SG v. GDV

FCMC 10217/2020

[2021] HKFC 163

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 10217 OF 2020

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J U D G M E N T

(Maintenance pending suit/Interim maintenance)

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Introduction

1.  This is an application by a Petitioner wife for maintenance pending suit for herself pursuant to section 3 of the Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO) and for interim maintenance for the two children of the family, two boys who are now aged 11 and 8 years of age respectively, under section 5 of the same ordinance. The wife seeks the sum of HK$52,000 per month (i.e. HK$32,000 per month for rental and HK$20,000 per month as direct maintenance for both herself and the boys), plus a continuation of the husband’s agreement to pay for the children’s school fees. The husband for his part offers HK$36,600 per month (including rental of HK$22,600 per month) plus HK$45,200 for a rental deposit. He says that the school fees have been paid for up to date, but clearly provision will need to be made for the school fees going forward in addition. The husband estimates these at a further HK$20,383 to HK$24,460 per month. Thus it appears that on the face of it the parties are only HK$15,400 per month apart (i.e. HK$52,000 – HK$36,600 = HK$15,400).

The main issues

2.  The only issue to be determined, at this stage then, is how much should the husband pay to the wife for her interim support and that of the children?

Background

3.  This is a very high conflict case between a Petitioner wife who was originally from Kyrgyzstan and a Respondent husband who is a US citizen but of Greek heritage. They met in 2002 in the United States and on the XX May 2004 they married in Washington State, USA. In 2006 they relocated to Hong Kong, where the husband set up his own business called AIS, which is a real estate media and software company. They and the children are both Hong Kong permanent residents, but the wife does not have any immigration status in the US. The boys, however, are both US citizens.

4.  There have been many allegations and counter allegations made by one party against the other, which I do not intend to go into here. In so far as the living arrangements are concerned, it appears to be sensibly acknowledged by both sides that it is now imperative that they live apart. To that end it is also of note that an order was made on the 19 November 2020 that the children be not be removed out of the jurisdiction of Hong Kong, save with the leave of the court. This was followed on the 23 February by an interim interim order that the husband do pay the wife interim maintenance pending suit for herself in the sum of HK$8,000 per month and interim interim maintenance for the two boys in the sum of HK$3,000 per child per month. This was premised on the parties continuing to live under the same roof in the immediate to short term. A further order of the same date sets out the interim care arrangements for the two boys. I am told however that this arrangement has not worked well. There is currently a Children’s Dispute resolution hearing scheduled for the 1 September 2021.

5.  In addition to the matrimonial litigation, there is also litigation pending in the High Court with respect to the husband’s company. As at the 18 January 2021 it was the husband’s position that this action was likely to be determined shortly, within weeks or months. The current status of that litigation is unknown. According to the husband’s Form E he has drawn the sum of HK$87,800 per month on average from the company by way of a director’s loan and he has received no formal salary as such. It is the wife’s position that historically the husband received an income and/or other financial resources from the company in the sum of approximately HK$300,000 per month.        

6.  It does not appear to be disputed that the husband has always been the main breadwinner in the family and that he was responsible for the most of the outgoings during the marriage, including the rental, domestic helper’s costs and school fees.

The law

Maintenance pending suit

7.  The law is well known and not in dispute. Section 3 MPPO Cap192 states that the only governing principle is that the court shall make such order as it considers reasonable in all of the circumstances of the case. Consequently, applications such as these are approached on a broad-brush basis. A detailed examination of the parties’ means may be examined at a later date at a full ancillary relief hearing if there is no agreement in the meantime, when there is then every opportunity to achieve fairness by means of set off. In other words, if there is any overpayment or underpayment that can normally be rectified at a final ancillary relief hearing. As Rayden points out

…what really matters is the immediate and reasonable requirements of the wife balanced against the ability of the husband to pay for them, assessed using a broad-brush approach. (See paragraph 16.17 of Rayden, 18^th edition).

It adds:

In practice, as oral evidence is rarely given, it will be unusual for the court on an application for maintenance pending suit to be in a position to make findings of fact on issues in dispute sufficient, for example, to deal with conduct or allegations of non-disclosure.  However, if it is demonstrated that the paying party has not performed his duty to make full and frank disclosure of his financial resources, then the court can take a broad and robust view of his means, and it does not have to accept and proceed on the basis of the assertions of the paying party as to his means and an inability to pay.  The court can look at the reality of the situation and take into account voluntary funding from third parties. Any under provision or over provision in the order for maintenance pending suit can always be corrected when the account comes to be taken at the substantive hearing when there are every opportunity to do fairness by set off ……”

(Ref paragraphs 16.18 of Rayden, 18^th edition).

8.  Reference may also be made to the Court of Appeal decision in HJFG v KCY (CACV 127/2011, 28 October 2011, where the following principles were reiterated with respect to maintenance pending suit/interim maintenance applications:

a.  The sole criteria to be applied in determining the application is “reasonable” which is synonymous with “fairness”.

b.  A very important factor in determining fairness is the marital standard of living.

c.  In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long term expenditure, more aptly to be considered on a final hearing.

d.  Where the affidavit or form E disclosure by the payer is obviously deficient, the Court should not hesitate to make robust assumptions about his ability to pay.  The Court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such situation, the Court should err in favour of the payee.

How much maintenance should the husband pay to the wife as maintenance pending suit for herself and interim maintenance for the children?

An overview

9.  Counsel for both sides have put forward different proposals based on a totally different analysis of the current financial situation of the parties. Counsel for the wife suggests as follows:

4.  The total W is seeking (at this stage) as an interim measure is:

Rent:	$32,000 (modest 2-bedroom apartment near the former matrimonial home and the Children's school)
Living Expenses:	$20,000(for W & the Children)
Total:	$52,000

This sum would represent just 17.33% of the H’s $300,000 monthly salary. In addition, the H would undertake to pay or have paid the school fees.

10.  It is also suggested, inter alia that the husband has refused to make full and frank disclosure of his means

Lack of Full and Frank Financial Disclosure

21.  As set out earlier, the Respondent has failed in his duty to provide full and frank disclosure.

22.  The Petitioner's Solicitor's letter 12^th April 2021, highlighted the ‘information deficit’ in his Form E, as he has yet to disclose various directly relevant documents; the outstanding documents are inter alia:

(1)  the 2019, 2020 and 2021 financial statements (whether audited or unaudited, monthly and annual) of AIS Hong Kong Limited and its parent company AI Corporation USA (the “Companies”), both of which the Respondent has a significant direct or indirect shareholding in and moreover is the CEO of both Companies;

…

(3)  the Respondent’s personal bank Statements (Citibank and / or any other personal accounts);

(4)  tax returns filed for the Companies since 2019;

(5)  the Respondent’s personal Hong Kong and U.S. tax returns;

(6)  any shareholders’ agreements for the Companies including any amendments;

(7)  the Companies’ monthly and annual profit and loss statements;

(8)  documents in relation to the Respondent’s employment terms and remuneration (including any periodic drawings, bonuses, health care benefits, dividends, housing benefits, reimbursements to the Respondent from the Companies); and

(9)  documentary evidence of any offers made to the Respondent in the proceedings of HCMP 1847/2020 and any relevant without prejudice and open offer correspondence.

23.  The lack of financial disclosure intentionally deprives the Court of any picture (let alone any vaguely accurate picture) of his financial situation.

24.  The Respondent alone controls all the finances for both the Companies’ and the parties’ personal finances. The Petitioner is rendered helpless without any reasonable interim maintenance from the Respondent; she and the children are held hostage by the Respondent’s approach.

25.  The case law is clear; in AD (aka AT v RT [2020] HKFC 188, this Court set out as quoted above (see §7 above), that if the payee has to borrow from resources available to him to subsist then he must also borrow for his/ her spouse’s needs. Thus, if (which is denied), on the Respondent’s own case he is impecunious as a result of the ongoing civil proceedings against him, and that he therefore has to make company loans to himself from AIS HK to subsist, he can borrow to fund the basic needs of the Petitioner and his children: a safe, calm home for the children and their mother and their basic expenses. Nothing more, nothing less.

This analysis of the law is accepted.

11.  In answer to this the husband’s counsel puts forward three different scenarios as follows:

G. ANALYSIS: H’S OFFER MORE THAN FAIR

G 1. First analysis: dividing available resources after Children’s needs

33. One analysis would involve deducting the sum of those three essential Children’s needs (homes, school, DE) from the parties’ monthly resources, and splitting the balance of the remaining monthly resources in half between the parties.

34. That would be ‘fair’ in the interim because (1) children come before parents (2) care is presently shared equally and (3) 50/50 is the starting point of fairness.

35. Thus: two homes ($45,200) + school ($22,422) + DE ($7,000) = $74,622 per month. Deducting $74,622 from the $101,502 generated each month, leaves a balance of $26,880 available to the parties each month, or $13,440 each.

36.H’s offer exceeds this. H currently pays $8,000 to W and $3,000 per child, totaling $14,000 per month: H#4 §10. He further offers to pay rent in cash and $45,200 by way of rental deposit.^[1] This is ‘more than fair’, calculated by reference to everything available to the family.

G2. Second analysis, incorporating W’s earning capacity at its lowest point

37.  Moreover, this analysis omits W’s earning capacity of $15,000 to $50,000. Even incorporated at its lowest, this makes H’s offer very generous. Parties’ total monthly resources would increase to $101,502 + $15,000 = $116,502. Deducting the Children’s needs in the sum of $74,622 would leave $41,880.

38.  W would receive $15,000 in earnings plus $14,000 per month, or $29,000.

39.  Whereas H would be left with $116,502 - $74,622 - $15,000 - $14,000 = $12,880, being (1) less than half of what W would receive and (2) a mere 31% of the $41,880 of parties’ available monthly resources after children’s needs.

G3. Third analysis, incorporating W’s reasonable needs

40.  W claims utilities ($4,500) + food ($12,000) + household expenses ($2,000) + unspecified ‘insurance premia’ ($9,000) + personal expenses ($25,000) = $52,500.

41.  This is nearly double the $26,880 that is available to the parties after Children’s essential needs (Section G1 above) and is, with respect, hopelessly wishful thinking. Note eg that W’s further claim of $32,000 for rent would itself use 40%+ of the parties’ resources (and further, is not supported by evidence).

42.  Realistic (and ‘mirror’) discounts are suggested at H#4 §63, and bring sums within the $14,000 that W would receive even without utilizing her earning capacity.

The reasonable needs of the wife

12.  Originally the wife said that her monthly expenses were in the region of between HK$172,420 – HK$174,420 per month. This is set out in her Form E dated the 4 January 2021. Later, in her 3^rd affirmation dated the 8 January 2021, she sought HK$22,200 per month whilst living in the former matrimonial home and anticipated seeking further financial assistance to cover rent, food and utilities in due course. As indicated above the court initially ordered that HK$14,000 per month be paid on an interim interim basis.

13.  It is of note that the wife currently has very little income of her own. She previously ran her own tailoring business in the US. However, since relocating to Hong Kong she has only worked on a very part time basis in the same field, although it is also her case that she helped set up the husband’s office and that she originally assisted him in the business. In any event it does not appear to be seriously disputed that the wife’s earning capacity is somewhat limited at present. I do not therefore accept that at present she has an immediate earning capacity of between HK$15,000 – HK$50,000 per month It is though accepted that the wife will need to do what she can to generate some more sustainable sources of income in due course.

14.  In the short term I accept that the wife needs additional funds in order to move into her own apartment. She asks for HK$32,000 per month. The husband offers HK$22,600 per month. I will allow HK$28,000 per month in this regard. This is slightly more than the husband is willing to pay and slightly less than the wife is seeking. I am of the view that the wife should be able to afford a reasonable but small apartment in that price range for both herself and the boys.   

15.  In addition I shall increase the wife’s maintenance slightly, as it is clear that she will need more resources at her disposal once she is living separately from the husband. Thus the husband shall pay an additional HK$16,000 per month to be divided between the parties as set out below.

The children’s school fees

16.  The husband has not formally undertaken to pay for the children’s school fees going forward. He has though stated that the fees are paid up to date. Clearly this will need to be a priority going forward and in the absence of an undertaking an indication will be given to this effect at the end of the judgment.

The husband’s ability to pay and the other financial resources available to the wife

17.  It is the husband’s case that although the parties enjoyed a good standard of living in the past that this is now threatened by the litigation that is currently ongoing with respect to his company. His counsel puts it thus:

D. HISTORICAL ARRANGEMENTS / STANDARD OF LIVING

…

14.  Up to 2020, the family’s expenses were met by the Company, in monthly sums of $56,500 for the rental cost of the former matrimonial home, the Children’s school fees and $24,600 to $30,000 to meet the Children’s and W’s expenses (including a domestic employee’s salary): W#3 §14; H#4 §8.

15.  In 2020, the Company made a net loss of $2.3 million.

16.  On 20 September 2020, the Company mandated by board resolution that H be ‘prohibited from directly or indirectly withdrawing any monies from the Company’.

17.  On 23 October 2020, a shareholder (Mr S) issued HCMP 1847 of 2020 (Company Action) against H and others for relief (1) returning two directors to office and (2) divesting F and his family of shares: H#1§8. Mr S contends that provision by the Company for the family’s expenses was improper: Exhibit GDV-1 pp. 26, 32; Letter from Reed Smith (LFRS) [LA14].

18.  Mr S now threatens a further claim against H for $1.6m + brought by the Company or as a derivative action if necessary: LFRS. H’s position in the Company and his legal liability is precarious and liable to change at short notice, on any view.

18.  Time will tell whether or not this is an accurate portrayal of the husband’s current financial circumstances and if he is able to come up to proof in this respect. In any event his proposals are put forward on the premise that he has historically drawn about HK$78,700 per month from the company. According to his Form E this figure is slightly higher at HK$87,800 per month. At the same time, he says he had outgoings of approximately HK$146,000 per month. It is of note that these figures do not match up in any event and it is not clear what the husband’s financial situation was previously and what his true financial position is now.

19.  All in all though I am satisfied that the husband should have the resources at his disposal to pay slightly more than he has offered (i.e. HK$44,000 per month plus the school fees and the rental deposit) as opposed to HK$36,600 plus the school fees and rental deposit. I also accept, as suggested by Mr. Surman for the wife that the husband has clearly had the ability to borrow historically. Further I also note the concerns about the husband’s disclosure and I accept what has been said in that respect. 

Conclusion

20.  Consequently, I shall make an order that the husband do continue to pay HK$8,000 per month as maintenance pending suit for the wife and HK$36,000 per month towards the children’s expenses or say HK$18,000 per month per child.

Costs

21.  Neither party has been wholly successful here and the amount in dispute was in reality quite small. This is a matter that can and should have settled. However, it seems, that given the husband’s stated position that the wife really had no option but to issue the application that she did. In such circumstances I shall exercise my discretion and make an order nisi to be made absolute in 14 days’ time that the husband shall contribute towards 50% of the wife’s costs of and arising out of her summons dated the 11 January 2021, such costs to be taxed on a party and party basis if not agreed. There shall be Legal Aid taxation of the wife’s own costs. In addition, there shall be certificate for counsel.

Order

22.  Consequently, I shall make an order as follows:

1)    Orders 2 and 3 contained in the court order dated the 23 February 2021 shall be varied to the effect that the Respondent shall continue to pay maintenance pending suit to the Petitioner for herself in the sum of HK$8,000 per month and interim maintenance to the Petitioner for the two children of the family in the sum of HK$18,000 per month per child, such payment to be backdated to the 1 August 2021 and allowance to be made for any payments made to date and thereafter to be paid on the 1^st day of each succeeding month until further order.

2)    The First Appointment hearing shall be adjourned to the 1 September 2021 at 11:00 am.

3)    There shall be an order nisi to be made absolute in 14 day’s time that the Respondent shall contribute towards 50% of the Petitioner’s costs of and arising out of her summons dated the 11 January 2021, such costs to be taxed on a party and party basis if not agreed. There shall be Legal Aid taxation of the Petitioner’s own costs. There shall also be certificate for counsel.

IT IS FURTHER DIRECTED THAT:

4)    The Respondent shall pay a rental deposit for the Petitioner and the two children of the family in the sum of HK$56,000, such sum to be provided within the next 7 days.

5)    The Respondent shall continue to pay for the children’s school fees.