AV also known as BGA v. CRG

FCMC 18276 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 18276 OF 2012

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J U D G M E N T

(Maintenance Pending Suit)

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1.  This is an application of the Petitioner (“Wife”) for Maintenance Pending Suit by way of a Summons issued on 16 January 2013 seeking maintenance for herself and the 3 children of the family (“Children”) and also a contribution towards her legal costs.

2.  The Wife also applied for directions in respect of the Children’s education and to freeze the termination payment received by the Respondent (“Husband”) on the purported cessation of his employment, and related discovery.

The Law concerning MPS application

3.  Under MPPO Section 3 (maintenance pending suit) and Section 5 (provision for child), the Court may make orders requiring one party in a marriage to pay maintenance for the other party from the date of the presentation of the petition for divorce and for the other for the benefit of children of the marriage for such term as may be so specified. 

4.  The main governing principle is that the Court will make such order as it considers reasonable based on the reasonable needs of the Wife and the Children and the ability of the Husband to pay. In view of such application being interim in nature, the Court will not conduct detailed investigation of the financial position of the parties, but approach on a broad brush basis.

5.  Regarding the principles that underpin such an application, paragraph 16.17 of Rayden^[1] states as follows:

“The court has an unfettered discretion to award such sum as it thinks reasonable. There is no hard and fast rule, and no fixed proportion: each case depends on its own facts. It has been said that the approach to maintenance pending suit should be empirical, and that in the ordinary sort of case the district judges who deal with these applications will have to take a broad view of means on the one hand and income on the other and come to a rough and ready conclusion, or to take a “broad brush approach”.  The overall consideration is the actual needs of the parties’ pending suit.”

6.  The court will also be looking at whether the applicant has an immediate need for financial support. Paragraph 16.18 of Rayden^[2] states as follows:

“…what really matters is the immediate and reasonable requirements of the wife balanced against the ability of the husband to pay for them, assessed using a broad-brush approach.”

7.  Another important factor in determining this application is consideration of the marital standard of living during marriage. In a recent Hong Kong Court of Appeal case HJFC v KCY^[3], Hartman JA said in para 37 of the Judgment as follows:

“The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it. For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i. The sole criterion to be applied in determining the application is ‘reasonableness’, which is synonymous with ‘fairness’.

ii. A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

iii. In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing. That budget should be examined critically in every case to exclude forensic exaggeration.

iv. Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation, the court should err in favour of the payee.” (emphasis added)

Brief background

8.  The Wife is 39 years old born in Laos and raised in Africa. The Husband is 43 and hails from the USA.

9.  The parties met in 1993 and were married in August 1999 in Paris. This is a long marriage of 14 years.

10.  There are 3 children of the marriage, namely:

i. J, a boy, 11 years old;

ii. W, a boy, 9 years old; and

iii. A, a boy, 4 years old.

11.  The parties relocated to Hong Kong in December 2008 for the Husband’s job. The Wife petitioned for divorce on 12 December 2012 based on the Husband’s unreasonable behaviour. The main suit is undefended.

12.  By a consent order pronounced on 8 May 2013, there is joint custody of the Children with care and control to the Wife and the Husband has staying access on alternate weekends.

13.  Pursuant to the recital C in a consent order dated 7 February 2013 (“Consent Order”), the Husband undertook as follows:

i. to pay $30,000 per month as interim interim maintenance to the Wife, and additionally settle her credit card bill up to the amount of $10,000 per month;

ii. to settle the Children’s school fees and bus fees directly;

iii. to pay the rent and utilities (etc.) of the former matrimonial home directly; and

iv. not to cause termination of the existing medical and dental insurance of the Children and the Wife provided by his employer (“T”) and reimburse the Wife any non-covered medical expenses of the Children.

14.  The Husband is in fact paying or has to pay around $94,000 to $96,000 every month for the maintenance of the Wife and the Children pursuant to the aforesaid undertakings.

15.  The parties also acknowledged in the Consent Order that the terms of the aforesaid undertakings are without prejudice to each party’s position at the substantive MPS hearing.

The Wife’s case

16.  The Wife alleged that during the marriage the parties have enjoyed a comfortable lifestyle. They have consistently lived in attractive housing and had access to clubs and facilities. There has always been hired domestic help – usually at least 2 nannies, sometimes 3. Overseas vacations were taken at least twice a year.

17.  She claimed that the marriage broke down due to the Husband’s suspected affair with his Shanghai colleague and that he has transferred large sums of the family’s money there. He left the matrimonial home on 2 November 2012 and then rented a property in Discovery Bay. He terminated the Wife’s supplementary credit cards and took $183,000 from the joint account, leaving a balance of $4,492. He also admitted that he took RMB 667,000 from the joint account in 2012, claiming to have spent on the trips in Shanghai over a period of several months. He undertook to wire the remaining amount of RMB296,800 from Shanghai back to Hong Kong.

18.  The Wife said that in order to avoid giving proper financial support, the Husband insisted that the Wife shall return to France, with the Children, to live off the State welfare.

19.  The Wife considered that no documentary proof of the dismissal of the Husband by T is given.  Such dismissal is highly suspicious as the Husband admits receiving a “handover bonus” of $420,000 from T.

20.  The Wife sets out her current actual monthly spending of about $54,500 in §6 of her 5^th Affirmation and thus claims that the cash allowance of $30,000 per month and use of credit card of $10,000 per month payable by the Husband are insufficient.

21.  The Husband has a proven high earning capacity. He obtained a Masters in International Business from a respected US university. He also has solid working experience, both in the international civil service and in private enterprise in the area of financial control. He has held senior positions in the companies.

22.  The Wife has now secured employment in HK on her own steam, and an application for a work visa has been lodged. If a work visa is forthcoming, she will get pay of $30,000 per month plus an undetermined sales commission.

23.  The Wife further claims that she cannot afford legal representation from her own funds. Any reasonable MPS order the Court might make will likely render her ineligible for legal aid. She had already incurred about $600,000 legal costs during the last 7 to 8 months.  Her costs are estimated to run to at least $50,000 per month.

The Husband’s case

24.  The Husband has the average monthly income of around $167,000 and monthly rental income of about $13,000 from a US property, making the total of roughly $180,000 per month.  He now claims that he was forced to resign by T and the termination of his employment is a direct consequence of the Wife’s telephoning his boss divulging matters relating to the parties’ divorce.

25.  As the employment will be ended on 31 August 2013, the medical insurance provided by T to the Wife and the Children ends at the same time.

26.  According to the Employer Tax Return dated 25 July 2013, he has the total income of $1,332,130, which consists of a handover bonus of $420,000 and leave pay of $79,211, for the period from 1 April to 31 August 2013 ie 5 months.  For the period from 1 April 2012 to 31 March 2013, he has the total income of $1,960,669 excluding the value of residence provided by the employer.

27.  The outstanding tax due to the Inland Revenue Department of HK (“IRD”) upon termination of the Husband’s employment has been paid in the sum of $143,363. 

28.  The balance of the monies held on the Husband’s solicitors escrow account is about $700,000 and another sum of about $400,000 is in the parties’ joint account. The Husband agreed that these 2 sums shall not be released except with the consent of the parties or an order of the court.

29.  He therefore proposes to vary his undertaking in the Consent Order relating to the interim interim maintenance to $nil with effect from 31 August 2013 and to undertake to partially release the monies held on the secured account after legal fees are paid.

DISCUSSION

Standard of living

30.  The first issue is what the standard of living of the parties before the breakdown of the marriage is. It is not disputed that they employed at least 2 domestic helpers during the marriage. The Husband said that the family does not enjoy any particular club membership and has rare overseas vacations. However, the Wife said that they have consistently lived in attractive housing and had access to clubs and facilities and that overseas vacations were taken at least twice a year.  Based on the evidence given by the parties in their respective affirmations and Form Es, I am of the view that they should have enjoyed a comfortable standard of living before the breakdown of the marriage.

Wife’s income

31.  Ms Todd for the Husband submitted that the Wife never managed stable employment whilst in HK. I fail to see the relevancy of this submission save and except that it may support the Husband’s insistence that the Wife shall relocate back to France with the Children and live off the State welfare. Nevertheless, the Wife has absolutely no desire to do so and nor do the Children. She has spent only brief periods in France over the last 14 years; the Children have not lived in France at all, save J and W for a short period while very young.  The Wife has not only clearly rejected the idea of relocation but also secured a job in HK subject to the issuance of the working visa.  There is no evidence that the Husband has never actually bothered to ask the Children about their wishes of relocation in France.  In the circumstances, I cannot see how the court may force her to relocate, in particular the care and control of the Children have been granted to her but not the Husband.  Furthermore, in view of the high earning capacity of the Husband, it is entirely not justifiable for him to insist the Wife with the Children to live off the State welfare in France.  In my judgment, he is extremely irresponsible.

32.  Mr Parker, Counsel for the Wife, submitted that the Wife is prepared to undertake to inform the Husband of the issuance of the working visa to her. I therefore accept that subject to the issuance of the working visa to her, she would have the income of $30,000 per month.

Immediate and reasonable requirements of Wife and Children

33.  The Husband is obliged to pay $30,000 per month as interim interim maintenance to the Wife, and additionally settle her credit card bill up to the amount of $10,000 per month.  The Wife is now claiming her expenses of $54,547 per month according to her 5^th affirmation.

34.  Based on the broad brush approach without detail examination, I think that the item of the Wife’s clothing/shoes expenses for $8,284 seems excessive especially when she has not yet got a job.  I only allow $2,000 for this item.  However, upon commencement of her new job after the issuance of the working visa, I would increase to $7,000 per month.

35.  Besides, I consider that a reasonable amount for the medical/dental expenses of the Wife and the Children shall be added as the medical insurance of the Children and the Wife provided by T will soon be terminated due to determination of the Husband’s employment.  For the purpose of this MPS application, I allow $2,000 for this item based on the broad brush approach.  Thus, in my judgment, excluding the Children’s school and bus fees, the rent and utilities (etc.) of the former matrimonial home which are currently settled by the Husband directly, the immediate and reasonable expenses for the Wife and the Children are about $50,000 per month before the commencement of her new job. Upon receipt of her salary of about $30,000 from her employer when she starts to work, the reasonable monthly needs for the Wife and the Children will be reduced to about $20,000.

Husband’s ability to pay

36.  To start with, I accept as a matter of fact that the Husband’s employment in Hong Kong will be terminated as at 31 August 2013 after careful considering the Employer Tax Return signed by T and the Assessment Demanding Final Tax for 2013/14 issued by IRD. Nonetheless, I refuse to accept the submission made by Ms Todd for the Husband that the termination of the Husband’s employment is a direct consequence of the Wife’s telephoning his boss divulging matters relating to the parties’ divorce. Bearing in mind that he is holding a very senior position in T as VP Finance earning more than $2 million annually, it is very difficult to believe that the Husband’s employment is terminated simply because of the Wife’s telephoning his boss divulging matters relating to the parties’ divorce. Besides, the Husband fails to produce any document eg termination letter from T, to prove the reason of the termination of his employment although he barely alleged no such letter.  According to the letter of 26 July 2013 from the Husband’s solicitors, it said, inter alia, as follows:

“……given the profession of our client, seeking a formal documentation to confirm the termination of our client’s employment will have a serious impact to his future employment.”

37.  I agree with the submission of Mr Parker, Counsel for the Wife that this explanation is beyond fanciful. The Husband also does not bother to ask his boss to make an affirmation to support his allegation that termination of his employment is a direct consequence of the Wife’s telephoning his boss divulging matters relating to the parties’ divorce.  Furthermore, such termination just took place few days before the hearing of this application.  Hence, I do not accept the Husband’s bare assertion without documentary proof that he was forced by T to resign.

38.  I am not satisfied with the Husband’s explanation for his lack of income and I take the view that he is deliberately arranging his affairs so as to keep money out of his possession because of this application. As the disclosure by the Husband is obviously deficient, I will not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.  Even though I accept his employment will be terminated as at 31 August 2013, I consider that he is able to find a new job very soon in view of his qualification and working experience and I will make an order founded on my assessment of what the Husband could reasonably earn.^[4]

39.  Based on the Form E of the Husband, he claims that his monthly expenses are about $189,000 which includes $25,050 being tax.  Since he had already settled all the tax in HK, such item can be taken out from his monthly expenses. Applying the broad brush approach without detail examination, I think that the item of the Husband’s holiday expenses for $10,000 seems excessive. I will allow $5,000 for this item. For the purpose of MPS application, I consider that the reasonable expenses of the Husband excluding the interim maintenance of $40,000 are about $120,000 per month.

40.  Since the Husband has the average monthly income of around $180,000 including the rental of the US property, I consider that he has the ability to pay $60,000 to the Wife.

41.  I note that there will be a net increase in monthly school fees of about $5,000 per month^[5] if this court allow the Wife’s education summons that J and W shall attend D in the coming September.  This summons will be dealt with in the latter part of this judgment.  In the circumstances, I am satisfied that apart from honouring his undertaking to pay the Children’s new school fee, bus fee, rent and utilities (etc.) of the former matrimonial home, the Husband is still able to pay the Wife $55,000 every month after taking into account of such increase. The Husband’s proposal to vary his undertaking in the Consent Order relating to the interim interim maintenance to $nil is entirely unreasonable and must be rejected.

Costs provision

42.  Regarding the Wife’s claim for costs provision of $50,000 every month, the principles governing an application by a spouse for provision of legal costs on an interim basis have been set out in Currey v Currey (No. 2)^[6], namely, that the conditions are as follows:

(i) That the applicant spouse has no assets, or none that can reasonably be deployed (at §19-20).

(ii) That he can provide no security for borrowing, or none which can reasonably be offered (at §19-20).

(iii) That he cannot reasonably obtain legal services by offering a charge on the outcome of the litigation (at §20).

(iv) That he cannot secure publicly funded legal help “at a level of expertise apt to the proceedings” (at §20).

43.  The above legal principles in Currey v Currey have been well summarised and applied in Hong Kong by the Court of Appeal in HJFG v. KYC^[7].

44.  The Court of Appeal in HJFG v. KYCalsomakes reference to the fact that there shall be “equality of arms” in relation to the payment and funding of legal expenses.[8]

45.  Although Ms Todd for the Husband rightly submitted that the Wife failed to make any sufficiently detailed calculation of the estimated legal fees^[9], I think that her costs incurred previously have some indication or significance to the future costs to be incurred up to the date of the final determination of the ancillary relief.  The average monthly legal costs incurred by her in the past are about $75,000 which is much higher than that claimed by her for costs provision.

46.  Furthermore, I am of the view that in order to maintain the equality of arms in relation to the payment and funding of legal expenses, the Husband shall contribute part of the legal costs to the Wife even after she has started to work after the issuance of working visa. 

47.  Ms Todd for the Husband estimated a sum of about $370,000 will be incurred by him up to and including the FDR and if FDR is unsuccessful, further sum of $600,000 will be incurred up to and including the trial of ancillary relief, totalling about $970,000.  I consider that more or less amount will be incurred by the Wife.  Hence, I conclude that her claim for $50,000 per month is not unreasonable.  However, due to the limited ability to pay, namely only $55,000 every month on the part of the Husband, I think that it is academic and not necessary to find the reasonable amount of the costs provision. 

48.  In the circumstances, I order that:

(i) the Husband do pay the Wife $55,000 every month as maintenance pending suit ( inclusive of the costs provision) for herself and the Children commencing from 7 September 2013 and thereafter on 7^th day of each month until further order; and

(ii) save and except the Husband’s undertakings to settle the Children’s school fees and bus fees directly and to pay the rent and utilities, etc. of the former matrimonial home directly, the remaining undertakings of the Husband in the recital C of the Consent Order be discharged.

The Wife’s education summons

49.  The Wife applies for directions for the schooling arrangements of J and W from September 2013 onwards.  J and W are currently at L in, respectively, year 6 and year 4. By consent, the Husband is responsible for paying their school fees.

50.  L does not offer secondary schooling. J is about to rise into secondary school.  In January of this year the Wife spoke with the Principal of D who informed the Wife that if J transferred into year 6 now, he would automatically be given a place in year 7 next year. The Principal also indicated that W could be given a place in year 4 now.

51.  The Husband had already given his consent to the transfer to D according to his email of 15 March 2013.  He further signed the D acceptance form, acknowledging his agreement to pay the school fees.

52.  Nonetheless, the Husband now objects to the transfer on the basis of ‘financial grounds’.   I reject his contention that there are very limited family funds to meet the upfront levy of $110,000 for enrolment in D since the total sum held on the escrow account of the Husband’s solicitors and the parties’ joint bank account is about $1.1 million.  If the Husband refuses to withdraw the necessary sum from these accounts, the Wife may make application to the court.

53.  Another objection of the Husband is that the Wife has to return to France if she cannot obtain a working visa in Hong Kong.  I accept that it may happen but very unlikely based on the evidence before the court.  In my judgment, more important is that if this court declines the Wife’s education summons, J will have no school to attend in this September.  D is only one realistic schooling option on the table. In my view, it is in the best interests of J and W to transfer across to D now. Nevertheless, the Wife must inform the Husband of the outcome of her application form working visa in Hong Kong whether successful or not.

54.  I therefore make an order in terms of §1 of the Wife’s education summons dated 3 May 2013 upon her undertaking to inform the Husband of the outcome of her application for working visa in Hong Kong as soon as practicable.

Wife’s Summons for discovery and freezing termination payment etc

55.  The Wife also takes out another summons on 26 July 2013 seeking, inter alia, an order that the Husband shall disclose copy employment contract, proper documentation proving the quantum of the termination payment made by T.  The Husband filed an affirmation on 29 July 2013 in response to this and exhibiting several documents such as the Employer Tax Return signed by T and the Assessment Demanding Final Tax for 2013/14 issued by IRD.  As mentioned above, I find that his present employment will be terminated as at 31 August 2013 based on these documents.  I accept that the quantum of the termination payment made by T to the Husband is clearly shown in the Employer Tax Return. Regarding the copy employment contract, the Husband had already stated in his Answer filed 12 July 2013 that such contract does not exist. Hence, I see no reason to ask the Husband to produce further document in this regard.

56.  Nevertheless, I would remind the Husband his legal duty to make full and frank disclosure of his financial position in the ancillary relief proceedings, which is continuous[10]. That is to say, if he gets a new job whether in Hong Kong or not, he is bound to disclose to the other side as soon as practicable.

57.  The Wife further seeks an order that the Husband shall not deal with or dispose of the termination payment without leave of the court and transfer the same to the court.  Ms Todd, solicitor for the Husband, confirmed at the hearing that her firm will undertake not to release the sum of $707,701.99 consisting of the balance of the handover bonus of $276,637 held in her firm’s account to any parties without the consent of the parties or an order of the court. My understanding is that the firm shall not use this sum to defray any outstanding legal costs owed or incurred by the Husband.  Thus, so long as such undertaking is well recorded, I do not think that it is necessary to make the order sought by the Wife.

58.  In the circumstances, upon undertaking of the Husband’s solicitors, Withers, not to release the sum of $707,701.99 held in the firm’s account to any parties without the consent of the parties or an order of the court, I make no order to §§1 to 6 of the Wife’s summons dated 26 July 2013 except costs, which will be dealt with in the latter part of this judgment.  Should the Husband’s solicitors refuses to give the said undertaking for whatever reason, they shall inform this court and the Wife within 7 days from the date of this judgment, I shall re-consider §§4 to 7 of the Wife’s application for freezing the money held in the firm’s account.

Costs of the Wife’s 3 summonses

59.  Before I consider the question of costs, I would like to point out the legal costs incurred by the parties are wholly unproportional to the size of family assets. Ms Todd for the Husband rightly submitted that the total legal costs incurred by the parties up to now are about $1 million whereas the total family assets value about $1.6 million which has been substantially eroded by the legal costs.  Ms Todd estimated further sum of about $370,000 will be incurred up to and including the FDR and if FDR is unsuccessful, another sum of $600,000 will be incurred up to and including a 3-days trial of ancillary relief.  I think that similar amount for legal costs will be incurred by the Wife too.  That is to say, the entire family assets will be eroded before the trial.

60.  The FDR will be fixed by the parties very soon.  However, I hope that the Husband would make some constructive offer to settle with the Wife rather than insisting the Wife and the Children to relocate back to France and rely on the social welfare, which is totally unrealistic and against their wishes. If he is not prepared to do so, the forthcoming FDR is meaningless and bound to fail.  Setting down the case for trial is only a disaster to the parties.

61.  Turning back to the question of costs of the Wife’s 3 summonses, I must say that there are a lot of good reasons to order the Husband to pay costs to the Wife, in particular his unreasonable proposal to vary his undertaking in the Consent Order relating to the interim interim maintenance to $nil.  Nonetheless, I would make an order nisi that costs of the Wife’s 3 summonses be reserved which shall be made absolute unless any of the parties applies to vary within 14 days.  The main reason for making such costs order is to encourage the parties to reach amicable settlement as soon as possible.