LKW v. WPM

FCMC 8517 / 2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 8517 OF 2010

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J U D G M E N T
(Ancillary Relief)

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Background

1.  This is the trial of the Petitioner’s Husband (“Husband”) claim for ancillary reliefs which, as per the prayer in the Petition, seeking orders to be made as per the agreement which had been reached between the parties as set out in Paragraph 7 of the Petition.  I now recite as follows :-

“(a) Both parties agree to sell the property at Unit 3, xx Floor, Blockx (xxxx Court), No.x, xxxx Street, Aberdeen Centre, Hong Kong(the “Property”) and after deduction of all the necessaryexpenses including agency commission, solicitors’ costs and disbursements, etc. incidental to the sale of the Property, a sum of HK$500,000.00 be paid out from the proceeds of sale of the Property for the repayment of the Respondent’s loan from State China Finance Limited and other debts including credit cards repayments and the balance thereof be to the Respondent as her maintenance and the remaining balance of the proceeds of sale of the Property be to the Petitioner.

(b) Upon the performance of paragraph (a) above, each party shall waive his or her claim for ancillary reliefs against the other.”

2.  The agreement between the parties was in fact made in Chinese (“Chinese Divorce Agreement”) which, for completeness sake, is recited verbatim as follows :-

“ 離婚協意(sic)書

立離婚協議書人	xxx (以下簡稱男方)
	xxx (以下簡稱女方)

茲雙方因故無法繼續婚姻生活，經雙方同意後立此協議書，以資遵守，其條款如下 :-

一. 雙方協議離婚。

二. 子女扶 (sic) 養 :

(一) 雙方所生之子xxx (於一九九四年x月xx日生，身份證號碼 :

Yxxxxxx(x)) 由男方管養而女方有合理的探視權。

(二) 男方同意負責兒子一切生活費。

三. 夫妻財産處理 :

(一) 雙方共同擁有之名下位於香港仔中心xx閣x樓x室之房屋，女方願意把其下一半業權歸還給男方所有。簽訂本協議書翌日起於一星期內辦妥。所有費用由男方負責。

(二) 男方日後剩餘所有財產上的安排一概與女方無關及更不得日後追討。

(三) 男方同意付女方五十萬港元，作為對付予女方在離婚後所有嚮 (sic) 有的贍養家費的權利。女方答應除前述的五十萬港元外，女方不會作出對男方追討任何或其他贍養費。雙方於辦妥所有一切離婚文件後，始正式生效。

四. 雙方正式簽妥離婚文件翌日，女方願意搬出男方擁有之 (香港仔中心xx閣x樓x室) 名下物業。

立協議書人

男方姓名 :	xxx	男方簽署 :	xxx
身份證號碼 :	xxxxxxx(x)	日期 :	18-6-10
女方姓名 :	xxx	女方簽署 :	xxx
身份證號碼 :	xxxxxxx(x)	日期 :	18-6-10”

3.  At this juncture I must point out that whoever is bi-lingual is able to see the English text recited in the Petition differs substantially from the original Chinese text.  The English text refers to the sum of HK$500,000 for repayment of loan from State China Finance Limited, debts including credit cards and the balance to the Respondent Wife (“Wife”) as maintenance.   However, the original Chinese text simply refers to the HK$500,000 as lump sum maintenance. 

4.  The parties were married on 19 September 1993 in Hong Kong.  There is one child born out of the marriage in October 1994 who is, at the date of trial, just passed his 18^th birthday. 

5.  These divorce proceedings were commenced by the Husband in July 2010 relying on the fact of “Unreasonable Behaviour”.  The particulars set out in the Petition rested upon the Respondent Wife’s indulged in heavy gambling leading to neglect over the family and the child which resulted in the marriage irretrievably broken down.  There are allegations of the Wife running into substantial debts from friends, relatives and finance companies over her gambling.  Over the past 10 years, the Husband alleged he had repaid a sum close to Hong Kong Dollars 1 million for the Wife for her debts.  It also transpired to the Husband that the Wife’s interest in the jointly owned matrimonial home was charged by finance companies.  The Husband could no longer tolerate the situation and thus filed the Petition for divorce.  The marriage between the parties lasted for 17 years at the time of the Petition. 

6.  The Notice of Application to Proceed with Ancillary Relief was filed on 22 September 2010.  Decree Nisi was granted on 3 November 2010.  At the 1^st Appointment hearing on 15 August 2011, the Petitioner was required by this Court to confirm his position on the issue of ancillary reliefs in light of the absence of the Respondent.   The Petitioner then confirmed he wished to proceed with the ancillary reliefs.  

7.  The Husband is now aged 53 who is self employed as a contractor of a sole proprietor business.  In his Form E filed on 18/10/2012, he deposed his average monthly income was “N/A” but with a net profit income from his business at HK$300,218.00. 

8.  The Wife is now aged 52. In the Petition, the Wife’s occupation was stated to be a part-time waitress. Apart from the Acknowledgement of Service signed by the Wife and filed on 15 July 2010, the Wife had neither filed any other documents such as Form E nor taken any part throughout these proceedings.  She had never attended any of the court hearings including this trial.  Service of today’s Notice of trial on the Wife was by way of advertisement on 24 September 2012.  Affirmation of service was filed on 18 October 2012. 

9.  This trial ended up with the Husband proving his case on ancillary reliefs.

The Husband’s Open Offer for Ancillary Reliefs

10.  The Husband, through his Counsel’s written opening submission dated 24 October 2012, stated his open proposals as follows:

(1) The Husband seeks the Court Order to enforce the terms of the Divorce Agreement that has been reached between the parties on 18 June 2010;

(2) Alternatively, if the Court rejects the Divorce Agreement, by reason of the Wife’s conduct and negative contribution to the marriage, the assets of the Family should be dealt with so as to pay off the Wife’s known debts and thereafter, the Wife should only be entitled to about 20% of the remaining family pool;

(3) Custody of the child is not in issue, an Order having been granted by Deputy District Judge Tracy Chan on 13 November 2010 although the Child will shortly be reaching 18 years of age. 

The Law on Ancillary Relief

11.  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-

(a) 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)(c), 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;

(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments to be secured to the satisfaction of the court.“

12.  The Court also has power to grant a property transfer order or a sale of property order under ss.6 and 6A of the MPPO:

“6. Orders for transfer and settlement of property and for variation of settlement 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 sections 10 and 25(1), make any one or more of the following orders, that is to say-

(a) an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion;

…………

………

………

(e) an order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion, and for the use of the proceeds of such sale…

6A. Orders for sale of property

(1) Where the court makes an order under section 4, 5 or 6 then, on making that order or at any time after the making of that order, the court may make a further order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion.

………....…”

13.  The governing principles in relation to the distribution of the family assets in dissolution of marriage are set out in section 7 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, (“section 7 factors”) which states as follows:

(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.

14.  In the leading case of LKW v DD[1] the Court of Final Appeal sets out 4 principles as to how section 7 shall be approached, which are stated as follows:

a. The first is that the implicit objective of a section 7 exercise is to arrive at a distribution of assets which is fair as between the parties[2];

b. The second is that the concept of fairness requires the refutation of any gender or role discrimination[3];

c. The third principle is that, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a “yardstick of equal division” which should be departed from only for good, articulated reasons[4];

d. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement[5]. 

15.  The Court of Final Appeal went further to lay down 5 steps as to how the Court should do when exercising section 7 as follows:

a. The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing[6];

b. The next step is for the court to assess the parties’ financial needs[7];

c. If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the “needs” question previously considered to be dealt with under that principle[8];

d. The fourth step therefore involves considering whether good reasons exist for departing from the principle of equal division[9];

e. When deciding the outcome, the court is not bound to depart from equality in the division of the parties’ assets even if one or more of the factors considered are engaged on the facts.  The weight to be given to such considerations is a matter of discretion for the court[10].

Issues

16.  The issues fall to be considered by this Court are as follows :-

(a) Whether the Chinese Divorce Agreement dated 18 June 2010 should be accepted and implemented, and if so, to what extent ?

(b) How should the family assets be divided bearing in mind the principles laid down by the Court of Final Appeal in LKW v.DD (supra) and the section 7 factors ?

The Husband’s Evidence

17.  The Husband filed 4 Affirmations in total.  The Husband adopted all his Affirmations as his evidence in chief.  For this trial, only the 3^rd and 4^th Affirmations are relevant.  The 3^rd Affirmation sets out the background and circumstances leading to the signing of the Chinese Divorce Agreement.  The 4^th Affirmation was filed for setting out the amount of indebtedness of various charges registered against the Property.

18.  There are 2 Valuation Reports produced by the same CS Surveyors Limited respectively dated 31/5/2012 and 21/7/2012.  At the initial trial hearing fixed for 3 July 2012, I raised with Counsel Miss Y W Man for the Husband that the first Valuation Report could not be accepted as evidence for non compliance with Order 38 rules 37A and 37C of Cap.336H on expert evidence.  This was agreed by Miss Man.  Upon application, the trial was then adjourned with leave granted for Husband’s solicitors to handle the non compliance issue in respect of the Valuation Report by before 19 July 2012.  The Husband, however, chose to produce a second Valuation Report by the same expert.  In this second Valuation Report, the market value of the Property on vacant possession was HK$5,800,000, which is less than the valuation of HK$6,000,000 in the first Report.  The Husband accepted the later valuation of HK$5,800,000.   

19.  At trial, the Husband testified the Chinese Divorce Agreement was drafted by his younger sister.  When it was signed in the Property, only the child was present.  He re-iterated the consensus at the time was that the Property be sold to repay the debts then outstanding which was about 2 million odd dollars, details of the debts are set out in paragraph 13 of his 3^rd Affirmation.  The Husband agreed that such debts also included his loans, the balance of the sale proceeds would then be equally split between himself, the Wife and the child.  It was also agreed that a sum of $100,000 would be reserved for miscellaneous expenses for the property sale. At the time of signing the Chinese Divorce Agreement, the Property was worth around 4 million.  Therefore, the balance after repayment of debts of about 2 million odd dollars, reserving $100,000 for expenses, the balance left behind for distribution would be around 1.5 million.  This is the basis for working out the one-third amount of $500,000 for the Wife.

20.  As stated in paragraph 17 of his 3^rd Affirmation, he was not aware of a Legal Charge created by the Wife in favour of State China Finance Limited on 2 April 2008 until shortly before filing this Petition for divorce.  Subsequently, a Charging Order Absolute under DCCJ Action No.3301 of 2010 was also registered against the Wife’s interest in the Property on 22 December 2010.  The Husband further testified that actually he had no idea what other debts the Wife had incurred at the time of signing the Chinese Divorce Agreement in June 2010 apart from those presently set out in his 3^rd Affirmation.  

21.  With the rise in prices of the Property from 4 million to 5.8 million, the net surplus available for distribution is likely to exceed the $500,000 even taking into account the high interest accruing on those debts charged over the Property.  When being asked by this Court whether he would now adhere to the same one-third equal splitting of balance of sale proceeds, the answer given by the Husband was that if that one-third split to be applied now, he would not be paying off those debts as per the encumbrances registered against the Wife’s interest in the Property.  He further said he would not take up any responsibility on any other debts of the Wife which have not come to light yet.

22.  The Husband then supplemented his answers by saying the sum of $500,000 was aimed for the Wife to repay whatever debts she had at the time of the Chinese Divorce Agreement.  Such supplemental answer was, however, nowhere to be found within the terms of the Chinese Divorce Agreement or even within paragraph 13 of the Husband’s 3^rd Affirmation.  Such supplemental answer only appeared in paragraph 7 (a) of the Petition and paragraph 11 (b) of Counsel’s Opening Written Submission.  I was not assisted by Counsel Miss Man as to why she would put in her paragraph 11(b) nor had she addressed me further on what other evidence, apart from the supplemental answer given at trial, I might consider the purpose of the $500,000 at the time of signing the Chinese Divorce Agreement was for repayment of loans of the Wife.  Quite contrary, the purpose of the $500,000 was clearly stated to be lump sum maintenance for the Wife both under the terms of the Chinese Divorce Agreement and even in paragraph 13 of the Husband’s 3^rd Affirmation !

23.  In light of these discrepancies on the genuine purpose of the $500,000, my view is that the Husband does not wish to adhere to the agreed “one-third” sharing of sale proceeds.  Despite the rise of the Property price from 4 million to 5.8 million, the Husband wished to adhere to the amount of $500,000 rather than any ratio, say, the one-third sharing of the net sale proceeds. 

24.  The Husband’s evidence, in so far as concerning the purpose of the sum of $500,000 to be given to the Wife, is unclear.  On such basis alone, I am entitled not to give effect to the enforcement or implementation of the Chinese Divorce Agreement for the purpose of the ancillary reliefs.  I will deal with the context of the Chinese Divorce Agreement in the following paragraphs.

The Chinese Divorce Agreement

25.  Counsel Miss Man rightly referred to the English Supreme Court decision of Granatino v. Radmacher [2010] UKSC 42 on enforcement of nuptial agreement where those line of House of Lords decisions such as White v. White [2001] a AC 596 and McFarlane v. McFarlane [2006] 2 AC 618 were considered and applied. 

26.  In Granatino, it was held, inter alia, that if the agreement is to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and informed of its implication (see paragraph 68 of the Judgment). 

27.  Further, at paragraph 69 of the Judgment, where it said :-

“………but we consider that the Court of Appeal was correct in principle to ask whether there was any material lack of disclosure, information or advice. Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party’s assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that agreement should govern the financial consequences of the marriage coming to an end.”

28.  Since the Chinese Divorce Agreement is a ‘home-made’ one, the Court before attaching any weight to it must first be satisfied, by reading the contents, that there was sufficient and material disclosure by both parties. This is one of the pre-requisites.  On the question of disclosure, it should cover both assets and liabilities so that the parties to the agreement could have all the information that is material to his or her decision, and that each party should intend the agreement should govern the consequences of the marriage coming to an end.  This explains why the format of financial statements (Form E) covers both assets and liabilities.

29.  Upon reading the Chinese Divorce Agreement, it was not stated anywhere that the parties’ had acknowledged that they are aware of the other’s assets and liabilities.  Not even the Chinese characters or phrase (債務/債項) which in English is ‘liabilities’ appeared anywhere in the entire document.  In that case, there is simply no basis for this Court to find there was debt on the part of the Wife at the time of the Chinese Divorce Agreement nor the Wife acknowledged that the lump sum of HK$500,000 was for repayment of debts as the Husband now pleaded.

30.  Further, as I said earlier, the amount of HK$500,000 was expressed to be lump sum maintenance for the Wife.  It came along with an acknowledgement of the Wife that she would not claim any further maintenance.  Even if there was sufficient and material disclosure of assets and liabilities by both parties (which I made no such finding), such acknowledgement could not be evidence to show the Wife was fully aware of the implications or was she simply indifferent to the Husband’s assets.

31.  Moreover, the Husband’s evidence was that the Wife was aware there were debts outstanding but he was unable to say further whether the Wife was, or at least he himself did not, aware of the exact amount of indebtedness.  The Husband said the consensus was simply to sell the flat in order to repay debts.  In such a case, there is an issue of undue influence or pressure which may render any ‘agreement’ unenforceable. There is also the question whether the parties could be in any position to ‘agree’ on the sum of HK$500,000 as distribution of balance of sale proceeds without first knowing the exact amount of debt outstanding.  The simple reason is that the debt might have already exceeded the proceeds of sale of the Property.  In such event, how could each person (including the child) be assured of the sum of HK$500,000  out of the sale proceeds ?

32.  For these reasons, I also find the Chinese Divorce Agreement not enforceable.

The Wife’s Acknowledgement of Service

33.  The other submission is that the Wife had chosen to fill in the Acknowledgement of Service without seeking the Court to consider her financial position.  

34.  The answers provided in the Acknowledgement of Service (Form 4) as to financial reliefs, namely under questions 8 and 9 therein, could not be taken as final and conclusive.  Under the practice and procedure, the Form 4 was required to be filed within 8 days of service of proceedings.  In most cases there will not be sufficient time to seek independent legal advice on such issue.  To give an answer “No” to those questions on ancillary reliefs in the Form 4 would not, in my view, bar the Respondent from seeking ancillary reliefs afterwards, whether by the filing of a fresh Form 4 or, more appropriately, filing the Notice of Intention to Proceed with Ancillary Relief (Form A).  In fact, the Matrimonial Causes Rules, Cap.179A, do not prohibit such course of action.

35.  I am not at all convinced that the Respondent’s indication in the Form 4 not seeking financial reliefs could be supportive evidence that the Chinese Divorce Agreement should then be affirmed.  One does not necessarily follow the other.  Therefore, I find such contention fails.

36.  I will now approach the Husband’s ancillary reliefs by reference to the relevant law bearing in mind the principles enunciated in the landmark case of LKW v. DD (supra).  

Identification of Assets

37.  The first step is to identify the assets of the parties and the family.

38.  As said, the Wife had not taken any part (except filing the Form 4) in these proceedings.  I can only consider the assets disclosed by the Husband in his Form E dated 17 October 2012 (that is, filed 12 days before trial) and his evidence in Court.

39.  The Husband claimed the main asset is the matrimonial home under the joint names of the parties.  The market value in the second Valuation Report dated 21 July 2012 was HK$5,800,000.  There is no outstanding mortgage except various charges registered against the interests of the Wife over her debts.  Appearing in the Land Office search annexed to both the first and second Valuation Reports, those creditors include State China Finance Limited (which transferred the charge to American Wilson Finance Limited); Ego Finance Limited; Hang Seng Bank Limited. Upon enquiries by the Husband and confirmed in his 4^th Affirmation dated 26 June 2012, the total indebtedness to those creditors who had registered charges on the property amount to around HK$618,869.99 with daily interest accruing from 27 June 2012 until actual payment.  Moreover, the Respondent owed debts of HK$210,000 to one of the Husband’s friend Mr. Pang and HK$30,000 to the Husband’s sister which remain unpaid.  Thus the total amount of debts of the Wife was around HK$858,869.00 plus interest accuring.

41.  In addition to the matrimonial home, the following assets and liabilities are disclosed in the Husband’s Form E dated 17 October 2012 :

Assets

(a) Bank accounts (personal name accounts)
Bank of China (Savings)	026xxxxxxxxx76	$81,764.01
HSBC (Savings)	064-x-xxxx28	$55,143.02
HSBC (Savings)	109-x-000081	$29,022.96
HSBC (Savings)	473-xxxxxx-833	$24,490.80
Bank accounts (company name account)
Bank of China	012xxxxxxxxx87	$10,200.20
		$200,620.99

(b)	xxxx Drilling Company (100% owned)	No capital value
(c)	Shares of xx控股	$48.32
	Shares of xx控股	$23,000.00
	xxxx Group	$923.72
	xxxx Holdings	$Nil
		$23,972.04
(d)	MPF Super Trust (current value)	$3,646.68
	MPF Super Trust Plus (current value)	$ 27,718.38
		$31,365.06

Liabilities

Loan from father (for purchase of first matrimonial home)	$500,000.00
Loan from father & 2 uncles (decoration of present matrimonial home)	$350,000.00
Loan from sister for redemption of mortgage on matrimonial home	$1,200,000.00
Balance of loan from Mr. Chan xx	$165,000.00
	$2,215,000.00

42.  As to monthly income, the Husband relied upon his 100% owned drilling business income of HK$300,218 for the Year ended March 2011.

43.  In the summary of assets and liabilities at Part 2 of the Form E, the Husband stated as follows :-

Net value of interest in matrimonial home	$5,300,000.00
Total value of interest in all bank accounts	$200,620.99
Total value of interest in all holdings (e.g. stocks)	$ 23,972.04
Sub-total :	$5,524,593.03
Total value of pensions, if any	$ 31,365.06
Total :	$5,555,958.09
Less : Total value of your liabilities	$2,215,000.00
Net Value :	$3,340,958.09

44.  According to the Land Office search, the matrimonial home was purchased in 1997 with mortgage from Citibank N.A.  In 2000, the Citibank N.A. mortgage was discharged and on the same date a mortgage with Hang Seng Bank Limited was registered.  This is commonly seen as ‘transfer mortgage’ cases probably for better mortgage interest rates.  In 2004, the mortgage with Hang Seng Bank Limited was also discharged. Then there appeared those charges of the Wife’s creditors starting from 2008 onwards.

45.  At Part 2.1 of the Husband’s Form E, it shows a down payment of $3,000,000 for purchase of the matrimonial home was paid by the Husband, with a mortgage for HK$1,700,000 with Hang Seng Bank Limited.  On these figures, this worked out the Husband had paid  around 64.1% of the purchase price of HK$4,680,000 (as per Land Search which Husband stated purchase price was HK$4,700,000 in his Form E).  The mortgage sum of HK$1,700,000 represented only about HK$35.9%. 

46.  Had the Husband been able to afford 64.1% for down payment of the matrimonial home in 1997, I find it difficult to believe the alleged loan of HK$500,000 from his father for purchase of the first matrimonial home (see paragraph 41 above) would not be repaid first.  Likewise, the need to raise the loan of HK$350,000 from his father (without repaying the HK$500,000 to the father) and 2 uncles for decoration of the present matrimonial home seems dubious.  So far, there is no documentary evidence from the Husband to support these liabilities had actually been incurred and still outstanding after so many years.  There is not even an affirmation from the father and the uncle.  I am not convinced that these sums should be deducted from the asset value of the property.

47.  For the sum of HK$1,200,000 of loan from the sister for redemption of mortgage of the matrimonial home, I will not deduct it from the pool of assets, or more correctly, from the asset value of the Property in the absence of any cogent and compelling evidence of such debt.  It is again dubious that the Husband, having had a business for years as the Husband confirmed it was set up long ago and generating income, and who is able to accumulate HK$200,000 savings sitting around in different bank accounts would leave such loan unpaid for so many years.  There is again no evidence of such loan ever existed or if exists, had not been repaid. There is not even an affirmation from the sister confirming it.  Thus this loan will not be deducted from the asset value of the property.

48.  For the loan of HK$165,000 from Mr. Chan xx, the Husband said Mr. Chan this is his ‘boss” as Mr. Chan provided business to his drilling company.  Same in other cases of liabilities, there was no direct evidence, documents or by way of affirmation from Mr. Chan xx, to support this sum.  Therefore this amount will also not deduced from the Husband’s assets.

49.  The Husband is the sole proprietor of xxxx Drilling Company.  No audited accounts of this company were produced except Income Statement for the years ended 31 March 2011 and 31 March 2012.  Thus, there is no evidence as to the asset value of this company. However, by comparing the Income Statement of these 2 years, it is noted that there is a sharp increase in business turnover and profits.  For the Year ended 2011, the turnover was HK$872,000 with a Net Profit of HK$178,993.  For the Year ended 2012, the turnover was HK$2,281,000 with a Net Profit of HK$300,218. 

50.  On the Husband’s assets, I find it to be HK$6,055,958.09 made up as follows :-

Net value of interest in matrimonial home	$5,800,000.00
Total value of interest in all bank accounts	$200,620.99
Total value of interest in all holdings (e.g. stocks)	$ 23,972.04
Sub-total :	$6,024,593.03
Total value of pensions, if any	$ 31,365.06
Total :	$6,055,958.09

without deducting any of the alleged liabilities. To round up, I adopt the figure of HK$6,056,000.

Assessing the parties’ financial needs

51.  The next step is for the Court to assess the parties’ financial needs.  As the Wife had not filed her Form E nor taken any part in the ancillary relief trial, I can only consider the Husband’s financial situation and needs and also the fact that he has to support the child of the family.

52.  The Husband in his Form E invited this Court to take into consideration of the child’s financial needs on University education in the United Kingdom for at least 3 years from 2013.  He worked out an average tuition fees of HK$112,500 a year or HK$9,375 a month. For living expenses, he worked out the estimate of HK$22,500 per month.  Thus, the annual tuition fees and living expenses for the child together are in the region of HK$382,500 per year (HK$112,500 + HK$22,500 x 12).   The total sum for 3 years would then be HK$1,147,500.  There are, however, no documents yet to show such plan is on the way.

53.  One of the peculiar facts of this case is that the Husband asks for a sale of the matrimonial home in order to repay substantial amount of debts incurred by the Wife.  Those debts are attracting high interest rates on a day to day basis. 

54.  In the 3^rd Affirmation dated 5 August 2011, the Husband said between 1995 and 2008, he had repaid credit card companies a total sum of not less than HK$500,000 at the Wife’s requests.  Between 2009 and 2010, he had further paid a total sum of not less than HK$450,000 to credit card companies and finance companies for the Wife on her debts resulted from gambling.  Moreover, he had also paid UA Finance Limited a sum of HK$9,800.  There are also outstanding and unpaid debts owed by the Wife to one Mr. Pang at HK$210,000 and to the Husband’s younger sister at HK$30,000.

55.  In the 4^th Affirmation dated 26 June 2012, the Husband said the debts due to the 3 creditors who had registered charges on the matrimonial home amount to HK$618,869.99 plus daily interest from 27 June 2012 until actual payment.

56.  Although the matrimonial home is now occupied by the Husband and the child, he is minded to sell it to repay the aforesaid debts of the Wife.  Besides, he claimed at paragraph 13 of his 3^rd Affirmation that the Wife had also agreed to apply the proceeds of sale to repay those debts owed to his father of HK$500,000 and his father and 2 uncles of HK$350,000 and to his younger sister of HK$1,200,000. 

57.  I accept there is a need for sale of the matrimonial home to repay those debts which had charged on the property with high interest accruing on a day to day basis.   Such need is, in my view, imminent and overrides the need of accommodation for the Husband and the child.  The child will be studying abroad in 2013.  It is not difficult for the Husband to arrange alternative accommodation for himself given the fact that he has earning capacity having business of his own generating monthly income.  I am satisfied that this is a suitable case for ordering a sale of the matrimonial home as prayed by the Husband.  I also take note of the child’s needs on education expenses abroad which would have to be set aside before determining the shares of the Husband and the Wife.

Income, earning capacity, property and other financial resources

58.  The Husband is a sole proprietor running a drilling business.  From the Income Statement of the company for the year ended March 2011 and 2012, the net profit increased from HK$178,993 to HK$300,218 (that is, about 68% increase). 

59.  Moreover, the Husband has savings in his 4 personal bank accounts and also will be having sale proceeds of the matrimonial home.

Financial needs, obligations and responsibilities

60.  It is fair to say there is a practical need for the Husband to repay the Wife’s debts and to bring the high interest currently accruing daily to an end rather than any substantive financial needs; for otherwise, any beneficial interest that the Husband may have over the matrimonial home would be eroded by the interest element over the Wife’s debts.   

61.  The obligations and responsibilities in the foreseeable future being to support the child’s living and educational expenses. 

Standard of living before breakdown of marriage

62.  The parties have been living at the matrimonial home since the purchase in 1997. 

Age of the parties and duration of marriage

63.  The Husband is now aged 53.  The Wife aged 52.  The marriage lasted for 17 years when the parties separated in 2010.  It is a long marriage.

Any physical or mental disability of either party

64.  No issue of any disability was disclosed.

Contributions to the welfare of the family

65.  There is no information as to Wife’s contribution.  The Husband’s case being that the Wife indulged in heavy gambling shortly after the marriage.  The Wife gambled a lot and run into heavy debts and various borrowings.  The Husband had paid off substantial debts for the Wife.  This factor tilts in the Husband’s favour. 

Compensation

66.  There is no issue on this factor.

Applying the sharing principle

67.  Given the fact that there is no evidence of the Wife’s financial position, I can only consider the Husband’s case one-sided and the section 7 factors in determining whether the sharing principle should be applied.  The parties married in 1993 and the Wife left in 2010, it is a period of 17 years of marriage counting up to separation. 

68.  The Husband’s case is not on “equal sharing”.  It is rather a case of a lump sum payment of HK$500,000 to the Wife as per the Chinese Divorce Agreement.  Since I have not accepted enforcement or implementation of the Chinese Divorce Agreement, I will apply the sharing principle on the assets of the Husband which I found to be HK$6,056,000 in paragraph 50 above.  In view of the Wife’s substantial debts over the years as the Husband had deposed, I take the view that the Wife virtually has no assets of any value which may fall within the family pot for computation.

Consideration of any good reasons for departing from equal division

Conduct of the parties

69.  The Husband’s case for irretrievable breakdown of the marriage was based principally, if not solely, on Wife’s conduct of gambling.  The Husband claimed in the particulars of the Petition that the Wife’s indulgence in gambling caused her neglect the family and failed to prepare meals for the child from time to time.  She even failed to return home a day of two without informing the Husband.  The Wife also returned home late around 1 a.m. or 2 a.m.

70.  The Husband could not tolerate anymore and sought a divorce.

Deciding the Outcome

71.  Considering the Husband’s case, I find there are good reasons for departing from the equal sharing principle.  In my decision, I find a departure of, say, 15% should be fair and reasonable.  Thus, the sharing ratio would be 65 (Husband) : 35 (Wife).

72.  Out of the Wife’s 35% sharing, the Husband should be reimbursed all those repayments he made for the Wife on her debts over the years.  I accept the following sums set out in the 3^rd Affirmation of the Husband to be deducted :-

(a) HK$500,000  (in paragraph 9 of Affirmation);

(b) HK$450,000  (in paragraph 11 of Affirmation);

(c) HK$9,800   (in paragraph 12 of Affirmation).

73.  As the child is now still studying in Hong Kong, I decide his future University educational expenses overseas be set aside from the assets of HK$6,056,000 which I found at paragraph 50 above. I find such sum to be HK$1,200,000 and need to be paid into Court from the proceeds of sale for further disposal when details of the child’s expenses are available.

74.  As a matter of conveyancing practice, the Husband has to discharge those charges and encumbrances created by the Wife’s creditors over the title of the matrimonial home before sale. The Husband agreed and undertook to do so but from the proceeds of sale.  I accept the Husband’s undertaking.  I am also satisfied from reading the records that these debts were incurred by the Wife which I was informed that as at the date of trial it had accumulated close to HK$900,000.

75.  I also agree the sums required of for discharge of the charges and encumbrances over the property should be paid out from the proceeds of sale before applying the sharing ratio.

76.  As for the costs and expenses directly relating to the sale reasonably incurred, such as legal costs, estate agents commission, stamp duties and others, all these also to be deducted from the proceeds of sale before applying the sharing ratio.

77.  Subject to the HK$1,200,000 payment into Court and other payments and deductions aforesaid, the residue of the proceeds of sale be split between the Husband and the Wife on the ratio of 65 : 35.

Orders and Directions

78.  I now make the following Orders :-

(1)    There be a sale of the Property within 90 days from the date of this Decision at the then prevailing market value;

(2)    The Husband shall have the conduct of sale of the Property;

(3)    The Registrar of the High Court be requested to sign all deeds  and instruments on behalf of the Wife under section 26 of the Matrimonial Proceedings and Property Ordinance Cap.192;

(4)    The Solicitors representing the Husband and the Wife in the sale of the Property be authorised to :-

(a)    arrange a sum of HK$1,200,000 from the purchase price of the Property to be paid into this Court pursuant to paragraph 73 of this Decision prior to completion of the sale by contract or auction (whichever is applicable) ; and

(b)  within seven (7) days after completion of the sale by contract or auction (whichever is applicable), arrange payment into this Court the net balance payable to the Wife after compliance with paragraphs 72 (a), (b) and (c), 74 and 75    of this Decision.

(5)    In the event no Formal Sale and Purchase Agreement is signed at the expiration of the 90 days (i.e. on or before 11 March 2013), the matrimonial home be sold by public auction forthwith to be arranged by the Husband subject to the minimum price of 5.8 million or the then current market value at the sole discretion of the Husband, the costs for auction to be shared equally between the Husband and the Wife;

(6)   There be liberty to apply for disposal of the respective sums paid into Court under paragraphs 78 (4)(a) and (b) hereof;

(7)  Upon compliance with paragraphs (1) to (5) above, all claims which each party may have against the other for ancillary reliefs be dismissed; and

(8)  Both parties have liberty to apply for further directions as to implementation of this Order.

Costs

79.  As this trial went uncontested in the absence of the Wife, I decide to exercise my discretion not to make any order for costs for these ancillary relief proceedings including all costs reserved.  Such costs order nisi will become absolute unless any party apply to vary the same within 14 days from the date of this Decision.

[1] FACV No. 16 of 2008

[2] At §§56

[3] At §§57

[4] At §§58-61

[5] At §§62-70

[6] At §§71-73

[7] At §§74-79

[8] At §§80-82

[9] At §§83-130

[10] At §§131-132