K,J v. C,WYW

FCMC 1384/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 1384 OF 2015

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J U D G M E N T
(Maintenance pending suit and interim maintenance)

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Introduction

1.  This is an application by a Respondent wife for maintenance pending suit for herself pursuant to section 3 of the Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO) and interim maintenance pursuant to section 5 of the same ordinance for the only child of the family, a boy J who was born on the XX May 2003 and is now almost 13 years of age.

The main issues

2.  The central issue then, in common with most applications of this type, is how much should the husband contribute towards the wife’s interim maintenance (if anything at all) and to that of the only child of the family? There are also related issues, which in truth will not be possible to determine fully at this stage of the proceedings. This includes the extent to which the wife runs her personal expenses through the business accounts.

Background 

3.  By way of background the parties met in Hong Kong in October 1997 and started dating sometime the following year. The husband is German and the wife is originally from Hong Kong. The husband has also lived in South Africa and the wife for her part also has strong connections with Canada.  They married on the XX October 2001 and separated, but continued to live under the same roof from about June 2012. The husband finally moved out of the former matrimonial home in February 2014. The parties have lived in separate accommodation since that time. As indicated above there is one child of the family – a boy J who will be 13 years of age in May. The divorce petition was issued on the 2 February 2015. This was then a reasonable length marriage of approximately 11 years. The parties are both 48 years old.   

Orders with respect to the child

4.  The husband is an executive chef with a well known airline in Hong Kong whereas the wife is a musician with her own small business. The wife plays piano for a number of venues and also subcontracts out other performers for similar purposes. She also teaches the piano.

5.  There are a number of disputes between the parties concerning their finances, which may necessitate a preliminary issues hearing. This includes the weight to be attached to a partial financial agreement in 2010 and whether or not a property, although held in the wife’s name, is in truth the wife’s mothers’ property.

6.  In so far as the 2010 agreement is concerned, the wife explains her position on this in her Answer’s to the Husband’s Questionnaire dated the 29 September 2015 thus:

Answer

We first discussed separating in or about August, 2010 because our relationship had deteriorated to the point that we were no longer communicating or treating each other as a married couple and we did not believe it could be fixed.  We discussed all the elements of the intended divorce at the time:

· the landed properties we owned that were of the marriage - the three in South Africa, and the TF and DB properties in Hong Kong;

· custody of J and what child care and household expenses each would be responsible for; and

· spousal support.

At that time, we were in agreement in principle about all these matters.

The only part of the discussed agreement that we acted on and resolved was the landed property agreement.  This agreement had two major components.

· First, because the Petitioner had always planned to move to South Africa and because I never had any intention to leave my home, family, and work in Hong Kong, we agree that the Petitioner would keep the three South African properties and I would keep the two Hong Kong properties.  These are, respectively, the B, CS, and W houses in South Africa, and the DB flat and TF house in Hong Kong.  At the time, the total value of the 3 properties in South Africa were roughly the same as those 2 properties in Hong Kong.  To my recollection, the 3 properties in South Africa were in fact worth slightly more than the 2 properties in Hong Kong at that time.  The Petitioner was quite eager to make this exchange of landed properties because he always wanted to move there and, at the time, the South African properties were appreciating rapidly.

· Second, the 3 South African properties were fully paid for - and were, in fact earning net rental income - but the two Hong Kong properties had outstanding mortgages, so we agreed that the Petitioner would pay me HK$19,000 per month until those mortgages were paid off.

We executed the above deal by (1) transferring in December 2010 the ownership of the Hong Kong properties from the Petitioner to me; (2) obtaining a loan with Hang Seng Bank, using the equity in my mom’s house (GM property) as collateral - with her consent - in order to consolidate all the outstanding loans on the two Hong Kong properties; and (3) the Petitioner, began making the agreed upon HK$19,000 monthly payments to me.  Attachments showing documentation of all of these actions are contained below in this document.

At about the same time, upon the Petitioner’s request, I also started to look for a lawyer to draw up a joint and uncontested divorce that also dealt with support and custody.

According to the wife’s schedule of income and outgoings she is currently paying approximately HK$25,000 in mortgage repayments.

7.  In so far as maintenance pending suit/interim maintenance is concerned there is no dispute that originally the husband was contributing a significant portion of his salary towards the maintenance of the household and as a contribution towards the outstanding mortgage repayments and other outgoings on the properties. It is also not disputed that this came to an end by September 2013, by which time the husband had stopped contributing the sum of HK$19,000 towards the GM mortgage. He had made these payments since 2010. The husband also stopped making all other contributions to the household, such as payment of rates and utilities, when he moved out of the former matrimonial home in February 2014. The husband has however continued to pay for J’s school fees in the sum of approximately HK$10,600 per month, plus payment for his school lunches. He is also willing to pay for scheduled school trips.   

8.  The husband’s open offer prior to the hearing is that he will pay an additional HK$10,000 per month as maintenance for J on top of his current payments and that he will also backdate these payments to the date of the wife’s application (ie the 25 June 2015). He makes no offer with respect to the repayment of the mortgage or to the wife’s maintenance generally.  

9.  The wife is seeking interim maintenance of HK$35,000 per month for herself and HK$20,000 per month for J (inclusive of school fees). It is her case that the husband previously paid HK$40,000 towards general household expenses and an additional HK$19,000 towards the mortgage repayment. Thus she seeks a similar amount going forward.

The law

Interim maintenance

10.  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. Applications for interim maintenance under section 5 of the same ordinance are approached in exactly the same way.

11.  Mr. Clough for the wife referred me to the classic definition of the approach to be taken to maintenance pending suit applications namely that it is accepted that:

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 paragraphs 16.17 of Rayden, 18th edition).

Further

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 …… 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).

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

Each party’s income

The husband

12.  The husband’s income is not in dispute. He earns approximately HK$118,000 per month inclusive of bonuses and housing allowance. In addition he receives a rental income from the South African properties of approximately HK$11,000 per month. Thus his average income is approximately HK$130,000 per month.

The wife

13.  In contrast the wife’s income is very much in dispute. There are also allegations that she deliberately sought to mislead the court when she claimed initially that the average profit from her business was only HK$11,000 per month. Later this figure was amended to HK$59,000 per month. In addition the husband argues that the wife runs many of her personal expenses through her business. This is only accepted in part by the wife.

14.  According to the wife’s own tax return for 2014/15 her gross turnover was HK$3,574,095 and her net profit was HK$747,585 – or approximately HK$62,300 per month. Mr Hughes for the husband summarizes his client’s position thus:

25. According to R’s most recent accounts for the 2014/2015 financial year her net monthly income for tax purposes was HK$62,298 (HK$747,584.97 for the full year).  In light of the above, however, it is obvious that R must have been receiving significantly more in the way of gross monthly income.

26. In any event, irrespective of the legitimacy of the business expenses R has been able to claim over the years, what is beyond doubt is that the financial picture R has tried to paint of a business with an average monthly profit of just HK$11,000 is far from correct.  R has continued to receive significant gross income of, in the last calendar year, almost HK$90,000 per month, whilst continuing to claim all of her business expenses, and also a large number of personal expenses through the business.

15.  I accept therefore that on the face of the current evidence before me that the wife’s income from her business is at least HK$62,300 per month – possibly more and that she may benefit in kind by running other personal expenses through her business, the extent of which cannot be fully determined at present.   

Each party’s outgoings

The husband

16.  The husband’s stated outgoings including the expenses for the South African properties and the school fees amount to just over HK$86,000 per month. Most of these expenses seem quite reasonable save for the estimate of HK$8,000 per month for holidays which seems a little on the high side – especially given the fact that the husband is entitled to discounted staff flights. All in all I would accept that the husband has outgoings of approximately HK$82,500 per month. Thus he has a surplus of approximately HK$47,500 per month. I accept that he also has ongoing legal fees to pay which have not been included in this computation and that according to his recent bank statements he has cash savings of approximately HK$1.2 million. 

The wife

17.  The wife’s stated outgoings are as follows:

Part 4 Current Monthly Expenses

4.1 General

Item	Amount
Rent
Mortgage instalments	$25,024.50
Utilities (electricity, gas, rates, telephone & water)	$6,215.96
Management fees	$1,526.00
Food	$6,026.66
Household expenses	$5,600
Car expenses
Insurance premia	$344.50
Domestic helper(s)	$4,500.00
Other (specify) Transportation expenses for the domestic helper	$100.00
Total monthly household expenses	HK$49,337.62

Attach copies of the latest rental receipt.

4.2 Personal

Item	Amount
Meals out of home	$6,411.66
Transport	$3,000.00
Clothing / Shoes	$3,000.00
Personal grooming (including haircut and cosmetics)	$2,927.33
Entertainment / presents	$2,490.33
Holiday	$6,189.13 (holiday expenses for both the Respondent and J)
Medical / Dental	$4,666.39
Tax	$10,040.00
Insurance premia	$1,365.00
Interim maintenance
Contribution to parents	$7,000.00
Dependent family members
Others (specify) Pets	$1,039.16
Total monthly personal expenses	HK$48,129.00

4.3  Children

Item	Amount
School fees	Paid by the Petitioner
Extra tuition fees	$3775.00
School books and stationery	$200.00
Transport to school (including school bus)	$600.00
Medical / Dental	$483.92
Extra Curricular Activities	$2,449.05
Entertainment / presents	$1,001.75
Holidays	[Refer to 4.2 Personal under the item of Holiday]
Clothing / Shoes	$366.50
Insurance premia	$736.25
Lunches and pocket money	$500.00 (exclusive of school lunch paid by the Petitioner)
Other Transport
Child-minding fees
Uniform	$174.16
Others (specify) SUPPLEMENTS	437.50
Total monthly expenses for children	HK$10,724.13

Total Monthly Expenses (4.1 + 4.2 + 4.3)

HK$108,190.75

18.  The first point to note is that these are extraordinarily exact figures – down in most instances to the decimal point. As previously indicated there is also a concern about the extent to which the wife runs her general and personal expenses through the business accounts. This was raised by the husband in his questionnaire as follows:

Question

18.  Please identify which of the items of ‘General’ and ‘Personal’ expense are either paid by WCP directly or paid by you and claimed as an expense of WCP.

The wife answered as follows:

Answer

For the current tax year, I will expense about half of the utilities, rates and management fees for the DB flat as I have used it a lot to teach lessons and do other company business.  All the rest are family expenses and are not expensed as costs of the company.  When my taxes for the current tax year are completed, I will submit this to you.

19.  This answer will need to be substantiated in due course.  In the documentary evidence attached to the Answer the wife states that half of the building management fees, electricity, gas, rent and rates and telephone bills for the DB property are expensed through the business. The difficulty is ascertaining how that compares with the estimated figure of HK$6,215.96 per month for utilities set out in her Form E schedule referred to above.   

20.  Putting that issue to one side for a moment, I accept that most of the wife’s actual estimated general expenses are reasonable. Apart from the mortgage repayments, the wife has general expenses of approximately HK$24,300 per month for both herself and J. This includes the domestic helper’s salary and maintaining three dogs and other pets. I do not consider any of these expenses particularly excessive bearing in mind the standard of living historically enjoyed by the family prior to separation. As with the husband I also accept that the wife has ongoing legal costs to pay.

How much should the husband contribute towards the mortgage and the general household expenses?   

21.  On a broad brush basis I accept that the husband should be contributing HK$19,000 towards repayment of the mortgage as this payment appears to be in relation to the restructured payments on the former matrimonial home and the DB property – both of which are matrimonial assets. This payment should be backdated to the date of the petition. 

22.  Putting it at its lowest then, the husband is earning almost twice what the wife is admitting to earning. Consequently it seems to me that on a broad brush basis the husband should contribute towards 2/3 of J’s expenses and the wife should contribute 1/3. These figures can be amended at a later stage if it is found that the wife is earning significantly more than the HK$62,300 per month referred to above.

General expenses

23.  Thus the calculation will be as follows:

HK$24,300 general expenses divided by 2 = HK$12,150 each for J and the wife. Of that amount the husband should contribute 2/3 of J’s share ie HK$12,150 x 2/3 = HK$8,100.

J’s expenses

24.  In so far as J’s actual expenses are concerned the wife estimates these at HK$10,725 plus school fees of HK$10,600 per month plus holidays (say HK$3,000) and other smaller expenses such as payment for J’s school lunch (say HK$500) etc – or approximately HK$25,000 (rounded up) in total. The husband should contribute 2/3 of these expenses overall, account to be taken of those expenses that he pays directly. Thus the calculation will be as follows:

HK$25,000 x 2/3 = HK$16,650 (rounded down) less the school fees (HK$10,600) and school lunches (HK$500) = HK$5,550. Thus in total the husband should pay HK$13,650 as interim maintenance for J (ie HK$8,100 + HK$5,550 = HK$13,650).

Should the husband contribute towards the wife’s own expenses?

25.  I will not order that the husband contribute towards the wife’s own expenses in addition to the mortgage repayments.

26.  In total then the husband will contribute in the region of HK$43,750 per month ie HK$19,000 for the mortgage, plus HK$10,600 for the school fees plus HK$500 for school lunches plus HK$13,650 for J’s maintenance. School trips will be in addition. I accept that he could not afford to pay much more than this sum.

27.  Consequently upon the husband undertaking to continue to pay for the school fees and the school lunches for the child of the family J, plus payment for any scheduled school trips going forward, I shall make an order as follows:

1) The Petitioner shall pay maintenance pending suit to the Respondent in the sum of HK$19,000 per month the first payment to be made on the 1 March 2016 and thereafter to be paid on the 1^st day of each succeeding month until further order, such payments to be backdated to the date of the petition ie the 2 February 2015.

2) The Petitioner shall pay interim maintenance to the Respondent for the child of the family in the sum of HK$13,650 per month the first payment to be made on the 1 March 2016 and thereafter to be paid on the 1^st day of each succeeding month until further order, such payments to be backdated to the date of the petition ie the 2 February 2015.

3) Costs shall be reserved.