LWT v. TKH

FCMC 4988 / 2020

[2025] HKFC 79

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 4988 OF 2020

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JUDGMENT
( Ancillary Relief )

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1.  This is the trial of the parties’ ancillary relief dispute.

A.  Facts

2.  The parties are in their early forties. They were married in October 2007 but separated on 23 September 2017 when the Respondent husband’s (“H”) left the former matriominal home (“FMH”). The Petitioner wife (“W”) presented the petition for divorce in 2020. Their marriage lasted for about 10 years up to their separation in 2017.

3.  They have three children (“Children”), aged 14, 13 and 10 respectively.

4.  The custody, care and control of the Children were granted to W by an order dated 1 April 2022. H has defined access by an order dated 1 March 2023.

5.  The majority of the parties’ assets, including Fortune Plaza and the FMH, are owned by W.

6.  Fortune Plaza was purchased by W on 16 March 2007, prior to their marriage in October 2007. W said that the downpayment for the purchase was made by her with loans from her parents, including $500,000 from her father (“Father”) and $340,000 from her mother (“Mother”). H contended that these are either gifts or soft loans. The mortgage has been fully repaid on 28 March 2009.

7.  On 18 August 2010, W purchased the FMH. Fortune Plaza was leased out for rental income.

8.  Both parties work in the catering industry. H works as a chef and W as a restaurant manager.

9.  The parties disagreed on the amount of H’s contribution to the family expenses during marriage. H said that he contributed around $10,000 to $12,000 a month. However, W said that he only contributed around $6,000 to $8,000 a month for less than 6 months a year.

10.  H stopped paying for the Children expenses shortly after he left the FMH in 2017.

11.  H was adjuged bankrupt in March 2018. On 6 March 2022, he was automatically discharged from the bankruptcy by operation of section 30A of the Bankruptcy Ordinance.

12.  H had an injury on left knee in around August 2019 and had surgery in public hospital in 2022.

B.  The Parties’ Open Proposals

13.  W proposed that she would be responsible for Children maintenance by utlising the 2 landed properties (whether by rental income, sale proceeds and/or remortgaging). She was prepared to give an undertaking to this effect and absolve H from past and future maintenance for the Children. Her primary position was to keep both Fortune Plaza and the FMH without a compulsory sale at this stage. Alternatively, if Fortune Plaza has to be sold in the open market, she proposed that the sale proceeds (estimated to be $3,750,000) be first applied to discharge her debts of $2,371,004 and the balance be paid into the Court to be drawn by her for the Children maintenance.

14.  H initially proposed that he would pay a monthly periodical payment for the Children in the sum of $11,100 (i.e. $3,700 for each child) up to the statutory maximum term, and the 2 landed properties would be sold at open market, its sale proceeds together with all other liquid assets of the family (i.e. except MPF) would be distributed to W and H in the ratio of 65% and 35%. Alternatively, W would pay H a lump sum equivalent to 35% of the total assets.

15.  After close of evidence, H revised his open proposal to the effect that both landed properties be sold and the sale proceeds be paid into the Court for Children maintenance.

16.  In other words, both parties agreed that the 2 landed properties shall be used to meet the Children maintenance. Their difference is whether they shall be sold now with the sale proceeds deposited into the Court for Children maintenance.

C.  The Legal Principles

17.  The legal principles applicable to the determination of ancillary relief claims are well established. The factors to be considered are set out in Section 7 of Matrimonial Proceedings and Property Ordinance (“MPPO”). The authoritative guidelines and approaches in ancillary relief claims are set out in LKW v DD (2010) 13 HKCFAR 537.

D.  Reliability of Witnesses’ Evidence

18.  The principles on assessing the reliability of witnesses’ evidence are not in dispute. In gist, the Court considers the inherent plausibility and consistency of the parties’ case and evidence, examines any corroboration by contemporaneous documents. The witnesses’ motives and demeanor may be relevant. See: Lee Fu Wing v Yau Po Ting [2009] 5 HKLRD 513; Hui Cheung Fai & Anor v Daiwa Development Ltd & Ors, HCA 1734/2009, unrep. 8 April 2014; Northampton Borough Council v Cardoza and others [2019] EWHC 26 (Ch).

19.  Mistake made by a witness on one issue does not necessarily lead to the rejection of his/her evidence on the other issues. It is essential to give regard to the entirety of a witness’s evidence in the assessment of the reliability of the relevant evidence. See: M.A (HK) Limited & Anor v Yeung Yuk Sing & Ors, HCA 1641/2010, unrep, 31 October 2017; Chung Pui Tong v Qian Zhen [2020] HKCFI 187 at §31.

20.  The Court’s approach where a party put forward a version of event different from what he previously said was summarised in Haider Awais v Intrafor Hong Kong Limited & Anor [2022] HKCFI 3043 at §10:

“Where the plaintiff has put forward one version of event, which is different from a previous version of event also put forward by him, ‘the judge’s function was not to decide which of the plaintiff’s versions of the incident was more preferable. His role was to determine whether, on the balance of probabilities, the plaintiff’s current version of the incident was correct. That involved considering whether the plaintiff’s previous versions undermined his current version to such an extent that it could not be said that the plaintiff’s current version of the incident was probably correct …’ (Chan Chi Shing v Tsang Fook Metal Engineering, CACV 238/1999, (unrep 21/12/1999) at page 3, as applied in Liu Kin Pong v Kee Wah Food Production Limited, HCPI 632/2014 (unrep. 607/2017) at §§17& 18).”

21.  H, W, Father, Mother and Mr Cheung have given evidence at the trial. Applying the above principles, I found that the evidence of Father, Mother and Mr Cheung were reliable. Their evidence was direct, clear and firm. Some of the core issues, such as part of Father’s loans and Mr Cheung’s loan, were supported by contemporaneous documents.

22.  W was straight forward and firm on key issues. She appeared to be strong-willed and ready to work hard for the Children. She was noticeably emotional and at times argumentative during her testimony, especially on events concerning H’s leaving the family as well as the emotional and financial pressures fell on her during the breakdown of the marriage. Her oral evidence on certain details of events differed from her affirmation evidence. Her evidence on key issues, especially the loans, was corroborated by the evidence of the other witnesses. Overall, where there were conflict of factual matters put forward by H and W, I found W’s version of events was more reliable.

23.  H was evasive and has the tendancy to give answers to suit his own case. I approached his evidence with caution.

E.  The Parties’ assets and liabilities

E1.  Agreed Assets and Liabilities

24.  The parties agreed that they have the following assets:

Items	W (HK$[1])	H (HK$)
Fortune Plaza	$3,740,000[2]
FMH	$3,750,000
Bank accounts	$41,899
Funds from Hope Rich loan	$500,000
insurance	$973,533
MPF	$272,722	$267,060
Sub-total:	9,278,154	$267,060
Less
Agreed liabilities	(522,135[3])
Total:	8,756,019	$267,060

25.  The parties agreed that the three bank loans of $370,846 owed by H during his bankruptcy should not be counted because following his discharge from bankruptcy on 6 March 2022, he was released from these bankruptcy debts although it has no effect on the functions of the trustees under the Bankruptcy Ordinance: Official Receiver, the Trustee of the Property of Leung Man Yuen v Leung Man Yuen and Anor, HCB 582/1996, unrep. 20 September 2016.

26.  As to W’s 20% shares in a company (“the Company”) which owned a restaurant managed by her, the parties agreed that it bore no value for the purpose of this trial.

E2.  The Disputed Loans

27.  The real dispute on Step 1 is whether the following loans of $2,348,869 disclosed by W should be deducted from the matrimonial pot:

27.1.  $880,000 owed to Father, out of which:

27.1.1.  $500,000 was borrowed in 2007 before the purchase of Fortune Plaza. A signed memorandum in Chinese dated 16 January 2007 (“the Memorandum”) recorded the loan was produced.

27.1.2.  $380,000 was borrowed in 2010 before the purchase of FMH, $200,000 of which was paid directly by Father to the contractors who renovated the FMH.

27.2.  $490,000 owed to Mother, out of which:

27.2.1.  $340,000 was borrowed in 2007 before the purchase of Fortune Plaza;

27.2.2.  a total of $150,000 was borrowed from time to time when H did not make any payment for family expenses.

27.3.  $700,000 owed to Mr Cheung, out of which:

27.3.1.  $200,000 was borrowed in 2010 before the purchase of the FMH;

27.3.2.  $500,000 was borrowed in 2019 for investment in the Company. This was documented by a written loan agreement signed by W and Mr Cheung on 6 May 2019.

27.4.  $278,869 owed to the Company as recorded in the Company’s financial statements for the year ended 31 March 2020.

28.  W, Father, Mother and Mr Cheung testified that the above loans are real loans advanced to W. They are not gifts nor soft loans, and W has the obligation to repay them.

29.  It was common ground that the acquisitions of Fortune Plaza and the FMH were mainly funded by W. Even if we took H’s case to the highest, his contribution to the family expenses would not be sufficient to pay the deposits nor the full repayment of the mortgage for Fortune Plaza in about 2 years’ time. W had to rely on the loans from her parents to fund the acquisitions.

30.  The Memorandum produced by Father recorded that he lent $500,000 to W for her payment of initial deposit for property acquisition, to be repaid by W 15 years later, i.e. from 2022. His two sons have knowledge of this loan. If he passed away before W repaid the loan, such amount shall be deducted from W’s entitlement from his estate.

31.  The Memorandum was signed by Father and W, witnessed by Mother. The fact that they had taken the step to sign the Memorandum evidenced their intention to treat this sum as a loan that W was obliged to repay. The Memorandum supported Father’s testimony that he wanted to distribute his assets fairly among all of his children, instead of giving more to W.

32.  At trial, W said that she had not used the entire sum of this loan on the purchase of Fortune Plaza. This was inconsistent with her affirmation evidence. When considering the entirety of evidence, this discrepancy on the use of part of the funds did not change its nature as a loan advanced to her by Father.

33.  Father did not enforce his right to repayment in 2022 pursuant to the terms recorded in the Memorandum because of W’s financial difficult caused by these divorce proceedings are understandable. I accepted that Father has not waived his right to enforce the repayment of the loan.

34.  Although no written document was signed for the other loan of $380,000 from Father, the evidence of Father and W was that this loan was to be treated in the same manner as the previous loan and shall be repaid when W has the ability to do so after this trial.

35.  I also accepted the evidence of Mother and W that W has the obligation to repay Mother’s loans of $340,000 made in 2007 to fund her property acquisition.

36.  I had doubts on the remaining loan of $150,000. This was an aggregate sum of monies given by Mother to W from time to time when they had tea. It was given to W when she was struggling financially to support the Children since her separation with H. Mother’s evidence on the total amount of loan was $200,000. Considering the entirety of evidence, I found this loan was a soft loan and should not be deducted from the matrimonial pot.

37.  Mr Cheung knew W for a long time. He was W’s boss and he regarded W as a good assistant in the business. He offered to help W because she was in a difficult financial situation and he believed that, with times, W has the ability to make earnings for repayment.

38.  Mr Cheung and W said that the 2010 loan was to be repaid when W’s son reached 21 years of age. They differed on the time when they agreed to this repayment term. W said that they agreed to this term at the time when the loan was advanced, but Mr Cheung said it was agreed subsequently. I found this discrepancy did not affect the nature of the loan.

39.  The 2019 loan was supported by a written loan agreement. I found this was a genuine loan advanced to W for her investment in the Company.

40.  The loans from the Company was documented in the Company’s audited financial documents and was corroborated by Mr Cheung’s evidence.

41.  These loans were advanced and used for the family’s purposes or for investment in the Company intended to generate income to meet family expenses.

42.  In summary, a further liability of $2,198,869 should be deducted from the matrimonial pot, making a total value of $6,824,210, out of which $1,513,315 (being insurance of $973,533 and both parties’ MPF of $539,782) are funds not readily available. The readily realised funds in the matrimonial pot are $6,824,210 less $1,513,315 = $5,310,895.

43.  It was W’s evidence that the Hope Rich loan of $500,000 have been used to pay legal costs, thus further reduced the net value of the matrimonial pot.

E3.  Distinction of Matrimonial or Non-matrimonial Assets Not Relevant

44.  Both parties agreed that this is a “needs” case. The assets in the matrimonial pot are not sufficient to cater for all the needs of the Children and the parties. It was not necessary to go to Step 4. Therefore, the argument of whether Fortune Plaza is a matrimonial or non-matrimonial asset is a non-issue in this case. Similarly, the factual dispute on the amount that H had contributed to the family expenses during marriage has little effect on the outcome.

F.  Earning capacity

45.  The parties agreed that they have the earning capacity to meet their own financial needs.

46.  H has been working in the catering industry as a chef after he completed Form 3 education. In his Form E, he stated a monthly earning of $8,500 as a part time chef. He said that his earning capacity was affected by the knee injury which caused his inability to stand for long period of time. His monthly income at the time of trial was increased to $20,000 with monthly expenses of $16,800 (an increase from monthly expenses of $9,300 at the time when he filed the Form E). He was residing in a property owned by his mother.

47.  W said that H has 20 years working experience. With reference to online resources on salary for jobs used to be taken by H, he should have the ability to earn about $25,000 per month.

48.  There was no medical evidence to prove H’s contention that his injury had caused a long term adverse effect on his earning capacity. He disclosed in his affirmation evidence that he was able to earn $29,000 in November 2023.

49.  W confirmed that, at the time of trial, she has a monthly salary income of $26,600 and a monthly rental income of $11,500 from Fortune Plaza.

50.  H suggested that W has under-reported her income. H referred to several deposits put into W’s bank accounts adding up to $360,678.26 during the 32 months’ period from 3 January 2019 to 28 August 2021, equal to an average of $11,271.20 per month that W failed to provide the source of these funds in her Answer to Questionnaire. She said in the Answer that she did not recall the source of these deposits.

51.  At trial, W explained the source of these items. Some specified transactions of $5,000 or $6,000 were monies paid to her by the Company to enable her to buy ingredients from the wet market and cook meals for coworkers in the restaurant. Some were reimbursement from the Company for purchases she made for the Company’s gathering, such as Christmas gathering in December 2019. Certain sums were payments from the customers in the restaurant who preferred to pay by electronic means such as Payme, instead of cash or credit cards. She made available her Payme account for the receipt and reimbursed the Company later.

52.  W explained that when the Answers were due, she was still under immense pressure. She single-handedly took care of the Children who were at young ages, and was shouldering all the financial burden to meet the needs of the Children. After H left the FMH, she worked 14 hours a day, handling multiple tasks all by herself. One of the Children suffered from speech impairment and required treatment. She was not in a position to obtain documents or properly recalled those transactions at that time.

53.  W’s explanation on the sources of these deposits was accepted. There was no evidence to support a finding of undisclosed income by W.

G.  Needs of the Children

54.  The Children are now aged 14, 13 and 10 respectively, attending either secondary or primary school. Their financial needs, as agreed by the parties, are crucial considerations in these proceedings.

55.  W stated in her Form E that the Chidren expenses were $29,400 per month. At trial, she updated the expenses to $30,880 with an increase in the Children’s extra tuition fee from $12,000 to $16,480, and a decrease of holiday expenses by $1,000, and a decrease of other transporaton fee by $2,000. The updated breakdown are as follows:

Item	HK$
Extra tuition fee	$16,480
School books and stationery	$500
Transport to school (including school bus)	$400
Extra curricular activities	$4,000
Entertainment / presents	$1,200
Holidays	$4,000
Clothing / shoes	$1,000
Insurance premia	$1,500
Lunches and pocket money	$600
Other transport	$1,000
Uniform	$200
Total:	$30,880

56.  In addition to the above expenses, there are the following undisputed monthly general expenses of $25,200, three quarters of which (i.e. $18,900) are attributable to the Children:

Item	HK$
Mortgage instalments	$5,000
Utilities (electricity, gas, rates, telephones & water)	$4,000
Management fees	$2,200
Food	$8,000
Household expenses	$1,000
Domestic helper	$5,000
Total:	$25,200

57.  The revised total expenses claimed by W for the Children are $49,780, that is $16,593 for each child.

58.  On W’s calculations, the Children’s needs amount to $6,172,596:

58.1.  Elder son, who was in Form 2, should graduate from the university in 2033. He has needs of 9 more years: $16,593 x 108 months = $1,792,044;

58.2.  Elder daughter was in Form 1 and should graduate from the university in 2034. She has needs of 10 more years: $16,593 x 120 months = $1,991,160;

58.3.  Younger daughter was in primary 5 and should graduate from the university in 2036. She has needs of 12 more years: $16,593 x 144 months = $2,389,392.

59.  H agreed to the duration for the provision of the Children’s financial needs. He contended that the amount for each of the Children maintenance should be $12,533 instead of $16,593. His calculation of the total sum to cover the Children’s needs was $4,662,276:

59.1.  Elder son: $12,533 x 108 months = $1,353,564;

59.2.  Elder daughter: $12,533 x 120 months = $1,503,960;

59.3.  Younger daughter: $12,533 x 144 months = $1,804,752.

60.  The expenses and financial needs should be assessed on a broadbrush basis.

61.  The value in the parties’ matrimonial pot is not sufficient to meet the Children’s needs estimated by W. There would however be a slight surplus on H’s estimation.

62.  To take note of the likely increase in the Children’s financial needs when they commence their teritary studies, the surplus, if any, in the matrimonial pot after catering for the Children’s needs would not be significant. In view of the parties’ latest open proposals, a determination of whether H or W’s cases on Children’s financial needs would not have a meaningful impact on the outcome.

63.  Having considered H’s case on his earning capacity and the history of his bankruptcy, it is prudent to reserve all the available assets in the matrimonial pot to cater for the Children’s needs, instead of distributing any part of it to the parties. The parties’ latest open proposals indicated their agreement to this arrangement.

H.  Two other matters

64.  There are two other matters to be addressed. These are H’s claims that W has the financial assistance from her family, and W’s claim for H’s non-payment of Children maintenance in the past 7 years.

H1.  Any financial assistance from W’s family

65.  I have held that the money advanced to W by her parents were repayable loans. The evidence does not support the existence of a likelihood that her parents would continue to provide W with financial assistance in the foreseeable future. See: KEWS v NCHC [2013] HKLRD 314.

H2.  H’s non-payment of past Children maintenance

66.  W argued that H should compensate his non-payment of Children maintenance in the past 7 years, which she claimed to be in the sum of $2,028,600. There was no application for interim maintenance to be paid by H, neither was there a determination with respect to H’s ability to pay at the relevant time bearing in mind his bankruptcy and knee injury that affected his earnings. The loans obtained by W to meet the needs of the Children have been deducted from the matrimonial pot in the above calculation. No separate compensation from H would be ordered.

I.  Outcome

67.  I have held that both parties have the earning capacity to maintain themselves and the net value of the matrimonial assets should be used to meet the Children’s financial needs.

68.  The next issue is to weigh between H’s proposal to sell the landed properties and deposit the sale proceeds into the Court for the purpose of the Children’s expenses, and W’s proposal to keep 1 or 2 landed properties with her undertaking to make use of the 2 landed properties (whether by way of rental income, refinancing or sale if necessary) for provision of the Children’s needs.

69.  Having carefully considered this matter, W’s primary proposal was preferred for the following reasons:

69.1.  Firstly, there was no evidence that W would not maintain the Children. Quite the contrary, the evidence was that she had tried her best to provide for the Children despite difficult financial conditions.

69.2.  Secondly, it is in the interest of the Children to maintain stability of their living environment, hence it is better to retain the FMH as their residence.

69.3.  Thirdly, the rental income generated by Fortune Plaza would provide regular funds to support the Children. There is no pressing need to liquidate the property at this stage.

69.4.  Fourthly, W’s proposal has the benefit of flexibility in the utilization of the income or proceeds that these 2 properties may generate.

70.  By reasons of the above, and upon W’s undertaking that she will be responsible for the Children’s maintenance until the Children reach the age of 18 or cease to receive full time education, whichever is the later, by making use of her resources including the 2 landed properties (whether by way of rental income, refinancing or sale if necessary), all claims for ancillary relief are dismissed. For the avoidance of doubt, the parties shall retain the assets under their names, and be responsible to pay their own debts.

71.  As to costs, I have considered, inter alia, the parties’ open proposals, the nature of the claim and its outcome. On a nisi basis, I ordered H to pay W’s costs of the trial of the ancillary relief dispute, on party and party basis, at an amount to be taxed if not agreed. There is no order as to the other costs of the ancillary relief disputes. H’s own costs be taxed in accordance with the Legal Aid Regulations.

72.  A declaration under section 18(1)(b)(i) of MPPO be granted.

73.  I thank Ms Choy and Ms Tam for their assistance to the Court.