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FCMC 15783 / 2011
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES
NUMBER 15783 OF 2011
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BETWEEN
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SCT |
Petitioner |
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and
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CH |
1st Respondent |
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SS |
2nd Respondent |
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| Coram: Deputy District Judge I. Wong in Chambers (Not Open to Public) |
| Dates of Hearing: |
13, 24 and 25 September, 23 and 24 October, and
26 November, 2013 (1 hour) |
| Date of Handing Down Judgment: 28 February, 2014 |
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J U D G M E N T
(Ancillary Relief)
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1. This is a trial on the ancillary relief of a divorce petitioned by the husband.
Introduction
2. The marriage in question is a Hong Kong and Mainland marriage. The petitioner husband (“H”) is a Hong Kong resident while the respondent wife (“W”) was originally from the Mainland.
3. H is now aged 55 and W is 38 years old.
4. The parties met each other in the end of 1998 and started cohabitation in Shenzhen in early 1999. They were formally married in November, 2001.
5. There are 2 children of the family.
6. The elder is a daughter who was born by W with her boy-friend long before she met H. The daughter is now 18 ½ years old. She is studying in a boarding school in Shenzhen.
7. The younger is a son born by W with H. He is now 5 years old and is attending a kindergarten in Hong Kong.
8. On 11 November, 2011, H petitioned for divorce on the ground of 2 years separation. It was pleaded that the parties had separated with each other since February, 2009. This was not contested and decree nisi was granted on 11 April, 2012.
9. By an order dated 13 February, 2012, H is to pay an interim maintenance of $8,000 to W. He has been paying this sum up to now.
10. As regards the son, his custody, care and control was granted to H on 18 September, 2012, with defined access to W. However, due to the tensions and conflicts between the parties, the defined access was subsequently replaced by an order of supervised access.
Background Facts
11. Before I go to the relevant post marriage facts, it is pertinent for me to refer to some of the material events prior to the marriage.
12. This marriage is the second one for H. He first married in 1981. This former marriage bore 2 sons who are now aged 32 and 29 respectively and independent.
13. In about 1995, H and his former family (ie his former wife and 2 sons) immigrated to Alberta, Canada. According to his evidence, H applied for immigration as an “entrepreneur”; and as a requirement he acquired a clothes alteration shop there for CAD10,000. However, he did not stay there for long. Like many other breadwinners in Hong Kong at that time prior to the return of sovereignty in 1997, H had to return to Hong Kong for a living, leaving his family behind in their new country.
14. It was probably against this background that H met W back in 1998 while his family was in Canada and their relationship matured to a stage where H petitioned for divorce against her former wife in April, 2001 on the ground of 2 years separation. This first marriage was formally dissolved in September, 2001. By an order dated 10 August, 2001, H was enjoined to pay his former wife a monthly maintenance of $15,000. It is not in dispute that this order is still valid and effective.
15. As for W, as said, she has a daughter from a former relationship. The daughter was treated by the parties as a child of the family.
16. The parties initially cohabited in a flat in Shenzhen purchased by H in the name of W (“the 1st Shenzhen Property”). The parties then moved to another apartment (“the 2nd Shenzhen Property”) which was also purchased in the name of W in about April, 2001 at RMB615,000. All these happened before they formally married in November, 2001.
17. In November, 2003, the parties purchased an apartment in Lai Chi Kok which became their matrimonial home in Hong Kong notwithstanding that in the meantime W was still spending most of her time with the daughter in Shenzhen.
18. In January, 2007, W was granted a Single Entry Permit. She then moved to Hong Kong. Sometime later, the daughter also joined the family in July, 2008 when she also obtained her Single Entry Permit.
19. It was unfortunate that their relationship then turned sour. Even at the time when W was pregnant with the son, their relationship deteriorated from bad to worse. They finally separated in February, 2009 when the matrimonial home in Hong Kong was sold and when the son was merely 3 months old.
20. It would appear that after the separation and up to now, W has moved back to Shenzhen to stay with the daughter. While staying there, she occupies the 2nd Shenzhen Property, and for the purpose of exercising access in Hong Kong, she has rented a flat in Yau Ma Tei (“the Yau Ma Tei Flat”) since February, 2012 for $8,000 per month.
21. As for H, he is now living with the son and his parents in a flat (“the Chelsea Apartment”) purchased in the names of H’s father (“the Father”) and his elder brother (“the Elder Brother”). As will be seen below, the ownership of the Chelsea Apartment turns out to have an adverse impact on the credibility of the Father’s evidence.
H’s Background
22. Much of the dispute in the present proceedings centres on the status of H, ie whether he is merely a salaried worker or he is operating a business and owning substantial assets.
23. H received education up to F.2 or F. 3 level. Since leaving school, he has always been working for a business originally founded by the Father.
24. Two business entities are involved: a firm YL and a limited company KML.
25. On record, H is one of the two partners of YL. The other partner is the Elder Brother. As for KML, again on record, H is the registered shareholder of 2,500 shares out of a total of 10,000 issued share capital. The other 2 shareholders are his sister (“the sister”) and the Elder Brother who hold 5,000 shares and 2,500 shares respectively. In other words, H holds 25% of the equity in KML. All of them are the directors of KML.
26. Again on record, H is one of the registered owners of 4 landed properties (“the Disputed Properties”) the total value of which for the purpose of the present proceedings is agreed at $67,500,000.
27. Despite all these documentary records, H’s case is that in truth and in fact, he is merely a delivery worker by occupation earning about $22,000 per month. The reason being that everything in fact belonged to the Father and he and all his siblings are merely nominees for the Father.
W’s Background
28. As regards W, she equally did not receive much education. Prior to her relationship with H, she engaged in some low-skilled jobs in Shenzhen. She then ceased work for taking care of H and the daughter.
29. W alleged that after settling in Hong Kong in 2007, she also worked in H’s business up to about 2008, earning $5,000 to $6,000 per month but this is denied by H. Anyway, I do not think it is in dispute that W has not been working since 2008.
H’s Business
30. I think it is not in dispute that the business was started by the Father way back in 1968 when H was merely 10 years old. At the beginning the business was on the supply of canvas sheets to ferries and ships, it later expanded to the supplies of metal tools and groceries. It was originally operated as an unincorporated firm in the name of YLH of which the Father was the sole-proprietor.
31. In about 1989, YL was established with the Elder Brother as the sole-proprietor. This was to replace YLH and to carry on the business. It was also from then onwards that at least as far as the records are concerned the Father dropped out of the picture.
32. In about 1 February, 2008, H became a partner of YL and therefore the firm became a partnership. That is the situation up to now.
33. In June, 2002, KML was incorporated. H has since its inception remained a 25 % shareholder of the company.
34. As regards the relationship between YL and KML, two points need to be made.
35. First, both YL and KML occupy the same business premises.
36. Secondly, it has been conceded by Ms Lam, counsel for H, that despite two companies, there is in fact one business only. YL is the vehicle for the operation of the business (ie for the receipt of profits) and KML is the vehicle for expenditures.
The Disputed Properties
37. As said, H is also a co-owner of the some landed properties. They are:
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Shop 10, Ground Floor of MF Building (“Shop 10”) |
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Shop 32, Ground Floor of MC Building (“Shop 32”) |
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Workshop no. 9, Ground Floor of WI Centre (“Workshop no. 9”) |
| 4. |
Factory B on 1st Floor and Car Parking Space no. 24 on Ground Floor of WL Industrial Building (“Factory B”) |
38. I believe the following facts, which are gleaned from the land search records, should not be in dispute.
39. Shop 10 was acquired in March, 1987, with a mortgage in favour of the China and South Sea Bank Limited, in the names of H, the Elder Brother and his younger brother (“the Younger Brother”) and was held by them as tenants in common in that H held 25%, the Elder Brother held 50% and the Younger Brother held the remaining 25%.
40. The Younger Brother unfortunately passed away in about August, 1992. Letters of Administration of his estate was granted on 14 March, 1994 in favour of the Father and his wife (“the Mother”) who are said to be the beneficiaries of the estate. The Father and the Mother then, on 28 August, 2002 by way of an Assignment and for a consideration of $250,000, assigned the Younger Brother’s share in Shop 10 so that H and the Elder Brother each held and is still holding the property as tenants in common in equal shares. At the same time, a new mortgage was executed in favour of the bank.
41. Shop 32 was acquired by the 3 brothers in June, 1990, with a mortgage in favour of the China and South Sea Bank Limited, as tenants in common in equal shares for the consideration of $1,800,000. After the tragic demise of the Younger Brother, the same modus operandi applied such that on the same day (ie 28 August, 2002) the Father and the Mother as beneficiaries of the estate assigned the Younger Brother’s shares to the 2 remaining sons for a consideration of $350,000 as a result of which H and the Elder Brother each holds 50% as tenants in common. Again, at the same time a new mortgage was executed in favour of the existing mortgagee bank.
42. The Workshop no. 9 was acquired by the 3 brothers on 3 August, 1992 with a mortgage in favour of the same bank at a consideration of 6,514,000 as tenants in common in equal shares. Again, after the death of the Younger Brother, on the same day the same modus operandi was adopted so that H and the Elder Brother became the owners of the shop as tenants in common in equal shares at a stated consideration of $850,000 and they executed a new mortgage in favour of the bank.
43. Factory B is the last on the list, as it was acquired on 21 March, 2002 at a price of $280,000. There are 4 tenants in common. Apart from H and the Elder Brother who each holds 16.7%, there are two other persons, said to be the Father’s friends, each owning 33%. It would appear that mortgage finance was not required for this purchase.
44. All the Disputed Properties are being used by YL and KML.
45. Further, prior to the purchase of Shop 10, there was another property being Unit 7 on 5th Floor of WL Industrial Centre (“the Unit 7 Property”) purchased in the names of the 3 brothers as tenants in common in equal shares on September, 1984 at $207,520. It was subsequently sold in July, 1992. According to the Father, the proceeds of sale were used as part of the deposit for the purchase of Workshop no. 9.
W’ Landed Property
46. The 1st Shenzhen Property was sold apparently during the marriage for RMB380,000, out of which, according to W, RMB200,000 was used for payment of the outstanding mortgage of the 3rd Shenzhen Property, which I will deal with below.
47. The 2nd Shenzhen Property was the matrimonial home of the parties prior to W’s moving to Hong Kong. It was purchased in W’s name on 30 April, 2001 for RMB615,000. According to H, all the purchase monies were from him, of which $200,000 were borrowed from the Father and the balance was from the proceeds of sale of his house in Canada. On the contrary, W said H contributed $320,000 only, and the remaining in the region of RMB300,000 was paid by her out of the maintenance paid by her former boy friend towards the daughter. No issue arises from this discrepancy. It is also not in dispute that W is living in this apartment now whilst she is staying in Shenzhen.
48. There was also another property in Shenzhen (“the 3rd Shenzhen Property”) which again was purchased in W’s name. It is common ground that this property was acquired in April, 2003 for rental incomes and had been sold by W in about December, 2012 for RMB350,000, with net proceeds of sale (after deducting all costs and expenses) in the sum of RMB320,000 in W’s pocket.
49. Thus, W currently owns one property only, ie the 2nd Shenzhen Property. Its value has been agreed at RMB1,500,000 or employing an agreed exchange rate of 1:1.267, at $1,900,500.
H’s Case
50. H’s case, in a nutshell, is that all along he was and is merely a delivery worker. He merely works for the Father as an employee earning roughly $22,000 per month and he has no interest whatsoever in the Disputed Properties. He and the Elder Brother are merely trustees for the Father.
51. Though Ms Lam did not expressly say so, it would appear that H’s case is also that he is holding the business, namely his interests in YL and KML in trust for the Father. Needless to say, the Elder Brother, and I take it must also include the sister, are in the same position as H’s.
W’s Case
52. W’s case is simple and straight forward. The records show the true position: what are stated on the records as belonged to H are beneficially owned by him.
The Father’s Application to Join as a Party
53. Since W is claiming a share in the Disputed Properties, the Father applied to join in as a party to the present proceedings. The application came rather late but was uncontested. By an order dated 25 July, 2013, leave was given for the Father to be joined as the 2nd Respondent in the present proceedings and to participate in the trial.
The Father’s Case
54. The Father’s case is that he is the owner of everything: YL, KML and H and the Elder Brother’s shares in the Disputed Properties. At all times he treated the bank accounts of YL as his own. He caused all the monies for the purchase of the Disputed Properties and also all the monthly repayments on the mortgages to be paid out from YL’s bank account. The Disputed Properties were registered in his sons’ names merely for the purpose of facilitating the obtaining of mortgages and he never intended to give away any of his interests to them. He is therefore the beneficial owners of the Disputed Properties by way of resulting trust.
The Factual Issues in Dispute
55. It is evident that the main factual issues in dispute are as follows.
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Whether H is the beneficial owner of the business and the Disputed Properties; |
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The whereabouts of the proceeds of sale of the matrimonial home in Hong Kong; and |
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The whereabouts of the proceeds of sale of the 3rd Shenzhen Property |
Parties’ Open Proposal
56. In his open proposal H agrees to pay a lump sum of $3,000,000 to W and to be responsible for the maintenance of the son; and each party is to pay his or her own costs.
57. As for W, she seeks an equal distribution (ie 50% : 50%) of the parties’ assets; or alternatively, a lump sum payment of $12,000,000.
Witnesses
58. In trial, H, W and the Father gave evidence in court. The Elder Brother was initially listed as a witness and had given an affirmation but H eventually chose not to put him to the witness box.
Whether H is the beneficial owner of the business and the Disputed Properties
H’s Evidence
59. H’s evidence is that at all times, he was and is merely an employee of the Father and receives at most wages $22,000 per month. His main duty is working as a driver making delivery; his other duties include giving instructions to workers and attending to everything (甚麼都做). Notwithstanding that on record he is a partner of YL and a shareholder and director of KML, in truth and in fact, he has no say in any of the matters. The same predicament applies to the Elder Brother. Everything is determined by the Father. In evidence, he admitted that he and the Elder Brother are merely “puppets” and he is merely a waged labourer (支薪打工仔).
The Wife’s Evidence
60. The W’s evidence is that the Father has long retired. H and the Elder Brother are the ones who take charge of and are responsible for the daily operation of the business. In addition to the so called “salary” of $22,000, H is also entitled to share profits on 50/50 basis with the Elder Brother. The Elder Brother is rather lay back and hence, H is effectively in charge of all matters; in particular he is responsible for allocation of jobs amongst the workers and he also has the authority to hire extra labour when in need. All the cheques and documents of the business are also signed by H and the Elder Brother. She added that she knows because she witnessed these; in particular she had worked for some time in the business after settling in Hong Kong. The Disputed Properties are registered in the names of H and the Elder Brother because they have actual interest in them and not for more favourable interest rates as alleged by the Father.
The Father’s Evidence
61. The Father’s evidence, in gist, is that he is the mastermind behind his children’s backs. He denied having retired. At all times, he was and is the decision maker of the business, including its daily operation, management, risk management and the purchase of properties. None of the others could have a say. In particular, he was the one who decided to acquire the Disputed Properties for business purpose; the sons did not participate in the process except in the execution of the relevant title deeds and documents which was merely performed at his direction. In short, despite the fact that on record he is not the owner of anything (except the Chelsea Apartment), he is in fact the master of everything. He is the invisible hand of the “puppets”.
Presumption of Resulting Trust and Presumption of Advancement
62. In Lee Tso Fong v. Kwok Wai Sun & Anor [2008] 4 HKLRD 270, [2008] 4 HKC 36, Deputy High Court Judge To (as he then was), said as follows,
23. Prima facie, beneficial ownership goes hand in hand with legal ownership. If a plaintiff seeks to divorce the beneficial ownership from legal ownership and to claim the beneficial ownership in the property which he purchased and transferred to the name of another, he must bear the burden of proving his equitable right which is inconsistent with the undisputed legal title. He may discharge that burden by proving an express trust. Or, he may be assisted by the presumption of resulting trust by proving that he paid the purchase price of the property. But, like all presumptions, the presumption of resulting trust operates only in the absence of evidence to the contrary. Once this presumption is raised, the party seeking to challenge it bears the evidential, but not legal burden, of adducing evidence to displace the presumption of resulting trust. That party may adduce evidence of a contrary common intention of making a gift. If that evidence is insufficient to displace the presumption of resulting trust, the presumption prevails. But if that evidence is sufficient to displace the presumption of resulting trust, the party who has the legal burden will fail unless he can prove the resulting trust.
24. Where a parent purchases property and transfers it to his child, it is capable of raising both the presumption of resulting trust and the presumption of advancement by reason of the parent and child relationship. Bearing in mind that the legal burden is on the party seeking to prove his equitable right which is inconsistent with the undisputed legal title, the parent who purchased the property and transferred it to his child must bear the evidential burden of rebutting the presumption of advancement, which is part of his legal burden of proving the resulting trust. Thus, the legal burden is on the parent whether he is relying on the presumption of resulting trust or whether the presumption of advancement is raised against him.
25. The above conclusion is consistent with the commonly held opinion as to the nature of the presumption of advancement vis-à-vis the presumption of resulting trust. In his Equity: A Course of Lectures, 2nd ed (1936) at 77-80, Maitland referred to the presumption of advancement as a sub-rule that qualifies the presumption of resulting trust. In Murless v Franklin (1818) 1 Swans 13 at 17; 36 ER 278 at 280, Lord Eldon referred to the presumption of resulting trust as the general rule which is subject to an exception where the purchaser was under a species of natural obligation to provide for the nominee. In Napier v Perpetual Trustee (WA) (1980) 55 ALJR 1 at 3, Aickin J also spoke of the presumption of advancement as an exception to the primary presumption of resulting trust. In Pettitt, Equity and the Law of Trusts, 6th ed (1989), the learned author refers to evidence which rebuts the presumption of advancement as reinstating the presumption of resulting trust. It therefore appears that the commonly held opinion is that the presumption of resulting trust is the basic rule while the presumption of advancement is the exception. If so, the legal burden of proof must be on the parent seeking to rely on the presumption of resulting trust to rebut the presumption of advancement. ... (emphasis added)
63. On the rationale for the presumption of advancement, the learned judge spoke of this in para. 13 of the same judgment,
13. This presumption of advancement is based on the father-child relationship, the child’s dependence on the father, the father’s moral obligation to give and the common experience that the father, being older and having accumulated wealth, is more likely or is commonly intended to make gifts to this child. The presumption does not apply to strangers or other relationships.
Discussion
64. H’s case is premised on the contention that all the monies for the purchase of the Disputed Properties including the monthly mortgage payments were from YL; and YL itself, together with KML, belonged wholly to the Father and he and his siblings are mere nominees.
65. Ms Lam, counsel for H, accepted that the presumption of advancement applies and H has to rebut it.
66. Ms Tang, counsel for the Father, also agreed that as the Father is asserting the beneficial ownership of YL, he bears the burden of proof; and he also bears the legal burden of proving the resulting trust and the evidential burden to disprove the presumption of advancement. In regard to the issue of ownership, I take it that Ms Tang also includes KML.
67. On the other hand, it has been submitted by Mr Wong on behalf of W that all the purchase monies were from the brothers and hence, the presumption of resulting trust or the presumption of resulting trust does not arise at all.
Credibility of the H’s Evidence
68. I will first consider the general credibility of H as a witness.
69. On the assessment of a witness’s credibility and/or reliability, Chung J said the following in Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd, HCA 3523/2002 (Judgment dated 13/08/05), at paragraph 12: -
“12. The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-
‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-
(a) whether that part of his testimony is inherently plausible or implausible;
(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).
Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’”.
70. After having heard his evidence in court, the only conclusion I have is that H is utterly a liar. My reasons are as follow.
The Transactions on the Disputed Properties
71. As mentioned in Paras 39 to 42 above, on 28 August, 2002, the latest transactions concerning Shop 10, Shop 32 and Workshop no. 9 took place as a result of which H and the Elder Brother each held 50% shares in the properties; and on the same day, they executed a new mortgage in favour of the bank. In evidence, H said that he had no recollection whatsoever about the transactions because everything was arranged by the Father. He said he did not recall having been to the solicitors’ office for the execution of the title deeds but even if he had been to, he must have done this on the instructions of the Father. He also maintained that he was not clear about the mortgage arrangement and did not recall having signed any mortgage documents. He even went so far as to say that even if the solicitor had explained to him on the nature and contents of the documents, he would not have been able to understand them; and in any event he was just giving his signatures on the documents because the properties belonged to the Father. All in all, he emphasized that everything was arranged by the Father and he knew nothing about the transactions, the documents he signed and the liabilities that he might have incurred. He claimed it was not until the present proceedings that he realized that the Disputed Properties were worth multi-million dollars.
72. In his 1st Form E dated 1 June, 2012, H sets out the Disputed Properties as the properties he beneficiary owns. There is no qualification or caveat whatsoever that he is not the beneficial owner or he is merely a nominee. In examination-in-chief, his explanation is that when he was at his solicitors’ office filling out the Form, notwithstanding that he already knew that the properties did not belong to him, since the records showed he was the registered owner, he nevertheless filled out the particulars according to the records as a fulfilment of his duties (作交代). The same situation applies for YL and KML notwithstanding that he does not have any interest in them.
73. However, when he was being cross-examined, H changed to say that it was after he had filled out the Form and when he discussed the case with the Father that he was told the Disputed Properties in fact did not belong to him.
74. What makes thing even worse is that when being asked of how he was able to apply for immigration as an “entrepreneur” to Canada in 1995 if according to him he was merely a waged labourer, H accepted that in order to be qualified as an “entrepreneur” one had to be a businessman and he further admitted having made use of the Disputed Properties (except the Factory B which was purchased after 1995) in support of his application. He even admitted he had cheated the Canadian authorities.
75. It is clear that his testimony is this respect is inconsistent, contradicting and unbelievable. It is also abundantly clear that he always regarded the Disputed Properties as his.
KML
76. As for the KML of which he is the shareholder and director, again he claimed he does not have a clear understanding of the situation. He just works like a dog and is just minded in doing his job. Everything, big or small, is decided by the Father. He has no power to handle any matters beyond his duties and in fact does not know how to handle (不識去理). He emphasised he is just a waged labourer (打工一名).
77. When being asked if what he said is true: the Father is the owner behind their backs, why the Father chose not to become the shareholder? His answer again is he is not clear about the reason. He is merely doing what are assigned to him. He admitted having signed the financial statements as the director of KML but merely did so because the Father had approved them and he did not know whether the accounts were correct or not. He put his signatures on the statements because he believed in the Father. In any event, to determine the correctness of the statements was simply beyond his abilities. He is not clear about the responsibilities entailed and the liabilities incurred as a director. He was not worrying about the consequences because he had trust in the Father.
YL
78. As regards YL, at one stage, H even claimed he was not sure whether he was a partner of the firm. Again, when being put to him regarding the accounts of YL, he alleged that he was not sure whether the same are true or not but he just signed them because they were arranged by the Father and he was asked to do so. When being cornered, he was driven to confess that he was somewhat irresponsible in that regard. He even went so far as to assert that despite the disclosure of his share of profit in the sum of $132,068 in his 1st Form E dated 6 January, 2012, there was in fact no such profit. Because of this assertion of falsity, I reminded him that his Form E was supported by his Statement of Truth and he was giving evidence under oath. It was clear that he was putting forward an inconsistent or even a contrary case. He was therefore cautioned and I stood the case down so that his legal representatives could give him legal advice in this respect. When the hearing resumed, H was again properly cautioned and he chose to remain silent and not to explain further.
79. H testified that the Father never mentioned to him about the business and the Father just arranged jobs for him to carry out. When it was put to him that if it was the case how he was able to detail the business and the transactions regarding the Disputed Properties in his affirmations, his explanation was that he obtained these details from the Father when he prepared the affirmations; whether they are true or not he personally could not tell. In my view, anyone reading the affirmations would no doubt have the impression that H was narrating the history out of his own personal knowledge.
80. While H admitted he is the authorized signatory of KML, in evidence, he was resolute that he is not the authorized signatory of YL. However, the evidence before the court is that, in particular from the bank mandate that I subsequently directed to be produced, he is clearly one of the 3 signatories, the other 2 being the Elder Brother and the Father. I have reasons to believe that H has committed perjury.
Relationship between YL and KML
81. As said, Ms Lam agreed that KML and YL are 2 vehicles for one business but when being cross-examined on the operation of KML and the relationship between these 2 entitles, H’s answer was he was not clear and it was not up to him to decide (我管唔到).
82. In short, H’s evidence is that he just lent his name and signatures to the Father and he was not worrying about the consequences because he believed in the Father. He was evasive to all the material questions and just pleaded ignorance. In my view, he has been “working” for the Father (to use his own term) for the past 40 years, it is absolutely impossible for him to know nothing about the business.
H’s Income
83. H testified that throughout the last 40 years his wages with YL were at most about $20,000 per month and the maximum amount of double pay bonus in a particular year was $50,000. It was only during the few years from about 2002 to 2008 that he got an extra $10,000 from KML on top of $20,000, making a total of about $30,000. This was the maximum sum he earned in his entire career. Hence, prior to 2002 inclusive of his double pay bonus, his income on average would only be $24,167 : (($20,000 X 12 months) + $50,000) ÷ 12).
84. When he divorced his former wife in 2001, he agreed to pay maintenance of $15,000 per month while at the same time, even on his own version, he was already in cohabitation with W and was paying her $10,000 as household expenses. When being questioned if he just got $20,000 per month, how he could have afforded to pay all these sums, H explained that he never paid as much as $15,000 and it was only in recent 3 to 4 years that he paid $4,000 per month. In order to explain away he even chose to say he did some part-time jobs.
85. I find it utterly unbelievable. The objective fact is that he agreed to pay $15,000 per month back in 2001. It is indicative of his financial ability. Even if his assertion that he never paid $15,000 is true (which I do not believe), on his own version, at the relevant time he still had to support his former wife and 2 sons back in Canada for about a year while in parallel he was maintaining W. He was evasive when being questioned on the amount of support that he contributed to Canada. He just put up an excuse that he had no recollection.
86. Turning back to his Form Es, in his 1st Form E dated 6 January, 2012, he reported $31,671 as his monthly expenses. He agreed on that basis he would have a deficit of about $9,600 per month. In his 2nd Form E dated 20 August, 2013, he stated a monthly expense of $28,871, the deficit being reduced to about $6,800 per month due to the termination of the service of the domestic helper in August, 2012. H accepted these deficits during the period as stated on the 2 Form Es would be as much as about $144,000 in total. When being questioned how he was able to sustain, his answer at one stage was that the Father paid all these for him for the time being (墊支). After the present proceedings have been concluded when he does not need to pay maintenance to W anymore, he would repay these to the Father. Then at another stage, he even claimed that the monies were the Father’s sponsor for the living expenses of his son but at the same time he maintained that he needs to repay.
87. In my view, H is simply not able to make good his story. In his Form Es dated 6 January, 2012 and 20 August, 2013, he stated himself as a merchant and a partner or a shareholder of YL and KML. Apart from the facts which have been dealt with above, in particular his immigration to Canada as an “entrepreneur”, it is abundantly clear that his standard of living does not fit his alleged status as a waged labourer (受薪打工仔), as can been seen from the following facts:
| 1. |
In about December, 2001, the month following their marriage H purchased a car for use in Shenzhen at RMB128,000; |
2. |
H purchased the 1st Shenzhen Property in about 1998 for cohabitation with W. That was before his divorce with the former wife. Hence, at that time H had to support his family in Canada and his new “family” with W. It is of note that H was not able to tell the court the source of funds for the purchase of this property. His explanation that he had no impression about the source is utterly unbelievable. |
3. |
He purchased the 3rd Shenzhen Property in about April, 2003 for rental incomes. |
88. H tried to attribute his extra financial resources to the Father, such as the shortfalls of his living expenses, a loan of $220,000 for the purchase of the 2nd Shenzhen Property and the legal costs of about $850,000 for the present legal proceedings. He however admitted there was no mention of the repayment date and the Father may simply just waive all these liabilities. His Form Es do not disclose these liabilities owed to the Father. In my judgment, H was just improvising his evidence along the way.
89. Finally, though a small point, it needs to be mentioned that given H’s version that the Father makes all the decisions on a daily basis and he and the Elder Brother are merely puppets, he was driven to say that though the Father is already 86 years old, he does not have any succession plan and the business could come to a standstill and in chaos if the Father for any reason is not able to attend to the business. Again, I find it contrary to commonsense. It is unbelievable that the family in general and the Father in particular would be content with the business being rendered into this predicament without any preparation.
90. For the above reasons, H’s evidence is inconsistent, contradictory and unbelievable. His version is full of holes and does not hold water. In my view, he is nothing but a sheer liar.
Credibility of the Father’s Evidence
91. The Father is now 86 years old. He testified that at the time of the purchase of Shop 10, he did not explain or state to the sons that they were merely holding the property as trustees, nor did he explicitly tell them that he was the true owners. As a matter of fact, all along he never told the sons that the property belonged to him. He said it was simply not necessary for him to do so. The sons just listened to his words and signed the documents according to his instructions. As for the finance, it was he who applied to the bank for the mortgage because he was the boss and the bank trusted him. Since he had some very good banker-friends, he was not required to submit any documents in particular the financial statements of the business for the purpose of making the application for mortgage. Because of his advancing age and in order to obtain a more favourable interest rate and payment terms, it was at the suggestion of the bank that the sons were made owners.
92. When being asked why the sons held the property as tenants in common, he claimed he did not know why this happened. At one stage he even asserted that it was not possible for this to have happened. He testified that he never mentioned about the division of shares amongst the brothers, nor did he know how the property was to be shared amongst them. He did not know that the sons were holding the property as tenants in common and there should not have been any division of shares of ownership (應該無份). He never thought of giving the shares amongst the sons and he certainly never gave such instructions to the solicitors. All he did was to instruct the sons to attend the solicitors’ office for execution of the documents.
93. As for the remaining properties, namely Shop 32, Workshop no. 9 and Factory B, the Father affirmed that what had happened were the same as before for Shop 10. He did not know why the properties were owned by the sons as tenants in common. On each and every occasion, it was the bank that arranged all the documents and assigned the solicitors. All he did was to instruct the sons to go to sign the documents. He was not aware what documents had been signed. He maintained he did not need to worry about this because he trusted his sons.
94. As regards the assents and the assignments executed on 28 August, 2002 in respect of Shop 10, Shop 32 and Workshop no. 9 arising from the death of the Younger Brother, the Father claimed that he gave instructions to the same solicitor Mr EC for the preparation of the title deeds but he was adamant that he did not know the mode of ownership. Indeed, he went so far as to say that he had not met Mr EC at all. The title deeds were taken to him for signatures by the Elder Brother. When being put to him that there was an attestation clause to the effect that he had signed the title deeds in the presence of Mr EC and that Mr EC had interpreted the contents, which obviously included the mode of ownership, the Father at one stage conceded that he was not sure of his evidence but then he maintained that he did not recall having met the solicitor and he was sure that the solicitor did not explain the title deeds to him.
95. The Father claimed to be a seasoned businessman. I find it hard to believe that he did not make decisions on the mode of ownership or he did not give any instructions in this regard if the sons were to hold the properties as trustees for him. The division of shares as expressed in the title deeds must have come from their specific instructions and hence it must have been a deliberate decision. It follows that the allegation that the Father did not give any instructions and had no knowledge on the matter must be a sheer fabrication.
96. It is not difficult to understand why the Father said so. It is all too obvious that the mode of ownership would have a significant impact on their case. If the sons were to hold the Disputed Properties as trustees for the Father, the preferred mode of ownership must be by way of joint tenants. If one of the sons unfortunately passes away, his share would automatically go to the surviving brothers who would continue to hold the same for the Father if the mode of ownership is joint tenants. However, if the mode of ownership is tenants in common as it is now, the share of the deceased brother would go to the estate for the benefit of the deceased’s beneficiaries. On the part of H and the Elder Brother, they were already married and had their own children at the material times, the risk of having his or their shares being passed to the estate and hence working against his wishes and intention must be obvious and apparent in the mind of the Father, especially when this had happened before when the Younger Brother suddenly died in 1992. If the Father’s version were true, he was fortunate enough that the Younger Brother was single and died intestate but it would not be the case for H and the Elder Brother. Against this background, this is wholly unbelievable for the Father to say that he had not given any instructions and even that he had not met the solicitor at all in the execution of the assents and the assignments. I have no doubt he was driven to lie since the otherwise would mean that he knew of the implication of the mode of ownership and that it was a conscious and deliberate decision to have the properties assigned to the remaining sons as tenants in common.
97. The Father said he was very unhappy when he learned of H’s decision to leave for Canada for which H all along processed the application behind his back. He never gave his consent to H using the Disputed Properties (except Factory B which was purchased later) in support of the application. Again, I am sure he was driven to say this in light of H’s evidence. If H were merely a salaried worker without much skill, training or education, it must have been obvious in the mind of the Father that it would not be possible for H to have succeeded in his application. It is therefore wholly unbelievable that the Father was not aware of H using the properties in support of the application. Indeed, according to H’s evidence (and I accept), it was the Father who introduced the immigration consultant to him.
98. As for the allegations of more favourable interest rates and payment terms, the same are not supported by any particulars or evidence. In any event, even if it is true that there were more favourable interest rates, in my view, it is neither here nor there. The Father could have had dual or multiple purposes.
99. Perhaps the most telling part is his evidence on the Chelsea Apartment. The Father is now living with H and his sons at the Chelsea Apartment. It was purchased in June, 2006 in the joint names of the Father and the Elder Brother. He testified that he was the one who decided to purchase this property and again he had the power not to include H as one of the owners. On why the property was purchased in the joint names with the Elder Brother, his answer was one that astounded everyone; and I believe it was a Freudian slip. His answer was he feared that he might have no place to live it. This was to ensure that he had the right to stay in the property and that the Elder Brother would not be able to evict him and the Mother from the property. This statement is in stark contrast to the case that has all along been presented before this court. Their case is that the Father is the ultimate boss and the family members have mutual trust on one and other. If what they said were true, there is absolutely no basis for the Father to harbour such fears.
100. Regarding the financial situation of the business, whilst the Father maintained that he makes all the decisions, he is not aware that KML owes some $5.3 million to its directors. He tried to explain away by saying that this is the responsibility of the accounting staff and then turned to say for the reason that he is the boss, any money owed to the directors must be owed to him. He also tried to explain away that he never reads KML’s accounts and he does not know whether H has signed the audited reports or not. He is clear about YL’s financial situation but not that of KML. In my view, if he is in truth the mastermind, there is no reason why he is not aware that he is owed $5.3 million. Further, his testimony is contrary to that of H. H’s version is that the accounts of KML have been approved by the Father, to which the Father expressly disagreed and maintained that he never asked H to sign the same.
101. The concerted stance of H and the Father is that the latter is the boss and the sons are merely employees. However, pursuant to the mandate to the bank, the signing arrangement for YL is that H, the Father and the Elder Brother are authorized signatories and any 2 would be effective. It would mean that any cheque signed by the Father would need to be co-signed by one of the sons in order to be valid. The Father added that this practice has been in place for decades and everyone is aware of this arrangement. He explained this is for the purpose of checking against each other (監察). To me, this arrangement does not sit well with their assertion. Whilst I can understand that cheques issued by one of the sons may need to be checked against by another, I fail to see why the Father as the overlord needs to be checked against by a subordinate. It simply does not make any sense. It is also contrary to the Father’s evidence that none of his sons and daughters could interfere with his decisions.
102. The Father also agreed that notwithstanding that he is already 86 years old there is no one to succeed him or taking up the business because both of his sons are not up to the required quality (不成材). The implication is clear. Once the Father is gone, the business is gone. Once again, I find it incredible.
103. For the above reasons, I have also come to the same conclusion that the Father’s evidence is not believable.
Credibility of W’s Evidence
104. As for W, as far as the Disputed Properties are concerned, it is clear that she does not have personal knowledge on the matter. In any event, her evidence in this respect is not material. Nonetheless, I have to make it clear that I do not accept her evidence that she worked in the business after coming to Hong Kong. According to the in-and-out records of the Immigration Department, W was away from Hong Kong for 225 days in 2007 and for 234 days in 2008, there is no way that she could have worked as claimed. I will deal with her evidence in other respects in later part of this judgment.
105. I do not think it is in dispute that the purchase monies and the mortgage payments came from YL. Thus, the issue is whether at the time of the purchase, the Father was the sole beneficial owner of YL and if the answer is in the positive, what was his intention at the time of the purchase. As for the latter issue, it is to be noted that intention is to be inferred from the acts and declarations of the parties before or at the time of the purchase or so immediately after it as to constitute part of the transaction. They are admissible in evidence either for or against the party who did the act or made the declaration. However, subsequent acts and declarations which reflect on the intention of the parties are also admissible to the extent that they are evidence against the party who did the act or made the declaration, but not in his favour: see Lee Tso Fong v. Kwok Wai Sun, supra, at para 116.
106. For the reasons that I have elaborated above, I must reject H and the Father’s evidence. Their evidence regarding the acquisition of the Disputed Properties is wholly unbelievable and hence, their alleged intention of trusts must be rejected. Their motive for deliberately not giving truthful evidence is too obvious: it is aimed at defeating W’s claim. It follows that the Father and H fail to discharge the burden of proof to rebut the presumption of advancement. I hold that the Father was not the beneficial owner of the Disputed Properties at the time of the purchase and that the intention of the parties was what had been stated on the assignments, whether at the time of the initial purchase or the subsequent assents and assignments after the death of the Younger Brother.
107. Ms Tang quoted Lewin on Trusts (17th Edition) para 9-07 and para 9-08 and stressed that in the context of rebutting the presumption of advancement, it is the intention of the transferor that is relevant; and the transferee needs not participate in such intention. Even if H acted in contrary to his capacity as trustee, there is no bearing on the Father’s intention. Hence, H’s evidence concerning how he utilized the Disputed Properties not immediately around the time of the purchase is only admissible against the maker, ie H himself but not the Father. On this, I hold that the Father knew of the utilization of the Disputed Properties and he, as a matter of course, did not raise any objection to this because H was the beneficial owners of the properties.
108. As for the business, whilst I accept that the Father was the founder and he procured the establishment of YL, on the evidence before me, I find the truth is that the Father has over the course of years retired and dropped out of the picture. I do not exclude the possibility that the Father might have turned up at the shops from time to time or even discussed with the brothers regarding the business but it would not alter the fact that H and the Elder Brother have long taken up and become the owners of the business.
The Whereabouts of the Proceeds of Sale of the Matrimonial Home in Hong Kong
109. As said above, the matrimonial home in Hong Kong was sold in February, 2009 for $2,600,000. It is common ground that the net proceeds of sale were $700,000 and H had withdrawn $260,000, leaving $440,000 with W.
110. Ms Lam submitted that since W has been fully maintained by H all along, there is no reason why she would have exhausted the balance. Even after the commencement of the present proceedings, H agreed to pay her interim maintenance of $8,000 per month and the amount has not been varied even subsequently the son has been taken care of by H. Ms Lam therefore asked for the adding back of this $440,000.
111. W’s evidence is that since at the relevant time she was taking care of the son she had used $300,000 on a station wagon for transportation convenience. She added that she did not dare to exhaust the balance as H would not allow her to do so.
112. I note W does not dispute H’s assertion that all along the ATM card was being kept by her. At that time the parties had already separated, I fail to see why she still would have taken heed to H’s permission. Thus, I hold that W has to account for the balance of $140,000.
The Whereabouts of the Proceeds of Sale of the 3rd Shenzhen Property
113. It is not in dispute that the sale took place in December, 2012 and the net proceeds were RMB 320,000.
114. In her affirmation dated 2 July, 2013 W said she had exhausted the proceeds on her legal costs and living expenses but without any breakdown or particulars. She however testified in court that she paid $200,000 as legal cost, repaid loans to friends in the sums of RMB50,000 and $50,000 and finally, gave RMB30,000 to her mother during the Chinese New Year of 2013; these made up roughly RMB320,000. It has been agreed that this is equivalent to $400,000.
115. Ms Lam rightly pointed out that W had never mentioned the existence of these loans before she went to the witness box, whether in her affirmation or Form E. In light of this and further in the absence of supporting documentary evidence, I do not think W has been able to prove her contention. That said, I do accept that she needed to spend some money on legal costs. On her own account, it was $200,000. As for the RMB30,000 given to her mother, given the stringent financial position that she said she was in, I wonder why she still needed to pay this amount, which was not insubstantial. I therefore hold that apart from the legal costs, W has to account for the balance of $200,000 ($400,000 - $200,000).
The Law and Legal Principles
116. The jurisdiction of the Court in granting financial relief for a party is governed by section 4 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) which provides:
“4. Financial provision for party to a marriage in cases of divorce, etc.
(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of section 25(1), make any one or more of the following orders, that is to say-
(v)an order that either party to the marriage shall make to the other such periodical payments and for such term as may be specified in the order;
(b) an order that either party to the marriage shall secure to the other to the satisfaction of the court, such periodical payments and for such term as may be so specified;
(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified.
(2) Without prejudice to the generality of subsection (1)I, an order under this section that a party to a marriage shall pay a lump sum to the other party-
(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;
117. In deciding on how to exercise its power in this regard, the court is bound to consider section 7 of the MPPO which provides,
“7. Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6
(1) 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) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.”
118. In LKW v DD, (2010) 13 HKCFAR 537, Ribeiro PJ set out the steps to be taken by the courts in undertaking a section 7 exercise. In brief, they are:
(i) The ascertainment of the financial resources of each of the parties calculated as at the date of the hearing (paragraphs 71 to 73 of the Judgment);
(ii) The assessment of the parties’ financial needs. If the total resources are not enough to meet the parties’ needs, the s.7 exercise should stop here and there is no room to apply any sharing principle (paragraphs 74 to 79 of the Judgment);
(iii) If surplus assets would remain after the parties’ needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties’ total assets, with a yardstick of equal division as part of that principle. This means that the total assets should be divided equally between the parties unless there is good reason for departing from an equal division (paragraphs 80 to 82 of the Judgment);
(iv) In considering whether good reasons exist for departing from equal division, the answer is to be found in the terms of s.7 and the implicit objective of a fair distribution of the assets. Factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations (paragraphs 83 to 130 of the Judgment); and
(v) The weight to be given to each of the factors is a matter of discretion for the court (paragraph 131 of the Judgment).
Financial Resources of the Parties
119. Based on the above findings and with the agreed values of other properties, the parties’ assets are as follows,
|
H’s Assets |
|
|
Items |
Value (HK$) |
| 1. |
Shop 10 |
10,400,000 |
| 2. |
Shop 32 |
9,500,000 |
| 3. |
Workshop no. 9 |
8,000,000 |
| 4. |
Factory B |
1,953,900 |
| 5. |
Cash in Bank |
1,631 |
| 6. |
Net Equity of YL and KML |
753,140 |
|
Total: |
30,608,671 |
| |
|
|
|
W’s Assets |
|
| 7. |
The 2nd Shenzhen Property |
1,900,500 |
| 8. |
Cash in Bank |
4,734 |
| 9. |
Sale Proceeds of the 3rd Shenzhen Property |
200,000 |
| 10. |
Sale Proceeds of the matrimonial home in Hong Kong |
140,000 |
|
Total: |
2,245,234 |
120. H’s assertion that he owes the Father money is incredible, on that basis the issue of liabilities does not arise. The total net value of H and W’s assets is therefore $32,853,905: ($30,608,671 + $2,245,234).
H’s Financial Needs
121. H reported that he needs $28,871 as his monthly expenses; this already includes the expenses for the son and the interim maintenance of $8,000 payable to W.
122. If the parties are going to have a clean break (that is being asked for by both parties), H should have more than sufficient income to meet his monthly needs even on his own account of $22,000 per month. However, since I have already held that H is a proprietor of YL and KML, I have no doubt that he is earning much more than what he has chosen to disclose. In this regard, I consider that he has failed to give a full and frank disclosure of his financial situation and for this reason, I am entitled to draw adverse inference against him.
123. H is now 55 years old and is apparently in good health. It would also appear that his business is also a vibrant one, as can been seen from the landed properties that have been acquired and his own living standard in the past that I have alluded to. There is also no suggestion that he is going to retire or not going to continue his business in the foreseeable future. I am satisfied that H has more than sufficient income to meet his monthly expenses without having recourse to his capital.
W’s Financial Needs
124. W is now 38 years old and is not working. She is staying mainly in Shenzhen and comes to Hong Kong for access to the son and for now, the present litigation. She is now living on the interim maintenance of $8,000 per month. She testified that after the conclusion of the litigation, she would find a job in Shenzhen. She estimated that she could earn around RMB2,000 per month.
125. It is not in dispute that W ceased work after the marriage and depended wholly on H’s provision. There is however some dispute over how much W received from H. H’s case is that he gave $10,000 together with a supplementary credit card. W said that in addition to $10,000, H also gave her additional sums of about $2,000 to $5,000 during festive seasons. Be that as it may, I do not think this discrepancy is material.
126. The daughter is now 18 ½ years old. H accepted she is a child of the family. W however did not apply for ancillary relief for her. I believe this is an oversight on her part. That said, it does not mean that I should ignore W’s obligations towards the daughter. I need to say that as I find H’s evidence utterly unbelievable, his evidence that he had no concern with the daughter at the time of the marriage must be rejected. W said that H paid the daughter’s school fees RMB28,000 per year; and H admitted that after the daughter was granted permission to immigrate to Hong Kong, she stayed at the matrimonial home. I hold that the daughter was also dependent on H during the marriage.
127. In her Form E dated 3 August, 2013, W reported her general expenses at $17,600 (inclusive of monthly rental of $8,000 for the Yau Ma Tei Flat), personal expenses at $11,000 and children’s expenses at $15,000, making a total of $43,600. For food expenses alone, both at home and outside, they are $7,500, household expenses are $3,000, clothing/shoes are $1,200 and personal grooming expenses are $1,200.
128. All these alleged expenses are without particulars. Ms Lam also rightly challenged that these expenses are unsupported by documentary proof. In her 1st Form E dated 20 January, 2012, she stated that H gave her $6,000 as maintenance only after separation. Inclusive of the rental income of RMB1,800 from the 3rd Shenzhen Property that she had at that time, the total would at most be in the region of $10,000 but from the fact that she did not state any debts or liabilities in the Form E, apparently she was able to manage. W is essentially living alone as the daughter is staying in the boarding school and the son is with H most of the time, but her food expenses are said to be as much as $7,500. I have no doubt that she grossly inflates the amounts and in this regard, she is dishonest. Further, as according to her own evidence, W is going to live and work in Shenzhen, it will not be necessary for her to keep the Yau Ma Tei Flat. After the conclusion of the present litigation and when W gets a job, her travelling expenses should be much less than what they are now reported to be. Doing the best I can, and considering all the above in a round and also that W already has the mortgage-free 2nd Shenzhen Property as accommodation, I consider that $20,000 per month should be more than sufficient.
The Sharing Principle
129. Since there should be surplus assets after the parties’ needs have been catered for, I consider that this is an appropriate case to apply the sharing principle.
Whether there are Good Reasons for Departing from Equal Division
130. Both H and W agree there should be a departure from equal division for the reason that the bulk of the assets that H has (ie the Disputed Properties and the business) are external to the marriage. This amounts to $30,607,040, leaving matrimonial assets in the region of $2,246,865 ($32,853,905 - $30,607,040). It is fair to say that the acquisition of the business and the Disputed Properties were not the joint efforts of the matrimonial partnership. They are the fruits of H’s involvement in the business that lasts for nearly 4 decades. Mr Wong, for W, argued for a 60:40 split. Ms Lam, on the other hand, submitted that W should be entitled to no more than 20% value of the matrimonial pot. Whichever percentage it is, in my view, it is clear that even on the part of H, the assets that he said to be external to the marriage are not to be ringfenced but only that there should be a significant departure from equal division. I think this is the correct approach.
131. Jackson’s Matrimonial Finance, (9th Edition) has the following commentary on this subject,
5.77 The classification of property as ‘non-matrimonial’ does not mean that it has to be left out of account altogether. Indeed, s 25(2)(a) of the MCA 1973 requires the court to have regard to the ‘… property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future … ’ and this includes non-matrimonial property. The main importance of the distinction is in relation to the yardstick of equality or sharing principle.
5.78 The sharing principle (equal shares unless there is good reason to the contrary) both provides the rationale for the yardstick of equality used as a check to a provisional overall assessment and also operates in respect of individual assets enabling the court in an appropriate case to hold that one spouse should have a reduced or no share in a particular asset because of the existence of a justifying factor. The categorisation of an asset as non-matrimonial may thus provide a justification for departing from equality in the overall result or for reducing the size of a share in that asset.
5.79 Although the sharing principle applies to all property of the parties, it has been said that it applies more forcibly (or readily) to matrimonial property. Indeed, it has been said that whereas the ordinary consequence of the application of the sharing principle to matrimonial property is equal division, the ordinary consequence of the application to non-matrimonial property of the sharing principle is an extensive departure from equal division, often to 100%-0%. However, it is important to stress that the categorisation of some or even all of the parties’ assets as non-matrimonial will not inevitably result in such departure. In particular:
(a) the factor that property is non-matrimonial will carry little if any weight if the parties’ needs cannot be met without recourse to it. However, the recipient’s needs, perhaps generously assessed, are likely (but nor certainly) to represent the ceiling for any award in a case where all the assets are non-matrimonial;
(b) the operation of the principle of compensation is likely to be very different from that of the sharing principle;
(c) the importance of the non-matrimonial property factor may diminish over time;
(d) the nature of the asset is important. Some assets such as heirlooms are more likely to be ringfenced than others; and
(e) the way the parties have organised their financial affairs and in particular have treated the asset during the marriage may be important eg if the parties have used or drawn down an asset to enhance their standard of living, it is less likely that that asset will be ringfenced.
It has been said that the treatment of non-matrimonial property is highly fact-specific and very discretionary, that application of the sharing principle is inherently arbitrary and that no formula will provide the right answer.
132. I consider that paragraphs (a) and (e) above are relevant here. First, in order to cater for the needs of W, in particular in the situation where both are asking for a clean break, these non-matrimonial or unilateral assets have to be taken into account. Secondly, it is clear that the more affluent standard of living that the parties enjoyed during the marriage was due to the success of H’s business.
133. However, I cannot agree with Ms Lam’s contention that any lump sum awarded to W should be subject to a deduction for the son’s living and educational expenses up to the completion of his university education. She argued that the court should consider the financial needs of the son. She said it is reasonable to expect that the son’s expenses would increase progressively as he grows up. On that basis, for the time being, the son’s monthly expenses would be $12,200 per month but when he progresses to primary school, the expenses would go up to $13,000 per month. She went on to say that the son would need $19,500 during the secondary school years and $24,900 per month for university education. Then she took the trouble of working out a calculation the result of which is that the son would require a total of $4,500,000 up to the age of 22 and it follows that, she argued, W should contribute half of it and this should be made by way of a deduction from the lump sum.
134. Leaving the question of whether there is any evidence in support of the alleged quantum aside, I have no doubt that this ground is either a red-herring or is misconceived. The reason being that H has not made any application for ancillary relief on behalf of the son; what the court is tasked to do is the application for ancillary relief by W. Of course, in dealing with W’s application I should give due regard to the financial obligations and responsibilities that H has towards the son, as he always has since the son’s birth: see section 7(1)(b), MPPO. It is nothing but an ill attempt on the part of H to try to defray W’s claim and must be rejected. With the wealth that H has and the evidence before me regarding the care of the son, I am satisfied that his needs have been well catered for.
135. I also cannot agree with Ms Lam’s contention that the marriage is a short one. Inclusive of the cohabitation prior to the marriage, it is a 10 year relationship and the parties bore a son, during which H was the sole breadwinner and W was keeping the home. I consider both had equal contribution to the family.
136. Apart from the issue of unilateral asset, I do not find any other factors which warrant a departure from equal division.
Deciding the Outcome
137. On the footing that the unilateral asset is the only factor that warrants a departure, it follows that the matrimonial assets need to be shared equally. It means that each is entitled to $1,123,432.50 ($2,246,865 ÷ 2).
138. As for the unilateral asset, for the factors that I have discussed above, taking all the matters in a round, I assess that 20% should be an appropriate figure. It means $6,121,408 ($30,607,040 X 20%). Hence, W should be entitled to $7,244,840.50 ($1,123,432.50 + $6,121,408). Since W already has $2,245,234 with her (which is essentially the 2nd Shenzhen Property), H only needs to pay her the balance $4,999,606.50 ($7,244,840.50 - $2,245,234). I will round it up to $5,000,000.
139. Considering W’s relatively young age, her evidence that she is going to find a job in Shenzhen, her responsibilities towards the daughter and that she already has a mortgage-free accommodation, this $5,000,000 and the income that it may generate should be sufficient for her to maintain a standard of living that is commensurate to that during the marriage. On the other hand, I do not think H would have any difficulty in raising the sum. He could easily raise the sum by further mortgaging one of the Disputed Properties. I will give him 3 months to pay. This is a clean break arrangement.
Order
140. I therefore order that the petitioner is to pay the 1st respondent a lump sum of $5,000,000 within 3 months of the issuance of decree absolute.
Costs
141. I do not see any reason why costs should not follow the event. Further, in my judgment, H and the Father’s claim of resulting trust is wholly unmeritorious. This issue has dominated the trial; in my view it is a waste of costs. What could have been done in 1 or 2 days has turned out to be a rather lengthy one. I consider that H and the Father should bear W’s costs of the present proceedings. I give an order nisi that the petitioner and the 2nd respondent are to pay the 1st respondent’s costs of the ancillary relief proceedings including all costs reserved, to be taxed if not agreed.
Section 18 Declaration
142. I am satisfied that arrangements made in respect of the child of the family to whom section 18 of MPPO applies for his welfare are satisfactory or are the best that can be devised in the circumstances and I accordingly make a declaration to this effect.
Referral to the Secretary of Justice
143. Finally, as I have set out in Paras 78 and 80 above, there is prima facie evidence that H has committed perjury and/or other offences, I direct that a copy of this Judgment be sent to the Department of Justice for their further investigation or prosecution.
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( I. Wong )
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Deputy District Judge |
Ms Yanky Lam, instructed by Messrs George Chan & Co., for the petitioner
Mr Wong of Messrs Christine M Koo & Ip, for the 1st Respondent
Ms Candy Tang, instructed by Messrs Lam Fung & Co., for the 2nd Respondent
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