CCYL v. CCSR

FCMC 15718/2018

[2020] HKFC 154

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15718 OF 2018

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R U L I N G

( Variation of Costs Order Nisi )

( By Paper Disposal )

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Introduction

1.  This Ruling is a sequel of my earlier Judgment handed down on 10 October 2019 (“the Judgment”) by which I dismissed the petitioner wife’s application for maintenance pending suit (“MPS”) for a monthly sum of $315,000 (inclusive of legal costs provision) and I accepted the husband’s offer of $35,000 according to which I made an interim maintenance order for the benefit of the parties’ daughter. 

2.  When it came to costs, I took the view that since the petitioner had failed in her application, she should bear the costs of it.  Accordingly, I made an order nisi that the petitioner is to bear the respondent’s costs of her application. 

3.  The petitioner was not happy with the costs order nisi.  She applied, by way of a summons on 24 October 2019, for its variation.  Both parties have since agreed to have the variation matter to be dealt with by way of paper disposal.

4.  For convenience I shall continue to refer to the petitioner as “thewife” and the respondent as “the husband”.  As I have already set out the background to the wife’s original application, the parties’ arguments and my reasoning in the Judgment, I am not going to repeat the same here. 

5.  At this early juncture, it should be pointed out that in her summons for variation, the wife sought to have the costs order nisi to be varied to one of “no order as to costs”.  However, for reasons only known to her and her legal team, her submissions lodged in support was one for “the husband to pay her costs”. There was no explanation for the discrepancy nor was there any application for the amendment of the summons.  It was upon the enquiry by the court that the discrepancy was noticed as a result of which, with the consent of the husband (who was then legally represented), the wife was granted leave on 27 March 2020 to amend her summons in the way that the costs order is to be varied to either “no order as to costs” or “the husband is to pay the costs”. 

The Legal Principles

6.  It is trite that the issue of costs is a matter of discretion for the court.  The discretion is a wide one and of course must be exercised judicially.  In ancillary relief cases, it has been said by the Court of Appeal that because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: Z v X & C, (unrep., CACV 166/2011, 8 March, 2013) at § 10. 

7.  As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3 of the Rules of the High Court.  Sub-paragraphs (1) to (2A) of the rule state as follows:

(1)       Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2)       If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

(2A)     If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.             (emphasis added)

8.  The application for MPS is an interlocutory application so sub-paragraph (2A) is applicable. 

9.  Sub-paragraph (2A) was introduced in the Civil Justice Reform of 2009: Hong Kong Civil Procedure (2020) Vol 1, §62/3/3B.  The present position in this regard has been succinctly summarised by Hon To J in Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), which I gratefully adopt.

19.       Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings.  Unlike other proceedings, the general rule of costs following the events do not apply.  The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit.  In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action.  The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule.  Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

The Wife’s Grounds for Her Application for Maintenance Pending Suit

10.  The wife’s grounds in support of her application are briefly recapped below.

11.  First, the wife submitted that the husband’s self-petition for bankruptcy was a cynical move designed to attempt to defeat her financial claims: see [13].  This ground was rejected based mainly on her own evidence that the husband was in deep financial trouble at the relevant time and accordingly, I was not satisfied that the husband’s self-petition for bankruptcy was an attempt to defeat the wife’s claim: see [31] to [40].

12.  Secondly, the wife submitted that the husband failed to give a full and frank disclosure of his financial situation. On that basis, she invited the court to make ‘robust assumptions’ against the husband about his ability to pay. 

13.  On this ground, whilst I accepted that the husband had failed in his duty, I declined to make the ‘robust assumptions” as urged upon by the wife.  I considered that even with all the non-disclosure in mind, the wife’s own evidence that lent support to the husband’s assertion regarding the crumpling of his business must carry weight in the balancing exercise: see [55] to [62].

14.  Thirdly, I found there was not a shred of evidence that the husband’s family is willing to support the wife and the daughter at whatever level demanded by her: see [64].

15.  Finally, in addition to the above, insofar as the quantum was concerned, I disbelieved the figure proposed by the wife; I found it both extravagant and unnecessary.  I remarked that “The wife should understand that this litigation tactic of inflating items would meet with the disapproval of the court”: see [67].

The Wife’s Grounds for Variation

16.  It is Mr Chan’s submissions that although the wife’s application was dismissed, the fact of the matter is that without taking out the application the husband would not have offered to pay any MPS at all.  He emphasizes that it was only on the date of the substantive hearing of 12 August 2019 that the husband offered to pay $35,000 per month which the court eventually accepted.  It is common ground that during the course of the marriage the family enjoyed a relatively high standard of living and the husband was the main and predominant breadwinner.  The wife had no choice and was compelled to apply for MPS.

Discussion

17.  I am the docket judge in this case and have been overseeing the proceeding ever since its inception.

18.  The husband’s liability was not at issue but quantum was.

19.  The 1^st First Appointment hearing was fixed to be heard on Monday, 25 February 2019, at 9:30 am.  On 21 February 2019 (Thursday) (ie 4 days (or 2 working days) before the hearing) the wife’s solicitors wrote to the court seeking leave for her intended application for MPS to be heard in the same hearing.  In the letter the court was informed that the supporting affidavit “is being finalized and will be sworn tomorrow”. In other words, the supporting affidavit was not in sight.  The application was refused by the court with the following reason given:

“This is an 11^th hour application. The petitioner has also failed to lodge the 1^st Appointment Bundle”.

20.  The wife’s solicitors renewed the request the next day, ie on 22 February 2019 (Friday), but was refused by the court on the same date.

21.  I gather it was only on Monday, 25 February 2019 (ie the same date as the 1st First Appointment Hearing), that the summons for MPS was taken out with a return date of 12 April 2019.  Therefore, the hearing of 25 February 2019 was not meant to deal with the MPS issue and in all likelihood at the time of the hearing the summons had not been taken out yet and almost certainly the husband had not been served with the same.  Notwithstanding all these, since the daughter’s welfare was involved, I allowed the issue of interim maintenance to be raised.  The husband’s immediate response was, with the support of his mother, he was willing to pay a monthly sum of $20,000. The court accordingly made an interim order in terms of the husband’s offer. 

22.  It transpires from the husband’s submissions for the purpose of the present application for variation that before the hearing of 25 February 2019 and the wife’s taking out of her summons for MPS, the father had already agreed to pay maintenance for the benefit of his daughter.  The “Without Prejudice Save as to Costs” letters issued by the husband’s solicitors and annexed to Mr Cheung’s submissions showed that in fact similar offers had been made by the husband on 11 February 2019 and 20 February 2019.  In the letter dated 11 February 2019, he said his family was able to pay a monthly maintenance of $20,000 for the daughter plus all the expenses of education.  And in the letter dated 20 February 2019, the offer of $20,000 was repeated and it was said that the husband’s mother was agreeable to provide the wife with some financial subsidy in a discretionary amount for her accommodation. 

23.  I have not been referred to the response, if any, given by the wife in respect of the offers prior to the taking out of the application for MPS.  It is also not entirely clear as to how close, in real terms, the husband’s offers were to the $35,000 awarded by the court.  All that can be seen from the wife’s supporting affidavit is that the daughter’s school fees and the costs of extra-curricular courses were said to be $6,015 and $5,410 respectively, or a total of $11,425.  Be that as it may, on the basis of the above account of facts, I cannot agree with the wife’s submission that without taking out the application for MPS, the husband would not have offered to pay any MPS at all.

24.  It is also argued that it was only at the substantive hearing of 12 August 2019 that the husband offered to increase the interim maintenance to $35,000.  I accept that was the case but at no point the wife ever indicated that she would have accepted it if it had been made known to her before the hearing.  In fact, the offer was rejected outright. 

25.  It has also to be mentioned that during the hearing of 25 February 2019, when being enquired by the court as to what was the figure the wife had in mind, the answer from her legal representative was merely a sum of $50,000 per month. This was staggeringly much lower than the figure she sought in her application.  As I remarked in [67] of the Judgment, the litigation tactic of inflating items would meet with the disapproval of the court.

26.  The “event” of the application for MPS was clear: it was whether or not the husband should pay MPS in favour of the wife at the rate of $200,000 and legal costs provision of $115,000. The wife fell flat in her application.  The reason I gave in the Judgment for the wife to bear the cost was the wife had failed in her application: see [70].  It is clear that “the costs to follow the event” was adopted.  This is an option that the court is entitled to and did adopt.

27.  As I have demonstrated above, the wife failed virtually on all counts with the exception of the non-disclosure on the part of the husband.  I believe the result should have been the same even if an issue based approach is adopted.  When I made the order nisi, I was fully aware of the comments that I had made regarding the husband’s disclosure.  In this regard, it is apt to be reminded of what Hartmann J (as he then was) said in F v F (No 2) [2003] 3 HKLRD 976 at [22] that “the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures, like a profit and loss account, but rather by way of overall impression”. 

28.  I am conscious that the wife, as a teacher, earns a modest income.  Yet, at the same time, it should not be forgotten that the parties have a joint interest in the Robinson Road Property (as referred to in [5] of the Judgment) with a net equity of around $15 million.  In light of the disapproval of the court on the wife’s litigation tactic of inflating items, in my view, the fact that the wife is earning a modest income should carry little weight in the exercise of the discretion.

Orders

29.  For the above reasons, the wife’s application for variation of the costs order nisi ought to be dismissed and I so order.

30.  The wife should also bear the costs of this application for variation, including the costs in respect of the amendment of the summons.  I make an order that the costs of the application for variation and the costs of and occasioned by the amendment shall be borne by the wife with counsel certificate.

FCMC 15718/2018

[2019]HKFC329

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15718 OF 2018

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J U D G M E N T
(MCR Rule 121)

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The Application

1.  By Summons dated 11^th April 2019 (as Amended on 20 December 2019) the Petitioner (W) seeks leave of the Court for the release of three documents filed by the Respondent (H) in these proceedings, specifically his Form E and two sets of Answers to the Petitioner’s Financial Questionnaires, to the Court of First Instance, in bankruptcy proceedings filed in 2018 (“the Bankruptcy Proceedings), in which H is the petitioner.  W accepts that if leave is granted, those parts of the documents which are not relevant to H’s financial position and the issue of whether he is or is not capable of meeting his debts should be redacted to prevent disclosure of irrelevant personal information including those relating to the child of the marriage. 

2.  The basis for W’s application is her contention that in the Bankruptcy Proceedings H has failed to come to the court with clean hands, and has, in fact, provided financial information to the CFI which is either incomplete or inconsistent with that supplied in his Form E and the two sets of Answers.  She submits, therefore, that permission should be granted for her to provide the documents in the Bankruptcy Proceedings so that the CFI is not “hoodwinked” into granting an order on the basis of an inaccurate picture of his financial circumstances.  She adds that, as a matter of general principle, a litigant should not be able to “say different things to different courts”, particularly as, in these proceedings and in the Bankruptcy Proceedings, H has the same duty of full and frank disclosure of his financial position. 

3.  W points to the prejudice she will suffer if H is made bankrupt, namely that her prospect of obtaining or enforcing her application for ancillary relief, including relief for the child of the family, will be substantially diminished if not frustrated altogether.  In this regard it is generally accepted that a party seeking financial relief in matrimonial proceedings has a legitimate interest in the outcome of bankruptcy proceedings brought by or involving the other party including because the claims of the trustee in bankruptcy will prevail over an order made by the court.[1] 

4.  H opposes the application. He denies that he has mislead or provided incomplete information to the Court of First Instance, and says that even if the financial information is inconsistent with that given to this Court, the discretion to permit the release of the requested documents should not be exercised as this would (a) be potentially detrimental to him and (b) is unnecessary, having regard to the heavy burden he inevitably will be required to discharge to obtain an order for his bankruptcy. 

5.  On 24th October 2019, W’s solicitors wrote to H to propose that the matter be resolved by him giving an undertaking to

1.   Release and provide the following information together with all supporting documents to the officer at the Official Receiver’s Office in charge of Bankruptcy Proceedings (“Officer”) for the same to be provided to the Bankruptcy Court:

i.    all properties and assets disclosed in Your Form E of 8 February 2019;

ii.   all properties and assets disclosed in Your Financial Answers of 1 April 2019;

iii   all properties and assets disclosed in Your Financial Answers of 4 April 2019;

2.   Continue to provide the Officer with all properties and assets disclosed in further Financial Answers when and if they become available; and

3.   Copy our client into all correspondence with the Officer (including providing a copy of all correspondence received from the Officer to our client immediately after receipt).

6.  At the hearing of the Summons, H’s counsel informed the Court that H would not provide such an undertaking, and that H’s firm position was that he would only supply further documents or information to the Official Receiver when specifically requested to do so. 

Background

7.  The relevant background has been set out in a previous judgment of this Court on W’s application for maintenance pending suit, dated 10th October 2019.  It can briefly be summarised.

8.  The parties, who are both 29 years of age, were married in June 2014.  In June 2016 they purchased a property in Robinson Road, Mid-levels, HK (“the Mid-levels Property).  Their child, a daughter, was born in February 2018.  They separated later that year, in August 2018.  H petitioned for self-bankruptcy in December 2018 and W filed her Petition for divorce on 12 December 2018. 

9.  W is a senior teacher.

10.  During the marriage H ran a textile/garment business through a Hong Kong company, H I Limited, which in turn owned 70% of the shares in TT Limited, a company incorporated in Bangladesh and the owner and operator of a garment factory in that country.  H stated in his MPS affirmation that since mid-2018 his business has been collapsing due to a series of events including the loss of a major US customer (which filed for Chapter 11 protection in early 2018) and the seizure and forced sale by the Bangladeshi authorities of TT Limited and their pursuit against H and W for repayment of outstanding debts relating to the business. 

The Law

11.  Rule 121 of the Matrimonial Causes Rules (Cap. 179A) provides that no document filed in matrimonial proceedings, other than a decree or order made in open court, shall be open to inspection by the public without leave of the Court. 

12.  Rule 121 underpins the general power of the Court to regulate access to documents filed or lodged by the parties or supplied by others pursuant to its direction.  Once received, whether and to whom access is granted to a document is not a matter for one or other party to dictate.  Indeed, the parties are each subject to an implied undertaking that they will not disclose documents received by them in the course of the proceedings.[2] Rather, whether or not a document can be released and used in other proceedings is a matter for the Court to decide in the exercise of its inherent jurisdiction.  The usually non-public manner in which family litigation is conducted does not detract from the discretion to grant release, although it may be a factor in its exercise: see Secretary for Justice v FTCW & Ors [2014] 1 HKLRD 849, at §§16, 18-19, 27. 

13.  In considering whether or not to release a document or documents, the Court is to conduct a proportionality analysis, which is necessarily fact-specific.  In Secretary for Justice v FTCW, Lam V-P, giving judgment for the Court, adopted the approach suggested by Toulson LJ in R (Guardian News and Media Ltd) v Westminster Magistrates’ Court [2013] QB 618, namely:

In a case where documents have been placed before a judge and referred to in the course of proceedings, in my judgment the default position should be that access should be permitted on the open justice principle; and where access is sought for a proper journalistic purpose, the case for allowing it will be particularly strong.  However, there may be countervailing reasons. … I do not think that it is sensible or practical to look for a standard formula for determining how strong the grounds of opposition need to be in order to outweigh the merits of the application.  The court has to carry out a proportionality exercise which will be fact-specific. Central to the court’s evaluation will be the purpose of the open justice principle, the potential value of the material in advancing that purpose and, conversely, any risk of harm which access to the documents may cause to the legitimate interests of others.[3]

14.  As noted above, W has an interest in the Bankruptcy Proceedings in that they may materially impact on her claim for ancillary relief.  This is so even though generally speaking a debt due as a result of an order of this Court in matrimonial proceedings is not a provable debt for the purposes of a bankruptcy petition.[4] 

15.  Further, it is relevant to note that a petitioner in bankruptcy proceedings must come to the court with clean hands and provide full and frank disclosure of his financial position. If not, the petition stands to be dismissed: Re Yiu Yuen Kwok [2017] HKCFI 1603; HCB 2385/2015, at [21]-[23] (Hon. Anthony Chan J). 

H’s disclosure to this court and the CFI

16.  A central aspect of W’s submissions is that the Court cannot be confident that H will comply with his duty of full and frank disclosure in the Bankruptcy Proceedings having regard to his failure to be full and frank in his financial disclosure to this court.

17.  At the hearing on 19^th August 2019 on W’s application for maintenance pending suit, counsel for H acknowledged that his client had not provided satisfactory disclosure to the Court.  In his 10^th October 2019 judgment on the MPS application (“the MPS Judgment”), HH. Judge I Wong noted that acknowledgement and went on to say that, even had such a concession not been made, he would have held as much: MPS Judgment, at §56. 

18.  W argues that the situation is worse in the Bankruptcy Proceedings, where H’s disclosure is “even less full and even less frank”: W’s Skeleton Submissions, at §3.

19.  In her 2^nd Affidavit, W provided a table comparing H’s disclosure in his Form E and Answers to W’s first Questionnaire with his H’s Statement of Affairs and Amended Statement of Affairs in the Bankruptcy Proceedings.   

20.  It is important to note the dates of the documents filed in each set of proceedings as this may be relevant to the question of whether one statement is indeed inconsistent with another:

6 December 2018	H’s Statement of Affairs in HCB (“SOA”)
2 February 2019	H’s Amended Statement of Affairs (“ASOA”)
19 February 2019	H’s Form E
1 April 2019	H’s Answers to W’s first Questionnaire (“April Answers”)

21.  The following is W’s table, with initials used in place of the names of companies included therein.  

Items	Respondent’s Position in HCB	Respondent’s Position in FCMC15718/2018
Companies	The Respondent asserted in his SoA that he owns H I Limited and later conceded in his ASoA that he also owns CFC Limited (“CF”). The Official Receiver has doubts on this assertion, and questioned whether the Respondent also owns N A Limited and two other companies in the Mainland China.  The Respondent has not provided any answer in response.	In addition to (i) H I Limited and (ii) CF, the Respondent unequivocally admitted in his Answers that he also owns the following companies:- 1. NA Limited (answer 29) 2. GUT Company Limited (answer 25) 3. RU (answer 25)
Mid-Levels Property	The Respondent stated in a his SoA and ASoA that the estimated value of the mid-level property is only HK$31,000,000.  The Respondent also alleged, in his Affirmation dated 1 April 2019, that my estimated value of HK$38,000,000 is unsustainable.	The Respondent’s own estimated value of the mid-level property in his Form E is HK$38,000,000
Employment	The Respondent stated in his SoA and ASoA that he is currently “unemployed”.  The Official Receiver has doubts about this in view of the fact that the Respondent is a director of (i) CF, and (ii) YFS Limited and (iii) NA Limited	The Respondent also admitted in his Answers that he is working as a freelance consultant on commission basis for a company trading fabrics and garments (answer 4)
Salary	The Respondent stated in his SoA that his salary before income tax in the past 12 months is HK$240,000, and that he has no (i) income from investments or dividend or (ii) money from other allowances, benefits or sources	The Respondent admitted in his Answers that:- 1.  He was entitled to director’s housing allowance with electricity, water, and gas bills paid by H I Limited.  (answer 2(c) and 28); and 2. He has drawn at least HK$10,000 from H I Limited on 23 November 2018 for his “daily expenses for necessities”: (answer 12).  This claim is also contradictory to his assertion that H I Limited has lost all its distributable profits by October 2018 (answer 24)
Life Policies	The Respondent stated in his SoA that he has no life policies	The audited financial statement of H I Limited, as enclosed in the Respondent’s Form E, shows that the Respondent has a life insurance in the amount of HK$1,542,904.95 as at 30 June 2017.
Residence	The Respondent stated in his SoA and ASoA that he is residing at an address in Sham Shui Po, which is a sub-divided flat	The Respondent admitted in his Form E and Answers that he is now residing in an apartment at Grand Pacific Views on Castle Peak Road.  The apartment has 2400+ square feet, 4 bedroom with 2 parking spaces. (answer 6)
Accounts	The Respondent merely stated/disclosed his HSBC HKD account no. 828-xxxxxxx-292 and asserted that the account balance is zero.  He did not disclose any bank statement in his bankruptcy proceedings.	The Respondent’s Form E show that he also has a savings account with account no. 828-xxxxxx-292. The balances of those accounts are not zero.
H	The Respondent stated that the value of H I Limited is HK$1.  Without any financial statements provided by Respondent, the Official Receiver relied on circumstantial evidence and commented that “it looks like a substantial underestimation when H I Limited seems to have owned 70% of a factory in Bangladesh”	The audited financial statement of H I Limited, as enclosed in the Respondent’s Form E, will confirm this fact (at least as of July 2017), and will also assist the Bankruptcy Court in assessing the veracity of the Respondent’s assertion.

22.  In addition to this, Mr. Chan for W pointed to other matters that the CFI had not been told about but have been disclosed in these proceedings, and which has been referred to in the MPS Judgment, namely:

a.     H’s directorships in and ownership of a number of companies

b.     A gift by H to his mother of HK$450,000 in the month of November 2018 prior to the December 2018 filing of the Bankruptcy Proceedings

c.     Undisclosed bank accounts into which H received HK$603,000 in November 2018

23.  H’s response to W’s table is set out in an affirmation dated 10^th October 2019.  As I have set out W’s table in full, it is appropriate I also quote H’s response in full (again with appropriate abbreviations for the names of companies):

Companies

5.   I did disclose and clarify in my Bankruptcy Application and Letters to the Official Receiver my interests and directorships in the companies, in which the Petitioner’s father falsely accuses me of holding.  The Bankruptcy Application further clarifies that GU and RU do not hold any factor assets and are facing further litigation from owed wages and suppliers.  Till today I have not received any further questions from The Official Receiver and is fair to assume that I have clarified any doubts. (Please see attachment 1).

Mid-Levels Property

6.   At the time of my bankruptcy filing 6^th of December 2018, property agents from Centaline and Midland Realty had estimated the value of the property to be approximately HKD31million as the property was not yet completed and was on a downward trend (Please see attachment 2).

7.   When the property was near its completion date, and the property market in mid-levels was on an upward trend, various property agents including Centaline and Midland Realty had estimated that the market value had increased to HKD38million. (Please see attachment 2).

8.   Towards April 1^st, one of the factors regarding to my statement of “unsustainable” was that certain potential buyers and property agencies became aware of my bankruptcy filing and therefore expectations of the price had been lowered.

9.   Subsequently a letter from Zhong Lun Law Firm dated 29^th July 2019 (please see Correspondence Bundle C1 – Page 30), indicated that their client intended to sell and or market the property for HKD45-47Million. 

10. Today presently, the entire Hong Kong property market has dropped due to social and economic factors, which could not have been foreseen on 1^st April 2019 or at the time of my Form E filing.  The property market can be volatile, especially when there are uncontrollable factors involved.  (Please see attachment 2).

Employment

11. At the time of my bankruptcy filing on 6^th of December 2018 I was unemployed. However due to my maintenance, need to provide for A [the child] and as a responsible father I started freelance work as a consultant for trading fabrics and garments.

Salary

12. In regard to my annual tax return, this was filed personally by me and is a clerical error. I could not afford personal accountants to verify my tax income declaration, unlike the petitioner whereby a certified accountant is retained for her US tax returns, therefore I missed the declaration for housing allowance.

13. I had drawn HKD10,000 because since I had not drawn a full consecutive monthly salary for 11 months, this amount as necessities was essential for food, transportation and partially given to the Petitioner. (Please refer to the Answer to Question 5 in the 1^st Questionnaire.)

Life Policies

14. The life insurance policy does not belong to me as I am not the beneficiary, nor did I personally pay for the policy.  The life insurance policy beneficiary and purchaser are the company, H I Limited.  The insurance policy was collateralized against the HSBC SME Loan as stated in the HSBC Banking Facilities.  (Please refer to Answers to the 1^st Questionnaire – Annexure 4).

15. The policy is a K M Insurance Policy:  thus, in the event of my death, the company will collect all the monies from the insurance company.  (With best efforts I am locating the Policy document in which I request the court’s permission to accept the Policy if located before 1^st November 2019). 

Residence

16. At the time of my bankruptcy filing (6^th December 2019)[5] I had stayed at the sub-divided flat which belonged to a friend.  After consulting with my parents, I had moved back into my mother’s home in Grand Pacific Views on Castle Peak Road.  Therefore, at the time of my Form E filing I had already moved back into my mother’s residence.

Accounts

17. The HSBC Account No. ending 292 was a savings account that was under the primary account ending 833.  The balances had changed due to a few transactions from the time of my bankruptcy filing (6^th December 2019) to the filing of my Form E. (Please refer to the exhibits in Form E)

18. The bankruptcy filing application does not request for any bank statements. Therefore, I did not attach any of my bank statements.  Furthermore, nowhere has the Bankruptcy Court or Official receiver request for my bank statements. Therefore, I did not submit any of my bank statements.

H I Limited

19. The Official Receiver made this claim before receiving my Bankruptcy Affirmation with exhibits and my numerous letters. Till today I have not received any further questions from the Official Receiver’s Office pertaining to these suspicions which I assume has clarified any doubts.   

24.  Counsel for W, Mr. Chan’s response to these answers was, in short, to refer back to the burden on a person petitioning for his or her bankruptcy to come to the court with clean hands and provide full and frank disclosure of their financial position.  It is not, so to speak, to sit on those hands and only supply information when requested.  He pointed to the fact that there was no indication by H that he had informed the Official Receiver of the “clerical error” in respect of his tax return, had updated either the Official Receiver or the CFI of his change of address or his employment status, or had disclosed the extent of his involvements in and holdings in the various companies.  He placed emphasis on the fact that H had not provided adequate disclosure in relating to H I Limited.

25.  Mr. Cheung for H argued that the Court should bear in mind that for the most part H has not been represented here or in the CFI or had the assistance of solicitors to advise him on the correct approach to be taken.  He says that in substance, H has been consistent in both sets of proceedings: he is in major financial difficulty.  He says that even if, which is not admitted, there are inconsistencies between the two accounts provided to this court and the CFI, this is by itself not a good reason for materials obtained in family proceedings to be disclosed and for the privacy which would otherwise apply to them to be put aside.   

Decision

26.  In my view, not all of the claimed inconsistencies are properly to be described as such or would amount, by themselves, to a valid basis for the Court to grant leave.  Taken in isolation, it is not particularly significant, in my view, for H to have given one estimation of the value of the Mid-levels Property in his original filing in the CFI and another in his Form E which was some months later.  It was a new property.  Although the difference between the two values is considerable – $7M – it is not so dramatic as to be unbelievable, given the level of volatility which is sometimes seen in the Hong Kong property market.

27.  Nor am I persuaded that the representations made about where was living or from time to time are inconsistent, although I do accept that if he has changed address this is something he should inform the Official Receiver about. Again, and to be clear, taken in isolation this would not amount to proper basis for leave to be granted.

28.  What is more telling is that H has yet to be clear to the Official Receiver and the CFI about the nature of his involvement in the various companies including providing in the Bankruptcy Proceedings any financial statements of such companies which may be available to him.  The failure of his business ventures is at the core of his claimed need to obtain protection and will likely form a central part of the Bankruptcy Proceedings. 

29.  In Submissions for the hearing before Hon Mr. Justice Ng on 18 March 2019 (“the OR Submissions”), the Official Receiver included these comments concerning H’s employment status and interest in various companies (I have omitted the bracketed page references to the CFI Court Bundle):

6.  For the purpose of assisting His Lordship, the Official Receiver sets out below the matters which the Debtor may need to explain to the Court:

(1) Whilst the Debtor claims to be unemployed, he seems to be a director of CFC Limited, YFS Limited and NA Limited;

(2) The Debtor seems to be the sole shareholder of NA Limited and 2 companies in the Mainland but those interests were not disclosed in his Statement of Affairs; and

(3) The value of the Debtor’s 100% shareholding in H I Limited which the Debtor claimed to be HK$1 in the Statement of Affairs, looks like a substantial underestimation when [the company] seems to have owned 70% of a factory in Bangladesh.

30.  In his affirmation in opposition to the Summons, quoted above, H said that he did disclose and clarify his interests and directorships in the companies with the Official Receiver: see paragraph 5 of H’s Affirmation in Opposition quoted in paragraph 23 above.  He referred to “attachment 1” to the affidavit in support of this.   

31.  Attachment 1 consists of three letters to the Official Receiver. The relevant letter is dated 8^th March 2019, in which H spoke of his interest in companies:

In respect of YFS Limited, NA Limited and PV limited, first of all, I was a director of YFS Limited but I had resigned from the directorship of the aforementioned company in late 2018 although the Annual Return was filed late. However, I do not have an interest in the company, whether directly or indirectly.  Secondly I signed the agreements (i.e. items 2 and 3 of the documents annexed to Messrs. Withers’ letter dated 8^th February 2019) on behalf of NA Limited and PV Limited as their authorised signatory only.  These 2 companies are owned by my mother [name] and I do not have interest in any of them.

In relation to CFC Limited, I have already reported in my Statement of Affairs that I am a 100% shareholder of this company but my estimate of the current value of the company is HK$1 (based on its registered capital) and perhaps nil value. In essence, since the acquisition of the same by me, this company has never had any business operation at all.  Therefore, this company is essentially nothing. 

With regards to H I Limited, I have also reported in my Statement of Affairs that I am a 100% shareholder of the company and I have used this company as my vehicle for textile and garment trading.  In the meantime, due to its substantial business loss made in the past 2 years, my estimate of the current [value] of this company is HK$1.00 (based on its registered capital) and perhaps nil value (if not negative).  On appropriate occasion, I will provide the Financial Statement(s) and/or management account(s) of this company to show its financial position. 

Regarding TC Limited (a Bangladesh company), the company was closed down in 2017 due to substantial financial loss there.  As a result, the company’s assets were forced sold for settlement of outstanding wages under the labour law of Bangladesh.  Moreover, the shares of H I Limited was (sic) were also transferred to other persons in September 2017.  I annex to this letter as Annex 1 a copy of the documents relating to the shares in TC Limited for you reference.

Thank you for your kind attention. Please do not hesitate to let me know if you have any queries.

32.  Mr. Chan submits that insofar as this letter suggests or implies that H’s interest in NA Limited is other than ownership i.e. his statement that he signed an agreement involving NA Limited as “authorised signatory only” is inconsistent with H’s statement in his First Answers that he owns NA Limited.  It is clear from the Official Receiver’s Submissions that this point has not gone unnoticed and needs to be clarified by H.  He has not done so. 

33.  Further, and even though in his letter Attachment 1, H promised to supply the financial statement for H I Limited, he has inexplicably not done so, and as I have said, his stance is that he will not provide further information unless it is explicitly requested by either the Official Receiver or the Court in the Bankruptcy Proceedings.

34.  I have considered the potential countervailing factors, including that the information provided to this Court was given in family proceedings and is subject to W’s implied undertaking.  I have also taken into account that there may potentially be consequences to H if his Form E and Answers are provided to the CFI on the Bankruptcy Proceedings, i.e. that he may be called upon to explain his failure to provide the information earlier, or to account for the omissions in his SoA and ASoA.  I have also taken into account, as H’s counsel submitted, that the burden he faces to obtain the protection of a bankruptcy order is a heavy one, and the Court of First Instance will not grant such an order without being satisfied that he is unable to pay his debts. 

35.  H further submitted that W could provide evidence and information about H’s businesses and financial position which she gleaned during the marriage.  I do not consider that this to be a persuasive argument.  There is a difference between such general knowledge and the specificity she is now asking the Court to grant permission to disclose.

36.  In my judgment the balance is in favour of granting leave to W enabling her to provide the documents requested to the Court of First Instance in the Bankruptcy Proceedings. 

The Order

37.  I will therefore make the following Orders/Directions on the Summons, namely:

(1)     Subject to paragraph (2), leave be granted to the Petitioner to disclose the following documents in High Court Bankruptcy proceedings HCB [number]/2018:

(a)     The Respondent’s Form E Financial Statement dated 8^th February 2019 and filed on 19^th February 2019 and the attachments thereto;

(b)     The Respondent’s Answers to the Petitioner’s Questionnaire dated 1^st April 2019 and filed on 2^nd April 2019 and the Annexure thereto; and

(c)     The Respondent’s Answers to the Petitioner’s 2^nd Questionnaire dated 4^th October 2019 and the attachments thereto

(“The Documents”)

(2)     The Documents be appropriately redacted so as to limit the disclosure to information relevant to the financial disclosure including in respect of income, property and assets disclosed by the Respondent. 

(3)     The Petitioner do serve on the Respondent the proposed redacted version of the Documents within 14 days of this Order, and the Respondent do respond with any further proposed redactions within 14 days thereafter. 

(4)     In the event the parties are unable to reach agreement as to the redactions, the Court is to be informed of the extent of the disagreement and will decide on the final form of the redacted documents to be provided to the CFI under this Order. 

38.  As to costs, they should follow the event.  I make an order nisi to be made absolute within 14 days that the Respondent do pay to the Petitioner her costs of the Summons.  There be a certificate for counsel. 

FCMC 15718 / 2018

[2019] HKFC 261

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15718 OF 2018

----------------------------

---------------------------

__________________

JUDGMENT
(Maintenance Pending Suit)

__________________

The Application

1.  By a summons dated 21 February 2019, the petitioner wife applies for maintenance pending suit (“MPS”) for herself and for the child of the family (a 1 ½ year old girl) together with legal costs provision against the respondent husband.  The wife is seeking MPS at the rate of $200,000 and legal costs provision of $115,000 per month.

Background

2.  Both parties are young, at the age of 29 only.  They were married in June 2014 and a daughter, the only child of the family, was born in February 2018.

3.  The wife has been working as a senior teacher (redacted) earning around $26,700 per month.

4.  During the relationship, the husband was an entrepreneur in the textile / garment trading business.  He owned a Hong Kong company “H Limited” which in turn owned 70% of the shareholding in “TT Limited”, a company incorporated in Bangladesh and operated a textile factory there.

5.  In June 2016, the parties purchased, as joint tenants, a pre-construction unit on Robinson Road, Mid-Levels (“the Robinson Road Property”) for $30,418,000 with a mortgage loan of $27,376,000.  For the reason that the parties had failed to pay the mortgage payments, the mortgagee obtained a monetary judgment on 3 May 2019 against the parties in the sum of $28,500,000 plus costs.  Notwithstanding the judgment, I am informed that the Robinson Road Property has a net equity of around $15,000,000.

6.  Sadly, the marriage was a short-lived one.  In around August 2018, the parties separated.  What happened was that on August 2018 the daughter had a yeast infection and was admitted to a private hospital.  The daughter was discharged from the hospital on 23 August 2018 and on the same day, the wife and the daughter moved to live with her parents. Subsequently, the husband also moved out of the former matrimonial home, a leased apartment in Kau To Shan, Shatin, upon the surrender of the lease.

7.  On 12 December 2018 the wife petitioned for divorce on the grounds of the husband’s unreasonable behaviour.  The Petition is met with an Answer and a Cross-Petition.  So far the main suit is still pending as a defended one. 

8.  At about the same time on 6 December 2018, the husband petitioned for his bankruptcy. The bankruptcy petition has been opposed by the wife and her father who claims to be a creditor of the husband.  As of now, the bankruptcy proceedings are still pending.

9.  On 25 February 2019, by consent, the court granted the care and control of the daughter to the wife with interim access to the husband.  The custody issue and the long-term access arrangement are yet to be determined in the Child Dispute Resolution hearing.  On the same date, upon the husband’s concession, the court gave an order that the husband should pay a monthly sum of $20,000 to the wife as the interim periodical payment for the daughter, the first payment to be made on 1 March 2019 until further order of the court.

The Present Situation of the Parties

10.  The wife and the daughter continue to live with her parents in an apartment at the Riverpark, Shatin. She is still working as a senior teacher and the daughter has started schooling. 

11.  The husband has moved back to live with his parents. 

The Wife’s Case

12.  The wife has two major grounds. 

13.  The first is that the husband’s self-petition for bankruptcy was a cynical move designed to attempt to defeat the wife’s financial claims against him.

14.  The second and a relating ground is that the husband alleges impecuniosity whilst failing to make a full and frank disclosure of his true financial position.  Mr Chan, on behalf of the wife, argued that the husband’s financial disclosure is contrived and unreal.  His ‘wait and see’ approach with the hope that the wife might fail to ask the right question is a tactic to be deplored: see L v L [2006] 1 HKFLR 121 at [197] - [198]. 

15.  There is also a minor point. It has been emphasized by Mr Chan that the husband comes from a wealthy background – he and his family have business in Hong Kong, Mainland China and elsewhere.  The husband’s family is able and willing to provide financial support to not only him, but also his own family.  Mr Chan drew support from the fact that the $20,000 interim periodical payments were paid by the husband’s family rather than by himself; and on the husband’s own evidence, his mother has already provided funding to him in the tune of $3,000,000. 

The Husband’s Case

16.  The husband opposes the wife’s application.  Mr Cheung, acting on behalf of the husband, has advanced 6 grounds in resisting the application. For the reason that is evident below, I only need to set out these grounds briefly.  They are:

17.  First, the husband is impecunious and has been relying on the financial support of his mother.

18.  Second, contrary to the wife’s allegations, there has been no intentional non-disclosure of assets on the part of the husband.

19.  Third, the wife has other financial resources to deploy.

20.  Fourth, the wife’s proposed figures for MPS are extravagant and unnecessary.

21.  Fifth, the wife’s proposed figures for legal costs provision are extravagant and unnecessary.

22.  Sixth, the fact that the wife’s application for legal aid was rejected speaks volume of the wife’s case.

The Legal Principles

23.  Under section 3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, the court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of presentation of the petition or the making of the application and ending on the date of the determination of the suit, as the court thinks reasonable.

24.  The Court of Appeal in HJFG v. KCY [2012] 1 HKLRD 95 summarised the established principles,

“33.    Jurisdiction to award maintenance pending suit to a spouse is statutory, being governed by the provisions of s.3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.  By that section the court is given a discretion to make an order requiring either party to the marriage to make to the other such periodical payments for his or her ‘maintenance’ as the court thinks ‘reasonable’, subject to the condition that the duration of any such order is limited to the period of what may broadly be called the divorce litigation.

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 recurring costs 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’, which is 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.”

25.  In connection with the point made by the Court of Appeal in [37iv] of HJFG v. KCY,Rayden and Jackson on Relationship Breakdown, Finances and Children commented as follows,

[11.79] In practice, as oral evidence is rarely given, it will be unusual for the court on an application for maintenance pending suit to be in a position to make findings of fact on issues in dispute sufficient, for example, to deal with conduct or allegations of non-disclosure. However, if it is demonstrated that the paying party has not performed his duty to make full and frank disclosure of his financial resources, then the court can take a broad and robust view of his means, and it does not have to accept and proceed on the basis of the assertions of the paying party as to his means and an inability to pay. The court can look at the reality of the situation and take into account voluntary funding from third parties (see TL v ML above).

26.  Guided by the above principles, I now turn to the Application.

The Husband’s Self-Bankruptcy Petition is an Attempt to defeat the Wife’s Claim

27.  In her affirmation, the wife recounted the family’s standard of living during the relationship.  The former matrimonial home was a spacious 1,013 ft², with 3 bedrooms, 2 bathrooms, a spacious living room, a dining room that could fit a dining table for eight, a kitchen and a domestic helper’s room.  The family had the use of a Centurion American Express Black Card, flew business class and stayed in 5-star luxury hotels.  They averaged 2 short haul and 1 long haul holidays per year.  On special occasions, the husband often arranged luxurious dinners at famous and expensive restaurants. There did not appear to be limits as to how much they spent, and they often purchased luxurious items.  However, at about the same time when the wife commenced the divorce proceedings, the husband petitioned for his bankruptcy.

28.  The husband fairly accepted that the family enjoyed a relatively high standard of living. The family was able to do so because at that time his business was performing well but it is not the case now. 

29.  The husband explained in his affirmation that during the relationship his company, the H Limited, had to rely on the banking facilities provided by his bank, HSBC.  Since the company was freshly established back then, he was required by HSBC to act as a guarantor for the banking facilities.  Since around March 2018, he was in need of restructuring the business as the same was badly hit due to the collapse of a major customer, namely, “NW Holdings Limited” which had filed a Chapter 11 bankruptcy protection with the US Court. Consequently, since around mid-2018, his business had been collapsing. The factory in Bangladesh had been seized by the Bangladesh government and forced sold for repayment of outstanding wages owed to the employees there.  His factory in Mainland China was also facing litigation for owing money to suppliers and wages.  It was due to this dire financial situation that he failed to keep up with the mortgage payments of the Robinson Road Property, resulting in judgment being entered by the mortgagee.  He also had to move out of the former matrimonial home because he was no longer able to afford the monthly rentals, while at that time he did hope it would be a short-term arrangement.  The husband said the wife was well aware of his financial problems at the time of moving out.

30.  It was because of these financial difficulties that the husband filed a bankruptcy petition in December 2018.

Discussion

31.  It is not in dispute that during the relationship the husband was the main breadwinner of the household.  This is illustrated by the fact that the wife’ income was only $26,000 odd, whereas the rentals of the former matrimonial home was already $32,000 per month.

32.  As referred to in [25], in the absence of oral evidence, it would be unusual for the court on an application of MPS to be in a positon to make findings of fact on whether or not the husband’s self-bankruptcy is an attempt to defeat the wife’s ancillary relief claim.  This does not, however, mean that the court could not come to any view on this issue for the purpose of the present application.   It seems to me clear that the question is whether or not there are evidence that the husband’s case as to what happened to him is believable.   I believe there are and the same can be found in the wife’s pleadings.

33.  At the substantive hearing, I drew counsel’s attention to the wife’s Petition for divorce and her Statement as to Arrangement for the Child, both of which have not been included in the hearing bundles.

34.  The wife petitions for divorce on the ground of the husband’s unreasonable behaviour.  In para 9(d) of her particulars of unreasonable behaviour, she pleads,

“The Respondent has failed to discuss financial and business problems in an open and honest manner, and has caused loan sharks to leave Chinese notes at the Former Matrimonial Home with threatening messages, which has caused the Petitioner considerable distress, especially with the new born Child”.

      (emphasis added)

35.  In para 1.3 of the wife’s Statement as to Arrangement for the Child she said,

“… Furthermore, on 20 November 2018, the Respondent called the Petitioner to tell her that he is in danger and that he will be leaving Hong Kong for a while. The Respondent did not inform the Petitioner of where he was going, and despite the Petitioner asking, the Respondent’s immediate family and the Respondent himself have refused to inform the Petitioner of the Respondent’s whereabouts”. (emphasis added)

36.  On the future access arrangement, the wife said in Para (iv) of the Statement,

“The Respondent has unilaterally borrowed from loan sharks, failed to repay their loans, and therefore causing the loan sharks to leave Chinese notes at the Former Matrimonial Home with threatening messages, which has caused the Petitioner and the Child considerable distress”.

The Petitioner believes the Notice of Surrender is the Respondent’s deliberate act of evading from the loan sharks as he, too, is concerned about them causing harm to him.  As mentioned above, the Respondent called the Petitioner on 20 November 2018, telling the Petitioner he was in danger. The Respondent further said people were looking for him, following him and that he had to leave Hong Kong for a while.The Respondent left Hong Kong on 22 November. The Respondent did not say how the Child or the Petitioner should protect themselves as he only cared about himself.

…

The Petitioner is seeking an order for sole custody, and sole care and control of the Child be granted to her, with no access for the Respondent (including his mother, father, siblings, brother-in-law, nephews, nieces, grandmother, uncles, aunts, domestic helpers, servants or agents).      (emphasis added)

37.  It turned out that the husband fled to the UK for his safety, as a result of which the petition for divorce and the relating documents had to be served on him by a Process Server in London.  This can be seen from the Affirmation of Service dated 4 January 2019 filed on behalf of the wife.

38.  It can be seen there are clear evidence from the wife that the husband was in such a deep financial trouble in the latter part of 2018 that he had to surrender the lease of the former matrimonial home and left Hong Kong for his safety.  As mentioned in [6] above, around that time on 20 August 2018, the daughter had a yeast infection and was admitted to a private hospital.  She was discharged from the hospital on 23 August 2018 with the wife’s father paying the hospital bill.  The wife did not care to explain why it was not the husband who should have paid the bill. She only mentioned that the husband had promised he would pay her father back but he never did.  It is also telling that the wife chose not to return to the former matrimonial home for the daughter’s recuperation but chose to move to live with her parents.  I gather it must also have been around that time that the husband failed to keep up with the mortgage payments of the Robinson Road Property.  In the context of what had been happening at that time the only inference that can be drawn is the husband did not have the money to keep the family afloat.

39.  There is a letter of demand dated 24 January 2019 issued by HSBC in support of the husband’s claim that he was being claimed for $7,394,000.  The bankruptcy petition was taken out on 6 December 2018; so apparently about $7,394,000 was owed to the bank when the husband took out his petition. He was liable to pay the sum because he had given a guarantee in favour of the bank in September 2014 for securing some banking facilities for use by his H Limited.  This liability is one of debts that the husband has disclosed in his Statement of Affairs in support of his bankruptcy.  Another debt is said to be in the sum of $350,000, being a personal loan advanced by the UA Finance.  There are also some documentary evidence in support of the husband that he has lost control of his factory in Bangladesh. 

40.  All these evidence are consistent with what have been pleaded by the wife as referred to above and are in support of the husband’s assertion that his business was in great trouble during that time.  I believe the wife was aware of all these matters.  The wife did not say in her pleadings that all those matters regarding loan sharks, threatening messages or fleeing to the UK were anything other than real or that the same were orchestrated by the husband.  Mr Chan argued that the wife did not know whether or not the debts had been repaid.  I accept that but it is striking to note that the wife has seen fit not to have raised this question in her supporting affirmations nor in her Questionnaire.  On that view, I wonder how the wife could have said that the self-bankruptcy is a scheme calculated to defeat her claims.  Where relevant, this issue, ie whether or not the husband was and is impecunious, would have to be adjudicated in the trial of the ancillary relief but for the purpose of the present application, on the above analysis, I am not satisfied the husband’s self-petition for bankruptcy was an attempt to defeat the wife’s claims.  In coming to this conclusion, I have taken note of the forceful arguments advanced by Mr Chan regarding the insufficiency of the husband’s disclosure of his financial situation which I will deal with below. 

The Husband’s Failure to give a Full and Frank Disclosure

41.  Mr Chan went to great lengths to set out the husband’s non-disclosures of his financial situation.   He invited the court to consider not only the husband’s financial disclosure in these divorce proceedings but also the documents in support of his bankruptcy proceedings.  The following are some of the examples. 

42.  The husband failed to comply with the basic disclosure requirement by disclosing bank statements for the past 12 months in his Form E.  Instead, he disclosed not more than 3 months of his bank statements.  It was after being specifically requested that the husband then disclosed further statements for one of his two HSBC accounts but still he failed to disclose statements for his savings account.

43.  The husband failed to disclose any trusteeship / nomineeship in his Form E and only disclosed his alleged trusteeship / nomineeship in respect of a brokerage account that he said has been holding for his mother when so questioned by the wife.

44.  In the Form E, the husband disclosed directorship in 2 companies only - the H Limited and one CF Limited. It was only when being asked about it in the wife’s Questionnaire that the husband disclosed another company.  The search conducted by the wife revealed that he was also a director of YFS Limited but had resigned in late 2018. 

45.  The husband claimed not to have any life insurance policy but it turns out that according to the audited statement of H Limited as at June 2017, the husband had a life insurance in the amount of $1,542,000.

46.  The husband claimed his H Limited has a ‘nil’ value but according to the 2017 audited statements, this company had net profits of $1,100,680 for the year ended 30 June 2017 and net assets of $3,453,900.  That was the latest account. The husband failed to provide any up-to-date management accounts.

47.  Mr Chan also complained that there are no documentary evidence in support of the husband’s assertion that the Bangladesh government had seized the factory.  The evidence that the husband produced are on the transfer of his share holdings in TT Limited for BDT610,000 (about $56,000) and resigned as a director in September 2017.  To this, Mr Cheung responded that it was difficult for the husband to obtain the relevant documents from the courts of Bangladesh.

48.  There are discrepancies between what have been disclosed in his Form E and those in the bankruptcy proceedings.  The husband’s Form E disclosed his ownership in H Limited and CF Limited only.  Upon being questioned by the wife, the husband acknowledged he also owns NA Limited, GU Textile Limited and RU company.  This is different from those in the bankruptcy proceedings where he said he only signed documents on behalf of NA Limited as “authorised signatory”.  It has also been emphasized by Mr Chan that the husband did not mention his interest in PV Limited, a company incorporated in Seychelles.  The husband has been receiving monies from this company, such as $15,000 on 29 June 2018, $4,600 between 14 to 18 September 2018, $10,000 on 23 November 2018. 

49.  The husband stated in his Form E, his Statement of Affairs and Amended Statement of Affairs in the bankruptcy proceedings that he is unemployed but he informed the social investigation officer that he earns $8,000 per month.  In his Answers to the wife’s Questionnaire, he said he works as a freelance consultant on commission basis for a company trading fabrics and garments.

50.  The husband stated in the bankruptcy proceedings that his salary before income tax in the past 12 months was $240,000 but in his Answers to the wife’s Questionnaire, he admitted he was entitled to director’s housing allowance with electricity, water and gas paid by H Limited.   He drew at least $10,000 from H Limited on 23 November 2018 for his daily expenses.

51.  The statements for the husband’s HSBC current account reveal that he transferred a total sum of $450,000 to his mother’s account in November 2018. He said in his Answers that the monies were ‘given to his mother’.  It has been stressed by Mr Chan that was about the time when the husband had stopped paying anything to the wife.

52.  In addition, it is unclear as to whether the Centurion American Express Black Card that allowed the family a lavish life-style during the relationship is the supplementary card that the husband’s mother has now cancelled.   Mr Cheung said it is but the assertion is unsupported by any evidence.

53.  Mr Chan criticised that the disclosure in the husband’s bankruptcy proceedings and in the divorce proceedings are not only inconsistent and contradictory, but also wholly inadequate.  He urged the court to make ‘robust assumptions’ against the husband about his ability to pay.

54.  In response, Mr Cheung submitted that putting the wife’s case at its highest, it can only be said that there was innocent oversight on the party of the husband, which has already been honestly corrected in his Answers.

Discussion

55.  The wife has meticulously conducted an inch-by-inch search on the husband’s disclosure, leaving no stone unturned.  She is essentially putting the husband to strict proof of all of his assertions.  By way of illustration, questions on a sum as small as $1,000 insurance premia were asked of and form part of the non-disclosure complaints. That said, Mr Chan agreed that the court is not required to conduct a forensic examination of the disclosure exercise at this stage.  All that is required is a broad brush approach.

56.  As said above, Mr Cheung properly acknowledged that the disclosure given by the husband was not satisfactory.   I believe whether or not it was an innocent oversight is quite beside the point.  As I see it, this is a point rightly conceded since even if Mr Cheung did not do so, I would still hold that the husband’s level of disclosure is far from satisfactory.  The ultimate question is whether or not the court should make ‘robust assumptions’ against the husband’s ability to pay.

57.  Even with all the imperfections and deficiencies of his disclosure, it does not necessarily mean that the court should exercise its discretion to make ‘robust assumptions’ against the husband of this case – after all, the facts of every case are different.   This is a balancing exercise taking the extent and nature of the non-disclosure into consideration on the one hand and the husband’s alleged “sea-change” in his financial situation on the other.

58.  In considering whether the court should exercise its discretion to make ‘robust assumptions’ against the husband, I believe it would be unhelpful to just consider how long the list of compliant is.  The husband accepted that previously the family had enjoyed a high standard of living.  That was made possible because of his well-performed business but the situation started to change in about 2018.  The extent and the nature of the husband’s non-disclosure therefore should be seen in this light for the purpose of the present case.   

59.  In my deliberation, I do take note of the fact that apparently there is a bank account that the husband has not disclosed and from that account 2 sums totalling $603,000 were deposited into his HSBC savings account on 6 and 7 November 2018.  In response, Mr Cheung explained that the monies were loans from the husband’s mother but there is no evidence in support of the assertion.  It is unsatisfactory as Mr Cheung was essentially giving evidence from the Bar table.  That being said, I do not consider the husband should take up the blame entirely.  The relevant transactions were already shown on the statements of the husband’s saving account with HSBC that had been disclosed to the wife as part of the annexures to his Form E as early as on 19 February 2019 but for some reasons the wife did not raise these matters in her Questionnaire. 

60.  I also take note of the fact that the husband admitted that he had given a total of $450,000 to his mother in November 2018: see [51] above; that was the time when the husband is said to have stopped paying any money to the wife. 

61.  Hence, apparently there were some transactions between the husband and his mother at the relevant time.  In the context of this particular case, taking the above money-in ($603,000) and money-out ($450,000) together and considering the high standard of living as alleged by the wife, it appears to me that the sums involved are not that substantial.   The sums that the husband admitted to have received from H Limited and PV Limited may also be seen in this light.  I am conscious that on one view these transactions may well be just a slap shot of the reality. On another view, it can be said that these are all we have after a scrupulous exercise on the part of the wife.  Whatever way it is these transactions would have to be investigated into at the ancillary relief trial.

62.  With all the non-disclosures in mind, I consider the wife’s own evidence that lends support to the husband’s assertion regarding the downturn of his business must carry weight in the balancing exercise.  On the above analysis, weighting all the matters relating to the husband’s alleged non-disclosure and those pertaining to the alleged change in his financial situation, I decline to make ‘robust assumptions’ against the husband about his ability to pay.

The Husband’s Family

63.  I now turn to the final point relied upon by Mr Chan.  As said, it has been emphasized by Mr Chan that the husband comes from a wealthy background; his family is able and willing to provide financial support to not only him, but also his own family. 

64.  On the wife’s supporting affirmations, it is clear that she is not putting forward a case of third party financial assistance on which guidance has been given by the Court of Final Appeal in KEWS v NCHC [2013] 2 HKLRD 314.  At the substantive hearing, Mr Chan also confirmed it was because of the husband’s business that the family was able to enjoy a high standard of living during the relationship.  It is true that according to the husband it is only with the support of his family that he has been able to pay the interim MPS of $20,000 per month.  Yet there is not a shred of evidence that the husband’s family is willing to support the wife and the daughter at whatever level demanded by the wife, not to mention the legal costs provision applied for.  The evidence before me is that the husband’s family is willing to support at the level offered by the husband.

The Wife’s Financial Needs

65.  With the conclusions that I have come to it is apparent that I only need to deal with this issue briefly.

66.  I agree with Mr Cheung that the wife’s proposed figures for MPS both for herself and the daughter are extravagant and unnecessary.   Looking at the figures alone, she said in her supporting affirmation she needs $291,092.80 per month, inclusive of legal costs provision of $115,000; and the daughter needs $40,092.  Thus, she needs a total of $331,184.80.  Leaving the legal costs aside, it would mean she needs $216,184.80 on a monthly basis.   I am aware that the wife said she needs to move out to a separate accommodation and so there is a rental of $35,000.  Yet, on any view, this is an extravagant amount. The wife said in her affirmation that the husband made “at least HK$80,000+ per month during our marriage, including the director’s fees that he receives. In addition to this, if the family had any extra expenses, his companies would cover it with no questions asked”.   Thus, even on her own case, it is doubtful as to whether the family could have afforded as much as $216,184.60 per month during the good days.

67.  When it comes to the particular items, again I agree with Mr Cheung that mobile expense of $1,300, landline expense of $500 and holiday expense of $58,333 (for her alone) are, by way of examples, extravagant if not grossly inflated.  The wife should understand that this litigation tactic of inflating items would meet with the disapproval of the court.

Conclusion

68.  For the reasons aforesaid, the wife’s application must be dismissed; and I so order.

69.  The husband informed the court, via his counsel, that with the support of his family, he is able to pay an additional sum of $15,000 per month on the top of the current $20,000; making a total of $35,000.  On that basis, I give an order that the respondent shall pay $35,000 to the petitioner as the interim maintenance for the child of the family, the 1^st payment to be made on or before 1 November 2019 and thereafter on the 1^st day of each succeeding month until further order of the court.

Costs

70.  Since the wife has failed in her application, she should bear the costs of it.  I give an order, by way of an order nisi, that the petitioner do pay the respondent the costs of her application, including all costs reserved, and with counsel certificate, to be taxed if not agreed.