LTT v. TTM

FCMC 2679/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 2679 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is a trial on the petitioner wife (hereinafter called “the wife”)’s application for ancillary relief against the respondent husband (hereinafter called “the husband”).

2.  I think it would be helpful if I should set out the parties’ respective request on ancillary relief right at the beginning of this judgment.

The Parties’ Respective Request onAncillary Relief

3.  The wife asked for an order that the husband shall transfer all his interest and title in the property known as a unit at Block M, Kam Tai Court, 33 Ning Tai Road, Shatin, New Territories, Hong Kong (“the former matrimonial home”) to her subject to the existing mortgage, but at nil consideration.  She would not insist on any periodical payments for herself (not even for nominal maintenance) or for the children of the family.

4.  On the other hand, the husband’s open offer is that he would transfer all his interest and title in the former matrimonial home to the wife subject to existing mortgage, but at a consideration of $150,000.

The Main Issue

5.  As one can see from the parties’ respective positions, there is no dispute that the husband shall transfer the former matrimonial home to the wife.  The issue is whether the wife should pay a sum of $150,000 to the husband for the said transfer.

Background

6.   The parties married in 1992.

7.   Within wedlock, 2 children were born and they are:

(1)   The elder son who is now aged 16, a Form 5 student now residing with the wife; and

(2)   The younger son who is now aged 8, a Primary 4 student now also residing with wife.

8.   On 10 March 2009, the wife issued a petition for divorce against the husband based on behaviour and a decree nisi was granted on 19 October 2009.

9.   On 6 August 2009, the parties agreed and so the court ordered that the custody of the 2 children be granted to the wife with reasonable access be granted to the husband.

10.  As to maintenance, the court also granted an order for interim maintenance for the 2 children on 28 October 2009 that the husband should pay a monthly sum of $1,000 (i.e. $500 for each child) towards their interim maintenance beginning on 1 November 2009.  I am given to understand that the husband has only paid for 2 months and stopped thereafter.

11.  As to final maintenance, the parties can not agree on the wife’s ancillary relief application and therefore, the case was adjourned to my court for trial.

The Law on Ancillary Relief

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

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

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

(a) an order that either party to the marriage shall make to the other such periodical payments and for such term as may be specified in the order;
(b) an order that either party to the marriage shall secure to the other to the satisfaction of the court, such periodical payments and for such term as may be so specified;
(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified.

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

(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;
(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments to be secured to the satisfaction of the court. “

13.  Apart from the granting of financial relief, the court has also power to grant a property transfer order or a sale of property order under ss.6 and 6A of MPPO:

“6. Orders for transfer and settlement of property and for variation of settlement in cases of divorce, etc.

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

(a)   an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion;

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(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 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…

6A.   Orders for sale of property

(1)    Where the court makes an order under section 4, 5 or 6 then, on making that order or at any time after the making of that order, the court may make a further 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 or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion.

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Section 7 Considerations

14.  In deciding on how to exercise its power in this regard, the Court is bound to consider Section 7 of MPPOwhichprovides:

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

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

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

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

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

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

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

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

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

(2) Without prejudice to subsection (3), it shall be the duty of the court in deciding whether to exercise its powers under section 5, 6 or 6A in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say-

(a) the financial needs of the child;
(b) the income, earning capacity (if any), property and other financial resources of the child;
(c) any physical or mental disability of the child;
(d) the standard of living enjoyed by the family before the breakdown of the marriage;
(e) the manner in which he was being and in which the parties to the marriage expected him to be educated;

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

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Income, Earning Capacity, Property and other Financial Resources

The Wife’s Situation

15.  According to the Wife, she has been working as an insurance agent for the past few years.  For the year from April 2009 to March 2010, the Wife had an average monthly income of about $18,000.  However, as from April 2010, her average monthly income has been reduced to about $10,000.  She attributed such a decrease to the fact that she has been emotionally disturbed by the present litigation and that she has to take care of the younger son.

16.  After hearing the Wife’s evidence, I accept that her present average monthly income is $10,000 and she is running a monthly deficit in her family budget.   That explains why there is quite a big amount of outstanding utilities bill and management fees.

17.  As to the Wife’s assets, I accept her evidence that she is not holding any valuable assets.  Despite the husband’s allegation that the wife has not disclosed all her assets and income, it is my ruling that the wife is not hiding anything from the court or the husband.

18.  According to her Form E, she has liabilities in the sum of about $30,000 which is mainly made up of credit card debts and outstanding utilities charges.  She said she also owed friends and relatives some other debts which were not stated in her Form E.

The Husband’s Situation

19.  According to the husband, he used to be a jewellery technician for 10 odd years.  In the period between 2002 and 2005, he went to the mainland and opened a jewellery shop in partnership with some relatives.  The said business venture was not successful and it was closed down in 2005. After his return to Hong Kong, he has done other jobs, the last of which was a jewellery salesman with an average monthly salary of $9,000.  That job lasted for 3 years but he was made redundant in December 2009.  He remains unemployed since then and that is why he could not afford to pay the $1,000 interim maintenance for the 2 children. 

20.  Solicitor for the Wife did challenge the husband’s unemployment by saying that he has not used his best endeavours to find employment.  The husband explained that during the last 10 months, he has attended 5 interviews but all did not come to a fruitful result.

21.  In this regard, I take note that the husband is only 42 years of age.  He has extensive experience as a jewellery technician and salesman.  He has 3 years’ experience in running a jewellery business in the mainland.  As to his failure to get employment, I note that the husband has not adduced any evidence of his attempt to find employment and so I have some doubts in this regard. With the background and experience of the Husband, I am prepared to find that he must have some earning capacity.  I am prepared to find that he should at least have earning capacity of $9,000 per month, that is the income of his last job.

Needs, Obligations and Responsibilities

The Wife’s Situation

22.  The wife has set out her monthly expenses at $26,395 in her Form E.  However, according to her evidence in court, since she is now having a much reduced income, she has also tried to lower her monthly expenditure.   She said her monthly expenditure now is about $18,000.  I do not intend to go into a detailed discussion of this figure except by saying that I accept that is her reasonable monthly expenditure, especially after taking into account that she is now paying about $5,000 per month for mortgage repayment, leaving just $13,000 for the maintenance of 3 persons.   Therefore, I also accept that the wife is now having a monthly deficit of about $8,000 which is now covered by loans from the wife’s friends and relatives.

23.  As the custody of the 2 children is now vested with the wife, it is therefore important to make a reasonable assessment on the reasonable needs of the children as well.

24.  According to the wife, the elder child is now aged 16 and is a Form 5 student.  He will proceed to higher education after completing Form 6.  According to the wife, even if the elder child could not enter the local universities, he would still take the IVE course in order to complete his post secondary education. 

25.  In her evidence, the wife said it would take 4 years for the elder son to complete the IVE education and the annual tuition fee would be in the region of about $40,000.  This was being challenged by the husband. 

26.  In this regard, I note that there is no evidence from the wife on the actual tuition costs of the IVE education.  Doing the best as I can, I would assess it at $20,000 per year, and for a period of 3 years only.  As to the other living costs of the elder son, I would assess it at an annual sum of $50,000, i.e. about $4,000 per month.  That would include the elder son’s housing costs, transportation, food, private tuition, extracurricular activities, pocket money, etc.  On this basis, for the coming 2 years of secondary education, the costs for maintaining the elder son would be $100,000 ($50,000 x 2 = $100,000).  That would be enough see him through to the end of his secondary education.  But for his post secondary education, there will be another 3 years with an annual costs of $70,000 ($20,000 for IVE + $50,000 living costs = $70,000).  Three years’ costs would be $210,000.  In other words, it is reasonable to assume that for the elder son to complete his education up to the post secondary level, the total costs to be incurred will be in the region of about $310,000.

27.  As for the costs of maintaining the younger son, I will adopt a lesser figure of $3,000 per month for his living costs, i.e. about $36,000 per annum.  Again, that would be inclusive of everything.  He is now aged 8, approaching 9.  If we just calculate his maintenance up to his attaining the age of 18, there is another 9 years to go.  In other words, there will be another set of living costs for the younger son at $324,000 ($36,000 x 9 = $324,000).  

28.  Therefore, it is my finding that the estimated costs of maintaining the 2 children until they reach the age of 18 years or finish full time education will be in the region of $634,000 ($310,000 + $324,000 = $634,000).

The Husband’s Situation

29.  According to the husband, he is now living with a friend at Mei Foo Sun Chuen.  He said his friend is not charging him any rent and in his Form E, he stated that his monthly expenses are $7,000.  However, when he was being confronted with how he could have made his ends meet for the past 10 months when he was unemployed and without any income, he changed to say that his monthly expenses are less than $1,000.  In any event, it is my assessment that for an adult like the husband, his monthly expenses at $7,000 would not be unreasonable.  Although he is claiming that he is unemployed at the moment, I have already made a finding earlier in this Judgement that the husband should have an earning capacity of about $9,000 per month. Therefore, even if this court should accept he has a monthly need of $7,000 and accept that he may have some further rental costs to be incurred if he should find his own accommodation, it is my view that the husband could still make his ends meet if he should use his best endeavours to find a job.

Standard of Living Enjoyed by the Parties before the Breakdown of the Marriage

30.  This family has been housed in a HOS flat for the past decade or so.  The husband’s business was not successful which had a profound effect on the finance of this household.  There have been difficulties in keeping the mortgage payments and eviction proceedings have been instituted by the mortgagee bank for 3 times already.  Management fees have been in arrears for over a year and the same for the gas bill.  It is clear from the above facts that this family has been struggling in its finances at least for the past few years.

Age and Duration of the Marriage

31.  The wife is now aged 41 and the husband aged 42.

32.  They married in 1992 and separated in 2009.  It is a long marriage of 17 years.

Physical or Mental Disability

33.  There is no evidence to suggest that either party or the children are suffering from any physical or mental disabilities.

Contribution

34.  During the early stages of the marriage, it is not in dispute that both parties have worked and contributed towards the well being of the family.  When the former matrimonial home was purchased, I am satisfied that both parties have contributed to the down payment as well as to the monthly mortgage repayments.  However, after the husband’s unsuccessful business venture in the mainland in the period between 2002 and 2005, I accept that the financial contribution from the husband has been reduced substantially.  Thereafter, the financial burden of the family mainly fell on the shoulders of the wife.  This, together with the fact the wife also has to look after the 2 children of the family, I am satisfied that the wife’s overall contribution to the family is bigger than the husband.

Recent Case Law

35.  The leading Hong Kong authority in ancillary relief application is the case of DD v LKW [2008] HKEC 379.  After a careful and comprehensive consideration of some similar UK cases, Cheung JA said this in paragraph 64 of the judgement:

“On divorce the principle and spirit underlining the union should be reflected in the division of the family assets. The division should proceed on the basis of fairness and this necessarily means there is no room for discrimination between husband and wife. The starting point is equality in division unless there is a good reason to depart from it.”

36.  Apart from giving a detailed discussion on the interaction between the 3 principles of needs, compensation and sharing, His Lordship has also given the following guidance (at paragraph 69 of the Judgment) to Family Court Judges in the determination of future ancillary relief cases:

(1)   In cases where there are only limited financial resources, fairness requires such division of the assets so as to provide for the housing and financial needs of the parties.  In appropriate cases, it may be necessary to augment the available assets by making periodical payment orders.

(2)   If the assets are more than enough to satisfy the parties’ immediate housing and financial needs, there should be equal division unless there is a good reason to the contrary.  This approach is not limited to “big money” cases.

(3)   There should first be a computation of the total family assets.

(4)   The assets should then be divided by reference to the 3 principles of needs, compensation and sharing.

(5)   If there should be any irreconcilable conflicts between these 3 principles, the criterion of fairness is to be applied.

(6)   Such principle of fairness is applicable to both matrimonial and non-matrimonial properties.

(7)   The equal sharing principle should apply to both long and short marriages but in case of short marriage, the non-matrimonial property may be a good reason to depart from equality of division.

(8)   The concept of “special contribution” may be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise.

Ancillary Relief in this Case

37.  As one can see from the above discussion, the main issue here is how to divide up the only asset of the family, that is the former matrimonial home.  As to the value of this asset, it is the agreement of the parties that the net value of the former matrimonial home is $600,000, that is the best available market price of the property minus the premium to be paid to the Housing Authority and the outstanding mortgage.

38.  The former matrimonial home is a flat under the HOS.  Although it was registered in the sole name of the husband, it is clear that the wife, as a spouse in a long marriage and has made substantial contribution both to the acquisition of the property and to the family, is at least entitled to half of the interest in the former matrimonial home.  But it is my view that before we start dividing up the former matrimonial home between the parties, it is important for the court to look at the future maintenance of the children first.

39.  In this regard, I take note of the fact that the future needs of the 2 children amount to a total sum of $634,000.  One can immediately see that the 2 children’s future needs are already more than the net value of the former matrimonial home.  This burden will be shouldered by the wife in the coming 5 to 8 years. 

40.  At one stage, I have been thinking of making a periodical payment order against the husband so that he would contribute a fair share towards the future maintenance of the 2 children, but the fact remains that even for a very modest interim maintenance order at $1,000 per month, he is not in a position to honour it.  Therefore, it is my view that proper provision has to be made from the existing family assets in order to secure the children’s future needs, rather than relying on the periodical payments from the husband.

41.  In the circumstances, I agree with the wife’s proposal that the entirety of the parties’ interest in the former matrimonial home should be given to her, which amounts to $600,000 only.  By this arrangement, at least the wife and the 2 children will have a secured accommodation and if necessary, that accommodation can also be liquidated by a sale in order to raise sufficient funds to provide for the 2 children’s education and daily needs.  There is no reason why a lump sum order of $150,000 should be made against the wife upon the transfer.

42.  In his final submission, solicitor for the wife asked for a nominal maintenance order as well.  However, in her evidence in court, the wife has already indicated that she will not ask for a nominal maintenance order and so no such order will be made.

Conclusion and Order

43.  Based on the above discussion and reasons, I will make the following order:

(1)Subject to the consent of the Housing Authority, the mortgagee bank and subject to the 1^st charge of the Director of Legal Aid, the husband shall transfer all his interest and title in the former matrimonial home to the Wife at nil consideration within 3 months from the granting of the Decree Absolute at the sole costs of the wife.

(2)If the husband shall fail to effect such a transfer of the former matrimonial home in accordance with the above order, the Registrar of the High Court be requested and authorised to sign and execute all the necessary papers on behalf of the husband.

Costs

44.  As the wife has succeeded in her ancillary relief application, she will have the costs of the application, including all costs previously reserved. This will be in the form of an order nisi, to be made absolute upon the expiry of 14 days from the handing down of this Judgment.  Both parties’ own costs to be taxed in accordance with legal aid regulations.

S.18 Declaration

45.  Finally, I will also grant a s.18 Declaration.