LAI LAI HING (then Lai Hing) v. LAI KWAI PING

IN THE COURT OF APPEAL

1994, No. 201
(Civil)

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J U D G M E N T

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Mortimer, J.A.:

1. On 19th May 1994 in ancillary relief proceedings, His Honour Judge Gill made an order giving the wife a lump sum of $240,000 and transferring her interest in the matrimonial home to the husband in final settlement of all claims between husband and wife save for some accumulated arrears of maintenance. The wife appeals against this order.

2. It is accepted by both parties that there should be a clean break and that the wife's interest in the matrimonial home - the parties' one asset - should be transferred to the husband. Mr Clough's main contention for the wife is that the judge was in error in valuing this asset at too low a figure and that the award of $240,000 is therefore too low and unjust to the wife.

3. The brief relevant facts are that the parties were married on 24th July 1987. The husband was then about 28 years of age and the wife 26. There are no children. In August 1988 they purchased a flat under the Home Ownership Scheme in their joint names. They moved into the flat in May 1990. In August 1991 the wife finally left the husband. She had left and returned previously.

4. The parties therefore separated after 4 years and 1 month of marriage. In due course there was a decree nisi in May 1993 which was made absolute in November 1993.

5. The flat was purchased for $325,000. The deposit and all repayments were made by the husband and he continues them. At the time of the hearing, the repayments were $2,309 per month but they vary with interest rates.

6. The wife contended that she provided $10,000 worth of household items, most of which she has kept on the judge's findings.

7. The husband is a construction worker. He was earning about $8,000 per month at the hearing. He was the principal earner and provider. The wife was also in employment during the marriage. The judge described this as "spasmodic" but at the hearing she asked the judge to assume that she was fit and able to support herself. Obviously her earning capacity is far less than that of her husband. At the hearing she was a garment factory worker, earning $3,114 per month.

8. The husband has remained in occupation of the flat. He lives there with his mother. Although he pays and continues to pay the mortgage instalments, he has the benefit of accommodating himself and his mother there at a much reduced cost than they would have to pay for similar rented accommodation.

9. Since the parting, the wife lives alone in a cubicle which she was renting at the hearing for $1,200 per month. Her circumstances since the parting and the end of the marriage are obviously much reduced.

10. Although the judge was inclined to question the reason why the flat was put in their joint names, in the result he correctly accepted that the parties are joint owners of the flat. The starting point before the judge was that the wife had a 50% interest in the flat which was by agreement of the parties to be transferred to the husband. Having regard to the provisions of s.7 of the Matrimonial Proceedings and Property Ordinance (Cap.192) it is accepted by Mr Clough that a variation must be made in order to achieve justice.

11. It is necessary to outline briefly the effects of the Home Ownership Scheme a consideration of which is essential to this appeal. The scheme is designed to provide housing at a low cost and less than market value for occupation by the purchasers. There are severe restrictions upon the right to re-sell once such a flat has been purchased. For the first 10 years it cannot be resold save back to the authority. For the first 5 of those 10 years, such a flat can be resold but only at the original considerably reduced purchase price. For the next 5 years, it can be resold to the authority at an increased price but in present market circumstances still at a very substantial discount to the market price. After 10 years, it can be resold on the open market but a premium has to be paid to the authority representing some of the increased value. It is recognised that in present circumstances the owner of such a flat selling after 10 years will still reap a very considerable profit.

12. With this background the judge had before him two valuations. First, $1.076m as the amount for which the flat could be resold to the Housing Authority at that time. The other valuation was $2.2m, the price for which the flat could be sold on the open market if that were possible.

13. The judge took the value of $1.076m and ignored as irrelevant the price the flat would make on the open market subject to the premium. In present circumstances, however, the flat must have an increased value over the $1.076m which could be obtained by resale to the Housing Authority because in 31/2 years from now, it will be free of restriction and, subject to the premium, can be sold on the open market. There is no evidence of that increased value taking those matters into account and there was none before the judge. For my part, however, I am satisfied that it would be unjust to the wife were she not to participate in some way in the windfall associated with her share of the flat which will arrive once the flat is available for sale on the open market. The present value, it seems to me, must be more than $1.076m, but of course less - perhaps much less - than the $2.2m open market value.

14. Both parties recognise that it would be thoroughly undesirable to return this case to the judge for further determination, having regard to the relatively small value of this asset and the drain on resources which a further hearing would represent. In those circumstances - in my view very sensibly - the parties have invited this Court to do the best it can to achieve a just solution upon the evidence which was in front of the judge.

15. The judge took the net value at $800,000, i.e. $1.076m for which the flat could be resold to the Housing Authority, less the amount owing on the mortgage. In other words, he took that as the equity. We must approach this matter most conservatively. For my part, I would take the net value at $1m, taking into account all necessary factors.

16. From this starting point and the recognition that there must be a variation after consideration of s.7 of the Ordinance, I turn to the matters which I would take into account. As has been said before, in making such an assessment, an arithmetic approach is not appropriate and such approach can lead to error, perhaps, serious error. See P. v. P. (Financial Provision: Lump Sum) [1978] 1 WLR 483 per Ormrod L.J. at 489H and Roskill L.J. at 492D. It is necessary to approach the assessment broadly.

17. These are the matters which I would take into account.

18. This was a short marriage. There are no children. The parties are both able to support themselves and are relatively young. The husband made the major contribution in financial terms and continues to do so towards the flat. The wife's contribution to the marriage was made in other ways but that also led to the purchase of the flat. The wife's need is much greater than that of the husband. Her circumstances are greatly reduced since the parting and the divorce.

19. The husband is paying the instalments but he has the benefit of the flat for himself and his mother for less than he would have to pay for similar rented accommodation for the two of them. The husband's ability to pay is also crucial. We are told by counsel that in 3 months he will be able to pay the $240,000 awarded by the judge. There is no indication as to the source of that sum. There is equally no indication that he has the ability in the near future to pay more. However, this sum, in my view, does not represent a just share for the wife.

20. Taking all these matters into consideration, I would assess her just share as $400,000 of which the husband is able to pay only $240,000 in the near future. In some circumstances where an asset will come to hand or increase in value in the near future, an adjournment of the hearing may provide a solution but there are disadvantages to such a course, see Roberts v. Roberts [1986] 2 FLR 152 at 155-156. Here, an adjournment is not necessary - finality can be achieved so that the parties know exactly where they stand financially.

21. In order to do this, I would propose that the wife be awarded a lump sum of $400,000; that her interest in the flat be transferred to the husband; that $240,000 of the lump sum be paid within the next three months and that the balance of $160,000 be paid on or before 31st December 1998 - that gives a number of months after the flat becomes available for sale on the open market. Further, subject to the consent of the Director of the Housing Authority I would order that the flat be charged with that sum of $400,000 in the wife's favour. It will be necessary to hear counsel upon the exact terms. It will obviously be necessary to give liberty to apply. For my part, I would allow this appeal and so order.

Power, V-P:

I am in agreement with the reasons and the proposed order.

Godfrey, J.A.:

I agree. The split of the $400,000 between $240,000 and $160,000 is based on the submission made to this Court by counsel for the husband that the husband is able now to pay the former sum but not the latter, at any rate, in the immediate future. Since the husband's ability to pay is a relevant factor, it does seem to me appropriate that the $400,000 sum should be split in the way which my Lord has mentioned. There is nothing I can usefully add.