YKY v. WSM

FCMC 9167/2017

[2018] HKFC 224

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 9167 OF 2017

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Decision
(Decree Absolute)

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1.  This is the hearing of the Respondent/Husband (“H”)’s application by Summons dated 21 March 2018 pursuant to section 17(2)(a) of the Matrimonial Causes Ordinance (Cap. 179) (“MCO”)for leave to have the decree nisi granted in favour of the Petitioner/Wife (“W”) on 8 November 2017 be made absolute.

Core Issue & Relevant Law

2.  As a starting point, H emphasized that unless with good reasons, the decree should be made absolute within a reasonable time without delay. He referred to the public policy consideration for exercising the judicial discretion to grant a divorce, discussed by Viscount Simon LC in Blunt v Blunt [1943] AC 517 at 525:-

“…the interest of the community at large, to be judged by maintaining a true balance between respect for the binding sanctity of marriage and the social considerations which make it contrary to public policy to insist on the maintenance of a union which has utterly broken down.”

3.  The said public policy consideration is considered in Manchanda v Manchanda [1995] 2 FLR 590 where Thorpe LJ observed that “the public policy of ensuring a marriage that has been irretrievably broken down be put to an end without further ado must be subject to an equally important public policy of ensuring the spouse who opposes the making of a nisi absolute, must not be prejudiced in terms of financial provisions by way of ancillary relief.”

4.  In light of the above policy consideration and the instructive authority of JAH v VH (Decree Absolute) [2013] HKFLR 664, parties have agreed that for the purpose of this hearing, the core issue is whether W can establish real financial prejudice in that there will be a real risk that she will be deprived of her financial entitlement if the decree absolute is granted. In other words, to resist H’s application, W is not required to establish special or exceptional circumstances. 

5.  By Wickler v Wickler [1998] 2 FLR 326, I shall consider the following questions in exercising my discretion: -

(1) is there a risk real of prejudice to W if the decree nisi is made absolute?

(2) what is the prejudice done to H if the decree is not made absolute? and

(3) whether the prejudice to W, if any, outweighs the prejudice to H.

Relevant Factual Background

6.  H (currently 79 years old) and W (currently 81 years old) married in Hong Kong in May 1967. This is indisputably a very long marriage of around 50 years.

7.  There were 3 daughters born in the wedlock. They are now respectively aged 50, 44 and 41; all are married and independent.

8.  In about 1978, H started the business of manufacturing electric fans (“the Business”).The Business thrived and substantial wealth was accumulated therefrom.

9.  In 1984, the entire family emigrated to Canada. The parties acquired a large number of properties in Canada using the substantial profits generated from the Business. W stayed in Canada to raise the daughters and to take care of the properties in Canada; H travelled to and from Hong Kong to look after the Business.

10.  In about 1994, H started an extra-marital affair with a Thai female who gave birth to a son for H in August 2001(“the Mistress”).

11.  In 1996, H purchased a property in Hong Kong which is currently held in the sole name of the Mistress (“Property 1”). H also purchased 7 other Hong Kong properties respectively in 2007, 2010 and 2014 (“Properties 2-7”) which were held by H and the Mistress as joint tenants until they become tenants in common in equal shares pursuant to the Notices of Severance executed on 5 June 2015.

12.  On 30 June 2015 (shortly after execution of the said Notices of Severance), H petitioned for divorce under FCMC 8306/2015 based on two-year separation since June 2004 (subsequently amended to December 1993). The Petition was dismissed after trial by HH Judge C.K. Chan on 10 July 2017.

13.  On 17 July 2017, W filed a divorce petition based on two-year separation since July 2015. The Petition was undefended. On 8 November 2017, a decree nisi was pronounced in W’s favour.

14.  According to W’s Form E filed on 22 September 2017, she had assets of net value of no less than HK$43 million; H had assets of net value of no less than HK$565 million as disclosed in his Form E filed on 4 January 2018.

15.  W’s claim for ancillary relief is on-going (“the AR proceedings”). The ownership of Property 1 and Properties 2-7 is currently the subject matter of a preliminary issue trial fixed to be heard in July 2019 (“the TL v ML proceedings”).

W’s Objections

16.  W asserted that if decree absolute is granted before the conclusion of AR proceedings, she would suffer the following financial prejudice:-

(a) her right to apply for maintenance pending suit (“MPS”) would be deprived;

(b) her claim for ancillary relief including the right to continue the TL v ML proceedings would be stifled; and

(c) H will delay and/or lose the incentive to proceed expeditiously the matrimonial proceedings once the decree is made absolute, hence putting W at real risk that H would die before the conclusion of the AR proceedings.

Discussion & Analysis

Deprivation of W’sright to apply for MPS

17.     It is not in dispute that W will be disentitled from applying for MPS under section 3 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) once the decree absolute is granted. However, H argued that in light of the level of W’s liquid assets (over HK$14 million is in the form of cash deposited in banks), there is no question of any immediate needs for recurring costs of living on the part of W. Hence it is unlikely W would be able to establish any entitlement for MPS. H relied on the following authorities.

18.  In HJFG v. KCY [2012] 1 HKLRD 95, Hartmann JA stated: -

“34. By definition, therefore, maintenance pending suit is restricted to payments which constitute “maintenance”, which are reasonable in the circumstances and which will endure for no longer than it takes to determine the divorce litigation. “Maintenance” is a broad concept. I do not seek to define its exact meaning but it seems to me that it must be restricted to those payments necessary to meet the recurring costs of living at whatever standard of living is appropriate. That being the case, no matter how great the wealth of the parties and how unevenly distributed that wealth may be at the time an application for interim maintenance is made, the court has no jurisdiction to make orders which for all practical purposes result in a form of pre-trial capital rebalancing. In the present case, the Judge recognised the long-established approach of looking to the “immediate and reasonable needs” of the wife and son.”

19.  Further, as opined by Mr Justice Coleridge in Moore v. Moore [2010] 1 FLR 1413 at §22 :-

“...An order for maintenance pending suit is, as Bodey J observed, “a creature different in form and substance from substantive orders made upon the making of decree nisi”. It is designed to deal with short-term cash flow problems, which arise during divorce proceedings. Its calculation is sometimes somewhat rough and ready, as financial information is frequently in short supply at the early stage of the proceedings. It is nonetheless valid until discharged.”

20.  W relied on CWK v YCHS & Anor FCMC 6082/2014 (unrep) (10 December 2015).  In that case, the petitioner wife who applied for MPS had a total capital sum of around HK$14 million. When the same  aforesaid argument of H was raised by the 1^st respondent husband, it  was rejected by the Court.

21.  In that case, DDJ G Own (as he then was) observed at §39 that since there was no urgent and immediate need of cash for the wife nor was there any shortage of cash for the husband, the focus would fall upon whether it is “reasonable” for granting MPS, rather than the wife’s immediate needs for it or the husband’s ability to pay for it.

22.  After considering the fact that there was a long established pattern of payment to the wife by the husband, which ceased in the month following his departure from the wife and the wife’s commencement of the divorce proceedings, the Court stated at §48:-

“In my view, unless there is cogent evidence showing a material change of financial circumstances to the extent affecting the Husband’s ability to continue with what he had so far been paying to the Wife for years, there is no room for the Husband to cease an established pattern of payment simply because a divorce suit was filed against him. Had this been allowed, it is tantamount to set up some form of financial threat or duress to deter a spouse from taking court proceedings. Put it the other way, it is akin to ‘penalise’ the Wife for filing the divorce.”

23.  The Court therefore awarded the wife MPS. It was held that in all fairness, which is the guiding principle on MPS applications, the wife should be entitled to the same ‘established pattern of payment’.

24.  In the present case, there is also an established pattern of payment by H for W’s maintenance. Although the ruling in the CWK case may give W the legal basis to pursue an application for MPS, the issue in the present context is not on merits of an intended application; it’s about deprivation of the right to do so.  

25.  The fact before me is that W ever since the petition(s) has not made any application for MPS, not even after H unilaterally and unreasonably stopped paying for her maintenance in around July 2017, as W complained about.  There is no explanation why she has not done so.

26.  Without evidence pointing to the contrary, W’s inaction only shows that she is not keen or serious about making such application, or she has not even intended to do so at all. While W could have exercised such right but elected not to, I do not think it is fair or reasonable for her to allege prejudice of being deprived of such right by the grant of a decree absolute.

Stifling W’s claim for ancillary relief and the right to challenge the ownership of Property 1 and Properties 2-7

27.  Since W cannot continue with her claim for ancillary relief if H dies before the conclusion of the AR proceedings, W therefore submitted that whether a decree absolute is granted by then would be determinative on her status to claim as a wife or an ex-wife.

28.  There is no evidence on whether H has made any Will, and if yes, whether there is any provision in favour of W. Hence, in the scenario that H dies intestate, W said she would be prejudiced if the decree absolute is granted, because her only claim will be a dependent’s claim under the Inheritance (Provision for Family & Dependents) Ordinance (Cap.481) (“I(PED)O”).

29.  W regards it crucial to remain as a spouse (without a decree absolute) because the position of a former spouse is less advantageous than that of a spouse due to the different applicable definitions of “reasonable financial provision” under the I(PED)O.

30.  H disagreed and argued that it is totally incorrect that if the decree has been made absolute, W could not claim as a “wife” for financial provision under I(PFD)O. H relied on H v H, FCMC 1802/1999 (unrep) (1 March 2010)and Miller-Smith v. Miller-Smith (No. 2), [2009] EWHC 3623 (Fam), and raised the point that W may claim under section 16(1) of the I(PED)O. The Court would consider her dependent’s claim with the same “divorce standard” as if the decree has not been made absolute.

31.  Section 16(1) of I(PFD)O provides,

“(1) Where after the date on which a decree of divorce or nullity of marriage has been made absolute or a decree of judicial separation has been granted, a party to the marriage dies and—

(a) an application for a financial provision order under section 4 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) or an order under section 6 of that Ordinance has not been made by the other party to that marriage; or

(b) such an application has been made but the proceedings thereon have not been determined at the time of the death of the deceased,

then, if an application for an order under section 4 of this Ordinance is made by that other party, the court shall, notwithstanding anything in section 3 or 5 of this Ordinance, have power, if it thinks it just to do so, to treat that party for the purposes of that application as if the decree of divorce or nullity of marriage had not been made absolute or the decree of judicial separation had not been granted, as the case may be.”

32.  In H v H, the petitioner wife alleged that if decree absolute is made before concluding the ancillary proceedings, she would lose the “wife” status and thereby suffer material prejudice, including inter alia (i) her claim as an “ex-wife” under I(PFD)O would be less advantageous than that as a “wife” and (ii) she would be a stranger to the estate if H dies intestate.  The court found section 16(1) of I(PFD)O as a complete reply to the alleged prejudice (i), and stated the following: -

“28. …Even if the decree is made absolute before disposal of her ancillary application, the Wife can still apply under IO (i.e. (I(PFD)O) and the Court, if it considers just to do so, to treat the application as if the decree has not been made absolute. For the time being, there appears to be no reasons to exclude the Wife’s application under section 16 if circumstances require her to make the application. Accordingly, the Wife is not disadvantaged under IO (i.e. I(PFD)O) as alleged.

…

30. In light of section 16 of IO (i.e. I(PFD)O), I do not believe the alleged third prejudice (the alleged prejudice (ii)) a real prejudice to the Wife at all.”

33.  H also referred to section 5(2) of I(PFD)O which provides that the court shall also have regard to the provision which an applicant wife might reasonably have expected to receive if on the day on which the deceased died the marriage had been terminated by a decree of divorce. 

34.  While the authorities should not be disputable, W invited the Court to note that the power under section 16 of the I(PED)O to treat W’s application as if the decree has not been made absolute is merely discretionary; the Court will exercise such power only it considers it just to do so. However, for the time being, there appears to be no reasons or unjust factors that W would be excluded.

35.  In light of the clear legal propositions, I agree with H that the grant of the decree absolute will make no material difference to W’s rights under I(PFD)O.

36.  Having said these, it is noteworthy that there is one crucial factor which distinguishes the present case from H v H.  The court in H v H was not faced with any consideration relating to TL v ML proceedings within the matrimonial proceedings.

37.  In this regard, W submitted that there is no provision under the I(PED)O to enable W to commence any application equivalent to her current TL v ML proceedings. Hence, if H passes away, 100% of Property 1 and 50% of Properties 2-7 would remain in the name of the Mistress. In such an event and if the decree absolute is granted prior to H’s death, only the estate of H can litigate on the beneficial ownership of Property 1 and Properties 2-7; W will no longer be able to continue the TL v ML proceedings or commence new proceedings in relation to such interest in her personal capacity. 

38.  H submitted that the Court in considering a claim under the I(PFD)O, can also determine beneficial ownership in disputes in order to ascertain the size of the estate, akin to conducting a TL v ML trial under matrimonial proceedings to determine the size of the matrimonial pot. In advancing this argument, H concedes that there are so far no authorities in support.

39.  I reject H’s argument. The I(PFD)O is legislated to empower the court to make orders for the making out of the estate of a deceased person of provision for person entitled under the Ordinance. There is no provision under the I(PED)O to enable the court to determine disputes concerning the size of the estate. Although section 4(4)(a) of the I(PED)O provides that the court can order any person holding property being part of the net estate to transfer, I do not think such power extends to investigating and determining whether someone is holding a property on trust for the deceased which forms part of the estate.

40.  Further, when the deceased can no longer testify on how the property went into the hand of a third party, no investigation can be fairly conducted or any determination properly reached.

41.  Therefore, although W’s rights are not prejudiced in having her dependent’s claim considered with the same“divorce standard” as if the decree has not been made absolute, the loss of opportunity to continue the TL v ML proceedings would prejudice her entitlement to a fair award. W is at risk of receiving a significantly reduced amount under the I(PED)(O) as compared to her entitlement in the AR proceedings.

42.  Despite the above discussion and analysis, seeing the actual state of affairs, W’s interest or difficulty ahead of her in fact depends on the demise of H, not on whether the decree nisi is made absolute. As long as H survives conclusion of the AR proceedings, the aforesaid prejudice is irrelevant. That is to say, if H dies before conclusion of the AR proceedings, irrespective of whether the decree is made absolute, W’s claim for ancillary relief and the right to continue the TL v ML proceedings would still cease.

43.  Therefore, I find that W failed to establish how her claim for ancillary relief and the right to challenge the ownership of Property 1 and Properties 2-7 are stifled by the grant of a decree absolute.

H will delay and/or lose the incentive to proceed expeditiously the matrimonial proceedings once the decree is made absolute, hence putting W at real risk that H would die before the conclusion of the AR proceedings

44.  W said due to H’s uncooperative and evasive attitude in the proceedings, and the tactical steps taken by H to deprive W of her fair share of the family assets, once the decree is made absolute, H would further delay or stall the AR proceedings, or lose the incentive to proceed expeditiously the matrimonial proceedings.

45.  W’s complaints include, inter alia the following:-

(a) Execution of the Notices of Severance was a deliberate attempt to put 50% interest of Properties 2-7 out of W’s reach. The timing of the Notices of Severance (25 days before H filed his petition under FCMC No 8306 of 2015) is telling.

(b) When H first issued the petition for divorce, the date of separation was June 2004; he subsequently amended it to December 1993. This was presumably done for advancing the argument that the parties had separated in 1993, signed a separation agreement, allegedly divided the family assets, and hence W would not be entitled to claim any further ancillary relief.

(c) Despite W’s offer to file a fresh petition on the basis of one-year separation with consent such that parties could save time and costs and avoid a trial on the main suit, H rejected. Had that proposal been accepted, the parties would likely have concluded the AR proceedings by now.  

(d) H has rather chosen to salvage the inconsistencies of his case by making amendments and then pressed on with the trial unreasonably. After a 6-day trial, HHJ CK Chan found, inter alia, that the parties did not separate in 1993, and that the separation agreement was for the purpose of tax avoidance.

(e) W experienced difficulties in serving her petition on H, H explained that there was no attempt to evade service; he was hospitalized during that time and could not bother anything else apart from his health. However, during the same period of time, H was able to come to the important decision to terminate TMT, one of the companies which run the Business (“TMT”).

(f) By letter dated 31 July 2017, W was being informed that her “employment agreement” with TMT is terminated and that TMT would stop paying all her medical, dental, credit card and domestic helper expenses and utilities bills of the former matrimonial home as well as her salary. No objective evidence as to the alleged downturn of the Business was produced by H at any stage.H could easily have arranged to have SMT (the company which owns the former matrimonial home) (“SMT”) continue paying W’s maintenance; but he did not do so.

(g) Since the valuation of H’s companies is a prerequisite to the parties proceeding to the financial disputes resolution hearing (“FDR”) or trial, W suggested in April 2018 appointing a single joint expert to value H’s companies such that the expert could get started earlier and the proceeding be expedited. This was, however, rejected by H.

(h) W had previously suggested parties put aside the preliminary issue on ownership disputes and proceed to FDR in order to resolve the AR claim as soon as possible. This was, however, rejected by H.

46.  Although H has refused to go by W’s proposals in terms of how proceedings should be better conducted, I do not think there are sufficient grounds to find that H has been feet-dragging and stalling the proceedings. However, there are cogent evidence of H taking steps to deprive W of her financial benefits and her fair share of the family assets as described in paragraphs 45(a), (b) and (f) above.

47.  Further, it is noteworthy that, in some of the authorities that H relied upon, the husbands in those cases were willing to undertake to ensure the wives receive financial benefits even after their death:-

(1) In Re G (Decree Absolute: Prejudice) [2003] 1 FLR 870, the respondent husband was willing to undertake not to sever the joint tenancy on the former matrimonial home, such that if he died before the conclusion of the ancillary relief proceedings, the husband’s interest in the former matrimonial home would pass to the wife; and

(2) In Miller Smith v Miller Smith (No 2) [2010] 2 FLR 351, the petitioner husband offered to undertake to nominate the wife as a dependent prior to the decree absolute being granted, such that she would continue to benefit from his pension in the event of his death until the resolution of the ancillary relief proceedings.

48.  Shortly after H took out this Summons, W’s solicitors on 28 March 2018 wrote to H asking him to give an undertaking not to deal with his real properties, shares in his companies and stocks until the conclusion of the ancillary relief proceedings. H refused.

49.  H has made no offer to give any undertaking to back up his application until the following are offered on the day of hearing. Considering the scope of protection, I well understand why W regarded them wholly inadequate and unacceptable:-

(i) not to dispose of his shareholdings in SMT;

(ii) to utilize his position as shareholder and director of SMT to ensure that W will continue to be allowed to reside at the former matrimonial home; and

(iii) to utilize his position as shareholder and director of SMT to procure that SMT will continue to pay for all utilities and reasonable outgoings in relation to the former matrimonial home.

50.  In my assessment of risk of prejudice, what is likely to happen after the decree absolute is granted must be considered against the past pattern of H seeking to cut W off financially, as well as H’s elderly age and poor health condition; even H himself is of the same concern that he might pass away at any occasion. Taking all these into consideration, I find it apparent that H would lose the incentive to proceed expeditiously with the AR proceedings, such delay would put W at real risk that H would die before the conclusion of the AR proceedings.

Exercise of Discretion

51.  Therefore, among the three objections raised by W as set out in paragraph 16 above, she succeeded on (c). W has established real financial prejudice in that there will be a real risk that she will be deprived of her financial entitlement if the decree absolute is granted.

52.  The next question is what would be the prejudice done to H if the decree is not made absolute. The only reason given by H in support of his application is that he wishes the dissolution of the parties’ marriage to be completed before he dies. H is of concern that he might pass away at any occasion and lose the chance of a formal dissolution of the marriage.

53.  The third question is whether the prejudice to W outweighs the prejudice to H. I shall not comment on H’s personal desire; he may feel aggrieved, resentful or prejudiced at risk of remaining as W’s spouse at the departure of his life. However, weighing of prejudice is a matter for the Court.

54.  While there is a need of fair opportunity for W to exit the parties’ marriage of 50 years with a proper entitlement to the family assets, I find that W’s prejudice clearly outweighs H’s personal desire to have the parties’ marriage formally dissolved before his death.

55.  In the exercise of my discretion, I refuse to make the decree nisi absolute.

Conclusion

56.  The Respondent’s Summons is dismissed.

57.  Costs shall follow event. I make a costs order nisi that H do pay forthwith W’s costs of the application, with certificate for one counsel, to be summarily assessed if not agreed. Unless there is an application within 14 days to vary, the nisi order shall become absolute.

Directions

58.  It is directed that failing agreement on costs, W do lodge with the Court and serve on H her Statement of Costs for summary assessment within 7 days after the nisi order has become absolute. H’s comment on the Statement of Costs (if any) shall be submitted within 7 days thereafter. No further submission shall be lodged without leave.

Dated this 7^th day of December 2018.