YSYM v. LHB

FCMC 19025 /2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 19025 OF 2012

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J U D G M E N T

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(Ancillary Relief Application)

1. This is the Petitioner Wife’s application against the Respondent Husband for ancillary relief for herself and their 2 children, both boys age 6 and 7 whose care and control has been granted to her after what can be described as a bitterly drawn-out battle on almost every issue over their care and access arrangements down to the most minutia such as the time and place of collecting and returning them for the Husband’s weekly access. Sadly their disputes over the question of ancillary relief turned out equally as contentious, as while there does not seem to be any controversy over the income of their disclosed occupation, she at 36 having just been recruited for a senior position in an insurance company at a salary close to HK$99,000 per month plus bonus, and he at 39 is an orthopaedic surgeon under the employment of the Hospital Authority at a monthly salary of more than HK$137,000, there are major issues over whether he has or has had any beneficial interests in a business known as HMC and in a taxi, in which he does not dispute of some substantial involvements in the past but that they were merely to help out his mother and elder brother whom he claims to be the true owners respectively, an assertion of course not acceptable to the Wife.   

2. There is however no real issue over the law or principles applicable to the distribution of marital assets in that both parties agree that there be equal division as a clean break between them, and that the Husband shall continue to make proper financial provision for their children, hence the trial which span over 6 days was mostly focused on evidence of the extent of his involvements and beneficial interests, if any, in the said business and taxi, and if the court is to find against him for having failed to disclose those interests frankly and properly, it is the Wife’s case that his such conduct should be taken into account by the court and that adverse inferences be drawn against him as to his true financial resources in its determination on the distribution of the marital assets as well as on the costs of the trial.   

3. Further compounding the dispute and no doubt fuelling the acrimony between the parties is that one of the other persons involved in the said HMC business consisting essentially of 2 clinics providing medical and physiotherapy services, is a former colleague of the Husband whom the Wife suspects to be his mistress and has been assisting him in concealing his true interests in the business and his income derived therefrom, both of which are of course denied by the Husband.

4. Henceforth it would be highly relevant to first set out the historical backgrounds of the parties and their relationship in more details before proceeding to consider the evidence of the major issues referred to above.   

Background

5. Both parties were born and raised in Hong Kong, with the Wife obtaining her university degree in business from UK in about 2000, and has since worked in various employments in marketing or financial management, while the Husband graduated from Chinese University Medical School in 1997 and now practises as a specialist in orthopaedic surgery at Queen Mary Hospital and as noted above under the employment of the Hospital Authority.   

6. They became acquainted after the Wife’s return to Hong Kong and started cohabitation in about 2001 in some rented accommodation when the Husband was then working at Kwong Wah Hospital. On 30^th September 2003 he started a side business, a newsstand located in a side street in Mongkok behind Kwong Wah Hospital and which was acclaimed for employing disabled persons as its staff (“the newsstand”).

7. Shortly thereafter the said business of HMC was formed initially in the office space behind the newsstand to provide medical and physiotherapy services in which the Husband together with 2 former colleagues at Kwong Wah Hospital, a Dr Yen, and a Dr Lee whom the Wife suspects to be the mistress, were registered as partners in late 2003 in the Business Registry. Dr Lee soon left Kwong Wah Hospital to work full-time at HMC, while the Husband would carry on with his employment under the Hospital Authority, using only his spare time to run certain administrative and accounting works of both the newsstand and HMC business, which has since grown to 2 clinics, one in Mongkok and the other in Chaiwan, and has diversified into also selling and supplying medical equipments, of which I will no doubt go into more details later in this judgment.   

8. About 6 months later in March 2004 the Husband withdrew his registration from the Business Registry and on the same date his mother Madam To was registered as a partner. One month later on 14^th April 2004 Dr Yen also followed suit to withdraw from the registration and in his place was registered his mother Madam Law. In June 2004 the Husband’s contract with the Hospital Authority was extended for 3 years for a position at the Queen Mary Hospital, and that he would after work or in his spare time continue to be involved in those administrative and accounting works of the business, while the Wife also helped out from time to time in both the newsstand and the clinics including promoting and selling medical equipments for the company and earning commissions.  

9. In late 2005 when she became pregnant with the elder son, the Wife ceased working and the parties decided to formalise their relationship by registering their marriage on 14^th February 2006. 3 months later on 27^th May 2006 the Wife gave birth to the elder son and became a full-time mother. One year later on 28^th May 2007 she gave birth to the second son.   

10. In early 2008 the Wife returned to full-time employment in an insurance company, and the Husband’s mother Madam To started to come to their home during weekdays to assist in looking after their children together with their domestic helper while the parties worked. Meanwhile the Husband would continue to be involved in the administrative and accounting works of HMC, and there was a period when the elder sister of the Wife was also hired to work in the clinic.   

11. However later in the same year the Wife suspected the Husband of having an affair and issued a petition for divorce against him, but later withdrew it after the parties had reconciled, and later in 2009 they purchased their rented apartment at Tai Shing Building, Caine Road, Hong Kong from their landlord in their joint names with the assistance of certain personal loans and a bank mortgage (“the former matrimonial home”).

12. Sadly their relationship did not improve and instead there were increasing conflicts over various issues in particularly the Wife’s suspicion of the Husband’s affair with Dr Lee, and after a confrontation with him one day in May 2011 over the alleged affair during which she demanded to divorce him, the Husband moved out of the former matrimonial home allegedly into his parents’ home at Shaukeiwan.

13. Their conflicts unfortunately exacerbated which on some occasions led to police interventions, cumulating in one particularly ugly incidence in September 2011 which led to the Husband being arrested and later charged for allegedly assaulting the Wife in public, and while he was subsequently acquitted after a trial, sadly it was to be the shape of things to come over the next 2 years during their many disputes in particular over their 2 children with the tendency to involve the police at the slightest drop of a hat mostly on the part of the Husband, of which the Wife complains as part of his scheme to harass and pressurise her into submission in their litigation but to which he of course denies.   

14. On 15^th July 2011 the Wife issued a divorce petition under FCMC 9565 of 2011 based on the Husband’s behaviour including his alleged affair with Dr Lee named as the 2^nd Respondent, thus triggering off what can fairly be described as a most bitter and acrimonious proceedings on all fronts with numerous applications from both side with almost 20 court hearings over the next 2 years or so, first as noted above on every issue over their 2 children, then followed by their present financial disputes, as evidenced by the resultant 24 affirmations filed by and for the parties and the 4 Social Investigation Reports which made up the bulk of the 8 trial bundles before the court. 

15. I do not propose to go into the details of those disputes involving the children for the present purpose, save that it is part of the Wife’s case that the Husband deliberately instigated most of them together with his many police reports as noted above to try to wear her down and to force her to settle her financial claims on his terms, and which she claims to have actually caused her to loss her previous jobs and with such traumatic impact on the children that they required regular psychological counselling, while the Husband insists that he was merely trying to safeguard the children’s interests as the Wife was not a suitable parent to have their care and control and that she had been most obstructive in every way to his access to or contact with them.   

16. Their disputes were not of course just confined to their children, but also over their divorce and obviously finance as well, starting with the Husband filing an answer to the Wife’s petition denying her allegations of unreasonable behaviour or affair with Dr Lee, and soon followed by a strenuously argued maintenance pending suit application brought by the Wife, when the Husband was subsequently ordered by this court on 15^th December 2011 to pay HK$40,000 per month as interim maintenance for the Wife and the children on top of his undertaking to continue to pay for all the expenses and outgoings of the former matrimonial home including mortgage payments, government rents and rates, management fees and household utilities.

17. It should be pointed out that the order was made on the usual broad brush approach based on their then Form E and supportive affidavit only and with the intention that any necessary adjustment could and would be made at the final hearing.

18. It should also be noted that according to the Wife’s Form E at that time, she was then an associate director of an insurance company earning HK$45,000 per month with some HK$78,000 in savings but debts of almost HK$580,000 and a monthly needs of more than HK$70,000 for herself and the children, while the Husband disclosed in his Form E of an income of just over HK$112,000 per month from the Hospital Authority, with equally insubstantial savings but had shares and equities worth more than HK$310,000 and insurance coverage of more than HK$900,000. It was also in her supportive affidavit that the Wife first raised the issue over the Husband’s interests in and income from HMC which were however not disclosed or mentioned at all in his Form E.   

19. Eventually the parties were able to resolve their disputes over the children, or so it seemed at that time, on 1^st November 2012 after a 3 days trial during which both parties could no longer afford legal representations, and that the Husband’s mother Madam To also gave evidence in support of her son’s case, when the Husband finally conceded on custody care and control of the children to the Wife, who then agreed that he should have certain defined staying access with various means of contact to the children, while the question of joint custody was to be reviewed at a later date. An order was accordingly made on the same day.

20. Any hope that that consent order would put an end to their battle over their children soon quickly went out the window when the parties returned to court the next month in December 2012 accusing each side of failing to comply with the terms or spirits of their agreement, with the Husband shortly thereafter launching another major battle for variation of the said order that custody of the children be instead granted to him. By then the only common ground that they could find was that their marriage had indeed broken down irretrievably, and that it should be dissolved on the ground of their separation for 1 year with the Husband’s consent, thereby removing Dr Lee from the scene, if only just for the time being.

21. Accordingly the Wife issued her fresh petition in these proceedings on 28^th December 2012, with the relevant pleadings and documents filed in the earlier proceedings consolidated by a consent order for use in the new proceedings to save on time and costs.  

22. To cut the story short, the Husband eventually abandoned his variation application, although regular disputes over his access/contact to the children would persist, at least the parties were then finally able to move on to the next and final battle, which is their financial dispute and the matter now before me.

23. By then the Wife’s solicitors have come back on board, while the Husband would continue to appear in person, although the Wife suspects that he may continue to have access to legal advice and assistance from the side. As noted above the parties had exchanged their respective open proposal at the trial, of which I shall now go into their details.    

Wife’s Open Proposal

24. In her open proposal made before the trial, the Wife is in effect asking for equal division of the family assets including not just the former matrimonial home and the Husband’s MPF/Pension but also what she believes to be his undisclosed interests in HMC and the taxi, the exact total value of which is not clear but she has put at not less than HK$17.5 million, hence she seeks the following terms:

(a)   Her half share of the martial assets at HK$8.75 million in the form of the transfer of the former matrimonial home to her at HK$5.2 million net with the shortfall to be made up by a lump sum of HK$3.55 million as a clean break from the Husband;

(b)   That the Husband shall continue to pay a monthly sum at the same rate of the maintenance pending suit of HK$40,000 per month for the maintenance of their 2 children being HK$20,000 for each;

(c)   That he shall bear all her costs of the ancillary relief proceedings.

Husband’s Open Proposal

25. The Wife’s proposal is of course not acceptable to the Husband who insists to have no beneficial interests in either HMC or the taxi, hence his open proposal made during the trial on 11^th November 2013 on the basis that their former matrimonial home and his MPF earned during the marriage are the only marital assets which should be divided as follows:

(a)   He shall buy out the Wife’s half share and interests in the former matrimonial home for a lump sum of HK$3 million on the basis of his own valuation of its net worth at HK$6 million;

(b)   He shall pay her a further lump sum of HK$320,000 when he receives his MPF;

(c)   The Wife and the children may continue to reside in the former matrimonial home free of charges until the children have reached 18 or completed their full-time tertiary education whichever is later, during which he will be responsible for all the charges of the property including the government rent, rate and management fees as well as maintaining it in proper condition for their accommodation;

(d)   In the event of the Wife electing to move out of the former matrimonial home to reside elsewhere with the children, he shall pay HK$7,500 per month per child as his contribution towards their rental expenses;

(e)   In either event he shall pay HK$15,000 per month for the children’s maintenance being HK$7,500 for each until they reach the age of 18 or complete full-time tertiary education whichever is later;

(f)   He will also inject HK$200,000 into an account to be opened for the children for their future education fund;

(g)   That each party shall bear his/her own legal costs.  

26. This proposal was likewise rejected by the Wife, and so the trial took its full course, during which the Wife was represented by Mr Cheng as her counsel, while the Husband as noted appeared in person.

27. Before proceeding to consider the many issues existed between the parties and the evidence advanced by them at the trial, I should clarify that the 8 trial bundles before the court, of which those marked A1 – A5 are pleadings from the previous proceedings, while those of A*1 – A*3 are for those filed in these proceedings. It would also be helpful for me to first set out the law and principles applicable to the determination of the question of ancillary relief, given the multiple issues between the parties and for the benefit of the Husband who is unrepresented.   

The Legal Principles

28. First of all, section 7(1) of Matrimonial Proceedings and Property Ordinance, Cap 192 has set out the following matters which the court is required to have regard in deciding on what orders to make of ancillary relief applications as between the parties:

(1)  It shall be the duty of the court in deciding whether to exercise its power 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.

29. The principles of how this section 7 exercise should be approached have been definitively set out by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 when Ribeiro PJ stated from paragraph 56 of his judgment:

“Objective of fairness

56. … 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…

Rejection of discrimination

57. The second is that the concept of fairness requires the refutation of any gender or role discrimination. Lord Nicholls reiterated this at the start of his speech in Miller/Mcfarlane when, referring to White v White, he stated:

 “ … the House emphasised that in seeking a fair outcome there is no place for discrimination between a husband and wife and their respective roles. Discrimination is the antithesis of fairness. In assessing the parties’ contributions to the family there should be no bias in favour of the money-earner and against the home-maker and the child-carer. This is a principle of universal application. It is applicable to all marriages.”

Yardstick of equal division

58. 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…

59. In Miller/McFarlane, the “yardstick” concept was elaborated into the “equal sharing principle” as further discussed below. However, it is worth emphasising that according an equal status to the role played by each of the parties during the marriage does not necessarily or even usually mean that their assets should be equally divided. Thus, in White Lord Nicholls stated:

“Sometimes, having carried out the statutory exercise, the judge’s conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge’s decision means that one party will receive a bigger share than the other.”

60. And in Miller/McFarlane, he referred to the equal sharing principle as follows:

  “When their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary. Fairness requires no less. But I emphasise the qualifying phase: ‘unless there is good reason to the contrary’. The yardstick of equality is to be applied as an aid, not a rule.”

…

Rejection of minute retrospective investigations

62. 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.

63. Such attempts have been encountered in various contexts, including disputes over the extent of a party’s assets; over the contribution made to the welfare of the family; over the parties’ conduct; over claims to be compensated for having suffered some disadvantage, and so forth.

…

69. the essence of this fourth principle is reflected in Thorpe LJ’s illuminating comment in Parra v Parra:

“ … the outcome of ancillary relief cases depends upon the exercise of a singularly broad judgment that obviates the need for the investigation of minute detail and equally the need to make findings on minor issues in dispute. The judicial task is very different from the task of the judge in the civil justice system whose obligation is to make findings on all issues in dispute relevant to outcome. The quasi-inquisition role of the judge in ancillary relief litigation obliges him to investigate issues which he considers relevant to outcome even if not advanced by either party. Equally he is not bound to adopt a conclusion upon which the parties have agreed. But this independence must be matched by an obligation to eschew over-elaboration and to endeavour to paint the canvas of his judgment with a broad brush rather than with a fine sable. Judgments in this field need to be simple in structure and simply explained.”

70. The four principles discussed above should be borne in mind when embarking on the section 7 exercise …”   

30. Riberio PJ then proceed to state the steps to be taken in that exercise which may be summarised as follows:

Step 1: Identification of the assets

31. 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, as stipulated by section 7(1)(a), with the objective to compute the net financial resources, taking account of all material liabilities, and at this stage the court need not attempt to distinguish between matrimonial and non-matrimonial property until when it is necessary to consider distribution of the assets.

32. The parties do have an important duty to ensure that the court has sufficient information regarding their assets by making full and frank disclosure, and a party who fails to do so runs the risk of the court drawing adverse inferences or making adverse costs orders against that party.

Step 2: Assessing the parties’ financial needs

33. The next step is to assess the parties’ financial needs, and the exercise may often stop at this point since the total resources may be insufficient to go beyond or even to meet both parties’ needs. If so, no room is left for the application of any sharing principle, and where the assets are meagre, a “clean break” between the parties may not be possible, and it may be necessary to have recourse to an order for periodical payments.

34. While the process of evaluating “needs” obviously involves assessing those matters under section 7(1)(b), other matters referred to section 7(c) to (e), that is, standard of living, age and disability will often also be relevant. 

35. Such needs should also be “generously interpreted”, i.e. in trying to ensure that each party and their children have enough to supply their needs set out at a level that equates, in so far as resources allow, to the standard of living they enjoyed during the marriage, those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances.

  Step 3: Deciding to apply the sharing principle

36. 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 alongside all other material factors in the next steps.

  Step 4: Considering whether there are good reasons for departing from equal division  

37. The fourth step involves considering whether good reasons exist for departing from the principle of equal division. Any such departure means increasing or reducing one party’s share and correspondingly reducing or increasing the share of the other. The question for the court is therefore whether the balance ought to be shifted from a point of equality to some other point in the circumstances of the case by considering all those factors under section 7(1) with the implicit objective of a fair distribution of the assets. A finding that one or more of those factors are engaged however does not necessarily mean that a departure must occur. The weight to be given to such factors is in the court’s discretion, which leads to the final step.

  Step 5: Deciding the outcome

38. The fifth and final step is of course for the court to decide the outcome, whereupon it should step back and look at the overall impact of the factors found to be relevant, and may decide that certain factors carry such weight that a departure from equality is called for. The decision is fact-specific and discretionary, but where there is a departure, the court should explain its basis since the articulation of reasons provides a useful check on the fairness of the outcome.

39. Furthermore, given the nature of the major issues involved in this case, it would be essential to emphasise the duty of the parties to make full and frank disclosure of their financial means referred to above by His Lordship, which implicitly underline Step 1 to be taken by the court to identify the assets, the importance of which has stated in Rayden and Jackson on Divorce and Family Matters, 18^th edition at Chap 17.28:

“The importance of the duty of both husband and wife to make disclosure of their assets which is full, frank and clear cannot be over emphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under s 25 of the MCA 1973, it is required to have regard, it cannot lawfully or properly exercise its discretion in the matter ordained by that section. The duty of each party is absolute, and it must be discharged regardless of whether the application for ancillary relief is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one; a party must not mislead the other party and the court into assuming that his financial situation is unchanged if it in fact has changed, Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.”

40. This principle has been emphasised in the authorities and particularly succinctly in the case of J-P C v J-A F [1955] P215, [1955] 2 All ER 617, CA:

“The obligation of the husband in maintenance proceedings is to be full, frank and clear in his disclosure of his means to the court, and any shortcomings in this respect can and normally should be visited at least by the court drawing inference against him on matters the subject of shortcomings.”

41. In Baker v Baker [1995] 2 FLR 829, where the Court of Appeal held that the trial judge was entitled to draw adverse inference against the husband and the standard of proof in a case where material non-disclosure was alleged was the ordinary balance of probabilities, Otton LJ emphasised that failure of such duty to make full and frank disclosure would severely undermine the integrity of the legal process at 837B:

“ ... I wish to add a passage only by way of emphasis. Under statute and from authority … there is a duty upon a party in proceedings such as these to make a full and frank disclosure of all matters relevant to the assessment of the financial position of the parties and the relief to which a spouse is entitled. The integrity of the legal process would be severely undermined if a party were permitted (and seen to be permitted) to evade that duty by a deliberate and stubborn refusal to make such disclosure to the other party and, more important, to the court.”

42. It is henceforth with these principles and guidance in mind that I shall now embark on the section 7 exercise, starting with the identification of the assets of the parties, which as noted above constitutes essentially just about all the major issues between the parties as summarised below.  

Issues

43. It would be useful to set out the issues here again, all factual as identified by Mr Cheng for the Wife in his closing submission as follows:

(a)   Whether the Husband has and/or had any beneficial ownership in HMC?

(b)   If so, whether the business of HMC has not been profitable as claimed by the Husband?

(c)   Whether the Husband has and/or had any beneficial ownership in the Taxi?

(d)   Whether the Husband has fully disclosed his assets other than those listed in his Form E?

(e)   Whether the Husband is indebted to the extent as he claims?

(f)   Whether the Husband has the means to pay what the Wife now claims in her application?

(g)   Taking into account all the circumstances of the case, whether it is fair to order the Husband to pay what the Wife asks for in her said open proposal? 

44. The Husband of course does not accept that the issues are all about his true financial resources, as he clearly disputes the Wife’s alleged debts as well as her stated needs and expenditure for herself and the children, and he also questions whether she has fully disclosed all her income earned since the breakdown of the marriage.  

45. There is however no question in my mind that at the heart of their issues is over the Husband’s alleged beneficial ownership of HMC, of which I propose to start with my facts-finding exercise. 

Beneficial Ownership of HMC

46. To start off, it would be fair to say that the result of my determination of this issue will almost certainly make or break the parties’ respective case, in that a decision against the Husband will have found him guilty of the most fundamental duty imposed on parties in ancillary relief proceedings: to make full and frank financial disclosure, and will almost certainly and severely impact on his creditability as to most of the remaining issues, while a finding in his favour will likely make the Wife appear vindictive, as it is his case that she has always blamed his alleged extra-marital affair with Dr Lee on the breakdown of their marriage, and thus make his proposal seem fair and reasonable under the circumstances.   

47. The Wife’s case is that it was the Husband who first founded HMC with Dr Lee and Dr Yen joining as his partners, and that even if he is not the senior partner with the biggest share, he should at least be held as an equal partner of that business, and that later his mother Madam To took his place only in name and in trust for him to avoid being found out by his employer of his interests in HMC and risk breaching his employment terms with the Hospital Authority.

48. Her evidence was first set out in her 1^st Affidavit of 6^th October 2011 (A2/363, 364-366) as follows:

“3. ... When we started our cohabitation, the 1st Respondent was then a medical doctor working for Kwong Wah Hospital. He was, however, a business minded person. He always talked about starting his own business and that he had to save money for his business capital. He expressed interests to a number of business such as physiotherapy clinic, medical equipment supply, newsstand and even online real estate agency service. He often asked for my opinion about which business would make good profits …

4. In late 2003, the 1st respondent finally started his side business. In the beginning, it was a newsstand in the business name of CM because the idea was that he saw an opportunity that the newsstand could bring public attention from the people around the area to the clinic that he would operate in due course … Soon after, the 2nd respondent, his colleagues then at Kwong Wah Hospital decided to join the 1st Respondent’s side business. I was told by the 1st Respondent that she was not happy working at Kwong Wah Hospital and she wanted to quit and become fully engaged in the 1st respondent’s side business as a medical doctor. I was also told by the 1st Respondent that another colleague in Kwong Wah Hospital, (Dr) Yen, had also joined his side business but the 1st Respondent would remain the major business partner since he was the major capital contributor. Soon afterwards, clinic and physiotherapy centre were opened next to the newsstand in Mongkok. The business was eventually changed to HMC. Clinic and physiotherapy centres were also opened in Tin Wan Estate and Chi Fu Fa Yuen. The 1st Respondent also spent a lot of time to set up and develop networks for distributorship and promotion of medical equipment so that his side business would continue to grow. I also helped him with his business by doing marketing works such as printing leaflets and name cards and logos design.

5. In about 2004, the 1st Respondent told me that he was worried that his involvement of his side business might affect his contract with the Hospital Authority. He therefore made his mother (Madam) To became the nominee holder of his shareholding in the side business so that he could continue to operate his side business behind the back of the Hospital Authority. His mother is a housewife and a person of low education level. He also told me that his colleague (Dr) Yen also made his mother a nominee for him in the business. The 1st respondent continued to perform a key role and involvement of the side business such as hiring staff for the newsstand and the clinic, dealing with the problems posed by the physiotherapists, preparing the income tax papers etc. he was also actively involved with building up websites promoting the products of the business such as oximeter, cryopen and later photocatalyst and meditech FOS3. As shown from the domain searches and its enlarged version … he is the administrative contact of the “holisticphysio.com” and the holder of the domain name “cryopen.hk” which are all operated by HMC. I continued to help him with his business by doing the marketing and public relation works and accompany him to Shenzhen to negotiate deals with Edan Instruments Company. In fact, I helped him full time with his business from May 2004 to August 2004 and I was paid a commission for selling the medical equipment for the business. On 3rd September 2004, he wrote and sign a reference letter in my favour as the director of the business to recommend me to potential employers. Copy of the said reference letter is now exhibited hereto …

…

7. … during about October 2006 to December 2007, I was not working for any employer because I had to take care of the infant children …the 1st Respondent continued to work for the Hospital Authority …when he was off work at home, he continued to be absorbed in his side business sitting hours before his computer; setting up and coding websites for his business, answering queries from potential customers, MSN with the 2nd Respondent, etc. … He also made me to help him with the business answering the calls and help make product deliveries to clinics or hospitals when he was successful in tenders for the oximeter device. Under holisticphysio website, he has created secondary website addresses for various products such as “oximeter.holisticphysio.com”, “newsstand.holisticphysio.com”, “photocatalyst.holisticphysio.com” etc. He created youtube videos featuring his own voice in demonstrating how to use the medical equipment and videos casting his mother and our son to promote the products ... He also printed name cards bearing names for himself, myself and even PQ (elder child) as salespeople for Advance Medical & Health Products which is a subsidiary of HMC according to the company blog of Meditech. Exhibited hereto … the 1st Respondent also set up a Facebook account in the name of (elder child) to promote his own business and he would interact online under such false name with strangers for the sake of getting business … Whenever there were flood problems in the Mongkok clinic, he rushed to do the clean up and handle the insurance claims. Once I also went with him to do the clean up because of the flood in the middle of the night. In a nutshell, the 1st respondent was withdrawing himself from me and the children to dedicate all his spare time on his business.

…

18. After the 1st Respondent moved out in April 2011, … He also removed the computer hard discs but before he did so I was managed to copy from one of his hard disc a document prepared by him titled “HMC Account To 31 March 2006”; copy of which is now exhibited hereto marked “YSYM-10” which contains a list of questions and answers apparently exchanged between the 1st and 2nd Respondents on the accounts of their business, its balance sheet and trading accounts. It also shows “Leung Drawings” at ($1,638,726.83) as at 31.3.2006 apparently to mean that he had loaned the said amount to the business which is much more than the drawings of the other two persons “Lee” and “Yen” which I believe to be Dr Lee (the 2nd Respondent) and Dr Yen. I was also able to make a copy of another hard disc of his before he removed it which contains thousands of photos relating to his business and some documents relating to his business. Exhibited hereto marled “YSYM-11” are copy documents downloaded from such hard disc which are relating to the business and which shows he is extensively involved as the chief operator.

…

36. … His business has been booming since 2007 and he told me that he paid about HK$1,000,000 for distributing license for on of his medical equipments, Cryopen. He also launched an iphone application to promote on or of his products, heartbeat monitor. During Chinese New Year, I had to help him to prepare all the Red Packets to his employees from his newsstands, physiotherapist clinic, salespeople for his medical equipments and nurses. In early 2011, his business product photocatalyst solution was showcased in a TV program receiving a lot of good comments. In April 2011, he tried to convince me not to divorce him and in his email to me dated 15th April 2011, he wrote that his company annual return would exceed HK$20 million by 2013. Copy of the email exchanged between is now exhibited hereto marked “YSYM-13”.

49. To complete what the Wife said in that last paragraph of her affidavit, it is important to recite here exactly what the Husband allegedly stated in that email, the tenor of which she submits undoubtedly proves his beneficial ownership of HMC:

“think back, if it is not for you and our 2 boys, why I need to print till I have shoulder pain?

If I am not wish you three have a good living quality, why need to take up the photocatalyst issue? With current progress, I expect the company annual return should exceed 20M by 2013. It is not a hobby, neither it is an easy job.

The whole project drawn 3 hospitals, 4 departments, 2 universities together, size exceeds ever recorded in past. You wont understand or will u?”  

50. The Wife then went on to set out in her 2^nd Affidavit (A2/630, 631-638) details of various deposits made by the Husband into his Hang Seng Bank Prestige Integrated Account No 385-465323-888 and Standard Chartered Bank Dream Account No 433-2-020641-0 between June 2009 and September 2011, averaging HK$87,643 per month for the former account and HK$26,400 per month for the latter account, totalling in excess of HK$110,000 per month which she said were part of the daily cash intake of the HMC business brought home by him in an envelope after the close of business and which he would deposit into those accounts the next day, and that sometimes he would give her some of those cash for their household expenses.  

51. These evidence of the Wife, almost all based on her first hand personal knowledge, are so comprehensive and in so much details that it is not surprising that the Husband does not try to dispute them but rather to explain, as when he agrees that he was the one who started the newsstand business, but subsequently dropped out and for his mother to take over as her investment, that his continued involvement in the business was merely to help out his mother and Dr Lee, and that the Wife well knew all about these but deliberately twisted the truth to suit her ulterior motive to get a bigger share of their assets than she deserves. His responses and explanations to these allegations of the Wife can be found in his 2^nd Affirmation (A3/857):

“3. I agreed on the time line of our courtship but I disagreed with her description that I was a business minded person. In fact it was the Petitioner who always wanted me to do business as she always said she could help me out with her experience and education in marketing. As a result, I asked the petitioner to explore what business we could do. However, my main interest is still my practice as an orthopaedic surgeon.

4. The establishment of the newsstand business was at the time when SARS was just over and the market was in recession … Unemployment rate was high and those with physical or mentally challenged people were mostly jobless. The company thus targeted in providing supported employment for those groups of people, thus bearing the name “Capable Minority”. The newsstand was in operation since late 2003. It did not make any profit. I had informed Hospital Authority at that time.

…

6. The reason why I was no longer in the company was because of the change in business nature back in mid 2004 which I shall set out the reason below.

7. From 1997 to 2004, the Hospital Authority only provided a 6 year contract for all newly employed doctors and I was one of them. June 2004 was the last month of the contract. Most of the contracts in Kwong Wah Hospital were finished. The 2nd Respondent Dr Lee (“Dr Lee”) decided to start her own clinic and I decided to continue my work in Queen Mary Hospital.

8. My mother and Dr Yen expressed their interest in investing in the clinic to be opened by Dr Lee. Dr Lee agreed to continue the newsstand operation and to take over Capable Minority. I thus withdrew from the company when I was offered another 3-year contract from Queen Mary Hospital. My mother then joined this company in March 2004.

9. Financially, by the time of handing over, the newsstand carried a negative balance of around HK$1,000.00 per month and the capital value was nil. In order to start up the clinic business, my mother provided an injection of capital during that time. In relation to operation of the company, my mother had been actively participated in the newsstand business. Document to show her active participation included a newspaper clip showing her attendance in the award ceremony in 2004 receiving the award on behalf of the company. There is now produced and shown to me and marked “LHB2-2” a copy of the photo of my mother taken at the Award Presentation Ceremony on behalf of the company. My mother was also responsible for attending the Labour Tribunal in a case taken out by an employee who was terminated by my mother for theft. Unfortunately we could not find the relevant document. If my mother did not involve in cross checking stock and cash flow, how would she be able to detect a staff had stolen some magazines to sell? Other than that, she cross checked the finance report of the newsstand every month and was in charge of all the payments to the newspaper and magazine suppliers. Given my mother is a graduate from high school (considered as highly educated in her time while most people can only finish primary school education at most), she had the capacity of overseeing many of the business administrative works …

10. My mother and Dr Lee asked me to assist her in handling administrative and accounting works of the company. As a result, I had had knowledge of the financial situation of the company despite I was not a shareholder. The company did not work well in the first 3 years, not only the salary of Dr Lee (estimated market value of HK$1 million per year) were not able to meet, but the income also could hardly cover the expenses.

11. As the initial capital amount was far less than the financial debt and Dr Lee requested further injection of capital, my mother decided not to invest further and had to withdraw from the company from the financial year onward on 30th March 2011. The time of submitting the document was well ahead the Petitioner’s attempt to divorce me. Having said that, she still helped out the newsstand on voluntary basis. She expressed her view to help until the newsstand closed on 9th November 2011 when the rental contract finished … I still helped out the company on some of the back office work in favour of my mother and my friend without any pay.

12. I reiterate that I do not have any personal interest in the company as alleged by the Petitioner. There has never been any financial interest I received from the company.

13. For the medical equipment supply, this division was started when the Petitioner expressed her view of working flexible hour in 2005, when she was pregnant. The set up of this division was in Dr Lee’s good will. However this did not last long as the petitioner later found a more gainful job shortly after (elder son) was born in 2006. The division was reinstated when the Petitioner’s sister approached in 2008. The Petitioner’s sister was a middle-aged beautician, unemployed for 1 year. She required a flexible job so that she could take care her child aged around 10. I thus agreed to teach her knowledge on medical equipment, assist in handling all those work concerning procurement and administrative duties. During that time, the Petitioner was also actively participated in these works. The name cards she mentioned which bears the names of my sons were just used for the design of the name card.

14. This one person division only had around HK$10,000.00 a month business volume. Hence, it was also of negative balance. Both the Petitioner and her sister knew about this.

…

16. Helping on administrative and accounting works was in favour of my mother, my friend (Dr Lee), my sister-in-law and my wife. That was very reasonable. Having said that, there had never been any conflict of interest. Being a frontline doctor, I never sit in the procurement selection board. And all the work was done in out of office hour, thus I believed my work did not impart any negative effect on my employer.

…

64. … I reiterate that I have no financial interest in the business of Dr Lee and I receive no extra income from any other business save and except my income from the Hospital Authority. There is now produced and shown to me and marked “LHB2-6” a copy letter written by Dr Lee and a letter written by the accountant of the company.”

52. In the same affirmation the Husband went on to reply to the Wife’s 2^nd Affidavit as to his various cash deposits into his bank accounts as follows:

“70. I shall now explain all the cash deposits into my Hang Seng Bank account. Around 3 years ago, Dr Lee asked me to help her to handle the income of the newsstand by allowing the staffs of the newsstand to deposit cash representing the income of the newsstand into my Hang Seng Bank. At the end of the month, the staffs would give me all the pay-in-slips and I would verify the total amount deposited into my Hang Seng Bank account. I would then either write a cheque or withdraw cash and gave to Dr Lee normally at the end of the month but if I was busy, I could do it within the next month. Dr Lee said this will provide a better in-out list for the auditor to follow.

71. The other thing Dr Lee asked for my help is that on a number of occasions over the whole year, she would ask me to help her to deposit around a thousand of HK$100 notes into my bank account then later transfer back to the company account. This is because the bank will charge the account holder HK$250 if more than 300 bank notes are deposited but Hang Seng Bank will not charge my personal account due to the offer made by the Hang Seng Bank to medical doctor of the Hospital Authority.”

53. Neither Dr Lee nor the accountant of HMC has filed any affidavit or given evidence in court, but as referred to above by the Husband, both are said to have written a letter to confirm that he has no interest in HMC, and it would be relevant to set out below their entire contents, starting with Dr Lee’s, which was dated 12^th December 2011(A3/925):

“I am the partner of the (HMC) since 2004.

Dr L (the Husband) deposits the income of the company into his personal account and transfers the same amount of money in a lump sum into the company account in order to make the cash flow of the company account easier to be followed. I am aware of this practice for many years.

To my understanding, Dr L (the Husband) has not received any financial interest from the company.”   

54. The letter from the accountant, a Ms Lau, was dated one day later on 13^th December 2011 and addressed to Dr Lee, reads as follows (A3/926):

“Re : Proof of Dr L (the Husband) not holding financial interest of HMC

I am an accountant of (HMC) and have been preparing its management account since its establishment.

The company has a few divisions, namely medical clinic, physiotherapy centre, medical supply, and newsstand. Each division generates its income but the company only holds the bank accounts in one bank.

In order to make the in-out list clearly shown for each division, Dr L (the Husband) assists HMC in depositing the income of the newsstand business and part of Dr LEE’s clinic income into his personal account and transfers the aggregate amount of money in a lump sum into the company account once every 1 to 2 months in order to make the cash flow of the company account easier to be followed and enjoy the waiver of service fee of depositing $100 bank note into the company bank account. I am aware of this practice for many years.

At the beginning, you and the two partners need to contribute the fund to run the business. They put the money into the company. I recorded all the money into the “Leung (the Husband) Drawings” account in stead of the partners current account. Later, I separate the “Leung Drawings” into three accounts. The meaning of “L Drawings” in the Trail Balance refers to the partnership current account. The heading is for internal easy reference only. The partnership current account is recorded Dr L (the Husband) and/or his mother’s withdrawals and deposits to the company. Mrs L (the mother) is the partner of the company. Dr L (the Husband) helps his mother to run the business. Dr L (the Husband) used the drawings to pay off the creditors and business expenses.

Ever since the establishment of the company, there were no record of drawing by Dr L (the Husband) and/or his mother from the company. And neither was any record showing he has any unpaid liability to the company or the company owes Dr L (the Husband) any money.

To my understanding, Dr L (the Husband) has received no income or benefit from HMC.”  

55. In his 7^th Affirmation (A4/1426) the Husband further elaborated on the ownership of HMC and tried to play down his involvements in the business at p1435:

“16. Dr Lee took over the social enterprise I founded, which was a newsstand employing physically and mentally challenged unfortunate. She later on injected additional fund and started her business as medical clinic.

17. My mother also injected money into the company not only as investor but also be responsible for the newsstand business.

18. The Wife expressed her view of working flexible hour in 2005. Persuaded by my mother, Dr Lee started a division of medical equipment sale to create a career opportunity for the Wife, in her good will. Then from time to time when the Wife was between jobs, she worked for the same division to earn some money. And in 2008, when the Wife’s eldest sister was unemployed, my mother convinced Dr Lee to reinstate the division. But that division never made a balance.

19. Given the intricate background, I had to assist the Wife and her sister on acquiring related skill and knowledge, as both of them are new to this area. And thus some involvement in the daily operation of HMC is understandable…”   

56. He then argued in the same affirmation that to prove that he is indeed the beneficial owner of HMC by using his mother as his trustee, it must fulfil the following criteria:

(a)   that the investing capital was from him rather than from his mother;

(b)   that he can obtain monetary revenue from the company not only as employee but also as shareholder;

(c)   that his mother was directed by him, acted in accordance with his instruction and accustomed to the practice.

57. In the absence of any direct corroborative evidence from the Madam To or Dr Lee, the court can only decide whether objectively the evidence fits better with the Wife’s case or the Husband’s case, on balance of probabilities, and Mr Cheng for the Wife submits that the Husband’s explanations about his involvement in HMC cannot have been the truth for the following reasons.

58. Firstly, he submits, that the Husband’s oral evidence contradicts with his affirmation evidence as detailed in the Wife’s closing submission, of which the more relevant is his reason for his mother’s retirement from HMC in 2011 due to its trading in debt and the need for further capital injection, which was contradicted by the tax returns of HMC (A*3/843-853) showing that its business had been making a profit 3 years in a roll, which may well be correct but in the absence of further financial documents of HMC such as audited accounts or at least profit and loss accounts or balance sheets, that assertion is in my view not conclusive.   

59. Equally contradictory, Mr Cheng submits, is his evidence in his affirmation that the Wife has always known that he has no beneficial interests in HMC but that she is now making this false accusation against him so as to take revenge against him (A4/1440 -1441), and yet in his oral evidence at the trial he claimed that she would repeatedly ask him about details of his interests and ownership in HMC even to the extent of waking him up in the middle of the night with her such interrogations. I agree this may appear contradictory in his evidence, but it does not go to the heart of the issue.

60. There is also vast difference, Mr Cheng submits, in the Husband’s explanation as to the cash deposits of the business’s income when he said in both his said 2^nd Affirmation and his answer to the Wife’s 1^st Questionnaire (A3/951) that it was Dr Lee who asked him to help depositing those HK$100 bank notes into his account which would save HMC from having to pay bank service charges of HK$250 when depositing more than 300 notes in one go, but when confronted under cross-examination as to why HMC would still need to deposit the clinic’s income into his account on occasions when the deposits were less than 300 HK$100 notes, his explanation was that the deposits also included smaller notes such as HK$50 and HK$20, of which Mr Cheng argues as highly artificial.

61. While it is not possible to tell from the bank records (A2/631-637) whether these deposits did indeed include these smaller notes, but if they  were income from the newsstand where purchases would normally be of insignificant amounts, and hence smaller bank notes would be involved as explained by the Husband, but quite a few of the deposits were in fact quite substantial in excess of HK$10,000, which causes the Wife to suspect that these deposits may in fact also include income from the clinic as well, which goes to support a much deeper involvements of the Husband in HMC’s business instead of merely the newsstand.    

62. In any event, Mr Cheng submits that the Husband’s case that he was merely helping out in HMC as a favour to his mother, Dr Lee, the Wife and her elder sister and not because he has real beneficial interests in the business is simply incapable of belief. Given the amount of evidence of his involvements in HMC before the court, and in particular the extents of such involvements, I can see why.

63. Firstly, consider the following timeline in the formation of HMC according to the Business Registration Record of HMC (A2/393-398):

30^th September 2003 : Registration of Capable Minority by the Husband

7^th October 2003 : The Husband was registered as the Owner

6^th November 2003 : Dr Lee and Dr Yen were registered as Partner

18^th March 2004 : Outgoing of the Husband from Partnership

18^th March 2004 : Incoming of the Husband’s Mother into Partnership

19^th March 2004 : Formation of HMC Physiotherapy Centre

14^th April 2004 : Outgoing of Dr Yen from Partnership

14^th April 2004 : Incoming of Dr Yen’s Mother into Partnership

10^th August 2004 : Formation of HMC Medical Centre

24^th May 2011 : Outgoing of the Husband’s Mother from Partnership  

64. It is clear from the record that Dr Lee and Dr Yen joined the Husband to form a partnership within 1 month of the start of the newsstand, and quite obviously not for the purpose of selling newspaper or magazines but for something directly related to their medical profession, i.e. the physiotherapy centre and medical clinic, which were then opened for business respectively on 19^th March and 10^th August 2004.

65. Hence when the Husband said Dr Lee agreed to take over the newsstand from him after he had been offered another 3-year contract to work at Queen Mary Hospital, their decision must have been made before 6^th November 2003 when Dr Lee was registered as a partner in the business, which begs the question of why did the Husband wait for 4 month later until 18^th March 2004 to be de-registered from the business which had obviously by then grown to a lot more than just a newsstand and which he said had nothing to do with him?   

66. His de-registration from the partnership and his replacement by his mother in fact took place just 1 day before the commencement of the physiotherapy centre, which appears suspiciously for the purpose of avoiding the notice of the Hospital Authority as suggested by the Wife, while less than 1 month later on 14^th April 2004 Dr Yen did the same thing with his mother replacing him in the partnership, which would in my view be too much of a co-incidence if it were not for the same reason.

67. Which brings me to the next controversial issue: Was the Husband’s mother a genuine investor in the HMC business as alleged by him, or just a trustee in name for him to avoid the notice of the Hospital Authority as alleged by the Wife?

68. Whether or not Madam To was an investor, the first question must be what was it that she had invested in? While she may have been said to have participated mainly in the newsstand business, according to the Husband’s evidence, she did invest in the clinic and the physiotherapy centre and hence the HMC business, so the next question would be why would she want to invest in what is technically and practically a medical partnership, of which she had absolutely no knowledge or control, instead of in the much more common ones such as the property or stock market, or in some trading or consumers-oriented business that would not be so technically alien to her? There was simply no explanation from the Husband.   

69. Then there is the issue over her financial means to fund that investment. It is not in dispute that she had always been a housewife and relied on her husband who was a retired construction worker at the material time. The Wife’s evidence is that he was a habitual gambler and constantly in debts and hence could not have provided much money to Madam To to enable her to invest on anything.

70. This is of course denied by the Husband, but he was unable to provide a complete picture of his mother’s injection of capital into the business save for a redacted bank record of a withdrawal of HK$170,000 from her Hang Seng Bank account on 18^th March 2005 (A4/1454) which the Husband said was part of her capital injection into HMC. While this may show that Madam To was not without any means as alleged by the Wife, it is far from being conclusive evidence that she did inject that sum of money into HMC either, in particular when it was not even direct evidence from Madam To herself, which brings me to the obvious question of why not?

71. As noted above, at the parties’ custody disputes, Madam To did file a lengthy affirmation (A4/1274) in support of the Husband’s case and actually attended the trial to give evidence as his witness, but there was not one piece of evidence from her as to her alleged investment in HMC which was clear to all the most controversial issue between the parties in their whole litigation, and that her evidence would obvious be crucial if not the key to resolving this issue, it seems therefore incredible that the Husband did not find it necessary to call his mother to give evidence, or at least to arrange for her to write a letter or make a simple statement to confirm that she did invest in HMC if for some reason she was no longer prepared to come to court to help her son again. One just wonders why?

72. The Husband tried to explain away all these at the trial that he thought it was the Wife’s duty to call Madam To to give evidence, but the importance and relevancy of Madam To’s evidence on that issue had in fact been raised and discussed on more than one occasion at the PTR, and it is difficult to accept that he would not have realised that it was for him to call his mother as his witness, unless as suspected by the Wife, it was intentional on his part not to because he knew his mother would not be prepared to lie for him about HMC, or that her evidence would not hold up under close scrutiny in court.

73. Whether that suspicion is valid or not, the evidence that Madam To did give in her earlier and only affirmation (A4/1274) filed in the parties’ children dispute appears to have contradicted the Husband’s own evidence that she had since joining HMC “been actively participated in the newsstand business … attending the Labour Tribunal … cross-checking stock and cash flow … was in charge of all the payments to the newspaper and magazine suppliers … overseeing many of the business administrative works…” referred to above in his 2^nd Affirmation, whereas not a single word of such participations was ever mentioned by Madam To in her said affirmation when she set out in full details of her daily routines during weekdays at that time from 10 am in the morning to 9 pm at night assisting the parties at their home looking after their 2 children and supervising their household chores, in which case how could she find any time to actively participate in those matters of the newsstand business as alleged by the Husband?

74. The fact that Madam To did attend the award ceremony receiving an award on behalf of the company in 2004 or at the Labour Tribunal over a dispute with an employee of the company is neither here nor there, since she was then a registered partner of the business, she must of course deal with these formalities, but they do not necessarily prove her alleged active participations in the business.

75. The evidence before the court in fact shows, and admitted by him, that it was the Husband who had actively participated in the administrative and accounting works of the company, which he said was as a favour to his mother, Dr Lee, the Wife and her sister. Even assuming that his mother was in fact an investor and a partner in the business and that he was merely helping out his mother with her investment, the great depth and extent of his actual involvements in the company, according to the Wife, simply defy common sense and logic in the world of business if he was merely helping out, but were instead what only a boss or at least a partner was entitled to do.

76. While he may argue that some of the administrative works which he had carried out for HMC such as bringing home its daily cash intake every night or painting the clinic in his spare time were merely helping his mother or his friends, never mind the contradiction in his explanation for those cash deposits of HMC into his bank account as pointed out by Mr Cheng above, his much deeper involvements in the management such as the hiring and firing of staff, the marketing works on the internet including the Facebook to promote its business by using the images of his own sons, and in particularly the taking and keeping the accounts and accounting records of HMC in his own computer at home simply go well beyond what an outsider would be allowed to do in any business, especially for a partnership of professionals such as doctors, lawyers and accountants, just to name a few examples, when their accounting records must be the most important documents of their partnership which they would no doubt jealously guard against even their own staff save for the accountant, let alone an outsider such as the Husband, no matter how close he may have been a friend to the other partners, or the son of one of the partners.

77. One needs only to take a look of Exhibit YSYM-10 to the Wife’s 1^st Affidavit of the HMC’s draft account for the financial year of 2006 (A2/436-491) which she retrieved from the Husband’s computer, in which he appeared to be giving instructions and/or asking questions from Dr Lee about various accounting entries, to realise the extraordinary depth and extent he had been involved in not just the general management of the company but more significantly the financial aspects in particularly its accounts, and the important role he seemed to have undertaken in the business, which appears not less than that of a partner or a boss. The fact that the account stated Dr Lee’s drawing for that year at HK$5,414.60, Dr Yen at HK$46,009.00, while the drawing designated to the Husband instead of his mother 2 years after she was said to have taken his place in the partnership at a much higher sum of HK$1,587,303.23 (A2/439) really says it all about his position in HMC.   

78. There can be no dispute that HMC all along had its own accountant who would obviously be responsible for its routine bookkeeping and managing its account, which would then be subject to yearly audition by an auditor, as all registered business do, hence it is simply incredible that the Husband would be requested, as he has alleged, to help out with the accounting works, let alone allowed to keep such detailed records in his own computer of HMC’s income and accounts as evidenced in “R-10” including the charges for each consultation at either the medical clinic or the physiotherapy centre.

79. Another example of his extensive involvements in HMC can be seen from the numerous materials advertising and promoting the various medical products and equipments for sale at HMC also retrieved from his computer (A2/493-511) in which not only was he named as the person to be contacted or in-charge, but that he had also listed both the Wife and the elder son as staff of the clinic which shows the extents he was prepared to go to promote a business which he claims to have no interests at all, while his lame excuse that one of the name cards he had prepared using that of the elder son as a company’s sales representative was just a sample is laughable indeed.   

80. Unlike in the case of his mother, the Husband did as noted above produce what he claimed to be a letter from each of Dr Lee and HMC’s accountant Ms Lau confirming that he has no interests in HMC, but again neither of them had actually provided any evidence either by affidavit or oral testimony, to at least explain why, for example, the Husband’s depositing the cash income of HMC and then writing out a cheque to HMC would “make the cash flow of the company account easier to be followed” as stated in Dr Lee’s letter, or why, when the partners contributed funds into running the business, Ms Lau “recorded all the money into the L (the Husband) account instead of the partners current account”,andforwhat accounting purpose would this serve? Or for that matter, why would the Husband be allowed to do all these if he was not a partner or owner? In the absence of proper evidence directly from either Dr Lee or Ms Lau, of whom at least Dr Lee could have easily filed an affidavit and come to court to verify the situation, as after all, if it is indeed the case that it was she who had asked the Husband to help out in her business, it is only right and obvious for her to return the favour to help him back on what was clearly the most crucial issue in his divorce litigation by verifying that fact. As in the case of the Husband’s mother, one can only wonder why Dr Lee has not done so.

81. On the other hand, all of these would make perfect sense if he was indeed the founding member of the HMC business with the other 2 doctors joining him later as partners, hence initially all the money and capital were paid into the “Leung Drawing” account, his subsequent setting up of various divisions within the company including the provision of medical supply and equipment, of which he has in fact neatly sum it all up in that email of his to the Wife on 15^th April 2011(A2/516) above that what he was doing in the company was for the sake of the family, and that he was expecting its annual return to reach HK$20 million, which only makes sense if he was indeed the managing partner, while his explanation that he was merely telling a “white lie” to the Wife could not have made it any clearer of his desperate attempt to stubbornly and shamelessly cling to his lies and deceits about his true position in HMC.

82. All these also explain why he and Dr Yen later dropped out from the Business Registration as partners and their mother took their place, which was to avoid the notice of the Hospital Authority as he has admitted in so many words in his 1^st Affirmation, but when his mother became de-registered from the Business Registration in May 2011, I believe it was indeed to avoid the Wife’s claims, and while it did take place before she took out the present divorce proceedings as he has taken pain to point out, it cannot be denied that it was in the same month of May 2011 when he was confronted by her about his alleged affair with Dr Lee which led him to move out of their matrimonial home, hence it would have easily occurred to him that divorce might be inevitable and therefore the intention to hide his interests in HMC, as otherwise it would be too much of a co-incidence to me for his mother to suddenly decide to pull out of the business in the same month of the breakdown of parties’ relationship after so many years of allegedly receiving no profit or losing money.

83. There is no question in my mind that the Husband is a highly intelligent person and a very capable litigant who was throughout the trial able to come up with an answer to any question put to him by the Wife and her counsel over any of the many issues before the court, which is not at all surprising given the many clever and skilful ways he had gone about for years setting up and promoting the HMC business as detailed above even to the extent of making obvious misrepresentations about his son’s role in the business, which were clearly designed to avoid, successfully if I may add, the notice of his employer the Hospital Authority, but simply could not hold up in court under close scrutiny, and that having heard and observed him in evidence throughout the trial, I find his evidence that he has no interests whatsoever in HMC and that his participations or involvements in its business were merely to help out his mother or Dr Lee at their request is indeed incapable of belief.   

84. On the other hand, I have no difficulty finding the Wife a truthful witness as to her evidence about she personal first hand knowledge in such details of how the Husband decided to start HMC, how he ran its business, managed its accounts, expended the company, and how she assisted him on various aspects of its business, which her case that he was all along and still is one of the 3 partners, if not the senior partner, of HMC so objectively convincing at the end. I shall now turn to the next issue over the profitability and income of HMC, which is in fact for reasons apparent below more difficult to determine.     

Profitability of HMC

85. Given the Husband’s denial of beneficial interests in HMC throughout the proceedings, there has therefore never been any full or compete disclosure of its financial documents including audited accounts or reports other than some bits and pieces of information produced by him clearly for self-serving purpose, hence Mr Cheng submits that, applying the principles referred to above, adverse inferences should be drawn against the Husband that the profits must be so significant or substantial that he was prepared to make so much effort to conceal his interests in the business and to tell so many lies while under oath about it, and that the court can and should so infer from whatever documents available before it.

86. Firstly, Mr Cheng submits, from HMC’s accounting documents before the court, the Husband had by 31st March 2007 withdrawn a total sum of HK$1,371,445.17 from the business (A2/510), and that was during the first 3 ½ years of the business.

87. Secondly, he submits, from the HMC’s tax returns for 2009/10, 2010/11, and 2011/12, the reported profits were respectively HK$443, 671, HK$741,011 and HK$716,825 (A*3/845,848,852) while the provisional tax for 2009/10 was HK$137,040 (A*3/843), which means that the profit for the previous year of 2008/09 must be at least HK$913,000, hence adding these figures to the Husband’s said drawing of HK$1.3 million for the first 3 ½ years bring HMC’s total profits for the first 10 years to at least HK$4.2 million, of which the Husband of course reported none of it in his Form E.   

88. In addition, Mr Cheng submits that the court should also take into account of the following matters:

89. The Husband confirmed in re-examination that the cash he took home represented the newsstand income. He estimated it to be HK$2,000 – 3,000 a day, around HK$100,000 per month. He agreed that it was the gross profit of the newsstand only. As such, the gross profit would be more than HK$1 million per year;

90. The above is corroborated by the cash deposits into his bank account, and working from the Husband’s 7th Affirmation, the total of such deposits amounted to HK$1,795,754 fro the 12 months between October 2010 and September 2011 [A4/1467]. The magnitude of these sums is consistent with his oral evidence.  

91. Therefore, Mr Cheng submits, as a conservative estimate, it is not unreasonable for the court to infer that the Husband would be able to generate at least $1 million per year from HMC, and that insofar as the Husband may argue that this cannot be correct, the court should draw adverse inference against him for his failure to disclose all relevant information about HMC, which is beneficially owned by him.

92. In the absence of full disclosure of all the relevant financial information of HMC, the court will never be able to ascertain its profits or income, nor the true value of the Husband’s interests in that business or the true extent of his income therefrom over the years. How then is the court going to conduct the section 7 exercise and to give effect to the principles expounded by LKW v DD above?

93. Mr Cheng submits that insofar as the court has been prevented in measuring possible awards to the Wife against the principle of fairness, the sole responsibility for this dilemma thereby encountered is the Husband’s, and in such circumstances it is better, he submits, that any unfairness occasioned by the court’s necessarily imprecise assessment of the extent of the parties’ financial resources should fall on the defaulting party rather than the innocent party. Such approach is wholly supported by authorities, starting with the classic passage in J-P C v J-A F supra, when Sach J said at p227:

“In cases of this kind, where the duty of disclosure comes to lie on a husband; where a husband has – and his wife has not – detailed knowledge of his complex affairs; where a husband is fully capable of explaining and has had opportunity to explain, those affairs, and where he seeks to minimize the wife’s claim, that husband can hardly complain if, when he leaves gaps in the court’s knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap in such a state that two alternative inferences may be drawn, the court will normally draw the less favourable inference – especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative.”

94. In F v F [1994] 1 FLR 359, where the wife petitioned for divorce following a 5-year marriage, but before her application for ancillary relief was heard, the husband was declared bankrupt. The wife then sought an annulment of the bankruptcy order on the basis that the husband had presented his financial position in a fraudulent manner and had deliberately failed to disclose assets including those located abroad. In holding that the husband’s explanation of his financial position was fundamentally implausible and that the bankruptcy order was an abuse of the process of bankruptcy and must be set aside, Thorpe J (as he then was) ordered him to pay a lump sum of £150,000 to the wife, and explained at 367C:

“So if he has conducted his affairs throughout the marriage in such a covert fashion as to relieve him of the ordinary obligations of citizenship to support the State through tax contribution, if he has conducted these proceedings in a vain endeavour to maintain that camouflage, if in consequence the obscurity of my final vision results in an order that is unfair to him it is better that than that I should be drawn into making an order that is unfair to the wife. If at the end of this case he feels that the lump sum that I order is unfair in reflection of his present retrenchment then he should remember that he has brought that consequence upon himself by the fashion in which he has chosen to arrange his affairs over the course of the last decade, coupled with the fashion in which he has chosen to conduct these proceedings.”

95. These principles have been endorsed by the Court of Appeal in Baker v Baker supra, when Butler-Sloss LJ (as she then was) said at p835D:

“Mr Posnansky pointed to an utterly false case and asked us to consider why the husband was lying and what did he have to hide. If the cupboard was bare, it was in his interests to open it and display its meagre contents. But on the contrary, the husband, despite his protestations to the contrary, continued to live the life of an affluent man. I agree with the submissions from Mr Ponnansky that if a court finds that the husband has lied about his means, lied about other material issues, withheld documents, and failed to give full and frank disclosure, it is open to the court to find that beneath the false presentation, and the reasons for it, are undisclosed assets. Willmer LJ said in Payne v Payne [1968] 1 WLR 390, at 396:

‘In such circumstances it is well established that the court is entitled to draw inferences adverse to a husband who has not made a proper disclosure of his available resources.’

The judge carefully considered the relevant criteria set out in s 25(2) of the Matrimonial Causes Act 1973, including the shortness of the marriage. In my judgment, there was ample evidence upon which the judge was entitled to draw inferences adverse to the husband and to make findings that there were assets available to meet the order he made. To accept Mr Holman’s alternative proposition that, unless the assets can be shown positively to be available an order cannot be made, flies in the face of the principles enunciated in the judgment of Sach J and would send a clear message to spouses unwilling to make full and frank disclosure. It would indeed, as Mr Posnansky said, be a cheat’s charter...”  

96. In the more recent case of Al-Khatib v Masry [2002] 1 FLR 1053, where it was held that there was a compelling case for drawing adverse inference against the husband in the light of his utterly misrepresentative and untruthful disclosure of his means even at trial; the very substantial scale of his concealment and deceit; the court’s inability, in the absence of corroboration, to accept as the truth anything that the husband said unless it was either an admission or otherwise contrary to his interests; and his evident determination that the wife should receive no ancillary relief beyond that embodied in an earlier interim order, the court would draw the inference that the husband had sufficient assets to satisfy the wife’s claim, but it would only be entitled to do so from the evidence before the court, as Mumby J said at para89:

“I accept, of course, that part of Mr Deacon’s submission, based on the passage from Butler-Sloss LJ’s judgment (in Baker v Baker above), to the effect that I can properly draw adverse inferences only if there is some proper basis for them in findings of fact correctly arrived at in the light of admissible evidence. I reject, however, Mr Deacon’s further submission that, even if there is proven non-disclosure, inferences as to the existence of ‘must be based on credible evidence as to the existence of such assets.’ That submission, if I have correctly understood it, seems to be in reality but a repetition of the submission from Mr Holman (as he then was) which Butler-Sloss LJ was at such pains to reject. Indeed, put in these terms Mr Deacon’s submission seems to me, with all due respect to him, to fly in the face of the Lady Justice’s acceptance in the passage quoted that ‘it is open to the court to find that beneath the false presentation, and the reasons for it, are undisclosed assets’.”

97. The Husband’s undisclosed interests in HMC of course cannot compared with those mentioned above in terms of size and value, but the extent of the measures taken by him to conceal it from the Wife and the many lies told by him in court is in my view no less deliberate or comprehensive, and deserves as much contempt and adverse inferences to be drawn against him by this court. 

98. Accordingly and in the circumstances, while it is not possible to ascertain the Husband’s current income from HMC, I have no doubt that it would be substantial, and given the extents he had tried to conceal his interests in HMC and his forecast of its profitability referred to above, there is every good reason to believe that its business is doing well and that his share of its profits would be at least equivalent to if not more than his drawings of HK$1.3 million back in 2006, hence it would be fair and reasonable to conclude that he would be receiving at least HK$100,000 per month from HMC.    

Ownership of Taxi

99. The Wife’s evidence that the Husband owns a taxi is set out in her 2^nd Affidavit (A2/639) where she said at §9:

“ … On a day in about March 2011, the Respondent returned home with a small stack of magazines. While he was in a shower, I was browsing through the magazines, in between laid a taxi purchase agreement dated 26th March 2011 signed by the 1st Respondent as the purchaser. I immediately took some photos of it with my mobile phone; copy of which are now exhibited hereto marked “YSYM2-2” … the photos show the 1st respondent’s signature, the purchase price at HK$4,930,000; a deposit of HK$20,000 paid upfront on 26th March 2011, a further deposit HK$130,000 due on 28th March 2011, another sum of HK$1,230,000 due on 4th April 2011 and the balance of HK$3,550,000 be paid when the finance loan was approved. I also note from his Hang Seng Bank statement for the month of March 2011 that on 26th March 2011, there was a ATM withdrawal of HK$20,000 (A1/205) and on 28th March 2011, there was a cheque withdrawal of HK$130,000 (A1/206). The above entries tally with the payment terms of the taxi agreement.” 

100. The Husband does not dispute he did sign the agreement for the purchase of the taxi, but claims that he was merely doing it for his elder brother and Dr Lee who had long discussed about investing in a taxi, and that when the opportunity arose, his brother asked him to sign the purchase agreement as he was busy at that time, as he explained in his 2^nd Affirmation (A2/856, 894) at §77:

“For Paragraph 9 of her 2nd affidavit, she mentioned a taxi. I was frustrated she took photo over that voided bridging contract. My brother and Dr Lee had discussed buying a taxi for investment in mid March 2011 but the price was high. On 26th Match 2011, my brother called me and asked me to help him to sign a contract of purchasing a taxi as he was busy. He asked me to help him to pay a cash of HK$20,000.00 and issued a cheque of HK$130,000.00 and he would pay me back later. My brother needs time to check when did he repay the sum of HK$150,000.00 to me. As one can see, there was no withdrawal of HK$1,230,000.00 from my bank account. I asked my brother what happened to the taxi. He told me that he later used a company called Glory Faith Investment Ltd which is owned by my brother’s wife So YW and Dr Lee to hold the taxi. My brother has given me a statement showing that the taxi is owned by Glory Faith Investment Ltd. There is now produced and shown to me and marked “LHB2-7” a copy of the statement and the relevant company search record of this Glory Faith Investment Ltd. The temporary contract was voided after he executed the taxi purchase with the taxi dealer company. I believe the Petitioner took photo without my signature due to avoidance of the word “VOID”. I also doubt the ill intention of taking photo over this document. I have no interest in this taxi. How would that photo serve any constructive mean to a marriage? Furthermore, this void contract was dumped into the rubbish bin. I do not know the reason why the Petitioner searched over the trash…”

101. Exhibit “LHB2-7” (A2/927-936) indeed shows Madam So and Dr Lee were each allotted 1 share in Glory Faith Investment Ltd and appointed directors of the company on 7^th April 2011, and that Glory Faith Investment Ltd did obtain loan of about HK$3.5 million from China Construction Bank (Asia) Corporation Ltd presumably for the balance of the purchase price of the taxi, with a monthly instalment repayment at HK$14,878 up to April 2036. However, as in the case of his mother’s alleged interests in HMC, there is no direct evidence from either his brother or Dr Lee by way of affidavit or oral testimony upon which they could be cross-examined in court, but just some declaration allegedly of Dr Lee exhibited to the Husband’s affirmation (A*3/987) and some bank statements showing certain transactions said to be payments from Dr Lee to the wife of the Husband’s brother for the taxi but which Mr Cheng submits provide no proof at all. 

102. In fact Mr Cheng submits that the Husband’s evidence that he was merely an agent in the purchase is on the whole incredible and must be rejected for the following reasons, and I can see why:

(a)   While his brother might have been too busy to sign the contract on 26^th March 2011 as alleged by him, he offered no evidence as to why either Madam So or Dr Lee could not do so instead, when he himself was obviously as busy if not more with his job in a public hospital, nor did he elaborate what was it that his brother so busy with that he could not tend to the matter with the taxi on that day, or why it could not wait another day. Or for that matter, if I may add, why his brother would want to invest with Dr Lee instead of with him or their mother whom he has always claimed to be looking for investment opportunity? There is not one word of evidence from the Husband, and as such his explanation as it stands does appear implausible;

(b)   It is implausible that the contract he signed had the word ‘VOID’ chopped on its back as alleged, as common sense dictates that it should have been chopped all over the place in particularly on the front page to achieve the purpose of cancellation, or better still as submitted by Mr Cheng to just shred the whole contract. His explanation is so illogical that it is inherently impossible;

(c)    That he was just making up his story along the way about his brother repaying him of his initial payments of HK$150,000, which he initially said in his 2^nd Affirmation that it should be by cheque on a later date (A3/895), but in his 7^th Affirmation he appeared to have changed his case by claiming that he was repaid HK$130,000 by HMC instead, and later still when he stated that it was Dr Lee who deposited HK$100,000 in cash to him on 28^th March 2011 to enable him to make the 2^nd payment (A4/1464), which are simply inconsistent and confusing;

(d)   His alleged proof of payments by Dr Lee and Madam So provides no assistance to his case in that Dr Lee’s declaration did not specify the purpose of her payment of HK$500,000 to Madam So, while the debit of HK$1,184,597 from Madam So’s account on 7^th April 2011 (A*3/990) does not correspond to the contract in terms of time of payment of 4^th April 2011, nor the amount of HK$1,330,000 (A*2/991).   

103. Mr Cheng therefore submits that the Wife’s evidence should be preferred in that the Husband always intended to invest in a taxi and that Glory Faith was again another façade put up by him to conceal his beneficial ownership, and this time it was from the Wife as their marital relationship was breaking down and that it was clear to him that divorce was looming.

104. In reply the Husband argues that if it was indeed his attempt to conceal his ownership in the taxi from the Wife, it would not make sense for him to bring the contract home in the first place, nor when he made the deposit payments from his own bank account which would clearly be easily traceable to him, instead of using an undisclosed account or even in cash which would make tracing much more difficult if not impossible. He submits that the clear evidence before the court is that the taxi is owned by Glory Faith which is in turn owned by his brother and Dr Lee, which has nothing to do with him, and that the Wife simply made use of the voided contract to try to pin the taxi on him in order to boast up her claims for a bigger share of their marital assets.

105. While there seems to be some merits in this argument of the Husband, given the extent he was prepared to lie about his interests in HMC and the various suspicious circumstances surrounding the purchase of the taxi, it is difficult to simply brush all of them aside and just accept his explanation, as it is entirely possible that he was just being careless on that one occasion when he brought the contract home.    

106. As in his case with HMC, the Husband could have easily arranged for his brother and Dr Lee to come to court to confirm his case, or at least to file an affidavit to that effect with direct documentary evidence of their payments for the purchase of the taxi, which is again the least they should do to return the favour to the Husband if indeed he was helping them out when he signed that contract for the taxi at their request. In the absence of such evidence or any explanation of their absence, the latter of which again echoes the Wife’s suspicion that either they were unwilling to lie under oath for the Husband, or that he was afraid that their evidence would be destroyed under cross-examination in court. As such and as the evidence stand before the court, I find the Wife’s case on balance of probability more convincing that indeed the Husband does have an interest in the taxi.

107. I am however unable to find without reservation that he is the sole owner, and I wish to stress that even if I did, he only has himself to blame for all the lies and deceits he has spun over HMC, but given the factual involvements of Dr Lee and Madam So in Glory Faith, I cannot rule out the possibility that it was instead his joint investment with either or both Dr Lee and/or his brother.

108. Mr Cheng has put the market value of the taxi at about HK$6.8 million which was not disputed by the Husband at the trial, which would give a net equity at HK$3.5 million after deducting for the outstanding charge under the hire purchase agreement, which would put the Husband’s share at either ½ or 1/3 thereof, i.e. HK$1.2 – 1.75 million, with possibly some income albeit insignificant taking into account of the monthly loan instalment repayment.

Former Matrimonial Home

109. There is no dispute that the former matrimonial home is jointly owned by the parties, and the only issue about it is its present value, of which the Wife’s appointed surveyor has put at HK$9.7 million, thus a net equity of HK$5.2 million after setting off the outstanding mortgage of HK$4.5 million. The surveyor was appointed by the Wife after the parties were unable to agree on the valuation and when the Husband failed to respond to her invitation to select the surveyor pursuant to the court’s direction. That report was exhibited to the Wife’s 12^th Affirmation of 7^th October 2013 (A*3/943 – 964).

110. The Husband basically does not challenge that valuation under the present market situation, but argues that there is a possibility of the entire building being bought out for redevelopment and hence the former matrimonial home could be worth a lot more at something like HK$14 million in future, as evidenced by some leaflet or flyer making that offer which he claimed to have received on the street in its neighbourhood shortly before the trial with the said offer.

111. While the surveyor who attended court to give evidence for the Wife did acknowledge the possibility of redevelopment to the former matrimonial home, it is his evidence that it was merely some talks at very peripheral level and that as far as he was aware, it remains just some future prospect which may take years to realise, and that there is simply no proper basis behind that figure mentioned in the flyer at the present situation. As such and for the present purpose, I accept the Wife’s valuation at HK$9.7 million, thus giving the property a net equity of HK$5.2 million.  

The Husband’s Stock Portfolio

112. The Husband has disclosed a stock portfolio in his Form E (A*2/313) then estimated at about HK$1.04 million in late May 2013. The Wife submits that its value should be updated given the rise in the stock market since to about HK$1.745 million at around the time of the trial as detailed in paragraph 81 of Mr Cheng’s closing submission, of which there does not appear any serious dispute from the Husband. I accept his stock portfolio should be valued at HK$1.745 million as at the time of the trial.   

The Parties’ Alleged Debts

113. Both parties have taken issue with the various loans disclosed in each other’s Form E which would otherwise be taken into account and set against their assets, with the most significant one over the Husband’s alleged loans of (i) HK$500,000 from his mother; (ii) HK$310,000 from his friend a Ms Li; and (iii) HK$500,000 from Dr Lee, totalling more than HK$1.3 million, the evidence of which I shall next consider one by one, but which must inevitably be set against his true financial resources when it comes to the reason or purpose of each loan.  

114. The Mother claimed that she lent HK$548,000 to the Husband for his purchase of the former matrimonial home (A4/1278), which was also the Husband’s case when he answered the Wife’s 1^st Questionnaire (A3/946-947), but Mr Cheng argues that he later changed his evidence at trial when he said he only spent HK$300,000 on his share of the down payment while the rest were spent elsewhere on the family. 

115. Perhaps more controversial is the same issue as before: the mother’s ability to lend him such large sum of money and for so long without repayment. There is no direct documentary transfer of the said sum evidencing the alleged loan, and the Husband’s explanation is that his mother had placed her savings with him for investment in foreign currencies, and when he asked for assistance for paying for the former matrimonial home, his mother agreed that he could liquidate her investment for that purpose, which of course prompt the Wife to suspect that it was in fact his own investment which explains why he has never made any repayment or any part thereof to his mother, and that even if it was indeed money from his mother, it was either a gift or just a soft loan.   

116. In reply the Husband argues that if it was his own money, it would have put his total savings in his bank account at more than HK$1 millions, which would have made it unnecessary for the Wife to borrow HK$500,000 from her elder sister for the balance of the down payment for which they were required to pay interest at 8% per annum.

117. The Wife’s evidence is that she asked her sister for the loan because she was told by the Husband that he needed the rest of his savings for other important purposes relating to his business and had nothing to do with his mother’s alleged loan. Again, in the absence of direct evidence from his mother, it is not possible just on the Husband’s words to ascertain whether the money did come from her, but the fact that no repayment or part thereof or even by instalments to his mother all these years notwithstanding his good earnings just from his regular job, and never mind from HMC, certainly does not help his case, and I agree with Mr Cheng that the down payment likely came from his own money held by his mother on his behalf, and that even if it was indeed a loan from his mother, it should be regarded as a soft loan repayable only at his convenience, as the Husband appears to have invited the court to do so in his closing submission.

118. As for the alleged loan of HK$310,000 from Ms Li, Mr Cheng submits that her bank statements produced by the Husband (A*2/445-452) as evidence of such loan in fact have no probative value at all, as they do not even correspond to the figures stated by the Husband in his Form E, and that even assuming Ms Li did withdraw those sums from her account, there is no evidence to suggest that they were actually given to the Husband. Given Ms Li’s account was with HSBC, Mr Cheng submits that it was unnecessary for her to take out those cash for the Husband as she could have simply electronically transferred the money into his HSBC account.

119. Furthermore, Mr Cheng argues that since Ms Li was according to the Husband’s own evidence only a classmate in a mediation course some years ago, it is difficult to understand why she would be willing to lend him so much money, hence the court should reject his case that he owes her this loan as improbable.

120. The Husband in reply argues that first and foremost there is a loan agreement signed by Ms Li as indisputable evidence which the court should not doubt as there is no reason why she as a mere acquaintance would be willing to lie for him.

121. Secondly, he points out that it is factually wrong for Mr Cheng to assert that Ms Li could have easily transferred money from her HSBC account to his in the same bank, as his account was with Heng Seng Bank and not with HSBC.

122. The so-called loan agreement (A*2/445) is in fact titled as loan memorandum dated 20^th May 2013 and retrospectively confirmed an outstanding loan of HK$300,000 then due from the Husband which was to be repaid in the total sum of HK$305,000 by 31^st December 2013. It ended with the signatures allegedly of Ms Li and the Husband.

123. The Husband never called Ms Li to give evidence in respect of the loan, but instead produced some redacted bank statements (A*2/446-452) allegedly of Ms Li purportedly as proof of various payments withdrawn from her HSBC account to make up that loan, which were identified by him as the following sums:

124. The problem with this piece of evidence is that, firstly, these sums clearly add up to well exceed the alleged loan of HK$310,000 by as much as 5 times, and as pointed out by Mr Cheng, there is no other evidence that they had indeed been given to the Husband, nor any evidence of any subsequent repayment by him during that period to reduce the total outstanding amount down to its present level. If he did, as submitted by Mr Chen, they simply do not correspond with those figures as stated in his Form E.

125. Furthermore, the withdrawals of those 3 sums of AUD suspiciously resemble the normal monthly renewal or rotation of fixed deposit in foreign currencies given the similar timing and amount on all three occasions with earned interests added rather than 3 separate loans in similar amount and borrowed more or less in 3 consecutive months which seems to me just too much of a co-incidence to be true.

126. Above all, an examination of the Husband’s own bank records reveals that at the time when these loans were allegedly borrowed from Ms Li, his bank balances appeared quite significantly liquid. For examples, his Standard Chartered Account (A*2/378-405) shows a relatively healthy net balance of HK$327,838 in May 2012, HK$338,750 in June 2012, HK$249,434 in July 2012, and HK$260,111 in August 2012 when he allegedly had to borrow those large loans from Ms Li.

127. Even more amazing is when he was said to have borrowed a much smaller sum of HK$23,500 on 21^st March 2013, he had in fact more than HK$1.1 million in that Standard Chartered account (A*2/378-380), and that the same statement also shows even much higher net balance for the previous 3 months at HK$2.26 million in January, HK$2.53 million in February, and HK$2.21 million in March 2012, and that is even before one were to look into the balance of his other bank accounts, which just prompts the obvious question of why and for what purpose would he still need to borrow such a small loan of HK$23,500 under the circumstances? I am unable to think of any valid or legitimate answer.

128. The Husband tried to brush aside all these flaws and deficiencies in his case by asking the rhetoric question that if Ms Li had not lent him these loans, why would she be willing to lie for him in the said loan memorandum? The short answer to that is that there is no evidence, apart from his bare assertion, that it was Ms Li’s signature in that document. Like all his other allegations involving third parties, none of them have filed any affidavit in these proceedings to corroborate his case, let alone to come to court to be cross-examined under oath. As such and for all the reasons referred to above, I am not convinced that the Husband owns Ms Li any loan as alleged.    

129. As for the alleged loan of HK$500,000 from Dr Lee, Mr Cheng submits that the Husband’s evidence is even scantier in the absence of any bank records or statements except again a loan memorandum (A*2/453) allegedly acknowledged by Dr Lee, again retrospectively and starting with the following words: “This memorandum is written to comply with his submission of the Form E”, which gives the impression that it was made for his own purpose rather than to acknowledge the loan between them, and that given the closeness between the 2 of them, Mr Cheng argues that the court should conclude that the alleged loan was just made up to create hurdles for the Wife’s ancillary relief application.

130. The Husband argues that it is not true that there is no other evidence of this loan as there were clearly multiple deposits into his Standard Chartered Bank account which made up the said loan of HK$500,000 which even if true do not prove they did come from Dr Lee, and more importantly it prompts the same obvious question of why would he need to borrow so much money from her?

131. The answer is not clear from his evidence, while his closing submission offers no assistance either, except his reference to having incurred HK$214,000 in legal costs for defending the criminal charge for allegedly assaulting the Wife in that incident after their separation, which if true still does not explain why he needed to borrow more than twice that amount, or why he needed to borrow at all in the first place given his income and other financial resources.

132. I agree with Mr Cheng that the Husband’s evidence about this loan is similarly suspicious and ultimately unsatisfactory, and given my findings about his interests in HMC in which Dr Lee is a partner and that even if she is not his mistress as suspected by the Wife, as in the case of his other alleged loans, I am not convinced that he owes Dr Lee any loan, let alone at that amount.   

133. I shall now come to the Wife’s alleged loans made up of (i) HK$193,000 being the remaining balance of the original loan of HK$500,000 from her elder sister Madam Yeung; (ii) HK$100,000 from friend Ms Leung; (iii) HK$300,000 from her said elder sister Madam Yeung for her legal costs in these proceedings, making a total amount of HK$593,000.

134. The Husband does not seem to dispute the validity or authenticity of the loans from the elder sister Madam Yeung originally obtained for the down payment of the former matrimonial home and repayable by monthly instalment of HK$10,000 which he said should have been paid up by now but for what he believes to be the Wife’s extravagant lifestyle and excessive spending which also led to the 2 other loans, such as her holiday in Australia less than 4 months after these loans, as well as regular expensive purchases on clothing and glooming averaging more than HK$17,000 per month as evidenced by her credit cards statements (A21/137-197).

135. While it is in my view certainly debatable whether such spending is excessive for the wife of a surgeon who is herself also a professional in the financial field with a combined undisputed income in excess of HK$200,000 per month, there is no question that the bulk of these loans were for her legal costs as she has claimed, and given the complexity of the case, the length of the trial and the extra expenses for instructing a counsel, I do not find the Husband’s criticism as to either the necessity of these loans or their quantum reasonable or justified.

136. The same can be said about the loan of HK$100,000 from Ms Leung which the Wife says also for her legal costs, and while the Husband doubts that Ms Leung, whom he believes makes only HK$30,000 per month, could afford to lend that kind of money to the Wife, given the amount which is really insignificant compared with the assets involved in this case, and with the Wife’s ongoing substantial legal costs, I do not agree that there is anything suspicious about this loan, and accept that it is genuinely part of her liabilities.  

Husband’s Costs Liability from Criminal Trial

137. The Husband claims to have spent HK$214,000 for defending the assault charge brought against him in that incident in September 2011 which should be added back to his liabilities in determining the marital assets.

138. While there does not appear to be any serious dispute from the Wife as to the amount or the purpose of that spending, if that is something he had to borrow, it would certainly form part of his current liability but that does not seem to be his case, otherwise I fail to see why it should not be treated as part of his expenditure already paid for, unless it is his argument that he was framed by her but there is simply no evidence to that effect, nor was it raised at the trial.

139. There is probably no dispute that it was the Wife who called the police and reported the assault, but it was the police who decided to prosecute him, and in the absence of any evidence that he was framed by her, I do not see why this sum, which I understand to have already been paid off, should be added back to his liability.     

The Wife’s Alleged Undisclosed Assets

140. The Husband believes that the Wife actually earned a much higher income than disclosed in her 2 Form E, ranging from HK$17,000 to $60,000 more per month, and since the family expenses had mostly been met by his income, hence she should be able to accumulate a sizable sum of at least HK$300,000 even if she were to save up HK$5,000 per month.

141. It seems that the Husband mounted his claim on the basis of 2 bank transfers totalling HK$85,000 in July 2009 from her HSBC account (A3/822), of which the Wife explained under re-examination that it was just a revolving credit line obtained from HSBC during a promotion which she later repaid and has since never used again. I find her explanation convincing and that there is nothing suspicious about that transaction. 

142. It is however noted that the Husband has made some references in his closing submission to certain tax rebate appeared in her credit card which she again satisfactorily explained in her evidence that it was for certain purchases that she made during one of her trips to UK, of which I fail to see any relevancy to her income or savings.   

143. In his closing submission the Husband also raised the point that he could not find any record in her disclosed credit cards of how she paid for her air fares, hotel and other expenditure during her overseas trips, and hence his suspicion that they must have been paid from some undisclosed account of hers. However this issue was never raised at the trial, nor was she cross-examined about it in court, while an examination of her disclosed bank statements and credit card records did reveal some of those spending. In the circumstances I am unable to find any proper basis or justification in the Husband’s suspicion that the Wife has undisclosed assets. 

The Total Assets

144. Accordingly the marital assets can be summarised as follows:

145. As stated above the total valuation does not include the Husband’s interests in HMC due to deliberate default on his part to provide its necessary financial information, but given that the company is not just service-oriented but also sells medical products and hence not without assets, and taking into account of his own forecast of its annual return of HK$20 million in that infamous email, white lie or not, the value of his interests therein cannot be said to be insubstantial, and as noted above any outcome of the court’s decision which may turn out to be unfair to him, he has only himself to blame.

146. Accordingly and in the circumstances, I shall now proceed to the next step to consider the parties’ earnings, starting with those of the Wife which is comparatively more straightforward.

The Wife’s Earnings

147. The Wife used to earn HK$45,000 per month in basic salary at TLB, an insurance company, but the Husband had disputed that she had understated her actual income, of which she subsequently clarified that at the time when she filed her Form E, she was not aware of the exact amount of the bonus she was to receive, but which she later confirmed would bring her average income HK$57,000 per month. In any event as submitted by Mr Cheng, this is no longer a weighty factor as she has since November 2013 started her present job at another insurance company earning almost twice as much at HK$99,000 per month in basic salary plus bonus which she says is too early to predict in her case, but it would be fair to assess her earnings at more than HK$100,000 per month taking into account of possible bonus that may come with this new job.

The Husband’s Earnings

148. Similarly there is nothing controversial about the Husband’s present job as an Associate Consultant Orthopaedic Surgeon at Queen Mary Hospital or his salary from the Hospital Authority at HK$137,422 per month. It is of course his earnings from HMC that is as already noted above at the heart of the dispute, and for the reasons already articulated above I have broadly assess his additional monthly earnings from HMC at not less than HK$100,000 per month, which would bring his total income to at least HK$240,000 per month, and this is without taking into account of any income albeit insubstantial from the taxi.   

The Wife’s Needs

149. The Wife’s needs which must necessarily include those of the 2 children are set out in her 2^nd Form E (A*1/116, 130 – 132) give a total sum of some HK$125,000 per month, comprising of HK$63,850 for general expenses but of which the Husband has been meeting directly the mortgage payment, utilities and management fees, leaving actually only about HK$23,000 out of her pocket for mainly food and other household expenses as well as for 2 domestic helpers, HK$27,000 for her personal expenses, and HK$35,000 for the children’s expenses, which have in fact gone up somewhat when she updated them at the trial, but which the Husband argues as exaggerated, unreasonable or unnecessary with many of the items stated either for herself or the children.

150. Given the Wife’s present income and her claims for transfer of the former matrimonial home and a lump sum as a clean break with the Husband, the main issue taken by the Husband is really over what she claims to be the children’s needs at just over HK$80,000 per month including 2/3 of the household expenses at HK$42,566, and HK$37,940 for their personal expenses.

151. In addition the Wife also seeks a further weekly sum of HK$6,000 for the children’s psychological counselling made necessary as a result of the persistent parental conflicts over them the past several years, as evidenced by the various Social Investigation Reports submitted to court in the earlier custody proceedings.

152. The Wife accordingly submits that there are ample basis to order the Husband to pay HK$40,000 per month for the children’s maintenance based on their actual needs and on equal responsibility of the parties.

153. As noted above the Husband takes issue with many of these expenses such as the household expenses of HK$15,000 which he argues the earlier figure of HK$10,500 appears more accurate based on the receipts produced by the Wife, while her claim of HK$8,040 for their private tuition fees is not all supported by receipts and that he finds a lesser sum of HK$6,000 more reasonable.

154. As for the rest of the children’s expenses such as transportation, extra-curricular activities, clothing and holidays, the Husband also finds them excessive, and upon what he claims to be proper downward adjustment by about HK$20,000 in total as set out in his closing submission, he puts their monthly expenses at HK$60,000, and given his own expenses incurred on the children during his access to them during weekends and major school holidays, as well as his share of their accommodation expenses either by way of the mortgage payments of the former matrimonial home or for their rental expenses, he submits that he is already spending about HK$28,928 (paragraph 282 of his closing submission) on the children, and on the basis of the Wife’s proposed equal responsibility, he should therefore pay only HK$16,102 per month to the Wife for the children’s maintenance which would incidentally bring his total share of their expenses to just over HK$45,000.   

155. Having considered carefully the list of the Wife’s stated expenses including those of the children, and taking a somewhat broad brush approach given that the children are growing up quick with obviously more frequent changes to their needs, I agree that it would not be practical, nor would it be reasonable, for the Wife to produce documentary evidence for each and every item of those expenses, in particularly for the children’ private tuition charges and extra-curricular activities, and given the background and standard of living of the family as well as their expectation of how their children should be raised in particular as to their education, and while I agree that she may no longer be able to justify having 2 helpers with the children now older and attending whole day school, in general I do not share the Husband’s criticism that the Wife has been extravagant either with some of her personal spending or of the children, especially when there are clearly more than enough income jointly from the parties to meet these needs.

The Husband’s Needs

156. The Husband has put his total needs and expenses at more than HK$350,000 per month which is in fact well beyond his disclosed income from the Housing Authority and which he explained the existence of his various alleged loans, but given my findings above of both his other resources and the said loans, his claim to have to make those loans repayments can no longer stand and should be removed from his monthly expenditure, thereby substantially cutting down on his monthly expenditure and putting his other expenses well within his total means as I have found above.

157. The Wife suspects that in fact the Husband has been cohabiting with Dr Lee in some expensive apartment in Beacon Hill instead of at his parents’ smaller flat at Shaukiwan, and while her evidence was based mainly on the children’s words after having spent time there with their father during his access, which is both hearsay and obviously not wholly reliable given their age, but given the fact that the Husband never disputed that place but merely claimed that it belongs to a friend, which when  taken into consideration with all the other evidence about his relationship with Dr Lee and the many lies that he had already told in court, I cannot say that the Wife’s suspicion is wholly without basis or entirely rule out that possibility, and if that is indeed the case, it would then be fair to say that his household expenses, whatever they may be, would be shared with and/or met by Dr Lee as well.   

Duration of Marriage

158. While the parties may have registered their marriage in 2006 and hence it appears to have lasted only 6 years or even less when the Husband first withdrew from cohabitation in May 2011, Mr Cheng for the Wife submits that their pre-marital cohabitation from 2001 up to the time of the registration of their marriage should also be taken into account as one of the material considerations under section 7 of MPPO, as clarified by the Court of Final Appeal in WLK v TMC [2010] 13 HKCFAR 618 when Riberio PJ stated as follows:

“97. … Pre-marital cohabitation is clearly capable of coming within section 7 as a species of “conduct” or as a fact to be taken into account as a relevant part of “all the circumstances”. But, as pointed out by Hartmann J (as he then was) in F v F [2003] 1 HKLRD 836 at §117, the fact of cohabitation per se is not sufficient. It is the nature of the cohabitation which dictates whether it should be taken into account in the exercise of the court’s discretion under section 7. Thus in F v F, cohabitation on the parties’ express understanding that it was a trial period made it irrelevant.

98. Pre-marital cohabitation which is taken into account tends to involve the parties living together in circumstances which approximate to cohabitation as a married couple. Thus in GW v RW (Financial Provision : Departure from Equality) [2003] 2 FLR 108 at §33, Mr Nicholas Mostyn QC, as a Deputy High Court Judge, agreed with Hartmann J’s approach and stated:

“ … in my judgment where a relationship moves seamlessly from cohabitation to marriage without any major alteration in the way the couple live, it is unreal and artificial to treat the period differently.”

  99. And, in CO v CO (Ancillary Relief : Pre-Marriage Cohabitation) [2004] 1 FLR 1095 §44, Coleridge J stated:

“Committed, settled relationship which often endure for years in the context of cohabitation (often but not always with children) outside marriage must, I think, be regarded as every bit as valid as those where parties have made the same degree of commitment but recored it publicly by civil registration, ie by marriage.”

100. In contrast, in H v H (Financial Provision : Short Marriage) 919810 2 FLR 392 at 399, Balcombe J considered the parties’ pre-marital relationship irrelevant:

“To consider it as equivalent to a true period of marriage would be cynical in the extreme. It lacked any semblance of permanence; there were no children, and on the several occasions when they separated both considered themselves free to take another partner.”

159. Here the parties commenced cohabitation in 2001, regarded themselves as married couple and conducted themselves accordingly as amply demonstrated by the evidence before the court referred to above,  which continued seamlessly in one household and family into 2006 when they decided to registered their marriage after the Wife became pregnant with their elder child and to purchase the same flat which they were then occupying as their matrimonial home, I am satisfied that that period of their cohabitation for about 6 years should be taken into account in assessing the duration of their marriage to be one of significance in excess of 10 years or so for the purpose of the application before me. For the same reason I do not agree with the Husband that the Wife’s entitlement to share his MPF should be calculated only from the date of their marriage.

Conduct

160. There is one last matter that the Wife submits should be taken into account in the court’s determination of her application, or at least should attract the court’s criticisms: the Husband’s conduct in failing to discharge his obligation to make full and frank disclosure of his means, or to comply with various orders or directions to make further financial disclosure, the former of which has already been amply demonstrated above, while the latter according to Mr Cheng would include the following.

161. By an order dated 19^th July 2012 (A5/1870) the Husband was required to provide a written explanation as to the removal notice of his account with Philip Securities and the cancellation of his DBS Visa Platinum Card, and to provide a copy of his AIG credit card and BEA credit card, but none of which he had complied and could only offer a lame excuse in court.

162. Similarly, despite the order dated 21^st June 2013 (A*3/752) requiring him to disclose his banking and securities trading statements which he was supposed to do in the first place with his Form E, he still failed to do so but instead he blamed the Wife’s solicitors for not accurately setting out what statements were required.   

163. Worse still, Mr Cheng submits, the Husband had been oppressive against the Wife in the entire divorce proceedings by bullying pestering and harassing her with numerous emails and letters, by persistently being difficult with her on his access arrangements to the children, by taking her back to court on too many occasions over trivial matters over the children thereby making it difficult for her to focus on her jobs, and by taking too many unnecessary or irrelevant points in court as well as a wholly uncompromising position, with details set out in his closing submission (paragraphs 94-100), thereby unnecessarily prolonging the trial that he should be penalised at least in costs if not to reduce his share of their marital assets. 

164. On this issue Mr Cheng relies on the case of M v M (Financial Provision: Party Incurring Excessive Costs) [1995] 3 FCR 321 when Thorpe J (as he then was) stated at 330:

“Conduct is only relevant insofar as the wife relies upon the manner in which the husband has conducted these proceedings. Ordinarily speaking, it seems to me that the manner in which proceedings are conducted is to be reflected in orders for costs rather than directly in the scale of the awarded sum. However, this seems to me to be the exceptional case where the husband’s strategy has been so gross and so extreme that it would be inequitable to disregard it. It seems to me that it is appropriate to look at the quantification of the wife’s share not of what remains today but of what remain today had that policy of waste and destruction not been pursued.”

165. Mr Cheng submits that the Husband’s conduct exhibited at trial is similarly of the worst types, and hence the court should take such conduct into account and draw inferences adverse to him in terms of what is fair and reasonable in the present case, and that the court should further make a robust departure of the equal division principle in favour of the Wife.

166. As I have already commented above, while the Husband’s conduct in concealing his interests in HMC and the taxi is such a serious breach of his duty to make full and frank disclosure of his financial resources clearly justify condemnation by the court, but it is not in my view so exceptional as in the case of M v M that it cannot be adequately reflected in costs perhaps at a higher scale.   

Conclusion

167. For all the reasons discussed above, I have come to the conclusion that not only is the Wife’s proposal for the former matrimonial home to be given to her a fair and just award in the circumstances as her equal share of their marital assets, it will also at the same time provide a stable home for the children to grow and flourish for the next 10 years or more after what must have been a most traumatic ordeal to them for being caught in the middle of their parents’ conflicts.

168. The property is however under an outstanding mortgage of about HK$3.5 million with a monthly repayment of HK$37,000, which would be beyond the Wife’s current ability to meet after taking into account of her other needs and her fair share of those of the children as well as her own liabilities, and given the Husband’s much better financial resources and the size of the total marital pool, I agree with Mr Cheng that it is only fair for him to first discharge the mortgage before the transfer, for which I am prepared to give him until the end of this year to do so, whether by liquidating his stock portfolio or savings or from some other resources which he may have yet to disclose, not to forget that he was able to offer to pay HK$3 million to the Wife in his open proposal. These terms shall be a clean break between the parties as suggested by both of them, and which will in my judgment achieve fairness ultimately between the parties.

169. As for his share of the children’s maintenance, I also agree with the Wife that it should be HK$40,000 per month being the Husband’s half share, of which I in fact find to be more than generous given his much higher income and better financial resources to shoulder up a bigger share, in particularly when he would no longer be burdened with the monthly mortgage payments of the former matrimonial home after its transfer to the Wife.   

170. Lastly on the question of costs, there is no question in my mind that the Husband should have to bear the Wife’s costs of and incidental to the application given the above outcome, but for his flagrant breach of his duty to fully and frankly disclose his financial means and for his persistent attempts to continue to lie about them in court, I am inclined to consider full indemnity basis to reflect the court’s contempt and displeasure of his such conduct. However, since that matter has never been properly raised or canvased at the trial, I am prepared to give him an opportunity to persuade me why that scale should not apply in his case at a hearing to be fixed for 1 hour.

171. My order is accordingly as follows;

(a) the Respondent Husband shall upon the decree nisi of divorce being made absolute and in any event not later than 31^st December 2014 transfer all his share and interests in the former matrimonial home to the Petitioner Wife absolutely and free of all mortgages and encumbrances at his costs and expenses;

(b) Until the transfer he shall continue to pay the monthly mortgage repayment, utilities and management fees of the said property as before and as and when they fall due;

(c) The above terms shall be in full and final settlement of all claims between the parties which shall be dismissed;

(d) The Respondent shall pay to the Petitioner HK$20,000 per month for the maintenance of each child of the family totalling HK$40,000 per month until the child reaches the age of 18 or completes full time education whichever is later;

(e) The question of costs is adjourned to a date to be fixed with 1 hour reserved for argument, with written submission to be exchanged between the parties and filed into court 7 days before the hearing;

(f) Liberty to apply;

(g) Section 18 declaration.