SPY v. KYH by guardian ad litem, KWOK IAN CHIN YEUNG

FCMC 7988/2007

[2023] HKFC 214

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 7988 OF 2007

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

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Introduction

1.  This is the trial of the parties’ claims for ancillary relief. 

2.  The petitioner will be referred to as “Wife” whilst the respondent as “Husband” below.

3.  Pursuant to the Order made by Recorder Stewart Wong SC on 29 March 2021 in HCA No. 579 of 2017^[1], in which the Wife is the plaintiff and the Husband is the defendant, the Consent Order (as defined below) be set aside and there be a hearing de novo of the plaintiff’s application for ancillary relief in the Family Court, together with costs of the action to be paid by the defendant to the plaintiff, to be taxed if not agreed, and in so far as necessary and applicable, the plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations (as the plaintiff had at one time, but not now, legal aid).  The plaintiff’s claim for damages is adjourned sine die with liberty to restore.

Background

4.  The parties got married in July 1987.  The Husband is now 78 years old and the Wife is 72 years old.  They have two children of the family who was born in 1990 and 1991 respectively, now over 18 years old and self-supported.

5.  The Wife commenced the divorce proceedings in the Family Court on the ground of 2-year separation in July 2007.  It is a long marriage of about 20 years.

6.  On 13 November 2007, Deputy District Judge Kot (as she then was) made an order by consent (“Consent Order”), pursuant to a Consent Summons dated 13 August 2007 filed in these proceedings, in the following terms:

“The Judge upon the making of the Decree Nisi herein ordered by consent that there be no order as to costs for the suit including the application by way of the Consent Summons dated 13^th August 2007 save that the Petitioner’s own costs be taxed in accordance with the Legal Aid Regulations.

UPON the Respondent undertaking to the Court that he shall move out from the [matrimonial home] which is jointly owned by the Petitioner and the Respondent latest on 31^st December 2007.

AND UPON the Petitioner undertaking to the Court that she shall be responsible for repayment of the existing mortgage loan in respect of the matrimonial home until full repayment.

AND UPON the Petitioner and the Respondent agreeing and undertaking to the Court that (i) they shall jointly sell the matrimonial home 10 years immediately after the date of the pronouncement of the Decree Absolute at the then market price or at any time and such price as the Petitioner and the Respondent may mutually agree and (ii) half of the sale proceeds (after deducting therefrom the related legal costs and disbursements) without deducting therefrom the balance then outstanding of the said mortgage loan shall be paid to the Respondent and the other half of the said sale proceeds after repayment of the then outstanding mortgage loan shall be paid to the Petitioner.

The Judge by consent ordered that the custody of the children of the family … be granted to the Petitioner with reasonable access to the Respondent …”.

7.  Decree Absolute was pronounced on 8 January 2008.

8.  As per the aforesaid Order made by Recorder Stewart Wong SC, the Wife restored the claims for ancillary relief in the Family Court in June 2021.

9.  Subsequently, unknown to the Wife, the Husband was diagnosed with advanced dementia and Parkinson disease at least since May 2017 and becomes a mentally incapacitated person^[2].  The younger son of the parties took out an application for appointment of guardian ad litem for the Husband in these proceedings.  By consent of the parties, I made an order for appointment of the younger son as guardian ad litem for the Husband (“GAL”) on 16 August 2022.

10.  On 15 November 2022, GAL filed a Notice to Act in Person in place of his then solicitors, Gary Tam & Co. stating the address of the Matrimonial Home^[3] as his address for service and failed to appear at the pre-trial reviews on 15 May 2023 and 4 September 2023 as well as the trial on both 10 and 11 October 2023.

11.  The Wife has served all documents at the address of the Matrimonial Home and the email address of GAL.

The relevant legal principles and approach

12.  The Court's jurisdiction in making an order for periodical payments, lump sum and sale of property is founded on sections 4, 6 and 6A of the Matrimonial Property and Procedure Ordinance (“MPPO”), in particular section 6(l)(e) provides:

"(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation, or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of sections 10 and 25(1), make any one or more of the following orders, that is to say-

…..

(e) an order for the sale of such property, as may be specified in the order, being property in which or in the proceeds of sale of which either party or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion, and for the use of the proceeds of such sale.

….."

13.  The factors to be taken into account by the Court in the exercise of its powers under the above sections are set out in section 7 of the MPPO:

"(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 of 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.”

14.  In LKW v DD (2010) 13 HKCFAR 537, after considering the line of English authorities of White v White [2001] 1 AC 596; Miller vMiller and McFarlene v McFarlene [2006] 2 AC 618, the Court of Final Appeal (“CFA”) has given a detailed discussion on how a Hong Kong court should approach the issue of ancillary relief. A brief summary is as follows:

(1)  The previous Hong Kong Court of Appeal decision in C v C [1990] 2 HKLR 183 should be overruled. In other words, the principle of "reasonable requirements" should no longer be followed;

(2)  When the court exercises its discretionary powers under section 7 of the MPPO, guidance may properly be sought from the White v White line of cases;

(3)  Financial provision applications are highly fact-sensitive and judges dealing with them must ultimately be guided by section 7 of the MPPO and the implicit aim of arriving at a fair financial outcome as between the parties;

(4)  In most cases, the available assets are usually not sufficient to cater for the needs of both parties so that the exercise does not progress beyond consideration of their needs;

(5)  On how section 7 of the MPPO should be approached, the CFA identified four principles underpinning the White v White line of cases:

(a) The first principle - objective of fairness.  The implicit objective of a section 7 exercise is to arrive at a fair distribution of the assets as between the parties;

(b) The second principle - Rejection of discrimination.   The concept of fairness requires the refutation of any gender or role discrimination;

(c) The third principle - yardstick of equal division: 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;

(d) The fourth principle - rejection of minute retrospective investigation: The court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tends to deplete the parties' (and the court's) resources and to increase antagonism and discourage settlement;

(6)  The actual steps to be taken by a court in undertaking the section 7 exercise are as follows:

(a) Step 1: identifying Assets:

The ascertainment of the financial resources of each of the parties calculated as at the date of the hearing.

"The object will of course compute the net financial resources, taking into account of all material liabilities. At this stage, the court need not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets."

(b) Step 2: Assessing the parties' financial needs:

The assessment of the parties' financial needs. If the total resources are not enough to meet the parties' needs, the section 7 exercise should stop here and there is no room to apply any sharing principle;

(c) Step 3: deciding to apply the sharing principle:

If surplus assets would remain after the parties' needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties' total assets, with a yardstick of equal division as part of that principle. This means that the total assets should be divided equally between the parties unless there is good reason for departing from an equal division;

(d) Step 4: Considering whether there are good reasons for departing from equal division:

In considering whether good reasons exist for departing from equal division, the answer is to be found in the terms of section 7 and the implicit objective of a fair distribution of the assets. Factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations; and

(e) Step 5: Deciding the Outcome:

The question as to whether factors exist justifying a departure from equality is fact-sensitive and the weight to be given to such factors remains a discretion for the court. But where the court decides upon a departure, articulation of reasons for doing so is necessary as a check to ensure fairness of the outcome.

15.  I would follow the guidelines laid down in LKW’s case and discuss the relevant matters as mentioned in section 7 of the MPPO below.

Standard of living

16.  The parties purchased a property situate at Room 207, Block 31, Heng Fa Chuen, Chai Wan, HK (“Matrimonial Home”) in joint name at the price of $2,368,000 in October 1995.  During the marriage, the parties with the children were living in the Matrimonial Home of about 580 sq ft, hiring a domestic helper and having holidays 1 to 2 times a year within the region and abroad.  The children finished studying in the local secondary school and universities in Hong Kong.

17.  The Husband was responsible for payment of mortgage of the Matrimonial Home whereas the Wife paid the other expenses of the family.

18.  I consider that the standard of living of the parties before separation can be regarded as middle class level.

Husband’s income and earning capacity

19.  According to his Form E dated 15 April 2011, he had been retired and claimed unemployed since 2004.  At that time, he declared that apart from the interest in the Matrimonial Home, he had the assets valued in the total sum of about $2,075,000 including the 2 properties in the PRC.  Before retirement, his monthly income was about $18,000 according to the employment certificate issued by the Dao Heng Bank Ltd on 14 November 1994.  He also had the rental income from these 2 PRC properties.

20.  Despite of my various orders, GAL failed to file and serve the updated Form E of the Husband.  As the Husband is a mentally incapacitated person, I am satisfied that he has no income and earning capacity.  Nonetheless, GAL still has the duty to make full and frank disclosure of the Husband’s assets up to date.  In view of his breach, the court is entitled to draw adverse inference against the Husband.

Wife’s income and earning capacity

21.  According to the Wife’s Form E dated 20 December 2021, she has very little income working as a part-time tutor.  She has to borrow money from the bank and other people to maintain her living and other expenses of the Matrimonial Home.

22.  She rented out the Matrimonial Home at about $17,000 per month since 2014 but she said that it is always difficult to find a tenant as the Husband is also one of the joint owner and refuses to sign the lease.

Step 1: Identifying Assets

23.  The main asset of the parties is the Matrimonial Home.  According to the online valuation from various banks recently conducted by the Wife, its market value is between $6.85 million to $6.87 million.

24.  One of the PRC properties owned by the Husband had been sold in 2014 in the sum of about RMB660,000.  GAL has failed to account the whereabouts of the sales proceeds.

25.  According to the Husband’s Form E dated 15 April 2011, he owned another PRC property in Dongguan, value of which was estimated at about RMB180,000 at that time.  GAL also failed to update the value of this PRC property owned by the Husband and the rental income, if any.

26.  According to the Wife’s Form E dated 20 December 2021, she has no substantial assets save as to the Matrimonial Home but she owes a number of huge debts including the legal costs^[4] in the total sum of over $6.5 million.  I am satisfied that it is necessary for the Wife to keep borrowing money for the purpose of maintaining the children and her expenses as the Husband has failed to pay any maintenance to her or make any contribution to the mortgage instalments of the Matrimonial Home since their separation.  GAL has not filed any evidence or affirmation to challenge the Wife’s evidence.

Step 2: Assessing the parties' financial needs

27.  In my view, the Husband owns the assets of at least $2 million in value and the court is further entitled to draw adverse inference against him due to his failure to file his updated Form E as ordered.  GAL also unreasonably refuse to reveal or inform the Wife and the court of the current health condition of the Husband.  According to the 3rd affirmation of GAL, the Husband was no longer residing at Mie King Home For Aged since August 2022 and it was not clear if the Husband is still staying in the hospital.  Hence, I have to come to the conclusion that the Husband has owned sufficient assets to satisfy his needs.

28.  On the other hand, the Wife is currently indebted of over $6.5 million.  I consider that her financial needs are much higher than the Husband’s.  In LKW’s judgment, Mr Justice Ribeiro PJ said:

“D.2 The exercise often stops at “needs”

54.  The second point is that in most cases, discussion of the guidelines is superfluous.  Usually, the available assets are insufficient to cater for the needs of both parties after termination of the marriage so that the exercise does not progress beyond consideration of their needs.  As Lord Nicholls put it in Miller/McFarlane:

“In most cases the search for fairness largely begins and ends at this stage. In most cases the available assets are insufficient to provide adequately for the needs of two homes. The court seeks to stretch modest finite resources so far as possible to meet the parties’ needs.”[62]

55.  It is therefore only in cases where surplus assets remain to be distributed after seeing to the parties’ needs that the guidelines may require consideration.  The disposal of simple cases should not be pointlessly complicated by inappropriate attempts to apply such guidelines.”

29.  In the present case, even if the Matrimonial Home be sold, the sale proceeds may not be sufficient to repay the Wife’s debts.  Hence, I find that the available assets of the family are insufficient to cater for the Wife’s needs and no surplus assets remain to be distributed.  In the circumstances, the sharing principle is not applicable.

30.  It was further said in para. 85 of the Judgment in LKW’s case:

“85. It is important to stress that while such factors, individually or cumulatively, are potentially capable of resulting in a departure from an equal division, a finding that one or more of those factors are engaged does not necessarily mean that a departure must occur. The weight to be given to such factors is in the court’s discretion to be exercised in Step 5 as described in Section E.6 below. It cannot be over-emphasised that the matter is fact-specific and discretionary. The sharing principle must not be mechanistically applied.”

31.  In case the court has to consider all the matters listed in paragraphs (a) to (g) of section 7(1) of the MPPO and other relevant factors as mentioned in LKW’s case, I find that the Wife has made much greater contributions to the family, in particular taking care of the children at their young age and the repayment of the mortgage loan of the Matrimonial Home since their separation in about 2005.  These are good reasons for departure from an equal division in favour of the Wife.

Order

32.  In the circumstances, I exercise my discretion and now make an order as follows:

1.  within 3 months from the date of this order, the Matrimonial Home be sold by private agreement in the open market;

2.  all costs of and incidental to the sale of the Matrimonial Home (including but not limited to the outstanding mortgages, charging orders and other lis pendis as registered in the Land Registry, reasonable legal costs, estate agents’ fees and commission, stamp duty and government charges, if any) shall be first deducted from the proceeds of sale;

3.  subject to the first charge of the Director of Legal Aid, all balance of the net sale proceeds of the Matrimonial Home, if any, be paid to the petitioner;

4.  the petitioner shall have the conduct of the sale of the Matrimonial Home, including but not limited to appointing or nominating a firm of solicitors and estate agent, if necessary, to represent the respondent in respect of such sale and conveyance;

5.  subject to the compliance with the above, the parties shall retain all the cash and other assets in his or her own name and the parties’ applications for ancillary relief claims against the other do stand dismissed;

6.  liberty to apply for implementation of the above order.

Costs

33.  Regarding the question of costs of the ancillary relief proceedings, I consider that since the parties are unrepresented at the trial of this application, I would exercise my discretion to make no order as to costs including all costs reserved, if any.