WONG YIU LAN v. WONG YUEN TING

IN THE COURT OF APPEAL

1995, No. 7
(Civil)

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H E A D N O T E

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Matrimonial proceedings - Ancilliary relief - Exercise of court's discretion under rule 77(4) and (5) Matrimonial Causes Rules - Judge's broad approach approved.

IN THE COURT OF APPEAL

1995, No. 7
(Civil)

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J U D G M E N T

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Litton, J.A. (giving the judgment of the court):

1. We are concerned on this appeal with orders for ancilliary relief in matrimonial proceedings made by Deputy Judge Day on 1 September 1994. The husband is the appellant. The wife by her respondent's notice cross-appeals.

The orders under appeal

2. The judge made a maintenance order for the benefit of the three children in the sum of $5,000 per month each. The three children, all sons, are aged 12½, 11½ and 10 years. The orders in favour of the wife are as follows:

(1) The husband to transfer to the wife his half share in Flat D, 6/F, Kar Fu Building, Java Road, North Point, free of mortgage. The husband to bear the legal costs. This is a 30m² flat with one bedroom. The wife and the three children are now living in that flat. The wife owns this flat jointly with the husband. The flat, which has an agreed value of $1.2 million, is mortgaged to a bank; the equity in this flat at the date of the order was approximately half a million dollars.

(2) The husband to pay to the wife $2m whereupon she is to transfer to him her half share in Flat A on the 2/F, Venice Gardens, Blue Pool Road, Happy Valley. The husband in April 1994 valued this flat at $7m. At the date of the order there was a bank mortgage on the flat to the extent of about $2.86m, leaving an equity of $4.1m.

(3) The husband to pay to the wife $600,000 being approximately one third of the equity in Units Q and R on the 15/F Phase I and carparking space No. 30 on the 4/F of Kingly Industrial Building Yip Kam Road, Wong Chuk Hang, Hong Kong. These premises are occupied by the husband for the purposes of his business.

Background facts

3. The husband is the sole proprietor of a decoration business. The husband and wife are both in their forties. The parties were married in October 1981. In January 1993 the wife and the three children moved out of the matrimonial home which was the Blue Pool Road flat. The life-style of the family was until the breakdown of the marriage luxurious. The flat has four bedrooms and the family had the services of a live-in maid. The husband owned a BMW car.

4. The flat in Kar Fu Building, Java Road, into which the wife and children moved is very small. It has only one bedroom. The three sons are constrained to share the living-room as their bedroom.

5. In May 1994 the husband, without the knowledge or consent of the wife, rented the Blue Pool Road flat to a tenant on a two-year tenancy for $34,000 a month. He keeps the whole of this income and discharges the bank mortgage on the flat by monthly payments.

6. Clearly, on the evidence before the judge, the husband's earning capacity is considerable but the wife's is very low. Apart from helping the husband out in his business temporarily, the wife did not, during the subsistence of the marriage, have regular employment outside the home. She devoted her full-time to looking after the family and the children. Apart from the properties referred to in the judge's order, there were other properties purchased by the aid of bank mortgages and from income generated by the husband's business. They are as follows:

(a) Flat B2 on 17/F Kar Wai Building, Java Road sold in April 1993 yielding two sums: (i) $118,500 which the wife used to maintain herself and the children, the husband having failed to pay any maintenance and having left the discharge of the mortgage repayments on the flat in Kar Fu Building to the wife and (ii) $150,000 which remains in a joint account.

(b) A property in Canada sold in May 1993 yielding Canadian $47,000 which the wife kept.

(c) A flat of about 65m² in Sheung Shui in which the husband now lives, purchased by him in about June 1993 on a 90% mortgage. The husband made a downpayment of $400,000.

7. There were, in the affirmations before the judge, other inconclusive pieces of evidence concerning both capital and income: for instance, an account maintained by the wife in her name for the purpose of receiving commissions earned by the husband which he then withdrew for his own purposes; also another flat in Kar Fu Building, Flat 5D, apparently purchased by the wife and her brother in August 1992.

The hearing

8. The hearing of the application for ancilliary relief took place on 16 August 1994. By that date he had before him three affirmations by the wife and two by the husband, with copious exhibits amounting to several hundred pages. The husband was represented by counsel and solicitors and the wife by a solicitor.

9. In view of the submissions which have been made by counsel on this appeal, it may be helpful to refer to the Matrimonial Causes Rules to see precisely what are the functions and duties of the judge in dealing with an application for ancilliary relief. Rule 77(5) says:

"(5) At the hearing of an application for ancillary relief the court shall, ... investigate the allegations made in support of and in answer to the application and may take evidence orally and may order the attendance of any person for the purpose of being examined or cross-examined, and may at any stage of the proceedings order the discovery and production of any document or require further affidavits."

10. There had, prior to the hearing in August 1994, been an interlocutory order made regarding the lodging of evidence by the parties. At the hearing before the judge in August, neither side asked the judge for orders regarding cross-examination, further discovery or anything else. The judge accordingly proceeded to deal with the application doing the best he could, on the basis of the material before him.

11. Plainly, the material before the judge was incomplete. On the husband's side, he had given no indication of the income or turnover of his business which seems to have been the main, perhaps the sole, source of the family's wealth. On the wife's side, there was the unexplained purchase of the flat in Kar Fu Building with her brother in August 1992.

12. This, however, is by no means an unusual occurrence in matrimonial cases. The exercise of the court's discretion under rule 77(4) and (5) of the Matrimonial Causes Rules in ordering discovery and production of documents must be carefully weighed: on the one hand, the absence of evidence could result in injustice; on the other hand, the process of requiring further and better disclosures could in itself be oppressive and almost certainly adds to the cost of proceedings: a process which a judge would obviously wish to avoid. But these considerations are academic in this case because at the hearing of the application, both sides appeared content for the judge to proceed on the material before him. This had the virtue of both expedition and economy, but it meant that the judge was necessarily constrained to take a broad approach. He said this:

"I start this exercise therefore without knowing the husband's income, although I know that he has apparently been able to support expenses of $66,000 per month and to pay arrears of maintenance pending suit (March to August) of $60,000 at the door of the Court.

If the husband chooses to be vague about his assets then he cannot be heard to complain if the Court on evidence otherwise before it draws inferences against him.

The wife has disclosed her income from recently undertaken part time work as a domestic maid."

13. The judge, after a laborious exercise - the accuracy of which, on the material before him, has not been impeached in this court - reached the following conclusion as regards the capital available:

"Ignoring the Sheung Shui property for lack of information, the combined equity in the other three properties is $6,497,626.

When making my decision, I have to bear in mind the need of the parties to have somewhere to live. This is the more important when considering the three children.

Ideally I would have liked to install the wife and the children in the larger Blue Pool Road flat as part of my award but this is not possible as the husband has chosen to lease this property until May 1996. He has done that two months after the decree nisi and knowing full well that this property would be one of the assets to be dealt with by the Court. Furthermore, although the flat is owned jointly with the wife her consent to the lease was not obtained. I have not been addressed as to the possibility of recovering the possession of the flat in these circumstances but even if it were possible it may well only be so after protracted litigation, leaving the wife and the children homeless in the meantime."

14. The effect of the judge's order broadly is this: Out of the combined equity of about $6.5m in the three properties, the wife would, at the end of the day, get $3.8m. But she would receive no maintenance from the husband. This achieves a clean break as far as the parties are concerned. The husband would have to find $3.3m to discharge the mortgage on the Kar Fu Building flat and pay the wife the lump sums totalling $2.6m. The judge gave the husband three months to discharge those obligations and then he added:

"How he finds that money will be his concern but I note that there is a sufficient equity in the Blue Pool Road Property and the Industrial Building to enable him to finance the award. I also bear in mind that he has not told me his income and I have not taken into account the Sheung Shui property, the BMW motor car or the sum of $150,000 remaining in the bank account. He will retain all of these.

His business continues and he has a flat to live in."

15. It seems to us that the judge has taken a careful and sympathetic approach to a very difficult task before him, and it is hard to see how, as far as the husband is concerned, the judge can be said to have erred. The husband's main complaint seems to be that he would have great difficulty in raising the cash to comply with the order: a plea which understandably fell on deaf ears since the husband never disclosed to the judge the extent of his capital and income.

The husband's appeal

16. Mr Pilbrow Counsel for the husband (he did not appear in the court below) perhaps sensing the difficulty of his task in this court, asked us at the commencement of his submissions to remit the matter back to the Family Court for a rehearing because, as he puts it, of the "woeful lack of disclosure by both parties and the glaring conflict in the evidence". He seemed to have the support of Miss Longmore, counsel for the wife, in this regard.

17. We declined any such "application". The matter is fundamental. Orders for ancilliary relief have been made by a court of competent jurisdiction and, unless such orders are discharged by this court in the exercise of our appellate jurisdiction, those orders bite. There is no basis whatsoever for impeaching the orders as far as the husband is concerned. The fact that the husband "challenged" the wife's evidence regarding capital and income is neither here nor there. Mr Pilbrow relies on Comley-Ross v. Comley-Ross [1986] FLR 1 where a husband applied to the magistrates for a variation of an order for periodical payment. He testified that his income had been reduced because of tax liability and because he no longer had an additional part-time job. He produced documents to support his case. There was nothing inherently improbable in his story. There was nothing before the magistrates to contradict what the husband said. Yet the magistrate disbelieved him and dismissed his application for variation. The husband successfully appealed to the High Court.

18. We cannot see how Comley-Ross v. Comley-Ross helps the husband in this case. On the face of the evidence before the judge, the husband is a man of wealth and has considerable earning capacity. As the judge said, he has apparently been able to support expenses of $60,000 per month and was able to raise $60,000 to pay off maintenance pending suit at the door of the court.

19. If the husband is truly unable to discharge the orders made against him, it is for him to produce evidence of his means on a full and frank basis. The judge gave him three months to satisfy the orders. That was nearly six months ago. To remove any uncertainty as regards the effect of the judge's order against the husband, we would dismiss the appeal and confirm the judge's order, with a variation to this extent, that the husband should have until 30 June 1995 to comply.

Wife's cross-appeal

20. We now turn to the wife's cross-appeal.

21. The one matter which caused us some anxiety in the course of the argument is this. The judge plainly thought that the flat in Kar Fu Building was unsuitable for the three children. It is far too cramped. He thought it would have been better if the wife and the children could have the Blue Pool Road flat but the husband has let the flat and the judge thought that posed an insuperable obstacle to his achieving the "ideal". The question is: Has the judge erred in this regard? Might he have made an order for the transfer of the Blue Pool Road flat to the wife nevertheless, but making other adjustments in the transfer of property orders to do justice between the parties? For instance, that the husband should have the Kar Fu Building flat, subject to a licence in favour of the wife until the Blue Pool Road flat becomes available on the termination of the tenancy? When it became obvious to counsel for the wife that none of these matters were reflected in the respondent's notice served on behalf of the wife, counsel applied to amend the notice by substitution as follows:

"1. The husband do transfer to the wife all his interest in the property situated at Flat A, 2/F, Venice Garden, Blue Pool Road within one month of the date hereof.

2. The transfer shall be subject to the existing tenancy and until the expiration and/or determination of the tenancy the husband shall receive the rental income and shall promptly discharge all mortgage instalments, both as to interest and capital.

3. Upon the expiration and/or determination of the tenancy the husband shall redeem the outstanding mortgage over the property.

4. Pending the expiration and/or determination of the tenancy, the wife shall be entitled to the exclusive use and occupation of the premises at Flat D, 6/F, Kar Fu Building, Java Road.

5. The husband do pay and continue to pay all monthly mortgage instalments in respect of the Kar Fu Building flat during the wife's occupation of the flat.

6. Upon the husband complying with paragraphs 1, 2 and 3 hereof, the wife shall transfer to the husband all her legal and beneficial interest in the Kar Fu Building flat.

7. The husband will concur with the wife in any and all applications to determine the tenancy of the Blue Pool Road flat."

22. When we heard Mr Pilbrow concerning the amended respondent's notice, it became obvious that such orders would have radically changed the arrangements between the parties and the values accorded to each as arrived at by the judge.

23. Moreover, this is not a case where the judge had overlooked a relevant factor. He was very conscious of the unsatisfactory effect of his own order as far as the occupation of the Kar Fu Building flat by the wife and children was concerned.

The judge said at p.15:

"I have by this order attempted to provide a roof of sorts over the heads of the wife and the children. Should the property be too small, the wife will be able to sell it and will have $3.8 million with which to buy or rent a larger flat."

With these considerations in mind, we would dismiss the wife's cross-appeal as well.