LYY v. CCKE

FCMC 10960 / 2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10960 OF 2010

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BETWEEN

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JUDGMENT
(Maintenance Pending Suit and Injunction)

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Introduction

1.  There are a number of matters presently before me that now require determination – namely an application by a Petitioner wife for maintenance pending suit for herself pursuant to s. 3 Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO), an application for interim maintenance for the two children of the family pursuant to s. 5 MPPO and the return hearing date in relation to injunctive relief sought by the wife.

2.  This is a difficult case, where the wife is seeking interim financial support for her children who are studying at University in New Zealand. She also seeks financial support for herself.  The difficulty is that she seeks that support against a background of the husband’s failing business and very limited financial resources. The reality is that on the face of it, there is very little money available here. There are no assets apart from the husband’s companies. The wife does not work in any meaningful capacity. The wife has also sought to injunct funds that the husband maintains are needed for use within his business, in an attempt it seems to me to preserve some funds for herself and the children going forward.      

Background

3.  The parties married in March 2000. Each had been married before. The wife has two children by a previous marriage. Those children are now aged 18 and 20 years respectively and are studying at University  in New Zealand.  It is the wife’s case that the children are “children of the family” and that the parties agreed to send them to University overseas. The husband also has two children by a former marriage, who are in their 30’s and are to all intents and purposes self supporting. Indeed the husband maintains that one of his elder daughters has been assisting him financially. The wife is now aged 47 and the husband is 61 years of age. By all accounts the marriage has not been a happy one and by 2006 the parties had begun to live separate and apart, albeit initially under the same roof.  This was then a relatively short marriage of some six years duration. The husband runs a small trading company, doing import and export mainly between Hong Kong and Europe. The wife has an interest in a pyramid selling scheme involving Uni-Amia products. This seems to be more of a hobby rather than a serious attempt to make any money. She also has some mental health issues. 

The issues

Should the injunction be upheld or discharged, in whole or in part?

Should the husband pay interim maintenance for the children? If so in what amount?

Should the husband pay maintenance pending suit for the wife? If so in what amount?

The law

Injunction

The law - generally

4.  It seems that the wife’s application for an injunction was issued pursuant to s.17 Matrimonial Proceedings and Property Ordinance, Cap 192. This section states as follows:

(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a) it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c) if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

5. Reference was also made to a mareva injunction, but I am satisfied that in the circumstances of this case that the wife’s application is made pursuant to s.17 MPPO. It is therefore incumbent upon her to prove that any disposition made by the husband was made with a view to defeating her claim for ancillary relief.

Should the injunction be upheld or discharged, in whole or in part?

Introduction

6. The wife initially sought an injunction in the following terms:

1. The Respondent whether by himself, his servant, agent, in his capacity as a shareholder and/or director of C Limited and V Limited (collectively “the Companies”) or otherwise dealing with or diluting his shareholding in the Companies.

2. The Respondent whether by himself, his servant, agent or otherwise be restrained from withdrawing any money from his time deposit account no. ABC (“the Personal Account”) with The Bank Of East Asia Limited; or disposing of, encumbering or otherwise dealing with any money or interest therein; or using further banking facilities which may cause a decrease in value and/or balance of and in the Personal Account;

3. The Respondent whether by himself, his servant, agent, in his capacity as a shareholder and/or director of CLimited or otherwise be restrained from dealing with any balance of the HK$942,138.90 (“the Transferred Amount”) transferred to CLimited’s account no. XXX-XX-XXXXX-X (“the Company Account”) with The Bank of East Asia Limited on 21^st July 2010;

4. The Respondent do provide to the Petitioner’s Solicitors within 7 days from the date of service of the Order to be made herein (“the Date of Service”) copies of the statements or passbook in respect of the Company Account for the period from 1^st June 2010 to the Date of Service with an explanation as to the whereabouts of the Transferred Amount;

5. The parties do file and exchange their Financial Statements in Form E within 14 days from the Date of Service; and

6. The costs of this application be borne and paid by the Respondent and the Petitioner’s own costs be taxed in accordance with Legal Aid Regulations.

7. The ex parte application was heard on notice to the husband.

8. At the initial hearing on the 16 September the husband agreed to the following order:

5. The Respondent whether by himself, his servant, agent, in his capacity as a shareholder and/or director of C Limited and V Limited (collectively “the Companies”) or otherwise be restrained from transferring, selling, disposing of, encumbering and/or otherwise dealing with or diluting his shareholding in the Companies until further order;

6. The Respondent whether by himself, his servant, agent or otherwise be restrained from withdrawing any money from his time deposit account no. ABC (“the Personal Account”) with The Bank Of East Asia Limited; or disposing of, encumbering or otherwise dealing with any money or interest therein until further order;

9. The wife is suspicious about the husband’s transfer to C Ltd of the sum of approximately HK$940,000 in July 2010. This sum was not initially injuncted as prima facie I accepted that the husband would need some funds in order to operate his business. In support of her application the wife had said as follows in her affirmation of the 14 September 2010:

15. The Respondent’s irresponsible attitude stated above reminds me of his vow several months ago that he would liquidate his companies and leave for the Mainland for good. (His mistress is a mainlander.) As my last resort, I looked for documents relating to his means and found the following dispositions:-

(a) He maintained a fixed deposit of about HK$2.2 million with the Bank of East Asia until 21^st July 2010 when he transferred about HK$940,000 of it to the account of C. From the copy Confirmation of Deposit, HK$1,260,000 which remains in the fixed deposit account is now pledged for banking facilities.

(b) On 30^th August 2010, he sold his Camry (Vehicle Registration No. DWXXXX) for HK$34,000.

10. The difficulty however is that the wife has not been able to show that this transfer and the sale of the car were done in order to defeat her claim for ancillary relief. Rather on the face of it, it would seem that the husband is simply trying to keep the companies afloat. The wife’s solicitors made some very sweeping allegations, including the fact that the husband had not made full and frank disclosure of his means or produced the necessary documentation to show how the HK$940,000 has been utilized.

11. These are serious allegations. From the documents produced however it seems clear that the husband’s businesses are in serious trouble. They are technically insolvent.

12. The husband put his position thus:

10. I have pledged a time deposit of about $1.2 million to BEA for the business needs of C and V. There is now produced and shown to me an exhibit marked “CCKE-4” which is the facilities letter of 5 November 2009 issued by BEA. It can be seen that the original amount of $2,207,657.40 had been pledged to BEA and I can only deal with it with the explicit approval of BEA. As C has unstable operating results and has an accumulated loss, BEA would not give C any banking facilities without a tangible asset as security. The time deposit of $1.2 million is my only tangible asset.

11. The Petitioner said in paragraph 15 of her First Affirmation of 14 September 2010 (“Petitioner’s Affirmation”) that $940,000 out of the original $2.2 million of the time deposit was transferred to the C bank account. The transfer was to facilitate settlement payment to BEA, and C suppliers.

13. He asks that the injunction be discharged because:

28. The reasons are that if any customer or supplier learns of the injunctive orders they might come to a wrong conclusion concerning the going concern status of the 2 companies and the potential adverse effects on the operations of the 2 companies might not be reparable.

29. As for the BEA time deposits I do not know when I may need money to pay off company debts. In any event BEA would not allow me to deal with that deposit as I wish except for business reasons as they have been pledged. The lack of financial freedom to use money from that time deposit when business situation requires can also pose serious adverse effect on the 2 companies as they may run into short-term technical insolvency.

14. At the hearing he produced audited accounts for both companies for the last two years. It is clear from these that his assertions are correct. Both companies are in serious financial difficulty.

15. The wife complains that the husband has not accounted for the whereabouts of the HK$940,000. I agree that he will need to produce documentary evidence in support of his claim that he has used these funds in order to pay his suppliers and to make payment to the Bank of East Asia. I will expect that information to be provided with documentary evidence attached within the next 28 days. In the meantime the wife asks that the injunction be continued.

16. The husband argues that the injunction be uplifted. When asked during the hearing what practical effect that would have, given that he is not intending to deal with his shareholding in the short term and he is required to retain the banking deposit in order to ensure that the companies have access to banking facilities, his barrister concurred that this would have little practical effect.

17. Consequently I will make an order that para’s 5 and 6 of the order dated the 16 September 2010 shall continue pending further order. Both parties shall have liberty to apply with respect to that order.

Maintenance pending suit and interim maintenance

18. Applications for maintenance pending suit and interim maintenance are governed by s.3 and 5 Matrimonial Proceedings and Property Ordinance, (MPPO) Cap 192, which state that the only governing principle is that the court will make such order, as it considers reasonable in all the circumstances of the case. Consequently maintenance pending suit applications are approached on a broad-brush basis. A detailed examination of the parties’ means will be considered at a later date at a full ancillary relief hearing, if agreement cannot achieved in the meantime. Any over payment or under payment may be dealt with then. Thus I need to consider the reasonable needs of the parties and in this instance the ability of husband to provide for those reasonable needs.

Discussion

19. I must now turn to consider the issues, the law, and the parties’ evidence as set out in the affirmations filed, their Form E’s together with the submissions made by their lawyers.

Should the husband pay interim maintenance for the children? If so in what amount?

20. The difficulty here is that on the face of it here does not seem to be the funds available to support the wife’s application for financial support for the children. Even on the wife’s case the financial situation has deteriorated over the last few years:

7. My relationship with the Respondent turned sour from mid-2006. We have been sleeping in separate bedrooms since then. He also started to adopt more and more stringent financial policies on the Children and me. For example, he required me to acknowledge as my debts to him half of his remittances to the Children. In 2009, the Respondent was often late in remitting money to WY for his lodging. As a result, WYsuffered from psychological disturbance and had to suspend schooling on medical advice. (WYis repeating Year 1 at University of X.) From time to time, the Respondent has kept hammering into our brains that he is not as rich as before and hence, all of us have to economize.

21. As I have said this is supported by the audited accounts produced by the husband. In the event that the husband does not come up to proof in relation to the HK$940,000, then the wife may have some basis for her claim. Without that it is difficult to see where the funds to support two young people studying overseas will come from. Even putting the wife’s case at its highest it is difficult to see where the money will come from in the longer term to support them.

22. The wife says that she has borrowed from friends this year in order to pay for the children’s costs. She says that she has borrowed HK$350,000. In total she puts her debts at c HK$825,000. The husband’s position is no better. He has debts including huge credit card debts to the tune of c HK$666,000. The husband’s counsel said that he had borrowed on the credit cards in order to pay for the children’s expenses previously.

23. As I have said there are no assets here apart from the companies. The companies are in serious difficulty. There is precious little income. In the circumstances I cannot see on what possible basis I can make an order that the husband pay further sums in support of the children. This is especially so given the fact that the children’s expenses are rather high (NZD42,710 or HK$247,700 in total for the university fees and a further NZD7,794 being the lodging fee for each child i.e. NZD15,588 or HK$90,410 per annum). Pending further clarification of the whereabouts of the HK$940,000 I will not make any order in relation to the children’s maintenance in the immediate to short term.

Should the husband pay maintenance pending suit for the wife? If so in what amount?

24. The husband has offered to pay the wife HK$2,000 per month. He says that he has an income of c. HK$30,000 per month. Of that HK$15,000 goes on debt repayment. One of his elder daughter’s presently pays for his rent. I accept that on the face of it, pending further clarification of the HK$940,000 above, there is little room for the husband to economize further.

25. The difficulty for the wife however, is that she has no access to any funds at all. She is a housewife. She has a very limited earning capacity. As indicated above she also has some mental health issues. She is also legally aided.

26. In these circumstances I will make an order that the husband do pay the wife maintenance pending suit of HK$4,800 per month. I accept that in order to pay this the husband may have to reschedule some of the debt repayments. Other outgoings may need to be reduced or stopped (e.g. insurance premia). I accept that these are desperate measures. Ultimately both sides will need to give some serious thought on how to move this case forward.

Costs

27. As neither party has been wholly successful I will make an order nisi that there shall be no order as to costs save that the Petitioner’s own costs to be taxed in accordance with Legal Aid Regulations, such order to be made absolute in 14 days time.