AA v. BB

FCMC 41/2022

[2025] HKFC 21

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 41 OF 2022

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BETWEEN

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D E C I S I O N

( Ancillary Relief )

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1.  This is the hearing of ancillary relief claims where the parties have signed a post-nuptial agreement that is now disputed by the Respondent wife (“W”).

2.  The Petitioner husband (“H”) is represented by Mr Barnes and Ms Liu of counsel and Messrs. Hugill and Ip. The W is represented by Mr Li of counsel and Messrs Haldanes.

Background

3.  H is aged 50. He grew up P and in New Zealand where he graduated from the University L with a law degree. He moved to Hong Kong in 20xx.

4.  W was born in China and is 42 years of age. She holds a Bachelor’s degree xxxxxxxxx from M University and a Master’s degree in xxxx from the University of N. She also moved to Hong Kong in 20xx.

5.  The parties met in Hong Kong in 20xx when they were both working with xxx Private Bank. They began co-habiting in 20xx and married on xxxxxx 2010. There are two children of the marriage: D, a girl aged 12 and S, a boy aged 8 (“the Children”). D attends year x at the x School. S attends Year x at the x School.

6.  The parties separated on xxxxxxxxx 2019 when they entered into a “nesting” arrangement at the 1,700 sqft, 4 bedroom rented former matrimonial home in Mid-levels (“FMH”) until xxxxxxxxx 2021. H then moved into another apartment in the same development and subsequently to his current address, also in Mid-levels. W remains in the FMH.

7.  The Petition was issued on xxxxxxxxx 2022 and the Decree Nisi on xxxxxxxxx 2023.

8.  The parties reached a mediated agreement in respect of the Children, signing the Child Mediated Agreement xxxx July 2021 (“CMA”). The Children arrangements were made an Order of Court by Consent Order dated xx February 2023, which reflects the terms of the CMA. It provides for joint custody and shared care and control, with the Children dividing their time equally between H’s and W’s apartments. The parties also entered into a financial mediated agreement on x July 2021, which is the subject of dispute in these proceedings (“FMA”).

The Husband

X Group

9.  H is the CEO of X Wealth Limited (“XWL”), part of a business begun in 20xx, providing independent wealth advisory services to private clients, including provision of insurance brokerage services. The other principal companies within the group are X Secretaries Limited (“XSL”), a Hong Kong company incorporated in 2015, providing secretarial and other administrative services to the group’s clients; X Trustees Limited incorporated in Hong Kong in 2016 (“XTL”) establishing a variety of trusts to suit clients; and XN Limited (“XNL”) which provides support services to companies in the group and does not derive any revenue directly from clients.

X Trust

10.  XWL, XSL and XTL, the income-producing companies, are held by a Cook Islands Trust, the X Trust through a BVI holding company, X H Limited (“XHL”).

11.  The X Trust is an irrevocable trust. It was established by a Deed of Settlement dated xxxxxxxxxxx 2012 and subsequently restated pursuant to a Deed of Restatement of Trust dated xxxxxxxxx 2020 (“the X Trust Instruments”). The discretionary beneficiaries of the X Trust are currently H and the Children, as well as H’s mother and sister, both of whom were made beneficiaries on xxxxxxxxxxx 2020, a few weeks after H’s father passed away. W was previously but has not been a beneficiary of the X Trust since xxxxxxxxxxx 2015.

12.  No application has been made by W to join the Trustee to these proceedings, or formally to challenge the X Trust Instruments or any declaration of trust. That the business is an X Trust asset is specifically referred to in the schedule to the FMA.

13.  W describes H as a successful businessman operating a series of X companies who has been obscuring his unknown income.

The Wife

14.  W is a xxxxxxxxxxxxxxxxx of C, assuming her position in xxxxxxx 2023. C was newly set up in Hong Kong. C is a public and private equity firm serving international investors and high net worth individuals. She earns a salary of HK$30,000 per month. She is entitled to bonus and incentive payments. H requested particulars of these but they were not supplied. It is H’s position that W is downplaying her earning capacity considerably.

15.  During the marriage she worked intermittently in consumer banking and stopped work for extended periods upon the birth of the 2 Children, taking up freelance roles in that interim until 2021. H says that W has extensive and increasing high-level experience and positions in private banking. This includes between 20xx and 20xx in positions as Portfolio Manager, Director, Relationship Manager, Investment Advisor and Executive Director in private banking at major international banks.

16.  In May 2019 W started her freelance consultancy business, S Limited (“SL”). At the same time from around xxx 2019 to xxxx 2021 she worked for O xxxxxxxxxxxxxxxx Limited (“OL”).

17.  In xxxx 2021 W was employed by Y on a 2-year contract xx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx responsible for foreign xxxxxx investment, earning ~HK$100,000 per month.

18.  For a period since separation, H had paid maintenance to W but then ceased. This is a contested issue. Subsequently he made provision of HK$88,000 per month for her rent.

19.  W says that irrespective of the FMA, H has ample financial resources and should maintain the status quo of W and the Children.

The Issues

Scott Schedule of Issues in Dispute

20.  The Scott Schedule of Issues in Dispute dated 13 March 2024 (“Issues Schedule”) sets out the stance of each party on the issues. The main issues arising at trial were summarised by Mr Barnes as:

(1) Issue 1. What weight is to be given to the FMA. H’s stance is that it should be accorded decisive weight. W’s stance is that no weight should be given to the FMA because of: vitiating factors, non-disclosure and overall unfairness.

(2) Issue 2. DD v LKW Step 1. What are the available assets and other resources and their values?

(3) Issue 3. DD v LKW Step 2. What are the current and likely future needs of the Children and the parties? Are there assets surplus to needs?

(4) Issue 4. DD v LKW Step 3. What departure, if any, should be made to the broad principle that matrimonial assets should be shared equally?

(5) Issue 5. DD v LKW Steps 4 and 5. What is a fair result, taking into account all factors, including the FMA?

Joint Schedule of Assets and Liabilities

21.  The Joint Schedule of Assets and Liabilities dated 19 March 2024 (“Assets Schedule”) under Remarks summarised the respective stance of each party and provides:

(1) Undisputed Part 1 (A) Assets and Liabilities Family Pool total is HK$22,889,554.50.

(2) Disputed Assets Part 2 (B) H HK$120,000, W HK$ 408,000.

(3) Disputed Assets, Part 2 (C) are Assets held by X Trust. H’s proposed total value is HK$11,364,888.04 or a 20% interest being HK$2,272,977.61. W’s proposed total value is HK$42,513,582.

(4) W says the total (A) + (B) + (C) is HK$65,931,137. H does not agree this figure represents the total matrimonial pot as it includes assets which are disputed.

Legal issues

22.  The principles and procedure to be applied in respect of the division of assets and financial provisions following a divorce are well settled: see DD v LKW [2010] 6 HKC 528. In addition, of particular relevance to the issues in these proceedings is the law relating to (a) financial agreements following separation, (b) how the court deals with valuation of private companies, (c) interests subject to trusts, and (d) non-disclosure. I will consider each of these in turn before the DD v LKW Steps.

(a) Financial agreements following separation

23.  Section 7(1) Matrimonial Proceedings and Property Ordinance, Cap. 192 provides that:

(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, …

The fact that in relation to their assets the parties concluded an agreement is recognised as part of the conduct and circumstances to which, by reason of this provision, the court is to have regard.

24.  The starting point is Edgar v Edgar [1980] 1 WLR 1410 at 1417E:

Important too is the general proposition that formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement.

25.  When considering this issue, the mere fact that a party would have done better by going to court, will not generally be a ground for failing to uphold an agreement: Edgar at 1418A.

26.  The Court of Appeal in L v C [2007] 3 HKLRD 819 adopted the Edgar principle, at [37] affirming it to be this:

37. When parties who are sui juris freely enter upon a bargain for the division of matrimonial assets then, absent unfair or unconscionable factors attaching to the circumstances in which that agreement came to be concluded and absent unforeseen circumstances arising after the conclusion of the agreement such as to cause manifest prejudice to one of the parties, the courts will hold the parties to their bargain. For reasons of policy, the courts will not permit the parties by agreement to oust the jurisdiction of the court in matters touching upon matrimonial finance or to control the exercise of the court’s jurisdiction once that jurisdiction is invoked (Hyman v Hyman), and the courts will be astute in maintaining their supervisory jurisdiction (Pounds v Pounds) even in the absence of provisions seeking to oust jurisdiction. In matrimonial matters, the courts have a particular role in ensuring protection for parties to a marriage that has broken down. The fact that there has been an agreement for the division of assets is not of itself determinative of an application, for the statute enjoins the court to have regard to all the circumstances that prevail at the time the court is required to make its determination for ancillary relief, and an agreement is but one of those circumstances, though it may transpire to be an important one. Precisely because agreements for the division of assets tend to be concluded against an emotionally charged backdrop, steeped in present and future uncertainty, the courts will take particular care to examine an assertion that an agreement should be accorded no or little weight because of this or that unconscionable aspect to the circumstances in which it was concluded. So too, because of the way in which the statutory duty is framed, it is incumbent on a court, even though there exist no circumstances surrounding the making of the agreement that should vitiate it, nonetheless to examine the present condition of the parties to determine whether justice demands a different dispensation. The subject matter is peculiarly fact-sensitive. Many questions will arise: the availability of legal advice at the time of the negotiations and conclusion of the agreement; whether those negotiations and the conclusions reached were attended by undue pressure, including self-induced pressure; whether there is some factor in the relationship between the parties, such as the exploitation of a dominant position, or the use of children as a weapon wielded against one of the parties; whether judgement has been impaired by emotion or fear or misapprehension of the factual or legal position; whether the parties have acted upon the agreement reached; and whether there has arisen since the making of the agreement a fresh unforeseen event by reason of which it may be unconscionable to hold the parties to the strict letter of the agreement. If one or more such circumstances are shown, then the court in the exercise of its supervisory jurisdiction might well interfere with the dispositions effected under the agreement.

27.  Stock JA (as he then was) at [38] emphasised that the principle was a product of important policy considerations:

38. Yet there is a starting position, which is also born of policy considerations. It is that the court should uphold agreements between husband and wife concluded before or at the time of divorce and should allow one of the parties to depart from the agreement only if that party demonstrates good and substantial grounds for so doing (Edgar v Edgar) . That policy consideration is one that itself recognises the considerable trauma that attends prolonged and costly matrimonial disputes, and the obvious advantage in settlement rather than in the litigious cauldron that stirs bitterness, prolongs uncertainty, and is the enemy of the clean break that enures to the advantage of husband, wife and children. Matrimonial law is a flexible tool, precisely because the personal element is at its centre and because personal and family circumstances and needs are complex, varying from setting to setting and from individual to individual. To this fact the statute gives due recognition by the wide discretion it confers, but the courts have articulated principles within which that discretion is to be exercised, else the certainty and finality that serves the interests of the family and the autonomy that should be accorded to individuals “to organise their lives as they see fit and to pursue their own sense of what is mutually acceptable in their own individual circumstances” (Miglin v Miglin) are rendered much more difficult to attain.

28.  Stock JA at [42] confirmed that the court should proceed on the basis that such agreements are “presumptively dispositive”:

42. … Yet it seems to me that that uncertainty is lessened to a degree that is acceptable and manageable if one proceeds on the basis that an agreement is ‘presumptively dispositive’ , the burden being on the party seeking to achieve a different disposition to show good and substantial cause why the compact should not be respected, and in recognizing that the scope for so doing is one directed at an injustice in the circumstances in which the agreement came to be concluded or in clear injustice occasioned to one of the parties by reason of events unforeseen at the time of the agreement were the agreement to be enforced to its letter. The courts should be reluctant to second-guess the initiative of the parties in reaching an agreement, particularly so where they had the benefit of independent legal advice, and especially so where there is no evidence suggesting that they did not appreciate the ramifications of what they were doing: see Hartshorne v Hartshorne; and the courts should be slow to undermine such agreements simply because it may be said ‘with the benefit of hindsight that they should have done it differently’: Miglin v Miglin. If this approach is adopted, then, so it seems to me, the agreement is given the respect it deserves and the notion that one accords it not too much weight becomes an inappropriate one… .

29.  Stock JA added at [46]:

46. … In this regard it is worth adding that recognition that divorces are accompanied by emotional stress should not without more be elevated ‘to a presumption that parties in such circumstances are incapable of assenting to a binding agreement’: see Miglin v Miglin.

30.  In Radmacher v Radmacher Granatino [2010] UKSC 42, [2011] 1 A.C. 534 the English Supreme Court held the court should give weight to an agreement, made between a couple prior to and in contemplation of their marriage, as to the manner in which their financial affairs should be regulated in the event of their separation in circumstances where it was fair to do so; in appropriate circumstances, the court could hold the parties to the agreement even when the result would be different from that which the court would otherwise have ordered; on an application for ancillary relief the court should apply the same principles when considering ante-nuptial agreements as it applied to post-nuptial agreements.

31.  In SPH v SA [2014] 3 HKLRD 497, the Court of Final Appeal affirmed the matters to be considered, in the context of ante-nuptial agreements, citing with approval the Supreme Court’s decision in Radmacher, and at [33] - [34] held:

33. In particular, an agreement would carry full weight only if each party had entered into it of his or her own free will, without undue influence or pressure, having all the information material to his or her decision to enter into the agreement and intending that it should be effective to govern the financial consequences of the marriage coming to an end; and the court should give effect to an agreement which was freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to the agreement. Enforcement of the agreement could be rendered unfair by the occurrence of contingencies unforeseen at the time of the agreement or where, in the circumstances prevailing at the time of separation, one partner would be left in a predicament of real need while the other enjoyed a sufficiency.

34. The parties could not by agreement, oust the jurisdiction of the court.

32.  These cases emphasise that any claim of non-disclosure is to be carefully scrutinised. There is no absolute black or white rule for full disclosure or independent legal advice. Rather, the question is whether in the individual case there is a material lack of disclosure, information or advice. Each party must have all the information that is material to his or her decision that the agreement should govern the financial consequences of the marriage coming to an end: Kremen v Agrest [2012] 2 FLR 414, at [72] (Mostyn J); SPH v SA, at [35].

33.  Radmacher held, inter alia, at [69] that:

[69] … the Court of Appeal was correct in principle to ask whether there was any material lack of disclosure, information or advice. Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party's assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.

34.  Mostyn J also considered the issue of disclosure in BN v MA [2014] EWHC 2450 at [30]:

[30] In paragraph 69 it was stated that there is no rule at all that full disclosure, or full legal advice, is a necessary pre-condition for the satisfaction of this criterion. On the contrary, the question is in the individual case whether there has been a material lack of disclosure, or a material lack of information, or material lack of legal advice. I venture the opinion that usually – and that is in the usual run of cases and not a case when one is dealing with such a highly intelligent sophisticate as Mr Granatino – a full appreciation of the implications will normally carry with it a requirement of having at least enough legal advice to appreciate what one is giving up; but in this case the question of legal advice does not arise, because the legal advice here came from the most high quality sources. The question is whether the husband here gave sufficient disclosure, and it is important to understand that the disclosure in question, as the Supreme Court pointed out in paragraph 69, is that which is necessary to permit the party to reach a decision that is material. As the Supreme Court put it, “What is important is that each party should have all the information that is material to his or her decision”. That does not require “full and frank disclosure” (as Mr Marshall repeatedly put it); it requires only a sufficiency of disclosure to enable a free decision to be made.

35.  A claim of undue pressure was considered by the court of Appeal in H v N CACV 261/2010, 16 November 2011. The court below had found that the mother’s suggestion that she would take the child of the family to New York could not be considered a threat and the Court of Appeal noted at [47] “even if it was, it was not operative on the father’s mind in signing the Deed (of Separation)”. The father’s subsequent conduct in not raising any mention of threats or pressure in subsequent correspondence, and acting on the basis of the agreement was in effect, constituted acts wholly inconsistent with his subsequent contention that his agreement was vitiated by coercive means: at [55-57].

36.  For an agreement to be vitiated there must be “undue pressure”. Moments of dispute and disagreements in communications are not sufficient to amount to “undue pressure”: MN v AN [2023] EWHC 613 (Fam) (Moor J) at [61]. Mr Barnes submits that the kind of elements present, for example, on the facts of V, RHM v V ES aka B, ES [2019] HKFC 279 per HH J Melloy must be present for the court to attach little or no weight to a concluded agreement. The heightened emotional stress of separation and divorce is, of itself, no reason for the court to set aside an agreement, H says particularly one made after discussions with the professional mediator and over a lengthy period of time.

37.  In considering the question whether there is manifest unfairness to hold the parties to the agreement, having regard to factors, including an allegation of material non-disclosure, the court should consider the value of the assets at the time of the mediated agreement : H v H (Financial relief) [2010] 1 FLR 1864.

38.  Mr Li emphasises that the presence of a nuptial agreement is nothing more than just one of the section 7 factors. The court’s jurisdiction is not usurped: CKK v WMY FCMC 10089/2007 (unreported, 23 December 2014). In V, RHM v V ES HH J Melloy at [8] set out the restatement of the law by Mostyn J in Kremen v Agrest (2012) 2 FLR 414 at [72]. Here each party places emphasis on different factors. With regards weight/ enforceability the court in Ancillary Relief will not only look to standard vitiating factors:

8. … [72] …

(iii) … Further, unconscionable conduct such as undue pressure (falling short of duress) will likely eliminate the weight to be attached to the agreement (ibid). Other unworthy conduct such as exploitation of a dominant position to secure an unfair advantage, will reduce or eliminate the weight to be attached to the agreement (ibid). The court may take into account the parties emotional state, and what pressures he or she was under to agree, as well as age and maturity…

39.  Mr Li also relies on CKP v SYK [2021] HKFC 14 where HH J G Owen reiterated at [16] “In matrimonial cases where finances are involved, it is always the statutory duty of the Court that it shall look into those factors under section 7” [of MPPO] and at [18] “In my view, [MCR rule 6(7)] provides an assurance that the statutory duty of the Court under section 7 [MPPO] would not be swiped away by the parties agreement”: see also [22].

40.  Mr Barnes emphasises that there is no black and white rule for full disclosure. While Mr Li reminds the court that unconscionable conduct falling short of duress will likely eliminate weight to be attached and that there is always a safety-net of (un)fairness.

Post-separation mediation and the FMA

41.  The marital partnership ended in 2019. Following separation, the parties engaged Mr S, an experienced matrimonial mediator and barrister as mediator (“the Mediator”). They each attended single sessions with the Mediator as well as joint sessions. W’s in-take meeting was on 11 November 2019. Joint sessions were held in October and November 2019, June 2020 (disputed) and January 2021. The agreements in respect of both the Children, namely the CMA and financial matters, the FMA, were signed by H on 29 June 2021 and W on 5 July 2021. W refers to the FMA as the “Disputed Agreement”.

42.  The FMA provides for a clean break settlement with W to receive:

(a) The property known as 11A and 11B AB, Central, Hong Kong, and retaining 10A SC, the three have been converted into a single apartment (“the AB properties”) (Clause 19).

(b) A lump sum of HK$3,000,000 payable in 30 equal instalments of HK$100,000 each (Clause 24).

(c) A lump sum of HK$720,000 payable in 24 equal instalments of $30,000 each (Clause 25).

43.  H is to receive the property known as CD, Central, Hong Kong (“the CD property”) (Clause 20) and the X Trust (Clause 21).

44.  Both the FMA and the CMA provided that the parties will continue a “nesting” arrangement through to the end of the lease on the FMH, in December 2021 (Clause 4 CMA), after which the FMH will not be retained and the parties would each find alternative accommodation for themselves (Clause 5 CMA). H says that the arrangement is strongly indicative of the commitment of them both at the time to an amicable and peaceful settlement of their differences and to shielding the Children from the distressing aspects of separation/divorce.

45.  H pays the school fees of both Children and under the FMA will continue to fund their education through to completion of their studies, including their tertiary education (Clause 14). In respect of maintenance of the Children it provides expressly that:

(1) The H shall be responsible for all of the children’s school fees and any & all other direct education related costs such as school bus, school books, school camps, school uniform (if any) and including but not limited to overseas boarding (if any), flights (if overseas boarding), howsoever arising until the children:

(a) Finish their-full time school, meaning High School/ secondary education or

(b) Finish their tertiary education, which means the end of their first undergraduate degree

whichever is later.

The H shall provide financial support to the Children during any ‘gap year’ a child or both Children may take (Clause 14).

(2) The x school Debenture (“the Debenture”) for their sonS bears the value of HKD500,000. The W paid HKD370,000 and the H paid HKD130,000. The Debenture was issued to XWL. The parties agreed that the Debenture is for S’s education with x school and will redeem the Debenture once S finishes his education with x school. The H undertakes that he shall return HKD370,000 to the W once the D is redeemed and x school returns the deposit to XWL (Clause 15).

(3) The Father shall be responsible for all the costs in respect of one domestic Helper who shall be employed to assist in the care and well-being of the children and who will be shared as between the parties (Clause 16).

(4) The H shall be responsible for all of the children’s medical costs including paying for the children’s medical insurance, and paying for all expenses that are related to all medical treatment (Clause 17).

(5) All other costs associated or incurred when the children are with each of the party, including but not limited to: domestic rent, food, clothing, taking the children out for activities, meals, ensuring they have for example birthday gifts for their friends are to be borne by the parent who at that time and that place has care and control of the child or children (Clause 18).

46.  The FMA records that:

(1) The parties have in mediation with the Mediator in years 2019, 2020 and 2021, reached agreements with respect to all the outstanding issues arising from the breakdown of their marriage (Clause 1).

(2) The parties agree that either shall have carriage of the divorce and Petition the Court for a divorce, and further that this agreement and the separate agreement with respect to the children shall be made Orders of the Court (Clause 5).

(3) The parties agree they have reached agreement concerning all matters relating to their finances and financial support of the two children of the family (Clause 7).

(4) Both parties acknowledge and agree that the provisions of this agreement are in full and final settlement of any and all claims that one may have as against the other howsoever arising from their marriage and that they are satisfied sufficient financial disclosure has been made to enable them to enter this agreement. (Clause 8).

(5) Both parties acknowledge and agree they have each had ample opportunity (the mediation leading to this agreement having taken place over a period of more than 20 months), to seek and receive independent legal advice on any and all aspects of this agreement as they see fit and have been specifically advised by the Mediator to go and seek such independent legal advice from an experienced matrimonial solicitor’s firm in Hong Kong (Clause 9).

(6) Both parties acknowledge and agree that they are of sound mind and full capacity (Clause 10).

(7) Both parties acknowledge and agree they are acting of their own free will and free from any duress undue influence or pressure of any kind that might enable this agreement to be set aside or altered in any material respect (Clause 11).

(8) Both parties acknowledge and agree they are aware of their entitlements to full and frank disclosure and discovery of the other party’s means and assets by way of Form(s) E or otherwise and have each agreed to dispense with formal disclosure whether by way of Form E, Questionnaires, Further & Better Particulars or however else arising (Clause 12).

(9) Both parties agree and understand the aim of this agreement is to create a financial ‘clean break’ as between them and they hereby agree that subject to the allocation of assets and the payment of the lump sums as set out herein above any and all financial claims that each may have as against the other is extinguished/ terminated by this agreement (Clause 26).

47.  W and H each signed the FMA beside their name. Thereafter the Mediator signed and endorsed the FMA with “I witnessed the signing of this document by [W] virtually over zoom and by [H] in person”. The Annex A names companies.

Issue 1. What weight is to be given to the FMA?

48.  A significant part of the written evidence concerns the issue of the weight to be attached to the FMA. H says the FMA should be accorded decisive weight, alternatively significant weight.

49.  W says that the FMA is unenforceable and in any event, ought to bear no weight in the section 7 exercise. Mr Li summarised W’s case on setting aside/ according no weight to the FMA thus:

(1) First, the vitiating factors of (a) non-disclosure, (b) misrepresentation, and (c) undue pressure undermine the FMA under contract law and equity.

(2) Second, the unfairness of the FMA in substance – manifested in the resultant financial imbalance and the context under which waivers were signed – will engage the “safety-net of unfairness” under family law principles and the court should utilise the “safety-net” to safeguard W’s and the Children’s financial interests.

(3) Third, should the above not negate the validity/ effect of the FMA, H’s own non-performance constitutes a repudiation of the contract, which W accepts; the contract is terminated.

50.  H considers that the two mediated agreements supplied a comprehensive and sensible settlement of all matters following the breakdown of the marriage. They were congratulated by the Mediator, who emailed them on 2 August 2021 attaching the signed agreements, saying “All good wishes to you both and well done to both of you; your children will be very grateful indeed for what you have saved them from”.

51.  The settled principle is that when parties have entered into an agreement for the division of matrimonial assets, then absent unfair or unconscionable circumstances surrounding conclusion of the agreement, the courts will hold the parties to it, subject to the safety-net and post agreement factors. The onus is on W to demonstrate that there is “good and substantial grounds” for departing from the FMA.

52.  W’s case is that the FMA is inequitable in its terms. Applying the terms of the FMA, W would exit the marriage with a 34:66 split. That is on the basis that what she refers to as the “discounted Pot” is HK$65.93m. Under the FMA W takes:

(1) The AB properties: 10A value HK$5.38M, 11A value HK$6.2M and 11B value HK$6.35M, being HK$17.93M minus outstanding mortgage of 10A, being HK$$1.95M giving a total of ~HK$15.99M.

(2) Lump sum by installments, of HK$3M.

(3) Lump sum by installments, of HK$720,000.

Total: ~HK$19.71M.

53.  Inclusive of W’s own assets such as bank accounts and securities, W would exit with ~HK$22.73M net. That is a 34:66 split in favour of H. There is no provision for spousal maintenance or Children maintenance, despite the 50:50 shared care and control of the Children.

54.  W says this is hardly fair, when (1) the major asset, the X Group, was built within the marriage, (2) W’s contribution was not just being a home-maker, but she went in and out of employment, sacrificing her own career to look after the Children, so H could concentrate on X business and she also contributed financially when able, (3) it was a 9 year marriage; and (4) both Counsel agree this is a sharing case.

(a) Absence of disclosure

55.  W’s case is that there was a material lack of both financial disclosure and financial information. All the financial disclosure is in the FMA Annexure A, which is only a definition section, to be compared with the Joint Assets Schedule. Annex A disclosed 3 companies, with no value or estimates of value of any company. Now there are 30+ corporate structures disclosed by H. Mr Li submits that W would not even know “how much there is” (his emphasis). This is “information material” to her decision and a vitiating factor.

56.  The Mediator in a November 2019 email put on H’s “To Do List”: to provide W with “recent audited ‘paperwork’ with respect to the Co – the aim to give [W] some greater clarity about it”. From then W had sounded that she had not clarity over the X Group.

57.  In negotiating the FMA W had requested financial disclosure by email, including saying:

(1) “I would suggest we take a step back and each of us declare the assets we have.”

(2) “I request disclosure now because you did not appreciate the concessions I’ve made, keep pushing me to the corner and became unreasonable …”

(3) “Lastly, I have no clarity nor control over the trust you set up for the kids”.

58.  H refused to provide such disclosure. He admitted that W had no financial information of the X Group and any such information would have come from him. His emails show he was unwilling to provide financial disclosure:

(1) “I am surprised by the request now for disclosure. I had previously objected disclosure because it doesn’t allow a value to be placed on the three businesses i.e. [XWL, XSL and XTL]…But your request to proceed with disclosure is not something I would be willing to do”.

(2) Shortly prior to signing the FMA W sought to limit the implications of Clause 8, concerning financial disclosure to Annex A. H refused. Wife said “And you refused to disclose your financials, even [the Mediator] found it odd”.

(3) “Sorry [W] take it or leave it. I am not going to go through the arduous process of having to disclose everything to you so you can pick through it with all of the information on clients and positions so that you can decide whether or not to take it. Just take my word for it, it is a very difficult business which is high risk and driven very much on personal relationships and personal trust – that aspect is not transferable”

(4) “I don’t want to have to go through the tortuous task of having to disclose the entire business to you with all of the clients information and everything associated with that with you asking more and more questions about everything. I’d rather you just take it over and deal with all the frustrations yourself. But you’ll have to make sure you don’t mess it up because this is the source of income to cover the kids costs until they graduate”

(5) “We both have to agree to full and final disclosure otherwise there’s no point in having the agreement because it opens it up to dispute at any future date… Unless you can agree to amend those points then I don’t see any reason to continue to discuss this further”.

(6) Wife said “The financial disclosure made in the agreement is only limited to what is stated in Annex A. The amendment I proposed on clause 8 simply reflects that fact. So just to clarify – did you mean by the following email that if I do not agree with your wording on clause 8, then there is no deal? Please let me know”

(7) “… value is unique for [X] because it relies almost entirely on me. If I die or quit it loses most of its value. That is why I not going through accounts and books to try and determine a value.”

59.  W says valuations and financial disclosure are 2 separate matters. If the X Group is hard to value, that is all the more reason to provide full and frank disclosure. She rejects his claim that though he did not give financial disclosure he had nothing to hide: “failure to produce evidence, as indicating unfavourable tenor of evidence”: Telings International Hong Kong v John Ho & Others CACV 10/2010 (unrep., 22 October 2010 per Le Pichon JA at [79]. W is conflating the FMA disclosure and failure to produce evidence in legal proceedings.

60.  H considered that financial statements, even if provided, would not have furthered W’s attempt to value the X Group, save perhaps on an NAV basis. It was more fundamental to know how the business ran, the relationships and the types of offerings, which W certainly knew. It was not put to H that his evidence was incorrect.

61.  She replies that (1) NAV based valuation is what H advocates, and (2) it is not for him to presuppose what utility it has for her. Expert valuers rely on such material to make their valuation. Further, H does not discharge his burden of proving W’s knowledge of the X business through uncorroborated assertions or submissions. W’s knowledge of the structure and nature of business has very little to do with figures, valuation. He does not rely on the “Millionaires defence” to avoid disclosure.

Waiver

62.  H relies on Clause 8 of the FMA whereby W expressly agreed that it was in full and final settlement and that “they are satisfied that sufficient financial disclosure has been made to enable them to enter this agreement”. Further, Clause 12 of the FMA provides that both parties acknowledge and agree that they are aware of their entitlements to disclosure and discovery of the other party’s means and assets by way of Form(s) E or otherwise “and have each agreed to dispense with formal disclosure whether by way of Form E, Questionnaires, Further & Better Particulars or however else arising”.

63.  W submits any waiver is ineffectual. It is essential that W was fully informed as to her rights and the extent of disclosure waived:

A person cannot be taken to have a liability or waived a right if he is not fully informed of his rights … The onus rests on the person alleging a waiver to adduce evidence of the other party’s knowledge and of an act inconsistent with the continued existence of the right. The onus cannot be thrown on to the other party to require him or her to prove a want of knowledge: Halsbury’s Laws of Hong Kong [WLA320] at [165.252].

64.  In my view W was fully aware of her right to obtain disclosure. Mr Li’s other points are that W was unclear/mistaken on the X Group’s value, H was not transparent and there is no evidence demonstrating W’s knowledge prior to the waiver therefore there cannot be an effective waiver of her right to disclosure. In any event, the legal test on non-disclosure is an objective test “whether in the individual case there is a material lack of disclosure, information or advice”: V, RHM v V ES at [8]. Mr Li submits that the answer is “yes”.

Legal advice

65.  H submits it is not unconscionable to enforce the FMA because W was advised to seek legal advice and that it was open for her not to sign the FMA. By Clause 9 of the FMA she acknowledged and agreed that she had had ample opportunity (the mediation leading to the agreement having taken place over a period of more than 20 months), “to seek and receive independent legal advice on any and all aspects of this agreement” as she saw fit and she had “been specifically advised by the Mediator to go and seek such independent legal advice from an experienced matrimonial solicitor’s firm in Hong Kong”.

66.  W did in fact seek legal advice. She claims that the non-disclosure renders any independent legal advice she sought impotent as she had no idea of the finances of the X Group asking “what is the utility of legal advice where she could provide no context?”

67.  Mr Li continues, that if H’s contention that the face value of “Wife was told to seek legal advice” and “Wife waived full disclosure” is sufficient and conclusive of enforceability and weight of the FMA, then the section 7 functions and duties of the court are indeed usurped. The court not only has to consider the circumstances of execution – or whether a spouse was advised to seek legal advice – but also vitiating factors and the “safety-net”. Mr Li submits that the fact that H insists that he had made proper disclosure of his finances in order to uphold the inequitable FMA, despite the scale of his concealment being substantial and continuing, makes his deceit all the more deplorable.

68.  H does not insist that he had made proper disclosure but rather, that he had made sufficient disclosure in all the circumstances. I find as a fact that H did not make financial disclosure (other than FMA Annex A) during the negotiations and mediation resulting in the FMA. H’s position was that he would not make financial disclosure in respect of the X business. W was well aware and understood that he was not making and she did not have full financial disclose from H and of the X business.

69.  The evidence shows that W had gone through drafts of the agreement herself and the Mediator certified her signing of each page. She does not suggest that she was unaware of or did not understand any Clause in the FMA. I find that W did in fact understand and agree to the full terms of the FMA. She thereby acknowledged and agreed, inter alia, that she was satisfied sufficient disclosure had been made for her to enter the FMA, that she was aware of her entitlement to full and frank disclosure, including by way of Forms E, and agreed to dispense with formal disclosure.

70.  She had ample opportunity to and had been expressly advised to seek legal advice from an experienced matrimonial solicitors firm, which she did. She says that advice was ineffectual because she had no disclosure. I do not accept the legal advice would be ineffectual. She could receive proper legal advice on the significance of disclosure and her options, including seeking discovery in legal proceedings. She had the benefit of eminent specialist matrimonial solicitors so I am satisfied that she was aware of her rights to pursue disclosure and her alternatives to signing the FMA.

Material non-disclosure

71.  In reply to W’s main point that there was a lack of financial disclosure H refers to V, RHM V ES at [6] that sound legal advice is obviously desirable, for this will ensure that the party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this:

But if it is clear that a party fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party’s assets, there is no need to accord the agreement reduced weight because he or she is unaware of these particulars.

72.  Mr Barnes accepts that W was not “indifferent”, but submits that she had, after much discussion and debate, and after consideration of what was on the table and of her financial position at the time, chosen to waive further disclosure from H as to X Group. She was fully aware of the implications of the agreement. There was no “enforced blindness”. Any lack of clarity was a result of W’s carefully considered choice. This is underlined by the fact that even as late as the week commencing 16/6/2021 W exercised her right to refuse to sign the FMA “because she feels that the number of shares and the lock up period in respect of the crypto currency needed to be specified”. W could have similarly refused to sign if she thought further information as to the financial status of X needed to be clarified.

73.  L v C at [42] held that the courts should be reluctant to second-guess the initiative of the parties in reaching an agreement, particularly so where they had the benefit of independent legal advice, and especially so where there is no evidence suggesting that they did not appreciate the ramifications of what they were doing. I find that W appreciated the ramifications of what she was doing.

74.  W contends that she did not know what she was waivings o the waiver was ineffectual. She had already taken legal advice from her solicitors, as early as October 2019. Her sole assertion was that her lawyers could not provide proper legal advice to her given the non-disclosure. Mr Barnes cautions that a claim of this nature must be considered very carefully. A highly educated women, clearly capable of holding her own in negotiations, having the advantage of specialist matrimonial solicitors, is now asserting that all this is to be considered naught, because H could have disclosed more information about X’s financials, for which she did not press. Is this a proper basis to declare a concluded and mediator assisted and drafted agreement of no effect and therefore disregarded? In my view it is not.

75.  In the circumstances of this case I find that the non-disclosure is not a basis to wholly disregard the FMA.

(b) Misrepresentation

76.  W alleges that, contrary to H’s obligation to provide reliable information, he misrepresented his financial position and/or that of the X Group at times close to signing of the FMA as follows:

(1) “Just a point regarding maintenance. I can’t charge it to a personal payment from me. Because it means I have to then start drawing a salary from the company. The company isn’t in a financial position to do that.” 24/2/2021

(2) “Please can you also keep in mind that you have a higher earning capacity than me … I haven’t earned any salary income for the last eight years” 24/2/21

(3) “My god, you have ability to be earning more income from what I pay as well as from other sources including employment so your monthly income could be more than what most senior executives get! Certainly multiples more than I get! The above is the best I can do. Take it or leave it” 1/6/2024 1:58 pm.

(4) “I don’t have business per se … My business barely breaks even” 1/6/2021 3:50pm

77.  W’s case is that H misrepresented to her that the X Group is in a poor financial state, portraying it to be struggling and she trusted him, which is reprehensible given that first, H’s case is that X Group covers all of H’s expenses. H’s 1^st Form E, Part 4 expenses come to ~HK$391,000 and H’s 2^nd Form E ~HK$442,000. Plus H’s rent and W’s rent, ~HK$170,000 for both apartments. X Group is able to financially sustain those recurring expenses. Secondly, H admitted that the X Group has deposited a total of HK$21,000,000 to him over a 36 month period. This is ~HK$585,000 per month, which shows its financial strength. Thirdly, this against H having HK$105,000 savings. It is evidently a front. H’s assets are held in the X Group.

78.  H denies providing misleading information about X or placing undue pressure on W. As to email (1) above, H continued “It also means I would need to incur further costs from tax”. The discussion was around how to structure payment of maintenance to W and whether it be as salary to her. As to (2) above, H also said “You can, in reality, get a position at a bank which would pay the same or more than the ‘maintenance’ that I am agreeing to pay you. So you can potentially earn in the range of HK300K per month in earnings”. As to email (3) above W did not dispute her potential earnings. The context was that W had made amendments to the draft, had set out her stance and that she could not make any more concessions or agree to any more changes. When they were negotiating the lump sum based on a monthly sum he had been paying he then made the comparison of her earning capacity and what he gets. He ends by saying that is the best he can do “take it or leave it”. She had already made amendment and stated her position was “no more changes”. They were negotiating. His position cannot be deemed undue pressure. If it was pressure she did not succumb to it, but was well able to stand her ground. She responded with her stance and concludes “Take it or leave it as in your words”: 1/6/2021 3:16.

79.  In my view the emails regarding H not receiving a “salary” are not a misrepresentation of fact in that his remuneration was not structured as salary. That is addressed below. His evidence includes that the 10A AB property was purchased in W’s name because he could not get a mortgage in his own name because he did not have a salary. The suggestion that W was thereby misled into believing that X could not afford to pay H, salary or otherwise, or he was uncertain about the viability is unsustainable. W knew the standard of living enjoyed by the family and that it was funded by X, subject to her financial contribution. The context is also relevant, in explaining why he could not charge payments to her as a personal payment from him was because he would then have to start drawing salary. Stating that the company was not in a financial position to do that in context is not a representation that X was struggling and its viability was uncertain. Claiming that he had not earned a salary for eight years did not mislead W. The comparison between W’s ability to earn with what he gets was not something that misled her and she then relied on to agree to the terms of the FMA.

80.  As to email (4) above, the statement must be considered against the position at that time. W says that his misrepresentation is clear. The evidence contradicts the statement the X Group “barely breaks even”, that the companies were not in a position to pay H a salary, or that the companies/ group is in any sort of financial difficult situation. In refuting any misrepresentation of X Group’s financial status, H singles out XWL as having made a loss in 2020 and 2021 omitting mention of XTL, which saw greater than double the prior year’s profits in 2020 and continued substantial profits (millions) in 2021 and 2022. XTL is also the main company. It was the only company which distributed dividends, in 2020. If H was as uncertain about the companies viability that year as he claims – “barely breaks even” or otherwise financially struggling then he would not have directed the distribution of HK$2.3m in dividends, which was a greater sum than the profit of HK$2.16m for that year.

81.  H disputes misrepresenting to W that the X Group was in a poor financial state. H’s email (4) above continues “My business barely breaks even after all the salaries and costs and having to pay you every month makes it even harder”. Mr Barnes considers the reference to H’s expenses and deposits from X a red herring – from the surrounding paragraphs it is apparent he was not suggesting it could not pay all their expenses. He had already taken account of H and the Children expenses.

82.  XTL owns a Mercedes-AGM car acquired for HK$3 million for H’s exclusive use. On 1/6/2021 he said that the car had a $1.7m debt, it is not worth “3mil” and is the result of his risk and hard work in dealing with the landrover. H explained on 7 May 2021 10:25 that “The car is purchased on a lease. That means we have to pay a monthly lease fee”. Mr Barnes says that the car is irrelevant to whether X was making a profit. In cross-examination Mr Li asked H “[XWL] purchased a car that year … Would this purchase of the car affect this profit figure?” H replied “No, I don’t believe it would.” W knew their standard of living. On balance she would not have believed that “barely breaking even” was before taking into account their expenses.

83.  In considering whether H misrepresented the value of X it is necessary to consider his statements against the facts at the time of the representations. In determining whether there is manifest unfairness to hold the parties to an agreement the court must consider the value of assets at the time of the mediated agreement: H v H (subject to the safety-net). The value of X is considered below. The valuation date is 31 December 2022. The X Group was not valued in 2020 or 2021 before the FMA was signed.

84.  W misrepresentation submissions in part rely of future financial information. The material time is when the emails were sent, being 2021 (commencing 2020), before they reached agreement. The present financial position of the X business cannot be prayed in aid of a claim that H misrepresented the financial position of the business at the time of the emails. The X Group Profit and Loss Statements for 2020 and 2021 results show profits of HK$136,651 and HK$1.6 million respectively. In my view email (4) above does not amount to a misrepresentation that should vitiate the FMA.

85.  During their discussions leading to the FMA there is evidence W believed the X Group to be worth ~US$2.4 million (or ~HK$18.72 million). Whereas per the “Summary of X Group Profit and Loss Statements”, the Groups turnover came to HK$27.18 million in 2021; in 2022 this grew to ~HK34.63 million. W signed the FMA on 5 July 2021. Mr Li says even accounting for Hs loans/ expenses which were booked to the companies, the X Group still yielded ~HK$1.18 million profit in 2021, and ~HK$9.07 million profit in 2022.

86.  W says that when she put forward a valuation of X Group, which H at the time did not agree, and which W says is severely undervalued, H chose to mislead her by saying nothing. Under cross-examination when asked why he did not correct W’s misunderstanding there and then, H first evaded answering before replying “I didn’t respond but I didn’t accept that”. H did not admit any misrepresentation.

87.  Mr Li submits that this is crucial to understanding the circumstances of execution; this is “possibly partially” why W signed FMA. Not that she relied on that value and that was the reason she signed the FMA. Mr Li says that his silence/ omissions to correct W is pulling the wool over her eyes – the net effect being a misrepresentation of the X Group value. She had no idea that she was signing away a significant share of the pot. W believed that X Group to be worth not even half of its current value. Of course, on this point, it is the value at the time of the representation that is material.

88.  Mr Li submits that W would not even know “how much there is” and that this is without doubt “information material” to her decision and a vitiating factor. SPH v SA at [33] held that an important factor is whether a party “had all the information material to his or her decision”: also V,RHM v V ES at [8(ii) and (iii)]. On these circumstances it would not be fair to hold W to the FMA. However, the mere fact that a party would have done better by going to court, will not generally be a ground for failing to uphold an agreement: Edgar at 1418A.

89.  There is also evidence from W that H was trying to persuade her that less than half for her was appropriate in their case. Her Narrative Affirmation states, inter alia, that in a 17 October 2019 text, referring to an earlier offer, he said “The property alone is valued at more than USD3mio. It is worth more than half the business plus the offer to cover all the children’s costs and maintain you”. He was not suggesting that the AB plus CD properties were worth the same as the business. She was aware that his position was that the properties were worth less than the business. H was expressly offering her less than half and encouraging her to speak to her solicitors as to the division in their case.

90.  Of more concern is that when W came up with her valuation of the X business H did not respond. W says in fact the value was well below the actual value. The fact that W was able to estimate a value at all does support H’s case that W knew more about the business than she admits. This must be seen against the evidence that when he made an offer of all the property he was saying it was worth more than half of the business, not an equal amount. The offers changed as time moved on, but it is another indication from H that W had when making her decisions. Valuation of an asset is time sensitive. The value of the properties and of the business depends on the valuation date. W was aware of changing property values and referred to their properties being worth less than the H had estimated. Further questions are then, first whether her estimate of value of the X business was materially below the actual value of the X business at that time? If so, secondly was it a misrepresentation by omission or unconscionable conduct of H not to have corrected her valuation at that time? And thirdly, did she rely on it?

91.  First, the valuation of the X business is addressed below. H admitted in cross-examination that he did not agree to her value. The evidence did not go into how W arrived at her value, nor what H thought the correct value was, save that it was difficult to value. Secondly, if W’s valuation was materially below the actual value of the X business at the time and H knew that to be so he ought to have corrected her. Whether that was to repeat his position that it was extremely difficult to value the business but he did not agree her figure or to dispute and otherwise question her valuation, she would then realise she may have been wrong. The evidence falls short of establishing what H thought the value to be at that time, that he knew her value to be materially less than the true value, that he misrepresented the value and acted unconscionably. Thirdly and in any event, she had received other indications from him. She did know that he considered it difficult to value the business. Her own experience and knowledge of the business would support that. She knew he would not disclose financial information, refusing discovery so was not telling her the value. I must consider her position at the time as distinct from her present position with the benefit of hindsight. She had also said if she had wanted more assets she would do something different. In my view she knew that she may have been accepting less than half. However, if the value of the X Group was materially more than her estimate then she was laboring under a misapprehension as to the value. Insofar as W proceed on the basis of her valuation it would mean that she entered into the FMA under a misapprehension as to a material fact. Even if H did not misrepresent the value of the X business, a misapprehension of a material fact is a vitiating factor.

(c) Undue pressure/ unconscionable conduct

92.   W accuses H of unconscionable unworthy conduct and exerting undue pressure on her shortly prior to the execution of the FMA, which are vitiating factors and relevant to weigh to be accorded to it.

Business

93.  W says that H leveraged her reliance on his business support in running her SL business. H said the following in negotiations:

(1) “if we cant communicate on a personal level, I don’t want to on a business level either”.

(2) “With your position that you think I should pay the AB mortgage, and if you don’t feel you can change on that position, then I will change my position and will need to exit existing work matters we have with you and your firm. I would be in a position to help you and your business but there has to be some give and take here.”

(3) “Please keep in mind that I’m not going to be willing to assist you with your clients if you can’t do simple thing like this”.

(4) “It does not make me very willing to keep doing business with you where you take that sort of approach”.

(5) “Regarding ongoing business relationship, please keep in mind that the business and personal are intertwined … But the extent of the ongoing business is dependent on how reasonable you are on the personal front and in finalizing these agreement”.

(6) “my choice not to do business with you is mine. I don’t understand why I should have to help you with your business and at the same time struggle to pay you maintenance fees and pay all the costs for the kids.”

(7) W said; “I was also very surprised you went down the route to use work to threaten me agree to what you want and sign the agreements … But using what we’ve agreed to hijack me is a completely different matter.”

(8) H said “Given your change of tack on this, please can we cease any of the new business including the new trusts which you are looking to set up”.

94.  W says payments to SL had to be sanctioned by H. W relies on part of an email exchange on 26/4/2021 when she chased H for fees overdue to SL for 2 months and H said “I will finalise it but can you also please finalise the separation”. The fuller account is that H told W regarding a X/SL agreement “There are drafting changes that need to be made ... at the moment it doesn’t read properly”. W replied “Ok. If you see change is necessary. But could you please finalise it by tomorrow as it been left undealt with for almost 2 months”. It was when W took the time point that he replied “Okay. I will finalise it but can you also please finalise the separation agreements? I see that you’ve sent the draft to [the Mediator] Do you know when he’s going to give you the final draft?” She replied on the drafts and “I urge you not to mix work and personal matters. We agreed to do that and I hope you will respect that”. He replied “Please keep in mind that the matters you are chasing me on are income generating for you. That’s the reason I am raising them now. … In addition to these sums, you will be getting referral fees from my business”.

95.  On 30/4/2021 W emailed:

“I hope you can continue to keep work matter separate from finance matter. … Please do not think I purposely delay finalizing the agreements to get more months of maintenance. If I want to get more assets, I would do something else. I want to have all matters settled and have a clean cut ASAP too.”

There were cordial emails on 17/5/2021.  On 18/5/2021 11:31am W wrote “Can we please stop these personal conversations and sort out the agreements so that we can file for divorce?”

96.  H did agree that it was the business model of SL to cooperate with X Group, which required his cooperation but not that she required his assistance in providing advisory services to her clients in structuring their investments. She could have chosen any other company to assist her in providing her advisory services. He believes she chose to use his company because she benefitted from a discount and his staff were attentive to her. That fact is supported by an email exchange on 24/2/2021. H said “in terms of business aspects, I’m not sure if you want to refer business to other service providers. It might be better just in terms of a clean split”. She replied that in terms of business, there were three clients that had already signed the fee letter and she suggested they leave as they are. H replied “agreed that the existing three cases we can keep them as they are. Going forward, I have no issue if you want to place the business with us and take a split or refer it to another service provider. I will leave that up to you”. When H referred to her using other service providers she did not claim she could not. She also says that she has lost particular clients or deals already with X because of him.

97.  H denies leveraging her reliance on X’s support in running SL. His emails on the cessation of their business relationship, if their separation turned acrimonious, was not pressure but a statement of the obvious. Mr Li submits that is farcical, W begged H not to mix work and personal matters and invites the court to go through the emails.

98.  In respect of email (3) above for example, Mr Li submits that H’s answer is far-fetched, if not twisted. H’s excuse of urgency is marred by the threat in the chaser email sent just hours after stating “please keep in mind that I’m not going to be willing to assist you with your clients if you can’t do simple things like this.” W now ignores the fact that H was asking her to attend to a business matter. There is nothing far-fetched or twisted about his response to her failure to respond on business a matter. It was not unconscionable for H to find that W’s failure to respond on that matter made him less willing to assist with her clients or to continue working together. Mr Li submits his explanation is litigation driven and bears very little weight as a matter of principle:

As a matter of common experience, contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event, especially in the case of “self-serving statements or conduct of the transferor, who may long after the transaction be regretting earlier generosity: per Stock NPJ in Leung Wing Yi Asther v Kwok Yu Wah (2025) 18 HKCFAR [56].

The contemporaneous conduct of H with regards the business they were doing at the time and/or his position in respect of their prospective future business relationship is consistent with his explanations. W’s evidence in these proceedings is not entirely consistent with the emails.

99.  The parties were divorcing. H was not bound to continue to assist or do business with W. They were trying to navigate their business relationship at the same time as negotiating the FMA. It is laudable that they were going to great lengths to remain cordial and work together in respect of the Children. H was entitled to consider whether he felt he could continue to work with her on business matters. Just as W was entitled to consider and determine what value that held for her, and not only in purely financial terms. I have been through all of the emails. They show H responding to her position or their respective changing positions, not him threatening to stop business if she did not agree to his terms. W was able to object to his position, stand up for herself and state her wishes at the time.

100.  I do not find that H’s emails or conduct with regards their present or future business relationship exerted undue pressure on W or was unconscionable such that they amounted to a vitiating factor.

Children

101.  W accuses H of bringing up the Children to procure her agreement. H accuses her of cherry-picking and ignoring the broader context, including that they were regularly interacting about the Children. There was no issue with the Children associated with the negotiation, because those discussions were amicable. She relies on his email stating:

“At the moment things have pretty much fallen off a cliff in terms of being able to work together on the business front and raise the children” 31/5/2021

102.  In my view both parents were acutely aware that the nature of their own relationship was important because they had to raise the Children. W herself brought up the connection between being able to reach agreement and raising the Children. On 26 April 2021 she said “But you came across more and more aggressive … But if you don’t agree likewise, it would be difficult for us to come to agreement and raise the kids amicable”. H maintained the distinction between the Children and other matters. For example, on 4 May 2021 3:15 he emailed:

“But whether I take the business or you do I am not willing to work with you going forward. I sorry for this but I would prefer a complete split with no interaction on anything – apart from the kids obviously. The whole exercise is draining for me and I am sure it is difficult for you too and I want to conclude it.”

103.  I have no hesitation in rejecting the allegation that H used the Children in any way to pressurise W to accept his terms. Both parents clearly have the Children as their paramount consideration. They are to be commended for having managed a nesting arrangement and the inevitable difficulties as well as they did.

Affair

104.  W accuses H of threating to expose her and her ex-partner’s affair in a public forum. W extracts part of a reply from H on 18/5/2021:

“Also relevant to disclosure, as you know the business is in a trust. You were excluded from that trust in 2015 after your affair. So the trustee will have issues with disclosing any information to you. And if you want to go down that route it’s going to bring up what happened in 2015 and 2019 in a public forum. I don’t know if [ ] ever told his wife but it will become public. I would not want to do that and I assume you wouldn’t want to either” 18/5/2021.

105.  This is an instance where it is unfair to take only part of an email exchange and to ignore context. On 18/5/202112:23 pm before the extract he had said she was happy to switch with her on the finances side. She was happy to look at that option but didn’t have information on the companies so certain disclosure was needed so she could assess what she would be handling. In response she did not simply stand for his reply, but there and then rebuked him for raising it and his manner.

106.  Mr Barnes submits that H fairly explained in his 18/5/2021 email, he meant that the information would come out as well if there were legal proceedings, which it has. H believes that W has chosen to bring up both of their affairs in these proceedings to paint him in a bad light. His evidence is that in January 2015 he found out about W’s affair, it was a very painful period of his life and he never wanted to relive those memories. He disputes the allegation that he used W’s affair against her in the negotiations. He mentioned it once in respect of the X Trust and the potential consequence if the divorce became litigious, which was that the affair would become known to other people, namely lawyers and the court. He denies that he threatened to reveal her affair to the public generally. To the contrary, he hoped they would be able to move on so the past would stay in the past.

107.  In my view H did not make a threat to the effect that if W did not agree to his terms he would expose both W and her ex-partner’s affair or raise it to put pressure on her. W initiated discussion about disclosure. W had been removed as a beneficiary of the X Trust in 2015. H says that was because of her extramarital affair. If the X Trust was in issue and disclosure was required in respect of the X Trust inevitably the fact of and reason for W being removed as a beneficiary would have to be addressed in proceedings. Now W’s case is that the X Trust is illusory so the creation and operation of the X Trust has to be considered. Further, his email also refers to what happened in “2019”, which raises his conduct or affair. I do not find that email amounts to unconscionable conduct or undue pressure by H that vitiates the FMA.

Maintenance

108.  W says that H unilaterally ceased maintenance payments. From separation in August 2019, H paid HK$150,000 per month. He admitted paying this until May 2021, a couple of months before the FMA was signed, when he unilaterally ceased these payments ($30,000 of which continued until shortly after the FMA was signed). H refused to acknowledge this was maintenance but himself referred to it as “maintenance”. On 5/6/2021 he emailed as follows:

“I have continued to pay you 150,000 per month since we separated in August 2019. I have no obligation to do that. I could’ve stopped doing that at any moment but I didn’t. I have held the last most recent payment because I want these agreements signed and finalized”

109.  Mr Li says H was exerting financial pressure on W so that she would sign the agreement, which was effective as the next day she sent an email to the Mediator to arrange signing. H refutes that cessation of payments pushed W to send an email to the Mediator to arrange signing. Mr Barnes says this ignores the proper timeline. W’s email was sent on 6/6/2021. The FMA was not signed until 5/7/2021, a month later. Between her email and signing of the FMA, she backed out of signing the FMA in the week prior to 16/6/2021. If H’s conduct was truly the catalyst which pressured W to sign, it is surprising that W herself raised any hurdles to signing the FMA.

110.  W position is that at the time she was jobless, H knew she had no income, he did not know how much she had in savings and SL was in its infant stage and loss making. W also refutes H’s Closing statement that “H had been covering the children’s expenses”. She had been paying for property-related expenses, servicing the mortgages and supporting the Children’s expenses in part, which he does not pay during the 50% of time they are in her care.

111.  H denies exerting financial pressure on W and disputes she was in financial difficulty. She had ongoing deals promising substantial income. The parties refer to the “D deal”. W alleges that H never caused the X Group to pay a referral fee of USD400,000 which was due. H responds that the suggestion that H did not cause X to pay it is misleading. In the beginning of 2022 W received USD257,000 in referral income. This payment was made from one of the partners of a firm, D in Shanghai, directly to W when it should have been paid to the relevant insurance carrier first, whose fees would then be deducted, commissions would then be paid to XWL who would then pay SL. This was said to be a breach of SFC rules for receiving direct payments. Had the D deal proceeded, SL would have received USD400,000 per year but the deal fell apart subsequently because W directly received USD257,000, instead of that sum being paid to the insurance companies. Mr Li refers to H threatening criminal proceedings and ask “Is this not unconscionable?” This would be subsequent unconscionable conduct.

112.  The parties refer to D deal issues that occurred after the FMA was signed. I make no findings in these proceeding with regards the propriety of D deal payments. W has not proved that any non-payment or delay of any D deal sum was used to put pressure on her or that this is a matter she can rely on in support of a vitiating factor. He says the relevance of the D deal on this issue is as an example of a deal W had put together, that W was successfully building the SL business, that she would be receiving substantial fees and that her financial position at the time of the FMA and prospects appeared good. H says there were other payments to be made to SL under the terms of the referral agreement of approximately US$100,000 – 150,000. So to say she was under economic stress to be financially independent is completely wrong. He disputes the portrayal of W as being in a poor financial state and admitting he knew she had no other income. He did not know how much W was earning from OL (nor is there any information before the court now), he believed that W, through SL, would receive income from the D deal and other deals, including BWT. Although there was no evidence on any income link between the BWT and W nor was she questioned on it. W’s future income was far from insignificant. Her Form E then disclosed she had very significant cash savings. It shows she had approximately HK$3 million in cash in her bank account and HK$2 million in her Interactive Brokers account. She had been working on deals where she would receive referral income under the referral agreement between XWL and SL. Therefore, W cannot say she was in financial distress at the time she signed the FMA. It is W’s case that the maintence was all she had.

113.  Mr Li responded that even if W did have such income, cessation of HK$150,000 is a decrease of W’s usual financial resources, and thus ceasing payment does exert pressure on her. H had no idea what other income and savings W had at the time so cannot argue the cessation of HK$150,000 did not financially strain W.

114.  I find that H did stop making the payments and that they were effectively maintenance. H was not under a court order to pay maintenance. However, it was a decrease in her usual financial resources. The evidence establishes that W also wanted a final agreement signed as soon as possible but not because the payments had ceased. What is material is the effect the cessation of monthly payments had on W. It is now known that she had ample funds available for her immediate needs and her own financial prospects appeared positive. I find that the cessation of maintenance did not actually put financial pressure on W at that time or cause her to sign the FMA.

115.  W says that cessation of maintenance puts even the Children at risk. H categorically refutes putting the Children’s interests at risk. At all times he was paying for the lion’s share of the Children’s expenses. I reject the allegation that H put the Children’s interests at risk. The nesting arrangement was continuing. All of the Children’s needs were being met. W had sufficient funds to cover expenses she had to incur while the Children were in her care.

116.  Mr Li says that H held a metaphorical gun to W’s head, “the right to set the transaction aside arises because the equitable wrong was part of the process by which the victims consent to the transaction was obtained”: per Briggs J in Hewett v First Plus Financial Group Plc [2010] 2 FLR 177at [34]. The case is readily distinguishable on the facts. By deliberately concealing an affair while seeking to persuade the wife to re-mortgage the home the husband breached his duty of fairness and candor exercising undue influence sufficient to vitiate the re-mortgage. In any event the circumstances here did not amount to an equitable wrong that requires the transaction to be set aside on that basis.

Emails

117.  The parties initiated discussions in 2019. Mr Li says that all the above discussions were made “just” a couple of months before the eventual execution of the FMA. In my view the email negotiations were not conducted over an unduly short period. Discussions commenced in 2019. W had ample time to explore and consider her options. She was able to do that independently of H, including before the 2021 discussions.

118.  Mr Li submits that the implications to and the undertones of these communications need no elaboration. I have read all the emails, not only those referred to herein. It is noteworthy that the evidence relied upon by W in respect of things said by H were said in emails or text. It is not suggested that they were negotiating in person alone where, for instance his physical presence was intimidating or over-bearing, that he raised his voice or that she was unable to speak up for herself. Clearly, she was able to deal with H directly by email as she saw fit. It is apparent from reading the emails that there were times when one or other was responding with more emotion. That is inevitable. W was able to walk away from his emails. After more difficult exchanges they could resume in cordial terms. When W found H’s emails objectionable she readily called him out and generally he accepted, rather than fought, her rebuke. W could also enlist the assistance of the Mediator and solicitors.

Trust and confidence

119.  Mr Li says that W reposed trust and confidence in H – personally and professionally. Yet, during a time when W was emotionally vulnerable he exerted pressure, the most woeful instances being his references to her affair in 2015 being made public and economic duress by ceasing maintenance payments.

120.  The emails show neither of them really trusted each other any longer on a personal level. For example, on 7 May 2021 8:03 am W wrote “That broke the last straw of trust between us”. On 18 May 2021 11:43 H wrote “we were even getting along ok on a personal front but then you … These things just cause a breakdown in the little trust that we have left between each other”.

121.  They both needed to place some trust in each other for the sake of the Children. They had joint care and control with approximately equal time and a nesting arrangement in place, so it was essential that they could communicate and rely on each other sufficiently to make that a success. W would need to have trust and confidence in H if she was to work with him professionally. The blanket assertion that W reposed trust and confidence in H in respect of the FMA is not established. She was clearly making her own decisions, not simply accepting his say-so. She had the assistance of the Mediator and solicitors if required. Insofar as W reposed any trust and confidence in H specifically in negotiating the FMA I do not find that H wrongfully took advantage of her trust.

122.  Further, I find that the allegation that W was pressured by H’s unconscionable conduct into signing the FMA is inconsistent with:

(1) The express acknowledgment in Clause 11 of the FMA that there are acting of their own free will and free from any duress undue influence or pressure of any kind.

(2) The Mediator’s letter dated 28 July 2021 which confirmed that “the agreements were signed by each party in my presence, and they signed of their own free will and volition”.

(3) The fact that nothing of the sort now raise by W was said by her in the many months after the FMA and the CMA were finalised and signed.

(4) Her subsequent conduct in not raising threats or pressure while pressing ahead with making the FMA an order of the Court in the months subsequently

(5) The fact that W voluntarily returned to mediation with the same Mediator 8 months after the mediated agreements were signed, in March 2022.

123.  For an agreement to be vitiated there must be “undue pressure”. Moments of dispute and disagreements in communications are not sufficient to amount to undue pressure: MN v AN. The heightened emotional stress of separation and divorce is, of itself, no reason for the court to set aside an agreement. H says particularly one made after discussions with a professional mediator and over a lengthy period of time. I have taken W’s emotional state into account and whether her judgement had been impaired by emotion. In L v C Stock JA found it was precisely because agreements for the division of assets tend to be concluded against an emotionally charged backdrop, steeped in present and future uncertainty assertions of unconscionable conduct are carefully considered. Recognition that divorces are accompanied by emotional stress should not without more be elevated to “a presumption that parties in such circumstances are incapable of assenting to a binding agreement”: Miglin v Miglin. I recognise that this, like most divorces, was accompanied by emotional stress. Notwithstanding how difficult W found going through the separation and divorce, she was able to look after the Children, work and pursue business in relation to SL. Doubtless some days the emotional toll would have felt greater than others, but the negotiations took place over a sufficiently lengthy period that she could take time to consider her position when emotions were not heightened. The emails show that during the 2021 negotiations it was not only H but W also wanted an agreement as soon as possible and moved the process forward with the Mediator.

124.  The evidence is inconsistent with her present claims that the FMA was vitiated by coercive means. There is no factor in the relationship between the parties, such as exploitation of a dominant position or use of the Children as a weapon or otherwise, by H which would make it unconscionable to hold them to the agreement. I find a dearth of unconscionable conduct. H did not exert undue pressure on W in the circumstances in which the FMA was concluded.

The mediation

125.  H’s evidence on the mediation includes the following. On 14 September 2019 he received an email from W with a list of recommended mediators, including the Mediator, and she contacted him to arrange the first meeting. W variously requested further dates for mediation in 2019 but they were not available, she followed up for further mediation in February 2020, the Mediator proposed various dates but H could not attend in May 2020, then from July he was not in Hong Kong because his father was unwell and passed away in September 2020. In November 2020 H tried to schedule sessions and the Mediator agreed to hold a further joint session on 12 January 2021. In February 2021, first W followed up with the Mediator then they both did. On 2 March 2021 W contacted the Mediator saying that they:

“have agreed on most of the items in relation to the kids and finance. We would like to meet with you to sign the agreements if we manage to work out the final point or two, and start the petition for divorce. Otherwise, it will still be good to meet with you to have your help to finalize all the items. Could you please advise your availability in the coming two weeks?”

Thereafter W had a one-on-one session with the Mediator on 22 April 2021.  Further correspondence with the Mediator ensued. W contacted the Mediator on 2 June 2021 to request his availability to witness signing. When he asked her whether they had “an agreement, one that they we both content to sign?” She replied on 7 June 2021 that they were “finalising the agreements and hopefully it will be ready then”. Emails between the parties on 7 and 8 June 2021 show that W proposed a change to the agreement on finances, to which he agreed, and that he proposed a change in respect of Children access, to which she agreed. W attended the Mediator to sign on 9 June 2021 but did not sign because she wanted a change in respect of the crypto currency terms. H attended the Mediator and signed the FMA and the CMA on 29 June 2021. W signed both over Zoom while in Shanghai on 5 July 2021.

126.  W denies that the parties negotiated the FMA for 20 months. Her case is that after the initial sessions in 2019, there was an attempt at reconciliation in 2020 and a lull period when H’s father passed away. The table of fee notes provided by the Mediator shows the parties were not in mediation for 16 months – between 10 December 2019 and 19 April 2021. 3 months thereafter the parties signed the FMA in early July 2021. The Agreed Chronology and Issues Schedule show the parties disagreements. The 3 June 2020 session was intended to be a make-up session, which H asked the Mediator to still bill for but H never confirmed it. Under cross-examination he could not confirm the 3 June 2020 session took place. The Mediator could not recall the 12 January 2021 session taking place and no fee note was issued. H has not produced evidence of discussions on Ancillary Relief continuing throughout the entire period and most of the email discussions were in 2021 prior to signing the FMA.

127.  W says that the FMA was not negotiated through the Mediator. Rather, direct negotiations between the parties only revived in February 2021, resumed negotiations between the parties were only for a “short” few months duration and mediated negotiations with the Mediator only resumed in April 2021. W says that the Mediator was not involved in the bulk of negotiations and was only re-brought on board “just before signing”. H had said on 24 February 2021 “So I think the better thing to do is to agree the terms between us and then go the [the Mediator] with the final agreement”, so only direct negotiations between the parties occurred per his wishes. She also claims that the Mediator played a limited role, primarily “to proof read terms of the agreement” reached by H and W themselves.

128.  H denies that he manipulated the process or wanted to avoid the Mediator’s involvement. It was actually the opposite. He positively encouraged her to see the Mediator, particularly towards the later stages of the mediation. For example, on 19 April 2021 H variously emailed “I would suggest that you meet [the Mediator] again [so] he can clarify these points with you. Rather than respond to my comment by email perhaps we can discuss them with [the Mediator]?”, “I think we can also discuss the nesting arrangement then too” and “I think it is important that you speak to [the Mediator] on this regarding his experience in these matter”.

129.  I accept fee notes relied upon by the W and the above account of H, save that it is not proved that a mediation session took place on either 3 June 2020 or 12 January 2021. Both H and W wanted to schedule further sessions, contacted the Mediator and each had access to him individually. I do not accept that H prevented involvement of the Mediator. On 24 February 2021, with a view to controlling costs to be incurred in the mediation, he suggested they reach an agreement and then provide it to the Mediator. However, thereafter and throughout the process there are instances of H expressly suggesting and encouraging W to raise different matters with the Mediator. W was able to contact the Mediator when she wished. I find that she was fully engaged in the process, attending and corresponding directly with the Mediator. The emails establish W was keen to move forward and sign the agreements. I do not accept that the Mediator’s role was primarily to “proof-read”.

130.  Where parties have engaged an experienced family mediator over a long period of time who has certified the mediated agreement was entered into, in the terms that the mediator saw fit to certify, it is not for the court to second-guess the conduct of the mediation. Details of the procedure followed, the number of occasion one or both of the parties attended before the Mediator or the extent to which the Mediator drafted or redrafted any particular clause in the FMA should not be an issue here. I am entirely satisfied that the parties participated in a mediation with an experienced family mediator, that the FMA is an agreement reached through mediation, entered into with the assistance of the Mediator and that the FMA was the product of a properly conducted mediation.

131.  Mediation is an important component of the Hong Kong legal system. The courts have long supported alternative dispute resolution. The CJR implemented procedural reforms included making mediation an integral part of the civil justice system. Family jurisdiction reforms have incorporated mediation. The importance of mediation cannot be overstated. The many benefits are well known. In the family context parties coming to an agreement themselves rather than having it imposed by the court enhances the chances of them being able to move forward constructively in their new circumstances. This is vital in family disputes where children are involved. I appreciate that in this hearing W only disputes the FMA, not the CMA. The fact of litigation inevitably causes tensions and must have an adverse impact on relationships. That is the case here. Costs savings can also be substantial. In principle, absent vitiating factors or a change in circumstances, the court should support the mediation process and uphold mediated agreements.

(2) Safety-net and change of circumstances

132.  Secondly, W submits that the safety-net is engaged due to unfairness and change in circumstances. Her monthly income is now HK$30,000. She asserts the disparity in their financial resources/ income is ever-widening, with H spending up to HK$700,000 per month while she struggles to make ends meet and maintain the status quo for the Children. This significant change in circumstances renders enforcement/ performance of the FMA wholly unfair. She could not afford a similar standard of living for the Children on her income. I accept that there is a difference between W’s present circumstances and those anticipated at the time of the FMA, which are addressed below.

133.  Mr Li submits that if the FMA is enforced, this would produce the scenario loathed by the Court of Final Appeal, namely “one partner would be left in a predicament of real need while the other enjoyed a sufficiency” because:

(1) Under the FMA there is no periodic payment. There are 2 lump sums, payable by installments, totaling HK$3.72 million. Her current income is HK$30,000. There is no evidence she will receive a bonus or that with a bonus she will be able to sustain both herself and the Children. H admitted the bulk of W’s Part 4.1 and 4.3 expenses to be reasonable. Her Part 4 expenses are ~HK$184,000 excluding rent. Her income is far short. W seeks Children maintenance of ~HK$115,000. As to the balance, she will need the capital division to make ends meet. On a HK$115,000 budget HK$3.72m will last only 32 months. With Children 12 and 8 years old she could not sustain them to maturity. In the context of this case this is unfair.

(2) The FMA will produce a ~34:66 split in H’s favour. W’s position is only 50:50, there is no factor justifying a departure from equal division. Given the unfairness the “safety-net” should be engaged.

134.  H notes that W again reveals her black-and-white thinking. Should the court hold that W would be left in a predicament of real need, the engagement of the “safety-net” would not lead to a 50:50 split, but instead only a distribution which meets her needs relative to her earning capacity. He also believes that she is downplaying her earning capacity.

ISSUE 1. What weight should be accorded to the FMA? (1) vitiating factors and (2) terms unfair and the safety-net

135.  The general proposition is that formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement. I must proceed on the basis that the FMA is ‘presumptively dispositive’, the burden being on W to show good and substantial cause why the FMA should not be respected, and recognising that the scope for so doing is one directed at an injustice in the circumstances in which the FMA came to be concluded or in clear injustice occasioned to W by reason of events unforeseen at the time of the FMA were the FMA to be enforced to its letter.

136.  Mr Li maintains that, first, the vitiating factors of non-disclosure, misrepresentation, and undue pressure undermine the FMA under contract law and equity and secondly, that the unfairness of the FMA in substance – manifested in the resultant financial imbalance and the context under which waivers were signed – will engage the “safety-net of unfairness”. It fails to pay any regard to W’s contribution to the family depriving her of the primary marital acquest. His case is said to be untenable, whether in the context of family law or contract law. No weight would be accorded to the FMA in the section 7 exercise. Mr Li says that with the benefit of hindsight, the deal under the FMA is undeniably prejudicial to W. However, the court should be slow to undermine such agreements simply because it may be said that “with the benefit of hindsight they should have done it differently”: L v C per Stock JA at [42].

137.  H points out that this is not a case involving parties of different levels of education or a material disparity in age and experience; both parties are very well educated with extensive experience in advising high-net worth individuals. They are, in the words of Stock JA (as he then was) in L v C, “astute business people”. W had the benefit of legal advice over the period leading up to the FMA. Further, they expressly agreed that there was no need for the extensive investigations into each other’s finances – this is not a short marriage, and W all along knew the nature of the X business. This is not a case where H hid that business from her - she knew how the companies which comprise the business operate. I accept those facts. Mr Barnes submits that there is a material difference between one party hiding assets from the other party, which would be potentially constitute a “vitiating factor” and the situation here, where although the X Group was not formally valued at the time of the FMA, the nature and extent of the business was well known to W. I accept that distinction.

138.  For the reasons above I find that W has not established any of the vitiating factors alleged, save one. W estimated the value of the X Group in 2021 before signing the FMA. Mr Li submits her figure may have influenced her decisions. She had said that if she wanted more assets there were other things she would do. She was not sure of the value at that time, given she said “if” that were the value. She knew H was adamant that the business was difficult to value and that he had suggested the AB properties and CD property combined were more than half the value of the business, not that they were of equal or greater value. If her value was materially below the value at that time this is material information that was wrong. The X Group was not valued at that time. Mr Barnes cautions that were it valued then the valuation may have been very different. Subject to my finding on the value of the X Group on the valuation date 31 December 2022 I accept that the W may well have been under a misapprehension on a material matter. Her estimate of value was not an express reason why she signed the FMA but it likely played a part in her decision. SPH v SA at §33 held that “an agreement would carry full weight only if each party has entered it of his or her own free will, without undue influence or pressure, having all the information material to his or her decision …”.

139.  The issue is then whether that ought to vitiate the FMA such that the court should wholly disregard it? Alternatively, whether the FMA should still be given weight and, if so, to what extent? H’s alternative case is that “substantial weight” ought to be given to the FMA.

140.  While L v C finds analysis in terms of weight inappropriate other authorities use the term. Provided it is understood in accordance with the proper principles the word is a convenient shorthand. Where authorities do refer to applying weight to nuptial agreement and consider the conduct of the party seeking to uphold an agreement the type of conduct is assessed and the factors considered necessarily vary. Here H’s conduct alleged to be a vitiating factor is the failure to correct the W’s estimate of the value of the X business in circumstances where the business had not been valued. In my view that falls far short of the sort of egregious unconscionable conduct seen in some of the authorities that has required the courts set aside agreements. I find that the facts do not establish a vitiating factor requiring the FMA be wholly disregarded. The terms of the FMA should be upheld as far as is fair. The terms were determined by the parties who are best placed to know how their assets should be divided in their circumstances. They determined that the H was to continue with the business, it shall fund the Children’s education and he shall take responsibility for their education expenses. On the division the business would be on his side while she would have the AB properties. They would each be responsible for the Children’s other expenses while in their care. The terms agreed are not simply financial, they impact on how they organise their lives going forward. In general terms that structure should be upheld.

141.  In my view the court should not wholly set aside or disregard the FMA in determining the ancillary relief in these proceedings. I must take into account all the circumstances in order to ensure there is a fair outcome. Even where there exist no circumstances surrounding the making of the agreement that should vitiate it the court has a statutory duty to and it is incumbent upon the court nonetheless to examine the present condition of the parties to determine whether justice demands a different dispensation. Therefore, I shall determine Issue 1 “what weight is to be given to the FMA” under Issues 4 and 5 below.

Issue 1 (3) H did not perform the FMA

142.  W now says that H did not perform the FMA:

(1) Under Clauses 24 and 25 FMA H was to pay lump sum instalments starting from August 2021. He did not.

(2) Under Cl.19(f), the AB properties were to be W’s absolutely. H was to pay the rental income generated. W. This was not done and W had to pay the management fees for 1 of the properties. H says that the rental income was used towards W’s FMH rent – but this is not in the FMA or any separate agreement.

(3) Under Clause 20(e) H was to take over the CD mortgage repayments registered in their joint names. He did not. W has serviced this mortgage.

(4) Under Clause 22, H was to pay 50% of the sale proceeds to W upon sale of the Block Chain Investment, seeking her consent prior to sale, but he did not. H says he sold in February 2022 “to pay for his expenses”. Under cross-examination, H agreed W’s entitlement to such sale proceeds should be ~USD15,000 or HK$117,000.

(5) Under Cl.16, H was to pay for all of the costs of one domestic helper to attend to the Children. He did not.

143.  W relies on those matters as acts inconsistent with the FMA which are repudiatory breaches so cannot now seek to enforce the FMA.

144.  H explained that the terms of the FMA are not yet implemented because W is trying to get out of it. In the circumstances he has held off fulfilling his FMA obligations until W confirms she agrees to honour it. It is unfair for her to pick and choose which terms she wants implemented. If W is under a mistaken belief that he has hidden assets, he does not. He has not transferred ownership of the 11A and 11B AB properties pursuant to the FMA because W does not want to be bound by it. She cannot have it both ways. If W had implemented the FMA he would have implement all the terms immediately.

145.  Pursuant to Clause 20 of the FMA H retains the CD property. He was entirely open and transparent in his attempt to sell the CD property and it was at a fair price. One reason for the sale was so he could have the proceeds of sale paid to W under the FMA.

146.  W does not believe he wanted to raise money for her even before an Order was made, given (1) how much he draws, and the X Group is able to pay him and (2) that suing W for her performance will only cause her to incur legal costs. Further, he failed to perform the FMA even before W reneged. H explained his default before May 2022, prior to W reneging or first indicating her renouncement of the FMA, by saying that the terms are to be performed upon the FMA being made an order of the court. However, the FMA does not so provide and Clauses contradict this. If the FMA was not to take effect until made an Order of the court, then why did he issue 2 sets of HCMP to force W into the sale of the CD property? Given his non-performance, it would be a double standard for him to now force W to adhere to the terms of the FMA.

147.  After the FMA was signed, on 16 July 2021 W emailed H asking which lawyer he wanted to instruct to file for divorce and if he wanted her to get in touch with them or he preferred to. W was keen to finalise the divorce. H contacted a solicitor Mr Chan of ECTW and on 2 August 2021 he emailed about documents, copying W. On 8 August 2021 W emailed Mr Chan for an update on progress. Emails between H, W and Mr Chan on the joint application followed. These included W on 12 September 2021 sending H her comments on the draft consent Summons saying “All the content is based on the Agreements and what we agree regarding when the payment of maintenance and rental of the AB start.” W was still content with the FMA and taking steps to finalise the Consent Summons. On 13 September 2021 she emailed referring to the agreed terms and whether undertakings or a separate order was needed. Emails on that followed. Mr Chan confirmed that the draft Consent Summons was based on the 2 mediated agreements. W responded on 29 October 2021, including on the draft Consent Summons. On 15 November 2021 she emailed Mr Chan “... can we please finalise the documents this week or next so that we can have them signed and file the application the week after?” At that point she still wanted to move forward with the FMA. On 29 November 2021 her reply to Mr Chan on, inter alia, the Consent Summons included “the content is all in line with what’s agreed in the mediated agreements and agreed afterwards”. W sent a chaser on 17 December 2021.

148.  I find that W’s emails, even thereafter, do show that she wanted to move forward and implement the FMA and the CMA. In addition to being involved in trying to finalise the documents for filing W was happy to continue to work with H, as seen in September 2021 emails and refer new cases to XWL. W was not taking issue with failure by H to implement terms prior to the Consent Summons, as is her present case.

149.  I find that W’s conduct after the FMA was executed shows she was eager to have both the FMA and the CMA made orders of the court. W did not rely on failure by H to implement the terms of the FMA to get out of it. Mr Li also relies on contract law principles to submit H repudiated the agreement and the W accepts that repudiation. W did not “accept” any repudiation by H in the months following the signing of the FMA. W by conduct affirmed the FMA. So in contract terms it remained open for each to perform. When she intimated she disputed the FMA she did not rely on his failure to perform the terms as the basis or purport to accept his repudiation. However, this is not a commercial or purely contract case and the proper matrimonial principles must be applied.

150.  In answer to Issue 1 (3) as framed by W, I find that H’s non-performance of the FMA after signing did not constitute a repudiation of the contract which W is now able to accept terminating the contract. H’s actions after the FMA was signed that were not in accordance with the FMA terms or any failure to abide by the terms timeously is not a basis to find that the FMA is unenforceable or should be given no weight.

Expert valuations

151.  Evidence of 4 single joint experts (“SJE”) was adduced, 2 of whom were not called as their appraisals were agreed. There is no dispute on the value of the (1) landed properties, and (2) valuables. Those valuations are:

(1) Properties, SJE Reports of Pamela Lam of Centerline, (a) AB properties total value HK$17.94m or HK$15.99m net of mortgage; (b) CD property HK$3.47m or ~HK$2.18m net.

(2) Watches and jewelry, SJE Report of Simon Sham, total value HK$944,500.

(b) Valuation of private companies

152.  The valuations of the companies are in dispute. The SJEs who valued the companies and gave evidence at the trial are:

(1) Mr Jerome Mc Donagh (“JM”) of Matson Driscoll & Damico, two reports, dated 22 November 2023 and 4 March 2024, valuing the X group of companies, SSL, OSS and SCL.

(2) Mr Ferry Choy (“Mr Choy”) of Sirius Corporation Services, report dated 14 March 2024 valuing SL, W’s consultancy business.

Law - valuation of companies

153.  It has been said that the exercise of attributing a value to a private company or group of companies for the purposes of an ancillary relief award is not an easy task. Moylan J addressed the issue in H v H [2008] EWHC 935 (Fam) at [5] and remarked:

[5] The experts agree that the exercise they are engaged in is an art not a science. …The purpose of valuations, when required, is to assist the court in testing the fairness of the proposed outcome. It is not to ensure mathematical/accounting accuracy, which is invariably no more than a chimera. Further, to seek to construct the whole edifice of an award on a business valuation which is no more than a broad, or even very broad, guide is to risk creating an edifice which is unsound and hence likely to be unfair. In my experience, valuations of shares in private companies are among the most fragile valuations which can be obtained.

154.  In one of the leading English cases Versteegh v Versteegh [2018] EWCA Civ 1015; [2019] 2 WLR 399 Lewison LJ referred to H v H and observed:

[185] The valuation of private companies is a matter of no little difficulty. In H v H [1008 EWHC 935 (Fam), [2008] 2092 2029 Moylan J said at [5] that ‘valuations or shares in private companies are among the most fragile valuations which can be obtained’. The reasons for this are many. In the first place there is likely to be no obvious market for a private company. Second, even where valuers use the same method of valuation they are likely to produce widely differing results. Third, the profitability of private companies may be volatile, such that a snap shot valuation at particular date may give an unfair picture. Fourth, the difference in quality between a value attributed to a private company on the basis of opinion evidence and a sum in hard cash is obvious. Fifth, the acid test of any valuation is exposure to the real market, which is simply not possible in the case of a private company where no one suggests that it should be sold. Moylan J is not a lone voice in this respect…

155.  The relevant principles relating to valuation of companies in the context of ancillary relief have recently been examined by the English Family Court in HO v TL [2023] EWFC 215, per Peel J, 1 December 2023. Mr Barnes relies in particular on the following points made at paragraphs 20-27:

(1) It is for the court to determine the value, not the expert.

(2) Valuations of private companies can be fragile and uncertain (Versteegh).

(3) The reliability of a valuation will depend on a number of factors, including, whether there are applicable comparables (H says here there are none) and a realistic market for sale (H says here non-existent), and whether the assumptions underpinning the valuation are seriously in dispute (H disputes them).

(4) In practice, the choices for the court will be to (i) “fix’ a value, (ii) order the asset to be sold, or (iii) divide the asset in specie. Neither (ii) nor (iii) are suggested by the parties.

(5) The appropriateness of the orders, depends on the facts of the case.

(6) There is a difference in quality between copper-bottomed assets and illiquid/ risk-laden assets, which assists in guiding the court’s award and division of assets. The court has to assess the weight to place on the value for the purpose of determining the award. This applies both to the amount and the structure of the award, issues which are interconnected, so that the overall allocation of the parties’ assets effects a fair balance of risk and illiquidity between the parties (Moylan LJ in Martin v Martin [2018] EWCA Civ 2866 at [93]).

(7) The value of a company must properly reflect its illiquidity and again, this is a matter which is to be determined by the court, having regard to the views of the expert.

156.  Mr Barnes submits that the last point is of particular importance in considering how to deal with illiquid corporate assets. At paragraph 27(iii), Peel J said that:

iii) The court might, in the right case, take both the valuation, which includes an accountancy discount, and apply a further court discount … Moylan LJ in Martin (supra) at para 94 considered that this would not be double counting; ‘ … this is not … to take realisation difficulties into account twice’ It will depend on the case…

157.  Mr Barnes refers to Martin for recent guidance from the English Court of Appeal on the issue of how best to approach the division of assets which involve a private business or company, especially where there is no suggestion by either party that it be sold for the purposes of the division. Moylan LJ, with whom the other 2 members of the Court agreed, considered submissions of the husband (appellant) that Mostyn J at the first instance had adopted too simplistic an approach in accepting the submissions for the wife that there was no material distinction between a corporate asset and other more traditional “copper bottomed” assets, other than the “sound of the auctioneer’s hammer”. Moylan LJ began this part of his analysis by acknowledging the truth of Lewison LJ’s cautionary words in Versteegh in assigning values to business and corporate assets, commenting at [92] that, “valuations of private companies can be fragile and need to be treated with caution. Further, it accords with long-established guidance and, I would add, financial reality.”

158.  In Martin Moylan LJ continued at [93], asking “How is this to be applied in practice?” Answer:

[93]… The Court has to assess the weight which can be placed on the value even when using a fixed value for the purpose of determining what award to make. This applies both to the amount and the structure of the award, issues which are interconnected, so that the overall allocation of the parties’ assets by application of the sharing principle also effects a fair balance of risk and illiquidity between the parties. Again I emphasise, this is not to mandate a particular structure but to draw attention to the need to address this issue when the court is deciding how to exercise its discretionary powers so as to achieve an outcome which is fair to both parties. I would also add that the assessment of the weight which can be given on a valuation is not a mathematical exercise but a broad evaluation exercise to be undertaken by the judge.

[94] I would add that this is not, as Mostyn J suggested, to take realisation difficulties into account twice. Nor, as submitted by Mr Pointer, will perceived risk always be reflected in the valuation. The need for this approach derives from the fact that, as said by Lewison LJ, there is a “difference in quality” between the value attributed to a private company and other assets. This is a relevant factor when the court is determining how to distribute the assets between the parties to achieve a fair outcome.

[95] It might be said, as Mr Marks referred to in his submissions, that it would be unfair to award one party all the “upside” in the event that the valuation proves to be an under-estimate. That, however, is intrinsic in an asset being volatile. There is potential for the asset to increase as well as decrease. … As Bodey J said in Chai v Peng, at [140] “It is a familiar approach to depart from equality of outcome where one party … is to receive cash, while the other party … is to retain the illiquid business assets with all the risks (and possible advantages) involved.

[96] … it is all about weight and balance. Not placing undue weight on a valuation and seeking to achieve a fair balance between the parties in the allocation of the assets.

159.  Moylan LJ at [97] explained that it was the “use which is made of such valuations which is of crucial importance”. Having concluded at [138] that Mostyn J’s description that the only significant between the company and parties cash assets was “the sound of the auctioneers hammer” was wrong, Moylan LJ noted, for emphasis, that liquidity was “often … a complex issue of considerable importance [requiring] specific analysis and determination”: at [140].

160.  Mr Barnes submits that it will be a matter for the court to consider carefully whether the SJE’s estimate as to the value of X is to be attributed as a part of H’s assets, especially given that H has no intention of disposing of it. Reliance is placed on TL v SN (Ancillary relief) CACV 196/2009, 9 December 2010 at [63-68] where the Court of Appeal declined to interfere with the first instance judge’s decision not to include the husband’s interest in a company, O Ltd, where there was no suggestion by the wife that the company should be sold or transferred by any order of the court, nor any claim by the wife of a beneficial interest in the company or its shares. The judge had held that the relevance of the valuation of the company was “in the context of what O Ltd can generate by way of income, accommodation and expenses for the husband and significant dividends”: at [65]. The Court of Appeal held that the judge had not ignored the value of the company, and had specifically taken it into account as a financial resource from which the husband would fund the lump sum award the judge had found was appropriate but only by reference simply to a ‘snap shot’ valuation of the shares: at [67]. Similar approaches, namely to decline to include in the computation of the assets, an attributed value of a business, but to consider it as an income resource, were taken in CCYM v PWH FCMC 1544/2013, 2 February 2015, and CSY v CPK (Ancillary Relief) [2019] HKFC 129.

JM Expert report

161.  In valuing the X Group JM relied on the definition of Fair Market Value, essentially being the price expressed in cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and both have reasonable knowledge of the relevant facts: International Glossary of Business Valuation Terms. JM valued the X Group as at 31 December 2022 (“the Valuation Date”). JM’s summary of valuation of the Fair Market Value of the X Group under the asset approach and income approach are as follows:

(1) The value of the X Group for the asset approach is HKD11,156,920.

(2) The value of the X Group for the income approach ranges from HKD44,061,629 for a 17 year projection with an 18% discount rate to HKD34,416,039 for a terminal value with a 23% discount rate.

(3) As the income approach values are all higher than the asset approach values, the income approach would be appropriate.

(4) The 17 year projection period assumes H runs the X Group until he retires at age 65. A terminal value calculation assumes that H could execute a sale of the X Group and his role be taken over by suitable replacement.

(5) It would be riskier for the X Group to find a replacement than H carry on his role. There would be more risk that the replacement may not have the experience or ability to properly replace H. Therefore the terminal value calculation would have more risk, hence the discount rate of 23%. For H remaining in his role it would be less risky so the discount rate is 18%. When concluding what would be the Fair Market Value of the X Group, it will depend on how likely H could execute a sale of the X Group.

(6) H has not had any offers for the purchase of the X Group, and when he has had discussion about acquiring the business concerns have been raised about him being the key person, based on the documents provided.

(7) Based on JM’s analysis it appears less likely H could execute a sale of the X Group, though it is still a possibility. JM determined the Fair Market Value of the X Group to be HKD40,846,433 or approximately HKD 40,846,000.

(8) The value is based on a weighted average, taking a 2/3 weighting of HKD44,061,629 for a 17 year projection period with an 18% discount rate and a 1/3 weighting of HKD34,416,039 for a terminal value with a 23% discount rate.

162.  In JM’s opinion the X Group has a value of ~HK$40.85m by the application of the “Income Approach”. JM’s analysis also considered the “Asset Approach” and the “Market Approach”. Mr Li said that JM’s conclusion is that the other approaches are unsuitable due to the nature of X’s business.

163.  I find that JM did address the Market Approach. Ideally he would use all 3 approaches. The Market Approach is considered when suitable comparable companies with observable values can be identified. The comparable business should reflect the nature of the target company’s business and be affected by similar risks and business drives. In order to conduct a market based approach valuation suitable transactions need to be identified. JM conducted research but was not able to find companies that would be appropriate as a comparable of the X Group. He identified 2 possibilities but concluded one was not appropriate to use as a comparable and he had no financial results for the other transaction. Therefore, he was not able to conduct a market approach valuation of the X Group.

164.  JM confirmed, and I accept, that H is the only person in the Group that is in a client-facing sales role, and the revenues of the X Group are derived from his contacts. H does not receive a salary from the X Group and for the purposes of the valuation JM considered what a market remuneration would be for H.

165.  The consolidated profit and loss statements of the X Group show, inter alia, that the total turnover for the year 2020 was HKD23,524,790 and for 2021 HKD27,179,951. While the total profit for the year 2020 was HKD136,651 and for the year 2021 HKD1,180,080.

166.  W invites the court to adopt JM’s valuation of ~HK$40.85m. She emphasises that the valuation was after discounts for: (1) company specific risk of 5% and 10%; and (2) lack of marketability, at the rate of 12.5%. Further, in-built to the valuation are 2 contingencies: (1) if X business is sold, and (2) if it will not be sold.

H’s case on valuation of the business

167.  Mr Barnes addressed the way in which the X Group is to be valued and treated for the purposes of a fair division of assets. He relies upon Mr Li’s confirmation that W does not challenge JM’s approach or methodology to submit that therefore the following derived from JM’s reports are not in dispute:

(1) The most accurate indicator of a value of a company is by reference to comparables which are either listed, or private companies which have been acquired or sold. This has not been possible.

(2) H is the linchpin of the business – the key person for all client relationships and management. X relies entirely on his personal contacts and business acumen, and without him, it would not exist. He is the only one with a client facing sales role and the revenues of the X Group are derived from his contacts.

(3) It will not be simply a matter of “finding a suitable person to replace” H in the event that X Group was sold because when relationships of trust and confidence have been built up with high and very high net worth individuals, it can hardly be assumed that they would be willing to continue with the X Group under new management, without H’s continued principal role in handling their affairs.

(4) An assessment based on an income approach over 17 years involves multiple assumptions stretching out over a period into the future considerably longer than the time that the business has been in existence. Other valuation assumptions are that H would be willing to remain in the business (he would not) and that a hypothetical buyer would be prepared to pay sufficient remuneration as suggested by JM, including a very significant proportion of the Group’s revenues.

(5) As an experienced accountant JM acknowledged different valuers even adopting the same methodology, may arrive at wildly different results (Versteegh). This underlines the fact that it will be for the court to arrive at its conclusion as to value of the X business, taking into account JM opinion but not being bound to accept it at face value.

168.  Mr Barnes submits that this is a case on all fours with his cited cases where the court declined to include the value of the companies in the husband’s assets. This is precisely why H objected to the valuation, as he knew that it would not assist the sensible resolution of the case. He has no intention of selling X, or more accurately asking the Trustee to agree to it being sold, and in any negotiations for a theoretical sale, he would make it clear to a prospective purchaser that he would not continue in the business as an employee.

Income method assumptions

169.  The income method chosen by JM involves multiple assumptions and contingencies, including the following:

(1) Simple prognostication. The Terminal Value and 17 year projection period involves a prediction of earnings into the future, the later far into the future. JM said it “is more difficult to project capitalized growth in future in general”. H considers that an understatement.

(2) Projected growth rate. JM referred to IMF GDP data projections. JM accepted these projections could be impacted by global and regional events: wars, foreign elections, and there “could be positive or negative growth rate”. Mr Barnes observed that the one certainty is that there will be such events in the next 17 years which will affect the region/global economy.

(3) Assumed business continuation. Implicit in JM’s 17-year projection is the assumption that the X business will continue as it is now (as a 12-year old business) for a further 17 years. There is no obvious successor to H as the key man; no certainty that he will continue to command client loyalty; no guarantee of his continued physical/mental fitness, as a man who has just turned 50, until he is 65. JM accepted that he was looking at two ends of the spectrum stating:

“When I looked at values, I considered 2 scenarios. One is as at valuation date, could H sell the business? And whether he could keep it running to 65. Those are quite extreme scenarios you could say. Two extremes, I addressed in my letter a week after this report. Concerning the two scenarios – what was the balance of probabilities? H had said it was quite difficult to find a buyer. …It makes sense it might be more difficult to find a buyer, though I don’t say impossible.”

The discounting factor

170.  The next step is to apply a discount to present day capital value of future earnings. There are multiple discounting components, which JM included in his analysis by application of the Capital Asset Pricing Model (“CAPM”). Depending on the selection of the value of the “beta” and “X” factor, namely the company specific risks, in this case the key man risk, the conclusion on value could change significantly.

171.  Three different scenarios and calculations to illustrate this point had been prepared and sent to JM by H’s solicitors on 15 April 2024, the day before he gave evidence (“the Tables”). Mr Li says this was an ambush on the eve of trial, but that in any event JM still did not accept as applicable/appropriate the alternative propositions. H denies the allegation of ambush. During oral opening submissions Mr Li indicated that he might object to the Tables provided to JM and reserved his position. When they were put to JM and he was questioned on them the possible objection was not made, so W cannot now take a point that JM or she was “ambushed’. JM had a little time to consider the Tables and, aside from some rounding differences, said they were accurate calculations with the injection of different discounting parameters.

172.  Scenario 1 was to consider how the valuation might change with the adoption of a different “beta”. Beta is a measurement of the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests the stock is more volatile compared with the market, and a beta less than 1.0 indicates a stock with lower volatility. JM referred to data sets compiled by Professor Damodaran of NYU and those relating to the Insurance (Life) Industry for Emerging Markets.

173.  JM selected the “unlevered beta adjusting for cash”, as X Group is currently debt-free. It was put to JM that a potential buyer for the X Group, the theoretical Company Y, might have plans for expansion to be funded by the taking on of debt and that Company Y might look at achieving an appropriate debt/equity ratio for the company. JM conceded this was possible. If so Company Y may very well want to consider appropriate capital restructuring of its new acquisition and such consideration would disagree with the application of a beta which reflects the current debt-free status of the company and the future capital structure of the business. JM agreed that if instead a different beta of 0.86 were to be used then the valuations would change. A high beta of 0.86 would yield different estimates of values set out in the Tables. The amount was HK$1.3m. Applying JM weighting at paragraph 4.86 of his Report this results in a total value of HK$39,150,212.

174.  Scenario 2 put was to adopt a different discount for “company specific risks” – the “X factor” of the CAPM. Mr Barnes submitted that JM’s estimate for this is too low, and significantly so. The hypothetical buyer Company Y would consider that a 5-10% discount is insufficient recognition of the risk inherent in acquiring a business the ongoing success of which is wholly dependent on one man. Company Y would likely be considering alternative investments, including more conservative ones. A sensible investor considering spending tens of millions on such a business would very likely regard keyman risk as worthy of a discount greater than the JM figure. JM defended this part of his opinion by suggesting that “other valuers may also think there is no keyman risk”. Mr Barnes submits that it is highly unlikely that a competent valuer would not apply a keyman risk discount. In my view at that point JM was trying a little too hard to counter propositions put by Mr Barnes. I would accept that submission of Mr Barnes.

175.  Assuming a higher, and what H considers a more realistic company specific risk of 15% is applied, then the value becomes a total of HK$33,657,653. A higher keyman risk of 20% is not out of the question and would drop the valuation below HK$30m. JM accepted that if both figures were changed, the higher beta and the higher keyman risk, the figure would be lower still.

176.  Scenario 3 put was the possibility that H might cease working in 5-years time, with a 20% loss in sales revenue, a significant possibility. That results in a total of HK$29,381,782. Mr Barnes submits that these are but a few illustrations of how the valuation might change significantly with a modest adjustment to the discount rates. Any value placed on the X business is highly theoretical, for the simple reason that there is no ready market for it.

Wife’s reply on valuation of X Group

177.  Mr Li submits that under cross-examination when JM was presented with H’s Tables JM did not accept the alternative propositions were applicable/appropriate. First, JM’s use of the Damodaran datasets were limited to “the beta for the life insurance industry for emerging markets” and “Levered and Unlevered betas by industry in Emerging markets as at January 2023”. JM did not endorse the broadened use of the Damodaran datasets as suggested by H. Secondly, JM disagreed with the modified underpinnings of H’s calculations, of the Beta figure and the percentage value for the discounts which H used. All that JM agreed was the arithmetic accuracy.

178.  H’s proposed values therefore lack factual and evidential basis, the only expert disagreed with them and there is no alternative expert endorsement of H’s calculations. H put hypotheticals. One was that, “there will be such events in the next 17 years which will affect the regional/global economy”. He would have the court take judicial notice. Even if assumed true, it is not known if such impact will be positive negative or neutral. The financial documents show that the business of the X Group grew amidst COVID. Another is that “H might cease working in 5 years time”. There was no such evidence, but this is what variation applications are for. The hypothetical possibilities are endless. Further, JM has already considered the variations/ alternatives scenarios he found relevant and applicable and applied the appropriate discounts. His expertise is to be respected and adopted.

179.  W submits first, JM was completely unshaken on his valuation of the X Group at HK$40.85m, whether pursuant to H’s challenges leading to the 2^nd Report “I have not changed my opinion and my opinions stated in the [1^st Report] do not require amendment” or under cross-examination “I still stick with my current opinion”.

180.  Secondly, whilst H does not agree with JM’s valuation, there is no alternative expert evidence opining a different value of the X Group. There is no evidential basis for the court to depart from JM’s valuation. In Daimler AG v Helge Herbeert Leiduck [2014] 3 HKLRD 56, Recorder L Wong SC (as she then was) stated, in relation to challenge to SJE on an application to adduce expert evidence from another expert, at §41:

… expert evidence is, by nature, difficult to effectively challenge simply by cross-examination of the SJE without the support of a different opinion, backed by reasons, from another expert. Without pre-judging the matter, in the absence of additional expert evidence to the contrary, it is much more likely that I would attach the greatest of weight to and accept Dr Forstl’s assessment.

181.  W says that there is no basis to challenge JM’s valuation of X Group. H’s remarks have no expert backing. All of H’s contrary opinions to that of JM are prima facie unreliable for lack of expertise and for his motive to downplay his resources to defeat W claims.

182.  JM 1^st Report was available in November 2023. H knew to make challenges. His queries resulted in JM 2^nd Report. H must have known another expert would produce a similar valuation so no leave was sought to adduce further expert evidence. H therefore has no positive case on what the value of X should be. H is thus barred from taking the point of an alternative figure(s) as proffered.

183.  Thirdly, in cross-examination H failed to put an alternative value/figure to JM for his endorsement or dissent. Mr Li says is not open to H to now run a case proposing a different value. This would be a Brown v Dunn point. It is not open to the court to adopt any valuation now arbitrarily proposed by H.

Illiquid

184.  Mr Li submits that JM’s valuation of X companies was by the Income Approach and not the Market Approach, so whether “there is no ready market for X and that it is profoundly illiquid” is irrelevant. W’s reply to H’s illiquidity case, is that H has never raised the matter of illiquidity before. This is a factual matter. H should adduce evidence that there is no market for sale but did not. The illiquidity case is untenable for want of evidence. H relies on his own choice not to sell the X business. This “predicament” of being left with the illiquid asset is self-inflicted. There is no disadvantage to holding this purported illiquid asset. It is the most valuable marital acquest. The assertion of illiquidity is to keep these income-producing assets for himself and to justify diminishing W’s claims by a departure from equal division. The recent trajectory, multiplying profits, is indicative the X Group will only become more valuable. No departure from equality is justified.

185.  Most critically, JM stood by his valuation. As a sole expert in the matter, his valuation is to be the proper figure. W maintains that the valuation of the X Group is “discounted’ as only 7 companies out of 30+ have been valued and the JM valuation of ~HK$40.85m is merely a baseline. However, she does rely on the JM valuation.

Husband’s questioning of JM

186.  Expert witnesses are admitted to give opinion evidence on a given set of facts established by other evidence or on assumptions. Alternative facts or assumptions may be put to an expert to seek the expert’s opinion on the basis of those alternatives. An experts assumptions may be challenged. In my view it would be unfortunate if every time a single joint expert were appointed a party felt bound to apply to adduce evidence from another expert because they may not be permitted to question the SJE on alternative facts or assumptions or to challenge the SJE’s opinion. Mr Barnes was entitled to put the alternative scenarios to JM and seek his opinion on those alternatives.

187.  Mr Barnes submits that W has presented her case on asset division in absolute terms, in effect that “JM’s dollar valuation of X is to be accepted therefore it is to be regarded as a presently realisable and divisible matrimonial asset in pure dollar terms.” Indeed, all assets are equally liquid, or if they are not, this is H’s fault.

188.  H considers that W’s Closing misunderstands his case on the valuation of X. The scenarios put to JM were not put to say that JM should have valued the company at a different figure, but to underline the point that such valuations are inherently uncertain and problematic: Versteegh at §89+, §185. I find that JM did agreed that different valuers applying the same methodology, formulae and relying on the same materials, might arrive at different valuations – “You get 10 or 20 valuers, 10 to 20 values, depending on their research and what assumptions they make”.

189.  H’s case is not that the court is precluded from accepting JM’s valuation to determine the total asset pool. His case is that if a value is to be ascribed to X, then this must be accompanied by an acknowledgment that this is a highly illiquid asset, and that if it is sold, it will have significant impact on the parties respective duties towards maintenance of the Children. W cannot ‘have her cake and eat it too’. She cannot expect in the event of an award of 50% of X, to then require H to also bear the vast majority of the Children’s expenses. He will, in the event of this hypothetical sale, be an employee, as she is.

190.  Mr Li submits the principles relied upon by H are not applicable and the cases cited are either non-domestic or of a different factual scenario. His reply HO v TL [2023] EWFC 215 is that:

(1) While ultimately it is for the court to determine value of companies, the value to be assessed must have regard to and place appropriate weight on, the expert’s evidence.

(2) There is no domestic application of HO v TL nor of the “court discount” explained at [27]. The court did not apply any “court discount”. The key factor considered for its application was illiquidity; however, this factor is irrelevant here given JM did not value the X Group on the Market Approach but on the Income Approach.

(3) H has cherry-picked only factors which are favourable to his case leaving out other factors considered, including (ii) how ‘niche’ the business is, (viii) the volatility or otherwise of the figures and (ix) the reliability, of forecasts at [23]. Particularly damaging to H’s case are:

(i) Factor (iii), whether the business is to be valued on a net asset basis or one of the recognised income approaches (such as EBITDA or DCF), JM stated that he had considered other valuation bases/ approaches and in his opinion, the NAV Approach is inapplicable. There is no basis to fault his choice of the Income Approach.

(ii) Factor (iv), the extent of the parties’ interests, and their level of control, H admitted to making operational and business decisions for X Group, in addition to being the sole director and shareholder of X companies and Chairman and director of X Trustees. H has full control.

(iii) Factor (v), the extent of third parties interests and (vi), the relevance of shareholders. X is held ultimately by the X Trust but the extent of H control on the operational level and also the application of its funds in context, the existence of the X Trust does nothing to reduce the extent of his financial resources.

(4) The HO v TL factors H says are helpful to his case in fact are not. The lack of comparables is more relevant to the Market Approach, which is not adopted by JM. A lack of comprable is therefore irrelevant. It is H’s evidence that it will not be sold to say a “realistic market for sale” is “nonexistent” and X is therefore “illiquid’, and that in turn should affect the court valuation of the X Group is wrong. It is H’s choice to make/ keep it illiquid therefore, whether there is a market for sale is irrelevant. Plus, JM has assessed the valuation both (1) on the assumption that the X Group would be sold, and (2) that it will not. Discounts have already been applied to cater for both scenarios. JM valuation is a weighted average for this purpose. W does not accept the assumptions underpinning the JM’s valuation are disputable.

191.  Mr Barnes points out that it is unsurprising the Hong Kong Courts may not yet have considered HO v TL, given it was decided in December 2023. Now this court is to consider the case. He submits that:

(1) It cannot be the case that the Family Court should value assets differently because it deals with them in a domestic context.

(2) The cases do not confine the principles on the court’s approach to valuation evidence to companies of a certain size, or a certain holding structure, or where the market approach is used.

(3) No case is cited in support of the submission that illiquidity is irrelevant where the business is valued on Income Approach. Wife’s Opening accepted that valuation on the Income Approach was based on the assumption that the business would be sold.

(4) W accepts that H makes the key operational and business decisions. The question whether H is likely to be able to continue as the main driver of the X business if a successor cannot be found is key to the valuation.

(5) JM accepted that the role of comparables as a “sense check” of the value was helpful, in terms, “it is ideal to use all three approaches”, however he found that no comparables were available.

(6) W suggested that H is to blame for his “choice to make/keep X illiquid”. This is a new claim only advanced in Closing. W did not suggest in her Form E, Open Proposal, Written Opening, Counsel’s oral opening or cross-examination that she sought an order for sale of X.

192.  I accept those points Mr Barnes makes relying on HO v TL.

193.  Mr Li says that the ratio in Martin v Martin is on the distribution on the type of assets rather than on companies valuation, so this is unhelpful to H. Further, it is contemptable for H to advocate that the valuation of the X Group should not be attributed as part of H’s assets. Both Counsel cited further authorities distinguishing the others’ but they take the matter no further.

194.  JM is a duly qualified expert. I accept his evidence, subject findings set out herein. I find that JM agreed that the process of placing a value on a private company is not an exact science and that assigning a value to a business absent a ready buyer was difficult. He agreed that the application of the same methodology used by him by different valuers could lead to different results: “10 or 20 valuers” could yield “10 or 20 values, depending on their research and what assumptions they make”. JM sets out his research and explanation of his inability to find a suitable comparable. H does not challenge the adequacy of the searches conducted but the fact that JM was only able to identify a single potential comparable (which he would not adopt) supports H’s case that there is not a ready market for X and that it is profoundly illiquid.

195.  H did not establish an alternative figure for the valuation of X Group. JM’s evidence did support the submission made by Mr Barnes regarding the uncertainty of such valuations and that X is illiquid.

196.  I accept Mr Li’s submission that not only is the HK$40.85m valuation a weighted average, but also JM has further applied various discounts, including the discount for lack of marketability, the company specific risk discount.

197.  I also accept Mr Barnes submission that a discount for lack of marketability serves the purposes of enabling a valuer to attribute to the business a dollar value, but it does not thereby magically change the present reality, which is that there is simply no demonstrated prospect of the X Group being sold, even if it was to be contemplated and the Trustee was to approve the sale. The reality is a point which has been emphasised repeatedly by courts here and in the UK faced with the similar issue of how to attribute a value to a private business.

198.  I accept the evidence of JM that it is difficult, though not impossible, to find a buyer/ sell X Group. On the basis of all the evidence I find that the X Group is indeed illiquid.

199.  H submits that the court is at liberty to apply a further discount to reflect the profound illiquidity of the asset. Alternatively, to adjust the sharing to take this element into account. First, per HO v TL at [20]-[27], the court may accept the valuation, which includes an accountancy discount, and apply a further court discount. This would not represent double counting: the example given is where the accountancy valuation includes a discount for a minority holding. Secondly, the Husband’s Reply considers that the Wife’s Closing cannot be read as seeking an order that the X business be sold. This is an impossibility in any event: the owner is not before the court. JM’s valuation ascribing only a minor 1/3 weighting to the terminal value (assuming X will be sold) further emphasises the unlikeliness of this in the near term.

200.  While there is authority that the court may apply a further discount to reflect the profound illiquidity of the asset I decline to do so. I am persuaded to consider the alternative sought by H of adjusting the sharing principle to take this element into account. The reason I prefer the later course is that in my view it is less uncertain than the former. Selecting an appropriate “court discount” on the facts of this case would be a more arbitrary exercise than following the usual course, which allows the court to take all of the circumstances into account in determining a fair balance.

Valuation of SCL and OSS

201.  H had taken issue with the valuations but by Closing submissions he nolonger challenged the valuation. I accept JM’s valuations of SCL of HK$1.607m and OSS of HK$53,000.

Valuation of SL

202.  Mr Choy valued W’s consultancy business SL at HK$1,056,000 at the valuation date 29 February 2024. H did not put any alternative value to Mr Choy, who reaffirmed in his valuation under cross-examination. Mr Choy was sufficiently satisfied with the financial documents of SL that were provided to him for the purpose of valuation. I find that W’s redactions did not affect Mr Choy’s valuation. H does not challenge the valuation on a NAV. I accept his valuation. SL is addressed further below in the context of the W’s income.

X Trust

(c) Interests subject to trust

203.  W defines as a sub-issue “the extent of H’s control/ beneficial interest and/or the X Trust as a financial resource of the H”. Her position is that the entire X Trust is a “smokescreen” for the lucrative business within it, that it is part of H’s labyrinth of offshore structures not fully known and concealed due to his material non-disclosure but that it does not keep assets beyond her reach in ancillary relief proceedings. Mr Li says that the X Trust from any angle, is just a façade for H to distance himself from his true wealth but this has no effect here.

204.  The legal principles to be applied to the assessment of whether a discretionary trust is a “financial resource” in the context of section 7, MPPO have been definitively stated by Ribeiro PJ in Kan Lai Kwan v Poon Lok Otto (2014) 17 HKCFAR 414.

205.  Whether or not a beneficiary’s interest in the trust is to be taken into account as a financial “resource” under section 7, MPPO is addressed by asking whether, if the beneficiary were to request an advance of the whole or part of the capital of the trust to him, the trustee would be likely to do so: at §27. The resource must be one that is “likely” to be available: at § 28, Whaley v Whaley 2011, per Lewison J. Ribeiro PJ held at paragraph 29:

29. … It is right that the Charman test should be adopted in this jurisdiction since the issue arising in cases like the present and since the Hong Kong provision are materially identical. To decide whether a discretionary trust is a financial resource of one of the parties, the Court asks whether, if that party were to request the trustee to advance the whole or part of the capital or income of the trust to him or her, the trustee would, on the balance of probabilities, be likely to do so.

206.  The Charman test, of whether on the balance of probabilities the trustee would, if requested, be likely to advance the whole or part of the capital or income of the trust to the beneficiary applies in Hong Kong. H accepts that the court may regard the X Trust as a financial resource.

207.  The court will look at the reality of situation and not be misled by appearances. W relies upon CWG v MH & Otrs [2017] 2 HKLRD 820, where Yuen JA stated that:

40. This is an ancillary relief exercise, and as mentioned previously, the court is not hampered by strict property lines. Its task is to look at the reality of the situation from the past conduct and to arrive at an assessment of the financial resources available to the party.

208.  W also refers to Lewin on Trusts, Volume II, (20^th Edn) at §51-046 on whether trust assets are a financial resource, including that it would be unrealistic for the court to ignore assets held in trust merely because the interested spouse had no fixed interest and was only the object of discretionary powers; the court looks at resources, not merely ownership. Relevant factors in determining whether a fund is a resource available to him are set out at Lewin at §51-049.

209.  W says the full extent of the X Trust is a financial resource available to H. H accepts the above legal principles and that the X Trust is a financial resource, but not the extent.

210.  W’s stance on the X Trust was set out under the Issues Schedule, Issue 12 “Will the X Business be sold?” and explained upon herein. H’s stance was that the X companies are beneficially owned by the X Trust of which H is one of 5 discretionary beneficiaries. To sell the business would require the consent of the Trustee of the X Trust which (because it is the primary asset of the Trust) would likely mean the Trustee would consult the other discretionary beneficiaries. At no time has W applied to set aside any of the declarations of trust, nor to join the Trustee. It is only of late that she has suggested the X Trust is not a separate entity but is in complete control of H.

211.  Mr Barnes refers to CWG v MH and Others HCMP 643/2012, 26 March 2013, where Deputy High Court Judge B Chu (as she then was) observed that where there is such a challenge, the beneficiary would need to be served, and in the absence of such a challenge, she was “unable to say that this transfer had the consequence of defeating the wife’s claim for ancillary relief.”: at 383. Further, in CSH v LA formerly known as CYY (Ancillary relief; Long separation) [2020] HKFC 143, HH Judge A Tse held that the presumption of an intention to defeat in relation to dispositions made within 3 years of an application for a financial claim only came into operation if an application was made under section 17, MPPO and if no such application is made, the party contending an intention to defeat is not entitled to the benefit of the presumption: at §83.

Illusory or sham

212.  Mr Barnes submits that W’s allegation in Opening that the X Trust is a “rubber stamp” and “illusory”, is essentially saying, for the first time, this has not appeared in any of her affirmations, that it is a sham. Namely, that it amounts to a document intended by the parties to give third parties or the court the appearance of creating legal rights and obligations different from the actual legal rights and obligations which the parties intended to create. A trust cannot, as a matter of law, be a sham if either the original trustee or current trustee were not, because they lacked the requisite knowledge and intention, parties to the sham at the time of their appointment: A v A [2007] FLR 467. A trust which is not initially a sham can never be a sham: ND v SD and Others (Financial Remedies: Trust: Beneficial Ownership) [2018] 1 FLR 1489. There must be a common intention to give third parties a false impression, an intention not to act in accordance with the terms of the trust deed: Equity and Trust Law in Hong Kong 4th 2022 Edn, Lawrence Ma, [14-71].

213.  W bears the burden of proving that it is a sham: Equity and Trusts Law in Hong Kong 2022 Edn at [14 – 79]. No notice was given by W to the Trustee that she would be asserting such a case, depriving the Trustee of the opportunity of responding, as happened in A v A and ND v SD. Mr Barnes says on the evidence the X Trust is not a sham.

Wife’s case - X Trust is an illusory trust as a matter of law

214.  W’s Closing clarified she is not alleging sham. Rather, that H’s case that the X Group is ultimately held by a trust, which is a nuptial trust, and that this will affect the extent of H’s resources in ancillary relief is untenable. The X Trust and all assets held thereunder is (1) a financial resource of the H, and (2) an “illusory trust” as a matter of law, so the complaint that W had not raised this in her affidavit evidence is misconceived.

215.  For the law on trust’s said to be illusory W relies on Snell’s Equity (34^th Edn, 2020) (“Snell”) and Lewin on Trusts Twentieth Edition (“Lewin”) including Lewin on Trusts First Supplement to the Twentieth Edition (“Lewin First Supplement”). The authority relied upon is JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch), but only the text books were on Wife’s Closing Supplemental Lists of Authorities.

216.  Lewin 5-020 p.162 provides:

In certain circumstances, the courts have found that the settlor has not created a trust at all, on the ground that what on its face is a declaration of trust was a sham. In those decisions, a declaration of trust is ineffective as a sham, or pretence, if the parties to the declaration intended not to create a trust, but instead to give a false impression to third parties and ultimately the court. Properly understood thus, there is no such thing as a ‘sham trust’, but merely a document purporting to create a trust which in fact does not exist. The question whether a trust is a sham is a different question from the question whether the control of the settlor over the trust fund and its income under the terms of the trust is so extensive that the trust is invalid on the basis that the purported settlor has never parted with the beneficial interest in the trust property; and it does not follow from a decision that a trust is not a sham that such an outcome should not follow if the facts justify it.

The authors caution that such circumstances are best not described as involving the creation of an “illusory trust”.

217.  While Snell at 22-072 p.683 provides:

(e) Shams and ‘illusory’ trusts. A purported trust may be ‘illusory’. To call a trust ‘illusory’ is a convenient, although analytically inaccurate label. The trust transaction is illusory when the true intention gathered from the trust instrument was to leave the beneficial interest in the purported settlor of the trust rather than to create a trust for the beneficiaries named in the instrument.

An illusory trust is analytically different from a purported trust set out in a sham document. The sham doctrine is concerned with the misleading mismatch between the objective intentions of the parties in the trust instrument and their subjective intentions about the transaction between them. The conclusion that a purported trust is illusory follows from the construction of the trust instrument itself, rather than a comparison between the terms of the instrument and the parties subjective intentions. The court construes the powers and duties of the parties as they are expressed in the trust instrument to work out their true effect. In going about this task, it is concerned with the substance of the transaction rather than its superficial terms. Some indications that the trust may be illusory are that the duties of the trustee stated in the trust instrument are incompatible with the core duties of trusteeship; or that the settlor has reserved such extensive power to himself as the protector of the trust that the interest of the beneficiaries named under it are unreal [footnote: the JSC v Pugachev case].

218.  Lewin at 5-021 p.163 distinguishes evidence admissible on “shamming intent” from construction of trust instruments as follows:

In addition to the intention not to give effect to the trust, the authorities require an intent to give a false impression. … Subsequent actions of the parties in disregarding the trusts declared are admissible in evidence to establish that they intended at the time when the trusts were declared never to carry them out, though not on the question of interpretation of the trusts. Evidence of effective control by a person other than the trustee is not sufficient to prove a sham, but is admissible to establish that a trust is a sham if it indicates that it was not intended at the outset that the trust take effect according to its terms. If however, such an intention is not established, then in subsequently disregarding the trusts declared the trustees are simply in breach of trust.

219.  Lewin First Supplement at 5-031 p.41 provides:

Subject to what is said below about a settlor’s failure to part with the beneficial interest in the trust property … and so long as the trusts are intended to take effect according to their terms, the retention of large powers or weighty influence by a settlor does not itself make the trusts void as a sham …It has generally been considered that, subject to that qualification, a trust is either a sham in the sense explained in §§ 5-20 and 5-21, or is valid and enforceable. There is no third state of affairs between a valid trust on the one hand and a sham on the other. If the settlor retains power to direct investments, that does not make the trust a sham. Indeed, his directing investment through the machinery of the trust recognizes them as real. Even if the settlor retains practical control of the whole administration of the trust through informal personal influence over the trustees, that does not enable his creditors to ‘pierce the veil of the trust.

220.  Further, Lewin First Supplement at 5-032 p.42 provides:

The retention by the settlor of extensive powers or interests may mean that economically the settlor is in a similar position to an absolute owner. … But so long as the trust is not a sham, such a retention does not in itself mean that the trust is not a trust, nor that it takes effect in some different way from what its terms provide.

221.  W also relies upon Lewin First Supplement at 5-034 p.43, which Mr Barnes considers irrelevant as it refers to life time trusts:

There are, however, two ways in which trusts under which the settlor retains powers, interest and control have been attacked otherwise than as shams, relying on these features of the trust, rather than any shaming intent, as forming the basis for attack. The first is that, upon the true construction of a trust instrument, the settlor has failed to part with the beneficial interest by a valid life time trust and so remains the absolute beneficial owner of the trust property… .

222.  Lewin at 5-035 p.43 with respect to life time trusts continues:

… The effect of the reservation of settlor powers which are said to be tantamount to beneficial ownership of the trust property is more complicated and considered below [at §§ 5-035B to 5-035J] The principle is one of construction and does not entail any dishonesty of the kind which is requisite for a finding of sham. A trust which is held to be void as the result of a determination that the settlor has failed to part with the beneficial interest in the trust property has been described as an ‘illusory’ trust but it has been said that it is better not to use that phrase; if there is not valid trust that is all that needs to be said.

223.  Lewin First Supplement 5-035A p.44 does consider the authorities on the issue more fully, inter alia, analysing the Pugachev case the authors opine:

We consider the decision to be doubtful. The reasoning of the court depended heavily on its categorisation of all the powers of the settlor as protector being personal powers exercisable for the settlors own benefit. Even if the power to appoint and remove trustees could properly be so viewed, this would give the settlor effective beneficial ownership only if it could direct a new trustee to act contrary to the interests of the beneficiaries, something that would be inconsistent with the finding that the trustees’ powers were fiduciary … normally where the trustee, even if also the settlor, has fiduciary powers exercisable in favour of the settlor and other persons, the fact that the settlor is or may become a beneficiary will not normally suffice to show that the settlor has failed to part with the beneficial interest.

224.  Lewin First Supplement considered 3 cases on the effect of the reservation of such powers, concluding that a number of questions arise, which they set out and considered: 5-35B p.45 to 5-035F-H [50-51]. Wife’s Lists of Authorities do not include any of the authorities on Pugachev or the issue. Submissions are confined to Lewin and Snell.

225.  Mr Li submitted that “the English Court in the Pugachev case held, as summarized in Lewin First Supplement Lewin at 5-035D p.48” what reserved powers are tantamount to ownership so as to prevent the settlor from parting with the beneficial interest of the trust property, i.e. to be economically in the same position as a settlor who retains absolute beneficial ownership of the trust property, then cited only the last 4 lines of that paragraph. Given that paragraph 5-035D is the basis of Mr Li’s submission I set it out in full, with the last 4 lines in italics. Under the heading “Whether trust valid if settlor reserved powers are not tantamount to ownership” the authors explain the doubts about the Pugachev decision at paragraph 5-035D as follows:

It is doubtful, in our view, whether settlor reserved powers which are anything less than powers tantamount to ownership are capable of preventing the settlor from parting with the beneficial interest in the trust property. Since the settlor can be a beneficiary, there is no need for the settlor to part with the entire beneficial interest in the trust property, and if the settlor no longer retains the ability through his own reserved powers to bring the trust to an end at any time and recover the trust property for his own absolute benefit, it is difficult to see how there has been a failure to part with the beneficial interest. The Pugachev case might, perhaps, be seen as a case where lesser powers than tantamount to ownership sufficed to prevent the settlor from parting with the beneficial interest in the trust property. But in that case the court stated the test in terms of retention of the beneficial ownership of the trust property, at least as tight a test as reservation of powers tantamount to ownership. The doubts about the court’s decision in that case arise, not from the statement of the test that was considered to be applicable, but, from the court’s decision that it was enough to satisfy that test that the settlor retained a personal power to appoint and remove beneficiaries and to veto exercises of the trustee’ fiduciary powers in favour of beneficiaries other than the settlor, as well as a personal power to remove trustees.

Illusory

226.  W’s case is that the X Trust is “completely illusory”. However, W does not confine her submissions to construction of the Deed of Irrevocable Settlement of the X Trust dated 17 December 2012 and Deed of Restatement to the Deed of Irrevocable Settlement Constituting the X Trust dated 14 October 2020, or any trust instrument, to establish that on a proper objective construction H failed to part with the beneficial interest in the trust property, such that there is no valid trust. W also relies on subsequent actions, matters that have occurred subsequent to property being settled on trust, including how the X Trust has been administered and the role, practice and conduct of the Trustees, Protector and H. The matters are said to establish that the X Trust is “a façade”. Notwithstanding Mr Li’s express confirmation that W’s case is not that the X Trust is a sham, she makes submissions in support of such a case. The facts and matters she relies upon do go to establishing that the X Trust is a financial resource available to H, but that is admitted.

W’s case - H Retained Powers/ Control/ Interest

227.  Mr Li makes the following nine numbered points in support of the case that H has retained powers, control and interest and that the X Trust is illusory.

228.  First, H was the only person to receive dividends or distributions from the Trust. He does not say that any other beneficiary had received any distributions; hence, the purported interest of the other beneficiaries is simply unreal. Apart from “name”, nothing indicates they are actual beneficiaries. H disputes the allegation that the Children, his mother and sister are not actual beneficiaries. There has never previously been any dispute but that the Children are beneficiaries under the X Trust. They are minors and H has utilised distributions for their benefit. W was removed as a beneficiary after her alleged extra-marital affair.

229.  Second, the “loans” from X companies were without loan agreement, security, interest, and repayment date. H as director of the underlying X companies had sanctioned the loans to himself. This has been the practice since 2012. H never sought consent from the Trustees in drawing the loans which are only repayable upon declaration of dividends. He decides when and what dividends to declare. There is no conceivable limit to these loans. H replies obviously that is not correct, the size of the loans is dependent on the success of the business: if it does not do well, there would be no money to pay the expenses.

230.  H admits that the Trustees never took issue or vetoed any decision he made despite the revenue and profits generated by X companies being X Trust assets. He explained that:

…the Trustee is a holding company… the course of business operations are left to the business to run, which includes me and the staff… the Trustees aren’t experts a with running the business … They never interfered with running the business. My experience with working in the trust field, they don’t do that … the Trustees have access to the accounts and they haven’t raised it [issue with h’s loans from X] they didn’t have any reason to raise it … they had no reason to [not act in accordance with H’s instructions].

231.  Mr Li says that the only explanation of the inconsistency between H’s claim that the assets are not his own and his dealing with them without Trustee monitoring is that the X Trust is indeed illusory.

232.  Third, H invested XWL funds into, inter alia, C Ltd acquiring shares personally without seeking Trustee consent, not in the name of XWL, XHL or the X Trust. Mr Li asks “Is this misappropriation of assets?” Mr Barnes takes grave exception to any suggestion that the application of the X funds by H amounts to a “misappropriation of trust assets”, as this is an outrageous suggestion, unsupported by evidence and was not put to the H.

233.  Further, H used his personal bank account for business transactions, with no evidence of any accounting back to X Group or the Trustees and use of the X Group for the Children’s school debentures demonstrate that he has full control, including of application of funds. H says such matters do not make X Trust illusory. He runs the businesses and the Children are beneficiaries under the X Trust.

234.  Fourth, H admitted to beneficial ownership of various X companies: (1) H declared 100% beneficial interest in XWL, XSL and SP in H Form E; (2) even in the AFS, H has admitted to beneficial ownership of X Corporate Services (the current XWL) XTL and XHL. These admissions are in formal official documents for submission to the Inland Revenue. There is no room for denial unless H is to say that he made a false declaration.

235.  H disputes making any admission that he retains 100% beneficial interest by his statements of shareholdings of various X companies, explaining that first, this is a misreading of the Forms E. Section 2.4 of his first asks “Give details of all your shareholding / beneficial interest in private companies”. Under the column “Your estimate of the current value of your shareholding / beneficial interest” (note dual elements), H refers to Section 5.5, where he explains his interest in the X Trust as a beneficiary. Secondly, H explained that for XCS, XTL and XHL, his beneficial interest has been divested by the Declarations of Trust. The Trustee holds those assets on trust for the beneficiaries of the X Trust. Mr Barnes says all this is Trust Law 101.

236.  W submits it is clear from the above 4 points that X Trust and all under it is, as a matter of fact, H’s own “fiefdom”. It is incredible for H to claim that he is just “1 of the 5 beneficiaries”, that the extent of his interest is “floating”, or fixed at 20%. Further, the X Trust is an extensive resource of H. He accepts the X Trust is a resource.

237.  Fifth, H had all along retained extensive powers and control over the Trust. W’s fifth point does include matters relevant in the construction of the Trust Instruments and determining her “illusory” issue. The facts in relation to the establishment of the X Trust and identity of the Settlor, Protector, Trustees and Beneficiaries from time to time are not in dispute. W relies on the following powers and matters:

(1) The X Trust was established in December 2012. H is the Creator/Settlor of the Trust. According to Schedule 3, H settled on Trust, inter alia, “all issued shares in XFE Holdings Limited, and such assets as are contributed to this Settlement from time to time”.

(2) Since inception in 2012, H has been the only person vested with the power to appoint and remove trustees, which he exercised in November 2019 replacing Fidelitycorp with T&F as Trustee.

(3) By the Deed of Restatement dated 14 October 2020, H remained the only Settlor, Protector and person empowered to appoint and remove trustees.

(4) Until November 2020, H was the only Protector of the Trust, from whom consent must be sought to, inter alia, declare and remove beneficiaries: Clause 6. H exercised the power to remove and declare beneficiaries. In 2015 H removed W as a beneficiary shortly after the son was born. In November 2020, after H’s father died, he declared his sister and mother as beneficiaries.

(5) Qua Protector, the Trustees required H’s consent before making any advancement/ payment to any beneficiaries. H exercised such powers, giving consent to the Trustees to release payments to himself.

(6) On 14 November 2020 he resigned as Protector and appointed his sister as the Protector in his stead.

(7) While his sister is Protector, H is still the only person empowered to appoint successor trustee(s) and to remove any trustee: Clause 37 and Sixth Schedule. Thus, he still has power, should the Trustees act against his wishes, to remove and replace them.

(8) Since his sister became Protector, there has been no change to his operations of the Trust and its assets. H admitted that (i) there was no change in how he drew money from the X Group, (ii) his sister has no knowledge of his “loans”, he did not inform her or seek her consent for drawing the loans. The sister gave consent to the Trustee for release of funds who simply obliged.

238.  W considers it significant that H has financially supported the sister since 2021, continuing to do so, that she has never acted against his will in her office as Protector and that she has no involvement or participation in the X Group. Mr Li says there is no basis to assume that she will independently exercise any of her powers qua Protector. All decisions would continue to come from H. H refutes as baseless the claims that his sister will not independently exercise any of her powers. As with W’s approach to other issues, H’s sister was not joined for these allegations to be put to her to enable the court to test W’s claim. W says that he did not inform his sister of the loans or seek consent for the drawing of dividends to repay is conclusive evidence that he treats himself as the de facto Protector despite his cessation of office. H replies that this displays a fundamental misreading of the Deed of Restatement cl.5(a). The Trustee, not the beneficiary, is the one required to seek consent from the Protector. W has not identified a single transaction in respect of which H’s sister qua Protector ought to have refused consent.

239.  W asserts that H paid no regard to if the loans diminished the interest of the other beneficiaries of the X Trust. Whereas his evidence is that the loan/dividend arrangement enables the beneficiaries’ expenses to be met, not just his own. Mr Barnes submits, and I would agree, that if it was W’s case that H had improperly diminished the interests of other beneficiaries, fairness required this to be put to him. It was not.

240.  Sixth, the Trustee never acted against H’s instructions since inception in 2012 despite there being a change in Trustee in 2020. In short the Trustees have “no conceivable role/function”. The Trustees never questioned H’s distributions to himself nor queried his management. They never had anything to do with (1) the operations of the X Group, or (2) application or utilisation of trust assets. It was never put to H that the Trustee ought to have vetoed any business decision or transaction, questioned distributions or queried his management of X.

241.  Thus says Mr Li, the Trustees are his “mere puppets”, they are “a rubber stamp”. Further, W is not challenging the professional competency of the Trustees. The factual matrix serves to show as a matter of law, that the X Trust is illusory, and that H’s financial resources are not limited or hampered in any way by the existence of the X Trust. Mr Barnes replies that clearly W is challenging the professional competence of the Trustees by calling them H’s “mere puppets”, “a rubber stamp” and alleging that they “have no conceivable role/ function”. I have to agree.

242.  Seventh, H has full control over all aspects of the X companies. He is the keyman of the Group, operating the business holding positions such as director, shareholder and Chairman. He decided whether to declare dividends and how much at the operating companies to be paid to XHL. XHL will then pay these to the Trustees who pay the entire sum to H. Since 2012 only H has controlled the declaration of dividends and been the only recipient of such funds which is telling of ultimate and absolute ownership.

243.  Eighth, under the Trust Instruments, the Trustees have no obligation to inform beneficiaries of their status regarding the Trust, although they may consult beneficiaries. The beneficiaries will have no information, or chance to protest H drawing on the Trust and distributions to himself. Now one of the beneficiaries, the sister, is the Protector so will have information in that capacity.

244.  Ninth, Mr Li says the fact that W has not applied to join the Trustee is completely beside the point. The court’s function here is to determine whether (1) the Trust is a financial resource of H and (2) whether the Trust is illusory. Nothing necessitates joining the Trustees.

245.  Mr Barnes replies that in the absence of any section 17 application, W’s point (2), whether the trust is “illusory’, is in effect trying to set aside the Trust Instruments by the back door. The Trustee has no opportunity to advance its case. In the Pugachev case, relied upon by W for the principles governing an illusory trust, the former and the new trustees were made defendants to the action to enable the court to determine if the trusts were shams or illusory. The assertion that it was not necessary to join the Trustee ignores basic requirements of fairness.

246.  H does not and never has disputed that X Trust is a financial resource. H disputes that X Trust is an “illusory trust”. Mr Barnes submits trusts are either genuine instruments administered in accordance with the deeds under which they are constituted, or they are shams i.e. illusory. If the settlor has failed to part with the beneficial interest in the property there is no trust. There is no third category of “non-sham” but “illusory trust”. Neither Lewin nor Snell assist W to demonstrate that there is: see Lewin §5-032.

247.  Mr Barnes points out that the contention that only H has received distributions from the X Trust hardly comprises evidence that the X Trust is a sham or illusory. It is common ground that H pays for other beneficiaries’ expenses. The Children are both under 18. H presently pays most of their expenses. I accept the submission that H meeting of his and the Children’s expenses is in accordance with the X Trust, not contrary to it, nor any indication that it is an illusion or façade.

Wife’s Reply X Trust is an illusory trust

248.  W persists, despite the fact that H admits the X Trust is a financial resource. Mr Li says first, W never argued that X Trust is a sham. Rather, her case is that the X Trust is an “illusory trust”. This is a different legal concept from a sham. It is wrong to conflate these 2 distinct concepts. The question is whether the control of the settlor over the trust fund and its income under the terms of the trust is so extensive that the trust is invalid on the basis that the purported settlor has never parted with the beneficial interest in the trust property: Lewin 5-020.

249.  Secondly, W maintains that the X Trust is undisputedly and squarely, an illusory trust. Further, it is “illusory” for H to refer to the Trust Instruments to say that he does not own or possess the Trust Fund. For the past 12 years H has been spending or utilising it at whim, with no veto by the Trustee nor by his sister as Protector. Whereas Mr Barnes makes reference to the Trust Instruments. In my view that is the proper approach. Subsequent actions may go to establishing subjective intent, were W alleging sham, and be objective evidence that the X Trust is a financial resource, rather than to construe the Trust Instruments.

Construction of the trust instruments

250.  The conclusion that a purported trust is “illusory” follows from the objective construction of the trust instrument itself, rather than a consideration of the parties subjective intentions and subsequent actions. The court must construe the powers and duties of the parties as they are expressed in the Trust Instruments to determine their true effect. This involves having regard, not merely to the individual words used, but to the Instruments as a whole, the factual and legal background against which they were concluded and the practical objects which it was intended to achieve.

251.  I have considered the express terms of each of the Trust Instruments, individually and as a whole. In construing them the legal context is significant. In the absence of proof of foreign law it must be presumed that the law of the Cook Islands relating to trusts is the same as Hong Kong law. I have regard to the legal background, including the law of trusts and basic principles relating to the powers and duties of trustees, the protector as well as the position of the settlor and beneficiaries. The factual background includes that at the time of the settlement H was married to W and they had one child and whether a practical object intended to be achieved was to set up a family trust.

252.  The Trust Deed executed on 17 December 2012 and the Deed of Restatement dated 14 October 2020 contain many provisions in similar terms. Distinctions include that in the Restatement the Recitals set out changes since 2012: Recital (B) (i) W was removed as a Discretionary Beneficiary of the Trust and appointed as an Excluded Person of the Trust on 23 February 2016; (ii) The son was appointed as a Discretionary Beneficiary of the Trust on 11 July 2016; (iii) Fidelitycorp was removed as Trustee and T & F Trustees Services Limited was appointed as Trustee on 8 November 2019. Additional Clause 4 in the body of the Deed, not merely the Schedule.

253.  Notwithstanding the Deed of Restatement I must first consider whether the Trust Deed executed on 17 December 2012 settled property on trust transferring the beneficial interest and was a valid trust. Material provisions include:

(1) Recital (A), the Settlor has transferred to the Trustee the property in the Third Schedule to be held upon trust and subject to the following trusts.

(2) Clause 2, the Trustee declares that the Trustee shall henceforth stand possessed of the Trust Fund subject to the powers and provisions herein contained. Deed of Restatement clause 3 (“DR cl.3”)

(3) Clause 3, the Trustee shall stand possessed of the Trust Fund for the benefit of all or any one or more of the Discretionary Beneficiaries and with such powers of appointment, maintenance and advancement in favour of all or any one or more of them, as the Trustee, with the consent of the Protector, may in the Trustee’s discretion think fit. DR cl.4

(4) Clause 4, the Trustee shall possess the Trust Fund and the income upon and subject to the trusts powers and provisions set out, including (a) the income shall be held by the Trustee with the consent of the Protector, to apply for the benefit of any Discretionary Beneficiary, and (d) at the expiration of the Trust period the Trustee shall hold for such of the Discretionary Beneficiaries living at that time as the Trustees may determine failing such determination for the Discretionary Beneficiaries in equal shares as tenants in common and in the event there are no Discretionary Beneficiaries or issue living the Trustees shall hold the Trust Fund absolutely for the International Red Cross. DR cl.5

(5) Clause 5, Powers of Advancement, the Trustees, with the consent of the Protector have the powers set out. DR cl.6

(6) Clause 6, Trustees and Protector’s Powers of addition and exclusion in respect of Discretionary Beneficiaries. (a) The Trustees with the consent of the Protector shall have the power to declare any person (i) other than an Excluded Person be a Discretionary Beneficiary, (ii) no longer be a Discretionary Beneficiary or (iii) be an Excluded Person. (b) The Protector shall have the power to declare (i) any person (other than an Excluded Person) be Discretionary Beneficiaries, (ii) that a person shall no longer be Discretionary Beneficiaries. (iii) any person be an Excluded Person (save a Trustee). (d) The powers in (b) shall be powers collateral and not fiduciary or trust powers, and shall be exercised only by the Protector. DR cl.7

(7) Clause 8, Additional Powers of the trustee – General Powers. DR cl.9

(8) Clause 19, the Trustee shall have power to lend any money, with or without security, to a Discretionary Beneficiary, with or without payment of interest, and upon such terms as to repayment as the Trustee shall in the Trustee’s absolute discretion think fit. DR cl.20

(9) Clause 33, Exercise of Trustee’s Powers, (a) Subject to any express provision affecting the same and subject to the consent of the Protector when required, every discretion vested in the Trustee shall be an absolute and uncontrolled discretion and the Trustee shall have an absolute and uncontrolled discretion in deciding whether to exercise any power. (b) The powers vested in the Trustee may where there is more than one Trustee be exercised by a majority of the Trustees. DR cl.34

(10) Clause 37 Power of Appointment and Removal of Trustee, including the power to appoint and remove a trustee shall be vested in the person in the Sixth Schedule. That person is H. (d) The Protector also has that power in express circumstances. DR cl.38

(11) Clause 41, Standard of Care of Trustees. The standard of care required of the Trustee in performance of the Trustee’s duties or in the exercise of any power, function or discretion the Trustee may have is one of good faith and honesty. RC cl.42

(12) Clause 45, The Proper law, (a) The Settlement is established under the laws of the Cook Islands and shall be construed, interpreted and take effect according to the law of the Cook Islands which shall be the forum and whose law shall be the Proper Law of this Settlement and any rights powers and obligations and every provision hereof shall be governed exclusively by the Proper Law and the Trustee, the Protector and the Discretionary Beneficiaries shall be subject to the exclusive jurisdiction of the courts of the Cook Islands. DR cl.46

(13) Clause 46. Provisions as to Excluded Persons. No Excluded Person shall be capable of taking any benefit of any kind by virtue of this Settlement. DR cl.47

(14) Clause 47, Concerning the Protector. (a) the Protector may, at any time, by giving notice in writing to the Trustee resign as Protector and provide for a substitute Protector at the same time with such resignation. (h) All the powers of the Protector are powers collateral to its office and are not fiduciary or trust powers. DR cl.48

(15) Clause 50 Irrevocability of Trust. This Settlement hereby created shall be irrevocable. DR cl.51

(16) Clause 54, Trustee to consult. The Trustee may consult with the Discretionary Beneficiaries but is not required to consult. DR cl.55

(17) Clause 55. Nothing shall oblige the Trustee to inform the Discretionary Beneficiary of their status as such. DR cl.56

(18) The 2012 Schedules provided: First Schedule original Trustee Fidelitycorp Limited. Second Schedule Trust Period (iii) The date (if any) which the Trustee may with the consent of the Protector appoint as the distribution date. Third Schedule Trust Fund Issued shares in XFEHL and such assets as are contributed from time to time. Fourth Schedule Discretionary Beneficiaries. Fifth Schedule Excluded Persons. Sixth Schedule Persons Empowered to Appoint Successor Trustee(s) H. Eighth Schedule Protector(s) H. The Deed of Restatement Schedules are updated.

254.  The Trust Instruments are in conventional terms. The X Trust is an irrevocable trust. There are provisions providing for the settlement of assets on trust and that clearly indicate that the beneficial interest in the property has been settled on trust. The Trustee must observe the terms of the Deed of Settlement and Deed of Restatement and the applicable law. Expressly, “The Trustee HEREBY DECLARES that the Trustee shall henceforth stand possessed of the trust fund subject to the powers and provisions herein contained”: Deed of Settlement cl.2 and Deed of Restatement cl.3.

255.  As there is no evidence on the law of the Cook Islands it is to be presumed that the same general principles relating to trusts apply there as in Hong Kong, including the duty of care which applies to all trustees when exercising their powers (in Hong Kong codified by the Trustee Ordinance, s.3A). A failure to act independently, or to use Mr Li’s characterisation, “as a rubber stamp”, would be in breach of this duty and could lead to action by other beneficiaries. A trustee must preserve trust property and exercise due care in managing it: Equity and Trusts Law in Hong Kong 4^th Edn 2022 [19-57].

256.  The Trustees powers are consistent with the usual powers and duties under trust law. I find that upon an objective construction of the Trust Instruments that the Trustees powers are fiduciary.

257.  Provisions of the Trust Instruments that indicate H as Settlor retained power and control include that H has power to appoint and remove the Trustee. The Pugachev case does refer to such power as an indication that the Settlor may not have parted with the beneficial interest. Mr Barnes submits that here this is not a sign that the X Trust is illusory. The Trustee must comply with its duties set out in the Trust Instruments. Snell at §22-072’s reference to the reservation of extensive powers to the protector of the trust relies on the Pugachev case, the correctness of which is refuted by Lewin §5-035D.

258.  Although the power to appoint and dismiss trustees can be an indication that he may have retained power, Lewin considers this would give the settlor effective beneficial ownership only if he could direct a new trustee to act contrary to the interests of the discretionary beneficiaries, something that would be inconsistent with the finding that the trustees’ powers were fiduciary. In my view upon a proper construction of the Trust Instruments H could not direct a new trustee to act contrary to the interests of the discretionary beneficiaries.

259.  The authors of Lewin at §5-035D, referring to the Pugachev case, consider it doubtful whether settlor reserve powers which are anything less than powers tantamount to ownership are capable of preventing the settlor from parting with the beneficial interest in the trust property. In the Pugachev case the court stated the test in terms of retention of the beneficial ownership of the trust property, at least as tight as reservation of powers tantamount to ownership. In my view upon a proper construction of the Trust Instruments, H, the Settlor no longer retains the ability through his own reserved powers to bring the trust to an end at any time and recover the trust property for his own absolute benefit. In such circumstances Lewin opines that it is difficult to see how there has been a failure to part with the beneficial interest.

260.  Further, H was the Protector but now that the sister is Protector she has the power to name her replacement. The allegations made against her personally in the discharge of her duties are not matters to be taken into account in construing the Trust Instruments.

261.  All indications from the clauses in the Trust Instruments in respect of beneficiaries read in the prevailing factual and legal background point to the conclusion that the Discretionary Beneficiaries are actual beneficiaries. They are not in name only. Further, the Trust Instruments provide for the power to remove beneficiaries and provisions in respect of Excluded Persons. That would be unnecessary were it intended that the beneficiaries were not real and that the Settlor retained the beneficial interest in the settled property in any event. Objectively construed the intention and construction of the Trust Instruments was to settle property on trust for the intended beneficiaries.

262.  I have construed the powers, duties and position of the Settlor, Trustee, Protector and Beneficiaries as they are expressed in the Trust Instruments to determine their true effect. I have considered the substance rather than superficial terms. The Deed of Trust and Restatement both contain some of the indications derived from the Pugachev case that indicate they may be illusory. However, I do not find that the duties of the Trustee stated in the Trust Instruments are incompatible with the core duties of trusteeship, nor that H, the Settlor reserved such extensive power to himself as the Protector of the Trust that the interest of the Discretionary Beneficiaries named are unreal. The Trust Instruments must be construed as a whole in context, not simply by focusing on one or two provisions to the exclusion of all else. The true intention gathered from the Trust Instruments was not to leave the beneficial interest in H, Settlor of the Trust, rather than to create a trust for the beneficiaries named therein.

263.  I answer the question whether the control of the settlor over the trust fund and its income under the terms of the trust is so extensive that the trust is invalid on the basis that H as purported Settlor has never parted with the beneficial interest in the trust property, in the negative.

264.  The conclusion that a purported trust is illusory follows from the construction of the trust instrument itself. A trust which is held to be void as the result of a determination that the settlor has failed to part with the beneficial interest in the trust property has been described as an ‘illusory’ trust but it has been said that it is better not to use that phrase: if there is not valid trust that is all that needs to be said. In my view there is a valid Trust. I hold that the X Trust is a valid trust. It is not a sham. It is not illusory.

265.  Mr Barnes also made what he termed a “vital point”: W has taken no steps to set aside the Trust Instruments. The Trustee is not here. There has been no notice of the challenge to the Trust.

266.  W seeks a finding that the X Trust is illusory. In that event the X Trust would be void. There would be no trust. It does not then exist as a species of trust labelled an “illusory trust”. W has not sought to set aside the X Trust. None of the Trustee, Protector or Beneficiaries have been joined. Procedural issues aside, whether or not there be a section 17, MPPO application, fairness would demand at least that notice be given to the Trustee so it may be joined as a party, adduce evidence or make submissions. Before declaring a trust void at least the Trustee, if not also the Protector and the Beneficiaries should have notice of the challenge to the Trust so they may take such action as they deem fit. Had notice of the challenge been given before the hearing these proceedings and also the evidence may have been materially different. For example, had the validity of the X Trust been put squarely in issue it is conceivable that evidence of the proper law of the X Trust, the law of the Cook Islands may have been adduced and given the allegations against the Trustee and the Protector, they may have sought to adduce evidence.

267.  If I be wrong in determining the proper construction the X Trust I would not have been prepared to hold that it was not a valid trust without, at the least, notice of the challenge to the validity of the X Trust being given by W to the Trustee.

Extent of H’s Control/ Interest and /or as a financial resource

268.  W considers any suggestion that the Trustees may take issue if H decides to sell X Group contradicts his case that it will not be sold, and there is no evidence of them ever taking issue with H’s decisions. Further, H’s argument that the X Group is merely an income source but will not be sold, and therefore its value of HK$40.85 million should be disregarded, is wrong.

269.  H’s case, assuming it is appropriate to place a value on X, is that this should come with a large asterisk, with the metaphorical footnote being that this cannot be taken as at all equivalent to cash. Assuming that the ~HK$40m can be viewed as a potentially realisable sum, who will be entitled to the proceeds of this theoretical sale is not only H. The structure of the X Group and the nature of the X Trust has always been clear. So too has H’s interest in it. He holds the shares in X for the X Trust. The X Trust is the owner of the Trust assets, including the X business, but it holds and manages these assets for the beneficiaries of the X Trust. That is the nature of all trust, not just this one. Consistent with the nature of a discretionary trust none of the beneficiaries of the X Trust has a fixed or determinate interest in the assets of the Trust. The standard Form E calls for statement of the extent of an interest in an asset. H suggested 20% on the basis that he is one of five beneficiaries. There is nothing inconsistent with this and the inexact nature of a discretionary trust. H could not know whether the trustee would ultimately distribute an equal amount to each of the beneficiaries. H did not attempt to deny his beneficial interest. He explained the position according to his understanding of a discretionary beneficiary.

270.  The facts in KLK included that the shares of the holding company were settled on a discretionary trust. The husband was appointed as protector. The relevant beneficiaries were the husband, wife and their surviving daughter. She was one amongst a class of beneficiaries in a discretionary trust without a vested interest and there were Jersey law opinions that did not support the proposition that the trustees could not dilute her “interest”. The Court of Final Appeal held that the entire trust fund should be regarded as a financial resource available to the husband for the purposes of section 7(1)(a), MPPO. In making himself protector of the trust the husband reserved to himself important powers, including the power to remove the trustee. He intended the trustee to have only a passive role of a shareholder, leaving it to him to run the Group. The trustee often acceded to his wishes and allowed him access to funds. When the company declared a dividend, the trustee invariably complied with his wishes to distribute the money to the husband himself. There was every reason to believe that the trustee would comply with the husband’s request to meet the courts award, as determined on final appeal, out of the trust assets. Mr Barnes distinguishes the facts on the basis that the daughter in KLK was an adult and there was not evidence of her benefiting from distributions.

271.  Applying KLK and the Charman test to decide whether the discretionary X Trust is a financial resource of H, I must ask whether, if H were to request the Trustee to advance the whole or part of the capital or income of the X Trust to him, the Trustee would, on the balance of probabilities, be likely to do so? The answer is in the affirmative. H admits that the X Trust is a financial resource. I have found that the other named beneficiaries are actual beneficiaries. The Children are beneficiaries and their interests would not be disregarded. However, in the circumstances where H is the father of the Children who intends to continue to ensure they are provided for, the entire X Trust fund should be regarded as a financial resource available to H for the purposes of section 7(1)(a), MPPO in this case. The resources available to H would be sufficient to satisfy the award I make herein without jeopardising the interests of the Children or other Beneficiaries, such that the Trustee may refuse a request for funds to be advanced for present purposes.

(d) Non-disclosure

Has H failed to make disclosure?

272.  W alleges non-disclosure throughout the proceedings as well as in relation to the FMA. She accuses H of refusing to make disclosure, obscuring any view of his true finances, aiming to divest himself of his assets and being guilty of litigation conduct which is relevant to the ancillary relief determination.

273.  I am referred to the authorities in respect of the duty to give full and frank disclosure and inferences to be drawn, including the statement of principles in TCP v KLS [2020] HKFC 67. W says obtaining disclosure has been difficult, it is still not up to par, the true extent of H’s wealth is unknown and that this is a compelling case for drawing adverse inferences against H.

274.  H refutes the allegations that he has failed to comply with his obligation of full and frank disclosure. Mr Barnes submits that:

(1) Allegations that a party has deliberately failed to disclose information for the purposes of placing assets beyond the reach of another, are very serious. Deliberate non-disclosure is a subset of fraud. The accusing party bears the burden of proving distinctly, the existence of a fraud, and that it is materially causative of a seriously wrong order being made: Cathcart v Owens [2021] EWFC 86, at 836 per Mostyn J.

(2) Where there is material non-disclosure, adverse inferences may be drawn, but only if “there is some proper basis to do so”: H v W & Ors [2013] HKCFI 2296, 10/9/13 at §48. In H v W Au-Yeung J confirmed, by reference to NG v SG 2012 1 FLR 1211, that there must be a “sound evidential basis for reaching a conclusion as to the scale of undisclosed assets” and that the court “should not be led into a knee-jerk reaction that says simply because evasiveness and opacity is demonstrated there is some vast sum salted away”. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got: LNE formerly known as LKPBB v CKLN [2024] HKFC 73 at §186.

275.  W asserts that what is disclosed is still not the full pot, making four points. First, the valuation of the X Group is only of 7 out of 30+ companies. Thus, the size of the pot is at best discounted.

276.  Second, where a party denies beneficial interest in assets held in their name, that party bears the burden of proof. Under the Family Court TL v ML procedure, the purported beneficial owner will be joined as a party for the court to determine issues of beneficial interest but there is no such application. It is incumbent on H to serve Form F on the purported beneficial owners. This was not done. H disavows beneficial interests in at least 13 companies which are held in his name for which there is no information, financial disclosure or evidence of value, contrary to Form E requirements. H provides are Declarations of Trust in support. Mr Li submits that the court’s section 7 powers cannot be usurped by single-paged Declarations of Trust witnessed by X’s employees which are self-serving documents. None of the purported beneficial owners have come forward to acknowledge such beneficial interest. H’s case is that X Group charges fees for the provision of nominee shareholder services but no receipt or invoice is produced except for 1 company. H’s case is that he sold his shares in it to the beneficial owner but if this was a nominee holding why the sale?

277.  Third, H says XSL provides nominee service but despite being the sole shareholder he failed to provide information on these nominee shareholdings. Without information W is not in a position to consider H’s case.

278.  Fourth, for directorship positions H is secretive, contrary to the Form E requirements, explaining that there are privacy and confidentiality reasons without giving any particular, yet he volunteered W’s list of directorships. These proceedings are confidential so adverse inferences must be that disclosure would be to his detriment.

279.  Mr Li submits that H has fallen short both in (1) his duty of full and frank disclosure, and (2) discharging his burden of proof that he has no beneficial interest. H’s failure to disclose is indicative of “the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstances or document or witness, if brought, would have exposed facts unfavourable to the party”: Telings International Hong Kong v John Ho & Others CACV 10/2010 (unrep., 22 October 2010 per Le Pichon JA at [79]. H’s recalcitrance is the basis for the court to draw adverse inferences and the conduct should be taken into account as a matter under section 7 or on costs.

280.  H accuses W of conducting a campaign, through her written evidence and her solicitors’ letters, to establish a failure to make full and frank disclosure. A trail that Mr Barnes says has fallen flat. H sets out the sequence of his disclosure, which is voluminous, also how he responded in a timely fashion to requests made by letters from Haldanes. Despite this W has persisted with the allegation that he has not complied with his duty, which is denied. Mr Barnes takes the following 4 examples to substantiate his submissions.

281.  Example 1, Investment account. Both parties have an investment account. Both accounts are agreed assets. There is no dispute as to their value. H has given full information on his S account, volunteered an account that was not used, gave 2 years of bank statements and provided a second set of answers by way of his 4^th Affidavit. When W asked questions twice on his account he still answered. I accept that the H has responded appropriately.

282.  Example 2, the UBS account. W first raised the question of other bank accounts in her Questionnaire. He answered there were none. She asked again, claiming to remember seeing a statement of a UBS Singapore (“UBS SG”) account. He answered there was none. She was not satisfied and asked him to obtain information from UBS SG or authorise her to. Mr Barnes considers that the letter is effectively accusing him of perjury, a false Form E, a false Answer and false Affirmation. H could have at that point simply refused to request to obtain confirmation from UBS and instead require W to seek third party discovery, but he did not. He complied with the request and wrote to the bank providing the alleged bank account number. UBS SG responded with an emphatic “Mr [] did not maintain any account with UBS SG, either singularly or jointly with another person.” W was still not satisfied. Haldanes provided a draft letter to UBS Hong Kong, which he sent. The reply noted USS SG Branch had already responded and that the bank could not comply with the request due to confidentiality concerns absent a court order. W did not issue a bankers Summons despite having 5 months before trial to do so. W’s narrative Affirmation, paragraph 21 then further displayed the unreasonableness of her position even after those replies. She persisted, “21. I recalled H had an account with UBS SG with the account number 0546-00262793. He outright denied that. Although some answers were given by UBS, they were opaque and not consistent. The bank did not even deny there was the existence of the above bank number”. W is still not satisfied and is not prepared to drop the matter. She has demonstrated no willingness to admit that she might have been wrong. In my view there must come a point where a party stops pursuing every trail. Even if W had some recollection and she would not accept H’s repeated evidence, that point must have come when UBS Singapore replied.

283.  Example 3, bank transactions. W on 5/1/2024 sought disclosure in relation to numerous transactions for insignificant sums, including 2 shares with a total market value of USD6.13. When challenged W said the shares had dropped significantly in value since his purchase, but there were no questions in cross-examination, such as a suggestion of unwise investment. H considers that this kind of relentless pursuit of the unimportant and insignificant is emblematic of W’s badgering of H in an effort to portray him as a serial non-disclosure. In my view these matters do not portray him as such.

284.  Example 4, in correspondence W repeated requests for disclosure already answered. After an answer from the H on 12 January 2024 W repeated the request by letter dated 4 March 2024. During re-examination W suggested that the reason why the requests were repeated was because there was incomplete explanation as to the nature and purpose of transactions, not documentary proof. However, the two letters dated 5 January 2024 and 4 March 2024 asked effectively the same question. If W’s position was that his first answer was not a sufficient explanation not simply of the transaction but the source of the funds to provide for the transaction, then she should have said so. I would agree.

285.  W’s Closing includes as Annexure A a list of H’s outstanding disclosure and makes additional points. H’s Reply addresses W persisting in her allegations of non-disclosure and replies to her Annex A by his Annex C, Response to Annexure A to W’s Closing – List of outstanding Disclosure/ Undisclosed Documents. He deals with each item in turn. He considers that overall Annex A cements W’s attempts to portray him as a serial non-disclosure. For instance, he had already told her that no AFS were available, but she persists in describing H as failing to disclose them. Mr Barnes adds that W’s criticisms also display a disregard for proportionality and attendant legal costs incurred by unreasonable requests. W requests for 2023 management accounts or unaudited FS are unnecessary, as JM has already valued the companies as at the Valuation Date. W also sought documentary evidence for H’s transactions concerning minor sums. In my view H has provided sufficient responses.

286.  H replies to the allegation that the pot is “discounted”, as only 7 companies out of 30+ have been valued, thus:

(1) One of the services provided by X includes H acting as a nominee director and sometimes nominee shareholder. He has explained with documents, why some clients want this service, and that he reluctantly provides it. W was involved in the business for many years and knows this is part of the X “model’. Her feigned ignorance is for strategic purposes.

(2) If W felt that she had a legitimate challenge to H’s explanation, the proper course was to seek specific discovery. She has not sought either financial documents of other X companies or companies held by H or the Group as nominee shareholder, nor for JM’s remit to be expanded to include those companies. She cannot complain that she is not even in a position to consider H’s case while sitting back, which is contrary to principles of fairness which underpin the Rules of Court. I would agree.

287.  W alleges that H bears the burden to show that he does not hold a beneficial interest in the assets of the X Trust and appears to blame H for not joining the Trustee to these proceedings. Mr Barnes replies that this is to turn the proper procedure on its head:

(1) H has provided, by the Deed of Settlement, Deed of Restatement and relevant declarations of trust, clear evidence that he has divested himself of his beneficial interests in various corporate interests the Trust holds. I accept that if W considered that these settlements were challengeable, then the onus was on her to bring the appropriate application to set them aside and to join the Trustee. She had ample opportunity to do so, but has not.

(2) She alleges the Declarations of Trust are self-serving. This ignores one vital element: their dates; some are as early as 2012-2014. They cannot have been attempts to place matrimonial assets beyond W’s reach or that of a court Order.

288.  I accept H’s evidence that one of the services provided by the X business through XSL is the provision of professional directorship and nominee shareholding services. The directorship services are either provided by him personally or a corporate nominee wholly owned by him. The nominee shareholding positions are usually provided by a corporate nominee wholly owned by H or him personally. As with the directorship positions, because of his close relationship, clients opt for him personally or XSL to act as corporate nominees. He says that he rarely provides personal nominee shareholding services because of the risks involved and will only do this for clients he has known for many years and where the risk is low. W has always been aware of how the X business operates and in particular that one of the services it provides is a directorship and nominee shareholding service.

289.  The expert, JM has gone over the X business documents and has been satisfied that the businesses are as described by H. That is independent support that the nature of the business includes providing the services explained by H rather than the picture painted by W. W has not established that the size of the pot is discounted. Nor that his nominee shareholdings and directorships held for the purposes of the X business are other than as he has explained.

290.  In LKW v DD Ribeiro PJ reiterated the underlying principles, including the rejection of the need for a minute retrospective investigation of parties finances. However, I have been through the details, including the Forms E, Questionnaires and Answers, affirmations, correspondence, submissions and W’s Closing Annex A with H’s Reply Annex C. I have highlighted some of the points above. I shall not recite all the allegations, answers and correspondence. I am satisfied H is not the recalcitrant party W paints him to be. I do not find that H has been in breach of his duty of disclosure such that the court should draw adverse inferences against him. I decline to do so.

Has W failed to make disclosure?

291.  Conversely, H alleges that it is W who has failed in her duty to provide full and frank disclosure.

292.  He points to the materials disclosed for the expert Mr Choy to value SL. She repeatedly failed to disclose SL’s bank statements to H despite requests. When she was forced to provide them to Mr Choy, she redacted multiple transaction, some of which she agreed were inappropriate. For example, she had no proper excuse for redactions to a Consulting Agreement with an anonymous company.

293.  W replies to allegations of non-disclosure regarding her redactions in relation to SL that critically, this is not a pattern but a one-off instance for W and:

(1) Mr Choy had made it clear that the identity of the parties to the agreements were not material to his valuation;

(2) Mr Choy reaffirmed he was satisfied with W’s answers to his queries, and maintained his valuation of SL;

(3) W’s confidentiality concerns were regarding H. Her prior experience of loss of major clients D and O, because of H justified her precautions against him.

294.  W has not disclosed how the USD257,000 commission received from the D deal was calculated and by reference to what document. Nothing has been disclosed or indicates the amounts she was receiving through her deal with OL. SL’s redacted bank statements show large regular payments into her account. Her explanation of recent payments into SL in summary, is they were from SL’s previous referral to X, which were paid into W’s personal account. The USD257,000 fee amount was ultimately paid back by W to SL and accounted for. The missing information from the tax document was due to this accounting having occurred at a later date.

295.  W was reluctant to provide full disclosure in respect of her business and work and ought not to have redacted some matters. However, I am not prepared to draw adverse inferences against her regarding SL disclosure ultimately made available for Mr Choy.

Credibility

296.  W’s legal team has left no stone unturned. The detail that has been explored by both sides has inevitably revealed some inconsistencies, apparent slips and oversights. H and W should not be held to a standard of perfection, be it in record keeping, timely responses or recollection in every aspect of their lives. I focus on material matters.

297.  I have considered the evidence given by each of the parties, written and oral, including the documents. I have taken into account all matters in the round in addition to the matters expressly referred to herein. Where there is a conflict of evidence reference to the objective facts proved independently of their testimony and in particular reference to documents, to the witnesses’ motives, and to the overall probabilities, are of assistance in ascertaining the truth.

Is H a credible witness?

298.  Mr Barnes submits that H gave clear and straight forward evidence, maintaining an even temperament. He did respond directly to “yes” or “no” questions, and elaborated on his answers where this was needed. Examples of his responses in cross-examination include:

(1) Questioned on CS suggesting he had given an untruthful Answer by stating on 21/2/2023 that the shares “are in the process of being acquired” was true because the terms of the Share Transfer Agreement had yet to be fulfilled, and if not the share transfer would be reversed. W had not requested a copy of the Share Transfer agreement.

(2) Questioned on the X Trust and his interest in it he gave full answers, consistent with the documents.

(3) He was clear and to the point on his “income”. He accepted that his spending is significant, but so are his expenses.

(4) Notably, he did not quibble about W’s expenses even though there was strategic exaggeration. This was not an admission that he was happy for the court to make an order that he pay for these expenses.

299.  W’s case is that H failed to give disclosure, is hiding assets, behaves unconscionably and is thoroughly dishonest. The evidence does not substantiate the extreme nature of the allegations. I find that H has not been lying about his business. He has answered the disclosure issues raised by W through solicitors’ correspondence and in these proceedings. He gave direct and frank answers, making appropriate concessions. I find that his oral testimony tallies with his sworn evidence, his evidence has remained consistent throughout the years and what he says is consistent with documentation. In my view, the evidence of H is inherently credible, supported by contemporaneous documents and conduct, and does not suffer from any material inconsistency. His evidence on events, discussions and dealings is not materially countered by other evidence, save the word of W. Overall I find H to be an honest and reliable factual witness. I accept and place weight on his evidence.

Is W a credible witness?

300.  Mr Li submits that W is straightforward and truthful. Mr Barnes refers to her as a less than impressive witness. He submits that she adopted a defensive attitude, at times seen in her questioning the relevance and purpose of the question, rather than concentrating on answering it. Serious inaccuracies in her written evidence emerged during cross-examination. Mr Li replies that H comments on W as a witness do not undermine her credibility.

301.  W was cross-examined to show that a Chart she created of H’s expenses was wrong. Mr Li says that the evidence was necessitated only because of H’s non-disclosure of his income so W’s approximations/guesswork was required. More importantly, W chiefly relies on another table: Deposits from X Companies to H’s BOC Account on which there was no cross-examination or challenge. W provided inaccurate evidence. I do not hold her to an exacting standard but she did not adduce the evidence as approximations and guess work. She did not have to create the Chart. She was motivated to damage H’s case and bolster her own. Once the Chart was undermined she failed to withdraw the evidence or thoroughly review and correct herself, when given the chance to do so.

302.  H asserts that when questioned about the payment of USD257,000 to SL she became defensive because she knew she was not entitled to the payment directly from the D client. She relied on her privilege against self-incrimination in writing and in the witness box when asked about her failure to duly include this in documentation. Mr Barnes suggests that the court may well find that the deliberate flouting of the X/SL referral agreement is entirely consistent with W’s attempt to resile from the FMA and her attitude to binding agreements when it does not suit her agenda.

303.  Mr Li’s reply to W getting defensive was “of course she did, the H referred to purported criminal implications”. These proceedings are not to determine any disputes between SL and X. I do not regard that D deal evidence as corroborative or indicative of a general attitude to have little regard for binding agreements. I do not take that D deal issue into account in assessing W’s credibility.

304.  Mr Choy acknowledged that his report depended on information supplied by W but she supplied redacted documents. H accepts, for the purposes of the court’s judgment, that SL can be valued at its NAV, but without admission that SL is permanently dormant. One inaccuracy was W saying that SL ceased business activities in July 2021, not July 2022, as in her Answers to H’s Questionnaire. Mr Li replies that this was clearly a typographical error in the year. It has always been W’s case that SL was suspended in xxxx 2021, when she started work in Y. This is reflected in Mr Choy’s report. Even H refers to her Y contract preventing her from undertaking any other work or business, there was no confusion over when SL ceased business. However, she also gave evidence that she tried to revive SL in 2023. W had previously chosen not to declare it dormant and go to the trouble of filling a formal document so H suggests that the only reason she has done so now must be connected with the trial. She had even more reason to file a certificate of dormancy in xxxx 2021 when her contract with Y would have prevented her from undertaking any other work/business, but did not do so.

305.  On 6/3/2024 W asserted for the first time that she had lost the OL contract due to actions allegedly taken by H in relation to events that had taken place by the end of 2022. No mention was made of these until her narrative affirmation, by which time she knew that H would have no opportunity to respond to it. Then no question were put to him in cross-examination. Mr Barnes invites the court to find they are untrue and that this is indicative of her less than forthright approach.

306.  Mr Li submits that the attack on W’s credibility is unwarranted, the court has seen and heard W’s evidence firsthand. It needs no elaboration that she is straight forward and truthful.

307.  I did not find W to have been straightforward. There were inconsistencies between the picture painted in her affirmations and the undisputed and indisputable evidence. Her efforts to set aside the FMA caused her to make broad, sweeping and wide ranging statements that were inconsistent with the documents and her actual conduct over the years. She went to extreme lengths to discredit H in order to bolster her case and in the process undermined her own credibility. In my view she was motivated to avoid the FMA. She also failed to answer questions and withheld information regarding her earnings, that she could have provided, because she perceived it may have been damaging to her case. I have compared her evidence to objective facts, in particular the documents. I find she has not been entirely truthful and as a result the court cannot rely on her evidence. I prefer H’s evidence to that of W, where they differ.

Issues 2-5: LKW v DD steps

308.  The Court of Final Appeal in LKW v DD [2010] 6 HKC 528 settled the law on how the court shall exercise its ancillary relief powers. Ribeiro PJ reiterated the four underlying principles of: (1) fairness; (2) the absence of discrimination; (3) the upholding of the concept of the yardstick of equality; and (4) the rejection of a need for a minute retrospective investigation of parties’ finances. LKW provides the four-step approach to be adopted in determining ancillary relief.

LKW v DD Step 1

309.  The first step is to identify assets and financial resources.

71. The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing. In particular, under s.7(1)(a), the court must have regard to ‘the income, earning capacity, property and other financial resources’ which each of the parties ‘has or is likely to have in the foreseeable future’. The object will of course be to compute the net financial resources, taking account of all material liabilities. At this stage, the court need not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets.

LKW v DD Step 2

310.  The second step is to assess the parties’ financial needs.

77. As s 7(1)(b) indicates, the process of evaluating ‘needs’ involves assessing the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future in the light of present and foreseeable resources. The matters referred to in s 7(1)(c) to (e), that is, standard of living, age and disability, will often be relevant. As Lord Nicholls put it in White:

‘Financial needs are relative. Standards of living vary. In assessing financial needs, a court will have regard to a person’s age, health and accustomed standard of living.’

78. And in Miller/McFarlane his Lordship stated in respect of ‘needs’:

‘When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party. Most of these needs will have been generated by the marriage, but not all of them. Needs arising from age or disability are instances of the latter.’

79. Baroness Hale stressed that the parties’ needs should be ‘generously interpreted’. Accordingly, in trying to ensure that each party and their children have enough to supply their needs set at a level that equates, insofar as resources allow, to the standard of living they enjoyed during the marriage, those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances.

LKW v DD Step 3

311.  The third step is to decide whether the “sharing principle” is applicable.

80. If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the ‘needs’ question previously considered to be dealt with under that principle (as pointed out by Sir Mark Potter P in Charman v Charman (No 4) cited above). In other words, the court should not make an immediate allocation but should return to ‘needs’ for them to be dealt with alongside all other material factors in the processes described below as Steps 4

……

82. The point reached at this third stage of the s 7 exercise therefore involves the court deciding that the sharing principle applies and taking the view that the total assets should be divided equally between the parties unless there is good reason, capable of articulation, for departing from an equal division. It is worth emphasizing, however, that as pointed out by Lord Nicholls, the court will often ultimately not arrive at an equal division.

LKW v DD Steps 4 and 5

312.  The fourth and final step is to consider whether there are good reasons for departing from equal division.

Open Proposals

Husband’s Open Proposal

313.  H’s Open Proposal dated 19 March 2024 (“HOP”) maintains that there is nothing unfair about the terms set out in the FMA and his proposal is in line with what the parties agreed.

314.  The HOP provides:

(1) There shall be a clean break.

(2) W shall have beneficial ownership of the AB flats 10A, 11A and 11B. Flat 10A, presently in her sole name, shall remain undisturbed. Ownership of flats 11A and 11B, presently in H sole name, shall be transferred to the W. W shall be responsible for the outstanding mortgage of flat 10A (HK$1,950,757 as at 29 February 2024).

(3) H shall have beneficial ownership of the CD flat, presently in their joint names. W shall transfer all her legal and beneficial ownership in the CD flat to H. H shall be responsible for the outstanding mortgage of the CD flat (HK$1,151,126 as at 29 February 2024).

(4) H and W to retain all other assets in their respective names.

(5) H shall pay to W a lump sum of HK$3,720,000 (“H Lump Sum”), such sum to be paid in equal monthly installments of HK$130,000 each month until full payment. The first installment to be paid within 14 days of the final judgment and thereafter on the 1^st day of each month.

(6) In respect of the Children’s expenses:

(a) H will provide an undertaking to:

(i) Pay the Children’s school fees and any education related costs including but not limited to school bus, school book, school camps/trips, school uniforms, overseas boarding and flights (if applicable), howsoever arising until the Children respectively complete secondary education or their first undergraduate degree, whichever is later.

(ii) Provide financial support to the children respectively during any ‘gap year’ a child or both Children may take.

(iii) Pay 50% of the costs of a domestic helper (including but not limited to salary, insurance and flight tickets) up to a cap of HK$4,000 per month, who will be working for the W and assisting in the care of the Children when they are in W’s care. The costs shall be paid until the son reaches the age of 18.

(iv) Pay the Children’s medical expenses, including but not limited to health insurance coverage and all expenses however arising from any medical treatments.

(b) Save for the expenses set out in (a) above, the parties shall each be responsible for paying the Children’s expenses, including but not limited to rent, food, clothing, activities, meals, entertainment, birthday gifts for friends etc when they have care and control of the Children.

(7) When the son finishes his education with xx school and the debenture is redeemed, H shall pay W HK$370,000 to reimburse her for the sum she paid.

(8) In respect of the rental of the FMH which H paid from the date of the FMA, W shall repay the entire sum to H. H proposes that this sum is deducted from the H Lump Sum. The total is HK$2,948,400 calculated as follows: $133,200 (incurred during nesting arrangement) + $2,575,200 November 2021-March 2024) + $240,000 (April 2024-September 2024) = HK$2,948,400.

(9) Property taxes on the AB flat paid by H from the date of the FMA, W shall repay the entire sum to H. To date of HOP approximately HK$140,000 paid in 2021 and 2022. H proposes that the sum be deducted from the H Lump.

(10) The CD flat has been valued by the SJE at HK$3.74 million. In June 2022, H received an offer to sell the CD flat at HK$4.8 million. As a result of W reneging on the FMA, the parties have incurred a loss of HK$1.06 million. H proposes that the sum is added back by W, by way of deducting HK$530,000 (i.e. 50% of HK$1.06 million) from the H Lump Sum.

(11) W shall pay H’s legal costs since H’s show cause Summons filed on 12 July 2022.

Wife’s Open Proposal

Capital division and spousal claims

315.  W’s Open Proposal dated 19 March 2024 (“WOP”) position is that the FMA should be set aside, or no weight be attached to it.

316.  The WOP provides:

(1) There shall be a clean break settlement between H and W.

(2) The matrimonial pot is HK$68,877,933.20 which consists of the following:

(a) Non-Disputed Assets (Schedule of Assets Part 1) HK22,889,554.50.

(b) Disputed Assets (Schedule of Assets Part 2) HK$43,041,583.

(c) Add-back of family assets depleted by H to his sister and partner, according to H’s disclosure HK$2,196,795.70.

(d) H’s acquisition of a new business of CISL HK$750,000.

(3) W shall have 50% of the matrimonial pot, which amounts to HK$34,438,966.60, corrected to $33,663,402.39. [$67,326,804.78].

(4) Each party shall retain all investments, properties chattels and assets which are presently in his or her own sole name or held jointly with others.

(5) Deducting assets and liabilities presently under W’s name which amount to [HK$7,141,932] including but not limited to flat 10A AB, and 50% of flat 2A CD, H shall pay W a balancing lump sum of HK26,521,470.69 as follows:

(a) H to transfer all his title and interests in flats 11 A and 11B AB to W within 30 days of the Decree Absolute – HK$12,560,000, with the expenses of the transfer shared equally between the parties.

(b) H to transfer all his title and interests in flat 2A CD to W within 30 days of the Decree Absolute – HK$1,094,436.50, with the expenses of the transfer shared equally between the parties.

(c) A lump sum of HK$12,867,034.19 to be paid by H to W in the following manner:

(i) HK$6,433,517.10 to be made within 14 days from the pronouncement of the Decree Absolute.

(ii) HK$3,860,110.26 to be made within 3 months from the pronouncement of the Decree Absolute.

(iii) HK$2,573,406.84 to be made within 6 months from the pronouncement of the Decree Absolute.

Children Maintenance

(6) W proposes H shall pay periodical payments in the sum of HK$115,000 per month for the Children, the daughter now aged 11 and the son now aged 8, commencing on the 1^st day of the month after the Order to be made and thereafter on the 1^st day of each succeeding month until the Children reach the age of 18 or cease full time education, whichever is later (“the Children Maintenance”).

(7) In addition to the Children Maintenance, H shall continue to pay for the Children’s (1) education expenses, including but not limited to school fees, extra tuition fees, school books and stationary; (2) medical/ dental expenses; and (3) insurance premia until the Children reach the age of 18 or cease full time education, whichever is later.

Costs of Ancillary relief

(8) Costs of and incidental to the ancillary relief matter of these proceedings be born by H.

Mechanics of Wife’s Open Proposal

317.  WOP seeks a balancing lump sum of HK$12,867,034.19. With the AB and CD properties, this will achieve a 50:50 split of the reduced/discounted pot. W says H can afford that amount. As to the mechanics, W is open for the balancing lump sum to be paid by installments. The WOP is a 6-month installment proposal. She is open to longer installments if the court deems fit.

Issue 2. DD v LKW STEP 1: Identify assets and financial resources

Disputed assets

318.  W disputes the size of the pot alleging it is a “discounted pot” and claims to be generous in not pursuing H’s other assets.

319.  H answers W’s case on the Schedule of Assets Disputed Assets thus:

(a) There is no UBS account and never has been.

(b) The xx School debenture to be repaid as agreed in the FMA.

(c) Any referral fee for SL is an issue between SL and X, beyond the scope of these proceedings. If SL has any claim it may take proceedings against whoever it sees fit.

(d) Legal costs incurred in separate proceedings related to the attempt to sell the CD property are a matter for the court seized of those proceedings.

320.  I have considered W’s case on all the disputed assets. W also claims that H has financially supported his current partner in the form of (1) bank transfers and (2) a Credit Card. The monthly average is ~HK$70,000. H supports his sister with the use of his AE Credit Card, being ~HK$20,000 per month. W claims the amounts H provided to the girlfriend and sister be added back as set out in the WOP.

321.  Mr Barnes submits that she is effectively accusing H of wanton and reckless expenditure by allowing his partner of 5 years to use his supplementary credit card and providing his sister, who is a beneficiary under the X Trust, with a card. This is very far from wanton and irresponsible expenditure.

322.  The Court of Appeal recently re-examined the law relating to allegations of wanton and irresponsible expenditure, in LCC v LTLA, CACV 281/2022 (20 April 2024), [2024] HKCA 406. The case involved the husband’s alleged gambling losses of HK$100M. The first instance judge added back the entire losses into the matrimonial pot. The husband successfully appealed. The Court of Appeal found that there was insufficient evidence to justify the add-back. It noted that even where it is satisfied that the conduct is “obvious and gross” in the Watchel v Watchel sense, it does not necessarily lead to a re-attribution of assets. Where serious misconduct resulting in financial loss is alleged the court should apply a two stage approach, namely (1) that a party asserting misconduct must prove the facts relied upon, and that such facts meet the conduct threshold, which has been consistently set at a high or exceptional level, and that there has been identifiable negative financial impact; a causative link is required, and (2) the court will then consider how the misconduct should impact on the outcome, balancing all the relevant section 7 factors. The court exercises its discretion to add-back very cautiously, and only in cases where it is satisfied that the high or exceptional threshold of gross and obvious misconduct has been met.

323.  W has not established the first stage, or that the facts meet the conduct threshold, that there has been a negative financial impact or causal link. In this case there is no misconduct to consider in balancing the section 7 factors. There is no basis for any finding that amounts should be re-attributed to the H’s side of the ledger for the expenditure on his partner and sister.

324.  The HOP asks, inter alia, for (1) W to repay him HK$2,948,400, being the FMH rent from July 2021 to September 2024, (2) AB property taxes in the sum of HK$140,000, and (3) reduced value of the CD property in the sum of HK$530,000 (being 50%). In total this comes to ~HK$3,610,000. The HOP proposes he pay HK$3,720,000 lump sum to W by way of installments over 28 months. Mr Li points out that the net effect of the above repayments / deductions, set off against the lump sum, means that H’s real lump sum offer is HK$101,600. Thus, the real effect of the HOP (Children maintenance aside) is for W to exit with just the AB properties with mortgage and a sum of HK$101,600. This produces a ~28:72 split. H’s position is clearly unreasonable.

325.  That aside, if H is serious about attempting to recoup HK$2,948,400, he would have to show, in effect, that this is MPS overpayment, that W is in a financial position to pay it and that it is fair in the circumstances. W says it is not. I accept that submission.

326.  Mr Li points out that the AB taxes are expenses spent on the up keep of matrimonial property. Given this is to be a sharing case, it matters not who’s pocket the expenses came out of. As to the reduced value of the CD property, this may be the case for all properties. Assets fluctuate in value. W should not bear this reduction, which came about in pursuit of her lawful rights under MPPO. I accept that submission.

327.  W is not required to repay any sum claimed in the HOP by H in respect of the rental of the FMH or property taxes on the AB properties. No sum shall be added back by W in respect of the CD property lost sale.

Step 1 - Financial resources and assets section 7(1)(a)

328.  The agreed assets are $22,889,554.50 net of liabilities. H’s primary position is that the court should not attribute a value to the X Trust. If the court accepts JM’s valuation, it should also acknowledge X’s fundamental illiquidity as an asset.

329.  I find the matrimonial pool of assets to be as follows:

(1) Non-disputed assets: HK$22,889,554.50.

(2) Disputed assets:

(a) UBS – nil/ non-existent

(b) Loans, Debenture – nil. Following the FMA and HOP HK$370,000 shall be returned to W when the debenture is refunded upon the son leaving xx School.

(c) Referral fee owed to SL – nil. SL may address this separately as W sees fit.

(d) Legal costs of other proceedings – nil. W may address those separately as she sees fit.

(e) Add-back – nil.

(f) X Trust HK$40,846,433 (XWL + XSL + XTL + XNL).

(g) SP (HK$1,367,304).

(h) SCL HK$1,607,000.

(i) OSS HK$53,000.

(j) CS Bank Account HK$7,150.

(k) CS – nil.

Sub-total HK$41,146,279.

Total net assets are: HK$64,035,833.50

330.  This is on the basis that the entire assets of the X Trust according to the JM valuation are attributable to H as a financial resource.

W’s income, earning capacity and other financial resources which she has or is likely to have in the foreseeable future section 7(1)(a)

331.  W’s case is that her current monthly income is HK$30,000. Since xxxxxxx 2023 she has been employed as xxxxxxxxxxxxxxx of C, a new start up in Hong Kong. Her Employment Agreement dated xx xxxxxxxxx 2023 provides that bonuses are discretionary, with her employer retaining “absolute discretion”. There is currently no figure as she only joined C recently. She said that she needed to build a new business line in C and the team and “it is not a well-established team”. The prospects of such is uncertain, and bonus all the more so. She secured the job after 70+ job applications, only receiving 2 offers after 7 months. One was without salary therefore she took the C role.

332.  H has endeavoured to ascertain particulars of her bonus or other entitlements. Her C appointment letter is in general terms and uninformative as to the potential levels of bonus/commission she may receive. It provides expressly for a “Performance Related Bonus”, that conditional upon her meeting “key performance indicators (KPI) as mutually agreed”, she will be eligible to participate in the annual discretionary bonus scheme. W avoided his solicitors’ questions asking for details of any discussions with her employer about bonuses, including when she expects to receive her bonus and in what form, repeatedly stating that this is at the employer’s discretion. It is common for an employment agreement to state that the bonuses are discretionary. However, W is very qualified and it is inconceivable to H that she would accept a position which pays 70% less than her previous base salary, unless she has received a firm indication with respect to her bonus entitlements, including the conditions to be fulfilled which would give rise to such bonuses and the quantum of potential bonuses. Attempts were also made to find out more from W in cross-examination. She declined to elaborate on when she may receive any bonus and what that may be. When pressed she admitted that during her discussions with her now employers she did not accept vague and unspecified assurances from them as to the level of compensation. Yet she had resisted repeated requests asking her for details of these discussions. H submits that W has deliberately hidden the details of her potential remuneration or bonuses as they would be inconsistent with her self-portrayal as a person with limited income and limited earning potential. H also invites the court to draw its own conclusions from the number of her business trips to the Mainland, where the D deal was brokered, and to Sydney.

333.  W’s disclosure shows multiple substantial credits to her personal BOC account from August 2023 to February 2024. There were payments of more than HK$130,000 per month from C and of more than HK$110,000 per month from SL.

334.  W explained that the evidence of additional payments received from C were reimbursements for business trips. C is not colluding with her to hide her true income and no other inference should be drawn from her frequent trips to the Mainland.

335.  Mr Barnes submits that W’s earning capacity is considerably greater than she portrays it to be. This is plagued by non-disclosure and for tactical reasons. She has not disclosed how the USD257,000 commission received from the D deal was calculated. Nothing has been disclosed or indicates the amounts she was receiving through her deal with OL. Her explanation of recent SL payments is they were from SL’s previous referral to X, which were paid into her personal account and for SL’s accounting purposes were repaid to SL. She denies that she is “receiving” amounts from OL, claiming to have lost the OL contact due to H. SL is dormant, not in business with OL and any prior income was reflected in Mr Choy’s valuation.

336.  W says she attempted to restore SL business after her Y contract in xxxx 2023, but this did not work. SL suffered a net loss of HK$70,284 as of December 2023. She declared SL dormant in February 2024. Mr Choy valued SL on an NAV basis at HK$1.056m. She alleges H sabotaged her relationship with D and OL. Mr Choy has said that even with these deals SL is loss-making.

337.  Asked whether SL was permanently dormant or could be “reactivated”, Mr Choy said that the valuation was date specific and “at that date, the company is dormant so I have to value it as dormant”. Mr Li considers this point unconstructive because “dormancy” is irrelevant. If W has the skillset/ abilities, W could start a new company to pursue SL’s business. I agree. Thus, H’s focus should not be on SL’s “dormancy” but on a wider concept of whether there is a likelihood, in the foreseeable future, for W to do so and to further earn an income from such business. There is no such thing as permanent dormancy; regardless, the key factor remains whether it is foreseeable that SL will contribute to W’s income. Mr Li submits that given the track record of SL with Mr Choy’s evidence, that SL was loss making and financially unsustainable, and further, W’s current full time employment, the answer is: No. H’s true contention is that W has further earning capacity. SL is not a present or future income source for W. It was just an asset.

338.  Prior to C, W had a 2 year contract to work at Y, earning HK$100,465 per month, with a gratuity of ~HK$416,000. Averaged over the 24-month term, her monthly income would be ~HK$117,000.

339.  W says even if she exits with the 3 AB properties, the net amount of rental income is not $45,000. The properties have taxes/ expenses of ~HK$13,000 per month and mortgage of ~HK$36,500 net.

340.  W’s investment account is significantly larger than his but she responds that XTL AFS had shown investments of ~HK4.3m held by XTL controlled by H which disappeared the year after.

341.  W is also receiving monthly contributions of HK$22,000 from her boyfriend towards the general monthly expenses including rent, with 4 payments seen in her September to December 2023 statements.

342.  Mr Li submits that there is no evidence that W has a higher income and earning capacity than $30,000. This is the level of income the court has in approaching matters of Children’s maintenance. There is no evidence she can revive SL or start a new business along similar lines. The AFS of SL show that business is not profitable. All of the previous SL business required H’s co-operation which is no longer provided. H maintains that W is seeking to present a picture that she has poor earning capacity. She did not have to rely on X Group for her business and given her track record she is clearly capable of working without X.

343.  I cannot accept that there is no evidence that W has a higher earning capacity than her $30,000 monthly salary. W’s earning capacity may be seen from other evidence. First, there is evidence of past earnings. Her earning capacity is substantiated by her qualifications, experience and past work. Secondly, under her current employment agreement she is entitled to bonuses or sums in addition to her base salary. That provides for a discretionary bonus. She admits that she had discussed terms and details have been negotiated with her employer but would not reveal any particulars, despite H’s solicitors’ efforts to ascertain them and his counsel’s attempts in cross-examination to get to the bottom of those issues. W would not assist, even in general terms, as to when she may receive any sum and what that may be. I readily infer that she is entitled to sums considerably greater than her monthly salary. What she actually receives will depend on performance and factors that she would not disclose. Her employer was prepared to set up a Hong Kong office and employ W, so must have considered there was business to be had. In the past W has proved herself able to broker deals or secure transactions worth considerable sums for herself. She relies on the positive indications regarding local, regional or global financial forecasts to submit the X Group has much upside.

344.  I accept that SL is now dormant and not profitable. I do not accept that W is incapable of starting a new business or engaging in business along similar lines. Nor that W’s previous business was wholly dependent on H. She did have his assistance in the past and she booked deals through X. His assistance and being able to work with X Group was a help to her. He says she may have got better treatment from X than other companies. That does not mean she could not carry on a similar business without him or the X Group. It is clear from their emails in the run up to the FMA that W could use X or other providers for SL business. They discussed her placing future business with others, both at the time his position was that he did not mind either way and later when he required she stop using X Group and instead use others. She never suggested that was not possible or difficult for her. She blames him for the loss of two business relationships or contacts. In the future she can operate without his interference.

345.  I must consider earning capacity and future financial resources. I am satisfied that W has the skillset and ability to conduct business of a similar kind securing similar deals with commensurate financial rewards in the foreseeable future, if she wished. She says that she tried to revive SL between the end of her last employment and taking up her present employment but without success. The efforts are unclear. In my view W has proved herself able to secure business that reaps considerable sums for herself. She has not suddenly lost that ability. Whether she would do so in the foreseeable future on her own account would be a matter of choice for W. If she is doing well in her present employment she may chose to remain there but, if not, she would be able to pursue business as in the past or reap substantial sums for herself.

346.  I accept W’s explanation that other sums received from C were reimbursements for expenses incurred. Her expenses and travel do show that she is actively engaged in establishing the business. Alternatively, she could do so for a business of her own. The evidence fails to establish that she is doing new business through SL.

347.  The matter that has left me with no option but to draw inferences is in respect of W’s earnings, earning capacity and likely financial resources in the foreseeable future. Her refusal to provide any meaningful information in respect of her discretionary bonus and the sums or financial resources she is likely to have in the foreseeable future by reason of her current employment means the court must draw inferences. In the absence of evidence from W inferences are drawn from all the other evidence of past income and earning capacity.

348.  In terms of section 7(1)(a), I find that W’s income, earning capacity and financial resources which she has or is likely to have in the foreseeable future are as follows. Her present monthly salary of HK$30,000 is not the full extent or limit of her earning capacity and what she is likely to have in the foreseeable future. Absent any indication from W as to her forecasts, targets or discussions with C that determine bonus I shall infer her income from that achieved previously. She did not disclose particulars of how her D payments were calculated. I adopt her earnings received in her previous Y employment. I find W’s earing capacity to be at least $117,000 per month.

349.  In addition she would have the rental income, less mortgage and expenses, of real property in her sole name after the order. W is also receiving HK$22,000 per month from her partner living in the FMH.

350.  W’s income, earning capacity and financial resources on that basis is HK$117,000 per month, plus rental income and partner’s contribution.

H’s income, earning capacity and other financial resources which he has or is likely to have in the foreseeable future section 7(1)(a)

351.  H’s financial resource is what he receives from the X business. He draws his income by way of loans from X companies. W says that there appears to be no limit to this. Her case is that H’s income has been an average of at least HK$556,198 per month, up to HK$697,391. His Form E Part 4 comes to ~HK$400,000, up to HK$700,000. He agreed in cross-examination that he withdrew ~ HK$21 million from X Group over the past 36 months or ~ HK$585,000 per month. Mr Barnes challenged W’s calculations of H BOC Account withdraws not his X Group withdrawals. According to his 2^nd Form E his Part 4 expenses come to ~HK$442,000 inclusive of legal fees. Without those it is HK$320,000. W says he has a luxurious lifestyle seen from his HK$585,000 per month expenses, spending large sums on AV “Stereo/ Sound Equipment ~HK$195,000, in 2 months, use of a luxury car and other valuables. H was also in receipt of ~HK$45,000/month rent from the AB properties.

352.  H’s income, earning capacity and financial resources now and in the foreseeable future are those generated by the X business and rental income from the AB or CD properties. I accept the above figures. I take his drawings of HK$585,000 per month as his earnings. Mr Li submits that there is no question over Hs financial ability to meet the WOP, at least in so far as Children maintenance is concerned.

Issue 3. DD v LKW STEP 2: What are the current and likely future needs of the Children and the parties? Are there assets surplus to needs?

W and the Children needs

353.  Section 7(1)(b) and (2), the financial needs, obligations and responsibilities which each of the parties and each of the Children has or is likely to have in the foreseeable future must be considered. H and W set out updated expenses in their second Forms E.

354.  W’s monthly expenses set out in her 2 Forms E and H’s position on W’s reasonable adjusted monthly needs are as follows:

Part 4.1 General expenses

Item	1st Form E (HK$)	2nd Form E (HK$)	H case on W needs (HK$)
Rent HK$88,000 paid by H	88,000	Paid by H	66,000
Mortgage instalments	28,182	29,713 10A AB and CD	13,213
Utilities (electricity, gas, rates, water and telephone)	4,834	9,000	3,625.5 (4,834/4x3)
Management fees	1,300	1,800 10A AB	1,800
Food	14,550	14,550 including household expenses	15,000 including meals out +household expenses
Household expenses			-
Car expenses	--	NA	--
Insurance premia	222	4,000	-
Domestic helper	7,228	7,999	7,999
Others		NA
Total monthly general expenses	144,316	67,062

Part 4.2 Wife’s personal expenses

Item	1st Form E (HK$)	2nd Form E	H’s case (HK$)
Meals out of home	10,000	16,000	Already under food
Transport	2,000	2,000	2,000
Clothing / shoes	9,000	9,000	3,500
Personal grooming (including haircut and cosmetics)	7,200	12,000	6,000
Entertainment / presents	300	8,000	5,000
Holiday	2,200	7,000	7,000
Medical / dental	1,000	17,700	3,000
Tax	21,918	To be ascertained	Nil
Insurance premia	3,840	4,600	4,600
Interim maintenance	--	N/A	--
Contribution to parents	4,550	5,000	0
Dependent family members	--	--	--
Others (News subscription and computer maintenance)	1,235	1,235	1,235
Total monthly personal expenses	63,243	82,535 Excluding tax

Part 4.3 Children

Item	1st Form E (HK$)	2nd Form E (HK$)	H Case (HK$)
School fees $23,533 paid by H	23,533	Paid by H	--
Extra tuition fees	--	Paid by H	--
School books and stationery		[1,000]	0
Transport to school (including school bus)		8,000	0
Medical / dental		Paid by H
Extra curriculum activities	1,430	1,430	0
Entertainment / presents	1,100	6,500	2,000
Holidays	4,400	14,000	5,000
Clothing / shoes	1,000	1,500	1,500
Insurance premia	--	Paid by H	--
Lunches / pocket money	400	600	0
Other transport	--	800	800
Child minding fees	1,900	N/A	--
Uniform	1,500	1,500	0
Others	NA	NA
Total monthly expenses for children	35,263	34,330 [35,330]	9,300
Total monthly expenditure for Wife	242,822	183,927	149,272.5

355.  H says that W has significantly inflated her claimed expenses for the purposes of these proceedings so they should be carefully scrutinised. There is substantial strategic exaggeration and an aspirational element. Some of the claimed items do not match W’s current or past spending, being amounts she would like to spend. These amounts are addressed, inter alia, by H on affirmation and in solicitors’ correspondence. He highlights the following:

(1) Rent, utilities and household expenses: Electricity bills for a period in 2022 were very high but dropped to around $3,000, so $9,000 is excessive. The figures should be divided by 4 given the presence and $22,000 contribution of W’s partner.

(2) Credit card spending: Comparing W’s average spending on the 2 cards most used from June 2023 to December 2023 show there is significant exaggeration in the expenses claimed. H Closing Annex B sets out the average spending on the 2 cards calculations:

(a) Meals out: Form E $16,000 vs $7,501.57 spent;

(b) Clothing / shoes: Form E $9,000 vs $3,109.43 spent;

(c) Personal grooming: Form E $12,000 vs $4,791.21 spent. Comparing her 1^st and 2^nd Form E the sum claimed increased from $4,800 to $12,000;

(d) Entertainment/ presents: Form E $8,000 vs $2,608.95 spent;

(e) Medical expenses: Form E $17,700 vs $404.29 (unknown if the one sum is covered by insurance).

Therefore, H considers the reasonable adjusted monthly expenses should be a total of HK$149,272.50.

356.  Mr Li says that H’s challenge to W’s expenses was only by way of submissions, unsupported by any factual evidence and with no cross-examination, depriving W of the opportunity to respond. The calculations are disputed and should be disregarded. For example, food is HK$500 per day 3 meals for 3 with and no budget for eating out, while he spends thousands on one meal. In cross-examination H accepted the bulk of W’s Parts 4.1 and 4.3 expenses were reasonable relative to his own expenses. H agrees the Children should continue enjoying a similar standard of living whether with H or W. Therefore the court is being invited to make an order which contradicts his evidence.

357.  H replies that it is misleading to say he agreed to the bulk of her declared expenses. He had clarified that he was only making a point that he could not disagree with the figures listed in her expenses. It was not an agreement to pay those sums. He added this important point: “the Children are only with her 50% of the time. Just in context, as far as rent is concerned, if there was to be maintenance, I would certainly thought would be 50% of that, or 66% of that 50% if it is 3 of them living there”.

358.  W was not cross-examined as to the truth or reasonableness of her expenses but there is evidence to undermine her present claims. There would appear to be exaggeration given some unexplained differences between her Forms E and also her own evidence of actual spending. I do not accept that H’s case is unsupported by evidence. I would have taken a total closer to his figure but that was not expressly put to W. I doubt there would be any unfairness in reality, the parties well know each other’s case. However, H did consider her expenses reasonable, just not that he should have to pay them.

359.  I will accept W’s 2^nd Form E Part 4.1 General Expenses total monthly household expenses of HK$67,062. That does not include FMH rent of HK$88,000 per month paid directly by H. H relies upon the presence and contribution of her partner and that the Children are only there half the time to reduce the sum.

360.  Her 2^nd Form E Part 4.2 Personal expenses are HK$82,535 (excluding tax). I do question the significant jump in some items and that the credit card spending does not match the 2^nd Form E. However, given H’s evidence I will also accept her over all Part 4.2 expenses. Part 4.1 and 4.2 expenses are therefore HK$149,597 (HK$67,062 + HK$82,535).

361.  The Part 4.3 Children’s monthly expenses claimed are HK$34,330 (items amount to HK$35,330). Her 2^nd Form E total monthly expenses are HK$183,927.

H’s needs

362.  H acknowledges his Forms E list of expenses are considerable. His 2^nd Form E shows Part 4.1 General Expenses total monthly household expenses are HK$226,493. That includes FMH rent of HK$88,000 per month. His Part 4.2 Personal expenses are HK$144,800, including legal costs of HK$118,000. The Part 4.3 Children’s monthly expenses are HK$70,920. His 2^nd Form E total monthly expenses are HK$324,213 (not including legal fees) or HK$442,213 (including legal fees). I accept the figures as H’s expenses.

363.  W says H has financially supported his partner, monthly average ~HK$70,000 and his sister, averaging ~HK$20,000 per month.

364.  H’s position remains that he and W are both working and can meet their own needs from their own earning capacities and from the asset division in accordance with the terms of the FMA.

Other section 7 factors

365.  The primary obligations and responsibilities, which each of the parties has and will continue to have into the future is for the Children. The other section 7(1), MPPO factors must be considered and may be material to needs. As already set out there is ample evidence that the family enjoyed a good standard of living before the breakdown of the marriage: section 7(1)(c) MPPO. H is aged 50 and W 42, while the duration of the marriage was 9 years: section 7 (1)(d) MPPO. The parties do not suffer from physical or mental disabilities: section 7 (1)(e) MPPO. I find that each has contributed to the welfare of the family, including by looking after the home and caring for the family: section 7 (1)(f) MPPO.

Children Maintenance - financial needs of the child

366.  W proposes Children maintenance of ~HK$115,000 per month. I must take into account all the circumstances, including the section 7(2), MPPO matters. In particular their financial needs, the standard of living they have enjoyed and the manner they were being and which the parties expected them to be educated. The financial provision for Children should aim to place them in as close a standard of living as they enjoyed prior to the breakdown of the marriage as possible: section 7(2)(b), MPPO. Moreover:

(a) “ … So ‘the child is entitled to be brought up in circumstances which bear some sort of relationship with the father’s current resources and the father’s present standard of living…”: see WGL v ASB [2013 HKFLR 391 per B Chu J at §§55+.

(b) “ … the children’s’ standard of living with their Mother (W) should not have to fall below that which they enjoy with their Father (H) and certainly not below the standard that was enjoyed during the marriage”: CCA v NPCA FCMC 1147/2007 (unrep., 20 July 2012) per DD Judge G Owen (as he then was) at §67 applying J v C [1999] 1 FLR 152.

367.  H accepts that the Children enjoyed and still enjoy a high standard of living. They reside at comfortable apartments when they are in the parents’ respective care. W remains at the HK$88,000 per month rented 1,700 sq ft, 4 bedroom FMH. The family used to have 2 domestic helpers, a private car, overseas holidays and dined out regularly. I find that was indeed the marital standard of living before the break down of the marriage: section 7(1)(c) and section 7(2)(d), MPPO.

368.  W’s case is that she has a monthly income of HK$30,000 and cannot afford to maintain the Children at a similar standard as H on her own. Their income disparity justifies asking for Children maintenance. W claims that on her current income the Children maintenance set out in WOP will be needed. HOP has no provision for (1) the Children’s share of the Part 4.1 expenses, when they spend 50% of their time with W, and (2) other expenses under Part 4.3, such as ECA, entertainment and holidays when the Children are with her.

369.  W will have to rent an apartment on par with his. His monthly rent is HK$85,000. H agreed a rental budget for W of around HK$88,000 and the bulk of her declared expenses. Mr Li submits importantly, he agreed that the budget for the Children of HK$115,000 maintenance was fair. H can afford to pay that sum. He is drawing ~HK$585,000 per month. The cessation of legal fees would enable this to be paid. Further, he lets his girlfriend and sister spend on his AE card and provides the girlfriend with cash. The Children must take priority over the girlfriend and the sister.

370.  H considers W’s claim of $115,000 for Children maintenance inflated (as analysed above) and unfair. W’s proposal involves her taking half of X. Halving the overall value of X Trust will accordingly decrease H’s future ability to draw loans. I accept in principle that a reduction in the value of the X Trust would negatively impact H’s ability to draw loans. On the other hand W, who is experienced in portfolio management, will doubtless be able to generate income from half of the cash value of X. Given W’s experience and the evidence of her previous investments she may well be able to generate income by investing the sum received, but there can be no figures. Further, H presently bears the lion’s share of Children’s expenses. If W is entitled to half the value of H’s only resource, there is no reason why W should not in turn, be responsible for half the Children’s expenses.

371.  On W’s 2^nd Form E Part 4.1 the sum of the HK$44,708 (HK$67,062/3 x 2) may be taken as the Children’s share of the general household expenses. H accepted the figures but pointed out that they were only with W half the time, so the sum should be HK$22,354. Further, her boyfriend was also present and contributing so the sum could be HK$33,531 (HK$67,062/4 x 2) or HK$16,765. However, in reality not all expenses would actually be reduced in the Children’s absence. I take the higher sum of HK$44,708.

372.  W’s 2^nd Form E Part 4.3 Children’s expenses paid by her include the following education related expenses: school books and stationary HK$1,000, transport to school HK$8,000, extracurricular activities HK$1,430 and uniform HK$1,500. Whereas H says that he pays the Children’s the education related expenses and the HOP is for him to continue to do so. The other items are: Entertainment/ presents HK$6,500, Holidays HK$14,000, Clothing/ shoes HK$1,500, Lunches and pocket money HK$600, Other transport HK$800. The total is HK$35,330. H says that W’s adjusted monthly expenses for the Children (excluding general household expenses) should only be as follows: Entertainment/ present HK$2,000, Holidays HK$5,000, Clothing/ shoes HK$1,500, other transport HK$800. He submits that W’s share of the Children’s expenses should amount at most, to HK$9,300. I find the Part 4.3 Children’s expenses to be HK$23,400 ($6,500 + $14,000 + $1,500 + $600 + $800).

373.  I have attributed the sum of the HK$44,708 as the Children’s share of the general household expenses with W not including rent. Hence, the Children’s total monthly expenses with W would be HK$68,108 ($44,708 + HK$23,400). This equates to each child’s total monthly expense being HK$34,054. It should be noted that the onus for providing for the Children lies with both W and H.

374.  At the time of the FMA W agreed that H was to provide for educational expenses and that she would be responsible for the Children’s expenses when they were in her care. H has the financial capacity to cover his own and the Children’s expenses in terms of the FMA. I find that H has the financial ability to pay HK$115,000 Children’s maintence sum proposed by W but that W should also be making some contribution to their expenses.

375.  I do accept that if the FMA or HOP is to be adopted in full, it would leave W in a predicament of real need against fairness, necessitating a reduction in standard of living, which affects the Children.

376.  The Children must be maintained at the same standard as they have been to date and at the same standard when they are with their mother as they enjoy with their father. The most obvious aspect in their daily lives is the home they live in. W must be able to maintain them in a home of the FMH standard. They must not be in inferior premises and living environment when residing with their mother.

377.  Another aspect of the Children’s daily lives is the assistance of a domestic helper. The mother is in full time employment. She must be able to employ a domestic helper.

378.  The Children should also be able to have overseas holidays with their mother, not only their father. The needs should be generously interpreted, not based on some lowest common denominator.

379.  I will allow a contribution to those items. It was acceptable to W when she entered the FMA that she should be making some financial contribution to the Children. I find that W is able to make some contribution. She proposes $115,000 Children’s maintenance on the basis her income is $30,000 per month. I have found it to be considerably greater. Once a share of the most substantial expenses, are provided by H she can use her own funds for other general and daily expenses.

380.  I base the Children’s maintenance on the figures claimed for the 3 main items addressed above. I take the rental of the FMH as HK$88,000 shared between the 3 family members. The sum would be $58,666.66 ($88,000/3 x 2) say $59,000. I make no discount for the fact they are in her care only half the time. A landlord does not reduce the rent accordingly. I disregard the presence and contribution of the W’s partner. If, and so long as he continues to contribute any sum, that will free up her funds to provide for other things. H proposes 50% of the cost of employing a domestic helper, with a cap of $4,000. W claims HK$7,999. Foreign domestic helpers are typically on standard full time contracts. A sum less than HK$7,999, even with the additional costs such as flights, would enable her to employ full time help. H has not quibbled over the figure, only that his contribution should be capped at HK$4,000. The Children are only with W half the time but given she would be employing full time help I allow HK$7,999. The other large item is the sum claimed for holidays. I allow the full $14,000 claimed. That may be high but the primary concern is the overall figure. In my view W would then be able to meet the Children’s share of other general household expenses, food, and all other items including clothing, gifts and entertainment, while in her care. Nevertheless, I shall also allow part of the claim for those other items by way of a lump sum of HK$8,000.

381.  Basing the Children maintenance on those items gives the total of HK$88,999 ($59,000 + $7,999 + $14,000 + $8,000), say HK$89,000. It is only fair and consistent with what had previously been acceptable to them as a family that W makes some contribution to their expenses. She is able to do so. I grant Children’s maintenance of $89,000 per month (HK$44,500 each child). The Children maintenance shall be payable on the first day of each month until each child turns 18, or completes full time education to the completion of first undergraduate degree, or tertiary education equivalent, whichever is later.

Issue 4. DD v LKW Step 3: What departure, if any, should be made to the broad principle that matrimonial assets should be shared equally?

DD v LKW STEP 3 Whether the “sharing principle” is applicable?

382.  The DD v LKW third step is to decide whether the “sharing principle” is applicable. The parties agree that the sharing principle applies. The total assets should be divided equally between the parties unless there is good reason, capable of articulation, for departing from an equal division. W seeks a 50:50 division and Children maintenance while H seeks to uphold the FMA.

Issue 5 DD v LKW Steps 4 and 5: What is a fair result, taking into account all the factors, including the FMA?

DD v LKW STEP 4 Whether there are good reasons for departing from equal division?

383.  The fourth step is to consider whether there are good reasons for departing from equal division. The question is whether there is justification for departing from the sharing principle. In my view the following may be relevant in determining the issue:

(1) Whether FMA should be considered and constitutes a good reason for departing from equality?

(2) Whether the structure of the award or the nature of the asset distribution should be considered and constitute a good reason for departing from equality?

(3) Whether the respective financial obligations towards the Children should be considered and constitute a good reason for departing from equality?

384.  The FMA structure allocated particular assets and financial responsibility in respect of the Children, as between the parties. The above 3 factors are not entirely independent and cumulative.

Whether FMA should be considered as a departing factor from equality?

385.  First, should the FMA be considered? The authorities are clear that a nuptial agreement may be taken into account as conduct. I find that in this case the FMA should be taken into account. Mr Barnes submits that whether holding both parties to the FMA would involve a departure from the sharing principle is not capable of a yes or no answer without further analysis. The WOP proposes 50% of the pot including X valued at ~ HK$40M, plus child maintenance of HK$115,000 per month. H considers that simply impracticable and would produce an unfair result.

386.  The authorities and principles on nuptial agreements are addressed above. Broadly, such agreements should be upheld subject to the vitiating factors and the safety-net. I have found there is one vitiating factor, namely W being under a misapprehension as to the value of the X Group at the time of signing the FMA. I have not found that H was guilty of egregious or other unworthy conduct. It is material that the agreement in this case was a mediated agreement. In all the circumstances the FMA should be accorded significant weight. While Mr Barnes points have some substance I do consider that strict adherence to the FMA would be a departure from the sharing principle. Without any vitiating factor the FMA should have been upheld or accorded very substantial weight. Even with the vitiating factor it should still be accorded significant weight and therefore is a good reason for departure from equal division and the sharing principle. I also take consider that strict adherence to the FMA would leave W in a predicament of real need impacting the Children and the safety-net.

Whether the structure of the award or the nature of the asset distribution should be considered and constitutes a good reason for departing from equality?

387.  Mr Li submits first, that the X Group, it is the primary marital acquest and complete exclusion of the X Group, whether as an asset or an income source would rob W of her share in a wholly a marital acquest. Secondly, the contention that the X Group is ultimately owned by the X Trust, and therefore W’s entitlement should be limited would not be fair. If the X Group is excluded, this becomes a needs case. There is no question of complete exclusion of the X Group. I have found that the X Trust is a genuine trust and there are beneficiaries other than H.

388.  The FMA, HOP and, importantly, WOP asset division allocates H the X Group. The FMA and HOP provide for W to have the more valuable real property, the AB properties and the WOP proposes W also to have the CD property. The division of assets acceptable to the parties is for H to take the private business while W takes real property. I consider their Hong Kong properties to be liquid assets. I have found that the X business is an illiquid asset. There is authority that I may have regard to the nature of the assets and the structure of the award in determining the division in order to achieve overall fairness. Granting W both the AB properties and the CD property is a departure from the FMA allocation. While allowing H some real property as well as the business undermines the force of the liquid v illiquid argument. Any departure from the sharing principle on the basis that H had the illiquid asset would be less if he also had some liquid assets, and the quantification more arbitrary. On the facts there may be a clear division between major liquid and illiquid assets. The asset division shall be that W has all the real property, namely the AB properties and the CD property. H shall have the X Group. On that basis she has the liquid assets while he has the illiquid asset, with the associated risks. In my view that is a good reason to depart from equal division.

Whether the respective financial obligations towards the Children should be considered as a reason for departing from equality?

389.  I have no doubt but that the financial obligations for the Children may be considered as a reason for departure from equality in this case. The parties have been consistent through the years, in the FMA, the HOP and the WOP, that H shall be responsible for the Children’s education and medical expenses. I shall maintain that division of financial responsibility. I accept that in so far as the value of the X business H retains is diminished to settle W’s entitlement to the assets the source of funding for the Children is reduced. It would not be fair for W to have half of the assets value while H pays the lion’s share of the Children’s expenses. In my view the respective financial obligations towards the Children is a good reason for departing from equality.

Determination

390.  In DD v LKW Ribeiro PJ reiterated the underlying principle of fairness. I have considered all of the evidence, circumstances and section 7, MPPO matters to achieve a fair award. In my view the FMA, the nature of the assets and the structure of the award as well as the financial responsibility for the Children are reasons for departing from the sharing principle but those factors overlap. Determining a fair award is not simply an arithmetical exercise. I find that departure from equal division is justified. There shall be a 57:43 division in favour of H or a departure from equal division of 7%. Taking the total assets of HK$64,035,833 W’s share of 43% is $27,535,408.19.

Issue 5. DD v LKW Step 5

What are the ancillary relief orders that should be made for the parties and the Children in light of all the relevant circumstances and considerations including the section 7 MPPO factors?

The ancillary relief orders

391.  W’s 43% share of the total assets is HK$27,535,408.19 (43% of HK$64,035,833). W shall take the AB and CD properties.

392.  The WOP is for H to transfer all his titles and interests in:

(1) The AB properties, flats 11A & 11B AB to W within 30 days of the pronouncement of the Decree Absolute, being HK$12,560,000, with the expenses associated with the transfer to be shared equally between the parties.

(2) The CD property, flat 2A CD to W within 30 days of the pronouncement of the Decree Absolute, being HK$1,094,436.50 with the expenses of the transfer shared.

393.  The WOP amount of assets in her name was corrected to HK$7,141,932, which includes the property flat 10A AB and 50% of the CD property. H title and interests in flats 11A and 11B AB value is HK$12,560,000. His half interest in flat 2A CD value is HK$1,094,436.50. After transfer of the properties the W shall hold HK$20,796,368.50 (HK$7,141,932 + HK$12,560,000 + HK$1,094,436.5). Therefore the W is entitled to an equalising/ balancing sum of HK$6,739,039.69 (HK$27,535,408.19 - HK$20,796,368.69), say HK$6,740,000.

394.  As to the mechanics for payment of the balancing lump sum of HK$6,740,000, W is amenable to payment by instalments. WOP, for a larger sum, is a 6-month instalment proposal. She is open to longer instalments if the court deems fit. The HOP proposes he pay a lesser lump sum to W by way of instalments over 28 months.

395.  The balancing sum is substantial. I will allow payment over a slightly longer period than the WOP proposal. The sum of HK$6,740,000 shall be paid in 4 instalments, unless otherwise agreed or ordered. The first instalment is for the lesser sum of HK$740,000 to be paid within 21 days after pronouncement of the Decree Absolute. H shall pay 3 instalments of HK$2 million at 3 monthly intervals, also starting from after pronouncement of the Decree Absolute. The first instalment is for the lesser sum of HK$740,000 because there will doubtless be legal fees in respect of these proceeding and the properties to address and to give the H a little time to make arrangements for the instalments.

396.  I grant leave to the parties to be heard on the instalments and any matter arising. If either party wishes to be heard the parties shall submit agreed draft directions within 21 days of handing down of this judgment. Otherwise the above instalments shall be the final order.

397.  H has already asked to be heard on costs. Therefore I shall not make a costs order nisi. Parties shall submit agreed draft directions for that determination within 21 days hereof.

Conclusion

398.  The court is charged with dividing the assets in a fair and equitable manner. Consequently I will make an order that upon pronouncement of the decree absolute that H do pay W HK$27,535,408.19 in full and final settlement of her claims for capital ancillary relief. H shall pay to W the sum of HK$89,000 per month for the Children (divided equally between the two children), until they attain the age of 18 or cease full time education up to first degree, or tertiary education equivalent, whichever is later. H has agreed to pay the Children’s education and medical expenses. I add that he shall also pay their dental expenses. This should be expressed as an undertaking in the order. Repayment to W of HK$370,000 upon redemption of the x school debenture should also be by way of undertaking.

The Order

399.  Upon the Petitioner undertaking to:

(a) Pay the children’s school fees and any education related costs including but not limited to school bus, school books, school camps/trips, school uniforms, overseas boarding and flights (if applicable), howsoever arising until the children respectively complete secondary education or their first undergraduate degree (or tertiary equivalent), whichever is later.

(b) Provide financial support to the children respectively during any ‘gap year’ a child or both children may take.

(c) Pay the children’s medical and dental expenses, including but not limited to health insurance coverage and all expenses however arising from any medical and dental treatments.

(d) Pay the Respondent HK$370,000 when the son finishes his education at x school and the debenture is redeemed to reimburse her for the sum she paid.

IT IS ORDERED THAT

1. There shall be a clean break.

2. The division of capital set out in paragraph 3 below shall be in full and final settlement of the Respondent’s claims for capital ancillary relief and in full and final settlement of the Respondent’s claims for all forms of ancillary relief.

3. Upon pronouncement of the decree absolute the Petitioner do pay the Respondent a lump sum of HK$20,393,476.19 as follows:

(a) Petitioner to transfer all his title and interests in flats 11A and 11B AB to Respondent within 30 days of the Decree Absolute – HK$12,560,000, with the expenses of the transfer shared equally between the parties.

(b) Petitioner to transfer all his title and interests in flat 2A CD to Respondent within 30 days of the Decree Absolute – HK$1,094,436.50, with the expenses of the transfer shared equally between the parties.

(c) A balancing lump sum of HK$6,740,000 to be paid by Petitioner to Respondent in the following manner unless otherwise agreed or ordered:

(i) HK$740,000 to be paid within 21 days from the pronouncement of the Decree Absolute.

(ii) HK$2,000,000 to be paid within 3 months from the pronouncement of the Decree Absolute.

(iii) HK$2,000,000 to be paid within 6 months from the pronouncement of the Decree Absolute.

(iv) HK$2,000,000 to be paid within 9 months from the pronouncement of the Decree Absolute.

4. Save as aforesaid in respect of real property, namely the AB and CD properties, each party shall retain all investments, properties, chattels and assets which are presently in his or her own sole name or held jointly with others.

5. The Petitioner do pay the Respondent periodic payments for the Children of the family, in the sum of HK$89,000 per month (for the daughter and the son in equal division), the first payment to be made on the first day of the month after the handing down of this judgment and thereafter to be paid on the first day of each succeeding month until each child’s 18^th birthday or cessation of full time education, meaning completion of secondary education or their first undergraduate degree (or tertiary equivalent), whichever is later or until further order.

6. Costs reserved. The parties shall submit a draft agreed order for directions for the determination of the cost within 21 days hereof.

7. A section 18 declaration to issue.