MICHAEL BERNARD HAMLETT v. GRACE ING YNG SHONG HAMLETT

IN THE COURT OF APPEAL

1995, No. 52
(Civil)

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J U D G M E N T

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Mayo, J.A.:

1. This is the husband's appeal against an order made by His Honour Judge Gill in Matrimonial proceedings.

2. In effect it was a lump sum maintenance payment to the wife which was intended to constitute a clean break.

3. Both the husband and the wife worked and still work for Cathay Pacific Airways. The husband is a flight engineer and the wife a member of the cabin staff.

4. The husband had previously been married. His marriage had been dissolved and under a court order he was required to pay his former wife one-third of his salary and the educational expenses of his 15 year old daughter.

5. The husband had cohabited with the wife for six years prior to their marriage in February 1985. This marriage had continued until the present proceedings.

6. The husband was aged 49 at the time of Judge Gill's order and the wife was 41. The husband had formed a relationship with another air hostess and has now married the lady.

7. His salary at the time of the hearing was $120,000 per month together with a number of valuable benefits such as a housing allowance. Under the terms of his employment he is entitled to continue his job until he reaches the age of 55. He is entitled to receive a lump sum on his retirement.

8. On the calculations which were before Judge Gill this fund would amount to $12m on his retirement. He would only be entitled to receive 25% of this as a consequence of the financial arrangements made with his former wife.

9. The wife's salary at the relevant time was $29,500. Under the terms of her employment she is entitled to continue with it until she reaches the age of 45. She is also entitled to receive a lump sum on her retirement. At the time of the hearing this amounted to $800,000.

10. When she commenced cohabiting with the husband she was single and aged 24. Shortly after this she went through a ceremony of marriage with a man called David Chan. The marriage was subsequently dissolved and no great significance needs to be attached to this.

11. The husband and wife cohabited at a property which the wife bought at Pak Shek. They got married in Taiwan in February 1985.

12. There are no children of the marriage and the wife continued to work and made a financial contribution towards the well-being of the marriage.

13. In 1990 a property was bought at Wong Chuk Shan, Sai Kung. It was referred to as the Sai Kung property and this was the matrimonial home.

14. As a matter of convenience the property was registered in the name of a shelf company Cabello. The husband was the registered owner of 60% of the shares in the company and the wife the remaining 40% of the shares.

15. It would appear to be accepted that the proceeds of sale of the Pak Shek property were applied towards the down-payment for the Sai Kung property. But what is equally clear is that the housing allowance which the husband received was used to fund the payments of principal and interest payable under the mortgage which was obtained to finance the balance of the purchase price.

16. Very shortly the other main assets belonging to the parties were as follows. The husband had an interest in a property in Canada. The net asset value of this was stated to be negligible. He also had a half share in property known as Riverside Villas which is presently occupied by his former wife and their daughter. As the former wife is entitled to continue to occupy this property it is not practical to place a value on it.

17. The wife's assets over and above her interest in the Sai Kung property and her interest in her retirement fund are confined to a half interest in a property in Canada.

18. The other relevant observation which needs to be made concerning the wife's financial position is that she cohabited with a former boy-friend Mr Koivisto after the parties separated and she had a baby from this relationship. Mr Koivisto who is a veterinary surgeon was unable to obtain employment in Hong Kong and has not contributed financially towards his daughter's up bringing. This relationship has been terminated. One consequence of this is that the wife needs to engage the services of an amah if she is to continue her employment.

19. At the hearing before Judge Gill there was a recognition that it would be in the best interests of both parties that there should be a clean break and that the husband should not be ordered to make periodic payments. There also appears to have been a recognition that the only practical means of bringing about such a clean break was to work out a formula for the disposition of the Sai Kung property which would enable an equitable settlement of the matter to be achieved.

20. It was eminently sensible that this approach should be adopted. Before considering how a formula could be worked out it is necessary to say that it was the wife's wish, if at all possible, to retain the Sai Kung property. Her proposal was that the property should be made over to her in settlement of her claims.

21. The approach adopted by the husband was that the Sai Kung property should be sold and the proceeds of sale divided between the parties on a 60/40 ratio in his favour. He contended that the wife's accommodation needs could be met if a small property of 700 sq. ft. were purchased from her share of the proceeds of sale which she would receive from the Sai Kung property.

22. However before these matters could be addressed there were a number of problems which had to be resolved.

23. The first problem was the value to be placed on the property and the second was to determine the beneficial interests of the parties in it. Thereafter it was necessary to determine the extent to which adjustments would need to be made to reflect all of the matters referred to in section 7(1)(a) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 so as to ensure that fairness between the parties prevailed and the interests of the wife were adequately protected.

24. One of the main grounds in this appeal is that Judge Gill erred in placing a net value of the Sai Kung property at $5.4m. He had before him valuations prepared by a Mr Williams and a Mr Clarke which diverged considerably.

25. Mr Williams for the wife valued the property at $6.9m and Mr Clarke for the husband valued it at $8.5m.

26. Judge Gill accepted both valuers as competent and reliable valuers. In his judgment he states:

"Having read and re-read the reports and considered the additional evidence adduced, I am inclined towards Mr Williams as having painted the more realistic picture, and adopted his valuation of $6.9 million."

27. He also states that Mr Clarke had only made a passing reference to the defects which existed. This was not the case. Mr Clarke gave detailed consideration to the main defect which related to water penetrating the property and made substantial allowance for this.

28. I find that the submission made by Mr Clough for the husband that Judge Gill erred in accepting Mr Williams' valuation and in effect rejecting Mr Clark's compelling. No satisfactory reason has been given for the conclusion reached by Judge Gill. I consider that the only satisfactory means of resolving the issue on the valuation of the property was to adopt a figure half-way between the valuations given by the two valuers.

29. The consequence of this is that the net value which should have been placed on the Sai Kung property was $6.2m.

30. I will now consider the question of the beneficial interests in the Sai Kung property. As I have said earlier 60% of the shares in Cabello are held by the husband and 40% by the wife.

31. Mr Clough complained that Judge Gill had not properly taken into account the factors which had to be weighed under s7(1)(a) when he had come to the conclusion that the property should be regarded as being owned by the parties equally. This is not so.

32. It is clear from Judge Gill's judgment that he considered all of the evidence concerning the respective contributions made by the parties. He did not attach undue weight to the fact that the wife had contributed more than the husband in respect of the down-payment. Certainly he was mindful of the fact that it had been the husband's housing allowance that had been used to service the mortgage on the property and it does not matter whether this is treated in a similar manner to payments of rent. Having regard to the fact that much of the value of the property is attributable to capital appreciation it was by no means a simple matter to arbitrarily state what each party had contributed towards the property. The judge found as a matter of the parties' intention that each party owned 50% of the property. This is a finding of fact and we do not consider that this finding can be faulted in any way.

33. This then leads to the final matter where substantial criticism is made of the judgment. This was the finding that for the purposes of the resolution of all of the matters to be considered under s7(1)(a) a division of the property between the parties should be made on the basis of the wife being entitled to 75% of the value and the husband 25%.

34. From the earlier part of this judgement it can be seen that notwithstanding the husband's commitments to his former wife he is in a significantly stronger position financially than the wife.

35. His salary including fringe benefits amounted to somewhere in the region of four times the wife's salary. In this connection we have been told that as a consequence of his relocation to France the housing allowance is no longer payable. This contingency was only a possibility before Judge Gill and we do not see how the judge could have been expected to take cognisance of it without far more details being available.

36. There is also the fact that the lady with whom the husband was cohabiting and who has now married him is employed by Cathay Pacific and in receipt of a good income. No doubt she will make some financial contribution towards expenses.

37. In addition to this the husband will receive a much larger capital sum on retirement than the wife will, even taking into account the husband's commitments to his former wife.

38. In deciding what the wife's reasonable requirements are it is necessary to have regard to all of the relevant circumstances of the case.

39. While the wife was living with the husband they enjoyed a high standard of living. They had a comfortable existence. To a considerable extent the wife contributed towards this. What needs to be considered is whether in the context of the husband's needs and resources a sufficient amount can be made available for the wife to continue to enjoy a comparable form of life style.

40. These were all matters which were considered by Judge Gill. He came to the conclusion that there were insufficient resources to justify an order being made for the husband to, in effect, transfer the whole of the interest in the Sai Kung property to the wife to satisfy all her claims. He concluded that if the wife was required to pay 25% of the net value of the Sai Kung property that would satisfactorily provide for her interests and could reasonably be met by the husband.

41. I do not think that such a division of the property can be faulted. The end result of the disposition of the matter between the parties comes well within the parameters of the discretion referred to in Preston v. Preston [1982] Fam. R. 17.

42. As earlier stated the only matter which justifies intervention is the valuation of the Sai Kung property. For the reasons given the amount which must be paid by the wife to obtain the whole beneficial interest in the Sai Kung property must be increased from $1.4m to $1.55m. In my view this appeal should be allowed to this extent.

Liu, J.A.:

43. I agree. I only wish to add that I would regard, but not entirely without diffidence, the reliance placed almost equally upon Mr Williams' and Mr Clarke's valuation reports and their respective professional evidence, coupled with the hesitancy displayed in the judge's selection of the lowest value, as sufficient to enable us to take an average of the two valuations in the circumstances of this case.

Litton, V.-P.:

44. I agree with the conclusion which my brethren have reached and would only wish to add a few words in relation to the valuation exercise.

45. The valuation of property by its very nature is an inexact science. It is based partly on the ascertainment of primary facts such as the size and position of the property, but also on opinion; that is, the application of judgment and experience on the part of the valuer.

46. Here the two valuers were placing a value on a 3-storey house in Sai Kung. Each based his valuation upon comparable sales in the locality, but these were sales of individual floors in 3-storey houses. Accordingly, when it came to valuing the whole house some adjustment had to be made. Each valuer made an adjustment by putting on a premium of 15%.

47. As to the comparable sales of individual floors, there was of course a time element involved. There was some evidence to the effect that there had been some diminution in the value of property in the locality generally. Each valuer in turn made an adjustment for this factor.

48. There was then the question of the defects. Mr Williams in his report made a deduction of 10% on account of this factor, reducing the value of the property by $650,000. Mr Clarke on the other hand put a price on the works necessary to restore the property but looked at it from a prospective purchaser's point of view and gave a deduction which amounted to $447,206.

49. I cannot see how, in the light of the respective approaches of these valuers, it can be said that one had performed his task better than the other. The matters that I have mentioned are matters of value judgment upon which one would expect expert valuers to differ to an extent. On the judge's finding that both valuers are "men competent in their profession" and both "gave logical reasons for arriving at their respective final figures", it is impossible, in my judgment, for the judge then to accept the opinion evidence of the one as "more realistic" and reject the other.

50. In these circumstances it seems to me that the only logical approach is the one which Mayo, JA has adopted; that is to say, to take a half-way point. This is not an exercise of guess-work on the part of the court. It is an exercise in realism, accepting that valuation as I have said is not an exact science and that honest men can honestly differ.

51. I agree with the conclusion as suggested in the judgment of Mayo JA. The result of this appeal is that it must be allowed to the extent as he has stated.