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FCMC 5641/2001
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES
SUIT NO. 5641 OF 2001
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BETWEEN
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K |
Petitioner |
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and |
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W |
Respondent |
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Before : HH Judge Bruno Chan in Chambers
Date of Hearing : 8 – 12 June, 10 – 14 August, 16 – 17 September, 8 – 9 December 2009, 20 January, 25 February and 15 March 2010.
Date of Judgment : 7 May 2010.
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J U D G M E N T
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1. This is the parties’ contested application for ancillary relief upon the dissolution of their 20 plus years marriage. Their main dispute essentially concerns how their assets, consisting basically of 11 real properties located mostly in Hong Kong but also in the US, Australia and China with a total value in excess of HK$32 million, should be divided between them, with the Husband alleging that the Wife has already dissipated their 2 elderly home businesses and taken away substantial part of the family funds, the lost value of which should be “added back” into the balance sheet of her assets and hence he should be given a bigger share of the remaining real properties, while the Wife also seeks a bigger share thereof on the basis that she had made much more contributions towards the marriage and their assets. These contentions of the parties basically constituted the main issues before me.
2. As will be apparent below in this judgment, the dispositions by the Wife of the elderly home businesses between late 2000 and 2001 had triggered off an application by the Husband back in May 2002 for avoidance thereof under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“Section 17 Application”), which led to some of the most acrimonious and protracted litigations that this court has ever witnessed, which perhaps explain why it had taken so long for the parties to come to this final stage of their divorce proceedings.
3. While in the earlier proceedings both parties were represented by counsel, the Wife had since 2006 started to act in person, but had with the leave of this court the assistance of a lady friend as a McKenzie friend to assist her in this trial, although it was not denied that she had also been from time to time receiving legal advice on the side.
4. It was also agreed between the parties that since all the Husband’s affirmations were in English while the Wife’s were in Chinese in this application, with a view to save time and costs and again with the permission of this court the trial was conducted in Chinese, with assistance to the Wife by the court’s interpreter in case of any difficulty which she might have in reading the Husband’s affirmations and any other documents in English, although it has to be said that she does have a good working knowledge of that language, having attended college courses in the U.S.
5. I should also mention that while the trial bundles numbered 14 in total with more than 3000 pages of pleadings and documents, many of which were however never referred to during the trial and mainly came from the Wife, and of those with no or little probative value or relevancy to the matters before me, I do not propose to refer to them in this judgment. .
The Background Facts
6. The Husband, who is now aged almost 70, was born in July 1940 in Indonesia where his family ran a business selling electrical appliances. He went to China in 1960 to study music at Beijing University, and upon graduation with a decree in music he stayed to work in China where he met his first wife and married her in 1968 with 2 daughters born out of that marriage. Sadly his wife died of cancer in 1976 and he had to raise the daughters at the same time working full-time in a factory.
7. The Wife, who is much younger at 57, was born in November 1953 in Guangzhou, China, where she was studying to become a nurse when she first met the Husband in 1977. On 21st December of the same year the parties married in Guangzhou where they made their home together with the 2 daughters from the Husband’s first marriage, FC and YC who were then only 4 and 8 years old.
8. Shortly after the marriage the Husband was allowed to settle in Hong Kong, and in 1980 he applied for the Wife and his 2 daughters to join him in Hong Kong where the Wife gave birth to 2 daughters of her own in quick succession, E on 29th June 1980, and J on 20th September 1981, but both of whom while still in their infancy were sent to China to be cared for by the Wife’s mother until they were older, as both parties had to work and could only manage to take care of the 2 elder daughters of the Husband for the time being in Hong Kong.
9. In November 1982 the parties purchased their first property in Hong Kong at Chung Hing Building, Quarry Bay as their home for HK$193,000 with the assistance of a bank mortgage. With mortgage payments to meet and 4 small children to raise, they struggled to make their living with the Husband working first as a building security guard and later in a factory during the day and giving music/singing lessons in the evening, while the Wife also held down several jobs as a nurse on both full-time and part-time basis in various hospitals and clinics.
10. In 1987 they started their first elderly home business known as SKW Care and Nursing Centre, later changed to ST Home for the Aged (“ST”) which provided the main source of income for the family and, according to the Husband, their various investments in properties in the early 1990s as well, including their former matrimonial home at Taikoo Shing. It was however the Wife’s case that most of the properties were in fact funded by her own moneys and investments made in China, thus forming the first of many issues between the parties.
11. In 1996 a second elderly home known as RG Home for the Elderly (“RG”) was set up with the Wife and her brother registered as partners in its business registration but was found in my said judgment to be owned in fact by the parties in the same way as ST.
12. In the early 1990s the Husband applied for emigration to U.S. for the family and after obtaining residency there he returned to stay in Hong Kong. In 1995 the parties’ own daughters E and J went to further their studies in California, and the Wife went to join them in 1997 and bought 2 properties in San Francisco, one as their home and the other let out for rental income, while the Husband remained in Hong Kong to run their elderly home business, the extents of which, as will be apparent later in the judgment, also formed part of the major dispute between the parties.
13. In early 2000 the Wife returned to Hong Kong to take control of the 2 businesses after receiving news of the Husband’s affair with one of the staff. Although he denied the affair, their relationship started to unravel when the Wife kept the Husband out of the businesses and allegedly removed more than HK$8.7 million from their joint bank accounts, part of which she admitted of using to purchase her own residence while in Hong Kong at the City Garden in North Point.
14. As a result the Husband petitioned for divorce in these proceedings in September 2000 against the Wife based on her unreasonable behaviour and for general ancillary relief. The petition was initially contested by the Wife but eventually the parties were able to agree to a consensus divorce, and the decree nisi was subsequently pronounced in June 2002 and the decree absolute issued later in the same year.
15. Meanwhile in April 2002 when the Husband applied for interim maintenance against the Wife after he was prevented from drawing any funds from the business accounts for his living expenses, as he used to do so in the past, it was from the Wife’s affirmation in response that he first learnt of her transfer of RG to her brother back in December 2000, and ST to E and J, who were then still students in U.S., in June 2001, at nil consideration for both transfers, and had appointed one of their friends JY as the business manager. The businesses were then each incorporated into a limited company bearing the same name as before.
16. The Husband therefore took out the said Section 17 Application to set aside those dispositions on the basis that they were made with the intention to defeat his ancillary relief claims. The Wife denied any such intention but gave various reasons for the dispositions, in the case of RG that the Husband was disturbing the business by inciting its former employees to commence proceedings against the company and launching various complaints to Labour Department and Social Welfare Department, thereby causing the residents to leave and the business was therefore not viable, and that she found it physically and mentally difficult to carry on the business, but as she was unable to find a buyer, she therefore transferred the business to her brother so that he could close it down on her behalf.
17. As for ST, she gave the same reason of physically and mentally difficult for her to carry on with the business, and that the Husband was sabotaging the business by taking money from its business accounts, and so she transferred it to her 2 daughters also for them to close it down.
18. As mentioned above, that application was heatedly contested, during which the Wife even involved the police with allegations that the Husband had falsified documents for use in the proceedings, which led to him subsequently being charged for using a false affirmation, with that trial pending the conclusion of these proceedings. Meanwhile the trial of the Section 17 Application lasted some 27 days between January and July 2003 and involved a considerable number of witnesses including former employees as well as the 2 daughters, during which it was revealed that RG was further transferred to some third parties allegedly residents in China.
19. On 6th August 2003 I gave judgement (“Section 17 Judgment” D1 : 1538 – 1602) for the Husband and set aside the dispositions with costs against the Wife for the reasons set out therein, but essentially I rejected all her reasons for the dispositions and held that she had failed to rebut the presumption that they were made with the intention to defeat the Husband’s ancillary relief claims.
20. On 12th September 2003 the Husband together with his lawyers armed with the judgment attended at ST to try to take over management of the business but was refused by the said JY and other members of the staff, which led to a standoff and the subsequent intervention of the police. The Husband eventually left with his lawyers.
21. Three days later on 15th September 2003 the Husband applied and obtained, on ex-parte basis, various injunction orders restraining any further disposition or dealings of the 2 businesses including their closure or the destruction of any of their business records.
22. At the return hearing of that application on 26th September 2003, both the Wife through her counsel as well as her 2 daughters and JY gave various undertakings in respect of the 2 businesses in terms of the Husband’s application pending the final determination of the question of ancillary relief between the parties.
23. The Wife however changed her lawyers afterwards and 3 months later launched an application before me for leave to appeal against the Section 17 Judgment and for stay of execution thereof pending the appeal, but which application was refused after hearing arguments on 10th December 2003.
24. The Wife then took her application to the Court of Appeal, and on her assurance that the preservation of the status quo at RG would maintain profitability for the benefit of the family assets, Woo V-P granted her leave to appeal and a stay of execution on 6th January 2004.
25. On 26th May 2006 her appeal was however dismissed by the Court of Appeal with costs awarded to the Husband, but despite her assurance aforesaid, the Wife revealed at the hearing of the appeal that RG had in fact already ceased business sometime in 2003. As regard ST, it also ceased business sometime after the appeal, but only revealed by the Wife much later during the course of the ancillary relief application.
26. Since the appeal the Wife claimed to have spent her time on various non-commercial activities such as painting and singing opera in China and shuttling between U.S. and Hong Kong for court hearings in these proceedings, while the Husband has been staying in the former matrimonial home at Taikoo Shing (“Taikoo Shing Property”). Both now claim to be unemployed and rely on rental income from their properties as well as loans/financial assistance from their daughters, the elder ones for the Husband, and the younger ones for the Wife respectively.
27. As noted already at the beginning of this judgment, while the parties agreed that the said 11 real properties are essentially the remaining matrimonial assets on the table for distribution between them, they both insisted that they be given a larger share thereof for the reasons referred to above, and so the key issues for the court’s determination are : whether and what value of the 2 elderly home businesses and their income generated from the time of their disposition until their cessation, as well as what funds/capital which the Wife had removed from the joint accounts after the breakdown of the marriage, should be added back to the balance sheet of her assets, and what were the Husband’s contributions, if any, towards the said businesses and/or the marriage.
28. Before going into the evidence over those issues, however, it would be relevant to first set out the principles to be applied in the consideration of ancillary relief applications, not least because the Wife was unrepresented.
The Principles
29. The powers of the court to make orders for ancillary relief including periodical payments, lump sums, transfer and/or settlement of properties are derived from sections 4 and 6 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’), and in the exercise of these powers, the court shall take into account of those matters set out in section 7(1) of the Ordinance, which I set out in full for the benefit of the Wife as follows :
(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say –
(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
(g) in the case of proceedings for divorce or nullity of marriage, the value to ether 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.’
30. While the section, which is in almost identical terms with section 25(1) of the Matrimonial Causes Act 1973 and now section 3 of the Matrimonial and Family Proceedings Act 1984 of the United Kingdom, does not explicitly state what is to be the aim of the court when exercising these powers, Lord Nicholls of Birkenhead in the House of Lords’ landmark decision of White v White [2001] 1 AC 596 held that ‘the purpose of these powers is to enable the court to make fair financial arrangements on or after divorce in the absence of agreement between the former spouse.’
31. Lord Nicholls went on to emphasize the equal status of a husband and wife in a matrimonial union should be reflected in the fair division of assets when he stated (at p605) :
‘In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering (f), relating to the parties’ contributions. 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.
32. He then suggested that the ‘yardstick of equality of division’ should be used as a check on the proposed method of division of assets when he stated (at p605) :
‘A practical consideration follows from this. Sometimes, having carried out the statutory exercise, the judge’s conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge’s decision means that one party will receive a bigger share than the other. Before reaching a firm conclusion and making an order along these lines, a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination. This is not to introduce a presumption of equal division under another guise. Generally accepted standards of fairness in a field such as this change and develop, sometimes quite radically, over comparatively short periods of time. The discretionary powers, conferred by Parliament 30 years ago, enable the courts to recognise and respond to developments of this sort. These wide powers enable the courts to make financial provision orders in tune with current perceptions of fairness. Today there is greater awareness of the value of non-financial contributions to the welfare of the family.’
33. In another landmark decision of the House of Lords after White in the combined appeals of Miller v Miller and McFarlane v McFarlane [2006] 2 WLR 1283, Lord Nicholls further identified several elements or strands of principles for the purpose of achieving fairness between the parties : financial needs, compensation and sharing, the last strand of which of particular relevance to this case which he said (at p1288) :
‘This “equal sharing” principle derives from the basic concept of equality permeating a marriage as understood today. Marriage, it is often said, is a partnership of equals. In 1972 Lord Keith of Kinkel approved Lord Emsile’s observation that ‘husband and wife are now for all practical purposes equal partners in marriage’ : R v R [1992] 1 AC 599, 617. This is now recognised widely, if not universally. The parties commit themselves to sharing their lives. They live and work together. When their partnership is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary. Fairness requires no less. But I emphasise the qualifying phrase : ‘unless there is good reason to the contrary.’ The yardstick of equality is to be applied as an aide, not a rule.’[16]
34. This fairness approach with its underlying principles was embraced by the Hong Kong Court of Appeal in DD v LKW [2008] 2 HKLRD 523 (Cheung, Yuen JJA and Lam J) when Cheung JA said in the leading judgment :
‘White and Whiteare, of course, not binding on this Court but nonetheless they are highly persuasive authorities. I would firmly embrace the approach in Whiteand Milleron the division of family assets on divorce. On marriage the parties commit to sharing their lives. It is a partnership of equals. The husband may work while the wife may stay at home to take care of the family. Their contributions are nonetheless equal. As more frequently happens these days, with domestic helpers being available, both the husband and wife work and make equal contributions to the welfare of the marriage. [63]
On divorce the principle and spirit underlining the union should be reflected in the division of the family assets. The division should proceed on the basis of fairness and this necessarily means there is no room for discrimination between husband and wife. The starting point is equally in division unless there is a good reason to depart from it.’ [64]
35. Cheung JA then set out what he considered to be the relevant principles to be applied when the court considers ancillary relief applications :
‘In the majority of the cases where the parties only have limited financial resources, the focus of the inquiry on fairness is to divide the assets of the parties so as to make provision for their housing and financial needs. It may be necessary to augment the available assets by making orders for periodical payments.
Where there are assets which are available beyond satisfying the immediate housing and financial needs, equality in the division of the assets should be made unless there is a good reason to the contrary. This approach is not confined to ‘big money cases’ but to cases where the assets are available beyond satisfying the needs of the parties.
The inquiry should be conducted in two stages :
1) First, computation of the available assets of the parties such as property, income (including earning capacity), and other financial resources which the parties have and are likely to have in the foreseeable future.
2) Second, distribution of the assets by reference to the three principles of need (generously interpreted), compensation and sharing. These principles can be gleaned from section 7(1) and each of the matters set out in section 7(1)(a) – (g) can be assigned to one or another of the three principles.’ [69]
36. Cheung JA then concluded on these principles by stating :
‘The principle of fairness is to apply to all properties of the parties both ‘matrimonial’ (i.e. product of both parties which also include the matrimonial home, even if this was brought into the marriage by one of the parties) and ‘non-matrimonial’(i.e. by inheritance and gift).
The equal sharing principle applies to both long and short marriages, but in cases of short marriage, the non-matrimonial property may be a good reason for departing from equality.
The concept of ‘special contribution’ i.e. exceptional income generated by only one party, may be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise.
When a spouse has given up a lucrative career for the benefit of the family, this may justify an award for compensation.’ [69]
37. In W v H [2009] HKEC 757 another division of the Hong Kong Court of Appeal (Rogers VP, Le Pichon JA and Stone J) accepted that DD v LKW currently represents the applicable principles in our jurisdiction, but warned against the unqualified acceptance and adoption of the approach in White and suggested a flexibility in the exercise of the court’s discretion when Roger VP said :
‘ … I consider that there are grave difficulties in accepting that the Hong Kong courts are bound by the decisions of English courts. Naturally, decisions of the House of Lords are to be given respect. But since the resumption of sovereignty in 1997, it would appear difficult to suggest that decisions, even of the House of Lords, could be considered as binding. [47]
I consider it unnecessary to examine what was said in all the cases, but the provisions of the Ordinance mandate a flexibility in the exercise of discretion which in each case is necessary to meet the circumstances of the case. The English decisions have shown a progression towards the realization that fairness often dictates that, on dissolution of the marriage, the family assets should, in principles, be shared between the parties unless there was good reason to depart from such a distribution. Nevertheless, each case must be decided on its own facts and its own merits. In cases of divorce, the facts and circumstances relating to the parties and the marriage can and do vary significantly. In my view it would be dangerous to attempt to decree a principle that is applicable in all cases.’ [48]
38. It is therefore with these principles as my guidance, and with the necessary flexibility in accordance with the facts and circumstances of this case, I shall proceed with the section 7 enquiry of the parties’ case with the aim to achieve fairness in the distribution of their assets, starting first with the identification and computation of such assets.
Assets
39. I propose to divide the parties’ assets into 3 separate categories for consideration : real properties, the businesses, and cash. The real properties have all been properly identified and their value agreed. The other 2 items are more controversial and difficult to determine given the lapse of time and lack of their updated information. In fact, as noted above, as far as the Wife is concerned, the 2 elderly home businesses have long ceased to exist, and while the Husband does not seem to have evidence to suggest otherwise, he insists that their value and profits earned while under her control should be added back either to the pool of assets for distribution or to the balance sheet of her assets in the distribution of the remaining real properties.
Real Properties
40. As noted above there are altogether 11 of them, with 7 situated in Hong Kong including the former matrimonial home at Taikoo Shing now occupied by the Husband, 2 in San Francisco including the Wife’s residence in the U.S., 1 in Brisbane, Australia and 1 in Guangzhou, China with an agreed total value of about HK$32.4 million, the details of which are set out below in accordance with the parties’ agreed valuation reports (Trial Bundle D3 : 2653 – 2713), and all are held in the parties’ joint names save and except the City Garden Property in the Wife’s sole name :
| Property |
Purchase date |
Open Market Value in existing state as at 11th May 2009
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Occupancy |
| a. Flat X on X/F, Tung Hing Building, 28-40 Shau Kei Wan Main Street East, Hong Kong (“Tung Hing Unit 301”). |
July 1990 |
HK$1,500,000 |
Vacant. |
| b. Balmoral Garden South, Logan Reserve Road, XX Muchow Road, Watford West Q4133 Brisbane, Australia (“Australia Property”). |
March 1990 |
AU$220,000
(HK$1,584,000) |
Let out by the Husband for AU$840 p.m. |
| c. Flat X on X/F, Lei Shun Court, 116 Leighton Road, Hong Kong (“Lei Shun Property”). |
April 1990 |
HK$ 4,300,000 |
Let out by the Husband for HK$14,000 p.m. |
| d. Flat X on X/F and Flat Roof, Tung Hing Building, 28-40 Shau Kei Wan Main Street East, Hong Kong (“Tung Hing Unit 307”). |
July 1990 |
HK$ 2,400,000 |
Vacant. |
| e. 廣州巿天河區恆福路淘金花園X座 |
December 1995 |
RMB￥650,000
(HK$734,500) |
Let out by the Husband for RMB2,200 p.m. |
| f. Flat X on X/F, Tsui Kung Mansion, 4 Tai Yue Avenue, Taikoo Shing, Hong Kong (“Taikoo Shing Property”). |
July 1991 |
HK$ 5,200,000 |
Occupied by the Husband. |
| g. Flat X on X/F, Kut Cheong Mansion, No.11 Nation Street, Hong Kong (“Nation Street Property”). |
September 1993 |
HK$ 1,150,000 |
Let out by the Wife for HK$3,500 p.m. |
| h. XXX Baltimore Way, San Francisco California, USA (“Baltimore Way Property”). |
November 1992 |
US$530,000
(HK$4,134,000) |
Let out by the Wife for US$1,944.42 p.m. |
| i. Flat X on X/F, Glamour Court, Phase 3, Discovery Bay, Hong Kong (“Discovery Bay Property”). |
November 1991 |
HK$ 2,200,000 |
Let out by the Husband for HK$8,900 p.m. |
| j. XXX, 43rd Avenue, San Francisco, California, USA (“43rd Avenue Property”). |
August 1997 |
US$730,000
(HK$5,694,000) |
Occupied by the Wife and younger daughters. |
| k. Flat X on X/F, Block 8, City Garden, 233 Electric Road, North Point, Hong Kong (“City Garden Property”). |
August 2000 |
HK$ 4,900,000 with outstanding mortgage of about HK$1.4 millions |
Occupied by the Wife when she is in Hong Kong |
Total :
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Approx.
HK$32.4 millions |
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41. All the joint properties are free of encumbrances while the Wife’s City Garden Property has an outstanding mortgage of about HK$1.4 millions. It is also common ground that the Husband has the current use or control of properties (b), (c), (e), (f), and (i) and hence their rental income, while the Wife has the use or control of the other properties. As noted above, their valuations are all agreed between the parties and there is nothing controversial about them, unlike the next item of assets for discussion which were not only the main source of the parties’ wealth, as I have found in my earlier judgment, but also the cause of all these litigations : the 2 elderly homes ST and RG.
The 2 Elderly Home Businesses ST and RG
42. While the Husband is unable to offer any evidence that the 2 elderly homes are still in business today, given the utter lack of useful or actable information or documentary evidence from the Wife about either of them, as will be apparent later in this judgment, he argues that their value, if not of today, at least at the time of their taken over by the Wife in March 2000, as well as their generated profits at least up to the time of cessation of their business, should be added back into the assets for the purpose of their fair distribution between the parties, as it has been said in cases where one party has deliberately or recklessly wasted, lost or given away assets in anticipation of trial then it might be appropriate to add back the lost value of such assets into the balance sheet of that party’s assets : Cowan v Cowan [2001] EWCA Civ 679, [2001] 3 WLR 684 at [100] per Thorpe LJ.
43. The Husband has put the value of the 2 elderly homes at HK$13,800,000 as at March 2000 when the Wife returned to Hong Kong and took over their sole control, on the basis of the business situations including the total number of residents, their monthly charges and the net monthly income of the 2 homes at that time, the details of which he set out in his affirmation of 7th August 2002 (C2 : 848).
44. While he admits that the value depends also on the location of the home, its size as well as its decoration and available facilities, essentially the sale price would be calculated by multiplying the number of occupying residents and available bed space by the average annual fees payable by the residents at that time. So for RG which had 112 occupying residents in early 2000 each paying on average HK$55,000 per annum with 41 additional bed space at potential income of HK$50,000 per annum for each bed, he arrived at the following figures : 112 x HK$55,000 + 41 x HK$50,000 = HK$8,210,000 as what he says should be the value or sale price of the business.
45. Similarly, for ST which had 88 occupying residents with additional 15 bed space, the calculation of its value or sale price would be : 88 X HK$55,000 + 15 X HK$50,000 = HK$5,590,000, thus arriving at the grand total of HK$1,380,000 for the 2 businesses at the time of the breakdown of their marriage.
46. The Wife’s case is, as noted above, that the 2 businesses were not worth anything at all, which was the main reason why she said she decided to dispose of them in the first place, and that they have since been closed down and the business ceased altogether several years ago. So as far as this application is concerned, they have no value.
47. Her evidence on her reasons for the dispositions have of course all been heard at the Section 17 Application and dealt with and rejected in my judgment, and nothing I have read or heard on this occasion have caused me to change my mind about her real intention to put them beyond the Husband’s claims. In fact, I have become even more convinced about that view by the further evidence adduced at this trial, of which no doubt I will elaborate later in this judgement, but in the meantime it would be relevant to go into the Wife’s evidence of what had happened to the 2 elderly homes since the Section 17 Application, of which the Husband as noted above claims to have no knowledge at all and therefore not in any position to verify as true or not.
48. The Wife however made the same claim that she also has no direct knowledge of what happened to the 2 elderly homes after her transfer to her daughters and brother respectively other than what she had been told by her daughters, as she has since stopped working on any job or business and at one time gone to certain monastery in China to seek peace and quiet and to stay away from the traumas caused by all these litigations.
49. Her evidence is that, according to her daughters, ST was run up to around 2003 but after the Husband and his lawyers came to the elderly home with the Section 17 Judgment and order to demand taking over the business and made a scene there, which led to police intervention, as a result the staff and residents were all scared away, so her daughters decided to take steps to close down the business.
50. However at one of the subsequent hearings in late 2003 when the Husband applied to court for a restraining order that the business not be closed down, the daughters were advised by their counsel to reinstate the business, hence the staff and residents were put back to ST and the business continued until about mid-2006 after her appeal against the Section 17 Judgment was dismissed and the staff and residents again decided to leave. She therefore believed that the business has since ceased for good.
51. As for RG, the Wife claims to know nothing further about its business after her brother had transferred it to 2 Chinese residents when he found that he had no time to manage it. In any event, she disputes that the 2 elderly homes were worth anything, let alone the huge amount claimed by the Husband which she regarded as ludicrous given the poor management the business at that time, the lack of long tenancy for the premises and the many labour disputes launched by some of the staff incited by the Husband.
52. I do not propose to revisit each and every one of these allegations of the Wife as many of them had already been dealt with and rejected in the Section 17 Judgment that they were not the true or valid reasons to close down the businesses, suffice it perhaps to recite part of the conclusion which I reached about her such actions at the end of that judgment :
“112. ….I am satisfied that all her actions in respect of the dispositions aforesaid including the timing of the transfer, her close relationship with all the transferees, her deliberate concealment of the transfers from the Husband, her withdrawal of money from personal and business accounts and her cancellation of all the autopay arrangements were for one reason and one reason only : to put all her assets out of the reach of the Husband so that he would not be able to proceed with his financial claims against her in the event of their divorce….”
53. When I said she put “all her assets” out of the reach of the Husband, I of course did not mean those real properties which are in the parties’ joint names and hence could not be unilaterally dealt with, but the fact is that everything else which were under her sole control or possession had been removed by her, in particularly the 2 elderly homes business, which she has always regarded as her own without anything to do with the Husband, and I am convinced that they must be worth a lot more than she was prepared to admit, as otherwise why bother to go through all those trouble all these years including taking the matter to the Court of Appeal and incurring huge amount of legal costs just to close down something which she claims not to be worth anything? It simply defies common sense or logic.
54. In fact, even after her dispositions of the 2 elderly home businesses had been set aside by the court, the Wife was still trying to keep them out of the reach of the Husband when she made an affirmation on 24th December 2003 in support of her ex-parte application to the Court of Appeal for stay of execution, in which she referred to his earlier application for an order that she resumed management of RG and said this in her affirmation (para. 54) :
“There is not a single shred of evidence of mismanagement on the part of RG Ltd. There is simply no urgency to have the business to be transferred to me now, nor will the Petitioner suffer any prejudice if the matter is to be decided later. The best and the most commercially sensible policy to adopt would in fact be to retain the status quo, and to not disrupt the management of RG Ltd, as this is important to maintain the profitability (or whatever there is left of it) and therefore the maximum pool in the family asset (assuming but without admitting to be the case that I and/or (the Petitioner) still have interest in the business) for the imminent ancillary relief.”
55. As mentioned above and as stated in the Judgment (para. 18) of the Court of Appeal dated 26th May 2006 in dismissing the Wife’s appeal (1723 – 1741), it was on her such assurance that the maintenance of the status quo at RG would maintain profitability for the benefit of the family assets that Woo V-P granted the stay of execution on 6th January 2004, it was in my view probably an understatement when the Court of Appeal expressed in paragraph 19 of its Judgment that “it was a little surprising therefore for this court to be told by counsel for the Wife on the first day of the appeal that the business of RG had ceased in 2003.”
56. It would also be relevant to note that the Court of Appeal went on to say in the same paragraph about the business of RG as follows :
“Although the Annual Returns of the company have been filed up to 15 December 2004 and the company’s status at the Company Registry is still recorded as “live”, the cessation of business (at least at the original premises, a sizeable operation taking up 2 floors of a building) was confirmed by photographs produced to us showing that the premises, which also serve as the company’s registered office, were vacant.”
57. This led the Court to ask the question (para. 20) whether the Wife’s appeal in relation to the RG business would not be just academic, to which it was noted that her counsel was unable to say why it would not be, but I would venture to ask a further question of whether in fact what the Wife had assured Woo V-P about preserving the status of RG was indeed trying to confuse the court, if not to downright mislead it.
58. Furthermore, the fact that annual returns of the business of RG had been filed up to 15th December 2004, almost one year after its alleged cessation of business and 4 years after it was transferred by the Wife to her brother for the alleged purpose of closing it down, certainly goes to support the Husband’s case that it was never really her intention to close it down as alleged in the first place, in particularly when in fact in 2001, shortly after its transfer for that alleged purpose, it had instead entered into a 6-year lease with its landlord.
59. The same can be said about ST, the transfer of which to her 2 daughters E and J in June 2001 was according to the Wife also with the intention to close down its business, but the fact that it had continued to run for another 5 years until end of May 2006, as evidenced by her own account of the rentals which she had received from ST for renting the parties’ offices at Yung Hing Building during that period (D2 : 2099), likewise goes to contradict her alleged intention.
60. Equally controversial is her evidence over the decision to finally close down ST by end of May 2006, which she said was due to the mass departure of the staff and residents after they learnt of the dismissal of the appeal, as they did not want to remain in ST if it was to be taken over by the Husband, yet those statements allegedly recorded their such intention and produced by the Wife in support of her case (“R – 22”) were all dated either 20th or 21st of May 2006, some 5 or 6 days before the Court of Appeal dismissed the appeal on 26th May 2006, which bags the obvious question of how could the makers of those statements, none of whom had come to court to give evidence, have known of the result of the appeal and then decided to leave ST en mass well before the Court of Appeal even delivered its decision?
61. The Wife tried to explain away this discrepancy by alleging that some of the staff had actually attended the hearing of the appeal on 16th and 17th May 2006 and were able to gather from what they had heard in court to realise that she was going to lose her appeal, and therefore decided to resign even before the court formally delivered its decision. Even if one were to put aside whether this was plausible for these laymen to be able to gauge the thinking of the court, one finds it irresistible to wonder why was there such an urgency for them to resign their job well before the court’s decision, as after all, it was their livelihood. As for the alleged departure of the residents, does it not contradict the Wife’s earlier evidence that it would take a long time to relocate them in accordance with the policy of the Social Welfare Department?
62. The answer, according to Mr Yim for the Husband, must lie in the fact that these statements were all deliberately engineered by the Wife for her use in this trial, but that she made a mistake as to the actual date of the decision of the appeal, hence the discrepancy over the dates of those statements. Given the extents that the Wife was prepared to go to put the 2 businesses out of the reach of the Husband, I can well understand the Husband’s suspicion over the alleged cessation of the business.
63. While it can never be certain whether the 2 elderly homes have indeed ceased business as alleged by the Wife, there is no doubt in my mind that they were a lot more valuable than what the Wife was prepared to admit, but that by no means follows that they must necessarily be worth as much as HK$13.8 million as suggested by the Husband.
64. His valuation is as aforesaid primarily based on the number of residents in the 2 homes as at March 2000 when the Wife returned to Hong Kong to take control of the business : 88 in ST and 112 in RG (C2 : 843), and while the Wife seems to dispute that the numbers were in fact lower when she took over the business, according to documents filed by the business with the Social Welfare Department (C2 : 611), ST had 103 residents in early 2000, while RG also had 118 residents in April 1998 (C3 : 951), and when she was cross-examined over the amount of deposits of the residents held by the business in 2000, the Wife admitted that the numbers of residents in both elderly homes in 2000 were similar to those in 1998. I therefore accept that the Husband’s figures for the number of residents in early 2000 are either accurate or fair estimation.
65. In support of his valuation the Husband also relied on the evidence of a Madam Cheung, whose affirmation was filed on 12th August 2009, and who was involved in similar business and had bought an elderly home with about 70 residents at around the same period in May 2001 for HK$6,300,000, the sale contract of which can be found in D4 : 2718.
66. At the trial Cheung gave details of her experience in running the same business for more than 20 years since the 1980s during which she had owned as many as 12 elderly homes, that she was well acquainted with both parties and had visited both of their elderly homes, and that she agreed with the Husband’s valuation of them in both his method of calculation and assessment.
67. Cheung also explained in her evidence that although the elderly home which she bought in 2001 referred to above had fewer occupying residents, their annual charges were higher at HK$90,000 each hence she was willing to pay a higher price for it, but she agreed that the normal range for the annual charges to be adopted for calculating the sale price would be between HK$40,000 and HK$60,000, hence she found the Husband’s figures of HK$55,000 as the basis for the calculation and assessment of the sale price of his 2 elderly homes reasonable after taking into account of their conditions.
68. To counter Cheung’s evidence, the Wife produced her own witness a Madam Luk who was equally experienced and authoritative, if not more, in the same business for more than 24 years and had run more than 50 elderly homes and sold some 20 of them over the years, and is presently the chairwoman of the CB elderly homes syndicate, perhaps the biggest of its kind in Hong Kong. She was of the view that the parties’ 2 elderly homes were in fact not worth anything, the reasons and basis of which are set out in her statement dated 29th May 2009 (D4 : 2716).
69. Given her experience and qualifications, I have no reason to question Luk’s expertise in this business, and while some of the basis of her assessments such as the close proximity of RG to a slaughter house and a morgue, the number of residents and available bed space, or the condition of the decorations of the 2 elderly homes can be said to be fair or objective comments notwithstanding that she had never visited either home, but others such as labour disputes and government prosecutions for breaches of various regulations must have come from the Wife, a fact readily admitted by Luk as she herself had no direct or personal knowledge of any of those matters, and that even though she insisted she had heard about the same from others as well in the same business circle, they must in my view at best be regarded as second-hand knowledge if not outright hearsay.
70. Luk in fact happened to be the person who sold the elderly home to Cheung in 2001 referred to above, and she justified the high price for that sale on the new decorations, the large number of available bed space, and its relatively high chargeable income, all of which she believed to be inadequate or lacking in the case of ST and RG, which was why she said she was not prepared to pay anything for either of them.
71. Having seen and heard both witnesses who were clearly highly experienced and knowledgeable in the running and dealing of elderly home business, and I do not believe that they would intentionally lie or mislead for the parties in their evidence, but why were their assessments of the 2 elderly homes so diametrically opposite?
72. The answer in my view must lie in the fact that Luk’s assessments were clearly influenced by the entirely negative pictures of the Husband and the 2 elderly homes painted to her by the Wife in particularly of the many alleged labour disputes and government prosecutions laid against the businesses, as well as the various alleged mismanagement and chaotic situations of the homes as described in Luk’s statement under items (8), (10) and (11) in respect of RG, and item (5) in respect of ST, none of which could have been her own observations or personal knowledge but must have caused her to come to the conclusion that she would not pay anything for either of them.
73. In my Section 17 Judgment I found many of those so-called problems then facing the business either inaccurate or exaggerated, of which Luk of course was unaware, nor was she aware of the fact that RG had actually signed a 6-year lease in 2001, a factor which she regarded as important to secure a good sale price, and given her totally negative impression of the Husband as clearly demonstrated in court as she was convinced that he was wholly responsible for the breakdown of the marriage by his adultery, and that he is now trying to steal the businesses from the Wife, which was again no doubt fed to her by her one-sided stories, I can see why Luk held such a low opinion of the 2 elderly homes. I agree with Mr Yim that she was biased against the Husband in her evidence and that her valuation opinions about the 2 elderly homes were heavily based on hearsay information given to her by the Wife and are therefore in my judgment unreliable.
74. In further support of his valuation, the Husband has also produced a newspaper article dated 26th March 2003 and exhibited to his affirmation of 13th May 2009 (D3 : 2652) allegedly showing transactions of elderly homes of the preceding year of 2002 ranging from the most modest ones occupying one floor for HK$3.75 million to HK$4.3 million, to hugely expensive ones occupying 2 floors for HK$38 million or HK$49 million, with many in between HK$8.7 million and HK$13 million.
75. However, the Wife has submitted that those transactions in fact referred to the sale of premises upon which an elderly home was operating instead of the sale of such homes, and upon reading the entire article, I agree with her submission that they do not reflect the actual value of those elderly homes, but the article did forecast a significant upward trend in the demand for elderly homes in Hong Kong notwithstanding the impact of Sars in the economy in that year, which appears to contradict the Wife’s case that it was getting more and more difficult to run that kind of business and hence elderly homes were unable to demand high prices at that time.
76. Mr Yim further argues that despite the fact that the Wife or her agents had been in control of the 2 businesses since March 2000 to the exclusion of the Husband, she has failed to produce any accounts or financial documents of either business to dispute the Husband’s figures and valuations at all during the past 7 years after they were set out in his affirmation of 7th August 2002, and despite a court order directing her to produce those accounts after the court had set aside the dispositions.
77. Mr Yim submits that since it is well established that the failure of a party to bring before the court some documents which the opponent claims would elucidate the facts would give rise to the most natural inference that that party fears to do so, and this fear is evidence that the document, if produced, would have exposed facts unfavourable to that party, as it was said by the Court of Appeal in Tullett & Tokyo International Securities Ltd. v APC Securities Co. Ltd. [2001] 2 HKLRD 356 (CA) at 365C. He therefore argues that the court should draw adverse influence against the Wife for her failure to produce any relevant accounts or documents of the elderly homes in assessing the true values of ST and RG.
78. The Wife however insists that she did already produce 2 valuation reports by Messrs. SC & Co., certified public accountant, respectively on the 2 elderly homes consisting of more than 70 pages of relevant documents exhibited to her affirmation of 18th May 2009 (D4 : 3090 – 3161), upon which the Husband never asked any question during the trial, nor requested the accountant to formally produce those reports to court or to attend the trial for cross-examination on them, hence it would be wrong and unfair to now accuse her of not producing the relevant accounts of the businesses.
79. Mr Yim for the Husband does not seek to ask the court to exclude the 2 reports notwithstanding that they have not been formally produced, but argues that no weight should be given to them as they cannot have any bearing on the dispute between the parties because the relevant time for the assessment of the value of the elderly homes is March 2000 when the Wife started to take control of them to the exclusion of the Husband, whereas these reports sought to provide valuation of RG and ST as of 30 April 2001 and 30 June 2001 respectively, which are not of the correct period and hence irrelevant.
80. The appropriate or traditional date for the assessment or valuation of assets has always been at the date of trial, as was held in the English case of Cowan v Cowan [2001] 2 FLR 192. The facts of that case are not similar, but it would be useful to note the following reasons given by Thorpe LJ :
“[132] I start with Mr Pointer’s basic submission that the date of separation represents a cut-off date. I am unable to agree with it. I note that s 25(2)(a) itself requires the court, when exercising its power to make among other things a property adjustment order, to have regard to inter alia :
‘… the income, earning capacity, property and other financial resources which each of the parties has or is likely to have in the foreseeable future…’(emphasis added)
[133] Further, the date of the exercise of the court’s power is not only accepted to be the traditional date but is, as it seems to me, also the natural date in a case such as present. Here the parties have lived apart, either content or obliged to wait before any divorce. The bulk of the assets was in the meantime the husband’s and under his control. He could do with it as he wished. She had no opportunity to use the assets or to increase them in the meanwhile. If the husband lost the moneys, the wife would suffer. If he added to them, one might expect the wife to benefit.”
81. In the present case, the 2 businesses no longer exist at the time of the trial as far as the Wife is concerned, while the Husband as aforesaid was in no possible to argue otherwise, but there is no dispute that they had continued to run well after March 2000, at least up to 2004 for RG and 2006 for ST, hence there seems no valid reason to base their valuations on March 2000 simply because that was the time when the Wife took over them, especially when the Husband is also seeking his share of their profits earned thereafter up to the time of their closure.
82. I do however agree with the Husband that since it is the Wife’s own case that ST and RG had continued to operate until 2004 and mid-2006 respectively, the onus was on her to produce all the relevant accounts of those years, as the 2 reports produced by her were merely for 2001 and would not be sufficient to give an accurate picture of the financial state of the businesses.
83. The report for RG, which is entitled “Estimated Valuation Report According to Information and Explanation Available As of 30 April 2001” appears to consist of only 2 pages (D2 : 3090 – 3091), while the one for ST is also of 2 pages (D4 : 3112 – 3113) with a similar title but for a slightly different period as of 30 June 2001, but without intending to criticize the Wife as she has never been asked to make formal production of the originals to the court, without which it is not possible to verify whether those 70 pages of documents bundled in between the reports and consist of odd pages of bank statements, receipts, statements, tax returns, management accounts and tenancy agreements are indeed the actual appendixes to the 2 reports as alleged by the Wife, as they do appear confusing and chaotic and do not resemble anything properly prepared by professionals. In fact I did have great difficulty locating, for example, the documents referred to as Appendix I or Appendix II in the RG report so as to make any sense of the statements/comments relating to them.
84. Consequently and in the absence of any evidence from the accountant, it is not clear from the reports exactly what documents/information had been provided to the accountant for their preparation, but it would appear that they must have been those 70 pages of documents, and given the various negative references mentioned in the reports such as shortage of capital in RG making it not possible to renovate or expand its facilities, its involvement in 4 court cases and 5 unsubstantiated accusations with consequential legal fees and compensation, as well as reducing revenue but high expenditure resulting in deficits, with similar alleged problems in the case of ST plus loss of tenancy for its main branch, all of which no doubt came from the Wife and appear similar to those fed to Madam Luk in her valuation mentioned earlier above, of which I have already rejected as inaccurate, exaggerated or misleading, it is indeed not surprising that these 2 reports similarly gave both businesses a negative value.
85. In reply to the Husband’s argument that the relevant date for the valuation for both businesses should be March 2000, the Wife does not dispute that that was the time when she took over the businesses to the exclusion of the Husband, but seeks to explain that later dates had to be used for the valuation in the 2 reports because the Husband had removed all the previous accounts and financial records of the businesses, in her words “all 4 bags of them”, when he left the elderly homes in March 2000, hence it was not possible for her to provide any records or accounts prior to that date to her accountant for the valuation, and insists that the resultant reports, albeit of a later date, should still give an accurate valuation of the 2 businesses, as after all, according to her, the number of residents and the business revenue were not all that different from March 2000.
86. The Husband of course denies that he has ever taken away any such documents from the businesses, and argues that otherwise he would not have had to seek and obtain an order from the court for the Wife to produce them, and which he claims that up to today she has failed to do so, and that since she has never given any valid or legitimate explanation or reason for her failure to do so, the proper inference to be drawn against her under the circumstances is that such disclosure would have supported the his valuations.
87. As aforesaid those 70 odd pages of documents which accompanied the 2 reports indeed consist of what appear to be some of the accounts and financial documents of the 2 businesses, particularly relevant include a bank statement of RG’s account with Bank of Communication for the period from mid-March 2001 to mid-April 2001 (D4 : 3092), RG’s Balance Sheet and Profit & Loss Account for the year ended 31st March 2001 (3107 – 3111), a few pages of ST’s account statements with Bank of China (3114 – 3115), ST’s Balance Sheet and Profit & Loss Account for the year ended 31st March 2001 (3127 – 3131), Inland Revenue Department’s Profit Tax Assessment of ST for 1999/2000 (3133 – 3135), and so on, but they appear rather selective or at best piecemeal, and certainly in my view not sufficient or comprehensive enough to enable the accountant to give a true and accurate valuation of the 2 businesses as at March 2000.
88. The Husband’s valuations are similarly not supported by any business accounts or financial documents, but he had the advantage of being directly involved in the management of the businesses during those 3 years when the Wife was in the U.S. from 1997 up to the time of his exclusion in March 2000, and hence was wholly updated with first-hand knowledge of the financial state of the 2 businesses up to then.
89. Furthermore, there is no question that he did have in his possession many documents relating to the 2 elderly homes, just witness the volume of those exhibited to his many affirmations filed over the years, such as those of 18th April 2002 (A : 79 – 365), or of 7th August 2002 (C2 : 381- 907), and it matters not whether they were from those “4 bags of documents” alleged by the Wife, the question must be this : If indeed he still has other records of the 2 businesses which he has not disclosed or produced as alleged by the Wife, it begs the obvious question of why then did he not produce them to support his case?
90. In the absence of all the relevant accounts and records of the 2 businesses, and mindful that the blame for which may very well lie with the Wife, but given the conflicting evidence from the parties over the valuation of both businesses, I will have to look to other documents which are before the court for assistance to ascertain their true value.
91. Essentially, the value of a business would include its goodwill, its assets and its profitability which would no doubt be properly audited and detailed in an up-dated account of the business in the event of its sale.
92. In the present case of elderly home business, there is no evidence to suggest that the good will of either ST or RG was a relevant factor, hence it can be disregarded for the purpose of their valuation, with the focus on their assets and profitability. On this basis the Husband’s valuations of simply multiplying the number of residents by their annual charges appear in my view too simplistic, as while the residents were undoubtedly the most valuable assets of the elderly home, their paying charges represent only the business revenue and not their profits.
93. For the business profits, the Husband’s calculations are set out in his affirmation of 18th April 2002 (A : 75), essentially on the basis of a 53% profit margin for the 2 elderly homes, giving rise to a net profit/income of HK$256,520 per month for ST based on 88 residents, and HK$326,480 per month for RG based on 112 residents, hence according to his calculation the net profit from ST over 74 months (from March 2000 to June 2006) would amount to HK$18,982,480, while those from RG over 46 months (from March 2000 to December 2003) would be HK$15,018,080, making a total amount of a staggering HK$34 millions which he says have all been pocketed by the Wife, hence his claim for their half share of HK$17 millions.
94. He has however not produced any documentary evidence in support of his such assessments of the net profits of the 2 businesses, in particularly as to how he arrived at such profit margin. His explanation was that after his exclusion from the businesses in March 2000, he could not have gained any access to the relevant business accounts or records.
95. Mr Yim also points out that since this court had already observed in its Section 17 Judgment that RG should be able to make healthy profit at the time of its disposition, while the tax returns for the previous years also show that ST was profitable as well, therefore if the Wife suggests otherwise, the burden is on her to prove so.
96. However, he argues, not only has she failed to produce any business records of the 2 elderly homes, she also sought to give an amazing explanation for her such failure during her evidence that as she had all along been told by the staff of the Social Welfare Department to keep 2 different accounts for the businesses, an accurate one and another with understated figures so as to facilitate the residents to apply for allowances/benefits from the Department, and that when she told an Inspector Wong of the Department about the disputes over the elderly homes in these proceedings, she was advised that she must not produce those accounts or any other financial documents. This explanation, Mr Yim submits, which is tantamount to a conspiracy to defraud with the staff member of the Social Welfare Department, is simply incapable of belief.
97. Therefore, he submits, applying similarly the principles of Tullett & Tokyo International Securities Ltd above, the court should draw an adverse inference against the Wife for her failure to produce the relevant accounts and financial records of ST and RG when assessing their profits since March 2000.
98. While that statement may not be entirely correct as noted above, she did produce to her 2 valuation reports those 70 odd pages of documents relating to the 2 businesses, the fact remains that those reports covered only the 1st year of her taking control, i.e. up to mid-2001, but none whatsoever thereafter when even according to her, RG had continued to run until 2004, and ST for a further 2 years until mid-2006.
99. Her explanation was that she had since nothing to do with the 2 businesses after their transfer as she was either in China engaging in various activities such as singing and painting, or in the U.S. studying in college and was therefore in no position to produce any such records of the 2 elderly homes which were being run by some third parties. In support she has produced various documents and photos as evidence of her such activities.
100. In my Section 17 Judgement I did not accept that the Wife had ever relinquished her control of the 2 businesses despite her transfer to her 2 daughters and her brother respectively, and nothing I heard in this trial have caused me to change that view, which also explain why she was still able to produce those 70 odd pages of documents in respect of the 2 businesses, albeit selectively for a different but specific purpose : to dispute the Husband’s case over the value of the businesses, which then begs the obvious question : Why not produce the full accounts and records of the 2 elderly homes up to the time of their respective closure if indeed they were not making any profit so as also to rebut his allegation over their profitability or his claim for his share of the profits earned during that period?
101. The Husband would of course proffer that the simple answer must be because those records would instead reveal how profitable the 2 businesses had been, which would no doubt go to support his claim for his share of the profits, hence in the absence of such records, adverse inference should be drawn against the Wife accordingly and that his assessments should be accepted or preferred by the court in assessing the profits.
102. However attractive that argument of the Husband may appear, and the Wife’s conducts in her dealings of the 2 businesses certainly did not help her case, I have serious reservation accepting his estimation of the business profits over that period, not just because his alleged profit margin appears unusually high at 53% in a non-monopolised service industry and in his case the main revenue would come mainly from the Social Welfare Department, but the idea that 2 medium-sized elderly homes could generate a net profit in excess of HK$34 millions over a period of 4 to 6 years is, to say the least, mind-boggling.
103. While there is no question that the businesses had been the main source, if not the sole one, of the parties’ wealth which include their 11 real properties valued at almost as much, which were however purchased over a much longer period throughout the marriage and certainly with the assistance of bank mortgages, while their current valuations have obviously taken into account of their appreciation since their purchase. In other words, the parties never spent that kind of money to purchase those properties.
104. How does one then explain the Husband’s assessments? His evidence on the average number of residents in the 2 homes of between 80 and 110 and their monthly charges in 2000 of about HK$5,000 were in the main either not seriously disputed by the Wife or were supported by documents. He has however not given any particular reason or basis for the alleged 53% profit margin, just claiming that it was what he understood to be the case throughout the marriage. The reason for his alleging such a high profit margin, I suspect, may be found in the Profit and Loss Accounts of the 2 businesses for the year ended 31st March 2001 produced by the Wife (D4 : 3107 – 3111, 3127 – 3131).
105. The RG’s account (3108) shows a gross income of about HK$4.5 millions for that year which, at an average monthly charges of say HK$5,000, would put the number of occupying residents at 75, while this is quite a bit less than the Husband’s figure of 112 for the year 2000, it also gives a lower costs of sale at about HK$2.3 millions, and at a profit of almost HK$2.2 millions, it would give a profit margin of 48%, a figure not far from the Husband’s 53%.
106. Similarly, the ST’s account (3128) shows a gross income of almost HK$3.2 millions which would put the number of occupying residents at 53 which is again much lower than the Husband’s figure of 88 for 2000, and after deducting the costs of sale of HK$1.7 millions, it would show a profit of almost HK$1.5 millions, likewise a profit margin of nearly 47%, a figure consistent with the case of RG.
107. While these figures taken from only one year cannot of course be conclusive, but whether at 48% or 53%, as I have said would still seem a very high profit margin. However, according to the attachment (3109 and 3129) to these 2 reports, there was in fact no net profit in that year for either business. It seems that apart from the costs of sale which covered mainly the costs of services provided for the residents including daily meals and care, there were also operation expenses such as accounting fees, advertising, business registration fee, utilities, rent and rates, etc, generally business overhead expenses in the total sum of HK$2.6 millions for RG and HK$1.8 millions for ST, which essentially left both businesses with no net profit at all, and in fact put them in the red, never mind a profit margin of 53%.
108. Given that the maker of these 2 accounts was never called to give evidence at the trial, it is not possible to ascertain the accuracy or truthfulness of these figures, and I do not blame the Husband for regarding any evidence from the Wife about these 2 businesses with wary or suspicion, but leaving these figures aside, most of the items under either Cost of Sales or Operation Expenses do appear normal and necessary for operating such a business, and it seems that the only challenge that the Husband could have raised about the contents of the accounts, and admittedly he had not while the Wife was under his cross-examination, was over the amount of the gross income which, as noted above, were based on a significantly lower number of occupying residents for both homes than the Husband’s figures for the year 2000.
109. The Wife’s figures were of course a year later in 2001, and while residents do come and go and hence their numbers would fluctuate over time and can never be the same for each year, but a drop in occupancy by as much as 1/3 as in this case for both homes in just one year must be said to be significant. Hence, by putting the Husband’s case at the highest, and assuming that the Wife had deliberately understated the gross income for both businesses, and by bringing the gross income for both businesses up by 1/3, but adjusting for the corresponding increase to the costs, one would arrive at a total net profit of about HK$3.8 millions for that year based on the Husband’s best figures.
110. However, even if one were to apply this net profit to the businesses every year thereafter until their closure respectively in 2004 and 2006, the total net profit would only amount to about HK$18 millions, far short of the Husband’s figure of HK$34 millions, but would still appear to be a very significant sum for the net profit of such a business.
111. As aforesaid, this figure is based entirely on the Husband’s best case for the year of 2000 and on the assumption that the income for 2001 had been understated in the Wife’s accounts, and that such high profit could be achieved for each and every year thereafter until the closure of the businesses. In the absence of any other business accounts or records after 2001, and mindful of the fact that the fault for which must lie squarely on the Wife’s shoulders, the question to ask myself must be : Is it possible for the 2 businesses to generate that kind of profits, i.e. between HK$3 millions – 4 millions net per year, and if so, how likely was that the case during those years? The answer can perhaps be found from some of the parties’ earlier affirmations, starting with the Husband’s of 18th April 2002 (A : 58 – 365).
112. That affirmation was made in support of his application for maintenance pending suit at that time, and in paragraph 26 (A : 69 – 70) he gave an account of his remittance of more than US$1 million (~HK$7.8 millions) to the Wife in U.S. between 1997 and 1999 from the profits of the 2 elderly homes for her living expenses there and the purchase of the 2 properties in California, to which the Wife did not in the main dispute, and in any event most of the remittances were well documented by the various bank remittances attached to the Husband’s affirmation (A : 146 – 163). If this HK$7.8 millions were indeed drawn from the profits generated over those 3 years, it would mean an average net profit of not less than HK$2.6 millions per year.
113. However, also attached to the affirmation were 2 Profits and Loss accounts of RG, one for the year ended 31st March 1997, which was its 1st year in operation, showing a total revenue of about HK$2.4 millions but with a net loss of HK$2.1 millions (A : 97), while that of the following year ended 31st March 1998 shows a smaller loss of some HK$357,000 but with a much higher revenue of more than HK$4.7 millions (A : 102). This may be due to a sharp rise in the number of residents almost doubling over the year resulting in a smaller loss for that year, but still no net profits. Does it mean that the remittances to the Wife in 1996 and 1997 came from ST’s profits, or that there may indeed be 2 sets of accounts with different figures and for different purposes as earlier alleged by the Wife?
114. The latter may indeed be the case, as there was another set of account of RG over the same year attached to the Wife’s affirmation of 3rd July 2002 (C1 : 205 – 315) in which she alleges that the Husband had falsified his signature : a profits and loss account for the period from 1st July 1996 to 30th June 1997 showing an income in excess of HK$2.5 millions with a net profit of some HK$439,000 (219). While it is true that the period of the 2 accounts differs somewhat, with the 1st one ended on 31st March 1997, while the 2nd one 3 months later on 30th June 1997, it still cannot not explain the huge difference over the figures in almost every item between the 2 accounts.
115. These are in fact by no means all the business accounts before the court, as more can be found attached to yet another affirmation of the Husband filed on 7th August 2002 (C2 : 338 – 907) where he referred in paragraph 40 (p354) to those profit tax returns prepared by him for the 2 elderly homes throughout the marriage under exhibit KKM-30 (p665 - 698).
116. These profit tax returns in fact covered mainly the 90s, but even then none would show the kind of large profits alleged by the Husband. For RG, there were in fact losses of more than HK$2.1 million in its first year (p679), with the following year doing better with a net profits of HK$206,025 (p696), while ST was shown to be doing only slightly better at HK$308,993 over the same period (p688), but their combined total were nowhere near the Husband’s figures, and in fact amount to only 1/10 of his alleged sum of HK$6 millions in net profits.
117. What is more confusing and troubling is that there were again 2 sets of Profits and Loss Account of ST for the same year ended 31st March 1999 amongst the exhibits to this affirmation of the Husband, one on p583 and the other one on p688, both with different figures for all items of revenue and expenses, and with the 1st account recording a net profit of HK$826,650, while the 2nd account a lower net profit of HK$308,993 for the same year.
118. This again brings to mind of the Wife’s claim that there were 2 sets of accounts prepared for each year, and while it is possible that both of the said accounts of ST were false, and I am unable to think of any reason why that should be so, one thing is for sure : they cannot both be right, and again putting the Husband’s case at the highest that the one with the higher net profit, at HK$826,650 was the right one, it would still amount to only a fraction of his figures, and even adopting a similar approach for RG, the combined net profit would still fall far short of the Husband’s alleged figure of HK$6 millions per annum.
119. Furthermore, the stated gross income of HK$5.28 millions and HK$5.58 millions respectively in the 2 accounts would put the number of occupying residents in between 88 and 93, which would be close to the number used by the Husband in his calculation of ST’s net profits, making the higher sum of HK$826,650 a more realistic figure for that year, which is also in the same level of the net profits of RG at HK$819,032 for the same period (p591), giving a combined total net profits of only HK$1.64 millions for the 2 elderly homes .
120. Going back to the Wife‘s profit and loss account of ST for the following year ended 31st March 2001 (D4 : 3128), which as noted turned out a net loss of HK$378,000 for the year, no doubt the result of significantly lower revenue of only HK$3.18 millions, but there was an item of Operation Expenses (p3129) in Proprietor Salaries of HK$480,000 which did not feature in the Husband’s account, and which should in fact be regarded as part of the business’s net profits.
121. Her account of RG for the same period (D4 : 3108 – 3109) also shows similar situation : a lower income of HK$4.52 millions resulting in a net loss of HK$447,000 but the Operation Expenses again included the same sum of HK$480,000 for Proprietor Salaries which, if to be regarded as net profits, and combined with ST’s, would give a total net profit of HK$960,000 for that year. While this may be quite a bit less than the year before, it would still appear more consistent with the historical figures that we have seen before, and much more realistic than the Husband’s alleged figures.
122. Furthermore, it is the Husband’s evidence that after the Wife went to stay in the U.S. in 1997, he had remitted the profits of both ST and RG to her for the next 3 years in the following amounts : US$219,800 (HK$1,714,440) in 1997, US$130,016 (HK$1,014,124) in 1998, and US$498,000 (HK$3,884,400) in 1999 (A : 69 – 70 para.26), giving an average sum of HK$2.2 million per year, which again falls far short of his alleged average figure of HK$6 million.
123. In conclusion, and mindful of the fact that the Wife has failed to produce all the relevant financial accounts and records of the 2 businesses after her taking control in March 2000, against whom the Husband has urged for adverse inference to be taken, but given the evidence before the court in particularly of the past business accounts produced by the Husband himself, I am not convinced that the 2 elderly homes were capable of earning the kind of net profits alleged by him, but in the absence of a proper and independent valuation or of all the necessary financial records and accounts, I can only take a broad brush approach in the circumstances, and conclude that the combined net profits of the 2 businesses would realistically be much lower at HK$1 – 1.5 million per annum after March 2000.
124. Whether this annual sum for the following 4 to 6 years until the closure of the business should be taken into account as the Husband’s share of the profits, and if so how much, it must first be set against the Wife’s various necessary expenses during those intervening years such as the mortgages of the U.S. properties and the daughters’ living and education expenses which were indisputably all met by her alone in the U.S.
125. For the same reasons and as explained above, I have also come to the conclusion that the Husband’s valuation of the 2 businesses is on the high side, and taking into account of some of the more valid comments of Madam Luk about the 2 elderly homes, I would again apply a broad brush approach by putting the combined value of ST and RG at a more realistic level of HK$10 millions for the present purpose. I shall next turn to the issue over the bank savings allegedly taken by each party at the time of the breakdown of their marriage.
Cash
126. Neither parties claim to have any cash or shares investment left by now as whatever they may be at the time of the breakdown of their marriage, they had all been spent on their living expenses over the past 10 years, as well as their legal costs in these proceedings which I understand to have a combined total amount in excess of HK$10 millions.
127. The Husband’s case however is that the Wife has failed to truthfully accounted for the HK$8.7 million which she had withdrawn from their joint bank accounts in 2000, or the profits earned by her from the 2 elderly homes up to February 2004 and June 2006 respectively, all of which he argues should also be added to the balance sheet of her assets. The Wife on the other hand also accuses the Husband of taking HK$4 millions from the business accounts before her return to Hong Kong in 2000, of which she also argues that he should account for and be included as part of his assets.
128. I propose to first deal with the Husband’s case about the HK$8.7 million, to be exact at HK$8,788,828.01 according to his affirmation of 18th April 2002, allegedly removed by the Wife from their various bank accounts and safe deposit box (A : 66). She does not deny that she did remove funds from those bank accounts in early 2000, but she insists that the correct amount should be lower at only HK$6 million, for which she gave an account of their use in her affirmation of 18th May 2002 (B : 382 - 383).
129. The major difference between the parties over the amount taken by the Wife is essentially the sum of HK$1,720,000 alleged by the Husband to have been kept in the safe deposit box with Overseas Trust Bank, which the Wife insists only for keeping important documents of the family during the marriage and that there were never any cash in it, let alone more than a million dollars which she argues as incredible and absurd.
130. The Husband’s evidence on this issue is simply that the parties had during the marriage agreed to put some cash in the safe deposit box for emergency use, and that before the Wife returned to Hong Kong, he had made the calculation that there were HK$1.72 million in the box (C2 : 361). I find this explanation difficult to accept.
131. Firstly, I cannot imagine what sort of emergency that would require the availability of that kind of cash up front, to which the Husband could only offer a limp excuse of having to return from time to time the cash deposit to residents leaving the elderly homes, but even in an extremely unlikely situation of a sudden and simultaneous mass exodus of residents from both homes, that would still only require a payment of no more than half of that amount on the basis of the Husband’s figures for the number of residents in both homes at that time.
132. Secondly, even if there were a perfectly legitimate reason to have that kind of cash readily available, why put them in a safe deposit box when they could be as easily and conveniently placed in an ordinary savings account in the same bank and could be as easily withdrawn in cash to meet such purpose or emergency?
133. More importantly, the interests earned on such a sum even in an ordinary savings account in those days would have been significant enough to make putting it a safe box financially nonsensical, no matter how valid such idea may appear in the first place, unless the purpose was to hide this money, but there is no suggestion before me that that was the case.
134. For these reasons I do not believe that there were HK$1.72 million in cash in the parties’ safe deposit box, and in any event while not a small sum, it represents only a small fraction of the total assets between the parties and I therefore do not propose to take it into account.
135. As for the rest of the moneys allegedly withdrawn by the Wife from their bank accounts, they were essentially from 3 banks : HK$1,319,096.43 from Hang Seng Bank, US$443,594.81 (HK$3.46 millions) from Bank of America, and US$291,387.6 (HK$2.27 millions) from Citibank FSB, totalling just over HK$7 million as evidenced by the various bank records produced by the Husband (A : 112 – 141). I shall deal with the Wife’s accounts for each separately as follows.
136. First, for the HK$1.3 million withdrawn from the Hang Seng bank’s fixed deposit accounts, the Wife explained that they were mostly the deposits from the residents of both elderly homes which she had subsequently put back into the respective business account via her own personal account, and she has produced the relevant bank statements as evidence (B : 499 – 504). Hence she argued that they were not the parties’ assets and should not be taken into account in these proceedings.
137. The Husband was however doubtful that they were indeed the residents’ deposits as there were residents routinely coming and leaving at anytime while deposits would therefore also be paid in and out, he questioned why the monies were placed in fixed deposit accounts instead of ordinary accounts when the deposits could be easily dealt with according to the situation.
138. Mr Yim for the Husband also points out that the fact that the Wife had subsequently used some of these funds to the extent of HK$700,000 for other purposes such as renovating ST and later changed her evidence that some of the money were in fact used to fund her purchase of her City Garden Property all go to contradict her claim that the funds were the residents’ deposits.
139. It is however indisputable that one or more of the parties’ bank accounts must have contained the residents’ deposits from both elderly homes which were not and cannot be treated as their assets, and given that the number of the residents then of about 200 (slightly more according to the Husband and somewhat less according to the Wife), which at the average sum of HK$5,000 – 5,500 per person for the deposit would give a total sum of slightly over HK$1 million, which is close enough to the sum in question that I am satisfied that the funds in the Hang Seng Bank accounts were in the main the residents’ deposits and hence not to be regarded as the parties’ assets.
140. For the US$443,594.81 withdrawn from Bank of America, I am also prepared to accept the Wife’s explanation, either as factually indisputable or credible, that the bulk had been spent on the purchase and decoration of her City Garden property in Hong Kong, paying for a car for each of the 2 daughters in the U.S. as well as the mortgage of her U.S. residence, leaving unaccounted for only the US$104,238.70 which she claims to be her own savings, but true or not, and more relevantly, would be available at her disposal at that time.
141. As for the various sums withdrawn from the 3 Citibank accounts totalling US$291,387.60, the Wife disputes some of their amounts but claims in any event that they had all been spent on the mortgage payments of their 2 houses in U.S. and her living expenses and of their daughters as well as their college fees over the 2 years prior to her said affirmation of 18th May 2002.
142. As noted above, the amounts withdrawn from the Citibank accounts are evidenced by the bank records produced by the Husband and upon hearing his evidence in court, I see no reason to doubt the accuracy of his figures, so the real issue is whether these withdrawals by the Wife, which together with the earlier sum of US$104,238.70 from the Bank of America, totalling US$395,625 or just over $3 millions in Hong Kong dollars, had indeed all been spent on her alleged expenses in U.S., as the bank statements of those accounts disclosed by her and exhibited to her said affirmation (B : 556 – 774) show very little money left by the middle of 2002. The Husband of course does not accept that her money had all been spent, hence it would be necessary to look more closely into her alleged expenses at that time.
143. In her said affirmation the Wife claimed to have a monthly expenses of HK$46,700 in Hong Kong and US$6,580 (HK$51,324) in U.S., making a combined total of HK$98,024 per month inclusive of the mortgage payments of her City Garden property in Hong Kong and the living and education expenses of her 2 daughters in U.S. (B : 392 – 393). These expenses were never seriously challenged by the Husband at the trial, and at this rate would have amounted to more than HK$2.4 millions by the time when she made her said affirmation in May 2002.
144. While these expenses would have eventually come down somewhat when the 2 daughters who were then both in their early 20s completed their college education and became financially independent, it could still mean that the Wife would have exhausted her capital by 2003, which is when she said she started to rely on her daughters as well as borrowing from a number of people over the years, resulting in debts and liabilities in the total sum of HK$12.64 millions incurred up to the end of 2008 as set out in her latest Form E of 2nd December 2008 (D2 : 1829).
145. These alleged debts must however be considered in the contest of my above findings that the 2 businesses were able to generate a combined net profits of HK$1 - 1.5 millions per annum until their closure. Surely then with this kind of income, the Wife would have been able to meet her own living expenses without any difficulty at least up to 2005 or 2006, as even according to her own Profit and Loss Accounts of the 2 businesses for 2001 (D4 : 3109, 3129), she was receiving HK$960,000 for that year in proprietor salaries, while she has failed to produce any other accounts to suggest anything less in the following years.
146. So why would she still be in such debts? One obvious answer must be for her legal costs, of which she has produced a summary of all those costs incurred in these proceedings from October 2000 to January 2009 in the total sum of HK$6,212,153.19 (R – 13), with the bulk of more than HK$5.8 millions mainly over the Section 17 Application up to the end of her appeal in June 2006, of which again the Husband does not take any serious issue, as they were well supported by invoices and receipts issued by her lawyers (R – 41). He however takes real issues with the authenticity of some of the alleged debts.
147. It would be helpful to set out all the debts stated in the Wife’s Form E (D2 : 1829) as follows :
a) Mortgage loan on her City Garden Property : HK$1,445,564.07;
b) Loan from friend EH : HK3,502,860.12 (US$451,399.50);
c) Loan from friend BS : HK$2,892,152 (US$372,700);
d) Loan from sister WXL : HK$1,250,000;
e) Loan from sister WSW : HK$1,500,000;
f) Loan from friend CCF : HK$550,000;
g) Loan from daughters E and J, and son-in-law CWY : HK$1,500,000.
148. The Husband takes issue with all the alleged personal loans on the basis that the Wife was at all material times financially well off and he fails to see how she could be in debts of more than HK$12 millions even if she had substantial legal costs, especially the loans allegedly from her friends, and in particularly the sums of US$451,399.50 and US$372,700 respectively from EH and BS, with the latter just a neighbour of her U.S. residence.
149. As evidence of these 2 debts the Wife has produced as evidence 2 loan agreements between her and EH and BS respectively (D2 : 2113 – 2114), both dated the same on 30th November 2006 and signed before a public notary in California. The agreement with EH shows that moneys were lent from 5th January 2003 to 30th November 2006, while for BS they were from 8th July 2002 to similarly 30th November 2006.
150. In addition and perhaps more significantly the Wife has also produced 2 final judgments issued by the Court of First Instance dated 18th and 19th June 2009 respectively obtained by EH and BS against her in respect of the said debts under 2 High Court Actions of HCA1250/2009 and HCA1251/2009 (R – 14), of which she says have remained outstanding as she has no means to pay until after she receives her share of the remaining assets in this application.
151. While the Husband does not dispute the authenticity of the 2 judgments, he disputes the genuineness of those debts in that firstly, since EH and BS are both U.S. residents, he questions why they had suddenly, and shortly before this trial, decided to come to Hong Kong to start recovery proceedings against the Wife when the loan agreements were executed some 3 years ago in the U.S.?
152. Secondly, he observes that from the 2 judgments, it is clear that the 2 legal actions were handled by the same law firm under the same reference, and, if I may add, that the action numbers show that they must have been commenced together one after the other on the same date. He therefore suspects that the Wife was the master-mind behind these 2 legal actions.
153. Given the history of this case and the Wife’s conducts in these proceedings, I can well understand the Husband’s suspicion and would not be surprised at all that she was indeed behind these legal actions, no doubt with the intention to bolster her case, but that does not necessarily follow that these debts must be fabrications. The question to ask is : Given the Wife’s income and capital situation at that time, would these debts make sense?
154. To answer this question, it would be necessary to consider her income and capital situation at that time, going back to 1997 when she first left Hong Kong to stay in the U.S. with the daughters, and then when she returned to Hong Kong in March 2000 until the close of ST’s business in mid-2006, which can be summarised as follows :
a) From 1997 to March 2000 remittance from Husband : HK$7.8 millions
b) March 2000 withdraws from joint bank accounts : HK6 millions
c) From March 2000 to early 2004 profits from 2 business until RG closed its business at between HK1 – 1.5 millions per year : HK$4 – 6 millions
d) From 2004 to 2006 profits from ST at HK$500,000 – 750,000 per year : HK$1 – 1.5 millions
e) Total : HK$18.8 – 21.3 millions.
155. Against which must be set her living and capital expenses during the same period, some of which are clear from the evidence such as the purchase of her City Garden property, its decoration and mortgage payments and her legal costs, others such as her living expenses during her years in the U.S. can only be gauged from her Form E and other affirmations filed at that time, and are summarised as follows :
a) Down payment and decoration of City Garden property : HK$1,800,000;
b) Purchasing 2 cars for daughters : HK$390,000;
c) Mortgage payments of her U.S. residence : HK$462,000;
d) Living expenses for herself and daughters from 1997 to 2000 in U.S. based on her figures in her affirmation of 18th May 2002 at US$70,000 per year : HK$1,638,000;
e) Living expenses for herself and daughters from 2000 to 2002 based on para.48 of her said affirmation : HK$1,116,304;
f) Living expenses for herself and daughters from 2002 to 2006 based on para.71 of her said affirmation : about HK$4 millions;
g) Legal costs : HK$5.8 millions by then;
Total : HK$15.2 millions.
156. It can therefore be seen from the above, even by taking a lower figure of HK$18 millions for her total income, and taking her highest figures for her expenses over the same period, the Wife would still have sufficient means to meet all these expenses without having to resort to borrowing. She could of course argue that after ST closed its business in June 2006, there would be no further income and when she had exhausted all her means, she would have to resort to borrowing, but then these alleged debts of HK$6.43 millions due to EH and BS were according to her evidence already incurred from 2002 to 2006 when she clearly was not in needs.
157. Furthermore, while both EH and BS were clearly in Hong Kong for their court actions over the alleged debts at around the time of this trial but were never called by the Wife as witnesses at her trial, and apart from the suspicious circumstances of their actions in Hong Kong raised by the Husband, the Wife’s own evidence on how she incurred those debts are similarly far from convincing.
158. Firstly, it is her evidence that EH and BS did not know each other when she first asked each of them for loans, but somehow they would end up instructing the same firm of solicitors in Hong Kong at the same time to sue her for those debts years later seems to me much more than mere coincidental.
159. Secondly, while EH may well be a close friend ready and able to lend that kind of money to the Wife, the fact that BS was just a neighbour who was also willing to lend almost HK$3 millions to her over such a long period of time without any security for repayment is in my view more questionable.
160. Above all, it is the manner that these debts were said to be incurred that arouse the most suspicion, since instead of one or several loans in large round sums made to the Wife as was the case of all her other personal loans, these 2 debts appear to be made up of many smaller payments mainly as various bills and purchase payments by EH and BS on behalf of the Wife on regular basis over several years according to her documents in support (D2 : 2113 – 2149), such as US$46.09 for Comcast, US$99.35 for Old Navy, US$46.09 for SBC, US$14.80 for stamps, US$1,039.13 for Discover Card, US$4,657.78 for property tax, US$5,232.48 for BOFA Visa, and US$2,500 for J, just to name a few examples.
161. These payments certainly do not look like loans but rather to me more like some sort of arrangement between the Wife and EH/BS for them to make payments of various bills on her behalf during her absence from the U.S., either from some account of hers for which they would keep a record for her similar to those appeared in p2128 - 2129, or that they would pay first on her behalf and be reimbursed later, since it is a fact that she was at that time in Hong Kong engaged in the divorce proceedings dealing in particularly with the Section 17 application and the subsequent appeal and, as I suspect, in the running of the 2 elderly homes.
162. Furthermore, according to the loan agreements with EH and BS, their loans were supposed to go back to 2002/2003 when surely the Wife would still have sufficient funds from the moneys withdrawn from the joint accounts in March 2000, and that even according to her disclosed accounts, the 2 businesses were paying almost HK$1 million in proprietor salaries just one year before, and yet she had to borrow, for example, US$14.8 for buying stamps? I just find such claim incredible.
163. Given my findings of her financial means at that time, and the nature of these payments allegedly made by EH and BS, as well as the many suspicions over these loans, I am not convinced that the Wife owes EH or BS those debts as alleged, and I therefore do not propose to set them against her capital during those years.
164. As regard her remaining debts allegedly due to her 2 sisters, her daughters and a son-in-law in the total amount of HK$4.8 million, again none of them have come to court to give evidence about those debts, although as in the case of EH and BS, the 2 sisters did sign a statements acknowledging them, which can be found amongst the same bundle of documents referred to above (D2 : 2112 – 2173), which also include copies of payment slips into the Wife’s bank accounts and cheque payments of her legal costs.
165. Again, according to the statement of sister WSL (D2 : 2115), the debts due to her in the total sum of HK$1.25 millions were said to have incurred also from about the same period of 2002 - 2006 when the Wife claimed to have also borrowed HK$6.43 millions from EH and BS but during which, as I have found, she had substantial cash and income and would not have to resort to borrowing. The same can also be said about some, if not all, of her other alleged loans from her family members.
166. Furthermore, the Husband argues that these loans, even if proved, can best be classified as “soft-loans” with no pressing need to repay, and hence the court should not regard them as a real liability of the Wife.
167. Whether or not they have to be repaid, and the Wife insists that they will come out from her share of the remaining assets, the point here is that if they are indeed genuine, then no doubt they will go to show that the Wife must have exhausted all the moneys that she had taken from the joint accounts as well as from the 2 businesses. The Husband of course will argue that she has by now lost all her credibility and unless there were much more solid evidence before the court directly from these alleged creditors, and I agree that there are not, then all these alleged debts should be disregarded.
168. While the Husband may seem to have a valid point in his argument, as there is no evidence that the 2 businesses had continue to operate since 2006, and given the Wife’s living expenses and in particularly her legal costs over all these years, the reality is that any cash or capital she might have been able to amass since the divorce would have been greatly reduced, if not exhausted altogether by now.
169. The same can be said about the HK$4 millions allegedly taken by the Husband from the business accounts, of which the Wife has not produced any documentary evidence, not even any business records of such withdrawn in support of her case. In fact, with that kind of moneys in hands, and with the rental income he was receiving at that time, surely there would be no reason for him to apply for interim maintenance from the Wife on urgent basis shortly after he had filed for divorce.
170. For all these reasons and in the circumstances, I do not propose to include any cash or capital in the pool of assets for distribution between the parties, of which I have identified and valued as follows :
|
(a) 11 Real Properties |
HK$32.4 millions |
|
| |
(b) ST and RG Businesses |
HK$10 millions |
|
| |
Total : |
HK$42.4 millions |
|
171. I shall next undertake the statutory exercise to consider the various factors in Section 7 of Matrimonial Proceedings and Property Ordinance, Cap. 192, starting with those which are non-contentious or less controversial.
Husband’s Situation
172. The Husband has since the divorce been residing in the former matrimonial home at Taikoo Shing and relying on the rental income from 4 of the properties in the total sum of almost HK$30,000 per month (D2 : 1757). He disclosed little savings in his Form E (D2 : 1742 – 1817) with some stocks and shares of insignificant value, but claims to owe one of her elder daughters HK$967,000 for his living expenses over the years, and that he also owes his lawyers about HK$900,000 in outstanding legal costs. Other than the Wife’s accusation that he had taken HK$4 millions from the business accounts and which I have already dealt with above, there is no dispute over any undisclosed income or assets on his part.
173. At his present age, and he will be 70 by July, there is also no question of him returning to work or engage in any business, and no doubt he will continue to reside in his present flat and rely on his share of the family assets to meet his future needs and expenses which he has put at no more than HK$27,000 per month as stated in his latest Form E (D2 : 1758 – 1759), and which the Wife again has taken no issue with..
Wife’s Situation
174. The Wife also claims to be unemployed and rely on her 2 daughters and rental income from the Baltimore Way Property and Kut Cheung Property in the total sum of about HK$17,700 per month. While she says she has been travelling in China doing painting and singing Chinese opera over the past several years, and has produced some documents including various photos as evidence, unlike the Husband, and perhaps because she is much younger at 56, she has expressed a desire to return to the same business as before running some elderly home if opportunity presents itself and if she has the capital to do so. Given her skills and experience, I do not doubt her earning capacity in that field, or her desire to do so.
175. Perhaps also because she has been shuttling between her homes in U.S. and Hong Kong, she seems to have twice as much expenses as the Husband at more than HK$67,000 per month, including the mortgage payment of almost HK$19,000 for her City Garden Property. If she were to re-start her business, no doubt she will spend most of her time in Hong Kong, in which case her expenses in U.S. would be much reduced, which would bring down her overall expenses substantially.
Contribution
176. This is the next most contentious issue between the parties, as it is the Wife’s case that as far as their elderly home business and other family assets were concerned, her contributions, both physical and financial, were much bigger than the Husband’s throughout the entire marriage, hence she should be entitled to a bigger share of the assets, which is disputed by the Husband in that both parties had worked hard throughout the marriage to support the family and to build up their family assets together, it would be wrong for the Wife to now denigrate his efforts after all these years.
177. In support of her case the Wife had filed several lengthy affirmations containing details of the parties’ married life going back almost to the date of their marriage and over the next 3 decades, with equally voluminous documents such as many letters written between husband and wife as well as from their daughters in their most private nature during the marriage (B : 369 – 802, C1 : 205 - 315, C3 : 917 – 1122) which of course prompted equally substantial and lengthy rebuttals from the Husband with his share of voluminous supportive documents (C2 : 338 – 906, C3 : 1124 – 1160), inevitably cumulated in lengthy oral testimony at the trial.
178. The Wife’s case can be summarised as follows : after the Husband left his factory job in 1984, he did practically nothing and was mainly idle at home, occasionally giving a few music/singing lessons and thereby bringing in little income to support the family, which burden was all shouldered up by her single-handedly working on several jobs at the same time.
179. When they first started their elderly home business in 1987 with the SKW Elderly Home which later became ST, she was responsible for all the initial set-up works and paid for all such costs from her own savings, but apart from placing some advertisements in the streets on a few occasions, the Husband again did practically nothing in the elderly home apart from running some errands such as bringing documents to Social Welfare Department or Inland Revenue Department, or appearing in court to face charges for illegally placing advertisements in the streets.
180. Similarly for RG, of which she initially claimed that all the capital and set-up costs came from her and her brother without any contribution from the Husband, but which version she later changed that they came from the profits of ST as well as her own investments in China, whereas apart from watching over the business during those few years while she was in the U.S., the Husband was lazy and had very little to do with that business either.
181. Given that many such allegations involved minute details of the parties’ married life going back more than 2 decades, I do not propose to embark on a full scale forensic analysis of each and everyone of them, but instead to adopt a broad brush approach with common sense, bearing in mind of the observation of Lord Nicholls in Miller and McFarlane, supra at 1202 :
“A point of a similar nature concerns the approach to be adopted when evaluating the contributions each party made to the welfare of the family. Apparently, in the post-White era there is a growing tendency for parties and their advisers to enter into the minute detail of the parties’ married life, with a view to lauding their own contribution and denigrating that of the other party. In the words of Thorpe LJ, the excesses formerly seen in the litigation concerning the claimant’s reasonable requirements have now been ‘transposed into disputed, and often futile, evaluations of the contributions of both the parties…
On this I echo the powerful observations of Coleridge J in G v G (Financial Provision : Equal Division) [2002] EWHC 1339 (Fam); [2002] 2 FLR 1143 at 1154 – 1155, paras [33] – [34]. Parties should not seek to promote a case of ‘special contribution’ unless the contribution is so marked that to disregard it would be inequitable. A good reason for departing from equality is not to be found in the minutiae of married life.”
182. As evidence that he had always worked in various jobs to support the family prior to their elderly home business, the Husband has produced salary slips of his factory job at Swire Magnetics Limited (C2 : 394) in 1984, Employer’s Certificate of his job at Hong Kong Southern Arts College from 1983 - 1986 (C2 : 396), his Tax Return for the years 1983 and 1985, and records of his giving music lessons (C2 : 385 – 392).
183. While considerable amount of time had been spent at the trial in the Wife’s attempts to challenge the authenticity of those documents which turned out to be futile, I accept that the Husband did shoulder up his share of the financial obligation towards the family during that period, and that it is unfair of the Wife to criticise him for focusing on his music career, after all, that was his profession when she first met him and later married him.
184. The Wife also tried to undermine the Husband’s contribution towards the purchase of their first property at Chung Hing Building in 1982 by alleging that the remittance from his family in Indonesia, which he said was to pay for the down payments, was actually for something else, but which was contradicted by her own letters to his family at that time asking for their financial assistance for the purchase of a property in Hong Kong (C2 : 412 – 418), and I accept that he did contribute towards the purchase of this property.
185. As for ST, I do not find it necessary to go into the Wife’s allegation that it was she who paid for all the set-up costs of some HK$27,000 from her savings without any contribution from the Husband, since it would be fair to assume that such savings must be the fruits of the parties’ hard work during the marriage, and that it would not serve any useful purpose to do otherwise.
186. Turning to the more controversial part of the dispute over the Husband’s role or involvement in ST, in which he gave details of his work in paragraphs 18 to 23 of his affirmation of 7th August 2002 (C2 : 345 – 347), consisting mainly planning and supervising the initial decoration/renovation, preparing and handing out of leaflets in the streets, preparing and bringing documents to various government departments including Business Registry and Inland Revenue, attending to the hiring of foreign workers, attending courts for any charges or labour disputes, and generally doing simple repairs in the elderly home.
187. Again the Wife tried to belittle the Husband’s role in ST by claiming that his name was added to the business as a partner merely to enable him to attend courts to face charges for illegally placing advertisements in the streets or to submit various application forms or documents at the government departments on behalf of the business, all simple errands which she argues cannot be compared with her own contributions, while at other times he would just go away to do his own things.
188. Given the strong personality of the Wife and the fact that she was a registered nurse well experienced in her profession, I do not doubt her obvious bigger involvement in the daily running of ST, and probably in its initial setting up as well, as compared with the Husband who was trained as a musician and had no skills or experience initially in that business, but from the evidence before the court in particularly those documents produced by the Husband, it seems that he was involved right from the beginning including preparing, reviewing and approving the design and decoration of the elderly home, and thereafter his role seems to be more on the side of the management of the business involving preparing its accounts, dealing with its banking and cash flow matters, and preparing and submitting tax returns and other relevant paper works including as aforesaid hiring foreign workers for the business, rather than the actual caring and feeding of the residents which were obviously of a different nature carried out by other staff as well as the Wife in their different role. His duties were no doubt not as physically demanding or time consuming as those of the Wife, and probably not even half as busy as the other staff, but certainly an integral part in the running of the business instead of the mere token one as painted by the Wife.
189. As for RG, the Husband’s role seems even more prominent than in ST for the fact that after the Wife left for the U.S. in 1997 and until her return in March 2000, he had to be there in the elderly home everyday to manage the business, which she does not dispute but still insists that he was lazy and actually did very little at the elderly home, and as the business was adequately staffed with the assistance of one of her sisters, his contribution was again only minimum.
190. These assertions of the Wife however appear to be contradicted by the following contemporaneous documents before the court, some of which were produced by the Wife herself :
a. sketches of the Husband’s design and work on the signboard of the elderly home (C2 : 562 – 564);
b. letters from the Labour Department showing the Husband’s involvement in the employment of foreign workers (C2 : 526 – 529, 531, 533, 547, 593);
c. fax communications with the Wife in 1998 and 1999 discussing the RG business (B : 482 – 483);
d. a certificate issued by the Social Welfare Department on 21st June 1997 of a 6-months course attended by the Husband for the purpose of the business (C2 : 475);
e. a letter from the Wife to the Labour Department on 23rd March 1997 appointing the Husband as the manager of RG (C3 : 1106);
f. a statement by the Wife in September 2000 to the Labour Tribunal in which she stated that the Husband was the manager of RG (D4 : 2968);
g. a record of interview given by the Wife to the Immigration Department on 2nd January 2001 stating the Husband to be the manager of RG (B : 516);
h. various letters from the Wife or daughters from the U.S. to the Husband asking him to watch his health and not to work too hard in the business (C2 : 662, C3 : 1156 - 1157).
191. It is over this issue about the Husband’s involvement in RG that the Wife has accused him of falsifying certain documents which as noted above are the subject matter of the criminal charge against him, and which were exhibited to his affirmation of 7th August 2002 under paragraphs 33, 34 and 68 as follows :-
a. A letter from RG dated 23rd March 1997 to the Labour Department in relation to the employment of foreign workers (C2 : 594 – 595).
b. An application form for elderly home license dated 1st April 1998 (C2 : 619 – 624, 828 – 834).
c. An application form for elderly home license dated 2nd June 1997 (C2 : 835 – 840).
192. According to the Wife, the alleged falsity arises from the fact that the signature and/or some particulars stated in these documents exhibited by the Husband to his said affirmation are in fact different from those stated in the documents actually submitted to the relevant departments and subsequently retrieved by her and produced in these proceedings (D4 : 2780 – 2781, C3 : 950 – 957 and C3 : 958 – 965, respectively), which caused her to report the matter to the police and eventually led to the criminal charge currently laid against the Husband for making his said affirmation with those alleged false documents.
193. The Husband’s explanation is that the these alleged forged documents were actually copies of the same documents prepared by him for the business before they were signed and submitted to the government departments, hence the copies which he had kept for record did not show any signature, as it was the parties’ practice for the one to bring the original documents to the department to sign them right there, hence the copies would not show the signature, and afterwards when he put them into a file, he simply put his signature on them just to complete the record at that time for no other reason or purpose. He denies falsifying these documents for the purpose of these proceedings.
194. Given that this is a subject matter of a pending criminal trial, I do not propose to go into the Husband’s state of mind when he put his signature on these documents, nor do I find it necessary to do so for the purpose of these proceedings, as such actions of his, rightly or wrongly, would have nothing to do with the issue over his contributions made during the marriage, nor do they go to refute all those other documentary evidence referred to above which I find to be demonstrative of his involvements in Regent, in particularly during those 3 years in the Wife’s absence.
195. It is true that the Wife has also produced a former staff, Madam Chan, to counter the Husband’s evidence by siding with her that he was lazy and seldom assisted in the running of the elderly homes (C1 : 176 – 179). Madam Chan in fact also gave evidence for the Wife at the Section 17 Application and whom I found in paragraph 72 of that judgment of mine to be biased against the Husband for believing that he had betrayed the Wife based primarily on what she had been told by the Wife without any personal knowledge of her own, and for making wild allegations that all the documents produced by the Husband in relation to employing foreign workers were forged by him without any basis. Her evidence in this application is therefore unreliable.
196. Guided by the observation of Lord Nicholls above, and with the evidence before me, I agree it would be a futile undertaking to delve any further into the minutiae of the parties’ working career and operation of their elderly home business of more than 2 decades in order to evaluate their contributions, as I am convinced that this is a typical case of both parties working hard throughout their marriage, both in their individual jobs before and later together but in their different role and different capacity for their elderly home business for the good and welfare of their family.
197. No doubt with the Wife’s stronger and more determined personality, and highly intelligent and articulating, as I have found about her throughout the proceedings, while obviously better equipped and experienced in the running of such business, I would not be surprised that she would stand out and dominate over the Husband in the eyes of the staff of the elderly homes, even though both were equal owners to them, but that should not distract from the fact that, as I have found, the Husband had also made his share of the contributions towards the business.
198. In addition to the elderly home business, the Wife also claims that all the real properties that were purchased in the joint names of the parties during the marriage were in fact purchased by her or at her own initiative and with her own moneys, and that the Husband was merely holding them as a trustee.
199. Again I do not think it is necessary to deal with the issue of who was the one who initiated the purchase or in whose name these properties were purchased as long as they were part of the matrimonial assets, a fact not disputed by the Wife, nor does she dispute that the Husband did also attend all the purchases, which explains why his signature also appears in all the title of the properties save for the City Garden Property which was purchased by the Wife only after the breakdown of the marriage.
200. As for her allegation that many of these properties were funded with moneys earned from her own investments in China rather than with their family savings or profits from their elderly homes, although she is unable to identify such properties, she contends that about two-thirds of their purchase price came from her own investments.
201. Such contention was in fact only raised in her affirmation of 9th December 2003 when she applied for leave to appeal over the Section 17 Application, to which she exhibited documents in respect of her investments in China (D1 : 1685 – 1704) showing several agreements to invest on certain properties and stocks in Shanghai, but under cross-examination at this trial she admitted that the property investment was later aborted, and while she was able to show a payment to her of RMB2.1 million from that investment, as well as another sum of RMB1.4 millions from her stock investments in mid-1997, she conceded that after deducting for the principal capitals which she claimed to have come from her family, these investments only resulted in a net profit of about RMB1 million.
202. The Husband of course disputes that the principal capitals were from the Wife’s family and argues that in the absence of any proof from her to the contrary, the court can only assume that they must have come from the profits of their elderly home business and hence these investments were part of their family assets and should be treated no different from their other properties.
203. The Wife may have come from a wealthy family, as she has always insisted but again disputed by the Husband, the fact that the investments were made in the mid-1990s when the parties were already running a successful and profitable business in ST, and were apparently financially well off, one wonders why the Wife would need to turn to her family for capitals for her investments?
204. Furthermore, as pointed out by Mr Yim for the Husband, even if the investment capitals were indeed from the Wife’s family, the investments were only capitalized and realized in mid-1997 when almost all of their real properties had already been purchased save for one of the U.S. properties and the Wife’s City Garden Property, hence the proceeds of the investments could not have been used in the purchase of those properties, let alone as much as two-thirds as alleged by the Wife.
205. Above all, the Wife had on more than a few occasions said in some of her earlier affirmations, in particularly the one of 18th May 2002 when she clearly stated that all their joint properties were funded from the profits of their elderly homes business as follows (B : 378 –379) :
“Due to my hard work over the years, ST made healthy profits. From the profits derived from ST and the other old age home ……and the sale proceeds of some properties I had bought and sold over the years, I invested them all in the property market. The properties that I purchased over the past 15 years are as set out in paragraph 8 of the Petitioner’s affirmation. Although all the properties are in the joint names of the Petitioner and I….all the initial purchase monies were paid by me which were derived from either the profits of the two old age homes which profits were made due to my hard work and which could only have arisen due to my initial capital contribution and idea to operate an old age home. [32]
I was the one who took the initiative to purchase all the properties over the years and when all the preliminary sale and purchase agreements were entered into, it was only my name that was put down as the owner….It was only because the Petitioner is and was a male chauvinist that he insisted that his name be added as an owner. I suffered constant abuse from the Petitioner if I did not do so. However, as I wanted to keep the marriage and the family harmonious, I therefore acceded to his request.” [33]
206. Again she said this in the same affirmation :
“In mid 1997, I bought the house at XXX, 43rd Avenue, San Francisco, CA 94121, USA from the profits derived from ST and RG. I originally bought it in my own name but after receiving constant harassing telephone calls from the Petitioner to add his name to the title, I eventually add his name to the ownership of the property….” [40]
207. Clearly what she now says about the funding of the properties with moneys from her own investments sauced from her own family are contradicted by her own affirmations, nor are they supported by the facts and evidence before the court. In fact, those paragraphs just about correctly sum up the misconceived and misguided case of the Wife : that all the assets accumulated in this marriage were the result of her hard works and have nothing to do with the Husband, and which may explain the extent that she was prepared to go to deny him of his share thereof.
208. As I have already pointed out above, given the Wife’s personality, background, qualification and skills, it would not be surprising that it was her idea behind their elderly home business, and that she was probably also the one to take initiative over some of the family’s investments in the property and stock markets, but the evidence also clearly suggest that the Husband had actively been involved in most if not all of businesses and investments, albeit in different role, and may well be less initiative, but certainly not as a total outsider as the Wife had painted him to be.
209. For all these reasons I do not agree with the Wife that the contribution factor in this case would justify departing from equality in the distribution of the family assets between the parties. However, it is also the Husband’s case that there should not be equal division either, but rather based on the Wife’s litigation conduct in being persistently and wrongfully obstructive to his application for ancillary relief throughout almost the entire 10 years of these proceedings.
Wife’s Litigation Conduct
210. First, according to the Husband’s case, that the Wife has failed to pay any interim maintenance to him despite a court order made on 20th March 2003 when there are ample evidence now before the court that she had both large amount of cash removed from their joint accounts and substantial income from the 2 elderly homes at that time.
211. Second, that she sought to transfer the 2 elderly home businesses away with the intention to defeat his claim for ancillary, and when such transfer had been set aside by the court, she failed to reinstate either elderly homes and instead allowed them to be closed down in flagrant breach of various court orders.
212. Thirdly, she failed to produce any business records of either homes despite a court order requiring her to do so, thereby making his application for ancillary relief difficult.
213. Lastly, she made various reports to the police accusing him of falsifying documents, which resulted in a pending criminal charge against him and making settlement of their dispute difficult. The Husband therefore submits that the court should take into account these hostile litigation conduct when dividing the remaining matrimonial assets, or that their combined effect makes it inequitable not to do so.
214. There is no question in my mind that the Wife has been guilty of litigation misconduct, at least as far as the first 3 grounds referred to above, but it seems to me that such misconduct is, according to Rayden and Jackson on Divorce and Family Matters, 18th Edition, Chap.16.81, ordinarily reflected in orders for costs rather than in the scale of the awarded sum, and was said in Tavoulareas v Tavoulareas [1999] 1 FCR 133, [1998] 2 FLR 418, CA when Thorpe LJ drew the distinction between marital and litigation conduct :
“… A clear distinction must be drawn in all these cases between what might loosely be described as marital conduct and what might conveniently be described as litigation conduct. It seems to me as a matter of construction that section 25(2)(g) is plainly aimed at marital misconduct. If the applicant’s misconduct is limited to misconduct within the ancillary relief case long after the separation of the parties, it is, in my judgment, questionable whether that factor should go to diminish the quantum of the financial award.
This question arose in the case of P v P (Financial Relief : Non-Disclosure) [1994] 2 FLR 381. In that case the applicant wife had been exposed … to have been guilty of considerable misconduct of the financial case. [Counsel] relied upon a decision of Lincoln J in B v B (Real Property : Assessment of Interests) [1988] 2 FLR 490 in submitting that, as a result of that misconduct, the court should reduce the wife’s award on the application of the section 25(2)(g) criterion. In ruling on that submission, I said (at 392H) :
‘It seems to me that in that case such price as is to be paid by the dishonest litigant is a price in costs, not in reduction of the appropriate share of the available assets. The suggestion contained in the last sentence of Lincoln J’s judgment that maxims of equity should be applied to deny or reduce relief I cannot follow. It seems to me that the court has a duty to discharge a statutory function on the application of statutory criteria, and maxims of equity have nothing to do with it.’
A more extreme case is M v M (Financial Provision : Party Incurring Excessive Costs) [1995] 3 FCR 321. At 330H I said :
‘Conduct is only relevant insofar as the wife relies upon the manner in which the husband has conducted these proceedings. Ordinarily speaking, it seems to me that the manner in which proceedings are conducted is to be reflected in orders for costs rather than directly in the scale of the awarded sum. However, this seems to me to be the exceptional case where the husband’s strategy has been so gross and so extreme that it would be inequitable to disregard it. It seems to me that it is appropriate to look at the quantification of the wife’s share not of what remains today but of what would remain today had that policy of waste and destruction not been pursued.’ ”
215. In M v M the husband made numerous applications to the court, which were usually either adjourned or dismissed with costs, and included pointless and expensive proceedings in the Chancery Division, and was at the end held to have dissipated his capital in litigation, but in a subsequent case Thorpe LJ held that it was not wrong that litigation misconduct was not to be taken into account, as the court must certainly not adopt a punitive campaign against the transgressor : Atkintola v Atkintola [2002] 1 FCR 453, [2002] 1 FLR 701, CA.
216. In the present case before me, the Wife had incurred more than HK$6 millions in costs mostly in relation to her disposition of the 2 elderly home businesses, and while it can be said that she is guilty of dissipating her capital in that litigation, since I have allowed that the value of those 2 businesses be added back to the assets for distribution, and that there would be sufficient assets to meet the parties needs while her litigation misconduct can be properly reflected in the order for costs rather than in the scale of the awarded sum.
Conclusion
217. Having regard to all the relevant matters referred to above, I now come to my decision on how the remaining assets, i.e. those 11 real properties should be distributed so as to achieve a fair outcome between the parties, the over-arching objective of this whole exercise.
218. The Husband has proposed, in Mr Yim’s closing submission, that there be equal division of all the assets available at the breakdown of the marriage which include not just the real properties but also the value of the 2 elderly home businesses as well as their profits generated since March 2000, with a total value of more than HK$88 millions, but for the Wife’s conduct, he would have been able to exit the marriage with assets of more than HK$44 millions. In this light, and given that the total value of the remaining assets is even less than his rightful share, he submits that his open proposal for him to be given 9 of the real properties, with the Nation Street Property and 43rd Avenue Property to the Wife would under the circumstances be very reasonable.
219. The Wife, on the other hand, is much less specific as to the ratio of the shares between the parties other than insisting that she should be given a bigger share of the real properties, of which she would like to include the 2 Tung Hing Building units so that she could start a new elderly home business in Hong Kong.
220. I have, for the reasons already given above, decided against adding back any profits of the 2 businesses into the assets for the purpose of distribution, and have also scaled down the Husband’s valuation of the elderly homes to a more realistic HK$10 millions which I propose to add back into the Wife’s assets, thus bringing the total value of the family assets to about HK$42.4 millions.
221. I have come to the conclusion, and I agree with the Husband, that a fair outcome between the parties can be reached by a more or less equal division of these assets, which means that each party would exit the marriage with assets worth about HK$21.2 millions, but with the value of the 2 elderly home businesses added to the balance sheet of the Wife’s assets, her share in the real properties would therefore be HK$11.2 millions. On the basis of the different needs and circumstances of the parties, it would be appropriate that the Wife should be given the 43rd Avenue Property as her residence in the U.S. and the 2 offices at Tung Hing Building to enable her to start a new elderly home business to earn her own living, and that she is to keep her City Garden Property as her home in Hong Kong, while the Husband should receive all the remaining properties, so that he can continue to reside in the Taikoo Shing Property and to let out the rest of them for rental income to support himself for the rest of his life.
222. While the Wife would appear to be receiving more than HK$11.2 millions worth of real properties under this distribution, the fact that the City Garden Property has an outstanding mortgage of HK$1.4 millions should in my view even things out and put the distribution on a more or less equal basis. However unfairly the Wife may feel she has been treated by this judgment, and I am sure she will think so, the fact remains that despite 10 years have passed since her wrongful disposal of the 2 most valuable assets of the family in the 2 elderly home businesses, and despite several orders from this court and from the Court of Appeal, and that she had had ample time and opportunity to properly reflect on the case and reconsider her actions, in particularly in view of the incalculable damage caused by these litigations and the resultant legal costs to the family, sadly she has still failed to come clean about what has actually happened to those 2 businesses, nor has she produced their full accounts when even on her own evidence the businesses had continued up to 2004 and 2006 respectively.
223. Instead, as amply demonstrated above, she had continued to weave more and more lies into her web of deceits designed to deny the Husband of his fair share in the matrimonial assets, so much so that even today it is not certain whether those 2 businesses had indeed ceased as alleged by her, and that they are not in fact still prospering somewhere under some other names or guises masterminded by her. If indeed they had been disposed by her for valuable consideration, then she had pocketed all their sale proceeds without accounting for them or sharing with the Husband. If on the other hand they had been closed down just so that she could deny the Husband’s claims, then she is guilty of wasting one of the most valuable assets of this family. Ultimately, fairness requires that the value of the 2 businesses be properly reflected in the awards between the parties.
224. Finally, on the question of costs, given my many findings against her, I cannot think of any reason why the Wife should not have to bear the Husband’s costs, but I do not propose there be certificate for counsel given that she was unrepresented throughout the application.
225. My order is therefore as follows :
a. The Wife shall within 3 months of today transfer all her share and interest in the properties under (b), (c), (e), (f), (g), (h) and (i) of Paragraph 26 above to the Husband;
b. The Husband shall within 3 months transfer his share and interest in the properties under (a), (d) and (j) of Paragraph 26 to the Wife;
c. The above terms shall be in full and final settlement of the parties’ claims for ancillary relief against each other, which claims shall stand dismissed;
d. The Wife shall pay the Husband’s costs of and incidental to the ancillary relief application to be taxed if not agreed. This is an order nisi to be made absolute at the expiration of 21 days.
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( Bruno Chan ) |
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DistrictJudge |
Mr. Eugene Yim instructed by M/S Alvin Cheng & Rosaline Choy for the Petitioner.
The Respondent acting in person.
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