LSLR v. LHW

FCMC 10819 / 2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10819 OF 2002

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J U D G M E N T
(Variation of maintenance)

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Introduction

1.  This is an application by the Petitioner husband to decrease the periodical payments paid to the wife from HK$9,000 per month to zero. He says that he would like to offer a lump sum payment of HK$200,000 in final settlement, although this offer was later reduced to HK$100,000. He does not seek to vary the maintenance for the child of the family. He presently pays HK$3,000 per month for the son who is now 18 years of age. According to the husband the son wishes to attend a 2 year course in the hotel industry with effect from September this year. No details have been provided by either side in relation to this.

Background

2.  The parties married in September 1994 and on the 19  September 2002 the husband issued a divorce petition based on two years separation. The petition was originally defended and amongst other things the wife took issue with the period of separation. It was clear however that the marriage was at an end and on the 4 February 2004 the decree nisi was pronounced. The child of the family LHL was born in February 1995 and as I have said is now 18 years of age. Despite the husband originally praying for custody the parties eventually agreed by consent to custody of LHL vesting in the wife with reasonable access to the husband. The husband also agreed to transfer his interest in the former matrimonial home to the wife and to pay her maintenance of HK$11,000 per month and maintenance for the son of HK$4,000 per month. The decree absolute was pronounced on the 8 April 2004.

3.  Further problems ensued and on the 20 February 2008 the wife issued the first judgment summons for arrears outstanding at that time of HK$78,000. The wife also issued a request for an attachment of income order. A compromise was eventually reached and by virtue of a further court order dated the 5 May 2008 the maintenance for the wife was reduced to HK$9,000 per month and maintenance for the child to HK$3,000 per month. The arrears were paid in full. On the 14 May 2012 the wife issued a further judgment summons for arrears of HK$90,000. In response to this the husband issued the Notice of Application dated the 17 August 2012 to vary the wife’s maintenance down to zero.

4.  As is normal in situations like this – the husband’s Notice of Application to vary will be dealt with first. The wife’s application for a judgment summons will be adjourned to be dealt with at some future date.  

The law 

5.  The husband’s application to vary is made pursuant to section 11 (7) of the Matrimonial Proceedings and Property Ordinance Cap. 192, which provides that:

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates ……”

6.  It is accepted that in considering a change of circumstances, I may look at the case de novo. In other words the court is not necessarily fettered by the existence of a previous order. I may look at the situation afresh and make an order based on the parties’ existing financial circumstances. (See Ch 3.131 Jackson’s Matrimonial Finance and Taxation, 7^th edition). It is also true that there would normally be a reason for the application to vary or what some might call a “trigger”.

7.  The court has a very wide power, including a power to terminate payments and to backdate the variation ordered. The overall objective is to achieve a fair outcome (see M v M, FCMC 4070 of 1990, dated 12 May 2006, unreported).

8.  The correct approach was summarized by the Court of Appeal in AEM v VFM [2008] HKFLR 106. In that case the Hon Cheung JA made the following point when setting out the law. Referring in particular to agreements reached by consent he said:

8.   At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order: Boylan v. Boylan [1988] FLR 282.

9.  In this case the parties had agreed in May 2008 that the father would pay HK$9,000 per month for the wife’s maintenance and HK$3,000 per month as maintenance for the son.

The issues

10.  The only outstanding issue at present is whether or not the wife’s maintenance should be reduced down to zero or to some other figure and secondly whether or not any of these orders should be backdated? Although the wife referred to the possibility of applying to vary upwards she did not do so and that application was not before the court.

Background

11.  The wife is 50 years old. She recently started to work as a real estate agent and now earns HK$6,000 per month. She has not earned any commissions as yet. Previously she worked for short periods of time on either a temporary or casual basis. She also holds two properties in her sole name. She claimed that one was beneficially owned by her sister, although she accepted that her sister allowed her to retain the rental income of HK$7,500 for her own use given her difficult financial circumstances at present.

12.  The husband is 46 years old and is a Director and shareholder of a trading company that is involved in the export of fitness and sports gear from China into Germany. He has remarried and he has a younger son who is now 8 years of age. His second wife works as an educational assistant in a kindergarten. She holds a property in her sole name in Tung Chung which is presently rented out. The husband said that he didn’t know how much she earned.

What then is the appropriate level for the wife’s maintenance? Should it be reduced down to zero or to some other figure?

13.  The wife is asking that the amended order do stand of HK$9,000 per month, whereas the husband is asking that her maintenance be reduced to zero.

14.  The husband argued that as his salary had been reduced from approximately HK$60,000 per month to HK$35,000 per month that he can no longer afford to pay the wife HK$9,000 per month to cover her own expenses. He produced a letter from his company which stated that his salary had been reduced to HK$35,000 with effect from May 2012. The wife did not accept the husband’s assertions in this respect. On the husband’s own evidence during the cross examination he admitted to receiving the following sums as salary from his company:

March 2012	43,945
April 2012	50,460
May 2012	56,000
June 2012	66,000
July 2012	69,500
August 2012	22,000
September 2012	33,000
October 2012	36,000
November 2012	20,000
December – no salary
January 2013	40,000
February 2013	35,000
March 2013	60,000
April 2013	38,253
May 2013	20,000
June 2013	49,000
July 2013	35,000
TOTAL	674,158

15.  This averages out to approximately HK$39,705 per month over a 17 month period. (HK$675,000 divided by 17 months = HK$39,705). The husband does not receive a set salary per month – but monies were deposited into his account in an ad hoc fashion. The husband said that this was dependant on the cash flow of the business and that he was only paid after the other staff had been paid.   

16.  According to the husband’s tax return he was paid HK$461,460 for the 12 month period from April 2012 to March 2013. This equates to HK$38,455 per month which is in line with the figures set out above.

17.  However according to the audited accounts for the period ending June 2012 the Director’s remuneration was US$114,704 or c HK$894,690 per annum. This equates to approximately HK$74,500 per month for the period from May 2011 to June 2012. The husband accepts that he was earning a higher amount previously. However he put his income at approximately HK$60,000 per month as opposed to HK$74,500 per month.

18.  In order to back up his claim the husband points to the fact that business has decreased sharply – with turnover decreasing by 20%. The audited accounts confirmed that in 2011 the turnover was US$9,047,066 but in 2102 it had dropped to US$7,226,235. But the gross profit remained about the same at just over US$1.5 million. It is also interesting to note that the Director’s fee went up from US$76,874 in 2011 to US$114,704 in 2012. The husband confirmed that there was only one director – namely himself. He owns approximately 1/3 of the shares.

19.  The difficulty then is in ascertaining whether or not the Respondent is genuinely receiving less money than before?

20.  Having considered all of these factors I am inclined to accept, on the balance of probabilities that the husband was earning in the region of HK$60,000 per month until probably in or around June/July 2012. I accept that his salary was just under HK$40,000 per month for the tax year April 2012 to March 2013. This was a reduction in round terms of about 1/3 of his salary.                   

Earning capacity

21.  The husband says that he has only been educated up to Form 5 and that he has been working for the same company for 23 years. He says that he has no alternative but to stay with the company and that he doesn’t believe that he could earn more elsewhere. I accept that that is probably the case.

22.  The wife for her part says that her priority has always been the son and that she has found it difficult to find employment. Although university educated in Taiwan she has not worked in a full time capacity since the separation. She is now 50 years old. I accept that her earning capacity is somewhat limited. However she does have an earning capacity of sorts and one that she must now fully utilize given that her son is now legally an adult. She is presently earning in the region of HK$6,000 per month – which is close to the minimum wage. I will expect her to be able to earn at least this amount going forward. I have also taken into account the fact that the wife receives the income from the property that is held in her sole name (although she claims that it is beneficially owned by her sister). Thus she has a total income at present of HK$13,500 per month. She does not pay rent as the second property is also owned by her outright. The husband is also agreeable to continuing to pay HK$3,000 per month for the son. Thus in round figures this means that she has HK$16,500 per month for both herself and the son without any maintenance contribution for herself from the husband.

The husband new wife and son

23.  The husband also argues that he cannot afford to pay the wife maintenance as “he has his own family now”. With respect this is not a reason for reducing the maintenance. Although I am charged with looking at the reality of the situation the fact remains that a husband cannot be excused of his responsibilities towards his first wife and family, because he has decided to remarry and have a further child.

The wife’s expenses

24.  According to the wife’s schedule of outgoings she has general outgoings of about HK$9,075, personal expenses of HK$6,800 and expenses for the child of just over HK$8,000. The expenses for the son will of course alter once he starts his college course. It was not clear how he is going to fund this course save that there appeared to be a vague hope that the husband would pay for the same. There was no discussion around government loans or grants. I was not told if the son would be eligible for these or whether he would be able to work part time. However the son’s expenses at present, on the figures provided, would amount to about HK$10,269 (i.e. HK$9,075 divided by 2 = HK$4,537.50, divided by 2 again = HK$2,268.75 + HK$8,000 = HK$10,269 say HK$10,270). The husband’s contribution of HK$3,000 per month currently covers his share of the general expenses only. That leaves his actual expenses that will need to be covered in some way.

25.  Most of the wife’s expenses seemed very reasonable. Her share of the general expenses, her contribution towards the son’s general expenses and her own expenses amount to approximately HK$13,600 per month. In addition there is the outstanding issue of the son’s actual expenses to consider.  

The husband’s expenses

26.  The wife complains that the husband is living a “high consumption lifestyle”. In other words she says that he is living beyond his means. Certainly the husband appears to have a reasonably comfortable life style and one that he doesn’t wish to alter. I would not say however that he has an extravagant lifestyle. He says that he took money from his insurance plan in order to supplement his income in 2012 – two tranches of HK$100,000 each. He also relies on a revolving loan facility and he has a personal loan. Last year his liability for tax was HK$91,029 or HK$7,585 per month. Thus his net income after tax is probably between HK$30,000 and HK$32,500. Although his present wife works he says that he does not know how much she earns as an assistant kindergarten teacher. The domestic helper is needed if his wife is to work. I accept that his financial situation is also tight. I also accept that it is not feasible for him to currently live in his wife’s investment property.

Conclusion                                  

27.  Situations like this, when there are limited funds to go around, are always difficult to determine. In the circumstances however I do not think that it would be fair or reasonable to reduce the wife’s maintenance to zero. However she must expect to maximize her earning capacity going forward. In so far as the son is concerned he may need to make enquiries with respect to government loans and grants in order to support himself at college. Bearing all of this in mind I will reduce the wife’s maintenance to HK$3,500 per month. Thus she will have a total income at present for herself of HK$17,000 per month on which to live. (Salary – HK$6,000 + rental HK$7,500 + maintenance HK$3,500). In addition she will receive an additional HK$3,000 per month as maintenance for the son, whilst he is in full time education. Thus in total she will receive HK$20,000 per month. On her own figures this should be sufficient. It will also mean that she is able to make a limited contribution towards her son’s actual expenses. She says that including the son’s costs on the present figures that she needs HK$23,885 per month. Given that she does not pay rent and with a little economizing it seems to me that although tight she and the son should be able to live on HK$20,000 per month.

28.  In contrast the husband will have a net income (net of tax) of between HK$26,500 – HK$29,000 per month from which he says he will have to pay for rent and the domestic helper’s salary. Thus his net income will be reduced to less than HK$10,000. However his second wife is also working and her contribution towards household expenses cannot be ignored.

Should the variation of maintenance be backdated?

29.  It is very difficult to accurately determine when the husband began to receive less income. On the figures it appears that there was a significant drop from August 2012. Therefore the maintenance payments shall be back dated to that date.     

30.  In conclusion I will make an order in the following terms:

1) Order 2 a) and b) contained in the court order dated the 5 May 2008 shall be varied to the extent that the monthly maintenance figure in 2 a) shall be reduced from HK$12,000 to HK$6,500 and paragraph 2 b) shall be varied so that the Petitioner shall pay to the Respondent periodical payments for herself in the sum of HK$3,500 per month to be backdated with effect from the 1 August 2012, payments to continue to be made during the joint lives of the parties, or until the Respondent’s remarriage whichever is the earlier or until further order. 

2) There shall be a call over in relation to the Respondent’s judgment summons on the 23 October 2013 at 9:30 am.

3) Both parties do personally attend that hearing.

4) There shall be no order as to costs.