TDJ ALSO KNOWN AS JT v. WB

CACV 214/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 214 OF 2013

(ON APPEAL FROM FCMC NO. 930 OF 2011)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1. The parties were married in 1988 and gave birth to two children. In 2011, they divorced and they agreed on the provisions for ancillary relief. Those provisions were contained in a court order made by consent on 31 October 2011. One of the provisions was as follows [“the Consent Lump Sum Order”]:

“6. The Petitioner do pay to the Respondent a lump sum by instalments of HK$3,180,000 as to HK$2,700,000 within 30 days of the pronouncement of Decree Absolute of Divorce and HK$10,000 per month for 48 months from 1^st January 2012 and upon receipt of the said lump sum, all the Respondent’s claims for periodical payments and secured periodical payments, lump sum provision and property adjustment provision shall stand dismissed and the Respondent shall not be entitled to make any further application in relation to the marriage under the Matrimonial Causes Ordinance, the Matrimonial Proceedings and Property Ordinance, the Married Persons Status Ordinance and/or any other relevant Ordinances in Hong Kong or relevant legislation in any other jurisdiction nor to apply to the court on the death of the Petitioner for provision out of the Petitioner’s estate.”

2. After less than one year, on 24 May 2012 the Petitioner applied for a variation of that provision, seeking to be excused from paying the $480,000 instalments.  The application was heard by Judge Melloy [“the Judge”].  On 15 April 2013, the Judge refused to excuse the Petitioner altogether.  However, she ordered a suspension of the payment of the instalments until both children have finished their secondary school education in June 2015.  She did so principally for the reason that, due to the change of policy on the part of his employer, the Petitioner unexpectedly had to pay the educational fees of the children which previously was covered by scholarships. 

3. Up to the date of the order, the Petitioner had paid 11 instalments. 

4. The Respondent appeals against that decision. Leave was granted on 16 October 2013 and she was only allowed to appeal on the following ground: the Judge failed to consider the unsatisfactory account by the Petitioner as to his disposal of the difference between $1.86 million (in June 2011) and $188,763 (in May 2012) in his bank account.

5. The Judge set out the law at paras 8 to 10 of her judgment in respect of variation of an order for lump sum payment by reference to the judgment of Cheung JA in CH v MEH CACV 92 of 2011, 10 Jan 2012. In view of the narrow scope of this appeal, it is not necessary to discuss the relevant principles at length.  It suffices to emphasize that the power to vary a lump sum order should be exercised with caution and the court must have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the original order. 

6. One of the matters that the court should have regard to in making the original order, and thus also in considering an application for variation, is the property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, see Section 7(1)(a) of the Matrimonial Proceedings and Property Ordinance  Cap 192.

7. Under the Consent Lump Sum Order, the Respondent was entitled to a lump sum payment paid by $10,000 monthly instalment as from 1 January 2012 for 48 months.  Though there were unexpected increases in the education expenses for the children, if the Petitioner had the means to meet those expenses as well as the instalment payments, we do not think there should be any variation, whether in terms of suspension or otherwise. 

8. At the hearing below, neither party was legally represented.  The Respondent advanced the contention that the Petitioner had the means to meet the educational expenses as well as the monthly instalment payment.  She said the account of the Petitioner shows that he had $1.86 million in June 2011, and the figures went down to $798,306 in October 2011 and then down to $188,763 in May 2012. 

9. In her application for leave to appeal, she produced the transcript of the hearing with the relevant parts highlighted by her showing that she had cross-examined the Petitioner about the disposal of money in his account and he had failed to provide satisfactory account or proof of at least a substantial part of the money.  These included the alleged payment of $200,000 as solicitors fees, transfer of a couple of hundred thousand dollars to his fiancée, transfer of £50,000 to his parents and some portion of the money unaccounted for.  The hearing was adjourned on 13 March 2013 for him to produce whatever evidence he could to support his account of how the money had been spent.

10. However, the Petitioner did not file any further affirmation after 13 March 2013 to address those concerns.  When the hearing resumed on 21 March 2013, those concerns were not addressed.  The hearing proceeded with the cross-examination of the Respondent.  After that, the Judge allowed the Petitioner to clarify one point which is not pertinent to those concerns.  Then she gave directions for the filing of written closing submissions.

11. In her written closing submissions, the Respondent did not bring up these concerns again. 

12. Likewise, in the judgment of 15 April 2013, the Judge did not address these challenges as regards the means and resources available to the Petitioner.  She simply stated at para 17 of the judgment:

“I am also aware of the fact that the husband only has limited assets upon which to rely as safety net.”

13. Before us, the Respondent repeated her challenges to the means of the Petitioner raised in the course of her cross-examination of the Petitioner.  She also complained about the difficulties she encountered in respect of access to the children.  The latter is not within the scope of this appeal. 

14. On the other hand, the Petitioner submitted that the Judge was not concerned about the distribution of wealth upon divorce and she was only concerned with how the unexpected education expenses were to be met.  He submitted that the issue of hidden assets in Taiwan was not a deciding factor because the parties had accepted before the Consent Lump Sum Order that each of them had given full disclosure of his or her assets.  

15. We cannot accept the Petitioner’s argument that the allegation of hidden asset is not material for the purpose of his application to vary the Consent Lump Sum Order.  As explained above, his means and financial resources are relevant considerations.  If there were hidden assets which the Petitioner could utilise for meeting the unexpected education expenses, whether in part or in whole, this must be a relevant factor which the Judge should take into account in deciding whether to grant him a suspension of his obligation to pay the $10,000 monthly instalment. 

16. Nor do we accept that the Respondent was somehow barred from challenging his means by reason of her agreement to the Consent Lump Sum Order.  We do not think the Consent Lump Sum Order can give rise to any issue estoppel in terms of the means of the Petitioner in the hearing of the Petitioner’s application for variation.  It is clear from the transcript that the Judge did not take such a view.

17. Though the Respondent, acting in person, did not repeat her challenges as to the means of the Petitioner in her written closing submissions, she had not abandoned such challenges. 

18. Further, as demonstrated by the Respondent by reference to the HSBC bank statement of the Petitioner, he made a transfer of $750,000 on 2 November 2011. That transfer was made after the Consent Lump Sum Order and had the effect of depleting his assets in Hong Kong.  This cannot be something which she could have challenged at any time before the Consent Lump Sum Order. But such an unaccounted depletion of assets must assume great significance in the context of the Petitioner’s application for variation.

19. With great respect to the Judge (who is very experienced in these matters), she had not satisfactorily dealt with those unsatisfactory aspects of the Petitioner’s case as to his means.  We cannot read her finding at para 17 of her judgment as acceptance of the Petitioner’s account of the disposal of funds originally in his account.  The transcript of the hearing showed that the Judge was not satisfied with the account of the Petitioner in the course of evidence on 13 March 2013 and she had asked him to produce supporting evidence.  He did not comply with that direction.  Nor did he give further explanation about the disposal of money at the hearing of 21 March 2013 or in his closing submissions.  In such circumstances, if the Judge were to change her assessment of the credibility of the Petitioner in this respect, it is necessary to give some reasons for the change.  We do not find such reasons in her judgment.

20. Thus, we are driven to the conclusion that the suspension of the monthly instalment as ordered by the Judge must be set aside.

21. Considering the matter afresh, in view of the Petitioner’s failure to give a satisfactory account on the disposal of his money when it was within his power to produce proper evidence to support his case in this respect, the court should draw adverse inference against him as to his means.  A party applying for variation of an order made in ancillary relief is under the same duty to give full and frank disclosure on his means as a party making the original application for financial relief.  The law on such a duty in matrimonial litigation is well settled, see L v C [2007] 3 HKLRD 819 at paras 68 to 71.  On the state of evidence before the court, we are not satisfied that the Petitioner did not have the means to continue with the monthly instalment payment of $10,000 to the Respondent even though his financial burden had been increased by the unexpected education expenses.

22. We allow the appeal, set aside the order of the Judge, and dismiss the Petitioner’s application for variation.  The effect of this outcome is that the Petitioner should have continued to pay the monthly instalment to the Respondent.  Taking account of the 11 instalment payments already made, the outstanding arrears up to 31 March 2014 is 16 instalments, viz $160,000.

23. We would order the Petitioner to resume his monthly instalment payment of $10,000 as from 1 April 2014. 

24. In addition, in respect of the arrears in the sum of $160,000, we would grant him some indulgence in light of his increased financial burden regarding the education expenses of the children. We order him to repay that to the Respondent by way of 4 instalments of $40,000 each on 1^st April, 1^st May, 1^st June and 1^st July 2014 respectively. If he defaults in any of these instalments, the payment of the whole arrear would be accelerated and the Respondent will then be at liberty to take enforcement proceedings for the total outstanding amount.

25. In other words, adding the arrears together with his continuing obligation under the Consent Lump Sum Order, the Petitioner needs to pay to the Respondent $50,000 on 1^st April, $50,000 on 1^st May, $50,000 on 1^st June and $50,000 on 1^st July. Then, as from 1^st August 2014, the monthly instalment would go back to $10,000.  

26. In the special circumstances of this case, we are not minded to order the Petitioner to pay interest for the arrears. However, this does not pre-empt the court from ordering him to pay interest for his defaults in the future, including any defaults in respect of the four $50,000 instalment payments ordered by us.

27. Neither party is legally represented before us. We would not make any order for costs in respect of this appeal.