LSDS v. BX

FCMC 8189/2017

[2019] HKFC 327

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 8189 OF 2017

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JUDGMENT

(Variation of Interim Maintenance)

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1.  This is the Petitioner’s (Father) application to vary parts of the interim maintenance Order (“MPS”) made by Her Honour Judge G Chan (“HHJ Chan”) dated 22 December 2017 (“the Order”). He also asks to be discharged from the Undertaking that he has given in Recital E of the Order (“Undertaking”).

2.  The relevant part of the Undertaking and the Order is in the following terms:

E.  AND UPON the Petitioner’s undertaking to the Court and to the Respondent that: -

(1)  The Petitioner shall forthwith, if he has not already done so, pay for the top up premium fee to upgrade the medical insurance provided by his employer to cover the medical and dental expenses of the Respondent and the child of the family, namely A;

(2)   The Petitioner shall arrange for reimbursement of the medical and dental expenses of the Respondent and A within 14 days upon production of the relevant invoices/receipts to him, and for him to pay within 7 days on receipt of insurance reimbursement indicating clearly with supporting documentation to which claim does the reimbursement apply; and

(3)  Subject to the production of receipts by the Respondent, the Petitioner shall settle all the medical and dental expenses of the Respondent and/or A not covered by the said insurance plan promptly and in any event, not later than 7 days on receipt of insurance reimbursement.

IT IS HEREBY ORDERED THAT: -

1. The Petitioner shall pay to the Respondent for the interim maintenance of the child of the family, namely A in the sum of HK$89,000 per month on the 1^st day of each month until further Order of the Court, to be back-dated to 23 November 2016;

Brief Background of the case

3.  Ms Kwan, counsel for the Mother, has helpfully summarized the parties’ background in her submission. 

4.  The Father is 40 years of age and the Mother is 36.  They met in Hong Kong in 2010 and got married in August 2012. A is the only child of the family.  He was born on 10 March 2014 and is now 5 ½ years old. 

5.  It was disputed as to when the parties were separated with the Father saying that it was September 2015 whereas the Mother said that it was April 2016.

6.  In any event, when the parties were separated, the Mother took A to Shanghai to reside with her parents. 

7.  A is now studying at an international school in Shanghai.  He has been diagnosed with kidney enlargement and developmental dysplasia of the hip which require regular medical check-up and treatment in Hong Kong. It is not in dispute that the Mother will bring A back 3 times a year for this purpose.

8.  Both the Father and the Mother are well-educated people who have studied abroad. They were both working in financial institutions in Hong Kong when they met. 

9.  The Father previously worked at Goldman Sachs (“GS”) and he now works as a Chief Financial Officer with a company called iCarbonX, which is a PRC based company.  According to Ms Kwan, iCarbonX is a rising star healthcare company with recent financing of USD1 billion and it is backed by the Chinese mega-conglomerate Tencent.

10.  The Mother was self-employed during the marriage and she now works in a company in Shanghai as their Investment Director, earning RMB20,000 per month.

11.  There are two properties that are the subject of the dispute in this case. The first is the matrimonial home of the parties held in the sole name of the Father. It was intended to be the parties’ matrimonial home when purchased.  It is however vacant now.

12.  There is another property in Shanghai registered in the Father’s sole name though, the Mother’s parents allege that the property in fact belongs to them and due to various reasons, the property is held under the name of the Father.  The Father, on the other hand, claims that the property was a gift from them and it forms part of the matrimonial asset. 

Other proceedings

13.  Other than this application, there are 3 more interlocutory/substantive hearings: -

i)     Given the different versions of the Father and the Mother’s parents, legal actions were taken out in Shanghai in which the Mother’s parents are seeking the court to declare that the Shanghai property is held by the Father as their trustee;

ii)     Judgment Summons on the outstanding backdated maintenance payments pursuant to paragraph 1 of the Order;

iii)     Committal proceedings on breach of undertakings. Ms Kwan submits that because of the Father’s failure to reimburse the Mother and A’s medical expenses in a timely manner, the Mother initiated the proceedings on 22 August 2018. The case was closed when the Court ordered the Father to pay the Mother HK$48,200 on 21 November 2018.

14.  Ms Kwan submits that the Father has unilaterally reduced the interim maintenance to HK$20,000 since January 2019.

The Law

15.  Section 11 of the Matrimonial Proceedings and Property Ordinance (Cap 192) provides:

(1)  Where the court has made an order to which this section applies, then, subject to the provisions of this section, the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended.

(7)  In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.

16.  The section applies to Orders made under section 3 and section 5 of the same Ordinance, governing maintenance pending suits and financial provisions for children.

The Legal Principle

17.  The modern approach in dealing with an application for variation of maintenance is that the Court may look at the case de novo.  In AEM V VFM [2008] 3 HKLRD 35 at 14,

“14.4. The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh: Flavell v Flavell [1997] 1 FLR 353 at 357B following Lewis v Lewis [1977] 1 WLR 409 and Garner v Garner [1992] 1 FLR 573

14.5 Any change in any of the matters to which the Court was required to consider when making the original order was one of the circumstances to be considered.

14.6  Almost invariable, an application to vary an earlier periodical payment order will be brought on the basis that there has been some changes in the circumstances since the original order was made, for example, continuing inflation; the increased costs in supporting a growing child and that one party may be more adversely affected than another by the increase in the costs of living: Garner v Garner”

18.  Jackson’s Matrimonial Finance and Taxation, 9th edition at 3.154 states,

“The modern approach is that the court has to consider all the circumstances of the case, and the court is not hide-bound by the existence of a previous order; the court must look at the matter and make an order that is reasonable in the current circumstances. The usual basis on which a variation of an order for periodic payments is founded is that there has been a material change in the circumstances of one or both the parties. On application for revision, the court, as it was put in one case, has ‘regard to all the circumstances of the case in the same manner as if those circumstances had existed at the date of the original order.”

19.  In 16.17 of Rayden & Jackson on Divorce and Family Matters, 18th Edn., maintenance pending suit is described as follows:

“The court has an unfettered discretion to award such sum as it thinks reasonable. There is no hard and fast rule, and no fixed proportion: each case depends on its own facts. It has been said that the approach to maintenance pending suit should be empirical, and that in the ordinary sort of case the district judges who deal with these application will have to take a broad view of means on the one hand and income on the other and come to a rough and ready conclusion, or to take a ‘broad brush approach’. The overall consideration is the actual needs of the parties’ pending suit”

20.  The above legal principle is not in dispute. 

21.  Ms Kwan however adds that:

(i)     The onus is on the Father to prove the material change in the circumstances and,

(ii)     The Father continues to have a positive duty of full and frank disclosure.

22.  I agree and I add that:

(i)     The onus is on the Mother to prove needs and,

(ii)     She also has a duty to make full and frank disclosure of her means.

The Father’s case

23.  The Father applies for the Undertaking to be discharged because he is no longer working for GS and therefore the medical benefits for his family which he previously enjoyed are not available.

24.  Ms Yu, counsel for the Father, says in her written submission that the Father’s offer in the Summons to discharge the Undertaking absolutely was proposed when he was unemployed.  However, Ms Yu also says that the Father is now prepared to take out an insurance plan (“intended insurance policy”) covering A’s medical expenses in China.  He also undertakes to pay for half of any of the shortfall.  Ms Yu confirms in Court, however, that the intended insurance policy does not cover medical expenses incurred overseas, including Hong Kong.

25.  As for paragraph 1 of the Order, the Father says the career change results in a huge pay cut, he therefore asks for a downward variation to HK$20,000.

26.  In her oral submission, Ms Yu says that the Father is now proposing to share A’s expenses equally with the Mother, so that each of them would bear HK$30,500 to be calculated as follows:

	The Order (22.12.2017)	H’s Comments
(A) ½ of General Expenses	(HK$)
Accommodation	42,000	40,000 See Wechat [E690]
Utilities	1,734	These are items for W’s Hong Kong landed properties.  For W’s major non-disclosure, H should not be responsible for the outgoings when he has a tight income.
Management fees	2,100
Government rates and rent	2,879
Insurance	318
Food	5,780	5,000
Household expenses	5,000	5,000
Car parking expenses	867	/
Cleaning lady (5 hours per day)	5,172	3,000
Total of (A):-	65,850 (rounding down to $65,000)	54,000
Half of (A):-	32,500	27,000
(B) Son’s Expenses	(HK$)
School fees	19,159	25,662 (N/B: H has undertaken to settle it directly and he has been doing so.)
Full-time nanny	7,514	/ A now attends Y1 and is no longer a toddler.  As observed by HHJ G Chan in [37] of the Judgment that “as the son grows old and is no longer a toddler, the necessity of a nanny may need to be justified”.
Extra-curricular activities	4,624	/ W should provide receipts to H for reimbursement and each of them should bear half costs of the agreed activities.
Son’s transportation in Shanghai	2,600	2,600
3 trips to Hong Kong for medical appointments	1,195 ($14,335 per year)	/ It is not feasible and unreasonable for A to keep coming to Hong Kong for medical treatment.  Shanghai is a city where high-level of medical service is provided [P581/§38].  Aiden only needs 3 medical appointments per year, which are mainly check-ups.  He now attends school ordinarily as all other kids.  He does not need special medical attention that is only available in Hong Kong: [P581/§37-38].
W’s air tickets and hotel for taking the son to attend these medical appointments	2,700	/ Same as above
Entertainment / presents	4,500	2,500
Holidays	2,635	2,000
Clothing/shoes	4,500	2,000
Other transport	1,900	/ There is error / double counting in the calculation.  According to [1000] of the judgment, this sum is subsumed under $2,600 transportation costs above.
Others (health food, milk powder, diapers, shampoo, body wash, lotion and other child’s daily essentials)	4,500	/ A is no longer a toddler.
Total of (B):-	55,827 (rounding up to $56,000)	34,762 (rounding up to $35,000)
Half of (B):-	/	17,500
½×½(A)+½(B)	/	$26,000×½+$17,500=$30,500

The Mother’s case

27.  Ms Kwan submits that the Father has failed to discharge his duty of proving the material change in the circumstances and that there is material non-disclosure on the Father’s part.

28.  Ms Kwan also finds that the Father’s termination of contract with GS is dubious and is litigation-driven.

29.  She challenges the period over which the Father claims that he was unemployed.

30.  Ms Kwan doubts the Father’s current earnings with iCarbonX.

Discussion

Undertaking

31.  The Father says that there were changes as to the insurance cover.

32.  In the Father’s 8^th Affirmation filed on 9 September 2019, he said,

“37. I am now covered by the group medical insurance provided by iCarbonX and I am now verifying with my employer whether A, as my son, is also covered by the medical plan. However, as to the Respondent, she is not covered by the medical plan.

38, In any event, the Respondent, as a Chinese citizen, should already been covered by the medical insurance provided by PRC government and her employment as mandated by PRC law. The Respondent would use the service provided by public health system in Shanghai and I see no reason that I would need to provide extra for her medical expenses.

39. For A, I have no problem to claim reimbursement for his medical fees which I covered by my current group medical plan so long as I am employed by iCarbonX. However, the current plan does not offer an “upgrade” option so I will no longer be able to upgrade the plan as I previous did when I was in GS and the relevant undertaking in the Order should therefore be discharged accordingly.

33.  Ms Kwan submits that when the Court ordered the Father to upgrade the company medical policy and to pay for the shortfall where the policy did not cover, the spirit of the Order was to make the Father pay for all the medical and dental expenses for the Mother and A, and that the provision of medical cover by the Father was clearly in line with prior standards of living.

34.  I disagree. It was clear from the Judgment that the Undertaking was made because of the Father’s voluntarily offer in those proceedings.

35.  In the MPS Judgment (“the Judgment”), HHJ Chan said,

38.     By an order made on 28 November 2016 (“1st interim order”), the husband agrees to pay the wife HK$20,000 per month starting from 1 December 2016 for the benefit of the son and undertakes to pay:

(1)  Medical expenses of the son reimbursed from the insurer;

(2)  Half of the accommodation expenses when the son comes to Hong Kong for his medical examination.

39.     By a further order of 10 March 2017 (“2nd interim order”), the husband agrees/undertakes to pay the following as a stop gap arrangement pending the substantive argument and this judgment:

(5)  Top up premium to upgrade the existing medical and dental insurance for the son and the wife;

(6)  Uncovered medical expenses; and

36.  HHJ Chan also said,

“80. Since the husband is quite prepared to upgrade the medical/dental insurance plan of the wife and the son and to reimburse her of those expenses not covered by the insurance plan, I am not going to address to and include their medical and dental expenses any more in the MPS budget in this judgement.” (emphasis added)

37.  Since HHJ Chan made no financial provisions for the Mother in her judgment, I doubt very much that the Mother should be entitled to the insurance benefits if the Father did not make the offer.

38.  Ms Kwan criticizes the Father of not putting forward any evidence in his Summons and he has never produced any company medical policy to support what he is saying, nor did he explain why he should cease to pay for the Mother until the end of the proceedings.

39.  I do accept Ms Yu’s submission that the application was filed when the Father was unemployed, which is why he asked for the Undertaking to be discharged absolutely, it was not surprising that no evidence could be produced at that time.

40.  As for the non-production of the company’s medical policy to support his case, Ms Kwan has rightly pointed out that this is the fringe benefit which the Father enjoys under the company’s medical policy. But I am not really convinced that the Father has access to that document.

41.  In any event, the evidence can be seen from the employment offer letter by iCarbonX, which says:

“1.5 Benefits

The Company shall provide you with a global medical plan. You will be eligible for other benefits as offered to U.S. employees including 401(k), disability coverage and life insurance. You will be entitled to certain employee benefits afforded to all employees of iCarbonX.’

42.  In paragraph 38 of the Father’s 9th Affirmation filed on 30 October 2019,

“…. I am willing to provide a medical insurance for A to cover his medical expenses in mainland, if my company’s group medical insurance does not cover him….”

43.  As the Father has already said that he can claim reimbursement from iCarbonX for A’s medical fees, I accept that there has been a material change in the circumstances and that his undertaking under Recital E will be partially released.  In relation to the shortfall (if any), the Father shall still be wholly responsible.

Have there been material changes in the Father’s circumstances and non-disclosure which justify a downward variation of A’s maintenance?

a)    Termination of contract with GS

44.  In the letter written by GS to the Father dated 26 October 2018[1] (“the Father’s affirmation”), it states,

“This is to confirm that the Father is in the role of Managing Director in the Corporate Finance Department of GS in Hong Kong and has been employed by the firm and one of its affiliates since July 21, 2008. The termination date for the Father is currently anticipated to be December 2018.”

45.  Towards the end of the letter, GS sets out the period the Father’s job title changed since he joined the company on 21 July 2008.

46.  From the way the letter was drafted, I agree with Ms Kwan that questions need to be asked to ascertain whether the Father resigned or he was dismissed. 

47.  On the face of the letter, it is apparent that it was a termination of the employment contract with notice instead of summary dismissal.  If the contract was terminated by way of resignation, under s31R of the Employment Ordinance (Cap 57), the Father would be at least entitled to long service payment. 

48.  Ms Kwan submits that the Mother’s solicitors wrote to the Father’s solicitors three times asking for further details in relation to the reason(s) for termination and, in particular, whether it was voluntary.  Nonetheless, the Mother’s solicitors received no response[2].

49.  I agree that the non-response is undesirable and I agree with Ms Kwan’s submission that GS, being an international financial intuition, is able to set out what the termination package was.  Until and unless that information is available, I accept that the Father has not made full and frank disclosure.

The period that the Father claimed that he was unemployed – was it true?

50.  Ms Kwan says that this question goes to credibility.  However, the court is dealing with this matter on paper only. Without the benefit of hearing any live evidence from the parties, and their evidence in the affirmations has not been subject to cross-examination, I will leave this issue to the substantive maintenance hearing.

b)    The Father’s current earnings with iCarbonX

51.  The Father’s employment contract dated 29 July 2019reads:

1.1      Salary

Your salary is equivalent of USD21,000 per monthly pay period, equaling to a total annual salary of USD252,000.  This amount will be pro-rated in year one based on your start date.

1.2      Discretionary Bonus

You will be eligible for a 70% discretionary performance-based bonus per year.  This bonus will be based on a combination of company and individual performance, and will be paid in the first quarter of each year.  You must be actively employed by the Company on the date of payout to be eligible for this bonus.

1.3      Performance Bonus

You will receive a performance bonus of USD850,000 upon the successful completion of the raise of an aggregate of USD300,000,000 by iCarbonX Group for the sales of its securities (whether in one or a series of closings).  This bonus will be payable no later than the end of the calendar month following the completion of such raise.

…

4.     Hong Kong Tax and Social Security

4.1     Taxes

Regular U.S. taxes will be deducted from your pay.  To the extent that any Hong Kong taxes are owed, you will be responsible for all Hong Kong income taxes arising from your income, variable compensation and other benefits as may be provided.

52.  Ms Kwan says she is not suggesting that the employment contract is a sham or forged but without any of Father’s bank statements, there is no evidence that the Father is receiving his basic salary.

53.  Ms Kwan invites me not to believe the letter dated 5 November 2019 from iCarbonX because it was signed by Human Resources instead of the Managing Director.

54.  In the letter, it says,

“This is to confirm that (the Father) currently employed by iCabtonX Inc., did not receive any signing bonus or any other forms of compensation for signing of employment with iCarbonX Inc.

Furthermore, this is to clarify that the Discretionary Bonus that (the Father) is eligible for, which is an amount that could be up to 70% of his base salary, is to be granted to him solely at the discretionary of ICarbonx Inc. The Discretionary Bonus is also dependent on the overall company performance as well as (the Father’s) work performance. As of the date of this letter, we have not paid nor planned to pay any Discretionary Bonus to (the Father). The Company will re-evaluate the Discretionary Bonus on an ongoing basis and communicate with the Father as when needed and appropriate.

55.  The Father says the following in his 8^th Affirmation dated 6 September 2019:

13. “As the Court would see in the employment contract, my current basic salary with iCarbonX is just US$21,000 per month, equivalent to about HK$163,800 each month.  According to Clause 4.1 of the employment contract, regular US taxes, which is expected to be around 37%, will be deducted from my pay, which means the actual sum I receive will be far less than HK$163,000.  In addition to that, I will also be responsible for all Hong Kong income taxes arising from my income, which is expected to be at around 15% of my total income.

14. As stated in clause 1.2 of the employment contract, I will be eligible for a 70% discretionary performance based bonus per year, which will be paid in the first quarter of each year.  However, by the first quarter 2020, I have only been employed by iCarbonX less than a year, which means likely I will not be entitled to such discretionary bonus. Moreover, this bonus is discretionary based on the performance of iCarbonX and myself.  Given the recent trade war between US and China, it is expected that iCarbonX’s business will be seriously affected and it is likely that I will not be entitled to any bonus, or only a nominal amount of bonus, will be paid to me for this year (if I am entitled to) and next year.”

56.  I do not agree with what the Father and Ms Yu submitted in her submission that the Discretionary Bonus is discretionary in nature. 

57.  In TADJUDIN SUNNY v BANK OF AMERICA, NATIONAL ASSOCIATION (HCA 322/2008), Hon To J (as he then was) said,

73.     The subject matter of the claim is the performance bonus awarded under the performance incentive programme.  The award is discretionary.  The discretion is not absolute but qualified in that it has to be exercised in accordance with the principles stated in the programme.

…

78.     If the contract of employment provides specifically that the discretion is to be exercised depending on some identified single factor, then the employer has an obligation to assess the bonus dependent upon that factor only and is not entitled to consider other factors.  In such a case, it would be less difficult to impugn the employer’s decision.  In this case, assessment of performance under the programme is dependent on a number of factors.  It includes not merely the individual’s contribution to profit (the “What”) but also other distinct factors relating to conduct, attitude, leadership qualities and teamwork (the “How”).  Even in respect of an individual’s contribution to profit, that contribution is the result of multiple touches.”

58.  In the Father’s employment contract, other than the word ‘discretionary’ , the wordings in the clause such as “You will be eligible…” “and will be paid in the first quarter of this year” are clear enough to indicate that such bonus is contractual. The only condition attached is that the Father must be actively employed by the Company on the date of payout to be eligible for this bonus.  As to the amount, I agree that it depends on the performance of the company and that of the individual.

59.  As for the Father’s allegation that he will not be entitled to the Discretionary Bonus because he has not been employed by iCarbonX for one year, again, the wordings in the employment contract do not suggest that the Father will only be entitled to the Discretionary Bonus upon completion of one year of his contract.

60.  For the reasons given, I do not have to find whether the letter written by Human Resources instead of the Managing Director on 5 November 2019 is credible or not. However, I accept that the content is inaccurate insofar as the following issues are concerned: -

a)     the amount is not “up to 70%”; clearly it is a 70% as stated in the contract;

b)     this bonus is contractual and not, as suggested in the letter of iCarbonX, that it would be granted to the Father solely at the discretion of the company.

61.  Ms Kwan criticizes the Father when he says the following in paragraph 13 of his 8^th Affirmation filed on 9 September 2019[3],

“……my current basic salary with iCarbonX is just US$21,000 per month, equivalent to about HK$163,800 each month. According to Clause 4.1 of the employment contract, regular US taxes, which is expected to be around 37% will be deducted from my pay, which means the actual sum I receive will be far less than HK$163,800. In addition to that, I will also be responsible for all Hong Kong income taxes arising from my income, which is expected to be at around 15% of my total income.”

62.  Ms Kwan contends that the Father should have produced monthly salary statement to support that some of his salary has been withheld for the US tax, to which I agree.

63.  For the above reasons, I agree with Ms Kwan that without the Father’s bank statements showing his remuneration, I hold that the Father is receiving more than the basic salary and that the deduction (if any) might be far less than what he alleges.

Matrimonial Home

64.  In her Judgment[4], HHJ Chan said,

“62. It is trite law that where the affidavit disclosure by the payer is obviously deficient, the court should not be hesitant to make robust assumption about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources (See: HJFG v KCY [2012] 1 HKLRD 95 at 37; TL v ML and Others (Ancillary Relief Claim against Assets of Extended Family) [2006] 1 FLR 1263 at 124.

63. Ms Thelma Kwan, counsel for the wife, further submits that the husband continues to adopt a deafening silence with regard to the status of the leasing of the matrimonial home, which has been left vacant for months. As a result, he has to pay $17,000 per month for the monthly mortgage repayment and another $28,000 as rental of his currently resided apartment. Counsel submits that this is clearly his tactic to increase his expenses.

64. The husband claims in his 2^nd affirmation that the inability to let it out was due to the wife’s repeated obstructions since April 2016 by misrepresenting to the estate agents in June/July 2016 that the matrimonial home would be sold instead of renting out, giving away the keys of the matrimonial home to the estate agents for property viewing and breaking into and staying at the matrimonial home in October 2016. All these, the husband complains, were done without his knowledge or consent, thereby causing police reports be made. As a result, the estate agents refuse to recommend the matrimonial home to potential tenants because they are afraid that the prospective tenants may be obstructed by the wife in future.

“65. The overall affirmation evidence shows that the husband has moved out of the matrimonial home since August 2016, whereas the wife has vacated from it by about December 2016. By the time of the substantive hearing, the matrimonial home has been left vacant for about 6 months. I accept Ms Kwan’s submission that it is impossible to imagine that the matrimonial home can remain vacant for months, in particularly it is the husband’s own case that “the landed property market in Hong Kong is very active” so that the wife should be able to sell her properties within a few months in order to cover her litigation costs.

66.  Besides, it is my view that the husband fails to show that he has made genuine attempt to rent out the matrimonial home.  But even if some documents, such as estate agency agreement to rent out the matrimonial home, was able to be provided by the husband, I would still accept Ms Kwan’s submission that he is yet to explain why he chose not to move back to the matrimonial home in order to save his rental expenses (now standing at $28,000 each month), which are obviously more than the monthly mortgage repayment ($17,000 per month).  In my view, if his position is really as dire as claimed, it would make more sense for him to move back to the matrimonial home so that his rental expenses can be saved up to satisfy the interim financial provision that this court is about to determine in this judgment.”

65.  At the beginning of the proceedings, I asked Ms Yu whether the Matrimonial Home was still vacant and Ms Yu confirmed in the affirmative without providing an explanation.

66.  In this respect, I agree with the ruling of HHJ Chan in its entirety. The Judgment was handed down in December 2017 and now that 2 years have passed and nothing has been done so far by the Father.

67.  For the reasons that I have given, I find that there is material non-disclosure on the part of the Father and I accept that he has the means to pay.

The Mother’s position

68.  Ms Yu says that the Mother’s major non-disclosure is still a live issue.  Up to this date, the Mother still has not addressed the issues in relation to Hk$1,800,000 and HK$1,650,000 respectively despite the repeated remarks on non-disclosure in the Judgment.

69.  In his 9^th Affirmation filed on 30 October 2019, the Father says[5],

“46. However, even by now, the Respondent has still produced no further documents in respect of those material non-disclosure of HK$1,800,000 and HK$1,650,000 respectively….”

70.  In paragraphs 143-144 of the Judgment[6], HHJ Chan said,

143.   While it is repeatedly stressed by the court that parties have the duty of full and frank disclosure of their financial means in ancillary relief matters, it is very often overlooked by them (and perhaps their legal advisers as well) that the law imposes a positive duty on them to disclose their financial resources. In the enlightening judgment of Johnson Lam J (as he then was) in L v L [2006] 1 HKFLR 121, His Lordship commented on the non-disclosure of the wife in that case and reiterated the positive duty to disclose one’s financial resources at §198 as follows:

“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.” ” (my emphasis added)

144.   In my view, the husband has raised his queries on her income from GLB (Hong Kong) in his 2nd affirmation. The wife, having confirmed in her reply affirmation that the said sums of $1,650,000 and $1,800,000 are her bonuses, has failed to discharge her positive duty to disclose the details of the fund into which she allegedly invested $1,200,000 out of her 2013 bonus. Nor has she produced in her reply affirmation any substantive documents to prove that she was required to re-invest her 2014 bonus of $1,800,000 into GLB (Hong Kong). She merely provides a letter dated 15 June 2015 allegedly from GLB (Hong Kong) claiming that the said sum of $1,800,000 was re-invested. Yet, it is correct of Mr Yim (the then Counsel for the Father) to point out that this letter is not signed and merely bears a stamp chop.  The audited account of GLB (Hong Kong) as at 31 March 2014 does not shed any light that the wife has re-invested $1,800,000 into the company.  She has not provided any other audited accounts of the company for this application.

145.   Unless further discovery is to be made by her, I agree that she has not fully and frankly disclosed her financial resources in so far as these 2 sums of money are concerned, and adverse influence should be drawn.

71.  As the situation remains unchanged, I share HHJ Chan’s view.

72.  Ms Yu submits that another example of the Mother’s material non-disclosure can be found in paragraph 47 of the 9^th Affirmation of the Father dated 28 October 2019. Moreover, the Father accuses the Mother of providing the most unreasonable and ridiculous answers,

47.  Worst still, the Respondent has kept refusing to make full and frank disclosures in her Answers by providing the most unreasonable and ridiculous answers.

48.  For example, reference is made to the Respondent’s Answer to Question 6 of the Petitioner’s 3^rd Questionnaire (filed on 18^th July 2019).  As shown in the Question 6, a sum of HK$2,000,000 has been withdrawn from the Respondent’s HSBC account no 602-xxxxx-888 on 17^th June 2013.  However, when she was asked about the withdrawal, the Respondent simply said that she transfer the funds to “one of her father’s friends” as per her father’s instructions.  The Respondent even go further by refusing to provide the name and other details of the alleged “friend” when she was asked to do so while such information could easily be obtained from the HSBC.  The Respondent is a professional in investment and she must know that she may have committed money laundering is she has no idea of the identity of the recipient for such a substantial amount.  Therefore, the only logical and reasonable explanation is that the alleged “friend” is made up by the Respondent with the hope to hide her own assets.

49. Another example is that it was discovered by the Petitioner that the Respondent has transferred about HK$3,827,453.6 to the account of a broker, Guotai Jun An (“GTJA”) from 2014 to 2015.  However, when the Respondent was asked about the whereabouts of these funds, she alleged that such funds were transferred to a Liu Yan’s GTJA account and it has then been repaid to her via GTJA’s account again (Answer to Question 13(2)(b) of R’s 3^rd Questionnaire filed on 18^th July 2018 refers).  However, no documentary evidence, such as Liu Yan’s GTJA account statement, has been provided to support the Respondent’s allegation.  It is also worth noting that the Respondent did not even produce her own GTJA account statement by claiming that such statement is unavailable. The Respondent’s explanation is simply unbelievable and I suspect that, instead of depositing such fund to Liu Yan’s account, she had deposit the said HK$3,827,453.6 into her own GTJA account and it can fully explain why the Respondent refuses to provide the statement of her own GTJA account.

50.  A more recent example is the Respondent’s shareholding in 上海鮮圖科技有限公司(“Xiantu”).  The Respondent has made no disclosure of her 1% share in Xiantu in her Form E or Answers.  When her non-disclosure was pointed out by me in my 8^th Affirmation, the Respondent alleged in R’s 8^th Affirmation that she holds the share of Xiantu on trust for her employer.  However, except a “聲明函”of 上海數味企業管理資詢中心 which is not event signed by any person.  Moreover, it is noted that 上海數味企業管理資詢中心is not even the employer of the Respondent.

51.  The explanation provided by the Respondent is unreasonable and unbelievable.  The Respondent has not produce any Declaration of Trust of document of similar nature to prove that she is a mere trustee while it is impossible to believe that her employer would ask her to hold the share without requesting her to sign a piece of paper to confirm the trust arrangement.

52. Moreover, it is also unreasonable that the Respondent’s employer would firstly form a partnership then use the partnership to hold 99% of Xiantu – the Respondent’s employer which is a limited company would simply hold all the shares of Xiantu itself which would avoid all these trouble.  Therefore, I do not believe the Respondent is telling the truth and she must be the beneficial owner of the 1% share of Xiantu, which she has failed to disclose.”

73.  Ms Yu invites me to disbelieve the Mother in relation to her income because:

a)   In her affirmation, the Mother says that the Father has owed her HK$781,593 excluding interest and as a result, she had to take out loans amounting to at least HK$3,833,739.  Ms Yu doubts her credit limit if she has only meagre means.

b)   The Mother holds a very important position in the Company which requires her to travel a lot. Ms Yu has drawn my attention to the fact that the Mother asked for leave to be absent in the hearing for the examination of the Summons to be held on the day immediately after today’s hearing because of an urgent business trip.  These hearings, as Ms Yu submitted, were fixed quite a long time ago.  If she was not holding a very important position, why would she have urgent business meetings?

74.  In paragraph 151 of the judgment, HHJChan commented on the Mother’s regular transfers of large sums of money out of the account, the learned judge said,

“One of the regular recipient of the transfer out of the wife’s 3 HSBC accounts is the account 500-xxx-002 (“Account 500”). The husband has previously asked question(s) concerning this account. Based on the Withdrawal Table, Mr Yim submits that for the years 2014 and 2015, about $1,232,000 and $1,010,000 were respectively transferred into this Account 500 out the wife’s 3 HSBC accounts, totaling over $2,200,000. Yet, the wife tells in her answer to the husband’s 2nd questionnaire that she “has no recollection of the purpose of the transfer to [Account 500]” when she was asked specifically about a sum of $200,000 deposited into that account on 11 November 23014. I agree with Mr Yim that it is rather extraordinary that she is unable to recall the purpose of transferring money into this Account 500 given the fact that she has transferred over $2,200,000 into it for 2 years. As such, I do not think that she has discharged her positive duty to disclose this Account 500, in the result of which adverse influence should be drawn against her.”

75.  I share the same view.  I agree and hold that the Mother has committed material non-disclosure.

76.  For the reasons given, it is my view that both the Father and the Mother have not made full and frank disclosure of their respective financial means.  I therefore hold that they both have the ability to pay for A’s expenses.

Delay/Fairness

77.  The proceedings taken by the Mother’s parents in China in relation to the Shanghainese property started in 2017 (the actual month is disputed by the parties).  Due to such proceedings, and by the consent of the parties, the First Appointment hearing was adjourned sine die with liberty to restore pending the determination of the PRC proceedings in November 2018. However, on 28 December 2018, the Mother’s parents withdrew the PRC proceedings and started another one in another Court.  Such delay, as Ms Yu suggests, is unfair to the Father. 

78.  In the Father’s 7^th Affirmation filed on 27 February 2019, he says,

10. “Initially, the trial of the PRC Proceedings was fixed for 7^th January 2018; however, the respondent’s parents requested to adjourn it due to reasons they need to confirm the transfer of my annual salary to the Respondent’s accounts for the payment of the mortgage, as well as their own accounts of money received from the Respondent.  The adjournment was accepted by the Putuo Court and it was adjourned to 13^th May 2018.”

11.  On the adjourned trial date, the Respondent’s parents refused mediation as requested by the court and insisted on proceeding with the trials on that date. Therefore the trial was proceeded as normal.

12.  All though the PRC Proceedings had been tried in or about late May 2018, the Putuo Court had not delivered its judgement.  I am advised that, in absence of the determination as to the beneficial ownership of the Shanghai Proceedings, the Court is unable to proceed with our respective ancillary relief claims further; therefore, by consent of the parties, the First Appointment hearing has been adjourned sine die with liberty to restore pending the determination of the PRC Proceedings on 21^st November 2018.

13.  To my great surprise, in 28^th December 2018, the Respondent’s parents have issued a fresh proceedings in (another court) against me on exactly the same matter, namely the beneficial ownership of the Shanghai Perperty… and was served on me in or about January 2019.”

79.  Ms Yu argues that in the light of the serious non-disclosure of the Mother on her assets and spending on A’s expenses and the deliberate delay caused by the Mother to the proceedings, it would only make sense if the parties are to share equally A’s expense, which is HK$30,500 per month for each of them.  Ms Yu suggests that the Mother may have all the motives to misapply A’s interim maintenance or pocket his maintenance.

80.  Ms Kwan, on the other hand, says the loans of 10 million taken out by the Father, which the Mother was not aware of previously, together with the property may have exceeded the jurisdiction of the lower court, it is possible that the proceedings may have to start all over again in a higher court.

81.  I have no comment as to who caused the delay since the proceedings take place in China, but I agree that there has been a substantial delay in the present case because the last Judgment was given 2 years ago and it is still at the MPS stage.

Sharing

82.  HHJ Chan said in her judgement as to why the Father was to bear the whole of A’s expenses:-

“157. Due to the above analysis, I am of the view that the wife has not, at this stage, fully and frankly disclosed her financial resources set out as aforesaid. However, in all fairness to her, I will take note that she has to bear her own and the son’s expenses without any financial support from the husband for about 8 months from April to November 2016, and that she has to pay out of her pocket those expenses not covered by the undertaking/order in the 1st and 2nd interim orders. I will also bear in mind that she has been paying $42,000 per month for the Shanghai Property since about mid-2016 after the husband, on his own case (but does not mean that the same is accepted by this court) ceased paying for its mortgage repayment, until the 2nd interim order whereby the husband starts to contribute $20,000 per month for the son’s accommodation cost.

158. On the other hand, I place great weight on the effect of section 7(2) of the MPPO and the best interest of the son that he should receive steady financial support. I take into account the admission of the husband in his affirmation that since the birth of the son, he is responsible for “a major part” of his expenses. I also take regard of the facts set out in §[157].

“159.  For all those reasons and all the other matters set out in the above, I conclude on a broad brush approach that it is fair to order the husband to bear all of the son’s expenses of $88,500 (rounded up to $89,000) per month in the interim stage.  I also conclude that the wife’s income and financial resources would be able to meet her own needs and fund her litigation in the interim stage.  Her application for her own MPS and litigation funding should not be allowed.”

83.  For these reasons, I find that the Mother has not made full and frank disclosure and I cannot see why the Mother should not bear some of A’s expenses given that the family was broken into two a long time ago. As for the percentage, having taken into account that the Father has been responsible for the majority of A’s expenses, I hold that the Mother should be responsible for 1/3 from now on.

84.  I now turn to the needs of A.

Nanny

85.  HHJ Chan allowed the expenses of a nanny then because,

“97. A full time nanny has been employed in taking care of the son since his birth, which cannot and is not disputed by the husband. I cannot see why this arrangement should not be continued for the time being in the best interest of the son. I do not accept that the maternal grandparents should be made to take up this job in place of a nanny for this interim period. Importantly, the husband himself says in his Form E that the child-minding fees of the son is $7,000 per month. It falls short of logic that he now says a nanny is not required for this interim period.”

86.  However, HHJ Judge Chan also said,

“99. Having said the above and without the intention to bind the trial judge in the ancillary relief matters, I think as the son grows older and is no longer a toddler, the necessity of a nanny may need to be justified.”

87.  As A is nearly 6 now, the need of a nanny no longer exists.

88.  In any event, Ms Kwan says that the maternal grandparents will help out sometime.

89.  For the reasons I have given, I do not allow this item.

Medical Expense

90.  For medical expenses, the Father argues that to reduce costs, the 3 regular check-ups should not be carried out in Hong Kong. In paragraph 38 of the 9^th Affirmation filed on 30 October 2019, the Father says,

“….it is simply not feasible and unreasonable for A keep attending Hong Kong for medical treatment. The Respondent and A are living in Shanghai where high-level of medical service is provided. Respondent had taken A to both public hospital and private clinics in Shanghai for medical treatment. Besides, A is growing old and it will seriously disrupt his study if he is required to travel to Hong Kong simply for medical check-ups. As stated in my previous affirmation, I am willing to provide a medical insurance for A to cover his medical expenses in mainland, if my company’s group medical insurance does not cover him….”

91.  In the letter from his legal representative to the Mother’s legal representative dated 5 November 2019, he recommends the following hospitals in Shanghai:-

a)   Sino-American Hospital in Shanghai which is top quality US affiliated private hospital in Shanghai and it is less than 20 minutes from A’s home.  It is our client’s undertaking that the Ping An insurance covers all expenses for child at A’s age for 10,000 RMB a year.

b)   United Family Healthcare Group which has 4 hospitals and clinics in Shanghai.  This is the largest and best private hospital in China.  It is 12 minutes by car from where A lives.  We are instructed that A’s doctor’s in Hong Kong referred the parties to visit this hospital and doctors for any issues in 2015 and 2016 and A has visited this hospital before.

c)   Shanghai Children’s Hospital, which is the best public Children hospital in Shanghai and China, and less than 2 minutes (550m) from A’s home.  This is the hospital that A goes the most currently for sickness and treatment.

92.  Ms Kwan denies that b) was referred to by A’s doctor, but it is her instruction that A’s doctor did mention to the Mother that he goes to that Healthcare Group once or twice a year and A can see him there.  Ms Kwan however says that in order to make it work, the Mother must know in advance when the doctor will be attending the Healthcare Group in Shanghai before the medical appointment can be made. 

93.  I cannot see any reason why A should continue his diagnosis in Hong Kong. It is not only because it is an expensive exercise, but it is also very tiring for a 6-year-old boy to come all the way solely for this purpose.  Given that the doctor will travel to Shanghai sometimes, I consider A should have his medical consultation in Shanghai from now on.  When making this decision, I have taken into account what Ms Kwan confirmed in her oral submission that for small matters like flu, vaccination etc,, A is being treated in Shanghai.

Other Expense

94.  For utilities, management fees, government rates and rent and insurance in relation to the Mother’s properties, I accept that they should be crossed out from the claim.

95.  As for A’s expenses, I agree that for entertainment/presents, HK$4,500 is on the high side and I find HK$2,500 to be a reasonable amount for a 6-year-old. Likewise, for clothing/shoes, I agree with the Father that HK$2,000 is more reasonable.

96.  As for the item under Other Transport, the Father says that there is a double-counting in the calculation in the Judgment.

97.  In the Judgment, HHJ Chan said,

“100. The wife confesses that a full time driver is hired only after the separation. In my view, she has not provided sufficient justification for employing a full time driver, nor can she persuade me that such arrangement falls within the living standard during the marriage. I am of the view that the son can take other mode of transport, such as taxi or uber. The wife says in her 3rd affirmation that $694 per month is needed for the son to take taxi/uber when the full time driver is off duty (which I take it that employees work 5 days in a week in China). Broadly, the son would thus need about $2,600 per month as his travelling expenses in Shanghai. As to the air ticket expenses for flying to Hong Kong to attend medical appointments, the husband does not dispute that the son will take 3 trips to Hong Kong for such purpose and the travelling expenses are $14,335 per year, or $$1,195 per month. The son’s needs for his transport expenses is thus about $3,800 per month.”

98.  In the light of her findings, I will delete the car parking expenses and the item under Other Transport.

99.  As for the Others (health food, milk powder, diapers, shampoo, body wash, lotion and other child’s daily essentials), I agree that A is no longer a toddler and I find HK$1,000 to be more reasonable.

100.  As for school fees, I accept the figure provided by the Father, and as the school fees have gone up, he will fulfil his undertaking by settling it directly with the school. 

101.  As there is no dispute that the Father is settling the school fees directly with the school, I find the amount the Father needs to pay the Mother is HK$21,000 (HK$46,666 - HK$25,662 = HK$21,003).

Costs

102.  There is no winner in this case, I make an order nisi that there be no order as to costs.

Order

103.  The Order made by HHJ Chan dated 22 December 2017 be varied to the extent that:

E.    AND UPON the Petitioner’s undertaking to the Court and to the Respondent that: -

(1)   The Petitioner shall forthwith, if he has not already done so, purchase an insurance policy for the child to cover all his medical expenses in China;

(2)   The Petitioner shall arrange for reimbursement of all the medical and dental expenses of the child within 14 days upon production of the relevant invoices/receipts to him, and for him to pay within 7 days on receipt of insurance reimbursement indicating clearly with supporting documentation to which claim does the reimbursement apply; and

(3)   Subject to the production of receipts by the Respondent, the Petitioner shall settle all the medical and dental expenses of the child not covered by the said insurance plan promptly and in any event, not later than 7 days on receipt of insurance reimbursement.

(4)   the Respondent shall settle the child’s school fees direct with the school.

IT IS HEREBY ORDERED THAT: -

1.   The Petitioner shall pay to the Respondent the interim maintenance of the child of the family in the sum of HK$21,000 per month commencing from 1 January 2020 and thereafter on the 1^st day of each and every month until further Order of the Court;

2.   There be an order nisi that there be no order as to costs;

104.  A penal notice will be endorsed on this court order.

105.  And last, but not the least, it remains for me to express my gratitude to both Ms Yu and Ms Thelma for their helpful assistance in this trial.