WAN YEUNG PUI LIN v. WAN MAN HOI

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

DIVORCE JURISDICTION NO. 2 OF 1984

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BETWEEN

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JUDGMENT

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Introduction

1. This hearing which lasted four weeks was to determine the prayers in the petition for custody of the two children of the marriage and for ancillary relief.

2. The parties, who were married on 17th January 1970, have two sons, Sunny, born on 6th November 1970 and Matthew, born on 27th September 1976. At present, both children are under the care and control of the petitioner pursuant to an interim order.

3. After their marriage, the parties established five companies, which until 11th March 1983, were jointly owned. Five properties were also purchased, three of which are in the joint names of the parties. The petitioner seeks to have the companies and properties valued and that value divided proportionately between the parties.

4. The division of the assets on this basis will make the petitioner self-sufficient so that she will not seek other relief. However, if she is awarded custody of the children, she will require maintenance for them from the respondent.

The Companies

5. The parties have since 1972 established five companies in the garment or textile track. They are:

Wo Yik Garment Ltd. (WYG)

Paul Stefeno International Limited (PSI)

Alberto Karina Limited (AK)

Wo Yik Industries Limited (WYI)

Juniora Moden Limited (JM)

6. Until the petitioner transferred to the respondent her shares in these companies, which I shall refer to collectively as the Group, the parties were the shareholders and directors. They had an equal shareholding in each company excpet WYG and PSI where the split was three to two in favour of the respondent.

7. The petitioner asks that the value of the Group be apportioned between the parties in accordance with the previous shareholdings. In principle, the respondent does not quarrel with this, save in relationship to WYG. The respondent contends that the first $200,000 of the capital of WYG was put up by him alone and that only the subsequent capital of $300,000 should be apportioned in the ratio three to two.

8. The respondent prepared a valuation of the Group based upon the individual financial statements of the five companies. This valuation shows that the Group has an excess of liabilities over assets with this valuation, the petitioner has no quarrel in so far as it is based upon the financial statements. It is the petitioner's case, however, that the substantial quota holdings of the Group, which as intangible assets do not appear in the financial statements, should be valued and brought into account. The petitioner valued the quotas at something in excess of $6 million.

The Properties

9. Between them, the parties own five properties. They are:

The source of funds

10. There is not really very much between the parties as to the apportionment of these assets. Mr. Wei, for the petitioner, asks for the Group to be split in accordance with the parties' earlier shareholdings and for the properties to be divided equally on the basis that it is a business which is being divided. For the respondent, Mr. Yam, by applying the well-tried principles relating to family assets suggests that the petitioner should get something more than a third leaning towards a half. However, in deference to the wealth of evidence and careful arguments, I think I must show how I find the initial funding of the Group and the properties to have been made and why I prefer Mr. Wei's approach.

11. There is a bitter division between the parties. During the course of the proceedings, the petitioner's conduct before separation and an allegation by the respondent that the petitioner had wrongfully removed about $½ million from the Group for her own use, were canvassed at some length. Fortunately, these issues are no longer live issues, at least in these proceedings. However, the activities of the petitioner after the separation on 20th July 1983 are material and it is in this area that the respondent launched his heaviest attack upon the petitioner's credibility.

12. The respondent alleges that the petitioner was instruumental in setting up in early 1924, two trading companies called Topatex and Gogo, that the petitioner is vigorously involved in running these companies and that she is able to earn about $60,000 per month. The petitioner, of course, denies the allegation. She maintains that her involvement in these companies which are owned and run by two of her brothers and a third person is limited to some part-time bookkeeping which she carries out at times convenient to herself and for which she receives no pay.

13. The evidence against the petitioner is, I fear, overwhelming. First, there is the affidavit of Miss Loletta Wong (p. 333 of Bundle (1)). Miss Wong deposed to the fact that she was engaged by the petitioner as a private tutor for Matthew between October 1983 and January 1985. For the first few months, she met the petitioner in the morning when she went to the petitioner's flat. However, from March 1984, the petitioner was not at home when Miss Wong arrived. Further, Miss Wong said that since July 1984, she had been employed by the petitioner to work for Tonatex where she found the petitioner to be in charge of the company, to be making final decisions and staying in the office till 6.00 p. m. on most days.

14. Either expressly or by implication, the petitioner denied Miss Wong's allegations. She said that Miss Wong had apologised to her for malting the affidavit and had explained that she had been forced to do so by the respondent, his lawyers and a member of the respondent's church. But the petitioner did not by affidavit contest the allegations before the hearing, nor did she accept an offer by the respondent to make Miss Wong available for cross-examination. She explained that she had forgiven Miss Wong and was trying to forget the matter. I found the petitioner's explanation unconvincing and I consider that she has not dealt satisfactorily with serious allegations, very material to the matters in issue.

15. Secondly, there is a substantial body of documents, which I shall not go into in detail but which consist principally of telexes and letters addressed to, or for the attention of, the petitioner (p. 257 of Bundle (3) and Bundle (4)). These documents involved the petitioner's activities in relation to Topatex, Gogo and Wah Sek, her own family's garment factory. The petitioner's explanation was, as I have indicated, that she was working only part-time as a book-keeper. However, she had agreed to assist an old business acquaintance, a Mr. Chris Bryan, resolve an outstanding dispute with another Hong Kong firm called Gala. She was doing this somewhat reluctantly. In addition, Bryan was negotiating an agency agreement with her brothers which gave rise to correspondence and telexes between them. Because Bryan knew and trusted the petitioner, he used her name on many of the documents.

16. Much of the documentation was produced by the respondent during the course of the hearing. When confronted with this documentation, the petitioner was forced to concede that her assistance to Bryan rather went beyond acting as an unwilling go-between in the settlement of his dispute. Not the least, her assistance was invoked in letters of credit where one of the conditions was that she should be responsible for certifying the quality of goods being despatched from Hong Kong to Bryan's company in England.

17. There were other documents unconnected with Bryan in which the petitioner's name appeared. I am constrained to say that I found it extraordinary that a part-time, unpaid book-keeper should be so involved in the companies' affairs.

18. Thirdly, the petitioner alleged that, following her separation from the respondent, she was in desperate need of money and borrowed money from various members of her family. Details of the loans were given by way of a letter written by the petitioner's solicitors (p. 1 of Bundle (c)) and byway of affidavit (p. 88 of Bundle (A)). Two things emerged after evidence had been given. First, although the loans were apparently given by family members, in many cases they were repaid to one of the various companies owned by members of her family. Secondly, the petitioner had to concede that a loan from her brother deposed to be $100,000 was in fact $10,000 and that, taking into account all the repayments admittedly made by her, she had repaid some $23,000 in excess of the alleged loan to her. The petitioner's explanation that she was maintaining a running account with her brother I found unconvincing.

19. Fourthly, the petitioner did two curious things during this period. On the trength of a credit card, the use of which she anticipated might be withdrawn by the respondent, she purchased some $15,000 worth of jewellery. Later, she spend $10,000 on a collection of books on palmistry which she was studying, the chance to acquire these books being a rare opportunity Whilst the petitioner's explanation of these purchases was in each instance superficially rational, looked at in the context of her allegedly desperate situation, it becomes unconvincin.

20. Finally, the petitioner while giving evidence over several days, showed herself to be an intelligent person of considerable acumen. She, perhaps more than anybody present during the hearing, had a firm grasp of all the many bundles of affidavits and documents. She is clearly a business woman of some energy and ability. It would be most surprising to find that she is simply indulging in a little part-time book-keeping and spending the major part of her time on less productive pursuits.

21. In my view, the petitioner has not made the full, frank and clear disclosure about her employment situation since the separation that is required of a party to an application for ancillary relief. On the authority of J. v. J. (1955) P. 215, I draw the appropriate inferences. The inferences which I draw are that the petitioner is deeply involved in the running and management of the two companies, Topatex and Gogo, and that she is earning a salary of $60,000 per month, the sum which the petitioner herself admitted that she is capable of earning. It means that I must also treat the petitioner's evidence as a whole with the greatest care.

22. The respondent, too, was far from being a satisfactory witness. I think that I have never seen such a smug and self-satisfied person in the witness box. His references to the respect and trust which he commands in the business world and to his wealth were tedious. In the same way as the petitioner attempted to discredit the respondent's contribution to the various companies with which they had been involved, so the respondent would give little credit to the petitioner for her part in the success of their business. However, while I am confident that the respondent told no outright lies, many of his answers were intended to deflect.

23. Before their marriage in 1970, both parties were employed in the petitioner's family garment factory called Wah Sek Garment. The respondent was first employed in about 1966 in the capacity of General Manager. He joined the company straight from his studies in college without any experience in the garment industry but with some knowledge of management and leadership. The company itself, for a variety of reasons, was on the verge of bankruptcy. According to the respondent, by virtue only of his efforts in obtaining customers and arranging loans from a variety of sources, the company was revived and by 1970 was on the "right track".

24. It might be thought surprising that a person of such limited experience as the respondent should be able to revive the fortunes of a garment factory. Nonetheless, the respondent has shown a considerable force of character and determination while giving evidence which lead me to believe that his account of this period is the correct one. I have no doubt that the petitioner, as she said, worked hard in the factory in her capacities as sub-manager and later as assistant manager, but she was wholly inexperienced. I do not think the part which she played in re-constituting the fortunes of the family factory would have been a significant one.

25. At this point, there occurred an event upon which the parties' later businesses were founded. The respondent at least was acquainted with Dr. L. K. Ding. According to the respondent, Dr. Ding suggested that the respondent should set up his own company. It was agreed that Dr. Ding would contribute $50,000 by way of capital while the respondent would contribute a similar sum which would be deducted from salary earned from the company. As a result, Promise Trading, the respondent's own company, was set up. The initial capital of this company, however, proved inadequate. Dr. Ding, therefore, provided a further sum which eventually amounted to U.S.$40,000. This was placed on deposit so that Dr. Ding could earn interest while the respondent could use it as security to obtain banking facilities.

26. It is the respondent's case that Dr. Ding came to this arrangement with him solely because of their acquaintanceship which had arisen as a result of sitting together on the board of a charitable institution and because of the reputation which the respondent had established as a businessman.

27. The petitioner claimed that she, too, was acquainted with Dr. Ding and that Dr. Ding's assistance was to both parties, not simply to the respondent. In particular, she says that it was given because the respondent was backed by Wah Sek Garment.

28. I find as a fact that the respondent's version is the correct one. The petitioner's acquaintanceship with Dr. Ding was a tenuous one, limited to a doctor and patient relationship. Further, Wah Sek Garment was, as I have already found, effectively the respondent's creature rather than an.independent concern. It could hardly be regarded as backing for the respondent. I am satisfied, therefore, that Dr. Ding's arrangment was personal to the respondent.

29. In July 1971, the parties purchased a flat at 50 Tung Choi Street, for $65,000. It was in the respondent's name and the respondent contends that the funds were provided from his own resources, being partly savings and partly loans fron credit facilities available to him. The petitioner contends that the money came principally from their joint savings and from monies provided by her. She said that the respondent's salary from Wah Sek had been expended upon family expenses, leaving her salary to be saved. I am unable to accept the petitioner's contention. Wah Sek tax return, which have been produced show that the respondent was earning at least twice as much as the petitioner. Through Promise Trading, the respondent had credit facilities available to him. I find that this property was purchases solely from the respondent's resources.

30. In 1972, both parties were sacked by Wah Sek. They then set up WYG. At the same time, the Tung Choi Street property was sold and Flat 1 was purchased for $154,000. After taking into account, the proceeds of sale of Tung Choi Street, another $84,000 was required to complete the purchase. The respondent contends that the balance came from his savings and the facilities available to him through Promise Trading. The petitioner says that the balance came from their joint savings and from the sale of some of her jewellery. Again, for similar reasons, I am satisfied that the respondent's version is the correct one.

31. Although the admitted shareholding in WYG was three to two in favour of the respondent, it is the respondent's case, although it only emerged somewhat late in the day, that he provided an initial capital of $200,000. Only the later capital of $300,000 should be divided a between the parties. $200,000 was a substantial sum of money which, I am satisfied, could only have been made available by the respondent rather than the petitioner.

32. The respondent had, as I have found, provided the funds to purchase the two flats, and completed the purchases in his sole name. He could equally have arranged, if he had wished, for the petitioner to have been given only a token shareholding in WYG or, indeed, no shareholding at all. Until the marriage began to show real signs of strain in about 1982, it seems clear that the parties both worked and lived in tolerable harmony and were partners in both the business and matrimonial sense. I have no doubt, therefore, that from the moment when WYG was established, the respondent regarded the petitioner as a full partner in both senses, whose shareholding in the company recognised the value which he placed upon her.

33. In 1977, Flats 2 and 3 were purchased. As I have already indicated, the respondent contends that they were in joint names simply because the petitioner was his wife. I am unable to accept that contention. By that time, the parties had been partners in business for five years. There can be no doubt but that the parties' business activities produced the funds to purchase these two properties. I find, therefore, that the petitioner was, through these activtities, an equal contribution to the purchase of the properties.

34. Later, the other four companies in the Group were established and Prince was purchased. There is, I think, no dispute that WYG was the source of the funds to capitalize the companies and to purchase Prince.

35. The Australian Property was purchased in january 1980. The purchase money came from the shareholders' account via the Chartered Bank current account of WYG. On the face of it, therefore, there can be no equestion, but that the funds were contributed jointly by the parties. However, the respondent says and the WYG accounts show that the money was repaid to WYG from an overseas sterling deposit held by the respondent. The respondent, therefore, says that the purchase of this property was made by him alone. However, the respondent has not explained precisely the source of the funds for the original sterling deposit the deposit was substantial being in excess of HK$1 million. It would not have been difficult, I think, to have shown the provenance of such a sum. I must, therefore, draw the inference against the respondent that this money was derived from the business and properties held by the parties.

36. It is significant that at one stage of his cross-examination, the respondent said that the petitioner left all decisions relating to the companies, the purchase of property and investments to him. The implication is that the respondent had the petitioner's trust and could be relied upon to spend the money for their joint benefit.

37. I am satisfied that until the marriage began to break down, the Group and all the properties ware part of a joint venture between the parties. Had it been necessary for these assets to be divided between the parties at that stage, the division would, subject to the shareholdings in WYG and PSI, have been on an equal basis. In effect, there would have been a liquidation of a business rather than a division of matrimonial property. Notwithstanding what has taken place since then, I take the view that as far as possible the assets must be so divided now.

38. If the Group and the properties are regarded purely as family assets, they will have to be divided in accordance with the principles set out in section 7 of the Matrimonial and Proceedings Property Ordinance. I take particular account of the fact that the marriage lasted 12 years before it began to break down and, during that period, both parties worked hard for a common interest. I also take into account what I have already found as a fact namely, that the source of funds for the first company, WYG, and for the purchase of Flat 1 was the respondent. Bearing these factors in mind, the petitioner is entitled to something more than one-third of the joint assets verging towards a half share, precisely as Mr. Yam suggests.

The Agreement and the rental claim

39. There are 2 other matters which I must dispose of. First, there occurred in mid-March 1983 a somewhat bizarre event. The respondent was distressed by petitioner's admitted relationship with another man. He was also dissatisfied with their own business relationship. Following a series of quarrels and family meetings, agreement was reached on 10th March, partly in writing and partly orally, concerning the division of assets. The written agreement is at p. 46 of Bundle (A).

40. It is the respondent's case that the agreement was made with a view to reconciliation and sought to separate the business from the marital relationship. The petitioner was to assign her shares in the Group and in Prince to the respondent, and they would exchange their shares in Flats 2 and 3 so that each would be owned outright by one party. The petitioner would also receive $15,000 p. m. for housekeeping expenses and, in the event that reconciliation failed and the parties divorced, the Australian property would be assigned to her.

41. The petitioner claimed that in addition to those terms, she was to be paid for her shares $1.65 rnillion, which she calculated, to be the full value.

42. On 11th March the parties attended their solicitors' office to sign the necessary documents. Three significant matters emerged:

                (1) There were bought and sold notes for the shares in each company showing a precise value for each share. The petitioner says that, although the total value was only $1.57 million she accepted this, and that it supports her contention that she was to be paid for the shares. The respondent is only able to say that he left the matter to the solicitors and assumes they prepared the share documents in this manner because it was proper to do so and reflected what was a package rather than individual gifts.

                (2) There was no deed of assingment of the petitioner's share in Prince to the respondent. Again the petitioner says that this supports her contention. The respondent is unable to furnish any explanation other than to conjecture that the title deeds were not available because the property was already mortgaged to a bank.

                (3) There was an assignment by the petitioner of her share in the 2 car parks in Prince, which the parties signed in the wrong places so that the petitioner appeared to be asignee. This was clearly an error.

43. What happened on the 11th March left a great deal to be desired, certainly as far as the conduct of the solicitors is concerned. In addition to the 3 matters I have mentioned, the exchange of Flats 2 and 3 was subsequently found to be ineffective. However, I think item (3) to be the most significant. Although the petitioner says that she queried the assignment and signed because she was told by a clerk that it was to be a gift by the respondent, the fact that the document was prepared at all is a clear indication that the solicitors had received instructions concerning Prince. I find it surprising that the petitioner, who was most meticulous about making a note of what happened at the solicitors office (and indeed on other occasion) and who is, as I have found, a woman of considerable ability who had no difficulty in following the many English documents in this case, did not read and appreciate the meaning of the assignment. Certainly, she understood that the bought and sold notes for the shares reduced the price she alleges she was to receive.

44. The respondent's failure to notice the absence of a document transferring Prince is equally surprising. His explanation for its absence is, however, not unreasonable in view of the speed with which the transaction was carried out. Furthermore, the petitioner was in no position to dictate terms to the respondent since a principal source of the friction between them was her admitted love for another man. I accept, therefore, the evidence of the respondent concerning the terms of the agreement. Thus, there is no agreement favourable to the petitioner to which Mr. Wei, on her behalf, suggests the respondent might be held.

45. Secondly, the petitioner claims her share of the rental income arising from the properties between April 1980 and April 1985. She says that the rent accruing up to March 1983 would have been sufficient to pay off her outstanding liability for Prince, which was purchased with the help of a bank loan.

46. The petitioner's liability for Prince, after initial payments, was $1.22 million. Her share of rental income up to March 1983, on the basis of joint ownership of the properties, was $1.212 million. However, she would have been liable for interest on the loan. Mr. Wei suggests that, at 12%, this would have been about $200,000. Perhaps that is conservative but Mr. Yam did not protest. In any event, Mr. Wei suggested that that sum could be set off against the petitioner's share of rental income between April 1983 and April 1985.

47. The income for the latter period was agreed at $1.74 million. In view of my finding as to ownership of the properties, the petitioner is entitled to half, amounting to some $870,000. Therefore, according to Mr. Wei, the petitioner is still owed in excess of $600,000 after setting off interest on the bank loan. Further, the petitioner has extracted from financial statements supplied by the respondent, details of the directors' accounts with the Group. Exhibit P23 shows that in the year 82/83, the directors were in credit, in the sum of $246,334. The petitioner should be given credit for some $123,000 which, says Mr. Wei, if set off against the loan interest, will reduce the claim on the later rental income to $77,000 only.

48. Mr. Yam for the respondent finds this unacceptable for 2 reasons. First, an analysis by the respondent (Ex. R27) of the parties' income and expenditure from April 1970 to April 1985 shows that the petitioner has a deficit in excess of $500,000. Secondly, the order for maintenance pending suit made in July 1983 for $32,000 p.m. took into account the rental income as being part of the family income. To date, over $600,000 has been paid.

49. I think Mr. Yam is right. Whether by the off-setting of liabilities, by the receipt of maintenance or by a combination of both, the petitioner has effectively receives the full benefit of rental income due to her. I see no basis for dealing with this claim separately.

Valuation

50. There is no dispute about the value of the Group and the properties, apart from quotas. Subject thereto, the petitioner accepts the respondent's valuations as at 31st December 1984 which are:

51. After taking into account the Group's liabilities, the net worth of the assets is apparently $8,529,623.

52. However, Prince (but not the 2 car parks) and Flat 2 have been mortgaged in order to provide banking facilities for the Group. According to the respondent, those facilities amount to $5,918,000 at present. Thus, the equity in these 2 properties is nil.

53. The petitioner contends that the respondent should bring into account the substantial permanent quotas held by the Group and which she values at about $6 million. I do not intend to rehearse the considerable body of evidence concerning the textile quota system and the dealings that may be done in quotas. Suffice it to say that each party called an accountant to give evidence. The accountants agreed that quotas are intangible assets which, because of the historical cost convention which prevails in Hong Kong, do not appear in a company's financial statements. They also agreed that the quotas have a value but disagreed as to how that value should be placed upon them.

54. For the petitioner, Mr. Tark Lau simply said that a quota has a value which must be worked out and brought into account.

55. Mr. Christopher Ho, for the respondent, said the valuation depends upon whether or not a company is a going concern. If it is, the value of the quotas is reflected in its profitability, in other words, is an integral part of its profit and loss account. The only quotas which could be given a value in such circumstances will be those surplus to the company's requirements and which can be disposed of without harming its performance.

56. Mr. Ho went on to say that if a company is not a going concern, its quotas must be valued on the basis of what they are likely to fetch when sold with all the other assets upon liquidation. He regarded the Group as not being a going concern because it relies upon outside assistance namely, the mortgages of the parties' personal properties and the respondent's personal guarantees. Upon information supplied to him he calculated that, on liquidation, the Group would still have a net deficit even if the quotas were to fetch about $6 million.

57. Mr. Ho was a more articulate, more highly qualified and more experienced accountant than Mr. Lau. I had little difficulty in following his careful explanations. I found it logical that a separate value cannot be put on asset, other than on a liquidation or break-up basis, unless that asset can be disposed of without causing a company to cease business. In the textile trade, quotas are inseparable from a continuation of business. A company cannot dispose of its quotas unless it is financially able to purchase more quotas on the market when they are needed. The Group is without doubt not in such a fortunate position.

58. I accept Mr. Ho's evidence. His calculations in relation to liquidation of the Group were not challenged. It seems improbable anyway that a company, whose liabilities exceed its assets on the balance sheet, would have a net asset value upon liquidation. The quotas therefore should not be separately valued.

Division of the assets

59. The petitioner proposed a division of the assets based upon either party taking the Group with the other party taking the bulk of the properties and a cash equalisation payment. I can say at once that this is wholly unrealistic. The Group's finances, precarious as they are, are based upon mortgages negotiated by the respondent and upon his personal guarantees. Although it has been said on behalf of the petitioner that she could, within a reasonable time, replace these securities, no evidence of this has been adduced. Further, the respondent has been the sole owner of the Group for over 2 years. It would, I think, be wrong in principle to remove him. I also think there can be no question of liquiating the Group and dividing the proceeds. As I have already indicated, there are unlikely to be any proceeds to divide. The Group in its present condition does, however, provide an income and fringe benefits for the respondent.

60. Mr. Yam, on the basis that the petitioner should be entitled to between one third and a half share of the assets and bearing in mind the negative worth of the Group and outstanding mortgages on Prince and Flat 2, says it remains to apportion the value of the unencumbered properties, that is Flats 1 and 3, the 2 car parks and the Australian property, which amounts to $3.7 million. He proposes that the petitioner be given Flat 2 and either Flat 1 or 3 on an unencumbered basis. These are worth $1.53 million or about 42% of the total value of unencumbered assets. The petitioner should transfer her share of Prince and the car parks to the respondent. The respondent will not pursue the petitioner for what he considers to be outstanding liabilites of $1.46 million. Mr. Yam asks me to look at the situation broadly to see if the proposal meets the justice of the case. He says his proposal will provide the petitioner with a home, a rental income of up to $13,000 p.m. and property worth $1.46 million which can be used as security to obtain credit facilities for her own business.

61. If Mr. Yam is correct in his analysis of the equity remaining in the properties, the respondent will have property valued at $7.3 million with an equity value of $3 million. Of course, in removing the mortgage from Flat 2, the respondent will inevitably have to mortgage at least one of the unencumbered properties. I also recognise that the respondent's personal guarantees, which provide substantial support for the Group and amount to $7.6 million, are acceptable to a significant degree because of the respondent's property holdings.

62. The question, however, is whether Mr. Yam's analysis is correct. Two matters must, in my judgment, be considered. First, the respondent caused the accounts of the Group to be taken at 31st December 1984 (p. 102 of Bundle 1), The petitioner analysed these (p. 14 of Bundle (D)). This analysis shows a net indebtedness of $8.46 million which, after taking into account fixed assets of $8.124 million, left the net liability of $318,177 to which I have already referred. The fixed assets include Prince Industrial Building 4/F and 2 car parks, and No. 2 Silver View Lodge, all of which are owned by WYG and which have a value of $5.8 million.

63. These accounts also showed that between 31st March 1984 and 31st December 1984 the Group reduced its net liability from $2.046 million to the more recent sum of $318,177. Mr. Ho, the accountant, said that according to his information there was no capital contribution to the Group so that this reduction in liability represented a profit of $1.7 million or $2.2 million over a 12 month period. It seems likely, therefore, that the Group's fortunes are reviving and, notwithstanding the uncertainties in the textile trade, should move into the black in the next year or two.

64. Secondly, Mr. Ho gave an estimate of the value of the Group upon liquidation (Ex. R13). After disposing of all assets, including the permanent quotas, there would be a loss of about $600,000. The value placed upon the quotas, after making a suitable adjustment to the petitioner's figures, was $5.9 million.

65. In the event, therefore, of the Group failing the most recent figures suggest that the calls on the mortgages and guarantees will not be great. The real equity in the properties, in my view, is in the region of $8 million.

66. I shall therefore make the following order:

Custody

67. The petitioner does not press for custody of the two boys, but simply says that she would have no objection if a custody order is made in her favour. That is not, if I may say so, a very satisfactory approach and suggests that the petitioner has no great interest in the children or their welfare. Indeed, at an earlier hearing, there was agreement that the respondent should have custody of the children. However, after talking to the two boys, both of whom expressed a desire to stay with their mother, I declined to make an order and adjourned the matter so that a social worker might provide the usual background report, and for further consideration.

68. The position now is not materially changed. The investigation report confirms the background of which we are already aware and that the boys prefer their mother. The social worker recommends that the petitioner should be given custody.

69. As I have already found, the petitioner is an active and hard-working business woman. She has, I am satisfied, little time to devote to the welfare of the boys who naturally enjoy the relaxed and indulgent atmosphere of their present home.

70. On the other hand, the respondent, for all his faults, is a devoted member of his church who has the greatest concern for the boys. There is affidavit evidence from the principal of the school which emphasises the amount of interest in and attention to the boys' education which the respondent has. The respondent has a house in Clear Water Bay which will provide a more than adequate home for the boys. He has so arranged his business affairs that he will be able to devote a substantial amount of time to them during the day and arrange for them to be taken to and from school. There is a house-keeper who can look after the boys while the respondent is not there.

71. In W. v. W. and C. (1968) 2 ALL ER 408, Lord Denning, M.R. said at P. 409:

"I feel it is right to be guided by the general principle that a boy of this age, some years of age, is, on the whole, other things being equal better to be with his father."

72. In that case, the boy showed affection towards both parents, but leaned towards his father. In the present case, of course, the two boys prefer their mother. However, other things are not equal. They are, as I have already indicated, in favour of the respondent.

73. I am sure that the two boys will benefit from the more regular discipline which the respondent is likely to impose upon them, the greater time and interest which the respondent will devote to them, and the more pleasant environment of a country house rather than a small town flat. In the circumstances, I have no doubt whatsoever that it is in the best interests of the boys that the respondent should have custody and I so order. The petitioner is to have reasonable access. I will give specific directions as to access if this cannot be agreed between the parties.