LWL v. LMF

FCMC 14442/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14442 OF 2012

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JUDGMENT
(Ancillary Relief)

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1.  This is a trial on the ancillary relief upon the divorce of the parties.

Background

2.  The respondent husband (“R”), now aged 38, is an Associate Engineer.

3.  As for the petitioner wife (“P”), she is now 34 years old.  She studied up to Form 5 in a local main-stream secondary school and then studied Year 12 in an international school in Hong Kong.

4.  P met R when she was 17 years old.  The courtship lasted for 8 years and she married R in January 2005 when she was 25.  A son was born in 2008, thus now 7 years old.  Throughout the marriage, the family lived in an apartment in Tseung Kwan O (“the matrimonial home”) which was purchased in R’s sole name.

5.  In September 2012, P petitioned for divorce on the ground of R’s unreasonable behaviour.  It was later amended to that of 2 years’ separation since June 2010.  Decree Nisi was granted on 30 April 2014.

6.  By an Order dated 10 October 2012, R was to pay an interim maintenance to P and the child in the respective sums of $3,500 and $1,800 and R was to move out from the matrimonial home.  He did so in early December 2012.  He also continued to pay and is still paying the monthly mortgage payments, management fee and Government rent and rates for the matrimonial home. 

7.  By a Consent Order dated 30 April 2014, the custody, care and control of the child has been granted to P with reasonable access to R. 

8.  Thus, the position is that P currently receives a total of $5,300 per month from R as interim maintenance. She also works as a part-time waitress earning about $4,460 per month.  She and the child are living at the matrimonial home.  The child now attends primary 1 at a school near to the home.  I was told, and this was not objected to by the R, the school is just 5-minute walk from the matrimonial home.   

9.  As for R, after moving out of the matrimonial home, he moved to a rented apartment.  Upon the expiry of the tenancy in early March 2014, he claimed that because he could not afford the rental deposit and rentals, he stayed in guesthouses occasionally and even overnight at some 24-hour operated restaurants.  He is now staying in friends and relatives’ homes.

10.  I think it is not in dispute that P is the primary carer of the child and the matrimonial home is the main asset of the family.  R has been working full-time whilst P has been able to work on part-time basis.  Both parties are relatively young and the child is in his tender age.  Given the relative simplicity of this case both in terms of the factual matrix and the nature of assets involved, it is somewhat difficult to understand why the parties were not able to come to a sensible resolution of the dispute otherwise than by way of litigation.  It turned out that there are two main obstacles.  The first is that the parties diverge on when the matrimonial home should be sold and their respective shares; and the second is that R alleges that P has an interest in a coach renting business and hence has some hidden source of income. 

Parties’ Open Proposals

P’s Open Proposal

11.  P proposes that the matrimonial home should continue to be the home for P and the child and it shall not be sold until the child attains the age of 18 years old or shall have completed full-time education or such other time as agreeable by P and R.  R should continue to be fully responsible to pay all payments of mortgage, charges (if any), management fees, government rent and rates in relation to the matrimonial home while P is to be responsible for the utilities charges.  Upon the sale of the matrimonial home, after deduction of all the reasonable conveyancing costs and expenses, estate agent commission and other expenses incidental to the sale, the net proceeds of sale shall be shared equally between the parties.

12.  R also is to pay monthly maintenance to P and the child in the respective sums of $3,500 and $1,800.  She also seeks costs against R. 

R’s Open Proposal

13.  R’s proposal is in a much simplified form.  He proposes that the matrimonial home be sold within 3 months upon granting of the decree absolute at a consideration of not less than $4,200,000.  After deduction of the existing mortgage, stamp duty (if any), estate agent commission and the conveyancing costs, the net proceeds of sale be divided between P and R in the ratio of 30% : 70% as a clean break of the parties’ respective claims of ancillary relief against each other.

14.  He also agrees to pay 50% of the amount of the maintenance as assessed by the court or agreed between the parties.  Alternatively, he proposes to pay P a monthly maintenance of $2,500 for the child.  He also seeks costs against P. 

15.  As can be seen, the parties’ position is rather polarized.  On the face of it, P agrees to have the main asset of the family, ie the matrimonial home, to be divided equally between the parties.  However, her proposal, if implemented, would lock-up essentially the sole asset of the family for at least another 12 years, thereby effectively deprive R of the asset for a substantial period of time.  On the other hand, R is seeking a lion’s share of the matrimonial home and is putting P on an equal footing when it comes to the maintenance of the child.  

Factual Issues to be Determined

16.  It seems to me clear that the only main factual issue in dispute is whether P has any interest in a coach renting business; and depending on the outcome of this issue, there is a subsidiary issue of whether or not P has been receiving income or profit out of the business. 

Whether P has any Interest in the Coach Renting Business?

R’s Case

17.  R said P has an interest in the coach renting business which has been operated by her parents.  Its main business is to carry students of international schools during school days but it also operates charter trips.  Although the business is being run by using a limited company (“the A Company”) as the vehicle which was set up in September 2011 and P was and is not a shareholder and/or a director, nevertheless she has an interest in it and has been receiving income or profit out of it.  Ms Lam, counsel for R, suggested that P was not made a director or a shareholder because of the present ancillary proceedings. 

18.  R said P has been receiving coach fees from the students, as evident by the fact that the fees have been deposited into her personal account instead of the A Company’s bank account or her parents’ bank account.

P’s Case

19.  P denied having an interest in her parents’ business.  She also denied having income from the business. She said she has been assisting her parents by sending out English emails to students’ parents and by accepting some of the payments and because the fees vary, depending on the location of the schools and the pick-up points, she also assists her parents in checking all the receipts, including payments received by her parents.  She emphasised that she has been doing all these on voluntary basis.

20.  In trial, she was cross-examined at some length on the entries of her HSBC account back in 2011.

21.  She accepted that because her parents did not have a HSBC account some of the fees and deposits for reservation of seats were deposited into her HSBC bank account.  The monies she received were either reservation fees from new students or the monthly fees from parents who preferred to make payments by way of bank transfers into her HSBC account.  There were also deposits or payments for private charters.  She maintained that every single cent she received was handed over to her parents.  Out of a total of 200 to 300 students, only a small portion of the fees had been deposited into her account.  There was a small envelope for each student to put his or her cash or cheque into it, and the envelope would be collected by the relevant drivers.  Many students preferred this method and therefore she had received a small portion of the fees only. 

22.  As regards how the monies were returned to her parents, P gave evidence that they were returned mainly in cash and only occasionally by way of cheques.

Discussion

23.  Although P did not state she has any interest in the business in her 1^st Form E dated 30 November 2012, R never expressly raised any requisitions in this regard.  In his 2^nd Affirmation dated 2 March 2013 in support of his application for downward adjustment of the maintenance pending suit (the application was later withdrawn), he referred to P’s allegation that her monthly expense was in the region of $18,573 but her monthly receipts were merely about $8,000.  He therefore concluded he had reasonable ground to believe that P had failed to fully disclose her source of income and might have other means to support herself and the child.  It is to be noted that R did not specifically refer to the coach renting business.  The first time he referred to this matter was in his narrative affirmation dated 11 July 2014.  In my view, the parties had been husband and wife for a good number of years, it is difficult to understand why he fell short of explicitly making his case known at an earlier stage of the proceedings. 

24.  As mentioned, P was cross-examined on the deposits and withdrawals records of her HSBC saving account back in 2011.  P explained that since her parents did not have a HSBC account, so she made use of her own HSBC account to receive monies for her parents.  As can be seen on the bank passbook, some of the entries had hand-written remarks or records next to them but some did not.  In this regard, at that time the business was still being operated by an unincorporated sole-proprietorship.  From her evidence, it is clear that her records were very rudimentary.  She did not make any formal records.  What she did was just to jot down the names next to the relevant entries on the bank passbook as a kind of reminder; and when she handed the cash to her parents, she would just scribble the names or the particulars on a ‘post-it’ that stuck to the bank notes. Other than that, there were no other records.  It means that apart from the bank passbook there was nothing that she might be able to rely on to revive her memory.  She could only give her evidence on the basis of the incomplete records that she marked on the bank passbook; and in this regard, I do accept that she might have been handicapped by the passage of time.

25.  Under cross-examination, the records were proved to be incomplete.  There were deposits that P admitted she could not recall their sources or explain.  For instance, on 7 June 2011 she withdrew $2,200 and she said she handed over cash in the sum of $2,140 being the reservation fees of 2 students to her parents.  However, the code “NTW” as shown on the bank passbook shows it was a transfer withdrawal, so it could not be the case where she handed over the money to her parents.  Alternatively, if what she said was true, that the money was given to her parents, it indicated that her parents did have a HSBC account.  To this, P has no explanation. 

26.  I find there is some evidence suggesting that P did not pay over all the monies to her parents.  By way of examples, on 7 July 2011, P made two withdrawals on 7 July 2011, one for $2,000 and the other for $3,700.  She admitted having given the monies to her parents on two occasions.  To me, it does not make any sense.  There is no reason why P did not withdraw the amount in one go or paid them in one go.  I doubt very much whether P did really pay both sums to her parents.

27.  Further, the $2,000 paid to her parents on 7 July 2011 included a sum of $1,240 that she received on 20 June 2011 and on 5 July 2011, she paid her parents $5,520 but this did not include the said $1,240 that was already received.  It means that she had the opportunity to pay but did not do so.  Her explanation was that the said $5,520 was students’ reservation fees but the $1,240 was for private charter, and because of this difference she handed over the monies on different occasions.  She also explained that if the amount was not large, her parents asked her to wait for 2 to 3 weeks.  Given that according to her testimony in court, she would have scribbled the names or the particulars on a ‘post-it’ that stuck to the bank notes, I fail to see why she would have the need to hand over the monies on different occasions.   

28.  There were various deposits, some of which were not of negligible amounts, that P admitted she could not recall because she did not make any records.  She then tried to explain that during that time since R did not give her any family expenses, her parents sometimes gave her money.  Ms Lam rightly pointed out that some of these amounts were of several hundred dollars only, for instance $900 on 9 March 2011 and $200 on 4 April 2011, and the mode of deposits varied from instant deposit, transfer deposit to cheque deposit.  I agree it is unlikely that these were monies from the parents. 

29.  I also find some force in Ms Lam’ submission that P failed to produce a single piece of documentary evidence, such as the parents’ bank statements or the company’s bank statements showing the corresponding entries to substantiate her case. 

30.  On her own evidence, there were cases where some clients required a larger coach (say a 60-seater coach) but her parents could not make their coach available, the clients would then deposit the fees to her account and she would pay over the hiring fees by way of cheques to another coach company “YS”.  For instance, a client Aggie paid $1,100 on 12 July 2011 for a 60-seater coach and on the same day, she issued a cheque for the same amount to YS.  P said she was acting for her parents’ company.  Obviously, the proper way to do it was to have the cheque issued by her parents’ company if what she said was truth.  To me, it is rather strange that she did not refund the money to her parents so that they would have been able to issue a cheque to YS.  

31.  P testified that since she had left employment after the birth of the child, in order to support herself and the family, she had to sell some of her gold ornaments and deposited the proceeds into her saving account with the Standard Chartered Bank.  She referred to sums of $22,000 and $10,000 on 12 August 2009 and 28 August 2009 respectively as the proceeds of sale.  However, the entry codes show that one was an ATM transfer deposit and the other was a cheque deposit.  Then she said she was not sure but added that at that time her parents gave her money to support her daily needs.  The support was mainly in cash but occasionally by cheques.  That said, she maintained that her parents gave her monies out of love and it was entirely unrelated to her assistance in the family business.

32.  Thus, on her own evidence, P admitted that some of the deposits shown on her bank passbook were monies given by her parents because R failed to make provisions for her and the child.

33.  On the evidence before me, the undisputed evidence is that all along P has been assisting in the business.  She is adamant that she has been doing it on voluntarily basis and has not received any remuneration at all.  However, she admitted that out of the love her parents had generously provided her with financial assistance. 

34.  As mentioned above, P’s records were casually made and incomplete.  It reflects the rather typical mode of practice of a family business.  I do not think it is necessary for me to come to a finding that she “works” for the family business as such as if she was and is an employee or a partner.  The objective fact is she assisted and is still assisting her parents in their business and at the same time she received some monies from them, it matters not that they were from the parents or from the business. 

35.  The A Company is presently being used as the vehicle for the business.  It is very much a family business.  The company was incorporated on 12 September 2011, after the parties had separated in June 2010.  The 3 shareholders are P’s parents and her brother.  Before that, the business was in the form of a sole-proprietorship of which P’s father was the owner.

36.  I think it is a matter of commonsense that, in a family business setting, one cannot rigidly look at the players’ relationship on a strict business sense.  For instance, the remuneration of an employee who is also a close family member of the business owner may not be in proportion to his duties or position as if he were an employee in the real commercial world.  He may get far less if the business is in the downturn but he may get far more if it is the other way round or it could be that the two do not have a direct correlation.  In some cases, a family member may not even formally be an employee or a partner and yet performs active roles.  This is the reality in Hong Kong that everyone can tell.

37.  On the evidence before me, I believe the present case should be looked at from this perspective.  To start with, as I said, it is very much a small family business.  Nearly all the family members are involved in it:  the father, the mother, the brother and P. All of them except P perform driving duties.  As for P, she no doubt plays a pivotal role in liaising with the English speaking clients. 

38.  For this reason, notwithstanding that Ms Lam has gone into some lengths in her cross-examination on the entries of P’s bank passbook, I do not think I need to go into the details of other transactions. My duty is not to conduct an audit on P’s bank accounts nor is it possible.  

39.  Thus, the conclusion that I can reach is that P has been receiving money from her parents by assisting them in their business.  I will come to the amount that P gets from this business when I deal with P’s financial resources.   

The Law and Legal Principles

40.  The jurisdiction of the Court in granting financial relief for a party is governed by section 4 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) which provides:-

“4. Financial provision for party to a marriage in cases of divorce, etc.

(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of section 25(1), make any one or more of the following orders, that is to say-

(a) an order that either party to the marriage shall make to the other such periodical payments and for such term as may be specified in the order;

(b) an order that either party to the marriage shall secure to the other to the satisfaction of the court, such periodical payments and for such term as may be so specified;

(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified.

(2) Without prejudice to the generality of subsection (1)(c), an order under this section that a party to a marriage shall pay a lump sum to the other party-

(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;

(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments to be secured to the satisfaction of the court.”

41.  Section 5 of MPPO provides for the financial provision for children of the family in cases of divorce.  I do not think I need to set out the provisions here.  In short, similar to section 4, the court is empowered to give an order of periodical payments or a lump sum.

42.  In deciding on how to exercise its power in this regard for a party to the marriage, the court is bound to consider section 7 (1) of MPPO which provides:-

“7. Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6

(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.”

As regards the financial provision for the children of the family, the relevant provisions are in subsection (2) of the same section 7,

(2) … it shall be the duty of the court in deciding whether to excise its power under section 5, 6 or 6A in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say-

(a) the financial needs of the child;

(b) the income, earning capacity (if any), property and other financial resources of the child;

(c) any physical or mental disability of the child;

(d) the standard of living enjoyed by the family before the breakdown of the marriage;

(e) the manner in which he was being and in which the parties to the marriage expected him to be educated;

and so to excise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a) and (b) of subsection (1), just do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him.

43.  The principles upon which this case is to be considered are the conventional ones, namely those set out in section 7 of MPPO.  Those principles are to be interpreted in the light of the Court of Final Appeal judgment in LKW v DD (2010) 13 HKCFAR 537.  I will follow the steps set out by Mr Justice Ribeiro PJ in that judgment in the consideration of the application before me.  As the parties have no dispute over the principles and steps to be applied, I do not think I need to set them out here.

Financial Resources of the Parties

Identifying the Assets

44.  P owns an apartment jointly with her mother in the Mainland.  It was purchased in June 2000 with mortgage finance when she was 21 years old.  P did not disclose it in her Form Es.  Her explanation was that the property belonged solely to her mother. In other words, she was just a nominee.

45.  In his affirmation dated 4 September 2014 that came shortly before the trial, R affirmed in unambiguous term that he was surprised to learn that P owned this property but it turned out that R was not truthful in this regard.  There is evidence showing that he was issued a resident card in respect of this property way back in March 2001 (Exhibit “P-1”) and that P and R had been there for a couple of time.  The fact is R knew of this property ever since it was purchased.  Despite R’s knowledge of this property from day-one, he never raised a single requisition in this regard throughout the proceedings.  To me, it is clear that the only reason why R did not raise this earlier was that he knew P did not have any beneficial interest in it.  In any event, in trial, Ms Lam conceded that this property may be regarded as the personal asset of P acquired prior to marriage and should not be included in the matrimonial pot.

46.  Thus, the only main asset of the family is the matrimonial home, which is also the only asset required to be dealt with in the proceedings.  The other assets, being the parties’ bank balances and their MPF funds, are either negligible in amount or illiquid.  In any event, they are not the subject matter of the dispute.

47.  The matrimonial home was purchased in July 2003, some 18 months before the marriage, in R’s sole name for $1,000,000.  The market value has been agreed at $4,200,000.  The outstanding mortgage is around $155,000; hence the net equity is $4,045,000.

P’s Debts

48.  In her affirmation dated 13 March 2013, she mentioned that for a period of years she had to approach her parents for cash hand-outs to keep her and the child.  In the same affirmation, she said she had a conversation with her parents in December 2012 and she was told that they could not afford to give her any more cash.  Thus, it would appear that her parents have ceased supporting her.  She agreed with her parents that she would pay them back for the cash given to her.  She produced a note dated 7 March 2013 signed by her mother that as from March 2012, the mother had given her $8,000 a month, and so the total amount as at the date of the note was $96,000.  The note stated that the mother had made it known that the money was a loan and the money had to be repaid upon the resolution of the financial matters of the divorce.  P emphasized that the monies were borrowings and not gratuitous gifts.  However, it should be noted that her latest Form E dated 14 August 2014 failed to mention this sum as her liability.  All she reported was her credit card liability in the sum of $2,662 only. 

49.  In evidence, P gave a slightly different version.  She admitted that she does not regard the monies given to her by her parents were loans but when she is financially able to do so, she would repay them. 

50.  With the conclusion that I have reached regarding the monies that she has been receiving from the coach renting business, I would not include this sum as her debt.

R’s Debts

$600,000 for the Acquisition of the Matrimonial Home

51.  It is not disputed that in July 2003, R acquired an apartment in Tseung Kwan O which later became the matrimonial home for the price of $1,000,000.  R claimed that his father lent him $500,000, a good portion of it ($491,512) came from the father’s pension. R also raised a mortgage in the sum of $500,000.  The monthly mortgage repayment is about $3,500.  For other expenses required for the acquisition, R borrowed $50,000 from his elder sister and $50,000 from his aunt.  He claimed that all these liabilities towards the family members are still yet to be repaid and he will do that when he has the ability to do so, such as when the matrimonial home is liquidated.  However, he admitted that his father has never demanded the return of the money nor does he ever have any repayment plan.  

52.  P said from what she knew, the sums of $600,000 were gifts.  R’s parents had in fact assisted his siblings in purchasing their own homes.  Thus, the sister and her husband purchased their home in December 2000 with the contribution from R’s parents; and likewise, R’s brother purchased his property in April 2012 in anticipation of his marriage.  P went further in her affirmation dated 14 August 2014 to say that the brother’s property was financed by the mother from the sale proceeds of her shop that was sold in March 2011.

53.  R denied the suggestion by P that the monies were gifts to him.  He also denied that his parents had also assisted his sister and brother in purchasing their properties but he did not provide further evidence or particulars to rebut P’s evidence.

54.  Mr Pickavant urged the court to approach such sudden appearances of soft loans at the time of divorce with a great deal of caution.  

55.  I find some force in Mr Pickavant’s arguments that at the time of the purchase the parties had been dating for 6 years and had jointly held a bank account since 1998 when P was 18 years old.  In addition they married in January 2005, some 12 months after the matrimonial home was finalized and decorated.  The monies were provided over 12 years ago.  The providers of these monies have not come to court to provide evidence and been subject to examination, and there is no further evidence to show that they had, at any time, confirmed that these monies were not provided as gifts nor indeed that demands for repayment were made of R.  It is also to be noted that when R had savings in his account prior to the divorce proceedings, he still had not made any attempt to pay off the monies whether in part or by way of instalments.

56.  For these reasons, on the balance of probabilities, I find that the monies were gifts to R.

More Recent Liabilities

57.  R’s Form E of 11 July 2014 reported a total liability of $918,277.  Apart from the said $600,000 that is attributable to the acquisition of the matrimonial home, the remaining $318,277 are loans raised by him since the divorce proceedings.  He testified that he needed extra money to pay extra items such as the interim maintenance to P and the child, the rentals for his accommodation or the lodging charges of guesthouses, the legal and mediation costs and his living expenses.  His financial position has been so bad that he has not had a fixed place of abode since moving out from his rented accommodation in early March 2014.  Initially, he had to stay from time to time at guesthouses and sometimes even at some 24-hour operated restaurants.  Of the total $318,277, 223,000 is a personal loan owed to the Bank of China, the remaining are loans from family members and relatives.  The bank loan would be fully repaid by October 2016.  

58.  He was subject to enquiry by the court at some lengths in this regard.  He admitted that prior to the divorce proceedings, he managed to have some savings.  In about October 2012 he had roughly positive cash of about $80,000 in his bank accounts.  Even after the commencement of the divorce proceedings when he had to pay interim maintenance but before moving out to separate accommodation, by and large he managed to break even.  It was after he had moved to separate accommodation that his financial situation started to deteriorate.  On the top of the rentals were also the $80,000 legal costs, $19,000 mediation costs and the extra expenditure of $28,800 that he incurred when having access to the child. All these extra expenses compelled him to raise loans.  

59.  It is true that R was not able to give a very satisfactory explanation on his expenditures and hence why he had to raise loans.  However, in her closing submissions, Ms Lam has helpfully prepared a table, with figures and the relevant particulars extracted from R’s Form E and affirmations and his evidence in court, showing that, from a global view, the total income received by R from October 2012 to August 2014 (a period of 23 months) was about $637,000 whilst for the same period of time, the total monthly expenses and other expenses such as legal costs were about $937,891. This did not include his alleged guesthouse expenses.  Thus, it was necessary for R to raise loans in order to cover his then expenses and outgoings. According to Ms Lam’s table, R’s debts up to July 2014 were $345,806.  I have carefully considered the figures against the evidence before me.  Apart from R’s alleged expenses on guesthouse, which are not included in the Table, P has not made any serious challenge on R’s expenses as stated in his Form Es and his affirmations. I am persuaded by these figures.  I accept that R owes the bank and his family members loans in the region of $345,806.

60.  That said, the parties have in fact agreed that each party is to be responsible for his or her loans.  In other words, the parties agree that neither party’s liabilities would have to go to the matrimonial pot.  The relevancy of these debts, at least as far as R’s debts are concerned, is that, as contended by Ms Lam, but for these debts R would not have be able to continue to foot his expenses including the mortgage payments of the matrimonial home and the interim maintenance.  This is a factor that the court should take into account when considering whether to depart from equal division of the proceeds of sale of the matrimonial home.

Earning Capacity of P

61.  P is now 35 years old.  She worked both prior to and after the marriage, until the birth of the child.  In about 2011, she worked as a part-time waitress occasionally when she had some free-time after the child had started schooling.  She continued with this job in April 2012 and is still doing the job now.  P said since she has to take care of the child, she has only been able to take up this job on Saturdays and Sundays at an hourly rate of $50.  On average, she earns $4,460 per month.

62.  In trial, R seemingly did not challenge P’s evidence that she has been working as a part-time waitress, the very same job that he also did before.

63.  It has been submitted by Ms Lam that since the child is now studying full time, P should be able to take up a part-time job during the school hour of the child on almost daily basis given that she is well educated and qualified and in particular she can speak and communicate in fluent English.  In any event, P should be able to stand on her own feet now given that all along she has been receiving income or profit out of the coach renting business or should be able to do so now or within 1 year given that the child is studying full-time.

P and the Child’s Financial Needs

64.  P’s Form E dated 14 August 2014 stated she needs to spend $18,050 per month.  The particulars are as follows:-

General
Item		Amount
Utilities (electricity, gas, rates, telephone & water)		1,000.00
Food		3,000.00
Household expenses		600.00
Total monthly household expenses		HK$4,600.00
Personal
Item	Amount
Meals out of home	1,000.00
Transport	500.00
Clothing / Shoes	600.00
Personal grooming (including haircut and cosmetics)	1,100.00
Entertainment / presents	800.00
Medical / Dental	800.00
Contribution to parents	500.00
Other (specify)	200.00
Telephone charge
Total monthly personal expenses	HK$5,500.00

The Child
Item	Amount
Extra tuition fees	1,100.00
School books and stationery	200.00
Medical / Dental	750.00
Extra Curricular Activities	3,000.00
Entertainment / presents	500.00
Clothing / Shoes	1,500.00
Other Transport	300.00
Uniform	600.00
Total monthly personal expenses for the child	HK$7,950.00
Total Monthly Expenses	HK$18,050.00

65.  The above do not include the mortgage payment, management fee and rates now being taken care of by R.  Ms Lam has not challenged the monthly expenses.  I accept these are what she needs.

66.  With an average monthly income of $4,460 and together with the interim maintenance of $5,300, P would have $9,760 only at her disposal.  This would mean a monthly shortfall of $8,290.  It is on that basis that R says P has failed to fully disclose her source of income.  With the conclusion that I have come to regarding her involvement in her parents’ coach renting business, it is clear that she has the means to meet her monthly expenses and in this regard, I find that she has failed to make a full and frank disclosure of her financial resources.  It is also important to note that shortly after the commencement of the petition in September 2012, P was granted legal aid on 22 November 2012 but the same was discharged on 3 April 2014.  Since then, she has been retaining the same solicitor on private basis to continue with the proceedings.  As for R, he was legally represented at the beginning, then acted in person on 23 December, 2013 and was granted legal aid on 25 April, 2014 to contest the ancillary relief claim.  It remains inexplicable as to how P has been able to meet her daily expenses and foot her legal bills.  That said, I am conscious of the fact that P has been doing a part-time job as a waitress for extra cash.  As P has failed to give a full and frank disclosure of her earnings, I am prepared to draw an adverse inference against her that her total earnings are sufficient to cover her and the child’s expenses.

Financial Needs of R

67.  R has been working as an Associate Engineer of a theme park since 2006.  He is also studying for a diploma in the evening. 

68.  According to the tax returns, his remuneration from April 2012 to March 2013 was $327,392, on average $27,282 per month.  As for April 2013 to March 2014, it was $311,856, hence on average $25,988 per month.  I round it up to $26,000.

69.  He gave evidence that he does not have a fixed place of abode now.  He has been staying at the homes of his elder sister, younger brother and cousin.  Before that, in about March and April 2014, he had from time to time stayed at guesthouses or just in some 24-hour operated restaurants. 

70.  His latest Form E dated 11 July 2014 reported a total monthly expenditure of $31,763.  The breakdown is as follows:-

General
Item	Amount
Mortgage instalments	3,436
Utilities (electricity, gas, rates, telephone & water)	244
Management fees	648
Total monthly household expenses	HK$4,328

Personal
Item	Amount
Meals out of home	5,000
Transport	1,500
Clothing / Shoes	1,000
Personal grooming (including haircut and cosmetics)	500
Medical / Dental	2,000
Tax	2,750
Interim maintenance	5,300
Other (specify)	8,585
Educational expenses: $618/month; Repayment of personal loan to Bank of China: $7,967/month
Total monthly personal expenses	HK$26,635

The Child
Item	Amount
Entertainment / presents	500
Other Transport	300
Total monthly personal expenses for the child	HK$800
Total Monthly Expenses	HK$31,763

71.  I consider that Clothing/Shoes $1,000, personal grooming $500 and medical/dental $2,000 are on the high side.  The reasonable amounts should be $500, $300 and $500 respectively.

72.  The mortgage instalments and the management fees totalling $4,084 are in respect of the matrimonial home and there is also the interim maintenance $5,300.  These give a total sum of $9,384.

73.  Therefore exclusive of the money that he needs to pay for the matrimonial home and to P, his total monthly expenditure should be in the region of $20,179.  I would round it down to $20,000.  I am aware that this does not include the costs of his accommodation.

74.  On that basis, given that his monthly salary is about $26,000, this would mean a balance of $6,000; but if his payment of $4,084 towards the matrimonial home is included, this would mean a total of $24,084, which leaves little for his accommodation.  On the assumption that he needs $8,000 per month for his rented accommodation, it would mean a monthly shortfall of $6,084.  This does not include whatever maintenance he has to pay for the benefit of P or the child.  I have not lost sight of the fact that his monthly repayment of $7,967 to the Bank of China will finish by October 2016 at which time, given all others constant, he should be able to have some positive cash of $1,800 per month but still it would not be sufficient for him to pay any maintenance for P or the child.

Should the Matrimonial Home be Sold Now?

75.  It is clear that P’s main bone of contention is on the child’s housing need.  Mr Pickavant, for P, argued that the child remains the paramount consideration at all times and that his financial and educational needs be placed at the forefront of this matter.  It is clear in this case that the resources of the parties are limited and that the “needs’ of the parties are paramount.  The reasonable, just and fair resolution in this case would be for the child and P to be allowed a home.  This need can be met by allowing P and the child to continue residing at the matrimonial home. The matrimonial home is needed not just to maintain the child’s standard of living but because the child and his primary carer need a home and there is no reasonable suitable alternative.  Upon the child reaches the age of 18 or completes full-time education, the matrimonial home may be sold and the proceeds of sale be shared between the parties equally.

76.  Mr Pickavant submitted that should the home be sold now P and the child shall have no alternative but to use the sums realized in limited payment of rent for a number of years only. He argued that it is wasteful.  He further submitted that P’s position as a wife and mother for a number of years has diminished her earning capacity to the extent that it does not allow her to re-enter the job market and earn sufficient money to raise a mortgage.  As P does not have a stable income proof, she may not be able to raise mortgage for the purchase of a new accommodation.  An order for sale would deprive the child and P of a home at the same standard and an investment, being her growing interest in the property.  The reasonable approach is to safeguard the matrimonial home as the asset of the marriage and more importantly allow the child to continue in his home, close to his school.  

77.  Further, given that P is only able to engage in a part-time job as a waitress earning about $4,460 per month, R should continue to pay maintenance for P and the child.

78.  As for R, he has a much higher earning capacity.  He has no problem in meeting his needs.  In other words, R can afford to wait.  In his closing submissions, Mr Pickavant also suggested that if R wishes to buy a property for himself, he can raise the money from a bank loan using his portion of the matrimonial home to facilitate such a transaction.   

79.  As a further alternative, Mr Pickavant also suggested that the sale of the matrimonial home should at least be postponed until the mortgage has been paid off.  By then the value of the property will be higher once the mortgage has been paid off.  In addition, the intervening period of 2 to 3 years will enable P and the child to adjust to the movement out of the matrimonial home with minimal trauma, and allow her to find suitable alternative accommodation and by then, P may subsequently will have obtained a suitable track record of earnings/savings to enable her to use the lump sum from the sale as a down payment and obtain a mortgage.

80.  Ms Lam contended on behalf of R that if the matrimonial home is not to be sold, the substantial part of the family assets would be ‘locked up’ for at least 12 years depriving R from having his entitlement of the family assets.  R does not have much savings in bank and he needs to repay his debts.  He has no other assets which he can utilize to solve his financial problem and his housing need.

81.  In her closing submissions, Ms Lam submitted that R urgently needs an accommodation.  It is reasonable for him to find a small flat close to his working place and evening school in Tsing Yi in order to save his travelling time and expenses.  Besides, as the father, he is entitled to have staying access to the child in weekends, public holidays and long school holidays.  It is reasonable and necessary for him to rent a small flat which he could stay with the child during access time.  However, given his current income and financial obligations, R cannot afford to rent a small flat for himself.  His standard of living is far worse than what he had prior to the dissolution of the marriage.  It has also been submitted on R’s behalf that parties’ housing need can be met by renting alternative accommodation but not necessarily to be met by a self-owned / mortgaged property.  In this regard, Ms Lam reminded the court that the financial resources of the parties in the present case, like many other cases, are very limited.

Discussion

82.  The matrimonial home is subject to a 15-year mortgage with a monthly instalment of $3,436 each and will only be fully repaid by mid 2018. The market value has been agreed at $4,200,000.  The flat has 2 bedrooms and is about 740 ft².  Originally, it housed a family of 3.  Given that there are only 2 persons in the household, it appears that the property is larger than what is necessary now.

83.  I accept that P and the child have their housing need, but so does R.  I find some force in Ms Lam’s argument regarding R’s housing need.  I accept it is reasonable for R to expect to be able to maintain his previous living standard after the divorce if that is possible. 

84.  It is true that in his Form E dated 16 November 2012 R at one stage agreed, at Part 16, that P and the child are to reside at the matrimonial home until the child attains the age of 18 or completes his full time education, whichever is the later.  Thereafter, the property is to be sold at the then market price and the net proceeds of sale be shared between the parties.  However, for the analysis that I have done regarding R’s financial needs, I am quite sure that P’s proposal to postpone the sale is untenable.  As I have demonstrated above, even if he does not have to pay a single cent for the maintenance of P or the child, he would not have any meaningful sums to cater for his accommodation.  His situation would not improve until October 2016.  If we take a step further to include the maintenance that R may have to pay, his situation would be even worse. 

85.  With the conclusion that I have come to regarding P’s financial resources from the coach renting business, P’s position is much tarnished and Mr Pickavant’s arguments lose much of their force.

86.  Mr Pickavant argued that the child needs to stay in the matrimonial home because it is just a 5-minute walk from his school.  This has not been challenged and I accept that but it does not necessarily follow that the child must live in that flat but not in another flat in the same estate or the same neighbourhood. 

87.  I remind myself of the reality in Hong Kong that real property is a valuable asset and for many people, the home is their single and most valuable investment in their lifetime.  The decision to sell is very often than not a painful one and would not have come to lightly.  I think I am entitled to take notice that the real property market in Hong Kong has gone up at an appreciable rate since the value has been agreed.  On the assumption that the value has gone up another 10%, it would mean that an extra fund of $420,000 would be available. 

88.  For the above reasons, given the circumstances as they are now, I am of the view that the most feasible solution is to have the matrimonial home sold.

The Sharing Principle 

89.  As mentioned above, both parties agree that the matrimonial home is to be sold with proceeds of sale shared.  In my view, this must be the correct approach.

Equal Division

90.  R denied P’s allegation regarding her involvement in the purchase of the matrimonial home.  That was 18 months before their marriage.  He purchased the matrimonial home because he was given the chance to do so under the Government Home Purchase Loan Scheme.  The purchase was entirely unrelated to P, in particular, he denied P’s assertion that the property was purchased with a view of the anticipated marriage.  That said, he admitted that it took about 6 months for the renovation and then after that, about a year later he married P.

91.  As for P, Mr Pickavant stressed that P gave evidence that not only did she take part in the application for the Home Purchase Loan Scheme, but she also chose the property with R and bought various household items of crockery and curtains.

92.  In my view, given the long term relationship of the parties, it is inconceivable that P had no involvement in the purchase.  It is also to be noted that after the parties had begun their relationship, they opened a joint bank account on 19 April 1998.  On the balance of probabilities, the property must have been purchased with the intention of being their matrimonial home.  I accept P’s evidence that she also participated in the purchase and the subsequent renovation and the fitting out.

93.  Ms Lam, for R, argued that the marriage was a short one; it lasted for 5 years and 5 months only if calculated up to the date of separation and it was 7 years and 8 months by the time the petition was presented.

94.  I agree with Mr Pickavant that though this is not a long marriage, neither is it a short one taking into account of all the circumstances.  

95.  It has also been argued on R’s behalf that the financial assistance from family members in the acquisition of the matrimonial home can be regarded as a special contribution on the part of R. In the present case, half of the purchase price was from R’s father and the mortgage payments were made by R.

96.  The gifts provided by R’s family members were certainly an external source of finance and were not fruits of matrimonial partnership.  Nevertheless, they were given 7 years before the break down of the marriage.  In my view, their significance has diminished over time.  Further, the gifts were for the acquisition of the matrimonial home, which was intended for and devoted to family use and which usually has a central place in any marriage: per Mr Justice Ribeiro PJ in LKW v DD (2010) 13 HKCFAR 537, at para 98.  Furthermore, I would also give regard to the fact that P’s responsibility of taking care of the child is an onerous one and on the top of that, whether she is going to rent or purchase a flat, she has to find one that is suitable for 2 persons while R only needs to look for a smaller one.

97.  The parties have different versions regarding their contributions to the family expenditure during the marriage.  P claimed that R just spent whatever he had earned according to his wishes and at the request of R she contributed half of her wages before the birth of the child.  On the contrary, R’s case is that P made no contribution at all and he shouldered all the expenses.  Despite the great disparity, I do not think it could amount to “gross and obvious conduct” that warrants a departure from equal division.  In any event, this is not a ground that the parties contend for.   

98.  Taking all these factors into consideration, I have come to a view it is fair that there should be an equal split of the proceeds of sale.  

Maintenance

99.  For the reason that I have found P has some extra financial resources from the coach renting business, I agree with Ms Lam that it is an appropriate case where R is not required to pay maintenance to her.

100.  As for the living expense for the child, it has been reported at $7,950 per month and has not been subject to any challenge.  On the top of this, the child also has a share in P’s general expenses.  I will add another sum of $1,500 to reflect this.  This would add up to $9,450.  With the conclusion that I have reached regarding P’s earning capacity, I consider that each should be responsible for half of the amount.  It means that R’s share is $4,750.  I round it up to $4,800 per month.

101.  I need to step back and look at the overall impact.  Each party should be able to get a sum well above $2,000,000 which should be sufficient for them to purchase his or her own flat with mortgage finance.  Alternatively, this should be sufficient for them to rent a suitable accommodation in the same neighbourhood in the years to come. Furthermore, R would have no difficulty in maintaining the child.

102.  The way to do it would be for R to have the matrimonial home sold within 6 months upon the issuance of the decree absolute, the proceeds of sale are to be shared between the parties in equal shares on a clean break basis.  In addition to this, R is to pay P a periodical payment of $4,800 per month for the maintenance of the child.

103.  In the meantime, before the sale proceeds are available for division, R should continue to pay the interim maintenance for the benefit of the child.  The order of interim maintenance for the benefit of P is discharged forthwith. 

Order

104.  For the above reasons, I give the following orders:-

1. The matrimonial home be sold in open market within 6 months of the decree absolute;

2. The proceeds of sale, after deduction of the mortgage payments, all necessary incidental expenses, estate agent commission and legal costs and subject to the 1^st charge of the Director of Legal Aid, shall be divided equally between the petitioner and the respondent in equal shares on clean break basis;

3. The respondent do pay the petitioner periodical payment of $4,800 per month for the maintenance of the child, the first payment to be made on the 3^rd day of the month following the division of the proceeds of sale and thereafter on the 3^rd day of each and every month until the child reaches the age of 18 years or ceases full time education, whichever is the later;

4. There be liberty to apply on the implementation of the sale;

5. The interim maintenance order dated 10 October 2012 for the benefit of the petitioner is discharged forthwith; and

6. The interim maintenance order dated 10 October 2012 for the benefit of the child of the family shall continue until it is replaced by the periodical payment in Paragraph 3 above.

Costs

105.  Each party has mixed success in the present proceedings.  P has been successful in getting half of the proceeds of sale but has failed in postponing the sale.  As for R, in addition to the timing of the sale, he has been successful in resisting P’s claim for maintenance; and I have given a different sum for the child’s maintenance. Thus analyzed, each party has won on some of the issues; it would appear that the proper costs order should be no order as to costs and I so order by way of an order nisi.

Section 18 Declaration

106.  Lastly, I am satisfied that the arrangements made in respect of the child of the family to whom section 18 of MPPO applies for his welfare are satisfactory or are the best that can be devised in the circumstances and I accordingly make a declaration to this effect.