S v. O

FCMC 5603 / 2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5603 OF 2003

_________________

_________________

_________________

J U D G M E N T

_________________

1. This is a trial of the Respondent’s application for ancillary relief against the Petitioner.  For convenience, I shall call the Petitioner the husband and the Respondent the wife in this judgment.

Background

2. The parties met in 1993 when the wife was working as a Guest Services Officer of a hotel in Manila.  The husband was the Director of Culinary Development of the same hotel with the wife working under him at that time.

3. The parties started to date each other in about November 1993.  As it might not be too appropriate for a senior staff to develop a love affair with a subordinate in the same department, the wife quitted her job and started to cohabit with the husband.

4. The parties got married in 1998 with their matrimonial home at Kadoorie Avenue, Kowloon, Hong Kong as the husband had already been transferred here.

5. There is some dispute on the wife’s alleged cohabitation with the husband between the period of 1993 and 1998.  The husband said they were merely lovers with the wife staying at his home occasionally when she travelled to Hong Kong from the Philippines.  I shall turn to that later in this judgment.

6. The parties have no children during the marriage.

7. It is not in dispute that after the beginning of their relationship, the wife had ceased her full time employment but only worked occasionally as a part-time model with negligible income.  The husband had taken up the role to maintain the wife by providing her with 2 supplementary credit cards with unlimited credit and cash allowance was also given.  On average, the wife spent about HK$10,000 to $30,000 each month on the credit cards.  On top of that, the husband gave her HK$7,000 cash each month to meet her other expenses which was later increased to HK$10,000 after marriage.  Furthermore, the husband had also provided the wife with a membership of the Pacific Club so that the wife could enjoy the facilities there, which included swimming pool, spa, sauna, facial and massage treatment, manicures and pedicures etc. 

8. The relationship between the parties began to turn sour by the end of 2001 after the wife had taken a trip to Italy.  The husband alleged the wife to have maintained an affair with an Italian man which was of course denied by the wife.  Even worse was the allegation that the wife had gone on a spending spree in February and March of 2002 on her credit cards for a sum of more than HK$1.5 million which had almost pushed the husband to the edge of bankruptcy.

9. The husband immediately stopped the wife’s 2 supplementary credit cards and suspended the monthly maintenance.  He also had to arrange for a personal loan from the banks to cover the credit card payments.  Starting from that period of time, the parties stopped cohabitation and they separated from each other.

10. The final blow came in October 2002 when the husband alleged that the wife came to the matrimonial home when he was out of town and removed most of his personal belongings, artefact collection, household furnishings, home appliances, utensils and cutlery (“the husband’s personal items”) without his consent.  There are a total of 56 items as listed in page 568 – 570 of the Trial Bundle.  For ease of reference, they are now reproduced in the schedule attached to this judgment.  The husband valued them at a total sum of HK$237,320 (HK$47,000 + USD24,400 @ 7.8).  The husband decided to end the marriage and a petition for divorce on the ground of unreasonable behaviour was filed on 19^th May 2003.

11. The wife filed an Acknowledgment of Service indicating that she would defend the divorce and seek ancillary relief.  However, she failed to file an Answer on time.  Subsequent applications to file the Answer out of time was refused by the court.  Decree Nisi for divorce was granted on 10^th December 2003 and the question of ancillary relief was adjourned with directions for the filing of affidavits showing each parties’ means and assets.

The Husband’s Case

12. In his opening address, counsel for the husband has made it clear that the allegation of the wife’s improper association is not directly relevant to the issue of ancillary relief.  It is common ground that the conduct of either party has to be “obvious and gross” before the court will take that into account in deciding on ancillary relief applications : Wachtel v. Wachtel [1973] Fam 72 (CA).

13. The only issue concerning the extra-marital affair is the issue of credibility.  According to the husband, the evidence of improper association is abundantly clear.  By vigorously denying such a fact, it only shows that the wife has no intention to be frank.  This should have cast doubts on her evidence concerning her financial position as well.

14. As far as the husband’s means is concerned, the details are listed out in his affidavit of means dated 3^rd April 2004 (page 244 – 338 of the Trial Bundle).  In summary, as a vice-president of a hotel, the husband receives a monthly salary of HK$137,150 with a housing allowance of HK$50,000 per month.

15. As to his gross assets, the husband is worth about $3,135,006 which mainly consists of his cash in bank, some unit trust investment and most importantly his retirement benefits to which the husband is only entitled when he leaves the employment.  As the husband also has a liability on tax and legal fee payments of about $400,000, the net capital worth of the husband is about $2,731,133.  I do not propose to go into the details of all these figures because I do not think they were being seriously challenged by the wife.

16. As to his expenses, they are listed out under paragraph 7 of the husband’s affidavit of means (P. 246 of the Trial Bundle) which amounts to the sum of HK$123,833, the details of which are as follows : -

Descriptions		Current expenses
		(HK$)
(1)	Rent (covered by the housing allowance)	50,000
(2)	Rates	2,500
(3)	Utilities (electricity, gas, rates, telephone and water)	4,000
(4)	Food and meals out of home	25,000
(5)	Household expenses, maid and gardener	6,000
(6)	Clothing and shoes	5,000
(7)	Personal grooming (including haircut)	2,000
(8)	Entertainment / presents	2,000
(9)	Transport	5,000
(10)	Holidays expenses	10,000
(11)	Medical / Dental (80% covered by the employer Out of pocket HK$10,000 per annum)	833
(12)	Club subscriptions (Pacific Club)	1,500
(13)	Legal expenses of the divorce proceedings	5,000
(14)	Miscellaneous (Laundries, newspapers, magazines, household maintenance and repair)	5,000
	Total :	123,833
		========

17. On those expenses, counsel for the wife has only cross examined the husband on the reasonableness of 3 items, i.e. food and meals out of home ($25,000), transport ($5,000) and legal expenses ($5,000).  I note that the husband is a man of high position in the hotel industry.  I have no difficulty in accepting the outgoings on food and transport to be reasonable.  As to the monthly legal costs of HK$5,000, the husband said he receives an interim bill each month from his solicitors.  I do not think that is unreasonable either.  However, this will stop after the conclusion of these proceedings and so I do not think it should be listed as a recurrent item.  Overall speaking, I accept that the figure of HK$118,833 (after the deduction of HK$5,000 which is not a recurrent item) represents a fair estimate of the husband’s monthly expenses.

18. As to the resources of the wife, the husband asked the court to take into account of a sum of HK$2,283,320 which was made up of the following sums : -

(1)	HK$1.5 million spent by the wife in February / March 2002 in purchasing luxury items in Europe.
(2)	HK$237,320 worth of the husband’s personal items that the wife had removed from the matrimonial home in October 2002 without the consent of the husband.
(3)	HK$312,000 (US$40,000) being proceeds of the sale of a Mercedes which was a gift from the husband.
(4)	HK$234,000 (US$30,000) being the start up capital of a business in the Philippines given by the husband on 28th January 2002.

19. In his final submission, counsel for the husband submitted that the court should take into account the following facts before it reaches its final decision on the matter of ancillary relief : -

(1)	This was a relatively short marriage of about 3 years and 3 months from October 1998 to January 2002. The husband contends that the intermittent living together between the period of 1993 and 1998 should not be counted as formal cohabitation between the parties.
(2)	The wife has not been frank in the disclosure of her income and assets. The wife has failed to explain the movement of funds in her bank accounts, the whereabouts of the proceeds of sale of the Mercedes and the business set up capital given by the husband in 2002. The wife has also failed to explain adequately the evidence on the 2 purported loans from her mother and friend. In view of those failures, the husband invited the court to draw the necessary adverse inferences against the wife.
(3)	The relative financial resources of the parties as set out in the preceding paragraphs.

20. Finally, counsel for the husband submitted that if proper considerations have been given to the above factors, the proper conclusion to be drawn is that there is no valid basis for the wife’s application for ancillary relief which should therefore be dismissed with costs.

The Wife’s Case

21. The wife contends that this was a marriage of over 8 years (from November 1993 to January 2002).  She said that she quitted her job in order to cohabit with the husband as man and wife despite the fact that the marriage was not solemnised until 1998.  Therefore, the period of cohabitation between 1993 to 1998 should be counted.

22. The wife denies that she has maintained any improper association with another man.  She said she knew an Italian gentleman who has helped her with the design of her retail shop in the Philippines.  She said her correspondence with that gentleman does not prove any intimate relationship, but rather it was only indicative of her warm character towards her friends or business associates.

23. The wife also denies that she has deliberately concealed her financial resources from the husband.  She said she set up a shop in the Philippines as from September 2002, the business of which had not been very encouraging.  In order to support her rather luxurious life style which she had enjoyed during marriage, not only that she had depicted all her financial resources, she also had to obtain loans from her mother and friend.

24. As to her monthly expenses, the details are set out in her affidavit of means dated 1^st March 2004 which amounts to about USD3,020 per month (P. 95 to 96 of the Trial Bundle).  Despite the fact that there have been some cross examination on those items, in view of the rather comfortable life that she had been living before, I have no difficulty in accepting that they represent a reasonable reflection of the wife’s expenses each month.

25. As far as the husband’s personal items are concerned, the initial position of the wife seems to be that those items did not belong to the husband personally.  They were family properties.  That position can be seen in her purported Answer which the wife had failed to file out of time (page 102 of the Trial Bundle).  However, when she filed the second affirmation dated 10^th December 2004, she said she had actually discussed with the husband and she had the consent from him to remove those items (page 692 of the Trial Bundle).

26. Throughout all the affidavits and oral evidence in court, the wife maintained her stance that she had given up her career in the hotel business and may be even a more promising career as a model in order to be with the husband.  In return, she had all along been provided with a luxurious way of life with the blessings of the husband.  The spending of HK$1.5 million in February and March of 2002 was implicitly authorised by the husband.  She was told that she could spend as much as she liked and buy whatever she needed.  Therefore, she denied there had ever been any overspending by her.

27. Furthermore, the wife complained that the husband had unjustifiably stopped the monthly maintenance of HK$40,000 per month since January 2002.  she had been deprived of a total sum of HK$1,380,000 calculated up to the date of trial.  She asked for a lump sum payment from the husband in order to have a clean break and also to provide for her reasonable needs.  She asked for a lump sum of HK$1,380,000.

The Law

28. In hearing ancillary relief applications, the court is bound to consider the provisions set out in section 7 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, which reads as follows : -

“	7.	Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6
		(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 either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring”.

Conduct and all the Circumstances

29. Section 7 provides that the court is entitled to take into account of the conduct of the parties and all circumstances of the case.  There is no dispute that for conducts, they have to be “obvious and gross” before they could be taken into consideration : Wachtel v. Wachtel (supra).  I do not think any of the parties’ conduct falls into that category.  Some criticism may be levied upon the wife’s spending of HK$1,500,000 in February / March 2002 which had caused financial hardship to the husband, but in view of the fact that the husband had been so generous in providing a number of credit cards without any credit ceilings to the wife and the lack of knowledge of the husband’s actual financial hardship by the wife, I do not consider it appropriate to categorise the spending of that sum of money to be regarded as conduct which is so obvious and gross that they have to be taken into account when deciding this ancillary relief application.

30. This also applies to the alleged extra marital affairs between the wife and the Italian designer.  Furthermore, I do not think it is appropriate to go into details of that allegation just for the sake of determining credibility.  Otherwise, all peripheral or unimportant issues also have to be litigated because they would invariably have some, though limited, bearings on the ultimate issue of credibility.

Income, earning capacity etc.

31. I think the evidence on the husband’s income and assets are quite straightforward.  He is now a Vice President of a hotel with a very comfortable income of HK$187,150 per month, inclusive of housing allowance.  As said in paragraph 15 above, I do not think this part of his evidence has been seriously challenged by the wife and I am prepared to accept that is his monthly income.

32. I also accept that apart from his monthly income, the net capital worth of the husband is about $2,700,000.  However, a predominant fact of this net capital asset is that it is in the form of future retirement benefits which would not be available until the husband leaves the service of the hotel.  In view of the fact that the husband is now aged 47, I think the HK$2.7 million will only be readily available in the next 10 years or even longer.

33. As to the wife’s income, it is common ground that the husband has stopped his regular maintenance contribution as from January 2002.  Apart from some lump sum payments made to the wife for setting up the business and for the new Mercedes, the wife was basically self-supporting.

34. The wife is now operating an accessories shop in the Philippines.  She is the biggest shareholder but she said the business was not doing well.  After charging most of the wife’s personal expenses of US$3,020 (about HK$23,556) and her net take away money of Peso20,000 (about HK$2,785) to the business, the business was not actually making money.  She said in order to support her business and her own living, she needed to resort to the lump sum of US$30,000 (the start up capital given by the husband), the proceeds from the sale of the Mercedes and loans from mother and friends to subsidize her living.

35. What was hotly disputed at trial was whether the wife had disclosed all her income and assets.  Counsel for the husband cross examined the wife at great length in order to prove that full and frank disclosure had not been made by the wife.  Particular criticisms were levied on the wife’s failure to account for the HK$1,500,000 she had spent in February / March 2002, the USD30,000 which the husband transmitted to the wife in January 2002 for the purpose of setting up the business and the sale proceeds of the Mercedes car.

36. After hearing the wife’s evidence on her finances for quite some time, I find that her evidence was rather confusing.  When she was asked to account for the sale proceeds of USD40,000 for the Mercedes in October 2002, she first said she had used some of it to cover the instalment arrears and the balance (about USD20,000) were put into the account of her business.  When she failed to pinpoint the entries in the bank account of her business which represented those payments, she said she had paid the money into the business, instead of the bank account.  She said it was now impossible to trace exactly where that sum of money had gone.  Later, she also said the balance of about USD20,000 was paid into a joint account with her mother which had already been closed.  When she was being confronted with the fact that she had never disclosed the existence of this so-called joint account with mother, she explained she did not know that she had to disclose accounts which were already closed.  I find the wife’s explanation on the proceeds of sale of the Mercedes highly unsatisfactory.

37. The same applies to the USD30,000 which was paid by the husband in 2001 / 2002 for the setting up of her business in the Philippines.  I think the wife had difficulty in explaining where that sum of money had gone.

38. Another concern is of course the HK$1.5 million that the wife spent in early 2002 in Europe.  A close examination of the credit card spending records of the wife (P. 399 to 406 of the Trial Bundle) covering January to March 2002 shows that out of the HK$1.5 million spent, at least HK$588,394.19 has been spent on jewellery.  There is nothing mentioned in the wife’s affidavit on the whereabouts of these jewelleries.

39. All the above have led me to the conclusion that the wife may not have disclosed all her assets in her affidavits.  Under usual circumstances, an adverse inference can be drawn that the wife is still in possession of some cash and the jewellery (or its equivalent).  The 2 sums of US currency amounts to USD50,000, which is equivalent to about HK$390,000 ((20,000 + 30,000) x 7.8 = 390,000).  By adding up the value of the jewellery of HK$588,394.19 as well, these assets amount to HK$978,394.19 (588,394.19 + 390,000).  However, one should not lost sight of the fact that the husband has stopped his financial support to the wife since March 2002.  If one would allow a monthly expenses of HK$26,341 (HK$23,556 + HK$2,785) to the wife from March 2002 to now (i.e. a total of 36 months), that would amount to a sum of HK$948,276.00.  Therefore, despite the fact that the wife may not have disclosed some of her assets in her affidavits, I am satisfied that all these undisclosed assets should have now been used up either to maintain her living or to maintain her business.

40. I accept the wife’s evidence that the accessories shop that she is operating is not really profitable.  Although she may not be young (34) in the modelling industry, she is still a very good looking woman and I see no reason why she could not continue her career in the field of modelling or fashion for some years to come.  As a matter of fact, I do see from the evidence of the husband that she did model for some magazines in the Philippines.  She was even elected one of the ten Best Dressed Ladies by one of the magazines.  She is not unknown in the fashion world and she certainly has a potential to become a successful model.  Although there is no evidence on the earnings of fashion models in the Philippines, but I am confident that the wife should have some good earning capacity.

Needs and Financial Obligations

41. The monthly expenditure of the husband amount to HK$118,833 which are listed out in paragraphs 16 and 17 above.  The monthly expenses incurred by the wife amount to HK$26,341 (23,556 + 2,785).  I have no difficulty in accepting these figures as the parties’ reasonable financial needs per month.

42. The wife said she owes some money to her mother and her friends, I do not think there are convincing evidence to that effect apart her own words.  I do not accept the existence of these loans.

43. As to other future obligations, the parties have no children and I do not think they have any plan for remarriage in the near future.

Standard of Living Previously Enjoyed

44. There is clear evidence that during the years of cohabitation and marriage, both parties have enjoyed rather comfortable lives.  The wife was not required to work and her needs were all catered for by the husband.  She was given credit cards with unlimited credit, cash allowances, club membership, frequent trips for pleasure or otherwise, business start up capital and a down payment for a Mercedes.

Age and Duration of Marriage

45. The wife is now aged 34 and the husband 47.  I think both of them are still in their prime years.

46. There is a dispute on the actual years of marriage.  Although the parties formally married in October 1998 and separated in January 2002, there is evidence that the parties had an intimate relationship since November 1993.  The issue here is whether the parties have had cohabited between 1993 to 1998 and whether that period should be counted as part of the marriage.  It is a difference between a 3 years 3 months marriage and a 8 years 2 months marriage.

47. From the immigration records as shown in the wife’s passport, I see that for the period between 1993 and 1998, the wife had come to Hong Kong almost every month.  As the wife was not a resident here, her stay in Hong Kong at that time was necessarily restricted.  The length of each of her stay varied from a few days to a few weeks.  I accept that at the time when she was in Hong Kong, she invariably stayed at the husband’s house.  She was fully dependent on the husband.  I accept that although they were not yet married at that time, they had been living together as man and wife.  Therefore, I am of the view that the marriage should be counted back to November 1993 and I am satisfied that the duration of the marriage is 8 years 2 months.  This cannot be described as a short marriage.

Contribution to the Welfare of the Family

48. Obviously, the husband was the sole breadwinner of the family and so there had been no financial contribution by the wife to the family expenses or assets.  All along she had been supported by the husband and she was basically allowed to spend whatever she wanted.  At trial, the wife tried to persuade the court that she had in fact assisted the husband in his work e.g. by introducing music bands to perform in the hotel.  She also said the husband had kept almost everything to himself including the financial aspect of the family and she was quite precluded from participation in the family affairs.  I think it is an undeniable fact that the wife had been engaged in frequent travelling and it is no surprise that her role in looking after the family was minimal.  It is my finding that her contribution to the welfare of the family is rather small.

Loss of Benefits Upon Dissolution of Marriage

49. The husband is entitled to rather generous retirement benefits.  Due to the dissolution of this marriage, the wife will not be able to enjoy any of those benefits together with the husband at his retirement.  However, it must be borne in mind that those benefits would not be realisable until the retirement of the husband which may be 13 years from now if we assume a retirement age of 60.

Clean Break and Lump Sum Payment

50. The parties do not have any children and they have maintained a 8 years marriage.  The wife is still relatively young and I think there is no dispute that a clean break is desirable.

51. The next issue is whether the wife is entitled to a lump sum payment from the husband and if so, how much should that lump sum be.

52. In Attar v. Attar (No : 2) [1985] FLR 653, which involved a very short marriage of 6 months and a very wealthy husband, the parties had no children and the wife was young, the English Court was of the view that the wife should be entitled to a readjustment period of 2 years to enable her to find employment and become self-sufficient and to re-establish herself in society.  It followed that the wife were entitled to financial support over the adjustment period.

53. The circumstances of the present case are dissimilar to Attar in 2 ways.  On one hand, the marriage here is much longer (8 years instead of 6 months).  On the other hand, the disparity in the financial means of the parties in the present case is not so huge as in the case of Attar.  The husband here is a well paid senior executive but he is in no way comparable as to the very wealthy husband in Attar.

54. After balancing all the considerations as set out in the preceding paragraphs, I am of the view that the wife is entitled to have 18 months’ financial support from the husband to cater for her reasonable requirements as from the date of this judgment.

55. As the reasonable monthly expenses of the wife amount to HK$26,341, therefore, the wife is entitled to have a lump sum of HK$474,138 (26,341 x 18 = 474,138).  That would give her about 17% of the husband’s total assets.  By ordering 18 months’ reasonable expenses to the wife, I have already taken into account of the wife’s undisclosed assets which must have been used by her to cover her living expenses for the past 3 years.  I accept that the husband may not have ready cash of HK$474,138, I will allow the husband to pay this lump sum by 18 monthly instalments of HK$26,341 each. 

The Husband’s Personal Items

56. The last issue is about the husband’s personal items that the wife have taken from the matrimonial home.  At trial, the wife’s position was that she was willing to return all those properties provided that the husband should pay for the cost of shipment.  I have given some considerations to the matter, I am satisfied that those items are the personal items of the husband and the fact is that the wife have taken them away without the consent of the husband.  Therefore the wife has a duty to return them to the husband in good order, of course at the wife’s own costs.  I will allow the wife to ship back the husband’s personal items in 3 months’ time, failing which I may have to reconsider the amount of the lump sum order against the husband.

Orders

57. Based on the above reasons, I will make the following orders :-

(1)	The husband shall pay a lump sum of HK$474,138 to the wife by 18 monthly instalments of HK$26,341 each on the 1st day of every month starting from 1st April 2005.
(2)	The wife shall return all the husband’s personal items in good order to the husband within 3 months from the handing down of this judgment.
(3)	There be liberty to apply to carry out the terms of these orders.

Costs

58. Both parties have failed to get what they asked for.  I will therefore grant an order nisi that there be no order as to costs which is to be made absolute at the expiry of 14 days from the handing down of this judgment.