FCMC 1678 / 2013
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES
NUMBER 1678 OF 2013
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| BETWEEN | | |
| | HTL | Petitioner |
| and | |
| | K,RE | Respondent |
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| Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not Open to Public) |
| Dates of Hearing: 29 and 30 September 2015 |
| Written closing received from the Petitioner: 14 October 2015 |
| Date of Judgment: 10 November 2015 |
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J U D G M E N T
(Final Ancillary Relief, variation of maintenance
and other miscellaneous applications)
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Introduction
1. This judgment followed a two day trial to determine the issue of final ancillary relief i.e. a division of the assets and orders for final maintenance. Consequently the wife’s summons dated the 6 August 2015 to vary the maintenance pending suit order, originally made in favour of the husband was also adjourned to the same date. In addition the respondent husband had also issued a summons dated the 22 September 2014 asking the wife to make payment to reconnect the water supply and repair the air conditioners at the former matrimonial home. Although that summons is now moot, given the present circumstances which will be elaborated upon below, it also technically returns to court for adjudication at this time. The husband has also tried to issue proceedings for contempt against the wife for non payment of the maintenance pending suit; that application was adjourned until after the conclusion of these proceedings. On the 4 September 2014 the husband further filed a praecipe to issue a Judgment Summons. Leave was given for him to do so, but notwithstanding that none seems to have been filed. In an affidavit filed by the husband on the 27 October 2015, after the conclusion of the trial, the husband says that this is inter alia because he has applied for a remission of fees in this respect and he was awaiting the result of that application. In any event consideration will also be given to that application and how it should be dealt with.
2. As will be seen the husband chose not to participate in the trial and therefore it proceeded in his absence.
3. This has been a very litigious case which has mainly centred on the appropriate arrangements for the two children of the family. There have been three judgments following substantive hearings (the original judgment on custody and care and control dated the 10 September 2012 from my sister judge HH Judge Bebe Chu (as she then was), the judgment dated the 11 July 2014 on maintenance pending suit/interim maintenance and the judgment dated the 5 March 2015 on variation of access and custody arrangements - both from myself.) There have also been numerous other directions and applications including several for leave to appeal. For the avoidance of doubt my findings, in so far as they are relevant to the issues before me now, continue to stand.
4. The husband could perhaps be best described as a professional agitator. He is an active participant in many political and social welfare issues arguably pertinent to Hong Kong; he takes part in demonstrations, hunger strikes etc. He is a regular visitor to the Family Court sitting either outside the court in the common area or attending court hearings when he is permitted. He regularly demonstrates both inside and outside the court building. XXX……..XXX. He has been seen following litigants in person from the court room and it is understood that he “counsels” them. His behaviour in this respect is a matter of some considerable concern. The wife for her part is a primary school teacher. She is originally from the Mainland. The husband is American.
Background
5. The parties married on the XX May 1997 in Hong Kong and they have two children, a girl A, who is now aged nearly 14 years and a boy J who is now aged 9 years. The mother has always worked as a primary school teacher save for a period of about 9 months when she took no paid leave. The father’s case is that he was a pastor and that previously he also worked as a tennis coach. He was the Director of X Limited, which is a Hong Kong registered charity. It is not in dispute that the husband has not contributed anything towards the children’s maintenance or indeed to the wife’s maintenance since the breakdown of the marriage. His case is that he has no earning capacity and that the wife should support him. The husband recently moved out of the former matrimonial home into a public housing unit. It is the wife’s position that he left the property in a very poor state of repair. The wife maintains that during the marriage the husband received donations and other financial support through a variety of different channels. She does not accept the husband’s case that he has no earning capacity and is of the view that he should at least be contributing towards the children’s maintenance. She also says that he has undisclosed assets.
6. According to the wife the parties’ marriage began to deteriorate in early 2007 and in late June 2011 the wife moved out of the former matrimonial home with the children and moved in with her parents. Relations between the parties were very fraught during this initial period and 29 reports were made to the Police for assistance from 5 June 2011 – 20 December 2011. The parties also attempted mediation for approximately 30 hours but to no avail.
Background to the litigation
7. On the 19 August 2011 the wife issued proceedings based on the husband’s unreasonable behaviour. The husband defended those proceedings. Other applications followed, which I will not go into here. Suffice it to say that in so far as the ancillary relief matter is concerned injunction proceedings were issued by the husband and on the 26 October 2012 the wife undertook inter alia not to sell, mortgage, dispose of or in any way deal with the former matrimonial home, which is in her sole name or to withdraw or dispose of any part of her provident fund. (See the Court order dated the 6 March 2012). On the 10 September 2012 HH Judge Chu handed down the judgment on custody and care and control of the children following a 17 day trial. In that judgment she describes the multiplicity of different applications issued by the parties prior to that date. I will not repeat that summary here but reference can be made to paragraphs 1 – 20 of that judgment dated the 10 September 2012 together with paragraphs 1 – 9 of my judgment on variation of access and custody arrangements dated the 5 March 2015, as necessary. On the 26 October 2012 the recently deceased Deputy Judge Carlson dismissed the husband’s injunction application against the wife and said that in his view the application had no merit. Notwithstanding that the wife voluntarily agreed to continue to abide by the undertakings as set out above. Other incidents followed and on the 7 January 2013 there were further injunctive proceedings before the court. In so far as the ancillary relief proceedings are concerned it is of note that the husband undertook as follows:
AND UPON the Respondent’s undertaking to return all personal properties of the Petitioner and the Children which were previously stored inside the Matrimonial Home before the Petitioner and the Children moved out in late June 2011, including but not limited to return the Petitioner’s personal collections of stamps and coins, her gold and jewelleries, and the Children’s school works and/or home works forthwith;
8. I am told that the husband has never fully complied with his undertaking in this respect and that personal items belonging to the wife have never been returned to her.
9. Notwithstanding the continuing high level of conflict the parties were nevertheless able to compromise the issue of the suit and on the 25 January 2013 the wife issued fresh proceedings based on one year separation with consent. The decree nisi was granted on the 22 April 2013.
Discovery
10. There then followed a series of discovery applications. According to counsel for the wife, during the course of the litigation the wife made a total of eight requisitions some in the form of requests for further and better particulars and others in letter format. A great many of these requisitions have never been adequately responded to. Documents have not been provided.
Adjournments
11. On the 7 October 2013 the Financial Dispute Resolution was conducted by a brother judge. Needless to say there was no settlement and the case was adjourned for trial. Unfortunately for a variety of different reasons the matter did not finally come on for trial until September 2015.
12. On the 28 November 2013 there was a Pre Trial Review before me. Directions were largely agreed and the matter was set down for trial in July 2014 with six days reserved. The husband was legally represented at the time. Further directions were given on the 11 February 2014 and again on the 15 May 2014. On the 4 July 2014 the trial was adjourned given that the husband’s legal aid certificate had been discharged. The husband said that he intended to appeal that decision. I agreed to adjourn the matter as it did not seem to be in anyone’s interest for the matter to proceed without the benefit of the husband being legally represented. New dates were given for December 2014. In any event the husband was not granted any further legal aid. Child related applications then came to the fore and it was agreed that the December dates should be utilized in order to deal with the cross applications in relation to the children. Further dates were given for the ancillary relief trial in June 2015.
13. On the first day of the adjourned trial on the 3 June 2015 the husband applied for an adjournment. He said that following my rejection of his application for leave to appeal against the judgment on the children’s matter, that he was seeking leave to appeal to the Court of Appeal. He also said that he had decided to defend the divorce petition. I stood the matter down for a short recess so that the husband should have an opportunity to read the wife’s opening and to also take some pills. I was then informed that the husband had collapsed in the lift lobby. Paramedics were called and the husband was admitted to hospital which is where he stayed until Friday afternoon whereupon he was discharged. I am then told that he had access to his son over the weekend. On Sunday evening he readmitted himself to a different hospital. Consequently on the 8 June 2015 I ordered inter alia that
3. The Respondent to provide a full medical report explaining the basis for his admission into Y Hospital from 2nd to 5th June 2015 including his diagnosis and medical tests undertaken and a full medical report explaining the basis for admission into Z Hospital on 7th June 2015 including his diagnosis and medical tests undertaken. Both reports to be filed prior to the hearing on 27th July 2015; and
14. To date no such reports have been received. The husband has however filed discharge summaries from both hospitals. He refuses to file a medical report because he says that it a) “violates his privacy and conscious”, b) medical information may prejudice the defence for his case and c) he cannot afford it. At trial the wife sought leave to file a short private Investigator’s report which describes the husband’s movements during the period between hospital stays. Reference will be made to this later when I come to consider the issue of costs. Suffice it to say that the husband was seen moving around freely. He did not appear to be suffering from ill health. It is also of note that whilst in hospital he was actively posting messages on his face book page. He said that he was in hospital for a rest.
15. The matter was eventually set down for trial for a fourth time. The husband again issued an application to adjourn. He said that he would be travelling out of Hong Kong during this period for a holiday. However he was not able to produce any ticket or any other evidence of a holiday. I told the husband that if he did not appear at the trial that the matter would be heard in his absence. He did not appear. The matter proceeded as indicated. I understand that the husband chose to go to Macau during this period. Again I will refer to this again when considering the husband’s litigation conduct and costs generally.
The law on Ancillary Relief
16. In the Court of Final Appeal’s decision in LKW v DD (FACV no 16 of 2008) the court sets out the approach that the court should now take when determining final ancillary relief.
The Four Principles
17. Mr Justice Ribeiro PJ reiterated four underlying principles that permeate ancillary relief proceedings namely fairness, the absence of discrimination, the upholding of the concept of the yardstick of equality and the rejection of a need for a minute retrospective investigation of the parties finances. These four principles apply in all ancillary relief applications and this case is no exception.
18. In addition he identifies a four step approach to be adopted in any ancillary relief trial namely
1) The identification of the assets
2) An assessment of the parties financial needs
3) Whether or not the sharing principle should be adopted?
4) If so whether or not there are any good reasons to depart from an equal division of the assets?
19. The s 7 factors are largely dealt with within this general framework. They are:
(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-
(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
Issues
20. The following issues now fall to be determined by this court:
What is the computation of available assets? To what extent should the wife’s pension be included in the computation of assets?
Has the husband made full and frank disclosure of his true financial position – with respect to both income and assets? Should an adverse inference be drawn against the husband?
What are the needs of the parties? Should this be regarded as a “needs based case” or should the sharing principle be applied?
What is the earning capacity of the husband? Does the husband have any health issues which impact on that earning capacity?
In the event that this is a needs based case how should the assets be divided bearing in mind the principles identified in the Court of Final Appeal’s decision in LKW v DD FACV 16/2008, the four step approach, the s.7 factors and the matters specifically identified above?
What provision, if any, should be made for the children’s future education expenses? Should the husband contribute towards the children’s maintenance?
Should the wife pay the husband maintenance going forward? How should the maintenance pending suit order be regarded?
To what extent should the husband’s litigation conduct be taken into account when considering the issue of final ancillary relief and costs?
What should be the Court’s final order for Ancillary relief and costs?
The parties open proposals
The wife’s open proposals
21. The wife made the following open proposal prior to the trial:
45. With the above financial positions of the parties in mind, W proposes the following:
(a) Considering the dilapidated state including water seepage problem, the Matrimonial Home to be sold at no less than HK$5 million (i.e. 90% of the agreed market price).
(b) The Children’s education fund of HK$1.5 million be deducted from the net sale proceeds and be maintained in a separate account hold by W. W undertakes not to utilize the funds in the account except for discharging tertiary education related expenses of the Children.
(c) The remaining net sale proceeds of Matrimonial Home be divided in the ratio of 60:40 between W and H, if H does not agree to contribute towards the Children’s maintenance.
(d) W’s pension accrued for the period from marriage (May 1997) to separation (June 2011) be divided in the ratio of 60:40 between W and H.
(e) W and H each to retain their own cash savings in their respective bank accounts (including those bank accounts of H which he refused to disclose the savings therein).
(f) W has so far paid an aggregate sum of $52,800 ($4800 x 11 months) to H from 1 August 2014 to 30th June 2015 under the MPS Order. If the Court accepted that H has undisclosed assets and/or income, W would humbly seek an Order for adjustment of HK$52,800.00.
(g) In view of H’s extremely uncooperative manners in the discovery procedure of the ancillary relief proceedings, W is asking H to bear W’s costs in the ancillary relief proceedings.
22. After the trial she modified her position slightly as follows:
Summary on W’s proposal
52. In summary, W submits that H should be able to earn more than enough to cover his expenses. H also enjoys accommodation and social benefits from Hong Kong government, as well as entitled to monthly pension payments from his United States social security account. He does not need W’s contribution to his living, and W is in any event not in a position to so contribute.
53. W asks for clean break between H and W. W further asks H to contribute to the Children’s financial needs.
54. For the family assets, out of the value of the Matrimonial Home, which is about HK$5 million, W asks for HK$1.5 million to be set aside for the benefit of the Children, which would be utilized only for the purposes of education related expenses of the Children.
55. Out of the remainder value of the Matrimonial Home, which is about HK$3.5 million, H’s interest in it should not be more than 40%, that is, no more than HK$1.4 million, if the Court finds that H will not be able to make monthly contribution to the Children’s expenses.
56. As H’s interest in the Matrimonial Home is less than his liability to pay costs of the ancillary relief proceedings to W (in the event that H was so ordered to pay W’s costs), W proposes to cancel out these sums by an Order that W to retain 100% interest and legal title in the Matrimonial Home, together with a no order as to costs in the present proceedings.
57. W considers this is a fair proposition to H. Even assuming W’s legal costs would be taxed down, if one takes into account the question of adjustments of the MPS (HK$52,800) and the costs of maintaining the Matrimonial Home from date of separation to present (HK$97,240), the above proposition still fairly reflects parties’ respective interest in the Matrimonial Home.
58. W also proposes that each party to retain the rest of their own assets, such as cash savings, shares and securities, and insurance policies etc.
59. As for the education fund for the Children in the sum of HK$1.5 million, W will offer her undertaking to the Court not to utilize this fund unless for the education related purposes of her Children. If the Court forms the view that such money need to be physically kept in a separate bank account, W will have to remortgage the Matrimonial Home to obtain such loan.
60. Considering the costs of reinstating the Matrimonial Home, the costs of furnishing it, and the costs of moving (say HK$400,000 in total), and the education fund (HK$1.5 million), W will need to take out a loan in the sum of HK$1.9 million, repayable in 13 years. With reference to the calculations in paragraph 25 of W’s 13th Affirmation dated 12th March 2014 [B2/p.408 para.25], W will have to make monthly repayment of around HK$14,000 for such loan. This will no doubt add to the month deficits and hardship now faced by W and her Children.
61. H enjoys lifelong pension benefit under the US social security system, and will receive a monthly sum of US$615 if he opts for starting to receive it at age 62. If he opts for starting to receive it at age 70, he can receive US1,074 every month.
62. As such, W says H is not entitled to claim against her pension fund. However, she proposed in her open offer a division of her pension between H and herself in 40:60 ratio with a hope that such reasonable offer will help to avoid the trial altogether.
63. However, H is anything but reasonable in the entire divorce proceedings, including the ancillary relief proceedings. With the possibility of settlement now out of the picture, W invites this Honourable Court to come to its own conclusion as to how much, if any, he is entitled to claim against W’s pension fund.
64. W’s pension as at 31st August 2011 was HK$2,052,660.23 [B1/p.142]. This sum represented the total pension accrued by W in her 21 years of working as a teacher (calculated up to 31st August 2011) [B1/p.131]. Out of that 21 years (or 252 months), W was married to H for 14 years and 1 month (or 169 months) (from their date of marriage on XX May 1997 to their date of separation on 26th June 2011). The portion of W’s pension for division (if any) is therefore:
HK$2,052,660.23 x 169/252 = HK$1,376,585.63.
65. W further proposes that any division of this fund will have to take place on the date of realization (i.e. her retirement) given the extremely tight financial status of W.
23. One of the reasons for this slightly different stance was that it became clear during the trial that the wife was not going to be in a position to afford to purchase a new home if she had to put aside HK$1.5 million for the children’s future education costs. There were also concerns relating to the wife’s ability to sell the former matrimonial home given its dilapidated state. Thus she accepted that it might be preferable if she retained the property and renovated it so that both she and the children could live there going forward. It would also be open to her to sell it in due course. In that event she would similarly not be able to afford to borrow against it to renovate and buy new furniture and in addition put HK$1.5 million aside for the children’s future education costs.
24. The husband did not make any open proposal.
Discussion
25. I must now turn to consider the issues, the law and the parties’ evidence as set out in their Form E’s,their affidavits and in their answers to the questionnaires such as they are. Further I will rely on the wife’s oral testimony in court.
What is the computation of available assets? To what extent should the wife’s pension be included in the computation of assets?
26. The wife set out the up to date asset position as referred to in the pleadings in her counsel’s written opening as follows:
| | Assets | W’s updated position (HK$) | H (at filing updated Form 3 in April 2015 (HK$) |
| (a) | Matrimonial Home (free from mortgage) | 5,600,000.00 | 5,600,000.00 |
| (b) | Cash at bank | ~192,000.00(as at 15 September 2015) | Alleged to be 0.00 |
| (c) | Insurance Policy | 348,920.67* | |
| (d) | Provident Fund | 2,648,192.75* | |
| Sub-total for (b) & (c) | ~540,920.67 | 0.00 |
| | Liabilities | | |
| (e) | credit card | ~9,300.00 odd | |
| (f) | legal cost | 0.00 | 15,000.00 odd |
| (g) | Personal loans | 75,720.00 (as at 15 September 2015; monthly repayment of HK$25,240 with the last instalment payable on 9th Dec 2015) | |
27. Given that the matrimonial home has been left in a dilapidated state I accept the wife’s oral evidence that having spoken to an Estate Agent, a more realistic valuation would be HK$5 million. She has been advised that it would cost at least HK$300,000 to renovate and at least another HK$50,000 for additional furniture. All in all she seeks a total of HK$400,000 in this respect. She presently rents a furnished property and the husband has taken most of the remaining furniture and chattels with him when he moved out of the former matrimonial home. There is no mortgage outstanding on the property. The wife also gave evidence that her up to date cash position in the bank is now HK$190,988. She has also reduced her loan to the bank and she has paid her legal costs up to date. For the avoidance of doubt it should also be noted that her pension cannot be touched until she reaches the age of 60 and likewise the insurance policy is not immediately liquid. Thus in order to renovate the property it is likely that she will need to take out a further mortgage.
28. Counsel for the wife argues that not all of the wife’s pension should be included in the computation of assets given that some of the pension was accrued prior to marriage and could therefore be regarded as a pre marital asset and further years have accrued post separation. Thus she states the wife’s position as set out in paragraph 25 (sub paragraph 64) above. I accept the wife’s position in this respect. Thus the total asset position of the wife is as follows. I have only included that part of the pension that the husband is entitled to claim against.
| | Assets | W’s updated position (HK$) | |
| (a) | Matrimonial Home (free from mortgage) | 5,000,000.00 | |
| (b) | Cash at bank | 190,988.00 | |
| (c) | Insurance Policy | 348,920.67* | |
| (d) | Provident Fund | 1,376,585.63* | |
| Sub-total for (b) & (c) | | |
| | Liabilities | | |
| (e) | credit card | 0.00 | |
| (f) | legal cost | 0.00 | |
| (g) | Personal loans | HK$25,240 (one repayment due on 9th Dec 2015) | |
Has the husband made full and frank disclosure of his true financial position – with respect to both income and assets? Should an adverse inference be drawn against the husband?
Material non disclosure
29. The law on disclosure is well known. Each party has a duty to make full and frank disclosure of their financial resources and income. This duty is absolute and continuing. It is fundamental to the ability of the court to make appropriate orders that each party abide by this duty. It has been said, and quite rightly, that all the cards should be on the table and face up. The issue of financial disclosure is not meant to be a game of hide and seek. If one party has deliberately and continuously failed to fulfil their duty then in the absence of such full and frank disclosure the court may draw such adverse inferences, as it considers reasonable in all the circumstances of the case. If the court errs in doing so then it should err on the side of the party seeking the disclosure. As far as possible attempts should be made to ensure that the erring party does not benefit from his deliberate non disclosure.
30. In summary the wife’s position is as set out in her counsel’s closing as follows:
Husband’s deliberate concealment on his true financial position and his healthy physical condition
23. W sets out below a summary of H’s failure to disclose to W and the Court his true financial position and his health condition. These are matters which would be cross-examined if H attends his trial on ancillary relief. As H failed to attend trial and failed to offer any explanation, W invites the Court to draw all necessary adverse inference against H.
Fails to disclose all his of his bank accounts in his Form Es
24. H has failed to disclose all of his bank accounts in his Form Es, and had not disclosed the following bank accounts in all the 4 Form Es he has filed [B1/p.164, B1/p.245, B2/p.433, B2/p.534-42]:
(a) the US BA account (the US bank account on which he drew his bank drafts) [C7/pp.1830 - 1840]);
(b) any of his bank accounts opened under the name of the Charity;
(c) Standard Chartered Bank account nos.XXX-X -XXXXXX-X and XXX- X XXXXXX-X
(d) Hang Seng Bank account no.XXX-X-XXXXXX, which was an account actively used by H, was disclosed only in page 15 of H’s Answer filed on 28th February 2013 [B1/p.319] in reply to W’s requisitions on various transfers made from H’s Bank of America (USA) account no XXXX-XXXX-XXXX. H did not disclose the said Hang Seng Bank account in the first two Form Es he filed on 29th November 2011 and 21st December 2012 respectively [C7/p.1916 - passbook of Hang Seng Bank account no XXX-X-XXXXXX].
Failure to produce Bank Statements
25. H has failed to disclose most of his bank statements despite various correspondences and requisitions from W and Court Orders [B2/pp.465- 1 to 465-6], [B2/pp.505-512], [B2/pp.534-59 to 534-62], [A/pp.124- 126], [A/p.129-28].
26. H is very clear about his legal obligation to produce updated bank statements [B2/p.528 para 29].
H’s failure to disclose his savings with the US ministry prayer centre
27. H has failed to disclose his savings with the US Ministry prayer centre despite requisition and court order [B2/p.534-59 to 534-63], [A/p.129-23 to 129-27], [B2/p.534-11].
Donations received by H
28. Paragraph 4 of SIO report dated 8th December 2011 stated the following:-
“… He claimed to get the donation from overseas to maintain and support the charity and the ministry work for the past twenty years ….” [D/p.2134]
29. In 2nd paragraph on page 2 of H’s affirmation filed on 8th December 2011, H affirmed that “After 2005, …. he continued to … raise financial support for Christian work he was supporting in HKSAR. He used this income from supporters worldwide to continue to faithfully support his family and his work….” [B1-181-31].
30. H further stated that “any person may make donations to him” by drawing cheques in favour of either “A” marked for “B” or the Charity or by credit card on PayPal.
31. In page 23 of H’s Answer filed on 28th February 2013, H alleged that no donation had been received by the Charity since August 2010 [B1/p.327].
32. The allegation that no donation had been received by the Charity since August 2010 above flies in the face of the following:-
(e) the fact that in August 2011, R extended his ministry work and rented the C Office at a monthly rental of $7,000 and he told SIO that he “continued to rely on the donations from overseas to maintain the service…” (see paragraph 17 of the SIO dated 8th December 2011) [D/p.2140]
(f) his allegation that W had been relying upon him through “the living costs package of the Charity to pay between 50% to 80% of the family bills including the mortgage instalment of the matrimonial home ….” (see paragraph 41 of his affidavit filed on 28th December 2012 [B1/p.281]
Reimbursements by the Charity
33. In paragraph 40 of H’s affidavit filed on 28th December 2012 [B1/p.280], H wrote:-
“the Charity relied upon donations to sustain it. Donations raised by the activities of the Charity and hostel at the C Office go to the Charity. All bills incurred by the hostel and office are then paid and expenses incurred by me as a director in the performance of my duties are then reimbursed by the Charity …”.
34. H further says in paragraph (2) on page 18 of his Answer filed on 28th February 2013 that the Charity used to reimburse him by cheque on the expenses he had incurred in running the Charity [B1/p.322].
35. However, H failed to disclose any bank statements which record the relevant cheque transactions from the Charity bank accounts to his personal bank accounts.
36. W says that there must be a reason for H to hide these records and/or relevant bank accounts. The inference to be drawn must be that there are significant sums of savings in these accounts which H is now hiding from us.
Fails to account satisfactorily the whereabouts of US$60,000 which H had remitted to US by 6 bank drafts in March 2009
37. H brought with him to US 6 bank drafts for an aggregate sum of US$60,000 drawn in his favour in about March 2009. W has set out the background of the aforesaid in paragraph 47 of her 13th Affirmation [B2/p.419].
38. In paragraph 10 of his Answer filed on 28th February 2013, H alleged that he only drew 5 bank drafts totalling US$36,800 and that almost all of the said sum had been transferred back to Hong Kong to his Hang Seng Bank account [B1/p.332].
39. However, the 5 bank drafts disclosed by H (see Annexure M of H’s Answer filed on 28th February 2013 [C7/pp.1830 - 1840]) were numbered DJXXXXXX- DJXXXXXX and DJXXXXXX and all dated 27th March 2009. Apparently, R had drawn a bank draft numbered DJXXXXXX and had not disclosed the same. The said 5 bank drafts disclosed were all drawn on R’s bank account no. XXXX-X-XXXX opened with Bank of American NA (“US BA account”).
40. Further, as indicated in paragraphs 7(b) and 7(d) in H’s Answer filed on 19th June 2013, regarding the fund under the said bank drafts, there were only transfers of an aggregate sum of US$7,162 back into H’s Hang Seng Bank account [B2/pp.348 - 349].
41. Hence, there was no documentary evidence to show that H had transferred back to his Hang Seng Bank account all the said sum of US$36,800 as alleged. H had also failed to disclose the bank draft no DJXXXXXX, or any bank statement for his US BA account.
42. Again, despite repeated Court Orders, H still has failed to produce any monthly statement of the US BA account. The adverse inference to be drawn here is that H apparently must have savings and/or assets that he is hiding in the United States.
31. In broad terms I accept the wife’s complaints with respect to the complete inadequacy of the husband’s financial disclosure. The wife argues that the husband has refused to produce documents and has further refused to answer perfectly reasonable enquiries raised by her. I accept that an adverse inference should be drawn in such circumstances. For the avoidance of doubt I accept that the husband is more likely than not to have some undisclosed assets. However I do not accept that the husband is a man of considerable means given the parties lifestyle in the past which was fairly ordinary and his earning capacity which was similarly limited. It seems to me that the adverse inference to be drawn must be seen in the context of the case. By the same token I accept entirely that as far as possible the husband should not be allowed to benefit from such an approach.
What are the needs of the parties? Should this be regarded as a “needs based case” or should the sharing principle be applied?
The law
32. In LKW and DD, Ribeiro PJ pointed out that after determining the asset base of the parties the next stage is to assess the parties’ financial needs. He commented as follows:
E.3 Step 2: Assessing the parties’ financial needs
74. The next step is for the court to assess the parties’ financial needs. As has been noted, the section 7 exercise often stops 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. Addressing the needs of say, the wife and children may immediately absorb more than half of the total assets. If so, “needs” are, for want of any alternative, determinative. Where the assets are meagre, a “clean break” may not be possible and it may be necessary to have recourse to an order for periodical payments.
75. The position is neatly summarised by Sir Mark Potter P in Charman v Charman (No 4) as follows:
“… when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail: per Baroness Hale in Miller at [142] and [144]. … It is also clear that, when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter result should in principle prevail: per Lord Nicholls in Miller at [28] and [29] and baroness Hale at [139].”
76. This is an approach which should dispel the fear expressed in Figgins v Figgins, that “rule equality” is likely to work injustice where the assets are meagre.
77. As section 7(1)(b) indicates, the process of evaluating “needs” involves assessing the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future in the light of present and foreseeable resources. The matters referred to section 7(1)(c) to (e), that is, standard of living, age and disability, will often be relevant. As Lord Nicholls put it in White:
“Financial needs are relative. Standards of living vary. In assessing financial needs, a court will have regard to a person’s age, health and accustomed standard of living.”
78. And in Miller/McFarlane his Lordship stated in respect of “needs”:
“When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party. Most of these needs will have been generated by the marriage, but not all of them. Needs arising from age or disability are instances of the latter.
79. Baroness Hale stressed that the parties’ needs should be “generously interpreted”. Accordingly, in trying to ensure that each party and their children have enough to supply their needs set 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.
33. On an initial assessment of the facts it seems likely that an award that caters for the needs of the wife and children will far exceed an award based on the sharing principle. The husband has not provided any form of maintenance for the wife and children since their separation. He sought and was awarded maintenance pending suit pending this trial when it was understood that there would be a full enquiry into his earning capacity and alleged health issues. The wife’s needs and those of the children are acute. The wife needs somewhere for herself and the children to live. She needs to be able to maintain them appropriately and to provide for their future education costs. The wife is wholly responsible for the children’s financial needs. Her income is reasonable. She currently earns HK$49,214.75 per month after the deduction of her provident fund. However this is not excessive and her budget is tight. In the past she has earned some money by investing on the stock exchange. I accept however that this is an extremely risky endeavour and one that may not produce good results in the future. I accept that she does not have the ability to increase her income other than this and that she has no other property or other financial resources other than as disclosed. Previously the wife had some savings which have now been virtually depleted and she also took out a loan to help with cash flow difficulties. I accept that the wife has survived to date by being extremely frugal.
34. The husband for his part chooses not to work. (This will be discussed in more detail below). He has recently moved to a Public Housing Unit so his housing needs are met. I accept as indicated above that he probably has some other undisclosed financial resources. I have noted in particular that during the period when the wife paid him maintenance that he would routinely cash in her cheques very late which presupposes that he did not need the money urgently. He is also entitled to a pension from the United States as he is a US citizen. According to the documentation filed (albeit very late) the husband is entitled to US$615 per month if he elected to take his pension from aged 62 or US$1,074 he took it from the age of 70. The husband is currently 58 years of age. Although the present situation is a little unclear it is thought that he is currently receiving CSSA.
35. Bearing in mind all of the above it seems to me that this case should be approached on a needs basis and that prima facie the sharing principle should not be applied. I should add that this approach seems to have been accepted by both parties in the past - see the agreed Statement of Issues dated the 27 November 2013, filed after the failed Financial Dispute Resolution hearing.
What is the earning capacity of the husband? Does the husband have any health issues which impact on his earning capacity?
36. The husband has consistently maintained throughout the ancillary relief proceedings that he suffers from ill health and that he is unable to earn his own living, either to support himself or to maintain his children. Consequently on the 15 May 2014 the court ordered inter alia as follows:
2. The parties do agree within the next 5 days on a joint expert to assess the health condition of the Respondent, failing an agreement the parties do write to the Court for direction 3 days thereafter on the engagement of the said joint expert;
37. On the 28 May 2014 the court further directed as follows:
The Court has received a number of letters regarding the appointment of a single joint expert to give medical evidence at the forthcoming ancillary relief trial.
Given that the Respondent has not provided any estimate from his preferred expert, the Court directs that Dr. K be appointed because although his hourly rate is HK$5,000 per hour, his estimate for both preparing a report and attending Court start at a slightly lower rate than the estimate of Dr. L.
It is a matter for the Respondent if he wishes to apply to the Court for leave to call any addition medical evidence. If he wishes to do so please seek leave by close of business on Friday 30th May 2014.
38. The husband refused to attend any appointment with Dr K. Therefore there is nothing to substantiate his claim that he is suffering from ill health to the extent that he is so incapacitated that he cannot work in any capacity. The wife further points out that he did not make this claim until after he lost the first custody battle.
39. It is also of note that although the husband carries a stick, he is often seen walking without it or he is seen carrying it. This point is also substantiated by the surveillance report dated the 7 June 2015 by V Consulting Limited.
40. The wife also produced a summary of the husband’s activities from the 18 June 2014 to the date of trial as seen on his face book page. From this is can be seen that the husband was actively involved in many different things. He took part in numerous demonstrations. He even participated in three hunger strikes. I accept that the husband appears to be perfectly healthy. In such circumstances it seems to me that the husband has chosen not to work in a paid capacity. Instead he has taken on other roles which are of interest to him and which he believes are important. This is his choice. It is also one that has impacted significantly on the welfare of his children.
41. I accept that the husband is reasonably well educated as he claimed during the child related proceedings. In particular I note that he claimed in various e-mails to the wife to have previously taught English to Chinese University graduates. I accept that that is more likely than his claims to have been an US Government Intelligence officer or a business man. I also accept that the husband was a pastor during the marriage and that he contributed towards the finances of the household during that time.
42. All in all I am not of the view that the husband has any health issues which impact on his ability to earn a reasonable living. In so far as his earning capacity is concerned it seems to me that the husband certainly does have the ability to support himself and to make a reasonable contribution towards his children’s maintenance, if he chose to do so. The wife suggests that he should be able to earn HK$15,000 per month by teaching English. This seems to me to be a reasonable expectation in the circumstances. Unfortunately it seems to me that regardless of any order that the court might make, it is extremely unlikely that the husband will comply with any order to pay maintenance based on his deemed earning capacity. Thus the burden of raising the two children from a financial perspective will most likely continue to rest solely with the wife. This is something that I intend to take into account when coming to a final determination on ancillary relief.
In the event that this is a needs based case how should the assets be divided bearing in mind the principles identified in the Court of Final Appeal’s decision in LKW v DD FACV 16/2008, the four step approach, the s 7 factors and the matters specifically identified above?
43. Provisionally it seems to me that the wife needs to be able to house the children appropriately, make some provision for their tertiary education and provide for them on an ongoing basis in the meantime. In order to do that she will require the bulk of the assets and all of her income. In so far as the section 7 factors are concerned, these have largely been dealt with in the discussion above. I would simply add, for the avoidance of doubt, that the parties enjoyed an ordinary standard of living similar to that of many other lower middle class families in Hong Kong during the marriage (see (c) the standard of living enjoyed by the family before the breakdown of the marriage). It is also of note that the parties are both middle aged. As I have said the husband is 58 years old and the wife is 47. They were married for 14 years – so this was a marriage of medium length. The wife only has a further 13 years before her mandatory retirement at the age of 60, although it will perhaps be possible for her to work in some capacity after that time. Likewise the husband should also be able to work past the age of 60. (See (d) the age of each party to the marriage and the duration of the marriage); Further I accept that each party contributed to the welfare of the family whilst married (see (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).
What provision, if any, should be made for the children’s future education expenses? Should the husband contribute towards the children’s maintenance?
44. The wife initially proposed that the sum of HK$1.5 million should be put to one side from the net proceeds of sale for the children’s tertiary education. She said that as A was not a particularly good student and she anticipated that she would need to go overseas for that purpose. The husband previously indicated that he would like the children to study in Hawaii, which is as I understand it, where he came from originally. However it became clear during the course of the trial that the wife would need to utilize the HK$1.5 million for her immediate housing needs. Indeed she said that she understood that she would be able to do this – which did not accord with her original open proposal. In any event it seems to me that it is not feasible for those funds to be put to one side. There is simply not enough money to make that a sensible proposition.
45. Thus I will accept the wife’s undertaking that she will be responsible for the cost of the children’s future tertiary education costs. It will not be necessary for the sum of HK$1.5 million to be put to one side in that respect.
46. Further I accept entirely that all things being equal the husband should contribute both towards the children’s future education expenses and their current maintenance. I also accept that it is unlikely that he will voluntarily do either.
Should the wife pay the husband maintenance going forward? How should the maintenance pending suit order be dealt with?
47. Given that a) the husband has an earning capacity, but one that he refuses to utilize, b) the wife needs to maintain both children effectively on her own and c) the husband has not complied with the court orders designed to provide evidence with respect to his alleged health issues, it seems to me that the maintenance pending suit order dated the 11 July 2014 shall be discharged. Given the order that I intend to make for ancillary relief generally I will not however make any order for repayment of the sum of HK$52,800 being the maintenance pending suit already paid by the wife to the husband in accordance with that order. It follows that the husband’s summons dated the 2 July 2015 shall be dismissed. For the avoidance of doubt the husband’s summons dated the 6 August 2015 seeking to vary the maintenance pending suit order shall be similarly dismissed. The husband also issued a Praecipe for issue of a judgment summons dated the 4 September 2015. Again this was an attempt to enforce the maintenance pending suit order. Leave was given for the judgment summons to be issued. As indicated above it appears that the husband did not do so because he is waiting for the outcome of his application to remit the payment of fees in that respect. Again for the avoidance of doubt the Praecipe dated the 4 September 2015 shall also be dismissed. Leave to file the judgment summons is hereby revoked and it is directed that the husband not file any further applications in this respect without first seeking the leave of the court.
To what extent should the husband’s litigation conduct be taken into account when considering the issue of final ancillary relief and costs?
48. It is generally acknowledged that litigation misconduct should more properly be reflected in an adverse costs order. In this instance the husband has gone out of his way to undermine the process. He has behaved in the most appalling manner; he has refused to comply with court orders, he has not made full and frank disclosure, he has deliberately flouted rules and regulations to the extent that he appears to have contrived illness and two hospital visits in order to avoid the final hearing. At the end of the day he simply refused to attend the final adjourned hearing preferring to visit Macau instead. His behaviour is contemptuous. The pressure on the wife as a result has been enormous. In such circumstances I accept notionally that the wife should have her costs, including the costs of the hearing in June on an indemnity basis. However I also accept that given that it will be virtually impossible for the wife to enforce that costs order, that the more sensible way to proceed is for the wife to retain the matrimonial home with no order as to costs.
What should be the final order for Ancillary Relief and costs?
49. UPON the wife’s undertaking to be wholly responsible for the children’s future tertiary education costs the wife shall retain the former matrimonial home. This shall be in full and final settlement of the wife’s claims against the husband for all forms of ancillary relief for herself. For the avoidance of doubt a) the court will not make any order that the husband pay maintenance for the children at this time; b) as set out in paragraph 47 above, the maintenance pending suit order dated the 11 July 2014 shall be discharged. Further orders shall be made as set out in that paragraph; c) the court shall make no further order in relation to the wife’s claim for repayment of the sum of HK$97,240 being the cost to her of maintaining the former matrimonial home post separation and d) there shall also be no order as to costs in relation to the ancillary relief proceedings (according to the Wife’s Form H her total costs for the ancillary relief proceedings stand at HK$1,548,114).
Pension
50. However the wife shall pay the husband 40% of the pension accrued by her during the course of the marriage – i.e. 40% of HK$1,376,585 – or say HK$550,000 upon receipt by her of that pension when she retires at the age of 60 years. This payment shall be in full and final settlement of the husband’s claims against her for all forms of ancillary relief. In the event that the wife decides that she would like to reorganize her financial affairs and pay the husband that sum prior to reaching the age of 60, then that is a matter for her and she is at liberty to do so. It goes without saying that the dismissal of claims shall come into effect once the payment is made.
51. A section 18 declaration to issue.
52. The husband’s summons dated the 22 September 2014 in relation to the reconnection of the water supply at the former matrimonial home shall also be dismissed.
| ( Sharon D. MELLOY ) |
| District Judge |
Ms Josephine Tjia instructed by Tang, Lai & Leung for the Petitioner
The Respondent was not represented and did not appear