EBS v. NTCD

CAMP 46/2021

[2021] HKCA 1775

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 46 OF 2021

(ON AN INTENDED APPEAL FROM FCMC NO 2128 OF 2013)

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D E C I S I O N

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Hon G Lam JA (giving the Decision of the Court):

Background

1.  The parties are now divorced upon the decree nisi of divorce pronounced on 6 June 2017 being made final and absolute on 17 February 2021.  Following a trial, Her Honour Judge Melloy (“Judge”) gave judgment on 23 November 2020 (“Judgment”),[1] dealing with the subject matter of final ancillary relief in the matrimonial proceedings, including child support and division of family assets.

2.  By summons dated 8 February 2021, the respondent (“the wife”) applies to this court for leave to appeal against the Judgment as well as for a stay of execution of parts of the resultant order, pending the intended appeal, and for leave to adduce fresh evidence on appeal.  Before applying to this Court, the wife had applied to the Judge for leave to appeal and for stay of execution, which the Judge dismissed on 25 January 2021.[2]

3.  The petitioner (“the husband”) in turn filed a summons on 10 February 2021, for an order that unless the wife amends her summons and draft Notice of Appeal to comply with Practice Direction 4.1, her application be dismissed. 

4.  This is our decision on the wife’s and the husband’s respective summonses which we consider appropriate to deal with on paper without an oral hearing.

5.  The background can be stated very briefly.  The parties married in 2007.  The wife is Singaporean and 53 years old, and the husband is American and 51 years old. Their son (“B”) was born in December 2008 and has resided at the matrimonial home at Residence Bel-Air ever since.

6.  Both parties had successful careers in investment banking.  According to her evidence, the wife’s annual income for the year B was born was HK$22.8 million which was nearly 7 times that of the husband at the time.  However, since B was born, the wife has been a full time stay-at-home mother.  The husband was at one time Managing Director of an investment bank, though he was made redundant in March 2017.

7.  On 15 November 2017, an order was made by consent for joint custody of B to the parties, with care and control to the wife and reasonable/defined access to the husband.  The wife and B continued to reside at the matrimonial home (which has a net saleable area of 2568 square feet), whereas the husband moved out.  The home is held solely in the husband’s name.

8.  The values of the parties’ assets were set out in a schedule which was prepared by the husband’s team and “largely agreed” and reproduced at [15] of the Judgment (“Assets Schedule”).  The former matrimonial home was valued at HK$100.5 million, with a net equity of about HK$79 million after deducting a mortgage loan, selling expenses, and US capital gains tax of about HK$14.6 million.  The parties jointly hold, among other things, a savings/current account at HSBC Beijing with RMB 12 million (equivalent to HK$13.44 million) and a time deposit account at BEA with HK$1.76 million, of which part of the funds were from the sale of previously jointly owned matrimonial assets.  According to the Assets Schedule, the total net value of the parties’ assets was HK$192,666,408.

9.  At [53] – [54], the Judge decided to divide the family assets as follows:

“ 53. Consequently, the final division of assets shall look like this:

i) Monies held for B / Educational Trust fund – HK$8,002,122

ii) Assets held by the wife: HK$94,369,788

iii) Assets held by the husband: HK$91,393,604

54.     Ultimately, this means that the wife will leave the marriage with approximately 48.7% of the matrimonial pot and the husband will retain 47.2%.  The remainder will be held for B’s future educational needs.  It seems to me that this slight deviation from the yardstick of equality is fair and reasonable in the circumstances of this particular case.”

10.  At [60] of the Judgment, the Judge made the following order:

“ UPON the Petitioner husband undertaking to continue to pay for the school bus and to continue to pay for insurance premia otherwise as set out in paragraph 13, 28(iv) and (viii) above.

IT IS ORDERED THAT

1. There shall be a settlement of funds in that the sum of approximately HK$8 million held in the parties’ joint bank accounts … shall be paid into court by the wife (as she has the control of these accounts) within the next 14 days. …

2. The wife shall pay the husband a lump sum of HK$7.5 million within the next 14 days. …

3. It is further ordered that the wife shall pay into court a further sum of HK$6 million, such sum to be paid within the next 14 days. This sum, or part thereof shall be released by the court to the husband in the event that there is an increased US Capital Gains tax liability payable on the sale of the Bel Air property. In the event that this is not the case, or the sum is less than the amount estimated, then this sum or part thereof shall be returned to the wife.

4. The parties shall each retain all other assets and liabilities held in their sole names.

5. The husband do pay to the wife periodical payments for the child of the family, B, in the sum of HK$52,500 per month, the first payment to be made on the 1^st day of the month following the wife and B moving out of the Bel Air property and thereafter to be paid on the 1^st day of each succeeding month until B’s 18^th birthday or cessation of full time education, whichever is the later or until further order. In the interim the husband do pay the wife periodical payments for B in the sum of HK$15,000 per month as a contribution towards B’s expenses, with effect from the 1 December 2020 until the commencement of the payment of HK$52,500 per month referred to above.

6. The division of capital as set out above shall be in full and final settlement of each party’s claims for all forms of ancillary relief.

7. There shall be liberty to apply on an urgent basis.

8. It is further directed that the wife and B shall vacate the Bel Air property within the next 60 days.

9. Costs shall be reserved for argument and shall in the first instance be adjourned for further directions on the 11 March 2021.

     ...”

11.  In her draft Notice of Appeal, the wife raised 7 intended grounds of appeal, which may broadly be summarized as follows:

(1)  the Judge failed to have regard to the authorities and apply the compensation principle (eg see McFarlane v McFarlane [2006] UKHL 24 and LKW v DD (2010) 13 HKCFAR 537), by failing to recognize that the wife’s circumstances, greater need and relationship-generated disadvantage justify a larger departure from an equal division of assets, in this case 60:40 in favour of the wife;

(2)  the Judge failed to understand that the wife’s and B’s combined needs are far in excess of the husband’s and consequently failed to make a larger departure from equal division of assets (specifically a 60:40 division) and to make the husband bear a greater share of B’s needs;

(3)  the Judge failed to comply with the duty under s. 7(2) of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“MPPO”) to place B, as far as practicable, in the financial position he would have been in had the marriage not broken down.  Monthly child support of HK$15,000 prior to B moving out is plainly well below his actual needs.  The amount for B after moving out is insufficient and deprives B of the right to be maintained as before;

(4)  the Judge erred in ordering the husband to pay only half of B’s ongoing monthly maintenance, despite the wife being unlikely to return to the workforce and her negligible projected income, in contrast to the husband’s superior expected future flow of income;

(5)  the Judge erred in finding that the wife had considerable passive income from her investment accounts to fund herself.  The evidence at trial does not support such finding, the wife was not cross-examined on this point; returns from such accounts were slim; and the Judge ignored the effect of inflation and failed to consider that the wife would likely need to liquidate her investment portfolio to pay for housing and ongoing needs;

(6)  the Judge should not have ordered the wife and B to move out of the Bel Air property and the wife to pay HK$6,000,000 into court for a potential increase in US capital gains tax, without ordering the sale of the matrimonial home pursuant to s. 6A of the MPPO;

(7)  the Judge erred in ordering the wife to make payment into court in [1] and [3] of the order when both parties favour a clean-break, there is no concern for risk of dissipation, the order deprives the wife of the freedom to manage her own finances, and the arrangement for applications for payment of B’s school fees and related costs on a timely basis is impractical.

Leave to appeal

12.  Having considered the parties’ arguments, we consider that there are reasonably arguable grounds for the intended appeal and that leave to appeal should be given on the basis of the draft Notice of Appeal (subject to the modifications referred to below). To avoid doubt, we would add that this is without prejudice to the husband’s objection that some of the grounds are new points not properly raised at the trial.  The detailed debate on the merits is of course a matter for the substantive appeal. 

13.  The costs of the application for leave will be in the cause of the appeal, with a certificate for two counsel for both parties.

Husband’s application for an unless order

14.  It is complained on behalf of the husband that the wife’s draft Notice of Appeal fails to comply with paragraphs 20 and 22 of Practice Direction 4.1, which stipulate that a notice of appeal should be a concise document setting out clearly and succinctly the reasons why the Court of Appeal should interfere with the judgment of the court below, and that a notice of appeal must not be prolix, unfocused or canvass evidence or submissions at length. 

15.  The draft Notice of Appeal is a relatively long document, with the grounds taking up 24 pages.  It is however not comparable to the notices that were criticised in Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] HKCA 344 at [12]-[15] and 秦錦釗對香港特別行政區[2018] HKCA 167 at [13], which appear to have been documents from which the actual grounds of appeal could not be deciphered.  Here the document is in our view neither concise nor succinct, but it would be inappropriate to impose an unless order based on these descriptions which are a matter of degree.  Nor would it be a proportionate course in all the circumstances to strike out the entire document as submitted on behalf of the husband.  We would however order that paragraph 1.1 be amended in that the quotations from authorities should be omitted.  Voluminous quotations are rarely a substitute for reading the original documents when considering the appeal and generally have no place in a notice of appeal.  The same applies to paragraph 4.1 with a lengthy quotation from a statute.

16.  We therefore make no order on the husband’s summons save that paragraphs 1.1 and 4.1 of the draft Notice of Appeal are required to be modified as described above.  We make an order nisi that the husbands’ costs of the application be in the cause of the appeal, with a certificate for two counsel.

Wife’s application to adduce fresh evidence

17.  The fresh evidence that the wife seeks to adduce is an extract from the Annual Report on the Consumer Price Index 2019 which sets out the annual rates of change in the consumer price index from 2010 to 2019.  Her summons says the new evidence is for “draft Ground 7”.  This is obviously an inadvertent mistake as the relevant ground of appeal is that stated in paragraph 6 of the draft Notice of Appeal (para 6.4(c)) and referred to in [11(5)] above, concerning the effect of inflation on her investment income.

18.  We refuse to admit the new evidence.  As submitted on behalf of the husband, the application does not satisfy the first two conditions set out in Ladd v Marshall[1954] 1 WLR 1489.  First, it cannot be said that the evidence could not have been obtained at trial with reasonable diligence.  The index was published in March 2020.  The question of passive income and the effect of inflation had been in play in the proceedings before the trial.  Inflation did not only become relevant by reason of the Judgment.  Secondly, we are not satisfied that the evidence would probably have an important influence on the result of the case.  Inflation might affect the precise real rate of return on the wife’s investments, but it does not directly affect the Judge’s observation that she had “considerable passive income” which the wife attacks.  Nor would the absence of the CPI index alone prevent the wife from contending that there was little growth in her assets.

19.  That part of the wife’s summons should be dismissed.  Paragraph 6 of the draft Notice of Appeal will require modification as a result of the new evidence being excluded.  We make an order nisi that the wife do pay the husband the costs of the application to be taxed if not agreed with a certificate for two counsel.

Wife’s application for stay of execution

20.  The wife seeks a stay of execution of paragraphs 2, 3 and 8 and part of paragraph 9 of the Judge’s order set out above.  We have been informed by the parties that as at 9 November 2021: (1) so far as paragraph 2 is concerned, only half of the balance of the BEA Account, in the sum of HK$878,349.50, has been paid by the wife to the husband; (2) the sum of HK$6 million has not yet been paid into court under paragraph 3; (3) the Bel Air property has not yet been vacated – the wife and B are residing there; and (4) the issue of costs has been adjourned to a hearing before the Judge on 7 December 2021.

21.  There is no dispute between the parties on the principles applicable in relation to stay of execution pending appeal.  We consider it appropriate to approach the wife’s application on the basis that she has an appeal with reasonable prospects of success.

22.  As regards paragraph 8 of the Judge’s order requiring the wife and B vacate the Bel Air property, it is important to note that it is not the wife’s stance in the appeal that she and B should be able to continue to reside in the property.  Rather, she contends that vacant possession should be contingent on the sale of the property, and that the Judge should have made an order for sale, so that the husband could not choose when or whether to sell the property.  In her Judgment the Judge allocated the property to the husband despite its marital home status.[3] The wife’s written submissions for the present application do not dispute that the husband should have the entire net equity of the property after the sale.  Nor is there any suggestion by either party in the present applications that the property may somehow be allocated to the wife instead, whether for the purpose of avoiding capital gains tax or otherwise.  That being the case, requiring the wife and B to vacate the property would not in principle render the appeal nugatory.  Now that B has finished his final year of primary school, the wife’s concern in that respect has also lapsed.  We are not satisfied that there is any good reason to grant a stay of paragraph 8 of the order.

23.  As regards paragraph 2 of the order which requires payment of HK$7.5 million by the wife to the husband, reflecting the funds in the HSBC Beijing Account and the BEA Account, the wife says that any further money paid to the husband may be spent by him and complications will develop once the money is lost or gone.  We are not satisfied from such general assertions that compliance with the remainder of the order would render the wife’s appeal nugatory.  The wife also relies on evidence about the difficulty in transferring funds out of Mainland China without physical attendance, but we do not find that to be a sufficient reason for staying the execution of the order. 

24.  In relation to paragraph 3 of the order requiring the wife to pay HK$6 million into court on account for any potential increase in US capital gains tax liability payable on the sale of the Bel Air property, we accept that it is only a contingent payment.  There would only be an increase in tax liability if the rate of US capital gains tax is increased and the timing of the sale of the Bel Air property is caught by that increase. Further, together with the lump sum for the husband under paragraph 2 the payment of this HK$6 million would very substantially deplete the available onshore assets of the wife.  In the exercise of our discretion we would grant a stay of paragraph 3.

25.  As regards paragraph 9 of the Judge’s order, how to deal with the question of costs in the light of a pending appeal is a matter for the court below.  There is no reason or basis for this court to pre-empt the Judge’s case management decision.

26.  For these reasons we would only grant a stay of paragraph 3 of the order.  The other parts of the wife’s application for stay are dismissed.  As an order nisi, the wife shall pay two-thirds of the husband’s costs in relation to this application with a certificate for two counsel.

[1] [2020] HKFC 242.

[2] [2021] HKFC 16.

[3] Judgment, [51].