MGB aka MAG v. GCB

FCMC 5376/2015

[2019] HKFC 312

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5376 OF 2015

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D E C I S I O N
(Leave to Appeal)

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Application for Leave to Appeal

1.  This is a hearing of the Petitioner (“the Wife”)’s summons dated 14 November 2019 in which she asked for the following orders:

(1)  Leave to appeal against my order dated 31 October 2019;

(2)  If leave to appeal is granted, the Wife do have leave to file Notice of Appeal as per draft Notice attached therein;

(3)  An interim stay of the Order dated 31 October 2019 pending the determination of the appeal; and

(4)  Costs of and incidental to the application to be in the cause of appeal, to be taxed if not agreed.

2.  The Respondent (“the Husband”) opposed the application.

The Law

3.  Leave to appeal is governed by s. 63A (2) of the District Court Ordinance, Cap 336 which reads:

“(2) Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that-

(a) The appeal has a reasonable prospect of success; or

(b)   There is some other reason in the interests of justice why the appeal should be heard.”

4.  As to what constitutes a reasonable prospect of success, it has been held that the prospects of succeeding in the intended appeal must be “reasonable” and therefore more than “fanciful”, but without having to be “probable”: SMSE v KL[1]

Background of the Order dated 31 October 2019

5.  This case originates from the Wife’s petition for divorce in 2015 in which there was also a claim for ancillary relief (“AR”).  The case first came before Deputy Judge A.N. Tse Ching (now HH Judge A.N. Tse Ching) who granted a MPS Order (by consent) on 3 August 2015 for the Husband to pay the Wife, inter alia, MPS in the monthly sum of HK$80,000.  The important term of the MPS Order was contained in paragraph 2 therein, namely:

“2. [The Husband] shall pay to the [the Wife] maintenance pending suit in the sum of HK$80,000 per month on the 1^st day of each month payable in advance from the 1^st day of the month following the date of this Order untilfurther order or until a final settlement of this matter either by way of agreement or judgment.” (underline added)

6.  The trial for AR was heard before HH Judge Bruno Chan who granted the AR Judgment on 19 June 2017 in which the learned Judge ordered a clean break between the parties with the Husband paying a lump sum of HK$12,360,000 to be payable by the following instalments:

(1)  The sum of HK$7,800,000 to be paid within 3 months of pronouncement of DA; and

(2)  The sum of HK$4,560,000 to be paid by 5 equal instalments of HK$912,000 payable annually commencing from 19 June 2018 to 19 June 2022 inclusive and to be secured by a life insurance to be taken out by the Husband.

7.  The DA was granted on 20 September 2017.

8.  There was subsequent dispute on when the MPS Order should end.  The Wife contends that it should end on the date of DA, i.e. 20 September 2017.  The Husband contends that it should end according to the terms of the MPS Order, i.e. the final settlement of the matter either by way of agreement or judgment.  Since the AR Judgment was handed down on 19 June 2017, therefore, as argued by the Husband, the MPS Order should also end on that date.

9.  As the Husband has stopped payment of MPS from 19 June 2017, therefore, if the Wife’s contentions are correct, he would be in default of about 3 months’ MPS payment.  This was the view adopted by the Wife and so she issued Garnishee proceedings and a sum of about HK$267,347.88 was frozen from the Husband’s 2 bank accounts by virtue of 2 Garnishee Orders Nisi (“GONs”).   The Husband applied for the setting aside of the Garnishee proceedings and on 17 August 2018, the parties agreed that the Husband’s application to be adjourned for argument and in the meantime, the sum of HK267,347.88 would be paid into court pending the result of the Husband’s application.

10.  The application was heard on 11 October 2018 with both parties being represented by counsel.

11.  On 31 October 2019, I handed down a Decision (i.e. the 31 October 2019 Order) ruling in favour of the Husband.  The sum of HK$267,347.88 paid into court together with interest were released to the Husband with costs including all costs reserved with certificate for counsel to the Husband to be taxed if not agreed.

12.  On 14 November 2019, the Wife issued her summons for leave to appeal.  In her solicitor’s affidavit of the same date, she put in a Draft Notice of Appeal in which 6 grounds of appeal were raised.  I will discuss those grounds herein under in turn.  

Delay in the Handing Down of Judgment

13.  The first ground of appeal is that there has been a lapse of 12 months between the hearing (on 11 October 2018) and the handing down of judgment (on 31 October 2019), rendering the Judgment unreliable and erroneous.

My View

14.  It is regrettable that the handing down of the Judgment has taken longer than expected.  However, I see no submission by the Wife on how that fact has rendered the Judgment “unreliable and erroneous”.  There is no suggestion that I have mixed up the facts of the case or my decision was being based on facts which are found to be incorrect.  I am not satisfied that the Wife has a reasonable prospect of success on this ground.

Reliance on the MPS Order instead of the AR Order dated 19 June 2017

15.  The second ground of appeal is that I have relied on the MPS Order in arriving at my conclusion instead of the AR Order made on 19 June 2017.  According to the Wife, since the AR Order did not discharge the MPS Order meaning that the MPS Order should continue until the DA.

16.  I agree with the Husband’s submission that the Wife was simply repeating her arguments at the hearing.

17.  In my view, when one is considering the duration of an order, the starting point is always to look at the terms of the order itself.  In paragraphs 21-30 of my judgment, I have considered the terms of the MPS Order which provided for the payment of MPS to last until “a final settlement of this matter either by way of agreement or judgment”.  It was my ruling that the parties have already reached a settlement on the issue of maintenance of the Wife and therefore, the terms of the MPS Order have been fulfilled and the payment of MPS would end there and then.  I am not convinced that the absence of a term in the final AR Order terminating the MPS Order would simply prolong its payment up to the date of DA.

18.  I am not satisfied that the Wife has a reasonable prospect of success on this ground.

No Capitalization of Maintenance?

19.  The third ground of appeal is that I have erred in finding that the second lump sum payment of HK$4,560,000 was capitalized maintenance.

20.  In this regard, I would repeat paragraph 35(a) of HH Judge Bruno Chan’s AR Judgment:

“Agreed Terms

35. Notwithstanding the apparent significant gulf between the parties essentially over the quantum of the lump sum payable to the Wife and that whether there should be a clean break between them, the parties have nevertheless been able to agree on the transfer of Rumpsticks House and other less controversial items as follows:

(a) the Husband to pay the Wife monthly maintenance of HK$76,000 for 5 years to be capitalized at HK$4,560,000 by 5 equal instalments of HK$912,000 each annually in advance from 31 December 2017 up to 31 December 2021 pursuit to Term (e) of his Open Proposal above;

...”

21.  Term (e) of the Husband’s Open Proposal can be found at paragraph 33(e) of the AR Judgment:

“33. The Husband responded to the Wife’s offer through his solicitors’ letter dated 14^th October 2016 [B4(12)/2800 in which he pointed out what he claims to be errors in the Wife’s calculation of the assets and on the basis of his own calculation of the assets at about HK$66.4 million, his Open Proposal was to effect a clean break settlement on a 50/50 division of the assets which would give the Wife about HK$33.2 million plus capitalized maintenance for 5 years and 50% of his loans as and when they are repaid, which can be summarized as follows:

...

(e) To avoid US tax on monthly maintenance he was to make 5 further payments to her at HK$912,000 each annually commencing from end of 2017 regardless of his income;

...”

22.  Also at paragraph 168 of the AR Judgment, HH Judge Bruno Chan said in his conclusion that:

“168. For the agreed payments of the capitalized maintenance for the Wife by way of a further lump sum of HK$4,560,000 for the next 5 years by 5 equal instalments of HK$912,000 each annually starting from the first anniversary of the date of this judgment, I also so order upon the Husband’s undertaking to take out a life insurance policy in the Wife’s favour so that in the event of his death within the 5 years period she will stand to receive the balance of the said sum with the costs to be borne equally by the parties, with of course liberty to apply.”

23.  It is abundantly clear from the above passages of HH Judge Bruno Chan’s AR Judgment that the parties have actually come to an agreement for the payment of the Wife’s monthly maintenance at the rate of HK$76,000 for 5 years to be capitalized at HK$4,560,000 by 5 equal annual instalments of HK$912,000 each. The purpose of such capitalization was obviously to avoid US taxation.

24.  Moreover, as pointed out by the Husband’s solicitors, even the Wife’s then leading counsel at the hearing on 13 November 2017 referred to the payments as “capitalized maintenance” (page 64 of the transcript at T).    

25.  I am not satisfied that the Wife has any reasonable prospect of success in this proposed ground of appeal.

Has the Wife made Full and Frank Disclosures?

26.  The fourth ground of appeal is that I have erred in ruling that the Wife had not made full and frank disclosure in her ex-parte applications for GONs.  She said that she had already provided an extract of the transcript of the hearing on 13 November 2017 and reference to such transcript was also made in her supporting affidavit for GONs.

My Views

27.  If one should read paragraph 35 of my judgment, the most significant deficiency in the Wife’s supporting affidavit for GONs is her failure to draw my attention to the parties’ agreement on the Wife’s capitalized maintenance for a period of 5 years at a reduced rate of HK$76,000 (instead of HK$80,000) per month.  I commented that if those information was forthcoming at the ex-parte stage, I would have reservation on granting the GONs.  This fact has never been drawn to my attention in the body of the supporting affidavit.  The fact that 11 pages of transcript were enclosed and this read-it-yourself attitude does not mean that the Wife’s duty on full and frank disclosure has been fulfilled.

28.  I am not satisfied that the Wife has any reasonable prospect of success in this proposed ground of appeal.

Should I consider whether the Wife should have issued Garnishee proceedings?

29.  The fifth ground of appeal is that as the GONs had already been uplifted, I should not have gone into the law as to whether the Wife should have issued Garnishee proceedings. In the Wife’s solicitors’ written submissions, I was further criticised in not treating the Wife’s application as one under O.45 r.6 of RHC. 

My Views

30.  As can be seen from paragraphs 16-17 of my judgment, I was fully aware that the GONs had been discharged by consent with the payment into court of the disputed sum.  But whether the Wife had any valid grounds in applying for a GON in the first place was still important because if she had not (which was my finding in the judgment), the natural consequence must be for the release of the payment into court to the Husband. 

31.  The Wife has never requested for her application to be treated as one under O.45 r.6 RHC.  But in any event, the discussion in my judgment and the ruling therein that there was no judgment debt in existence has already served a similar purpose.

32.  I am not satisfied that the Wife has a reasonable prospect of success in this proposed ground of appeal.

Reservation of Rights to file Supplemental Grounds of Appeal

33.  The so called sixth ground of appeal is not a ground of appeal at all and I will say no more on this.

Conclusions and Orders

34.  Based on the above discussion, it is my conclusion that there is no reasonable prospect of success in the Wife’s intended 6 grounds of appeal.  There is equally no other reason in the interests of justice why the appeal should be heard.   Under such circumstances, the Wife’s applications for leave to appeal and for stay are refused and her summons dated 14 November 2019 is dismissed.

Costs

35.  Costs to follow event. The Husband shall have the costs of the summons to be taxed if not agreed. This will be in the form of an order nisi to be made absolute after the expiry of 14 days from the handing down of this Decision. 

Representation:

[1] (2009) 4 HKLRD at para 17

FCMC 5376/2015

[2019] HKFC 277

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5376 OF 2015

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D E C I S I O N
(Setting Aside Garnishee Order to Show Cause)

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Hearing

1.  This is supposed to be a hearing of the Respondent’s summons dated 8 August 2018 for setting aside 2 Garnishee Orders to Show Cause both dated 6 July 2018 (to be referred as the “Garnishee Orders Nisi” or simply “GONs” hereinafter) granted in favour of the Petitioner.   But since the parties have already agreed for the GONs to be discharged upon the payment into court a sum of HK$267,347.88 by one of the Garnishees (as security), the setting aside application is no longer a live issue, except to the extent of how to deal with the moneys now in court and also the issue of costs.

2.  Despite the fact that a Decree Absolute (“DA”) has already been granted in respect of the Petition for Divorce, I shall continue to refer to the Petitioner as “the Wife” and the Respondent as “the Husband” in this Decision for the sake of convenience and consistency.

The Main Issue

3.  The main issue of this application arises out of a different interpretation of the Maintenance Pending Suit Order (“MPS Order”) made by Deputy District Judge A.N. Tse Ching (now HH Judge A.N. Tse Ching) on 3 August 2015, in which the Husband was ordered (by consent) to pay the Wife, inter alia, maintenance pending suit (“MPS”) at a monthly rate of HK$80,000. 

4.  The Wife contends that the MPS should be paid up to Decree Absolute (“DA”) which was granted on 20 September 2017.  If this contention is correct, the Husband would be in default of about 3 months’ MPS payment and thus the Wife was justified in taking out enforcement application by way of Garnishee proceedings.  

5.  On the other hand, the Husband contends that the MPS payment should end when the final judgment on the Wife’s ancillary relief application was made by HH Judge Bruno Chan (as he then was) on 19 June 2017 (“the AR Judgment”).  If this contention is correct, he was not in default of any MPS payment and the GONs should be set aside with costs.

Brief History

6.  The parties were married in 1989.  The Wife issued her Petition for Divorce in 2015 and the DA was granted on 20 September 2017.

7.  As far as MPS was concerned, the parties entered into an agreement and the MPS Order was made on 3 August 2015.    One of the important terms was recorded at paragraph 2 of the said order:

“2. [The Husband] shall pay to the [the Wife] maintenance pending suit in the sum of HK$80,000 per month on the 1^st day of each month payable in advance from the 1^st day of the month following the date of this Order untilfurther order or until a final settlement of this matter either by way of agreement or judgment.” (underline added)

8.  Despite this initial agreement, the parties failed to settle on the main ancillary relief claim and thus necessitated a full trial before HH Judge Bruno Chan (as he then was).   The AR Judgment was handed down on 19 June 2017 in which the learned Judge ordered a clean break between the parties with the Husband paying a lump sum of HK$12,360,000 to be payable by the following instalments:

(1)  The sum of HK$7,800,000 to be paid within 3 months of pronouncement of DA; and

(2)  The sum of HK$4,560,000 to be paid by 5 equal instalments of HK$912,000 payable annually commencing from 19 June 2018 to 19 June 2022 inclusive and to be secured by a life insurance to be taken out by the Husband.

9.  It is to be noted that the first sum of HK$7,800,000 to the Wife was ordered on the basis of equal sharing of the then matrimonial assets found to be about HK$65,800,000 (with HK$40,700,000 under the name of the Husband and HK$25,100,000 under the name of the Wife).   The second lump sum of HK$4,560,000 was ordered based on the parties’ agreement that the Husband shall pay capitalized maintenance calculated at HK$76,000 per month for 5 years payable by 5 equal annual instalments of HK$912,000 each commencing from 19 June 2018 to 19 June 2022.

10.  Subsequent to the AR Judgment, a sealed copy order (“the AR Order”) was filed recording the results of the trial.   It was provided in paragraph 6 of the AR Order that upon the payment of the lump sums by the Husband and the fulfilment of some other undertakings, the Wife’s claim for all forms of financial relief (including but not limited to MPS and other forms of ancillary relief) will stand dismissed.

11.  The DA was granted on 20 September 2017.   The first lump sum of HK$7,800,000 was paid within time and so was the first instalment of HK$912,000 of the second lump sum in June 2018.  Since there is no complaint that the second instalment of the second lump sum was not paid (by June 2019), I assume that the second instalment of HK$912,000 has also been paid by now.   Therefore, what remain outstanding are the third to fifth instalments in the total sum of HK$2,736,000 which are not yet due.

12.  Despite the AR Judgment and the subsequent AR Order, the parties’ disputes continued mainly on the issues of costs and the Wife’s application for leave to appeal.  I do not intend to go into details of those proceedings except to say that as far as the Wife’s appeal against the clean break order was concerned, the Husband conceded on the appeal and he was ordered to pay nominal maintenance of HK$1.00 per annum pursuant to the Court of Appeal’s order dated 9 April 2018.

13.  However, that was not the end of the matter.   There seems to be a divergence of views on when the MPS payment should end.  The Wife contends that the MPS should end on DA, i.e. 20 September 2017, whilst the Husband contends that it should end on the date of the AR Judgment, i.e. 19 June 2017.  This has resulted in the Husband stopping the MPS payment on 19 June 2017.   Despite an attempt to clarify the matter before Deputy District Judge Bruno Chan (as His Honour has retired by that time), the learned Deputy Judge was of the view that the dispute should better be dealt with in the enforcement proceeding. 

14.  As the parties failed to settle their dispute by correspondence, the Wife finally filed her 8^th Affidavit on 25 June 2018 in support of her application for Garnishee Orders against the Husband (in respect of his bank accounts with the Citibank and HSBC) in the sum of HK$ 262,347.88 being the arrears of MPS from 19 June 2017 to 20 September 2017 together with interests.   

15.  On 6 July 2018, I granted 2 GONs (one for Citibank and one for HSBC) with a return date fixed on 6 September 2018.

16.  On 8 August 2018, the Husband issued his present summons asking for the GONs to be set aside.

17.  On 17 August 2018, the parties agreed to adjourn the Husband’s setting aside application for argument with the sum of HK$267,347.88 from the Husband’s Citibank account being paid into court as security pending the result of the application.  Upon such payment into court, the GONs were discharged.

The Arguments of the Husband

18.  The Husband was represented by Ms. Rattigan of counsel.  As I see it, Ms. Rattigan’s arguments are mainly on 2 bases.   

19.  The first argument raised is that a GON was granted on an ex-parte basis in which the Wife has a strict duty to provide full and frank disclosures.  It is the Husband’s case that the Wife has failed in that duty by not providing the Court with the material background for it to make a fully informed decision.  It was further argued that the Wife’s supporting affidavit was grossly misleading by not disclosing some important information (“the non-disclosure argument”).

20.  The second and more important argument is that there has never been any judgment debt (“the no debt argument”) and therefore, the Garnishee applications are bound to fail.

No Debt Argument

21.  I shall consider the no debt argument first as it goes to the merits and therefore the heart of the application.

22.  In consideration of the Husband’s no debt argument, it is necessary to revisit the MPS Order which was made in the following term:

“2. [The Husband] shall pay to the [the Wife] maintenance pending suit in the sum of HK$80,000 per month on the 1^st day of each month payable in advance from the 1^st day of the month following the date of this Order until further order or until a final settlement of this matter either by way of agreement or judgment.” (underline added)

23.  By a fair reading of the said term, it is my view that the MPS will continue until the happening of one of the following 2 conditions:

(1)  There being an order of the court varying or terminating the said MPS Order (i.e. a further order); or

(2)  There being a final settlement of the matter by way of agreement or judgment.

24.  There is no dispute that there has never been any further order made in respect of MPS and therefore, the first condition simply does not apply.

25.  As to the second condition which mentions about “a final settlement of this matter”, in my judgment, it has to be referring to the final settlement of the issue of maintenance as the order was concerned with the maintenance of the Wife.

26.  In this regard, it has to be borne in mind that when the learned Judge made his order on the second lump sum of HK$ 4,560,000 as capitalized maintenance for the Wife, His Honour was simply giving effect to the parties’ agreement for the Husband to pay 5 years’ capitalized maintenance at the rate of HK$76,000 per month.  The whole purpose of the capitalization was for the avoidance of US taxation.  Therefore, I have no doubt in my mind that the parties have already reached a final settlement on the Wife’s maintenance which was given effect by the learned Judge’s AR Judgment.  The second condition has been fulfilled and the MPS should therefore cease.

27.  Furthermore, the parties have already agreed on a monthly maintenance for the Wife at the rate of HK$76,000 per month, which agreement was accepted and given effect by the learned Judge, I see no reason why a MPS at a different rate of HK$80,000 should continue.

28.  I fully appreciate the Wife’s argument that the capitalized maintenance would be paid in arrears, meaning that the maintenance would only start to be paid in a year’s time from the date of the AR Judgment, and that the first lump sum of HK$7,800,000 would only be paid after the pronouncement of DA.   Therefore, there would be a time gap between the date of AR Judgment and the receipt of the first lump sum or the capitalized maintenance during which the Wife would receive nothing.  But that was the parties’ agreement which was accepted by the learned Judge.  Moreover, it is quite apparent from paragraph 29 of the AR Judgment (P1/39) that the Wife had at least HK$22,467,383 under her name in which HK$11,341,567 was in the form of moneys in various bank accounts.  There is no question that she would be in any financial predicament during that short period of time after the cessation of the MPS payment.

29.  It is also the Wife’s argument that the MPS payment only ceased upon DA because her claims for MPS and other forms of financial relief would only be dismissed upon the receipt of the lump sums and the fulfilment of the other undertakings (according to paragraph 6 of the AR Order).   However, I am not convinced that paragraph 6 of the AR Order would have the effect of prolonging the MPS payment up to DA.  In my judgment, one should look at the actual terms of the MPS Order and if there is already a term governing the period of payment, whether the MPS or final maintenance application would be dismissed at a later time is neither here nor there.

30.  All in all, I am satisfied that the MPS has ceased to be payable by the time of the AR Judgment and after which, the Husband is not liable to pay any further MPS.   There is no judgment debt owed by the Husband and therefore, the Garnishee applications of the Wife must fail.

Non-disclosure Argument

31.  The second argument raised by the Husband is that there was no full and frank disclosure by the Wife in obtaining the GONs which were made on an ex-parte basis.  As I have already ruled that there was no judgment debt owing to the Wife, that should be enough to dispose of the present application.  However, for completeness sake, I would give some comments on the non-disclosure argument as well.

The Law

32.  It is trite that an applicant for an ex-parte order does have a duty to make full and frank disclosure.  There is a very helpful description of this duty in Velatel Global Communications Inc & Anor v Chinacomm Ltd & Ors [2012] HKCU 2178 in which Deputy High Court Judge Au-yeung (as Her Ladyship then was) summarised the legal principles at §§25-31 as follows:

“The legal principles

[25] There is no dispute on principles. An applicant must make full and frank disclosure in an ex parte application.

"On any ex parte application, the applicant must proceed with the highest good faith. The fact that the court is asked to grant relief without the person against whom the relief is sought having the opportunity to be heard makes it imperative that the applicant should make full and frank disclosure of all material facts …" Hong Kong Civil Procedure 2012, Vol 1, para 29/1/39.

[26] What is material is for the judge to decide. Suppression of material facts will cause the court to discharge an ex parte order without going into the merits.

"(1) The duty of the applicant is to make "a full and fair disclosure of all the material facts:" sec Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac  [1917] 1 K.B. 486, 514, per Scrutton L.J.
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v. Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R., at p. 504, citing Dalglish v. Jarvie (1850) 2 Mac. & G. 231, 238, and Browne-Wilkinson J. in Thermax Ltd. v. Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.

(3) The applicant must make proper inquiries before making the application: see Bank Mellat v. Nikpour [1985] F.S.R. 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.

(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. v. Robinson [1987] Ch. 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 92-93.

(5) If material non-disclosure is established the court will be "astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure ... is deprived of any advantage he may have derived by that breach of duty:" see per Donaldson L.J. in Bank Mellat v. Nikpour, at p. 91, citing Warrington L.J. in the Kensington Income Tax Commissioners’ case  [1917] 1 K.B. 486, 509.

(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.

(7) Finally, it ‘is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded’: per Lord Denning M.R. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms

‘when the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant … a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed:’ per Glidewell L.J. in Lloyds Bowmaker Ltd. v. Britannia Arrow Holdings Plc."

In Brink’s Mat Ltd v Elcombe[1988] 1 WLR 1350, at 1356F-1357F, per Gibson LJ. See also Gee on Commercial Injunctions, 5^th ed, at p 241.

[27] In considering what matters should be disclosed to the court, the test is whether the facts are relevant to the exercise of the discretion, regardless of whether they are relevant to the merits of the claim, and irrespective of whether the matters, if disclosed, would have caused the court to refuse to grant the ex parte application. The court was not concerned with whether the matters not disclosed would, if they had been disclosed, have caused it to refuse to grant the ex parte order. The test was whether the court should have these matters in the weighing scales: Standard Chartered Securities Ltd v Lai Arthur & ors[1993] 1 HKC 375, at 380-381.

[28] The test of materiality is objective.

"The duty extends to placing before the court all matters which are relevant to the court’s assessment of the application, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same. The test as to materiality is an objective one, and it is not for the applicant or his advisers to decide the question; hence it is no excuse of the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important. All matters which are relevant to the ‘weighing operation’ that the court has to make in deciding whether or not to grant the order must be disclosed." (Gee on Commercial Injunctions,5^th ed at para 9.002)

[29] The materiality of matters undisclosed or misstated, if relevant, will depend on the importance of the facts to the issues which were to be decided by the judge on the ex parte application: Pacific Base Services Ltd & Anor v Silver Gain Development Ltd & ors[1996] 1 HKC 610at 617I-618A.

[30] The duty to disclose cannot be fulfilled by simply exhibiting voluminous documents mentioned in the supporting affidavit without making any distinct reference to the points in the body of the affidavit itself or when addressing the judge at the hearing: Standard Chartered Securities Ltd v Lai Arthur, page 388Gfollowed in Rever (AMA) Salon Ltd v Kung Wai For Danny & others[2001] 1 HKC 241, 246E-F.

[31] Where there has been material non-disclosure in an ex parte application, the practice of the court is to discharge the order without going into the merits: R v Kensington Income Tax Commissioners, ex parte de Poliganc[1917] 1 KB 486, 514-515; Manor Electronics Ltd & Anor v Dickson & ors[1988] RPC 618at 624.”

Discussion

33.  The issue here is whether the Wife has failed in that duty.

34.  Despite the fact that there are 9 complaints by counsel on material non-disclosure (paragraph 46 of counsel’s skeleton submissions), I think the more important points can be boiled down to 3 main areas, namely:

(1)  The Wife had made an application to amend the AR Order by adding that the duration of the MPS payment should be up to DA but that application was refused.

(2)  That the parties had already agreed on the payment of 5 years’ capitalized maintenance.  In other words, the final maintenance of the Wife had already been agreed and there is no reason why MPS (which is a form of maintenance) should continue to be paid.

(3)  The amount of capitalized maintenance had already been agreed at a lesser rate of HK$76,000 per month.  There is no reason why a higher rate of MPS at HK$80,000 should continue to be paid.

35.  By reading the Wife’s supporting Affidavit (8^th Affidavit of the Wife) (A1/ 1-6) based on which the GONs were granted, it is quite apparent that the above facts were not referred to.  In paragraphs 21-30 above, I have already considered the terms of the MPS Order in some details and came to the conclusion that the MPS payments would only continue up to the AR Judgment and therefore, no judgment debt was actually incurred for the period between the AR Judgment and the DA.  In coming to such conclusion, the facts of the parties’ agreement on the Wife’s capitalized maintenance for a period of 5 years and at the monthly rate of HK$76,000 (instead of HK$80,000) are important considerations.  If those information was disclosed at the ex-parte stage, it would have disclosed a genuine case of the Husband disputing against the existence of a judgment debt.  Under such circumstances, I have much reservation on whether the GONs would have been granted in the first place. 

36.  It is my further view that what the Wife should have done was to seek a court order for payment of the so called “judgment debt” by a certain date relying on O.45 r.6 of RHC, instead of issuing a GON resulting in an outright freezing of the Husband’s bank accounts.  This is what being suggested in the judgment of Lam JA (as Lam VP then was) in CYM v YML (Judgment Summons) [2012] HKFLR 486 at § 51:

“51…. In my view, like committal proceedings in other types of civil litigation, judgment summons should be a last resort. In cases where the parties have genuine bona fide disagreement on the interpretation of an order instead of a recalcitrant judgment debtor, or where the parties have bona fide dispute about the quantum of an item under an order for payment, such disputes should be resolved by a summons taken out under Order 45 Rule 6 instead of a judgment summons…”

It is abundantly clear from this judgment that O.45 r.6 RHC is a very useful provision and should therefore be adopted in all cases where there is a genuine dispute on liability or quantum payable under a judgment. 

Conclusions and Order

37.  Based on the above discussion, it is my conclusions that there is no judgment debt in existence and also the Wife should not have applied for the GONs in view of such a genuine dispute on the Husband’s liability to pay MPS after the AR Judgment. Since the GONs have already been discharged by consent, what remains for me to do is to deal with the moneys paid into court.

38.  I hereby make an order that the sum of HK$267,347.88 which was paid into court pursuant to the order dated 17 August 2019 together with interest, if any, is to be released to the Husband within 14 days from the handing down of this Decision.

Costs

39.  Costs to follow event. The Husband shall the costs of his summons including all costs reserved and any costs incurred in the Garnishee proceedings, if any, such costs to be taxed if not agreed, with certificate for counsel.  This will be in the form of an order nisi to be made absolute after the expiry of 14 days from the handing down of this Decision. 

Representation:

FCMC No. 5376/2015
[2018] HKFC 8

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5376 OF 2015

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DECISIONS

(Costs & Leave to Appeal)

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1.  On 19^th June 2017, after a 7-days trial on the Petitioner Wife’s application for ancillary relief, and on the basis of equal sharing of the matrimonial assets which I found to be about HK$65.8M between the parties with HK$40.7M in the Respondent Husband’s name and HK$25.1M in the Wife’s, and upon certain undertakings given by the Husband, and as a clean break between the parties, I ordered the Husband to inter alia pay the Wife a lump sum of HK$7.8M within 3 months of the pronouncement of the decree absolute of divorce, plus a further lump sum of HK$4.56M as capitalised maintenance at HK$76,000 per month for 5 years payable by 5 equal annual instalments of HK$912,000 each commencing from 19^th June 2018 to 19^th June 2022.        

2.  At the conclusion of my judgment and notwithstanding my criticisms of some of the Wife’s conducts in the proceedings and that the total legal costs then incurred by the parties amounted to a wholly disproportionate sum in excess of HK$10 million with hers twice as much as his, I decided that this was an exceptional case in the circumstances for there to be no order as to costs in the ancillary relief proceedings in the hope that it could finally bring closure to what had appeared to me a most bitter and acrimonious marital dispute.     

3.  Sadly it was not to be, as both parties now seek to continue their feud by each bringing further applications, with the Wife seeking leave to appeal against my order for miscalculating the value of the final matrimonial asset pool for equal division and for wrongly ordering a clean break between the parties given her medical conditions and uncertain financial future, while the Husband seeks to vary the costs order nisi in his favour against the Wife due to her litigation conducts and her failure to accept his Calderbank offers which were much more generous than what she has been awarded under my judgment, of which I propose to deal with first.

Husband’s Application for Costs

4.  As noted above and in my judgment, the combined legal costs of the parties were in excess of HK$10M with the Wife’s at more than HK$6.7M and the Husband’s at HK$3.3M, with most of the Wife’s costs being funded by certain advanced distributions from the Husband of their capital assets under certain mediation agreement reached between the parties shortly after their divorce proceedings and subsequently by several consent interim maintenance orders.

5.  As part of the Husband’s case during the trial against the Wife as to her litigation conduct for which evidence were heard, and for those reasons set out in paragraphs 143 – 166 of my judgment, I was able to form a fairly firm view “that this is one of those exceptional cases in which the Wife deserves the compassion of this court notwithstanding such litigation conduct”, and proposed to make an order nisi of no order as to costs. That was of course made in the absence of any knowledge of the “Without Prejudice” offers and counter-offers exchanged between the parties before the conclusion of the trial and which have now been disclosed to the court.         

6.  Ms Mairéad Rattigan representing the Husband submits that while the court has decided that this was an exceptional case for no order as to costs, the Husband now asks the court to reassess the Wife’s litigation misconduct in the light of what he believes to be an overly generous offer made to her at the time of the FDR hearing where she would have received a staggering HK$19.3 million over and above her award under the judgment, with further “Without Prejudice” offers made during the adjourned period of the trial all of which he says were unreasonably rejected by her, and hence in the exercise of its discretion to vary the costs order, the court should consider the appalling manner in which the Wife has continued to litigate this matter since the judgment.

7.  That first “Without Prejudice” offer was made in the Husband’s letter on 26^th February 2016 [E1/2] in which he put their total assets at about HK$74.4 million, with HK$55.8 million in his name and about HK$18 million in hers including her property in USA at US$1.25 million, upon which he proposed that there be a 65/35 split in favour of the Wife thereby giving her HK$48.4 million to effect a clean break.

8.  In addition the Husband proposed that while the value of his company GCB was effectively nil, he was prepared to ascribe to it the value of his shareholder’s loan of HK$7.749,334 which he used to start up the company, and to offer to pay the Wife a further sum of HK$3,874,667 being 50% of the said shareholder loan, thereby giving her effectively well over 70% of the actual total assets, whereas he would be left with just over HK$22 million from the assets [E1/3-5].

9.  The letter concluded by stating that the offer would be open for acceptance until 5 pm on Tuesday 1^st March 2016, which happened to be the parties’ first FDR hearing during which, the Husband submits, that the FDR Judge did indicate to the Wife that his offer was reasonable and warned her about the costs consequences of not accepting it but ultimately to no avail.

10.  The Wife did however make a counter proposal on 30^th March 2016 [E1/21] which was according to the Husband preceded by some 7 pages of unreasonable allegations against him and a misrepresentation of many of the facts and the assets, and which he submits was clearly not a proposal that was reasonable, as on top of a lump sum of HK$25 million over and above the assets already in her name, she was seeking monthly maintenance of HK$192,000 until the expiration of the tenancy of her then apartment on 1^st December 2017, then HK$132,000 during their joint lives and to be secured by way of a life insurance or a charge against the husband’s assets, and that he was to pay for all her legal costs.

11.  This proposal as expected was rejected by the Husband as it was by then clear that the major issue between the parties was whether there should be ongoing maintenance for the Wife or a clean break between them, and therefore the trial proceeded as scheduled in November 2016 but as explained in my judgments, it was adjourned to February 2017 after the Wife suffered a panic attack during cross-examination, and on 9^th February 2017, about 2 weeks before the trial was to resume when the Husband made a further “Without Prejudice” offer with an additional lump sum of HK$4,560,000 for the Wife payable by 5 equal instalments of HK$912,000 annually as capitalised monthly maintenance for 5 years commencing from end of 2017 and to be secured by a life insurance policy in her favour for the whole amount in the event of his death with its costs to be equally shared equally by both, and that he was prepared not to seek any order for costs against her due to her litigation misconduct if she would agree to drop her demand for nominal maintenance [E1/84].

12.  Ms Rattigan submits that still that offer was rejected by the Wife and as the trial continued, the Husband on 1^st March 2017 extended his offer further in that he would agree to an order for nominal maintenance on condition that no application would be brought by the Wife for a variation of the nominal maintenance order unless it related to her pre-existing condition of Interstitial Cystitis, that the medical treatment that she required was no longer covered by her existing medical insurance policy, and that she had used up her capital [E1/98].                

13.  Ms Rattigan submits that the Husband made these offers in one last desperate attempt to settle with the Wife, but even this was not acceptable to her and as a result the parties had to go through the second tranche of the trial where the Wife was ultimately unsuccessful in securing any order for nominal maintenance, and that once again the Husband’s offer bettered what was awarded by the court.

14.  Ms Rattigan argues that such conduct of the Wife in her refusal to accept generous offers of settlement all of which would have placed her in a better position than going through trial certainly merits a costs order being made against her should be recognised by the court as serious litigation misconduct, for which the Husband has suffered enormously both financially and emotionally, and that it would be extremely unjust for the Wife’s behaviour to go without any sanction at all.

15.  She therefore submits that the Husband should be entitled to costs on many different levels, such as from the time of his offer of 26^th February 2016, for the first part of the trial which was wasted on a pursuit of an over inflated case that was never sustainable as demonstrated by a drastic revision of her position during the adjournment, and for the second tranche of the trial where the Wife refused to accept the Husband’s further offers to settle on terms that were more advantageous than what she was ultimately awarded.

16.  Mr David Pilbrow SC (with Mr Egerton) for the Wife however argues that as a matter of general principle of costs in all civil proceedings with costs following the event, prima facie the Wife is therefore entitled to her costs of the proceedings, unless it can be displaced by a valid Calderbank offer, and that the opportunity of settlement and use of such Calderbank offers during negotiations is a factor the court should consider, as while the purpose is to encourage settlement and promote a consciousness of a risk as to costs if reasonable offers are refused by the parties, this also discourages unreasonable offers made without any proper opportunity to consider and/or reply, as the relevant teeth for a Calderbank letter to bite are rigidly enforced due to severe financial consequences of not accepting such an offer unknown to the court at the time it is made.

17.  On this Mr Pilbrow relies on Rayden and Jackson onRelationship Breakdown, Finance and Children, 17^th ed, where it stated at Chap 23.35:

“The person to whom the offer is made is normally protected as to costs up to the date of the offer, but thereafter, assuming that sufficient information is available on which a reasonable assessment of the offer may be made, the offeree is at risk, in the sense of having to pay either the other side’s costs or at least his or her own costs …

      It has, however, been said that Calderbank offers require to have teeth in order for them to be effective and that there are certain preconditions to their efficacy, notably full and frank disclosure by both parties of all relevant assets. Thereafter, the respondent to the application must make a serious offer worthy of consideration. If he does so, then it is incumbent on the applicant to accept or reject the offer and if the latter to make his or her position clear and to indicate in figures what he or she is asking for (a counter-offer).”

18.  The requirement for Calderbank offers to have teeth to be effective was discussed by Butler-Sloss LJ, as she then was, in Gojkovic v Gojkovic (No.2) [1991] 2 FLR 233 at 238:

“It is … clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in RSC Ord.62, r.9 (and the equivalent CCR Ord.11, r.10) for the court to take account of Calderbank offers, and by analogy, open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter, the respondent to an application must make a serious offer worthy of consideration. If he does so, then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her/his position clear and indicate in figures what she/he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make the attempt to settle the case. This can be done either by open offers or by Calderbank offers, both adopted by the husband in this case. It is a matter for the parties which procedure they prefer. There is a very wide discretion in the court in awarding costs, and as Ormrod LJ said in McDonnell (about at p.38, the Calderbank offer should influence, but not govern, the exercise of discretion.

      There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation; for instance (as I have already indicated earlier) material non-disclosure of documents. Delay or excessive zeal in seeking disclosure are other examples. The absence of an offer or of a counter-offer may well be reflected in costs, or an offer made too late to be effective. The need to use all the available money to house the spouse and children of the family may also affect the exercise of the court’s discretion. It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate, and possibly be thought to constrain in any way, that wide exercise of discretion. But the starting-point in a case where there has been an offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it. That seems clear from the decided cases, and is in accord with the Rules of the Supreme Court and County Court Rules requiring the court to have regard to the offer. I cannot, for my part, see why there is any difference in principle between the position of a party who fails to obtain an order equal to the offer made and pays the costs, and a party who fails by the offer to meet the award made by the court. In the latter case, prima facie, costs should follow the event, as they would do in a payment into court, with the proviso that other factors in the Family Division may alter that prima facie position.”

19.  Accordingly it is the Wife’s argument that the Husband’s Calderbank offer was in effect missing some relevant teeth to be effective or worthy of consideration. Whilst accepting that this offer of 26^th February 2016 was a 65/35 split of the assets in favour of the Wife of a then alleged marital pool of HK$74.4M, Mr Pilbrow submits that it had in fact been significantly reduced in 8 months from the HK$86M stated in the Husband’s Form E of 15^th June 2015, hence he submits that it was not surprising that the parties did not settle at the time of the FDR hearing on 1^st March 2016 due to the Husband’s piecemeal and incomplete disclosure, and for the reasons set out in the Wife’s 6^th Affidavit which can be summarised as follows:                            

(a) that the offer was not open for a reasonable opportunity of 28 days for it to be considered, as it was open for only 5 ½ days and with such a short deadline that the Wife was unable to accept, that it provided no proper reason and was particularly inappropriate in light of the lack of full and frank disclosure;

(b) that the Husband had not yet answered her 2^nd Questionnaire filed on 2^nd February 2016;

(c) that it was on 26^th February 2016 and only 2 business days before the FDR hearing when the Husband updated his Form E in which he failed to disclose the termination letter between his company GCB and key consultant PBG which was allegedly generated and sent on 30^th December 2015 but not disclosed to the Wife until 9^th March 2016 and almost a week after the expiration of his offer;

(d) that as of the date of his offer on 26^th February 2016 the Husband’s company GCB had not yet been valued by the appointed single joint expert despite the order of the FDR Judge made on 5^th November 2015 that GCB be valued for settlement purposes;

(e) that there were good reasons for the Wife to believe that notwithstanding the said termination of a key consultancy agreement, GCB was an ongoing enterprise and that just 10 days before his offer the Husband had asked for her consent to inject US$300,000 into the company and hence GCB could still have considerable value and a future;

(f) that during the FDR hearing on 1^st March 2016 the Husband conducted himself rudely towards her and made certain obscene gesture to her that she became distressed and intimidated, coupled by her being unnerved by the short deadline and lack of transparency on the part of the Husband that she was unable to properly consider the offer to accept it before the deadline.

20.  Many of these appear to me valid points, in particularly when it is clear that there was simply no reasonable time and opportunity for the Wife to properly consider the offer when it was first communicated to her solicitors on 26^th February 2016 which was a Friday followed by a weekend and was stated to be opened only until the following Tuesday 1^st March 2016 which was the parties’ first FDR hearing and, as pointed out by Mr Pilbrow thereby giving the Wife only 2 working days to consider it and more importantly to seek proper legal advice, and the facts that there may well be detailed discussions between the parties and their lawyers at the FDR hearing with helpful indications from the FDR Judge, in my view they cannot and should not as a matter of principle displace or deprive the Wife’s entitlement to a reasonable time to consider something as important as an offer for overall settlement on a clean break situation between the parties.      

21.  According to Mr Pilbrow reasonable time requires 28 days as stipulated in the English Family Proceedings Rules 1991 following Gojkovic v Gojkovic (No 2) in which the Calderbank process was formally written into the rules in rr 2.69 which states:

“2.69 Offers to settle

(1) Either party to the application may at any time make a written offer to the other party which is expressed to be ‘without prejudice except as to costs’ and which relates to any issue in the proceedings relating to the application

(2) Where an offer is made under paragraph (1), the fact that such an offer has been made shall not be communicated to the court, except in accordance with r 2.61E(3), until the question of costs falls to be decided.

2.69B Judgment or order more advantageous than an offer made by the other party

(1) This rule applies where the judgment or order in favour of the applicant or respondent is more advantageous to him than an offer made under rule 2.69(1) by the other party.

(2) The court must, unless it considers it unjust to do so, order that other party to pay any costs incurred after the date beginning 28 days after the offer was made.

2.69C (revoked)

2.69D Factors for court’s consideration under rules 2.69B

(1) In considering whether it would be unjust, or whether it would be just, to make the order referred to in rule 2.69B, the court must take into account all the circumstances of the case, including –

(a)the terms of any offers made under rules 2.69(1);

(b)the stage in the proceedings when any offer was made;

(c)the information available to the parties at the time when the offer was made;

(d)the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated; and

(e)the respective means of the parties.” 

22.  Mr Pilbrow therefore submits that the Wife should have been given the same period of 28 days to consider that offer of the Husband, and while there are no similar provisions in our rules but which I find most useful and persuasive as guidelines, and that I am unable to say whether the Wife in this case would indeed require as many as 28 days to consider that offer in the absence of any such evidence at the trial, it is clear to me that 2 working days or for that matter even 5 days with or without a weekend in between to consider such an important offer cannot be said to be reasonable in the circumstances of the case, in particularly when it was the Wife’s then position that the true value of the total matrimonial asset pool and/or full details of the Husband’s assets had yet to be ascertained or disclosed by him, and which were subjects of one of her Questionnaires served on him earlier in February 2016 but which he had yet to answer.         

23.  The same criticisms however may not be levelled against the Husband’s 2^nd “Without Prejudice” offer dated 9^th February 2017 essentially with an additional lump sum payable by 5 annual payments, as although it was still not made with as many as 28 days before the trial was to resume on 21^st February 2017, in my view it would have in the circumstances given the Wife sufficient time to consider and to seek proper legal advice, and of which I note there was never any complaint from her in any event. Both this offer and its improved version offered by the Husband later on 1^st March 2017 with a conditional nominal maintenance were again rejected by the Wife.

24.  It is therefore plain that under the terms of my judgment with no nominal maintenance order in favour of the Wife but instead a clean break between the parties, the Husband can be said to be the successful party and therefore entitled to costs in his favour at least for the second part of the trial after the Wife had failed to accept his second offer to settle on that particular aspect which was more advantageous than what she was ultimately awarded.

25.  While it is as yet clear as to the quantum of the Husband’s costs for that part of the trial, but on the basis of an equalization of the total costs incurred between the parties, which was what the Husband was then seeking at the trial as referred to in my judgment, it would mean something in the vicinity of HK$1.7M, and whatever the final amount of which no doubt will have to go through another contentious and therefore expensive assessment procedure given the historical background of this case, would it then not run the risk of seriously undermining the structure of the substantive order for ancillary relief that I have made in my judgment having considered all the facts and circumstances of the case including the Wife’s future needs so as to do justice between the parties?

26.  On the other hand, there is no question that the court must continue to determine costs applications in accordance with the rules, as clearly stated in Gojkovic supra that the starting point in a case where there has been an offer is that if the applicant receives less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it, as otherwise it would not only be unfair to the other party, but also necessary to ensure that a party will not be allowed to indulge in unreasonable litigation with impunity. How then is one to resolve these conflicts or problems?                      

27.  These problems encountered in the proper construction of r 2.69B in fact lied at the heart of the criticism of Mr Mostyn QC sitting then as a deputy High Court judge in GW v RW (Financial Provision: Departurefrom Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108 where he set out his objections in principle to the general rule that costs should follow the event:

“[85] It is very easy to see why in an era where the wife’s claim was perceived to be against the husband’s money for a sum necessary to meet her reasonable requirements, costs should, prima facie, follow the event. Her position was comparable to that of an ordinary civil claimant. It is much more difficult to apply the analogy in the post-White era where the court’s function is (per Thorpe LJ in Cowan v Cowan [2001] EWCA Civ 679, [2002] Fam 97, [2001] 2 FLR 192 at para [70]) to determine the parties “unascertained shares” in the pool of assets that is the fruit of the marital partnership.

[86] In this case I have ascertained W’s share in this pool to be 40% and H’s to be 60%. In such circumstances what is the event that the costs are supposed to follow? It is an intellectual concept with which I find it hard to grapple … this is a submission that is often made: “… the wife has had to come to court to get her money”. But surely the husband has equally had to come to court to get his? Each party has had to come to the court to obtain an order which fairly disposes of the issues between them.”

28.  Mr Mostyn QC raised further objections in that the existing procedure forces parties to engage in a form of ‘spread betting’ by requiring them to guess the outcome of the case and take a position accordingly without making an award for those who might guess better than others, and went on to conclude:

“[92] In my judgment, a safer starting point nowadays in a big money case, where the assets exceed the aggregate of the parties’ needs, is that there should be no order as to costs. The starting point should be readily departed from where unreasonableness by one or the other party is demonstrated. This approach is, I believe, consistent with the spirit of the judgment of Butler-Sloss LJ in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic(No 2) [1991] 2 FLR 233 where due allowance is made for the seismic shift in the law since that decision was given. It reflects the terms of CPR 44.3(5). It also reflects the disapplication by FPR 10.27(1)(b) of the general rule within CPR 44.3(2) of the unsuccessful party paying the costs of the successful party.

  [93] It may also reduce the extent of satellite costs assessment litigation, which itself can be protracted and acrimonious, and which prolongs the agony between the parties.”       

29.  These problems have since been recognised and reported by the UK Costs Sub-Committee of the President’s Ancillary Relief Advisory Group in 2003 and discussed in Rayden andJackson on Divorce and Family Matters, 18^th ed, at 52.19:

“Problems have been identified with the current costs regime in ancillary relief proceedings. The first is the de-stabilising effect that costs can have on financial settlements that have been carefully constructed by the court. Having considered the facts and circumstances of a case the court arrives at a settlement that, in its judgment, does justice between the parties. If at the conclusion of judgment it is revealed to the court that one party has failed to reach the high water mark of a Calderbank offer, the consequences of failing to ‘beat’ a Calderbank offer by an order to pay the other side’s costs can undermine completely the substantive order for ancillary relief that the court has just made. The second problem is that the system of closed offers has introduced a degree of procedural gamesmanship. This, in turn, leads to uncertainty and has, in effect, also introduced an undesirable element of gambling into ancillary relief proceedings. Calderbanks have been likened to a form of spread betting. Orders for costs can be disproportionate and, in some cases, produce real financial hardship as well as undermining the court’s division of the matrimonial assets. Lastly, making orders for costs which involve a detailed assessment can result in expensive satellite litigation and delay.”

30.  This report has since been endorsed by the English Court of Appeal in Norris v Norris; Haskins v Haskins [2003] 3 FLR 1124, CA where both cases concerned contested applications for financial provisions on divorce in which both judges had awarded the wives roughly 50% of the matrimonial assets and went on to consider the offers and counter-offers made by the parties before making costs orders. In the first case the judge took into account the fact that the final award was higher than the husband’s Calderbank offer, but gave the wife only 80% of her costs to reflect the fact that she had lost on a major issue, but the husband had argued before the judge that where assets were divided equally and neither party had beaten their own Calderbank offer there should be no order as to costs, whereas in the second case the judge considered the husband’s offers had been inadequate but balancing that with the consideration that although the wife’s final counter-offer was extremely close to the final lump sum order, she had failed to negotiate until shortly before the final hearing, he awarded the wife 85% of her costs of the application. The husband in both cases appealed against the costs orders.

31.  In dismissing both appeals, the Court of Appeal (Dame Elizabeth Butler-Sloss P, Thorpe and Mantell LJJ) examined in details the correct approach of the court to the treatment of costs in family financial disputes, of which Butler-Sloss P recognised as issues of general importance at the beginning of her judgment at 1126:

“[1] The two cases before this court raise similar issues of general importance, that is to say, the correct approach of the court to the treatment of costs in family financial disputes. One feature relevant to both the cases is that they come within the bracket sometimes described as big money cases. The main issue raised is the proper approach of the court to the making of confidential offers and counter-offers by the parties which are then disclosed to the judge after he/she has made an award in an ancillary relief application, otherwise called ‘the Calderbank offers’.”

32.  The President proceeded to first consider the background to costs orders and how the Calderbank doctrine was adopted as the established procedure in matrimonial financial claims and subsequently written into the rules under the Family Proceedings Rules 1991 in the aftermath of the Court of Appeal’s decision in Gojkovic v Gojkovic (No 2), and confirmed that decision must be read in the light of the 1991 Rules:

“[10] We have been told by counsel in the two appeals that the approach to the award of costs in ancillary relief cases, where Calderbank offers have been made, has been dominated by the decision of this court in Gojkovic vGojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 and less attention, it appears, has been paid to the Family Proceedings Rules 1991 as amended by the Family Proceedings (Amendment No 2) Rules 1999 and the judicial exercise of discretion provided by rr 2.69B and 2.69D (see below).

…

  [16] Whatever may have been understood by the profession from my judgment in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 it has been overtaken by and has to be read in the light of the Family Proceedings Rules 1991 as amended...”

33.  Whilst Her Ladyship recognised the difficulties expressed by Mr Mostyn QC in GW vRW (Financial Provision: Departure from Equality) [2003] as set out above and exacerbated by the removal of r 2.69C thereby presenting problems in the construction of r 2.69B, and shared by the submissions made for Mr Haskins in the subject appeal, she insisted that it is the duty of the court to apply the rules and to do its best to make sense of them unless or until they are amended:

“[21] I recognise the difficulties which arise and which have been so trenchantly expressed by Mr Mostyn QC as set out above. The removal of r 2.69C increases the awkwardness of the language of r 2.69B and has presented problems. It does not, however, make that rule incomprehensible. In any event it is not for judges to deem a rule or a section of an Act of Parliament incomprehensible or unworkable. If passed by Parliament, whether it be primary or secondary legislation, it is the duty of the court to do its best to make sense of it. Judges do not have the right to dump the awkward passage wholesale. In my judgment therefore, Mr Mostyn QC in his judgment in GW v RW (FinancialProvision: Departure from Equality) [2003] EWHC 611 (Fam) [2003] 2 FLR 108 was wrong to treat the rule as incomprehensible and to substitute his own approach by making a decision which was not based on the existing rules.

[22] Mr Le Grice QC, for Mr Haskins, made submissions to the effect that since the decisions in White v White [2001] 1 AC 596, [2000] 2 FLR 981 and Lambert v Lambert [2002] EWCA Civ 1685, [2003] 1 FLR 139, the traditional approach to the award of costs required to be changed in order to do justice between the parties. He referred to the court’s move away from the concept of ‘reasonable requirements’ in the division of family assets, a concept which Mr Mostyn QC in GW v RW {Financial Provision: Departure from Equality) said, at para [84], had now been ‘comprehensively condemned as discriminatory’. It was submitted that in light of the radical in approach to the division of marital assets post-White, and in particular the ‘yardstick of equality’ approach, the proper starting point should now be that there should be no order as to costs. This was the approach of Mr Mostyn QC in GW v RW (Financial Provision: Depart fromEquality). It was also the approach of the Costs Sub-Committee of the President’s Ancillary Relief Advisory Group in its report (see below), which said at para 4(b):

‘Family proceedings arise out of the breakdown of a marriage, which may be seen as a misfortune falling on both parties. The fact that the court has to assist the parties to re-adjust their finances should not of itself imply blame on the part of either party … As Mr Mostyn QC points out at para [86] of his judgment [in GW v RW], it may often be that “each party has had to come to the court to obtain an order which fairly disposes of the issues between them”.’

  [23] the court is, nonetheless, obliged to apply the rules unless or until they are amended. Rule 2.69, as amended, provides the current code on Calderbank offers to be followed until any further rule changes are made. Subrules 2.69(1) and (2) give statutory authority to the Calderbank practice in ancillary relief proceedings. The starting point r 2.69B is whether the offerer offers more or less than the court order. If less, he/she will pay the costs incurred after 28 days after the offer was made, unless the court considers it would be unjust to do so.”

34.  Her Ladyship further explained that the court must take into account all the circumstances of the case including the list set out in r 2.69D and that its effect on r 2.69B is to give the court greater latitude in making costs orders in those difficult or problematic situations mentioned above:

“[24] Rule 2.69D and its effect on 2.69B merit closer consideration. In r 2.69D the court must take into account all the circumstances of the case including the list set out therein. This include, in (a), the terms of any offers. That must include counter-offers. It also requires, in (e), the court to take into account the respective means of the parties. In my view, (e) enables the court to look at the whole position of the parties after the order has been made and see whether costs may fall disproportionately on one party rather than the other. It may enable a judge or district judge to mitigate, to some extent, the uncomfortable consequences of a Calderbank situation in a case where there is some but not a substantial amount of property and/or money to divide and costs will have to be paid from the available capital. The judge, in such a case, may make an order, often just enough to buy a suitable property for the wife, and then find that effect of the Calderbank offers may totally destabilise his order. Equally, of course, the Calderbank process must have teeth which can bite. Both parties are under an obligation to engage in genuine negotiation with the other side, otherwise one party may have to be penalised in costs. In medium asset cases I do not underestimate the difficulties. Rule 2.69D does, however, give the court a greater latitude in making costs order than may so far have been widely recognised.

  [25] In my judgment, therefore, r 2.69B and 2.69D can be managed and, where the court considers it unjust to apply r 2.69B, it can make a different costs order to reflect the injustice of the case. Mr Pointer QC, in his thoughtful and comprehensive skeleton argument, sets out in a bar chart a series of permutations arising from a court order to a wife of £1 million. I take one hypothetical situation. If a husband offers £800,000 and the wife asks for £1,200,000, neither has achieved the figure of the order and each is wide of the mark by the same amount. In broadly comparable situations, not tied to exact percentages since each case must be decided on its own facts, the result might be termed, as Mr Cusworth for Mr Norris suggested, a draw. In my view, in some offer and counter-offer cases, the proper approach might well be, under the present procedure, to make no order as to costs and leave each party to pay his/her own costs.”   

35.  Her Ladyship however accepted that the difficulties arose from r 2.69 set out by Mr Mostyn QC in GW v RW supra did urgently require a rethink for further amendments to the rules governing awards of costs in ancillary relief cases, and endorsed the recommendations made in the said report of the Costs Sub-Committee of the President’s Ancillary Relief Advisory Group:

“[28] The difficulties which undoubtedly arise from r 2.69, set out by Mr Mostyn QC with clarity in his judgment in GW v RW (Financial Provision:Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108, do now urgently require a rethink and it is time for further amendments to the rules governing awards of costs in ancillary relief cases. The present rules may affect disproportionately the payers in big money cases. The effect of costs is, however, to be felt across all ancillary relief claims. Although I have criticised Mr Mostyn QC for the cavalier way in which he dismissed the Family Proceedings Rules 1991, his approach to the reconsideration of costs requires careful thought, and I agree with the overall direction of his judgment for the future.

  [29] The Costs Sub-Committee of the President’s Ancillary Relief Advisory Group, to which I refer above, under the chairmanship of Bodey J, recently reported to the main committee. We have been provided with a copy of the report. It makes a series of excellent suggestions, many of a radical nature, which would meet the current requirements in relation to costs in family financial disputes. I agree with them and endorse them. I hope time may be found to bring them into effect by amendments to the Family Proceedings Rules 1991 in the near future.”    

36.  Her Ladyship lastly referred to a letter from the senior costs judge on 27 January 2003 which had reinforced her view that the present approach of the courts in family financial matters needed reconsideration, and which she cited as follows:

“As you know we took over the assessment of costs in family proceedings comparatively recently. Large numbers of bills are payable out of the CLS Fund and, because of the rigorous funding regime, are comparatively modest. Where a party obtains an order that the costs be paid by the other spouse (usually the husband) and costs recovered go to reduce the statutory charge on property recovered or preserved (usually a share of the matrimonial home). In such cases solicitors have a vested interest in maximising the costs recoverable from a paying party because those costs are recoverable at commercial rates. The effect of this is twofold, the detailed assessment proceedings are very hard fought, and, perhaps more importantly, the underlying family proceedings may be pursued with unnecessary extra vigour to ensure an adequate return for the legal representatives.

Whereas in non-family civil proceedings the resolution of the substantive dispute frequently takes the heat out of any animosity between the parties, and enables settlement of the costs to be achieved in a significant number of cases, in family proceedings that animosity, which is in any event likely to be at a very high level, continues unabated during the assessment proceedings. The successful spouse on one side vows to bleed the other dry of every penny if at all possible, whilst the paying spouse goes out of his or her way to deny the other the possibility of any recovery. The number of settlements in assessments arising out of family proceedings is very low. This in turn means that the assessment hearings themselves last for longer than similar assessments in non family proceedings. Where a party is LSC funded the cost of the assessment proceedings is not added to the statutory charge and is therefore borne by the CLS Fund.

The purpose of this letter is to suggest that it may be worth giving serious thought to doing away with fee shifting in family proceedings. The Family Proceedings (Miscellaneous Amendment) Rules 1991 disapply CPR 44.3(2) (costs follow the event). It is therefore a relatively short step to providing that in family proceedings no order for costs will be made unless a particular party has behaved in such an unreasonable manner that the court feels that a sanction should be imposed. I would suggest that if this idea were to be adopted the court making such an order should decide what amount should be paid by way of costs there and then.

       The level of venom in detailed assessment in family proceedings is such that I am firmly of the view that the removal of costs as an area of conflict would have an overall beneficial effect. If costs were never in issue the heat would be taken out of the situation far more quickly and any incentive in legal representatives to pursue remedies over vigorously in the hope of recovering greater costs would also disappear.”

37.  The warning and proposals expressed in that letter were endorsed by the President who concluded her view for urgent changes to the proper approach to costs in ancillary relief disputes by stating:

“[31] I am extremely grateful to the senior costs judge for his timely warning as to the adverse effect of the costs assessment process on family financial litigation. His sensible proposals require urgent consideration and provide a spur to taking action to introduce a radical approach to costs in all ancillary relief or similar disputes.”

38.  Thorpe LJ sitting in the same court agreed with the President’s proposals for changes and added his views as follows:

“[63] What then is the rationale for change? First, as these appeals illustrate, r 2.69B and D are difficult to construe and apply to any case in which there has been a progressive Calderbank negotiation with the exchange of several offers and several counter-offers. These rules were drafted at a time when the predominant culture endured that if the judge’s award clearly exceeded the husband’s best Calderbank offer then he paid the costs. Of course in the aftermath of this court’s decision in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic Gojkovic (No 2) [1991] 2 FLR 233 the obligation on the applicant to counter-offer in response to an unacceptable Calderbank offer was plainly established. However, that did not impact much on the culture. That was perhaps understandable throughout a time in which the applicant’s award in substantial cases was calculated by reference to her reasonable requirements. If a husband’s Calderbank proposal had not sufficiently recognised her reasonable requirements then he should pay her costs even if the wife had put her case higher than the judge’s assessment. Of course the culture encouraged the husband to put forward generous proposals, the more so if he perceived the wife to be unreasonable, in order to avoid the costs liability. Equally if the wife’s unaided reaction was to reject the husband’s Calderbank offer it enabled those advising her to issue a clear warning of the risks of going forward to trial. Thus it cannot be doubted that the Calderbank conventions as then understood made a significant contribution to the resolution of ancillary relief cases in the high range.

        [64] However, for all the reasons given by Mr Mostyn QC in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108 ancillary relief cases are now litigated under very different principles. He had long been an advocate for the proposition that in ancillary relief, as in Children Act cases, there should be no order for costs unless exceptional circumstances justify an order. He has found an ally from a quarter which I doubt he anticipated. The experience of the senior costs judge, having taken over from the Principal Registry the task of assessing costs in ancillary relief cases, is in my judgment extremely significant. His view has undoubtedly influenced the report of the costs sub-committee. The committee has also factored in the considerations identified by Mr Mostyn QC in his judgment. The committee, upon which the relevant professional associations are duly represented, has endorsed the direction indicated by the senior costs judge and by Mr Mostyn QC. The report has been adopted by the President’s Ancillary Relief Advisory Group without qualification. More importantly the report has the support of officials from the Lord Chancellor’s Department and the Legal Service Commission. Our judgments in these appeals add further support for the reform movement. To introduce the new regime it will be necessary not only to consider the required amendments to the Family Proceedings Rules 1991 but also the application of CPR 44.3 to ancillary relief proceedings. The ultimate shape is a matter of policy and the report of the sub-committee offers a carefully considered detailed model…”     

39.  His Lordship concluded in the same paragraph of his judgment his endorsement of the report of the sub-committee for amendments to the Family Proceedings Rules 1991 by referring again to the said letter of 27 January 2003 from the senior costs judge and citing the following passage:

“[64] … If I were expressing my own view of the objective of the amendments I could not do better than to cite the following sentences from the letter of 27 January 2003 from the senior costs judge to the President:

‘The Family Proceedings (Miscellaneous Amendment) Rules 1991 disapply CPR 44.3(2) (costs follow the event). It is therefore a relatively short step to providing that in family proceedings no orders for costs will be made unless a particular party has behaved in such an unreasonable manner that the court feels that a sanction should be imposed. I would suggest that if this idea were to be adopted the court making such an order should decide what amount should be paid by way of costs there and then.’

  [65] The senior costs judge’s proposal demonstrates simplicity, clarity and overall fairness. Those should be the standards to which we aspire in all aspects of ancillary relief proceedings.”         

40.  The proposition that in ancillary relief cases, as in children cases, there should be no order as to costs unless exceptional circumstances justify an order, though sound attractive to me given the similarly high level of animosity encountered here as in this case but has yet to be seriously considered either by our courts or the professions, there does seem to be a growing practice in cases where one party, usually the non-earning wives, is able to fund her litigation with money from the asset pool either by way of a maintenance pending suit order or with the other party’s consent, thereby taking the heat out of any animosity between them and enabling settlement of the issue on costs at the end in an increasing number of cases in our jurisdiction.

41.  In the case now before me, as noted above and in my judgment most of the Wife’s costs were met by the Husband’s contributions from funds in his bank accounts, which were no doubt part of the matrimonial assets and from which he had also drawn to meet his own legal costs, hence it seems to me that his claim for costs is in effect not to recoup his costs paid out of his pocket but rather to compensate him for the consequential reduction to his half share in the matrimonial assets eaten up by the additional costs incurred by both parties as a result of the Wife’s failure to accept his last offer, and for which no doubt he would want to seek to set off such costs of his against the final lump sum award for the Wife and thus impacting on the estimated capital required to meet her future needs, let alone to guard against any unforeseen eventualities such as her ill-health or medical uncertainties which might strike at her earning capacity, all these in the absence of the safety valve of a nominal maintenance order for periodical payment, as Mr Pilbrow has submitted on her behalf.                   

42.  In my judgment I found that by awarding the Wife half of the total assets of HK$65.8M which together with her own earnings should meet all her future needs and living expenses at about HK$120,000 per month plus accommodation under a clean break situation, and without second guessing myself, I agree that in reality the available capital from her share of HK$32.9M, of which about 1/3 represents a property which she may need to house herself, cannot be expected to generate any huge surplus for her when she retires even before taking into account of the impact a costs order would have against her.

43.  As stated above, r 2.69D requires that in considering whether it would be unjust, or whether it would be just, to make the costs order under r 2.69B, the court must take into account of all the circumstances of the cases including those matters specifically mentioned therein, of which it would be relevant to note that firstly, the Wife’s reason for not accepting the Husband’s second offer was not because she had wanted more money or a bigger share of the matrimonial assets, but for the reservation of a right to ask the court to review her situation in the event that she had exhausted the award which the court had considered as sufficient to meet all her needs including medical for the next 30 odd years up to the time of her demise which necessarily involve certain degree of guesswork or speculation, when such needs had always been wholly and comfortably met by the Husband for the past 26 years until my order for the clean break; and secondly, the vast disparity in earnings and earning capacity which the Husband had over the Wife, so that I am unable to say that the Wife did not have any merits, or that she acted unreasonably, in insisting for a nominal maintenance order, even though ultimately I was not with her on this issue for those reasons set out in my judgment.

44.  Furthermore, notwithstanding the Husband’s offers since disclosed, I maintain my view expressed in the judgment that this is one of those exceptional cases in the circumstances that justifies no order as to costs. In conclusion and for the reasons given above I refuse to vary the costs order nisi which is to be made absolute forthwith, and for similar reasons I make no order as to costs of this application of the Husband.

Wife’s Application for Leave to Appeal

45.  The Wife’s complaints against the judgment essentially consist of 2 grounds as set out in her 5^th Affidavit [A1/7] in that the court has made a miscalculation of the matrimonial assets for distribution between the parties, and that when the court ordered a clean break between the parties, it failed to take any or sufficient account of certain relevant matters and erred in law by failing to award the Wife nominal maintenance in the circumstances. I shall start with her first ground.

Miscalculation of Assets

46.  For this ground the Wife’s case is that due to relying upon the asset schedules annexed to the parties’ Opening Submissions at HK$65M, the court had made a miscalculation of the assets by the end of the trial as it was clearly stated in her Closing Submission the asset pool had gone down to HK$60.7M with her assets at only HK$19.2M with the Husband’s at HK$41.95M, and in her draft grounds of appeal, she adopted the asset pool to be HK$61M with her assets at HK$20.36M and the Husband’s at HK$40.7M which was what the court had found that he had in the judgment.  

47.  Mr Pilbrow therefore submits for the Wife that this court has erred in fact by finding that the assets pool was HK$65M as opposed to HK$61M by miscalculating the Wife’s assets at HK$25.1M which was HK$4.74M more than she had net of the court’s increases in other assets by erroneously finding that:

(a) she had HK$11.7M in her bank account when she in fact had only HK$8.5M;

(b) her US tax liability for 2016 of HK$543,000 was not taken into account;

(c) whilst correctly setting out her legal costs of HK$6.7M but failing to deduct the sum of HK$1M of her legal costs owing;

(d) by including her future rental liabilities of HK$1,170,000 which had already been removed and conceded by her prior to the 2^nd part of the trial in February 2017;

(e) by including the outdated figure of the Husband’s monies and addbacks of HK$13,484,486 which had already been reduced and agreed to a lower sum of HK$5,153,065, as correctly stated in paragraph 63 of the judgment.  

48.  Mr Pilbrow argues that the Husband’s position of the asset pool as stated in his Asset Schedule attached to his Closing Submission was similarly incorrect at HK$65M in total with his asset at HK$36.9M and the Wife’s at HK$27.6M, and as explained above he submits that the correct figures should be those as stated in the Wife’s Closing Submission with hers at only HK$20.36M and the Husband’s at HK$40.7M, thus giving the asset pool HK$61M instead of HK$65M, and hence the Wife should have been awarded the lump sum of HK$10.5M as opposed to HK$7.8M.

49.  In opposing the Wife’s case Ms Rattigan argues for the Husband that the court was entitled to find the asset pool as it did based on the figures presented in the Opening Submissions and Asset Schedules before the court submitted by both parties at the time of the trial, and hence it is wholly wrong for the Wife to now seek to rely on post-trial figures to say that the court erred in calculating the asset pool and that this therefore merits a grant of leave to appeal, as she submits that the court acted entirely correct in finding the assets as it did on the basis of the material presented at the trial. And for the Wife to now say that those later figures should be used which were never before the court and never capable of being examined or challenged by the Husband would be entirely wrong, and therefore there is no merit in this aspect of the Wife’s intended appeal and leave should be refused.         

50.  This discrepancy of some HK$4M in the asset pool between the parties’ Opening Submissions and Closing Submissions can perhaps be explained by what happened to the Wife during the trial, as explained in paragraph 36 of my judgment, when she suffered a panic attack in the middle of cross-examination on 8^th November 2016 and the trial had to be adjourned for more than 3 months to late February 2017 when the evidence was finally concluded but closing submission could only take place on 5^th May 2017 upon consultation of the diaries of all concerned, with a significant time gap of some 6 months between the start of the trial and its conclusion, during which, of course as and when life goes on, the living expenses of the parties in particularly the Wife’s medical expenses as well as their legal costs would continue to be incurred which may go to explain the alleged reduction to the funds in the Wife’s bank accounts.

51.  I put her such reduction as ‘alleged’ because, as pointed out by Ms Rattigan for the Husband, if indeed that was what actually happened to her financial situations, evidence should and could have been adduced by the Wife when she resumed her evidence in February 2017, or that application could have been made on her behalf for leave to present new evidence as to her additional spending during that period so that they could be properly examined or challenged by the Husband, or that leave could have been sought by those representing her to take her instructions as to such alleged spending or additional expenses but somehow none of these were done, and as the matter now stands I agree with the Husband that it would be wrong both in principle and in procedure, and unfair to him, for the Wife to now rely on figures never properly presented before the court or capable of being examined or challenged, and accordingly leave to appeal on this ground is refused. I shall proceed to consider her next and remaining ground.             

Error in Ordering a Clean Break

52.  Mr Pilbrow submits that the Wife all along in the proceedings was seeking an order for equal share of the matrimonial assets with a nominal maintenance due to her limited financial means and ability and her medical conditions that it was essential that she be protected with a nominal maintenance to guard against any unforeseen eventualities, as it was held in Scallon v Scallon [1990] 1 FLR 194 in which the petitioner, who suffered from asthma and had been married for a long time to the respondent, was awarded the nominal maintenance.

53.  Mr Pilbrow further submits that the Wife had also included in her open offers an undertaking that she would not seek an increase for herself within a 5-year period save if she is suffering from severe illness or disability.

54.  Mr Pilbrow therefore submits that the court failed to take any or sufficient account of the following matters and erred in law by failing to award the Wife nominal maintenance:

(a) by ordering a clean break on an asset pool of HK$65M which was actually HK$61M, so that the Wife is deprived of income upon the difference, as the asset pool in the beginning of the proceedings had depleted from HK$86M to HK$65M which was in fact only HK$61M, hence a failure to make provision for periodical payments to cover the Wife’s loss of income on the reduced lump sum or at the conclusion of the lump sum by instalments;

(b) due to the chronic nature of the Wife’s medical condition confirmed by unchallenged medical evidence, the court should have awarded her nominal maintenance;

(c) failing to take into account of the Wife’s reasonable needs given her medical condition, the Husband’s future earning capacity, the Wife’s limited earning capacity, and the payment of periodical payments of HK$76,000 per month made into lump sum payments by instalments for a period of 5 years;

(d) failing to take into account of the Wife’s agreement to accept a 50/50 division of the assets was on the basis that she was to retain nominal maintenance;

(e) failing to take into account of the Wife’s unopposed evidence of her agreement to a 50/50 division of assets was expressly conditional upon receiving nominal maintenance after the payment of lump sum by instalments in the sum of HK$4,560,000.   

55.  Mr Pilbrow further submits that the Wife’s health condition has not improved since the judgment and has in fact worsened, as recently when she attended clinic in order to undergo her planned pain management medical procedures as set out in her original narrative affidavit and referred to in the judgment, she was unable to carry through because of her high blood pressure, and while she does have insurance that may cover such procedure, the policy is subject to the palliative care ceiling of US$50,000, and once that ceiling is reached, she will have no more reimbursement for any of the pain management procedures, and if she must proceed to the next level of procedure which will require hospitalization, she will immediately exceed this limit, which means that not only will she not be covered, there will also be nothing left for her end-of-life care.

56.  Mr Pilbrow therefore submits that the court erred by ordering a clean break without considering the need to guard against unforeseen eventualities referred to in Scallon such as the Wife’s ill-health and future medical uncertainties, which he argues will no doubt diminish her earning capacity, and leave should therefore be granted to her to appeal accordingly.        

57.  Ms Rattigan argues for the Husband that again there are no reasonable prospects of the Wife succeeding on an appeal against a carefully considered judgment on this aspect of her case which has correctly found that her needs have been more than met by her award, that this is not a case where an order for nominal maintenance is appropriate, and that the court has exercised its discretion against awarding it, and as there is no error of law or mistake of fact, this case more than any other needs to end, there will have no prospect of success on appeal, and that the Wife’s present application is all but a continuation of her unreasonable litigious behaviour which the Husband argues must end.

58.  The law on application for leave to appeal is clear, and the appropriate test as set out in Section 63A District Court Ordinance, Cap 336 is that either the appeal has a reasonable chance of success or that there is some other reason in the interests of justice why the appeal should be heard. Given the circumstances and medical conditions of the Wife I am unable to say that there is no reasonable chance of success in her appeal on this ground. Accordingly I grant leave to her application for appeal on this ground, with costs to be costs of and incidental to the appeal.    

59.  At the conclusion of my earlier judgment I urged the parties to finally bring closure to their litigation so that they could move on. It is still my hope that they would be able to do so by returning to mediation to resolve any remaining issue between them. Lastly it remains my wish to express my gratitude to counsel for both sides for their most valuable assistance rendered to the court.  

FCMC No. 5376/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5376 OF 2015

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JUDGEMENT
(Ancillary Relief)

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1.  This is the application for ancillary relief by the Petitioner Wife, now aged 58, against the Respondent Husband, aged 55, upon the dissolution of their 26-year marriage, essentially for equal division of their matrimonial assets, and for initially substantive periodical payment but by the close of the trial she had come down to only nominal maintenance during their joint lives as a safe guard due to her health conditions.

2.  Whilst it is common ground of the parties that the equal sharing principle shall apply to division of their matrimonial assets, there is apparently significant difference between them as to what they claim to be their total value, with the Wife putting it at just over HK$77 million while the Husband’s figure is significantly less at about HK$65 million, hence a difference of some HK$12 million separating the parties.

3.  This difference can essentially be explained by the Wife’s case that by reason of the Husband’s marital and financial conducts during the marriage with deliberate or reckless dissipation or waste of marital assets, that his such marital conduct has adversely affected her earning capacity and increased her needs in particularly her medical expenses, and that his litigation conduct in failing to comply with court orders or to provide proper disclosure all of which justify substantial “add back” to the matrimonial assets for equal division.   

4.  The Husband of course denies that he has been guilty of any such conducts, insisting that many of the so-called dissipations were either unsuccessful investments or loans made to his friends in needs, and that whilst some may not be recoverable, he proposes to pay the Wife 50% of those that are as and when they are paid back, which is however not acceptable to her or unless they could be secured against his assets.

5.  As for the Wife’s claim for nominal maintenance, the Husband insists that there should be a clean break instead as he is terrified by the prospect of recurrence of their litigation given what he claims to be the Wife’s unreasonable stance and vexatious litigation conduct in these proceedings, hence for both parties the issue of conduct, be it marital, financial or litigation, is clearly at the heart of their disputes, and the fact that their combined legal costs are in excess of HK$10 million, a staggering sum by any standard and disproportionate to either assets or issues but which is sadly fast becoming the norm in family litigations, which speaks volume of the parties’ uncompromising and difficult stance in the proceedings, or at least of one according to the other.

6.  There is fortunately no children issue as their son is now almost 25 and working while staying with the Wife in Hong Kong, while their daughter, aged almost 22 is in university in UK and wholly supported by the Husband.    

Background

7.  The Wife was born in the USA and raised in Massachusetts/Rhode Island area with her extended family still living there. After graduating from university with a degree in economics, she went on to business school in London for MBA where she met the Husband, a British and a fellow student.

8.  In 1980 the parties married in UK and later also held a Catholic ceremony in the US with the Wife’s family. After the marriage both worked in the finance industry in London until about 1991 when the Wife moved with the Husband’s job in Baring Securities to Tokyo where their elder child A, a son was born in the following year in 1992 with the Wife then became a full-time housewife and mother save for some summer part-time jobs editing English translated documents for some Japanese companies.     

9.  In 1995 Baring Securities ceased trading and the Husband moved his team of research people to another company eventually taken over by Merrill Lynch when the Husband then moved to Schroders. In the same year their daughter C was born also in Tokyo.

10.  In 1996 the family moved with the Husband’s job in Schroders to Hong Kong which he then lost in the 1997 Asian Financial Crisis. In 1998 he joined Dresdner Kleinwort Benson until 2000 when he changed to working for HSBC as Chief Asia Economist. It was around this time when the Wife started a book club business teaching their daughter and her friends.

11.  In 2004 the Husband left HSBC to join BIA where he ran certain hedge fund but for the next 3 years he had no income and the parties had had to cut down on their expenses. In 2008 his hedge fund rose substantially and as a result the Husband earned US$8 million in that year and consolidated his reputation as a successful fund manager. For the next several years the Husband was able to earn a yearly income in excess of US$1 million and that the family enjoyed a high standard of living including luxurious apartments and expensive overseas holidays, while their children attended boarding schools.

12.  In the following year in 2009 the parties purchased a 5-bedrooms property in the Wife’s home town of Rhode Island at Rumstick Road, Barrington (“Rumstick House”) for US$1.875 million which came also with a separate guest cottage and a large garden as a family home, and for which the parties also paid US$43,000 for the audio and video equipment existed in the property, and US$17,500 for the nearby Rhode Island Country Club membership.   

13.  During about the same period the Wife came down with severe bladder pain and has since been diagnosed with Interstitial Cystitis, or painful bladder syndrome with chronic bladder and pelvic pain, which has since necessitated constant medical attentions and treatments including high dosages of pain killers, and as a result also reduced her intimacy with the Husband which by late 2010 had ceased altogether and led to the parties attending marriage counselling.    

14.  In 2013 the Husband left BIA to set up his own company GCB as the sole director and shareholder by injecting US$1 million from his savings into the company as a shareholder’s loan to provide the initial working capital and from which he was to draw a salary of HK$175,050 per month to meet his family’s expenses. 

15.  On 2^nd December 2013 GCB entered into a joint venture agreement with CFIC (Hong Kong) Ltd (“CFIC”), an institution in asset management registered with the Securities & Future Commission (“SFC”), to provide consultancy service, under which the Husband was made a non-remunerated director of CFIC together with 4 other directors, and in March 2014 GCB launched a new hedge fund known as CP Fund and paid HK$145,600 per month for a new apartment for the Husband and his family at La Hacienda on the Peak.

16.  In February 2015 the parties and their daughter spent 3 days in what the Wife claims to be an unusually lavish holiday in Venice where the Husband was said to have spent HK$67,000 during their stay at the luxurious Hotel Gritti Palace, but afterwards he went to London where he spent a weekend with a woman whom the Wife later discovered and suspected to be his mistress and on whom she believes he had spent more than HK$68,000 on that weekend which eventually led to the breakdown of the marriage.

17.  By April 2015 the Wife had become so suspicious of the Husband’s activities that she hired a private investigator to look into his affairs, and when she received reports of his extra-marital activities including with prostitutes which may have gone on for several years, she confronted him with the same and demanded that he left their matrimonial home at La Hacienda, which he subsequently did and eventually moved to his present apartment in August 2015 on Stubbs Road at a rental cost of HK$55,000 per month.

18.  On 5^th May 2015 the Wife instituted these proceedings by issuing a petition for divorce based on what seems to me a fairly mild version of the Husband’s unreasonable behaviour and for general ancillary relief. On 8^th May 2015 the Husband returned his Form 4 through his former solicitors indicating that he would not contest the petition, and as a result the decree nisi was granted to the Wife on 26^th August 2015.  

19.  Meanwhile the parties had exchanged their Form E in June 2015, where the Husband disclosed total net assets in excess of HK$86 million, with an income of more than HK$4.1 million for the year which averaged out to about HK$350,000 per month, but had a monthly expenditure of more than HK$510,000 including rent for his new apartment and interim maintenance of HK$269,600 for the Wife. It is note-worthy that he had also disclosed being owed HK$2,360,000 in loans which he had earlier made to two of his friends namely BB and MH, and that he would be seeking the court to make a clean break settlement with the Wife [B2(1)/1-36].

20.  The Wife as expected disclosed in her Form E much less income at HK$20,000 per month and assets worth no more than HK$7.7 million made up essentially of her interest in Rumstick House and her savings, but claimed to have an expenditure of more than HK$448,000 per month [B2(1)/37-64].

21.  Shortly thereafter the parties were able to enter into a mediation agreement on 11^th July 2015 whereby the Husband agreed to pay the Wife US$500,000 as an advance distribution of their capital asset to be set off against her final award and to transfer Rumstick House to her, as well as a monthly sum of HK$80,000 for her interim maintenance and to continue to pay for the rent of the former matrimonial home up to 15^th November 2015 when the Wife was to move to a new accommodation for which he was to contribute HK$90,000 per month towards her rental expenses for the new apartment pending the final resolution of their financial dispute. These terms of the mediation agreement were subsequently made an order of the court on 3^rd August 2015 [B1(1)/4].  

22.  However, eight months later in February 2016 the Husband updated his Form E to reveal a serious drop in his income to only HK$55,000 per month as he claimed to have been forced to cut his salary due to serious losses incurred by GCB and to avoid having to re-capitalize his company, whilst the net total value of his assets also came down significantly to HK$55.8 million, partly because he had since transferred some such as his interest in the Rumstick House to the Wife, and partly due to the ongoing substantial legal costs incurred in the proceedings.

23.  It was also at this stage when the Husband’s answers to the Wife’s several questionnaires revealed his many more loans made to his friends without her prior knowledge or consent, and in particularly that his extra-marital activities had in fact started as early as 2012 during the marriage that the Wife claims to have been so traumatised emotionally and so exacerbated her health problems that have indeed further deepened their entrenchment.   

24.  So it was no surprise when the parties came away without any settlement at their FDR hearing before Deputy Judge Ching on 1^st March 2016, and as a result the ancillary relief matter therefore came before me on 27^th May 2016 for PTR when the parties were directed to file their narrative affidavit setting out respectively their case only on the issues for trial which were as noted above essentially over the quantum of their matrimonial assets for equal division and whether or not there should be a clean break between the parties or that there should be periodical payment/nominal maintenance in favour of the Wife after the divorce. In other words, issues which were fairly limited and straight forward.

25.  Or so it seemed, until when one came to read the parties’ narrative affidavit, especially that of the Wife known as her 4^th affidavit filed on 18^th August 2016 [2(1)/196] which turned out to be a massive 88 pages 268 paragraphs plus a further 120 pages of exhibits of what appears to be her autobiography with staggering amount of retrospective information and material of her family background and history dating back to her ‘great-great-great grandfather’ with details of her upbringing and schooling as well as her early professional career, followed by how she came to meet the Husband whilst still in a serious relationship with a boyfriend, and then every minutiae of her 26 years marriage, with some 70 paragraphs devoted to what she claimed to be the Husband’s marital conduct which led to the eventual breakdown of their marriage, and a further 100 paragraphs of his litigation misconduct in these divorce proceedings, many of which in particularly her historical background are either irrelevant or unhelpful to the determination and resolution of the few and fairly straightforward issues referred to above, and are clearly within the contexts of which the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 has taken pain to warn that the court should not countenance any attempt to engage in costly and futile retrospective investigations which tend to deplete the parties’ resources and to increase their antagonism.

26.  This was so despite my direction given to the parties at the PTR hearing specifically warning against such improper indulgences in their narrative affidavit, in particularly in view of the impact of the litigation apparently already on the Wife’s health problems and the substantial legal costs already incurred by both parties, and when such warning was clearly at the forefront of the parties’ mind and those representing them when their affidavit was being prepared, as evidenced at the beginning of their affidavit of both parties, starting with the Wife’s in paragraph 3 [2(1)/197]:

“After the directions hearing on 27^th May 2016, I was advised that my narrative affidavit would be my evidence in chief for the trial set down in November 2016. The original document which covers more than 100 pages. Following advice from my Solicitors and Senior Counsel, I have attempted to reduce the length. It has not been easy to prepare or edit this affidavit as a result of the stress of these divorce proceedings and this is evident in my medical reports …”

27.  Likewise in paragraph 3 of the Husband’s affidavit of 18^th August 2016 [2(1)/154]:

“In preparing this 2^nd Affidavit, I have considered the remarks made by His Honour Judge Bruno Chan during the Pre-Trial Review hearing on 27^th May 2016 that the narrative Affidavit on Ancillary Relief should focus on the issues. The Judge made it clear during the hearing that the Affidavit should not be full of angry words and huge amounts of details on the background/history of the marriage given that the sharing principle applies. I have borne this in mind when preparing my Affidavit and have tried to stick to the issues as best that I can.”

28.  It appears that the Husband did try to do just that but his affidavit still came in 42 pages and 119 paragraphs albeit less than half in length of the Wife’s and did focus as he so claimed mainly on the issues over the extent of the matrimonial assets and his financial situation including his various investments and loans involving his friends. It is however clear from their affidavit that both parties had intended to raise the issue of the litigation conduct of the other as the basis for their claim for costs of the ancillary relief proceedings in the event that their Open Proposal was not acceptable to the other, and the way they presented their narrative affidavit will no doubt be a factor to be taken into consideration when I come to deal with their litigation conduct and/or costs later in this judgment, but meanwhile it would be relevant to first go to their Open Proposal.      

29.  To which the parties have each also attached a Schedule of Assets [1(1)/120-121, 152-159], and as noted above it is apparent that there was then a significant difference between them as to the size and quantum of the matrimonial assets of between HK$13 million – 16 million, depending on whose Schedule one is looking at, but it is clear that the major issue centres around what, if any, assets or value should be added back into the matrimonial pot for division between the parties, and therefore before setting out their respective proposal and to have a proper understanding thereof, it would be useful to first look at their respective Schedule of Assets which I have combined together and summarised as follows so as to identify their major differences:     

Wife’s Assets & Liabilities

W’s Position

H’s Position

	Value (HK$)
Rumstick House	9,750,000	9,687,500
Bank Accounts	11,341,567	11,733,056
Rental Deposit	246,360	246,360
Harbourside Inn Timeshare	15,000	116,250
RFM Ltd	526,000	526,000
Stocks	165,351	165,351
Jewellery	612,500	1,720,000
Rumstick’s Chattels	76,360	585,000
Chattels at Wife’s Residence	570,662	685,000
Rhode Island Country Club	0	135,625
MPF/Pension/Annuity	395,297	395,297
Credit Card Liabilities	(61,723)	(61,723)
Future Rental Liabilities to 12/2017	(1,170,000)	0
Wife’s Total Net Assets :	22,467,383	25,933,716

Husband’s Assets & Liabilities

Bank accounts	910,800	889,229
CP Fund	28,749,971	28,749,971
Other Investment Funds	5,834,482	4,925,459
CA Ltd	585,000	581,250
SR Capital	1,560,000	0
Macau Golf Club (Bocabec)	2,100,000	907,400
Insurance	478,160	451,085
Personal Items & Chattels	721,000	643,580
MPF	245,983	245,983
Credit Card Liabilities	(71,246)	(71,246)
Monies owed & Add Backs	13,484,846	3,131,465
Husband’s Total Net Assets :	54,598,996	40,454,176
Total Matrimonial Assets :	77,066,379	66,387,892

30.  As noted above, it is essentially the last item of the Husband’s Assets as assessed by the Wife at about HK$13.5 million being monies owed to him from various loans made to his friends and other unsuccessful investments and spending of his which the Wife argues as losses from the marital asset pool which would otherwise have been available for division but for his ‘reckless and cavalier financial misconduct’ contrary to her objections or without her knowledge or consent, and for which she has sought to add back to the marital pool for division in her following Open Proposal.

The Wife’s Open Proposal

31.  The Wife’s Open Proposal was set out in her solicitors’ letter dated 30^th September 2016 [C4/2653] on the basis of equal sharing of the matrimonial assets which she put at about HK$77 million including all the add backs on the following terms:

(a) She was to retain the Rumpstick House and her other assets totalling HK$22.3 million;

(b) The Husband was to pay her a lump sum of HK$17 million by 2 instalments being HK$10 million within 3 months of decree absolute and HK$7 million within 6 years secured by either a life insurance or a charge against his assets;

(c) The Husband was to pay her periodical payments at the rate of HK$76,000 per month during their joint lives or until further order;

(d) Each party to retain their personal effects and she was to retain the contents of Rumsticks House and chattels from the former matrimonial home in storage as well as those of her residence at Old Peak Road;

(e) The Harbourside Inn Timeshare to be transferred to her within 14 days of decree absolute;

(f) She was to have the use of the In and Out Club for the duration of the Husband’s membership with consumption at her own expenses;

(g) The Husband was to reinstate her supplementary Black American Express Card and she was to pay her expenses in advance of payment by the Husband;

(h) The Husband to continue to pay for the daughter’s education and maintenance until she finishes full time education;

(i) On the basis of the above terms, there be no order as to costs.   

32.  Essentially the Wife was seeking a lump sum and transfer of assets totalling HK$17 million to bring her half share of the total matrimonial assets to HK$39 million plus substantive ongoing maintenance of HK$76,000 per month for life.

The Husband’s Open Proposal

33.  The Husband responded to the Wife’s offer through his solicitors’ letter dated 14^th October 2016 [B4(12)/2800 in which he pointed out what he claims to be errors in the Wife’s calculation of the assets and on the basis of his own calculation of the assets at about HK$66.4 million, his Open Proposal was to effect a clean break settlement on a 50/50 division of the assets which would give the Wife about HK$33.2 million plus capitalized maintenance for 5 years and 50% of his loans as and when they are repaid, which can be summarised as follows:

(a) The Wife was to retain Rumsticks House valued at US$1,250,000 and the assets under her name, as well as the Rhode Island Country Club Membership which follows the ownership of Rumsticks House and to be counted as an asset to be transferred to the Wife;

(b) He was to transfer his shareholding in RFM Ltd to her together with the Harbourside Timeshare;

(c) He was to pay her a lump sum of HK$5,399,076 and transfer to her 50% of the shares in CA Ltd to make up her half-share of the matrimonial assets;

(d) He was to pay her a further lump sum of HK$352,283 for her half-share of the add back of his extra-marital activities expenses;

(e) To avoid US tax on monthly maintenance he was to make 5 further payments to her at HK$912,000 each annually commencing from end of 2017 regardless of his outcome;

(f) He was to pay her 50% of all out-standing loans as and when they are repaid in the future;

(g) The Wife was to let him have certain items of painting and carpet in exchange for her retaining certain of his personal belongings including his books in Rumsticks House;

(h) He was to allow her to use the In and Out Club in London at her expense for as long as their daughter remains at university in England, and thereafter if the Wife so wishes, he will propose membership for her.  

34.  This offer of the Husband was as expected rejected by the Wife but has remained his Open Offer for trial.   

Agreed Terms

35.  Notwithstanding the apparent significant gulf between the parties essentially over the quantum of the lump sum payable to the Wife and that whether there should be a clean break between them, the parties have nevertheless been able to agree on the transfer of Rumpsticks House and other less controversial items as follows: 

(a) the Husband to pay the Wife monthly maintenance of HK$76,000 for 5 years to be capitalized at HK$4,560,000 by 5 equal instalments of HK$912,000 each annually in advance from 31^st December 2017 up to 31^st December 2021 pursuit to Term (e) of his Open Proposal above;

(b) the Rumstick House agreed at US$1,250,000 (HK$9,750,000) to be retained by the Wife;

(c) the Husband to transfer his shareholding in RFM Ltd to the Wife within 14 days of decree absolute and resign as director;

(d) the Wife to transfer to the Husband certain agreed painting and books at Rumstick House by 31^st July 2017 or within 3 months of decree absolute;

(e) various interim or temporary arrangements relating to the use of certain credit cards and club memberships as set out in the Wife’s Closing Submission;

(f) the Husband to continue to pay for their daughter’s education and maintenance until she finishes full time education.   

36.  As the matter inevitably proceeded to trial, with Mr. David Pilbrow SC and Mr. Robin Egerton representing the Wife, and Ms Mairéad Rattigan representing the Husband, which was originally scheduled for 4 days in early November 2016 but had to be broken off on the 4^th day on 8^th November 2016 when the Wife was unable to continue with her evidence due to a physical and emotional relapse, specifically a panic attack during cross-examination according to the medical reports subsequently produced [C4(13)/3214, 3216], and the second part of the trial had to be rescheduled for additional days in February 2017.

37.  It was after this episode that the Wife revised her Open Offer as set out in Mr Pilbrow’s Closing Submission dated 13^th April 2017, and it would be in my view relevant to cite in full as follows:

“106. In summary, it is submitted that this is a case for a lump sum payment with ongoing nominal maintenance. W has taken into account H’s concern of ongoing litigation which was H’s reason at trial to refuse W’s nominal maintenance claim. W has therefore provided in her offer an undertaking that she will not seek an increase for herself within the 5 year period, save that she can do so if she is suffering from severe illness or disability.

107. Apart from what has been agreed … W is essentially seeking a lump sum of HK$15,560,000 to be paid by H which comprises the following:-

a. HK$8,500,000 within 14 days of Decree Absolute, being the equalization of the total liquid assets (total liquid assets being HK$56m, 50% being HK$28m minus W’s assets of HK$10.2m);

b. HK$2,500,000 on or before 31^st December 2020 (being 50% of the 5 personal loans at total of HK$5.1m plus extra-marital activities of HK$704,565) to be secured by way of legal charge against the respondent’s assets and failure to pay any instalment due makes any balance due and payable forthwith.

c. HK$4,560,000 to be paid by 5 equal instalments of HK$912,000 payable annually in advance from 31^st December 2017 to 31^st December 2021 inclusive and to be secured by way of life insurance and legal charge against H’s assets and failure to pay any instalment due makes the remaining balance payable forthwith.

d. Nominal maintenance to start after W receives the lump sum of HK$8.5m above.”   

38.  Whilst the Wife has accordingly adjusted her position, and if I may add not insignificantly, it is clear that the remaining issues were still too entrenched between the parties that the trial had to run its full course, with those remaining issues specifically set out in the Wife’s Opening Submission for the court’s determination as follows:

(a) What are the matrimonial assets;

(b) The value of the assets which the parties have failed to agree;

(c) What constitutes the appropriate division of assets;

(d) What is the appropriate figure of spousal maintenance;

(e) It is the Wife’s case that by reason of the Husband’s marital conduct during marriage, financial misconduct and deliberate or reckless dissipation or waste of marital assets and the Husband’s litigation conduct failing to comply with orders or provide disclosure to the court, there should be “add backs” to the marital assets.

39.  Whilst the Husband has not so specifically stated in his Opening Submission, he did in his narrative affidavit set out what he believed to be the key issues for the trial [2(1)/155-157] which are essentially the same as those of the Wife, except that he insists that there be a clean break between them upon her receipt of her half share of their marital assets, and that he also intends to raise the issue of excessive legal costs due to the Wife’s litigation conduct in the proceedings. Hence it would be helpful for me to first set out the relevant principles to be applied towards those issues for determination.   

Applicable Legal Principles

40.  In deciding on ancillary relief application the court is required by section 7(1) of Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) to have regard to the conduct of the parties and all the circumstances of the case including the following matters:

(a) the income, earning capacity, property and other financial resources which each of the parties 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 benefits (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

41.  As to how the court should undertake this section 7 discretionary exercise, the Court of Final Appeal in LKW v DD supra laid down comprehensive guidance including the 4 underpinning principles which are by now well known to all but worth repeating here as they are always to be borne well in mind when embarking on the exercise:

-   Objective of Fairness

-   Rejection of Discrimination

-   Yardstick of Equal Division

-   Rejection of Minute Retrospective Investigation

42.  It is not necessary for me to go into the reasoning articulated by Ribeiro PJ in his judgment for the court behind all four of these principles, since there seems to be no controversy between the parties in respect of the first three of them, but given the fact that the Wife has raised various issues of conduct against the Husband who also seeks to argue litigation conduct against her in the way she has prosecuted her claims in the proceedings, I find it relevant to remind myself again of what His Lordship said about the fourth principle:

“[62] The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the court’s) resources and to increase antagonism and discourage settlement.

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

[64] The English courts’ response to allegations of “special contributions” by parties seeking to justify departure from an equal division is instructive. Referring in 2002 to the then growing practice of examining minutely the respective contributions of the parties, Coleridge J stated:

“The effect is not at all dissimilar to the ‘conduct’ debates of the 1970s. In those days ‘conduct’ was similarly raised against wives to try and limit their claims. However, the court, recognising the undesirable consequences inherent in those arguments and further the impossibility of fairly adjudicating upon them introduced the concept of ‘obvious and gross’ very effectively to limit their application. It is suggested by some that these current ‘special contribution’ debates are reintroducing conduct by the backdoor. I would say by the front door.”

His Lordship added:

“ … the parties are not assisted to achieve compromise when they are encouraged by the law to indulge in a detailed and lengthy retrospective involving a general rummage through the attic of the marriage to discover relics from the past to enhance their role or diminish their spouses.”

[65] The courts’ disquiet was noted by Lord Nicholls in Miller/McFarlane:

“Apparently, in this post-White era there is a growing tendency for parties and their advisers to enter into the minute detail of the parties’ married life, with a view to lauding their own contribution and denigrating that of the other party. In the words of Thorpe LJ, the excesses formerly seen in the litigation concerning the claimant’s reasonable requirements have now been ‘transposed into disputed, and often futile, evaluation of the contributions of both of the parties’: Lambert v Lambert [2003] Fam 103, 117, para 27.”

[66] Heeding Coleridge J’s “powerful observations” in G v G, Lord Nicholls held that:

“Parties should not seek to promote a case of ‘special contribution’ unless the contribution is so marked that to disregard it would be inequitable. A good reason for departing from equality is not to be found in the minutiae of married life.”

43.  His Lordship then referred to a statement made by Thorpe LJ in Parra vParra [2003] 1 FLR 942 at para 22 as illuminating and reflecting the essence of the fourth principle:

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

44.  It is therefore with these principles in mind that I shall now proceed to undertake the first step of the process in identifying the matrimonial assets and their value for the purpose of division between the parties which they have agreed to be in equal share.

Identification of Assets

45.  Given the parties’ wealth it is inevitable that their matrimonial assets comprise of quite a long list including real property, companies, bank savings and investments as well as personal belongings and chattels either in joint names or sole name between the parties, and while there is no real controversy with some of them either in terms of what they are or of their value, and as noted above those disputed items have since the trial dwindled down to a handful, what remain at issue are still quite substantial in terms of their value as will be apparent below, which for easy reference I propose to set them out under the name or possession of the Wife and the Husband separately but with their differences which I am able to identify between them in a summary form, starting with the Wife’s list of her assets.

Wife’s Disputed Assets

46.  In leaving aside those loans owed to the Husband which the Wife argues should be added back which I propose to discuss separately under the item of “Add Back” below, what remain still at issue over the value of the Wife’s assets are quite straight forward, such as her jewellery and household chattels of which and in the absence of any formal SJE valuation, l propose to adopt a broad brush approach by accepting the Husband’s suggestion to use the average of their respective figures as follows:

Item	W’s figure	H’s figure	Average
Jewellery	$612,500	$1,720,000	$1,166,250
Rumstick’s Chattels	$ 76,360	$ 585,000	$ 330,680
Chattels Wife’s Residence	$570,662	$ 685,000	$627,831

47.  As for the value of her Harbourside Inn Timeshare, I accept the Husband’s explanation that when he first put its value at $15,000, he meant for it to be in US Dollar instead of HK Dollar, which should therefore be converted to HK$116,250 for the present purpose.

48.  For the Husband’s value for the Rhode Island Country Club at HK$135,625, it was simply based on his purchase price of US$17,500 then in 2009 but again in the absence of any formal valuation, I propose to accept it as more realistic rather than the Wife’s suggested no value as there is simply no evidence to indicate that it is now worth nothing and if so why.

49.  I also accept the Husband’s value for the Wife’s bank account balance at HK$11,733,056 after taken into account of the funds transferred from 50% redemption of the Panab, Bonsai and Akamatsu funds.

50.  The remaining difference in valuation over the Rumstick House appears to me is simply due to the different exchange rate adopted by each party, as both have accepted its formal valuation of US$1.25 million, and since it has already been by agreement transferred to the Wife as part of her award, I therefore propose to adopt her figure of HK$9,750,000 for the present purpose.  

51.  As for the last of her disputed item, which is her rental expenses at La Hacienda up to December 2017 which she claims should be included as part of her liabilities in assessing the total value of her assets, I agree with the Husband that it is in principle wrong to do so for that purpose, as otherwise he should also be allowed to include his. I would therefore exclude it from her net assets for the purpose of division.     

52.  In the premises and in exerting these valuation as I have found into the Wife’s list of assets, I have arrived at a total net value at HK$25,130,977 for her assets which is only about HK$800,000 short of the Husband’s suggested figure.

Husband’s Disputed Assets

53.  As for the disputed items of the Husband’s list of assets, they are essentially as follows:

Item	W’s figure	H’s figure
Other Investment Funds	$5,834,482	$4,925,459
SR Capital	$1,560,000	0
Macau Golf Club (Bocabee)	$2,100,000	$907,400
Insurance	$ 478,160	$ 451,085
Personal & Chattels	$ 721,000	$ 643,580
Monies owed & Add Backs	$13,484,846	$ 3,131,465

54.  For the value of the Macau Golf Club and the Husband’s personal items and chattels, I propose to similarly adopt a broad brush and use their average figure at HK$1.5 million and HK$760,000 respectively.

55.  As for his various investment funds and insurance which could otherwise have been easily verified by their statements, I believe the relatively insignificant difference between the parties probably lies at the different timing the figures were picked from the statements and also due to various dealings made by the Husband with his accounts, and hence he should probably be more accurate with their correct value. In any event the differences between the parties appear to be insignificant, and I therefore propose to adopt the Husband’s figures for these 2 items at HK$4,925,459 and HK$451,085 respectively.

56.  Regarding the value of SR Capital, I also accept the Husband’s evidence that it has been folded and is not his asset, hence leaving only his various loans and unsuccessful investments which remain at the heart of the parties’ dispute and the subjects of the Wife argument for ‘Add Back” and which I shall now turn to.

Add Back

57.  As noted at the beginning of the judgment, it is the Wife’s case that she has been deeply upset by the Husband’s conduct in relation to:

(a) marital misconduct which he has conceded by his admission of the Wife’s behaviour petition and his own expenditure of at least HK$704,565 on extra-marital activities;

(b) financial misconduct in that apart from extravagant and unnecessary living expenses, it has during the last three years of the marriage resulted in a depletion of at least HK$24 million by his loans and investments made recklessly or dishonestly and either without her prior knowledge or against her wishes;

(c) litigation misconduct in failing to provide full or frank disclosure of his financial resources, or to comply with various court orders as to his such disclosure.    

58.  For the last item which is the Husband’s litigation misconduct, Mr Pilbrow submits that in view of the Court of Appeal’s guidance given in LSY v THE [2013] HKLRD 1233 that it is best sanctioned by an order of costs, it would accordingly be more appropriately dealt with when this court considers the question of costs of the ancillary relief proceedings between the parties.   

59.  As for the Husband’s marital and financial conduct in support of her argument for the add backs to the matrimonial pot for division, it is the Wife‘s case that in the three years prior to her divorce petition, the Husband behaved recklessly and irresponsibly, first and foremost financially, significantly dissipating the matrimonial pool which according to the parties’ First Form E was about HK$90 million, but more than HK$16 million vanished to investments, both equity and loans made to relatives, friends and colleagues within 3 years prior to the petition, both behind the Wife’s back and/or despite her objections, and in 2 cases despite her own strongly worded objections. Theses ‘investments’, she argues, were made without the due diligence or investment discipline which the husband had applied in decisions for his own hedge fund or other funds he invested in their marital assets.

60.  Regarding the 8 personal loans that were granted by the Husband, the Wife argues that only 3 were declared in his two Form E and only 2 had any documentation, whilst all 8 loans, totalling HK$6.6 million, were made without interest, or security, and without repayment terms, and in fact most are very unlikely to ever be repaid, and that all equity investments are now worthless save one which remains at initial investment value.

61.  In addition, the Wife argues that the Husband’s company GCB & Partners which was established in 2013 in connection with his new hedge fund CP Fund, was funded with US$1 million of their marital assets, but GCB was wound down in 2016 with the entire sum of US$1 million written off, which was according to her entirely avoidable given the Husband’s managerial skills, but was exacerbated by its travel and entertainment expenditure which she believes was way out of line at the time.

62.  Furthermore, she argues that at the time of her divorce petition, she was unaware of the 3 years of the Husband’s adultery which dated back to June 2012, and while she had already been suffering ill health prior to the 3 years of extra-marital activity, it was the revelation of the extent, variety and duration of his adultery that so severely affected her ability to cope that the court should have regard of such conduct of the Husband and its impact on the Wife when considering her financial claims.   

63.  As noted above, by the close of evidence the Wife has come down substantially from her original position and in her Closing Submission she seeks the add back of only the following 5 personal loans made by the Husband as well as his extra-marital activities:

(a) BB	HK$1,311,500
(b) MH	HK$1,190,000
(c) JM	HK$ 585,000
(d) DG(half-brother)	HK$ 172,000
(e) AL(former secretary)	HK$1,200,000
(f) Extra-marital activities	HK$ 704,565
	Total : HK$5,163,065

64.  Mr Pilbrow submits on her behalf that there are two ways which the court may approach these loans of the Husband and his spending in his extra-marital activities either by departing from equal division of the marital assets in the Wife’s favour, as per ARAV v VP [2011] 3 HKLRD 759, Mimi Kar Kee Wong Hung v Raymond Kin SangHung [2014] 17 HKCFFAR 585; or by adding back these sums to the matrimonial pot for distribution as per Norris v Norris [2003] 1 FLR 1142, Vaughan v Vaughan [2008] 1 FLR 1108. 

65.  Whatever is the right approach, it is however for the Wife to show that those loans and spending are the result of such conduct of the Husband that the court shall have regard under section 7 of MPPO, but only if the conduct is such that it is inequitable to disregard, as held by the Court of Final Appeal in LKW supra, where Ribeiro PJ first examined the rationale behind why costly and time-wasting investigations regarding conduct in ancillary relief proceedings should be avoided and the case law developed over the years of its relevancy to such proceedings:

“[99] Section 7(1) makes it the court’s duty to have regard to the conduct of the parties in exercising its discretionary jurisdiction. It is therefore in principle a factor which may, alone or in combination with others, result in a departure from an equal division.

[100] However, the courts have recoiled from permitting the parties to indulge in a post mortem of their marriage in order to find fault with each other or to air “their mutual recriminations and go into their petty squabbles for days on end”. As Sir George Baker P stated in Campbell v Campbell, “ … everything should be done by the court to avoid costly, indecent and time-wasting investigations” regarding conduct in relation to ancillary relief proceedings. Otherwise the court will be faced with “ … a lengthy, costly and, most likely, pointless investigation stretching over days, when allegations and counter-allegations are made by the ex-spouses or spouses, one against the other.” These sentiments are just as pertinent today and are reflected in the fourth underpinning principle referred to above.

[101] In Wachtel v Wachtel, Ormrod J devised a means to counteract such objectionable practices which was endorsed by Lord Denning MR in the Court of Appeal. It was made clear that “conduct” was only relevant to financial provision if it was:

“ … both ‘obvious and gross’ so much so that to order one party to support another whose conduct falls into this category is repugnant to anyone’s sense of justice.”

His Lordship added:

“In such a case the court remains free to decline to afford financial support or to reduce the support which it would otherwise have ordered. But, short of cases falling into this category, the court should not reduce its order for financial provision merely because of what was formerly regarded as guilt or blame. To do so would be to impose s fine for supposed misbehaviour in the course of an unhappy married life.”

[102] As Sir Mark Potter P stated in Charman v Charman(No4):

“ … the case of Wachtel was seen at the time, and is still seen to be, fundamentally important. It established, amongst other things, that the acrimonious disputes as to the causes of the breakdown of marriage, which had characterised the law of divorce prior to the 1969 Act, were not to be born again in the arena of financial disputes.”

[103] In England and Wales, section 25 was amended in 1984 so that section 25(2)(g) now states that conduct is to be taken into account only “if that conduct is such that it would in the opinion of the court be inequitable to disregard it”. It therefore differs from section 7 which does not contain that express qualification. However, in my view, that amendment makes no material difference. Section 25(2)(g) puts into statutory language what is essentially the “obvious and gross” test used before 1984. This is indicated in the passage from the learned President’s judgment cited in the preceding paragraph and made clear by Baroness Hale:

“ … once the assets are seen as a pool, and the couple as equal partners, then it is only equitable to take their conduct into account if one has been very much more to blame than the other, in the famous words of Ormrod J in Wachtel v Wachtel [1973] Fam 72, 80, the conduct had been ‘both obvious and gross’. This approach is not only just, it is also the only practicable one. It is simply not possible for any outsider to pick over the events of a marriage and decide who was the more to blame for what went wrong, save in the most obvious and gross cases.”  

66.  His Lordship then concluded as to what conduct is to be regarded as material or relevant at §104:

“Conduct, or more accurately, negative conduct, is therefore only to be regarded as a material factor if it is “obvious and gross” in the sense explained in Wachtel v Wachtel or, which comes to the same thing, if it is such that it would in the opinion of the court be inequitable to disregard it.”

67.  Whilst it is clearly the Wife’s case that her psychological distress after the breakdown of the marriage was exacerbated by the extent of the Husband’s infidelity with prostitutes over a 3-year period, in respect of which the Husband has admitted spending more than HK$700,000 including HK$400,000 sent to his mistress in London, Mr Pilbrow accepts that infidelity may not usually be considered as gross and obvious conduct in a marriage, but he argues that the extent of the infidelity in this case was particularly distressing to the Wife, as the Husband knew full well that she was a devout Catholic, as was himself an active Christian for most of the marriage, and the fact that the parties underwent a second Catholic wedding ceremony in 1990 in England and celebrated a 20^th anniversary party in 2009 when vows were renewed and the husband presented the Wife with a diamond eternity ring in front of guests that she was traumatised when she learnt of his chronic infidelity of which she was unaware until it only became apparent from his answers to her questionnaires.  

68.  Mr Pilbrow submits that the Wife only came to learn that whilst the Husband had been talking about reconciliation and a future together and was ostensibly working with the Wife in an effort to improve their marriage, in reality he was spending substantial time and funds on his infidelity and was committed elsewhere.

69.  As regard her dispute over the remaining 5 loans and/or failed investments made by the Husband, it is the Wife’s argument that none of those loans were made with interest, security or any repayment terms, and most in fact are unlikely to ever be repaid, while all the equity investments are now worthless save for one which remains at initial value.

70.  Furthermore, the Wife argues that the Husband’s company GCB established in 2013 in connection with his new hedge fund CP and was funded with US$1 million of the marital assets was wound down in 2016 with the injected capital of US$1 million had to be written off entirely, but it is her view that the failure of GCB was avoidable given the Husband’s managerial skills, while its travel and entertainment expenditure was way out of line with what a fledging company should have been spending on those items.

71.  Whilst the Wife does not dispute that she knew about those loans and investments as contended by the Husband, she argues that if she had known about his infidelity, she would have filed for divorce 3 years prior to them being made and would have been entitled to 50% of all the matrimonial assets before any unauthorized expenditure of any nature had been made, and that although the Husband did discuss those loans and investments with her, he either went ahead and made them despite her objections and/or mentioned them to her only after they had been made, thereby depriving her of any input into the use of the asset pool.

72.  The Wife therefore submits that such recklessness and dishonesty of the Husband, who was carrying on a double life for at least three years, is relevant to the issue of financial misconduct, of which she argues also includes his own high spending in all realms, be it personal, family, extra-marital, or business travel or entertainment which contradicts his expressed concern about the family expenditure.  

73.  The Husband disputes that there were any elements of recklessness or dishonesty in any of those loans made to his friends or in his investments, and that he, and for that matter the Wife as well, have been generous to their families and friends in view of their own financial success, as he illustrated in his narrative affidavit [2(1)/163]:

“28. Throughout our marriage, we have been very generous to both our families and close friends given that we have been successful financially.

29. I supported my half-sister MA throughout our marriage by making transfers to my stepmother G, as MA suffered from depression, I bought a home for MA and her husband in Sri Lanka which cost less than US$10,000 and I paid for MA’s husband S to visit the UK. Sadly, MA has now passed away.

30. We purchased a print by Andy Warhol (HKS101,000) for my sister LJ as a charity lunch which the Petitioner and I gave to her for her 50^th birthday.

31. Prior to his recent death, I paid for my father’s care in a BUPA Home in the UK. I also contributed money to my sister LJ, who herself is unwell and unable to work full-time, as she would visit our father frequently and take him out for day trips and meals which I could not do given that I live and work in Hong Kong.

32. We have throughout the years paid for our family members to holiday with us. For example, we paid for numerous holidays for the petitioner’s mother and other relatives including trips to Hawaii and Italy, which we thoroughly enjoyed as a family. We also paid for her visits to Hong Kong and for other trips throughout Asia and the US when we were visiting. The Petitioner’s extended family would also spend long periods of time with us in the Rumstick House at our expense.

33. We were both supportive of each other’s families during our marriage and we had a good relationship with our respective in-laws. We frequently had family and friends stay with us and we would pay for entertainment of our family and friends.”  

74.  As to his failed investment in GCB, the Husband also gave detailed explanation in his narrative affidavit [2(1)/164-167] after having produced all the relevant financial documents and information in his answers to the Wife’s earlier questionnaires, all of which have also been examined and reviewed by the SJE in the valuation of the company.  

75.  None of these were challenged or disputed by the Wife at the trial, and as noted above it has always been the Husband’s case that the Wife shall receive her half-share of those loans as when they are repaid, whereas for his extra-marital expenses he has agreed to be added back in full into the marital pool for equal division with the Wife. Is there then still justification for the Wife in the circumstances to insist that the Husband had been reckless with those loans and investments and that they should all be added back for division for the present purpose regardless whether they are recoverable?

76.  Ms Rattigan argues that these loans were made by the Husband because he is a kind and generous man and that there is a pattern of his generosity to family members and lending money to help others throughout the marriage, which was in fact known to the Wife who herself comments on his kindness as being a reason she was attracted to him.

77.  Ms Rattigan further submits that the loan made to AL, the Husband’s long term secretary was to help her when she was in severe financial difficulty and facing possible bankruptcy, and the money was given to her when the Husband had just earned a huge sum of money, of which he also explained in his evidence that this loan will not be recovered as he does not believe that AL has the means to do so.

78.  In relation to the other debts, Ms Rattigan submits that it would not be fair or equitable for the Husband to have to pay the Wife regardless of whether they are in fact recovered, as the loans made to BB were part and parcel of the investment into his business that the Husband thought would do well, which also applies to the money advanced to JM who is the Wife’s friend and university alumni, and since it was the parties’ agreement that they would diversify their investments, it would not be fair that the Wife should only stand to gain any profit, which she did in some of their investments, but not the losses, hence Ms Rattigan submits that the Husband’s decisions to make those loans and investments cannot be said to be reckless or financial misconduct as those referred in ARAV v VP supra, and that his proposal for the Wife to have 50% of any repayment if and when they are recovered.     

79.  In the case of ARAV v VP where the parties set up a family business known as BT of which they were equal shareholder, drawing a monthly salary and sharing the declared dividends during their marriage, but unbeknownst to the wife the husband formed another company known as FC and when their family business collapsed, the wife alleged that was because the husband had secretly transferred HK$32.5 million in loans, trade debts and outstanding commissions from BT to FC, and in the ancillary relief proceedings pursuant to their divorce, the court found that the matrimonial assets totalled HK$65 million for distribution between the parties, but declined the wife’s request to add back the HK$32.5 million to the matrimonial pot to reflect the husband’s ‘underhand’ and ‘deliberate’ misconduct, noting that his undertaking to account for any sums retrieved had dealt with any residual concerns the wife might have. The wife therefore appealed.

80.  The Court of Appeal in dismissing the appeal held that where a spouse had frittered away assets by extravagance or reckless speculation, the court could taken into account in ancillary relief proceedings by notionally adding back the value of such assets to that spouse’s matrimonial assets, and by doing so, the reckless spouse was deemed still to have those assets to be shared with the other spouse, but reckless financial conduct covered a wide spectrum of behaviour and would be highly fact sensitive, and that a finding of misconduct would not inevitably lead to the reattribution of assets to the pot, as pointed out by Cheung JA in his judgment at p763:

“[7] The conduct may be in many forms. The wife relied on financial misconduct of the husband. If conduct (which must be obvious and gross or inequitable to disregard) is one of the factors to be taken into account, then obviously the Court is not hamstrung in the precise way in which it will recognise this factor. Where the misconduct involves the wastage of the matrimonial assets, one way is to order the wasted funds to be added back to the joint assets before the Court makes the distribution: Rayden & Jackson on Divorce and Family Matters (18^th ed., 2005) para.16.54 and Norris v Norris [2003] 1 FLR 1142. However, in my view, that is not the only way to give recognition to misconduct. Another approach which is consistent with the Court’s power to achieve what is fair to the parties is to depart from the yardstick of equal division and equal sharing principle as explained by Ribeiro PJ in LKW v DD at paras.58-61.”

81.  Sitting in the same Court and giving the leading judgment, Fok JA (as he then was) agreed and articulated the principles applied in some of the relevant authorities to further explain that misconduct does not inexorably lead to the conclusion that expenditure made by a spouse guilty of any type of misconduct must inevitably be added back to the marital pot for the purpose of ancillary relief proceedings, as he stated at p772:

“[53] It is clear that, where a spouse has frittered away assets due to his or her extravagance or reckless speculation, the court can take into account in ancillary relief proceedings by notionally reattributing (or adding back) the value of the assets so squandered to that spouse’s side of the list of matrimonial assets. By doing so, the reckless spouse is deemed still to have those assets and, depending on the division of assets, to share them with the other spouse.

[54] Martin v Martin and Norris v Norris referred to above are instances of the court doing so. Similarly, in C v C [1990] 2 HKLR 183, a proportion of the wife’s gambling and futures speculation was added back to the assets to be divided between the parties to redress the wife’s financial irresponsibility.

[55] It is important, however, to recognise that misconduct that may constitute a factor for a judge to take into account in proceedings for financial relief under s.7 of the matrimonial Proceedings and Property Ordinance (Cap.192), can be constituted by acts which cover a wide spectrum of behaviour. The characterisation of particular behaviour as amounting to reckless financial conduct will be highly fact sensitive and depend on the judge’s view of the evidence.

[56] Thus, in Martin v Martin, Cairns LJ considered the husband’s use of a false name, concealment and lack of documentation of his property dealings justified the Judge drawing unfavourable inferences (p.343D). He regarded the evidence as justifying the conclusion:

… that he was entering into a transaction on a scale which was far beyond his own resources and which he could only finance by putting in jeopardy money which the wife was entitled to share. {p.343F}

[57] In Norris v Norris, the husband’s conduct leading to the add back was in the nature of extravagant overspending on jewellery for his mistress, a Ferrari motor car and expensive holidays. And in C v C, as noted above, the financial irresponsibility consisted of gambling and futures speculation.

[58] It does not therefore follow that there is a unitary concept of misconduct that inexorably leads to the conclusion that expenditure made by a spouse guilty of any type of misconduct must inevitably be added back to the pot of assets for the purposes of ancillary relief proceedings. Moreover, in Vaughan vVaughan [2008] 1 FLR 1108, para.14, Wilson LJ (as he then was) noted that the reattribution of assets by way of add back:

… has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) …

[59] Further, it is not the case, in my opinion, that a finding of misconduct on the part of a spouse must invariably lead to a reattribution of assets. In Morgan v Morgan [2006] 2 FLR 1253, for example, the Judge found the husband had been guilty of compulsive gambling and channelling funds to his new partner. However, instead of adding back the monies spent, the Judge took the husband’s conduct into account in arriving at a division of the proceeds of the couple’s joint assets: see para.96(d).

[60] Therefore, as I have endeavoured to demonstrate, the Judge was not faced with the stark choice of finding that the husband was guilty of financial misconduct so that the HK$32.5 million must be added back to the matrimonial pot, on the one hand, or on the other, absolving him from responsibility for simply having had the misfortune of having taken a calculated risk which did not succeed.”  

82.  In the present case the Husband has properly explained in both his narrative affidavit and in his testimony his reasons in details for making those loans and investments, and having heard him in evidence at the trial I agree with Ms Rattigan that it was out of his kindness and generosity that he made those loans to his friends, and for those investments which turned out unsuccessful, he did discuss with the Wife and although some may not have met with her full approval, they were nevertheless his genuine judgment-call and decisions which cannot be regarded as reckless financial misconduct, let alone gross or obvious conduct, as after all, he was the only financial expert here and there was no other expert at the trial to contradict him or to support the Wife’s case of reckless investments.

83.  As for the Wife’s argument that she would have filed for divorce 3 years earlier had she known about the Husband’s infidelity then and hence would have been entitled to 50% of a bigger marital pool before he was to make those loans and bad investments, it is in my view purely speculative and no different from, say, an argument that if she had known that their marriage would end up in divorce, she would not have married him in the first place, or that she would have spent more on her own favourite activities. Hindsight rarely assists in court and should have no place in this exercise.  

84.  As already conceded by the Husband, I agree that his extra-marital expenses of HK$704,565 are to be added straight back to the matrimonial assets for division, whilst for the loans I also agree with his proposal that if and when they are recovered 50% thereof shall be paid to the Wife. In the premises I shall put the total net value of the Husband’s assets at about HK$40.7 million for the present purpose of division.  

85.  Accordingly and by including the Wife’s assets of HK$25.1 million, I find that the total net value of the parties assets to have come to about HK$65.8 million for immediate division plus whatever monies due to the Husband from those loans if and when they are recovered, but before proceeding to consider the parties’ respective proposal as to how they are to be divided, it would be relevant for me to next proceed to undertake the section 7 exercise, starting with the least controversial one over the Wife’s earnings and earning capacity.

Wife’s Earnings/Earning Capacity

86.  The Wife now earns HK$35,000 per month from her tutor services which is unquestionably insignificant compared with that of the Husband, and it is submitted on her behalf that her earning capacity is significantly impaired as a result of her parenting the children instead of pursuing her career including giving up offer of equity in London fund management consultancy upon the Husband’s transfer to Tokyo, that the market for tutor services in Hong Kong being very competitive and overcrowded, and her health condition mentioned below.

87.  The Husband however believes that the Wife is capable of earning more at HK$55,000 per month as when these proceedings are concluded she will have the ability to take on more pupils for private tuition and to expend her business into more school as she has said she would like to.

88.  I agree that it would certainly be in her best interest to do so, and I have no doubt of her intelligence and ability as clearly evidenced throughout the proceedings, but at her age and in particularly her current health condition, and whilst the latter issue will likely improve after the end of these proceedings, as will be apparent when I come to discuss her medical problems later in this judgment, I am unable to say with any certainly at this stage that the Wife will indeed be capable of reaching the level of income as submitted by the Husband.

89.  I should however note that the Wife has the benefit of the rental of Rumstick House of US$6,000 per month which is about HK$46,800 per month, although it is her case that most of it has to be spent on various maintenance and up-keeping of the property, to which the Husband has expressed his doubt and I agree that it seems illogical to me that such a valuable property which the Wife once put at US$1.8 million in her Form E would yield such little return, and if it is somehow indeed the case, then the Wife should consider liquidating this asset and put the proceeds to some better investments with much better yields, unless of course it is her intention to return to the US after the divorce and to use it as her future home, of which I will no doubt have more to say when I come to consider her future needs later in this judgment.   

Husband’s Earnings/Earning Capacity

90.  The Husband’s evidence is that given his age and the current market conditions, he had had discussions with CFIC in March 2016 and reached an agreement that the joint venture between GCB and CFIC had been dissolved and that he along with other key members of his team at GCB have since become direct employee of CFIC.

91.  Accordingly the Husband is now employed by CFIC as a portfolio manager at a fixed salary of US$350,000 per annum which is on average HK$226,333 per month before tax.

92.  The Wife however submits that according to his offer of employment, the Husband is also entitled to the following increment to his salary and/or bonus:

(a) If his CP Fund exceeds US$150,000,000, he stands to receive an increase in his income having a variable salary which is 15% of the management fee instead, and if the Fund reaches above US$350,000,000 his variable salary will be subject to CFIC’s discretion for an annual review;

(b) He is also entitled to a year-end non-discretionary bonus as well as reimbursement of reasonable expense.  

93.  It is therefore the Wife’s submission that as foreseeable resources the Husband is a highly talented fund manager who in 2008 was able to earn US$8 million and enjoys strong reputation throughout Asia as both economist and fund manager.

94.  The Husband however argues that the Wife’s belief that his earnings from CFIC will increase and that he will receive a bonus is mere speculation, as he claims that there is no such prospect in the foreseeable future, and that instead there is a real risk that he could lose management of the fund and be made redundant at the end of the 12 months period, whilst the CP Fund would need to improve dramatically for 2 years before he would see any increase in his income especially as any profits from the CP Fund would first need to be repaid to CFIC for the losses that they took on, as confirmed by the SJE. In any event he argues that at his age of 55 it is unlikely that his earning capacity will increase drastically prior to his retirement.

95.  Whatever the Husband’s future earning may be, given the fact that the Wife now appears to have abandoned her claim for substantial periodical payment save for nominal maintenance, it seems to me sufficient for the present purpose to accept the Husband’s fixed income at just below HK$230,000 per month with entitlement to higher adjustment and/or bonus if his performance reaches certain target or conditions as set out under his employment terms but which may however be adversely affected by the heavy losses absorbed by CFIC as a result of its joint venture agreement with GCB being dissolved earlier during the proceedings.  

Standard of Living

96.  Given the income and assets involved in this case, there cannot be any serious dispute that the parties did enjoy a comfortable lifestyle during the marriage, and according to the Wife it was well reflected in their rental accommodation and travelling as set out in both her narrative affidavit and summarised in her Closing Submission as follows:

(a) Between 1996 and 2006, the parties paid rent of between HK$90,000 to HK$115,000 per month;

(b) In July 2006 when the Husband started to run his own investment fund (and hence had no income), the parties still rented a 2,400 sq. ft. apartment at Magazine Heights for HK$62,000 per month;

(c) In 2009 the parties moved to Tavistock which was a 4,860 sq. ft. flat with clubhouse, pool and health club and at rent and charges approaching HK$300,000 per month;

(d) From end of 2011 to early March 2014 the parties moved to Branksome on Tregunter Path at a rental of HK$120,000 per month;

(e) In March 2014 the parties moved to their 3,400 sq. ft. 4-bedroom former matrimonial home at La Hacienda for HK$145,600 per month paid by the Husband’s company;   

(f) The family would spend holidays on business class to UK, Europe and Asia in addition to staying at Rumstick House where the Husband would rent a Range Rover or Mercedes for the family at US$13,000 to $14,000 for the 3 weeks of their stay;

(g) For Christmas 2014/New Year 2015 the parties stayed at Sofitel St. James in London at the equivalent cost of HK$220,000, and in February 2015 they travelled to Venice for 3 nights where they stayed at the Gritti Palace Hotel for HK$67,000.     

97.  Whilst the Husband does not dispute that the family had a very good lifestyle throughout the marriage, and when he had very successful years in 2008 and 2013, they were able to move to La Hacienda on the Peak and to go on expensive holidays, but there were also times when the parties had to cut back their spending drastically, such as when he left HSBC with no salary for almost 3 years when the family had had to downsize significantly, or when their daughter left for boarding school, they rented accommodation for just HK$68,000 per month, and when GCB was not doing well in 2015, he argues that their lifestyle has had to change since these proceedings by him moving into a flat on Stubbs Road at HK$55,000 per month and by reducing his spending significantly including not having any holiday for over a year, but that the Wife has refused to do so and which he argues has led to their capital being significantly depleted during the proceedings.

98.  For obvious reasons lifestyle and standard of living of course would ordinarily commensurate with the parties’ financial means and resources, and in this case I agree with the Husband that their standard of living varied greatly depending on his income and job situation as the disparate rental costs indicate, and while their lifestyle was indeed at times very good, it was when he made very large amounts of money, and at times when this was not the case, they cut down their costs as demonstrated by their monthly rental expenses coming down from HK$120,000 at Branksome to HK$63,000 at Magazine Gap Road. Given his unchallenged evidence of the poor performance of GCB prior to the breakdown of the marriage, and now that there are two households on a significantly reduced income, I agree that the reality is that there has to be a downsizing as the parties had done in the past, which is indeed the reality in the majority of divorce cases. It is against these circumstances and the remaining available assets and resources of the parties that I now propose to consider their respective needs and how best they can be met.   

Wife’s Needs

99.  The Wife claims to require about HK$200,000 per month for her present expenses, but will need a bit more for her future needs as she explained in her narrative affidavit at para.263 [2(1)/277]:

“I reasonably need HKD190,000 – 200,000 per month to live. My rent, mgmt.. fees, rates and utilities come to about HKD95,000 per month. By the terms of the tenancy agreement, I must stay until the end of the lease, namely until 20 November 2017. In any case, for at least the next 5 years I will need a family home, for C (daughter) who does not finish until July 2020, and for A (son) who has not yet found a “real job” and when he does he will be unlikely to move to his own place until he has accumulated a deposit and has a salary that can cover both HK rent and living expenses. C will no doubt find herself in the same position 3 years from now.”

100.  Accordingly she estimates that her future monthly expenses will constitute the following figures:

rent plus management rates & utilities	HK$95,000
grocery/household	HK$17,000
domestic helper	HK$ 5,000
meals out of home	HK$ 4,100
transportation	HK$ 2,000
clothing/shoes	HK$ 7,500
personal grooming	HK$20,000
entertainment/presents	HK$ 6,300
holidays/travel	HK$17,500
medical insurance	HK$ 4,940
uncovered medical care	HK$ 1,500
medical & insurance for old age	HK$15,000
psychiatry/psychiatric drugs	HK$ 6,626
physiotherapy/medical	HK$ 3,500
personal trainer	HK$ 7,650
club/gym membership	HK$ 5,000
children expenses	HK$ 8,000
	Total: HK$226,616

101.  The above expenditure of the Wife is obviously predicated on her staying in Hong Kong which is according to her at least for the next 5 years apparently for the children, which is however not accepted to the Husband that she needs to stay in Hong Kong for them, as both children are over 18 with the son already working while the daughter is in university in UK wholly maintained by the Husband, and whilst she will want to visit the parties in Hong Kong during school holidays, the Husband argues that it is not accepted that the Wife needs to live in Hong Kong for that purpose, as she could choose to move back to the US, the daughter could still visit her there, and if the Wife lives in the Rumstick House property, the daughter has her own room there already. Hence it is submitted by the Husband that it is not accepted that the Wife has to remain in Hong Kong, and more particularly that she has to rent expensive accommodation at a cost of over HK$80,000 per month in Hong Kong on the pretext that it is for the children. 

102.  Apart from her claimed rental costs, the Husband also takes issue with some of the Wife’s alleged expenses, quite justifiably so in my judgment even if they are to be generously interpreted, such as HK$17,000 for grocery and household and HK$51,300 for clothing, personal grooming, entertainment and holidays as excessive, HK$25,126 for medical as unnecessary when she appears to be already well covered by her existing insurance, and HK$8,000 for children’s expenses as unnecessary for the reasons already stated above.

103.  Accordingly the Husband has put the Wife’s needs, generously interpreted at around HK$120,000 per month if she chooses to stay in Hong Kong, and that if she decides to move back to the US then her expenses will be far less as her housing needs will be met without the need for expensive rent.

104.  While it is my view that it is not for this court, or anybody else for that matter, to dictate to the Wife where she should make her home after the divorce, I agree with the Husband that it is simply unrealistic for her to maintain the same high standard as before or as much as she claims for her monthly expenditure if she chooses to remain in Hong Kong and hence to have to rent her accommodation. In which case I cannot say that the Husband’s assessment of her reasonable monthly needs, generously interpreted, at about HK$120,000 is improper or without merits.

105.  At any rate, with her half share of the matrimonial assets as well as the Husband’s offer of capitalised maintenance for 5 years at the average monthly rate of HK$76,000 as well as her own income discussed above, I agree that the Wife’s future reasonable needs as generously interpreted will be well catered for, as suggested by the Husband’s Duxbury Report from BDO [Attachment 3 to his Opening Submission], and more importantly appears to be accepted by the Wife herself which explains why she no longer insists in seeking substantive monthly maintenance from the Husband.

106.  Above all, if it is her intention to make Hong Kong her permanent home, as pointed out above the rental income from her Rumstick House would certainly add to her spending power to enable her to meet her needs in Hong Kong, and if it is true that those rental income have as alleged all been spent on the upkeep of that property, then she can and should sell it to make a better investment out of the sale proceeds, as she has suggested in her narrative affidavit when she said she “can well imagine selling the property for something more manageable and then with the proceeds buying and refurbishing student accommodation near BrownUniversity.” [2(1)/283]. If on the other hand she is to move back to the US and to reside in Rumstick House or some more modest property, I agree with the Husband that her monthly needs should come down quite significantly without the expensive expenses for Hong Kong accommodation.    

Wife’s Health Problems

107.  It is however also the Wife’s case that she has significant medical, physical and psychological problems, with her physical condition of chronic pelvic pain (interstitial cystitis) have existed for more than 7 years prior to the separation, and significant provision for her medical expenses was covered by the parties paying out of pocket as well as medical insurance purchased through the Husband’s employment.

108.  Mr Pilbrow submits that the Wife’s long term prognosis is unknown as it is clear from her medical reports that since October 2015 she has been suffering from panic attacks, complex post-traumatic stress disorder (PTSD) and depression on top of her chronic pelvic pain since 2008, which necessitate her attending regularly GP Dr Sarah Borwein, Psychiatrist Dr Jenifer Chan and pain management consultant Dr Carina Li, all of whom collaborate on her treatments and prescribing her antidepressants, sedatives, opioids and sleep medication.     

109.  According to her evidence, the Wife has recently started the medical procedures recommended by Dr Li in her letter dated 10^th August 2016 [C4(13)/2892] in the hope that she can achieve more effective pain relief as well as to be weaned off opioids, but Mr Pilbrow submits that whilst it is hoped that her mental condition will stabilize and her health possibly recover, her medical future remains uncertain.

110.  Mr Pilbrow submits that the Wife therefore runs the following risks:

(a) Her medical insurance being inadequate as there is a US$50,000 cap to cover her ongoing palliative costs;

(b) Her medical cover for her chronic pelvic pain condition could be cancelled, as it has been in the past, leaving her with no options whatsoever for insurance;

(c) Her mental and psychological state being such that her earning capacity will be depleted.

111.  It is for these reasons, Mr Pilbrow submits, that the Wife needs to retain a maintenance or at least a nominal claim so that in the event that her health deteriorates further, she can at least be sustained if necessary by maintenance.

112.  The Husband has no dispute about the Wife’s illness, which he accepts is not new as it is a condition that she has been living with for some eight years, and that whilst he agrees that it is a painful condition he insists that it is not life threatening and has not stopped her from running her business, from providing private tuition and from pursuing these proceedings with the zeal that she has.

113.  Furthermore, he submits that she has adequate insurance which covers her condition, and that on the agreed settlement as well as his Open Proposal she already has more than enough to meet her needs with assets worth more than HK$32 million including a home in USA plus maintenance for another 5 years.

114.  In order to show that on his offer the Wife will have more than enough to meet her exaggerated needs as it assumes that she will live in Hong Kong rather than moving back to the US where she will be able to live for far less, the Husband has commissioned a Duxbury calculation from BDO [Attachment-3 to his Opening Submission] which calculates that from her age of 63 when her 5-years of capitalized maintenance will have been used up, she will require a capital of HK$27.5 million in order to sustain monthly expenses of HK$121,000 to the age of 82 being the average life expectation of an American woman. On the basis of the most conservative investment risk, the Husband argues that on his offer of HK$32.5 million to her, the Wife will still have an additional cushion of some HK$4.8 million over and above her needs.

115.  Ms Rattigan submits that the Wife will in fact be much better off than the BDO Duxbury assumes as she will be receiving the full lump sum now as opposed to when she is 63 so it can be used to start generating capital earlier than the report supposes and over the next 5 years while she is still receiving capitalized maintenance at the agreed sum of HK$76,000 per month.

116.  The Wife’s medical reports, and there are quite a few dating from October 2015 to February 2017 and can be found in [C4(2)/269, C4(11)/2485, C4(13)/2892, 3214, 3216 & C4(14)/3290]. As pointed out by Mr Pilbrow, none of which were challenged by the Husband at the trial, but it would be relevant to refer to some of them in more details so as to have a proper understanding of the extent of the Wife’s health problem and her future prognosis.

117.  The earliest report before the court is the one dated 9^th October 2015 by Dr Li [C4(2)/269] which confirms that the Wife has since 2008 been followed by her at the Pain Management Clinic for health issues cited as follows:

“She was noted to have depression issues related to her family and other stressors over years, and recently she was found to have newly symptoms of

1.post traumatic stress disorder related to divorce and family issues

2.worsening anxiety and depression, co-morbidity of poor sleep

3.flare up of her chronic pelvic pain, now near double her dose of potent opioids since July last when seen by me…

…

In conclusion, with her psychological status and health conditions, she requires numerous medicines that influence her cognitive functions and normal daily function. I would strongly advise her that she should not have further major decision making or major life changes, as she is already on a dangerous line of coping for her daily living.”  

118.  That report was about 6 months into these proceedings and I believe right in the middle of some intensive dispute between the parties over the discovery and disclosure of the Husband’s finances, which may explain the worsening anxiety and depression of the Wife as observed in the report.

119.  The next relevant medical report produced by the Wife came on 10^th August 2016 and also by Dr Li [C4(11)/2485] in which she gave more details of the Wife’s medical history and her health problems but which again confirmed their connection with her on-going divorce litigations, and also suggested various treatments options:

“Mrs B has been followed for pain management by me since 2008 with referral by Dr Sarah Borwein October 2008.

She was previously under my care at HK Sanatorium Hospital Comprehensive Pain Management Clinic in the Comprehensive Oncology Department from autumn 2008 – January 2015 with stable analgesic regime. Pain Score 5-7 out of maximum 10. She then was under the care of Dr T.W. Lee, another Pain Specialist at HK Sanatorium Hospital for the period of Jan-2015 – July 2015. She has been then under my care again jointly with Dr Sarah Borwein at Central Medical Health Practice (since July 2015 until present).

She was noted to have Chronic Pelvic pain (Visceral and Neuropathic Bladder pain of Interstitial Cystitis) and co-morbidity of depression issues related to her family/marital issues. More specific, she has been found to have additional symptoms of:

1.post-traumatic stress disorder related to divorce and family issues

2.worsening anxiety and depression, co-morbidity of poor sleep, already a problem due to pain level

3.flare-up of her chronic pelvic pain, so that she has nearly doubled her dose of potent opioids since July 2015. She needs additional strong opioid Methadone since July 2015 for her severe pain. Methadone is more potent and has lower cost as compared to Oxycodone.

She is currently on a high dose of Multimodal Analgesics (3 different types of potent opioids) and benodiazepam and hypnotics. Both Dr Sarah Borwein and I referred Mrs B to Psychiatrist Dr Jenifer Chan, Central Health medical Practice in October 2015, as she has gone through a very traumatic and stressful divorce and continues to suffer from insomnia, flashbacks, anxiety, panic attacks and overwhelm.

Her BDI score (Beck Depression Inventory) in October 2015, a measure of depression, comes out at 38, which puts her in the ‘severely depressed’ category. She has been then followed by Psychiatrist Dr Jenifer Chan since 13^th October, 2015 for management of PTSD/Panic Disorder/Depression, particularly in the context of a complex medical situation and stressful family issues.

Her updated prescription medications list and management Plan is …

Mrs B has been overwhelmed by the divorce issues in losing her ability to concentrate and perform work related to her business properly. She has also reported difficulty with meeting numerous work schedules deadlines.

Besides, our clinic record shows that on 7 occasions she needed to ask for refill of her medicine during the period of 14 pain consultations (July 2015 – August 2016). This did not happen over the preceding years 2008 – 2014 when her pain was high but she was able to handle her time and work schedule better. She has reported fitful sleep, difficulty in walking in the morning and need to take sleep during the day. Pain Score increased 7-10 out of maximum 10 most of the time…

In conclusion, with her psychological status, constant stresses and health conditions, she requires numerous medicines that influence her cognitive functions and normal daily function. She has been constantly in severe pain, low mood and difficult sleep over past 1-2 years, which was worsening in last 12 months with her stressful marital circumstances and divorce settlement.

Furthermore, she fulfils criteria to justify pain interventional procedures given her current high dose of multimodal analgesia (potent pain killers). However, with the time limitations with her busy schedule and finance constraints, she could not make up her decision to undergo the above-suggested treatments that we have discussed since early 2016. In addition, her pain could be also controlled with other treatment options, including evidence-based therapy for chronic pain and depression such as Mindfulness Therapy. In my opinion, such a therapy would be effective if she has more time for herself and is able to solve her current financial constraints.”    

120.  In both of her reports, although separated by some 10 months in between, Dr Li was of the same opinion that the Wife’s worsening condition was to do with her current divorce disputes with her husband. This is further confirmed by the Wife’s psychiatrist Dr Jenifer Chan in her even more comprehensive report dated 16^th August 2016 [C4(11)/2489] where she stated how the current divorce litigations have played a significant part on the Wife’s mental health problems which has led to the diagnosis of her suffering from a Major Depressive Disorder:

“10. … Mrs B found the final years of the marriage especially difficult because of the combination of Mr B’s explosions stemming from minor matters, the coldness of his putdowns of her and kindness and generosity from him. Before her discovery of his infidelity in late April 2015, she had new hope that she and her husband could work things out.

11. Subsequent to the separation, Mrs B had not coped well with the discovery of her husband’s adulterous activities…

12. During the divorce process Mrs B reported being devastated by learning about what she called her husband’s ‘double life’. She said that she did not expect her husband to treat her like he has. She had expected to be finished with divorce proceeding already and reported that she was very surprised that Mr B had not followed legal orders …

13. Mrs B has repeatedly throughout treatment described how shameful she feels when she thinks of her husband’s past behaviour, primarily citing his betrayal and humiliation of her and the children owing to his frequent and indiscreet adulterous behaviour … maintained that the shame was her burden to carry and that due to her strict New England upbringing she found the humiliation of what her husband had done to her unbearable …

CONCLUSION

19. Mrs B suffers from a Major Depression Disorder, currently in the severe intensity range as per scoring on the Beck Depression Inventory. Although her anxiety levels have improved, her depressive symptoms have proven more resistant to treatment.

…

22. The depression has so far not responded well to treatment but recovery is also made difficult given the ongoing psychological maintaining factors (e.g. being concerned about finances, finding social interaction difficult, stress from her family members like her children, the divorce process itself etc).”   

121.  It is therefore clear that from the medical evidence adduced by the Wife and unchallenged by the Husband, the emotional and psychological aspects of the Wife’s health problems were in effect caused by the breakdown of her marriage and exacerbated by her current litigation with the Husband, all of which, as argued by the Husband, will sooner or later become history and no longer a relevant or contributing factor to that part of her problems.

122.  There is of course still her chronic pelvic pain which has gone back for years but according to Dr Li’s report, it seems that certain new or advanced treatments have been recommended to the Wife and that she is expected to undergo some of them upon certain financial arrangement has been put in place, of which certainly it would not present any problem on the basis of the Husband’s proposal or the award she is to receive under this judgment.   

Husband’s Needs

123.  The Husband put his current total expenses at HK$268,263 per month [2(1)186], but by excluding the MPS sum of HK$80,000 for the Wife which will no longer be relevant after the divorce, his monthly expenditure should come down substantially to the more manageable amount of just below HK$190,000 and within his income after tax. Furthermore, in 3 years when the daughter should finish university, his burden will no doubt be further reduced.

124.  His case is that in 5 years when he will be 60 and ready to retire, and hence he will need all his share of the matrimonial assets and his income for the next few years to meet both his needs and those of the daughter as well as paying for those lump sum instalments for the Wife’s capitalised maintenance for the next 5 years. I agree, but also note that given his undisputed expertise and reputation in his field, his earning years may well be longer than he claims.

Revisit of Parties’ Proposals

125.  Having found the total matrimonial assets at about HK$65.8 million, and on the basis of an equal division thereof between the parties as proposed by them, it would be appropriate to revisit the parties’ latest revised proposal as set out in their Closing Submission, starting with the Wife’s which is apart from what has already been agreed as above, she seeks a lump sum of HK$15,560,000 and a nominal maintenance from the Husband on the following terms:

(a) HK$8,500,000 within 14 days of decree absolute being equalization of the total liquid assets being HK$56 million with 50% being HK$28 million less the Wife’s assets of HK$19.2 million;

(b) HK$2,500,000 on or before 31^st December 2020 being 50% of the 5 personal loans of HK$5.1 million plus Husband’s extra-marital expenses of HK$704,565 to be secured by way of legal charge against his assets with the condition of failure to pay any instalment due makes any balance due and payable forthwith;

(c) HK$4,560,000 to be paid by 5 equal instalments of HK$912,000 payable annually in advance from 31^st December 2017 to 31^st December 2021 inclusive and to be secured by way of life insurance and legal charge against the Husband’s assets and failure to pay any instalment due makes the remaining balance payable forthwith;

(d) Nominal maintenance to start after the Wife receives the lump sum of HK$8.5 million above. 

126.  Her claim for HK$8.5 million under (a) above must however be set against my findings in this judgment that she already has assets worth HK$25.1 million instead of only HK$19.2 million, and that the total assets stand at HK$65.8 million instead of HK$77 million, hence in order to bring her 50% of the total assets to HK$32.9 million it would require a lesser sum of HK$7.8 million instead to be added to her own assets of HK$25.1 million.

127.  However, the Husband argues that whilst he originally agreed to pay a lump sum of HK$6,043,859 to the Wife in order to effect an arrangement giving her just over 50% of the assets, but given that the parties have had to go through the second part of the trial and that their assets have since depleted further, it is only fair that the lump sum to be paid to the Wife should come down to HK$4,979,186 with an equalization of legal costs in the manner as proposed in his Closing Submission, plus the fact that the further lump sum of HK$4,560,000 being 5 years of capitalised maintenance at HK$912,000 per year is to ensure that she will not have to incur additional US tax which would otherwise be payable on maintenance payment, and for which the Husband also offers to take out a life insurance policy in the Wife’s favour to ensure she will receive the full lump in the event of his death but with the cost to be shared equally by the parties.   

128.  This proposal of the Husband as to the lump sum for the Wife would in effect mean that she would end up having just over HK$30 million, which is only about 45% and somewhat short of what the parties have always agreed to an equal sharing of the matrimonial assets. This is of course due to the Husband’s proposed adjustment for equalization of their ever increasing legal costs as a result of the Wife’s continued unreasonable litigation conduct which has led to reckless depletion of their assets.

129.  Litigation conduct, however as pointed out by Mr Pilbrow in following the guidance of the Court of Appeal in LSY v HTF (2013) HKLRD 1233, is best sanctioned by an order of costs and not as a factor justifying a departure from equal division.   

130.  In Tavoulareas v Tavoulareas [1998] 2 FLR 418 cited by the Court of Appeal in LSY v HTF with approval, Thorpe LJ stated that a distinction should be drawn between marital conduct and litigation conduct in determining the quantum of the financial award (at 426):

“The criterion of conduct under s 25(2)(g) of the Act is clearly stated to be relevant if the court concludes that it would be inequitable to disregard it. But it does seem to me that a clear distinction must be drawn in all these cases between what might loosely be described as marital conduct and what might conveniently be described as litigation conduct. It seems to me as a matter of construction that s 25(2)(g) is plainly aimed at marital misconduct. If the applicant’s misconduct is limited to misconduct within the ancillary relief case long after the separation of the parties, it is, in my judgment, questionable whether that factor should go to diminish the quantum of the financial award.”

131.  Similarly in M v M (Financial Provision: Party IncurringExcessive Costs) [1995] 3 FCR 321, also cited in LSY, Thorpe LJ applied the same decision at 330:

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

132.  It seems quite clear to me from Ms Rattigan’s Closing Submission that the Wife’s misconduct as alleged by the Husband are all confined to the ancillary relief proceedings after the parties’ separation and hence as submitted by Mr Pilbrow should be more appropriately dealt with by an order of costs rather than be a factor relevant to the quantum of her award.  

133.  As for the further lump sum payments under (b) and (c) of the Wife’s revised proposal which are either already agreed by the Husband or rejected earlier in my judgment above, while the sum of HK$704,565 has also been added back to the total marital pot for division, the only remaining issue is whether their payments should be secured by way of a charge against the Husband’s assets in respect of non-payment, and whilst it is not clear from the Wife how this is intended to operate or what it is to be secured against, it is rejected by the Husband as unnecessary or unmerited, as Ms Rattigan submits for the following reasons:

(a) He has already agreed to take out a life insurance policy whereby the Wife will be protected in the event of his death prior to full payment of the lump sum;

(b) If he does not pay the lump sum he will be in breach of a court order and the Wife can simply enforce the same;

(c) If he loses his job or his income is reduced he will have to use his capital to pay for the daughter’s expenses as well as his own and he will have to use it to pay the lump sum to the Wife, hence it cannot be used as security;

(d) He has acted entirely honourably throughout these proceedings, hence there is no justification for seeking additional security against his share of the capital;

(e) The Wife has already received significant capital, so this is not a case where security is merited. 

134.  I agree these are all valid points given the Husband’s various genuine and serious attempts to settle with the Wife throughout the proceedings, and in the absence of any evidence to suggest that he may willingly or deliberately default with those payments which were after all proposed by him in the first place, I am unable to see any justification for them to be so secured as requested by the Wife.

Clean Break/Nominal Maintenance

135.  As noted above, this is the second major issue between the parties, as the Husband insists that upon the Wife being awarded her half-share of the matrimonial assets, there should be an immediate clean break between them with all her claims to be dismissed, while the Wife seeks a nominal maintenance order due to her limited earning capacity and her medical problem.

136.  As pointed out by Mr Pilbrow for the Wife, prior to the enactment of Matrimonial and Family Proceedings Act 1984 in UK, it was the prevalent view in England that a party was entitled to a nominal award and the same could not be dismissed unless with the consent of that party. Whilst those enactments have not been incorporated into the law in Hong Kong, it has been well established that our courts do have the power to dismiss a party’s claims to periodical payments without her consent, as so held by the Court of Appeal in Ngao Tang Yau-lin v Ngao Kai-suen &Another [1984] HKLR 310.

137.  Mr Pilbrow however submits that our courts should follow the guidance of English authorities when considering the appropriate circumstances in which this power should be exercised, of which he refers to Jackson’s Matrimonial Finance, 9^th edition, where it stated at Chap.  3.23:

“Factors commonly relied on by an applicant to support an argument against a clean break include long marriage, applicant’s earning capacity low or impaired, applicant’s insecure accommodation, dependent children of the applicant, applicant’s ill-health and future uncertainties facing the applicant. Factors commonly relied on to support an argument for clean break include short marriage, wife’s cohabitation with another man, applicant’s conduct, absence of children, applicant’s reasonable earning capacity, substantial capital available to the applicant and mutual poverty.”

138.  Ms Rattigan submits for the Husband that given the Wife’s unreasonable stance and terrible vexatious litigation conduct, the Husband remains terrified that the nightmares that this litigation has been for him will never be over, and hence there should indeed be a clean break between the parties upon the Wife receiving her fair share of the matrimonial assets.

139.  Such is his willingness to compromise, Ms Rattigan submits, that the Husband was even prepared to do so over the question of nominal maintenance in order to avoid the second part of the trial and to alleviate the Wife’s concern about her medical condition, by reluctantly proposing an order for nominal maintenance that would be conditional that she could only seek to vary the order if the variation related to her existing medical condition of Interstitial Cystitis, that it was not covered by her medical insurance, and that she had exhausted her funds, yet they were refused by the Wife which cements his fears that she has no intention of ever letting this litigation end.

140.  Furthermore, Ms Rattigan argues, the Husband’s business has gone under and his employment is precarious, whilst this litigation has taken a terrible toll on him and he cannot be left at the risk of further litigation, as he is already bearing enough risk paying all of the daughter’s expenses and agreeing to a lump sum for capitalised maintenance for the Wife for the next 5 years.

141.  On the other hand, Ms Rattigan argues that the Wife has sufficient insurance coverage for her illness and will have assets worth more than HK$32 million including a home in the US plus maintenance for the next 5 years to meet all her needs including medical expenses, as supported by the Duxbury Calculation from BDO noted above, hence Ms Rattigan submits that the court can be well satisfied that the Wife’s needs will be more than met by his proposed settlement, and that this is a case where there must be a finality and a clean break is entirely appropriate.

142.  As I have already remarked above about the Wife’s health problems and their prognosis that at least her emotional and psychological issues should no longer be relevant after the conclusion of her litigation with the Husband, while her pelvic pain will hopefully be also reduced by the further treatments recommended by her doctors, I agree with Ms Rattigan that with the financial award she is to receive from her equal share of the matrimonial assets and the capitalised maintenance proposed by the Husband, and given the huge costs not just financially but more significantly emotionally and psychologically of their disputes on both parties, it is in my judgment that it will be in the best interest in particularly to the Wife that there be a final closure to their litigation by way of a clean break between them without any order for nominal maintenance, conditional or otherwise.   

Costs/Litigation Conduct

143.  As already noted, both sides have raised the issue of litigation conduct as the basis for seeking costs against the other, with the Wife accusing the Husband of failing to provide full and frank disclosure of his means and breaching court orders as to his disclosure, while the Husband is blaming the Wife for adopting an unreasonable and unrealistic approach in the entire proceedings in seeking unnecessary and excessive discovery against him and in refusing to properly respond to his many settlement proposals and failing to make her proposals until only shortly before the trial. 

144.  The Wife’s case of the Husband’s failure to make full or frank disclosure is set out in her Closing Submission from paragraphs 42 to 88 of which I do not propose to set out here, but essentially over his various loans made to his friends and investments which turned to be unsuccessful to which he is said to have failed to disclose in the first place, and then thereafter failed to provide their details notwithstanding various orders requiring him to do so.

145.  To which the Husband refutes and insists that the Wife’s litigation conduct has been a cause of great concern for him throughout the proceedings and the resultant huge legal costs and depletion of their capital assets, as notwithstanding his answer to her first questionnaire on 2^nd October 2016 [B1(3)/424] was accompanied by such extensive disclosure which ran to 8 box files [B1(3) – (10)], the Wife saw fit to employ forensic accountants to examine them and then to seek further discovery from him by way of a schedule of documents that she said were missing from his answers, and for leave to serve further or supplemental questionnaire, all of which he insists he has complied, and still the Wife sought to serve a further questionnaire on those new answers provided by him up to the time of their FDR hearing in March 2017.

146.  Ms Rattigan further argues that the Husband has made every effort to settle this matter from the outset by offering 50% of all the marital assets and reasonable ongoing maintenance in accordance with what he earns, but the Wife made no proposal until her letter of 30^th September 2016, and then her asset schedule and offer seek to place the lowest possible values on those assets that are in her name or to be transferred to her while inflating other assets and seeking to add back that are entirely unjustified.

147.  Whilst I have earlier refused to accept the Wife’s submission that the Husband’s infidelity going back 3 years prior to their separation is a financial misconduct justifying adding back certain assets, I have no doubt about her emotional and psychological distress so exacerbated by the extent of such infidelity and the fact that she was a devout Catholic, but I suspect that they may have also contributed to her apparent bitterness and hostility towards the Husband in the pursuing proceedings, and caused her to not trusting any of his financial disclosure or considering any proposal or offer from him, and instead insisting in leaving no stone unturned in the investigation of his financial resources by adopting what the Husband claims to be senseless forensic investigation into each and every aspect of his finances which led to the huge legal costs in the proceedings and with hers almost doubling his.

148.  The sad fact is that by the time of the second part of the trial in February 2017, the Wife’s costs had run to more than HK$6.7 million while the Husband’s were HK$3.3 million, of which Ms Rattigan argues that this represents an obvious disadvantage to the Husband as the assets held by the Wife would have been at a much higher level but for these costs and thereby increasing the amount he has to pay her by way of lump sum to effect a 50/50 division, and therefore suffers the disadvantage of her excessive spending on legal costs.

149.  Such disparate levels of costs, Ms Rattigan submits, can properly be adjusted, as Sir Peter Singer held in RH v RH [2008] 2 FLR 2142, and Mostyn J in LS v JS [2012] EWHC 2960 (Fam) and in J v J [2014] EWHC 3654 (Fam), and the Husband therefore invites the court to make adjustment to the Wife’s award accordingly as above by taking adjustment of her legal fees into account, in which case he would be willing to forgo asking for his costs to be met in full, as this would be simpler and less costly than taxation proceedings given the Wife’s litigation conduct, but otherwise he would be asking an order that his costs be met in full by seeking to address the court further in relation to the disparate levels of costs and “without prejudice offers” that have been made to the Wife.

150.  There is no question that a combined legal costs of HK$10 million is by any standard a very substantial amount and could have meant an additional HK$5 million for each party in the equal division of the marital assets had they not spent a single cent on legal costs.

151.  Whilst the impact of such costs at about 11.5% of the marital pot then disclosed in the parties’ Form E is nowhere near as calamitous as in some of those cases mentioned by Mostyn J in J v J supra, it would still be relevant to refer to his following statement about the court’s concerns highlighted by such costs expenditure and what should be done about it:

“10. The impact of this costs expenditure is not as calamitous as it was in the infamous case of KSO v MJO & Ors [2008] EWHC 3031 (Fam) [2009] 1 FLR 1036. There the parties spent £553,000 out of a marital pot of £771,000 (or 71.7%), leading Mumby J, as he then was, to compare the case to Jarndyce vJarndyce, he quoting from Chapter 65 of Bleak House in his Appendix. Here the proportion of the estate wasted is a little under half as much but the costs themselves are nearly twice as much. In his judgment Mumby J stated at para 81:

“Something must be done about the problems highlighted by this and by too many similar cases. We simply cannot go on as we are. The expenditure of costs on the scale exemplified by this and by too many other such cases is a scandal which must somehow be brought under control.”

11. Although the mantra “something must be done” is repeated time and again, nothing ever is. In the ancillary relief field the mantra has been incanted over and over ever since the iconic judgment of Booth J in Evans v Evans [1990] 1 FLR 319. The procedural reforms of 1996 and 2000 tried to address the problem, but with only limited success, as this and many other egregious cases show only too clearly. In the civil sphere the Jackson reforms of 2013 were intended to curb excessive litigation costs…

…

13. In my judgment the time has come when the law-makers in this country, whether they are legislators or judges, must stop saying something must be done and actually do something. The first thing would be to insist, as Lord Neuberger did in the lecture I have cited, on fixed pricing for cases, whether they are ancillary relief cases or anything else…

14. The second measure that needs to be taken is for the court in ancillary relief proceedings to be able to impose at the very beginning of the case a costs cap on what may be charged by the lawyers to their client for each of the three phases of the case. Naturally this cap would be variable if circumstances change but the change of circumstances would have to be a big one for a variation to be allowed.”  

152.  Mostyn J however also recognised that the power of the court to control the costs charged by lawyers to their clients, and if I may respectfully also add, the costs chosen by the parties to spend, is very limited and can usually only be done after the conclusion of the proceedings, or only after the damage has been done, and suggested that only if steps are taken for fixed pricing and judicial costs capping will such problems be arrested.

153.  His Lordship then proceeded to address the problem facing him in the case before him as to who was to be held responsible for running up the costs incurred to £920,000 from total marital assets of £2,885,000 or almost 32% of the assets, and how to resolve the issue:

“54. So I turn to the costs of £920,000. I first remind myself that in order to equalise the costs differential of £182,000 the husband has already paid £91,000 to the wife. Should he pay an additional amount by reference to his litigation conduct within the terms of FPR 28.3(6) and (7)? These provides:

“(6) The court may make an order requiring one party to pay the costs of another party at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).

(7) In deciding what order (if any) to make under paragraph (6), the court must have regard to –

(a) any failure by a party to comply with these rules, any order of the court or any practice direction which the court considers relevant;

(b) any open offer to settle made by a party;

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

(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;

(e) any other aspect of a party’s conduct in relation to proceedings which the court considers relevant; and

(f) the financial effect on the parties of any costs order.”

55. Subsection (f) is highly important. This requires the court to ensure that its primary disposition, which will usually be strongly influenced by considerations of need, is not undone and subverted by a costs order. It was for this reason that the Calderbank principle was abolished (see rule 28.3(8) where Calderbank offers are made inadmissible). Some quarters are calling for the Calderbank principles to be reintroduced (and it is true that the current rules permit it to be used for certain proceedings other than the final hearing of an ancillary relief claim). For my part I will fight its reintroduction to the last ditch. In my opinion it would be retrograde and unconscionable to allow a carefully crafted disposition to be turned upside down by virtue of a without prejudice letter produced after judgment has been given.

56. I am satisfied that in certain respect the husband has been guilty of litigation misconduct which the court should, in principle, take into account under subparagraph (e). I am generally in agreement with the criticisms made of him in the second half of Miss Harrison QC’s written final submissions. It is unnecessary to spell them out here. Some of his misconduct I have already detailed. Most of it happened before the FDR. I remain completely baffled as to how the professionals on each side incurred £700,000 of costs following the FDR. It seems to me to have been an unbridled exercise where the only commodity being charged for was time rather than product.

57. In my judgment, having regard to subparagraph (f), I cannot reflect the husband’s misconduct other than symbolically. Miss Harrison seeks an order that he pays 75% of the wife’s costs. Ignoring amounts disallowed on assessment this would require the husband to pay £276,750. It would elevate the wife’s capital position to £1,350,250 and depress the husband to £614,750. This would be grossly unfair especially where I regard the wife as having litigated almost as disproportionately as the husband.

58. In my judgment the husband’s delinquency should be reflected by a costs order of £50,000 (inclusive of VAT) to be paid from his share of the FF share sale proceeds. The upshot will be that from the pre-costs starting point of £2,885,000 the wife will receive £1,123,500 (38% of the assets); the lawyers and experts will receive £920,000 (31.9%); and the husband £841,500 (29.2%). These figures speak for themselves. Such a result should not be allowed to happen again.”    

154.  Whilst in Hong Kong we do not have the equivalence of FPR 28.3 upon which our courts to have regard to those factors under paragraphs (7) and (8) thereof in deciding on the issue of costs in ancillary relief proceedings by reference to litigation misconduct, I do find them helpful in particularly subparagraph (f) when both parties here have similarly proposed to apply equal sharing in the division of all their marital assets, and that the various agreed and/or proposed terms were designed and accepted by both parties to ultimately achieve fairness between them as to the division of their marital assets and at the same time properly and  sufficiently meeting their respective present and future needs. I therefore propose to apply the same factors where relevant to the facts of this case in the determination of the issue of costs.

155.  While I agree, having rejected the Wife’s case against the Husband on both marital and financial conduct for the reasons already detailed above, there seems little difficulty accepting Ms Rattigan’s criticisms of the Wife’s own litigation misconduct in particularly her refusal or failure to accept the Husband’s further proposal to settle after the first part of the trial and still stubbornly pursued her claims over his various loans at the resumed trial which may justify to be reflected in the costs order, given the unchallenged medical evidence of the Wife’s emotional and psychological state of mind during the proceedings, and on reflection I confess to have the same problem as Mostyn J did in J v J to properly reflect her alleged litigation misconduct through a costs order or as to its quantum if not otherwise just symbolically.

156.  From the evidence before the court in particularly the unchallenged medical evidence, I agree with Mr Pilbrow that the Husband’s extra-marital conduct and activities did have a very material effect upon the Wife’s emotion and psychological health which may have traumatised her in such a way to have affected her various decisions making in the ancillary relief proceedings and which led to what he now argues to be her litigation misconduct.     

157.  It is of course necessary, and is in fact the court’s duty, to look at the facts of each case in the cold light of day, objectively and devoid of emotions, and while it has also been well established by authorities that a party’s conduct such as adultery or extra-marital activities may very well be sufficient to end a marriage but not relevant to the resultant ancillary relief proceedings, as I have so found above, I agree with Mr Pilbrow that even if another wife may have reacted differently, it would in my judgment not just be fair but also necessary to have regard to such impacts on the Wife as to her subsequent conduct in the pursuing ancillary relief proceedings.

158.  I am of course not suggesting that because a party has reacted so emotionally or so traumatised by the breakdown of the marriage that his or her subsequent litigation misconduct would be acceptable or even justified, especially when it results in serious financial costs or losses to the family assets, but that does not follow either that the court should be so oblivious to any such emotional impact on a particular party when determining how best to assign his or her liability in the resultant costs or losses as a result of his or her such reaction, as after all, marriages are essentially about emotions, and the extent and effect of their breakdown must be to each his own, some much more serious than the other, as Thorpe LJ once famously remarked that when marriages break down, sadly some parties are simply emotionally or psychologically incapable of managing their affairs.

159.  Whether this statement applies to the Wife in the present case, and if so how such emotional or psychological state of hers may have affected her decision-making relevant to such litigation misconduct that may justify a costs order against her can perhaps be first gleaned from her narrative affidavit as to how she described about the numerous events during the last years of the marriage which led to her discovery of the Husband’s extra-marital activities and his various financial dealings and their impacts on her emotion.

160.  Of course it was just she said which the Husband quite rightly chose not to waste the court’s time during the trial challenging each and everyone of them on the basis that, and again rightly so, they had fallen far short of establishing marital misconduct on his part as gross and obvious for the court to take into account on the issue of add-backs, nevertheless they are clear evidence from the Wife as to how she had been so affected emotionally and psychologically by these events.     

161.  There is also as noted above clear and unchallenged medical evidence from more than several doctors of the Wife as to the severity of both her physical as well as emotional and psychological problems at the time of the divorce and throughout the ancillary relief proceedings, cumulating of course by that panic attack and depression of hers in the middle of her evidence that broke up the trial into two parts.

162.  Of those medical evidence, it would be suffice to refer again to the one from Dr Li’s report dated 9^th October 2015 [C4(2)/269] to drive home the point that the Wife’s ability to make proper important decisions may have been so hampered as so stated in that report:

“She was noted to have depression issues related to her family and other stressors over years, and recently she was found to have newly symptoms of

1.poor traumatic stress disorder related to divorce and family issues

2.Worsening anxiety and depression, co-morbidity of poor sleep

3.Flare up of her chronic pelvic pain, now near double her dose of potent opioids since July last when seen by me …

In conclusion, with her psychological status and health condition, she requires numerous medicines that influence her cognitive functions and normal daily function. I would strongly advise her that she should not have further major decision making or major life changes, as she is already on a dangerous line of coping for her daily living.” 

163.  It is of course one thing that the Wife’s decision-making ability may have been affected by the medicine which she was taking at the material time, it is in my judgment also relevant to look into her motive or purpose behind her decision to launch such forensic investigations into the Husband’s financial affairs in particularly his various loans and failed investments to determine whether it was her vindictiveness against him for his extra-marital behaviour as suspected by the Husband, or otherwise typical of a wife wishing to maximize her financial claims with legitimate reasons.

164.  To do so it would be relevant to revisit her background and the history of her marriage. The undisputed evidence is that she was a “smart andhard-working girl” who went to a good university with aspiration for a successful career in economic and finance, but after marrying the Husband and moving with his job to places far away from home such as Tokyo and Hong Kong, and with childbirth came the inevitable sacrifice of her own career to become a fulltime mother and housewife wholly dependent on the Husband whose career on the other hand had since flourished.

165.  In 2008, as pointed in the Wife’s narrative affidavit the Husband “had a year so good we could never have imagined it” when he earned US$8 million and thereafter the parties purchased Rumstick House as their family home clearly with the intention of retiring into it. Then sadly came the Wife’s health problems starting with her Interstitial Cystitis and the gradual unravelling of the marriage and the ensuing divorce proceedings, and it was during financial disclosure that she learnt of the full extent of the Husband’s extra-marital activities as well as his various loans made to his close friends some of whom he also claimed to have suffered substantial losses investing in their business.  

166.  It must therefore be set against these circumstances that the Wife be judged whether she should be penalised with costs for her litigation conduct, and notwithstanding my criticisms of the way she had prepared her narrative affidavit and her stance taken against the Husband on both marital and financial conduct, it cannot however be said that her initial challenges against his unrecovered loans and failed investments were not without merits, and having regard to all the circumstances in particular her medical conditions at the material time, it is my judgment that this is one of those exceptional cases in which the Wife deserves the compassion of this court notwithstanding such litigation conduct, and accordingly I propose to make an order nisi that there be no order as to costs of the ancillary relief proceedings as the best mean to finally bring closure to the parties’ broken relationship, knowing that the Husband may on reflection agree that his kindness and generosity shown so readily to his friends should also be extended, again, to the Wife.   

Conclusion

167.  In conclusion and for the reasons given above, and on the basis of the parties’ agreement for equal sharing of their matrimonial assets, and in addition to what has already been agreed by the parties at paragraph 35 above and which I hereby so order, and upon the Husband’s undertaking to pay the Wife 50% of any of the loans owed to him if and when they are received by him, I order that the Husband shall pay the Wife a lump sum of HK$7.8 million to bring her current marital assets from HK$25.1 million to HK$32.9 million being half share of the total assets of HK$65.8 million within 3 months of the decree absolute.     

168.  For the agreed payments of the capitalised maintenance for the Wife by way of a further lump sum of HK$4,560,000 for the next 5 years by 5 equal instalments of HK$912,000 each annually starting from the first anniversary of the date of this judgment, I also so order upon the Husband’s undertaking to take out a life insurance policy in the Wife’s favour so that in the event of his death within the 5 years period she will stand to receive the balance of the said sum with the costs to be borne equally by the parties, with of course liberty to apply.  

169.  These terms shall be in full and final settlement of the parties’ claims for ancillary relief against each other as a clean break between them, which claims shall be dismissed.

170.  As for the support of the daughter, I also accept the Husband’s undertaking to continue to be wholly responsible for her until she finishes university. Accordingly I also make the Section 18 declaration.

171.  As indicated above, I also make an order nisi that there be no order as to costs of the ancillary relief proceedings between the parties, which order is to be made absolute at the expiration of 21 days, and should there be any application to vary the order nisi, I suggest that it be done on paper and for the parties to agree on a time table for filing their written submission.

172.  Last but not least, I am most grateful to counsel for both sides for their most valuable assistance rendered to the court and in particularly for the restrains and discipline they conducted their argument and cross-examination during the trial given the obvious emotions exhibited by the parties as well as the Wife’s health conditions.