KKWZ v. CPW

FCMC 14301 / 2013

[2019] HKFC 110

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14301 OF 2013

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JUDGMENT
(Variation of Maintenance)

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1.  This is an application for downward adjustment of the maintenance payable by the petitioner father for the benefit of his son, who is now being taken care of by the respondent mother.

2.  In this judgment I shall, for ease reference, refer to the petitioner and the respondent as “the father” and “the mother”.

Background

3.  The parties met in Ontario, Canada in about 2000 when they were furthering their studies there.  Shortly upon their return to Hong Kong, they were married in October 2006.  At that time, the father was 24 years old and the mother was 23.  A few months later in February 2007, their son was born. He is the only child of the family.

4.  The parties were married young but sadly, the marriage ended young too; in March 2011, they separated when the father moved out of the matrimonial home. 

5.  Thankfully, the parties were able to come to an agreement on the disposal of their marriage, thus avoiding the bitterness of litigation.  A Deed of Separation dated 3 June 2011 was made accordingly whereby, among other terms, the father agreed to pay a monthly sum of $7,000 for the maintenance of the son and another monthly sum of $7,000 for the maintenance of the mother.  There is an express provision that the monthly sums can be adjusted upward in accordance with the living index as quoted by the government.  Other major terms include a lump sum of $600,000 payable by the father for the benefit of the mother and the purchase of an insurance policy for $5 million for the benefit of the mother and the son.

6.  On 7 October 2013, the father petitioned for divorce on the ground of 2 years’ separation.  On the same date, a Supplemental Deed of Separation was made whereby the 2 sums of $7,000 payable by the father were combined into one as maintenance for the benefit of the son as from August 2013.  The effect is that there would not be any maintenance in favour of the mother.   

7.  Decree nisi was granted on 2 July 2014. 

8.  The custody and the financial matters were dealt with by way of a consent order dated 22 September 2014 which embodied the terms of the Deeds of Separation.   By that time, the maintenance payable to the son was adjusted to $15,868 according to the Composite Consumer Price Index.  Accordingly, there is an express provision in the Consent Order that the maintenance can be adjusted upward in accordance with the most update annual Composite Consumer Price Index.

9.  The Decree Absolute was issued on 3 November 2014.

The Application

10.  On 9 July 2018, the father took out the present application for the downward adjustment of the maintenance sum.  By that time, the monthly maintenance was $17,735; the father sought to reduce it to $10,000. 

11.  It is a common ground that as of today the monthly maintenance should still be $17,735 and the father is still paying this sum.

Present Situation of the Parties

12.  The father has remarried in January 2015 with a daughter born in August 2015, now aged 3 ½ years.  The father and his new family are now living in a flat in the Whampoa Garden that was co-owned by the father, his mother (“the grandmother”) and his younger brother.

13.  Ever since his return to Hong Kong, the father has been working for his parents’ business which is a metal products manufacturing company with its operation in the Mainland.  The undisputed evidence is that the father has been very much in charge of the business since the sudden death of his father in August 2008.  He is being assisted by the grandmother and his younger brother.  The grandmother is responsible for the finance of the business while the younger brother is responsible for routine accounting matters.  The father’s wife is also working part-time for the business.

14.  As for the mother, she is living with the son together with her family members - a household of total 8 persons - in a property at the Telford Garden, Kowloon Bay, which, according to the father, is owned by the mother’s parents.  This is not disputed by the mother.

15.  At the time of the divorce, the son was 7 years old.  He is now 12 and is attending Form 1.

The Mother’s Refusal to give Financial Disclosure

16.  The mother has all along refused to make any disclosure regarding her financial situation.  In her Form E dated 31 August 2018, the only disclosure she made was the son’s expenditure that was said to amount to $66,756 per month.   

17.  In the call-over hearing of 29 November 2018, despite the court’s warning that where appropriate, the court may draw an adverse inference against the mother in respect of her financial situation, the mother categorically refused to give any disclosure.  At trial, the only matter she disclosed was that she is working as a Relations Manager in a bank, this is a job that she has been working since July 2008 (ie before the breakdown of the marriage with the father).  She refused to disclose her salary.  

Legal Principles

18.  The court’s power to grant an order for variation is governed by s11(1) and (7) of the Matrimonial Proceedings and Property Ordinance,Cap.192 (the “MPPO”) which provides as follows: 

“11. Variation, discharge, etc. of orders for financial provisions

(1) Where the court has made an order to which this section applies, then, subject to the provisions of this section, the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended.

….

(7) In exercising the powers conferred by this section the court shall 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 order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.” (emphasis added)

19.  The Court of Appeal in AEM v. VFM [2008] 3 HKLRD 36, [2008] HKFLR 106 and HCTT v. TYYC [2008] HKFLR 286, [2008] 5 HKC 86 discussed the principles applicable to such an application.  Based on these authorities, the principles can be summarized as follows,

1.   The court has a wide power to deal with the orders that fall within the scope of s 11 of the MPPO. In an application under s 11, the court shall have regard to all the circumstances of the case and is entitled to look at the matter afresh.  In doing so, the court is entitled to look at all the relevant matters set out in s 7 of the MPPO: AEM v. VFM, supra, at [4].

2.   Any change in any of the matters to which the court was required to consider when making the original order is one of circumstances to be considered: AEM v. VFM, supra, at [5].

3.   The original order is one of the matters that the court should consider.  The court should pay due regard to the basis and intended effect of the original order and there should not be a radical departure from the approach taken by the parties. Ultimately, how much weight should be given to the original order must depend on the circumstances of the case.   Lapse of time and whether there has been a material change in the circumstances are matters that the court need to consider. AEM v. VFM, supra,at [8]; and HCTT v. TYYC, supra, at [15].

4.   Where a consent order is the subject of an application for variation, the application is not a venue for the parties to have second thoughts about their settlement.   An application for variation should not be pursued when in substance the grounds advanced tantamount to re-argument of the issues. HCTT v. TYYC, supra, at [49].

The Parties’ Stance

20.  At the beginning of his application, the father sought to have the maintenance reduced from $17,735 to $10,000.  His case is that there has been a substantial change in the circumstances in that he has now remarried with a daughter.  Comes with this are new obligations and expenditures including the increasing education expenses of his daughter.

21.  Before trial, the mother objected to the application.  She insisted on the continued implementation of the Consent Order.

22.  Despite the earlier differences, at trial, the parties managed to narrow down their difference to $2,000 only.  The father is willing to pay $12,000 while the mother is willing to accept $14,000; both agree that the express provision that the monthly maintenance can be adjusted upward in accordance with the Composite Consumer Price Index should continue to stand.

23.  With this narrow difference of $2,000, the scope of investigation has also become much narrower, focusing on the ability to pay on the part of the father and where the father is found to have the ability to pay at a certain level, whether he should be ordered to pay at that level.

The Financial Resources of the Father

24.  As said above, the father is operating the family business with the assistance of his family members, viz, the grandmother, his wife and his younger brother.   He has, on average, a monthly remuneration of $45,500 and his wife has $10,833 per month.

25.  The mother alleged that the father has transferred the family business from one company to another, has dissipated his assets and has manipulated his level of remuneration so as to achieve a downward adjustment of the maintenance.

26.  At trial, the father’s evidence has been carefully scrutinized in light of these allegations.  

27.  On the allegation that he has transferred the family business from one company to another, the father explained that the transfer was due to the abolition of the so called “Three-plus-one” trading-mix (“三來一補”) policy by the Mainland authorities.  Since the Mainland authorities abolished the “Three-plus-one” trading-mix policy, the original company had to be dissolved and a new company needed to be established in order to operate on a new business model.  The father admitted that he is not a shareholder or a director of the new company while previously he owned 25% in the original company with his younger brother owning 25% and his mother 50%, but he fairly accepted that he has a share in the business.  As a matter of fact, he frankly accepted that he is very much in charge of the business.  As I see it, according to the evidence, he is the mastermind of the business.

28.  The father has also been examined on the source of funds for the purchase of two properties. The first property, purchased in February 2012, is now being occupied by the father and his new family and the second one, purchased in March 2015, is being occupied by the grandmother and the younger brother.  Both properties were co-owned by the father, the grandmother and the younger brother.  I am satisfied that the source of funds could be traced back to two earlier properties owned by the father’s parents.

29.  As for the manipulation of his remuneration as alleged by the mother, the audited reports of the business for the last 3 years together with the father’s bank statements have been closely examined, the figure of “staff salaries” as stated on the audited statement is found to have largely tallied with the monthly remuneration of the father and his wife as claimed.  

30.  In my assessment, the father is forthcoming as a witness.  Given the narrow monetary difference between the parties, it is not necessary to deal with the evidence in detail here. Suffice to say, after having heard his testimony and judging it in light of the documentary evidence, it is clear that the business is by no means of a substantial scale.  It is very much a family business.  I consider it is highly improbable that the father would have carried out such a laborious exercise as asserted by the mother for the purpose of seeking a reduction of the maintenance.  In any event, on the evidence before me, I am satisfied there have not been any transfer of funds or any hidden assets as alleged for the purpose of defeating the mother’s claim.  I do not find any substance in the mother’s allegations.

The Financial Needs of the Father

31.  In his Form E dated 14 August 2018, the father reported that his monthly expenses are $29,633. This comprises general expenses of $14,623 (inclusive of mortgage payment of $10,000), personal expenses of $7,395 and her daughter’s expenses of $7,615. 

32.  The monthly sum of $29,633 was not challenged by the mother.  As I see it, it is a reasonable sum for a middle-class household of 3 persons.

33.  The father conceded that with an income of $45,500 per month, after having paid $12,000 as proposed, he would still have about $3,867: ($45,500 - $29,633 - $12,000).  When being asked by the court whether it means he has the ability to pay more, say $13,000 or even $14,000 as requested by the mother, the father explained given that his business may fluctuate, he would need this money as a buffer for his daughter’s increasing needs.  The daughter has started kindergarten.  He would like to make use of this extra money for some extra-curricular activities.   However, when being questioned by the court as to whether his wife has contributed to any of the expenses reported, he conceded that there is roughly about $1,000 from his wife.  Consequently, he agreed that as far as arithmetic is concerned, he is able to pay $13,000.  The father also accepted some of the miscellaneous expenses, such as travelling expenses or some entertainment expenses (for instance, going to a circus show in 2018) were paid by the family business. For these reasons, I find that the father is able to afford at least $13,000 per month.

The Mother’s Financial Resources and Needs

34.  As said above, apart from informing the court that she is working as a Relations Manager in a bank, the mother refused to disclose any of her financial situation, be it on the income or the expenditure side.

35.  As for the son, the mother gave a figure of $66,756 per month as the son’s monthly expenses.  Only some of the items were supported by documentary proof such as invoices or receipts.  Be that as it may, I agree with the father that the figure is outrageous.  Some of the items are ridiculously high; for instance, the mother said the son needs to have overseas trips at least 4 times a year and this item alone would be $201,796 annually, or $16,816 monthly.  It is never the mother’s suggestion that the son enjoyed this high standard of living at the time of the parties’ marriage.  For these reasons, the figure of $66,756 must be rejected.

What Should be the Amount Payable by the Father?

36.  Given that the mother has accepted a lower figure of $14,000, it is clear she agreed that there has been a substantial change in the father’s personal circumstances.   Further, the parties’ original agreement was that out of a total of $14,000 payable by the father, $7,000 was for the maintenance of the son and the remaining $7,000 was for the mother.  It was only subsequently at the request of the mother that the two sums were combined into one, expressed to be for the maintenance of the son. There was virtually no discussion between the parties at that time regarding how much the son would need as a result of which a figure of $7,000 or $14,000 was obtained.  Lastly, the mother had already been in gainful employment at the material time.  It is never the suggestion of the mother that at the time of the agreement it was agreed that the father should be responsible for all the expenses of the son.

37.  I have found the father is able to afford at least $13,000.  The question is at what level the father should be ordered to pay.

38.  At the closing submission, the father made the point that he has not been able to keep any savings.  I accept that with the growing needs of his daughter, it is justifiable for the father to reserve some extra money as a buffer. 

39.  On the other hand, the mother refused to make any financial disclosure.  The only disclosure that she made (ie the son’s financial needs) is ridiculously high and utterly unreliable.  This greatly impedes the discharge of its duties on the part of the court. Despite repeated warnings, the mother has been adamant in her unyielding stance.  As a result, the court has not been able to properly and accurately assess the mother’s financial resources and the son’s needs.  In the circumstances, I am prepared to draw an adverse inference against the mother in respect of her financial situation and the son’s needs.   I am prepared to hold that $13,000 should be the father’s fair share for the son’s needs and this is the figure that the father should be asked to pay.

40.  The father has been paying $17,735 per month up to this day.  The revised sum of $13,000 should therefore commence as from the next month, ie May 2019.  Further, this newly assessed sum should stay on for the rest of the yearly period.  Therefore, any adjustment according to the Composite Consumer Price Index should only be made on 1 April 2020.

Orders

41.  For the reasons aforesaid, I give an order that: -

1.   Paragraph (3) of the Order dated 22 September 2014 be varied as follows,

“The petitioner do pay to the respondent for the maintenance of the said child periodical payments at the rate of $13,000 per month payable in advance commencing on the 1^st day of May 2019 and thereafter payable on the 1^st day of each succeeding month until such time as he attains the age of 18 or shall cease full time education.”

2.   There shall be no adjustment on the periodical payment payable by the petitioner pursuant to paragraph (4) of the Order dated 22 September 2014 until the 1 April 2020.

Costs

42.  The parties were only able to narrow down their differences at the commencement of the trial and the final figure awarded by the court is the median figure of their respective final offers.  Neither party can be considered as entirely successful or failing.  In the circumstances, the proper costs order should be no order as to costs; and I so order.