KAM LEUNG KIT YEE v. KAM YING FAI

IN THE COURT OF APPEAL

1996, No. 194

(Civil)

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J U D G M E N T

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Liu JA:

1. The parties married in May 1980. I shall call them "husband" and "wife" for the purposes of this appeal. They had a son who is now twelve years old. A little over six years later in 1986 they separated. The judge was told that after divorce the wife would remarry the man she had been living with after she left her husband in 1986. There was a daughter born of the relationship between the wife and this man in about 1992. A decree nisi was pronounced in May 1994 on the ground of a five-year separation. Custody of the boy was granted to the wife. The husband was ordered to pay $1,500 a month. Subsequent to the making of the maintenance order, the husband volunteered to increase the maintenance by $500 a month and he now pays $200 a month. The husband is 47, the wife 42. They are both in good health. The husband has been and still is a driver, earning $9,000 a month. His monthly outgoings of $8,904, including the mortgage payment for a flat he has been living in, reach almost the same amount.

2. The husband and wife together purchased a flat in Tai Po in 1986. After decoration in 1986, the parties moved into it. Six months later, the wife left the husband. As a matter of fact, the wife and the man she is living with today, bought another flat a month before she left her husband. The value of the Tai Po flat was agreed before the Family Judge, Deputy Judge Carlson at $700,000. It was also common ground before the Deputy Judge that neither party had any significant savings.

3. The wife had done well. She owned a magazine stall in Tokwawan, which provided her with a monthly income of $8,000. The man she was living with worked in a clothing factory. His income was between $10,000 to $12,000 a month. The wife had been caring for the boy with the contribution of $2,000 a month from the husband. For setting up her magazine stall in Tokwawan and the redemption of the mortgage on the property jointly acquired by the wife and the man she is now living with, the wife took a loan of $150,000 or thereabouts from close relatives. The property jointly owned by the wife and the other man was then worth $1.4 m. On 26 April 1995 the Deputy Judge, having heard the parties on the evidence, awarded in effect the Tai Po flat to the husband upon his paying $90,000 within three months thereafter to the wife. Accordingly, the wife had to transfer her half share in the Tai Po flat for $90,000. It is perhaps worthy of note that the lump sum could not have been sought by the wife after remarriage. The wife intends to remarry the man she is living with as soon as she is free to do so.

4. The wife feels aggrieved by the order of the Deputy Judge, hence the instant appeal pursuant to the leave granted by this court. In terms of dollars and cents it may be summarised in this way: the Deputy Judge ordered the husband to pay about 14% of the then value of the Tai Po flat to the wife. In this appeal, the wife seeks at least $316,000, approximately a third of the value of the Tai Po flat six months after the Deputy Judge's order made on 26 April 1995. We have read another valuation report de bene esse, which puts the current open market value of the Tai Po flat at $1.78 m.. Deducting $20,000 outstanding mortgage and the 32% premium extracted by the Housing Authority in the sum of $570,000, the net value of the Tai Po flat today comes close to $1.2 m. It is the difference between this present net value of $1.2 m. and the agreed value of $700,000 before the Deputy Judge, that has given rise to problems.

5. The Tai Po flat was bought in 1986 for $204,000. The parties jointly paid a deposit of $20,500. The balance of the Tai Po flat came from a mortgage. The parties also contributed in equal shares to the conveyancing expenses, legal fees and stamp duty charges, amounting in all to $2,700. After the purchase, the Tai Po flat was, much to the dislike of the husband, decorated with a sum of $50,000 which came from the wife. The husband was critical of that item of expenditure as being unnecessarily extravagant. But there was in 1986, and it is very much past history today. The wife also paid six months mortgage payment. Each was nearly $2,000. The wife also paid the maintenance fees for the Tai Po flat at $190 per month from March 1986 to September 1989. But since the husband volunteered an extra $500 by way of maintenance for the boy, in the overall picture, the Deputy Judge did not attach much significance to the maintenance fees met by the wife. The family expenses came substantially from the wife during her cohabitation with the husband. The Deputy Judge found the wife paying two-thirds to three quarters. At the hearing, counsel for the husband invited the court to order the husband to pay $34,500 to the wife. And counsel for the wife sought a payment of some $380,000, being the aggregate of half of the then value of the Tai Po flat and what represented her past investments sunk into the Tai Po flat.

6. The husband has since 1986 been and still is residing in the Tai Po flat. He has been living there for some ten years. The Deputy Judge was conscious of the fact that he should continue to have a roof over his head, so to speak. The Deputy Judge also took into account the property investment potential of the wife who jointly owned a flat with the man she had been living with. It had a market value of $1.4 m. then. The view taken by the Deputy Judge was that it would be unfair to knock the husband off, so to speak, the property escalator. So there were two elements on which the Deputy Judge focused, a home to be continued to be provided to the husband in Tai Po and some property investment opportunity to be kept open for him. The Deputy Judge was therefore concerned that the lump sum payment should not be so large as would have the effect of forcing the husband to sell the Tai Po flat. After sale, the husband was expected to be accommodated in rental premises. The husband was paying $2,000 a month as a contribution to the maintenance of the boy and the mortgage outstanding was some $60,000. The Deputy Judge decided on a lump sum payment of $90,000, which together with the outstanding mortgage of $60,000, totally $150,000, was an amount, he reckoned, the husband was able to raise on a further mortgage or otherwise. The wife had a home in which she was cohabiting with the other man. She had a half share in property investment i.e $700,000. She ran a magazine business with a loan from close relatives. She had an income. The other man also had an income. It would seem that all the material circumstances of the husband and the wife were duly taken into consideration.

7. In this appeal, the primary complaint is that the Deputy Judge should have recognised the potentials of an open market sale of the parties' Housing Authority flat in Tai Po and adjourned the hearing at least for a period of six months so as to enable the Tai Po flat to be realised in the open market. But the value of the Tai Po flat was expressly agreed for the court's evaluation. Counsel for the wife made submissions on the basis of that agreed value. Fluctuation of the property market in Hong Kong is not altogether a matter foreign to us all. The circumstances at the hearing were such that no one was able to suggest that the husband was likely to get more in the foreseeable future. A report from Knight, Frank & Kan was produced before the judge in which the non-alienation restriction of the Tai Po flat was referred to. The reference read as follows:

"Being a unit within Home Ownership Scheme development, the subject property is sold subject to the usual 10-year restriction on alienation which provides, inter alia, that the purchaser shall not alter the period of 5 years but before expiration of 10 years from the date of the assignment of the property to the purchaser (i.e. 1 November 1985 for the subject property) sell or assign the property unless and until he shall have first made an offer in writing to sell or assign the same to the Housing Authority at the price (excluding interest and any legal fees and conveyancing expenses paid by the purchaser) to be fixed by the Housing Authority having regard (whenever possible) to the price of units as similar as possible to the property being offered for sale by the Housing Authority at the time of the purchaser's offer to assign and approved by the Director of Housing less any amount due or to become due for principal and interest or otherwise under any mortgage of the property of alternatively free from incumbrances."

8. The report ended with this conclusion:

"In view of the above, we are of the opinion that the current open market value of the subject property, given vacant possession, is approximately Hong Kong Dollars Six Hundred And Ninety thousand Only."

The Deputy Judge was aware of the alienation restriction of Housing Authority, but his attention was not drawn to the possibility of an open market sale after 10 years upon paying a premium to the Housing Authority, less to the possibility of the husband getting appreciably more. In fact, from the report, it would appear that the open market value of the Tai Po flat was in accord with the then offer made by the Housing Authority. No evidence was led before the Deputy Judge as to the amount of a net gain to the husband in six months' time. In Jenkins v. Livesey [1985] 1 A.C. 424 at p. 436 H - p. 437 A, Lord Brandon of Oak brook observed:

"It follows that, in proceedings in which parties invoke the exercise of the court's powers under sections [4] and [6], they must provide the court with information about all the circumstances of the case, including, inter alia, the particular matters so specified. Unless they do so, directly or indirectly, and ensure that the information provided is correct, complete and up to date, the court is not equipped to exercise...... its discretion in the manner ordained by section [7(1)]."

9. Not only was the Deputy Judge left without any information as to the possibility of a better price to the husband 6 months after the hearing, the report suggested to the court that the offer from the Housing Authority for the agreed price of the parties was the current open market value. No point was taken by either of the parties before the Deputy Judge on any likely higher net gain after the hearing nor indeed was his attention specifically called to the possible release of the non-alienation prohibition. Counsel for the wife did not even ask for an adjournment. The wife cannot now complain of the valuation adopted by the Deputy Judge at the invitation of both for making his order. Moreover, the wife's half share in property investment must have similarly enhanced in value. It would not be right to look at the current market price of the husband's Tai Po flat in isolation. We know not at what price alternative accommodation could today be acquired for the husband. We are not told the up-to-date revenue from the wife's magazine business in Tokwawan. We have been given no information of the present earning power of the wife's cohabitee. In these circumstances, by itself the current valuation report submitted to us de bene esse can offer no assistance. For all these reasons I have given, I would not admit it.

10. The one-third rule has been overtaken or subsumed by s. 7 of the Matrimonial Proceedings and Property Ordinance Cap. 192. What must not be lost sight of is the statutory emphasis placed on "the conduct of the parties and all the circumstances of the case". The seven factors in s. 7 are but part of the overall circumstances to be taken into account. In my view, what should also be constantly borne in mind is that it rests upon the Family Judge to exercise his powers and that the s. 7 considerations are only his tools but not his masters. The Deputy Judge meticulously balanced the parties' respective interests. The global view he took was as eminently sensible as it was fair and equitable. The emphasis he had chosen to place on a home for the husband and an investment potential parallel to that enjoyed by the wife was, in the circumstances of this case, wholly justified.

11. I am not at all persuaded, in the circumstances, that the Deputy Judge should have taken upon himself to adjourn the hearing to a later date. It would have been wrong for him to do so. In conclusion, the Deputy Judge has not been shown to be wrong in the exercise of his discretionary power. I can find no justification for disturbing the order he made. I would dismiss this appeal.

Bokhary JA:

12. In the circumstances, the judge was justified in proceeding to a decision rather than taking it upon himself to impose an adjournment on the parties when neither of them sought an adjournment.

13. And the judge's award is warranted by the material before him.

14. There are a number of difficulties in the way of the wife's argument that changed circumstances justify our increasing the judge's award in her favour or remitting the matter to the Family Court for a fresh hearing.

15. Those difficulties include these.

16. There is no reason to consider it more probable than not that a fresh hearing would result in an award more favourable to the wife. For all we know, the value of the flat which she co-owns with her cohabitee may have gone up to match or even exceed any increase in the value of the former matrimonial home.

17. Also, no increase in value of the former matrimonial home would alter the fact that realistically the husband would have to sell it if he had to pay the wife more than the judge has awarded her. The judge did not consider it just to force such a sale. And he is justified in that view of the justice of this case.

18. I, too, would dismiss this appeal.

Nazareth Atg CJ :

19. Mr Hung, for the appellant/wife, very properly concedes that the approach of the judge was basically correct. But, he says, the judge was misled by the information given to him. In short, that he should have applied his approach to the real market value of their family flat which, on the wife's contention, should have resulted in a lump sum to her of at least $316,000. Upon this basis, it is not really necessary to canvass the propriety of the judge's approach, which, in any event, I must say I find rational and sensible in the circumstances for it sought to secure to the husband and the child of the family being looked after by him, a roof over their heads.

20. Reverting to the question of the quantum of the wife's lump sum award, the fact of the matter is that there was an agreed valuation of the flat put before the judge, of the order of $700,000. It was produced by a firm of valuers, appointed by the court on the joint application of the two parties. The report concluded that:

"In view of the above, we are of the opinion that the current open market value of the subject property, given vacant possession, is approximately Hong Kong Dollars Six Hundred and Ninety Thousand Only."

21. Nevertheless, Mr Hung submits that, in pursuance of the duty imposed upon him by s.7 of the Matrimonial Proceedings and Property Ordinance to have regard to the conduct of the parties and of all the circumstances of the case, the judge should have investigated the value of the flat to the point of discounting the obligation to sell the flat back to the Housing Authority on the expiration of the 10-year period of ownership which was due to take place six months after the hearing; and also discounting the result of the payment of the premium which would have resulted in a larger value in a free market.

22. Mr Hung seeks to find authority for that proposition in the following passage in Jenkins v Livesey [1985] 1 AC 424 at pp. 436H - 437A when Lord Brandon of Oakbrook said this:

"...It follows that, in proceedings in which parties invoke the exercise of the court's powers under sections [4] and [6], they must provide the court with information about all the circumstances of the case, including, inter alia, the particular matters so specified. Unless they do so, directly or indirectly, and ensure that the information provided is correct, complete and up to date, the court is not equipped to exercise, and cannot therefore lawfully and properly exercise, its discretion in the manner ordained by section [7(1)]."

23. But that does not avail him for it was the wife's failure to draw the particular circumstance to the attention of the court that resulted in its not being expressly addressed by the judge, not that I think that this would have made any real difference. Likewise, Mr Hung relies upon Davis v Davis [1986] 1 FLR 497 but it also, in my view, does not avail him for in that case in adjourning the matter to enable the husband's potentially improving position to become clear, the court knew of the likelihood of that circumstance, which is not the case here. Here, the judge was on the contrary misled by the agreed valuation of $700,000 and the valuer's report. He was entitled to and cannot be criticised for proceeding on the basis of the evidence placed before him.

24. In making the order he did, he exercised his discretion, in my view, as I have said, in a sensible and rational manner. In that regard, as is well established by the authorities, this Court will not lightly interfere with the exercise of discretion by judges at first instance. I can in that respect do no better than refer to Asquith LJ's enunciation of the principles in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345 which was, of course, a matrimonial case. It was referred to in G v G [1985] 2 All ER 225 at 228H:

"It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere."

Here, plainly the judge was well within the generous ambit referred to. More than that, in my view, he was plainly right.

25. With reference to other specific points made by Mr Hung, I would add that I reject the suggestion that the judge erred in failing to adjourn the matter or in not having attributed to the flat an increased value of the sort contended for in assessing the lump sum to be paid to the wife. The judge, as I have said, was entitled to rely upon the agreed value placed before him.

26. In the result, I can see no reason which would warrant intervention by this Court. For the reasons I have endeavoured to give and indeed, the reasons already referred to by my Lords, I would also dismiss the appeal.