TYCZ v. SKY

FCMC 6549 / 2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 6549 OF 2002

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J U D G M E N T
(maintenance of children)

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APPLICATION

1.  The Respondent (“Mother”) took out a summons dated 30^th October 2009 (“the said Summons”) for, inter alia, that her application for maintenance for the children of the family be set down for hearing.

2.  She indeed applies for an order that the Petitioner (“Father”) do pay periodical payment for HK$70,000 per month to her for and on behalf of the 2 children of the family, twin girls, born on 28^th September 2000. She also asks for the children’s maintenance to be backdated or for a lump sum to be paid in order to reflect the maintenance that the Father shall have paid over the years, which is in the region of HK$2.2 million excluding living costs such as accommodation and food. She further requests for an order for monthly maintenance to be adjusted in accordance with the inflation index as well as an attachment of income order.

BACKGROUND

3.  The parties got married in August 2000 in New York, the USA. The children were born there in September 2000, just about 1 month later. As they separated in November 2000, the marriage indeed only lasted for a few months.

4.  Initially, the Mother started the proceedings under the Guardianship of Minors Ordinance in FCMP No.19 of 2002 on 6^th February 2002, in which she sought sole custody, care and control of the 2 children. On 14^th June 2002, the Father issued a petition for divorce in this case. The decree nisi was granted on 29^th November 2002 which was only made absolute in August 2006. The litigation between the Mother and the Father has been protracted and acrimonious. After a long bitter battle for the children’s custody before Judge Geiser starting from 2002 to 2005, the sole custody, care and control are granted to the Mother and the Father has defined access to the children every alternate week-end and the main school holidays are shared equally pursuant to the order of Judge Geiser dated 30^th September 2005. It was further ordered that all questions regarding financial relief be adjourned with liberty to restore.

5.  It was recorded in the Judgment of Judge Geiser dated 30^th September 2005 that the Father was then paying $8,000 per month for the children in addition to their educational and medical expenses. But the Father admits that he fails to pay the same shortly thereafter.

6.  Regarding the parties’ ancillary relief claims against each other, they were dismissed pursuant to the Order made by consent dated 14^th August 2006. In the 14^th Affidavit of the Mother filed 1^st August 2006, she said, inter alia, that she was able to meet the children’s expenses by way of financial help from her family and she and her family would continue to meet the children’s usual expenses in this manner until the Father’s financial circumstances improved. She prayed for a Section 18 declaration. As a result, such declaration was granted by the court on 14^th August 2006.

7.  After issuance of the said Summons by the Mother, the Father finally started to pay $4,000 per month for each of the children (total $8,000) as their interim maintenance commencing on 28^th November 2009 pursuant to the Order of Deputy Judge Kot dated 10^th November 2009.

8.  The Father has remarried and has a baby of about 6 months old. He said that his wife is pregnant again and the expected due date is October this year. His wife has an income of around HK$60,000 a month.

9.  The Mother has not remarried and resides with the children in a flat in Repulse Bay rented by her mother. The children are now 10 years and 7 months attending Hong Kong International School. She said that she is now working in her sister’s company earning $24,000 a month.

THE LAW

10.  The jurisdiction of the court to make orders for the financial support of the children is found in section 5 of the Matrimonial Proceedings and Property Ordinance Cap.192 (“MPPO”). In making orders under section 5, the court shall regard to the matters in section 7(2) of the MPPO, which are set out below:

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

(a)    the financial needs of the child;

(b)    the income, earning capacity (if any), property and other financial resources of the child;

(c)    any physical or mental disability of the child;

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

(e)    the manner in which he was being and in which the parties to the marriage expected him to be educated;

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

11.  According to s7(2) of the MPPO, the court has to consider the matters mentioned in s7(1)(a) and (b), which says:

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)…………

Financial needs of the children

12.  The Mother stated in Part 4.3 of her Form E dated 21^st January 2010 that the total monthly expenses for the children are $120,560.52 and after discount by 20% as some of the expenses to her account, the net sum is $96,448.41.  Despite it was stated “see attached spreadsheets”, no spreadsheet is in fact attached to her Form E.

13.  The Father’s solicitors issued a questionnaire asking the Mother to provide such spreadsheets and the copy receipts to substantiate the alleged average monthly expenses of $120,560.52. In the Answer dated 22^nd March 2010, the Mother’s solicitors attached a spreadsheet for the year 2009 showing the average monthly expenses of $223,517.1 instead of $120,560.52. Nevertheless, she makes no explanation as to why there is more than $100,000 difference between the 2 figures.

14.  At the trial, the Mother at first provided a detailed spreadsheet showing the average expenses of the children for about $240,000 a month, which includes some of her personal expenses. Then, the Mother made some adjustments and produced a revised spreadsheet showing the average monthly expenses of the children for about $180,000.

15.  Although the veracity of the actual expenses is not challenged, the Father said that the Mother is spending too much. For instance, she spends about $20,000 on the children’s birthday every year. She also takes the children on luxury holidays including skiing, staying at the world famous hotels and the cruise through the Mediterranean in Europe etc. The average amount spent for travel for the 2 children is about $80,000 per year.

16.  He further said that the Mother is from one of the most prominent and wealthy families in Hong Kong. Although she only earns about $24,000 a month, she is still able to hire 2 domestic helpers and a driver, reside with the children in a luxury duplex of 3,000 square feet in Repulse Bay and maintain her own and the children’s monthly expenses for nearly $240,000.

17.  The Father considers that the reasonable monthly expenses of the children are $74,000. Therefore, he makes an open offer to pay $8,000 per month as the children’s maintenance plus his undertaking to pay the full annual tuition fees for about $326,000 for both of the children as well as their medical and dental expenses upon the production of the original invoices by the Mother so that he may claim such expenses back from his employer’s insurance.

18.  The breakdown of the average monthly expenses claimed by the Mother and the reasonable monthly expenses suggested by the Father are set out as follows:

	Average Monthly Expenses claimed by Mother	Reasonable Monthly Expenses suggested by Father
Beauty	1,479.00	150.00
Birthday	1,603.20	150.00
Clothes	3,557.41	1,500.00
Clubs	4,696.68	0
Entertainment	660.24	0
Extracurricular activities	10,199.61	1,800.00
Food	12,186.31	5,000.00
Gift & Gratuities	4,215.51	0
Help	11,383.34	0
HKIS	32,862.27	31,000.00[1]
Home & Utilities	67,331.92	30,000.00
Medical	5,403.57	2,000.00
Misc	4,646.72	0
Toys	81.80	0
Transportation	8,611.19	2,500.00
Travel	6,964.62	0
Foreign exchange	4,278.06	0
Total:	180,161.45	74,000.00

19.  Before I can come to the conclusion as to the reasonable financial needs of the children, I am bound to consider the matters discussed below first.

Income, earning capacity (if any), property and other financial resources of the child

20.  There is no relevancy of these matters in this case as the parties have not raised the same at the trial.

Physical or mental disability of the child

21.  Ms. Irving, Counsel for the Mother, submitted that the children have had health problems in the past and require frequent medical consultations. She fails to specify what the health problems are. Although the Mother did produce some medical receipts of the children, I do not accept that these receipts can prove the children are suffering from any significant physical or mental disability.

Standard of living enjoyed by the family before the breakdown of the marriage

22.  About 2 to 3 months after birth of the children, the parties lived apart. The parties are not in dispute that since their separation in November 2000, the marriage has in fact broken down. Before the breakdown of the marriage, the parties and the 2 newborn children resided in a 2-bedroom apartment of 1200 sq. ft. in New York, the USA. The Father said that after the separation, the Mother and the children moved back to her apartment at Old Peak Road in Hong Kong. He never regarded this apartment as the matrimonial home.

23.  The Mother said that the children have lived at a high standard of living. I consider that such high standard of living only happens after the breakdown of the marriage but not before. It is not denied by the Mother that she is from a wealthy family and indeed she admitted that she is able to spend about $240,000 a month for her and the children’s expenses with the support of her family rather than with the support of the Father. I only accept that the standard of living enjoyed by the family before the breakdown of the marriage is comfortable but not luxurious.

Manner in which the children were being and in which the parties to the marriage expected them to be educated

24.  The children are now studying in an international school which is one of the most expensive schools in Hong Kong. All along the Father agrees to pay their annual school fees for about $326,000. Therefore, it can be readily inferred that the Father expects the children to enjoy the life style and the extra-curricular activities at a similar level to their school friends. Since both parties are well-educated and have degrees in the universities, they must expect their children will receive similar education in the future.

25.  It can also been seen from the various photographs produced by the Father that he expects the children to live in a spacious and comfortable house.

26.  The Father stated in his Form E dated 20^th January 2010 that he and the children enjoy club facilities at the American Club, the China Club, the Royal Hong Kong Yacht Club and the CWB Golf Club (which is provided by his employer). So, I can see no reason why the Father disagrees to include the club expenses as one of the reasonable expenditures of the children.

Father’s income, earning capacity, property and other financial resources

27.  From 7^th August 2006 to 2^nd October 2007, the Father was working for B C A Ltd. According to the tax return, the Father had an income of almost $2 million (including a sign on bonus) and housing of about $1 million (rent paid by the employer to the landlord) for the period from 7^th August 2006 to 31^st March 2007. Thus, he has about $3 million for this 8 months period and an average monthly income of around $375,000.

28.  From 1^st April 2007 to 2^nd October 2007, he earned more than $820,000 together with housing of about $800,000 (rent paid by the employer to the landlord). Therefore, he has about $1.62 million for this 7 months period and an average monthly income of around $230,000.

29.  From October 2007 to July 2008, he was unemployed. On 5^th August 2008, he started working for D Securities as managing director. From then onwards until 31^st March 2009, he earned more than $1.3 million together with housing of about $600,000 (rent refunded to him by the employer). Hence, he has about $1.9 million for this 8 months period and his average monthly income is around $237,500.

30.  He had an income of almost $2.3 million in addition to the housing allowance of almost $650,000 (rent refunded to him by the employer) for the financial year 2009/2010. Hence, he has about $250,000 per month for that year.

31.  Out of the Father’s claimed expenditure of $218,636 per month in his Form E, he spends around $139,600 for his residence of about 2,300 sq. ft. in Seven Road, the Peak. Breakdown of $139,600 is set out below:

32.  The Father has current housing allowance of $78,000 per month but elects to pay more than $60,000 a month out of his disposable income to live in that residence. He explains that since that residence was originally rented by his former employer, he just wants to provide consistency and continuity for the children. I cannot accept that is a good explanation. The children only stay in that residence every alternate week-end and about half time of the main school holidays. Therefore, the Father and his new family enjoy that residence most of the time. Ms. Irving, Counsel for the Mother submits that the children would be better served by having proper financial provision made for them than spending access in a lavish accommodation on the Peak during some weekends and holidays. I agree.

33.  Ms. Irving also rightly points out that when the Father was unemployed for about 10 months from October 2007 to July 2008 and had to borrow money to pay the legal costs, he still did not move from that residence. That is to say, he was paying $130,000 odd per month even though he had no income. I consider that he is not only unreasonable but also financially irresponsible to the children. If he moves to a cheaper residence, I believe that he shall be able to save at least half a million during that period of time.

34.  The Father’s new wife has an income of about HK$60,000.  I am of the view that she should be able to contribute to some domestic expenses of their family, such as the wages of the maid, expenses for the 6-month baby and the new baby to be coming in October this year.

35.  If the Father has the basic monthly income of $200,000 (inclusive of housing allowance) and his wife has about $60,000, the total income of his new family is about $260,000 per month without taking into account of the bonus to be paid to the Father in the forthcoming month. Although the Father said such bonus is discretionary, I consider that it shall not be less than $200,000 in light of the past record of payment of bonus.

Father’s financial needs, obligations and responsibilities

36.  According to his Form E dated 20^th January 2010, he owes several loans to his friends for the total sum of around $3.6 million. He said in his testimony that he has repaid some of them upon receiving the bonus from the employer. There is no evidence before me that his friends will press him to repay these loans.

37.  He stated in this Form E that his monthly expenses are $218,636. Ms. Irving has not challenged these expenses save and except the rent, management fees and utilities as mentioned above.

38.  He also borrows 2 loans from United Asia Finance in November 2010 for the total sum of $910,000 and has to repay about $23,000 per month. In my view, the Father does not have borrows such loans so long as he is willing to move to a cheaper residence.

Mother’s income, earning capacity, property and other financial resources

39.  The Mother worked for M L until the end of 2008 earning average about $23,400 a month. Since about February 2009, she starts working for her sister earning $24,000 per month. She received a bonus of $20,000 in April 2010 and further $18,000 in August 2010. She said that she receives some money from her sister and other relatives from time to time, either as gift or loan. The Mother agrees that she has over the last many years been funding the expenses with the assistance of borrowings from her family. She said that she incurs the loan due to her family for more than $4 million and that her family exerts no pressure on her for repayment.

40.  The Father submits that the support from her family provides her with substantial financial resources so as to maintain her and the children’s luxurious lives by spending almost $240,000 every month freely. Although it is beyond my imagination as to why the Mother’s relatives keep on lending such huge amount of money to her every month, I consider that such sum shall be in law regarded as either gift or loan but not her income or financial resources for the obvious reason that the Mother’s relatives have no legal obligation to support her and the children financially. They may, if they wish, stop giving her any money at any time although it seems to me very unlikely.

41.  Regarding the Mother’s earning capacity, I consider that she is an intelligent woman and shall be able to earn much more than what she is now earning, namely $24,000 a month with bonus. Obviously, she may not think it necessary to earn more since her wealthy family will certainly provide her and the children’s financial needs no matter the outcome of this application. At the same time, I shall not ignore the fact that she has to spend a lot of time in looking after the children’s affairs. Nonetheless, in view of the Mother’s high education and past working experience in M L, I consider that she shall be able to earn about $40,000 a month.

Mother’s financial needs, obligations and responsibilities

42.  The Mother has not completed Part 4.1 and 4.2 in her Form E dated 21^st January 2010 as she stated therein that the monthly household and personal expenses did not appear to be relevant to her application for the children’s maintenance.

43.  She also mentioned in her Form E that she owes about $4 million to her mother and sister. Nonetheless, she concedes that she receives no pressure from them for repayment. As a result, I have to assume she has not much financial obligations except some of her own and the children’s reasonable expenses.

Discussion

44.  In my view, the Mother’s figure of $180,161.45 is on high side and unacceptable since she fails to explain why she originally stated the figure of $96,448.41 in her Form E dated 21^st January 2010 but suddenly changed it to $180,161.45 at the time of the trial. Bearing in mind that her Form E was prepared by her solicitors and made by her under oath, she has to be extremely careful in completing the same. Even if the sum of $180,000 odd is actually incurred by the Mother for the children every month, I cannot accept that it is the children’s financial needs as mentioned in s7(2) of the MPPO. In my judgment, if the marriage between the parties has not broken down, no one will expect that the Father will or is able to pay this $180,000 odd for the children’s expenses every month.

45.  On the other hand, I also consider that the figure of $74,000 suggested by the Father seems too low. It is unreasonable for him to expect no expenses for clubs, entertainment, gift, travel etc. Having carefully considered all the relevant matters as mentioned above, I am of the view that the reasonable monthly expenses of the children are $82,000, breakdown of which is set out as follows:

Beauty	500
Birthday	500
Clothes	1,000
Clubs	1,000
Entertainment	400
Extracurricular activities	5,000
Food	3,000
Gift & Gratuities	500
Help	4,000
HKIS	30,000
Home & Utilities	30,000
Medical	2,000
Misc	500
Toys	100
Transportation	1,000
Travel	2,000
Foreign exchange	500
Total:	82,000

46.  The next question would be how much the Father shall share this sum of $82,000 every month. In my judgment, if he is prepared to move from the Peak residence, he is financially capable to meet this payment. It would be irresponsible for the Father to rely on the Mother’s relatives to support the children financially. Waterhouse J. said in page 117 of the judgment in Moon v Moon[2]:

“It is the father here who has set the standard of his life in his new marriage and it is part of his responsibilities and duties to cut his coat accordingly in the light of his existing responsibilities.”

47.  On the other hand, since I rule that the Mother has the capacity to earn about $40,000 a month, she shall also bear part of this $82,000. In my view, $16,000 is appropriate since she has much lower financial needs and responsibilities than the Father.  I therefore come to the conclusion that the Father shall pay the children’s monthly maintenance of $66,000 (ie $82,000 - $16,000).

48.  The Father offers to undertake to pay the children’s full annual tuition fees, medical and dental expenses upon the production of the original invoices by the Mother so that he may claim such expenses back from his employer’s insurance. I refuse to accept his undertaking on the ground that first, despite it was recorded in the Judgment of Judge Geiser dated 30^th September 2005 that the Father was then paying $8,000 per month for the children in addition to their educational and medical expenses, he had not paid the same shortly thereafter until the interim maintenance for $8,000 pursuant to the Order of Deputy Judge Kot dated 10^th November 2009.

49.  Secondly, the Father had the past record of delay payment of the school fees as well as the record of having received the payment from the insurance but he failed to reimburse the Mother or pay directly to the clinics in question. Secondly, the parties’ relationship is really bad and the trust between them is so low that they will probably come back to the court for some small amounts if such undertaking is accepted by the court but breached by the Father.

50.  The Mother also invites me to make an attachment of income order. The Father opposes. The law on attachment of income can be found in section 28 of the MPPO. I am satisfied, on the evidence before me, that this is a suitable case for an attachment of earnings order. I grant this order accordingly.

Backdating and Lump Sum Order

51.  When making order for maintenance of the children, the Court is bound to consider not only the matters mentioned in s7(1)(a), (b) and s7(2) of the MPPO but also all the circumstances of the case.

52.  Ms Irving submits that all the circumstances of the case include the financial misconduct of the Father and his failure to support the children which are appalling. The Mother seeks the backdating or the order for a lump sum payment to cover the expenses she has borne during the time the Father has shirked his responsibilities. Ms Irving submits that the lump sum is in the region of $2.2 million excluding living costs such as accommodation and food. She cites the case of Martin v Martin[3] concerning an ancillary relief application by a wife against a husband for a lump sum. The court held that the husband’s conduct must be taken into account because a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably. She submits that the principle in Martin’s case is applicable here.

53.  I do not accept her submission in this regard. In Martin’s case, the court was not dealing with the application for the children’s maintenance whereas I am only determining the children’s maintenance in this case but not an ancillary relief application by a wife against a husband.

54.  On the other hand, the Father rightly submits the relevant legal principle stated in Kiely v Kiely[4] which concerns the wife’s application for ancillary relief including an application for a lump sum or sums for the children. Booth J said in page 251 of the judgment:

“Lump sum orders in favour of children, in particular of children whose parents are of limited means, are rare…….”

55.  Booth J further said in page 253 thereof:

“As Lord Denning MR said in Wachtel v Wachtel [1973] Fam.82, at p.85:

“One thing is, however, obvious. No order should be made for a lump sum unless the husband has capital assets out of which to pay it ….”

Although it may appear likely that the realization of the husband’s charge will produce sufficient resources, this is not a certainty.  The precise value of the husband’s share in the equity will not be known until the property is sold, and that may take place at any time within the next 6 years.  There is presently little, if any, margin between the estimated value of his interest and the financial obligations to which it is subject.  It is, therefore, a matter of some speculation as to whether the resources ultimately available on the sale of the property would be sufficient to enable the husband to discharge his liabilities.  In those circumstances it seems to me to be an improper exercise of the court’s discretion to make a lump sum order against the husband which if he is unable to discharge, will render him liable to legal sanctions.”

56.  Having carefully considered all the evidence including the Form E of the Father, I am satisfied that he is of very limited capital assets out of which to pay the sum of $2.2 million as claimed by the Mother. I therefore refuse to exercise my discretion to make a lump sum order in favour of the children. I also refuse to order backdating the children’s maintenance because it will in effect ask the Father to pay a lump sum which, in my view, he is unable to discharge.

57.  The Mother further requests for an order for monthly maintenance to be adjusted in accordance with the inflation index. I refuse to accede to her request since the inflation index may not be the same as the percentage of the increment of the Father’s salary in the future. It will be unfair to him if the rate of his salary increase is lower than that of the inflation index increase.  

Order

58.  For the question of costs, since the open offer by the Father is far away from my determination whilst the request of the Mother is much closer, he shall bear the costs. However, I also consider that this trial is to certain extent lengthened by the fact that the Mother is claiming to spend about $240,000 for the children’s monthly expenses at the beginning and that quite a lot of time is used at the trial to clarify such expenses. Besides, the unreasonableness of the Mother’s request for a lump sum order of $2.2 million from the Father is also one of my considerations regarding the question of costs.  I now exercise my discretion to order him to pay ¾ of the costs of this application and make an order in the following terms:

1)       The Petitioner do pay Respondent the periodical payment for the 2 children of the family in the total sum of HK$66,000 per month ($33,000 for each), first payment to be made on the 1^stJune 2011 and thereafter on the first day of each succeeding month until the 2 children reach the age of 18 or finish full time education whichever is the later.Such payment shall be attached to the Petitioner’s salary with his employer.

2)       There shall be an order nisi to be made absolute in 14 days that the Petitioner shall pay ¾ of the Respondent’s costs relating to paragraph 10 of the said Summons including all costs reserved in relation thereto, to be taxed if not agreed on a party and party basis.