LKW v. KY

FCMC 530/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 530 OF 2011

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J U D G M E N T
(Ancillary Relief Application)

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1. This is the Respondent Wife’s application for ancillary relief against the Petitioner Husband upon the dissolution of what was a second marriage to both that had lasted some 13 years, specifically for monthly maintenance of HK$8,000 for herself and HK$3,000 for her daughter from her previous marriage but treated as a child of this marriage and who is now already 23 but still on full time education at university in Guangzhou,  or at least still was up to the time of the trial, and for the transfer of their former matrimonial home in Shenzhen currently in their joint names into her sole name so that she and the daughter can continue to have a home after the divorce and in lieu of her claims against his remaining assets including his transportation business and his interests in his deceased father’s ancestral home as well as 2 other properties in China which she believes he has concealed from the court.

2. The Husband now aged 51 and who runs a cross-border transportation business however argues that an earlier sum of RMB500,000 already paid to the Wife as part of their divorce settlement should be sufficient to meet her reasonable needs, as he believes that she in fact has her own income from running an aquarium shop in Shenzhen, and that in any event she has earning capacity and should be looking for a job to support herself if she is not already doing so, and insists that their former matrimonial home is the only remaining landed property of their marriage valued at RMB2,660,000 or just over HK$3.3 million with just a small outstanding mortgage should be sold with the proceeds to be shared between them with a bigger share of 55% to the Wife.  

3. The major issues between the parties are therefore essentially whether the Wife, now aged 43, has been involved in any business of her own, and if not does she have any earning capacity, and whether the Husband has any other property which he has not disclosed including those 2 properties in China as suspected by the Wife, or whether his ¼ share in his father’s ancestral home in Danshui, China should be included for distribution, as well as the value and profitability of his transportation business. Before proceeding to consider the evidence about these issues, it would of course be necessary to first set out the relevant background of the parties.

Background

4. Both parties were born and raised in China, where the Husband started to work as a driver upon completing secondary school and later entered into his first marriage in 1986. He and his first wife soon made their home in Hong Kong and had 3 children. That marriage ended in the mid-1990s when he divorced his wife who was then granted custody of their 3 children, with whom he had had little contact since.

5. As for the Wife, she quitted school early to work in various odd jobs in factories and restaurants, and had her first marriage in 1990 from which she gave birth to her said daughter in 1991. She and her then husband later moved to Shenzhen where she worked as a restaurant waitress. After that marriage ended also in a divorce with custody of the said daughter granted to her, the Wife started a courtship with the Husband who happened to be a regular customer of the restaurant where she worked.

6. The parties eventually registered their marriage on 23^rd November 1998 in China and made their home in Shenzhen together with the Wife’s said daughter. By then the Husband had already set up his own transportation business known as Goldway Transportation Limited (“Goldway”) which owned several trucks with which he and his hired drivers were to transport goods between Hong Kong and China, and from which he claims he now earns about HK$21,000 on average per month.

7. After the marriage the Wife quitted her job to become a full-time housewife, and in about 1999 the parties purchased a flat at Jia Jun Court, Xuan Jia Hua Ting, Fu Qiang Road, Shenzhen City (“Former Matrimonial Home”) in their joint names for RMB1,161,888 by means of a bank mortgage and where the family resided together with the Wife’s mother. Later in about 2000 the Husband also purchased a property in Fanling in Hong Kong (“Fanling Property”) in his sole name for HK$1,783,000 where the parties would stay from time to time whenever they were in Hong Kong.,

8. In the following year on 20^th March 2001 the Wife gave birth to their son in Hong Kong. Sadly that child was born with a congenital heart disease which required constant medical attention, but from which sadly he would not survive beyond the age of 11.  

9. Going back a bit in time to 2004, the Wife was granted the one-way permit to come to Hong Kong, and for about a year she worked in various restaurants and in a karaoke where she was arrested together with the other staff when police raided the place on suspicion that it was a vice establishment. She was subsequently released without charge on the next day and returned to Shenzhen. According to the Husband that incident was the cause of the eventual breakdown of their marriage as he suspected that the Wife was involved in running that vice establishment, which she denies and insists that she was just a waitress working there ignorant of the vice element in that karaoke, and she believes that the Husband deliberately used that to justify his affair with another woman in Shenzhen while she was working in Hong Kong.

10. In any event by July 2009 the Husband had moved out of the matrimonial home in Shenzhen to allegedly return to Hong Kong to stay in the Fanling Property. A few months later in October 2009 the parties met in Shenzhen to discuss about financial settlement with a view for a consensus divorce when the Husband produced a document under the title of “Divorce Agreement” (“Divorce Agreement”) in which he proposed to pay HK$8,000 per month for the maintenance of the son and a lump sum of RMB500,000 for the Wife, that she was to have the former matrimonial home in Shenzhen the mortgage payments of which he would continue to be responsible, while he was to keep the Fanling Property and his Goldway business, and that they shall proceed to divorce by August 2010 [“R-2”].

11. It is not clear whether there was indeed any overall settlement or agreement reached between the parties at that meeting as the said Divorce Agreement had only been signed by the Husband, but the upshot of that meeting was that about one month later on 10^th November 2009 the Husband paid a lump sum of RMB500,000 to the Wife, and also started to pay her monthly sums of HK$8,000 for the son, and in addition also HK$2,000 for the daughter.

12. At about the same time or earlier the parties arranged for the son to receive his primary education in Hong Kong by crossing the border everyday to attend a primary school in Fanling. To cut down on the son’s travelling time to school the Wife later rented a place in Tai Wai, Shatin where she would stay with the son during weekdays and to return to the former matrimonial home in Shenzhen on weekends.

13. In February 2010 the Husband sold his Fanling Property for HK$1,790,000 allegedly to fund his payment of RMB500,000 to the Wife, but of which she claims to be unaware at that time and disputes that it was sold for that purpose, and that she believes that he has 2 other properties in Shenzhen where he has been cohabiting with his girlfriend, first at a flat at Flat G, 7/F, Fumin Building (“Fumin Property”) from 2008, and later in 2011 at 3/F, Phase One, Tai Wai Sing Bong, Lung Kong Region (“Lung Kong Property”), all of which he has categorically denied.

14. In any event the parties subsequently had a heated dispute in late October 2010 when the Husband accused the Wife of changing her mind about their divorce agreement and of demanding more money from him which subsequently required police intervention, and which eventually led to the Husband issuing a petition for divorce on 13^th January 2011 in these proceedings against the Wife based on her behaviour, but which he subsequently amended to one based on 1 year separation since 30^th July 2009 with the Wife’s consent, and upon which the decree nisi of divorce was then granted on 28^th July 2011.

15. The parties were also able to agree to have joint custody of their son with care and control to the Wife with reasonable access including staying access to the Husband, which agreement was then made an order of the court on 11^th July 2011, but they were unable to resolve their remaining dispute on the question of ancillary relief mainly over the distribution of their former matrimonial home in Shenzhen.

16. In his Form E [Bundle/23] the Husband disclosed that he was making HK$21,000 per month from his transportation business, that he had just over HK$30,000 in savings with an MPF then at just over HK$150,000, and that his only remaining asset of substance was the former matrimonial home in Shenzhen after having earlier sold his Fanling Property to fund the said lump sum of RMB500,000 for the Wife under their divorce agreement but that she had subsequently gone back against her words and demanded for more money, hence he proposed in his Form E that the former matrimonial home should instead be sold with the sale proceeds be shared equally between them but that the Wife should return half of the said lump sum of RMB250,000 to him. While no proposal was made about any maintenance for the Wife or the children, his Form E disclosed that he was then paying HK$8,000 per month for the son, as he believes that the Wife was then running an aquarium business in China and hence could support herself without requiring any maintenance from him.

17. In her Form E [B/48] the Wife however claimed to be unemployed without any income other than the said monthly sum of HK$8,000 from the Husband for their son, that she had virtually no savings or assets save for her half-share in the former matrimonial home which she put at RMB715,000 and a vehicle worth about RMB65,000, and that she wished to seek a monthly sum of HK$10,000 for the maintenance of herself and the children, but she did not mention anything about the alleged divorce settlement of October 2009 or the whereabouts of the said lump sum of RMB500,000, nor did she make any claim over the Husband’s share in the former matrimonial home which was then being occupied by her and the son.   

18. As noted above after an unsuccessful FDR, the ancillary relief application then came before me for PTR, but sadly the parties lost their son to his illness in July 2012 and understandably took some time off the proceedings. Eventually and after updating their respective financial means in their narrative affirmations, the ancillary relief finally proceeded to trial in early 2014 after they failed to accept each other’s respective open proposal made before the trial as follows. It should also be noted that the Husband has since the passing of the son ceased paying the said monthly sum of HK$8,000 to the Wife which he claims was meant for the son only under the Divorce Agreement of October 2009.

The Wife’s Open Proposal

19. The Wife’s open proposal was in fact set out in her then Counsel’s opening submission of 21^st February 2014 on the following terms:

(a)  The Husband shall pay her monthly sums of HK$8,000 for her maintenance and HK$3,000 for the maintenance of the daughter;

(b)   The Husband shall transfer his share and interest in the Former Matrimonial Home in Shenzhen to her absolutely;

(c)  The Husband shall pay her a lump sum of HK$350,000 to enable her to pay off the outstanding mortgage of the said Shenzhen property;

(d)  The above terms shall be in full and final settlement of her claims against the Husband’s other assets.

The Husband’s Open Proposal

20. The Husband’s open proposal was in fact made much earlier in a statement dated 8^th October 2013 which he adopted at the opening of the trial as follows:

(a)  The Former matrimonial Home be sold with 55% of the net sale proceeds to the Wife and the remaining 45% to him, with the costs and expenses of the sale be borne by the parties in the same proportion, and that the Wife shall waive all her claims against his interest in the Danshui Property;  

(b)  Alternatively, the parties shall divide the net sale proceeds in equal share and the Husband shall pay the Wife a lump sum of RMB80,000 in settlement of her claim against the Danshui Property;

(c)  Either way, the Husband shall waive his claim against the Wife for half of the said RMB500,000 given to her after their said meeting in October 2009 if the Wife abandons her claim for monthly maintenance, otherwise he shall pay her HK$4,000 per month for her maintenance but she will have to return to him RMB250,000 being half of the said sum of RMB500,000;

(d)  He shall pay half of the Wife’s costs.  

21. It is quite clear from these proposals that the major bone of contention between the parties is over the former matrimonial home in Shenzhen, which the Husband insists to be their only remaining marital asset of substance left and hence should be divided between them equally but he is prepared to let the Wife have a slightly bigger share as a clean break after taking into account of the lump sum of RMB500,000 already paid to her earlier pursuant to an agreement, and that if she insists that he should pay her monthly maintenance, then she should return to him half of the said lump sum, while the Wife insists that it is only fair that she gets to keep the entire property for her accommodation as the Husband has at least 2 other properties where he has made his home in China, and that since she has no income of her own and was wholly dependent on him throughout the marriage, she requires financial provisions from him to continue instead of a clean break between them, as she has by now all but used up the said sum of RMB500,000 on her needs and expenses over the years since their separation in 2009.   

22. The Husband as noted above does not accept that the Wife has no earnings or earning capacity, nor does he accept that she has truthfully accounted for the whereabouts of the said lump sum of RMB500,000, which together with the Wife’s alleged interests of his in 3 other properties in China including the Danshui Property thus constituted the major issues between the parties in the trial, during which the Husband was represented by Ms Linda Wong of Counsel, while the Wife had by then started to appear in person. Henceforth before proceeding to consider the evidence of these issues, it would be helpful to first set out the legal principles applicable to the determination of ancillary relief matters, not least because the Wife is unrepresented. 

The Applicable Principles

23. The powers of the court to make orders for periodical payment and lump sum payment, which is what the Wife is seeking, are derived from section 4 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’), and in the exercise of this power, the court shall take into account of those matters set out in section 7(1) of the Ordinance, which I set out in full for the benefit of the Wife as follows :-

‘(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.’

24. The principles of how these section 7 enquiries should be approached have been definitely set out by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 when Ribeiro PJ stated from §56 of his judgment:

“Objective of fairness

56. … The first is that the implicit objective of a section 7 exercise is to arrive at a distribution of assets which is fair as between the parties …

Rejection of discrimination

57. The second is that the concept of fairness requires the refutation of any gender or role discrimination between a husband and wife and their respective roles. Lord Nicholls reiterated this at the start of his speech in Miller/Mcfarlane when, referring to White v White, he stated:

  “ … the House emphasised that in seeking a fair outcome there is no place for discrimination between a husband and wife and their respective roles. Discrimination is the antithesis of fairness. In assessing the parties’ contributions to the family there should be no bias in favour of the money-earner and against the home-maker and the child-carer. This is a principle of universal application. It is applicable to all marriages.”

Yardstick of equal division

58. The third principle is that, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a “yardstick of equal division” which should be departed from only for good, articulated reasons …

59. In Miller/McFarlane, the “yardstick” concept was elaborated into the “equal sharing principle” as further discussed below. However, it is worth emphasising that according an equal status to the role played by each of the parties during the marriage does not necessarily or even usually mean that their assets should be equally divided. Thus, in White Lord Nicholls stated:

“Sometimes, having carried out the statutory exercise, the judge’s conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge’s decision means that one party will receive a bigger share than the other.”

60. And in Miller/McFarlane, he referred to the equal sharing principle as follows:

 “When their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary. Fairness requires no less. But I emphasise the qualifying phase: ‘unless there is good reason to the contrary.’ The yardstick of equality is to be applied as an aid, not a rule.”

…

Rejection of minute retrospective investigations

62. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the court) resources and to increase antagonism and discourage settlement.

63. Such attempts have been encountered in various contexts, including disputes over the extent of a party’s assets; over the contribution made to the welfare of the family; over the parties’ conduct; over claims to be compensated for having suffered disadvantage, and so forth.

…

69. The essence of theis fourth principle is reflected in Thorpe LJ’s illuminating comment in Parra v Parra:

“ … the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviate the need for the investigation of minute detail and equally the need to make findings on minor issues in dispute. The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally he is not bound to adopt a conclusion upon which the parties have agreed. But this independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable. Judgments in this field need to be simple in structure and simply explained.”

70. The four principles discussed above should be borne in mind when embarking on the section 7 exercise to which I now turn.”   

25. It is with these principles in mind that I shall now embark on the section 7 exercise, starting with the identification of the parties’ assets and financial resources, which is as noted above at the heart of their disputes, of which I shall start with the 2 main issues concering the Wife : (a) whether she has been running the aquarium business in China, and (b) the whereabouts of the said sum of RMB500,000.

The Aquarium Business

26. The Husband’s allegation that the Wife has been running this aquarium business was first made as noted above in his Form E, which he repeated in his 1^st Affirmation of 10^th September 2012 in §9 when he just said: “ … the Respondent has been running her own aquarium business. I believe that she has been a partner of the said business and the other partner is her boyfriend.” [B/103]. 

27. It was in his 3^rd Affirmation of 16^th April 2013 that he provided more details of his case about the Wife’s alleged business in §5 [B/126] as follows:

  “5. In about 2005, she (the Wife) started to have intimate relationship with Cheung Yung (張勇) and they also jointly commenced aquarium business in Shenzhen. They have been running aquarium business for over 6 or 7 years. After I presented the divorce petition in the proceedings herein, I did attempt to try to obtain further information relating to her business. In about early 2012, I went to aquarium known as “The Cleair Aquatics” at 深圳市福田區深南大道世紀中心紅星美凱龍家居廣場一樓which was run by the Respondent and Cheung Yung. There are now produced and shown to me marked “LKW-5” photos taken by me showing the promotion booth run by “The Cleair Aquatics”. I also produced a business card of “The Cleair Aquatics” bearing the name of the Respondent and a leaflet of her business. There are now produced and shown to me marked “LKW-6” copy of her said business card and leaflet. Evidently, the respondent’s allegation in the Answer that she worked only three months for the “Cleair Aquatics” is untrue. She should have been carried on the business of or working in the said “The Cleair Aquatics” till early 2012.

  6. On or about 31 March 2013, I went to the aforesaid promotion booth of “The Cleair Aquatics” again. The said promotion booth was still there but I could no longer find the Respondent’s business card. I got the business card of “鐘興” only. I recalled that my son did mention about this 鐘興and told me that he was a partner in the business with the Respondent. There is now produced and shown to me marked “LKW-7” a copy of the business card of the said鐘興.”  

28. In his evidence in court the Husband further explained that it was on that first occasion in 2012 when he made enquires at the Cleair Aquatics in Shenzhen that he was given the Wife’s business card as the boss which was stapled to a leaflet of the said aquarium business under Exhibit “LKW-6” and “P-1” by a saleslady there, who also told him that for any inquiry about price, he would have to contact her boss directly.   

29. The Wife of course denies to have any connection with this aquarium business, and her reply to this allegation was first set out in her 4^th Affirmation from §7 [B/130] as follows:

“7. … I deny that I had had intimate relation with Mr. Cheung Yung as alleged by the Petitioner. In fact I met Mr. Cheung Yung in 2002 or 2003 before I came to Hong Kong in or about 2004. He was the proprietor of the business of an aquarium shop named Cleair Aquatics (可麗愛水族). At that time the shop was located at the downstairs shopping arcade of the former matrimonial home named Times Square (時代廣場) at Fu Qiang Road, Shenzhen. I therefore would go to his shop from time to time. I am not the owner of and do not have any interest in the business.

8. I was also acquainted with Mr. Cheung Yung’s girlfriend named Ah Mui. I remember that at least on one occasion Mr. Cheung was invited to the former matrimonial home for dinner with the Petitioner and me. It is ridiculous that the Petitioner now accused me that I had intimate relationship with Mr. Cheung, and that we had been running the aquarium business for 6 to 7 years.

9. As stated in my Answer to the Petitioner’s 2nd Questionnaire dated 12 January 2012, I only helped Mr. Cheung for taking care of the shop between June and September 2008 when he was out of Shenzhen.

  10. As far as I know, Mr. Cheung has returned to his home place in Anhui Province (安徽省). He has no longer run the business as he has sold it to another. The shop is no longer located in Times Square and has moved to another shopping arcade at Shen Nan Road (深南大道). The man named Chung Hing was not my business partner as alleged by the Petitioner in …”

  11. The name card bearing my name produced by the Petitioner and marked exhibit LKW-6 did not belong to me. I suspect that it is a forged document.”  

30. At the trial the Wife further postulated that the Husband just got hold of the business card of 鐘興marked LKW-7 from the shop and simply duplicated the one marked LKW-6 by putting her name and her mobile phone number on it in order to connect her to the business, but without realising that she had since their separation changed to a different phone number of which he was not aware, hence she argues that it just shows that that business card was fabricated by him, as otherwise there was simply no reason at all for her to put her old phone number which she no longer used on her own business card if it were indeed her card.

31. Furthermore, it seems very odd to me that the alleged business card of the Wife would also contain the mobile phone number 13824309751 of that other person 鐘興 which simply does not make any sense as mobile phone number is obviously something so personal to each individual that there is no reason for her to include the mobile phone number of another person even her business partner in her own business card, and it goes to support her case that the Husband had fabricated her name card by duplicating the one of 鐘興 but made the mistake of not omitting his mobile phone number from the business card intended for the Wife.  

32. As a matter of fact, if indeed the Wife had since 2005 started and been running this business in the same building of the parties’ home where they were then still living together, I find it difficult to believe that the Husband would appear to know nothing much about it other than the address of its shop and the name of her other partner, that he could only obtain her business card indirectly from a staff of the shop some 3 years after their separation, and that on both occasions when he attended at the shop that the Wife was not even there running the business as he has alleged.

33. It seems equally far-fetched to me that the Wife would be, as alleged by the Husband, so soon after being arrested by police for working in that nightclub/karaoke in Hong Kong in 2004 that she would so soon thereafter be running something so different as an aquarium business in Shenzhen in which she seemed to have absolutely no experience or expertise. The Wife’s evidence as noted above is that she had to work as a waitress in that nightclub earning some additional income after she had just been allowed to stay in Hong Kong where she had rented a flat with the son while he went to a local school, which bags the obvious question of where would she get the necessary capital to fund the aquarium business? I am unable to find any answer from the Husband’s evidence.

34. Besides, if indeed the Wife had been running this aquarium business since 2005, why did the Husband not make any reference to it in the said Divorce Agreement which was clearly prepared by him and in which he obviously found it necessary to make it one of the terms that he should be entitled to keep his own business as part of the settlement, or that he was willing to pay the Wife as much as RMB500,000 when she already had her own business with her own income and would also be getting the most valuable asset in the former matrimonial home? Again I am unable to find any logical explanation from his evidence.

35. Above all, if in fact he had bother to search the website of Cleair Aquatics at Http://www.cleair.net listed on the back of the leaflet (“P-1”) which he obtained from the aquarium shop, he would have noticed from the introduction of its home page that Cleair Aquatics is in fact one of the brands or products of what appears to be a much bigger corporation in  Chengdu(成都) with international or at least national connections all over the Mainland and that Cleair Aquatics was in fact not commenced in 2005 by the Wife as alleged but rather much earlier in 1995 by its parent company in Chengdu(成都), as the first paragraph of its “About Us” stated as follows:

  “可丽爱(Cleair)水族是成都智拓水族用品有限公司旗下的中高端水族箱品牌之一。在业界有着“中国水族箱高端品牌领导者”之称谓。品牌成立于1995年，一直在水族箱行业领导着整体行业的工艺与设计发展，不但是第一个将亚克力材质大量引入到成品套缸的制作，更是水族箱行业中首批与外籍设计师合作开发的企业。在韩式缸，欧简风格等一个个行业风潮中成为领路人。公司更于2012年在水族行业开始追求量化生产引入ISO等管理体系时，可丽爱又率先突破引入意大利POLIMODA柏利慕达设计学院风格的奢侈品工艺管理体系，以欧洲奢侈品标准来追求精工质量，在水族箱生产工艺中必不可少的许多纯手工环节，透过先进的工艺管理知识，精益求精的不断朝精细化，稳定化与艺术化发展。提供消费者，时尚，专业,安全的水族箱产品。”

36. In the premises and on the evidence before the court, I am unable to imagine how this Wife, financially or otherwise, is capable of starting or running this business as alleged by the Husband. Accordingly, I totally reject his case that the Wife has or had had any interest in Cleair Aquatics, and I accept that it may well be the case that the Husband all along knew about the Wife having befriended the person-in-charge of that particular shop and his wife whom she would visit from time to time while living in the same building during the marriage, and when she changed her mind about their divorce settlement and wanted to claim more money from him, he decided to make use of that information to build a false case against her and to resist her financial claims against him in these proceedings.   

Whereabouts of RMB500,000

37. The Husband’s evidence on this payment to the Wife is first set out in his Form E [B/41] in which he claimed that on 13^th October 2009 with the intention to end their marriage, he met with the Wife for discussion to resolve their financial issues in the event of a divorce when she agreed to accept RMB500,000 from him in settlement of her claims for maintenance, that in order to fund that payment he had to borrow the money from a friend and gave the said sum to the Wife about a month later on 10^th November 2009, and that later he had to sell his Fanling property to repay his friend, but as the Wife later changed her mind and demanded for more money from him before she would agree to give him the divorce, to which he disagreed and hence he was unable to go ahead with the divorce as originally planned.   

38. The Wife does not dispute their discussion about their divorce and financial settlement at that meeting in October 2009 or her subsequent receipt of the said sum of RMB500,000 from the Husband about a month thereafter, but she denies that she had ever agreed that the said sum was to be in full and final settlement of her financial claims upon their divorce, as she has all along also required him to continue to pay her regular maintenance, and that in any event she has by now used up most of the said sum on her various expenses and those of the 2 children as the Husband’s monthly sums of HK$8,000 were insufficient, and that upon the passing of their son in July 2012 he had ceased his maintenance payments altogether, which also explain why she had had to sell her car or liquidate some of her insurance policies, and finally resorting to borrowing from her brother.   

39. In her 4^th Affirmation of 27^th May 2013 [B/132] the Wife gave a breakdown of how she had already spent about HK$400,000 of the said sum by that time on the following items:

Legal costs in these proceedings	HK$92,000
Insurance premium payments	HK$88,000
Rental expenses	HK$65,000
Her mother’s medical expenses	HK$30,000 + RMB63,500
Daughter’s school fees	RMB30,000
Total  :	About HK$400,000

40. That was then in mid-2013, which if true and on the basis of what she claimed to be her monthly expenses of about HK$15,000 in her Form E, clearly by now what was left of the RMB500,000 would have all been depleted or to irrelevant amount.

41. The Husband of course does not accept that the Wife has by now spent the entire sum or in the manner as alleged, and Ms Wong on his behalf submits that what the Wife said in her 4^th Affirmation is in fact inconsistent with her evidence at the trial under cross-examination when she claimed to have already exhausted all the money by 2011 and had to start borrowing money from her brother.

42. According to Ms Wong and her closing submission, it seems that in less than one month of her receipt of the said RMB500,000 into her bank accounts, the Wife had withdrawn RMB200,000 of which she was only able to account for RMB90,000 being spent on mahjong games, purchasing a fur and some furniture as well as a holiday with the son, leaving RMB110,000 unaccounted for.

43. As for her further withdrawals of RMB150,000 from late September 2010 to end of January 2011, and RMB110,000 between March and April 2011, Ms Wong submits that again the Wife was only able to account for some of the money being spent on her mahjong games and rental deposit for her rented flat in Hong Kong at that time, leaving the rest of those withdrawals accounted for, whereas her claims that she had spent some of the money on her legal costs in these proceedings and her mother’s medical expenses were inconsistent with her evidence in court that they were in fact met by borrowing from her brother, while her daughter’s school fees would have already been taken care of by the Husband’s monthly maintenance. Ms Wong therefore submits that it is highly suspicious of the Wife’s claim that she has already used up the entire sum of RMB500,000, of which the court should take into account as part of her assets.   

44. While I accept that the Wife’s evidence given in court to account for the said sum of RMB500,000 may not always appear precise or cogent, which is however understandable given the fact that many of the details went back some 3 or 4 years ago, but since there is no dispute as to her legal costs or her mother’s medical expenses which had to be paid one way or the other, as well as her insurance premium payments, together with the fact that the Husband had since late 2009 stopped paying for her own maintenance, if indeed she had not used the sum of RMB500,000 for any of her alleged expenses or her own regular household and personal expenses, then how did she manage to maintain herself the past 4 or 5 years when she had no income of her own or other financial resources?

45. At that rate her own stated monthly expenses from late 2009 to end of 2013, which span over 4 years, would have required more than HK$700,000, and even if they were in fact at the same level of her open proposal at HK$8,000 per month, it would still have consumed the bulk of RMB500,000 over that same period just on her regular living expenses, not to mention her legal costs or her mother’s medical expenses. In the absence of evidence that she may have had other resources or income at that time, and notwithstanding the imprecision of her evidence on this issue, I am unable to find anything suspicious about the Wife’s account of how she spent the said sum of RMB500,000 over the past years, or for that matter what was left of the sale proceeds of her car or her insurance policies, and I believe that most if not all of them have by now been depleted or at an irrelevant amount.   

Husband’s Transportation Business

46. Before proceeding to consider the next major issues over the Husband’s alleged non-disclosed interests in the said Fumin Property and Lung Kong Property, it would be highly relevant to first consider the profitability of his trucking business Goldway Transportation, not just at presence but also going back several years to around the time of their separation in 2009, it being his only known source of income would inevitably go to the question of his ability to own those 2 properties since that time. The Wife’s stance is that the Husband has deliberately understated both the profits of his business and his own income.   

47. There is no dispute that the Husband wholly owns the business, holding 99% of its shares while the only other named shareholder was merely a nominee of his, but his evidence is that while Goldway owns 3 – 4 trucks or lorries driven by hired drivers and himself, and that although the annual business revenue is in excess of HK$4 million, its annual direct costs such as hire-purchase payments of the company’s trucks, their repairs and maintenance costs, drivers’ salaries, and fuel and gas would cost in excess of HK$3 million, while its annual administrative expenses would amount to as much as HK$1 million, resulting in little net profit each year which explains his stated income of just over HK$20,000 per month in his Form E.

48. The Wife of course does not accept that that is all that the Husband earns, alleging that he has deliberately lied about the number of trucks that Goldway owns which she puts at 6 – 7 instead of only 3 - 4 as alleged by him thereby understating his business’s revenue and hence his income which she believes should be at least HK$40,000 to $50,000 per month on average, as she had always been told by him and based on the regular amount of what he used to spend on their family per month throughout their marriage.  

49. Apart from her own words, the Wife has not proffered any other evidence about the number of the trucks that Goldway actually owns, nor is that information readily apparent from the disclosed audited accounts of Goldway before the court [B/153 – 179, 191.13 – 26], but they appear to support the Husband’s evidence about the business’s profits and hence his income based on the financial statements [B/162, 166, 179, 191.26] between 2007 and 2012 which reveal an average annual revenue in excess of HK$4 million but after deducting for all the direct costs and administrative expenses produced a much smaller net profit for the year, at best from almost HK$160,000 in 2011 to no profit at all in 2008 as follows:

Year	Revenue	Direct Costs	Admin  Expenses	Net Profit
2007	$3,760,871	$2,488,509	$1,160,938	$87,086
2008	$4,006,803	$2,987,829	$1,454,191	($406,559)
2009	$4,459,348	$3,113,170	$1,376,491	$8,560
2010	data not available
2011	$4,227,655	$3,196,962	$957,794	$159,464
2012	$4,161,829	$3,267,599	$867,413	$118,174

50. It is apparent from the above that what accounted for the huge differences between the gross profits and net profits is the administrative expenses, or what are commonly known as ‘overhead expenses’ of a company or business which will usually have to be defrayed first before the net profits, if any, are distributed in cash as dividends to the owners or shareholders, and in this case the Husband.

51. While these administrative expenses of Goldway were never challenged by the Wife at the trial and that most of them, such as Rent and Rates, Bank Charges, Secretarial and Accounting Fees are just common or routine overhead expenses and nothing controversial except for 2 particular items, not so much as to their authenticity but rather their practical effects on the net profits or cash position which may be relevant to the actual amount of income available and payable to the Husband : Depreciation and Entertainment, the amounts of which are listed below together with the Husband’s Director’s Remuneration and Net Profit over the same period referred to above by way of comparison:

Year	Depreciation	Entertainment	Directors remuneration	Net Profit
2007	$473,549	none	$132,000	$87,056
2008	$567,402	none	$132,000	$(406,559)
2009	$450,249	$31,000	$230,000	$8,560
2010	data Not Available
2011	$216,608	$112,277	$280,000	$159,464
2012	$162,608	$20,000	$180,000	$118,174

52. For accounting purposes the item of Depreciation being the reduction in the value of an asset, such as those trucks of Goldway in the Husband’s case [B/191.23], is commonly or routinely allowed and included in the company’s income statements for its costs allocation within an accounting period, and while it certainly has the effect of reducing the company’s profit for the purpose of assessing its tax liability, but since it is a non-cash expense, it does not actually change the company’s cash flow, or more significantly the cash available for payment to the owner or shareholders by way of distribution of profits or dividends.

53. In the present case the Depreciation Value adopted in Goldway’s accounting documents from 2007 to 2012 ranges from as much as half a million dollars to less than HK$200,000 for the year, and by putting these sums back in the cash flow and if they were subsequently distributed to the Husband as part of the business’ net profit for that year, and by taking into account of the director’s fee already received by him for the year, the total monthly cash available and payable to the Husband would indeed become much closer to the higher income which the Wife believes he was actually able to earn at that time as follows:

Year	Depreciation	+ Director's fee	+ Net Profit	= Annual/Monthly
2007	$473,549	+ $132,000	+ $87,056	= $692,605/$57,717
2008	$567,402	+ $132,000	+ nil	= $699,402/$ 58,283
2009	$450,249	+ $230,000	+ $8,560	= $688,809/$57,400
2011	$216,608	+ $280,000	+ $159,464	= $656,072/$54,672
2012	$162,608	+ $180,000	+ $118,174	= $460,782/$38,398

54. As for the item of Entertainment, it being an actual expense is obviously different from the item of Depreciation as certainly it cannot form part of the Husband’s income, but expenses such as restaurant meals with clients or customers can certainly benefit the Husband indirectly by reducing his own personal expenses for such meals thereby leaving him with more income for other uses or purposes.  

55. While it is true that none of the above had ever been properly put to the Husband at the trial by the Wife, these figures were all provided by him from his disclosed audited accounts and were no doubt evidence before the court which clearly indicate that the Husband was in fact earning or capable of earning much more than he had admitted from his business and in line with what the Wife has alleged.

56. This is in fact also supported by the bank records of his several personal bank accounts attached to his Form E [B/141 – 151] which show various much more substantial deposits than his claimed regular income, and more importantly all these evidence suggest that he indeed had had the means or ability to own one or both of the said Fumin and Lung Kong properties as suspected by the Wife.

57. In addition, while Goldway is necessarily an ongoing business of the Husband and the main source of his income, and that there is no suggestion by the Wife that it should be liquidated, which may explain why there was never any formal valuation of the company, it would however be relevant to note that it by no means has no assets of value, as it is not disputed that it does own substantial assets such as trucks or lorries, the exact number of which remains controversial and unverified, although according to Exhibit R-2, a note produced by the Wife and allegedly in the Husband’s handwriting of some operating details of 6 trucks with their registration numbers, name of the drivers, etc from 2007 to 2011 which seem to support the Wife’s case, and that according to Goldway’s audited report [B/101.23] their value before depreciation were put at HK$1,143,038 as at 31 December 2012 which is not insignificant.

58. In conclusion, I am satisfied that the Husband was actually earning more than what he had disclosed in his Form E, and more significantly that he was financially capable of owning the said Fumin Property or the Lung Kong Property or even both, which of course by no means follow that he must be their beneficial owner, of which I shall next turn to consider the evidence, but perhaps first to deal with the more straightforward issue over his interest in the Danshui Property.   

Husband’s Interest in Danshui Property

59. The Husband does not dispute his interest in this ancestral home of his deceased father who died in the earlier 90s of which the Husband is entitled to inherit as part of the estate, but his case is that since he has 3 other siblings and there had been on-going disputes amongst them over the question of succession, and as a result he had already renounced his share back in 2005 as he so claimed in §10 of his 1st Affirmation [B/104]:

“ … The property is a remote village house situate at the countryside and has been vacant for quite a number of years. There is a dispute on the succession of the said property between the siblings and we had heated arguments about that. The said property is still registered in the name of my father to this date because this dispute has yet to be resolved. In or about 2005, the Respondent agreed with me during a family meeting with my siblings that we did not want to be involved in this dispute and I should give up all my rights in the property.”

60. At the trial he confirmed that the said property was still in the name of his deceased father and had still not been vested in the beneficiaries, and that even though it has a market value of RMB1,060,000 according to the agreed valuation report [B/380], at most his share would only be ¼ at about RMB265,000, but according to the written legal opinion of a Mainland lawyer {B/343}, the vesting of the property would be subject to various payments of government premium and tax and hence the value of his share would realistically be much lower at no more than HK$100,000, as he so stated in his open proposal.

61. However, his proposal to pay a lump sum of RMB80,000 or the equivalence of almost HK$100,000 to the Wife in settlement of her claim against the said property seems to contradict his evidence that he had back in 2005 already renounced his interest. I believe that he has somehow still retained his interest in this property, but given the limited nature of his interest and the various restrictions over the sale of the property according to his expert, and while I do not necessarily accept his case that at best the notional value of his interest in that property is no more than HK$100,000, I agree that it is certainly not substantial.

The Fumin Property and Lung Kong Property

62. As will be apparent below, I propose to deal with the issues over these 2 properties together. According to the Wife, the Fumin Property was where the Husband had cohabited with his girlfriend a Ms Man from 2008 to 2011, and that although it was registered in the name of a Mr. Tang, a relative of his, she believes that the Husband was and may still be the beneficial owner, and that after he had moved to the Lung Kong Property in August 2011, he then had the Fumin Property renovated before putting it in the market for rent or sale.

63. While it is not clear whether the Fumin Property has since been sold, the Husband does not dispute that he had indeed resided there at that time albeit for only a month or so and by himself alone instead of allegedly with his girlfriend, but he denies to have any beneficial interest in it, claiming that he was merely helping out his relative by keeping a watch of the property while it was being renovated. This is in fact what he said about these 2 properties in his 1st Affirmation [B/105]:

“13. … I denied having lived with one Ms Man … Mr. Tang Man Keung is my relative and owner of the Fumin Property. Ms Man was an employee of the decoration contractor retained by Mr Tang Man Keung. I did have on a number of occasions visit the Fumin Property to keep an eye on the progress of the decoration work and lived there temporarily for only about a month. I did (not) and do not have any beneficial interest in the Fumin Property.

14. … I deny having any beneficial interest (past or present) in Lung Kong Property. The Respondent’s allegation about my moving to this property with Ms Man is not true. I recalled that I have visited this property only a few times for visiting my friend Mr. Tze.”   

64. When this explanation of his connection with the Fumin Property was challenged by the Wife, the Husband gave further elaboration in his 2nd Affirmation in §12 [B/122] as follows:

“ In or about September 2011, Mr. Tang, my relative and owner of the Fumin Property and asked me to help him checking and monitoring the decoration work carried out in the Fumin Property and in return I could stay there until it was leased out. Mr. Tang lived in Xinhuei, a place which is three hours travelling distance from Shenzhen. At that time, the said property was already put on the market for lease. Hence, in the end, I lived there for about a month and moved out shortly after the property was leased out. I would like to reiterate that I did (not) and do not have any beneficial interest or at all in the Fumin Property.”

65. In response to the allegation over the Lung Kong Property, the Husband said this in §13 of the same affirmation:

  “ … reiterate that I did and do not have any beneficial interest or at all in the Lung Kong Property as alleged by the Respondent. The said property belongs to my friend Mr. Tze. Those barely legible delivery notes contain nothing which arguably points to me, not to say conclusively. Even the barely legible words “劉生” are neither here nor there.”  

66. The Wife of course argues that these delivery notes are in fact clear evidence of the Husband’s decorating and furnishing both the Fumin Property with the intention of letting or selling it, and the Lung Kong Property for his own occupation, which follows that he must be the beneficial owner of both properties, as she said in her 3rd Affirmation [B/116] as follows:

“14. … I verily believe that both the Fumin Property and the Lung Kong Property are beneficially owned by the petitioner. Otherwise, he would not have visited the Fumin Property to keep an eye on the progress of the decoration work and lived there for about one month as admitted by him (but without mentioning when did he live there), while his occupation is a Hong Kong transportation company owner which is totally unrelated to decoration works.

15. Further, the Petitioner said that he had visited the Lung Kong Property only a few times for visiting his friend called Mr. Tze. However, I discovered that the petitioner was responsible for all the decoration works and furniture of the Lung Kong Property in June and July 2011. If he was there to visit his friend only, there would be no reason for the delivery notes of the decoration materials and the furniture to be addressed in his name as customer. There is now produced and shown to me marked “KY-6” a copy of 3 deliver notes numbers 003776, 003777 and 003782 in respect of the Lung Kong Property.

16. After the Petitioner and his cohabitant the said Ms Man Mei Or had moved from the Fumin Property to the Lung Kong Property, he then arranged for redecoration of the Fumin Property and put the same on the market. There is now produced and shown to me marked “KY-7” a copy of deliver note numbers 0005524 dated 11 August 2011 in respect of the Fumin Property. Again, if the Petitioner was not the beneficial owner of the Fumin Property, there should be no reason for the delivery note of the decoration materials and the furniture to be addressed in his name as customer. In fact in or about October 2011, I pretended to be an intended purchaser and visited the Fumin Property through the introduction of a property agent in Shenzhen. During the visit, I found some personal belongings of the Petitioner still inside the property.”

67. The document marked “KY-7” [B/287] referred to above shows a delivery note issued by a building materials supplying company by the name of “深圳市星華衛浴” dated 11 August 2011 to a customer Mr. Lau (the same surname of the Husband) of Fumin for the delivery of what appear to be materials for decorating a bathroom and the labour charges for installing a toilet and a shower cubicle.

68. The other 3 delivery notes marked “KY-6” appear to be issued by a different shop but its name was not apparent, and were dated slightly earlier on 13 and 23 of June and 4 of July 2011 respectively but all referred to an incomplete address in the same building of the Lung Kong Property and again to a Mr Lau whom the Wife believes to mean the Husband, and similarly set out quotations for various building materials to be delivered with charges for installations and renovation as in the case of the one under “KY-7” above.    

69. The Wife’s evidence over these documents is that at that time after learning that the Husband was cohabiting with his girlfriend at the Fumin Property but was putting it in the market through an estate agent, she together with a female friend therefore pretended to be potential customers and asked to view the property, and when they were accompanied by the agent to the said property, she recognised some of the clothing and personal belongings of the Husband there as well as those delivery notes stashed together on his desk, which she then secretly took with her and later brought to the shop in respect of the 1^st delivery note pretending to be a neighbour of the Fumin Property wishing to hire the same decorator then renovating that property and asked the shop staff to help her to contact the owner, and when the staff telephoned the Husband in her presence, he disclosed his address at the Lung Kong Property, and that was how she discovered where he was moving to, and when she later attended at the Lung Kong Property, she also noticed that it was being renovated by some workers as the door was then left open.

70. According to the Wife this renovation work in the Lung Kong Property was in line with those detailed in those 3 other delivery notes marked “KY-6” [B/283 – 285] which were dated respectively 13^th and 23^rd of June and 4^th July 2011 as they all referred to the same address of that property and same customer with the same surname of the Husband, and which similarly set out quotations for various building materials to be delivered and charges for installations and renovation as in the case of the note marked “KY-7” but were much more substantial.

71. The Husband of course denies to have anything to do with either property or any of the delivery notes in his affirmations, but his evidence at the trial on these issues appeared to me at best scanty and at worst downright evasive, and eventually he conceded under cross-examination by the Wife that he was indeed the same Mr. Lau referred to in the 1^st delivery note in respect of the Fumin Property but that he was merely taking delivery on behalf of his said relative, and maintained his case to have nothing to do with the other 3 delivery notes in respect of the Lung Kong Property which he suggested were probably fabricated by the Wife.

72. This is of course denied by the Wife who insisted that she would not know how even if she had wanted to, and having seen and heard her for days in court in evidence, she simply does not impress to me of someone with the knowhow or sophistication to be able to fabricate these delivery notes by including all those various items of building materials and different types of renovations of which I have earlier described against the Husband in these proceedings. Besides, if she did indeed fabricate these notes in support of her case that he was the beneficial owner of the Lung Kong Property, and was clever enough to make up all those different items on the notes, it does not make any sense for her to just put down the name of Mr. Lau as the customer thereby allowing the Husband the opportunity to argue that it was neither here nor there as he did in his affirmation, rather than putting down his full name to make sure that he and nobody else would be so implicated. These notes certainly look genuine to me, and I have great difficulty accepting that they were forged or fabricated by the Wife for use against him as suggested by the Husband.

73. Of course the facts that these delivery notes are genuine and that the Husband was indeed the person stated as the customer do not necessarily follow that he must therefore be the owner of the property referred therein, as he could very well be just a tenant since it is not uncommon for a tenant of a rented apartment to want to purchase his own furniture and for them to be delivered to that apartment, and sometimes even to carry out some minor renovations to the apartment with the landlord’s permission, but clearly that is not the case of the Husband.

74. As noted above, the Husband’s evidence in respect of the Fumin Property is that he was merely there keeping an eye thereof for his relative while it was being decorated. It has never been his case that those items in the delivery note marked “KY-6” were for his own use, which bags the obvious question of why was it stated that they were to be delivered to him in the note if he was neither the owner nor the tenant? There was simply no convincing explanation from him.

75. As for his alleged connection with the Lung Kong Property, the Husband’s case appears even more suspicious as while he claimed in his affirmations that it belong to a friend Mr. Tze and that he had only visited him there a few times, he appeared rather vain and evasive while under cross-examination about those visits to the extent of confessing that he was not even sure that he had actually been to that particular property as he could no longer remember the exact address of his friend, while claiming that it was in the same building of the said Lung Kong Property, which seems suspicious to me and bags the even more obvious question that if he had never lived there, why then was his surname so stated in all 3 delivered notes for the said property and which were found amongst his belongings at the Fumin Property? 

76. It is noted that the Husband has always claimed to be residing in a rented apartment elsewhere at Fuk Tin District in Shenzhen at that time and has produced a copy of the tenancy agreement as evidence [B/188], but that agreement shows that the tenancy was to expire on 31^st July 2011, and while he did explain at the trial that his tenancy had since been extended without signing another agreement, the fact that the expiration of his tenancy happened at the same time of his move to the Lung Kong Property alleged by the Wife seems to me just too much of a coincidence when considered together with all the other evidence before the court.

77. If indeed the Husband had moved to the Lung Kong Property at that time, again as noted above one could argue that he was just a tenant rather than its beneficial owner, as after all that property was also not registered in his name, in which case it would be relevant to look into the kind of furnishing and renovations in more details as set out in those 3 delivery notes to see if they would fit consistently with that scenario.

78. While it is true that some of the items on those notes include moveable fixtures and furniture such as shower curtains or portable wardrobes that a tenant may be entitled to install for his own use in his rented premises, but there were clearly also many other items that were of the nature of structural alterations that normally only the property owner is entitled to do, such as altering the bathroom tiles or the floors, changing the doors, installing fixed wardrobes and so on, and hence I fail to see how the Husband in this case would be allowed to carry out those renovation to the Lung Kong Property if he was indeed merely a tenant.

79. His case of course does not even suggest that he was a tenant of the property, and that unlike the Fumin Property in which he claims to be assisting his relative with its renovation, with the Lung Kong Property he was merely visiting his friend there, which brings me back to those delivery notes of which he has conceded that the one relating to the Fumin Property was genuine and that he was the person named therein, henceforth if I were to accept the Wife’s evidence of how she came to obtain the other 3 delivery notes relating to the Lung Kong Property, and I see no reason why I should not in view of the evidence referred to above, the only logical conclusion that I can come to in the circumstances is that indeed the Husband was also the person named in those 3 delivery notes relating to the Lung Kong Property, in which case the Wife is entitled in my view to ask the court to draw adverse inferences against him that he was indeed the beneficial owner to be so entitled to carry out that kind of renovations to that Property, and that he had concealed his such interest with the intention to mislead her and the court.

80. After all, the Husband certainly had had plenty of motives to do so since his said settlement meeting with the Wife in 2009 when she allegedly changed her mind after receiving RMB500,000 and demanded more money from him, it became crystal clear to him that she would pursue her such claims when he went ahead with his divorce, thereby providing him sufficient time and opportunity to arrange for any future acquisition of assets such as those said properties to be so concealed from the Wife to avoid her claims including putting them in the name of a trustee or nominee.  

81. Ms Wong for the Husband has casted doubt on the Wife’s evidence for her failing to produce any photos of either properties. I fail to see their relevancy to the issue over the Husband’s possible interest in those properties. Ms Wong also submits that even taking the Wife’s case at the highest in respect of the Lung Kong Property, her evidence could only show that the Husband had once lived there at the material times, and that there is no evidence to prove that he did own the property legally or beneficially, nor is there proper evidence of its value, as the document relied on by the Wife [B/290] purportedly valuing the property at RMB860,000 is so inadequate without stating even the full address of the property or the name or expertise of the maker that it is of no evidential value.

82. While I agree that the document relied on by the Wife may have fallen short of a proper expert report to be accepted unreservedly as to the true value of the property, which would however be difficult if not impossible for her to do so without proper access to its interior given the Husband’s denial of any connection with the property, but any unfairness occasioned by the court’s necessarily imprecise assessment of the extent of the Husband’s interest in that property as a result of his failure to make proper disclosure should fall on him as the defaulting party rather than the innocent party, as has been held as a proper approach in various authorities, starting with the classic passage in J v J [1955] P215:

“ … the obligation of the husband in maintenance proceedings is to be full, frank and clear in his disclosure of his means to the court, and any shortcomings in this respect can and normally should be visited at least by the court drawing inference against him on matters the subject of shortcomings.”

83. In the more recent case of F v F [1994] 1 FLR 359, where the husband was held to have deliberately failed to disclose his assets including those located abroad, and that his explanation of his financial position was fundamentally implausible, Thorpe J (as he then was) ordered him to pay a lump sum to his wife which was well beyond his disclosed means, and explained his reasons at 367C:

“So if he has conducted his affairs throughout the marriage in such a covert fashion as to relieve him of the ordinary obligations of citizenship to support the State through tax contribution, if he has conducted these proceedings in a vain endeavour to maintain that camouflage, if in consequence the obscurity of my final vision results in an order that is unfair to him it is better that than that I should be drawn into making an order that is unfair to the wife. If at the end of this case he feels that the lump sum that I order is unfair in reflection of his present entrenchment then he should remember that he has brought that consequence upon himself by the fashion in which he has chosen to arrange his affairs over the course of the last decade, coupled with the fashion in which he has chosen to conduct these proceedings.”

84. These principles were endorsed by the Court of Appeal in Baker v Baker [1995] 2 FLR 829 when it held that the trial judge was entitled to draw adverse inference against the husband and the standard of proof in a case of material non-disclosure was alleged was the ordinary balance of probabilities, as propounded by Butler-Sloss LJ (as she then was) at 831E:

“Burden of proof

The powers to make orders for financial provision and property adjustment following a divorce are conferred on the judge or district judge solely by statue. The statutory framework is contained within the Matrimonial Causes Act 1973 (see s 25(2)) and the Family Proceedings Rules 1991 (see rr 2.58(3) and 2.63). Special considerations apply to the exercise of this discretionary jurisdiction. Although the burden of proof is upon the applicant to prove his or her case, it is for the respondent to the application to provide to the applicant and to the court all the relevant information. As Lord Brandon of Oakbrook said in his speech in Jenkins v Liversey (Formerly Jenkins) [1985] AC 424, sub nom Liversey (Formerly Jenkins) v Jenkins [1985] FLR 813, unless a court is provided with correct, complete and up-to-date information on the matters to which, under s 25, it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that subsection, and each party to an application under the Act owes a duty to the court to make full and frank disclosure of all material facts to the other party and to the court. He said at pp 438 and 823C respectively:

‘This principle of full and frank disclosure in proceedings of this kind has long been recognised and enforced as a matter of practice. The legal basis of that principle, and the jurisdiction for it, are to be found in the statutory provisions to which I have referred.’

Particular problems arise in cases where one party has deliberately failed or refused to provide the material facts and has concealed from the other party and the court his true financial position. In such a case, J v J [1955] P215, Sach J said at p 227:

‘In cases of this kind, where the duty of disclosure comes to lie upon the husband; where a husband has – and his wife has not – detailed knowledge of his complex affairs; where a husband is fully capable of explaining, and has the opportunity to explain, those affairs, and where he seeks to minimise the wife’s claim, that husband can hardly complain if, when he leaves gaps in the court’s knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap in such a state that two alternative inferences may be drawn, the court will normally draw the less favourable inference – especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative.’

And at p 229:

‘ … it is as well to state expressively something which underlies the procedure by which husbands are required in such proceedings to disclose their means to the court. Whether that disclosure is by affidavit of facts, by affidavit of documents or by evidence on oath (not least when that evidence is led by those representing the husband) the obligation of the husband is to be full, frank and clear in that disclosure. Any shortcomings of the husband from the requisite standard can and normally should be visited at least by the court drawing inferences against the husband on matters the subject of the shortcomings – insofar as such inferences can properly be drawn.’

Those passages set out the principles upon which the court have for over 40 years approached the cases in which a spouse (not nowadays necessarily a husband) has been found to have lied and to have been guilty of material non-disclosure of relevant financial information in an ancillary relief application by the other spouse. In many decisions, reported and unreported, judges and district judges have applied those principles and drawn, where appropriate, adverse inferences from the deliberate failure of a party to give the court an accurate and complete picture of his true financial position.”  

85. Otton LJ sitting in the same court agreed that failure of such duty to make full and frank disclosure would severely undermine the integrity of the legal process at p837B:

“ … I wish to add a passage only by way of emphasis. Under statue and from authority … there is a duty upon a party in proceedings such as these to make a full and frank disclosure of all matters relevant to the assessment of the financial position of the parties and the relief to which a spouse is entitled. The integrity of the legal process would be severely undermined if a party were permitted (and seen to be permitted) to evade that duty by a deliberate and stubborn refusal to make such disclosure to the other party and, more important, to the court.”

86. Butler-Sloss LJ then went on to state the standard of proof to be applied to such cases of material non-disclosure at p833D:

“Mr Posnansky QC, for the wife, reminded us of the correct approach to this type of application, where the husband has deliberately failed to disclose his assets. These cases are far removed from the line of cases such as Bater v Bater [1951] P 35; Hornal v Neuberger Products Ltd [1957] 1 QB 247; Re W (Minors) (Sexual Abuse: Standard of Proof) [1994] 1 FLR 419 per Balcombe LJ at p 424. In Bater v Bater, an allegation of cruelty by a wife, Denning LJ said at p 37:

‘As Best CJ and many other great judges have said “in proportion as the crime is enormous, so ought the proof to be clear”. So also in civil cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject matter. A civil court, when considering a charge of fraud, will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature, but still it does require a degree of probability which is commensurate with the occasion. Likewise a divorce court should require a degree of probability which is proportionate to the subject matter.’

This principle applies across the field of civil litigation. It has been applied in family cases in particular to allegations of physical and sexual abuse and abuse of the process of the court. In F v F (Divorce: Insolvency: Annulment of bankruptcy Order) [1994] 1 FLR 359, Thorpe J found that a husband had obtained a bankruptcy order on his own petition which presented a false picture of his financial circumstances. The judge set aside the bankruptcy order and said at p 366F:

‘The finding that I make that the order must be rescinded involves inferentially a finding of deceitful presentation on the part of the husband. … The standard is one that augments with the gravity of the finding, so that even on the application of the civil balance of probability it is to a high standard that I must be satisfied in order to reflect the gravity of the stain on the husband’s integrity. I am certainly satisfied to that standard …’

Thorpe J then reviewed the financial resources of the husband. In doing so he directed himself:

‘Now, as I approach this operation I make it plain that I am by no means satisfied to that same high standard as to the existence of this or that asset.’

I respectfully agree with the distinction drawn by Thorpe J as to the standard of proof required to prove an abuse of the process by improperly obtaining a bankruptcy order and that required to infer the existence and amount of assets which a spouse declines to reveal to the court. The latter, an all too familiar situation in family disputes, is reprehensible but not in the same class of cases as the former. The husband in this appeal was not accused of fraud and Ward J evaluated his assets on a balance of probabilities and cannot be faulted for so doing.” 

87. Her Ladyship continued at 835D:

“Mr Posnansky pointed to an utterly false case and asked us to consider why the husband was lying and what did he have to hide. If the cupboard was bare, it was in his interests to open it and display its meagre contents. But on the contrary, the husband, despite his protestations to the contrary, continued to live the life of an affluent man. I agree while the submissions from Mr Posnansky that if a court finds that the husband has lied about his means, lied about other material issues, withheld documents, and failed to give full and frank disclosure, it is open to the court to find that beneath the false presentation, and the reasons for it, are undisclosed assets. Willmer LJ said in Payne v Payne [1968] 1 WLR 390, at 396:

‘In such circumstances it is well established that the court is entitled to draw inferences adverse to a husband who has not made a proper disclosure of his available resources.’

The judge carefully considered the relevant criteria set out in s 25(2) of the Matrimonial causes Act 1973, including the shortness of the marriage. In my judgment, there was ample evidence upon which the judge was entitled to draw inferences adverse to the husband and to make findings that there were assets available to meet the order he made. To accept Mr Holman’s alternative proposition that, unless the assets can be shown positively to be available an order cannot be made, flies in the face of the principles enunciated in the judgment of Sach J and would send a clear message to spouses unwilling to make full and frank disclosure. It would indeed, as Mr Posnansky said, be a cheat’s charter …”  

88. These principles were applied in the case of Al-Khatib v Masry [2002] 1 FLR 1053, where it was held that there was a compelling case for drawing adverse inference against the husband in the light of his utterly misrepresentative and untruthful disclosure of his means even at trial, with the very substantial scale of his concealment and deceit, and the court’s inability in the absence of corroboration to accept as the truth anything that the husband said unless it was either an admission or otherwise contrary to his interests, the court would draw the inference that the husband had sufficient assets to satisfy the wife’s claim as it was entitled to do so from the evidence before it, as Mumby J said at §89:

“I accept, of course, that part of Mr Deacon’s submission, based on the passage from Butler-Sloss LJ’s judgment (in Baker v Baker above), to the effect that I can properly draw adverse inferences only if there is some proper basis for them in findings of fact correctly arrived at in the light of admissible evidence. I reject, however, Mr Deacon’s further submission that, even if there is proven non-disclosure, inferences as to the existence of ‘must be based on credible evidence as to the existence of such assets.’ That submission, if I have correctly understood it, seems to be in reality but a repetition of the submission from Mr Holman (as he then was) which Butler-Sloss LJ was at such pains to reject. Indeed, put in these terms Mr Deacon’s submission seems to me, with all due respect to him, to fly in the face of the Lady Justice’s acceptance in the passage quoted that ‘it is open to the court to find that beneath the false presentation, and the reasons for it, are undisclosed assets’.”

89. I respectfully agree with the standard of proof required to infer the existence and amount of assets which a spouse in ancillary relief proceedings fails or declines to reveal to the court as enunciated in those passages referred to above, which is on a balance of probabilities, and it is on that basis that I agree that adverse inference should be drawn against the Husband that given his failure to fully and frankly disclose his interests in the said Fumin Property and Lung Kong Property, these properties must indeed be of significant value and may probably be worth as much as what the Wife has alleged at more than RMB2.6 million combined if not more. If their net value were indeed significantly less or that he was interested in only one of them, then the Husband only has himself to blame for failing to come forward with the whole truth about these properties.

90. I note that Ms Wong for the Husband has in her closing submission also referred to a few more issues such as the proceeds of sale of another property sold back in 2004 or certain debts incurred by the parties during the marriage, which were never properly raised at the trial and are in my view exactly the kind of issues which the Court of Final Appeal in LKW supra said the court should not countenance any attempt to engage as either irrelevant or of no benefits to its determination of the parties’ disputes.

91. Having now resolved all the major factual issues between the parties, I shall now return to their respective open proposals and to consider them together with the section 7 enquires, which is relatively more straightforward and essentially boil down to how the parties’ needs can be met with the identified assets so that fairness between them can ultimately be achieved.  

Section 7 Enquiries

92. On the basis of my findings above, the only asset of substance that the Wife still has is her half-share in the former matrimonial home, as what remains, if any, of her savings including the said sum of RMB500,000, the sale proceeds of her car and her insurance policies, as noted above of insignificant or irrelevant value. Her proposal for the transfer of the former matrimonial home to her sole name free of mortgage and for monthly maintenance of HK$8,000 for herself are essentially on the basis that she needs her own accommodation after the divorce, and that since she had been wholly dependent on the Husband without any employment throughout most of the marriage, she would also require his financial support to continue. As for the daughter’s maintenance, it seems it is no longer relevant as I understand she should be graduating from university this summer.

93. While there is no serious dispute that during the early stage of the marriage when the son was small, the Wife was essentially a housewife and was never required to seek any employment, and that although I have rejected the Husband’s case that she has been running an aquarium business, there was that episode that she did work albeit for only a brief period in about 2004 in Hong Kong that got she arrested and returned to Shenzhen shortly afterwards, I accept that it is not necessarily the case that she has absolutely no earning capacity, and at her present age and no longer burdened by any childcare, she is clearly capable of some sort of employment such as working in a restaurant as she used to before the marriage, albeit at limited income of say a few thousand dollars per month only.   

94. As noted above she had put her monthly expenses for her household and personal at over HK$15,000 in her Form E, but that included her then rental expenses of HK$4,300 for the apartment in Hong Kong which is no longer relevant, hence if she is to remain residing in the former matrimonial home in Shenzhen, essentially her future needs would amount to just about HK$11,000 per month, and when she instead only asked for HK$8,000 in her proposal, I assume because she could either cut down further on her expenses, or more likely because she intended to go back to work to supplement her income.

95. At either rate I believe it would be well within the Husband’s means to pay, as even according to the 2012 audited account of his business, the net profit for that year of HK$118,174 together with his director’s remuneration of HK$180,000 would have provided him with a monthly income of almost HK$25,000, and that was before discounting the item of depreciation of HK$162,608 which would have given him an additional cash of HK$13,550 per month, bringing his total possible income to more than HK$38,000 per month, which is clearly more than enough to meet the Wife’s claim for her maintenance as well as his own needs and expenses as set out in his Form E at only HK$12,000 per month after discounting his then maintenance payment for the son.

96. I accept that some of these figures actually go back 1 – 2 years ago or even earlier and may not be entirely up-today, but it is the parties who have chosen to present their case as they were, upon which the court can only do so much to carry out its assessments. In any event there was never any suggestion by either side at the trial of any substantial or significant change to their respective financial situation since that time.

97. Given the fact that this marriage had lasted some 13 years during which it is not disputed both parties had discharged their respective duties towards the marriage and the family, with the Wife as the home maker and child-carer and the Husband as the money-earner and breadwinner, which explains why he has proposed equal-sharing with the Wife of their marital assets even though all of which were no doubt acquired through his means.

98. However, this seems to me more a case about meeting the needs of the parties in particularly of the Wife upon their divorce rather than a mere straightforward case of equal sharing of marital assets, as the Husband’s open proposal of selling the former matrimonial home and paying 55% of its sale proceeds to the Wife to which even if the said sum of RMB500,000 are to be added back would only provide her with a total sum of HK$2.5 million without any periodical maintenance as a clean break, which is clearly insufficient to meet her future needs including housing for the next 40+ years even without the assistance of any Duxbury calculation. Given my findings of the Wife’s very limited earning capacity and that most if not all of the said sum of RMB500,000 should have by now been depleted, this proposal of the Husband is plainly unrealistic and unworkable.

99. Similarly, nor is his alternative proposal of giving the Wife 50% of the sale proceeds of the former matrimonial home plus RMB80,000 in settling her claim against his interest in the Danshui Property capable of meeting her needs, while his remaining other proposal to throw in a monthly sum of HK$4,000 for her provided that she shall repay to him RMB250,000 being half of the said sum is equally unworkable in view of my finding that she no longer has that sum or other means to do so, nor do I think it is a fair proposal under the circumstances.

100. There is no question in my mind that the Husband at 51 will be able to meet his own living expenses by continue running his transportation business for years to come, and even when he becomes too old to do the driving himself, he can still hire other drivers to operate his trucks, as he had always done before, while his housing need would have been catered for by the said Lung Kong Property even before taking into account of his interest in the Danshui Property or the Fumin Property.

101. In the circumstances it is in my view not only necessary but also fair for the Wife’s housing needs be met by allowing her to keep the former matrimonial home for herself, and while I accept that the Husband may not be able to pay off the outstanding mortgage in one go as requested by the Wife, I have no doubt that he can and should continue to pay off the outstanding mortgage by monthly instalments which may have only a couple more years, and to pay her periodical maintenance albeit not necessarily at the rate of her requested amount of HK$8,000 but instead at HK$5,000 per month as she should be able to find a job to help pay her living expenses.

102. While this may appear that the Wife would be getting the most valuable item of their marital acquests, the fact that the Husband gets to keep the bulk of his income and profits from his business and his said other properties some of which he had tried to conceal from the court and hence their true value are never known and for which he was no doubt entirely to blame, but even on the Wife’s rough estimation and by drawing inference adversely against him in respect of those 2 properties, the Husband’s share of the remaining assets cannot in my estimation be less than what the Wife is to get, and may in fact probably be more.     

Conclusion

103. In conclusion and for all the reasons discussed above, I am convinced that fairness between the parties would be achieved by having the former matrimonial home transferred to the Wife upon the discharge of the existing mortgage by the Husband who is to continue to be responsible for its monthly instalment until its full discharge, while he is to keep the rest of the assets in full and final settlement of all their financial claims against each other save and except for the Wife’s claim for periodical payment, for which the Husband shall pay her a monthly sum of HK$5,000 to meet her future living expenses.

104. Lastly, while the Wife may not have been wholly successful with all her claims, she clearly is on most of the issues in particularly over the Husband’s hidden assets as well as her claim over the former matrimonial home, and although she was unrepresented during the trial, there is no question that she had incurred legal costs up to then, hence costs should follow the event in her favour.  

105. Accordingly, my order is as follows:

(a)  The Petitioner shall continue to pay for  the monthly instalment of the existing mortgage of the former matrimonial home until its discharge whereupon he shall transfer his share and interest in the property to the Respondent at his costs and expenses;

(b)  Save for (c) below the above term shall be in full and final settlement of all other claims of the parties for ancillary relief against each other which claims  shall stand dismissed;

(c)  The Petitioner shall pay the Respondent periodical payment at the rate of HK$5,000 per month for her maintenance commencing 1^st August 2014 and thereafter on the first day of each month until she dies or remarries, or until further order;

(d)  The Petitioner shall pay the Respondent costs of and incidental to the ancillary relief proceedings to be taxed if not agreed. This is a order nisi to be made absolute at the expiration of 14 days.