HO YIU CHUEN-FONG v. HO WEI YIU AND ANOTHERS

IN THE COURT OF APPEAL

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JUDGMENT

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Li, V.-P.:

1. This is an appeal against an order for ancillary relief made on the 20th of December 1984 by Judge Caird. The appellants are a man and a woman with whom he is living (R1 & R2) and the respondent is the wife of the man. She is the Petitioner.

2. On the 15th March 1971 the Petitioner and R1 were married in Wu Hang City, China. Owing to the political situation then obtaining they lived together for about three months between the year 1971 and 1973. A son was born of the union in 1973. On the 10th of July 1973 RI left China and arrived in Hong Kong. In 1974 he was living with R2 while his wife was still in China. The first child was born to R1 and R2 on the 12th of April 1975. In the course of their co-habitation, R2 worked as a nurse earning about $1,500 per month. By October 1976 a flat known as Flat B, 4th floor, Ho King Building at 128 On Ning Road, Yuen Long (the property) was acquired on mortgage in the name of R1. Between 1976 and June 1977 they first made a down-payment of some $29,500 Plus some legal fees. The flat was mortgaged for the balance of the purchase price of $30,000 to be repaid by instalments. On the 15th of June 1979 the mortgage was paid off and the flat was assigned to the sole ownership of R1.

3. In January 1978 a second child was born to R1 and R2. On the 17th of December 1979 the Petitioner arrived with her son in Hong Kong. On the 28th of January 1980 R1 assigned-the flat to the joint names of himself and R2. On the 13th of February 1981 the Petitioner petitioned for divorce on the ground of adultery. On the 1st of April 1981 an application for ancillary relief was filed. On the 5th of April 1981 R1 filed an affirmation of his means with supplemental statements. On the 28th of March 1981 a decree nisi was pronounced which was not filed until the 11th of April 1981. On the 12th of June 1981 a freezing order was made pursuant to section 17 of the Matrimonial Proceedings & Property Ordinance by a district judge. On the 7th of September 1981 an interim order was made for maintenance. Following that, R1 filed a long further statement of his financial means on the 12th of October 1981. The matter was left in abeyance until the 12th of April 1983 when the Petitioner filed a notice to apply for an avoidance of disposition order against the property. This was heard in November/December 1984 by Judge Caird. On the 16th of February 1985 the decree absolute was pronounced.

4. The Petitioner also filed her affirmation as to financial means whilst R2 filed no affirmation and gave no evidence. In her affirmation the Petitioner alleged that when she arrived in Hong Kong she had nowhere to live but finally found a flat in Tuen Mun. The rent for which was $650 per month plus some $20 for water and electricity charges. She found work in a factory where she continued to work until some time in June 1984. At the beginning, Rl paid her and her son maintenance of $400 - 500 per month until October 1980. The payment revived in January and February. It stopped again since March 1981. At that time she was earning about $950 per month. By June 1984 the factory in which she work closed down. In July 1984 she was able to obtain a licence to practise herbal medicine. In this work she earned something like $1,200 per month. In the meanwhile she was fortunate enough to be able to find another place to live in a low-cost housing estate, paying the monthly rent of $42.50 Per month plus $150 utility charges and maintenance. An interim order in September 1981 made by Registrar Blackwell gave $300 for the maintenance of the child per month. The rest of her affirmation alleged various discrepancies in R1's statement of financial means alleging insincerity and the hiding of assets.

5. The affirmation and statements filed by R1 gave a pathetic story. There is no need to refer to them in detail. Generally, R1 said when he arrived in Hong Kong in 1973 to 1974 he worked as a waiter in a Wah Kwok Restaurant earning about $1,200 per month. R2 worked as a nurse and earned $1,500 per month. In 1975 he also practised as an herbalist. This enhanced his monthly income to $1,500. When the first child was born he received gifts, presumably monetary gifts, to the extent of about $5,000. In 1978 he gave up his job as a waiter, acquired a licence to practise Chinese herbal medicine. He opened a clinic of his own and earned about $2,000 per month. In 1980 he found that the rent of his herbalist clinic too high. The landlord raised the rent from $700 to that of $1,500. Thus, he closed down the clinic and turned it into a partnership business. At that time the clinic had a tenancy of three years to run. He transferred this tenancy to the partnership business for a sum of $20,000 plus a refund of his previous rent deposit of $5,000 making a total of $25,000 in all. This sum was not paid to him in cash but treated as his capital investment in the x-ray laboratory which was the partnership business. He was employed as an adviser and public relations staff of the partnership business for which he drew a monthly salary of about $1,600. At the formation of the partnership, R2 also put in $25,000 in cash. Between the two of them they had a $50,000 share in the partnership business. Equipment was then ordered and purchased on the instalments payment scheme. Business commenced.

6. By March 1981 it was found that the partnership business did not flourish. In a plan to reduce expenses R1 lost his job as a public relation officer. As a result he withdrew from the partnership and transferred the whole of the $50,000 shares to R2. In the meanwhile, in 1981, he started the Singapore Restaurant with friends where he was employed as the licences and a director earning $1,400 per month. He borrowed some $10,000 to contribute to share capital which he had repaid his friend leaving a balance of $3,000 outstanding. At the same time R2 contributed for herself $50,000 in shares. Between the two of them they have the share capital of $60,000 in the restaurant. According to R1, the business of the Singapore Restaurant did not go well at all. It was closed down in 1983. There were no details as to how much was left of the $60,000 share capital.

7. R1 also disclosed that in 1982 he resumed his herbalist practice. R2's income by that time had increases to $2,500 per month. However, R1's health failed. By the end of 1983 he was unable to work and he had to stay home to take care of the two children. R2 continued to work as a nurse. He said that the property was purchased with their joint earnings.

8. On the 5th of January 1982 a memorandum from the District Officer, Yuen Long, was exhibited in the affidavit of one Simon Si, a solicitors' clerk, sting the value of the property at the 26th of January 1978, the property was to be $70,000. By the 28th January 1980 the property was valued at $196,000. On the date of the valuation, which was made by the District Office Estate Surveyor, namely January 1982, the property was valued at $280,000.

9. In his judgment the trial judge rejected the evidence of R1 and accepted practically all the evidence of the Petitioner. He found that R1 had deliberately understated the value of the flat; that he consistently and deliberately set out to avoid responsibility to the Petitioner and her son by assigning the property to the joint names of R1 and R2 in 1980; that he closed the herbalist business and withdrew from the x-ray labouratory partnership business for the same purpose. However, he found that R2 did contribute something towards the assets of R1 and R2. He said that R1 never hesitated to lie in order to suit himself. The only evidence he accepted from R1 was that the time he and the Petitioner spent in China together was for a very short period. He assessed that the flat today would be worth $200,000. He was of the opinion that R1 deliberately caused himself to be unemployed in order to avoid responsibility.

10. In the event the judge made the following order:

11. In the course of his judgment the judge said:

"I am however satisfied that Madam Cheung as a working partner in their relationship has contributed something towards the assets of this couple. Next I hold that first Respondent has never hesitated throughout these proceedings to lie when it suits him. Their marriage includes what one might term the period of quite proper marriage' as distinct from the period from when they went through the ceremony of marriage in China until the time that marriage was dissolved in Hong Kong. I accept that there was a period of almost three years during which he was absent by virtue of conditions then extant in the People's Republic of China and that they in fact had only something like 3 months together. This is one of the few matters and which I am prepared to hold in respect of evidentially matters in favour of the first Respondent.

12. Counsel for both parties addressed us at length. If somewhat repetitive these addresses were certainly thorough and we are indebted to counsel for them.

13. Mr. Payne's complaint about the order can be categorized in two broad outlines. The first is the lump sum payment for the benefit of the child and the second is the avoidance of disposition order.

14. Mr. Payne's first complaint is that the judge has placed no limitation of time as to the periodical payment whereas there should be a statutory limitation. Secondly, the judge has not seen fit to discharge the earlier order made by Registrar Blackwell. Thirdly, in awarding a lump sum of $32,500 in addition to the periodical payment for the benefit and maintenance of the child the judge wrongly exercised his discretion. And lastly, in any event, the sum of $65,000 to be paid to the Petitioner was excessive.

15. Mr. Mok on behalf of the Petitioner maintains that according to the evidence as accepted by the judge it would require another $500 per month in order to maintain the child. The lump sum award is to augment the deficiency as provided by the $400 monthly payment. In any event, in her Respondent's Notice the Petitioner cross-appeals by asking this Court to delete the requirement that, the $32,500 lump sum payable for the benefit of the child be held in trust until the child reached the age of 21. It goes on to ask this Court to order, in the event that such cross-appeal is allowed, to grant either in whole or in part of the $65,000 to the Petitioner absolutely.

16. Section 4(1)(c) of the Matrimonial Proceedings and Property Ordinance (''the Ordinance") provides:

17. In the present case the judge has placed no limit to the period in which the monthly payment should be made. Nor has he discharged the order made by Registrar Blackwell. In both instances the judge was obviously wrong. He should have complied with the provisions of section 10 of the Ordinance and placed a limit in which periodical payments are to be made. He should also have discharged the order by Registrar Blackwell. He did, indeed, order that the $32,500 payment for the benefit of the child be held in trust until he reaches 21. We are of the view that this order is also wrong. If, in the mind of the judge, this lump sum is to augment the deficiency of the periodical payment of $400 per month, then the interest that can be produced from this lump sum would be sufficient to make up the monthly payment of $500.

18. Further, the judge made no order as to what is to happen to the capital sum when the son reaches 21 years. How is one to apply the reversion of this capital? Is it to go to the benefit of the son absolutely by the time he reaches 21, or does it vest in the mother once the son reaches 21? If it is intended that the interest earned from the lump sum is to be applied for the maintenance of the son until he reaches 21 and by that time the capital will vest in the son, then it appears that the order is against the principle laid down in Lord Lilford v. Glynn ⁽¹⁾. In that case a very wealthy father was ordered to pay periodical payments for the maintenance of two children until they reached the age of 18. In addition, he was ordered to settle ￡25,000 each in respect, of each child when they came of age. The Court of Appeal unanimously set aside the order for the payment of the lump sums settlement.

19. Having reviewed the provisions in the various sections in the Matrimonial Cause's Act 1973 which are in pari materia with sections 4, 5 and 10 of our Ordinances, Orr, L.J. said at page 447 as follows:

"In these circumstances there was, in our judgment, power under the 1973 Act to order a settlement in the present case, but it does not follow that on divorce a father whose means permit it ought to be ordered to make a settlement favour of a child of his marriage. There being expressed restrictions on the powers of making financial provision in the shape of periodical payments, lump sum payments or transfers of property in favour of children who have already attained 18, it could not be right, in our judgment, for the court to exercise the power to order a father to settle funds so as to make provision for the payment of income to the child during the whole life of the child. Furthermore, one finds in s 25(2) of the 1973 Act, which lays down the duty of the court in deciding whether to exercise its powers under (inter alia) s 24(1)(b), that the court is so to exercise the power to order a settlement, like the other powers there referred to, as to place the child ... in the financial position in which the child would have been if the marriage had not broken down and each of the parties to the marriage had properly discharged his or her financial obligations and responsibilities towards him'. Whatever the precise meaning of that phrase a father, even the richest father, ought not to be regarded as under 'financial obligations or responsibilities' to provide funds for the purposes of such settlement as are envisaged in this case on children who are under no disability and whose maintenance and education are secure."

If this sum were to be applied for the benefit of the mother on the son reaching 21, then we are of the opinion that the $65,000 as a lump sum to the Petitioner is excessive.

20. Mr. Payne forcefully argues that for the judge to make an order of avoidence is inconsistent with his findings of fact. The judge had found that R2 had made financial contributions to the assets of the couple". This included the property, the purchase price of the property. To vest the legal ownership of the property in its entirety in R1 is to ignore the equitable interest of R2 in the property.

21. The law on this subject is fairly settled. Prior to the enactment of the Matrimonial Causes Act 1973 it was held that a wife did not acquire any share at all in the house purchased in the husband's name even though she contributes some money out of her savings for furnishing and decorating the lawn of the house in the absence of some evidence to suggest that it was the intention of the parties at the time when the house was acquired that she is to have a share. The basis of her claim could only founded on an implied or resulting trust. Gissing v. Gissing⁽²⁾. By virtue of the 1973 Act, the Court is vested with a discretion to make an order giving the wife an interest in the house in any event. We have our counterpart in the Ordinance in the provisions of section 17.

22. A mistress, as is R2, stands on a slightly different position. In her case, even if she were to spend her earnings to pay the rates of the house acquired in the man's name and pay, for the telephone bill, buy furniture fittings, and certain domestic chattles for the house and decorated the interior of the house, she does riot acquire any share in the house unless there have been an expressed agreement or that she had made a substantial financial contribution to the acquisition of the house, or that there had been a common intention that she should acquire a beneficial interest in it. Burns v. Burns ⁽³⁾.

23. However, where there is evidence that the mistress has made contribution and/or has done a lot of work, such as contributing cash and/or labour in the building of the house, working on the house herself and used common funds to build the house, she would be given a share in the equity of the property. Cooke v. Head ⁽⁴⁾. In that case the mistress part of the work included demolishing a building, removing hard core and rubble, working the cement mixer and painting. She saved each week with the man with whom she lived as much money as they could from their earnings. Their savings were pooled and used for mortgage repayments in the buying of the furniture. Increasing her share of equitable interest to 1/3 of the property, Lord Denning M.R. said at page 521:

24. In the case of Eves v. Eves ⁽⁵⁾ a young woman under 21 lived together with a man. Together they found a house suitable for their joint home. The house was bought in a man's name. At the time of the purchase the man told her that if she had been 21 years of age, he would have had the house put in their joint names as it was to be their joint home. When bought, the house was in a dilapidated condition. The young woman and the man made their home together there. She did much work, some of it very heavy, to the house and garden. After separation, she applied for a share in the equity of the property. Her application was dismissed in the first instance. The Court of Appeal allowed the appeal and held that a trust had been created because the man had led this young woman to believe that she was to have an interest in the house and the property had been acquired and maintained by the parties for their joint benefit. It could be inferred from the conditions of the house and the work that the plaintiff did to it that it was part of the bargain that she should contribute her labour to its improvement. Referring to the promise made by the man, Lord Denning M.R. said at page 1342F as follows:

"It seems to me that this conduct by Mr. Eves amounted to a recognition by him that, in all fairness, she was entitled to a share in the house equivalent in some way to a declaration of trust; not for a particular share, but for such share as was fair in view of all she had done and was doing for him and the children and would thereafter do. By so doing he gained her confidence. She trusted him. She did not make any financial contribution but she contributed in many other wags. She did much work in the house and garden. She looked after him and cared for the children. It is clear that her contribution was such that if she had been a wife she would have had a good claim to have a share in it on a divorce."

25. In view of the authorities, it is quite clear that since the judge found that R2 had made a financial contribution to the assets of this couple, she is entitled to a share. The difficulty is that the judge had not quantified her share. The judge did award $65,000 out of his assessment of $200,000 to the Petitioner. Whether it was the intention of the judge to leave the balance of $135,000 to R1 and R2 in equal shares is speculation. The fact remains that the judge held that R2 has a share without quantifying it.

26. Mr. Payne suggests that in the absence of an apportionment by the judge, there should be an equal share between R1 and R2. We feel that is excessive. Even though the contribution to the assets of the couple should include the property, yet there is evidence that between 1974 and 1984 R1 had transferred $25,000 of his own shares in the x-ray laboratory to R2. In addition, R2 had $50,000 of her own money to take up shares in the Singapore Restaurant. Even if one takes into account the alleged $20,000 gift from R2's mother, the transfer of his $25,000 shares in the x-ray laboratory by R1 to R2 would compensate for the $20,000. It is irrelevant how much of the share capital in the restaurant or in the laboratory is left now. At that time, it was a sufficient quid pro quo. In the event we do not think that R2's equity should be put as greater than one quarter. On the figure as we have them that leaves a balance of $150,000. As to the Petitioner the judge found that she contributed by staying in China between the years 1973 and 1979. That alleviated R1's difficulty in that he did not have to support the Petitioner and her son. In short, it was a contribution by default. However, she is entitled to maintenance for herself and for her child. In the circumstances, we feel that one third of the remaining balance be granted to the Petitioner as a fair assessment. That is a lump sum payment of $50,000.

27. We now have to deal with the problem whether we should set aside the avoidance of disposition of property order so as to ensure that the lump sum payable to the Petitioner is well secured without affecting the equitable interest of R2.

28. We are given to understand by counsel from the Bar that R1 and R2 have vacated from the flat which is put in the market for sale. So far there is no buyer. The basic trouble is that R1 and R2 are joint tenants. If the avoidance order is not set aside R2 could become the sole owner of the flat should R1 die before sale. Further the lump sum payment is not an order which affects or should affect R2. Looking at the problem this way it is not feasible for the lump sum payment to be a charge on the property of which R2 is still a joint tenant. In our view the best solution is to refuse to set aside the avoidance order subject to the condition that R1 be permitted to make a declaration of trust in favour of R2 to the extent of one quarter of the proceeds of sale in the event a sale is completed.

29. For the aforesaid reasons the application is allowed to the extent that the order be amended as follows:

(1)    (1979) 1 A.E.R. 441

(2)    1971 A.C. 886

(3)    (1984) 2 W.L.R. 582

(4)    (1972) 1 W.L.R. 518

(5)    (1975) 1 W.L.R. 1338