal [2000] 2 FLR 763.  To address the procedural difficulty, Mr Mostyn prepared a summons and it was filed on 21 February 2005.  He submitted that the ancillary relief application could be heard together with the summons in tandem.  The summons sought the following relief,

“	1.	The cause herein (“the divorce suit”) be transferred to the Court of First Instance pursuant to Section 43 of the District Court Ordinance (Cap 336).
	2.	Pursuant to Rule 55 Matrimonial Causes Rules (Cap 179A) the divorce suit cause be reheard by Mr Justice Lam, and the time for making the application therefore be extended.
	3.	The requirements under Rule 55(6) to serve an affidavit in support of the application and under Rule 55(7) to file a transcript of the earlier proceedings be dispensed with.
	4.	The Decrees nisi and absolute in the divorce suit be respectively rescinded and set aside.
	5.	The Respondent do have leave to issue a petition alleging nullity (“the nullity petition”).  Service of the petition on the Petitioner be dispensed with (on the basis that she has been provided with an identical draft of the same).
	6.	All time be abridged and formalities dispensed with to bring the nullity petition before the court this day.
	7.	The aforesaid application and nullity petition be heard in chambers by Mr Justice Lam in conjunction with the existing application for ancillary relief in the divorce suit between 16 February and 22 April 2005.
	8.	Decree Nisi be pronounced on the said nullity petition.
	9.	The time for the making of Decree Absolute be abridged, and the Respondent (in the divorce suit, Petitioner in the nullity petition) be given leave to make the Decree Absolute forthwith.
	10.	The ancillary relief application in the divorce suit be deemed to have been made in the nullity petition.”

221.  I still take the view that it would have been better for the suit to be placed on a proper footing (viz. there should be a determination on whether the decree should be one of nullity or divorce) before the hearing of the final ancillary relief application.  That should be the correct procedure to be adopted.

222.  There are unusual features in the present case.  The procedural aspect was first raised by this court on its own motion at the pre-trial review on 14 December 2004.  At that hearing, I was concerned about the implication of the decree absolute from the point of view of issue estoppel.

223.  In the course of the opening speeches at the substantive hearing, counsel advanced interesting arguments as to the applicability of the doctrine of issue estoppel to family proceedings.  Mr Mostyn referred to Paras.16.82 and 16.84 of Rayden & Jackson’s Law and Practice in Divorce and Family Matters, 17^th Edn. and emphasized the duty of the court to inquire into facts alleged by the parties in exercising its power under the MPPO.  Counsel also underscored the summary nature by which a decree nisi and absolute was obtained in the present case due to the fact that the petition was undefended.  On the other hand, Mr Kotewall contended that a decree of divorce is a judgment in rem concerning a person’s status and a party cannot assert that a marriage is invalid in the light of such a decree.  Counsel’s research led to an interesting article by Mr Tolstoy QC written in 1968 at (1968) 84 LQR 245.  In that article, three English cases on the topic were considered: Wilkins v Wilkins [1896] P 108, Woodland v Woodland [1928] P 169 and Hayward v Hayward [1961] P 152.  I think Mr Mostyn supplied the answer to those submissions by accepting that the decree of divorce have to be set aside if the court were to adjudicate the ancillary relief on the basis that the Wife was guilty of bigamy.  For that purpose, the Husband was willing to issue a summons and as mentioned, a summons was issued.  The real issue is whether these applications can be heard in tandem. 

224.  In the special circumstances of the present case, I am prepared to accede to the course suggested by Mr Mostyn, especially when Mr Kotewall did not have strong objection to the summons to be issued and the evidence relating to the bigamy to be heard together with the ancillary relief application.  The parties appeared to have prepared the case on the basis that these matters were to be dealt with in tandem and the procedural point was only raised by this court at a rather late stage when parties were geared to tackle the ancillary relief in February 2005.  I am also satisfied that no unfairness would be caused by adopting such approach.  On the other hand, it would lead to a delay of the trial of the ancillary relief if we were to follow the usual procedure.  I also borne in mind the submission by Mr Mostyn that the court’s powers in granting ancillary relief are identical, whether under a decree of nullity or a decree of divorce.  That submission addressed the point raised by Mr Kotewall about the potential difficulties if a party wishes to challenge this court’s finding on bigamy by way of appeal.

225.  In dealing with the question of bigamy, it is important to distinguish between two related but distinct concepts.  As far as the crime of bigamy is concerned, it is governed by Section 45 of the Offence against the Person Ordinance [“OAPO”].  In the present context, several aspects are significant.  As regards the actus reus, prior to 1971, a valid marriage could be contracted by way of Chinese customary marriage and modern marriages without any registration.  It is not suggested that the Wife had a registered marriage with LW.  Mr Mostyn had not really specified whether the Husband relied on customary marriage or modern marriage.  He simply invited this court to find that the Wife had a valid marriage with LW because of her own statements in her affirmation.  He frankly told this court that but for those statements, the Husband would not raise this question of bigamy because he simply was not in a position to establish that the union with LW was a valid marriage.

226.  The second aspect is also about actus reus.  There is a proviso in Section 45 which reads,

“Provided that nothing in this section shall extend to any person marrying a second time whose husband or wife has been continually absent from such person for the space of seven years then past, and has not been known by such person to be living within that time …”

227.  In other words, if LW had been continually absent from the Wife for seven years prior to 1991 and had not been known by her to be living, the Wife would not be guilty of the crime of bigamy.

228.  The third aspect is mens rea.  An honest and reasonable belief by a defendant on a fact which, if true, would make the second marriage lawful is a good defence and it encompasses belief on facts pertaining to the proviso (see Archbold Hong Kong 2005 Para. 33-7).  On the other hand, Mr Mostyn submitted that recklessness would be sufficient to constitute the requisite mental element.  This is relevant in the context of the Wife’s knowledge about the validity of customary marriage and unregistered modern marriage in 1991.

229.  As regards the burden of proof, it was held that once seven years’ absence is proved, the burden is on the prosecution to prove that a defendant knew that the first spouse was still living during that period, see Archbold Hong Kong 2005 Para. 33-8.

230.  That’s all I propose to say on the criminal aspect of bigamy for the time being.  This discussion is germane because the rationale under the rule in Whiston v Whiston [1995] Fam 198 as expounded by Ward LJ is the public policy that a man should not be allowed to have recourse to a court of justice to claim a benefit from his crime (see also the judgment of Sir Brian Neill in J v ST [1998] Fam 103 at p. 154-5).

231.  A related but discrete concept is a void marriage by reason of the fact a party was already lawfully married.  This is governed by Section 20 of the Matrimonial Causes Ordinance Cap. 179.  No mens rea is required and the proviso under Section 45 of the OAPO has no application.  The consequence of a void marriage is that there would be a decree of nullity.  However, the rule of Whiston v Whiston has no application just because the marriage is void on that account when neither party is guilty of the crime of bigamy.   Under Section 4 of the MPPO, the court has the same power to grant ancillary relief in cases of decree of nullity as in cases of decree of divorce and under Section 7 the duty of the court in the exercise of such powers is exactly the same.  Mr Mostyn submitted that even so, the fact that the marriage was bigamous and the Wife’s conduct in procuring the same should be a relevant conduct to be taken into account.  I shall come back to this argument later.

232.  Counsel also debated on the operation of various presumptions pertaining to the validity of the two “marriages”.  On the one hand, Mr Mostyn relied on Pazpena de Vire v Pazpena de Vire [2001] 1 FLR 460 and Paras. 4.11 and 4.12 of Rayden 17^th Edn to contend that there is a strong presumption of marriage if a couple described themselves as married and cohabited.  Hence, counsel contended, the burden is on the Wife to prove that she was not validly married to LW.  On the other hand, Mr Kotewall prayed in aid the presumption of validity of the subsequent registered marriage against the background of an earlier doubtful marriage, see Taylor v Taylor [1967] P 25, Ives v Ives [1967] HKLR 423 and Kao v Kao  [1975] HKLR 449. 

233.  Although Mr Mostyn criticized the rule in Taylor v Taylor [1967] P 25 as being illogical and inconsistent with the earlier case of Monckton v Tarr (1930) 23 BWCC 504, I am bound by Ives v Ives [1967] HKLR 423 which was a decision of the Full Court.  I agree with Mr Kotewall that Ives cannot be said to be decided per incuriam.

234.  Perhaps it does not matter very much whether I should follow Ives or Monckton.  Mr Kotewall said there is no conflict between the two decisions.  In Monckton, the two presumptions in question were the presumption of validity of the last marriage and the presumption of death of the husband in the first marriage.  I would prefer to consider the cases as illustrations on how the court on the particular facts of the case before it resolved the apparent conflicts between different presumptions.  There is an interesting discussion on point in Adrian Keane, The Modern Law of Evidence, 5th Edn p. 655, after referring to Taylor and Mockton,

“[The approach in Taylor] suggests that the strength of a presumption may be gauged by reference to the comparative likelihood of the two presumed facts, or even to general considerations of public policy, as opposed to the nature of the burden placed on the party against whom it operates.  Inherently imprecise, such an approach has the obvious advantage of flexibility compared to any set formula.”

235.  Neither the Wife nor the Husband had been entirely truthful in giving evidence on the topic.  It strains credulity too much for this court to believe the Wife’s evidence that she just went to live with LW in early 1950’s pursuant to the direction of her grandmother and had four children borne out of that union without undergoing some kind of ceremony.  In her affirmation of 17 December 2002, she described the relationship as a marriage and she called LW her husband.  In Paragraph 113, she said, “My children were all born within wedlock and conceived with a man with whom I was married at the time.” She also said in the same affirmation that her father objected to the marriage.  In her oral testimony she put that forward as the reason why there was no ceremony.  However, she said in Paragraph 15 of her affirmation that her grandmother called the shot and at her insistence, she was married to LW.

236.  She was cross-examined by Mr Mostyn about these statements in her affirmation.  I do not find her explanations to be convincing.  She repeatedly said she regarded herself to be “married” because she was addressed as Mrs L by others.  But she had the benefit of advice from her solicitor when she made her affirmation of 17 December 2002 and the statement in Paragraph 113 specifically referred to “wedlock” and “divorced mothers”.  With respect, I am unable to accept the submission of Mr Kotewall that the references to marriage with LW in that affirmation were used by way of loose language and the Wife was only expressing sororial solidarity with divorced mothers.  When Mr Mostyn cross-examined the Wife with reference to her statement about the children having been born within wedlock, the Wife failed to come up with any satisfactory answer.  She simply said, “What happened between me and Mr LW – I have forgotten all about that already.” 

237.  There was a substantial time lapse between the raising of the issue of bigamy by the Husband on 18 July 2003 and the Wife’s substantive reply to that in her Fourth Affirmation of 2 November 2004.  Mr Mostyn asked the Wife why she did not put the record straight at the earliest opportunity if what she said in the first affirmation about marriage with LW was due to mistakes.  That was against the background that in the interim the Wife had filed an Answer to Questionnaire dealing with decree of divorce in respect of her marriage with LW.  She did not say in that Answer that she was not validly married to LW.  Instead she produced the death certificate of LW which failed to address the point in issue.  Again, I do not find the Wife’s answer to Mr Mostyn’s questions on this topic to be satisfactory.  She kept on insisting that it was a fact that she did not marry LW without addressing the issue why she (with the benefit of the assistance of those advising her) did not see fit to clarify it sooner.

238.  On the evidence before me, I find that the Wife was validly married to LW in early 1950’s by way of modern marriage.  However, there is nothing to suggest that the Wife had any contact with LW since they separated in 1962.  She cohabited with the Husband at the latest since 1971.  There is little doubt in my mind that LW’s absence from the Wife had lasted continuously for more than seven years prior to 1991.  There is no evidence suggesting to me that during the seven years prior to the registration of her marriage with the Husband in 1991, the Wife knew that LW had been living.  The law did not impose any obligation on the Wife to make any enquiry as to whether LW had been living during the seven years prior to the second marriage.  Once she showed seven years’ continuous absence or more, unless the Husband could prove that she had positive knowledge that LW had been living during the seven years, she can rely on the proviso in Section 45 of the OAPO. 

239.  Hence, the Wife was not guilty of the offence under Section 45 although the second marriage is invalid by reason of her marriage with LW.  The case therefore does not within the rationale of the rule in Whiston v Whiston.

240.  Notwithstanding the above conclusion, should I still, as urged by Mr Mostyn, regard the Wife’s role in bringing about a bigamous marriage with the Husband as a relevant conduct under Section 7 of the MPPO? Although the Wife should have done more by way of dissolving her marriage with LW before her marriage with the Husband in 1991, in the overall context of the present case, taking into account the long cohabitation between her and the Husband since 1971, the contribution made by her to the family wealth, the manner in which the wealth had been distributed under the Agreements and the conclusions I reached above as to the proper relief to be granted in these proceedings, I do not consider her conduct in this regard to come anywhere near to gross and obvious misconduct that warrants any diminution of award in her favour.

241.  In this connection, I find that the Husband was as reckless as the Wife in 1991 in respect of the validity of her marriage with LW.  I do not believe for a single moment his evidence that he had repeatedly urged the Wife to check about the implications of her marriage with LW and his own inquiry on the matter with a chief immigration officer who was his friend.  He did not say a single word about his checking with his friend and what he was told about Chinese customary marriage in his many affirmations filed in these proceedings.  Nor did he say anything about the belief held by him in 1991 that the Wife and LW had undergone Chinese rites for marriage and that was a valid marriage under the law.  He mentioned these for the first time on 4 March 2005.

242.  Mr Mostyn tried to defend the Husband’s credibility on this topic by informing the court that the Husband had sought advice from local leading counsel in August 1999 about petitioning in nullity on the ground of bigamy.  But Mr Mostyn only mentioned the episode on a without waiving legal professional privilege basis.  Nothing was disclosed to the court about whether the Husband had previously told his solicitor or the counsel involved that he had been advised by chief immigration officer before the marriage in 1991 and the belief he held in 1991 about the wife’s status with LW.  I do not think the mere fact that the Husband sought such legal advice in August 1999 is of any assistance in deciding the credibility as to his professed innocence in 1991 towards bigamy. 

243.  I have the distinct impression that he gave evidence about his belief in 1991 of the Wife having undergone Chinese rite and receiving advice from the chief immigration officer to bolster his story that he had reminded the Wife to check.  He excused himself by saying he was negligent and he could not state everything in his affirmations.  If in 1991 he was as cautious about the previous relationship between the Wife and LW as what he wanted this court to believe, I do not think he would go ahead with the 1991 marriage despite the lack of assurance that she had divorced LW.  In my judgment, all these were fabrications by the Husband and the truth is that the 1991 marriage was a pacification effort by him after the Wife discovered his affairs with another woman.  He did not care much whether the relationship with LW was a valid marriage and if so, whether the marriage had been properly dissolved.

244.  I do not accept Mr Mostyn’s submission that the Wife deliberately refrained from taking proper steps to dissolve her marriage with LW in order to avoid payment of ancillary relief to LW.  There is simply no evidence suggesting to me that the Wife had ever worried about that.  There is no suggestion that LW had ever approached her for money despite her increase in wealth since late 1970’s.  As I said above, there is no evidence suggesting that the Wife knew LW was alive during the 7 years prior to 1991.

The alleged negative contribution

245.  There is no separate doctrine of negative contribution.  It is but a species of conduct.  I respectfully echo what was said by Coleridge J in G v G [2002] 2 FLR 1143 at Para. 34,

“For what is ‘contribution’ but a species of conduct? Conduct refers to the negative behaviour of one of the spouses.  ‘Contribution’ is the positive behaviour of one or other of the parties.  Both concepts are compendious descriptions of the way in which one party conducted him/herself towards the other and/or the family during the marriage.”

246.  Hence, in accordance with established principle, only conducts which are so obvious and gross that it is repugnant to anyone’s sense of justice are relevant to the Section 7 exercise.

247.  Mr Mostyn identified the following heads of misconduct on the part of the Wife,

(a)	culpable bigamy;
(b)	defamation of the Husband;
(c)	interference with the employees of Club B;
(d)	attempt to wind up EPD;
(e)	refusal to inject funds from M Plaza into F Seasons;
(f)	lodging of caveats against Beacon Hill and Village Garden properties;
(g)	Lawrence’s attempt to marginalize the Husband in Club B and HKBT.

248.  Some of these can be disposed of shortly.  Bigamy should be laid to rest in view of my conclusions above.  Given the manner in which the parties divided up their assets and the equation set out above, F Seasons and Beacon Hill should no longer be the concern of the Husband.  Further, there is no concrete evidence before me indicating that the Husband suffered any financial loss arising from these alleged misconduct.  The problem with the caveats ties in with the finance for LR and it has been resolved by the loan from the Bank of East Asia.  In any event, as far as I can gather from the evidence, regarding items (d) and (f) the Wife and those advising her were merely taking steps to protect her interest, some of which may be rather aggressive, but not entirely unjustifiable.  The Husband had also threatened to wind up HKBT.  I would not characterize those as misconduct, let alone obvious and gross.

249.  Regarding the so-called defamation letters of 4 September and 9 December 2002, they were written by the Wife primarily to raise her concerns about the management of Guangzhou Excellence.  The letters were addressed to the board members of that company.  The 4 September letter suggested the Husband to have misappropriated funds from the company by procuring unauthorized payment of consultant fees to a BVI company called Curson.  The 9 December letter was prompted by the replacement of the then financial controller Mr Chen and wholesale removal of books of the company by the Husband.  Mr Chen was summarily relieved by Mr Kan (I have no doubt Kan did so on instruction from the Husband) of his duty as financial controller after he had allowed the Wife to inspect the books of Guangzhou Excellence.  The letters also contained some vitriolic remarks against the Husband.

250.  I am not going to turn this into a libel suit.  The only relevant before me is whether those letters constituted obvious and gross conducts warranting deduction of the award to the Wife.  Having considered the matter carefully, including going through the evidence and submissions concerning the topic against the very helpful Chronology on Curson prepared by Mr Mostyn and reading the two letters in their original form, I come to the firm conclusion that those letters come nowhere near to conducts of that sort.

251.  Quite a bit of time was spent at the trial on the Curson transactions and the payment of management fees by Guangzhou Excellence to Allied Talent, another company owned by the Husband.  As I said, the ultimate decision about what should be done regarding those transactions rested with the Liquidation Committee of Guangzhou Excellence.  However, based on what I have seen, the Husband did owe some explanations to the board of Guangzhou Excellence regarding these transactions.

252.  I am not impressed by the Husband’s evidence about the Curson payments.  The payments were purportedly made pursuant to a consultancy agreement that was, on its face, executed on 29 January 1993.  The agreement was signed by the Husband on behalf of Curson as well as Guangzhou Excellence.  We now know that actually it was not executed on 29 January 1993 since Curson was only acquired by the Husband in March 1997 (with the Husband and the Wife each holding one share).  The Husband admitted in the witness box that it was a document made in 1997 and backdated to 1993.

253.  The Husband said in his evidence that in 1993 there was an oral agreement between him and two deputy managing directors of Guangzhou Excellence for him to be paid for construction consultancy services provided by him.  In order to get the benefit of a lower tax rate, he decided to have the payments made to Curson in 1997 and “created [the Curson agreement] and backdated this to 1993 to reflect the date from which I was entitled to the consultancy fees” (Para.125 of his Second Affirmation).  The Husband did not produce any written evidence before me to support his assertion about this oral agreement in 1993.

254.  In a letter dated 16 May 2001 from the solicitors for the Husband, it was explained on his behalf that the expenses incurred for carrying out the consultancy work were divided into two components,

(a)	“reimbursement of out of pocket expenses (travel, hotel and entertainment etc.)” at $60,000 per month;
(b)	his personal remuneration at the rate of $200,000 per month.

255.  As Mr Kotewall noted, there was no reference in that letter to reimbursements paid to some part-time engineers and experts as he claimed under cross-examination on 3 March 2005.  The Husband said those payments were by cash and there was no written record of such payments.  He even claimed that the whole sum of $15 million was paid by him to those engineers and experts.  He backtracked in the course of re-examination and said only part of the $15 million was reimbursement for payments to engineers.  I have to say I have great reservations about the veracity of the Husband regarding the nature of the reimbursements.  If there were actually payments to part-time engineers or experts, I fail to see why there was no reference at all to the same in the letter of 16 May 2001.

256.  Furthermore, the Husband had conveniently forgotten about how and why he testified under cross-examination that the whole of the $15 million was reimbursements for payments to engineers.  The Husband asserted in his evidence that he did not receive anything as his salary for the M Plaza project and that was why it was appropriate that Guangzhou Excellence should pay him a sum of RMB 36 million under the agreement with Allied Talent dated 30 November 2002.  That was again an agreement signed by the Husband on behalf of both Guangzhou Excellence as well as Allied Talent.  He said his authority to make this agreement stemmed from a board discussion on 28 June 2002.  In that meeting, according to the minute, the Husband claimed that he had not received any salary for the project.  Hence, when this court asked him about the payments to Curson, he answered that they were payments to the engineers.

257.  On the materials before me, I have no reliable evidence that the whole of the $15 million was reimbursement.  The Husband apparently retracted from that position in re-examination.  That is also inconsistent with what his solicitor said on his behalf in the letter of 16 May 2001.  If the Husband had been remunerated for his efforts relating to M Plaza, it is at least questionable whether he received double benefit through the payments to Allied Talent.

258.  There were other aspects in the management of Guangzhou Excellence which prompted the Wife’s letters.  Bearing in mind the dispute about the Curson payments, she was quite entitled, as a director and shareholder, to ask for explanation regarding the replacement of Mr Chen  and removal of books.  Although the letters contained some vicious attacks against the integrity of the Husband, they should be read against the background highlighted above.  In any event, as I said, there is no concrete evidence that the letters caused any financial damage to the Husband.

259.  Mr Mostyn contended that the Wife was actuated purely by malice in writing these letters.  Counsel submitted that the Wife had executed documents showing she had knowledge about Curson and she actually benefited from the Curson payments.  The Husband testified that the Wife had been told about the same and she agreed that he should be remunerated accordingly.

260.  In this respect, I do not believe the Husband’s evidence.  Neither do I believe Mr Kan insofar as he gave evidence to corroborate the Husband’s case.  He was obviously doing the bidding of the Husband.  Although he hesitated initially, he eventually admitted he had a part in the drafting of the Curson agreement.  He was the person who gave instruction to Mr Robinson on behalf of the Husband.  Mr Kan also tried to salvage the legitimacy of the Curson agreement by reference to a minute of a working group meeting dated 26 November 2002 and the book entries of the Curson payments in Guangzhou Excellence’s ledger.  Neither of these contained express reference to Curson and I am not satisfied that they constituted proof of the consent of the representatives in the board of C Construction to the Curson agreement.  In any event, it is not suggested that these documents had been shown to the Wife when she wrote the letters. 

261.  Whilst the Wife had been involved in some dealings by Curson and had obtained monies from Curson for some property acquisitions, I accepted her evidence that she had not been told by the Husband about the Curson payment and agreement.  This is quite consistent with the complaint in the letter of 25 May 2001 from the Wife’s solicitors.  In her affirmation of 17 December 2002, she said she was not aware of Curson prior to the reference to the same by the Husband in the unsigned letter of 14 February 2000.  She however agreed in the same affirmation that she was asked to sign documents regarding the acquisition of Curson in 1997, she was not told about the reason for acquisition.

262.  Mr Mostyn cross-examined the Wife by reference to a cheque issued by her in favour of Curson in the sum of $350,000.  He also referred this court to the acquisition of a unit at Villa Rhapsody in the Wife’s name funded by monies from Curson.  With respect, that does not show that the Wife had been told about the Curson agreement and the $15 million received from Guangzhou Excellence.  It is quite apparent that the Husband, assisted by Mr Kan, was running the affairs of Curson and it was treated by him as some kind of private cash box.  He himself said the following when cross-examined about the lack of proper receipts and invoices recording expenses of Curson,

“My feeling is that this is a family business and at that time, I felt that I did not have to account to anybody.”

263.  I therefore do not regard the defamation letters as conduct relevant to the Section 7 assessment.

264.  As regards the alleged interference with employees of Club B after the 2000 Agreement, the only witness who gave evidence on the topic was Ms Law and she obviously made the allegations based on what she was told by others.  The relevant staff did not come forward to give evidence (notwithstanding that they had returned to work at Club B).  Ms Law retracted her personal comment of the Wife in the witness box.  I am not satisfied on such flimsy evidence that the Wife actually did what had been alleged against her.  In any event, I do not regard those alleged acts as relevant within the context of Section 7.

265.  Nor am I satisfied that there was any marginalization of the Husband in Club B and HKBT.  The evidence of Ms Law and other witnesses who worked in Club B and made affirmations for the Husband did not support any case of marginalization.  I accept the Wife’s evidence that it was the Husband’s preference to spend more of his time on the development of M Plaza than the business of HKBT.  The evidence in these regards does not come up with anything which remotely approaches gross and obvious conduct.

266.  Hence, whether these allegations are considered separately or collectively (including the allegation of bigamy), I do not regard them to be relevant for present purposes.

Norris add-back unnecessary

267.  In his Opening, Mr Mostyn argued that dispositions made by the Wife to Lawrence during the course of these proceedings should be added back and treated as assets held by the Wife even though there is no application to set aside the disposition under Section 17 of the MPPO.  Counsel relied on the approach adopted in Norris v Norris [2003] 2 FCR 299 Para. 44.

268.  In the light of my above conclusions on how the discretion under Section 7 should be exercised, I have in effect achieved the same result through a different route.  The Wife’s disposal of interest in HKBT in favour of Lawrence became a matter of no moment since it happened after the 2000 Agreement.  Likewise, the other gifts to her children after separation were taken into account in the equation dealing with her undisclosed assets.

269.  Regarding the gifts made by her prior to separation, I do not think there should be any add-back.  As Mr Kotewall put it, the Husband had also made gifts to the lady and daughter he is currently living with.

The outcome

270.  I shall make an order in terms of the summons of 21 February 2005 to place the proceedings on the correct footing in view of my conclusion on bigamy.

271.  Subject to adjustments that may have to be made arising from the winding-up of Guangzhou Excellence, I shall make an order to give effect to the equation set out in Paragraph 216 above.

272.  The matter is restored on 24 April 2006 for submissions on,

(a)	adjustments, if any, arising from the results in the liquidation proceedings of Guangzhou Excellence;
(b)	terms of the order;
(c)	costs.

273.  Last but not least, I wish to express my indebtedness to counsel on both sides for their hard works and great assistance.  Mr Mostyn told me counsel have gone through many volumes of documents to extract the relevant papers to put into the trial bundles.  Judging from the end product (I have no less than 40 trial bundles before me), I can imagine the daunting and arduous tasks undertaken by the legal teams in the preparation of the case.  As I have already mentioned, counsel have very sensibly cut down unnecessary details and cross-examination.  The blue pencil of Mr Kotewall had been put to good use at the trial.  Although there was a little hiccup which necessitated the July hearing, on the whole the trial have been conducted efficiently and no time has been wasted.