RPB nee RGP v. CFB

FCMC 13240/2019

[2024] HKFC 169

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 13240 OF 2019

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J U D G M E N T
( Leave to Appeal )
(Paper Disposal)

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1.  This is the Petitioner Wife’s (“W”) appeal against an ancillary relief decision made by me on 19 April 2024 (the “Judgment”). By that decision, I award:

1)  A lump sum of $6,789,502 to the Petitioner to be paid 180 days from the Decree Absolute.

2)  A periodical payment of $9,300 (rounded up to US1,200) to the Petitioner commencing 1 May 2024 until full payment of the above lump sum.

3)  A periodical payment of US1,800 per month to K, the child of the family until he reaches the age of 18 or completes his full-time education, whichever is the later.

2.  On 17 May 2024, the W’s solicitors filed a Summons for Leave to Appeal, together with the Counsel’s submissions. The grounds of appeal will be elaborated and dealt with further below. The Husband’s (“H”) submission was received on 31 May 2024.

The Applicable Legal Principles

3.  The appropriate test when seeking leave to appeal is set out at s.63A of the District Court Ordinance (Cap. 336), which states that either the appeal must have a reasonable prospect of success or that there is some other reason in the interest of justice why the appeal should be heard.

4.  The relevant test of whether an appeal has a reasonable prospect of success is whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal. The case of SMSE v KL [2009] 4 HKLRD 125, provided further guidance as follows:

“…. Reasonable prospects of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”.

Grounds of Appeal

Ground 1

That I have erred in calculating the assets available for division as being only $14,008,600, and in segregating and excluding property of $9,325,366 out of $23,333,966, and by failing to take into account the H’s additional excluded financial resource of $2,789,898, being the portion of his Fx Pension earned prior to the marriage.

5.  H is not incorrect in saying that W is regurgitating her arguments at trial; that the total assets should be considered as divisible between the parties in equal shares, and she should be entitled to $11,666,983. And she therefore says that I have erred in excluding some assets based solely on the basis of inheritance or lack of intermingling.

6.  In this case, the Court’s approach was to assess the assets in the matrimonial pot and dealt with parties’ arguments respectively, extensive analysis was made in the Judgment. Assets which the Court found to be premarital or inherited were excluded having considered the duration of marriage of 12 years 2 months, and absent evidence of inter-mingling. On this basis, the Court found that the total joint assets was $14,008,600, and applied 50-50 sharing on a clean-break basis.

7.  All the assets were taken into account in arriving at the total pot of $23,333,966 (Judgment §193). This approach was acknowledged in §§118 to 119 of the Judgment. Assets were not excluded as a starting point as alleged by the W’s submission §3, but only considered after the H’s claim of inherited / pre-marital assets were analysed; and decided to be excluded under step 4 of the analysis (Judgment §222). It should be of note that the court has not excluded all the items that H so claimed: (1) the NLF where H has failed in his proof of inherited source of funds (Judgment §163); and (2) pension attributable to duration of marriage only (Judgment §§88 and 89), were added as part of the matrimonial pot.

8.  As for the intermingling point under this ground, W submits that H had received a dividend from the Vanguard account into his Bank of America account, and cross referenced to a page in the H’s Form E. The said page indicated that H declared he had received dividend from Vanguard as “Other Income”, but that page did not say where it had been banked into. Referring to the transcript of the 5 days trial, the only occasion when Vanguard dividend (of US$10,007.62/$78,059) came up (on day 3) was in the context of the discrepancy between the amount received versus what H reported in his Form E, H was not cross-examined on him mingling his inherited / premarital assets with his own. In the W’s reply submission, reference was made to this one time cheque deposit on 25 January 2019; this Vanguard account which I found to be premarital (but not inherited as H alleges) had transactions which predates the parties’ cohabitation. From then till the separation date in July 2019, inclusive of the duration of the marriage of 12 years, there was only just this one occasion of payment of not a very large sum 6 months before the parties’ separation, which the W calls intermingling with pre-marital assets and which justifies bringing the Vanguard account into the matrimonial pot. The law is trite in that the use of non-matrimonial assets during marriage could cause them to be considered as family assets; the extent / degree of the merger would have a bearing on the extent to which such property should be shared. In my view, the concept of considering the extent of intermingling of assets which can bring otherwise excludable non-matrimonial assets into the matrimonial pot must connote a pattern of continuity, and not just for one time over the course of more than 12 years. Furthermore, this act of alleged co-mingling was not dealt with in cross examination, therefore depriving parties a chance of exploring this allegation by the W.

9.  W challenges my decision of exclusion of assets and says that it was unfair to her. The final award to the W must be, and was considered in the light of the principle of fairness to both parties; having weighed the case investigating H’s claim of inherited assets and W’s claims of mingling which I found she has failed to prove.

10.  As for the Fx pension, I took the view that only the portion that was attributed to the duration of the marriage should apply, and cited the case of HTL v K, RE unreported FCMC 1678/2013 dated 10 November 2015 at §81 of the Judgment to support my decision. W has not given me any legal premise for her proposition that I should take into account the whole of the pension amount to include the time before H cohabited with W or after their separation.

Ground 2

That I have failed to properly assess the reasonable financial needs of the W and K generously, by reference to the parties’ standard of living during marriage including failing to consider the W’s housing needs independent of K’s property in which W has no legal or beneficial interest.

11.  In §205, 207 and 208 of the Judgment, I have said why and that I would consider the living standard in S, Philippines to apply to W and K as it is where they are going to reside. I have then analysed W’s and K’s needs at §210 and §224; and have taken into consideration that with regard to the W, how she has not explained the increase in her expenses by 40% in 4 months, and for the both of them the absence of supporting evidence for the expenses (§211 of the Judgment).

12.  W says I have failed to consider her need for accommodation. I have considered this at §213 of the Judgement. In the immediate future until K turns 18, she will be living at K’s property in S. And with the award to the W of $6,789,502, I have said in §228 how this would put liquidity in her hands for her needs and for investment return, and to purchase a property for investment (generating rental income), that she could eventually use for herself.

13.  In the absence of W providing any evidence of estimated costs of her accommodation need, I had to do the best I could with the evidence before me at trial. I was aware that the parties bought land in S for $380,650 in 2017 and built a house thereon with around $1.2 million paid by H. I am of the view that W can comfortably purchase a property for herself from the lump sum award if she so chooses, rent it out for income; and until such time as she decides not to live at K’s property, she can move to her own place. She can also rent with the lump sum award, but again I have no information from W as to what rental would cost in S.

Ground 3

That I have erred in law by deciding that this was a sharing case rather than a reasonable needs case and ordered a capital clean break division to W of $7M, then offset by $60,498 of the W’s assets which had not been included in the asset calculation in the first place. And in the alternative, that the sharing principle should be applied to the total calculated assets at $23,333,966.

14.  I have dealt with W and K’s needs as mentioned above, the full analysis is in §§199 to 217 of the Judgment. I was satisfied that the W’s needs could be provided for from the matrimonial pot I calculated and the 50-50 sharing thereof.

15.  I will further deal with the amount of the award below.

16.  W says in her submission that there is no interplay between the division of capital and W’s needs, that is not correct. I repeat my points above and further refers to my Judgment at §206 and then §214 wherein I have arrived at the figure for W’s needs at $9,300 per month, and hence $111,600 per annum. I believed the interplay was self-explanatory but it appears further elaboration is required. With my award of $6,789,502, if W chooses to use $1 - 1.5 million to purchase a property (and this number is more than reasonable as she will only need a property for herself only as K has his own property, and K’s property in S was assessed at trial for $1,650,000), the balance amount ($5,289,502 to $5,789,502) would last her 47.4 to 51.8 years further to her current age of 39. And this is even without the W investing the lump sum sensibly and conservatively for return, or renting out an investment property for income in the meantime, and deploying her “limited” earning capacity. This latter topic was canvased at §§194 -197 of the Judgment.

17.  In my view, it is clear that there are sufficient assets for the parties to have a clean-break, and it was so ordered.

Ground 4

That I have erred in law by failing to correctly check the Order against the yardstick of equal division, apply principles of fairness and equality and assess whether the financial outcome was equitable in all the circumstances of the case, and cited the following factors:

(i)  The parties were married for 12 years and 2 months, with a 9 year old child in W’s care

(ii)  The W’s earning capacity is negligible in comparison to the H who has a high earning capacity of $296,780 and an income stream on retirement of US$130,000 per annum

(iii)  The H has $19,123,862 and W receive only $7 million, from which to meet her monthly expenses and “purchase real property”

(iv)  Failure to make provision for the W’s future housing needs

(v)  Undertaking in the Relocation Order dated 14 May 2021 that the W will relocate with K to wherever the H is based, when K is 10 years old

18.  The Court is very much alive to the factors in (i) to (iii) above. The Court assessed the duration of marriage at §§60 to 64 of the Judgment. I reiterate that I am also conscious of the W’s “limited” earning capacity, as discussed at §§194 to 197, and naturally also the respective portions of the matrimonial pot.

19.  As mentioned above I have considered W’s needs for accommodation.

20.  As for the Undertaking in the Relocation Order, it was also considered and taken into account (§205 of Judgment). At the time of trial, K was approaching 9 years old (K was born in February 2014), H says that W had negative experience living in the US and therefore unlikely that parties would agree for W and K to relocate to the US; with the evidence before me, there was no indication that W will be moving to the US in the foreseeable future and my decision was made on that basis.

21.  The Court has also considered principle of fairness, this was mentioned in §213 and §228 of the Judgment.

Ground 5

That I have erred in ordering a clean break between the parties and failed to give any or sufficient weight to

(i)  H has significant surplus income over expenditure after paying W’s maintenance

(ii)  After paying K’s school fees of $6,219 and maintenance of US1,800, H would have surplus monthly income of over $280,000

(iii)  That W had not worked after the child was born for over 8 years

(iv)  Gross disparity in earning capacity between parties

(v)  That as H’s assessed W’s earning capacity to be $4200 per month on full time basis, and I have said in my judgement that she can work part time, her earning would therefore be “far less”; and since I have assessed the W’s monthly needs to be $9300 per month, her income could not meet her needs.

(vi)  There was no explanation of the interplay between the division of capital and the W’s ongoing maintenance and capital needs, which would therefore have to be met from the lump sum, including future provision.

22.  I have dealt with the clean-break point above. When a Court makes a decision for clean break between the parties and not grant on-going periodical payment for a spouse, it was not because whether the paying spouse is in funds or not. In this decision, the Court has considered the needs of the Wife which can be covered by the division of capital assets from the 50-50 sharing of the joint assets, and hence no further periodical payment was ordered.

23.  As to the W not working for 8 years since K was born. W previous job was waitressing, and for a short time in the US, she worked at a call centre. It is not the kind of work that requires re-training or re-qualification, nor affected by age. This was therefore not a point taken when I found that she has earning capacity.

24.  The earning capacity point is a repetition and has been covered, the Court is aware of the parties’ disparity in their earning capacity (also §198 of the Judgment).

25.  Point (v) is misconceived as it seems to suggest that W is to cover her expenses with her earning capacity, which is not the decision herein. She has the lump sum award.

26.  The W ends her grounds of appeal with reservation of her right to file supplemental grounds of appeal generally and pursuant to Ladd v Marshall when they have obtained the transcript of the trial. The Court has not heard further from the W since the filing of the aforementioned grounds of appeal.

The Amount of the Award

27.  On reading the third ground of the appeal and in reviewing §193 of the Judgement, it came to my notice that while I have assessed the matrimonial pot to be the value of the parties joint assets of $14,008,600, I have not taken into account the parties’ assets in their respective sole names. I will reproduce the table from that paragraph below to take this point forward.

	H	W	Joint
Hawaiian land			2,338,600
Hilton Time Share			140,000
Car in Philippines			150,000
Bank account	1,491,856	45,498
Pension 401			2,800,000
BF LLC	3,412,500			Inherited, segregated
NLF			8,580,000
Vanguard, Fidelity and Merrill 7Z4XXXXX	1,944,651			Premarital, segregated
Merrill IRA 7YXXXXXX	1,177,611			Premarital, segregated
Boat	1,209,000			Purchased with premarital, segregated funds
Valuable: Jewellery		15,000
Valuable: Rolex	29,250
Sub-total:	9,264,868	60,498	14,008,600
TOTAL:			23,333,966

28.  What should also be taken into account are the following amounts:

H’s bank account	1,491,856
H’s Rolex	29,250
W’s bank account	45,498
W’s jewellery	15,000
	1,587,604

29.  The total matrimonial pot should therefore be $14,008,600 + $1,587,604 = $15,596,204, and W’s share on 50-50 sharing should be $7,798,102. The equalization amount she should be receiving after deducting assets in her name of $45,498 (bank account) and $15,000 (jewellery), is therefore $7,737,604. (§226 refers, the jointly owned car has been taken into account when the joint assets are divided.)

30.  It must be clear from the reading of my Judgment that it was not my intention to exclude the parties’ personal assets from calculating the matrimonial pot. I would have explained these exclusions if intended, in the same way I had analysed the assets in the parties’ name. I only intended to exclude assets which H claims to be inheritance / premarital and where W has failed to prove intermingling. The omission of these amount in the parties’ sole name was not mentioned as a ground of appeal, but it was mentioned in W’s submission but lumped together with all the assets that I have decided to exclude. This was an accidental omission in calculation, and in no way affect the rationale of my decision. In my view, this mathematical error can be rectified under the Slip Rule. It does not form the basis of giving leave to appeal as it is not an error in law nor a wrong exercise of discretion or finding of fact.

31.  On this point, I make a direction for parties (if so advised) to make submission to me as to why the Slip Rule is not to be engaged to amend the amount of award due to W. This submission is to be limited to not more than 4 pages and to be filed with the Court 14 days hereof. In the absence of submissions, the Court will proceed to amend the Order under the Slip Rule.

Reasonable Prospect of Success

32.  Engaging the legal principles, I am not of the view that W has a reasonable prospect of success with her grounds of appeal, nor is there any reason in the interest of justice that this appeal be heard. The leave to appeal application is therefore dismissed.

Stay

33.  Paragraph 3 and 4 of W’s Summons contain the ask for stay of the Order made pending determination of the application for leave to appeal. No submission was made on this.

Costs of this Application

34.  I see no reason why costs should not follow the event, I therefore award costs of and incidental to this leave to appeal application to the Respondent H, to be taxed if not agreed, with certificates for counsels. This to be a Costs Order Nisi to be made absolute from 14 days hereof.