LKW v. KY

FCMC No. 530/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 530 OF 2011

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DECISION
(Leave to Appeal)

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1.  On 17^th July 2014 I gave judgment after a trial of the question of ancillary relief and ordered the Petitioner Husband to pay HK$5,000 per month to the Respondent Wife for her maintenance until she dies or remarries, and to continue to pay for the mortgage instalments of their former matrimonial home until its discharge whereupon to transfer his half share and interest therein to the Wife in full and final settlement of all her other claims against him.  

2.  The Husband by way of a summons issued on 14^th August 2014 now seeks leave to appeal against that judgment in that this court erred in law and/or in facts in arriving at those decisions and hence those orders be set aside. Before proceeding to consider his proposed grounds of appeal, however, it would be necessary to provide some relevant back ground of the case leading to my judgment.

The Background

3.  The full background of the case had already been set out in my said judgment, and I do not propose to recite them here save for those details which are relevant to the application now before me.

4.  The parties were born and raised in China but the Husband became a Hong Kong resident in the 1980s. He met the Wife in the 1990s in Shenzhen where she worked as a restaurant waitress. They soon started a relationship and subsequently registered their marriage on 23^rd November 1998, it being a second marriage for both and with the Wife’s daughter born to her first marriage accepted as a child of their family.

5.  After the marriage the parties continued to reside in Shenzhen in their matrimonial home purchased by the Husband but put in their joint names, while the Wife quitted her waitress job to become a full time housewife and became wholly dependent on the Husband who ran his transportation business which owned several trucks shipping goods between Hong Kong and the Mainland.

6.  In 2000 the Husband bought another property in Fanling, Hong Kong where the parties would stay from time to time when they were in Hong Kong. In the following year in 2001 the Wife gave birth to their son who was sadly born with a congenital heart disease that required regular medical treatment and attention.

7.  In 2004 the Wife was granted a one-way visa to Hong Kong and came to work in a karaoke/nightclub but was arrested by police  about a month later for allegedly working in a vice establishment. She was subsequently released without charge and returned to Shenzhen.

8.  In about July 2009 the Husband believed that their marriage was at an end and moved out of their former matrimonial home in Shenzhen. In October 2009 the parties met to discuss possible divorce settlement during which the Husband offered to pay the Wife a lump sum of RMB500,000 as a clean break, a monthly sum of HK$8,000 for the maintenance of their son, and to transfer his interest in their joint Shenzhen property to her, and taht he was to retain his Fanling property and his business.

9.  While it was in dispute whether there was any agreement reached between the parties after that meeting, the Husband did pay the said sum of RMB500,000 to the Wife a month later in November 2009, and also started to pay the said monthly sum of HK$8,000 for the son as well as HK$2,000 per month for the daughter.

10.  Shortly thereafter the son was enrolled into a primary school in Hong Kong and stayed with the Wife in a rented flat in Shatin during school days while on weekends and school holidays they would return to the Shenzhen property.

11.  In February 2010 the Husband sold his Fanling Property for HK$1,790,000 allegedly to repay a friend for lending him the RMB500,000 for his earlier payment to the Wife. In October 2010 the parties had a heated argument when the Husband accused the Wife for going back against their agreement by demanding for more money, while the Wife accused the Husband of cohabiting with a mistress in Shenzhen at what had come to be known as the Fumin Property and later at another property known as Long Kong Property, of which she suspected that he was the beneficial owner of either or both.

12.  Eventually the Husband went ahead with his petition for divorce in January 2011 with the decree nisi subsequently granted in July of the same year together with custody of the son to the Wife, as the daughter was then already over the age of 18 but was still on full time education, while the question of ancillary relief primarily at that time over maintenance for the Wife and children as well as the former matrimonial home in Shenzhen remained in dispute.

13.  Sadly the son died from his illness in July 2012 and hence the ancillary relief trial did not proceed until early 2014 when the Wife made her open proposal for the Husband to pay her monthly maintenance at HK$8,000 for herself as she had no income and HK$3,000 for the daughter who was then in university in Shenzhen, and for the transfer of the Husband’s interest in the former matrimonial home in Shenzhen to her free of mortgages, while the Husband’s counter-proposal was essentially for the said property to be sold with 55% of the net sale proceeds be to the Wife and the remaining 45% to him in full and final settlement of their respective claims against each other including over the said sum of RMB500,000 and the Husband’s transportation business, and no provision for periodical payments for her as he believed that she was running an aquarium business selling fish tanks in Shenzhen, and hence was capable of supporting herself.

14.  Given their wide gulf as to their respective proposal, the parties therefore proceeded to trail during which the Wife appeared in person while the Husband was represented by counsel, with essentially the following major issues in disputes for the court’s determination:

(a)   Whether the Husband had any interests in the Fumin Property and/or Lung Kong Property;

(b)   Whether he had had the financial means to own those properties, and hence what were his income from his transportation business;

(c)   Whether the Wife had any interest in an aquarium business in Shenzhen;

(d)   Whether the Wife had properly accounted for the said RMB500,000;

(e)   What were their marital assets and how they should be divided between the parties.   

15.  As noted above after the trial I found that the Husband had failed to make full or frank disclosure of his interests in either or both of those properties and accordingly made adverse inference against him that he had interests in either or both, that he would have had the financial means and income from his transportation business to own either or both properties, that the Wife had properly accounted for the said sum of RMB500,000, that she had no interest in the aquarium business, and for the reasons set out in the judgment I made those orders referred to above, which led to the Husband’s application now before me, upon which the following legal principles apply.                     

The Legal Principles

16.  The Husband’s application is governed by s 63(1) of the District Court Ordinance, Cap. 336, and the threshold for granting leave is provided under s 63A(2) as follows:

“Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

17.  The relevant test of whether an appeal has a reasonable prospect of success is as set out in the decision of Chu J, as she then was, in Wynn Resorts (Macau) S.A. v Mong Henry, HCA 192/2009 where she stated:

 “18. … to adopt as the test for granting leave a requirement that the appeal has reasonable prospects of success, as conveying the notion that the prospects of succeeding in the appeal must be “reasonable” and therefore more than “not fanciful” without having to be “probable” …

 19. To meet the “reasonable prospect of success” test, an applicant is required to show more than just an arguable case, but an appeal that has merits and ought to be heard although he does not have to demonstrate that the appeal will probably succeed.”

18.  This test has since been adopted by the Court of Appeal in SMSE v KL [2009] 4 HKLRD 125, and more recently in TPL v WYY, HCMP 316/2013 when Fok JA, as he then was, stated in §6 of his judgment:

“ … The relevant test of whether an appeal has a reasonable prospect of success is whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal. A reasonable prospect of success therefore means an appeal with prospect that are more than “fanciful” but do not need to be shown to be “probable”.

19.  Furthermore, as regard an appeal against a judge’s discretionary decision in the application for ancillary relief, Kwan JA recently had this to say in PW v PPTW, CACV 224/2013:

 “37. The judge’s decision in the application for ancillary relief is highly fact-specific and very discretionary, as repeatedly emphasised in LKW v DD at §§52, 85 and 131. The husband’s appeal involves challenging the judge’s findings of fact and exercise of discretion. The approach of the appeal court in this regard is well established. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appeal court is entitled to interfere (Bellenden (Formerly Satterwaite) v Satterwaite [1948] 1 All ER 343 at 345). As stated by Lord Hoffmann in Piglowska v Piglowska [1999] 1 WLR 1360 at 1373A to D:

 “Thirdly, the exercise of the discretion under section 24 in accordance with section 25 [of the Matrimonial Causes Act 1973] requires the court to weigh up a large number of different considerations. The Act does not, as I have said, lay down any hierarchy. It is one of the functions of the Court of Appeal, in appropriate cases, to lay down general guidelines on the relative weights to be given to various factors in different circumstances. … These guidelines, not expressly stated by Parliament, are derived by the courts from values about family life which it considers would be widely accepted in the community. But there are many cases which involve value judgments on which there are no such generally held views. … These are value judgments on which reasonable people may differ. Since judges are also people, this means that some degree of diversity in their application of values is inevitable and, within limits, an acceptable price to pay for the flexibility of the discretion conferred by the Act of 1973. The appellate court must be willing to permit a degree of pluralism in these matters.”

20.  It is with all these principles in mind that I shall now consider the Husband’s proposed grounds of appeal set out below.

Proposed Grounds of Appeal

21.  The Husband’s proposed grounds of appeal as originally set out in his draft Notice of Appeal annexed to his said summons essentially consist of 5 main categories in the Skeleton Submission of Ms Wong for the Husband who also represented him at the trial, which can be summarised as follows:

(a)   That this court erred in law and on the evidence to find that the Husband failed to fully and frankly disclose his interests in the said Fumin Property and Lung Kong Property;

(b)   That this court erred in law and on the evidence to find that the Husband had sufficient means to own the said Fumin Property and Lung Kong Property including stepping into the arena of an expert to interpret the audited reports of his transportation business when they were not challenged by the Wife during the trial;

(c)   That this court erred on the evidence not to find that the Wife had failed to fully or frankly disclose her financial means including her interests in an aquarium business and by taking into account of information obtained from the internet but never put to the Husband at the trial;

(d)   That this court erred on the evidence in finding that the Wife had spent most if not all of the RMB500,000 paid to her by the Husband when she was also receiving maintenance from him;

(e)   That this court erred in law and on the evidence not to apply the principle of equal sharing of the marital assets between the parties, and to find that the Husband’s open proposal insufficient to meet the Wife’s future needs.     

Fumin Property and Lung Kong Property

22.  It was the Wife’s case that the Husband had concealed his interests in these 2 properties, neither of which were registered in his name, by relying mainly on the facts that he had resided in the former property where she discovered 4 renovation delivery notes amongst his belongings which were addressed to a man in the Husband’s surname and which linked to the latter property.   

23.  The Husband denied to have any interests in either property, admitting his only connection to them for having stayed in the former for only one month at his relative’s request to keep a watch of its renovation, and for having visited a friend residing at the latter for a few times.

24.  In my judgment from paragraphs 62 to 90 I set out in details the basis and reasons of my findings on this issue including that the 4 renovation delivery notes could not have been fabricated by the Wife, that the Husband’s evidence on them were scanty and evasive, that I accepted the Wife’s evidence of how she obtained them, that I believed that the person surnamed Lau in them actually referred to the Husband, and that in the circumstances of all the evidence before me that the Husband had failed to fully and frankly disclosed his interests in those 2 properties, and hence drew adverse inferences against him in having beneficial interests in either or both of them.

25.  In her submission Ms Wong argues inter alia that the court should not have found the Husband’s evidence as scanty or evasive as the transcripts of the trial reveal that he was neither as described. In my view the transcripts do not reveal any pause or hesitation on the part of the Husband, let alone his demeanor in answering questions, but that I was also entitled to arrive at that conclusion by taking into account of his change of his evidence on those delivery notes when he first stated in paragraph 13 of his 2^nd Affirmation that “ … Those barely legible delivery notes contain nothing which arguably points to me, not to say conclusively. Even the barely legible words “劉生” are neither here nor there” butlater admitted in his testimony that he was indeed the Mr Lau referred to in the 1^st delivery note (“KY-7”) in respect of the Fumin Property.

26.  Furthermore, upon finding that the Wife could not have fabricated the other 3 delivery notes in relation to the Lung Kong Property based on my observations of her in court and the type of renovations mentioned in those notes, and accepting that she found them amongst the Husband’s belongings at the Fumin Property, and given the Husband’s failure to provide any logical or credible explanation as to how he was connected by those notes to the Lung Kong Property other than his occasional visits of his friend at that property, and in the absence of any possible logical conclusion other than that he was interested in that property, I am unable to see how my findings that he had failed to make full or frank disclosure of his interests in that property and that adverse inference should be drawn against him in the circumstances can be criticised, or that this ground can be said to have any reasonable prospect of success.                       

The Husband’s Income from Business

27.  This issue in dispute was relevant not just as to whether the Husband’s income from his transportation business was able to meet the Wife’s claim for monthly maintenance but also whether he could afford to own either one or both of the Fumin Property or Lung Kong Property as suspected by the Wife, and it was all along plain in both her affirmations and testimony at the trial that she disputed the Husband’s disclosed income including the number of trucks his company owned and operated as well as its disclosed profits, and as he was the sole beneficial owner of that company known as Goldway Transportation which was the sole source of his income, hence this court was obliged to consider and examine its audited reports and financial statements disclosed by the Husband in order to ascertain his income.

28.  In my judgment on this issue from paragraphs 46 – 58 I identified those issues and proceeded to examine the audited reports and financial statements by adopting the straight forward approach by setting off the stated expenses from the revenue or gross profit to arrive at the net profits which may or may not have been distributed to the Husband but were nevertheless available for distribution if he so wished, and by discounting or adding back the notional amount allowed for the accounting term of  “Depreciation Value” and by taking into account of the stated “Entertainment Expenses”, plus the fact that his bank records also revealed much more substantial deposits than his disclosed income, I arrived at the conclusion that the Husband was in fact earning or capable of earning more than he had disclosed.       

29.  Ms Wong for the Husband argues that since the Wife never during the trial challenged those reports or statements including their authenticity or their accuracy, it was therefore wrong or inappropriate for this court to step into the arena of an expert to explain and interpret them in particularly as to the terms and sums under “Depreciation Value” and “Entertainment” to arrive at a conclusion of which the Husband was never aware as the issues, nor was he given any opportunity to address them at the trial if they were.    

30.  In ancillary relief litigation, the quasi-inquisitorial role of the court has been well established and reflected in Thorpe LJ’s comment in Parra v Parra [2003] 1 FLR 942 at §22:

 “ … the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviates the need for the investigation of minute detail and equally the need to make findings on minor issues in dispute. The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisitorial role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally he is not bound to adopt a conclusion upon which the parties have agreed. But this independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable. Judgments in this field need to be simple in structure and simply explained.”

31.  This comment of Thorpe LJ was in fact cited with approval by the Court of Final Appeal in the now seminal case of LKW v DD [2010] 13 HKCFAR 537 at §69, and was recently revisited by the same court in Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung, FACV Nos.10 & 11 of 2014 when the Chief Justice commented on how far that particular role of the court can go in matrimonial litigation:

 “42. In his judgment, Cheung JA was of the view that where the parties had not raised an issue, this did not prevent the court from doing so of its own motion. Reliance was placed on the decision of the English Court of Appeal in Parra v Parra where Thorpe LJ mentioned the quasi-inquisitorial role of the court in ancillary relief litigation.

 43. As H pointed out in his written Case, there are limits as to how far this point can be stretched, in particularly in the present case. What it does not mean is that matrimonial litigation is some form of “free for all” where procedural rules and practice, coupled with their rationale, have no application. In matrimonial litigation, I daresay that the court would exercise its quasi-inquisitorial role most acutely where children are concerned, or if one or the other party or both parties suffered from some disadvantage. Where, however, both parties are properly represented (as in the present case where at every stage, H and W have been represented by leading counsel), the court can in almost every case, unless some exceptional circumstances exist, rely on the parties to look after their own interests. It would be quite wrong in such circumstances for the court to second-guess, much less override, the parties’ approach to the litigation, much of it being driven by tactical considerations.”

32.  Although the Wife in this case was legally represented throughout the stage when issues were identified and cases were pleaded, and as noted above which were well and clearly reflected in her affirmations of her disputes inter alia over the Husband’s business income, by the time of the trial she became unrepresented and it was clear to me that she was unable to read or understand English, in which most of the Husband’s affirmations and financial reports were, and barely capable of properly expressing herself in court, let alone to master the art of cross-examination or submission on the evidence, clearly she was in a disadvantaged position compared with the Husband and thus necessitating the court’s inquisitorial exercise on those reports on its own motion, not to mention its statutory duty to investigate the Husband’s means, and for that matter the Wife’s as well, under the Section 7 exercise of the Matrimonial Proceedings and Property Ordinance, Cap192.

33.  Furthermore, if that exercise was regarded as procedurally wrong in denying the Husband the opportunity to explain or address those issues during the trial, he should have stated so in an affirmation in support of his leave application and to adduce such evidence, but which he has not done so. In the premises I fail to see how such ground can be said to have any reasonable prospect of success.        

The Wife’s Interest in Aquarium Business

34.  The Husband’s case that the Wife had been running this business was based primarily on a business card of the Wife stating to be the boss of the aquarium shop which he claimed to be attached to a leaflet obtained by him at the shop and produced as his evidence. In my judgment [§26 – 36] I found that the Wife could not have the capability or means to own and operate this business based inter alia on her own personal background and evidence and also on the information obtained from a website printed on the leaflet about the company which owned this business.

35.  The Husband’s main ground against these findings is similarly that it was procedurally wrong or unfair for the court to rely on information obtained from the website and without providing him the opportunity to address or rebuke them in court.

36.  As the website information were part of the evidence produced by the Husband, I fail to see why the court was not entitled to form its own interpretation, but the point must again be that if indeed it was procedurally wrong or unfair to the Husband not to have been afforded any opportunity to address the court on those information obtained from the website, there is however no such application by him to do so, and if those information are in fact true and accurate, then what prejudice would he have suffered as a result? In the premises I again fail to see how he would stand any reasonable prospect of success with this ground.         

The Wife’s Account of RMB500,000

37.  In my judgment [§37 – 45] I accepted the Wife’s evidence that by the time of the trial most if not all of this sum had been depleted mainly on her living expenses, the daughter’s school expenses, her mother’s medical fess and her legal costs incurred in the divorce proceedings, and hence did not accede to the Husband’s request to include this sum in the parties’ marital assets for division.

38.  The Husband’s ground on this issue is essentially that since in addition to this sum of RMB500,000, he had also paid the Wife HK$8,000 per month as maintenance, and hence the court should not have accepted the Wife’s evidence that she had to rely on the RMB500,000 to meet her living expenses.

39.  This argument of the Husband is not entirely accurate, as the monthly sum of HK$8,000 were for the son only as he admittedly proposed at their meeting in October 2009 when he offered to pay the W that sum of RMB500,000 as a clean break in full and final settlement of her maintenance claims, and that after the son’s death in July 2012 he had stopped paying that monthly maintenance of HK$8,000, and hence the argument that he had continued with that payment is both wrong and misleading.

40.  In the premises and having accepted the Wife’s evidence of how she spent most of that sum as set out in §39 of my judgment, I fail to see how this ground of the Husband can stand any reasonable prospect of success on appeal.    

Section 7 Exercise on Distribution of Assets

41.  This ground of the Husband, as clearly stated in Ms Wong’s Skeleton Argument, is premised on the basis that this court did err in the various factual findings referred to above, but otherwise as it is not the Husband’s argument that this court should not have exercised its discretion in arriving its conclusion or exercised it wrongly, in the circumstances and having already rejected all the Husband’s grounds of appeal against those factual findings referred to above, it follows that there is also no reasonable prospect of success for this ground.

Conclusion

42.  In the premises and accordingly, the Husband’s leave application is refused. Given that the Wife is unrepresented and made little argument at the hearing other than that she opposed the application, I am of the view that it would be appropriate to make no order as to costs, which is an order nisi to be made absolute at the expiration of 14 days.