BCJ v. RCS

FCMC 14020/2017

[2022] HKFC 167

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14020 OF 2017

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RULING ON COSTS

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1.  This is the ruling of the petitioner father (‘the Father’)’s application for costs of the respondent mother (‘the Mother’)’s summons for ‘emergency temporary relocation’ filed on 12 January 2022.

2.  The Father accepts that the general practice in children’s cases is to make no orders as to costs, but he argues that this is a case that the Mother’s conduct has been so reprehensible or her stance is beyond the band of what is reasonable that the court has a discretion to make costs order against her.

3.  The Father refers the court to LWYY v UKWK[2020] HKFC 118 at §§4-7

Legal principles

4. Although costs are always in the discretion of the court, it is accepted that a costs order made against one parent in a child related matter is generally considered unusual unless that parent has, for example, been unreasonable in the conduct of the litigation or has behaved in a way that is somehow reprehensible, or beyond the limit of what might be regarded as reasonable. See Sutton London Borough Council v Davis (Costs) (No 2) [1994] 2 FLR 569 , Gojkovic v Gojkovic (No 2) [1992] 1 AER 271 , S v S HCMP 5547/1999 and L v C CACV 169 of 2006 ).

5. Thus, in the normal course of events, regardless of the outcome, the court would normally make no order as to costs following a trial on a children's matter. To that end, Ms Irving for the mother has also referenced the following English cases in her written submission:

• 5.  The principle that reprehensible behaviour, or behaviour beyond the band of what is reasonable, may result in an order for costs against that party was set out in Keller v Keller and Legal Aid Board [1995] 1 FLR 259 at 265 per Wilson J.;

o "No one suggests that the court's discretion in respect of costs under s 51 (1) of the Supreme Court Act 1981 has become emasculated in children cases. The position is only that in most such cases, indeed in ordinary cases, the proper weighing of the factors in the exercise of the discretion is likely to lead to the choice of no order …. Where, for example, the conduct of a party has been reprehensible or his stance in the litigation has been beyond the band of what is reasonable, an order for costs might well be made against him." [emphasis added]

• 6.  When assessing whether a party's conduct has been unreasonable, what should be considered is unreasonableness in the attitude to the litigation. In R v R (Costs: Child Case) [1997] 2 FLR 95 at 98B, per Hale J.

• 7.  In Re G (Costs: Child Case) [1999] 2 FLR 250, per Butler-Sloss LJ at 252G:

o "If this judge in this case had found that this Father had behaved unreasonably in the litigation and had gone beyond what many Fathers do, seeking orders which are hopeless, the point will come at which pursuing a hopeless application becomes unreasonable. But hopelessness and unreasonableness are not necessarily the same thing. Indeed, particularly where there is a litigant in person, a degree of generosity towards a litigant may be more appropriate than to a litigant which is on legal aid generally advised by counsel and solicitors as to the extent to which they should continue to litigate." [emphasis added]

Her Ladyship then added at 253D:

o "It seems to me that the case of R v R does not change the normal situation that it is unusual to order costs, although it will be appropriate to order costs when a parent, even a litigant in person, goes beyond the limit of what is reasonable to pursue the application before the court. " [emphasis added]

6. This general approach was also reiterated in the later case of Re T (A Child) [2005] EWCA Civ 311 , where the Court of Appeal in England and Wales repeated the general principles on costs in child related matters as follows:

• 36.  The principles, which fall to be applied, are not, we think, in dispute. The judge summarised them succinctly in the following way:-

o 2.1 "The CPR apply. Under normal circumstances, according to rule 44.3(2)(a), the general rule is that costs should follow the event, although the court can make a different order. (Rule 44.3(2) (b) )

o 2.2 However, this general rule does not apply to family proceedings. (FamilyProceedings (Miscellaneous Amendments) Rules1999 )

o 2.3 It is suggested that even in family proceedings, the general rule is probably the starting point but can more easily be displaced. (Gojkovic v Gojkovic(No 2) [1992] Fam 40 )

o 2.4 In cases involving children in particular, costs awarded against one parent or another are exceptional since the court is anxious to avoid the situation where a parent may feel "punished" by the other parent which will reduce co-operation between them. This will only impinge ultimately on the welfare of the child or the children concerned. (London Borough of Sutton v Davis ( Costs) (No 2) [1994] 2 FLR569; Re: M (Local Authority's Costs)[1995] 1 FLR 533 )

o 2.5 The conduct of the parties is in reality the major consideration when deciding whether or not an exceptional order for costs should be made. It should only be made if the penalised party has been unreasonable in his or her conduct. Moreover the "unreasonableness" must relate to the conduct of the litigation rather than the welfare of the child. ( R v R (Costs: child case) [1997] 2 FLR 95)

o 2.6 One has to be very careful in this distinction when, as in the case of (the mother), the apparent unreasonableness is as a result of the personality of the relevant party. In such circumstances, there is often an overlap of that party's conduct of the litigation and the conduct relating to the welfare of the child.

7. Reference may also be made to our own Court of Appeal decision in TPL v WYY CACV 47 & 61 of 2014 , which also reiterates these general principles.

4.  The Mother opposes the costs application and furthermore, she seeks an order that the Father do pay her costs of the present costs application.

5.  About the law, the Mother refers the court to TPL v WYY (CACV 47 and 61/2014, unreported, 15 December 2014), in which the Court of Appeal summarised the general practice for costs in children’s cases and set out the exceptional circumstances in which a costs order would be appropriate as follows: -

"General practice” - no order as to costs

14.1. One starts with the "proposition" or "general practice" (though not a "principle": see London Borough of Sutton v Davis (Costs) No.2 [1994] 2 FLR 569 at p570H) that in applications to do with children, the usual order should be no order as to costs.

14.2. This approach stems from the aspiration that in these applications the court is seeking to find an arrangement which is best for the children, so that the only "winner" is the children, and neither parent should be regarded as the "winner"/"loser", although they had mutually exclusive proposals regarding custody and care and control.

14.3. The rationale is that when a court considers custody and care and control of children, the proceedings are inquisitorial rather than adversarial. In the court's search for the best option available, it does not wish "the spectre of an order for costs to discourage those with a proper interest in the child from participating in the debate. Nor does it wish to reduce the chance of their co-operation around the future life of the child by casting one as the successful party entitled to his costs and another as the unsuccessful party obliged to pay them" (LB of Sutton v Davis (No.2) at pp570H -571C).

14.4. As the English court of appeal observed in R v R (Costs: Child Case) [1997] 2 FLR 95 at p97, there is a "possibility that in effect a costs order will add insult to the injury of having lost in the debate as to what is to happen to the child in the future; it is likely to exacerbate rather than to calm down the existing tensions; and this will not be in the best interests of the child".

14.5. Having said that, this general practice is not a rigid rule. In particular, the court must be careful that this approach to costs should not be abused eg in cases where one parent has more means at his disposal than the other who does not qualify for, or prefers not to use, legal aid. The practice should not provide the opportunity for one parent to wear the other down financially by means of multiple interlocutory skirmishes.

Exceptional circumstances

15.1. Accordingly the courts have said that this approach to costs does not apply in exceptional circumstances, such as where the conduct of one party has been reprehensible, or the party's stance has been beyond the band of what is reasonable (LB of Sutton v Davis (No.2) at p571B-C, following Havering LBC v S [1986] 1 FLR 489 and Gojkovic v Gojkovic (No. 2) [1992] Fam 40 ).

15.2. However, in considering whether the exception applies in a particular case, the court should not be too quick to label a parent's conduct as "unreasonable". As Hale J (now Baroness Hale SCJ) observed in R v R at p98B,

"The fair point is made that in children cases one must not confuse unreasonableness in relation to the child - because one might say that we are expected to be unreasonable in our attitudes to our children - and unreasonableness in the attitude to the litigation".

15.3. Merely because a judge, dealing with a case dispassionately and objectively, considers one parent's proposals hopeless does not justify a costs order against him/her. As Butler-Sloss LJ said in Re G (Costs: Child Case) [1999] 2 FLR 250 at p252G:

"If this judge in this case had found that this father had behaved unreasonably in the litigation and had gone beyond what many fathers do, seeking orders which are hopeless, the point will come at which pursuing a hopeless application becomes unreasonable. But hopelessness and unreasonableness are not necessarily the same thing. Indeed, particularly where there is a litigant in person, a degree of generosity towards a litigant may be more appropriate than to a litigant who is on legal aid generally advised by counsel and solicitors to the extent to which they should continue to litigate".

15.4. To that I would add this proposition, that even if a court finds a parent's conduct reprehensible, or his/her conduct in the litigation unreasonable, and the court orders that one party should pay the other's costs, the costs so ordered should be no more than is necessary to reflect the exceptional circumstances. This is because of the policy consideration in the rationale discussed above, ie that it is in the best interests of the children that there should be no order as to costs.

6.  There is no dispute that the general practice is that, save for in exceptional circumstances, there should be no order as to costs in children’s cases. The dispute is whether the conduct complained of by the Father meets the threshold of being reprehensible or unreasonable.

7.  The Mother’s summons filed on 12 January 2022 was summarily dismissed by the court during the 1^st hearing on 31 January 2022. Despite the Mother’s contentions to the contrary, I maintain the view that the Mother’s said application is unmeritorious, taking into consideration: - (1) The said application covers essentially the same grounds as her summons filed on 30 April 2021 for permanent relocation, the substantive trial of which has already been set down to take place on 22 February 2022 that is just 3 weeks away from the returnable date of the summons filed on 12 January 2022; (2) Inasmuch as the Mother herself anticipates it may be that she is not in a position to bring the children back to Hong Kong as the Father may wish, in the event that the application for temporary removal is granted, the said application has the effect of pre-empting the permanent relocation trial; (3) Upon a careful scrutiny of her financial situation at the material time, I take the view that she should be able to get by on the funds that she had or would have in Hong Kong until the trial.

8.  Notwithstanding, I take exception to the Father’s argument that being summarily dismissed, the Mother’s application may be regarded as hopeless and therefore, unreasonable. According to the principles on costs in children’s cases as summarised in TPL v WYY, hopelessness and unreasonableness are not necessarily the same thing. It is also stated that indeed, particularly where there is a litigant in person, as it is in the present case, a degree of generosity towards a litigant may be more appropriate than to a litigant who is on legal aid generally advised by counsel and solicitors to the extent to which they should continue to litigate. I further take notice that in DCB v AB (HCMP 2173/2014, unreported, 28 July 2017 at §13), Madam Justice Bebe Chu endorsed counsel’s submission that “…there is a distinction between a party ‘behaving unreasonably’, which would warrant a costs order; and a party ‘running a hopeless case’, which would not warrant a costs order.”

9.  The Father further argues that the Mother’s summons for emergency temporary removal is wholly unreasonable, even for a litigant in person. The Father informed the Mother on 1 January 2022 that he had paid her HK$80,000 in December, that he would pay further sums of HK$60,000 monthly and that he would be able to pay her the balance of the AR Judgment dated 3 September 2021 (the ‘AR Judgment’) of HK$1.7 million by March 2022. Additionally, the Mother receives HK$16,000 per month in child maintenance. It being the Family Court’s Judgment that the Mother’s reasonable expenses are HK$66,000 per month (AR Judgment at §57), taking into consideration all of the above, the Mother was receiving more that her reasonable needs and as such, she clearly had sufficient funds to remain in Hong Kong until the substantive trial.

10.  According to the AR Judgment, the Father is to pay the Mother HK$16,000 per month for the maintenance of the children from October 2021. Up until that time, the Father was paying interim maintenance for the children in HK$60,000 per month. The AR Judgment also provides for the sale of 3 US Properties to be completed within 2 months of the date of the AR Judgment, or upon the making of the Decree Absolute, whichever is the later. The net proceeds of sale of the US Properties are to be divided equally between the parties. The sale of the US Properties was not forthcoming and the Father did not keep the Mother appraised of any efforts in relation to this aspect of the AR Order. Over and above, the Father did not apply for the Decree Absolute and by not doing so he extended the time that he had to sell the US Properties or pay the Mother. The Mother contends that after the children’s maintenance was reduced from HK$60,000 to HK$16,000 per month, by the end of 2021 she was in dire needs of financial assistance, and failing the Father applying for the Decree Absolute, she had no choice but to apply for the Decree Absolute herself, which she did with a return date on 30 December 2021. The Father vehemently opposed the application for the Decree Absolute. It was only after the granting of the Decree Absolute on 30 December 2021, and with the court’s encouragement, that the Father agreed to pay the Mother a partial advancement on the lump sum with the payment of HK$80,000. The Mother contends that she was given no assurance when, and how much, she would receive the monies in respect of the terms of the AR Judgment and she was given no security that further payments would be made to her. Conversely, the Mother contends that the application for temporary removal was borne out of the Father’s failure to pay the Mother the monies he was ordered to pay her.

11.  I accept that the chain of events leading to the Mother’s application filed on 12 January 2022 must be considered when looking to her motives to pursue the application for emergency temporary relocation and the reasonableness of such application at the time it was made. There was deep distrust between the parties that apparently was caused by the failure in the Father’s application for the Decree Absolute and the reality that the sale of the US Properties was not forthcoming and the Father did not keep the Mother appraised of the progress of the sale. It is obvious that the Father’s unmeritorious opposition to the Mother’s application for the Decree Absolute only exacerbated the Mother’s distrust of the Father and prompted her to take out the application for emergency temporary relocation. I take notice that with the sale of the US Properties yet in the flux at that time, the Mother was facing with an uncertain financial situation and worse still, she was troubled with the deep distrust between the parties. All things considered, I am prepared to accept that the Mother’s worries about finances and her position was bona fide in the hope that the emergency temporary relocation would reduce her monthly expenses significantly.

12.  In summary, I do not regard that the Mother’s application for emergency temporary relocation is reprehensible or unreasonable. I make no order as to costs of the Mother’s summons filed on 12 January 2022 including reserved costs. The Mother seeks costs of the Father’s present costs application. Despite that the Father is unsuccessful in the costs application, frankly speaking, this is a marginal decision made with a degree of generosity towards the Mother as litigant in person at the material time. I make no order as to costs of the costs application including reserved costs.

Mr Shaphan Marwah instructed by Ravenscroft & Schmierer solicitors for the petitioner

CRB solicitors for the respondent

FCMC 14020 /2017

[2021] HKFC 180

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 14020 OF 2017

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J U D G M E N T
(Ancillary Relief)

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Background

1.  This is the trial of the parties’ claim for ancillary relief.

2.  The parties were married in 2010 in Hong Kong. The Petitioner Husband (‘H’) is an airline pilot and the Respondent Wife (‘W’) was a manager and a director of her 50% owned business (‘SLAC’), a start-up company supplying baby and children products online. There are two children of the family (the ‘Children’). The older boy was born in November 2010 and the younger boy was born in September 2012. According to the separation agreement dated 21 June 2016 signed by the parties, the parties were separated in June 2016. H petitioned for divorce on behaviour on 27 October 2017. Both parties have re-partnered since separation.

3.  The parties have been entangled in protracted interlocutory applications and numerous disputes on children as well as finance since the commencement of these proceedings.

4.  On 13 February 2018, upon H’s ex-parte application and upon W’s undertaking not to molest the Children, the domestic helper and H, by consent it was ordered that interim care and control be granted to H with alternate day access to W, and H do pay W interim-interim maintenance at HK$30,000 per month until further order. On 10 May 2018, upon the parties agreeing that they do receive HK$100,000 per month each for legal costs from the monies held by H’s then solicitors until further order or agreement, and that H do continue paying all children expenses, by consent it was ordered that by way of interim maintenance (‘MPS’) H do pay W HK$35,000 on 10 May 2018 and thereafter HK$60,000 per month from 1 June 2018 until further order. The Decree Nisi was granted on 20 June 2018. By Recital D of the order made by HHJ Molley on 24 January 2019, H undertook that he would not seek to vary the order dated 10 May 2018 in respect of the MPS of HK$60,000 per month.

5.  Since around the end of 2019, H has been paying less than what is required under the MPS. By the summons dated 6 February 2020, H applied for the variation down of the MPS. By an injunction order made by Deputy District Judge D To dated 14 April 2020, it was ordered that H be restrained from dealing with a company (‘BR LLC’) controlled by H and three properties held by that company and situated in the US (the ‘US Properties’). By the summons dated 15 April 2020, H applied for the leave that he be released from his undertaking dated 24 January 2019.

6.  By the consent order made by HHJ Molley on 27 April 2020, joint custody and shared care and control of the Children were granted to the parties.

7.  Financial Disputes Resolution hearings were held before HHJ Melloy on 14 October 2019, 25 November 2019 and 27 April 2020 respectively and were unfortunately unsuccessful.

8.  W took out the summons dated 4 May 2020 for leave to temporarily remove the children to Melbourne as soon as she was given leave until the reopening of the children’s school in Hong Kong for the Autumn term on the proviso that the school was operating in person rather than by remote learning. By the order made by HHJ K.K. Pang on 18 June 2020, it was ordered that W’s summons dated 4 May 2020 be dismissed with costs reserved.

9.  By the order made by HHJ K.K. Pang on 21 May 2020, it was ordered that the question of ancillary relief be set down for trial before Deputy District Judge Thelma Kwan commencing on 17 November 2020, with 18 to 20 November 2020 reserved and the pre-trial-review (‘PTR’) hearing be held on 5 October 2020, and that the hearing of H’s summonses dated 6 February 2020 and 15 April 2020 be adjourned sine die.

10.  By the summons dated 28 August 2020, H applied for the discharge of the paragraph 1 of the injunction order made by Deputy District Judge D. To on 14 April 2020 so that he would be allowed to put the US Properties on the market for sale. On the same day, he filed his 15^th Affirmation in support of the above application. On 9 September 2020, it was ordered that the hearing of the summons dated 28 August 2020 be adjourned to 16 October 2020 for argument.

11.  On 23 September 2020, W filed her 13^th Affidavit in opposition of the above application.

12.  The Memorandum of Notification of W’s Application for Legal Aid was lodged with the court on 24 September 2020 and accordingly these proceedings were automatically stayed until 4 November 2020. By the order made by HHJ K.K. Pang dated 29 September 2020, it was ordered that the PTR hearing dated 5 October 2020 being a milestone date be proceeded as scheduled and the adjourned hearing dated 16 October 2020 be vacated and adjourned to a date to be fixed.

13.  On 12 November 2020, W filed the Notice to Act in Person.

14.  On 13 November 2020, H filed the Notice to Act in Person.

15.  On 16 November 2020, H filed his 17th Affirmation being the narrative affirmation in relation to ancillary relief.

16.  W was reportedly collapsed in the morning on 17 November 2020 and was sent to the Accident and Emergency Department of a hospital. The trial before Deputy District Judge Thelma Kwan was consequently fallen through. By the order made by Deputy District Judge Thelma Kwan on 17 November 2020, it was ordered that leave be granted to H to restore two summonses respectively dated 6 February 2020 and 15 April 2020 and PTR (Ancillary Relief) be held on 15 January 2021. On 20 November 2020, H filed his 18^th Affirmation in furtherance of the summons dated 28 August 2020.

17.  Apart from ongoing disputes on ancillary relief, the parties continue having sharp disagreements on access. By ex-parte summons on notice dated 16 December 2020, W applied for further directions on access. By the order made by HHJ K.K. Pang on 17 December 2020, it was directed that Child Disputes Resolution hearing be fixed to take place on 30 April 2020 and an updated Social Welfare Report on access be called for.

18.  By the order made by HHJ K.K. Pang on 15 January 2021, it was ordered that the question of ancillary relief and H’s summonses dated 6 February 2020 and 15 April 2020 be set down for trial together commencing on 7 July 2021, with 8 to 9 July 2021 reserved, and PTR hearing be held on 26 April 2021, and that the summons dated 28 August 2020 be disposed of by way of paper disposal. W filed her 15^th Affidavit on 20 January 2021 and H filed his 19^th Affirmation on 16 February 2021.

19.  On 18 February 2021, both parties sent letters to the court requesting urgent hearings on access. By the summons dated 7 April 2021, H made another application for directions on access.

20.  By the order made by HHJ K.K. Pang on 1 March 2021, it was ordered that H’s summons dated 28 August 2020 be dismissed.

21.  On 30 April 2021, by consent it was ordered that access as provided by the consent order dated 27 April 2020 remain unchanged, save that modest changes were made in regard to the parties’ access on Christmas holiday, Easter holiday, Mother’s day, Father’s day and the Children’s birthday.

22.  By the summons dated 30 April 2021, W made an application for leave to remove the Children permanently from Hong Kong to Sydney, Australia after their school mid-term break, leaving Hong Kong between 1 to 10 November 2021, subject to flight availability. Given that the parties professed that they were in dire financial situation, W proposed to relocate the Children to live with her in Australia. By the order made by HHJ K.K. Pang dated 23 July 2021, it was directed that W’s summons dated 30 April 2021 be set down for trial commencing on 22 February 2022, with 23 and 24 February 2022 reserved and that PTR be held on 3 January 2022.

H’s case and open proposal

23.  H said: -

a.  W knowingly obstructed H’s access with the intent to cause distress and harm to him.

b.  W refused to contribute fairly towards family expenses during marriage.

c.  The valuation and genuineness of W’s sale of her 50% share in SLAC in January 2021, that SLAC made no repayment of W’s loan to the company, were questionable.

d.  The valuation of the three US Properties were USD212,763, USD210,043 and UDS216,911 respectively.

e.  W lived a wasteful lifestyle and at the same time refused to make frank disclosure of her means and income.

f.  His current salary was less than half of what he earned pre-Covid. No way that he could afford the current MPS figure.

g.  H did not have the support of a wealthy partner as W alleged.

24.  H proposed that: -

a.  There be a claw back of HK$1.6 million of family funds used and paid back to W through her improper conduct during the purchase, sale and valuation of SLAC;

b.  There be a deduction of overpayment of MPS by HK$20,000 per month;

c.  There be a 100% deduction for the value of his Australian superannuation;

d.  There be a 50% deduction for the current value of his CPAPF provident fund;

e.  There be no spousal support;

f.  There be a level of Children’s maintenance order that considers his current income and significant debts, that W should be earning by now;

g.  Any liabilities be for each party’s account;

h.  Any legal fee liabilities be mutualized with any remainder being for each party’s own account;

i.  An opportunity to retain BR LLC and the US Properties by refinancing or seeking investment in the company;

j.  There be an order for balancing cash payment be made for settlement with assets to remain in respective parties’ names.

W’s case and open proposal

25.  W said: -

(1) W did not have undisclosed means or assets.

(2) W rejected H’s queries about the purchase and sell of her 50% share in SLAC.

(3) W strongly believed that H had the financial support of a wealthy partner.

(4) She was willing to work but she was unable to get work in Hong Kong, though she was offered a full time job in Australia. To live in Hong Kong and she could not secure a job, H would need to maintain nothing less than current level of maintenance whilst she tried to establish herself independently.

(5) She needed H to continue supporting the Children, including schooling, medical and travel.

(6) The parties were not separated in June 2016.

26.  W proposed that: -

(1) The US Properties be sold and the sale proceeds added to the family pot;

(2) The 1973 Royal Enfield Bullet 350 and 2018 Volkswagen Tiguan be sold and the proceeds of sale of the same and the 1983 Mercedes 280SL that was already sold be added to the family pot;

(3) The 1956 Airstream Overlander Trailer be transferred to W;

(4) The Conduit Road property be considered an asset that she brought into the marriage;

(5) The Mui Wo property be considered non-family money for the two years prior to their marriage;

(6) None of the proceeds of the sale of SLAC be taken into account as the sale took place after the parties’ separation;

(7) The two Breitling watchesbe held for the Children until the age of 18 as previously agreed between the parties and one to be kept by W and one to be kept by H for each child until the ages of 18;

(8) The 2013 BMW X3 be remained with W and be taken into account as a family asset for the split;

(9) All liabilities be taken into account;

(10) Once all assets are valued and sold the amount be deemed as family funds be split on 60/40 basis with 60% to W;

(11) Child support to be HK$15,000 per month per child with 2% yearly increase until each child reaches the age of 18;

(12) Spousal support of HK$20,000 per month for a maximum 12-month period;

(13) MPS be remained at HK$60,000 per month until final settlement;

(14) 60/40 split was fair considering H would keep most of his CPAPF provident fund and Australian superannuation.

Applicable legal principles

27.  The jurisdiction of the court in granting financial relief for a party is governed by sections 4, 6 and 6A of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) which provides,

“4. Financial provision for party to a marriage in cases of divorce, etc.

(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of section 25(1), make any one or more of the following orders, that is to say-

(a) an order that either party to the marriage shall make to the other such periodical payments and for such term as may be specified in the order;

(b) an order that either party to the marriage shall secure to the other to the satisfaction of the court, such periodical payments and for such term as may be so specified;

(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified.

(2) Without prejudice to the generality of subsection (1)(c), an order under this section that a party to a marriage shall pay a lump sum to the other party-

(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;

(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments to be secured to the satisfaction of the court.

6. Orders for transfer and settlement of property and for variation of settlements in cases of divorce, etc.

(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation, or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of sections 10 and 25(1), make any one or more of the following orders, that is to say- (Amended 69 of 1997 s. 23)

(a) an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion;

(b) an order that a settlement of such property as may be so specified, being property to which a party to the marriage is so entitled, be made to the satisfaction of the court for the benefit of the other party to the marriage and of the children of the family or either or any of them;

(c) an order varying for the benefit of the parties to the marriage and of the children of the family or either or any of them any ante-nuptial or post-nuptial settlement (including such a settlement made by will or codicil) made on the parties to the marriage;

(d) an order extinguishing or reducing the interests of either of the parties to the marriage under any such settlement;

(e) an order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion, and for the use of the proceeds of such sale,

 

and the court may make an order under paragraph (c) notwithstanding that there are no children of the family.

(2) Subsections (2) to (6) of section 6A apply in relation to orders under subsection (1)(e) as they apply in relation to orders under subsection (1) of that section.

6A.Orders for sale of property

(1) Where the court makes an order under section 4, 5 or 6 then, on making that order or at any time after the making of that order, the court may make a further order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion.

(2) Any order made under subsection (1) may contain such consequential or supplementary provisions as the court thinks fit and, without affecting the generality of the preceding words of this provision, may include-

(a) provision requiring the making of a payment out of the proceeds of sale of the property to which the order relates; and

(b) provision requiring any such property to be offered for sale to a person, or class of persons, specified in the order.

(3) Where an order is made under subsection (1), the court may direct that the order, or such provision of the order as the court may specify, shall not take effect until the occurrence of an event specified by the court or the expiration of a period so specified.

(4) Where an order under subsection (1) contains a provision requiring the proceeds of sale of the property to which the order relates to be used to secure periodical payments to a party to the marriage, the order shall cease to have effect on the death or re-marriage of that person.

(5) Where a party to a marriage has a beneficial interest in any property, or in the proceeds of sale of any property, and some other person who is not a party to the marriage also has a beneficial interest in that property or in those proceeds of sale, then, before deciding whether to make an order under this section in relation to that property, it shall be the duty of the court to give that other person an opportunity to make representations with respect to the order; and any representations made by that other person shall be included among the circumstances to which the court is required to have regard under section 7(1).

(6) An order shall not be made under subsection (1) in relation to any property where the purported assignment or other alienation of the property together with any agreement so to assign or otherwise alienate the property pursuant to the order would be void by virtue of section 17B of the Housing Ordinance (Cap 283).”

28.  Section 5 of the MPPO provides that the Family Court may make any one or more of an order for periodical payments, secured periodical payments, lump sum payment, secured lump sum payment for the benefit of the children of the family.

29.  Section 7 of the MPPO provides that: -

“(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

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

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

(2) Without prejudice to subsection (3), it shall be the duty of the court in deciding whether to exercise its powers under section 5, 6 or 6A in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say—

(a) the financial needs of the child;

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

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

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

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

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

30.  In LKW v DD (2010) 13 HKCFAR 537, the Court of Final Appeal sets out the steps to be taken by the courts in undertaking a s 7 exercise.  They are:

(i)    The ascertainment of the financial resources of the parties (paragraphs 71 to 73 of the Judgment);

(ii)   The assessment of the parties’ financial needs.  If the total resources are not enough to meet the parties’ needs, the s 7 exercise should stop here and there is no room to apply any sharing principle (paragraphs 74 to 79 of the Judgment);

(iii)   If surplus assets would remain after the parties’ needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties’ total assets, with a yardstick of equal division (paragraphs 80 to 82 of the Judgment);

(iv)   In considering whether good reasons exist for departing from equal division, factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations (paragraphs 83 to 130 of the Judgment);

(v)    The weight to be given to each of the factors is a matter of discretion for the court (paragraph 131 of the Judgment).

My view

Ascertainment of the parties’ financial resources

31.  According to W’s Form E dated 12 September 2019, the total value of her assets was HK$692,019.22, including HK$37,219.22 in banks, personal items including a 2013 BMW X3, an engagement ring, 1956 Airstream Overlander Trailer totally HK$654,800, Breitling watch of unknown value, life insurance policy of unknown value, Australian superannuation of unknown value, 50% holding of SLAC of unknown value. She had liabilities of HK$1,893,487.75. Apart from the above, a sum of was HK$334,817 held on account by her solicitors for her therapy and the children’s therapy,

32.  According to H’s Form E dated 24 September 2019, the total value of his assets was HK$8,897,234 including value of the US Properties of HK$4,744,101, HK$213,912 in banks, stocks of HK$78,665, valuable personal items including a 1985 Mercedes Benz 280SL, a 1956 Airstream Overlander Trailer, a 1973 Royal Enfield Bullet 350, a 2018 Volkswagen Tiguan, two Breitling watches valued at HK$467,603, an Australian superannuation of HK$209,189, CPAPF provident fund of HK$3,183,764 and life insurance policies of unknown value, and he had liabilities of HK$1,172,390.

33.  According to H’s Form E dated 13 November 2020, the total value of his assets was HK$8,847,423 including the US Properties of HK$4,959,419, HK$141,068.33 in banks, valuable personal items including a 1956 Airstream Overlander Trailer, 1973 Royal Enfield Bullet 350, 2018 Volkswagen Tiguan totally HK$320,900, Australian superannuation as of 11 November 2020 HK$242,272, CPAPF provident fund as of 13 September 2019 HK$3,183,764 and life insurance policies of unknown value. He had liabilities of HK$1,540,668.

34.  According to H’s updated Form E dated 2 July 2021, the value of his assets was reduced to HK$7,623,460 including the US properties of HK$3,819,791, HK$70,299 in banks, valuable personal items including a 1956 Airstream Overlander Trailer, 1973 Royal Enfield Bullet 350, 2018 Volkswagen Tiguan totally HK$300,900, Australian superannuation as of 11 November 2020 of HK$248,706 (AUD42,880), CPAPF provident fund as of 13 September 2019 of HK$3,183,764 and life insurance policies of unknown value. He had liabilities of HK$1,397,650. The value of his Australian superannuation as of 22 July 2021 was HK$265,256,97 (AUD47,198.75 X 5.62) and CPAPF provident fund as of 31 December 2020 was HK$4,142,796.83.

35.  According to W’s updated Form E dated 13 January 2021, the total value of her assets was HK$660,390.65, including HK$390.65 in banks, a 2013 BMW X3 of HK$100,000 and the net sale proceeds of 50% holding of SLAC estimated at approximately HK$560,000 to HK$580,000. She had liabilities of HK$3,285,133.68.

36.  By the Order dated 21 May 2020, expert directions were given for the valuation of SLAC. By the Order dated 29 July 2020, directions for a new timetable for the appointment of a single joint expert and the valuation of SLAC were given. Despite that the parties take issue over the value of W’s 50% interest in SLAC, neither party has taken any step for the valuation of SLAC.

37.  W purchased 50% share in SLAC for HK$1,600,000 in or about 2016, and she and her partner sold SLAC for HK$2,800,000 in January 2021. W said her net position as 50% owner after the sale was likely to be approximately HK$560,000 to HK$580,000. H disapproved W’s purchase and the subsequent sale of her interests in SLAC. He said her valuation of SLAC and genuineness of the sale were questionable. In his 17^th Affirmation, H proposed the valuation of SLAC to be at least HK$8 million, with W’s 50% share considered at not less than HK$4 million. He queried why SLAC made no repayment of the W’s director’s loan. H said W used SLAC as a vehicle to absorb family cash investment and create personal liabilities, only to be redistributed to W at a later date.

38.  W said, after she left the job that she was in for 17 years in or about 2015, she became involved in SLAC so as to look for other ways to earn money. However, the stress, the strain, the trauma of the ongoing litigation put her in a position that she was unable to concentrate on properly working. W said that business expenses that came through her credit card were reimbursed. W said, in the summer of 2020, W and her partner decided to look to sell SLAC for the following reasons: -

(1) The business was extremely inventory intensive, and as a result constantly suffered from cash flow issue that became worse the more the business grew;

(2) The cash flow shortage meant that they were unable to pay themselves fixed salaries, something that was causing immense personal problems;

(3) They tried to raise capital. However, they were unable to commit the necessary time to do this given that she was running the business day to day with a skeleton staff and W was too preoccupied by her divorce proceedings to contribute;

(4) W became more and more concerned about not being able to pay her lawyers’ fees and was keen to liquidate SLAC’s assets.

39.  W and her partner received three different offers to purchase and they chose the highest bidder. W said that the way that the buyer assessed what the company was worth was by how much profit SLAC actually made, and even though the company had pretty good turnover but the profit margin was terrible, and that was why they chose the company that eventually bought SLAC as well as the fact that they offered them the best price was because they were a distributer of baby goods in Hong Kong, so it meant that they would be able to take on the company and actually to make the bigger margins that everyone always wanted and to make it a viable business to continue. W produced the Audited Accounts of SLAC from 2016 to 2020 and the calculation of how she arrived the estimate of her net position as 50% owner after the sale to be approximately HK$560,000 to HK$580,000.[1]

40.  I take the view that W’s evidence in the above is plausible and hold that: -

(1) W’s purchase of 50% interest in SLAC is a positive move for her to look for other ways to earn money;

(2) The sale and valuation of SLAC is genuine;

(3) In view of SLAC’s cash flow shortage, it is conceivable that the company was unable to remit the directors’ loan.

41.  Accordingly, I do not agree that W used SLAC as a vehicle to absorb family cash investment and create personal liabilities and reject that there be a claw back of HK$1.6 million.

42.  Inasmuch as W’s purchase of the 50% interest in SLAC was funded by family money, I see no reason why the net proceedings of the sale of her 50% interest in SLAC should not be counted in the matrimonial pot.

43.  It is not in dispute that the US Properties are part of the matrimonial pot. H valued BR LLC at HK$3,819,791, to be arrived by the rateable value of the US Properties HK$4,989,791 less the liabilities and costs of sale estimated at HK$1,170,000. By the Order dated 21 May 2020, expert directions were given for the valuation of BR LLC and the US Properties. By the Order dated 29 July 2020, directions for a new timetable for the appointment of a single joint expert and the valuation of BR LLC and the US Properties were given. Despite that the parties have not been able to reach an agreement over the value of BR LLC and the US Properties, neither party has taken any step for the valuation of BR LLC and the US Properties. In the circumstance, I am prepared to adopt the rateable value as market value of the US Properties. H set out his calculation of the liabilities and costs of sale in the Form E dated 2 July 2021. In view of the parties’ disagreement, however, I consider that an account will need to be taken in order to ascertain the liabilities and costs of sale upon the completion of the sale of the US Properties, if and when an order for sale is eventually granted and executed.

44.  I accept that H’s Australian superannuation, to which all contributions were made before the parties’ marriage, should not be counted in the matrimonial pot.

45.  I accept that there be a deduction for the value of his CPAPF provident fund contributions made prior to marriage and after separation, i.e. around 50% of the current value of the fund being HK$4,142,796.83 ÷ 2 = HK$2,071,398.41.

46.  Neither party has taken issue on the value of the other party’s insurance policies or W’s Australian superannuation. As the value of the life insurance policies and W’s Australian superannuation is unknown, I do not count the same in the matrimonial pot.

47.  As neither party has sought to adduce evidence on the current value of the parties’ valuable personal items, including a ring, several vehicles and two Breitling watches, I adopt their values as shown in the parties’ Form E.

48.  He complained that W kept her salary offshore in Australia during the marriage, that W unilaterally withdrew around HK$639,800 from the family funds, including AUD44,000 from the joint ANZ account to her ANZ account in April 2014 and HK$400,000 from H’s HSBC account to her brother’s account in April 2017. He said money was shuffled to W’s family members as it was allegedly unaccounted for and his requests for W’s ANZ bank account statement were ignored. W sworn that she did not have secret bank accounts in Australia. She clarified that her ANZ account was laid dormant and was closed a long time ago. So no account statement was produced. She vigorously denied that she had undisclosed means and assets. After having carefully considered all evidence, I find that W’s testimony is not inherently implausible, or in any material way contradicted by other evidence that is undisputed or indisputable. Accordingly, I do not accept that W has unclosed means or assets.

49.  In the premises, the matrimonial pot consists of: -

(a)     Under H – HK$7,432,388.4 including the value of the US Properties of HK$4,989,791 (liabilities and costs of sale not acertained), HK$70,299 in bank accounts, valuable personal items valued at HK$300,900, 50% of CPAPF provident fund as of 31 December 2020 at HK$2,071,398.4;

(b)    Under W – HK$660,390.65, including HK$390.65 in bank accounts, a 2013 BMW X3 at HK$100,000 and the net sale proceeds of 50% holding of SLAC at approximately HK$560,000 to HK$580,000.

Assessment of the parties’ financial needs

50.  As the MPS of HK$60,000 per month was agreed between the parties at a time when his basic salary was around double what it is now, H said the MPS of HK$60,000 per month was clearly unsustainable and would have to be significantly reduced.

51.  According to H’s Form E dated 24 September 2019, his income was HK$243,722 per month and the monthly expenses were HK$444,956 including general expenses of HK$161,684 per month, personal expenses of HK$228,184 per month and children expenses of HK$55,088 per month. According to the Form E dated 13 November 2020, his income was HK$144,749 per month plus housing allowance of HK$88,200 per month and in addition he had HK$13,720 per month of rental income from the US properties. The monthly expenses were HK$202,451 including general expenses of HK$47,184 per month (rent of HK$88,200 per month paid directly by employer), personal expenses of HK$116,180 per month (including the MPS of HK$60,000 per month) and Children expenses of HK$39,087 per month. According to the Form E dated 2 July 2021, his average total income was HK$90,986 per month (excluding housing allowance of HK$68,000 per month), plus HK$13,720 per month of rental income from the US Properties. The monthly expenses were HK$156,545, including general expenses of HK$41,652 per month (excluding rent), personal expenses of HK$69,148 per month (excluding the MPS of HK$60,000 per month) and Children expenses of HK$45,745 per month. Of the rent of HK$80,000 per month, HK$68,000 per month was paid directly by his employer and the remaining HK$12,000 per month was covered by his partner, and that his partner shared some of the household costs and food costs. Currently, H has a monthly deficit of HK$156,545 – (90,986 + 13,720) = HK$51,839 per month (excluding the MPS of HK$60,000 per month).

52.  W set out her comments on H’s monthly expenses in her Scott Schedule. W’s position was that he could cut down his monthly expenses including MPS payment to HK$154,494.

53.  W adduced land search records and Company Registry record showing that H’s partner holds directorship in several companies in Hong Kong and is interested in several companies, at least one of which holds a landed property in Hong Kong, and that she is one of the two joint owners of another landed property in Hong Kong.[2] W argued that H had the financial support of a wealthy partner. H said after discussion with his partner, she advised him that just one of her directorships was associated with a company that provided her meagre income. The others were either dormant, her role as a director was as a trusted signatory, or they were not income producing. Her partner said she did not own any income producing property in Hong Kong. She and her brother however housed a dependent elder family member. All in all, I take the view that the evidence shows that his partner is a businesswoman of means and she is capable of contributing more to his monthly expenses. She should be required to contribute an amount equivalent to not less than half of the rent of HK$80,000 per month, on top of her share of some of the other household expenses, i.e. an increase by HK$28,000 per month.

54.  Despite that it seems indisputable to me that the parties have lived a comfortable living standard, both parties have to face the grim reality that once the divorce process starts, the standard of living will drop. Many factors combine to lower the parties’ living standard after their divorce. Legal fees, new living expenses and myriads of other costs will mushroom and drain their financial resources. Money previously used to support one household must now stretch to support two. In the present case, the drop in H’s income only exacerbated the problem. It is clear that H lives well beyond his means. I take the view that that it is not unreasonable to require him to save as much as 50% of general expenses (excluding rent that 85% was paid directly by his employer) and personal expenses, i.e. saving of HK$20,826 + 34,574 = HK$55,400 per month. Fox example, H should consider giving up one of his two family his cars and letting go one of the two of the home helpers. I have not lost sight that tax payment and personal loan repayment are fixed expenses. In the longer term, these expenses will be cut down. Being generous with the Children expenses, I accept that generally speaking the Children expenses are reasonable. With the above notable increase of contribution from his partner and cutting backs, hopefully H will make a surplus of as much as HK$30,000 per month.

55.  According to the Form E dated 27 March 2018, W’s total monthly expenses were HK$61,025. According to W’s Form E dated 12 September 2019, her income was between HK$20,000 to 30,000 per month and the monthly expenses were HK$126,600 including general expenses of HK$90,400 per month, personal expenses of HK$24,000 per month and children expenses of HK$12,200 per month. The increase was largely due to the new costs of rent in HK$60,000 per month, to which W accepted that the choice of a HK$60,000 per month rental apartment in Belair was criticizable. According to W’s Form E dated 13 January 2021, her monthly expenses were HK$81,500 including general expenses of HK$67,500 per month (including rent of HK$40,000 per month and home helper of HK$7,000 per month), personal expenses of HK$10,500 per month and children expenses of HK$3,500 per month. W said she had been in a worse financial position since the sale of SLAC as she was no longer receiving any income from SLAC. To address her bleak financial situation, she downsized her apartment in order to cut down on rent.

56.  H set out his comments on W’s monthly expenses in his Scott Schedule. H’s position was that she should cut down her monthly expenses to HK$49,637.

57.  W needs an apartment with 3 bedrooms to accommodate the Children when they spend time with her. I accept the rent of HK$40,000 per month. When she works, W will need home helper, the costs of which are about $7,000 per month. As said in the above paragraph 54, however, W needs to cut down on expenses. I take the view that that it is not unreasonable to require her to save as much as 50% of general expenses (excluding rent and home helper) and personal expenses, i.e. saving of HK$10,250 + 5,250 = HK$15,500 per month. I accept that W’s reasonable monthly expenses are around HK$81,500 – 15,500 = HK$66,000.

58.  H criticized that W did not fully utilize her earning capacity. W is aged 48. She has a Bachelor’s degree in business. She has worked as an operations manager with a trading company for 17 years. She ran SLAC from about 2016 to 2020, during which she learnt new skills that she needed such as how to build website, graphic design, how to market on social media, etc. She cannot read or write Chinese so that she is cut out of jobs that requires reading and writing Chinese. W is looking for jobs in digital market or graphic, advertising at the salary of around HK$50,000 per month. W expects that she probably needs up to to 1 years to re-enter the job market.

59.  By the time when W and her partner decided to sell SLAC in the Summer of 2020, obviously, W should start to actively look for jobs. Even assuming that she needs up to 12 months to re-establish herself in the workforce, in this way she should already be earning. She should be able to earn a reasonable income of around HK$50,000 per month. As her reasonable monthly expenses are HK$66,000, she has a deficit of around HK$16,000 per month. Accordingly, I take the view that there should be a maintenance payment of HK$16,000 per month to W for the benefit of the Children. This is conditional on that H continues to be responsible to the Children’s schooling. I have not lost sight that at present around 85% of the monthly rent and 75% of the Children’s school fees are paid via allowance. The Covid 19 situation required H signed on to a new contract in order to remain employed. By December 2022, his housing and education allowance will be reduced to around HK$22,000 per month and he will need to allocate a portion of his salary to cover these expenses. In due course, variation of the maintenance payment commensurate to the Children’s needs and the parties’ ensuing abilities may be called for.

60.  Despite that, by the order made by HHJ Molley dated 24 January 2019, H undertook that he would not seek to vary the MPS of HK$60,000 per month, H proposed that there be a deduction of overpayment of MPS by HK$20,000 per month, allegedly resulting from a significant reduction in his monthly income and significant increase in W’s means since the MPS agreement. By the summons dated 6 February 2020, H applied for the variation down of the MPS. By the summons dated 15 April 2020, H applied for the discharge of his undertaking dated 24 January 2019. The court may set off any under provision or over provision in the MPS order if it is fair and just so to do. In the present case, the primary question to answer is whether the undertaking dated 24 January 2019 should be discharged.

61.  My view is as follows: -

(1) It is apparent that W needed the MPS to cover her reasonable monthly expenses after separation;

(2) H castigated W that she allegedly lived wastefully. As it happened, both parties have lived well beyond their means.

(3) It is worthy of noting that W’s current financial situation is not in any way better than H’s, if not worse.;

(4) As such, I do not regard that it is fair to have any retrospective deduction of the MPS;

(5) By reason of the matters aforesaid, I reject H’s application for the discharge of the undertaking dated 24 January 2019 or retrospective deduction of the MPS.  

Liabilities

62.  According to the Form E dated 13 January 2021, W had liabilities of totally HK$3.285,133.68, including credit card debt of HK$276,372.07, indebtedness to a close friend and a close relative of HK$1,885,350 and outstanding legal fees of HK$1,123,411.61. According to the Form E dated 2 July 2021, H had bank loan, credit card debts, outstanding legal fees, indebtedness to his parents and tax liabilities of totally HK$1,397.650. H proposed that any liabilities should be for each party’s account on the grounds that W lived a wasteful lifestyle, that any legal fees liabilities should be for each party’s own account. W disagreed. W said that a vast majority of her funds were spent out of necessity on legal fees and living costs.

63.  My view is as follows: -

(1) W’s reasonable monthly expenses should be around HK$66,000. By the order made by HHJ K K Pang on 13 February 2018, it was ordered that H to pay W MPS at HK$30,000 per month and, by the Order made by HHJ Molloy on 10 May 2018, it was ordered that H to pay W MPS HK$60,000 from June 2018. Additionally, W received about HK$600,000 from SLAC from 2019. Under these conditions, the MPS and the income from SLAC together should be enough to meet W’s reasonable living costs; it was unnecessary for W going into debt to cover her reasonable living costs.

(2) By the order made by HHJ Molloy on 10 May 2018, the parties received HK$100,000 per month each for legal costs from the family money of HK$5,064,785 held in escrow by solicitors. While the legal costs the parties incurred are substantial, a considerable extent of the parties’ legal costs was already funded by family money.

(3) Notwithstanding that both parties put the blame squarely on the other side’s litigation conduct that led to protracted proceedings and increased costs, both initiated numerous legal exchanges as well as unsuccessful applications to the court. Despite both parties have stated their wishes to resolve matters out of court, nothing has come out of these intentions and various proceedings are ongoing. It seems both parties are responsible for the shocking drain on family resources on legal fees.

(4) A party’s own legal costs are usually considered his or her personal liabilities. The corollary is that any own legal fee liabilities generally are for each party’s own account. I see no reason why this should not apply in the present case.

(5) Neither party has any significant liabilities during marriage or prior to the parties’ separation.

(6) It appears that the parties’ indebtedness to close friend and relative is “soft loan”;

(7) All things considered, I accept that the parties’ liabilities should be for each party’s account.

Applying the sharing principle

64.  Most of the properties in the matrimonial pot were acquired during marriage. With that said, I take the view that it is appropriate to approach this case on the sharing principle. The next step will be for the court to apply the sharing principle to the assets in the matrimonial pot, with a yardstick of equal division as part of that principle. This means the assets should be divided equally between the parties unless there is good reason for departing from an equal division.

Any good reasons exist for departing from equal division

65.  H said this was a short marriage with time frames of 5 years from marriage to W’s extra marital affair, 6 years from marriage to separation and 7 years from marriage to the date of the petition. W maintained that the parties were not separated until she left the matrimonial home in 2018. In any case, this is not a long marriage. Despite that, I regard that there should be no departing from an equal division in the present case, weighing the various factors and striking a balance of fairness as follows: -

(1) Both parties brought pre-marital assets to the family. W brought into this marriage the Conduit Road property come from her first marriage, and H brought in the Mui Wo property he purchased in 2008.

(2) This marriage has two Children. Despite having unremitting disagreements on children matter, the parties are both caring and loving parents and are always ready to provide good nurture to the Children and are actively involved in the Children’s affairs.

(3) Generally speaking, both parties work and contribute financially during marriage.

(4) Most of the properties in the matrimonial pot were acquired during marriage

(5) By reason of matters aforesaid, both parties have made significant financial and non-financial contributions to the family.

(6) Both parties have earning capacity that is enough to take care of own needs.

(7) As to the Australian superannuation and 50% CPAPF provident fund that H exclusively keeps, I take notice that they are illiquid and are non-matrimonial assets.

(8) There is no “obvious and gross” conduct of the parties that the court should have to regard to in deciding whether there are any good reasons exist for departing from equal division.

Disposal

66.  W said it was agreed between the parties the two Breitling watches were held for the Children until the age of 18. She sought an order that one to be held by her and one to be held by H for each child until 18. No matter what W said, to which H disagreed, it is trite that equity will not complete an imperfect gift. I do not accept W’s proposal on the disposal of the two Breitling watches.

67.  Taking into consideration H does not gainsay W’s proposal on the 1956 Airstream Overlander Trailer, which allegedly has huge sentimental value to her, I accept that the 1956 Airstream Overlander Trailer be transferred to her at the value of HK$109,200 as per H’s Form E.

68.  It appears to be common ground that this matter should be dealt with on a clean beak basis and this is clearly the sensible way to proceed.

69.  On the whole, I take the view that the following is a fair and just disposal of the parties’ claim for ancillary relief: -

(a) H do pay W HK$16,000 per month for the maintenance of the Children;

(b) There be no order as to the summons dated 15 April 2020;

(c) The MPS dated 10 May 2019 be discharged;

(d) There be an order for the sale of the US Properties, the net proceeds of sale be equally distributed between the parties;

(e) There be opportunity for the parties to bid for the US Properties at market price;

(f) There be a balancing cash payment to H in the sum of HK$ ((660,390.65 + 109,200) – (70,299 + 300,900 – 109,200)) ÷ 2 = HK$253,795.82;

(g) Upon receiving his CPAPF provident fund, H do pay W the sum of HK$2,071,398.4 ÷ 2 = HK$1,035,699,2;

(h) There be a clean break between the parties.

70.  The end result is an order that: -

(1) The US Properties be sold at market price within 2 months of the date of this order, or upon the making of the Decree Absolute, whichever is the later;

(2) There be liberty to the parties to bid for the US Properties;

(3) H do provide W an account of the costs and liabilities of the sale upon the completion of the sale of the US Properties;

(4) The net proceeds of sale be equally distributed between the parties;

(5) W do pay H the sum of HK$253,795.82 upon the completion of the sale of the US Properties;

(6) The 1956 Airstream Overlander Trailer be transferred to W within 2 months of the date of this order, or upon the making of the Decree Absolute, whichever is the later, the costs of the transfer be paid by W;

(7) Upon receiving his CPAPF provident fund, or upon the making of the Decree Nisi Absolute, whichever is the later, H do pay W the sum of HK$1,035,699,2;

(8) H shall pay HK$16,000 per month to W as maintenance for the Children i.e. HK$8,000 per month per child, the first payment to be made on 1 October 2021 and subsequent payments on the 1st day of each succeeding month until the Children attain the age of 18 or cease to receive full time education, whichever is the later, the periodical payments be paid into W’s designated bank account;

(9) The MPS order dated 10 May 2018 be discharged;

(10) There be no order as to the summons dated 15 April 2020;

(11) Upon the compliance of the above paragraphs (1) to (7), the parties’ claim for ancillary relief against the other be dismissed;

(12) There be liberty to apply;

(13) There be s.18 declaration.

Costs

71.  Broadly speaking, neither party is wholly successfully. It is ordered nisi that there be no order as to costs of the ancillary relief matter, the summons dated 6 February 2020 and the summons dated 15 April 2020, including reserved costs. The costs order nisi becomes absolute 14

days after the order is made, unless a party has applied to the court for varying the order.

FCMC 14020/2017

[2021] HKFC 39

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 14020 OF 2017

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J U D G M E N T

(Application for discharge of injunction order)

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1.  This judgement is concerned with the Petitioner husband (‘H’)’s summons dated 28 August 2020 for the discharge of the paragraph 1 of the injunction order made by Deputy District Judge D. To on 14 April 2020.

2.  The parties were married in 2010 in Hong Kong. H is a pilot of an airline and the Respondent wife (‘W’) was a manager and director of her 50% owned business (‘SLAC’). There are two children of the family (the ‘children’). The older boy was born in 2010 and the younger boy was born in 2012. H petitioned for divorce on behaviour on 27 October 2017. Both parties have re-partnered since separation.

3.  The parties have been entangled in protracted discoveries and disputes on children matters. Upon W’s undertaking not to molest H, the domestic helper and the children and by consent, on 13 February 2018 it was ordered that interim care and control be granted to H with alternate day access to W, and H should pay W interim-interim maintenance at HK$30,000 per month until further order. Upon the parties agreeing and undertaking that they should receive $100,000 per month each for legal costs from the monies held by his former solicitors until further order or agreement and by consent, on 10 May 2018 it was ordered that by way of interim maintenance (‘MPS’) H should pay W $35,000 on 10 May 2018 and thereafter $60,000 per month from 1 June 2018 until further order and that H should continue to pay all children expenses.

4.  The Decree Nisi was granted on 20 June 2018.

5.  By the Recital D of the order dated 24 January 2019 made by HHJ Molley, H gave the undertaking that he would not seek to vary the paragraph 1 of the order dated 10 May 2018 in respect of the MPS of HK$60,000 per month.

6.  According to W’s updated Form E dated 12 September 2019, the total value of her assets was HK$692,019.22, apart from HK$334,817 held on account by her former solicitors for her therapy and the children’s therapy, including HK$37,219.22 in bank accounts, personal items including a 2013 BMW X3, an engagement ring, a 1956 Airstream Overlander Trailer totally valued at HK$654,800, a Breitling watch of unknown value, life insurance policy of unknown value, a superannuation in Australia of unknown value, 50% holding of SLAC of unknown value, and she had total liabilities of HK$1,893,487.75. Her income was HK$20,000 to 30,000 per month and current monthly expenses were HK$126,600 including general expenses of HK$90,400, personal expenses of HK$24,000 and children expenses of HK$12,200 per month. According to her Form H filed on 9 September 2019, W’s costs incurred up to the hearing dated 9 September 2019 were HK$3,543,906.9 and the outstanding legal fees were HK$798,400.

7.  According to H’s updated Form E dated 24 September 2019, the total value of his assets was HK$8,897,234 including value of the US properties of HK$4,744,101, HK$213,912 in bank accounts, STOCKS OF hk$78,665, personal items including A 1985 Mercedes Benz 280SL, a 1956 Airstream Overlander Trailer, a 1973 Royal Enfield Bullet 350, a 2018 Volkswagen Tiguan, two Breitling watches totally valued at HK$467,603, a superannuation in Australia of HK$209,189, MPF of HK$3,183,764 and life insurance policies of unknown value, and he had total liabilities of HK$1,172,390. His average income was HK$243,722 per month and current monthly expenses were HK$444,956 including general expenses of HK$161,684, personal expenses of HK$228,184 and children expenses of HK$55,088 per month. According to his Form H filed on 8 September 2019, his costs incurred up to and including current hearing were HK$3,977,514.

8.  Since around the end of 2019, H has been paying less than what is required under the MPS. By the summons dated 6 February 2020, H made an application for the variation down of the MPS. By an injunction order dated 14 April 2020 made by Deputy District Judge D. To, it was ordered that H be restrained from dealing with a company controlled by H as well as three properties situated in TX, USA (the ‘US properties’) and held by that company. By the summons dated 15 April 2020, H made an application for the order that he be released from his undertaking in the Recital D of the order dated 24 January 2019.

9.  By the consent order dated 27 April 2020 made by HHJ Molley, joint custody and shared care and control were granted to the parties.

10.  Financial Disputes Resolution hearings were held before HHJ Melloy on 14 October 2019, 25 November 2019 and 27 April 2020 respectively and were unsuccessful.

11.  On 21 May 2020, I made the order that the question of ancillary relief be set down for trial before Deputy District Judge Thelma Kwan commencing on 17 November 2020, with 18 to 20 November 2020 reserved and the pre-trial-review hearing be held on 5 October 2020, and that the hearing of H’s summonses dated 6 February 2020 and 15 April 2020 be adjourned sine die.

12.  By the summons dated 28 August 2020, H made an application for the discharge of the paragraph 1 of the injunction order made by Deputy District Judge D. To on 14 April 2020 so that he will be allowed to put the US properties on the market for sale. On the same day, he filed his 15^th Affirmation in support of the above application. According to another Form H, dated 22 May 2020 and exhibited thereto, his costs incurred up to and including the current hearing were HK$3,712,668 and the outstanding legal fees were HK$703,681.7. On 9 September 2020, it was ordered that the hearing of the summons dated 28 August 2020 be adjourned to 16 October 2020 for argument. On 23 September 2020, W filed her 13^th Affidavit in opposition of the above application.

13.  The Memorandum of Notification of W’s application for legal aid was lodged with the court on 24 September 2020 and accordingly these proceedings were automatically stayed until 4 November 2020. On 29 September 2020, I gave the directions that the pre-trial-review hearing dated 5 October 2020 being a milestone date be proceeded as scheduled and the adjourned hearing dated 16 October 2020 be vacated and adjourned to a date to be fixed. On 12 November 2020, W filed her Notice to Act in Person.

14.  On 13 November 2020, H filed his Notice to Act in Person. According to H’s updated Form E dated 13 November 2020, the total value of his assets was HK$8,847,423 including value of the US properties of HK$4,959,419, HK$141,068.33 in bank accounts, personal items including a 1956 Airstream Overlander Trailer, a 1973 Royal Enfield Bullet 350, a 2018 Volkswagen Tiguan, totally valued at HK$320,900, a superannuation in Australia as of 11 November 2020 HK$242,272, MPF as of 13 September 2019 HK$3,183,764 and life insurance policies of unknown value, and he had total liabilities of HK$1,540,668. His average income was HK$144,749 per month, plus housing allowance of HK$88,200 per month and HK$13,720 per month of rental income from the US properties. His current monthly expenses were HK$202,451 including general expenses of HK$47,184 (rent of HK$88,200 per month paid directly by employer), personal expenses of HK$116,180 including the MPS of HK$60,000 per month and children expenses of HK$39,087 per month. On 16 November 2020, H filed his 17th Affirmation being the narrative affirmation in relation to the ancillary relief matters.

15.  Unfortunately, the trial before Deputy District Judge Thelma Kwan was somehow collapsed. By the order dated 17 November 2020 made by Deputy District Judge Thelma Kwan, it was ordered that leave be granted to H to restore two summonses dated 6 February 2020 and 15 April 2020 and pre-trial-hearing be held on 15 January 2021. On 20 November 2020, H filed his 18^th Affirmation in furtherance of the summons dated 28 August 2020.

16.  Apart from ongoing disputes on the ancillary relief matters, the parties continue having sharp disagreements on the issue of access. By the summons dated 10 December 2020, W made an application for further directions on access. On 17 December 2020, it was ordered that Child Disputes Resolution hearing be fixed to take place on 30 April 2020 and an updated Social Welfare Report on access be called for.

17.  On 15 January 2021, it was ordered that the question of ancillary relief and H’s summonses dated 6 February 2020 and 15 April 2020 be set down for trial together commencing on 7 July 2021, with 8 to 9 July 2021 reserved, and pre-trial-review hearing be held on 26 April 2021, and that the summons dated 28 August 2020 (‘the present application’) be disposed of by way of paper disposal. W filed her 15^th Affidavit on 20 January 2021 and H filed his 19^th Affirmation on 16 February 2021.

18.  On 18 February 2021, both parties sent letters to the court making requests for urgent hearings on the issue of access. Leave was given to the parties to have their proposed summonses to be heard on 10 March 2021.

19.  The present application is primarily based on H’s current financial situation. It is not disputed that the US properties are part of the matrimonial pot. However, it is said that it has now come to a point that he can no longer afford to settle the outstanding legal fees in HK$703,681.7 or to have legal representation for the forthcoming ancillary relief trial unless he realises the US properties that are the only liquid and valuable assets left in the matrimonial pot. H recalled that his dire financial situation was not generated by his own making, but due to:

a.  Losing the monthly Pegasus income of HK$40,000 in mid-2018;

b.  Significant reduction in his salary income with further reductions imminent;

c.  W’s unilateral withdrawal of around HK$639,800 from the family funds, including AUD44,000 from the joint ANZ account to her ANZ account in April 2014 and HK$400,000 from H’s HSBC account to her brother’s account in April 2017;

d.  Mounting legal fees as H was forced to deal with various urgent application including W’s garnishee proceedings and injunction applications, H’s application to vary the MPS, H’s application for return of the children who were unlawfully retained by W in Australia between early February and mid-March 2020, and the parties’ numerous applications on the question of access; and that

e.  The MPS of HK$60,000 is clearly unsustainable and will have to be significantly reduced after the divorce.

20.  Allegedly, his financial means have been exhausted, and he has no intention to seek assistance from his new partner to pay for his legal fees.

21.  H is making the present application to realise the US properties to pay his outstanding legal fees and to fund the legal costs of the approaching pre-trial-review hearing and ancillary relief trial as he does not have any capital at his disposal that he can utilise for such purpose. It is worthy of noting that if H is allowed to pay his own costs out of capital, it will reduce the matrimonial pot for distribution. Additionally, provision for legal costs funding will be offset against any final award to a party in the ancillary relief proceedings.

22.  Against such backdrop, W contends that the sale of any or all of the US properties will leave insufficient assets to meet her award for ancillary relief. She has prepared a summary table of the parties’ assets and liabilities showing what assets exist and in whose control they are, exhibited to her 13^th Affidavit. According to W, the parties’ total net assets are HK$5,876,889.9, of which HK$3,565,190 is wholly illiquid, and wholly in H’s control, being his pension/ MPF.

23.  It is pertinent to take notice the parties take issue over the value of W’s 50% interest in SLAC. W’s contention that there will be insufficient assets remaining to meet her award for ancillary relief is an issue primarily arising from the parties’ disagreements over valuation of her 50% share in SLAC. W has recently sold her 50% share and her net position as 50% owner after the sale is said to be likely to be approximately HK$560,000 to HK$580,000. In his 17^th Affirmation, H proposes the valuation of SLAC to be at least HK$8 million, with W’s 50% share being considered at HK$4 million. The parties’ dispute on the valuation of SLAC is clearly a matter for trial. For the present purpose, it suffices to say that W’s valuation, whether it is right or wrong, is plainly arguable. In the premises, I tend to accept W’s contention that the continuation of the injunction order is necessary to protect her ancillary relief claim.

24.  According to her, W has been in a worse financial position since the sale of her interests in SLAC as she is no longer receiving any income from SLAC.

25.  Both parties deny that they have access to third party financial assistance in litigation costs funding.

26.  Both sides have complained about each other’s litigation conduct that have led to protracted proceedings and increased costs. Despite both parties have stated their wishes to resolve matters out of court, nothing has come out of these intentions and various proceedings are ongoing. Both parties have been legally represented. The legal costs that they have incurred are substantial and already amounted to more than HK$7.2 million. That represents a shocking drain on family resources, and clearly the money would have been better used for the children, particularly taking into consideration H having been unilaterally halving the maintenance payments from HK$60,000 to HK$30,000 per month since around the end of 2019.

27.  In LLC v LMWA, LELP [2019] 2 HKLRD 529, the Court of Appeal made the following observations:

30. A characteristic of matrimonial or family proceedings which all those involved in it (parties and those relatives who supported them, lawyers as well as judges) should always be mindful is that the resources

(including both time, monies as well as energy) of the parties should not be disproportionately squandered away in litigation. This is particularly so in cases where there are children in the family. For each $10,000 spent on legal fees, the parties would eventually have $10,000 less to be distributed amongst themselves (in a sharing case) or for maintaining themselves and their children (in a need case). For each hour spent on preparation and attending hearing, the party would have one hour less for rebuilding their lives after divorce or for spending time with their children. Actually, it could probably be worse because in many instances the time and energy spent on litigation would generate ill-feelings and hostilities for which much more time is needed to restore the litigant's peace of mind.

31. Like other places in the world, the divorce rate in Hong Kong is getting higher and higher. The caseload for the Family Court is increasing every year and the cases are getting more complicated. It is not uncommon that matrimonial or family proceedings lasted much longer than they should have and the legal costs incurred by the parties drained away an unreasonably large proportion of the family wealth. Based on our experience on the bench in hearing family cases, there is an urgent need for those practising family law to embrace a more proactive mindset to resolve family disputes through effective and proportionate means. There is also a need for the courts to adopt proactive case management to curtail excesses in litigation which ultimately do not do any good in resolving the matter for the parties.

*541 32. In England, Munby J lamented about similar state of affairs in that jurisdiction in KSO v MJO and MJO (PSO intervening) [2009] 1 FLR 1036. In that case, the original net matrimonial assets were about £770,900, but the parties had paid £276,471 in costs, and £276,989 remained to be paid. In addition, there was a liability for costs of the father-in-law (in the sum of £120,139) whom the wife had joined as a party. The judge ordered the husband to pay the wife one half of the costs she was paying to the father in law. At the FDR, the judge learnt that the family wealth had been so much dwindled that it was insufficient to meet the most basic needs of the parties. Unsurprisingly, the FDR failed to achieve a settlement. Shortly afterwards, the husband declared himself bankrupt and the litigation collapsed under the burden of costs.

33. The observations of Munby J reflecting on the problem of disproportionate family litigation provided much food for thought. At [76]-[81] of the judgment, His Lordship said:

[76] Not for the first time I have here been faced with ancillary relief litigation conducted at ruinous expense to the parties. I should like to think it will be the last time, but I doubt it.

[77] In A v A (No 2) (Ancillary Relief: Costs) [2007] EWHC 1810 (Fam), [2008] 1 FLR 1428, at para [269], I observed that in that case some 41.5% of matrimonial assets of £2,669,715 had gone in costs. I continued at para [270]: "It may be that the "mega" rich can afford to squander grotesque sums in costs. The allusion is, of course, to Moore v Moore [2007] EWCA Civ 361, [2007] 2 FLR 339, at para [6]. Lesser mortals cannot. Costs in too many so-called "big money" cases - in modern conditions many such cases do not in truth involve "big" money at all - are, as here, grossly disproportionate to either the amounts or the issues at stake. I have had occasion before to deplore the expenditure - one is tempted to say the waste - of money in such cases: see, for example, Re G (Maintenance Pending Suit) [2006] EWHC 1834 (Fam), [2007] 1 FLR 1674, at para [46]. Other judges have also expressed their concerns. A very recent example is provided by Wood v Rost [2007] EWHC 1511 (Fam), [2007] All ER (D) 198 (Jun), where, speaking of a case which had been conducted at "vast expense", the Deputy Judge lamented that the late Mr Charles Dickens was no longer alive to write a 21st century sequel to Bleak House. The simile, if I may Page 8 say so, is all too apt. The accusatory finger which in the 19th century was appropriately pointed at the High Court of Chancery is, in the modern*542 world, more appropriately pointed at the Family Division."

[78] Only a few weeks later, in Whig v Whig [2007] EWHC 1856 (Fam), [2008] 1 FLR 453, I had occasion again to lament what I described (at para [88]) as 'ruinously expensive' ancillary relief proceedings. In that case the ancillary relief proceedings had been overtaken by the husband's bankruptcy - on his own petition - and the aggregate costs of both sets of proceedings amounted, as I explained, to more, on the husband's view, than the net aggregate value of the identified family assets and not far short of what the wife said they were worth. I commented at para [5]:

"One wonders with astonishment at what has been going on. One can only speculate as to what anyone thinks they could possibly hope to salvage from this expensive and utterly futile fiasco."

[79] A year earlier, in C v C (Costs: Leave to Appeal), at para [19], I had commented on how costs amounting to no less than £394,275 had been spent in the course of ancillary relief proceedings which had been commenced scarcely 3 months earlier and which had, as to the substance of the matter, not yet progressed very far despite the intensity of the interlocutory skirmishing.

[80] The picture is deeply dispiriting. And it is not as if it is only the adults who suffer from the consequences of such folly. The luckless children do as well. The present case is a sobering, and for me deeply saddening, example. If, instead of spending - squandering - over £430,000 in costs, the wife and the husband had been able to resolve their differences at a more modest and, dare I say it, more seemly level of costs, there might very well have been enough left in the matrimonial 'pot' to house the wife and children and to enable the children to remain at their school, whilst still leaving something more than a mere consolation prize over for the husband. As it is, it is hard to see much being left from the wreck, not least after the trustee in bankruptcy has had his costs, expenses and remuneration. It is difficult not to be reminded at this point of Jarndyce v Jarndyce (see the Appendix). And the wife and the husband - and for this purpose I refer to them as the mother and the father, for that is what they are - are faced now with the wretched and thankless task of trying to explain to their daughters how it has all come to this.

[81] *543 Something must be done about the problems highlighted by this and by too many similar cases. We simply cannot go on as we are. The expenditure of costs on the scale exemplified by this and by too many other such cases is a scandal which must somehow be brought under control.

34. We are sad to say that the lesson has not been learnt in Hong Kong.

I respectfully agree.

28.  Despite that there are disputes over the value of SLAC, that both parties accuse the other party guilty of non-disclosure, that the other party not having used one’s earning capacity to the fullest, and that there are disagreements on the parties’ monthly expenses, this is not a complex case. Nor is there a situation that fairness demands that H be legally represented so as to achieve so called equality of arms, both parties having been acting in person since November 2020. Looking at the matter in the round, I take the view that H should have no real trouble in handling the ancillary relief proceedings personally and continuing acting in person in the coming pre-trial-review hearing and ancillary relief trial.

29.  By reason of matters aforesaid, I dismiss the present application.

30.  Presently, I see no reason why costs should not follow the event. It is therefore ordered nisi that H shall pay W’s costs of the present application, including reserved costs, to be taxed if not agreed. The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

The Petitioner acting in person

The Respondent acting in person