YSG (YX) v. LYAG

FCMC 15288/2015

[2022] HKFC 270

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 15288 OF 2015

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Respondent’s Summons:

Petitioner’s Summons:

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J U D G M E N T

(LEAVE TO APPEAL – COSTS)

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The Applications

1.  On 12 October 2022 I handed down a Judgment varying the costs order nisi (“Costs Judgment”) made in the Judgment dated 2 June 2022 on the parties’ respective claims for ancillary relief (“AR Judgment”). The nisi order for costs was that there be “no order” as to costs i.e. that each party would bear their own costs of the proceedings. The stated reason for this was that neither party had fully succeeded on their respective claims.

2.  The Costs Judgment followed an application by the Respondent (“Husband”) to replace the order nisi with an order for costs in his favour, citing a number of pre-Trial Sanctioned offers, alternatively that they should be regarded as Calderbank offers, and in both cases arguing that those offers had not been beaten by the final ancillary relief award to the Petitioner (“Wife”). Alternatively, he said that the Wife’s litigation conduct, in particular her pursuit of a “black-hole” theory of missing money, was unreasonable, had cause the lengthening of the proceedings and thus the incurring of costs, and had rendered difficult if not impossible any chance of settlement. He also sought an order that his costs be taxed on an indemnity basis.

3.  The Husband’s application was successful to the extent that the Court varied the order nisi and ordered that the Wife pay 20% of his costs of the ancillary relief proceedings, to be taxed on an indemnity basis. The reasons for this varied Order are fully set out in the Costs Judgment. In concluding that the Husband’s application was justified, the Court found that the Wife’s pursuit of her theory that the Husband was hiding millions of dollars in cash or other assets, a theory which was rejected by the Court in its AR Judgment, had hampered prospects of settlement of their respective claims and had added unnecessarily to the costs incurred by the parties and the length of the Trial itself, and that this should be reflected in an order for a proportion of the Husband’s costs of the proceedings to be paid by the Wife, to be taxed on an indemnity basis: Costs Judgment, §40 – 46.

4.  Both parties now seek leave to appeal from the Costs Judgment/Order, the Husband by Summons dated 26 October 2022 and the Wife by Summons dated 9 November 2022.

5.  The Husband regards the award of only 20% of his costs as inadequate and not properly reflecting his pre-Trial offers, the litigation misconduct of the Wife, and his success on most of the significant issues raised at Trial.

6.  The Wife for her part says that the effect of the order that she pay a proportion of the Husband’s costs “penalizes her twice”, and in effect awards the Husband a higher proportion of the matrimonial pool of assets which contradicts the aim of achieving a fair distribution of such assets.

7.  The Wife is pursuing an appeal against the AR Judgment. Her application to this Court for leave to appeal was dismissed by a Judgment handed down on 12 October 2022. She has renewed her application in the Court of Appeal.

The Law

8.  Section 63A of the District Court Ordinance, Cap. 336 provides that leave to appeal a judgment or order shall not be granted unless the Court is satisfied the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard. An appeal with a “reasonable prospect of success” is one with prospects that are more than fanciful but which do not need to be shown to be probable: SMSE v KL [2009] 4 HKLRD 125.

9.  As both Summonses seek leave to appeal a costs order, the parties must show that it is reasonably arguable that this Court erred in principle or its decision was plainly wrong: see LLC v LMWA [2009] 2 HKLRD 529, at [7] per Lam ACJHC (as he then was).

The Grounds of challenge

The Husband’s Summons

10.  The Husband now advances nine (9) grounds of appeal:

(1)  Ground 1 asserts that the Court wrongly found that the Sanctioned pre-Trial offers were beaten by the ultimate award, and that it therefore erred in failing to apply RHC O. 22 r. 23(3) to (5) with the consequences that the Husband has been wrongly deprived of his costs on an indemnity basis and interest thereon pursuant to O. 22 r. 23(4). It is the Husband’s case that assuming the Sanctioned offers were not beaten by the Wife at Trial, it is not, in all the circumstances of the case (rule 23(6)), unjust for such an order to be made.

(2)  Ground 2 says that the Court gave “little or insufficient weight” to the sanctioned offers in the exercise of its discretion on costs.

(3)  Ground 3 argues, in the alternative, that the Court should have given weight to the offers as “successful Calderbank offers”.

(4)  Ground 4 asserts that the Husband “beat” his Open Offer but that this was not reflected in the award of costs.

(5)  Ground 5 says that the Court gave “[n]o reasoned basis” for the Husband only receiving 20% of his costs and that such an award inadequately reflects the Court’s rejection of two important aspects of the Wife’s case – her desire for the two Singapore properties to be transferred to her and her “black hole” theory.

(6)  Ground 6 says that the Court failed to take into account that the Husband succeeded on the majority of the issues in contention at the Trial, that “the issues that the Husband was successful on took up vastly more of the Court’s time and represented enormously more by way of disputed assets.” It is suggested here that the Court’s finding that neither party had succeeded fully was “perverse and exceeded the generous ambit of [its] discretion.”

(7)  Ground 7 asserts that the varied order did not adequately reflect that the Wife had failed to negotiate or provide timely responses to the Husband’s offers.

(8)  Ground 8 is to the effect that I had made an error in the AR Judgment as to the legal entitlement of the parties to rent out one of the Singapore properties, and that, within the Costs Judgment, I had the discretion to vary this finding but did not do so, and in any event it was wrong to say that the Wife “won” on this issue for the purposes of the Husband’s application to vary.

(9)  Ground 9 deals with the costs award on the Husband’s Summons to vary the order nisi, and criticises the decision to award only 50% of his costs of the application. He says he was successful on the application and should be awarded all of his costs relating to it, particularly given that the Wife made no sanctioned offer to settle the issue out of court.

11.  The Husband’s written submissions begin with this distillation of how he says this Court erred in confining the award to 20% of his related costs:

“1. H seeks leave to appeal the costs order of the 12 October 2022. He does so on the bases that the learned Deputy District Judge misled himself as a matter of law as to (a) the significance of the Sanctioned Offers (b) the importance of a party rendering negotiations impossible by adopting a wholly unreasonable litigation posture and (c) treating a child’s claim for maintenance as part of the Wife’s claim.

2. Further in denying the Husband 80% of his costs in a case such as this, he exceeded the generous ambit of his discretion. We are acutely conscious that the threshold for reversing discretionary decisions on costs is high. But here, the Deputy District Judge demonstrably failed to appreciate the issues which the Wife lost on. …”

12.  Ground 1. The contents of the Husband’s several WP/Sanctioned offers, and the Wife’s responses to them are recorded in the Costs Judgment at §§16 – 22. Having considered both parties’ arguments on the Husband’s application to vary, I decided as follows:

“30. I do not accept the Husband’s assertion that this is a simple matter of applying O. 22 r. 23. I note that the second offer dated 1 September 2021 was expressed to be accepted if at all, “in its entirety”. So too was the last WP offer, which, if accepted, would have deprived the Wife of any maintenance for the older of the two Children and for the younger when he attends National Service in Singapore.

31. I bear in mind that Calderbank offers do not easily fit within matrimonial finance litigation as they do in ordinary civil litigation, such as a claim for damages for personal injury where it may be a simple mathematical analysis of comparing the offer with the final monetary award: W v K and Anor (Costs) [2008] HKFLR 387, at [16] – [19]; GW v RW [2003] 2 FLR 108.”

13.  The Husband now submits that the “relatively small sums for the child maintenance which H had not proposed were (a) not W’s claim (b) were easily subsumed in the much greater sum that was offered and, (c) were always capable of being varied – they were not an immutable part of the offer as the Judge held.”

14.  I reject this submission. First, even if, monetarily, the sums were “relatively small” as the Husband suggests, or can be said to have been “subsumed in the much greater sum that was offered”, they were not insignificant. Secondly, the Wife’s request was for ongoing child maintenance, including lump sums to provide for the two children through to their independence: it was an important part of her claim for ancillary relief. Thirdly, the fact that the Court possesses the power to vary an order for child maintenance is neither here nor there: the offers were put on the basis that the Wife accept them in their entirety including the Husband’s insistence that the Wife’s entitlement to child maintenance for N had ceased and the same would happen upon C turning 18 and reporting for military service in Singapore.

15.  The Wife in her submissions in Reply referred the Court to the considerations of the Chief Justice’s Working Party on Family Procedure Rules contained in its Final Report released on 14 February 2022, which includes a Proposal (Recommendation 64, Proposal 65, cf paragraphs 125 – 128 of the Final Report) that Order 22 should not apply to family proceedings; and to the remarks of Lam VP (as he then was) in AVT then known as MAM v VNT (unreported, CACV 234/2014, 21 December 2015, at [13] – [15] where the learned Vice President emphasised the importance of the Court taking into account all the circumstances of the case, (as required by sub-rule (6) of O. 22, r. 23) including the terms of the sanctioned offer, the stage in the proceedings at which it is made, the information available to the parties when the offer is put, and the conduct of the parties with regard to the giving or refusing of information to enable the offer to be properly evaluated.

16.  In this respect, the Wife additionally submits that the Husband’s offers (or some of them) were made at a time when the Husband had not made full and complete disclosure and they were “not all encompassing but contained material conditions and omissions”. On the first point she recites the progress of disclosure including that further significant documents were supplied pursuant to the Order of 20 October 2021, a few months before the Trial. On the second point she says, in the alternative, that the offers made no provision for the Children’s maintenance, or “woefully inadequate” provision (para 12).

17.  For now, and pending the introduction of new Family Procedure Rules which might follow the recommended reform, O. 22 r. 23 continues to apply to proceedings in this Court. But the costs consequences of failing to accept an offer only apply when either of the conditions set out in r. 23(1) is satisfied. Rule 23(1)(a) does not apply here – there was no “sanctioned payment” into Court. Nor in my view does r. 23(1)(b) apply. I remain of the view that the Wife did not fail to obtain a judgment “more advantageous than” the sanctioned offers in that none of the offers adequately provided for maintenance for the Children, as compared with the award in the AR Judgment. Ground 1 is not reasonably arguable.

18.  Nor do I consider Grounds 2 and 3 of the Husband’s draft Grounds to be reasonably arguable. In varying the order nisi, I took into account all of the Husband’s offers to settle, and the Wife’s responses to them. One of the significant elements justifying the variation was the fact that, even though the Wife responded to the offers put, she did so in each case on the basis that the Husband was vastly under-representing his true asset position, and, for the reasons set out in the AR Judgment, this was an erroneous position for her to maintain.

19.  Ground 4 is not reasonable arguable. I took into account the Open offer – which proposed a 50/50 split of the assets but contended that the Wife’s entitlement to child maintenance for N had ceased – in deciding on the Husband’s application to vary the costs order nisi.

20.  Ground 5 challenges the quantum of the variation, and asserts that the Court failed to provide a reasoned basis for the award to the Husband of 20% of his costs. Not so. The Costs Judgment records that the Wife succeeded on some points at trial, and the Husband on others (the Husband in his other Grounds, to which I will come, says this is a perverse finding when he was by far the more successful party). Despite this, and because of the Wife’s position in maintaining through to the end of the Trial (and, apparently, now before the Court of Appeal) her black hole theory of missing millions, not only did this stymie settlement negotiations, but the legal costs incurred by both parties in advancing their competing claims were significantly greater than they otherwise would have been. An award of 1/5^th of the Husband’s costs relating to these claims was, in my view, a fair and proportionate award reflecting the Wife’s conduct and the consequences of it. The Court agreed with the Husband’s claim that these costs should be taxed on an indemnity basis, a significant departure from the usual basis for taxation but one which was justified.

21.  In developing Ground 6, the Husband refers to the significant issues at trial and asserts that “To say that there was equality of outcome on the various issues was perverse. No reasonable Judge could have reached that conclusion.”

22.  On a number of significant issues, the Husband was successful, including on the Wife’s black hole theory. This was, I accept, one of the most significant issues in the correct assessment of the matrimonial “pot” (see AR Judgment, §36). However, in my view, in matrimonial cases the Court does not award costs by reference solely to the value in dollar terms of one issue or another. I accept that if one party pursues an issue of trivial importance, financial speaking, and even if that party were successful on such an issue, it would carry little weight in the Court’s exercise of its discretion. That was not the case here.

23.  The Wife was successful in resisting the Husband’s claim that her refusal to accede to the leasing out of the K Property was unreasonable and the lost rental should be reflected by an appropriate further adjustment to her ultimate award. The Husband argues (as he did in his original application to vary the order nisi) that the Wife had misled the Court by insisting that the K Property could not be lawfully leased after 2016, a contention which he says was debunked at the start of the Trial and that the Wife should not have continued to maintain it. I note, however, that the issue of Governmental permission to rent out was only one of the factors in the non-renting of the K Property. Another factor was the uncertainty as to whether the parties could have found a tenant, in the condition it was, without significant renovation (§82). Assuming the Court had not found (as the Husband submits was an error on the evidence before it) that the K Property could not be lawfully rented after 2016, it does not necessarily follow that the Court would have concluded that there was loss associated with the Wife’s refusal to consent to the Husband’s request that it be rented out.

24.  There were other issues on which the Wife was successful. She succeeded in demonstrating that the Husband’s Wine collection had significantly increased in value in the months between the SJE’s report and the Trial. The Husband says the same result could have been achieved by the expert simply updating his estimates by correspondence. This was of course possible, but that would assume that the process of engaging in written communications with the SJE would have been more efficient and will have saved legal costs compared with having him called as a witness at the Trial. Such correspondence is often – in significant money cases such as this – the product of a team of solicitors and frequently involves counsel in commenting on drafts and advising on responses. Very significant costs can be incurred in a short space of time. It is important also to consider whether an “updating” report could have been obtained from Mr. Wainwright (the SJE) within the relatively short period prior to trial. The Wife might well have argued that a pre-Trial updating report was still too conservative an estimate of the value of the collection. All in all, I am not convinced by the Husband’s arguments on this point.

25.  On the question of maintenance for the Children, I rejected the Husband’s case that the Court had no power to order him to continue to pay maintenance after N, (as in future C will) turned 18 and reported for compulsory military service. I do not accept at all that this finding (see AR Judgment, §§166 – 173) is insignificant, as the Husband now suggests, or that it would be correct for the purpose of the Court’s discretion on costs to label it as “a small issue dwarfed by the “Black Hole” and Singapore property issues”. The Husband maintained steadfastly throughout the Trial and in Closing Submissions that his obligation to maintain the elder of the two Children ceased upon his entry into national service and that the same would be the case for the younger child when his time comes. The Court found otherwise.

26.  Nor did the Court accept the argument that there was no utility in the multiple Single Joint Experts to be called to give evidence: Costs Judgment, including the wine expert, §§35 – 38. I maintain these views despite the Husband’s repetition of his arguments that it was a waste of time for them to be called.

27.  Ground 6 is not reasonably arguable.

28.  The subject matter of Ground 7 has already been addressed above: I took into account the Wife’s negotiating posture, and, to be clear, this included a consideration of the time-lapse between the first of the Husband’s Calderbank offers (19 September 2019) and the first from the Wife (20 April 2021). I accept that there was an opportunity for fruitful discussion in the period leading up to the FDR which did not apparently take place, including because of the Wife’s position that the Husband was hiding assets and had failed in his duty of full and frank disclosure. The Wife says there was inadequate disclosure to this point, but I do not consider this should have prevented her from exploring settlement with the Husband and advancing a counter-proposal, at least to resolve parts of her ancillary relief claim or narrow down the issues in dispute. This factor formed part of the basis on which I varied the order nisi. I do not consider Ground 7 to be reasonably arguable.

29.  Ground 8 relates to the non-rental of the K Property, and this has already been discussed above in the context of the competing issues point. It is not reasonably arguable.

30.  Ground 9 is standalone and relates to the costs of the application to vary itself. The Husband’s application was for much more than 20% of his costs, to be taxed on an indemnity basis. He did not fully succeed. The award of 50% of his costs of the application was well within the Court’s discretion. Ground 9 is not reasonably arguable.

31.  Consequently, the Husband’s Summons for leave to appeal the Costs Judgment/Order is dismissed, with an order that he bear the Wife’s costs of resisting it.

The Wife’s Summons

32.  The Wife’s grounds of appeal can be summarised as follows:

(1)  Ground 1. The Court erred in finding the Wife’s “black-hole” theory and her pursuit of it was a justifiable reason to award costs, and on an indemnity basis.

(2)  Ground 2. The Court erred in law in misapplying the principles of ordering indemnity costs in family cases, by failing to identify – “particularize” – the aspects of the Wife’s conduct which amounted to “special or unusual” to the extent that an order for indemnity costs was justified. In the alternative, that the Court over-relied on the Wife’s failure to call expert evidence to support her black-hole theory, as a reason to justify such an award.

(3)  Ground 3. The Court erred by not considering the impact of an indemnity costs order on the Wife.

33.  Ground 1. In her submissions on this Ground, the Wife refers to her application now filed in the Court of Appeal for leave to appeal the AR Judgment in which she has filed an affidavit exhibiting newly obtained reports from a forensic accountant supporting her black hole theory: Submissions §§7 – 8. This new evidence is not before this Court.

34.  The Wife says that she was under financial constraints and for this reason could not afford to engage such an expert at the Trial. The Husband says this is not correct, referring to the new evidence the Wife has filed in the Court of Appeal which indicates the Wife engaged one or more accountants in 2021 and paid significant sums for their services (Respondent’s Reply, §12).

35.  This Court is not in a position to consider this evidence – none has been filed in support of the Wife’s Summons (I note that the August 2018 revised procedure for dealing with applications for leave to appeal does not envisage affidavit evidence being filed other than to explain any delay in seeking leave). I would simply comment that, if the Wife had in a timely manner applied to the Court for the appointment of a Single Joint Expert to consider her black hole theory, and if the Court was satisfied that this was appropriate but that the costs of such SJE could not be shared due to the Wife’s financial constraints at the time, it might have been open to the Wife to argue that the Husband, being the financially better-off party, should bear the costs of the SJE at first instance, such costs to be taken into consideration in the final award. I say this with the caveat that of course I have not seen the evidence the Wife has now filed in the Court of Appeal.

36.  The Court arrived at its conclusions including on the Wife’s black hole theory on the basis of the evidence presented at Trial. If new information has now been produced which supports a different finding, this is a matter, with respect, for the Court of Appeal to consider.

37.  Further, the Wife’s failure to support her case that the Husband had successfully siphoned off and hidden vast sums of money with professional accounting analysis was but one of the many elements the Court considered when dismissing this black hole theory: AR Judgment §§65 – 68. There were six other reasons for rejecting it: AR Judgment, §§55 – 70.

38.  Ground 2. The Wife maintained throughout her pursuit of what I found was an ill-founded theory of calculated and long-standing dissipation of income by the Husband. I found that it was unreasonable for her to do so: Costs Judgment, §39, and that the effect of this was to scupper the prospects of pre-Trial settlement; to prolong the proceedings unnecessarily; and to increase the costs incurred: §40. I considered the applicable legal principles (§45) and then concluded that the Wife’s pursuit of her theory and the manner in which she presented it justified an award of indemnity costs (§46). I therefore do not agree with the Wife’s submission where she says (paragraph 5 of her Submissions) that no adverse findings were made against her which could give rise to such an order.

39.  I reject the submission that the Court “over-relied” on the Wife’s failure to call a forensic account to support her case. It was – as noted – one of the factors in the Court’s rejection of her theory, and a very significant one. The assessment of this theory would have been considerably aided by an impartial expert who could provide the Court with his/her views as to whether the theory had substance. The Wife chose to proceed to Trial without this evidence and without challenging the order at the PTR rejecting her late application to adduce it and this (together with the other reasons set out in this part of the AR Judgment) led to the Court rejecting her case that the Husband had hidden assets.

40.  In arriving at the Costs Judgment/Order, I considered the authorities on the circumstances in which it is “appropriate” to order indemnity costs. I have reviewed them again, and those additionally cited by the Wife in her Submissions both in Reply to the Husband’s Summons and in support of hers. On her behalf it is submitted that her proposals and litigation conduct were “well within the bounds of a reasonable litigant with an arguable case.” Much of her conduct was perfectly reasonable. But in my judgment, on a very significant point – the “black-hole” theory – it was unreasonable to a point which fully justified the order I made.

41.  Ground 2 is not reasonably arguable.

42.  Ground 3. This is not reasonably arguable. I considered the impact of the variation on the Wife’s award: Costs Judgment, §48. The Court was provided with both parties’ estimates of the costs they had incurred in relation to the question of ancillary relief. The Husband’s Form H dated 31 January 2022 filed shortly before the Trial estimated his costs (including counsel fees) to that date as HK$12,959,989 and anticipated costs of the Trial as HK$2,140,000, i.e. about HK$15,100,000 in total. Assuming all would be allowed on a taxation of costs on an indemnity scale, 20% of this is approximately HK$3,020,000. I found in the AR Judgment that there were assets surplus to needs: this was a sharing case. The Wife was awarded HK$53,500,000 in three separate lump sums, with HK$35,500,000 payable within six months of the AR Judgment. She is in a position to be able to meet the varied order on costs without it negatively impacting on her ability to meet her needs or those of the Children.

43.  The Wife’s Summons dated 9 November 2022 is dismissed, with an order that she pay the Husband’s costs incurred in opposing it.

COSTS

44.  The Husband asks for a Summary Assessment under Order 62 rule 9A. He has provided separate Statements of Costs for the work on his Summons and in opposition to the Wife’s Summons, both dated 2 December 2022. I consider the Husband’s costs of resisting the Wife’s Summons, including counsel fees to be reasonable and I allow it in full at HK$62,207.

45.  The Wife has not been able to separate her costs in preparing her Summons and opposing the Husband’s. I accept this may be difficult: both Summonses broadly relate to the same issues and a lot of the work done contemporaneously – e.g. conference with counsel are very likely to have involved the discussion of both Summonses.

46.  Her Statement of Costs for Summary Assessment filed with her Summons on 9 November 2022 claims solicitors’ fees and disbursements in handling both Summonses at HK$59,870 and counsel fees (for two counsel, John Scott SC leading Ms. S. Allison) at HK$177,000.

47.  I accept that there is some difference in terms of complexity between the Husband’s application and the Wife’s (including the number of grounds raised). I also accept that it was not unreasonable for her to seek the advice and representation of leading counsel, given what is at stake and that (I assume) Mr. Scott SC has already been engaged by her for the intended appeal against the substantive AR Judgment to the Court of Appeal.

48.  I consider it likely that more work was expended on the Wife’s Summons than in resisting the Husband’s Summons (this was the case with the Husband’s team as seen in the separate Statements of Costs) and I assess the Wife’s claim for costs of opposing the Husband’s Summons at HK$30,000 for solicitors’ costs/disbursements and HK$70,000 for counsel fees, i.e. HK$100,000.

ORDER

49.  I confirm my order as follows:

50.  The Respondent’s Summons dated 26 October 2022 for leave to appeal the Costs Judgment/Order dated 12 October 2022 is dismissed with an order that he pay the Petitioner’s costs of opposing the Summons which are summarily assessed at HK$100,000 (HK$30,000 solicitors costs and HK$70,000 counsel fees).

51.  The Petitioner’s Summons dated 9 November 2022 for leave to appeal the Costs Judgment/Order dated 12 October 2022 is dismissed with an order that she pay the Respondent’s costs of opposing the Summons which are summarily assessed at HK$62,207 (HK$12,207 solicitors costs and HK$50,000 counsel fees).

Mr. John Scott, SC and Ms. Sasha Allison instructed by PC Woo & Co for the Petitioner

Mr. Richard Todd instructed by CRB for the Respondent

FCMC 15288 / 2015

[2022] HKFC 202

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.15288 OF 2015

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J U D G M E N T
(LEAVE TO APPEAL AND STAY)

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The Application

1.  On 2 June 2022 the Court handed down its Judgment and Order on the parties’ respective claims for ancillary relief.  

2.  By Summons dated 30 June 2022 the Petitioner/Wife now applies for leave to appeal the Judgment/Order. 

3.  The Order directed the sale of two landed properties in Singapore, referred to in the Judgment and here as “C Property” and “K Property”, with the net proceeds of sale to be distributed equally between the parties (paragraphs 1 and 2).  It awarded three lump sums to the Wife (paragraph 4), with the third sum to be linked to the sale of the K Property (paragraph 4(c)).  The Order further provided for ongoing periodical payments of maintenance for the two children of the family, N and C, in the sum of HK$140,000 per month (HK$70,000 per child), with such maintenance to be reduced to HK$10,000 per child during their respective national service with the Singapore military (paragraphs 6 and 7).  Paragraph 11 of the Order granted the parties liberty to apply in respect of the implementation of the Order, including in relation to the sale of the Singapore properties.

4.  The Wife now seeks leave to appeal paragraphs 1, 2, 4(c), 6, 7 and 11 of the Order.  She also seeks a stay of paragraphs 1, 2 and 4(c). 

5.  The Grounds of Appeal read as follows:

“1. The Learned Judge misdirected himself on the principles of fairness and reasonableness as set out in LKW v DD (2010) HKCFAR 537 by failing to recognise the Petitioner’s financial needs and personal circumstances in calculating that the Petitioner was only entitled to 50% of the total assets.

2. The Learned Judge erred on various findings relating to the Petitioner’s case of “black hole”, thereby reaching the incorrect conclusion that the Petitioner’s case was not made out.

3. The Learned Judge erred in failing to ensure that the Petitioner’s ongoing needs would be at the standard enjoyed by the family before the breakdown of the marriage pursuant to section 7(3) of the Matrimonial Proceedings and Property Ordinance, Cap. 192, and subsequently failing to give weight to the Petitioner’s evidence as to her needs. In addition, the Learned Judge failed to provide sufficient or adequate explanation in concluding at the Duxbury figure for the Petitioner’s needs. The Learned Judge further erred in finding that the Petitioner had an earning capacity of relevance to the Petitioner’s qualifications and lifestyle at all or in the alternative, that the Petitioner was able to find relevant employment in the financial services industry. The Judge also erred in accepting the Respondent’s claims with regard to his earning capacity, and that the Petitioner’s potential salary could equate to the Respondent’s current salary.

4. The Learned Judge erred by ordering the sale of the C Property and the K Property being the only assets that the Petitioner had an interest in, and failed to take into account the Petitioner’s intentions and needs relating to her housing and that of the Children.

5. The Learned Judge further erred in calculating the Children’s needs, and that further reducing the Children’s maintenance, the burden of any shortfall will be borne by the Petitioner, which was in turn, not factored into the Petitioner’s needs.  In addition, the Learned Judge failed to take into account that the Petitioner will continue to incur fixed costs for the Children even when they are serving their National Service, and in any event, the sum of HK$10,000 per month is grossly insufficient to meet the Children’s needs whilst in National Service.”

6.  The Husband’s reply to the Wife’s application refers to the fact that both Singapore properties have been put on the market and that it is likely both will sell for more than the values assigned to them by the Single Joint Expert who was called at the Trial and whose evidence – and valuations – was accepted by the Court.  The Wife has written to the Court to object to this as impermissible post-Judgment factual evidence, and for the purposes of this Judgment, I have disregarded it. 

Background

7.  The background of the parties and their children and the issues arising for the Court’s consideration has been set out at the beginning of the Judgment: §§1 – 17.  In brief, this case involves a marriage of some 14 years producing two Children, one of whom is now an adult and completing his service with the Singapore military.  During the marriage, the parties, and the Children, enjoyed a very comfortable lifestyle due primarily to the Husband’s high-level positions with leading international investment firms.  The parties have lived in Singapore, Japan and now Hong Kong. 

8.  The Wife presented her case as needs-based, such needs being generously assessed.  She pressed for an award which would have enabled her to retain two landed properties in Singapore, together with lump sums for herself and capitalised maintenance for the Children.  It was a central element of her case that the Husband had not only failed in his duty of full and frank disclosure, but that he had systematically and surreptitiously diverted large amounts of his income to destinations unknown to the Wife and undisclosed by him.  Her estimates of this hidden money varied in the lead-up to the Trial, but at minimum, she put it at HK$100M. 

9.  This “black hole” theory was rejected by the Court: Judgment, §§36 – 71. 

10.  The Court found that the net assets should be evenly divided between the parties and rejected the Wife’s case that there should be a departure from equal sharing, taking into account all factors, including the disparity in earning power: Judgment, §§ 187 – 194. 

The Law

11.  Section 63A of the District Court Ordinance empowers the Court to grant leave to appeal against a judgment and order, with or without conditions.  Subsection 63A(2) provides that leave to appeal shall not be granted unless the Court is satisfied (a) the appeal has a reasonable prospect of success or (b) there is some other reason in the interests of justice that the appeal should be heard.

12.  The relevant test of whether an appeal has a “reasonable prospect of success” is whether the applicant has demonstrated that s/he has an arguable case with reasonable chances of success on appeal, being an appeal with prospects that are more than fanciful but which do not need to be shown to be probable: SMSE v KL [2009] 4 HKLRD 125.

Consideration

Ground 1

13.  Paragraph 1 of the Wife’s Submissions argues that the Court failed to take into account or ignored her “long term intentions with the Singapore properties, including holding those assets” for the Children’s benefit.  It is her case that the importance of these properties was repeatedly stressed and should have been reflected in a departure from equality in her favour. 

14.  I do not consider this Ground to be reasonably arguable.  The Judgment considered the history of acquisition of the Singapore properties – which represented the majority of the matrimonial pool – including the Wife’s contribution to the purchase price. The Court took into account the Wife’s wish to retain both the C Property and K Property: this formed a central part of her written and oral evidence and her submissions at Trial.  Having regard to the Court’s rejection of her hidden asset theory, the two properties represented more than half of the matrimonial pool of assets, and their sale was ultimately unavoidable, including given that both parties intend to remain living in Hong Kong for the foreseeable future. 

Ground 2

15.  The Wife’s Submissions particularise the claim that the Court erred in rejecting the “black hole” theory, in five different points. 

16.  First, she says that the Court erred in failing to take into account the highly acrimonious children’s proceedings which considerably delayed the financial proceedings. This is not correct.  The second basis for rejecting the theory explicitly referred to and made allowance for the fact that the parties’ focus for several years was primarily on the proceedings relating to the arrangements for the Children: Judgment, §60. 

17.  Secondly, she says the Court failed to have regard to the fact that the Respondent delayed in providing disclosure of relevant financial information, some of which was only given in November 2021, despite having been requested by the Petitioner in her Questionnaires.  Again, this is not accurate.  The Judgment records the relevant sequence of events, including the Wife’s Discovery Summons of July 2021, which was eventually compromised in October 2021 (Judgment, §§38 – 47), and the important terms of that resolution, including that the Consent Order dated 20 October 2021 records in its Recital that the provision of further documents was “entirely without prejudice to either party’s contention as to whether the Petitioner’s Summons was necessary.”  The Husband maintained throughout that the disclosed material was not relevant to the Wife’s claim for ancillary relief.  Furthermore, the part of the Judgment now being questioned (§§59-61) gives multiple reasons for the conclusion that the Wife had failed to act with sufficient promptitude in advancing her theory of the missing money. 

18.  Thirdly, the Wife complains under this Ground that the Court “failed to consider Petitioner’s accounts of Respondent’s deposits and withdrawals during the marriage, including the period before 2011” and that it “also erroneously misconstrued Petitioner’s MPS application which was to justify maintenance, not to justify black-hole in Respondent’s assets”.  Both of these points allude to §62 of the Judgment.  With respect, this submission misunderstands the point being made, which was, to be clear, to emphasise that the Wife’s theory of systematic syphoning off or diversion of funds, and her late presentation of it, was inconsistent with the fact that she and the Husband held joint bank accounts into which his income was received and out of which expenses were met.  It is settled law that MPS applications are decided on a broad-brush basis, but allegations of material non-disclosure by a paying party may be and often are made in support of such applications.  The absence of any reference in the Wife’s 6^th Affidavit (for the MPS Summons) to marriage-length diversion of money was a relevant point to make among the many reasons to reject her “black hole” theory. 

19.  Fourthly, the Wife says the Court erred in rejecting the charts she produced at the Trial.  I disagree.  There were multiple reasons for rejecting them as deficient and unreliable, including serious and material errors summarised in Judgment, §§65 – 67.  As noted in §68, the Wife did not call a forensic accountant.  All indications from the lead-up to the Trial were that she (and her legal team) was aware that this would be necessary, or at least highly desirable, in order to present her theory properly, but an application to do so was made very late and only informally and when it was refused, was not taken further (see Judgment, §61).  The charts themselves were only produced at the Trial. 

20.  Fifthly, the Wife says “it was well within the judge’s discretion to accept within the range of figures the size of the black hole”.  This presupposes a finding that there was a black hole.  I found otherwise, for the reasons set out in Judgment §§55 – 71. 

Ground 3

21.  This Ground asserts that the Court erred in three respects. 

Ground 3(a)

22.  First, as to the assessment of her needs, the Wife says that the Court erred in “dramatically reducing” her needs and that this was “distinctly unfair” having regard to various matters, including the Husband’s “extravagant lifestyle”. 

23.  This is not a reasonably arguable Ground.  Her needs were considered carefully and with regard to all relevant factors including the standard of living the parties enjoyed during their marriage.  The analysis is at §§147 – 161.  It included consideration of an appropriate proportion of the general expenses attributable to the Children, including having regard to the fact that the older child, N, was 19 at the time of the Judgment and living in Singapore, where he is undertaking his national service.  I do not accept that there was any flaw in the analysis and assessment of needs, generously assessed.  

Ground 3(b)

24.  Here, the Wife complains that there was no proper explanation of the conclusions on the Duxbury analysis.  The relevant part of the Judgment is at §§177 – 182.  The key point here is that, although the Court rejected the Wife’s case that she would adopt a very conservative, risk-averse investment strategy, aka the ‘prudent investor’ rate of return or “Bharwaney Portfolio”, the Judgment (§182) assumed that the Wife would do so, for the purposes of calculating the Duxbury sum.  In other words, the Court erred (if at all) in favour of the Wife’s case on this point. 

Ground 3(c)

25.  The Wife then says that the Court’s finding on her earning capacity was flawed.  She says that the Court found, wrongly, that the Wife had the potential to earn a reasonable salary in the financial sector and could reasonably expect to command the Husband’s level of earnings.  Additionally, she reads into the Judgment a finding (which she says is also flawed) that I considered that any shortfall in her capital award could be met by her earning a salary. 

26.  None of this is correct.  The passage in the Judgment where the conclusions on her earning capacity are to be found bears repeating, with emphasis:

“133. The Wife has the potential to earn a reasonable salary in the financial sector, but this will require some retraining and updating. She seems to have very little motivation towards that direction, and indeed baulked at the suggestion she should do so.

134. I do not accept the Husband’s argument that I should conclude that the Wife has an earning capacity of not less than HK$1.2 million per annum.  My view is that if she was to return to work she could not reasonably expect to command more than a third of that sum, at least initially.  I note the Husband’s current earnings are approximately that amount i.e. HK$400,000 per annum, albeit that is his base salary.”

27.  In other words, the finding that the Wife had the potential to return to remunerative employment was heavily qualified.

28.  Nor was the finding as to her capital award based at all on her returning to work.  The Court was required, by Section 7, MPPO, to consider all the relevant matters set out therein, including the Wife’s capacity to return to work, but the finding that she would need a Duxbury sum of between HK$75,000,000 and HK$80,000,000 (§182) assumed that she would not do so (see the second sentence of §132).  I noted both parties’ evidence and submissions on this important issue, including that the Wife had not worked in the finance industry for the best part of two decades and she may well find it difficult to return to it (Judgment, §§126 – 131). 

Ground 4

29.  The Wife’s Submissions on this Ground make three points. 

30.  The first is that the order for sale of the two Singapore properties failed to acknowledge that the Wife’s future living arrangements are contingent on where the Children’s future education will take place, and at the same time they need their base in Singapore.  The second is a repetition of Ground 1, namely that the Court failed to heed the Wife’s wish to retain the Singapore properties as part of her pension and her legacy for the Children.  Thirdly, the Wife says that the Court failed to take into account the Singapore government’s cooling measures in accepting the SJE’s value of the K Property. 

31.  None of these points has merit.  For the Court to have ruled that the two Singapore properties should somehow be retained by the Wife so that they could be held for the benefit of the Children would not have sufficiently provided for the present and future needs of the parties and the Children.  The Wife presented her case on the basis that she would remain living in Hong Kong for the foreseeable future and asked for her housing costs and other general and personal expenses to be assessed on that basis.  Having rejected the Wife’s case that the Husband had very substantially more assets than he said he had, it necessarily followed that in order to achieve an appropriate division of assets and provide for both parties’ needs, and those of the Children, the sale of the Singapore properties was necessary.  The Wife’s desire to retain them was not ignored, it was simply not possible to fashion an award which acceded to it. 

Ground 5

32.  This Ground is presented in two parts.  First the Wife says that the assessment – she refers to it as “reduction” – in the Children’s expenses will require her to bear the “shortfall” from her capital.  This is flawed.  The Children’s reasonable expenses were assessed (Judgment, §§162 – 164) by reference to the standard of living and the parties’ capacity to meet those expenses on an ongoing basis. 

33.  Part two of this Ground challenges the finding that the expenses for each child would be considerably reduced when they attend mandatory national service in Singapore.  The Wife’s submissions in this respect are difficult to follow, given that it must necessarily be the case that most of the child-specific expenses attributable to N had been either eliminated or considerably reduced after he left for his two years of national service in Singapore.  No details were provided by the Wife as to N’s financial needs during his national service.  In those circumstances, while the Court disagreed with the Husband’s argument that all maintenance should cease as the Court lacked jurisdiction to make an order that it continue (Judgment, §§166 – 173), it accepted there was a significant difference in the quantum of the expenses attributable to the younger child, C, who will be in Hong Kong for several more years before his national service, and the older child, N who has already commenced his compulsory service with the Singapore army.  Absent evidence or submissions from either the Wife and the Husband as to the extent of such reduction, the Court determined that at least some provision should be made for this and lighted on the figure of $10,000 per month.  As noted in §175 of the Judgment, when N completes his national service, adjustments will have to be made to the ongoing maintenance for him, to include further education costs. 

Stay

34.  The power to order a stay pending appeal is given by O.59 r.13, RHC.  The principles governing the exercise of this power were addressed by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.  Good reasons must exist for a stay to be granted.  These include whether the absence of a stay (or its existence) would render an appeal nugatory, and the overall merits of the appeal. 

35.  I have found that none of the proposed Grounds of Appeal have merit.  For completeness, I should add that in my view there is insufficient basis to suggest that the refusal of a stay would render any further application for leave to appeal or, if leave is granted, the appeal itself, nugatory.  Inter alia,assuming the two Singapore properties have been placed on the market pursuant to the Order, they cannot be sold without the cooperation of both parties, as they are in joint names. 

36.  In these circumstances, I refuse the Wife’s application for a stay of the relevant parts of the Order.

Conclusion

37.  None of the proposed Grounds of Appeal advanced in the Wife’s Summons are reasonably arguable.  The Summons is dismissed, with an order that the Wife pay the Husband’s costs. 

38.  The Husband asks for a Summary Assessment under Order 62 rule 9A.  I have considered his Statement of Costs dated 14 July 2022.  I will allow $20,000 for solicitors’ costs and disbursements and $80,000 for counsel fees, totalling HK$100,000. 

FCMC 15288 / 2015

[2022] HKFC 199

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.15288 OF 2015

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____________________

J U D G M E N T
(COSTS)

____________________

1.  On 2 June 2022 the Court handed down its Judgment on the parties’ respective claims for ancillary relief.  Part of the Order upon Judgment was that there be “no order” as to costs of the proceedings, including all costs reserved (“Costs Order”). This was made on a nisi basis to be made absolute in the absence of any application to vary it within 28 days. 

2.  The Respondent/Husband has now applied (within the 28 days) to the Court for variation of the Costs Order and for it to be replaced with an order that the Petitioner/Wife pay his costs of the proceedings, and that these costs be taxed in default of agreement, on an indemnity basis.  The Wife resists the application. 

Legal principles relating to costs orders in family cases

3.  Order 62 of the RHC governs the exercise of the Court’s discretion in respect to costs of legal proceedings: MCR, rule 3, rule 91A.  O 62 r 3(2) states that “If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”  O 62 r 5 sets out the matters to be taken into consideration by the Court in the exercise of its discretion, including the underlying objectives of the Rules under Order 1A, rule 1, which emphasises the need for cost-effective and expeditious disposal of matters and the promotion of reasonable proportion and procedural economy in litigation before the Court. 

4.  Calderbank offers made “without prejudice save as to costs” and which one party unreasonably refuses to accept may be considered in the exercise of the Court’s discretion.  In this respect, Order 1A rule 1 additionally emphasises the importance of parties making all reasonable efforts to settle disputes.  This has been repeatedly emphasised in respect of family cases.  Neither party may “ignore sensible and rational offers of compromise in the comfortable knowledge that they can do so with impunity”: HK v BD [2010] HKCA 357; CACV 252/2009 (15 October 2010) at [94]. 

5.  During the Trial, the Court reminded both parties of the potentially adverse costs consequences of litigating issues on which they might not ultimately succeed.  In exercising its discretion on costs the Court may have regard to the conduct of the parties, namely (sub-rule 5(2) ):

“(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

6.  It is recognised that due to the special dynamics of family proceedings the discretion of the Court to fashion orders for costs is wider than in other civil proceedings and the general rule that costs should follow the event may be displaced more easily: L v C [2008] HKCA 92 (CACV 169/2006, 19 March 2008)applying Gojkovic v Gojkovic (No. 2) [1992] 1 All ER 267; TL v SN (Ancillary Relief) [2010] HKCA 389 (CACV 196/2009, 9 December 2010); Z v X [2013] HKCA 124 (CACV 251/2011, 8 March 2013). 

The Judgment and Order

7.  The Judgment followed a 10-day Trial held in February 2022.  The award provided for an equal division of the net matrimonial assets, which included two landed properties in Singapore, a house (“K Property”) and an apartment (“C Property”).  The Order was for both of these properties to be sold, with the net proceeds to be distributed equally between the parties (paragraphs 1 and 2).  The Order further provided for the Husband to pay three lump sums to the Wife (paragraph 4) which, together with the division of the proceeds of sale of the two properties, and with the assistance of a Duxbury calculation, would provide for her future needs and enable a clean break.  Finally, the Order granted the Wife’s application for continuing support for the Children, including ongoing payments of maintenance to be made through to adulthood or completion of their full-time education (whichever is later). 

8.  The Wife has applied to this Court for leave to appeal the Judgment and aspects of the Order including the order for sale of the properties.  Her application is being dealt with by separate Judgment handed down at the same time as this Judgment. 

The Husband’s grounds to vary the Costs Order

9.  The Husband advances five reasons which he says justify an award of his costs:

a.  First, that the Judgment/Order achieved no better a result for the Wife than pre-Trial offers made by the Husband in September 2019, September 2021 and shortly before the Trial.  The Husband says these should be regarded as Sanctioned Offers pursuant to O 22 r 23(3)-(5). 

b.  Secondly, that the Judgment also reflects his Open Offer in January 2022 which proposed equal division of the net matrimonial pool of assets.

c.  Thirdly, that the Wife has failed to negotiate or provide a timely response to the various offers.

d.  Fourthly, that the Wife ran an unsuccessful case of deliberate non-disclosure on the part of the Husband and that this justifies an award of his costs on an indemnity basis.

e.  Fifthly, that the Husband was successful on the vast majority of the contentious issues.

10.  For the Wife, it was submitted that pending the determination of her application for leave to appeal, the Husband’s application to vary the Costs Order should be adjourned.  Judgment on her leave to appeal application is being handed down at the same time as this Judgment. 

11.  In the alternative, the Wife says that the existing Order for “no order” as to costs should be maintained.  She says that she did not unreasonably reject any of the Husband’s pre-Trial WP offers, nor did she negotiate on an unreasonable basis.  She says that she was entitled to put forward her case vigorously at Trial, including her claim that the Husband was hiding significant assets.  Finally, she says that neither party succeeded fully on all issues and that this underpins her submission that “no order” as to costs is the most appropriate order to be made. 

Issues

12.  It is convenient to deal with the Husband’s last point first. 

13.  The Husband says that he was successful in the vast majority of the issues at Trial including the Wife’s “black hole” theory/allegation of serious non-disclosure (H’s Submissions paragraph 11).  He says that on many other points his case was accepted by the Court – the “over-housing” of the Wife, his claim that she had a significant earning capacity, and that the ultimate award must include orders for the sale of the Singapore properties.  He also submits that the Trial was lengthened unnecessarily by the Wife insisting on the calling of three experts – as to the value of the properties, the appraisal of the Husband’s wine collection and the Duxbury report – when their views were accepted by the Husband, and ultimately the Court. 

14.  The Wife submits otherwise and says that on several issues, her position was preferred, namely

a.  As to the alleged loss arising from the non-rental of the K Property, where the Court rejected the Husband’s argument that this should result in a downwards adjustment of the Wife’s award by way of compensation;

b.  As to the value of his wine collection, where the Court agreed that the wine had, overall, increased considerably in value from the date of the SJE report to Trial;

c.  As to the Husband’s claim that the Wife could expect a sizable inheritance from her father, on which the Court agreed with the Wife’s contentions; and

d.  The rejection of the Husband’s case that child maintenance for N should cease, as he is reporting for national service with the Singapore military. 

15.  Leaving aside for the moment the question of whether it was reasonable for the Wife to pursue her black hole theory and the question of unnecessary lengthening of the trial, which I will deal with under “conduct”, I maintain my view that neither party has won on all of the issues – the Husband did on some, the Wife on others.  On this Ground, I am not persuaded the Costs Order should be disturbed. 

Offers

16.  The Husband refers to three “without prejudice save as to costs” letters from his solicitors (“CRB”) to those acting for the Wife (“PCW”) dated respectively 19 September 2019, 1 September 2021 and 1 February 2022.  It is his contention that these constituted Sanctioned Offers, all made prior to Trial, and which he bettered at the Trial.

17.  The first of these proposed that the Wife would receive slightly more than half of the net matrimonial assets of approximately HK$200M, by the split of the properties in Singapore, K Property to the Wife and C Property to the Husband; a cash payment of HK$5M to the Wife, and various other adjustments to arrive at the broadly equal division of assets. 

18.  On 20 April 2021 the Wife advanced a Without Prejudice proposal of her own through PCW.  This was one week before the FDR on 27 April 2021.  This proposal argued for the ring-fencing of the Singapore properties on the basis of her assertion that when they were acquired, it was the common intention of the parties that they be held for the Children and for this reason they should be excluded from the matrimonial pool. The Wife also suggested the Husband had hidden assets (based on her estimate of his past income and the family expenses) and that the total family assets should be at least HK$345M – excluding the Singapore properties.  She did not dispute that the assets should be divided equally, but on her calculation this would result in her being entitled to approximately HK$172.5M with, as noted, the Singapore properties being excluded from the pot.  She proposed that the properties be transferred to her to hold on trust for the Children.  She sought a lump sum payment for the Children’s future maintenance. 

19.  The next WP offer was CRB’s letter dated 1 September 2021.  It proposed a slightly improved proposition to the offer of September 2019, namely that the Wife would receive 50.5% of the assets and the Husband 49.5%. All disclosed assets were to be divided, including the two Singapore properties. The letter did not explicitly reject the Wife’s case on the alleged hiding of assets, but it did not need to: the Husband’s position rejecting the Wife’s claim that he was hiding money or other assets has been made very clear in open correspondence and in his narrative affirmations. 

20.  The 1 September 2021 offer letter confirmed that the Husband would continue to support the Children at the rate of HK$25,475 per child per month with direct payment by him of their school fees, and that he would discuss with the Children directly on his support during their national service with the Singapore military, and during university. 

21.  The next offer came from PCW on 26 January 2022.  This proposed the transfer of the two Singapore properties to the Wife for $nil consideration for the use of the Wife and Children in the future and, “for the intended benefit of the Children”, a lump sum of HK$40M from Husband to Wife together with a somewhat reduced lump sum for the Children. 

22.  On 1 February 2022 the third and final “sanctioned” offer was made by the Husband. It proposed a 52%/48% split in favour of the Wife, the components of which included the sale of the K Property and equal division of the net proceeds, with the C Property to be transferred to the Wife and an overall reconciliation to achieve the proposed percentage split. It included an agreement to pay $30,000/month for the younger child, C, but none for N who had by this time turned 18 and commenced his national service in Singapore.  The offer was expressed to be open for acceptance “in its entirety” until 10am on 7 February 2022 (the second day of the Trial) after which the percentage split would revert to 50.05%/49.95%. 

23.  At Trial, as in the now disclosed WP communications, the Wife maintained that the Singapore properties should be hers, enabling them to be handed down to the Children in the fullness of time.  The Husband’s open position was that this was not possible, as they represented the majority of the matrimonial assets and that in order to achieve a fair division and, at the same time providing for the needs of the parties and the Children, the properties had to be sold. 

24.  The Wife’s black hole theory was that having regard to the Husband’s total earnings during the marriage, net of tax, and allowing for the family’s expenses over the years, the Husband must be possessed of far more wealth than he had disclosed.  The Wife could not be precise about exactly how much was missing but estimated it to be at least HK$100 million: Judgment, §15.  She relied heavily on her black hole theory to underpin her claim that the two Singapore properties, into which she had sunk all her pre-marital savings, should be transferred to her as part of her award. 

25.  This part of her case was rejected: Judgment, §§36-71. 

26.  The Husband says that “beat” each of his three offers at Trial and that it is a simple matter of applying O 22 r 23(5) and awarding him his costs from 17 October 2019 (28 days after the first sanctioned offer), and on an indemnity basis with interest at 10% above the judgment rate.  Alternatively, he says that each of the offers are expressed as Calderbank offers and, per Gojkovic, he should receive his costs as the final result in the Judgment was either the same as his offers or more favourable to him. 

27.  The Wife, in response, says that she was entitled to maintain at the Trial her position on the Singapore properties and her hidden asset/black hole theory, views she says were genuinely held and arguable.  She says that it is misleading of the Husband to assert that he succeeded in beating either the first or second sanctioned offers, and that it was only the third which numerically trumped the Judgment and then “only due to the phenomenal appreciation” of the Singapore Properties.  In any event, she says, the offer failed on the issue of maintenance for the Children. 

28.  She makes the same point in respect of the Open offers/proposals which are noted in the Judgment. Again, she says that she was entitled to maintain and argue her position at Trial and that her views were reasonably held.  She rejects the suggestion that she failed to negotiate reasonably. 

29.  In his Reply submissions on this point, the Husband maintained his position that the Wife’s case on the retention or ring-fencing of the Singapore properties and her black hole theory were both unrealistic and irrational and the fact that they may have been “genuinely held”, as the Wife claimed, is of no relevance. 

30.  I do not accept the Husband’s assertion that this is a simple matter of applying O. 22 r. 23.  I note that the second offer dated 1 September 2021 was expressed to be accepted if at all, “in its entirety”.  So too was the last WP offer, which, if accepted, would have deprived the Wife of any maintenance for the older of the two Children and for the younger when he attends National Service in Singapore.

31.  I bear in mind that Calderbank offers do not easily fit within matrimonial finance litigation as they do in ordinary civil litigation, such as a claim for damages for personal injury where it may be a simple mathematical analysis of comparing the offer with the final monetary award: W v K and Anor (Costs) [2008] HKFLR 387, at [16] – [19]; GW v RW [2003] 2 FLR 108. 

32.  What does resonate from this correspondence is that the parties were negotiating without any common ground on the net asset position.  This was due to the Wife’s insistence that the Husband was hiding very significant assets of at least HK$100M and that both of the Singapore properties should be transferred to her.  Neither of these was accepted by the Court in its Judgment. 

Conduct

33.  The Husband then says that the Wife was guilty of litigation misconduct by pursuing her black hole theory in her written evidence and then through to Trial. 

34.  Further, he says the Trial itself was unnecessarily lengthened by the calling of three witnesses.  I will deal with this point first. 

35.  I do not accept that the attendance at Trial of these witnesses was without good reason. 

36.  First, the calling of Ms. Fong enabled the Wife to put her case that the value Ms. Fong had attributed to the K Property (by far the more valuable of the two Singapore properties) was too high having regard to its location in Singapore, its overall condition and the “cooling measures” introduced by the Singapore government in 2021 (this last issue was also relevant to the estimated value of the C Property).  This was important evidence, and although ultimately the Court concluded that Ms. Fong’s valuations of the two properties constituted an appropriate basis for the purposes of the ultimate award, it was proper for the Wife to ask that she give evidence, which was of considerable assistance to the Court.  I should add that Ms. Fong being called enabled the Husband to put to her his case that the K Property was worth more than she had estimated. See Judgment, §§93 – 108.

37.  Secondly, as to Mr. Wainwright, the wine expert.  Approximately a day was spent on his evidence, during which he was questioned by both parties.  The majority of the questions were put by the Wife, both with respect to individual lots in the collection, which Mr. Wainwright agreed had risen in value since his report of only a few months before, as well as to particular categories: e.g. White Burgundies had decreased in value and Red Burgundies had increased, in Mr. Wainwright’s view. This was perfectly reasonable and the conclusion of the Court in what this meant in dollar terms was not insignificant: Judgment, §§109 – 121.

38.  Thirdly, as to Ms. Chi, the SJE who provided a Duxbury calculation.  Her report, and her oral evidence, were both important as they provided a basis on which the Court could assess the Wife’s claim for a lump sum to provide for her future needs on a life-long basis.  The analysis of her evidence, including in the witness-box, has been set out in the Judgment and there is no need to repeat it here: Judgment §§177-182.  I would add that Ms. Chi was appointed at a fairly late stage, only a matter of weeks before the Trial.  It was not unreasonable for the Wife to want her to give evidence at the Trial and for the Wife to put her case to Ms. Chi on various aspects, including which of the investment scenarios advanced by Ms. Chi should be adopted for the purpose of the correct Duxbury figure. 

39.  Of much more significant concern is the Wife’s persistence in maintaining her black hole theory throughout.  I have already referred to the passage in the Judgment which addressed this theory: §§36 – 71.  In my view, it was unreasonable for the Wife to pursue this aspect of her case.  She may well have genuinely believed it, but that is not sufficient.  The question is not simply whether something is genuinely believed, but whether this belief is reasonable and soundly based.  It was not, for the reasons explained in §§55 – 71 of the Judgment.

Conclusion

40.  The pursuit by the Wife of her black hole theory has been significant in three main respects.  First, it hampered any reasonable prospect of settlement, as the Wife approached negotiations at least in part on her belief that the Husband was vastly under-representing his true asset holding and she would not consider any settlement which did not include the Singapore properties being transferred to her.  Secondly, it forced the Husband to respond to the theory, in all its manifestations, in his written evidence and then again at Trial, resulting in him expending significant additional costs.  Thirdly, it added to the length of the Trial and the written Submissions which preceded and succeeded it.  Inter alia, the Husband was forced to respond to the various charts by which she sought to flesh out the mathematical basis of her theory, but these were only produced at the Trial itself and they were not the product of a professional forensic accounting analysis of the documents in evidence (Judgment, §§65 – 68). 

41.  I find that there is a basis to depart from the Costs Order nisi.  I intend to grant the Husband’s application to the extent that the Wife will be ordered to pay 20% of the Husband’s costs of the ancillary relief proceedings. 

42.  The Husband asks that these costs be assessed summarily on an indemnity basis. 

43.  I am aware of the power of the Court to assess costs summarily in lieu of taxed costs (O. 62, r.9), but in my view given the length of the case and the sum claimed, it is neither practicable nor appropriate for the Court to conduct a summary assessment, which is necessarily broad-brush (PD14.3/4).  A formal taxation will be required unless the parties are able to come to an agreement. 

44.  In seeking indemnity costs, the Husband refers to and relies upon the case of Clutterbuck v HSBC PLC and others [2015] EWHC 3233, which he submits as authority for the proposition that where a party unsuccessfully pursues an allegation of fraud, the Court is “very likely” to award indemnity costs.  That case involved an action in tort for deceit and/or negligence. One of the defendants to the action applied to strike out the action against him. Ultimately before the application was heard, the claimants filed a notice of discontinuance.  It was in these circumstances that the Court ordered costs to be paid by the claimants on an indemnity basis. 

45.  Nonetheless, I find that the Wife’s conduct in pursuing her case in this respect is of the kind which justifies an order that costs be taxed on an indemnity basis.  I have considered the relevant authorities, including those referred to in para 62/App/12, Hong Kong Civil Procedure, 2022 Edn, Vol 1.  The governing principle is that an award of indemnity costs must be “appropriate”: Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 (CA).  The Court must be additionally satisfied that the case has some “special or unusual feature” and the reasonableness of the conduct of the parties may also be relevant:  Town Planning Board v Society for Protection of the Harbour Limited [2004] HKCFA 22; (2004) 7 HKCFAR 114, at §§14 – 23.  See also, in the context of family cases, LYE v CWW [2005] HKFC 5; FCMC 14787/2002. 

46.  In my view, although it may not have been unreasonable for her to raise her theory in her Discovery Summons, the fact that she persisted with it on the basis and in the manner she presented it, including the lack of any forensic accounting to confirm that there was some merit to her theory despite the Husband’s persistent denials, justifies an award of costs on an indemnity basis. 

47.  I therefore grant the Husband’s application to vary the Costs Order, and replace it with an order that the Wife do pay 20% of the Husband’s costs of the ancillary relief proceedings, to be taxed in default of agreement on an indemnity basis.  As the Husband has not been wholly successful in his application to vary the Costs Order, I will award him 50% of his costs of the Summons to be taxed in default of agreement, on a party and party basis.  In respect of both Orders, I grant a certificate for counsel. 

48.  I have borne in mind the financial consequences of this change to the Costs Order, and have noted the Husband’s Estimate of his costs of the ancillary relief proceedings.  I see no reason to alter the overall award set out in the Judgment. 

FCMC 15288/2015

[2022] HKFC 114

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.15288 OF 2015

________________________

________________________

________________________

J U D G M E N T

(Ancillary Relief)

________________________

Agreed exchange rates:

1USD = HKD7.78460

1SGD = HKD5.77630

1GBP = HKD10.64670

1AUD = HKD5.61360

1MYR = HKD1.86400

A.  Introduction and Background

1.  This judgment follows the Trial in February this year of the parties’ claims for ancillary/financial relief.  

2.  The Petitioner/Wife is from Singapore and is now 50 years of age. The Respondent/Husband, a national of Malaysia, is 49.  They met in Singapore when they were working for the same international investment bank.  They married in Singapore in November 2000, after about 5 years of dating.  They have two children, both sons: N who was born in Jan 2003 and is now 19 years of age, and C, who was born in Sep 2007 and is 14 (“the Children”).  N is undertaking national service in Singapore, and C is completing year 10 in an international school in Hong Kong, studying for his IGCSEs. 

3.  The parties have lived in Hong Kong with the Children since the end of 2007.  Before that they were in Tokyo for just under two years, where the Husband had been posted by his then employer.  Prior to that they lived in Singapore.  They are both Hong Kong permanent residents, and both of them testified that they have no plans to leave, although the Wife said that she would likely want to spend time in whatever country or countries the Children decide to pursue their tertiary studies. 

4.  The Wife attended university in Singapore and upon graduating worked in the foreign exchange markets for an investment bank, specialising in derivatives.  She moved to another investment bank, then returned to her first employer, rising to a senior position with the bank and by 2004, commanding an annual salary plus benefits of more than SG$300,000.   

5.  She ceased work in September 2004.  The Husband was earning more than enough to support the growing family and the Wife says that her decision to stop working and to devote herself full time to caring for the Children and the household was fully supported by him. He has criticised her self-description of having “retired” at this point, but it is not in dispute that she left what was a well-established career in finance to focus on her role as a mother to N and later to C, to supporting her Husband’s career and to looking after the household.   

6.  When the parties met the Husband was working as an FX trader for the same investment bank, having completed his education in Singapore and London.  By the time they married the Husband had found a position with another investment bank involving again FX trading and fund management. 

7.  In 2006 the Husband obtained a position with a leading international investment firm, and the family moved to Tokyo, where the Husband had been posted by the firm.  As noted, from late 2007 the family moved to Hong Kong.  Ultimately the Husband rose to a partnership position with this firm and to a leading position in its FX/Fixed Income Trading division.  This was a highly lucrative position and the family enjoyed a very comfortable lifestyle and the parties accumulated considerable assets.  

8.  Since 2014 the Husband has been with a Hong Kong investment management firm.   

9.  Marital difficulties began in 2011 leading to periods where they were living separately.  The parties finally separated permanently in August 2014 and have remained apart since then.  Divorce proceedings were initiated by the Husband filing a petition on 28 August 2014 alleging “mild unreasonable behaviour” grounds.  The suit was defended by the Wife but was eventually compromised in November 2015 on the basis that the Wife would file a fresh petition on the ground of one year’s separation with the Husband’s consent.[1] The Decree Nisi was pronounced on 8 March 2016. 

10.  Issues of custody and access concerning the Children were contested over several years, and necessitated the involvement of multiple experts including psychologists, culminating in the Court’s Judgment and Order dated 13 August 2019,[2] by which the parties have joint custody of C with care and control to the Wife and defined access to the Husband.  By the same order the Wife has sole custody of N with reasonable access to the Husband (but there is at present no contact between N and his father and there has not been for some years).   

11.  The Husband has been providing interim financial support to the Wife for her and the Children pending the determination of ancillary relief.  On 17 November 2020 the Wife applied by Summons for maintenance pending suit and interim maintenance for the Children on the basis that the amount the Husband was paying had been unreasonably reduced by him and was insufficient to meet her immediate needs and those of the Children.[3] The Husband had offered the Wife a Charman payment of HK$5 million which he said she had unreasonably turned down.  Her application was dealt with on paper with the Court delivering judgment on 28 October 2021[4] awarding on an interim basis HK$85,000 per month for MPS and HK$217,000 for interim child maintenance backdated to the date of the Summons.  Since N reported for national service, the Husband has ceased payments attributable to him on the basis that N is now an adult, who has completed his studies and is in full-time employment with the Singapore army. 

B.  The Issues

12.  The task of the Court is to achieve a fair distribution of the assets and ongoing support of the Children having regard to all the relevant circumstances.  In doing so the Court will strive to achieve a clean break if the assets are sufficient to enable this to happen.  The issues in this case are straightforward: What is the extent of the matrimonial pool? What are the parties’ other financial resources, including their current earnings and potential earning capacity? What are their needs, assessed appropriately including by reference to the standard of living during the marriage?  What are the Children’s needs?  Will the parties’ needs and those of the Children be adequately met by the assets and are there assets surplus to needs?  If so, how should these be divided, and in particular, should the Court depart from equal sharing? 

13.  For the purposes of the Trial, the parties supplied the Court with an updated Schedule of Agreed and Non-Agreed Assets with a figure of approximately HK$241.6M net.  As the title suggests, the value of some of the assets was not able to be agreed and multiple single joint experts were appointed and provided Reports.  Some of the Reports resulted in agreement, others did not and those experts whose valuations could not be agreed gave evidence at the Trial.   

14.  Pursuant to pre-Trial directions given by the Court, the parties also produced a Scott Schedule of contentious issues.  One of the more significant disputes concerns allegations of misconduct levelled by each of the parties against the other which they say has significantly impacted the matrimonial pool of assets available for distribution. 

15.  The Wife claims that during the marriage the Husband syphoned off millions of dollars in cash to undisclosed locations: her estimate is that this amounts to at least HK$100M.  The primary basis for her allegation is a simple formula: her estimate of the Husband’s total earnings, deducting therefrom her calculation of the total family expenditure and then comparing what she says the current net position should be with the net position as disclosed. 

16.  The Husband for his part says that the Court should take into consideration the Wife’s conduct including her refusal to agree to lease out one or both of the two landed Singapore properties held in joint names during the past 6-8 years leading up to the Trial.  He also criticises the Wife’s litigation conduct in using “every trick in the implacably hostile parent’s playbook” to delay the proceedings and to sabotage his access to the younger child, C.[5] He says the Wife (a)  unreasonably contested his unreasonable behaviour Petition, resulting in a delay of 15 months and (b)  unreasonably contested the children’s arrangements, resulting in a delay in a further 3 ½ years before the Court’s Judgment of August 2019. 

17.  The Wife disputes this.  She says she was quite entitled to defend the Husband’s suit and the grounds of misbehaviour alleged, however “mild” they may have been.  Further, she says that the prolongation of the Children’s proceedings was inevitable, having regard to the number of witnesses and the issues in dispute.  I note that to the extent that the Wife’s conduct of the Children’s proceedings may have been inappropriate, this has been reflected in the Court’s Order dated 9 April 2020 that she pay a proportion of the Husband’s costs of those proceedings.   

C.  The parties as witnesses

18.  Both parties filed detailed a narrative affidavit/affirmation for the purposes of the Trial, which were confirmed during their oral testimony together with the other relevant affidavits/affirmations, and their respective Forms E and Answers to Questionnaires.

The Wife

19.  The Wife is a very intelligent woman.  She presented her case forcefully and with the intention of raising all points of concern for the Court’s determination. During her oral evidence she was, at times, voluble, and her responses to questions developed into a statement of position or argument. This was natural enough. She is anxious to maintain her financial security and that of her two sons and to preserve the Singapore properties acquired during the marriage and which were financed, in part, by her pre-marital savings. She emphasised her limited earning capacity and that she is a cautious, risk-averse investor. 

20.  Both parties agree that the Court’s award should be on the basis of a clean break, if this is possible. Whether or not this is achievable without the sale of one or both of the Singapore properties is one of the issues in the case.  The Wife was adamant in her assertion that the Husband is possessed of far more assets than he has disclosed and that this supports her claim and underpins her request for both Singapore properties to be transferred to her as part of her award.

21.  Any clean break will take into account that, as noted, neither the Wife nor the Husband have plans to relocate from Hong Kong.  In this respect, it was repeatedly suggested to the Wife that, at some point in the near future, given the divorce, she would return to Singapore to live.  She refused to commit to this: her estimate of monthly expenses was on the basis that she would continue to live in Hong Kong, at least for the foreseeable future.   

22.  The Wife Opening Submissions[6] summarised her proposal thus:

(1)  A clean break;

(2)  Transfer of the two Singapore properties to her (~HK$109.82M);

(3)  A lump sum of HK$50M in cash, or the equivalent in stock or other assets.

23.  She also sought payment of a HK$15M lump sum representing HK$108,500 per child per month, extrapolated over 4-6 years in respect of N and 10 years in respect of C.[7]

24.  By the time of her Closing Submissions, this proposal had been modified, to a request that the Court order as follows:

(1)  The transfer of the K Property and C Property to her at HK$Nil;

(2)  That the Australian land investment be transferred to W (or to N)  at AU$975,000;

(3)  That the H Club be transferred to her at HK$Nil consideration.  

(4)  For ongoing maintenance for the Children at HK$133,650 per child (with the same extrapolation periods)  payable by lump sum of HK$25,660,800. 

(5)  And one of the following findings:

(a)  A finding that the ‘black hole’ is a concern but cannot be fairly quantified (due to lack of transparency of H’s earnings over the past 6 years), and the award of the Singapore properties to W at nil consideration in lieu of the black hole, and the application of the sharing principle to award W assets equivalent to 60% of the remaining assets – to reflect W’s sacrificed career, the ‘choice’ that she made to invest her savings and pension into the properties, and her inability to now achieve anything close to the income level that she had 18 years ago, still less that she would have now if she had remained in work

OR

(b)  Computation including H’s bonuses paid in 2016 and 2017 and HK$104M added back from the ‘black hole’, and application of the sharing principle to award W assets equivalent to 60%

OR

(c)  A finding that half of the matrimonial pot will not meet W’s needs, and a lump sum Duxbury award of HK$182,910,000, less the value of K Property and C Property.[8]  

The Husband

25.  The Husband gave his evidence in an undemonstrative manner.  He is also very intelligent.  His responses at times were brief and to the point, but not incomplete. 

26.  The Husband has moved on – he has re-partnered and he and his fiancée have a child.  He is anxious to formalise the relationship, and for this reason the Court was asked to make a pre-Judgment Section 18 declaration enabling the Decree nisi to be made absolute, without delay.  The Wife opposed this, saying that there was no rush and the ancillary relief issues should first be dealt with, including those relating to N and C.

27.  The Husband’s case can be briefly summarised:

(1)  There are no missing millions, in cash or other assets.  The Wife’s “black hole” theory is misguided, the lateness with which she presented her theory amounted to an ambush and in any event her calculations are fundamentally flawed, unsupported by any professional analysis such as a forensic accountant. 

(2)  In order to complete a reasonable asset division, the two Singapore properties must be ordered to be sold. Without this, a fair distribution providing for both parties’ future needs would be impossible. 

(3)  A fair result would be for a 50/50 split of the net assets.  The parties may differ on how individual asset classes should be divided, for example whether the wine collection should be divided in specie, but there is no cause to depart from the principle of equal sharing. 

(4)  Assuming that this is a “needs generously assessed” case, a 50/50 split of assets will more than adequately provide for the Wife’s needs, generously assessed, for life.

(5)  The Wife’s entitlement to maintenance for N has ceased with effect from commencement of his national service in Singapore as he has now left school and is in full time employment with the Singapore military.  If having completed national service he returns to full time education, any claim for ongoing maintenance will be his claim, not the Wife’s.  C will continue to be supported by him through to his further education, subject to an interruption of that education.

D.  The Law

28.  The Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”)  provides the Court with a number of powers to grant financial relief to divorcing parties.  They include the making of orders for lump sum or periodical payments for a spouse or child of a marriage (ss 4 and 5)  and orders for the transfer or sale of real or personal property (ss 6 and 6A). 

29.  In considering such applications the Court is required, by Section 7 of the Ordinance, to have regard to the conduct of the parties and “all the circumstances of the case” including

“(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.”

30.  Section 7(2)  further provides that in considering whether and how to exercise the powers under ss. 5, 6 and 6A in relation to a child of the marriage, the Court must have regard to all the circumstances, including

“(a)  the financial needs of the child;

(b)  the income, earning capacity (if any), property and other financial resources of the child;

(c)  any physical or mental disability of the child;

(d)  the standard of living enjoyed by the family before the breakdown of the marriage;

(e)  the manner in which he was being and in which the parties to the marriage expected him to be educated;

and so to exercise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a)  and (b)  of subsection (1), just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him.”

31.  The Court of Final Appeal in LKD v DD (2010)  13 HKCFAR 537 encapsulated the procedural steps the Court must follow in exercising its powers under these provisions to grant ancillary relief and the underlying principles to be followed in cases of this nature.   

32.  The Court is required to

•  Step 1: Identify the assets, income and other financial resources of the parties

•  Step 2: Assess the parties’ and the children’s financial needs and how these may be met by the assets, income and other financial resources as assessed

•  Step 3: In the event that there are assets surplus to those needs, to apply the sharing principle

•  Step 4:  Consider whether there are good reasons to depart from equal division of the assets

•  Step 5: Decide the outcome. 

33.  The asset division and provision for payments by way of maintenance, whether spousal support or educational and other support for children is governed by the broad goal of working towards an outcome which is just, particularly having regard to

•  First, the objective of fairness

•  Secondly, the rejection of discrimination, including the rejection of gender or role discrimination

•  Thirdly, the yardstick of equality

•  Fourthly, the rejection of minute retrospective investigations which will serve only to “deplete the parties’ (and the courts’)  resources and to increase antagonism and discourage settlement.”[9]

E.  Step 1 – identification of assets and other financial resources

E.1  The Assets

34.  In addition to the cash balances in the joint or sole bank accounts, the significant assets are

(1)  Two landed properties in Singapore, in order of acquisition an apartment, and a house.  These are in joint names and always have been.  The value of each property was the subject of a report from an SJE but this did not lead to agreement: the Wife says the properties are worth significantly less than as assessed by the SJE; the Husband says they are worth at least as much as assessed and, in respect of the larger of the two properties, probably more.  Consequently, the expert was called at the Trial.

(2)  Other properties: two landed properties in Malaysia, and a property investment in Australia. Subject to an issue of whether a discount should be applied to the Australian investment, there is agreement as to their value. 

(3)  Financial investments. The Husband’s are quite significant – in the order of HK$65 million. To a small number of them the Husband asks that a discount be applied to reflect their illiquidity.   

(4)  A fine wine collection.  This is again a significant holding. Its assessed value was not agreed, requiring the attendance at trial of the appointed wine expert. 

(5)  Insurance and pensions.

(6)  Valuable personal items, including jewellery, watches and artwork.  As noted, the value of these were agreed post-trial.  

35.  Before dealing with the disputed values of the Singapore Properties and the wine collection, I will address the Wife’s theory that the Husband is hiding significant cash or other assets as well as the Husband’s claim for an adjustment due to the Wife’s refusal to accede to the Singapore properties being rented out. 

E.1.1 The Wife’s “black hole” theory

36.  One of the most financially significant disputes is the Wife’s theory that there must be very substantial assets, of at least HK$100 million and likely much more, which have been successfully siphoned away by the Husband during the marriage and hidden somewhere.   

37.  This theory is primarily based on the Wife’s estimate of the total amount the Husband must have earned up to when they finally separated, less the estimated family’s expenses during the marriage, and comparing that figure with the disclosed assets.  Her case is that even when appropriate allowance is made for the disputes over the values of those disclosed assets, there is an unexplained difference between the disclosed assets and the amount of wealth the family should now have according to her assessment.  The only logical conclusion, she says, is that the Husband must have surreptitiously squirreled away large amounts of money which he is now hiding from her and the Court.  She says that justice and fairness require (a)  the Court to find that this has occurred and (b)  assign a figure to the missing assets/money and add the amount back into the assets of the Husband before determining the appropriate division. 

38.  This theory was first presented with the Wife’s Inter-Partes Summons dated 5^th July 2021 for specific discovery of various documents (“the Discovery Summons”)  relating to the Husband’s compensation from his employers for the years 2001 to 2013.  In her (8^th)  Affidavit in support, she claimed that the Husband had provided insufficient disclosure and that she had therefore been “forced to reconstruct the family’s earnings and expenses”.  She continued:

“4. … To my horror and surprize, there is about HK$122.2 million in earnings that are not accounted for in H’s disclosure. They appear to have been vested or saved away somewhere. Further, there are unexplained withdrawals totalling some HK$105 million from the Hong Kong joint account by H and me maintained at the HK HSBC.”

39.  By this time the parties had been separated for nearly 7 years and the proceedings, including the Husband’s initial defended Petition, had been on foot for the same period. The Wife had been legally represented for most if not all of that time, as had the Husband.  The Wife says that she was concentrating on the disputed Children’s proceedings before this time, however the Court’s children’s Judgment was handed down in August 2019 and from that point on the parties were focussed on financial aspects. 

40.  The Wife exhibited to her 8^th Affidavit (as a single exhibit YSG-21)  a bundle of documents including the Husband’s salary and pay statements from 2006 onwards, compensation statements for 2011 and 2012, salary tax assessments for 2013 to 2016, lists of monthly deposits and withdrawals and hundreds of pages of statements of their joint HSBC account.[10]

41.  The Wife presented an analysis of the Husband’s earnings over the years, based on these materials, including from the investment bank he was with prior to their marriage and up to his present employer and concluded that during this time the Husband had earned approximately HK$284 million.  The Wife then put forward an estimate of the total family expenses for the same period as unlikely to have exceeded HK$37,060,000, and on this basis deduced[11] that the current assets in the Husband’s name should be at least HK$230,000,000.  She continued:

“62. Much to my concern and surprise, however, H’s first Form E dated 2 February 2015, gave his ‘total assets’ as only HK$165.69 million. That sum included the two Singapore properties, which should be excluded since I paid for the 20% down-payments of both homes, with the mortgage of the first home further serviced with my pension, i.e., the Central Provident Fund of Singapore, and later further serviced with rents collected, and the mortgage of the second home serviced with rents collected. Any contribution by H would not be significant, and especially so given H used HSBC Singapore joint account meant for servicing property loans to pay for his expenses, instead of expensing his personal Singapore local bank and other foreign bank accounts. Excluding those properties, H’s Form E gave total assets of HK$107.8 million.

63. That is a staggering HK$122.2 million ‘short’ (= 230 million – 107.8 million).” 

42.  As for the unexplained withdrawals, she exhibited a document collating the withdrawals from the HSBC account which she said were unexplained:

“64. ‘Monthly summaries of accounts and accounts and expenditures’ for the years 2007 through 2014, appear at pages 26 to 31 of exhibit YSG-21. They summarise and collate (among other things)  withdrawals from the Joint Account. Adding these payments up, there are unexplained withdrawals of approximately HK$105 million. I believe these withdrawals were made to undisclosed accounts or asset holding facilities, to which H’s undisclosed bonuses have also been paid.”

43.  The Husband’s response (his 6^th Affirmation)  was to label the Wife’s requests for more documents as “more than just a fishing expedition.  They are an impermissible attempt to conduct an audit of the whole marriage..”.  He said the application was made extremely late in the day, given that the proceedings had been ongoing since 2014 and that no steps had been taken to advance the allegation of material non-disclosure prior to the Summons, including prior to the FDR on 27 April 2021.  He added that in his view the theory was “pure wishful thinking”:

“8. … She has not articulated a reasoned case on why this disclosure is necessary.  For example, she has not pointed to a transaction which goes into a dark hole, or an undisclosed Swiss bank account or indeed anything tangible.  Her case is simply, “oh, I thought there should be more” without any regard to the fact that we have had difficult years as well as good years, that we spent as we went along and that millions have been wasted on this bitterly fought litigation.

9. Only six months before the final hearing did [the Wife] elect to raise this allegation of material non-disclosure, to the tune of HK$122 million.  I have pressed her to say when she first knew of this.  From her inchoate answers she should have had that inkling years ago.  She has done nothing.  As such (a)  she should never be entitled to disclosure going back this far and (b)  in any event, she has left it far too late.  She should have brought the application promptly (albeit it would still have had to have been dismissed even if brought timeously).  In truth there has been no explanation for the delay.”

(Emphasis in original)

44.  The Husband commented in his affirmation to the level of his financial disclosure in the case: two Forms E, two Answers to lengthy Questionnaires, 32 lever arch files of documents and that the part of the Wife’s theory that income must have been deliberately diverted/hidden would necessarily have involved his employers, which he described as “highly regulated financial institutions”, in the attempt to defraud the Wife.  He added that all his income and other compensation was paid into joint accounts, save for the period 2011 and beyond when he became a partner with the particular investment firm, requiring him to open a private wealth management account, and that statements for that account had been disclosed with the first Form E.   

45.  As for the Wife’s estimate of the family expenditure, the Husband described this as “an egregious misrepresentation” and pointed to a report obtained by him from a firm of forensic accountants which had analysed the parties’ accounts for the four year period 2015 – 2018 in which the average annual expenditure was HK$16.296 million[12] and that “it is wholly implausible even with two households and the inordinate legal fees incurred that our annual spending during 2008-2014 was less than a third of what it was for the period of 2015-2018”.[13] 

46.  The Wife’s reply Affidavit (her 9^th)  disputed the Husband’s contentions and maintained that there was nothing oppressive in her discovery request, nor illogical about her theory of missing millions.  Neither, she said, was her request in any way delayed, as the primary focus of the parties for the period from the commencement of litigation through to late 2019 was on resolving issues relating to the Children. 

47.  The Discovery Summons was eventually resolved by the Husband agreeing to a limited further disclosure of compensation summaries and other documents verifying his income for the period 2007 to 2013.  The consent order, dated 20 October 2021, records in its Recital the parties’ agreement that

“(1)  The order is entirely without prejudice to either party’s contention as to whether the Petitioner’s Summons was necessary.

(2)  The Petitioner acknowledges that she has had no pending or intended application for discovery, subject to the disclosure made by the Respondent in compliance with the order; and

(3)  The Trial hearing fixed for 9 days [in January/February 2022] be preserved..” 

48.  The Wife devotes a section of her (10^th)  narrative Affidavit for the Trial to her black hole theory and at §§170-177 she concentrates on an examination of a number of bank statements and credit card statements supporting her claim that the Husband had syphoned off approximately HK$154.1 million by a series of withdrawals, and specifically that

“177. I believe these withdrawals were made to undisclosed accounts or asset holding facilities, to which [the Husband’s] salaries (since February 2011)  and undisclosed bonuses have also been paid.”

49.  At the PTR on 13 December 2021, the Wife’s counsel confirmed that these allegations in the 10^th Affidavit were additional to those raised by her in her 8^th Affidavit in support of the Summons.  Her counsel then sought an order that the Wife be allowed to hire and call as a witness a forensic accountant to aid her analysis of allegedly missing millions.  This was refused.  She did not appeal that refusal nor formalise her application by Summons and supporting affidavit.  Such an application, if successful, would almost certainly have resulted in the Trial being adjourned. 

50.  During the Trial, the Wife sought to adduce a significant number of further documents she said were relevant to her black hole theory and that she had only just discovered a few days prior to the Trial.  This was refused: see Ruling dated 18 February 2022.

51.  In preparing for her oral evidence on this issue, the Wife had compiled various charts (“the Charts”)  based on and cross-referenced to the admitted disclosure and updated with the newly discovered documents.  On Day 6 of the Trial she sought to adduce them into evidence.  Given the Court’s Ruling refusing to allow the recently discovered documents, the Wife was allowed the opportunity to modify the Charts to remove any references to these documents. 

52.  On Day 7 of the Trial (Tuesday 22 February 2022), the Wife produced the modified Charts and these were marked provisionally PP11-A to PP11-E.  They were later marked P11-A to P11-E.  They are detailed documents and the Wife said they had been prepared with the assistance of an accountant over some time, from about the time of the MPS/IM application.   

53.  These charts refer to refined total of the “unaccounted-for” assets as HK$147,244,943.  Her Closing Submissions further refined this to approximately HK$104,000,000. 

54.  For the following reasons I am not satisfied there is any missing money or hidden assets. 

55.  First, it should be noted that an allegation of material non-disclosure for the purposes of placing assets beyond the reach of the claiming party is a serious one.  The Husband referred in his Closing Submissions to a recent decision of Mostyn J[14] where the learned Judge commented that deliberate non-disclosure is a subset of fraud and that as such, “it is at the very least implicit that there is a burden on the claimant not only to prove distinctly the existence of a fraud but further that it was materially causative of a seriously wrong order being made.”[15]

56.  In this case it is at the very least implicit in the Wife’s case that the Husband has been guilty of serious non-disclosure of substantial asset holdings and that this hiding/dispersal of assets has been continuing for a long time.  On the first day of the Wife’s oral evidence, the Court heard argument on her application to adduce new evidence which she said supported her black hole theory (and which resulted in the Ruling dated 18 February 2022).  During this exchange the Court clarified with counsel for the Wife as to the relevance of the additional documents, and whether it was really her case that the Husband had been engaged in cheating the Wife during the entire period of their marriage.  He confirmed that it was.   

57.  Adverse inferences may be drawn where a party leaves gaps in the information which should properly be placed before the Court, and the Court will normally draw the inference less favourable to the non-disclosing party.  But inferences “should only be drawn if there is some proper basis to do so.”: H v W & Ors [2013] HKCFI 2296; HCMC 6/2008 (10 September 2013)  per Hon Au-Yeung J, at §§47-48.  There, the CFI referred to the decision of Mostyn J in NG v SG [2012] 1 FLR 1211 which offered guidance on the circumstances where and the process by which adverse inferences arising from non-disclosure may be drawn.  Madam Justice Au-Yeung noted Mostyn J’s emphasis on the requirement that “there must be a sound evidential basis for reaching a conclusion as to the scale of undisclosed assets” and that “[t]he court should not be led into a knee-jerk reaction that says simply because evasiveness and opacity is demonstrated there is some vast sum salted away.”[16]

58.  The Wife has failed to convince me that the Husband has been guilty of such non-disclosure.   

59.  Secondly, I do not accept that the Wife has acted with sufficient timeliness in advancing her claim.  Her theory, although first explicitly presented in mid-2021 with her Specific Discovery application, was first hinted at in her 2015 Form E in paragraph 5.2 of the Form dealing with “conduct”

“Pending discovery, I am unable to give particulars save that I am aware of the following:

- Transfers of money by the Petitioner into other financial instruments etc e.g. equities, private investments, insurance or other vehicles, and also into those belonging to third parties, including his immediate family

- The Petitioner has made investments and purchases that did not include my name, including [New York property]”[17]

60.  The Wife says that she was primarily focussed on the Children’s proceedings, but this does not explain the late presentation of her claim that for the whole period of the marriage the Husband has been syphoning off vast sums of money into hidden destinations and that he should now been called to account for this gross misconduct.  Financial disclosure was given during the dispute over the Children, for example, by a process of Questionnaires and Answers on the first round of Form E Financial Statements filed in 2015: the Wife’s first Questionnaire was presented in May 2017.[18]

61.  After the August 2019 Judgment the parties refocussed on financial matters, and filed updated Forms E (in September 2019 and February 2020 respectively[19])  and there was another round of Questionnaires and Answers (H’s Answers were provided in September 2020.[20])   The Wife’s second Questionnaire sought bank statements for 2011 to 2014 and the Husband refused to provide these on the ground they were irrelevant, but this was not pressed by the Wife either by seeking leave to adduce a further Questionnaire or by a Summons for specific discovery (until much later). The FDR was fixed for 27 April 2021 by a consent order made on 21 October 2020.[21]  At the (unsuccessful)  FDR, directions were given for the agreement of valuation of the landed properties and in default the appointment of an SJE.[22] No directions were sought by the Wife for the appointment of a forensic accountant to conduct an audit of the family’s finances during their marriage.  Nor were any such directions sought at the Case Management Hearing on 28 May 2021 when Trial dates and the date for the PTR were fixed and directions given for the appointment of one or more SJEs in default of agreement of values for the Wife’s jewellery collection and the Husband’s watch, wine and art collections.[23]  I have already referred to the fact that at the PTR on 13 December 2021 the Wife applied through her counsel for the appointment of a forensic accountant but that this was made informally.  It should also be noted that even at this late stage, the Court granted leave to the parties to adduce evidence from a single joint expert in relation to the Duxbury Calculation of the Wife’s needs.[24] To complete the picture, a further (consent)  order was made on 4 January 2022 giving additional directions for the trial including provision for the parties to agree upon the additional materials to be used in cross examination of the Single Joint Experts to be called at the Trial.[25]  No attempt was made at this time by the Wife to introduce evidence in the form of detailed charts explaining the alleged dissipation of assets or to call any person who may have assisted her in compiling them. 

62.  Thirdly, given the fact that the Wife asserts that this “syphoning off” began prior to 2011, when the first separation took place, and even going back to the start of their married life, it cannot be overlooked that on the Wife’s evidence (her 6^th Affidavit in support of her MPS Summons[26])  during the years they were married through to separation the parties held joint bank accounts into which the Husband’s remuneration from his various jobs was paid and from which the family expenses were met. This is consistent with the Wife’s comment in her first Form E that it was only after the first “walk-out” in November 2011 that the Husband became mysterious with his finances.[27] Nothing in this 6^th Affidavit for the MPS application is to the effect that the Husband had been syphoning-off millions of dollars each year from these accounts or had diverted his salary into other accounts or investments or in the acquisition of assets as yet undisclosed.   

63.  Fourthly, although the Wife forecast in her first Form E that the Husband had improperly diverted matrimonial assets whether cash or otherwise into “other financial instruments” she did not at any time later pursue this by seeking a preservation order or reversal of transaction order pending the determination of the question of ancillary relief.  This underlines that she was not confident of being able to point a transaction or series of transactions by which the Husband was squirreling away or diverting his income into other accounts for the purpose of putting them beyond the reach of the Wife. 

64.  Fifthly, to the extent the black hole theory relied on the hiding of bonuses from the Husband’s employer(s), the Husband argued that that this may have involved the banks/firms in deliberate deceit, making such a theory inherently unlikely.  Even if that is not a logical and necessary deduction, the direction/destination of these payments including bonuses could have been tested by the Wife seeking third party disclosure or asking the Court to issue subpoenas if she considered it necessary for such evidence to be obtained.  She was asked about this in cross-examination, in respect of seeking information directly from the Husband’s current and immediate past employers.  Her explanation for not doing so was that “I am not so acrimonious or greedy to dig up every single cent.  Neither am I going to [D].  I know the guy.”[28] This was unconvincing testimony.  I find that it is more likely that the Wife did not want to pursue this line of enquiry because she did not want to obtain confirmation that the Husband’s assertions as to the level of compensation he had obtained from his former and current employment were accurate and there are no hidden bonuses. 

65.  Sixthly, the Charts themselves were seriously deficient. As conceded by the Wife, there were mistakes in her calculations including in respect of certain unsold equity bonus shares, wiping off HK$9.3M of her estimate of the shortfall.[29]

66.  The Husband’s main complaint was that the Wife’s estimate of the expenses was wildly off the mark: in the witness box he described it as “blindingly off.” Admittedly, the Wife conceded she had not accounted properly for tax liabilities on income, in respect of the Husband’s earnings in Singapore and Hong Kong, although she maintained the accuracy of her tax allowance for his employment in Japan. On her analysis, her miscalculation resulted in a further downward adjustment of HK$35.4M in her estimate of the size of the black hole.[30] 

67.  This was not accepted at all by the Husband as an accurate figure.  In the Husband’s Closing Submissions, it was asserted that the Wife’s figure for expenses understated them by some HK$122M including the tax liabilities.[31] 

68.  It is simply not possible for the Court, unaided as it is by a forensic accounting analysis, to be confident as to the extent of the expenditure of the parties over the years. The Court has in mind that it is in the interests of the Wife to portray a modest expenditure and, for the Husband, to do the opposite.  This is precisely why independent expert evidence is required.  The burden rests on the Wife to make her case and to do so with sufficient precision and with the assistance of a professional auditor such as a forensic accountant, and one supplied with all relevant materials.  She has not done so.  The resulting imprecision is manifested in the variations of the size of the alleged black hole over the period of some 6-8 months from when it was first presented until the Trial. 

69.  Seventhly, to the extent the Wife relied on her alternative theory, namely the allegation of unexplained withdrawals, there are also significant problems.  First, the Wife had included withdrawals but failed to include amounts credited or wired into the same account by the Husband.[32] 

70.  This alternative theory was the focus of the relevant part of the Wife’s narrative (10^th)  affidavit for the Trial.  I am not satisfied that it holds water.  If anything, it is even less convincing than the “there must be more than this” theory on which she primarily relies. I accept the Husband’s explanation of these withdrawals in his evidence to the Court and in his Closing Submissions[33], and that there is no basis to conclude that he has improperly and permanently diverted cash assets by a systematic series of withdrawals of large sums of money and that the Court should add-back such amounts into the matrimonial pot or adjust the distribution of the net assets to take into account this allegedly improper conduct.

71.  I find that the Wife’s black hole theory is not made out. There is no proper evidential basis on which the Court can conclude that the Husband is hiding any assets whether in the form of cash or valuable property/investments.   

E.1.2 Non-rental of the Singapore properties

72.  I will refer to the two Singapore properties as the “C Property” and the “K Property”. 

73.  Government approval is required for renting out the K Property as it is a house on land.  There is no such restriction on renting the C Property.

74.  The parties had obtained approval for rental of the K Property from the relevant body in Singapore, and this permitted the K Property to be rented through to 13 May 2016.  Any rental beyond that time was subject to an appeal process: see email from Land Dealings (Approval)  Unit of the Singapore Land Authority to the Husband dated 9 April 2015.[34] This email was in response to enquiries from the Husband on the possibility of obtaining an extension to the existing permission.[35]

75.  As both properties were in joint names (and the Wife had custody of the keys to both)  any further renting was a matter to be agreed by both parties.  The Husband’s written evidence[36] was that the Wife rebuffed all his proposals for the properties to be rented out, and that this was unreasonable and has resulted in significant loss of rental income which might otherwise have defrayed the expenses of the parties and contributed to the remaining mortgage on the K Property. 

76.  The sequence of requests and responses is this:  

(1)  In April 2015 the Husband sent several messages to the Wife proposing that both properties be rented out.  The Wife was resistant to this suggestion saying (by message on 20 April 2015)  “We are in the midst of divorce proceedings, I ask that these properties be left as it is.”[37] The following day she reiterated her position and said “please leave these properties alone.”[38]

(2)  On 23 April 2015 the Husband’s former solicitors Withers wrote to PC Woo & Co for the Wife[39], noting that the K Property had been rented through to January 2015 at SG$20,000 per month and the C Property rented through to July 2013 at SG$7,300 per month.  The letter proposed that both properties be re-rented, both at perhaps somewhat reduced rates and K Property for a year until the expiration of the SLA permission. 

(3)  There was no response to this letter.  The Husband says he contacted the Wife directly in July 2017 and later in November 2018, when he had received an enquiry from a couple interested in renting the C Property, but these efforts were unsuccessful in getting the Wife to change her mind.  The Wife’s view was “These homes were bought for the family, and not for you to generate income to pay for your expenses.  As per previous position, to leave these alone in the midst of legal proceedings.”[40]  

(4)  His solicitors (now CRB)  wrote again in January 2020 proposing that the parties agree to seek new permission from the SLA to rent out K Property and for C Property to be rented, and that this might produce an income of some SG$18,000 per month.  Again, there was no response. 

(5)  Finally in August 2021, having received another approach about the possibility of C Property being available for lease the Husband messaged the Wife about this, and she responded by saying “No, this will be kept free for [N] to live in in Singapore.[41]  

77.  The Husband says that there was no good reason why the properties could not have been rented out, and the Wife closed off an important source of revenue which, inter alia, could have contributed to the repayment of the mortgage on the K Property.  His Opening and Closing Submissions placed the loss at some HK$9.317M “and counting”.

78.  The Wife’s Closing Submissions[42] argued that:

(1)  It was not realistically feasible to rent out C Property since May 2013.  The C Property was an old walk-up apartment which could not compete with a “deluge” of new developments.  It might, if rented, only fetch SG$4,000 per month compared with the SG$6,000 – SG$7,000 per month it used to command.

(2)  The Wife wished to keep C Property free for N to use, and it remains free for him now during his national service.[43]

(3)  Due to deterioration in its condition, K Property would have required considerable renovation for it to be in a rentable condition. 

(4)  Even then, the K Property could not have been rented out beyond May 2016 without SLA permission, which she had always understood would not be forthcoming. 

(5)  The initial requests for the properties to be re-rented came at a time when the proceedings had only just commenced, and the Wife was focussed on the well-being of the Children and herself and did not want to be “distracted by H’s manoeuvres” with the K Property. 

(6)  In any event, the Husband’s insistence on obtaining an income from the two properties sits ill with his profligate spending on “rent, cars, clubs, properties, watches, wines and others” and that the Court should take this into account in determining whether to make any add-back or other adjustment.[44]

79.  By all accounts, the C Property has been completely unused by either of the parties in recent years and on the Wife’s case N has been staying with his paternal family in Singapore during his present national service.  There is no evidence N has used the property at all, and further, he only commenced national service last year.  There is no rational reason why the C Property could not have been rented for at least some of the period since the proceedings commenced in 2014.   

80.  Even at the reduced rental of say SG$4,000 per month, I consider that it would have been reasonable and sensible for the Wife to have agreed that it be leased pending the conclusion of these proceedings at least to meet some of the expenses of both parties.  The evidence suggests that there were potential tenants in 2018 and 2020, and if the property had been advertised there may well have been more. 

81.  Even though the C Property had been empty for a year or two after the previous lease in 2013 and before the Husband’s first suggestion that it be re-rented, it was not in such a state as to be uninhabitable (the Wife’s proposal that N should be able to use it now, supports that even now it is in a habitable condition).  Allowing for the possibility of gaps between leases and the possibility it might not rent even at $4,000/month, I find that it is likely that the failure to rent the C Property has resulted in a loss of at least SG$150,000.  Did the Wife’s unreasonable refusal amount to misconduct[45] such that the loss of rental should be reflected in the final distribution?[46]  I think that it did. There was no logic to her position which was driven by emotion rather than practicality. 

82.  K Property is more problematic.  There is no evidence of a potential tenant/lessee for the period of a year from May 2015 to May 2016 when the SLA permission expired.  Tenants for large properties such as this might prefer longer tenancies, and if only for a year, then the option of renewal.  It is not certain that the appeal or application for an extension of permission to lease the property would have been granted.  I have not ignored the Wife’s evidence that if the K Property is transferred to her as part of an award, she will want to rent it out, which seems to contradict her insistence that the permission to lease it until 2016 was the final extension from which the SLA would not waver.  Nonetheless, as time passed with the property being empty, it has deteriorated to the point where it is not leasable without at least some remedial works being performed (paint, floorboards/tiles, garden, pool etc)  if not quite the extensive renovation the Wife intends to undertake if it is transferred to her. 

83.  It is part of the Husband’s case that the K Property must be sold to achieve the clean break sought by both parties.  The same 2015 SLA email to the Husband confirming the limited permission to rent the K Property[47] reminded the Husband that when the property was purchased, it was the condition they could not sell the K Property until five years after obtaining and retaining vacant possession of it.  The Husband’s argument that the Wife unreasonably refused to lease out the K Property in the last five years is in a sense inconsistent with his case that there should be an order for its sale, as such an order could not be complied with if the property had been leased during this period. 

84.  I do not agree with the Husband that the Court should in these circumstances find there is a loss due to the Wife’s refusal to allow K Property to be rented out.   

E.1.3 Singapore properties   

K Property

85.  The K Property is a two-storey house of some 4,585 square feet internal area (including basement)  with car porch and terrace situated on approximately 11,800 square foot of land comprising a garden and swimming pool.  It is situated in a Landed Housing Area of Singapore.  Although not itself a “Good Class Bungalow”[48] it is in a District which contains such properties.  There is only a limited supply of such properties in Singapore. 

86.  The parties purchased K Property in March 2005 for approximately SG$4.8 million, with a down-payment of approximately SG$970,000 paid by the Wife. 

87.  It is in joint names.  Again, the Wife asserts that the intention and understanding was that it was purchased for the benefit of the Children.  This is denied by the Husband. 

88.  It was apparent through the Wife’s presentation of her case that one of her main aims is to preserve the K Property in the family and for that reason the Husband’s equal share should be transferred to her.  She has advanced multiple arguments to support this including her initial financial contribution to the property from her pension/savings, without which she says its acquisition would not have been possible.  She says that the Husband has always been aware of her aspiration of living in a freehold property rather than renting, owning property in a colonial style in Singapore, and passing it down through her family.[49]

89.  After the purchase, the mortgage on the K Property was partially financed through renting it out.  In recent years this has not been happening.  The Husband has been meeting the mortgage payments since the last tenant moved out.

C Property

90.  The C Property was purchased for SG$1.43 million, or about HK$8.312 million, in 2000.   This is an apartment of some 1,900 square feet with a 300 square foot patio.  The Wife paid the 20% down-payment of SG$286,000 (= HK$1.65 million)  out of her savings and contributed a further SG$281,000 to the mortgage payments, out of her Singapore pension fund, CPF.  The Husband also contributed SG$80,000 cash and a further SG$72,000 from his CPF.[50] The property is now mortgage free, the mortgage payments having been met by a combination of rental (2006-2013)  and by the Husband.  The property was renovated after purchase and the parties lived in it until they relocated in 2006 to Tokyo.  If C Property is sold the Wife will be required to return SG$435,000 to the CPF.[51] The Husband will also have to return an amount to the CPF, on his estimate SG$584,402.[52] 

91.  The Wife says that she and the Husband had agreed that, having relocated away from Singapore, the C Property would not be sold but be kept for the Children, and that therefore it should not be included in the computation of the matrimonial assets.  She refers to this being accepted by the Husband during some counselling sessions held with two of his best friends when she and the Husband were going through marital difficulties.  She does not go so far as to say that the property is held on trust in a proprietary or equitable sense, just that this understanding should be given weight when consideration is given as to how the properties ought to be distributed.[53] She resists any order that the property should be sold. 

92.  The Husband says this alleged intention/understanding to keep the C Property for the Children is simply untrue, and he points to the fact that as a non-Singapore citizen, in order to become a co-owner of the property he was required to demonstrate to the Singapore government that he was not only a Singapore permanent resident but that he was making a significant economic contribution to Singapore.  He says the fact that his application was rejected several times until it was finally accepted shows his intent to become a legal and beneficial co-owner of the C Property, and that if it was always the parties’ joint intention that it would simply be held for the Children, it would have been much simpler for it to be held by the Wife in her sole name.

93.  The Court appointed SJE, Ms. Sherri Fong from Knight Frank Pte Ltd to supply an independent value of the properties. Ms. Fong is a Senior Director of Advisory and Valuation at Knight Frank’s Singapore office.  Ms. Fong prepared reports on the two properties[54], and valued them on 2 December 2021 (the date they were inspected), on an “as is” basis with vacant possession.  Ms. Fong estimated the market value of the K Property at SG$20 million and the C Property at SG$3,550,000.[55]  

94.  The Husband accepts both valuations.  If anything, his position is that the properties are worth more, particularly the larger K Property, given the current robust state of the property market in Singapore.  The Wife’s position is both valuations are too high, and she refers, inter alia, to an email from HSBC Singapore of October 2020 giving indicative values of K Property at SG$15m and C Property at SG$3.28m.[56] 

95.  During her evidence (by VCF)  Ms. Fong was referred to the recent cooling measures introduced by the Singapore Government.[57] It was put to her that these measures had the intention of reducing the price of properties; she disagreed, it was the intention of them to “stabilise a market” in which prices had been increasing considerably.  She agreed that these measures, which included an “ABSD” or additional buyers stamp duty imposed on certain classes of potential buyers who had contributed to the “heat” of the market, had achieved the desired effect of discouraging foreign buyers from the market for the time being.   

96.  It was suggested to Ms. Fong by the Wife’s counsel that the net effect of these measures was a reduction in value of the C Property and the K Property of about 10% for each of them.  For the K Property, Ms. Fong disagreed: she said this kind of property was “very limited and very scarce” and for 20 years there had been limited increase in stock for landed housing.  She agreed that the C Property might have been affected somewhat, but that demand overall still outstripped supply.   

97.  The Wife focussed most of her cross-examination of Ms. Fong on the K Property.  For the purposes of this, the Wife had obtained recent external and internal photographs of the house and Ms. Fong was taken to these.  The photographs indicate water damage including damage to flooring and mould on the walls.  Ms. Fong agreed that the condition of the property was poor: she explained the word “fair”[58] was accepted as ‘valuer-speak’ for “no good” and that if the property had been in reasonable condition she would have described it as “average”. 

98.  For the K Property, Ms. Fong adopted the Direct Comparison Method, by looking at sales of similar detached houses, with appropriate adjustments for differences in location, land area, age etc.[59]

99.  Ms. Fong was closely questioned by the Wife’s counsel on her methodology and her choice of comparable properties.  It was suggested that two of the comparable properties she had selected were in a better area including their proximity to one of the top colleges in Singapore.  She agreed that this was an element in the assessment of value, but that the K Property was also close to very good schools. 

100.  Ms. Fong was then taken by the Wife’s counsel to an article on the “Top 5 Districts for Landed Housing in Singapore”[60] (part of the agreed additional cross-examination materials, and which had been sent to Ms. Fong prior to her being called)  and asked to agree that the District in which the property is situated was less salubrious than the District with the chosen comparable properties and that historically the prices in the former were lower than the latter.  She disagreed and indeed her position was the reverse was the case. 

101.  The HSBC indicative value for the K Property was put to her and it was suggested that a more reasonable value for the K Property should be SG$15M.[61]  

102.  Ms. Fong disagreed. She was not moved from her conclusion on the value she had attributed to K Property and confirmed that she had made all necessary adjustments, including as to location, land area and condition when arriving at the market value.   

103.  The Husband’s counsel similarly suggested a different value for the K Property, of SG$25M.  Again, Ms. Fong disagreed.  At this point she noted that given its condition, the K Property would need “major renovation” even if there were no structural defects (on which she was not able to comment as explicitly noted in her report[62]). 

104.  I have considered the detailed criticism of Ms. Fong in the Wife’s Closing Submissions which again places emphasis on the K Property, given its considerably greater value and significance compared with the C Property.[63] These submissions reiterate all the matters put to Ms. Fong in cross-examination including the inappropriateness of comparing one District with (on the Wife’s case)  properties in a better District, the impact of the Singapore Government’s cooling measures and its poor condition. 

105.  At §79 of the Closing Submissions the Wife submits that “Given the ‘fair’ condition only, the ‘assumption’ that K is in sound order and free from structural faults, rot infestation and other defects is not wholly reliable.  Further discount should reflect likelihood that in fact over the past 20 years it has fallen in some disrepair.” (Emphasis in the original)

106.  At no point during the cross-examination of Ms. Fong was a positive case put to her that the K Property has structural faults.  She had acknowledged the “fair” meaning “no good” condition of the property, the water damage and the mould and generally that it was in a poor state of repair.  She did not say that there were any significant structural faults. She was in no position to assume that there were, absent information to suggest the property was so impaired. 

107.  If it was part of the Wife’s case that the K Property has significant structural issues, then she should have adduced appropriate evidence e.g. from a structural engineer.  In any event, it may not have mattered, as Ms. Fong confirmed that she had also taken into account in arriving at her appraised value the possibility a potential buyer may wish to demolish and rebuild.   

108.  I accept the values placed on the two Singapore properties by Ms. Fong.   

E.1.4 The Wine

109.  The Husband has a substantial collection of fine wines, located in three specialist storage facilities in Hong Kong, the UK and Geneva. 

110.  The parties were unable to agree on the value of the collection, and an SJE was therefore appointed, pursuant to the Order at the CMC on 28 May 2021.   

111.  Mr. Wainwright has his own business, Wainwright Advisors.  He has considerable experience in appraising fine wines, having worked in the industry for some 25 years, including a period with the wine division of Christies and with Zachys. 

112.  In Mr. Wainwright’s letter/report dated 10 December 2021[64] he makes the following points (inter alia):

•  When placing value on wine, we look to find a net realised price that the owners could expect to receive should the collection be sold, most usually through one of the top auction houses

•  The figure chosen is one representing its realistic value, a number net of costs and expenses

•  The value attributed assumes wines are in excellent condition with regard to age, known provenance (authenticity is assumed), packaging and storage history

•  Subject to one group of wines, it is assumed that none of the wines has been “tainted, cooked, or maderised”.  The exception being White Burgundy made between 1995 and 2010 in respect of which some degree of pre-mature oxidation may have taken place, and therefore has been taken into consideration (he gives a specific example of a vintage which may have suffered from “pre-mox”.  Some of these wines may be undrinkable.   

113.  This letter attached a list of some 4,000 “lots” grouped into two charts, the first being approximately 3,400 lots which he valued at HK$10,777,270 (“Chart A”)  and the second, 623 lots valued at HK$2,538,900 (“Chart B”).   The Chart B lots are all from either 2003 or 2007 (the birth years of the Children). 

114.  Mr. Wainwright acknowledged in his oral evidence the somewhat imprecise nature of what he is tasked to do, that values of fine wine are “as variable as the stock market” and that indeed, the values sometimes correlate to the stock market.  He spoke of the various influencing factors: the scarcity of the wine, its vintage, the most recent auction price as a “good market indicator”.  He acknowledged the fact that the market for top end wines was in an upward trend, although for mid-range wines it was somewhat static, if not reducing in price. He referred to other factors which might justify premia to be attached to certain lots – larger bottle size, for instance, and that the lot was still in its original wooden or cardboard case. 

115.  A significant number of the lots in the Husband’s collection are White Burgundy, and this variety has been affected by pre-mox in recent years.  Mr. Wainwright confirmed that this might well significantly impact on the value of the lots and some bottles might not be drinkable.  He added, though, that a maximum of 5% of the lots might be so tainted.

116.  Conversely, the Red Burgundies are very sought after, and Mr. Wainwright was of the view that the relevant lots, since his report of only two most prior to the Trial, might have significantly risen in price, between 10% to 15%, and a few of the lots by even more than this. 

117.  Mr. Wainwright’s view was that, taking into account the potential increase in value of some of the wines, the overall collection for those listed in Chart A may have increased to closer to HK$12 million and those in Chart B to a total of $3 million. 

118.  Mr Wainwright gave impressive and convincing evidence. 

119.  I accept the Wife’s submissions that, overall, the value of the wine collection has increased since Mr. Wainwright’s Report.  I do not accept the argument that the effect of Mr. Wainwright’s evidence was that none of the individual lots would have decreased in value.  His oral evidence and revised estimate explicitly noted that some of the lots may not gained in price and some may have decreased.  Further, at no point did Mr. Wainwright give evidence that the entire collection “had risen by 20%”, or that, overall, I should conclude that is worth, as the Wife now submits, in the order of HK$16,500,000.[65]

120.  I conclude that the present value of the wine collection is HK$15,000,000.   

121.  I accept the Husband’s evidence that some of the wine is subject to an agreement precluding it from being sold on the open market without first offering it to the vendors from which it was obtained.[66] I also note that the Chart B wines were specifically acquired with the intention of passing them on to N and C when they came of age, and the Husband’s submissions that the Chart B wines be divided in specie between the parties and taken off the asset schedule.  This was not agreed to by the Wife.  She said she had no interest in obtaining any of the wine as part of her award, even though it is, at present at least, an appreciating asset. 

E.1.5 Summary of Asset Pool  

122.  The values of the properties in Malaysia and the land in Australia have been agreed. 

123.  The Malay property in Selangor is jointly owned by the Husband and his brother.  It is a commercial property and is rented out, with the income contributing to the mortgage repayments.  The Husband cannot dispose of it without his brother’s agreement, and the Husband views it as part of his retirement fund.

124.  The Australian property interest is a 12.5% interest in some 864 acres of farmland in Victoria, held through a company.  I accept that it is illiquid in that it is unlikely to be able to be sold with ease to a prospective investor.  I decline to reduce the value of the Australian investment by 30% but will take its illiquidity into account in the overall award. 

125.  Bearing in mind the above findings, and the agreed values/liabilities, the asset position can be summarised as follows (I acknowledge that the bank balances may have fluctuated, and the amounts are to some extent outdated):

Joint Assets

	HKD	HKD
K Property SGD 20,000,000 Less mortgage as at April 2022[67] SGD630,000 C Property SDG 3,550,000 Less CPF to be returned W – SGD 435,000 H – SGD 584,402	115,526,000   (3,639,950)   20,505,865   (2,512,691) (3,375,681)	111,886,050         14,617,493
Bank accounts HSBC Singapore (as at Aug 2021) SGD 22,445.29		129,651
Net Joint Assets		HKD 126,633,194

Wife

		HKD
Bank (some in SGD)		1,111,100
Stocks/investments (Silver bars)		973,000
Pensions (including CPF to be recredited upon any sale of C Property)		3,461,434
Personal items including jewellery and watches		995,000
Loans (including loans by W to fund third party litigation)		594,959
Sub-total		HKD 7,135,193
Less credit card balance		(81,019)
Wife’s net assets		HKD 7,054,174

Husband

	HKD	HKD
Malaysian properties Property 1 (jointly owned by H and his brother) MYR 2,050,000 Less mortgage MYR 492,739 Property 2 MYR 4,065,000 Less mortgage MYR 3,918,400	3,821,200   (918,465)   7,577,160   (7,303,898)	1,451,367 (i.e. 50%)     273,262
Australian land investment (12.5%) AUD 682,500		3,831,282
Bank (including SGD and MYR accounts)		4,308,957
Investments (Not including the 30% illiquidity discount for three of the holdings)		65,828,821
Personal items Wine Watches Cars Club memberships: Singapore SGD 247,200 H Club GBP 127,500 (Not including 30% discount for illiquidity) Art		15,000,000 5,347,500 1,430,000     1,427,901   1,357,454   4,500,000
Insurance and pensions (including CPF to be recredited upon any sale of C Property)		8,914,420
Misc Loan to brother		1,179,657
Sub-total		HKD 114,850,621
Less liabilities		(345,140)
Husband’s net assets		HKD 114,505,481

  In summary

Net Joint Assets		HKD 126,633,194
Wife’s net assets		HKD 7,054,549
Husband’s net assets		HKD 114,505,481
Total net assets		HKD 248,193,224

E.1.6 Earnings and earning capacity

The Wife

126.  The Court accepts that the Wife has a relatively limited earning capacity, given the length of time since her last employment in 2004.  Whatever label she attaches to her cessation of work in 2004 is irrelevant to the question of her present capacity to earn.  She is intelligent and well educated and has high-level experience, albeit somewhat dated, in the financial sector.  She is multilingual and has the right to work in Hong Kong and in Singapore.  She has many years ahead of her before the “traditional” retirement age of 65, and her role as full-time mother will be at the very least winding down in a few years’ time when C attains his majority and attends national service in Singapore.   

127.  The Husband’s position is that the Wife has a significant earning capacity she is electing not to exercise.  He said in his narrative affirmation that he put the Wife “to strict proof” of the job applications she made in the past two years (i.e. 2019 to 2021).[68] It was made clear during the Wife’s oral evidence that she had made no such applications.   

128.  The Husband’s contention was that now N is in national service, and C is a teenager, the Wife no longer needs to be available for them and she could look to “returnship” opportunities for experienced and able people in the finance industry who have taken a career break to have children and who are looking to return to the industry.[69] He produced, with his narrative affirmation and later by letter from his solicitors, some examples of such opportunities. 

129.  I have considered these.  They involve retraining over a period of 3 months or so, for potential employees with appropriate skill sets who have taken a break from employment for 2 years or more.  CRB’s letter suggested that these opportunities could pay approximately US$8,000 – US$12,000 per month and potentially more with bonuses. The aim of the bank/institution at the end of such re-training would be the offer of a permanent position.  Other suggestions with CRB’s letter were positions as “investment counsellor” with a bank in Hong Kong, offering a base salary of HK$1.2 million per annum. 

130.  The Wife said in cross-examination that she had no intention of applying for jobs, and that she was focussed on looking after C.  On the “returnship” offers, she stressed her age, and asked rhetorically “would I, as a 50-year-old, have a chance?”  Her position through to 2004 was on sales, reliant on a client network, and awareness and up-to-date knowledge of the markets.  She conceded though, that “it might be something I will look to in the future.”  The Wife’s Closing Submissions criticised these suggestions as short term “internships”, not realistic or suitable long-term employment prospects.  Further, that the Wife would be “unlikely to be a competitive candidate for their related full-time positions” and that it “was painfully clear in examination-in-chief that W did not have the relevant work experience or qualifications to even apply for these positions.”[70]

131.  Whether or not the Wife could have, say 10 years ago, re-entered the financial sector with or without the assistance of such retraining, it is going to be more difficult for her to get back into the industry now.  She is likely to find it difficult to compete with younger candidates and those who have perhaps decided to return to work after a much smaller career gap of say 2-4 years, as opposed to some 17-18 years.  I have not ignored the Husband’s submissions that she had the opportunity to return to remunerative employment earlier, particularly since separation, but even if she had done so (in say 2014, 2015 or 2016)  this would have been challenging for her given the decade of not working.  

132.  I also accept that the Wife has been very involved in the Children’s schooling, and that this may have particularly been so in the past two years during the Covid-19 pandemic when for periods schools have been conducting classes remotely.   

133.  The Wife has the potential to earn a reasonable salary in the financial sector, but this will require some retraining and updating.  She seems to have very little motivation towards that direction, and indeed baulked at the suggestion she should do so.

134.  I do not accept the Husband’s argument that I should conclude that the Wife has an earning capacity of not less than HK$1.2 million per annum.  My view is that if she was to return to work she could not reasonably expect to command more than a third of that sum, at least initially.  I note the Husband’s current earnings are approximately that amount i.e. HK$400,000 per annum, albeit that is his base salary. 

The Husband

135.  The Husband has been in his present position as Business Development Director and Senior Portfolio Manager with D Co since early 2014.  He says he was eased out of his previous position as partner of the international bank.[71] His initial salary with D Co was US$200,000 pa[72] but to due to trading losses in 2016, 2017 and 2018[73] he had to take a pay cut to US$50,000 pa from 1 July 2019.[74]  This is his present salary.[75]

136.  His employment terms entitle him to a share of the net profits and a performance bonus in accordance with formulae set out in a schedule to the contract. 

137.  His total income is based on 10% of the net profit, i.e. gross profit less operating costs, which includes his salary.[76] Any losses are accumulated year-on-year and carried forward to the following year, at the beginning of which he is informed of a “High Water Mark Shortfall” i.e. the amount he must make before he is entitled to anything in addition to his base salary.[77] 

138.  In his narrative affirmation, the Husband explained that in addition to taking a pay cut, he was required to buy back some of his trading losses at a negotiated discount, and these buy-backs took place in 2019 and 2020.[78] He has not earned anything in addition to his base salary and he spoke of the potential difficulties he may have in retaining his position unless things improve. 

139.  The tax assessments for the financial years 2014/2015 onwards show a sharp decline in the Husband’s income.[79]

140.  The Wife submitted the Court should find the Husband’s capacity far exceeds his present salary of ~HK$33,000 per month.  She did not accept his poor performance in recent years given the health of the stock market as indicated by the Dow Jones and Nasdaq indices (among others).  It was her case that there is no reason for the Husband to remain at D Co and could earn far more if he was to join a “large corporation”.[80] She confirmed this view in the witness box, and that the image portrayed by the Husband was wrong. 

141.  In cross-examination, the Husband accepted the suggestion that despite what he is earning now, this could improve to a point where he could expect to make HK$1 million per annum, and indeed that the reason he invested in the buy backs was his hope and expectation of earning more, and that HK$3 million per year “would be a good result” although he would not concede that was his present earning capacity. He accepted that the markets had been buoyant but since mid-2021 have been poor. 

142.  It is the Husband’s case that to the extent that he could be earning more, this will be short-lived as this is a “young man’s industry”.[81]

143.  I reject the Wife’s contention, implicit in her evidence and submissions, that the Husband could and should be earning far more than he is at present.  There are, of course, prospects that his earnings will increase.  He has twice invested substantial sums by way of buy backs to look forward to better times when, under his current terms of employment, he will be entitled to receive performance bonuses or profit shares without them being blocked or reduced by clawback. 

144.  It is also clear that the Husband has a significantly greater earning capacity compared with the Wife’s, and that will continue to be the case for the foreseeable future.  This is a significant factor in this case.

Other

145.  The Husband’s fiancée is in a secure position which pays well.  She is contributing to the household expenses, and this I have taken into account. 

146.  The Husband argued, in my view unsuccessfully, that the Wife can expect to receive an inheritance from her late mother’s estate and, when the father passes, from his estate.  Am not convinced that there is any likely prospect, for the reasons contended for by the Wife in her evidence and in her Submissions.  This may seem summarily dismissive of the Husband’s contentions.  It is not.  I have considere all of the points made by both parties, and their evidence on the matter.[82]  

E.2  Needs

The Wife

147.  As already noted, the Wife has argued this as a needs case.  She confirmed her expenses were those listed in her updated Form E but set out her anticipated expenses in a new table in her narrative affidavit (with some abbreviation of the commentary/explanations):

Item	HKD/m	W’s Explanations
Rent	$133,000	This is a compromise from the current rental of $160,000 which was allowed in the MPS Judgment.  In the future, when the children move out, I am willing to move to a smaller house.
Utilities	$5,500	Excluding network/telecommunications
Telecom	$2,500
Household, Shopping, Misc	$32,000	Misc. expenses including car-parking
Dog	$1,000	Grooming etc
Cash	$30,000	$15K + $7.5K per child
Domestic helper	$7,500
Dining out	$10,000
Personal grooming	$10,000	Hair, facial, body, skin care etc
Entertainment and presents	$5,000
Holiday	$30,000	Flights = 6 premium short hauls, 3 business long hauls Hotels = 70 days/year at $120k per year + Expenses
Car purchase and maintenance	$100,000	Ferrari + Alphard by 5 year loan at $85k/m + licences, maintenance, petrol and tolls ($5.5k)  and parking ($3.5k)
Petrol and tolls	$8,500
Insurance premia	$35,500	Life, medical, home, travel, accident
Furniture	$8,500
Appliances incl repair	$2,000
Electronics	$3,000
Subscriptions	$1,000	Landline, Cable TV, internet, mobile
Clubs	$8,500	2 HK and 2 Singapore.  Costs reflect only 2 HK clubs
Credit cards	$2,000	Annual fee for 4 cards for HK and Singapore
Luxury brands	$14,000	Bags, shoes etc
Jewellery, watches	$20,000
Total	$472,500

148.  The Wife said that she is willing to adjust her living standards “to accommodate the realities of our divorce and its necessary impact on our finances” and that although this list was commensurate with the standard of living during the marriage, she was willing to adjust her needs to $350,000 per month.[83]

Housing

149.  The Husband’s repeated submission, including on the MPS/IM application, was that the Wife has been “over-housed”.  Specific potential alternative rental properties of a similar cost to his ($80,000 per month)  were suggested by him. 

150.  The Wife produced the current rental agreement on her flat.[84] It was renewed on 30 June 2020 for a period of 2 years from 1 October 2020 to 30 September 2022 at $160,000 per month.[85]  The Wife accepted in her evidence that she could move to less expensive accommodation at $120,000 per month, and that the figure of $133,000 took into account costs of renewal (deposit etc).  As she is in the second year of the lease, she is able to give two months’ notice to quit according to the terms of the tenancy agreement.

151.  The current flat is a six-bedroom flat of some 4,300 sf net size.  It is located in Central and is one of the more salubrious of apartment blocks in this area of Hong Kong. 

152.  I accept that this is excessive and beyond the Wife’s needs generously assessed.  For the purposes of assessing needs I will allow $110,000 per month for this item inclusive of management fees. 

Other

153.  Shortly prior to the Trial the Wife filed an Answer to the Husband’s Notice to Admit Facts in which she Wife accepted that her average monthly spend had been HK$58,105 but that this was “for the family’s bare and minimal essentials pending the determination of the AR proceedings”, taking into account the Covid-19 circumstances and that the Husband had not being complying with the MPS/IM judgment/order and had cut his payments to $240,000/m. 

154.  In Closing[86], the Husband advanced the following submissions on the Wife’s revised schedule of expenses:

(1)  She conflates the children’s expenses (which would not be a 38-year need)  with hers.

(2)  The claimed expenses are not consistent with her open case nor with what she has spent.

(3)  Several of the items were plainly wrong – the $30,000 “cash”, the $100,000 per month car expense. 

(4)  A number included Children’s costs and therefore could not properly form the basis of a Duxbury calculation of the Wife’s lifelong expenses.  Several were double counting – car parking coming under Household and then under a separate item. 

(5)  Some were clear exaggerations and unsubstantiated: the allowance for insurance premia, the electronic repair estimate, the holiday allowance, and budget for luxuries.   

155.  I approach the calculation of the Wife’s expenses by grouping them into general, personal and child-related.

156.  I accept the following as reasonable:

General

Item	HKD/m
Rent, including management	$110,000
Utilities	$5,500
Telecom	$2,500
Household (including furniture), Shopping (including food), Misc	$35,000
Family car expenses including maintenance, petrol and tolls	$7,500
Insurance premia	$2,500
Dog	$1,000
Domestic helper	$7,500
Sub-total	$171,500

  Personal

Dining out	$10,000
Clothing, bags, shoes, accessories	$3,150
Personal grooming	$10,000
Entertainment and presents	$5,000
Holiday	$10,000
Medical/dental	$5,000
Petrol, tolls insurance (personal car)	$7,500
Subscriptions	$1,000
Clubs	$10,000
Sub-total	$61,650

157.  Total monthly General and Personal expenses: HK$233,150.  I will attribute $60,000 of the General expenses to the Children. 

158.  As for cars, I accept that it is reasonable for the Wife to purchase a family vehicle such as an Alphard or equivalent.  This will likely cost in the region of HK$1 million including stamp duty. It is also reasonable for her to look to having to replace this say every 8 years with a replacement price including trade-in of say $700,000.  That equates to an additional $7,300 per month in the budget.   

159.  I also accept that the Wife will want to purchase her own car, possibly a first- or second-hand sports car and that this is likely to cost $2,000,000 - $3,000,000.  Naturally, the more expensive the vehicle the greater the maintenance and insurance expense. 

160.  She is likely also to want to join a club in Hong Kong and this will carry additional and significant costs.  Her Closing Submissions asked that the membership of the H Club be transferred to her at HK$nil consideration.   

161.  These additional costs will broadly arrive at a figure of $200,000 per month for the purposes of the Duxbury calculation. 

Children’s expenses

162.  Some time was spent on the topic of who will be directly responsible for the procedure of paying C’s school fees.  This was, in my view, unnecessary.  The Husband wants to pay the fees directly.  That is sensible. The Wife’s stated position in her Summons for maintenance pending suit/interim child maintenance was that the status quo i.e. that she pays the fees should be kept “until after the conclusion of the financial proceedings.”[87] The Husband will be paying these fees directly, with effect from the start of the 2022-23 school year.  Until then the Husband will continue to reimburse the Wife for C’s school fees (if any are outstanding or yet to be billed).

163.  I will allow the following additional expenses for the Children:

Children

Extra tuition fees	$10,000
Transport	$3,000
Extra-curricular	$6,000
Entertainment and presents	$2,500
Holiday	$5,000
Clothing	$2,500
Clubs	$5,000
Other	$2,500
Sub-total	$36,500

164.  I will round up the specific child-related expenses to $40,000/m per child and the child-attributable expenses (i.e. including general expenses)  to $70,000/m per child. 

165.  I accept that to a considerable degree, with effect from his entry into national service, the Wife’s expenses attributable to caring for N have ceased and this will remain the case while he is serving in the Singapore military. 

166.  Nevertheless, the Wife’s application for an order that the Husband should pay maintenance for N into the future is accepted. 

167.  The Husband’s submits that the Court has no jurisdiction to make such an order.  For the following reasons I disagree.

168.  Section 10 of the MPPO prescribes the Court’s power to make orders for the financial maintenance of adult children and the limited circumstances where this is permissible: 

“10 (1)  Subject to subsection (3)-

(a)  no order under section 5, 6(a)  or 8 shall be made in favour of a child who has attained the age of 18;…

…

(3)  The court may make such an order as is mentioned in subsection (1)(a)  in favour of a child who has attained the age of 18… if it appears to the court that

(a)  that child is, or will be, or if such an order or provision were made would be, receiving instruction at an educational establishment or undergoing training for a trade, profession or vocation, whether or not he is also, or will also be, in gainful employment; or

(b)  there are special circumstances which justify the making of the order or provisions.”

169.  “Special circumstances” include situations of illness or other physical or mental handicap.[88]  Courts have made provision where a child wishes to take a gap year between high school and university.[89]

170.  National service in Singapore is an obligation which falls on all male Singapore nationals when they turn 18.  It is not optional.  Failure to report for national service is a criminal offence.  This law applies to Singapore nationals who are resident overseas. 

171.  N had no choice but to report for national service.  Neither will C. 

172.  According to the Wife’s evidence, both of the Children have aims to continue their studies at university.  Enquiries have been made for N with Imperial College, London and the National University of Singapore. 

173.  I find that the obligation to report for national service in Singapore before continuing to tertiary studies amounts to “special circumstances” within the meaning of section 10(3)(b)  of the MPPO justifying the making of an order which provides for ongoing maintenance payments under s. 5 of the same Ordinance.  Nonetheless, the Husband is entitled to expect that both N and C will have already selected a tertiary course and enrolled in full-time education by completion of their national service.  If this does not happen, then in my view the obligation to make payments should cease.  If either child wishes to take a “gap” year, then it will be necessary (assuming the Husband opposes this)  for the Wife (or the Children)  to apply to the Court for further order. 

174.  The Wife’s case for capitalisation of ongoing child maintenance depended significantly on her complaint that the Husband had not complied with the MPS/IM Order in respect of N.  As will be seen from the orders made on this Judgment, the needs relating to N very significantly reduced since his reporting for national service.  In my view, there is no justification for an order that interim maintenance be capitalised.   

175.  If/when N (and later C)  attend university, adjustments will have to be made to the ongoing maintenance for the Children including for university fees and other costs associated with overseas study and for adjustment to the Order which is made below for ongoing periodical payments for N and C.  If those matters cannot be agreed (every effort should be made to do so)  then the matter will have to be brought back to Court.  

The Husband

176.  I accept that the Husband has needs including rent expenses which at present considerably exceed his income. 

Duxbury

177.  A Duxbury calculation retains utility as a tool to determine how much might be needed to meet the living expenses of the party to a marriage who might otherwise need to be maintained for life by ongoing periodic payments.  It is designed to facilitate the achievement of a “clean break” by capitalising the obligation to maintain into a lump sum.  The tables have been developed to take into account a “discount rate” namely the rate of return on the lump sum exceeding inflation.

178.  The Wife stressed her low risk tolerance and that she would be conservative, perhaps extremely conservative, in her investment decisions.  She said she had not interested in foreign exchange investments, even though she was involved in selling such products when she was working, and the only shares she had invested in were bank shares.  She was wary of government bonds due to inflation.  She would need cash in order to renovate the K Property and lease it out in order to pay off loans.   

179.  She maintained her position under cross-examination.   

180.  The Wife referred in her 10^th Affidavit to the Duxbury Tables published by the Hong Kong Family Law Association[90] with the assistance of a firm of forensic accountants.  This was before Ms. Chi was appointed.   

181.  I was impressed with Ms. Chi and have confidence in the report she submitted. I have carefully considered the Wife’s Closing Submissions and the analysis contained therein. 

182.  I do not accept that the Wife will adopt the very conservative, risk-averse investment strategy she sought to advance in her oral and written evidence and in her Submissions. However, even assuming for present purposes that the Wife will adopt a low risk strategy, and on the basis that her needs are $200,000 per month, this equates to a Duxbury figure of $72,141,636 (i.e. $200,000/$50,000 = 4 x $18,035,409).  Allowing for the possibility that Ms. Chi erred in her calculation by adopting a remaining lifespan of 38 years rather than 39.3 years, I find that the Wife will need a sum of Duxbury sum of between HK$75,000,000 and HK$80,000,000.

E.3  Deciding to apply the sharing principle

183.  On the basis of the above findings, and allowing for the sale of the two Singapore properties, there are assets surplus to needs.  The next question, per LKW v DD, is to apply the sharing principle. 

184.  Notionally, a 50/50 split will result in each party receiving HK$124,000,000.

185.  This is clearly sufficient to provide for the Wife’s needs, allowing for the Husband’s continued obligation to provide for the Children.

186.  Subject to Step 4, the parties should share the net assets equally. 

E.4  Are there are good reasons to depart from equal division of the assets?

187.  The Wife submitted that the K Property was “totally funded by W (and rentals)”[91] and that given her investments she asks both Singapore properties “(i)  to be transferred to her, and passed on to the Children as they were always intended; (ii)  not to be included in matrimonial assets to fund H’s financial settlement of divorce as he had intended since 2011, (iii)  not to be included in the matrimonial assets to fund H’s exorbitant expenses, past present and future.”[92]  She asks that the properties be “returned” to her.   

188.  The Husband’s Closing Submissions analysed the Wife’s claim that the rental income covered the mortgages on both properties.[93] I accept these submissions. 

189.  A significant portion of the Husband’s present assets, including investments, have accrued post-separation and it was submitted by the Husband that this constitutes a good reason to depart from equal sharing.  However, I have to bear in mind that the Husband’s success, and his periodic substantial bonuses both pre- and post- separation resulted in part from the Wife’s dedication to supporting him in his chosen career.[94]  

190.  As noted, the Wife seeks 60% of the net assets and part of her reasoning is that this would properly reflect her sacrifice of her career.  This is essentially a “compensation” submission. 

191.  I accept that there is a marked difference in earning capacity, and that the Wife gave up a promising career in the financial industry.  Although there is no certainty that she would have risen to the same career heights as has the Husband (i.e. his partnership position with the international firm), there is no reason to think otherwise.  It is a fact that the Wife gave up what would very probably would have been a successful and lucrative career.[95]

192.  The Court must proceed on the basis that compensation for relationship-generated disadvantage

“…is generally already factored in upon any application of the sharing principle. The extent of compensation allowed for in applying that principle and deciding the extent of any possible departures from an equal division, is, in any particular case, a fact-specific question which will depend on the nature, certainty, permanence and other qualities of the disadvantage incurred, viewed in a broad brush way. It will only be in exceptional cases that a separate element of the award over and above the amount already factored in should be dedicated to such compensation on the specific facts of the particular case. In such exceptional cases, the court should not attempt to try the issue evidentially or conceptually as if it were a damages claim. A broad brush attribution of some percentage of the award to the element of compensation would generally be sufficient.”[96]

193.  This is not an exceptional case.   

194.  I find there is no reason to depart from equal sharing. 

E.5  Deciding the outcome

195.  The assets will be divided in accordance with the following specific orders.  In arriving at this decision I have taken into consideration all matters, including what I have found is the Wife’s unreasonable refusal to permit the C Property from being rented out from 2015 onwards.  I have taken into account the Wife’s contribution towards the purchase of the K Property, but also that the Husband has been responsible for the mortgage repayments on this property including without any rental assistance since it was last leased, as well as the fact that a significant proportion of the current assets are the product of the Husband’s post-separation earnings.  I have noted that that the Australian property investment and certain other investments may be relatively illiquid. 

196.  Each of the Singapore properties will be sold with the net proceeds of sale to be divided equally between the parties.  They are to cooperate in the marketing of the properties, and renovation costs (if any)  will be shared equally.   

197.  The balance of the assets amount to HK$121,560,030.  Half of that is HK$60,780,015.  Deducting the assets in the Wife’s name leaves HK$53,725,466. Exercising my discretion, I will reduce that to HK$53,500,000 to take into account what I have found is the Wife’s unreasonable refusal to facilitate the renting of the C Property.  The Husband will pay this by three lump sums as set out below.

198.  The result, including after the sale of the two Singapore properties, will enable each party to purchase suitable accommodation in Hong Kong should they wish to do so.  It will enable their needs and those of the Children to be met.  The future tertiary educational costs of the Children cannot at this time be determined and will need to be addressed when appropriate.  It is to be hoped that the parties will be able to resolve such matters without the need to return to court.

199.  My order is as follows:

(1)  There will be an order for the sale of the C Property and K Property.  Each property to be marketed with the assistance of Singapore real estate professional.  The parties are to cooperate on the presentation and sale of the two properties.   

(2)  The net proceeds of sale of the C Property[97] and K Property are to be divided equally between the Petitioner and the Respondent.

(3)  Each party to retain all assets in their own name.

(4)  The Respondent do pay the Petitioner the following lump sums:

(a)  The sum of HK$13,500,000 within 2 months from this Order;

(b)  A further sum of HK$20 million within 6 months from this Order;

(c)  A further sum of HK$20 million upon sale of the K Property.

(5)  Upon compliance with paragraphs (1), (2)  and (4)  of this Order, both parties claims for ancillary relief do stand dismissed.  

(6)  The Respondent do pay to the Petitioner periodical payments of maintenance for the Children of the family in the sum of HK$140,000 per month (HK$70,000 per child)  until C’s 18^th birthday or the completion of the Children’s full-time education whichever is later.  For the avoidance of doubt, upon each child reaching independence, i.e. adulthood and cessation of his full-time education, the periodical payments in respect of such child shall cease.  

(7)  Such child maintenance to be reduced to $10,000 per child per month for the duration of their respective national service, such order to have retrospective effect to 1 October 2021 in N’s case.

(8)  With effect from the start of the school year 2022-2023 the Respondent will pay C’s school fees directly. 

(9)  A Section 18 declaration do issue. 

(10)  The Decree Nisi be made absolute forthwith. 

(11)  There be liberty to apply in respect of implementation of these Orders including in respect of the sale of the Singapore properties.

F.  Costs

200.  Neither party has succeeded fully and there will be an order nisi to be made absolute within 28 days that there be no order as to costs including all costs reserved. Either party wishing to vary this order may do so by writing to the Court with short submissions (no more than 5pp, 14 point font).  The issue will be dealt with on paper. 

201.  The Wife twice sought extension of time to file her Closing Submissions, and costs were incurred by the Husband in considering these requests and responding to them including writing to the Court.  On 25 April 2022 (the date of the hearing of submissions in Reply)  I made an order, by consent, that the costs of the final extension (granted to 22 April 2022)  be to the Respondent to be summarily assessed.  I have considered the Statement of Costs for Summary Assessment dated 22 April 2022.  This estimates the costs of the two extension requests. Exercising my discretion I assess the costs of the Respondent pursuant to the Order at $10,000, with solicitor’s costs at $5,000 including disbursements and counsel fees at $5,000.  Such costs to be paid by the Petitioner within 14 days from the date of this Judgment. 

Mr. Azan Marwah and Mr. Josh Baker instructed by PC Woo & Co for the Petitioner.  On 25 April 2022 the Petitioner was represented by her solicitors, Mr. Simon Tang and Mr. Jacky Suen, without counsel.

Mr. Richard Todd instructed by CRB for the Respondent

FCMC 15288/2015

[2022] HKFC 44

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 15288 OF 2015

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BETWEEN

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R U L I N G

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1.  On Tuesday 15 February 2022 the Petitioner/Wife (“W”) began her evidence. After the formality of verifying her various affirmations, the majority of her oral evidence-in-chief was devoted to confirming and at times commenting on the material produced by her for the purposes of cross-examination of the various Single Joint Experts (“SJEs”) pursuant to the Order of 4^th January 2022.

2.  Towards the end of the day she then sought to produce a number of charts she had prepared to support one of the integers of her case, namely that the Respondent/Husband (“H”) has syphoned off and hidden away a large amount of money from his earnings during the marriage and, as indicated in one of the charts, before the marriage. Her counsel Mr. Marwah then applied for leave for these charts to be adduced. The Respondent opposes the application.

3.  The production of charts to assist the Court to navigate and comprehend often substantial volumes of material are frequently allowed and are useful: one example being those used during the evidence of Mr. Wainwright, the wine expert.

4.  In this case, the charts rely at least in part on additional documents not already in evidence. W explained that she had only recently discovered these documents which she found in a box in her apartment; she had previously assumed the box contained only her own documents.

5.  Her solicitors (PC Woo & Co (“PCW”)) wrote to H’s solicitors (CRB) on 8 February 2022 announcing that W had found the documents “last week” (i.e. the week commencing 31 January 2022) and that they related to “the family’s assets in Singapore which remain unaccounted for”. This Trial began on 4 February 2022, with the first witness being called on Monday 7 February 2022. On 10 February 2022 PCW wrote to the Court proposing to update the trial bundles including with this new evidence. This was immediately objected to by CRB by letter of the same date.

6.  Today, W confirmed that she had discovered the documents during Chinese New Year and had immediately informed her solicitors of the discovery. She also explained that she had modified the charts to incorporate this new material. The charts were prepared with the assistance of an accountant.

7.  I have taken W’s application, made from the Bar Table, to be an application not simply to use these charts but also to adduce the new evidence discovered by W. Mr. Marwah has confirmed, today, that this was the nature of the application.

8.  To be clear, the proposed bundle updates consist of three items which I understand are not contentious:

(a) E3/Tab 170.15 – a letter dated 7 February 2022 from PCW to CRB concerning the packaging of H’s wine collection;

(b) E4/Tab 170.17 – a letter dated 9 February 2022 from PCW to CRB concerning H’s query on W’s possible inheritance from her father and mother – W has already given evidence on this topic; and

(c) updates to the G Bundle adding documents which have already been supplied by H.

9.  Mr. Todd for H opposed the application on the following grounds:

(a) The “Black hole” argument is now raised, 6-7 years into the litigation. To the extent she was, and remains intent on pursuing it, it was beholden on W to present particularised questions for H to respond to;

(b) The October 2021 Order embodies W’s agreement to limit the extent of her enquiry;

(c) The written evidence for the trial is closed. At the PTR in December 2021 W was refused leave to adduce professional evidence to assist the “audit” of the marital finances. In any event, such an “audit” runs contrary to the principle that the Court should not countenance a retrospective ‘raking over the coals’ of a failed marriage, per LKW v DD;

(d) W could have, and should have discovered these documents long ago, and in any event before the close of the parties written evidence. Her explanation is unsatisfactory;

(e) Some of the contents of the charts are not factual, but argumentative;

(f) In the context of the parties AR claims, this is well outside the scope of the proper enquiry the court should be conducting.

Relevant background

10.  This matter was originally commenced by H’s petition dated 28 August 2014. The suit was defended but on 25 November 2015 it was compromised on the basis that the matter would proceed with W filing a fresh petition (1 year’s separation plus consent). It is therefore not in dispute that the parties have been and remain separated since 2014. There then followed several years of litigation concerning the two children, culminating in the Order dated 13 August 2019. The parties then shifted their focus to the question of ancillary relief.

11.  After the unsuccessful FDR, W sought further disclosure by H of documents relating to H’s earnings prior to separation. On 5 July 2021 she applied by Summons for orders for discovery of these documents, spanning from 2001 (the year after their marriage) to 2013 (the year before they separated). This was the first sign she was intending to run the case that she is now putting forward. Nothing in her maintenance pending suit (“MPS”) principal affidavit or reply affidavit suggests it. In her affidavit supporting the specific discovery (“SD”) summons, (her 8^th) she explained that the documents were needed to confirm her assessment that, having regard to H’s estimated earnings during the marriage, and taking into account the expenditure during the marriage and for the 2 years after separation – necessarily another estimate – the likely assets in H’s name were HK$230 million, much more than he had declared in his first Form E filed in 2015, which was HK$165.69 million. Adjusting further for those she said should be excluded, the two Singapore landed properties being among them, she said that this represented a “staggering” shortfall of HK$122.2 million (paragraphs 61-63).

12.  CRB wrote immediately in response by letter of 7 July 2021 [E1/1890] referring to discovery request as “extraordinary”, and based on a flawed analysis. In H’s affirmation in response to the Summons (his 6^th) he further elaborated on this labelling it as a “fishing expedition” (para 6), and the theory of the missing millions as “wishful thinking” without a rational basis (para 8). W’s reply (9^th) affidavit responded to these assertions by maintaining the necessity for the disclosure of the documents.

13.  The matter was resolved by Consent Order dated 20 October 2021 recording H’s agreement to file an affirmation exhibiting some of the documents sought, i.e. limited to (a) compensation summaries issued to H by his employer for the years 2007 to 2013; (b) accounting pay statements issued by the same employer at the end of the years 2006 to 2013; and (c) final tax assessments issued by the IRD to H for the FY 2009/10, 2010/11 and 2011/12. In this respect it is relevant to note that W had said in her principal (8^th) Affidavit that 2007 was the year when the marriage began to break down and that from 2008 onwards H’s bonus payments were not paid into the parties’ joint account as they had been before then [A/90, paras 54, 55].

14.  The Consent Order began with a recital recording the parties’ agreement that:

(1) The Order is entirely without prejudice to either party’s contention as to whether W’s Summons was necessary;

(2) W acknowledged that she had no pending or intended application for discovery, subject to the disclosure made by H in compliance with the Order;

(3) The Trial hearing dates, which had by then been fixed, would be preserved.

(I note, parenthetically, that there has been some adjustment to the dates for trial, inter alia to take into account W’s change of counsel, but the month of the trial – February 2022 – has been preserved.)

15.  H says that paragraph (2) of the Recital to the Consent Order was a firm statement that W would not be making any further applications for discovery at least insofar as H’s income during the marriage was concerned. I agree.

16.  Two weeks later, on 3 November 2021 W filed her narrative affidavit (her 10^th) for the Trial. It includes paragraphs under the heading “Section F: Undeclared Assets to be Added Back and/or Brought into the Computation Analysis”. This Section of the Affidavit is further sub-divided and includes a passage – paragraphs 170 to 177 of the Affidavit – in which W alleges, in essence, that starting from early on in the marriage H had syphoned-off large sums of money from a joint Singapore bank account totaling HK$154.1 million. She produced a large number of bank statements of the joint HSBC Singapore Loan and Bank Accounts, and questioned why H was still making auto payments from this account to service his Singapore credit card when they had already relocated to Hong Kong. She asks semi-rhetorically in the next paragraph “How did [H] manage to use his Singapore credit card to drain monies away from our matrimonial funds?”. At paragraph 173 she queries transactions of auto-deposits into his DBS Account (statements of which she exhibits) and concludes at paragraph 174 that all these documents demonstrate a systematic draining of the Singapore accounts to an undisclosed location or in the form of undeclared assets (para 177).

17.  At the PTR on 13 December 2021, W’s counsel confirmed that they were additional concerns to those raised by her 8^th Affidavit (paragraph 27 of W’s counsel’s Note). The same Note applied (again absent a Summons) for the Court to allow W to engage and call as a witness a forensic accountant to aid her analysis and reconstruction of the alleged missing money/assets. Her application was not granted.

18.  What should then have happened, if W wished to obtain further documents connected with her black hole theory, e.g. credit card statements connected with the alleged draining of matrimonial funds, she should have applied for an order that they be produced, or leave to issue a further questionnaire. Of course, this would have been inconsistent with her confirmation in the October 2021 that she had no pending discovery application, but it should have been made.

19.  Instead, she now seeks to adduce the documents to bolster her case.

20.  On 15 February 2022, in response to a question from the Court, W confirmed that her “black hole” theory of secret dissipation or syphoning off by H was limited to the period during the marriage i.e. before separation.

21.  PCW’s letter describes these newly discovered documents as

(a) H’s letter to the Singapore Ministry of Defence 24.9.2019 – showing that H knew NXXX will go into the army, and H stated that “I am responsible for the financial needs of NXXX”;

(b) Documents showing H’s XXXX salaries and bonuses;

(c) Joint Citibank account statements from April 2002-May 2006, showing the deposits of XXXX bonuses, withdrawals and some KXXX rentals;

(d) H’s UOB statements showing H’s joint account with his mother, which he did not declare;

(e) H’s UOB Singapore statements for the period after the family removed from Singapore, showing expenses and withdrawals;

(f) H’s HSBC Singapore credit card statements for the period after the family removed from Singapore, showing there were monthly charges of ‘ITX-Income Tax’;

(g) H’s DBS statement for the period after the family removed from Singapore, showing monthly deposits of SGD20,000; and

(h) H’s UOB Singapore credit card statement showing summary 1 year of expenses.

22.  W’s application is extremely late and not made properly – it should have been made by Summons with a supporting Affidavit explaining why the Court should allow the documents to be adduced and how their production is consistent with her related duties of promptitude and full and frank disclosure, and their relevance to her case.

23.  I refuse the application to adduce the new evidence with one exception. I will allow the production of item 1, being the letter to the Singapore Ministry of Defence. All documents for which leave is refused are to be removed from the Trial Bundles. As I have allowed that single letter, I grant leave to the Respondent (if so advised) to file an affirmation dealing with that letter and exhibiting any other emails/documents he wishes, before he commences his evidence. I will hear from Counsel as to a specific date. Leave is given to W to produce amended charts before she completes her evidence.

Mr. Azan Marwah instructed by P.C. Woo & Co. for the Petitioner

Mr. Richard Todd instructed by CRB for the Respondent

FCMC 15288/2015

[2021] HKFC 209

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 15288 OF 2015

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DECISION

( Maintenance Pending Suit/ Interim Maintenance )

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Introduction

1.  This is an application filed on 17 November 2020 by the Petitioner Wife (“W”) for Maintenance Pending Suit (and Interim Maintenance) for herself and 2 children of the family.

2.  W and the Respondent Husband (“H”) were married on 12 November 2000 and have 2 sons, N (aged 18) and C (aged 13).  H and W separated in August 2014.

3.  W was granted sole custody, care and control of N.  Joint custody of C was granted to W and H with care and control of C to W.

4.  W applies for the sum of HK$437,280 for herself and the Children.   According to W, H had all along been providing for W and the Children through their joint account but he unilaterally closed the joint account and started paying only HK$240,000 per month from 1 October 2019.  The amount was further reduced to HK$180,000 by 1 October 2020.

5.  H’s case is that the maintenance provided by him is reasonable and W had been put on notice to cut down on expenses including moving to a more economical accommodation but W unilaterally renewed the lease on 30 June 2020.   H even offered a Charman payment of HK$5 million but was unreasonably turned down by W.

6.  H invites to this Court to make an order of maintenance pending suit in the sum of HK$180,000 or in the event R volunteers a lump sum of HK$5 million, then the amount of maintenance pending suit shall be varied to $1 per annum. 

General Background

7.  H is 48 years old and now employed as a fund manager at an investment management firm (“the Firm”) at US$50,000 per annum (about HK$32,333 per month) plus bonus. 

8.  W is 49 years old, she used to work as a banker in Singapore and retired in September 2004 to be a full-time homemaker. 

9.  H grew up in Malaysia and has worked in investment management business since October 1994.  He had previously worked at several well-known investment management institutions in Singapore, Japan and Hong Kong. 

10.  Before joining the Firm in February 2014, H left his last employer due to his performance.  H’s bonus dropped significantly in January 2013 and his former employer put pressure on H for him to move on by offering him managerial role he was inexperienced in as opposed to the more lucrative trading role, H eventually left his last employment in September 2013.

11.  During his last employment, H earned approximately HK$160 million (comprising basic salary and bonus) over 7 years, his  remuneration package then was basic salary of US$950,000 per annum (about HK$615,000 per month) plus bonus.

12.  H started off with the remuneration of US$200,000 per annum (about HK$129,589 per month) plus bonus at the Firm.  However, H generated trading losses for 3 consecutive years from 2016 to 2018 and received no bonus for the last 4 years.  H’s position at the Firm became extremely difficult in mid-2019 and he had to accept a significant salary cut to US$50,000 per annum (HK$32,333 per month) since July 2019 to keep his job.  H even bought buy back some of his trading losses at a significant discount to keep a better trading record.

13.  In this application, there is no express challenge by W of the remuneration or salary cut of H with the Firm.  W also does not rely on any allegation of material non-disclosure in her submissions despite allegations in her affirmation evidence.  For avoidance of doubt, I consider there is little material before me to substantiate such a claim at this stage.

14.  It is also common ground that this Court does not have jurisdiction to award Charman payment in this application.

The Law

15.  Section 3 of the Matrimonial Proceedings and Property Ordinance, Cap.192 (“MPPO”) for maintenance pending suit provides that the court may make an order for such periodical payments for maintenance and for such term it thinks reasonable.

16.  It is trite law that such applications are approached on a broad-brush basis.  A detailed examination of the parties’ means may be examined at a full ancillary relief hearing when there is then the opportunity to achieve fairness by means of set off. If there is any overpayment or underpayment, it can be rectified at a final ancillary relief hearing.

17.  W’s present application covers maintenance for the Children, section 5 of the MPPO should be applicable and the factors set out in section 7(2) are to be considered.  Again, a broad-brush approach should be adopted. (LAML v TCCY, (unrep.; CACV 75/2004, 13 September 2004))

18.  The following principles were set out in the Court of Appeal decision in HJFG v KCY [2012] 1 HKLRD 95 with respect to maintenance pending suit/interim maintenance applications:

a.   The sole criteria to be applied in determining the application is “reasonable” which is synonymous with “fairness”.

b.   A very important factor in determining fairness is the marital standard of living.

c.   In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long term expenditure, more aptly to be considered on a final hearing. That budget should be examined critically in every case to exclude forensic exaggeration.

d.   Where the affidavit or form E disclosure by the payer is obviously deficient, the Court should not hesitate to make robust assumptions about his ability to pay. The Court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such situation, the Court should err in favour of the payee.

Marital Standard of Living

19.  It is W’s case that the family enjoyed high standard of living which was met solely from H’s income since they moved to Hong Kong in 2007.

20.  The family first rented a 3,400 square foot town house with 4 rooms, 2 helpers’ rooms and 2 car parking spaces in Southside for HK$190,000 between 2007 and 2011.  Between 2011 and 2013, the family moved to Admiralty’s Pacific Place at the rent of HK$203,000 for a 2,650 square foot service apartment with 3 rooms, 2 car parking spaces.

21.  The family later moved in 2013 to the accommodation in question in Mid-Level’s which is a duplex of 5,400 square foot (gross area) with 6 rooms and helper’s room and 2 car parking spaces.  Its current rent is HK$160,000 per month.

22.  H has owned many cars in the past, including sports cars like Ferrari, Porsche, Aston Martin, Jaguar and Nissan GTR and sedans/7 seater cars like BMW 7 Series, Mercedes Benz S Class, Toyota Alphard/ Vellfire. 

23.  In relation to standard of living.  H submits that the present application should not focus on the alleged standard of living 7 years ago, not only was the more lucrative employment was gone, H has suffered from a significant drop in income.  H also has to maintain 2 households now.  According to H, he stopped buying new cars for 4 years and he had to cut down on expenses.

24.  Despite H’s salary cut, H and W still own substantial assets.  From H’s Form E filed on 18 September 2019 and 2 February 2015, H’s net worth was HK$153,466,278 and $165,697,311.86 respectively.  From W’s Form E filed on 21 February 2020, her net asset was HK$44,388,259.11. W’s net worth in her Form E filed on 6 February 2015 was HK$40,553,190.

25.  From the evidence before me, I find that the parties did enjoy a very comfortable standard of living funded by H before separation.

Forensic Accountant’s Report

26.  H instructed a forensic accountant firm to analyse the expenditure of W. The forensic accountant’s report dated 27 October 2020 suggested that W’s average monthly personal expenses (excluding rent valued at HK$170,000) was only HK$53,775 in 2019 and HK$55,617 during COVID-19 between January and August 2020.

27.  The forensic accountant engaged by H is not a single joint expert appointed for the parties, W submits that the forensic accountant’s report will be challenged at the final ancillary relief.  In these circumstances, my view is that little weight should be attached to the forensic accountant’s report at this stage.

General Expenses

Rent

28.  This item represents the most significant portion of the maintenance in dispute.  H submits that W and the Children simply do not need an accommodation as big as 5,400 square feet (gross area).  H already by letter dated 19 September 2019 put W on notice that she should move to a more economical accommodation after the lease was supposed to expire by the end of September 2020. 

29.  Without H’s knowledge or consent, re-signed the current lease on 30 June 2020.  H considers the reasonable rent to be HK$100,000 by reference to a simplex half the size in the same building of the this rent as advertised. 

30.  W submits that this is the accommodation that the family has occupied before the divorce proceedings, a status quo should be maintained.

31.  It is true that the H’s his income has dropped to US$50,000 per annum with no bonus in the past few years.  However, judging from  H’s expenditure from his Form Es filed in 2015 and 2019, H maintained the same level of spending as before on his general and personal expenditure even after the salary cut.

32.  H’s general expenses and personal expenses in 2015 were HK$305,985.76 per month and HK$139,333 per month respectively.  H’s general expenses and personal expenses in 2019 were HK$128,200 and HK$243,900 per month respectively.  The major differences between 2015 and 2019 on general expenses come from the rent of HK$49,151.21 per month in Singapore and mortgage instalments of HK$137,834,55 for the Singapore property.  After deducting these sums, the general expenses in 2015 was HK$119,000. Even counting the expenses on wine ($50,000) as investment, the general expenses and personal expenses in 2019 were still higher, after the salary reduction, than in 2015.

33.  In H’s Affirmation filed on 15 December 2020, H said he had taken steps to reduce his spending by eating out less and no longer providing his parents with monthly support but just an annual red packet and limiting his spending where possible.  He would also try to negotiate his monthly rent of HK$85,000 per month to HK$80,000 per month.  However, there is no particulars or actual figures provided by H about his reduction in expenses, I do not consider the efforts he described improve his case much.

34.  H had been providing maintenance to W and the Children including the rent for the present accommodation that was occupied by the family before divorce, while H now says that his salary has gone down and W should move to a more economical accommodation, I don’t consider it reasonable when H, to say the least, has maintained his level of spending.

35.  My view is W should be allowed to keep renting the present accommodation.  I therefore allow the sum of HK$164,000 as rent.

Utilities

36.  W claims HK$7,700, under this item.  H argues that even HK$6,000 is absurdly high.  I accept HK$6,000 to be the reasonable amount for W.

Food and Car Expenses

37.  W claims HK$26,000 and HK$10,230 respectively.  H argues that these figures are exaggerated especially during COVID-19.  I agree and consider HK$4,000 and HK$1,000 to be reasonable for them respectively.

Household Expenses (ParknShop, L’ occitane, Dog Food and Grooming)

38.  H complains that there is no justification or explanation by W as to why the amount jumped from HK$5,000 in Form E in 2015 to HK$16,730 in W’s Affirmation.  I am prepared to allow only the sum of HK$5,000.

Domestic Helper

39.  H has no complaint about this item.  I allow HK$7,500 as claimed.

Others (Heath Foods and Supplements), Toiletries, Electronics, Subscriptions, Storage)

40.  W’s claim is HK$23,300, H argues they are excessive and not supported by evidence.  From W’s 2019 Form E, health supplements and bird’s nest amounted already to HK$16,360.  I agree with H’s complaint, in particular, I do not see evidence of why W and the Children should need such amount.  I will only allow HK$3,000 for this item.

Personal Expenses

Meals Out (including Children) and Personal Grooming

41.  HK$18,800 and HK$16,930 are claimed respectively, H submits that they are excessive and not supported by evidence.  I am with H, and accept the sums of HK$4,000 and HK$4,000 to be reasonable.

Clothing’s, Bags, Shoes, Accessories

42.  This item is not challenged by H, the sum of HK$3,150 is therefore allowed.

Entertainment/Presents

43.  H has no specific complaint about the claimed figure, I accordingly allow the sum of HK$8,120.

Holidays

44.  W claims HK$11,670, H argues that it is not possible during COVID-19.  Staycation during COVID-19 is not uncommon, I consider HK$2,000 to be reasonable.

Children Expenses

School Fees

45.  The claim is HK$43,000, the amount is not in dispute, H just claims it is paid by him direct.  I allow this amount, whether it is to be included in the maintenance or paid by H direct will be discussed later.

Extra Tuition Fees

46.  H argues that this is excessive and unclear why this sum should jump to HK$25,200 now from HK$11,700 as claimed in the 2020 Form E.  The particulars given by W is that each child should have 4.5 hours per week at HK$700 per hour.  I understand from W’s 2020 Form E that the old figure was for the elder son.  Now the younger child is also to start but he should need a lower amount.  I accept HK$15,000 to be reasonable.

School (Uniforms, Stationaries, Books and etc.) and Clothing, Bags, Shoes, Accessories

47.  There being no complaint about these items, I allow the sums of HK$1,000 and HK$3,000 respectively as claimed.

Transport to Schools (School Buses)

48.  H says this item should be included in general expenses.  As this relates to school buses, I accept it to be under Children’s Expenses at the amount of HK$5,800 as claimed.

Extra-Curricular Activities

49.  W’s calculation is 3 hours per week at HK$800 per hour, H questions the increase from HK$6,000 to HK$9,600 from last Form E.  I consider this amount claimed reasonable and would allow it.

Entertainment/Presents

50.  The claimed amount of HK$2,410 is allowed as not being challenged.

Holidays

51.  W claims HK$23,340, H argues that it is not possible during COVID-19.  Again, staycation during COVID-19 is not uncommon, I consider HK$4,000 to be reasonable for the Children.

Allowances (School, Outings, Other transport)

52.  H complains about the increase from HK$2,200 in 2015 Form E to HK$4,340 in 2020 Form E then to HK$5,700 now.  I see that the figure was actually HK$5,640 in 2020 Form E.  I accept as the Children have grown older, the amount should be adjusted upwards.  I consider $3,000 to be reasonable.

Others (Haircuts, Facials, Dermatologist excludes Endocrinologist)

53.  H complains about the increase from since 2015 from HK$2,400 to HK$4,100.  Having considered that the Children have grown older, I accept the sum of $3,000 to be reasonable.

54.  For ease of reference, the items I have allowed are summarised as follows:

General Expenses
Rent	HK$164,000
Utilities	HK$6,000
Food	HK$4,000
Household	HK$5,000
Car Expenses	HK$1,000
Domestic Helper	HK$7,500
Others	HK$3,000
Total	HK$190,500
Personal Expenses
Meals out of home	HK$4,000
Clothing etc.	HK$3,150
Personal Grooming	HK$4,000
Entertainment/Presents	HK$8,120
Holidays	HK$2,000
Total	HK$21,270
Children’s Expenses
Schools Fees	HK$43,000
Extra Tuition Fees	HK$15,000
School	HK$1,000
Transport to School	HK$5,800
Extra-Curricular Activities	HK$9,600
Entertainment/ Presents	HK$2,410
Holidays	HK$4,000
Clothing	HK$3,000
Allowances	HK$3,000
Others	HK$3,000
Total	HK$89,810

55.  On a broad-brush approach, I apportion one-third of the General Expenses to W and two-thirds to the Children.  For W, her share of the General Expenses allowed is HK$63,500 and the Children’s share should be HK$127,000.

56.  The Maintenance Pending Suit for W should therefore be  HK$84,770 (ie. HK$63,500+HK$21,270) to be round up to HK$85,000.

57.  The Interim Maintenance for the Children should be HK$216,810 (ie. HK$127,000+HK$89,810) to be round up to HK$217,000 to be equally shared by the 2 Children.

H’s Ability to Pay

58.  H has over HK$3.6 million in his bank accounts and H has maintained his level of living even after the salary cut since July 2019.  H had made the offer of HK$240,000 per month (plus school fees) as W’s maintenance pending suit.  The amount I allow now is not much higher.   Given the above, there is little reason for me to doubt H’s ability to pay.

Order

59.  The only outstanding question is whether the school fees should be paid to the schools direct by H or be included in the Interim maintenance for the Children.

60.  I note H’s strong preference to pay the school fees by him direct for avoidance of trouble that may be caused by W.  However, H has not offered to give an undertaking to pay the schools fees direct. 

61.  I am not satisfied that school fees should be left out of the Order I am about to make.  I do not share the H’s concern over payment of the school fees by W in any event.  I shall include the amount allowed for school fees to be part of the Children’s Interim Maintenance.

62.  In the present application, neither party is considered successful as their respective offers were not accepted by me.  By reason of the foregoing, I make the following orders:

(a)   The Respondent shall pay maintenance pending suit to the Petitioner in the sum of HK$85,000 per month and Interim Maintenance to the Petitioner for the Children of the Family in the sum of HK$217,000 per month (to be equally shared by the Children) to be backdated to 17 November 2020 and thereafter to be paid on the 1^st day of each succeeding month until further order;

(b)   Credit be given to any sums that the Respondent has paid to the Petitioner from 17 November 2020 onwards; the difference (if any) shall be paid within 14 days from the day of this Order;

(c)   There shall be an order nisi to be made absolute in 14 days that there be no order as to costs.

FCMC 15288/2015

[2020] HKFC 194

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 15288 OF 2015

________________________

________________________

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D E C I S I O N
(Costs)

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THE APPLICATION

1.  This is an application made by the Respondent by summons filed on 5 June 2020 (“the Costs Summons”) to vary the costs order nisi made by HH Judge Melloy in the decision handed down on 25 May 2020, in which the learned Judge decided to recuse herself from these proceedings.

2.  While it was sought by the Respondent in the Costs Summons that this variation of costs order application shall be dealt with by HH Judge Melloy herself, the learned Judge had passed the Costs Summons onto this court for consideration, because Her Honour had acceded to the Petitioner’s application that she shall recuse herself forthwith from further hearing or deciding any matters in these proceedings.  The parties had not objected against this arrangement.  This court shall therefore deal with this application accordingly. 

3.  Upon the parties’ confirmation of their agreement to have this matter disposed of on paper, this decision is handed down without any oral hearing.

BACKGROUND OF THE PROCEEDINGS

4.  This case has a long history.  The initial proceedings were started under FCMC 11445/2014, which were subsequently stayed by consent upon the presentation of the Petition herein (FCMC 15288/2015).  While the first set of proceedings was commenced in 2014, the litigation on children matters herein did not come to an end until HH Judge Melloy handed down a Judgment on “Custody/joint custody and access” on 13 August 2019.

5.  The children matters had not been concluded earlier because, among other things, there had been a heated dispute on whether the Respondent (and his wider family) had a mental health issue.  This in turn had led to various applications to the learned Judge and an appeal to the Court of Appeal in relation to the expert evidence to be adduced.

6.  It was because of the above that while the trial on children matters was started on 24 April 2018, it did not conclude until 23 March 2019.

7.  The Judgment on children matters was then handed down, as aforesaid, on 13 August 2019, with an order nisi that there be no order as to costs.  The costs order was subsequently varied upon the Respondent’s application, to the extent that the Petitioner was ordered to pay a 20% contribution towards the Respondent’s costs of and occasioned by the children related litigation.  The reason for such a variation, in HH Judge Melloy’s own words, was that:

“This is in order to recognize the unacceptable manner in which the [Petitioner] chose to conduct the litigation on occasion and to penalize her for this and for her generally over aggressive litigation approach. The percentage is not higher in recognition of the fact that ultimately this was a children’s matter and the court has no doubt that many of the [Petitioner’s] concerns were genuinely held.”[1]

THE RECUSAL APPLICATION

8.  Soon after the Judgment on children matters was handed down, the Petitioner filed a summons on 17 October 2019 for recusal of the learned Judge (“the Recusal Summons”).  In support of the recusal application, it was submitted on behalf of the Petitioner that:

(1)     “…the Judge’s conduct within the proceedings gave rise to an apprehension of bias against [the Petitioner], in that there were a preponderance of hearings and occasions when the Judge made orders and directions in favour of [the Respondent] without justification.”[2]  

(2)     “The Judge made various criticisms of [the Petitioner] which would led (sic) an ordinary reasonable person to conclude that there was an apprehension of bias…”[3]

(3)     “…the Judge granted most of [the Respondent’s] requests and rejected most of [the Petitioner’s] requests….[there was also] inconsistency of the Judge’s directions on the same issues, especially on allowing and disallowing experts and their evidences, and the changing of the Judge’s directions with whatever [the Respondent] requested or with partiality to [the Respondent’s] point of view...”[4]

(4)     There were “prejudgement of questions and matters when they should not have been determined.  The possibility of an unfair trial already justifies recusal, let alone one that had been shown to be unfair and unjust, with its failure to address the best interests of the Children putting the Children and their future at risk.”[5]

(5)     “The Judge embraced and repeatedly used [the Respondent’s] argument that [the Petitioner] did not address ‘how [the Respondent’s] PDs impact access to the Children?’.  That answer was given by [the Petitioner’s] expert witnesses…and in [the Petitioner’s] 4^th and 5^th Affidavits…It was therefore, not a question of [the Petitioner] not addressing or providing evidence of [the Respondent’s] personality disorder, even when articulated by [the Petitioner’s] Counsel in trial but the Judge again ruling (sic) against [the Petitioner] due to bias.”[6]

(6)     A recusal at that point of time would not result in wasted costs or further delay.  It was “an appropriate juncture in (sic) which the Judge is requested to transfer the case, before interlocutory applications regarding finances which may need to be determined prior to FDR hearing.”[7]

9.  Having considered the Petitioner’s application, HH Judge Melloy made an order in terms of the Recusal Summons (save as to the costs thereof), but on a basis which is very different from those relied on by the Petitioner.  As Her Honour’s reasoning of recusal would have an important impact on this decision on costs, such reasoning is quoted at length below:

“Overview

13. I should say at the outset (although this is clearly trite and more for the benefit of the lay clients than the lawyers), that I stand by all of the Rulings and Judgments made in this case, together with all of the other orders and decisions made to date. If I have made an error, either as to the law itself or in the exercise of my discretion or otherwise then it was open for the parties to seek leave to appeal. On the occasions where matters did proceed to the Court of Appeal my decisions were upheld. I do not, as a general comment accept any of the accusations made against me in the [Petitioner’s] submissions, including the allegations of inconsistency or unfairness and of course, bias.

14. Having said that it is clear that the [Petitioner] is convinced that I am biased against her, and similar to the way in which she has conducted these proceedings generally it seems very unlikely indeed that she will ever be convinced otherwise. This is of particular concern given that the next stage in the litigation is for there to be a Financial Dispute Resolution hearing, which is a facilitative hearing, where the judge traditionally gives the parties an indication and encourages them to reach settlement with respect to their finances. I accept that the chances of any success in this respect with myself presiding as the FDR judge are virtually nil given the venom with which the [Petitioner] regards me.

15. In such circumstances I have further considered whether anyone reading the judgments and rulings for the first time, a fair minded observer if you will, might come to conclusion that there could be the possibility of ‘apparent bias’ going forward?  In particular, given the personal nature of the attacks made against me and my professionalism, would it start to become difficult to maintain the line of strict impartiality? I hope that this would be unlikely, however I accept that given the [Petitioner’s] open hostility towards me and the personal nature of her attacks, that an independent observer might come to that almost inevitable conclusion.  I have decided therefore that it would be more appropriate to err on the side of caution and to make the order that the [Petitioner] seeks.”

10.  Before I go on, I should point out immediately that I do not agree with what Ms Allison submitted for and on behalf of the Petitioner that:

“While the Judge did not accept [the Petitioner’s] accusations made against her, and stands by all of the Rulings and Judgments made in the proceedings, it is submitted that the Judge could not have done otherwise. If the Judge had accepted [the Petitioner’s] criticisms, then it would have necessitated those Rulings and Judgments being set aside and parties having to relitigate those issues. This would not have been an ideal situation for anyone and hence it is unsurprising that the Judge adopted this course of action.”[8]

11.  From my reading of the Ruling on the Recusal Summons, it is apparent that Her Honour stood by all her Rulings and Judgments made in these proceedings not because the learned Judge “could not have done otherwise” nor because accepting the Petitioner’s criticisms “would have necessitated…[the] parties having to relitigate those issues”.  It is plain that Her Honour rejected the Petitioner’s allegations simply because she maintained that those Rulings and Judgments had been correctly made without any bias, inconsistency or unfairness as alleged.

COSTS OF THE RECUSAL APPLICATION

The order nisi

12.  Since HH Judge Melloy took the view that the recusal application was “clearly arguable both ways”[9], she made an order nisi that there be no order as to the costs thereof.

The Respondent’s application

13.  By way of the Costs Summons, the Respondent seeks to vary the costs order nisi to an order that his costs of and incidental to the Recusal Summons be borne by the Petitioner on indemnity basis.

The legal principles

14.  It is trite that the court has a very wide discretion on the question of costs. 

15.  Before the implementation of Civil Justice Reform in April 2009, the general rule that “costs shall follow the event” applied equally to interlocutory and final judgments and orders pursuant to Order 62 rule 3(2) of the then Rules of the High Court (Cap.4A, Laws of Hong Kong).  Hence, back then, costs would follow the event unless there were circumstances in the case which justified the making of any other costs order.  However, the said rule 3(2) had been amended as part of the reform, and by virtue of such an amendment, interlocutory proceedings have been excluded therefrom.  As a result, the application of the general rule that “costs shall follow the event” has since then been restricted to proceedings other than interlocutory proceedings.  The reform further introduced a new paragraph (2A) under Order 62 rule 3, which stipulates that the court may order the costs of or incidental to any interlocutory proceedings to follow the event.  The overall effect of these amendments is that, in interlocutory proceedings, “costs follow the event” has become just one of the options available to the court, and is no longer the “default position”.

16.  The rationale of such a change can be found in Recommendation 122 made by the Working Party on Civil Justice Reform:

“The principle that the costs should normally “follow the event” should continue to apply to the costs of the action as a whole. However, in relation to interlocutory applications, that principle should be an option (which would often in practice be adopted) but should not be the prescribed “usual order.” Costs orders aimed at deterring unreasonable interlocutory conduct after commencement of the proceedings should be given at least equal prominence in practice, with the court being directed to have regard to the underlying objectives mentioned in relation to Recommendation 2. These powers should not apply to pre-action conduct.”

17.  Order 62 rule 5 of the Rules of the High Court has given further guidance as to what special matters the court should take into account in exercising its discretion on costs.  Insofar as this application is concerned, the Respondent relied on “the conduct of all the parties” under rule 5(1)(e).  As to this sub-paragraph, rule 5(2) provides further that:

“For the purpose of paragraph (1)(e), the conduct of the parties includes –

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

18.  The ultimate question which this court has to answer is: what costs order would be a fair and just one in light of all the circumstances of the case.  The court’s hands are not bound by any “default position” as such. 

The Respondent’s argument

19.  The main grounds which the Respondent has relied on in support of his application to vary the costs order nisi are as follows:

(1) The basis of the Petitioner’s recusal application was muddled and unclear; all her allegations had been rejected by the court, and as a matter of fact she had attempted to argue a point (actual bias) which had already been rejected in the learned Judge’s Judgment on children matters.

(2) The court acceded to the Petitioner’s recusal application only because (i) the learned Judge found that the unreasonable hostility and conduct on the part of the Petitioner had rendered the chance to have a successful FDR unrealistic if Her Honour remained the presiding judge at the FDR, and (ii) of the Petitioner’s intimation that she would sabotage the collaborative process of the FDR.

(3) The recusal was caused by the Petitioner’s litigation misconduct, and her unreasonable and improper assault on the learned Judge’s bona fides.

(4) The Petitioner did not prosecute her application for recusal with promptitude.

(5) The Petitioner had conducted the recusal application in a personal and intimidatory way.

(6) The Petitioner’s behaviour in these proceedings as a whole was disgraceful and thus meriting condemnation in costs.

(7) The Petitioner was engaging in a “judge-shopping” exercise by virtue of the recusal application.

(8) The Respondent was acting perfectly reasonably in challenging the Petitioner’s recusal application and put the Recusal Summons to proof, and the Petitioner had failed that proof.  He should therefore not be left out of pocket thereby.

Discussion

20.  First of all, I do not think there is much room for the Respondent to argue that it was unreasonable for the Petitioner to raise or pursue her allegations as she did in the recusal application at all for the following reasons:

(1) Although the Petitioner did raise certain accusations against the learned Judge at the trial on children matters, one must not lose sight of the fact that no recusal application was made at the trial.  The central question considered in the recusal application, namely, whether there was “apparent bias”, was never considered by the court in these proceedings before the recusal application was made.  As a result, the Respondent’s argument on res judicata is totally beside the point, and indeed, HH Judge Melloy did not rule that there was any issue estoppel as such in her Decision on the Recusal Summons.

(2) Furthermore, it was HH Judge Melloy’s finding that the Recusal Summons was “clearly arguable both ways”[10]. This must be a basis which this court should act upon in its deliberation of the Respondent’s Costs Summons.

21.  I do not think it is fair for the Respondent to accuse the Petitioner of having intimated that she would sabotage the collaborative process of the FDR, as she never did.  All the Petitioner was saying in the recusal application was that “this is an appropriate juncture in (sic) which the Judge is requested to transfer the case, before interlocutory applications regarding finances which may need to be determined prior to FDR hearing.”[11].  Similar submission was made in the Petitioner’s reply submissions, in which it was stated that “it would be far better for the matter to be transferred to a different court at this juncture than to continue bearing in mind, that there may be interlocutory financial applications which may be made prior to the FDR hearing”[12].  While at the end of the day, the chance of success of the FDR was indeed one of the main reasons for the learned Judge to recuse herself, it seems to me that this matter was considered by Her Honour only out of her abundant experience sitting in the Family Court, but not because of any intimation as such on the part of the Petitioner.

22.  While HH Judge Melloy did comment that the Petitioner’s allegations had been made in a way which bordered on the improper, the learned Judge had also expressed her views that many of the Petitioner’s concerns were genuinely held[13] and that it is clear that the Petitioner is convinced that Her Honour was biased against her[14].  Hence, this is not a case where it can be said that the Petitioner had jumped at an available opportunity for “judge-shopping” purpose.  In my judgment, it would make a difference when it comes to the exercise of the court’s discretion if the Petitioner’s view was held genuinely, even if mistakenly.

23.  While it is the Respondent’s right to resist the Petitioner’s application, this does not mean that the Respondent is bound to be “costs-proof”.  The fact that the Respondent had acted perfectly reasonably in challenging the Petitioner’s recusal application is just one of the matters to be taken into account.

24.  It is true that the learned Judge had rejected all criticisms made by the Petitioner against Her Honour.  Be that as it may, the learned Judge had acceded to the Petitioner’s application at the end of the day by, among other things, applying the “apparent bias” test.  Hence, both parties can be regarded as successful, but at the same time, both of them can be said to be losers.  It all depends on how one looks at the matter.  In my view, the costs order should adequately reflect such outcomes of the recusal application.

25.  I do not accept that this court should take the Petitioner’s conduct in the children’s matters into account when considering the matter on costs in relation to the Recusal Summons, since the Petitioner has already been penalised by the court by virtue of the order to pay a 20% contribution towards the Respondent’s costs of and occasioned by the children’s matters.  The Petitioner’s past conduct should have been considered already in the process. Therefore, the same conduct should not be considered again herein.  Hence, this court should only consider the conduct of the Petitioner in the recusal application.

26.  Neither do I think the alleged delay in the making of the Petitioner’s recusal application should have any bearing on the application on costs.  It can be seen that many of the accusations made by the Petitioner were in relation to incidents which took place after the commencement of the trial on children matters.  If the Petitioner did not wait but made her recusal application there and then, the progress of the trial on children matters would no doubt have been affected.  Hence, I do not think the Petitioner’s decision to wait until the conclusion of the children matters before making the recusal application can be made a factor which works to the Petitioner’s disadvantage in the present application.

27.  In the Respondent’s reply submissions, it was further argued that the Petitioner’s forcing a change of the docket judge has delayed matters[15].  While delay must have been occasioned by the Petitioner’s recusal application, I do not think this is a matter which the court should place much weight.  In the same paragraph, the Respondent further referred to the Petitioner’s failure to file an updated Form E, which in my view is totally irrelevant as far as this application is concerned.

28.  Having taken all the above matters into account, I am of the view that a fair order to be made is “no order as to costs”. 

ORDER

29.  I therefore order that the costs order nisi made by HH Judge Melloy on 25 May 2020 be made absolute.

COSTS OF THE COSTS SUMMONS

30.  I make a costs order nisi that:

(i) the Respondent shall pay the Petitioner’s costs of and incidental to the Costs Summons.  For the avoidance of doubt, such costs shall include counsel’s fee incurred in opposing the Costs Summons;

(ii) such costs shall be assessed summarily on paper, pursuant to Order 62 rule 9A(1)(a) of the Rules of the District Court (Cap.336H); and

(iii) the assessed costs shall be paid within 14 days after summary assessment.  

31.  In the absence of any application made within 14 days to vary, the above costs order nisi shall become absolute.

32.  For the purpose of summary assessment of the Petitioner’s costs of and incidental to the Costs Summons:

(i) The Petitioner shall lodge and serve her statement of costs (see Appendix A of PD 14.3) within 7 days after the costs order nisi above has been made absolute;

(ii) The Respondent shall lodge and serve his statement of objection within 7 days thereafter.