CSY v. CPK

FCMC 7235 / 2015

[2023] HKFC 100

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 7235 OF 2015

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JUDGMENT
( Variation of Children Maintenance )

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1.  After a five-day trial in December 2018/January 2019 on the ancillary relief claim made by the Petitioner (“W”) for herself and 3 daughters (“the Children”), DDJ Doris To (as she then was) handed down a decision on 16 May 2019 (“AR Decision”) and ordered, inter alia, that the Respondent (“H”) do pay W a monthly periodical payment of HK$67,000 for the maintenance of the Children to be settled by part of H’s share of sale proceeds of the former matrimonial home (which H was ordered to place into the Court) and by H’s personal fund after the money in Court was exhausted (“Children Maintenance Order”).

2.  Two years later and shortly after the money placed in the Court for the Children’s maintenance was exhausted in April 2021, H took out a Summons dated 30 August 2021 (“Summons”) seeking a substantial downward adjustment from HK$67,000 to HK$10,000 to take effect from 1 September 2021. Specifically, H asked for the following reductions:

(1)  for A, the eldest daughter, aged 12: from HK$26,000 to HK$3,881;

(2)  for B, the second daughter, aged 10: from HK$22,000 to HK$3,283;

(3)  for C, the youngest daughter, aged 9: from HK$19,000 to HK$2,836.

3.  The terms of the Children Maintenance Order and the related orders are as follows:

“2. The Former Matrimonial Home be sold within 3 months upon the grant of Decree Absolute at a price not less than HK$13,250,000. Deposit payment(s) received from the purchaser be shared equally between the Petitioner and the Respondent forthwith. Upon completion, the net sale proceeds (after deducting the outstanding mortgage loan as well as conveyancing and related expenses) be shared equally between the Petitioner and the Respondent, with the Respondent’s half share paid into court within 7 days of completion (“the Respondent’s Fund”).

3. The Respondent do pay to the Petitioner a lump sum of HK$1,750,000 out of the Respondent’s Fund.

4. The Respondent do pay back to the Petitioner the arrears of maintenance accrued up to May 2019 inclusive, out of the Respondent’s Fund.

……

6. Commencing 1^st June 2019 and on the 1^st working day of each subsequent month, the Respondent do pay the Petitioner HK$67,000 per month as periodical maintenance payment for the 3 daughters (HK$26,000 for [A], HK$22,000 for [B] and HK$19,000 for [C] until each child attains the age of 18 or complete full time education, whichever is the later. Payment should be made in the following manner:

(a) from 1^st June 2019 until the Respondent’s Fund is paid into Court, the Respondent do pay the Petitioner on the 1^st working day of each month into the Petitioner’s designated bank account;

(b) upon payment of the Respondent’s Fund into Court, a monthly sum of HK$67,000 would be paid out from the Respondent’s Fund to the Petitioner by the Court on the 1^st working day of each month, until the Respondent’s Fund in Court is exhausted; and

(c) upon exhaustion of the Respondent’s Fund in Court, the Respondent do resume making monthly payment of HK$67,000 to the Petitioner on the 1^st working day of each month into the Petitioner’s designated bank account.”

4.  Immediately after H took out the Summons, he unilaterally paid only HK$10,000 for the Children’s maintenance since September 2021.

5.  H is 43 years old and W aged 39. They got married in May 2010. A was born in September 2010, now aged 12. B was born in August 2012, now aged 10, and C was born in February 2014, now aged 9. The Children were at the respective ages of 8, 6 and almost 5 at the trial on ancillary relief matters (“AR Trial”).

6.  The following background facts were found by DDJ To[1]:

(1)  W was a kindergarten teacher until she became a full time mother in 2011 after the birth of A. During 2013 and 2015 she worked again from time to time on a part time basis. She was an insurance agent at the time of the AR Trial.

(2)  In 2004, H started to work in A Ltd, a family business that import and export plastic flowers, when he was at his mid-20’s. In June 2005, he became a 50% shareholder of A Ltd and the other 50% shares was owned by his mother. He was appointed a director until he resigned in around December 2015 (after the Petition was presented). At the time of the AR Trial, he was A Ltd’s Director of Sales. In addition to his employment income of around $59,000 net of MPF per month, he received dividends and directors renumeration.

(3)  The valuation of H’s shares in A Ltd is $4,390,000 with reference to the single joint expert report (“AR SJE Report”).

(4)  The marital standard of living is average middle class but not luxurious or lavish.

7.  In June 2015, W petitioned for a divorce on the ground of unreasonable behaviour. The Petition was undefended. The decree nisi was pronounced on 1 April 2016.

8.  By the order of HHJ Grace Chan in August 2016 (“MPS Order”), W was granted maintenance pending suit for herself (HK$18,000 per month) and for the Children (HK$42,000 per month). In addition, H provided undertakings to continue to pay for (a) the school fees, school bus and school books of the Children, and (b) the mortgage, management fees, rates and government rent of the former matrimonial home.

9.  In June 2017, joint custody of the Children was granted to H and W, with sole care and control to W and defined access to H.

Relevant legal principles

10.  The legal principles on variation of maintenance order are not in dispute. The Court is empowered by Section 11(1) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”) to vary or discharge an order for financial provisions:

“(1) Where the court has made an order to which this section applies, then, subject to the provisions of this section, the court shall have power to vary or discharge the order or to suspend any provision thereof temporarily and to revive the operation of any provision so suspended.”

11.  Section 11(7) of MPPO requires the Court to have regard to all the circumstances of the case when exercising the powers conferred by section 11. These include any change in any of the matters to which the Court was required to have regard when making the order to which the application relates.

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.”

12.  This is a fact sensitive matter. Each case must be determined with regard to its own facts. The Court has an unfettered discretion in determining a variation application by having regard to all the circumstances of the case. It is not required to proceed from the starting point of the original order. The Court looks at the matter afresh. This does not mean that the Court can give no regard to the original order for maintenance, nor that the original order carries no weight. The basis and intended effect of the original order are relevant factors for consideration and proper weight should be given to it. The proper approach was explained by Cheung JA in AEM v VFM [2][14]:

“4. The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh : Flavell v. Flavell [1997] 1 FLR 353 at 357B following Lewis v. Lewis [1977] 1 WLR 409 and Garner v. Garner [1992] 1 FLR 573.

5. Any change in any of the matters to which the Court was required to consider when making the original order was one of the circumstances to be considered.

6. Almost invariably, an application to vary an earlier periodical payment order will be brought on the basis that there has been some changes in the circumstances since the original order was made, for example, continuing inflation; the increased costs in supporting a growing child and that one party may be more adversely affected than another by the increase in the costs of living : Garner v. Garner.

7. An increase in the wealth of the husband was a relevant factor to be taken into account : Primavera v. Primavera [1991] 1 FLR 16 and Cornick v. Cornick (No. 2)[1995] 2 FLR 490.

8. At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order : Boylan v. Boylan [1988] FLR 282.”

13.  It was acknowledged that in practice, applications for variation were brought almost invariably on the basis that there has been some change in circumstances since the original order. Normally, the earlier order would not be varied unless there has been a material change in circumstances: HCTT v TYYC[3] [15] and [16],

“15. But as Garner v Garner [1992] 1 FLR 573 shows that does not mean that the earlier order, whether made by consent or not, carries no weight. How much weight should be given to the earlier order must depend on the circumstances. Cazalet J said in the English Court of Appeal:

“Almost invariably, an application to vary an earlier periodical payments order will be brought on the basis that there has been some change in the circumstances since the original order was made; otherwise, except in exceptional circumstances, the application will, in effect, be an appeal. If an order is not appealed against, or is made by consent, then the presumption must be that the order was correct when made. If it was correct when made, then there will usually be no justification for varying it unless there has been a material change in the circumstances. However, because of the impact of continuing inflation, because children grow older and cost more to support and because, for example, the cost of living in its increase may hit one party harder than another, it will usually follow that, if time has passed, there will inevitably have been some changes in the circumstances, and in particular in the financial circumstances, of the parties concerned.

Following Lewis v Lewis, by which decision this court is bound, a court on the hearing of an application to vary is fully entitled to look at all the relevant matters set out in s. 25 of the Matrimonial Causes Act 1973. On occasions, the court may be slow to accede to an application to vary a consent order; not least because the parties’ solicitors might otherwise be deterred from either seeking to negotiate such a provision or to achieve finality. Another factor which may influence a court will be the time that has passed since the original order was made. If an application consequent on an order is brought very soon after that order has been made, the court, in normal circumstances, is likely to attach more weight to the earlier order than if it had been made some years previously. Likewise, the court would expect to pay full regard to any special terms agreed between the parties at the time the original order was made - as, for example, when endorsements on briefs or contemporaneous correspondence show that an agreed order has, for some particular reason, been set at an artificially low figure. Shortly stated, the court must decide what weight it should attach to the original order and all the surrounding circumstances. However, once an application to vary is before it, the court is fully entitled to make an order considering all the circumstances afresh, paying such regard to the old order as may be thought appropriate.”

16. Thus, although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in circumstances.”

(emphasis in bold added)

14.  It is an error not to take into account the original agreement, a fortiori, the original order, as to how the maintenance should be dealt with. The Court of Appeal in WNWG v PBF[4] held that:

“16. Then the Judge referred to the means of the Petitioner and said that she would be able to provide for the children even if the maintenance payment were to be reduced. At para 47 he jumped straight to the question of how the needs of the children should be reasonably apportioned between the parties. It does not appear that he gave any weight to original agreement as to how the maintenance for the children should be dealt with. Nor did he give any consideration as to whether there should be a variationdespite the ability of the Respondent to afford the payment of maintenance on the same level and the earning capacity of the Respondent (notwithstanding his cessation of his employment).

17. With respect, we are of the view that in so doing the Judge fell into error. Under the Mediation Agreement, the financial burden of providing for the maintenance of the children was placed primarily upon the Respondent. This is not surprising in light of the great disparity in the earning capacities of the Petitioner and the Respondent and the different roles played by the Respondent and the Petitioner in the upbringing of the children.”

15.  The Court has the power to backdate the effect of the variation of the order. Cheung JA held in AEM v VFM [15] that:

“1. The court has an almost unrestricted power to vary its own order retrospectively and to backdate any variation which it makes in a pre-existing order beyond the date of the application for variation.

2. In practice, orders are not usually backdated to a date prior to the notice of application to vary unless the justice of the case so requires.

See Rayden and Jackson on Divorce and Family Matters (18^th ed., 2005) Vol. 1 para. 18.25 and the cases cited.”

H’s Grounds for Variation

16.  H’s case is that there were the following material changes of circumstances which caused a reduction of his income and an increase of his financial obligations:

(1)  He sold his shares in A Ltd to his mother for HK$3,000,000 on 13 July 2020. He ceased to be a shareholder of A Ltd and would have no dividends income.

(2)  He ceased to work in A Ltd following his resignation and started to become an estate agent from October 2020 with a substantially reduced income.

(3)  He got engaged with his fiancée on 14 April 2019. They have a daughter, X, born on 2 December 2019. His financial obligations are increased.

H’s Credibility

17.  Counsel for W, Mr Eric Leung, submitted that H is not a reliable witness and had a history of non-compliance of court orders. He has a habit of retracting or changing his own case once he realised that it has become untenable or does not benefit him.[5] He drew the Court’s attention to the following findings in the AR Decision and H’s testimony:

(1)  He did not abide by the MPS Order. He unilaterally reduced the monthly payment of $60,000 to $15,000, and has persistently been late in paying the Children’s school fees, school bus and school book fees. W had taken out garnishee proceedings, application for income attachment order and committal proceedings in 2017.[6]

(2)  He was found to have made “blatant lie” by stating in affirmation that he only has one bank account in Hong Kong.[7] Both HHJ Grace Chan in the MPS Judgment and DDJ To in the AR Decision found that H failed to make full and frank disclosure.

(3)  By reason of H’s non-disclosure at the AR Trial, the Court has drawn adverse inference that H has other financial resources, his income and earning capacity was much higher than what he claimed.[8]

(4)  H had said at the AR Trial that he had no intention to sell his shares in A Ltd, which is a small family business. On this basis, DDJ To has not placed his equity interest in the matrimonial pot for division purpose.[9]

(5)  It was found in the AR Decision that “it is important for H to continue with his business to generate profit, since there is a long-term obligation on him to maintain the 3 daughters financially.”[10]

(6)  Shortly after the AR Decision, he sold the shares in 2020 and resigned from A Ltd on his own volition. He told this Court that after he ceased to be a shareholder and an employee of A Ltd, he had no money to pay the Children’s maintenance.

(7)  H had taken the stance at the AR Trial that the family business was a “sunset” or “dying” business. This was rejected by DDJ To who found that A Ltd had been generating profits and declaring dividends. H and his father were still willing to inject millions of loans into A Ltd. The increasing entertainment expenses suggested that A Ltd continued to be actively marketing for business.[11]

(8)  H has been the director of A Ltd until he resigned in around December 2015 (shortly after W presented the Petition). The Court found that the resignation is highly artificial and more likely than not that H was still in de facto control of A Ltd. There was evidence that H was treating the business as his own.[12] W submitted that the sale of shares and career change subsequent to the AR Decision were similar tricks pulled by H to avoid meeting the financial obligations to maintain the Children.

(9)  One of H’s main reasons for the career change was that his true interest and passion are in digital marketing and he wanted to work in the estate agency industry. However, he had never mentioned these at the AR Trial.

18.  Mr Eric Leung further submitted that H was not straightforward nor forthcoming when he gave evidence before this Court. He made up excuses or became evasive. His evidence was contrary to his prior testimony or contemporaneous documents. He dodged the questions when he was shown the inconsistencies, take for example, when he was directed to his own bank statements showing his spendings since April 2021.

19.  The Court evaluates the evidence as an overall process, assesses the credibility of a party’s case by taking into account the inherent probabilities, the documentary evidence or the lack of it, the observation of the demeanour of the witnesses before reaching the conclusion on the findings of fact: Lee Fu Wing v Yan Po Ting Paul[13], Ageas Insurance Company (Asia) Limited (formerly known as Fortis Insurance Company (Asia) Limited) v Lam Hau Wah Inneo[14].

20.  Having considered H’s evidence in the present trial, I come to the view that H is not a reliable witness. He was evasive and defensive. When the inconsistencies of his evidence were pointed to him, he often simply ignored the inconsistencies, either repeated his own view or mounted his challenge by asking questions. When it was suggested that he had other financial resources, such as working in A Ltd, to meet the shortfall from his expenses, he answered by asking “Do you want me to go back and work for A Ltd?”. He tended to shift his stance to suit his own case. I reject his evidence which was not corroborated by documentary or other credible evidence.

Sale of Shares in A Ltd and Career Change

21.  On 13 July 2020 (about one year after the AR Decision), H sold all his shares to his mother for HK$3,000,000. After the sale, he remained employed by A Ltd and earned a monthly salary of HK$56,000 until 30 September 2020. He was paid a lump sum amount of HK$240,000 as long service payment.

22.  He then became a licenced estate agent and was employed by an estate agent company with the basic salary of HK$5,500 plus commission.

23.  H said in his affirmation that he sold the shares of A Ltd and made the career change for the following reasons[15]:

(1)  The environment of the import-export business was deteriorating as impacted by the trade war, the US/China relationship and the city shutdowns during the early stages of the COVID-19 pandemic (“External Factors”).

(2)  He was nudged into the family business, and it was understood between him and his mother that if he does not attempt to build up his own career, he will live forever with regret.

(3)  His true interest, passion and skills are in the field of digital marketing and he was “bullish” on the long term prospects of Hong Kong real estate.

24.  H has not adduced any valuation report to support the consideration for the sale of his shares. He asserted that the true value of his shares was less than $3,000,000 because the valuation in the AR SJE Report was made on the assumptions that (a) A Ltd is a going concern and (b) there are no significant changes in the political and economic conditions of Hong Kong. He suggested that these two assumptions no longer stand. Further, he said that there was no market for his 50% shares except for his parents. The consideration of $3,000,000 was in line with the value under the adjusted net asset approach in the AR SJE Report.[16]

25.  Firstly, I find that H has exaggerated the impact of the External Factors on the business of A Ltd.

(1)  H produced the financial statements of A Ltd for the years ended 2019 and 2020. A review of these financial statements showed that despite the External Factors,

(a)  A Ltd was generating profits during the year of 2020.

(b)  A Ltd’s profit before tax was $1,368,900 in 2018. It was increased to $2,529,816 in 2019 and then decreased to $802,156 in 2020. The gross profit in 2020 was over $6 million. H contended that the profits in 2018 and 2019 were due to the non-recurring exchange gains.

(c)  Despite the drop in profits for the year 2020, the profits made was still higher than those in 2015 and 2017 when the External Factors did not exist.

(d)  Although there was a drop in the profits and turnover, dividends paid were increased from $800,000 in 2018 to $1,000,000 in each of 2019 and 2020.

(2)  The turnover has been dropping during the period of 2018 and 2020 ($61,719,846 in 2018, $56,778,967 in 2019 and $38,623,914 in 2020). H admitted in cross examination that A Ltd’s sales would go back up once the Hong Kong-Mainland border opens.

26.  Secondly, H admitted that it is his personal choice to sell and quit A Ltd. He was not forced to leave and he could remain to work in A Ltd if he wishes to.

27.  Thirdly, there is no convincing reason to justify his making this personal choice in 2020 at the expenses of his 3 daughters.

(1)  H told this Court that he was “bored of selling flowers” and did not want to continue working at A Ltd. He said in cross examination that he has already felt bored in around 2013 and 2014.

(2)  Nonetheless, he positively stated at the AR Trial in 2019 that he had no intention to sell the shares of A Ltd. He had never mentioned in the AR Trial that his true interest, passion and skills are in the field of digital marketing, nor his interest to join the estate agency works.

(3)  H was fully aware of the findings in the AR Decision that it was “within reasonable expectation that H would one day succeed his mother’s interest and own the entire business”[17] and “[i]t is important for H to continue with his business to generate profit, since there is a long term obligation on him to maintain the 3 daughters financially.”[18]

(4)  In 2020, he took steps to leave A Ltd. When he was asked why he did not leave in 2013/2014, he said that he had the obligations to make provisions for his 2 children at that time. He must be fully aware of his obligations to make provisions for his children when he chose to start a new career.

(5)  When it was suggested to him that his decision of career change was not financially prudent and was irresponsible when he has 4 children and a fiancée to take care, H said that he wanted to start a new career and he has the right to choose his career path. That may well be his choice and his right, but such choice cannot be allowed to impinge upon the welfare of the Children. He has to bear the consequences for his personal choice. I respectfully refer to the following remarks in WNWG v PBF:

“31. … Ms Irving submitted that given the accumulated wealth of the family, the Respondent could afford to retire at this age and he should not be penalised for making such a choice. That may be correct. On the other hand, the exercise by him of this choice cannot be allowed to impinge upon the welfare of the children and the long term security that the Petitioner needs in respect of the lump sum payment made to her. As found by the Judge, the Respondent has sufficient means to keep up with the existing level of maintenance for the children. There is no reason why he should not be required to take the financial consequences for his own choice.”

(emphasis in bold added)

28.  Fourthly, H has not cut his ties with A Ltd after he ceased to be its shareholder and employee. He admitted that after his resignation from A Ltd, he was still using A Ltd’s two cars (a Lexis and a Land Rover) freely for his personal purpose. He has followed up on business matters of A Ltd after his resignation, and occasionally forwarded messages from A Ltd’s clients to the company’s staff.

29.  Fifthly, I reject H’s bare assertion that his parents were winding down the business of A Ltd.

(1)  H asserted that his parents were winding down the business as they are old and do not want to continue the business.

(2)  H produced no document to support his assertion. He has not produced any financial statements of A Ltd after 2020. He has not called any of his parents to testify.

(3)  When he was asked why his parents did not close down the business when he sold the shares, his answer was that A Ltd needed time to collect the receivables.

(4)  It is now more than 2 years from the sale of shares. H admitted that A Ltd is still in operation.[19]

(5)  The shares in A Ltd were gifted to H by his parents. If it was the intention to wind down the business after H sold his shares to his mother, it begs the questions of why his mother paid $3,000,000 for the shares.

30.  Sixthly, contrary to H’s contention that there was “no chance” his monthly salary would still be $59,000 if he had remained working at A Ltd, the financial statements for 2020 showed that the directors’ remuneration had increased from $1,153,945 in 2019 to $1,438,000 in 2020.

31.  Seventhly, the sum of $3,000,000 is a 30% discount of the valuation held by DDJ To with reference to the AR SJE Report. H failed to prove that it is a fair market value of his shares at the time of sale.

(1)  There was no valuation report in support of the market value of the shares at the time of sale, nor evidence that a 30% discount is justified.

(2)  I do not accept H’s assertion that the two assumptions under the AR SJE Report no longer stand. I have rejected H’s assertion on the seriousness of the External Factors on the operation or profitability of A Ltd. H admitted that A Ltd is in operation. There is no evidence to suggest that it is not a going concern.

(3)  I agree with Counsel for W that it is more likely than not that the sum of $3,000,000 is a form of financial support from the parents.

H’s earning capacity

32.  H graduated from a university in Canada. Prior to joining the family business, he worked as a financial analyst at HSBC. He has 16 years of experience in trading business. He was found to have earned $59,000 net of MPF per month in addition to dividends and directors’ renumeration. Inference was drawn by DDJ To that he has financial resources other than those disclosed by him.[20]

33.  H claimed that his income was substantially reduced. In his 7^th Affirmation filed on 30 August 2021 and Form E filed on 25 February 2022, he said that he earned a basic salary of $5,500/$6,000 plus commission. His average monthly income stated in Form E was $22,838.

34.  At trial, H updated his average monthly income from the estate agency works in the past 9 months to be $34,000. H said that he expected to have an annual income of $500,000 in a few years’ time, and he targeted to earn an annual income of $1 million as an estate agent.

35.  Notwithstanding the substantial drop in his salary to $20,000 or $30,000, H continued to live beyond his means. He stated in his 7^th affirmation made in August 2021 that his total monthly expenses were $173,384, breakdown as follows:

(1)  $25,200 for rent and utilities.

(2)  $20,500 for food and meals out of home (for H, his fiancée and X).

(3)  $5,000 for household expenses.

(4)  $7,000 for transport.

(5)  $3,500 for car park fee.

(6)  $4,520 for domestic helper.

(7)  $800 for MPF contribution.

(8)  $6,000 for clothings/shoes, H said there was a lot of walking in his work as an estate agent and he needed good quality shoes.

(9)  $3,500 for personal grooming, H said he had allergy and needed to use special cream.

(10)  $6,000 for entertainment.

(11)  $5,000 for holiday; H said that he spent $60,000 for a family trip.

(12)  $5,000 for medical/dental.

(13)  $2,000 for tax.

(14)  $1,157 for insurance premia.

(15)  $67,000 for the Children’s maintenance.

(16)  $500 for contribution to parents.

(17)  $5,000 for payment to his fiancée.

(18)  $1,000 for X’s expenses.

(19)  $4,707 for loan repayments.

36.  Accordingly, when his reported monthly income was only around $20,000 on average in August 2021, his own expenses net of the Children maintenance was $106,384[21], in addition, he had made a loan to his fiancée in the sum of $112,835[22].

37.  The expenses disclosed in his February 2022 Form E was reduced to $63,426 net of the sum of $67,000 for Children maintenance when his average monthly income was $22,838.

38.  The bank balance in his HSBC integrated account showed that he had depleted $1,655,144 in one year from February 2021 (at a net balance of $2,817,374) to February 2022 (at a net balance of $1,162,230). On average, he used $115,595 per month after deducting the four months maintenance paid for the Children during this period. On H’s own calculation, he used $225,663 (inclusive of $67,000 maintenance to the Children) each month on average between April and August 2021[23], that is an average monthly expenses of $158,663 net of the Children maintenance.

39.  Although H’s fiancée is in the workforce, H did not know her income. He contended that he was bearing the full costs of maintaining this new household.

40.  When H left A Ltd, he received a total of $3,240,000. If we assume that he spent around $100,000 a month, the above sum would be exhausted in around 2 years and 8 months. If he spent around $160,000 a month, the above sum would be exhausted in around 1 year and 8 months.

41.  H is a mature and educated man. He confirmed at cross examination that before he decided to change job, he knew his financial obligations. He said “I know the bills. I know the numbers”. The logical inference must be that when he decided to exit from A Ltd and become an estate agent, he had some assurances or comfort that he has or would have financial resources other than his own savings and earnings as an estate agent to cover his spendings and financial obligations. This is in line with the finding at the AR Trial that his parents have been providing financial support to H.

42.  The Court should consider a party’s earning capacity including the potential earning capacity. It was held in WNWG v PBF that:

“27. The Judge found specifically that, despite the cessation of his employment, the Respondent could afford to continue with the current level of maintenance. He was able to come to that conclusion even though he discounted the potential income from the Koh Samui project. We do not think such potential income should be left out of the picture. It should form part of the earning capacity of the Respondent. After all, the Respondent himself testified that in 2009 he considered himself to spend his time and energy more effectively by finishing that project than looking around for a job. Subsequently, he accepted that (perhaps in respect of a different point in time when the job market for solicitor was more favourable) he would be better off working as a lawyer. Since the Respondent had not looked for another job, there is no evidence as to how much worse off he would be in terms of income (comparing with his previous earnings) if he had done so. In any event, the fact remains that there is a great disparity between the earning capacity of the Respondent and that of the Petitioner.”

(emphasis in bold added)

43.  A party has the duty to maximise his earning capacity. In S, PJ v S, CE nee D, CE[2022] HKFC 152, HHJ Melloy held that:

“30. …. In so far as income is concerned, it seems to me that both parties have a duty to maximise their earning capacity. In so far as the wife is concerned she has done this by returning to her previous role as a kindergarten teacher. The husband’s income has however, significantly reduced. He may need to rethink his options in this respect and/or consider further freelance work.”

(emphasis in bold added)

44.  In BX v BMPE[2019] HKFC 72, HHJ Melloy held that if the father’s business and unstable freelance activities are not going well, he may have to look for other alternatives including other paid employment.

“31. … Although I accept that his present financial situation is somewhat precarious I nevertheless have some sympathy with the wife on this. The father has an earning capacity and if his business and freelance activities are not going well, then he may have to look at other alternatives including other paid employment.”

45.  I find that H has a higher earning capacity than his actual disclosed income. He admitted that he could continue working in A Ltd. Alternatively, given his education, background and work experience, he could find another job earning a much higher income than the average of $30,000 per month. H has the same or substantially the same earning capacity and financial resources as at the time of AR Trial, which would be sufficient to cover the reasonable needs of the Children under the Children Maintenance Order.

New Family

46.  H started the new relationship with full knowledge of his financial obligations to the Children. It is well established that a new family or second marriage does not terminate a husband’s financial obligations to his first marriage.

47.  In N v C[24], which is a decision on ancillary relief claim, HHJ Bruno Chan (as he then was) summarised the principles as follows:

“39. It is well established in law that remarriage by a person against whom an order for periodical payments has been made does not terminate the order or of itself entitle that parties to a reduction in the amount ordered, and as regard the position of the after-taken wife, she must, on general principle, be presumed to take the other spouse subject to all existing encumbrances, whether known or not, including an obligation to support the wife or child of a former dissolved marriage, as per Hodson LJ in Cockburn v Cockburn [1957] 1 WLR 1020, CA when he said:-

“The law being as it is, it is quite impossible for the courts to ignore the just claims of the first wife because the man has taken on himself other obligations, although the courts have to take into account these obligations, as involving a reduction in the capacity of the man to pay for the upkeep of his first wife and child”.

40. So in the case of Cowie v Cowie (1983) 13 Fam Law 250 where the husband had remarried, had a child, and obtained increased mortgage, but his former wife was still able to obtain increase in periodical payments. On appeal by the husband, it was held that he had increased his obligations with his eyes open: and in Moon v Moon (1980) 1 FLR 115 where the husband has remarried and his second wife was pregnant, it was held that he must cut his coat according to his responsibilities to his first family.”

(emphasis in bold added)

48.  Although H’s financial obligations would prima facie increase with a second relationship, the former spouse and children shall be given such order that will protect their standard of living, without being subject to the possible decrease of available resources due to the second relationship: Jackson’s Matrimonial Finance, (10^th Edn), [3.127],

“3.127 Remarriage means that the payer spouse has assumed new financial burdens and responsibilities, and pro tanto his or her means may decrease; prima facie there is a decrease in the available resources out of which he or she can make provision for his former spouse and family; but, bearing in mind this consideration the court will try to give the former spouse and the children such orders as will protect their standard of living: it is ‘bearing in mind this consideration’, not ‘subject to it’.

In some cases the payer’s income may increase after his remarriage, and he may attribute this increase to the domestic, social or business gifts of his new spouse: that might well be a matter to be taken into account. It may be that the new spouse has an income of her own, and this likewise must to some extent be taken into account. The second spouse’s (or cohabitant’s) income cannot be taken into account as part of the payer’s income available for distribution to the former spouse and children. It can and should be taken into account when undertaking the ‘net-effect’ calculation so to determine the residual incomes of the respective households after payment of a hypothetical order by the payer. The court will assume that the second spouse will make a proper contribution from his income to the outgoings of the payer’s household.”

49.  A party entered into a new relationship with increased financial obligation does not, by itself, mandate a downward variation of the previous maintenance order. Each case must be considered against its own facts.

50.  H came into this new relationship with full knowledge of his obligations to maintain the 3 daughters of his own.

51.  Although H said that he was responsible for all the expenses of the new household, it was accepted in H’s closing submission that it was fair if the fiancée also contributes to the expenses of the new household[25].

52.  I have found that with H’s earning capacity, he could meet the obligations to pay the Children’s maintenance. The new relationship and the subsequent financial obligations assumed by H with eyes open is not a reason for varying the Children Maintenance Order.

Reasonable needs of the Children

53.  The Children’s expenses as disclosed in W’s Form E filed on 22 April 2022 are as follows:

Item	Amount for  A (HK$)	Amount for  B (HK$)	Amount for  C (HK$)
School fees	6,000	6,000	6,000
School books and stationery	1,000	1,000	1,000
Transport to school	400	400	400
Medical / Dental	1,000	500	500
Extra curricular activities	2,250	1,600	2,000
Entertainment / presents	1,200	1,200	1,200
Holidays	800	800	800
Clothings /shoes / bags / accessories /skin care	1,200	1,000	1,000
Insurance premia     1.  Critical illness     2.  Medical insurance     3.  Education fund	900 306 2,200	680 306 2,050	650 306 2,400
Lunches and pocket money	1,100	1,100	1,100
Uniform	500	500	500
Others – creams, essential oil, supplements, mask, disinfected products	3,000	2,200	2,200
Total:	21,856	19,336	20,056

54.  In addition, there are a total of $51,900 monthly general expenses for the Children and W, comprising rent ($25,000[26]), utilities ($3,000), food ($14,400[27]), household expenses ($4,000) and domestic helper costs ($5,500). On average, the general expenses for each of the Children was about $12,975[28]. Accordingly, the Children’s total expenses are $100,173 ($34,831 for A, $32,311 for B and $33,031 for C), which is $33,173[29] more than the maintenance payable by H.

55.  The following expenses of the Children were challenged by H who contended that:

(1)  The previous rent of $38,000 is excessive.

(2)  The expenses for cream and essential oil used by the Children (included in the item under “Others”) are excessive. H suggested that part of the expenses claimed were in fact incurred by W herself.

(3)  The extra-curricular activities expenses are excessive.

(4)  The total expenses of the Children are higher than the expenses found to be reasonable by DDJ To.

56.  W paid a rent of $38,000 at around the time of her Form E filed on 22 April 2022. W explained that the apartment rented was 1,400 square feet saleable area. They have 5 people in the household including the domestic helper. Due to the COVID-19 pandemic, the Children needed more space at home. She also held meetings with her colleagues and clients in the insurance industry at home. W contended that since the birth of the second daughter, the parties have lived in a 1,000 square feet, 3-bedroom apartment in the prime location in Lai Chi Kok. She is entitled to maintain the same standard of living.

57.  In any event, they have moved to a smaller flat of around 1,000 square feet saleable area for a monthly rent of $25,000, which H accepted as reasonable.

58.  The expenses under the item “Others” include not only the cream and essential oil, but also products necessary in times of COVID-19, such as facial mask, sanitisers and rapid antigen test kits.

59.  It is not in dispute that A has suffered from a serious eczema problem and dust allergy since birth. C has suffered from neonatal respiratory distress which causes choanal atresia. They need special creams and other supplements. H, who has skin allergy, had used similar lotions cost $3,500 a month. The expenses for each of the Children under this item ($3,000 for A, $2,200 for B, and $2,200 for C) are lower than H’s expenses for his special lotion. I am satisfied that the expenses under the item “Others” are not excessive.

60.  H suggested that some health supplements under the Children’s expenses such as “DNA Collagen” were beauty products used by W. He referred to the receipts which were addressed to W, as well as W’s admission that these products are also useful for her and she had used this kind of products.

61.  There is nothing unusual for W, a mother, to purchase supplements for her minor Children and hence the receipts were addressed to her.

62.  It appeared from the questions asked at cross examination that H linked the word “collagen” with advertisements seen at the MTR for beauty products of a different brand for woman. It appeared that the criticism arose from the misconception that “collagen” products are for woman only.

63.  Although “DNA Collagen” products are also useful for woman and W had used this kind of products, it does not mean that the products were not consumed by the Children.

64.  I reject H’s contention that the expenses for health supplements are not the Children’s expenses.

65.  H further complained that the extra-curricular activities expenses are excessive. He suggested that it is not healthy for the Children if their schedules were packed with extra-curricular activities. W contended that the Children were in fact happy attending these activities and had achieved good academic results.

66.  I agree that the expenses under this item are on the high side. Nonetheless, if we discount this item, the other expenses of the Children are within the budget of $67,000 payable by H. Hence, this item would not affect the overall reasonableness of the Children’s maintenance payable by H. W does not seek to claim for an increase of maintenance for the Children.

67.  Turning to H’s fourth point on the increased expenses of the Children as compared to the individual items approved by DDJ To. H accepted that as the Children grow, they have different needs. It is thus normal that their expenses would not be the same as those at the time of the AR Trial. Therefore, it is not a correct approach to restrict the current expenses of the Children under an individual item to the amount allowed at the AR Trial for that item. To reach the conclusion of reasonableness, the Court shall consider the overall picture and take heed to the different needs as a child grows. In the present case, the proper question is whether the reasonable needs of the Children (which was held to be almost 100% borne by H) should be less than the sums granted in the Children Maintenance Order, i.e. $26,000 for A, $22,000 for B, $19,000 for C. The answer is no.

68.  The reasonableness of the above expenses is further supported by the needs claimed by H for X. H claimed that X’s expenses are over $26,380 ($12,693 child expenses plus $13,687 shared general expenses). This is higher than the maintenance payable by H for each of the Children.

W’s earning capacity and expenses

69.  According to the Form E, W earned an average monthly income of $33,000. W claimed that her net income should be $5,000 only as there was a business expenses of $28,000. H opposed.

70.  The final outcome of this application would not be affected even if we take the sum of $33,000 as W’s monthly income, which was slightly higher than her average earning capacity of around $30,000 as assessed at the AR Trial[30].

71.  Counsel for H, Mr Michael MH Leung, had rightly pointed out in [17] of his written closing submission that the AR Decision has essentially held that “H is to be nearly 100% responsible for the 3 daughters’ expenses (needs of $67,318 compared with children’s maintenance of $67,000).” [31]

72.  In view of the above findings on the parties’ earning capacity and the reasonableness of the Children’s expenses, and having considered the evidence as a whole, there is no reason to disturb this ruling.

73.  Mr Michael MH Leung further submitted that:

“129. W is free to spend as much as she wants. But the Court in the AR Trial laid down reasonable spending guidelines in 2019 in accordance with the parties’ pre-divorce lifestyle. While children’s expenses can grow to meet their growing needs, it is unfair and unreasonable for W to have growing needs or to put her personal expenses ahead of that of her children.”[32]

74.  He was correct to state that W is free to spend her money and the Children’s expenses can increase to meet their growing needs. However, with respect, his allegation of unfairness and unreasonableness was misconceived. He failed to take regard to the following:

(1)  It was H who is seeking to pay less to meet the Children’s needs, not W.

(2)  It was held in the AR Decision that H is to be nearly 100% responsible for the Children’s expenses.[33] I have found that there is no reason to disturb this ruling.

(3)  The lump sum maintenance payment was awarded to W for her own benefit but not for the Children. How W spent her money is irrelevant. I refer to the following views of the Court of Appeal in WNWG v PBF [20]:

“20. … In our view, Clause E of the Mediation Agreement clearly provided that the $30 million lump sum payment was paid to the Petitioner by way of “spousal maintenance” as a clean break division of the assets. There is no suggestion whatsoever in the agreement that the Petitioner would be expected to utilize the part of such payments to maintain the children.”

(emphasis in bold added)

75.  Contrary to his allegations, it appears to me that on evidence, it was H who was putting his personal expenses and personal “wishes to fulfil his dream” ahead of the expenses of her own daughters. He unilaterally paid only 15% of the Children maintenance while he continued to have a comfortable life with his fiancée and X. He shut his eyes from his irresponsible acts and laid blames on the others. He claimed that he was entitled to pursue his dream and attained “joy” and “sense of achievement” in the estate agency works. By seeking to cut the Children’s maintenance substantially, he was doing this at the expenses of the Children, ignored the consequences of his own act and his obligations to take care of his own children.

Decision

76.  As it was found above, there was no material change of circumstances justifying a variation of the Children Maintenance Order. The reduction in H’s actual income was self-created. He has a duty to maximise his own earning capacity. There is no change in his earning capacity and he has the financial resources and capacity to meet the Children’s reasonable needs under the Children Maintenance Order. His personal choice to pursue a new career and to have a new family should not do away his responsibilities to maintain his own daughters by paying the monthly maintenance of $67,000. The Summons is dismissed.

77.  There is no reason to depart from the general principle of costs follow the event. H was not successful in this application. On a nisi basis, H is ordered to pay the costs of W at an amount to be taxed if not agreed, with certificate for counsel. This costs order will become absolute if no variation application is lodged within 14 days.

Mr. Eric Leung instructed by Alvin Cheng & Rosaline Choy for the Petitioner

Mr. Michael MH Leung instructed by Massie & Clement for the Respondent

FCMC 7235/2015

[2020] HKFC 101

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 7235 OF 2015

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Decision

(variation of costs order nisi out of time)

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1.  This is the Respondent/Husband’s (“H”) application by Summons dated 11 June 2019 to vary the costs order nisi given in the ancillary relief judgment dated 16 May 2019 (“the Judgment”).

2.  The Petitioner/Wife (“W”) opposed.

3.  The costs order nisi as set out in paragraphs 141-143 of the Judgment is as follows :

“141. I make a costs order nisi that H do pay W’s costs of theancillary relief proceedings, with certificate for counsel, to betaxed if not agreed.

142.W’s own costs be taxed in accordance with the Legal Aid Regulations.

143. Unless there is an application within 14 days to vary, the nisi order shall become absolute.”

4.  The variation sought by H is that he shall only pay 70% of W’s costs of the ancillary relief proceedings or in such proportion as the Court deems fit, with certificate for counsel, to be taxed if not agreed.

5.  Since the 14-day time limit to vary has expired on 30 May 2019, H in his Summons also seeks time extension of 14 days to make the application. Strictly and correctly speaking, H should be seeking  leave to vary out of time.

To vary out of time

6.  H conceded that he has to provide justifiable reason(s) for not making the application within time, as well as to demonstrate merits of the application to vary.

7.  The reason H provided is that, owing to W’s omission in updating her Form H at the beginning of trial, he did not have W’s updated estimated costs to take legal advice and consider whether to apply for a variation. It took time for him to obtain the information from W, hence the delay.

8.  H has written to W’s solicitors on 24 May 2019 requesting for updated estimated costs; but the response received on 27 May 2019 was not helpful. H wrote again to W’s solicitors on 27 May 2019 and 30 May 2019 urging for a reply. It was not until 5 June 2019  H was provided with a rough figure of “not more than HK$2.5 m”.

9.  On 5 June 2019, H’s solicitors wrote to the Court seeking to withhold the costs order nisi being made absolute and to withhold  sealing of the Order dated 16 May 2019; reasons being that H would be applying for an extension of time to vary the costs order nisi. Such request was declined by the Court on 6 June 2019.

10.  On 11 June 2019, this Summons was taken out.

11.  H submits that despite repeated efforts and enquiries, he was not properly informed of the estimated costs to enable him to be adequately prepared for making a variation application within time.

W argues that to vary or not is a consideration based on whether the Court has wrongly exercised her discretion on costs, not on the estimated costs.

12.  Whether or not the information is reasonably required of or necessary for personal reasons, there is plainly no explanation or excuse from H why he did not seek time extension before 30 May 2019, but simply let the time lapse.

13.  Notwithstanding the aforesaid, in order to achieve an overall justice, all matters will be looked at in the round including the length of delay, prejudice on W, merits of the variation etc to decide whether indulgence should be granted to H.

14.  I am satisfied that the delay of 11 days is neither inordinate not inexcusable; there is no substantial or real prejudice on W save for a brief delay in receiving her award.  

Merits of Application

15.  H’s application for variation is premised on a number of grounds/complaints. They can be categorized into five as follows.

Ground/Complaint (1)

While this is a needs case, the Court in the first place has made no provision at all for H’s needs. In further granting costs against H, the Court failed to consider whether H can reasonably maintain himself financially.

16.  On the proper reading of the Judgment, this complaint is plainly groundless. In determining the financial provisions for W and children, the Court has already considered H’s needs, earning capacities and liabilities. As set out in paragraphs 130 and 135 of the Judgment, the Court ensures that H keep his shares in the company to continue with his profit-generating business; and is satisfied that H has sufficient to maintain himself upon the maintenance for W and children. The fact that H is made the payor in ancillary relief claims does not mean no provision is made for him.

17.  The Court found that H has income and financial resources more than he claims; and he would have significant assets to inherit in the foreseeable future. Hence, there are basis to believe that the costs order against H would not render him unable to maintain or support himself.

18.  Further, it is misconceived to premise variation of costs on this ground. If H is so advised and is of the view that the Court has not properly dealt with the case as a needs case in accordance with the law and/or failed to make provision at all for H’s needs, it should be a matter for appeal against the Judgment.

Ground/Complaint (2)

W has failed onmanysub-issuesunder her claims, includingherallegedexpenses, income and liabilities.Therefore,W should bear part ofhercosts forhavingexaggeratedor inflated her claims.

19.  As stated in paragraph 103 of the Judgment, the Court having conducted an overall assessment of W’s alleged needs/expenses  made some downward adjustments in order to achieve a fair and realistic outcome on financial relief. There is no finding against W of any conduct of exaggerating or deliberately inflating whichought to be penalized on costs.  

20.  On W’s estimate of income, the Court having assessed her earning capacity made an upward adjustment. There is no finding against W of any conduct of concealing relevant information or her actual income whichought to be penalized on costs.

21.  Although W has failed on the allegation of loans owed to her mother, it is trite that a successful party to an action should not be ordered to pay any part of the costs of the hearing simply because he has failed to prove all of the allegations, unless it is shown that the failed allegations have caused significant increase in the length or costs of the proceedings or where he/she raises issues or makes allegations improperly or unreasonably. See : Re Elgindata (No. 2) [1992] 1 WLR 1207 CA

22.  It is not shown the failed allegations on expenses, income and loans have caused significant increase in the length or costs of the proceedings.

Ground/Complaint (3)

Wchanged her legal representation 5 times throughout the proceedings.With each change of legal team, costswould need to be duplicated or triplicated.

23.  This is not a reason to vary a costs order unless there is evidence of negative conduct in making changes of legal representation for ulterior purpose. All along W was legally-aided, the changescould only take place with the approval of the Director of Legal Aid.

24.  The only relevance to costs is whether there are unreasonable or unnecessary duplication of work incurring extra costs. This is a matter for taxation.

Ground/Complaint (4)

The Court drew adverse influence against H for lack of full and frank disclosure without drawing the same influence against W for her insufficient financial disclosure. W’s conduct should be taken into account in making a costs order.

25.  First of all, the Court did not declare any approval of W’s last-minute disclosure. On the contrary, as seen in paragraph 75 of the Judgment, the Court has looked into the nature of W’s non-disclosure. It was an omission to update her employment and income in a timely manner.

26.  Having differentiated W’s conduct with H’s serious deviation from the standard of disclosure required, the Court decided to only draw adverse influence against H.

Ground/Complaint (5)

W proposed a departure from equal division in her favor based on, inter alia,H’sgross and obviousconduct. The proposal was rejected by the Court.

27.  H submits that the issue of gross and obvious conduct was unreasonably and improperly made by W. I agree.

28.  At the beginning of the trial, the Court has already discussed with parties and reminded W of the following: W should not pick over the events of a marriage to argue that H was more to blame for what went wrong save in the most obvious and gross cases; in respect of conduct which has no financial impact whatsoever, the relevance would be less apparent; and parties would not be permitted to embark upon costly and time-wasting investigation on it.

29.  During the trial, oral examinations regarding the issue of gross and obvious conduct were kept within bounds under the Court’s monitor and management. The time spent on cross-examining H on this issue was not of a significant amount.

30.  However, as H rightly pointed out, W’s allegations of gross and obvious conduct against H were weaved throughout her entire Section 7 Narrative Affidavit, taking up a substantial part of the lengthy document. Although W is the successful party, I accept that H should not be ordered to pay for costs of and occasional by the said issue which was unreasonably and unnecessarily pursued by W.

Conclusion

31.  The merits under Ground/Complaint (5) should be properly reflected in the costs order. Looking at matters in the round. I will grant leave for H to vary out of time.

32.  H’s suggestion of reducing 30% of his liability for W’s costs is unjustified. There is no explanation on the basis of his evaluation.

33.  Since the increase of costs occasioned by the unnecessary issue of gross and obvious conduct is a relatively small part of the entire ancillary proceedings, I find that a 10% deduction is sufficient and fair. 

Order

34.  Leave for H to apply to vary the costs order nisi made on 16 May 2019 out of time.

35.  The costs order nisi made on 16 May 2019 be varied as follows:

(i)   H do pay 90% of W’s costs of the ancillary relief proceedings, with certificate for counsel, to be taxed if not agreed.

(ii)  W’s own costs be taxed in accordance with the Legal Aid Regulations.

Costs

36.  Although H managed to resist W’s opposition and has achieved some positive result of his application, he should not be entitled to costs. Not only that H has failed on most of the grounds taken, he is seeking indulgence to vary out of time when his excuse of delay is unsatisfactory, as discussed in paragraph 12 above.

37.  I make the following costs order nisi :

(i)  There be no order as to costs of the application.

(ii)  W’s own costs be taxed in accordance with the Legal Aid Regulations.

(iii)  Unless there is an application within 14 days to vary, the nisi order shall become absolute.

FCMC 7235/2015

[2019] HKFC 129

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 7235 OF 2015

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Decision

(Ancillary Relief)

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1.  This is the hearing of the Petitioner/Wife’s (“W”) claimagainst the Respondent/Husband (“H”) for ancillary relief for herself and the 3 children of the family.

Relevant Background Facts

2.  W and H were both born in Hong Kong. W was born in January 1984, now aged 35; H was born in March 1979; now aged 40.

3.  They married in May 2010 when W was 4-month pregnant. 3 daughters were born in the wedlock respectively in September 2010, August 2012 and February 2014, now aged 8, 6 and 5.

4.  W was a kindergarten teacher until she became a full time mother in 2011 after the birth of the 1^st daughter. During 2013 and 2015 she has worked again from time to time on a part-time basis. W is now an insurance agent.

5.  In October 2004 when H was only at his mid-20’s, he started to work as a sales manager for his family company which imports and exports plastic flowers (“A Ltd.”). In June 2005 he became a 50% shareholder of A Ltd; his mother owned the other 50% of shares. H was at that time also appointed a director until he resigned in around December 2015. According to the Single Joint Expert Report, valuation of H’s shares in A Ltd is $4,390,000. 

6.  The former matrimonial home at Banyan Garden on Lai Chi Kok Road Kowloon (“the Former Matrimonial Home”) was purchased in 2012 in H’s sole name. It was purchased with a down payment of $3,192,000 and a mortgage loan with HSBC for $4,788,000.

7.  The Former Matrimonial Home is a property of approximately 1,000 sq. ft.; H is still living there by himself. Valuation of the Former Matrimonial Home is agreed at $13,250,000; outstanding mortgage loan at the time of trial is $4,311,334.

8.  Shortly after W and the 3 daughters moved out of the Former Matrimonial Home in about May/June 2015, they have been living with W’s parents in their property which is a 400 sq feet apartment. Since June 2018, W has employed a domestic helper to assist in taking care of the 3 daughters when W is at work.

9.  In June 2015 W issued Petition for Divorce on the grounds of unreasonable behavior. It was undefended; decree nisi was granted on 1 April 2016.

10.  By Order dated 18 June 2017, W and H were granted joint custody of the 3 daughters, with sole care and control to W and defined access to H.  

11.  There is no question that the marital standard of living is average middle-class but not luxurious or lavish. In August 2016, the Court granted maintenance pending suit in the sum of $60,000 ($18,000 for W and $42,000 for the 3 daughters). H provided undertakings to continue to pay for the school fees, school bus and school books of the daughters and for the mortgage, management fees, rates and government rent of the Former Matrimonial Home (“the MPS Order”). Of the MPS award of $60,000, $15,000 was ear-marked as monthly rental expenses.

12.  Unfortunately, H did not abide by the MPS Order. In December 2016, H unilaterally reduced the monthly MPS payment of $60,000 to $15,000, and has persistently been late in paying for the daughters’ school fees, school bus, and school book fees.

13.  There were Garnishee proceedings and an application for Income Attachment Order in January 2017 for the recovery of the outstanding arrears in maintenance and to secure future payment of maintenance. Due to H’s refusal to abide by the undertakings provided to the Court under the MPS Order, W has also issued Committal proceedings against him in April 2017. All these proceedings are still pending.

LegalPrinciples

14.  The law on how to exercise the Court’s powers on ancillary relief have become well-settled after the Court of Final Appeal decision in LKW v DD [2010] 6 HKC 528. Mr Justice Ribeiro PJ reiterated the four underlying principles: (1) fairness; (2) the absence of discrimination; (3) the upholding of the concept of the yardstick of equality; and (4) the rejection of a need for a minute retrospective investigation of parties’ finances. The case of LKWhas also laid down the four-step approach to be adopted in determining ancillary relief.

15.  The first step is to identify assets and financial resources.

“71. The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing. In particular, under s.7(1)(a), the court must have regard to ‘the income, earning capacity, property and other financial resources’ which each of the parties ‘has or is likely to have in the foreseeable future’. The object will of course be to compute the net financial resources, taking account of all material liabilities. At this stage, the court need not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets.”

16.  The second step is to assess the parties’ financial needs.

“77. As s 7(1)(b) indicates, the process of evaluating ‘needs’ involves assessing the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future in the light of present and foreseeable resources. The matters referred to in s 7(1)(c) to (e), that is, standard of living, age and disability, will often be relevant. As Lord Nicholls put it in White:

‘Financial needs are relative. Standards of living vary. In assessing financial needs, a court will have regard to a person’s age, health and accustomed standard of living.’

78.  And in Miller/McFarlane his Lordship stated in respect of ‘needs’:

‘When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party. Most of these needs will have been generated by the marriage, but not all of them. Needs arising from age or disability are instances of the latter.’

79. Baroness Hale stressed that the parties’ needs should be ‘generously interpreted’.  Accordingly, in trying to ensure that each party and their children have enough to supply their needs set at a level that equates, insofar as resources allow, to the standard of living they enjoyed during the marriage, those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances.”

17.  The third step is to decide whether the “sharing principle” is applicable.

“80. If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the ‘needs’ question previously considered to be dealt with under that principle (as pointed out by Sir Mark Potter P in Charman v Charman (No 4) cited above). In other words, the court should not make an immediate allocation but should return to ‘needs’ for them to be dealt with alongside all other material factors in the processes described below as Steps 4

……

82. The point reached at this third stage of the s 7 exercise therefore involves the court deciding that the sharing principle applies and taking the view that the total assets should be divided equally between the parties unless there is good reason, capable of articulation, for departing from an equal division. It is worth emphasizing, however, that as pointed out by Lord Nicholls, the court will often ultimately not arrive at an equal division."

18.  The fourth and final step is to consider whether there are good reasons for departing from equal division.  

Issues for Determination

19.  Adopting the 4-step approach, the following are issues for determination.

20.  Identification of assets and financial resources:

(a)  What are the disclosed assets?

(b)  Did H has hidden assets?

(c)  Whether there was a $1,000,000 advancement by H’s parents for the purchase of the Former Matrimonial Home in August 2012? If yes, whether it was a loan or actually a gift to H or a “soft loan” which need not be repaid?

(d)  What are parties’ income and earning capacity?

21.  Assessment of the parties’ financial needs and obligations:

(a)  Whether H’s loans from his parents (apart from the $1,000,000 advancement aforementioned) represent “soft loans” which need not be repaid?

(b)  Whether W’s loans from her friends and mother represent “soft loans” or do they have to be repaid?

(c)  What are the reasonable needs of H, W and the 3 daughters?

22.  Whether the “sharing principle” is applicable?

23.  Whether there are good reasons for departing from equal division?  

(a)  Whether H’s conduct constitutes “gross and obvious” conduct that should be considered as a departing factor from equality?

(b)  Whether W’s continuing contribution as the primary carer of the 3 daughters for future years should be reflected as a departing factor from equality?

24.  What are the ancillary relief orders that should be made for the parties and the 3 daughters in light of all the relevant circumstances and considerations including the section 7 factors of MPPO?

(a)  Should there be an “add-back” by W of the sum of $1,000,000 withdrawn from her bank accounts between December 2014 and October 2015?

(b)  How should the arrears of interim maintenance payment be reflected in the ancillary relief order?

W’s Open Proposal

25.  W’s open proposal is for H paying her a lump sum, and periodical maintenance payment for herself and for the 3 daughters. 

26.  According to W, total matrimonial assets should be around $18,000,000; this includes net sale proceeds of the Former Matrimonial Home, H’s shares in A Ltd valued at $4,390,000, and H’s hidden assets of over $4,400,000. After deducting her loan liabilities of $400,000 therefrom (although the amount of loans has up to trial accumulated at $949,500), there should be a sum of $17,600,000 available for distribution.

27.  W said there should be a departure from equal division whereby W is entitled to 70% and H 30% of the family pot. Hence W is entitled to a lump sum payment of $12,320,000 (70% of $17,600,000).

28.  It is proposed that the Former Matrimonial Home be sold at not less than $13,250,000. After deducting the outstanding mortgage as well as conveyancing and related expenses, the net sale proceeds (around $8,850,000) shall be paid to W as part of the lump sum payment.

29.  H should pay to W the balance of the lump sum (around $3,470,000), and an extra sum of $400,000 being equalization money for W’s loan liabilities.

30.  H shall pay to W periodical maintenance payment of $10,000 per month during the joint lives of the parties or until W remarries, whichever is the earlier.

31.  H shall pay to W $67,000 per month as periodical maintenance payment for the 3 daughters ($28,000 for the eldest daughter, $21,000 for the 2^nd daughter and $18,000 for the youngest daughter) until each child reaches the age of 18 or completes full time education, whichever is the later.

32.  W requests the said periodical maintenance payments for W and the 3 daughters to be secured against a reasonable amount to be paid by H into court.   

33.  H should also pay back to W the arrears of interim maintenance under the MPS Order, with interest.

H’s Revised Open Proposal

34.  There is a huge gap between parties’ open proposal. H’s open proposal makes no provision for lump sum payment nor periodical maintenance payment for W. His proposal deals mainly with maintenance for the 3 daughters.

35.  H agreed the Former Matrimonial Home be sold. Out of the net sale proceeds, $1,000,000 will be used to repay the loan to his parents ($500,000 to his father and $500,000 to his mother).

36.  Then 2 respective sums of $3,024,000 and $1,260,000 will be ring-fenced as the Children’s Fund and the Rent Fund.

37.  The remaining sum of about $2,800,000 is to be kept by H to repay his outstanding loans and liabilities including his legal fees.

38.  Regarding the Children’s Fund of $3,024,000, H contends that it is sufficient for the 3 daughter’s living and education expenses for 7 years, calculated on the monthly sum of $36,000. H proposes the said sum of $3,024,000 be paid into Court with a fixed sum of $36,000 paid out to W each month. Any shortfall is to be borne by W.

39.  Regarding the Rent Fund, it will be solely used for the rental of a property for W and the 3 daughters for the next 7 years, calculated on the basis of $15,000 per month. Any shortfall is to be borne by W. The said sum shall be paid into a bank account to be opened and held in the joint names of H and W.  

40.  H also proposed the following as future maintenance for the 3 daughters. Upon the expiration of 7 years, H do pay W a sum of $36,000 per month for maintenance of the 3 children (i.e. $12,000 for each child) until each child attains the age of 18 or finishes full-time education, whichever is the later. Any shortfall is to be borne by W. The amount of maintenance would be adjusted by reference to the Hong Kong Consumer Price Index over the previous 7 years.

41.  H proposed that the arrears of interim maintenance be dealt with and reflected in the outcome of the ancillary relief order.

Discussion & Analysis

Identification of assets and financial resources

(a)  What are the disclosed assets?

42.  There is a significant difference in parties’ respective calculation of assets for distribution.  The main item of disagreement is whether H’s shares in A Ltd should be excluded from the matrimonial pot. I shall consider what approach to take regarding H’s business.

43.  A Ltd was incorporated in around June 2015, taking up the business of H’s father. A Ltd started off with 3 to 4 employees; currently there are 9 employees including H, his father and mother. There should be no question that it is a small family-run business.

44.  H relied on CCYM v PWH, unreported, FCMC 1544/2103 2 February 2015 where HH Judge Melloy has dealt with the same issue, making reference to 17.61 of Rayden (18^th edition) and the commentary at p 834 of the family law book Butterworths Family Law Service.

45.  The discussion can be summarized as follows:

Small companies of [the nature of a small family-run business] are generally only worth what someone is willing to pay for them. The Court must be realistic in dealing with figures for valuations, they are not in all cases the equivalent of cash, and in some cases, the Court must recognize that it may be impossible with any reasonable precision to place any value on a shareholding. It is necessary to look at the commercial reality of the situation beyond simple valuation exercises and consider whether there is a ready market for the shares or any business assets, how many could be raised by any of the business, and the impact that would have on companies as going concerns.

46.  As stated in paragraph 31 of the Expert Valuation Report, the assessments of value with respect to A Ltd are considered in accordance with the International Valuation Standards, which defines market value as the “estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction”.

47.  H only owns a 50% share and there was no intention to sell. The facts of the present case have many similarities with CCYM v PWH. I adopt the observation and finding therein and will not place H’s equity interest in the matrimonial pot for division purpose.

48.  However, since the value of H’s shares lies primarily in its income-producing ability, this is highly relevant in the assessment of H’s income and earning capacity, particularly in light of the fact that A Ltd has been generating profits over the review period (paragraph 30 of the Expert Valuation Report). Further, H’s actual role and relationship with A Ltd will also be considered in achieving the overall fairness.

(b)  Whether H has hidden assets?

49.  W said H has hidden assets in the amount of over $4,427,226 :

$3,518,000 + $909,226

50.  There were a number of cash withdrawals of significant sums by H from his HSBC premier account since November 2014, shortly before separation and at a time when W had already threatened divorce. Within the 17 months from November 2014 through March 2016, there were altogether 32 withdrawals which amount to $3,518,000. Amount of each withdrawal ranged from $13,000 to $600,000.

51.  Further, there were significant cash withdrawals by H from hisforeign exchange account with HSBC. Within the 7 months from June to December 2015, there were altogether 13 cash withdrawals of foreign currencies which amount to an equivalent of HK$909,226.

52.  In H’s 1^st Answer, his explanation for all these cash withdrawals was that it was for exchanging foreign currency for clients of A Ltd,  for personal use and business expenses.He explains that “when such clients travel to Hong Kong or China to do business with the Company, whether on sourcing trips or otherwise, the [Husband] would assist the clients in exchanging the foreign currency from their home country (e.g. CHF, EUR, USD) into HKD or RMB at the best possible rate.  At times, the [Husband] would assist business partners with exchanging RMB in USD or EUR for their further business travels.” 

53.  W challenged that there is noevidence of corresponding deposits by these so-called “clients” to either provide H with the foreign currency for exchange or to subsequently reimburse H for the same.

54.  H testified that about 20% of the withdrawals were spent on personal use and is no longer traceable; 80% of the withdrawals (over $3,500,000) were for foreign currencies exchange. H produced at trial a list of entries with an attempt to matching withdrawals of $2,778,000 with deposits of $2,730,608. However, the bank statements which H referred to did not show corresponding entries. The deposits are mostly in very small amount of thousands; H explained that deposits were made in small sums to avoid bank charges.

55.  H said it would be very difficult to explain and match each withdrawal in the absence of transaction records. When asked why he did not keep record, he said there were records in his mobile phone but could no longer be retrieved, and there were records on some small pieces of notepaper but were already thrown away. H denied having hidden any money.

56.  Given the large amount and frequency of the withdrawals, the alleged foreign currencies exchange must be assessed cautiously and viewed with reservation. H said the service could not be provided by using A Ltd’s bank accounts because of auditing problem, so he had to use his personal accounts. H said he had no gain in providing the service, sometimes he even suffered loss due to fluctuation of currency exchange rates.

57.  While it is understandable that at times H would offer to exchange some foreign currencies with his overseas clients who needed some petty cash, it is hard to accept the scale of service involving millions of dollars.

58.  While H on one hand stressed the importance and necessity to provide such service in order to maintain business relationship with his overseas clients, on the other hand H had purportedly stopped the foreign exchange service by March 2016. When cross-examined on this, he said he did not want to provide the service any longer because he was afraid that he would have to explain these transactions in Court.

59.  I reject H’s evidence of the foreign exchange service. I find that H has dissipated the sum of around $3,500,000. W proposed to have the dissipated sum added back to the ‘matrimonial pot’ for distribution. However, there is no evidence of the whereabouts of this sum of money, it is therefore more appropriate to deal with the dissipation by considering a claw-back from H’s side of his balance sheet.

(c)  H’s alleged loan of $1,000,000

60.  According to H, in order to pay for the down payment of $3,192,000 in the purchase of the Former Matrimonial Home in August 2012, he had borrowed $1,000,000 from his parents ($500,000 from father and $500,000 from mother). W disputed this. The issue is whether the advancement was made; if yes, whether it was a loan, or actually a gift to H, or a “soft loan” which need not be repaid.

61.  Despite W’s requests, H has not provided any documentary evidence in support. There are no bank statements showing deposits of the said sum into H’s bank account. On the other hand, evidence showed that the cheque in the sum of $698,663 being further deposit payment was made by H to his solicitors, not by his parents. 

62.  In the attempt to explain why there were no documents to show the transfer, H under cross-examination said his parents gave him the $1,000,000 in cash. His parents used to transact in cash, and they always keep huge amount of cash in the safe at home. H further explained that he did not deposit the money into his bank accounts because this is a businessman practice. I find H’s evidence wholly incredible.

63.  W contended that there was no reason why H needed to borrow as much as $1,000,000 from his parents at the time of the acquisition of the Former Matrimonial Home. Not long before the purchase of the Former Matrimonial Home in August 2012, H has sold a self-owned property in May 2012 for $4,750,000. After the discharge of outstanding mortgage of around $2,000,000, H has received a net sum of around $2,750,000.

64.  During cross examination, H changed his evidence and said that the $1,000,000 loan was not directly for the purchase of the Former Matrimonial Home but to pay for other expenses. This is contradictory to what he said in his Form Es and Affirmations.

65.  It is noteworthy that since the purported advancement, there has been no repayment by H notwithstanding that he has received from A Ltd the dividends of $300,000 in 2014 and $400,000 in 2016. There was never any demand by his parents for repayment. 

66.  By reason of the aforesaid, I reject H’s evidence that his parents have advanced the sum of $1,000,000. Even if they have, I would still regard it as a gift to H as opposed to a loan. H testified under cross-examination that when the money was given to him, his father said “你都大個仔，成家立室啦…..”.  I do not think such affectionate and earnest expression of a father sits well with lending of money to a son; it is more like a token of kindness and gifting by a senior member of the family.

67.  By reason of the aforesaid, I reject H’s allegation that he had borrowed $1,000,000 from his parents in August 2012. The alleged sum is therefore not a liability of H to be deducted from the sale proceeds of the Former Matrimonial Home.

(d)   What areparties’income and earning capacity?

 H’s Income/Earning Capacity

68.  As a 50% shareholder, H works for A Ltd as the Director of Sales, earning $54,500 per month net of MPF. Taking into account an extra month’s bonus, H earns around $59,000 per month net.

69.  Historically, as a director and shareholder of the Company,H was paid director’s remuneration of $59,167 per month for the year 2014/2015.  Although he did not receive any dividends for 2016, he did receive dividends of $300,000 in 2015 and had received dividends of $400,000 in 2017.

70.  The Court’s consideration is not limited to income but what is actually H’s earning capacity. As discussed in paragraph 48 above, the value of H’s shares in A Ltd lies primarily in hisincome-producing ability. Unlike what H describes the family business as a ‘sunset’ or ‘dying’ business, A Ltd has been generating profits and declaring dividends. H’s father was still willing to inject more than $5,000,000 as a director’s loan into A Ltd; H himself was willing to loan to A Ltd for more than $1,200,000. Entertainment expenses have been increasing over the years which means A Ltd continues to be actively marketing for business.

71.  H has been the director of the Company until he resigned in around December 2015, shortly after W issued the Petition. H said it was his father who requested him to resign as a result of his unsatisfactory performance due to the divorce proceedings. When the arrangement is considered against timing and cause, I agree with W’s contention that the resignation is highly artificial and more likely than not H is still de facto in control of A Ltd. There is evidence that H is treating the business as his own; the Former Matrimonial Home was pledged as security for a HSBC Export Credit Facility security for A Ltd. It is also within reasonable expectation that H would one day succeed her mother’s interest and own the entire business.

72.  In considering H’s financial capacity, onesignificant feature in the present case is the non-disclosure of his actual finances. This is evident from H’s conduct throughout these proceedings beginning with his 1^st Form E and his 1^st Affirmation contending that “I have only one bank account in Hong Kong…”. 

73.  This is a blatant lie. HH Judge G. Chan had the following comment in her MPS Judgment :-

“29.  … A closer look into the monthly statements of his Main HSBC Premier Account, however, will show that what he alleges is plainly untrue, because the said monthly statements reveal that he has/had at least 4 other premier accounts, a SmartVantage Account, an Advance account, a FCY current account, a SEC margin settlement account, all held with HSBC (“the Undisclosed Accounts).  He has failed to provide the monthly statements of these accounts… I am thus of the view that the husband has failed to make full and frank disclosure for the purpose of this hearing.”

74.  H had also failed to disclose at that time that he had three additional accounts held jointly with his 3 daughters respectively, all of which he accepted under cross-examination that he had sole control. 

75.  Indeed, W had some last minute disclosures regarding her employmentand income which she could have updated much earlier.However, such late disclosure pales in comparison to H’s deliberate non-disclosure of bank accounts.  It therefore lies ill in the mouth of H to complain about W’s late disclosure when he himself has failed to observe his duty for full and frank disclosure.

76.  It goes without saying that parties in matrimonial proceedings have an absolute, positive and continuing duty to give “full and frank disclosure of his or her own means”. Deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.” See: Rayden and Jackson on Divorce and Family Matters, 18^th Edition, Chapter 17.28; Baker v. Baker [1995] 2 FLR 829; J-P C v J-A F [1955] P215, [1955] 2 All ER 617 CA

77.  The obligation was also summarized by Lam J. in L v. L, HCMC 1/2003 (FCMC 9860/2001)(18 November 2005), at §§197-8  at p.81F-S where he stated that:

“197. … A good litmus test for distinguishing a bona fide fulfillment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party…

“198. It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek. Too much legal costs and judicial time had been spent on such wasteful exercise. As stressed by Mr. Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means. To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored. That by itself is a breach of the positive duty to give disclosure. As Coleridge J. put it recently in J v V [2004] 1 FLOR 1042 “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.””

78.  Mostyn J in NG v SG (appeal: non-disclosure) [2011] EWHC 3270 (Fam)had summarized the approach on a parties’ non-disclosure as follows:-

“16. Pulling the threads together it seems to me that where the court is satisfied that the disclosure given by one party has been materially deficient then:

(i) The Court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden.

(ii) But such inferences must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the Court is satisfied he has not got.

(iii) If the Court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in the broadest terms.

(iv) In making its judgment as to quantification the Court will first look to direct evidence such as documentation and observations made by the other party.

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(viii)  The Court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than that the Court should be drawn into making an order that is unfair to the Claimant.”

79.  By reason of the above, the Court is entitled to draw adverse inference that H’s income and earning capacity is much higher than what he claims. This inference is also supported by the following. 

80.  H was the main breadwinner of the family and during the marriage he had been paying the mortgage, management fees, government rates and rent, and utilities for the Former Matrimonial Home; the daughters’ school fees, school bus expenses and interest class fees, and their medical insurance policies. On top of this, he would pay to W lump sums to cover all other expenses.According to H, in 2015these expenses alone were approximately $35,000 per month.

81.  Further, between 2011 and 2015 H had paid the following lump sums to W:-

2011: $250,000 ($20,833 per month);

2012: $250,000 + $50,000 ($25,000 per month);

2013: $350,000 + $50,000 ($33,333 per month);

2014: $600,000 + $60,000 ($55.000 per month)[1];

2015: $200,000 (until May 2015) ($40,000 per month).

82.  The above showed that even on H’s case, he had been living beyond his means.  Despite the shortfall, the balance in H’s HSBC Premier Account has increased from about $881,667 in December 2014 to $2,042,279 in May 2015. H’s credit card liabilities in 2015 was only $40,000.

83.  All these beg the question of where did the shortfall come from in all these years.  The logical inference must be that H has some other financial resources.  

W’s Income/Earning Capacity

84.  W is an insurance agent; income is commission-based. Her average monthly income for the 10 months from December 2017 to September 2018 inclusive is $38,124. This has taken into account a monthly bonus of $10,000 which W is entitled to only in the first 18 months of service; such term will cease by June 2019.

85.  W said it is unlikely she can maintain this income in future. In the past 10 months, she has been getting subscriptions through her close friends and family (including purchasing policies for herself and the daughters) which is reflected in a spike of her earnings during this time. W does not have that many other friends who can purchase policies from her.

86.  W contend that her earning capacity should also be viewed in the light that she is the primary carer of the 3 daughters. This may limit the amount of time that she can meet clients. W’s estimate of her income in future will be around $20,000 to $25,000 per month.

87.  Having considered the above, I think it is realistic that W would be able to earn $30,000 per month on average. Although W has to attend to children matters, she has the assistance of a domestic helper; working hours of an insurance agent is flexible. With time and experience in the career, W should be able to build up her clientele instead of relying solely on close friends and relatives.  

 Needs of the Parties and Children

Obligations & Liabilitiesof H and W

H’s loans of $1,700,000

88.  Apart from the said purported loan of $1,000,000 in 2012, H said he has obtained the following loans from his parents during 2016 and 2018 which amount to a total of $1,700,000:-

$300,000 from his father on 17 May 2016;

$100,000 from his mother on 16 November 2016;

$200,000 from his mother on 28 September 2017; 

$250,000 from his mother on 15 August 2018;

$200,000 from his mother on 11 October 2018; and

$650,000 from his mother on 26 November 2018

89.  The dispute is whether the above loans are “soft loans” which are not real liabilities of H.

90.  Each loan was supported by a respective Personal Loan Agreement signed by H and either his father or mother.  The loans are purportedly interest free and can be repaid either in one lump sum or in monthly instalments determined by H “when he is capable” on or before a specified date. There are no collateral and no penalties for non-payment. 

91.  Neither of H’s parents has been called as witnesses or filed any Affirmation in support of H’s allegation of the loans. The Court is entitled to draw the necessary adverse inferences against H when an available witness to a material fact could have been called but was not (see:  Ip Man Shan Henry v. Ching Hing Construction Co. Ltd (No.2) [2003] 1 HKC 256 at 307B paragraphs 155 and 156).

92.  These loans appear artificial. Prior to the divorce, no loans were necessary; H could even loan to A Ltd the sum of $600,000 in 2015. H explained that the loans were used for paying legal fees. There are no documents in support of payment, and the amount of loans exceeded the figures in Form H (Estimate of Costs) dated 29 November 2018.

93.  In breach of the MPS Order, H had only been paying maintenance of $15,000 per month. Therefore, with his salary income and dividends, it is hard to understand why he needed such large  amount of loans.

94.  I have grave doubt on whether those advancements were loans. Even if they were, the circumstances of the loans suggest that there is no pressing need for H to repay. I find them “soft loan” and will not regard them as a real liability of H (see: WLK v. TMC (FACV No. 21 of 2009)(CFA; 12 November 2010).

W’s loans of $949,500

95.  Due to the H’s neglect to comply with the MPS Order, W had to borrow from her friends in order to maintain herself and the 3 daughters. Up to trial, the loans have accumulated to the total sum of $949,500. They comprised $759,500 from her 8 friends and $190,000 from her mother.

96.  The loans from W’s friends are supported by loan receipts and are reflected in the respective deposits into W’s bank accounts.  The repayment terms are usually within 2 to 2½ years, interest free.

97.  H seeks to argue that these are “soft loans”, I disagreed.  There is a significant difference between H’s loans and W’s loans, W borrowed from her friends where H’s loans are from his parents.  Unlike a parent, a friend does not have any filial obligation to their child and it is highly unlikely that a friend would not seek repayment of the loans of significant amount.  

98.  I find that W’s loans from her friends of $759,500 (but not her mother’s) are real liabilities. However, I do not think it is appropriate to deduct this sum directly from the matrimonial pot. It should be dealt with in connection with H’s pay-back of arrears of maintenance.  Otherwise, there will be double recovery.

 What are the parties’ and thedaughters’reasonableneeds?

99.  Needs of the parties and the 3 daughters have to be assessed with reference to the standard of living enjoyed by them before the breakdown of the marriage.

100.  W has detailed extensively the standard of living enjoyed by the family during the marriage in her 8^th Affidavit. The family enjoyed private medical services;expenses for the birth of 3 daughters in private hospital, confinement lady fees and dry Chinese nutritional food, family holidays (at least twice a year) to places like Bali, Seoul, Australia, USA and Mexico; meals out of home at fine dining restaurants or hotels, The family had a use of a private vehicle and would take taxi if not driving.  The family hashad use of 2 domestic helpers. H gifted to the Wife luxurious presents such as earrings, rings, watches, handbags and cosmetics (like Chanel, Dior, Valmont etc);

101.  H also provided W with a supplementary credit card with limit of $84,000 for her and the children’s spending. Because of W’s genetic health problem with her family's history of the breasts tumours, and the eldest daughter also has eczema, a lot of attention was paid to maintain health care.  The family would buy a lot of expensive nutritional food and health supplements and oils. 

102.  As observed by HH Judge Grace Chan in the MPS application, I agree that the family enjoyed a living standard comparable to an average middle class which is abundantly comfortable but not of a luxurious style.

The needs of W and the 3 daughters

103.  At trial W submitted the following updated table of the  needs/expenses for herself and the 3 daughters. Although H did not challenge each and every item during cross-examination of W, it does not prevent the Court to make necessary adjustment in order to achieve a fair and realistic outcome on financial relief. I have made the following adjustments.

General Expenses (shared among 4 persons):-

Item	W’s Estimate	Remarks
Mortgage rental inclusive of  management fees	$14,332     $18,000	Assuming that the Wife (after this trial) has to purchase a place for herself and the Children in Ma On Shan for around $9.5 million and to obtain a mortgage (with $6 million down payment) that she will be responsible for repayment. implausible to purchase, a realistic outcome is to rent a property
Utilities	$1,500
Management fees	$1,500	Assuming that a property is purchased.
Food	$16,000     $12,000	excessive
Household Expenses	$3,000
Car Expenses/Travelling Expenses	$4,000	Assuming that the Wife will purchase a vehicle for the family in 2019 and these are the expenses for fuel, licenses and insurance.
Domestic Helper (salary, provision for food)	$6,500    5,500	The Wife intends to employ a domestic helper so that she can return to gainful employment earning approximately $10,000 to $15,000 per month. reasonably required so that W can work
Subtotal	$46,832     $44,000	shared among 4; each share is $11,000

     W’s Personal Expenses:

Item	W’s Estimate	Remarks
Meals out of Home	$5,000        $3,000	excessive
Transport	$3,500        $1,000	provided for under general expenses
Clothing/Shoes	$2,500       $1,500	excessive
Personal Grooming	$2,500       $1,500	excessive
Entertainment	$5,000       $2,000	excessive
Holiday	$2,000      $1,000	excessive
Medical/Dental	$1,500
Others : mobile phone, monthly fees, ipad, insurance for W $2,400	$4,442      $3,400	excessive         *MPF of $1,500 not treated as expenses, relevant to ascertaining net monthly income
Subtotal	$15,500   $14,900

Children’s Expenses

Item	Amount (eldest child)	Amount (2nd child)	Amount (youngest child)	Remarks
School fees	$3,850	$3,850	$2,158	currently reimbursed by H
Extra Tuition Fees	$4,500 $2,500	$3,000 $1,500	$350	excessive
Books/Stationary	$600 $350	$600 $350	$350
Transport to School (including school bus) Other transport	$1,275 $200	$1,275 $200	$960 $200
Medical	$2,500 (including Chinese medicine and Eczema)	$500	$500
ECA	$2,250 $1,500	$950	$950	excessive
Entertainment/Presents	$1,000 $500	$1,000 $500	$1,000 $500	excessive
Holidays	$300	$300	$300
Clothing/Shoes Uniform	$300 $500$100	$300 $500$100	$300 $350$100	excessive
Insurance	$518	$686 + $2,028	$646 + $2,422	see: para 104
School Lunches	$350	$350	$0
Others (creams, oils, supplements	$2,500 $1,000	$1,750 $500	$1,750 $500	excessive
Subtotal	$20,643 $15,243	$17,289 $11,261	$12,236 $7,814
Total for Children’s Expenses				$50,168 $34,318

104.  H complained that in these difficult times, W should not have purchased insurance policies for herself and the Children. W explained that since she and her family have a history of breast cancer and it is cheaper and cost-effective to purchase the policies now whilst they are young. I do not think it is necessary to purchase life insurance at high premium at their young age; there are already medical insurance taken out for the 3 daughters. I believe it is more probable that W purchased the insurance plans  to meet the minimum target value so W is entitled to the bonus of $10,000.

105.  Taking into account that General Expenses of $44,000 are shared among 4, each person’s share would be $11,000per month.  Hence, W’s expenses are $23,208 per month (i.e. $11,000+$14,900); total Children’s expenses is $67,318 per month with the following breakdown:

eldest daughter : $26,243per month (i.e. $11,000+$15,243);

2^nd daughter : $22,261 per month (i.e. $11,000 + $11,261); and

youngest daughter : $18,814 per month (i.e. $11,000 + $7,814)

H’s Needs

106.  H’s needs are set out in his 2^nd Form E dated 17^th October 2017 and has not been updated. I have made the following adjustment based on his reasonable needs upon sale of the Former Matrimonial Home.

General Expenses:

Item	H’s Estimate	Remarks
Mortgage Rental inclusive of management fees	$14,880$15,000	Assuming that the Husband either rents an apartment for himself or purchases a property for himself and mortgage repayments of $14,880 per month. implausible to purchase, a realistic outcome is to rent a property
Utilities	$4,000$1,500	excessive
Management fees	$1,879
Food	$3,000
Household Expenses	$500
Car Expenses/ Travelling Expenses	$3,500    $3,000	excessive
Others	$1,500
Subtotal	$29,269    $23,000

Personal Expenses

Item	W’s Estimate	Remarks
Meals out of Home	$3,000
Transport	$2,000  $1,000	Provided for under general expenses
Clothing/Shoes	$1,000
Personal Grooming	$200
Entertainment	$500
Holiday	$1,000
Medical/Dental	$300
Insurance Premia	$1,946
Subtotal	$9,946 $8,946

Therefore H’s reasonable expenses should be no more than $31,946 per month (i.e. $23,000 + $8,946).

Whether the “sharing principle” is applicable?

107.  Both parties agree that this is a “needs” case. It is therefore unnecessary and impractical for H to pursue any argument against sharing based on short marriage and pre-marital asset.

108.  Both parties are young, H is only 40 and W only 35; the 3 children are still at their young age. Parties’ needs will have to be met not only from the family pot, but also from parties’ respective income.  A ‘clean break’ is impossible.

Whether there are good reasons for departing from equal division?

109.  W proposed a departure from equal division in her favor based on (1) H’s conduct; and (2) W’s continuing contribution as the primary carer of the 3 daughters for future years.

Whether H’s conduct constitutes “gross and obvious” conduct that should be considered as a departure factor from equality?

110.  W contends that H’s misconduct throughout the marriage constituted “gross and obvious” misconduct that is inequitable to disregard. W’s complaints are first set out in the Petition which was undefended. In her 8^th Affidavit, W further elaborated on other negative conduct of H.

111.  Although section 7(1) MPPO makes it the Court’s duty to have regard to the conduct of the parties, 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. Parties should not be permitted to embark upon costly, indecent and time-wasting investigation regarding conduct. Conduct is only relevant to financial provision if it was both obvious and gross.

112.  As set out by Baroness Hale in the celebrated case ofMiller and McFarlane [2006] 2 WLR 1283:-

“Is there any need to qualify these aims, considered in the light of all the circumstances and the factors listed in section 25(2)?  Two which have emerged in later case should, in my view, be firmly rejected: conduct and special contributions.  …  But 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 … 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.  …”

113.  This approach was accepted by the CFA in LKW v. DD, supra when Ribeiro PJ said,

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

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

114.  The conduct complained of must be negative and it must be recognizably ‘obvious and gross’ such that if it was not taken into account, it would “offend a reasonable person’s sense of justice” (see: Miller and McFarlane, supra, at paragraph 63).

115.  Conduct need not have any impact on the property available for distribution before it could be taken into account. However, the conduct in question must be examined against the overall notion of fairness, before it can be decided whether there should be any adjustment on its account. It is necessary to search for the relevance of the conduct on the principles of needs, compensation and sharing. In respect of conduct which has no financial impact whatsoever, the relevance would be less apparent. TCWF v LKKS(No. 1) [2014] 1 HKLRD 896260

116.  I find that W failed to establish that H’s negative conduct are both obvious and gross to justify departure from an equal division.

Whether W’s continuingcontribution as the primary carer of the3 daughtersforfuture yearsshould be reflected as a departure factor from equality?

117.  W submitted that while there is an arduous task on her to be the primary carer of the 3 daughters for at least the next 18 to 20 years, H can concentrate on his career and accumulate his wealth.  This type of continuing contribution should be reflected as a departing factor.

118.  If there is any force or footing in this argument, it would mean in every case involving young children, there has to be departure from equal division in favor of the parent being granted care and control. This must be wrong in principle. The fact that W has to take care of the 3 daughters will definitely be a factor to be given regard to in the overall notion of fairness in making a financial order, but not a factor to justify departure.

What are the ancillary relief orders that should be made for the parties and the Children in light of all the relevant circumstances and considerations including the section 7 factors of the MPPO?

119.  It is necessary to deal with H’s argument for adding-back of 2 sums by W into the family pot.

120.  Under the MPS Order, $15,000 out of the award of $60,000 per month was earmarked for “renting a property in Ma On Shan for W and the 3 daughters”. H argued that such sum of $15,000 paid by him was not spent by W on rental as required, hence should be added back.

121.  H’s stance provoked outrage. He shut his eyes from his own irresponsible act of not paying the full amount of $60,000, paying only $15,000 in neglect of the needs for W and the 3 daughters. While H has yet paid for the arrears, he is boldly seeking an add-back.

122.  As said in paragraph 45 of the MPS judgment, any over-provision or under-provision at the stage of MPS application can be adjusted at the final hearing of the ancillary relief (See : F v F [1996] 2 FCR 397). In light of the assessment of reasonable needs above, I find that the needs of W and the 3 daughters justify an interim maintenance of $60,000 even W did not spend on rental. Therefore, the monthly sum of $15,000 paid by H need not be added back.

123.  Another item of proposed add-back is the sum of $1,000,000 which W has withdrawn between December 2014 and October 2015 from her bank accounts.

124.  In W’s 8^th Affidavit, she explained that out of the $1,000,000, $520,000 was used for decoration, renovation and purchase of furniture and electrical appliances for her parents’ flat which W and the 3 daughters had moved into; $200,000 was for payment of legal fees in these proceedings and the remaining sum was spent on family, children and personal expenses.

125.  During cross-examination, H conceded that he shall not claim for the “add-back” of money spent on legal fees and living expenses. While H did not dispute the need for renovation, he challenged the sum of $520,000 being grossly excessive. He said the amount is out of proportion when compared to the value of the parents’ property.

126.  The legal principle of when expenses should be “added back” is clearly set out by the Court of Appeal in ARAV v. VP [2011] 3 HKLRD 759. Reference is made to Martin v Martin, Cairns LJ held at p.342G–H:

“Such conduct must be taken into account because a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably.

And at p.344D, he said:

It is wrong to have regard only to the asset which now exists and to disregard those that have gone and of which the husband has had the benefit.”

127.  In the present case, there is no evidence to suggest that the sum of $520,000 was wantonly or recklessly frittered away. It is not meaningful to assess reasonableness of renovation and furniture expenses by reference to value of the property. Hence, no add-back is required.

Ancillary Relief

128.  The starting point is equal sharing, subject to the grant of relief concerning assets dissipated by H to achieve an overall fairness.

129.  The Former Matrimonial Home be sold; net sale proceeds be shared equally between W and H.

130.  In addition to his half share of the sale proceeds, H can also keep his shares in A Ltd with an equity interest of $4,390,000. It is important for H to continue with his business to generate profit, since there is a long term obligation on him to maintain the 3 daughters financially.

131.  As regards H’s dissipated assets of $3,500,000, there should be a claw back of $1,750,000 from H’s side of his balance sheet. This is to be paid out of H’s half share of the net sale proceeds.

132.  As regards arrears of maintenance, H has to pay back for what is outstanding under the MPS Order up to May 2019 inclusive. On W’s calculation, the amount should be sufficient for repaying her friends for the loans. Since W’s loans from her friends are interest-free, the arrears shall not bear interest. The arrears should also be paid out of H’s half share of the net sale proceeds.

133.  W is young and has healthy earning capacity; she is able to maintain herself. However, since the 3 daughters are still very young, W’s financial situation may vary with the changing needs of the 3 daughters. Therefore, it is necessary to preserve W’s right to seek relief in future (if necessary) by awarding a nominal maintenance of $1 per annum in her favor.

134.  H do pay W $67,000 per month as periodical maintenance payment for the 3 daughters ($26,000 for the eldest daughter, $22,000 for the 2^nd daughter and $19,000 for the youngest daughter).

135.  I am satisfied that H has the financial ability to pay the said maintenance and have sufficient to maintain himself, although the two add up to around $100,000 per month. As said, adverse inference was drawn against H and I find that he has income and financial resources more than he claims. Further, when H one day succeeds A Ltd or when there is a decision to sell the business, H will be able to pocket a significant sum.   

136.  Taking into account H’s history of non-compliance of court order, payment should be secured. H’s half share of the net sale proceeds be paid into court, pending W’s application for payment out for (1)  the said sum of $1,750,000 and (2) the arrears of maintenance. The balance (roughly estimated at around $1,000,000) be retained in court to secure the periodical maintenance payment for the 3 daughters. Such sum should be sufficient to satisfy maintenance payment for about 15 months. Before H’s share of sale proceeds is paid into Court and after the security money is exhausted, H has to deposit into W’s designated account $67,000 per month.

137.  Regarding the Garnishee proceedings, Income Attachment Order application and Committal proceedings which are pending, application(s) should be made in due course by W herself or with H jointly for disposal and/or necessary directions including the issue on costs.

138.  Regarding costs of this ancillary relief proceeding, although W achieves a lesser award as proposed, her claim is properly grounded in law and on fact. On the contrary, H’s proposal is far from being realistic.  W is therefore entitled to costs; but it is to be observed that $200,000 of W’s legal fees has already been paid out of family fund, hence should not be doubly recovered.

Order

139.  Ancillary relief order is as follows :

(1)  H do continue to pay the mortgage, management fees, government rates and rent, and utilities for the Former Matrimonial Home until the property is sold.

(2)  The Former Matrimonial Home be sold within 3 months upon the grant of Decree Absolute at a price not less than $13,250,000. Deposit payment(s) received from the purchaser be shared equally between W and H forthwith. Upon completion, the net sale proceeds (after deducting the outstanding mortgage loan as well as conveyancing and related expenses) be shared equally between W and H, with H’s half share paid into court within 7 days of completion (“H’s Fund”).

(3)  H do pay W a lump sum of $1,750,000 out of H’s Fund. 

(4)  H do pay back to W the arrears of maintenance accrued up to May 2019 inclusive, out of H’s Fund. 

(5)  Upon the grant of Decree Absolute, H do pay W nominal maintenance of $1 per annum during the parties’ joint lives or until W remarries, whichever is the earlier.

(6)  Commencing 1^st June 2019 and on the 1^st working day of each subsequent month, H do pay W $67,000 per month as periodical maintenance payment for the 3 daughters ($26,000 for the eldest daughter, $22,000 for the 2^nd daughter and $19,000 for the youngest daughter) until each child attains the age of 18 or completes full time education, whichever is the later. Payment should be made in the following manner :

(a)  from 1^st June 2019 until H’s Fund is paid into Court, H do pay W $67,000 on the 1^st working day of each month into W’s designated bank account;

(b)  upon payment of H’s Fund into Court, a monthly sum of $67,000 would be paid out from H’s Fund to W by the Court on the 1^st working day of each month, until H’s fund in Court is exhausted; and

(c)  upon exhaustion of H’s fund in Court, H do resume making monthly payment of $67,000 to W on the 1^st working day of each month into W’s designated bank account.

140.  Finally, section 18 declaration to issue.

Costs

141.  I make a costs order nisi that H do pay W’s costs of the ancillary relief proceedings, with certificate for counsel, to be taxed if not agreed.

142.  W’s own costs be taxed in accordance with the Legal Aid Regulations.

143.  Unless there is an application within 14 days to vary, the nisi order shall become absolute.

FCMC 7235 /2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7235 OF 2015

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JUDGMENT

(Maintenance pending suit/interim maintenance;
Legal costs provision)

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The application

1. By her summons dated 30 March 2016, the petitioner (“wife”) applies for (i) maintenance pending suit/interim maintenance for herself and 3 young daughters of the family, aged between 2 and 5 (collectively “MPS”) in the total and most updated sum of $110,342 per month, to be back-dated to the date of petition; and (ii) legal costs provision up to the CDR in the total sum of $350,000.

2. The respondent (“husband”) opposes her application on the major ground that he has no ability to pay and that she has grossly inflated her/daughters’ expenses. Originally, he seeks to reduce the amount that he has undertaken to pay to the wife/daughters in the hearing of 30 December 2015 from an average of no less than $25,000 per month to $15,000 per month. His latest proposal is to continue paying $25,000 per month for the wife/daughters. On top of this, he will continue to pay the children’s school fees, school bus expenses and the extra-curricular activities/tutorial classes (collectively “ECAs”) with a caveat that the ECAs expenses be capped at $3,000 per month. He makes no offer to the wife’s legal costs provision.

3. The huge gulf between the proposal of the receptive parties is mainly due to their disputes over what exactly is the husband’s financial resources and whether the wife has exaggerated her expenses, in particularly after she has changed to her current legal team, from $69,335 per month in her Form E to $133,731 in her 2^nd affirmation within 6 months of time.   

Background

4. The parties first met in 2009. They got married in May 2010 after the wife found herself pregnant. Three daughters were born within their wedlock in 2010, 2012 and 2104 respectively. They are now respectively 5, 3 and 2 years old. It is not in dispute that the wife is their main carer.

5. The wife, local born, is now 32 years old. She worked as a kindergarten teacher until 2011 (shortly after the 1^st daughter was born). Since 2013, she started working again from time to time but on a part time basis, first in selling household cleaning products and later as an insurance agent. She claims that she has ceased working since mid 2015.

6. The husband is now 37 years old. He emigrated to Canada with his family when he was 12 years old and received education there. In 2001, he graduated from business studies in the university and later moved back to Hong Kong. His father founded and ran a company specialising in import and export of plastic flowers (“A Ltd”). The husband joined A Ltd in 2004 and subsequently took over the family business in/about 2005. He is now one of the equal shareholders (the other 50% shareholder is his mother) of A Ltd. He was also a director, but claims that he has resigned from the post since or about December 2015 on his father’s request.

7. Marital discord started to take shape after the birth of their 1^st daughter in late 2010. Despite that, the 2^nd and 3^rd daughters were born in mid 2012 and early 2014 respectively. The separation took place on/about 31 May 2015 when the wife moved out of the matrimonial home with the 3 daughters to live with her parents. By then, the marriage has lasted for only 5 years.  On 10 June 2015, the wife issued her petition on the ground of “unreasonable behaviour”, which was undefended. Decree nisi was made on 1^st April 2016. 

8. The parties have basically agreed that daughters will continue to be under the care and control of the wife. A CDR (children dispute resolution) has been fixed to take place in coming October for solving the issues of custody and access.

9. In so far as ancillary matters are concerned, the husband has given an undertaking to this court on 30 December 2015 that he will pay the wife no less than $300,000 per year (ie $25,000 per month) to support her/daughters until further order of this court, and to continue to pay for the daughters’ school fees, interest classes, tutorial classes and school bus fees (“Undertaking”). No questionnaire has been filed by either party, despite an order was already made on 30 December 2015. 

The wife’s case

10. It is basically the case of the wife that she has been a housewife and carer of the daughters during the marriage, completely and financially dependent on the husband whose financial means should not be confined to his monthly salaries, as he has access to the financial resources of A Ltd. Yet he has failed to fully and frankly disclose his and A Ltd’s financial means, including various premium bank accounts with HSBC. He also has made unexplained withdrawals from his HSBC accounts between November 2014 and September 2015 in the total sum of at least $3 million within 11 months. In any event, he has the ability to borrow, as his bank statements show that overdraft facility is available to him.

11. During their marriage, he paid for all major household expenses including mortgage repayment of the matrimonial home and the daughters’ education fees. On top of that, he paid her a lump sum to cover the food, her own expenses and other miscellaneous expenses. For example, in 2014, he paid her a lump sum of $600,000 averaging $50,000 per month, He also provided her with a credit card of credit limit of $50,000, of which she would spend about $12,500 solely on buying essential oils for the daughters.  However, since their separation, he has unilaterally cut her credit card and medical insurance. He has also cut his financial support to her/daughters to merely $25,000 per month, despite the Undertaking is to provide her with not less than $300,000 a year. Since she has taken out her MPS application, he becomes very strict and resistant in paying the daughters’ ECAs. Her urgent need is to house herself and the 3 daughters, who are now cramped in her parents’ self-owned public housing estate unit in Ma On Shan of about 400 sq feet, a significant downgrade of what they used to enjoy before the separation, which is an almost 1,000 sq feet matrimonial home in Cheung Sha Wan, with the service of at least a maid and usage of private car.

12. In her latest proposal, the wife says that she needs $110,342 per month in order to replicate the living standard that she and the daughters used to enjoy prior to the separation, with breakdown as follows:

	Items	$ per month
(1)	General expenses (including renting a private flat in Ma On Shan of comparable size to the matrimonial home and hiring a maid)	$57,110
(2)	Wife’s personal expenses	$10,835
(3)	Children’s expenses (but excluding school fees which shall continue to be borne by the husband)	$42,397
		$110,342

13. Due to lack of fund, she now has to rely on legal aid but is of the view that the husband is rich enough to finance her litigation fees. It would not be fair that any ancillary relief award to her in the future has to be subject to the first charge of the Director of Legal Aid.

The husband’s case

14. The husband agrees that he is the main breadwinner of the family. It is his case that on top of mortgage repayment and family expenses that were paid directly by him, he also paid the wife an annual lump sum of $300,000 (or $25,000 per month) to cover food, her own and other household expenses. He does not challenge the various lump sums that the wife claims she received from him between 2011 and 2015 (to be elaborated further below), but disputes the nature of the payment. For example, he paid a lump sum of $600,000 to the wife in 2014, but insists that only $300,000 (averaging to $25,000 per month) was to cover household expenses; the other $300,000 was a one-off payment made on her insistence for her pregnancy costs (借肚費).

15. Since his major source of income is his salary of about $59,000-$60,000 per month and dividends of A Ltd that is unlikely to be any for 2015 due to bad business, the husband says that he has been using his own savings to subsidise the expenses of the family, as well as the education/interest classes of the daughters which according to his own calculation amounts to $17,302 per month.[1] As a result, his savings at bank has been depleted significantly from almost $1,299,432 in February 2015 to $25,276 in May 2016.

16. According to him, the wife has grossly inflated her/children’s monthly expenses, almost doubling the expenses over a short period of 6 month like this:

	Wife’s Form E (1/12/2015)	Wife’s 1st MPS affirmation (30/3/2016)	Wife’s 2nd MPS affirmation (28/6/2016)
General	$27,300	$55,110	$57,110
Personal	$22,535	$22,535	$22,835
Children	$19,500	$68,334	$53,786
TOTAL:	$69,335	$104,334	$133,731

17. Although she has, by her latest proposal, tuned down the total expenses to $110,342 per month, it is still beyond his ability to pay. He is unable to sustain anymore with his limited salaries and savings. Hence, he asks the wife to secure a full-time job and if so, he would offer to pay the maid’s salary. His other proposal is already set out at §[2] above.

18. On the wife’s application for legal costs contribution, the husband makes no offer. His stance is that the wife does not need his financial support as she is receiving legal aid now. In any event, he does not have the ability to pay her.

Legal principles on MPS/interim maintenance

19. The power for this court to make a maintenance pending suit for a spouse and interim maintenance order for the children of the family is set out in sections 3 and 5 of the Matrimonial Proceedings and Property Ordinance (“MPPO” or “Ordinance”) respectively.

20. The governing principles in any MPS application require the court to balance the reasonable needs of the applicant spouse (and the children where applicable) against the paying spouse’s ability to pay by using a broad brush approach.  The overall and sole criterion is one of “fairness”.  The relevant principles are propounded by Hartmann JA (as he then was) in HJFG v KCY [2012] 1HKLRD 95 as follows:

  “34.  By definition, therefore, maintenance pending suit is restricted to payments which constitute ‘maintenance’, which are reasonable in the circumstances and which will endure for no longer than it takes to determine the divorce litigation.  ‘Maintenance’ is a broad concept.  I do not seek to define its exact meaning but it seems to me that it must be restricted to those payments necessary to meet the recurringcosts of living at whatever standard of living is appropriate. That being the case, no matter how great the wealth of the parties and how unevenly distributed that wealth may be at the time an application for interim maintenance is made, the court has no jurisdiction to make orders which for all practical purposes result in a form of pre-trial capital re-balancing.  In the present case, the judge recognised the long-established approach of looking to the “immediate and reasonable needs” of the wife and son.

   35.   As to the amount of maintenance pending suit that may be paid, the Ordinance provides only that it must be ‘reasonable’, that is, having regard to the circumstances of the case, that it must be fair.

   36.   An important factor in determining fairness is a consideration of the marital standard of living.  In this regard, each case must be considered according to its own circumstances.  It is not simply to be assumed that great wealth equates to great extravagance.  Some married couples who enjoy great wealth spend with comparative modesty and with a discipline born of discretion, others enjoy consumption on a grand scale.

   37.   The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness.  This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it.  For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i.   The sole criterion to be applied in determining the application is ‘reasonableness’, whichis synonymous with ‘fairness’.

ii.  A very important factor in determining fairness is the marital standard of living.  This is not to say that the exercise is merely to replicate that standard.

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

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

38.  Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a ‘broad brush’ basis.”

21. It is also well established that in the ancillary relief proceedings, including MPS, there is a duty on both parties to make full and frank disclosure of all relevant materials to enable the court to exercise its discretion in making the order. If the court is of the view that the evidence disclosed by a party is deficient, adverse inferences may be drawn against that party (See: C v F(Maintenance Pending Suit) [2006] HKLFLR 41at §28). 

The husband’s ability to pay

22. The husband’s ability to pay is actually in the centre place of dispute in this hearing. It is the fundamental ground of his objection to the wife’s application for MPS and/or to finance her litigation costs. Therefore, the following analysis applies equally to the wife’s application for MPS and legal costs provisions.

23. According to the husband, his financial means are limited to his monthly income, which is on average about $59,167 per month before tax for the year of 2014-2015. [2]  He is unlikely to receive any dividends from A Ltd for 2105 this year, though he received dividend of $300,000 for 2014 in 2015. Pursuant to the Undertaking, he has been paying $42,302 per month to the wife (including $25,000 per month for her/daughter’s maintenance; $17,302 for the daughters’ school fees and ECAs). He has also to pay the mortgage and other necessary expenses of the matrimonial home, carpark rental, his various insurance premiums and the education fund of the eldest daughter, totalling $23,228. Disregarding his own personal needs, he has to pay a total sum of $65,530 a month, which already exceeds his income of $59,167. There is a shortfall of $6,363 per month. As such, he has to rely on his savings at bank which has been depleted significantly from almost $1,299,432 in February 2015 to $25,276 in May 2016. He also has to re-budget his monthly expenses from $90,045 per month (per his Form E dated 23 December 2015) to $49,414 per month (per his 1^st affirmation dated 14 June 2016).  Yet, he still needs at least $15,247 per month in order to make up the shortfall between his salary and his expenses and various sums that he has been paying pursuant to the Undertaking. He is unable to ends meet, let alone to satisfy the excessive MPS demand of the wife.

24. The wife’s case on the husband’s financial ability is 2-folds. Firstly, she says that his financial means should not be limited to his monthly income as stated in his tax returns, because he is in absolute control of the finances and money of A Ltd, his family company. Secondly, she insists that the husband has not fully and frankly disclosed the financial condition of himself and of A Ltd, thereby inviting this court to draw an adverse inference on him.

25. Upon considering all Form Es, relevant affirmations and the submission of both parties, I am of the view that the husband does have the ability to pay for the MPS that I am going to order for this interim period on the following major grounds.

26. First, it is indisputable that during the marriage, the husband was the main breadwinner of the family. Here is how he describes his financial responsibility during the marriage in his affirmation in opposition to the MPS application:

“9. Throughout the marriage, I have been paying for the mortgage, management fees, government rates and rent and utilities for the former matrimonial home. I have also been paying for the children’s school fees, school bus expenses and interest class fees, which amount to approximately HK$3,000 a month, as well as their medical insurance policies. On top of that, I pay to the Petitioner a lump sum to cover all other expenses, including food, household expenses, the Petitioner’s personal expenses and the children’s other expenses.”

27. As said above, the husband agrees that he has paid the various lump sums to the wife between 2011 and 2015, but he disputes the purpose of the lump sum payment for 2014 and 2015. The different cases of the parties can be summarised in the following table:

Year	$ paid to the wife	Wife’s case	Husband’s case
2011	$250,000 per year ($20,833/month)	Household expenses	Agree
2012	$250,000 + $50,000 for hiring a maid per year ($25,000/month)	Household expenses	Agree
2013	$350,000 + $50,000 for hiring a maid per year ($33,333/month)	Household expenses	Agree
2014	$600,000 + $60,000 for hiring a maid per year ($55,000/month)	Household expenses	- Only $300,000 are household expenses; the other $300,000 is costs of pregnancy (借肚費) made at the wife’s requested. - The costs of hiring the maid was paid directly by him to the maid.
2015	$200,000 for January - May 2015 ($40,000 per month)	Household expenses	- $400,000 was paid to the wife between January-May 2015, of which $300,000 was for the usual household expenses and $100,000 was to cover her moving out and staying at her parent’s place.

28. Since a MPS application is argued on affirmation evidence without taking oral evidence, it is impossible for me to pass any firmed view on the above factual dispute as to the nature/purpose of the lump sum payment. Such factual dispute should be decided in the final ancillary relief trial by the trial judge. But in my judgment, irrespective of the nature/purpose of such lump sum payment, it certainly sheds light on the husband’s ability to pay.

29. Second, it is the husband’s case that he has “only one bank account in Hong Kong”,[3] and he has so far disclosed the bank records of his HSBC premier bank account (“Main HSBC Premier Account”).[4] A closer look into the monthly statements of this Main HSBC Premier Account, however, will show that what he alleges is plainly untrue, because the said monthly statements reveal that he has/had at least 4 other premier accounts, a SmartVantgae account, an Advance account, a FCY current account, a SEC margin settlement accounts, all held with HSBC (“Undisclosed Accounts”). He has failed to provide the monthly statements of these accounts. Ms Lam, his solicitors, attempts to argue that the Undisclosed Accounts have been disclosed in the bank statements of the Main HSBC Premier Account. This submission is erroneous, as only the balance of the Undisclosed Accounts is shown, but not each and every transactions that may have taken place within the required period of the Form E (if any).  I am thus of the view that the husband has failed to make full and frank disclosure for the purpose of this hearing. The case law is clear that I should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources (See: HJFG v KCY (supra) at §37).  

30. Third, as I have pointed to Ms Lam for the husband during the hearing, despite his claim for limited financial resources to meet all the family expenses as described in his affirmation, it is noted that the portfolio assets at the Main HSBC Premier Account (consisting of cash in HKD, foreign currencies, stock and gold) has significantly increased during the last 6 months before the petition was issued in June 2015, despite his allegation that he had limited income to meet his ends. The portfolio assets have increased from about $881,667 in December 2014 to about $2,042,279 in May 2015, but suddenly and coincidently dropped by about $1 million to about $1,020,000 after the petition was issued in June 2015. The husband has yet to offer an explanation to this, which I am sure he would do in the final ancillary relief trial. But for the purpose of this application, the aforesaid increase in the Main HSBC Premier Account tends to show that he may have other financial means apart from his monthly salary which he has yet to disclose/explain, thereby enabling him to accumulate his wealth between December 2014 and May 2015 despite all his liabilities and expenses.

31. Fourth, it is submitted by the wife and conceded by the husband through his solicitors that he has the ability to borrow. It is trite law that an ability to borrow can be regarded as one of financial resources of the paying party.

32. Fifth, it is indisputable that the husband has through his solicitors made an offer to increase the MPS to $28,000 per month in the court hearing of 6 April 2016, but was not acceptable to the wife. Subsequent to that hearing, the whatsapp messages between the parties show that the husband had invited the wife to view accommodation in Ma On Shan area. These undeniable facts and arrangement do not sit well with the husband’s suggestion that he does not have the ability to pay.

33. In passing, I take note that Mr Wong for the wife points out that the husband has made numerous withdrawals of a total sum of $3 million between November 2014 and September 2015 from the Main HSBC Premier Account.[5] He also refers me to some deposits, in particularly those foreign currencies deposits via western union, into the Main HSBC Premier Account. Since this is merely a MPS application and that the court only needs to take a broad brush approach, I find it unnecessary to make any specific findings on this submission, other than what I have already observed and set out above. That should be left for the trial judge of the final ancillary relief upon receiving oral evidence. 

34. Submission is also made by Mr Wong that since the wife’s MPS summons, the husband has recently claimed that he has resigned as a director of A Ltd on his father’s request. The wife says that it is a sham arrangement. The husband is still de facto in charge of A Ltd.  It is noted that according to an employer’s return for 1 April 2015 to 31 March 2016 which is disclosed by the husband himself, he is still described as the “director” of A Ltd. This document does not sit well at all with his own allegation that he was told to resign and has in fact already resigned in/about December 2015. I hold the preliminary impression that the husband has not fully explained his current and true relationship with A Ltd.

35. Upon considering the above and all the circumstances, I conclude that the husband has not made full and frank disclosure of his financial means, in particularly his various accounts held with HSBC. He has yet to explain this. With his alleged family expenses far exceeding his monthly income, how and why his portfolio assets at the Main HSBC Premier Account was on the rise for at least 6 months before the petition was filed in June 2015, after which his bank reserves coincidently start to drain by at least $1 million after the petition was issued. For the purpose of this application and until he has offered an explanation, it is my preliminary view that he may have other undisclosed financial means and thus has the ability to pay any amount that I am going to order in this judgment.

Reasonable needs of the wife/daughters

36. The reasonable needs of the wife and the daughters would have to be considered against the living standard of the family during the marriage. There cannot be of dispute that before the separation, the family lived together in the matrimonial home measuring 978 sq feet, with 3 bedrooms and 2 toilets. It was purchased in the sole name of the husband in 2012. It is also not in dispute that the daughters were all born in private hospitals and the wife received medical attention with private doctors for her health problems. Since/about 2012 after the birth of the 2^nd daughter, the husband hired a maid to assist the wife in taking care of the children, and for a short period of about 3 months after the 3^rd daughter was born, another maid was employed. The family had private car(s) and enjoyed outings to Ocean Park/Disneyland.[6] They had overseas trip(s) every year, such as to the USA and Mexico in 2012. 

37. However, it is pertinent to point out that according to the wife’s Form E, the matrimonial home is worth about $10.5 million but subject to a mortgage of almost $4.8 million. It is not situated in the traditional prime and expensive districts, such as Kowloon Tong. It used to house at least 4 adults (including a maid and the wife’s mother) and 3 young children before the separation of the parties.[7] On the face of it, the living condition of this family cannot be regarded as spacious and luxurious. Besides, the family did not enjoy any private club service. The private car they used, in the wife’s best case, is just a Lexus or an Alphard. They are not those high-end and expensive cars. After a long haul flight back from the USA/Mexico, they took a bus home instead of by more expensive transport such as taxi.[8]

38. Having considered the Form Es and the relevant affirmations, I have an overall impression that the family enjoyed a living standard comparable to an average middle class during their marriage, but not of a luxurious and wealthy style.  As such and given a broad brush approach is adopted in any MPS application, I have the following preliminary view.

39. Firstly, as a general observation, the wife has failed to explain to my satisfaction why there is such a sudden and drastic increase of the monthly expenses by almost a double from $69,335 per month in her Form E to $133,731 per month in her 2^nd MPS affirmation within a brief period of 6 months, which is further revised to $134,062 in her opening submission. Mr Wong acting for the wife attempts to submit that the alleged increase in expenses would cover renting a flat (at $22,000 per month); hiring a maid (at $4,110 per month) and those increased expenses including ECAs of the daughters. However, this line of submission does not sit well with what the wife has originally sought for in her 1^st Appointment Bundle filed for the hearing of 30 December 2015. In that 1^st Appointment Bundle, she seeks MPS for herself and the daughters in the total sum of $70,000 only.  Also, if Mr Wong’s submission is accepted, it would mean that for merely over a short period of 6 months, the increased expenses and the ECAs of the 3 daughters alone (now aged 5, 3 and 2 only) would cost about $38,286 per month (if the total expenses are $133,731 per month). This, in my view and for the purpose of this application, is excessive and not in line with the living standard of this family. 

40. Secondly, the wife asks the husband to cover the expenses of hiring a maid. However, the affirmation evidence and exhibits thereof show that for the majority of the time when they did enjoy the service of a maid, the wife was at least working part time. Since it is now her case for the purpose of this application that she has ceased working in order to take care of the daughters, and with the continued assistance of her parents especially her mother, I am not inclined to allow the wife to have the maid’s expenses for this interim period.

41. Thirdly, the wife claims a sum of $22,000 per month in order to rent a flat in Ma On Shan of similar size of the matrimonial home to house her, the daughters and a maid. During the hearing, I have tried to explore the possibility of the wife’s moving back to the matrimonial home with the daughters while the husband moves out of the matrimonial home. The wife rejects this alternative and submits that moving back to the matrimonial home would bring back to her bad memories of the past. In any event, the husband claims that he has no alternative accommodation. Pausing here, I must comment that it is rather unwise of the parties to reject the aforesaid possibility, in particularly their daughters are still very young and would be in need of financial support in the years to come. Resources can surely be saved if the wife and the daughters would move back to the matrimonial home while the husband would move to stay with his parents.  But with the aforesaid stance of the parties, some interim measure has to be put in place to house the wife and the daughters in a comparable accommodation. I take the initial view that they should be entitled to rent a flat of about 600-odd sq feet during this interim period, given what I have said above on the living standard and on the rejection of hiring a maid. According to the wife’s research, the rental of a flat in Ma On Shan of about 600-odd sq feet would fall within the range of $12,000 - $15,000.[9] I would err on the safe side and allow $15,000 per month to cover the rental.

42. Fourthly, I tend to agree with the husband that the wife has overstated the expenses of the daughters. She claims a sum of $12,527 per month to cover the ECAs of the daughters. It is on the high side given their living standard and the relatively young age of the daughters. I also notice that some of the expenses relate to summer classes which should not be recurring except during the summer holidays. The children’s school bus and books can be paid by the husband. The daughters are too young to receive any pocket money. On the other hand, the wife has failed to explain why the medical/dental expenses of the daughters (including creams and essential oils)[10] would increase from $8,000 per month (in her Form E) to $15,000 per month (in her 2^nd MPS affirmation), or $13,000 per month as per her latest proposal. I have the same observation in respect of the increase of the daughters’ entertainment/presents which is increased from $2,000 per month (in her Form E) to $5,000 per month (in her 2^nd MPS affirmation), or $4,000 per month as per her latest proposal. Finally, for this interim period, I am not prepared to allow any expenses relating to the daughter’s education fund, which surely will be further considered at the final ancillary relief trial.

43. Taken into account of all the circumstances and by adopting a broad brush approach, I conclude that for this interim period, the reasonable needs of the wife and the daughters would be as follows:

	Items	per month
(1)	General expenses (including renting a flat in Ma On Shan at $15,000)	$32,000
(2)	Wife’s personal expenses	$10,000
(3)	Children’s expenses including ECAs but excluding school fees, school bus and school books)	$18,000
		$60,000

44. For clarity, the above sums would be apportioned as to $18,000 for the wife and $42,000 for the daughters.

45. I remind both parties that any over-provision or under-provision at the stage of the MPS application can be adjusted at the final hearing of the ancillary relief (See: F v F(Ancillary Relief: Substantial Assets) [1996] 2 FCR 397).

Applicable law on legal costs provision

46. There should not be any dispute between the parties that as a matter of general principles, this court has the power to include an element for the contribution towards the Wife’s legal costs in an order for maintenance pending suit under section 3 of MPPO (See: KGL v CKY & Anor [2003] 2 HKC 512). Family judges in Hong Kong have constantly referred and adopted the guiding principles set out in the English Court of Appeal case of Currey v Currey (No 2) [2007] Costs LR 227 (adopted by the Hong Kong Court of Appeal in HJFG v KCY [2012] 1 HKLRD 95 per Hartmann JA (as he then was); H v H, FCMC 1969/2007 per HH Judge Bruno Chan) which provides the following conditions:

(1)   that the applicant has no assets, or none that can be reasonably deployed;

(2)   that she can provide no security for borrowing, or none which could reasonably be offered.

(3)   that she cannot reasonably obtain legal services by offering a charge on the on the outcome of the litigation;

(4)   that she cannot secure publicly funded legal help at a level of expertise apt to the proceedings.

Discussion on legal costs provision

47. At the time when the wife took out this summons, she had applied for, but not yet granted legal aid. She has obtained legal aid since 12 April 2016, but still wishes the husband to provide for her legal costs. It is her case that she has spent all her resources on daily spending of her and the daughters. Her main bank account with Hang Seng Bank is now overdrawn.  The husband is in control of the family assets which he can apply to subsidize his own legal costs, whereas any final distribution of family assets to her will have to be subject to the first charge of legal aid. This is not fair to her. She estimates that she would need $350,000 to cover her costs going forward up to the stage of CDR as follows:

(1)	Discovery including specific discovery against A Ltd:	$250,000
(2)	Accounting expenses and property valuation:	$20,000
(3)	Preparation and attendance of CRD:	$80,000
	TOTAL:	$350,000

48. In opposition, the husband says that he does not have the financial means to subsidise the wife’s legal costs. More importantly, she has yet to account for the following:

(a)  How she has spent her savings and loans of $200,000 within 6 months between her Form E and her 2^nd MPS affirmation;

(b) her salary working as insurance agent of $159,583;

(c)  her bank withdrawals in the total sum of $400,866 from her Hang Seng Bank account between January 2015 and October 2015 (ie $40,086.60 per month);

(d) her bank withdrawals in the total sum of $639,500 from her HSBC Advance account between December 2014 and September 2015 (ie $63,950 per month).

49. On the face of it, the wife has withdrawn more than $1 million from her Hang Seng Bank and HSBC Advance accounts between December 2014 and October 2015. For the purpose of this application, I do not accept the wife’s oversimplified explanation by way of her 2^nd MPS affirmation that “the withdrawals of sums from the bank accounts were for the daily spending of our daughters and me”. A cursory reading of her HSBC Advance account records would reveal that there are at least 3 large sum of withdrawal in the total sum of $320,000 as follows:

(1) A sum of $100,000 withdrawn on 13 May 2015;

(2) A sum of $100,000 withdrawn on 15 May 2015; and

(3) A sum of $120,000 withdrawn on 29 July 2015.

50. In my preliminary view, the proximity in time of such withdrawal (ie immediately before or shortly after she issued the petition in June 2015) begs an explanation. It also begs her explanation as to why $200,000 by way of 2 lump sums of $100,000 each within 3 days was required to finance daily expenses. According to her best case stated in her 2^nd MPS affirmation, her total monthly expenses are $133,731 only. Until and unless further explanation is offered by the wife as to the use/whereabout of these money, I find myself unable to accept the submission made by Mr Wong on the legal costs provisions. In any event, the wife is able to secure, through legal aid, the legal advice from a legal team specialising in family law and thus her rights are protected. I conclude that her request for costs provision should be rejected upon reviewing all the circumstances.

Conclusion

51. Due to the matters aforesaid, I shall allow the MPS application of the wife for herself and the daughters in the total sum of $60,000 per month. It is fair that this sum shall be back-dated to the filing date of her summons (30 March 2016), but not the date of petition.

52. Both parties have agreed that costs should follow the event. The wife wins in her MPS application but loses in the legal costs provision request. Given the affirmation evidence and oral submission focus mainly on the MPS application, I shall exercise my discretion that the husband should bear 75% of the wife’s costs of and incidental to this application.

53. On the continued undertaking of the husband that (i) he will pay for the school fees, school bus and school books of the daughters within 14 days upon issuance of such invoices/receipts until further directions/orders from this court and (ii) he will continue to punctually pay the mortgage, management fees, rates and government rent of the matrimonial home until further directions/orders from this court, I shall make the following order:

(1)   the husband shall pay to the wife for her maintenance pending suit in the sum of $18,000 per month to be back-dated to 30 March 2016 and thereafter on the last calendar day of each and every succeeding month until further order of the court;

(2)   the husband shall pay to the wife for the interim maintenance of the 3 daughters of the family in the sum of $42,000 per month to be back-dated to 30 March 2016 and thereafter on the last calendar day of each and every succeeding month until further order of the court;

(3)   Credit be given to any sums that the husband has paid to the wife from 30 March 2016 onwards; the difference (if any) shall be paid within 14 days from today;

(4)   The husband shall bear 75% of the wife’s costs of and occasional by this application to be taxed if not agreed. This is a costs nisi which will be made absolute within 14 days from the date of this judgment unless either party applies to vary the same;

(5)   The wife’s own costs shall be taxed in accordance with legal aid regulation.

54. For completeness and avoidance of doubt, the husband’s undertaking given on 30 December 2015 in respect of payment of no less than $300,000 per annum and the ECAs should be discharged, but his undertaking not to further mortgage and/or cause further encumbrances to the matrimonial home shall continue.

55. The order should be drawn up by the wife for approval.

[1] Husband’s affirmation [294-295/§17]

[2] Husband’s affirmation [291/§7] and tax return for 2014-2015 [250]

[3] Husband’s affirmation [293/§13]

[4] [155] – [205]

[5] Wife’s written submission at §26.

[6] See Form J of the husband.

[7] According to the wife’s Form E, her mother started to live with them since 11/2014 to assist in taking care of the newly-born 3^rd daughter [38].

[8] [56]

[9] [281-282]

[10] According to the wife, the eldest daughter is suffering from eczema problem, food and dust allergies since birth, and thus requires creams, essential oils and Chinese medicine to control her problems. The youngest daughter has neonatal respiratory distress, which is now under control but needs essential oil and supplements to relieve her symptoms.