DJA v. OFI

FCMC 1342 / 2015

[2019] HKFC 234

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 1342 OF 2015

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J U D G M E N T
(Section 17 application and final ancillary relief)

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Introduction

1.  This is a judgment to determine, firstly a Notice of Application issued by the Respondent wife dated the 8 September 2017, inter alia to set aside a transfer made by the petitioner husband of 3,333 shares to his own father, nearly five years earlier on the 23 August 2012. Secondly, after that matter has been determined, the wife asks for the court to consider the issue of final ancillary relief, including maintenance for herself and the two children of the family going forward. In addition, the wife has issued a Rule 56 application asking that her financial position be considered post-divorce. This will be considered in the round as part and parcel of the other two applications.  

2.  As will be seen the husband did not participate in the trial or in the litigation in the run up to the trial and therefore, ultimately, there was no other choice but for this matter to proceed in his absence.

3.  I should add that this case brings into sharp focus a number of issues including the potential vulnerability of wives and children where marriages break down in an international context. There are also other related issues in this case concerning inter alia third party financial support, the drawing of adverse inferences, the limitations of such inferences and the possible difficulties likely to be encountered when seeking to enforce ancillary relief orders across different jurisdictions.  

Background

4.  The parties met in Hong Kong in early 2008. The wife, who is Filipino was then working as a quality control officer for a French company and was based in Hong Kong. The wife has permanent Hong Kong ID by virtue of a previous marriage. The husband is Jewish and a Belgium national. He came to Hong Kong in 2004 and he then worked for a family run trading business called AL. It does not appear to be disputed that this business is owned by his father. It is the mother’s case that the husband’s family are very wealthy.

5.  By all accounts it seems that the relationship developed quickly and the parties began to live together in April 2008 and they subsequently married on the XX December 2009. It is the wife’s case that she subsequently stopped working at the request of the husband. Two children followed, both girls, the first being born on the XX October 2010 and the second on the XX August 2012.

6.  Unfortunately, the relationship began to deteriorate in or about December 2012 when the husband admitted to having had an affair with a Thai lady. The parties finally separated on the 5 November 2013. This was then a fairly short marriage of about four years which has produced two children.

7.  It is the wife’s case that the husband’s family never really approved of the relationship and that steps were taken to ensure that any assets held in the husband’s name were placed out of her reach from an early stage.

8.  In or about October 2017 the husband moved back to Belgium and payments of interim maintenance have been spasmodic at best since then. Following these ongoing difficulties, the wife felt that she had no option but to also leave Hong Kong with the children, although she insists that this was meant to be a temporary measure only. The wife returned to the Philippines with the children in April 2018 and they have resided there ever since.   

Background to the litigation

9.  Following the initial breakdown of the relationship in 2013, the wife had also moved back to the Philippines with the two girls for a short period of time, which led to the husband instituting Wardship proceedings in Hong Kong. It is the wife’s case that the husband cut off all financial support during this time. The Wardship proceedings were discontinued in mid-February 2014. In May 2014 the wife returned to Hong Kong with the children once the husband had put her in funds.  

10.  Divorce proceedings followed, with the husband instituting proceedings based on the wife’s unreasonable behaviour, which were initially defended. Common sense eventually prevailed and on the 30 January 2015 the husband issued new proceedings, by agreement, based on one-year separation with consent. The decree nisi was pronounced on the 5 August 2015. On the 3 May 2016 the parties further agreed that the wife should have sole custody and care and control of both children with reasonable access to the husband to include access twice per week and for half of the school holidays.

11.  There were also a series of applications made by the wife for interim financial support. Initially the husband undertook to pay the wife HK$12,000 per month for the children as part of the Wardship proceedings, although it seems that there was some difficulty with payment being made as agreed. In any event several orders followed and the interim financial support increased over time, beginning with a voluntary increase to HK$22,000 per month in July 2014 and a further ordered increase on the 21 August 2014 for HK$34,000 per month. This amount increased again to HK$38,500 per month in November 2014 and finally to HK$52,500 per month on the 31 August 2016. It has always been the wife’s case that she needed at least HK$54,000 per month in order to live in Hong Kong with the girls.

12.  It is of note that the husband’s evidence throughout has been that he earned in the region of HK$58,000 per month inclusive of one- month double pay and that originally the rent was also paid for by the family company. He says that the rental allowance subsequently came to an end when the wife went to the Philippines with the children. He also states that he has no assets to speak of and that anything originally held in his name was held in trust for either his father or mother.

13.  In contrast the wife has continually asserted that the parties enjoyed a very high standard of living during the marriage, that the husband had access to corporate credit cards in addition to his income and that he received further monies from his parents from time to time in the form of an additional allowance. She also points to the fact that the husband’s parents paid for various ad hoc expenses for the family in addition to his salary and rental and other allowances, including business class flights back to Belgium for holidays etc.

14.  In addition, the wife has maintained throughout that the husband has failed to make full and frank disclosure of his assets. She has also issued various applications designed to ensure payment of the interim maintenance through various means, including an application to freeze his long service payment and an attachment of income order. I will not go through all of those applications here. Suffice it to say that it is the wife’s case that as at the time of the trial the husband owed her just over HK$540,000 in arrears of maintenance.

15.  The husband for his part stated for the first time in his Form E dated the 30 March 2016 that he has Steinert’s disease, which is a genetic disorder which affects the ability to control muscles. It is the husband’s case that because of this that he cannot work. He says that he is currently living in his parent’s property in Belgium and that he relies on government benefits and the good will of his parents.

The Notice of Application

16.  In the wife’s Notice of Application dated the 8 September 2017 she seeks an order inter alia as follows:

2.  Pursuant to Section 17(1)(b) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to set aside the dispositions made by the Petitioner of his 3,333 shares in AL International Limited bearing company number 7XXX0 to his father Mr. CJA on XX August 2012.

Setting aside dispositions

The law - generally

17.  Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 states as follows:

(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a) if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c) if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a) in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b) in a case falling within subsection (1)(c), that the disposition has had the consequence,of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.

(4) In this section-

“disposition” (財產處置) does not include any provision contained in a will or codicil but, with that exception, includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise;

“the relevant provisions of this Ordinance” (本條例的有關條文) means any of the provisions of sections 3, 4, 5, 6, 6A, 8, 11 (except subsection (6)) and 15; (Amended 69 of 1997 s. 33)

and any reference to defeating an applicant's claim for financial provision is a reference to preventing financial provision from being granted to the applicant, or to the applicant for the benefit of a child of the family, or reducing the amount of any financial provision which might be so granted, or frustrating or impeding the enforcement of anyorder which might be or has been made at the instance of the applicant under the relevant provisions of this Ordinance.

(5) The provisions of this section shall not apply to a disposition made more than three years before the commencement of this Ordinance.[cf. 1970 c. 45 s. 16 U.K.]

18. In this instance it is accepted that the presumption referred to in paragraph (3) above does not apply given that the wife’s application was made over three years after the alleged disposition of shares took place. Thus the burden is on her to show that the husband transferred the shares with the intent of defeating her claim for ancillary relief. I accept that I should try to look at the actual intention of the husband at the time that the disposition was made. I also accept that it must be clear that there was an actual intention to defeat the wife’s claim for ancillary relief, although it may not be the only or even the dominant intention of the husband given that “It is enough if it played a substantial part in his intentions as a whole”. (See Kemmis v Kemmis [1998] 1 WLR 1307).

19. In addition, Ms Allison for the wife refers to the appropriate standard of proof to be applied in her opening submission where she states as follows:

… Insofar as the Court standard of proof to be applied, this Court in C v T (unreported, 3 June 2009, FCMC 12488/2003) stated that:

“[39] ... The standard of proof required to satisfy the requirements of the ordinance, that the Court must be “satisfied”, was addressed in K v K (Avoidance of Reviewable Disposition) (1983) 4 FLR 31. It was held that, from Loveden ν Loveden (1810) 2 Hagg Con 1:

“The only general rule that can be laid down upon the subject is that the circumstances must be such as would lead the guarded discretion of a reasonable and just man to the conclusion.”

And in the words of Rayden,

Standard of proof

27.15 As to the standard of proof, the question to be asked by the judge after reviewing the evidence is: ‘Am I satisfied that the disposition was made with the intention of defeating the wife’s claim for ancillary relief? The standard of proof remains the balance of probabilities, although it has been said that since what has to be proved is not merely a dishonorable intention but a dishonest and fraudulent one, the evidence which is required to tip the balance, has to be correspondingly more convincing. ‘Satisfied’ in this context means no more than that the judge has to make up his mind

[40] I agree that I considering the intention of the parties it is necessary to look at each disponor’s conduct. In other words, can each side’s intention to defeat the other’s claim, be gleaned from their conduct at the time in question? Consequently, I accept that the circumstances surrounding the making of the dispositions are highly relevant.” [Emphasis added]

I confirm my agreement to what was said by myself on that occasion.

The law on Ancillary Relief

20. In so far as ancillary relief generally is concerned, reference should be made to the Court of Final Appeal’s decision in LKW v DD (FACV no 16 of 2008).

The Four Principles

21. In that judgment Mr Justice Ribeiro PJ reiterated four underlying principles that permeate all ancillary relief proceedings namely fairness, the absence of discrimination, the upholding of the concept of the yardstick of equality and the rejection of a need for a minute retrospective investigation of the parties’ finances.

22. In addition, he identifies a four step approach to be adopted in all ancillary relief trials namely

1) The identification of the assets

2) An assessment of the parties’ financial needs

3) Whether or not the sharing principle should be adopted?

4) And if so whether or not there are any good reasons to depart from an equal division of the assets?

23. The section 7 factors are largely dealt with within this general framework. They are:

(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.

Material non-disclosure and adverse inferences

24. The wife has reiterated throughout that the husband has not made full and frank disclosure of his assets. In Rayden and Jackson’s Relationship Breakdown, Finances and Children, the proper approach is reiterated is section 13.101 where it is stated as follows:

Duty of disclosure

[13.101] The importance of the duty of both parties to make disclosure of their assets which is full, frank and clear cannot be overemphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under the MCA 1973, s 25 [our s. 7 MPPO], it is required to have regard, it cannot lawfully or, properly exercise its discretion in the manner ordained by that section. The duty on each party is absolute, and it must be discharged regardless of whether the application for a financial remedy is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one: a party must not mislead the other party and the court into assuming that his financial situation is unchanged if in fact it has changed. Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default. In NG v SG (appeal: non-disclosure) Mostyn J reviewed the authorities concerning the drawing adverse inferences and assessing a non-discloser’s wealth. He stated:

‘[16] Pulling the threads together it seems to me that where the court is satisfied that the disclosure given by one party has been materially deficient then:

(i) The court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden.

(ii) But such inferences must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got.

(iii) If the court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in the broadest terms.

(iv) In making its judgment as to quantification the court will first look to direct evidence such as documentation and observations made by the other party.

(v) The court will then look to the scale of business activities and at lifestyle.

(vi) Vague evidence of reputation or the opinions of beliefs of third parties is inadmissible in the exercise.

(vii) The Al-Kbatib v Masry technique of concluding that the non-discloser must have assets of at least twice what the claimant is seeking should not be used as the sole metric of quantification.

(viii) The court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than that the court should be drawn into making an order that is unfair to the claimant.’

The analysis by Mostyn J is particularly relevant in the context of this case and I will refer to this again in the body of the judgment.

Third party financial support

25. The issue of third party support is also pertinent here given that the husband now claims to be unemployed and to be financially assisted in part by his parents. To that end reference must also be made to the Court of Final Appeal’s decision in KEWS v NCHC [2013] HKFLR 180 where it was held inter alia as follows:

Held, dismissing the husband's appeal:

(1) The court should only be guided by s 7(1) of the MPPO. In particular s 7(1)(a) includes financial assistance made by third parties to the parties of a marriage and accordingly this could be taken into account in the computation of that party’s overall financial resources. In every case where third party assistance is involved, the two critical evidential questions for the court to consider are: (a) the extent of the financial assistance provided by the third party to the husband or wife; and (b) the likelihood of such assistance continuing in the foreseeable future (paras 33-36, 52).

(2) The court must look at the reality of the situation and have regard to matters of substance and not just form. In looking at reality, it could take into account not only what a party actually had, but what might reasonably be made available to him or her if a request for assistance were to be made. As to what might occur in the foreseeable future, past conduct was often a useful guide. O’Dν O’D [1976] Fam 83 and SR ν CR [2009] 2 FLR 1083 referred to (para 37).

(3) Having ascertained the extent of the third party financial assistance provided and then finding on the evidence on a balance of probabilities that there was a likelihood of the continuation of such assistance in the foreseeable future the court was then in a position in law first to take this into account in the identification of the financial resources of the parties and second, in determining the appropriate ancillary relief to be granted. This approach was entirely consistent with the court’s duty under s 7(1) of the MPPO (para 39).

(4) The concept of ‘judicious encouragement’, which might be taken to mean that the court could encourage third parties to provide financial assistance, had led to confusion among judges and practitioners. If its true ambit was really no more than a restatement of the proper approach as set out above, there was no difficulty. However, if it meant a form of pressure on third parties to add to the relevant spouse’s resources which, on the evidence they would not do or were unlikely to do, the concept should be rejected. Such approach was consistent neither with principle nor with the authorities. It was better if the term ‘judicious encouragement’ were no longer to be used. Howard ν Howard [1945] P 1; B ν B (1982) 3 FLR 298; BrowneνBrowne [1989] 1 FLR 291, TL v ML (Ancillary Relief ClαiTn Against Assets of Extended Family) [2006] 1 FLR 1263 and Charman ν Charman [2006] 2 FLR 422 applied; Thomas ν Thomas [1995] 2 FLR 668 considered (paras 40-53).

(5) The concept of judicious encouragement is ambiguous, if court orders should only apply to parties to the litigation, it is difficult to see where the concept of judicious encouragement fits as a matter of principle. Court orders are intended to be binding and if necessary, enforced. It is difficult to see how a concept to ‘encourage’ can be enforced, in particular with regard to non-parties (para 41).

Again reference shall be made to these principles in the body of this judgment.

Issues

26. The following issues now fall to be determined by this court namely:

How should the section 17 application be decided?

What then is the computation of available assets?

Has the husband made full and frank disclosure of his true financial position? Should an adverse inference be drawn against the husband? If so what effect should that have on the computation of available assets?

Should this be regarded as a “needs based case”? If so what are the needs of the wife and the children?

What is the earning capacity of both the husband and the wife?

How much maintenance should the husband pay to the wife for herself and children going forward? How should the arrears of maintenance be dealt with?

What should be the court’s final order for ancillary relief and costs?

The parties’ proposals

27. Counsel for the wife summarized each parties’ respective positions in her opening submission as follows:

Parties’ proposals

38. Per the Order dated 14th March 2019, parties were to file and serve their respective open proposals on or before close of business on XX April 2019. H has not complied with the Order, and as set out at introduction above, W’s draft order is dated 18^th April 2019.

39. H has always suggested that the best resolution for the family would be for W to reconcile with H and to relocate with the Children to Belgium because of free education [C2/351]. Back in June 2017, H offered W HK$1.5 million to settle these proceedings if she would agree to reconcile and she and the Children moved to Belgium where he would buy an apartment for the Children to live and provide full financial support for the Children [B/244 §47]. W’s evidence is that H’s father has also told her to reconcile and to move with the Children to Belgium where he would financially support them [B/17S §33]. However, W does not wish to reconcile and she does not believe that she will provided for even if she moved to Belgium, in light of in view of H’s 2^nd Answer that his family would not support W or the Children [B/218]. W’s stance is not at all unreasonable considering H’s conduct in complying with the MPS Order.

40. Since that initial offer conditional upon reconciliation, no other offers have been made by H.

41. No consideration or information has been ever put forward by H as to whether W will be able to get a visa to reside in Belgium, the difficulties she will face in terms of culture and language adjustment to move to Belgium or how she would be financially provided for since there can be no expectation that W would be able to immediately secure any employment in Belgium. This proposal conditional upon reconciliation from H lacks complete meaning, even in terms of how the Children would cope and adjust to life in Belgium following H’s abandonment.

42. W suffers from ill health caused by the stress and anxiety from these proceedings [B/253 §78] and has a very limited earning capacity. Even if she could retrain, W lacks the funds to enroll in any course.

28. In summary the wife asks for a lump sum of HK$6,650,000 and ongoing maintenance of HK$52,500 per month. When I queried the basis for this during the trial I was told that the lump sum was premised on the gross book value of a property known as the Knokke property, which is held by a small limited company in the UK called A Limited. The husband is the sole shareholder of this company. The level of maintenance is based on the last order for maintenance pending suit/interim maintenance.

Discussion

29. I must now turn to consider the issues, the law and the parties’ evidence as set out in their Form E’s,their affidavits and in their answers to the questionnaires. Further I will rely on the wife’s oral testimony in court.

How should the section 17 application be decided?

30. I should say at the outset that I do not intend to accede to the wife’s request in this respect. Largely this is because I am not of the view that a different financial order would be made by this court if her application was granted.

31. It is the wife’s case that on the 23 August 2012 the husband transferred 3,333 shares in AL International Limited from his name into his father’s name. Although it was stated several times in the papers that this represented over a 50% shareholding in the company it has subsequently been confirmed that this was a 1/3 shareholding only. It follows that the husband was not a majority shareholder of AL International Limited.

32. This transfer took place just after the birth of the parties second child. In the husband’s first Form E, dated the 24 July 2014 (i.e. nearly two years after the fact) he did not disclose this transfer. He has been criticized for this. However, the Form E, at paragraph 2.4, requests disclosure of current shareholdings/beneficial interests in companies in Hong Kong or elsewhere. In addition, copies of the last two years audited/unaudited statements are to be produced together with any other documents on which a valuation is based if such a shareholding exists. Here, it is certainly arguable that the husband was not required to tell the court about a shareholding that he had held nearly two years prior to the Form E being filed.

33. In any event it is the wife’s case that the husband transferred these shares with a view to defeating her claim for ancillary relief, as she says that the husband was contemplating a divorce at that time i.e. in 2012. The difficulty however is that there is very little if any evidence to support this assertion. It has not been said, for example, that the husband was having an affair in August 2012 or that there was any suggestion of a divorce at that time. Rather it seems that, even on the wife’s case, the affair came a little later in December 2012 and the parties continued to try to make the marriage work for another year or so after that revelation.

34. In support of her case the wife also maintains that her parents in law never approved of the relationship and that in May 2014, this was confirmed when the husband told her that his parents wished him to divorce and that if he did not do so that they had threatened to disinherit him. However, this conversation took place nearly two years after the transfer took place and once the marriage had already broken down. Consequently, this does little to assist the wife’s case either. In her 4^th affidavit dated the 8 September 2017, the wife refers to further conversations that took place in 2017 as evidence of the husband’s and his family’s ill intent:

Petitioner’s Plan to Leave Hong Kong for Good

32. After the FDR, in about June 2017, the Petitioner mentioned to me verbally that he would leave Hong Kong and move back to Belgium to live there for good, He told me the reason for leaving was to avoid having to pay maintenance for me and the children. At that time, I did not believe the Petitioner would really breach the MPS Order dated 31^st August 2016 and leave Hong Kong in such circumstances as to prevent the Order from being enforced even if he could not see the children.

33. On the afternoon of 17^th August 2017, the Petitioner came to see me and the children when we were at the swimming pool of the X Apartment where the Petitioner lives. The Petitioner told me that he had given notice to terminate his tenancy with the X Apartment and he will leave Hong Kong to live in Belgium in October 2017. The Petitioner then telephoned to his father and passed his mobile phone to me to speak to his father being my father-in-law. The father-in-law told me that the Petitioner would leave Hong Kong in October 2017 and would live in Belgium, and the father-in-law invited me and the children to live with the Petitioner in Belgium and the father-in-law would support the living of the children and me when we live in Belgium. In the same conversation with the father-in-law, I asked him how about my divorce proceedings with the Petitioner, the father-in-law asked me to stop the divorce proceedings. I then asked the father-in-law how about my legal costs, he replied that he would pay the Petitioner’s legal costs, and I should pay for my own legal cost. I said I could not afford to pay my legal costs, He then asked me how much my legal costs would be. I replied that I needed to check with my lawyers.

34. On about 24th August 2017, the Petitioner contacted me and asked me again whether I and the children would live with him in Belgium as he would leave Hong Kong to live in Belgium in October 2017 which I did not answer.

35. However, it seems to me that it cannot be concluded, on a balance of probabilities, that the father in law did not mean what he said in this conversation. It is also difficult to assume ill intent when the wife and children have visited the father in Belgium, since this conversation took place, at his expense and the father in law has also paid for the children’s educational expenses in the Philippines. It does not seem to me that it can be said that the husband decided to rearrange the shareholding in the family business, at the request of his father, because he wished to defeat the wife’s potential claim for ancillary relief. This may have been in the back of everyone’s mind, but equally the father in law in particular may have had other concerns. I tend to accept that the husband simply transferred the shares back to his father because in reality he was not the beneficial owner of them and he was asked to do so. In any event it seems a) more likely than not that the family business is a non matrimonial asset, b) the business is run by the father in law and the husband’s sister and the father’s role does not appear to have been pivotal, and c) its value is unknown.

36. In so far as the last point is concerned, there is no tangible evidence before the court concerning the value of the company. The only reference was in relation to something that the wife had found on the internet. This was neither persuasive nor binding on the court. Thus it cannot be assumed that the family business is very valuable or that it is capable of being sold. Thus even if the transfer of shares was set aside it seems very unlikely that the court would make a different order from the one that it intends to make in any event. In such circumstances the wife’s application in this respect shall be dismissed.

What then is the computation of available assets?

37. In the wife’s closing she estimates that there is just over HK$6 million in known assets in the matrimonial pot, the vast majority of which are held by the husband. A copy of that schedule is attached to this judgment as Annex 1. As will be seen this schedule is not accepted.

Monies owed to the wife

38. The wife includes in the schedule, maintenance arrears from March 2018 to April 2019 in two tranches as part of her asset base. The difficulty with this, is that maintenance pending suit/interim maintenance is always subject to variation at a final hearing on ancillary relief. In judgments handed down by this court, the following sorts of statement/s are routinely made:

Maintenance pending suit and interim maintenance

12. The law is well known and not in dispute. Section 3 Matrimonial Proceedings and Property Ordinance Cap 192 states that the only governing principle is that the court shall make such order as it considers reasonable in all of the circumstances of the case. Consequently, applications such as these are approached on a broad-brush basis. A detailed examination of the parties’ means may be examined at a later date at a full ancillary relief hearing if there is no agreement in the meantime, when there is then every opportunity to achieve fairness by means of a set off. In other words, if there is any overpayment or underpayment that can normally be rectified at a final ancillary relief hearing.

39. Thus it cannot be assumed that the maintenance pending suit/interim maintenance monies can still be regarded as being owed to the wife or that the current level of maintenance will continue post judgment. In particular, I am cognizant of the fact that the wife has been residing in the Philippines since April 2018, where the cost of living is a great deal lower than that in Hong Kong. This will be discussed in more detail below. As things stand however these funds will not be included in the schedule as an asset belonging to the wife.

The loans

40. Of the remaining assets it is also of note that the wife claims that she has had no alternative but to borrow funds from third parties, given the fact that the husband has consistently failed to maintain her and the children. She sets out in the schedule details of 14 loans from family and friends. Some of these are supported by simple promissory notes. Others are not. She says that she owes just over HK$375,000. Although I did not find the wife to be totally credible during the trial, I nevertheless accept that she has had to borrow some money in order to make ends meet and that this sum is currently owed by her and consequently that this is a current liability.

A Limited, UK

The Knokke property

41. It has always been the wife’s case that the husband is the director and shareholder of a company called A Limited, which is a limited company registered in the UK. Reference is made to this from the very beginning and can be found in her first affidavit dated the 25 June 2014. The husband confirms in his first Form E dated the 24 July 2014 that he is indeed a director of A Ltd, but he fails to disclose any shareholding. Later in his Answers to the first round of questionnaires he said that he was a shareholder of A Ltd, but that he was holding those shares on trust for his mother. A simple trust document dated the 2 November 2013 is exhibited. For the avoidance of doubt I intend to attach no weight to this document. I accept that the husband is the legal and beneficial owner of this property. The wife later issued the section 17 injunction application and on the 14 September 2017 the husband undertook inter alia not to deal with his 100 % shareholding in A Limited.

42. When I queried the current status of A during the trial, it was agreed that Mr Peaker, the solicitor for the wife, would file further affidavit evidence in relation to the same as there was no up to date evidence before the court. In his 4^th affidavit dated the 26 April 2019 he states inter alia that the unaudited financial statements for A Limited for the year ended June 2018 were signed by the husband as Director. The balance sheet refers to investment properties worth GBP663,173 and to limited cash at bank and in hand of GBP5,231. The fair book value of the investment property is given at GBP658,373. There is also a reference to a director’s loan of GBP310,055. Thus on my read of this balance sheet the husband owns an investment property through a small limited company and he either has a loan or mortgage on this property for just under half of its value. Thus the net value of the property is somewhere in the region of GBP350,000 (i.e. GBP658,373 – GBP310,055). This is a very broad assessment of the situation given that there is no up to date valuation of the property or mortgage redemption statement or other information pertaining to the possible loan. It is suggested that the loan should also be included in the schedule of assets, as an asset that belongs to the husband. This is not accepted and runs contrary to my understanding of normal accounting practices. Thus the net value of the Knokke property shall be included in the “matrimonial pot” for distribution. In round figures I will allow the figure of GBP350,000.

43. Thus in broad terms the only asset of any value in the pot is the Knokke property. The wife has minimal assets otherwise made up of very small balances in her bank accounts. Prima facie I have not included the outstanding maintenance due to her as an asset and she has further liabilities of approximately HK$375,000. On the face of it the husband also has minimal balances in his bank accounts and no other discernible assets save for the Knokke property. The other smaller limited companies referred to by the wife originally seemingly have no value.

Has the husband made full and frank disclosure of his true financial position? Should an adverse inference be drawn against the husband? If so what effect will that have on the computation of available assets?

44. I accept that the husband did not initially disclose his shareholding in A Limited or in several other smaller companies including a shareholding in The B Limited, which was a small company that held a restaurant and 100% shares in C Limited. The wife has also made allegations in relation to a company called S Investments Limited. I accept that she came up to proof in relation to the first three companies, but as I have said in reality only A Limited is worth anything. The other two shareholdings have little, if any, value. Thus it is with respect a rather hollow victory. In addition, the wife made other allegations with respect to the disclosure of credit cards and the husband’s MPF, which do not take the matter very much further forward.

45. As indicated above, in the case of NG v SG [2011] EWHC 3270, where there is no direct evidence of possible undisclosed assets, the court is sometimes left with no alternative but to look to the parties’ lifestyle and to the standard of living enjoyed during the marriage, in order to try to fill in the gaps. The difficulty in this case however, is that there is no evidence of the very high standard of living to which the wife refers. It seems to me that the parties certainly enjoyed a fairly standard ex patriate life style in that they generally lived in comfortable but not overly expensive accommodation in Midlevels or Wanchai, the girls went to good but not particularly top end schools and they employed domestic helpers who were allegedly the wife’s family members. They did not belong to Clubs or lead a very lavish ex patriate life style otherwise. The wife says that the husband provided her with cash of between HK$40,000 – HK$50,000 per month in two tranches, but there is no direct evidence of this as the money did not pass through her bank account. Ms Allison has provided an analysis of foreign exchange deposits into the husband’s HSBC account, which appear to come from an undisclosed source. On the wife’s case this amounts to a further HK$23,467 per month. Again this does not go to support the wife’s contention that the parties enjoyed a very lavish ex patriate life style. On the evidence before the court the husband earned in the region of HK$58,000 + he received an additional sum of HK$23,467 per month (on average), so making a total income of HK$81,500 per month. In addition, the rent was initially paid for by the family company in the sum of HK$38,000 per month – making a total disposable income initially of approximately HK$120,000 per month. This puts the parties in the category of the comfortably well off as opposed to the wife’s contention that they enjoyed a lavish ex patriate life style. Thus I am not convinced that an adverse inference can be drawn against the husband generally, other than as set out above.

Should this be regarded as a “needs based case”? If so what are the needs of the wife and the children?

46. I accept that this should be regarded as a “needs” based case as opposed to a “sharing” case, although very little has been put forward by the wife to support her case on “need”. The wife says simply that she intends to return to Hong Kong to live, although it is difficult to see how that can be possible in the short to medium term, pending the enforcement of any order in Belgium.

47. If the wife remains in the Philippine she says that she will need approx. HK$13,280 per month on which to live, plus provision for the children’s school fees. The wife confirmed in the witness box that the husband’s father is currently paying for the children’s school fees in the Philippines. If she is living in Hong Kong she said that she would need approx. HK$68,540 per month, in addition to the children’s school fees. However, she actually seeks HK$52,500 per month and has confirmed that she will need to work in order to make up the short fall. These figures are set out in the wife’s updated Form E dated the 25 January 2019 as follows:

Part 4 Current Monthly Expenses

4.1 General

Item	Amount (HK) Incurred in Hong Kong as set out in my previous Form E dated 21st August 2015	Amount (HK) Currently incurred in the Philippines
Rent	18,500	N/A
Mortgage Instalments	N/A	N/A
Utilities (electricity, gas, rates, telephone & water)	2,000	700
Management fees	Included in rent	N/A
Food	10,000	6,000
Household expenses	1,000	2,000
Car expenses	-	2,400
Insurance premia	-	N/A
Domestic helper(s)	4,000 (employed by Petitioner	N/A
Ohers (specify)-transport	1,000	N/A
Total monthly household expenses	HK$36,500	HK$11,100

Attach copies of the latest rental receipt.

4.2 Personal

Item	Amount (HK)	Amount (HK)
Meals out of home	1,000	Incl. at Part 4.1
Transport	1,000	Incl. at Part 4.1
Clothing/Shoes	1,000	N/A
Personal grooming (including haircut and cosmetics)	1,000	180
Entertainment/presents	500	N/A
Holiday	-	N/A
Medical/Dental	1,000	N/A
Tax	N/A	N/A
Insurance premia	N/A	N/A
Interim maintenance	N/A	N/A
Contribution to parents	-	N/A
Dependent family members	-	N/A
Others (specify)	N/A	N/A
Total monthly personal expenses	HK$5,500	HK$180

4.3 Children

Item	Amount (HK)	Amount (HK)
School fees	13,070	11,100 Paid by the Petitioner
Extra tuition fees	500	N/A
School books and stationery	470	Incl. in school fees above
Transport to school (including school bus)	N/A	Incl. at Part 4.1
Medical /Dental	1,000	N/A
Extra Curricular Activities	1,500	1,500
Entertainment/presents	1,000	500
Holidays	-	N/A
Clothing/Shoes	1,000	N/A
Insurance Premia	N/A	N/A
Lunches and pocket money	3,000	Incl. in school fees above
Other Transport	500	Incl. at part 4.1
Child-minding fees	N/A	N/A
Uniform	3,000	500
Ohers (specify)	1,500	N/A
Total monthly expenses for children	HK$26,540	HK$2,000 (excl. school fees paid by the Petitioner)

 

Total monthly expenses (4.1+4.2+4.3)

HK$68,540

HK$13,280 (excl. school fees paid by the Petitioner)

48. Although very little evidence was produced by the wife in support of these figures I am inclined to accept what she says in this respect. In the wife’s closing submission, it further states that the wife seeks a lump sum of HK$6,650,000

… which represents the W’s and Children’s need for housing and calculated on the basis that this sum should support W and Children for 10 years if the W is able to recover this amount”.

49. It adds that this amount should come either from the sale of the Knokke property and/or from the financial resources of the husband’s parents. As will be seen however, these submissions are not accepted. If the wife remains in the Philippines, as seems likely, at least in the immediate to short term, then it is not accepted that she needs more than HK$13,500 per month (rounded up) on which to live. This is based on her own evidence. This would equate to a lump sum of HK$1,620,000 (i.e. HK$13,500 x 12 = HK$162,000. HK$162,000 x 10 = HK$1,620,000). In reality the wife will need financial support until both children are at least over the age of 18 years, which is another 11 years and does not take into account the possibility of higher education etc etc. I also accept, although this was not fully argued infront of me, that the wife should be able to buy a home for herself and the girls – most probably in the Philippines and that the girls educational needs should also be fully provided for.

50. I accept that on the face of it the husband’s needs appear to be wholly met by his family and the social welfare network in Belgium.

What is the earning capacity of the husband and the wife?

51. Both parties claim that they have no current earning capacity. The husband says he cannot work because he is suffering from Steinert’s disease, although this remains simply a bare assertion on his part. It is of note that ample opportunity was given to the husband to file medical evidence in relation to this and ultimately he chose not to do so. Reference can be made in particular to the undertaking given by him during the hearing on the 31 August 2016 that he would file a medical report on this when available. None was received. At the pre-trial review on the 3 August 2018 it was further ordered that

3. A Single Joint Expert who is a medical practitioner with the expertise in Steinert’s Disease be appointed and a joint report upon the Petitioner be prepared and filed at least 14 days before the next hearing.

52. Unfortunately, ultimately no Single Joint Expert was appointed because the parties could not agree on who should pay for the costs. On the 7 December 2018 it was further ordered that the husband should pay for the costs of the Single Joint Expert in the first instance. Further difficulties ensued. On the 14 March 2019 the husband’s former solicitors came off the record. On the same date I made an unless order inter alia as follows:

1. Unless the Petitioner do file and serve his all-inclusive narrative affirmation and updated Form E within the next 10 days, i.e. on or before close of business on 25^th March 2019, the Petitioner be barred from adducing and relying on further evidence at the trial.

2. Unless the Joint Letter of Instructions to Professor I is signed by the Respondent and returned within the next 10 days, i.e. on or before close of business on 25th March 2019, paragraph 5 of the Order dated 7^th December 2018 be discharged.

No joint letter of instruction was sent and no all-inclusive affirmation was filed by the husband. Infact the husband did not participate further in the litigation process.

53. In such circumstances it seems to me that it is impossible for the court to attach any weigh to the husband’s bare assertion that he is suffering from Steinert’s disease and cannot work. The wife says that there was no evidence of any ill health when she has seen the husband. In such circumstances it seems to me that the husband must have an ongoing earning capacity and one that he must now realize to the full.

54. The wife for her part says that she has now developed hypertension and has some anxiety issues as a result of these proceedings, which has been exacerbated by some bullying incidents at the school in the Philippines where the children are now studying. Oddly she said in the witness box that she spends all day at school, presumably in an attempt to protect the girls. In the medical note dated the 25 January 2019 filed in support of this claim reference is made only to elevated blood pressure. Thus it seems to me that I cannot attach too much weigh to this document either. Although the wife has been out of the work force for a while, there is nothing to suggest that she cannot return to the work force in some capacity. She trained in midwifery, but worked mainly in quality control before having the children. In any event it is clear that she must now also look to work and to realize her earning capacity to its fullest. I accept that the wife’s earning capacity is, on the face of it, significantly lower than that of the husband.

How much maintenance should the husband pay for the wife and children going forward? How should the arrears of maintenance be dealt with?

55. The wife’s case on need was based primarily on a capitalized maintenance figure. Thus it does not follow that she can have this and ongoing maintenance for both herself and the girls. In such circumstances the last order for maintenance pending suit/interim maintenance, namely order 1 contained in the court order dated the 31 August 2016 shall be discharged. For the avoidance of doubt the outstanding maintenance shall also be discharged. This order is made on the premise that it is anticipated that the husband’s father may continue to pay for the children’s school fees in the Philippines, given that he has done so in the more recent past and there is nothing to suggest that he will not continue to do so. I shall also order that the husband do pay the wife nominal maintenance with effect from the decree absolute. If the situation alters it will always be open to the wife to claim maintenance for both herself and the girls in the future.

What should be the Court’s final order for Ancillary relief and costs?

56. Thus I shall make an order that the husband do pay the wife a lump sum of GBP350,000, such sum to be paid within the next 6 months. I am giving the husband a period of time within which to make the payment as I recognize that he may need to sell the Knokke property in order to do so. This order is a needs based order and is made on the premise that it seems unlikely that the husband will comply with any order for maintenance in the near future. This sum is all that is available in the so called “matrimonial pot” and it should provide the wife with sufficient funds to support both herself and the girls in the Philippines. I am hopeful that it will also enable her to purchase a small home in which to live. I appreciate that the wife had hoped for an order that would enable her to return to Hong Kong. Although it is of course a matter for the wife where she decides to live, this order is made on the premise that that is unlikely to be a realistic option in the immediate to short term and that she may have no other option but to remain in the Philippines. It is also made on the premise that she will need to return to work in some capacity and that she will need to do this sooner rather than later.

57. The husband did not appear at the trial, although it is clear that all the papers including all the requisite court orders were served on him. He has not complied with court orders and he has made this process a lot more difficult than it needed to be. The wife is legally aided; it follows that she should have her costs. I also think it appropriate, given the circumstances, that she should have her costs on an indemnity basis notwithstanding the fact that she has not been successful on all counts. Thus I shall also make an order nisi to be made absolute in 28 days’ time that the husband shall pay the wife’s costs of and occasioned by the ancillary relief proceedings in both FCMC 2591 of 2014 and FCMC 1342 of 2015, including all costs reserved on an indemnity basis. The wife’s own costs shall be taxed in accordance with Legal Aid regulations. There shall be certificate for counsel.

Order

58. For the avoidance of doubt therefore I shall make an order as follows:

1. Paragraph 2 of the Respondent’s Notice of Application dated the 8 September 2017 shall be dismissed;

2. The Respondent’s Form 8A – Notice of Application under Rule 56B of the Matrimonial Causes Rules shall be discharged;

3. The Petitioner do pay to the Respondent a lump sum of GBP350,000 on or before the 6 March 2020, in full and final settlement of her claims for capital ancillary relief;

4. Nominal periodical payments to the Respondent to be paid by the Petitioner in the sum of HK$1 per annum for her maintenance during the joint lives of the parties or until the Respondent’s remarriage, whichever is the shorter, first payment to be made on decree absolute;

5. Order 1 contained in the court order dated the 31 August 2016, namely that the Petitioner do pay maintenance pending suit/interim maintenance to the Respondent in the sum of HK$52,500 per month shall be discharged;

6. For the avoidance of doubt any outstanding maintenance due and owing under the order dated the 31 August 2016 shall also be discharged;

7. Upon it being deemed that the Petitioner has made a claim for ancillary relief, all such claims for both capital and income shall be dismissed upon the making of this order;

8. There shall be an order nisi to be made absolute in 28 days’ time that the Petitioner do pay the Respondent’s costs of and occasioned by the ancillary relief proceedings in both FCMC 2591 of 2014 and FCMC 1342 of 2015, including all costs reserved on an indemnity basis. The Respondent’s own costs shall be taxed in accordance with Legal Aid regulations. There shall be certificate for counsel.

9. A section 18 declaration to issue.

10. Liberty to apply.