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CACV 127/2008
B B
IN THE HIGH COURT OF THE
C C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D COURT OF APPEAL D
CIVIL APPEAL NO. 127 OF 2008
E E
(ON APPEAL FROM HCMC NO. 1 OF 2006)
F F
G BETWEEN G
W Petitioner
H and H
I H 1st Respondent I
Z 2nd Respondent
J J
K K
Before: Hon Rogers VP, Le Pichon JA and Stone J in Court
L Dates of Hearing: 24 & 25 March 2009 L
Date of Handing Down Judgment: 12 May 2009
M M
N
JUDGMENT N
O Hon Rogers VP: O
P P
1. This was an appeal from a judgment of Saunders J given on
Q 29 February 2008. The matter before the judge was an application for Q
ancillary relief by the wife, the petitioner, in matrimonial proceedings. The
R R
judge ordered that the husband, the first respondent, should pay the wife
S HK$49,100,000 within 42 days in full and final settlement of the wife‟s and the S
husband‟s claims for financial relief.
T T
U U
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2. Notice of appeal was filed on behalf of the wife on 7 May 2008
B B
and on 12 March 2009, 12 days before the hearing of this appeal, a summons
C was filed on behalf of the husband seeking leave to serve a respondent‟s notice C
out of time. The orders sought by that respondent‟s notice were to the effect
D D
that the wife should repay to the husband part of the sum awarded to her
E because the value of the husband‟s investments had fallen since the date of the E
order of the court below.
F F
G 3. This court heard the application for leave to serve the respondent‟s G
notice at the commencement of the hearing and that application was refused.
H H
At the conclusion of the hearing of this appeal judgment was reserved which we
I now give. I
J J
Background
K K
4. The husband and wife married in August 1982. At that stage they
L were in their 20s. The wife is a US citizen although she was born in Hong L
Kong. There are two children of the marriage; the daughter is now in her early
M M
20‟s and seeking employment and the son is aged 20 and has had learning
N disabilities. N
O O
5. In June 1982, in anticipation of the marriage, a flat was purchased
P for $1.75 million. The 10% deposit was provided by the husband‟s father and P
the bank, for which the wife worked, provided a mortgage at a favourable
Q Q
interest rate. Both parties to the marriage worked in the financial field,
R specifically, at that time, in international merchant banks. R
S 6. In 1985 the family moved to London where both the husband and S
T
the wife worked in the London offices of their respective banks. It would T
seem that, probably, the husband instigated the move. Whilst in London they
U U
lived in a flat owned by the husband‟s parents.
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7. In 1991 the husband decided to leave his employment in London
B B
and he returned to Hong Kong to start his own fund management business.
C The wife did not return to Hong Kong at that stage but, instead, changed C
employment and moved to New York with the children. The judge records
D D
that the wife had the assistance of a domestic helper in respect of the children,
E although there were difficulties with that, and the husband visited the wife and E
children in New York from time to time.
F F
G 8. In August 1991 the husband set up his own investment company G
and was able to raise funds. US$5 million came from his father, a further
H H
US$10 million from a friend of his mother and he was able to invest
I US$1 million which he raised himself. I
J J
9. When the business was started the husband offered the wife a 30%
K
share in the company in return for payment by her of US$200,000. The wife K
did not take up any shareholding in the company. The reason she has given for
L L
not doing so is, as the judge said in paragraph 92 of the judgment, that the
M company was an untested new venture and, were that to fail, the family would M
have to look to that money, apart from anything else, for its support.
N N
10. The husband‟s investment strategy was to operate a hedge fund
O O
along lines that might, perhaps, be said to accord with the original meaning of
P that term. It would appear that investments were “hedged” by the purchase of P
other securities selected with a view to their projected movement in value
Q Q
counteracting, or at least cushioning, any downfall in the value of the basic
R security. That is in contrast to the way in which funds that have been R
classified as hedge funds have been operated in recent times. It would appear
S S
that, more recently, funds which are classified, or whose operators term them,
T T
hedge funds, operate by short selling shares, which the funds do not own.
U
Many of the more turbulent events on the stock markets have been attributed to U
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this. As the charts that have been produced by the husband show, in 1993
B B
there was a considerable increase in the value of funds under his management.
C C
11. The wife returned to Hong Kong with the children in
D D
September 1992. At that stage, the parties did not live in the flat which they
E had bought at the commencement of marriage because it had been let out. E
They lived, instead, in a flat owned by the husband‟s father. In 1994 the wife
F F
paid off the outstanding mortgage on the original flat. The amount paid off
G was approximately $770,000. She paid that out of monies which she had G
earned from her employment but, as noted by the judge, she did not inform the
H H
husband that she had done so.
I I
12. Between August 1995 and March 1997 the wife took what has
J J
been described as sabbatical leave. She ceased working. The husband kept
K
the family, indeed, he paid the wife $45,000 per month until she took up work K
again. In March 1997 the wife returned to work for an international bank and
L L
the judge recorded that she continued to work there and hold “a significant
M place in the organisation, and earns a salary and bonus appropriate to such a M
post.”
N N
13. In 1997 the husband wished to sell the flat which had been bought
O O
at the commencement of the marriage because, at that time, the family was
P living in his father‟s flat and they had no need for the other flat. The property P
prices in Hong Kong were then rising fast. The wife took a contrary view and
Q Q
the upshot was that the flat was transferred into a BVI company which was
R ostensibly owned by the wife‟s brother-in-law although beneficially owned by R
the wife. The parties transferred their shares into that company for
S S
HK$4.5 million each. In paragraph 104 of the judgment, the judge said that he
T
accepted the wife‟s evidence that it was necessary for a third-party to purchase T
U
the property so that the capital gain arising would be crystallised and any future U
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capital increase in the value of the property would not give rise to any capital
B B
gains tax liability for the wife as a US citizen. The judge went on to say that
C he accepted that the wife had taken professional advice that such a scheme C
would enable her to avoid capital gains tax lawfully in the future. As part of
D D
the netting off, the wife insisted that half the HK$770,000 which had been paid
E to the wife‟s former employer three years earlier, in 1994, was to be taken into E
account. Whilst it appeared that there was disagreement between the parties as
F F
to whether the husband had received a fair value for his share of the property,
G the judge regarded that as a matter which was in the past and could not be G
reopened.
H H
I The breakdown of the marriage I
J J
14. Whereas the judge records that the husband claimed that the
K
marriage had begun to deteriorate as long ago as 1985, it would seem that in the K
summer of 2002 the husband had suggested to the wife that there should be a
L L
divorce. Again, as the judge recorded in paragraph 109 of the judgment, the
M husband accepted that a relationship had begun between himself and the second M
respondent during 2002. That relationship continues to today. It was clearly
N N
at that time that the marriage started to disintegrate irretrievably.
O O
15. The second respondent joined the husband‟s company in
P January 2003 under a contract of employment which had been offered in P
December of the previous year. No exception was taken to the terms of that
Q Q
employment but it can be said that the terms were reasonable to the extent that
R there was a HK$200,000 signing on bonus and there was to be a year-end bonus R
of not less than US$150,000 of which US$80,000 would be paid as a
S S
contribution into the company‟s retirement scheme. There would also be a
T T
year-end bonus payable each year before Chinese New Year. In addition there
U U
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was to be a place of residence provided, which would, seemingly, be treated as
B B
a worth HK$20,000 per month.
C C
16. 2003 was certainly an eventful year. The judge records in
D D
paragraphs 110-112 that on 21 March 2003 the husband had proposed to the
E wife that they should enter a “post-nuptial” agreement. Then just a few days E
later, by letter dated 10 April 2003, the second respondent was offered greatly
F F
enhanced terms of bonuses. It was said in that letter that it had been agreed
G that the second respondent would receive a share of the fees of the husband‟s G
company in the form of cash or units in designated funds. That share would be
H H
30% of the relevant fees up to US$10 million per year. Beyond that it would
I be a 20% share. I
J J
17. In July 2003, the wife consulted a marriage counsellor and a
K
psychiatrist. On 20 September 2003, the husband proposed that there should K
be a divorce. A month later the husband simply moved out of the matrimonial
L L
home, without giving the wife any notice. It did not take the husband long to
M set about trying to put whatever assets he could beyond the reach of the wife. M
On 23 November 2003, he set up what has been referred to as the Charitable
N N
Foundation and on 5 December 2003 he set up what has been termed the Family
O Trust, in the Cayman Islands. O
P 18. When, in January of the next year, the wife was informed that P
some US$20 million had been settled into those trusts, there was, quite
Q Q
understandably, an immediate protest. Far from deterring the husband in what
R can only be taken to have been a deliberate effort on his part to divest assets R
beyond the reach of the wife and, in some respects, to the benefit of the second
S S
respondent, nearly US$2.5 million was transferred on 28 February 2004 as an
T T
additional contribution to the second respondent‟s account in the company
U
retirement scheme. U
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19. Between March and September 2004, a further US$5 million in
B B
fund units, and cash of some $3.5 million was transferred into the Charitable
C Foundation. Some of that came from the husband, and some from one of his C
companies.
D D
E 20. Divorce proceedings were commenced in May 2005 and a decree E
nisi was entered on 2 September 2005.
F F
The proceedings below
G G
H Section 17 of the Ordinance H
I I
21. As part of the dispute between the parties, the wife claimed that
J
dispositions that had been made by the husband to the Charitable Foundation, J
the Family Trust and the retirement scheme administered by the husband‟s
K K
company should be set aside under the provisions of section 17 of the
L
Matrimonial Proceedings and Property Ordinance, Cap. 192 (“the Ordinance”). L
It is convenient to set out the provisions of that section in so far as they are
M M
relevant to this case:
N N
“17. Avoidance of transactions intended to defeat certain claims
O (1) Where proceedings for relief under any of the relevant provisions O
of this Ordinance (hereafter in this section referred to as “financial
provision”) are brought by a person (hereafter in this section referred
P to as “the applicant”) against any other person (hereafter in this section P
referred to as “the other party”), the court may, on an application by
the applicant-
Q Q
(a) if it is satisfied that the other party is, with the intention of
R defeating the claim for financial provision, about to make any R
disposition or to transfer out of the jurisdiction or otherwise
deal with any property, make such order as it thinks fit for
S restraining the other party from so doing or otherwise for S
protecting the claim;
T T
(b) if it is satisfied that the other party has, with the intention
aforesaid, made a disposition to which this paragraph applies
U and that if the disposition were set aside financial provision or U
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different financial provision would be granted to the applicant,
B make an order setting aside the disposition and give such B
consequential directions as it thinks fit for giving effect to the
order (including directions requiring the making of any
C C
payment or the disposal of any property);
D …………….. D
and an application for the purposes of paragraph (b) shall be made in
E the proceedings for the financial provision in question. E
(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any
F F
disposition made by the other party (whether before or after the
commencement of the proceedings for financial provision), not being a
G disposition made for valuable consideration (other than marriage) to a G
person who, at the time of the disposition, acted in relation to it in
good faith and without notice of any such intention as aforesaid on the
H part of the other party. H
(3) Where an application is made under this section with respect to a
I I
disposition which took place less than three years before the date of the
application or to a disposition or other dealing with property which is
J about to take place and the court is satisfied- J
(a) in a case falling within subsection (1)(a) or (b), that the
K disposition or other dealing would (apart from this section) K
have the consequence,
L L
………………
M of defeating the applicant‟s claim for financial provision, it shall be M
presumed, unless the contrary is shown, that the other party disposed
of the property with the intention aforesaid or, as the case may be, is,
N with that intention, about to dispose of or deal with the property.” N
O 22. Although the husband initially resisted the wife‟s claim in its O
entirety, by the time the matter came to be heard before the judge the husband
P P
conceded that $181,200,000 that had been transferred to the Family Trust
Q should be treated as his property. At paragraph 182 of the judgment, the judge Q
came to the clear conclusion that the dispositions to the Charitable Foundation
R R
and the Family Trust were made by the husband with the intention of defeating
S a potential claim by the wife. Although he went on to say that he accepted that S
the husband had a genuine desire to undertake charitable work through the
T T
Charitable Foundation, he was satisfied that it was the husband‟s intention to
U U
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ensure that his wife did not share in the assets that were the subject of the
B B
dispositions to the Charitable Foundation and the Family Trust.
C C
23. One part of the evidence clearly impinged on the judge, he said that
D D
he found it particularly telling in relation to the husband‟s intention in relation
E to the establishment of the Family Trust. The husband was being asked about E
the creation of the Family Trust and the transfer of funds thereto and said in
F F
evidence in chief, at page 339R-340I of the transcript:
G G
“ Q. Well, let‟s take it chronologically. Why $20 million in setting
up a trust?
H H
A. Okay. Several reasons, the most important of which is that
when you set up a trust, you‟re talking about the future, I mean,
I it has to last 50, 80, even 100 years, so it needs a high margin I
for error because nobody can predict the future. I mean, the
J Great Depression happened 70 years ago. We haven‟t seen J
anything near that but that‟s not to mean that something similar
might not happen sometime in the future during the lifetime of
K the trust. K
Q. Yes.
L L
A. It‟s precisely during extremely adverse conditions that a trust
M will be needed by the children, so the trust needs to be able to M
fulfil what it‟s intended to fulfil under extremely adverse
conditions.
N N
Q. I see.
O A. Now, even 20 million doesn‟t reduce the chance to zero. I O
mean, it‟s still - -there are possibilities where the trust would
P fail under severe conditions. It just reduces the probability to P
such a low point that I feel comfortable with it.
Q Q. Well, you‟ve described that as one of the reasons. Were there Q
any other reasons?
R A. Yes. Because at the time the petitioner was saying that, “I‟m R
going to take the family assets, gift - - and run away and
S abandon the family,” I just want to show - - and I think it‟s also S
fair that I give all my assets to my children.
T Q. Now….. T
A. I mean, in fact - - I mean, the way I think this - -if she hadn‟t
U had so much assets, I would probably have included her. U
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Q. Now, she‟s an excluded - -excluded from being a beneficiary.
B B
A. Yes, less US tax, I mean, like the children.”
C C
24. That was, apparently, said in relation to a time when the wife was
D complaining to the husband‟s parents. As the judge said at paragraph 189, in D
cross-examination the husband said that had the wife not been so wealthy
E E
herself he “would have given her something”. In paragraph 200 of the
F judgment the judge said: F
G “200. In the present case I do not find it necessary to rely upon the G
presumption contained in s 17(3) to be satisfied that the necessary
intention was present. The evidence overwhelmingly establishes not
H H
only that the husband intended to exclude the wife from his assets, but
that he intended to do so in order that she may not succeed in any
I matrimonial claim against him. The existence of the presumption I
merely adds force to the conclusion that I have reached.”
J J
25. The judge examined the circumstances in relation to the Charitable
K Foundation and came to the conclusion that in respect of the Charitable K
Foundation the donations which had been made by one of the husband‟s
L L
companies should be brought back into the matrimonial balance sheet as also
M the payments made into the Family Trust. M
N N
26. The third category of payments in respect of which the section 17
O
applications were made related to payments into the retirement scheme run by O
the husband‟s company in respect of the second respondent. There was a
P P
payment in for the year 2003 of US$2,415,860.25. For the year 2006 the
Q payment in was US$676,691.93. These payments were made following the Q
letter of 10 April 2003. The judge came to the conclusion, based on the
R R
“Alpha Hedge Fund Compensation Report” for the year 2006, that the second
S respondent‟s remuneration, which in this context clearly included the payments S
to the retirement fund, was “well within the normal range of income for fund
T T
managers”. He also said that the remuneration package was commensurate
U with that of the second respondent‟s previous employment. For those reasons U
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the judge held that there was no basis upon which the payment to the retirement
B B
fund for the second respondent might be said to have been made with the
C intention of defeating a claim on the part of the wife. He held that they could C
not be challenged under section 17.
D D
E 27. The judge came to the conclusion that it was not necessary to make E
any specific orders under section 17, acceding in this respect to the request
F F
made on behalf the husband that the Family Trust and the Charitable
G Foundation should be kept intact, if at all possible. Instead of making specific G
orders the judge left the matter open but made an order for payment by the
H H
husband to the wife on the basis that the final order would be on the basis that it
I had been held that the wife was entitled to the orders. I
J J
28. The judge came to the conclusion that the total value of the
K
matrimonial property in the hands of the husband was $247,200,000 and in the K
hands of the wife was $57,500,000 amounting to a total of $304,700,000. In
L L
reaching that calculation the judge had attributed the value of $1,300,000 to a
M property under development in Vancouver which the husband had contracted to M
purchase through a company.
N N
The application of sections 4 and 7 of the Ordinance
O O
P 29. In approaching the case the judge considered whether the P
provisions in sections 4 and 7 of the Ordinance were to be applied on the basis
Q Q
of reasonable requirements of the parties. That was the contention on behalf of
R the husband, who relied upon the decision of this court in C v C [1990] 2 HKLR R
183. It can be said that that had been the approach that had been previously
S S
adopted. At the risk of being over concise, the issue between the parties was
T whether the approach that had been set out in the case of White v White [2001] T
AC 596, namely that when making a division of the assets the court should use
U U
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the yardstick of equal division as a foil against any preliminary views, should
B B
now be the test applied in Hong Kong. Lord Nicholls put the matter on the
C basis that: C
D “As a general guide, equality should be departed from only if, and to D
the extent that, there was good reason for doing so.”
E E
30. What was clearly a new approach adopted under the English
F legislation since the case of White v White, had been considered at first instance F
in Hong Kong but, up until the time the judge gave judgment in this case, the
G G
only indication from this court had been that the approach in C v C remained the
H approach of the courts in Hong Kong. As it happens there was a decision of H
this court, DD v LKW [2008] 2 HKLRD 523, which was handed down a few
I I
days after the judgment in the present case. In that case the court took a
J different view. J
K K
31. However, the judge considered various authorities in the United
L Kingdom and set out, in paragraphs 22-24 of the judgment, a summary of the L
submissions that had been made on behalf of the wife, which he accepted
M M
reflected the law as to entitlement in ancillary relief proceedings as it stood in
N England. N
O O
32. The judge considered the provisions of the Basic Law and, in
P
particular, Articles 19 and 22 of the Bill of Rights and came to the conclusion P
that the law as applied on the basis of what might be termed reasonable
Q Q
requirements, in accordance with C v C, was no longer the law in Hong Kong.
R The judge also considered that he could reach the same conclusion by R
interpreting the decision in C v C as requiring that the courts of Hong Kong
S S
would follow whatever the English rule was in respect of the equivalent
T legislation. T
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33. In the court below the case on behalf of the wife had been put that
B B
she was entitled to 45% of the matrimonial property. In the result the judge
C took that as the starting point but reduced the amount he was prepared to order C
in favour of the wife by 10% of the combined total of assets. He applied the
D D
reduction on the basis that the assets accumulated as a result of the husband‟s
E business so exceeded that which might be considered normal, that it would be E
inequitable to disregard them and not treat his skills as a special contribution.
F F
In addition the judge considered that there had been a rigid separation of the
G husband‟s and wife‟s finances during the course of marriage and that was also a G
matter to be weighed in the balance in determining the level at which the
H H
matrimonial property should be shared. The judge did not attribute any
I I
specific proportion of the 10% reduction to these 2 considerations. There was
J
simply a global reduction from 45% to 35%. J
K This appeal K
L L
34. On this appeal, Mr Shieh SC, who appeared on behalf of the wife,
M argued that the wife should be entitled to 50% of the matrimonial property. He M
said that the two reasons given by the judge provided no justification for
N N
reducing the amount to be awarded to the wife. He also said that the 2
O transfers of the assets into the retirement fund, namely of US$2,415,860.25 and O
US $676,691.93 should be set aside. Finally it was said that the matter should
P P
be remitted to the Court of First Instance for a valuation to be undertaken of the
Q Vancouver property. Q
R 35. For his part, Mr Mostyn QC, who appeared on behalf of the R
husband, argued the case on the basis that the judge had been correct to
S S
approach the case on the basis of equality and that the approach of the court
T T
should be in accordance with that laid down in the case of White v White and the
U
cases in England that followed that. It was maintained that the judge had been U
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correct in only awarding the wife 35% of the matrimonial property and the other
B B
contentions on behalf of the wife were resisted. In addition, as already noted,
C an attempt was made on behalf of the husband to obtain leave to serve a C
respondent‟s notice.
D D
E The two transfers into the retirement fund E
F 36. The first transfer into the retirement fund was the disposition by the F
husband‟s company “Management” of shares in his “Asia Fund” to the
G G
“Retirement Scheme” to the value of US$2,415,860.25. The second
H disposition was to the value of US$676,691.93. That was made in 2006 by H
I
“Management”, again, of shares in the “Asia Fund” to the same “Retirement I
Scheme”.
J J
37. The judge appears to have refused section 17 orders in respect of
K K
these transfers for three reasons. In the first place, he said in paragraph 220 of
L the judgment that “If any complaint about the payments would be made it could L
only succeed if all payments were challenged.” In this respect, the judge was
M M
alluding to the fact that no attack had been made in respect of the payments in
N 2004 and 2005. In the second place, the judge held that the total amount of N
remuneration with which the second respondent was credited, in particular in
O O
respect of the bonuses, was “well within the normal range of income for fund
P managers” based on the Alpha Hedge Fund Compensation Report. In the third P
place the judge said that the package which the second respondent received was
Q Q
commensurate with that in her previous employment.
R R
38. Taking the last point first, although the judge said (at
S S
paragraph 221) that the counsel below was unable to challenge that evidence,
T Mr Shieh argued that there had been no evidence relating to the second T
respondent‟s remuneration in her previous employment. Mr Mostyn was not
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able to draw this court‟s attention to any relevant evidence. Thus, in this
B B
respect, Mr Shieh‟s criticism would appear to be valid.
C C
39. In respect of the Alpha Hedge Fund Compensation Report one
D D
thing is clear and that is that only figures for 2006 were provided. It was also
E pointed out that, whereas the computer-generated report was based on hedge E
fund managers with 5-8 years experience, it would appear that prior to joining
F F
the first respondent‟s company, the second respondent had only two years
G experience as an investment manager, as opposed to an analyst. G
H 40. The above matters, on their own, call into question primarily the H
I
2003 figures, but, in respect of the overall amount, a number of matters have to I
be considered. In the first place the timing of the April 2003 letter, juxtaposed,
J J
as it was, immediately after the husband had requested the wife to enter a
K
post-nuptial agreement and a few months before the marriage fell apart K
irretrievably, followed by the attempts by the husband to prevent the wife
L L
having access to the matrimonial properties, is one such factor.
M M
41. The other matter is that the basis of the calculation of the bonus is
N again, something which causes considerable concern. As already noted, the N
second respondent was, by letter of the 10 April, given a 30% share of the
O O
relevant fees until the level of US$10 million per annum was reached. In the
P first place, there was no apparent consideration for this. The second P
respondent had only three months earlier commenced working under a contract
Q Q
whereby she was, seemingly, fully remunerated. That earlier contract did not
R indicate that the bonus would be reviewed after three months. Perhaps, R
equally importantly, was the fact that although the bonus was to be calculated
S S
on the relevant fees, the husband admitted, when giving evidence, that fees
T
which were due from related parties, in particular his family and the family‟s T
U
companies, had been waived. Hence, the payment made in 2003, which had U
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been calculated on fees of some US$6 million, had been calculated on the basis
B B
of fees that could have been charged but were not. Moreover, as was pointed
C out by Mr Shieh, the amount which was credited to the second respondent‟s C
retirement fund for the year 2003 dwarfs by an enormous margin the total
D D
amount of the husband‟s own contributions to the retirement scheme.
E E
42. It would appear that there may have been some misapprehension
F F
on the part of the judge as to the amount transferred in respect of 2006. That a
G benefit to the value of US$676,691 was credited to the retirement scheme in G
February 2007 in respect of the year 2006 is not disputed. For my part, I
H H
cannot see the relevance of the fact that the payments in respect of the
I intervening years have not been challenged. In my view the amounts credited I
for the years 2003 and 2006 should be treated as coming within the terms of
J J
transactions that should be set aside under section 17.
K K
The distribution
L L
43. In respect of the distribution of the assets, despite the decision in
M M
White v White and the cases which followed it, it must still be borne in mind
N that, in respect of orders for payment either of maintenance or a lump sum N
under section 4 of the Ordinance, section 7 sets out what the court must do
O O
when deciding how the matrimonial property is to be divided:
P P
“7. Matters to which court is to have regard in deciding what
orders to make under sections 4, 5 and 6
Q Q
(1) It shall be the duty of the court in deciding whether to exercise its
R powers under section 4, 6 or 6A in relation to a party to the marriage R
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,
S that is to say- S
(a) the income, earning capacity, property and other financial
T T
resources which each of the parties to the marriage has or is
likely to have in the foreseeable future;
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(b) the financial needs, obligations and responsibilities which
B each of the parties to the marriage has or is likely to have in the B
foreseeable future;
C C
(c) the standard of living enjoyed by the family before the
breakdown of the marriage;
D D
(d) the age of each party to the marriage and the duration of the
marriage;
E E
(e) any physical or mental disability of either of the parties to
the marriage;
F F
(f) the contributions made by each of the parties to the welfare
G of the family, including any contribution made by looking after G
the home or caring for the family;
H (g) in the case of proceedings for divorce or nullity of marriage, H
the value to either of the parties to the marriage of any benefit
(for example, a pension) which, by reason of the dissolution or
I I
annulment of the marriage, that party will lose the chance of
acquiring.”
J J
44. These provisions have not been repealed. What has happened, as
K K
the judge below pointed out, is that the Bill of Rights has provided in
L
Article 19(4): L
“Spouses shall have equal rights and responsibilities as to marriage,
M M
during marriage and at its dissolution. In the case of dissolution,
provision should be made for the necessary protection of any
N children.” N
O 45. The judge below, having referred to that provision in the Bill of O
Rights and other provisions in the Basic Law, considered that it was appropriate
P P
to depart from what may be referred to as the previous approach, namely, the
Q reasonable requirements of the parties. That approach was said to be laid Q
down in C v C [1990] 2 HKLR 183. He then went on to consider the case of
R R
White v White and a number of other cases following that including in particular
S Miller v Miller; MacFarlane v MacFarlane [2006] 2 AC 618 and Charman v S
Charman [2007] 1 FCR 217. Indeed, it can be said that he followed
T T
particularly what had been said in those later decisions.
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46. As an alternative justification for applying the law as set out in the
B B
various English decisions over the last decade, the judge said that
C paragraphs 72-74 of the judgment: C
D “72. Thus, it can be seen that Hunter JA‟s summary of the principles D
to be extracted from the English cases, including that of reasonable
requirements, is arguably nothing more than an analysis designed to
E E
determine what the English law was, which law would be applied in
Hong Kong, consequent upon his conclusion that the legislative
F intention in Hong Kong was to use English experience and to follow F
English example.
G 73. On this basis it is contended that the true ratio of C v C is not G
merely that reasonable requirements is the law in Hong Kong, but that
H
whatever the English law was, would also be the law in Hong Kong. H
I find considerable strength in this argument, particularly having regard
to the progression through the argument made by Hunter JA in his
I judgement. I
74. Consequently, even if I am wrong as to the significance of the
J constitutional provisions relied upon by Mr Pilbrow is justifying a J
departure from C v C, I am satisfied that in applying C v C, I must
K follow English law as it is presently stated. The end result is the K
same.”
L L
47. In so saying the judge anticipated by a few days what was said by
M another division this court in DD v LKW [2008] 2 HKLRD 523. I consider M
that there are grave difficulties in accepting that the Hong Kong courts are
N N
bound by the decisions of English courts. Naturally, decisions of the House of
O Lords are to be given respect. But since the resumption of sovereignty in 1997, O
it would appear difficult to suggest that decisions, even of the House of Lords,
P P
could be considered as binding.
Q Q
48. I consider it unnecessary to examine what was said in all the cases,
R R
but the provisions of the Ordinance mandate a flexibility in the exercise of
S
discretion which in each case is necessary to meet the circumstances of the case. S
The English decisions have shown a progression towards the realisation that
T T
fairness often dictates that, on dissolution of the marriage, the family assets
U
should, in principle, be shared between the parties unless there was good reason U
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to depart from such a distribution. Nevertheless, each case must be decided on
B B
its own facts and its own merits. In cases of divorce, the facts and
C circumstances relating to the parties and the marriage can and do vary C
significantly. In my view it would be dangerous to attempt to decree a
D D
principle that is applicable in all cases.
E E
49. As already indicated, the judge appears to have started on the basis
F F
that the matrimonial property should be divided between the parties on the basis
G of 55/45, as had been argued on behalf of the wife. He reduced that ratio to G
65/35 for two reasons, although he did not quantify which of the reasons caused
H H
a reduction for any particular amount.
I I
50. The first matter which the judge took into account was what was
J J
said to be the contributions of the two parties. He said at paragraph 256 of the
K
judgment: K
“What stands out in this case is the very substantial assets that had
L L
been accumulated through the husband‟s application of his financial
skills. I am driven to the conclusion that the extent of these assets,
M deriving as they do from the husband‟s effort, so exceed that which M
might normally be considered mere income, and are such that it would
be inequitable to disregard them, and not treat his skills as a special
N contribution.” N
O 51. In so saying he appears to have been applying what was said in the O
Miller decision at paragraphs 66-68. Reference is made in the cases to what
P P
was referred to as “stellar” contributions by one party to the marriage. As
Q Mr Shieh pointed out in the course of argument, the English cases have over the Q
last decade shown that it has been appreciated that any alteration in the
R R
distribution of the assets can only be justified in exceptional circumstances.
S The judge below recognised that both parties to the marriage provided as much S
T
as they were able by way of income. But, as Mr Shieh suggested, it might T
have been the size of the eventual assets which influenced the judge, because he
U U
said in paragraph 254:
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“That said, it must be recognised that the husband‟s ability as a fund
B manager has enabled very substantial assets to be accumulated, B
certainly assets well beyond those which might normally be
accumulated, even by high earning professional.”
C C
52. The comparison between a fund manager and a high earning
D D
professional is somewhat obscure. If, by that, the judge was intending to
E compare what a lawyer, accountant or doctor might expect to accumulate by E
reason of professional fees alone, then the comparison, in my view, is not
F F
legitimate. The function of those working in the financial sector, such as fund
G G
managers, is to create wealth. Making money is the primary object of their
H
work and is the yardstick by which their success or otherwise is measured. A H
professional, such as a lawyer or doctor, is directed to enhancing his
I I
professional work and, thereby, service to the community. It may well be that
J
many high earning professionals accumulate wealth. But even in cases of high J
earning professionals, the extent of their wealth during their lifetime is often
K K
multiplied by the successful investments which their fees enable them to make.
L L
53. In the present case, this court was shown what has been referred to
M as the performance profile of the husband‟s companies. In some years it M
would appear that the funds under his management have outperformed what had
N N
been referred to as the benchmark. Assuming the benchmark figures were the
O appropriate figures to take. In more recent years the performance can be said O
to have been flat, if not an underperformance of the benchmark. In my view it
P P
would be wrong to categorise the husband‟s talents as being of “stellar”
Q proportions. It could be said he was good at his job; and the highest that it Q
R
could be put is that he was better than most or above average. R
S 54. The other factor which the judge took into account was what he S
held to have been the rigid separation of the parties‟ finances. How much
T T
weight he gave to that is difficult to tell, since, at the end of the passage dealing
U U
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with that matter, at paragraph 268 he said that it was simply a matter to be
B B
weighed in the balance in determining the level of sharing.
C C
55. This court was taken through a number of passages in the transcript
D D
with a view to demonstrating the extent and the purpose for which the parties
E kept their finances separate. In my view, they demonstrate little more than E
what would normally be expected of a couple when both were earning income
F F
and where one of whom had considerable difficulties because she was a US
G citizen and, therefore, had to be careful over her liability to US tax. At one G
stage, the parties were working in different jurisdictions and each had their own
H H
income and their own requirements. One aspect which impinged was, for
I example, at page 85 of the transcript, where the wife said in answer to whether I
there was any other reason, apart from US tax, that finances were kept separate:
J J
“A. Well, US tax is a big reason; two is at the beginning of our
K marriage we had a joint account but then it get into a situation in which K
he wants to be able to spend “his” money and as a woman I would like
to spend it the way I want to spend it. For example, you know, I like
L L
to spend some shoes or clothes, whereas he wants to go and buy his
hi-fi. So after awhile it just became more convenient that we just
M don‟t co-mingle, but by and large clearly the US tax Consideration is a M
key consideration.”
N N
56. In considering this one has to bear in mind that with parties who
O are sufficiently affluent that the purchase of luxuries does not pose a financial O
strain, their interests may vary. No doubt one may be interested in listening to
P P
music at home and home entertainment systems. On the other hand, it also has
Q to be borne in mind that appearance is often regarded as important, particularly Q
amongst those who have senior positions in financial institutions. For ladies
R R
who hold such posts their appearance, whether it be in respect of clothes or
S otherwise, is often looked upon not so much as a matter of a luxury as a S
necessity.
T T
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57. On this aspect of the case, Mr Mostyn placed considerable reliance
B B
on the fact that the wife had not agreed to the sale of the original flat purchased
C at the commencement of the marriage but had bought out the husband‟s interest C
therein, after taking into account the payment of the outstanding mortgage loan,
D D
which she had made some years previously. Two matters should not be
E overlooked in this respect. The first is that when the mortgage loan was paid E
off, the wife simply paid the sum required. What should not be overlooked is
F F
the way that that was done. The fact that the wife paid off the loan, out of
G monies which she had earned, but did not even raise it at the time with the G
husband, indicates that there clearly was a community of assets. Secondly, as
H H
already noted, that flat had not been used as the matrimonial home for many
I I
years. It was simply an investment property. As such, no doubt, it was
J
regarded as an alternative investment to investments in shares and other J
securities. The fact that the wife considered that the flat should be kept, and it
K K
would seem that it was the only real estate which the parties had at the time, is
L indicative that the wife considered that there should be some diversity in the L
assets held. No doubt, had the flat been sold, the only alternative would have
M M
been to invest the proceeds of the sale in shares and other securities. It is
N clearly a matter of investment choice and philosophy as to whether all the N
family‟s assets should be put into the shares or whether some of it should be
O O
kept in other forms of investment. The arrangement between the parties had
P the effect of freeing up sufficient funds to allow for the wife‟s choice of keeping P
some investment in real estate whilst not preventing the husband from having
Q Q
access to additional capital, doubtless for investment in securities.
R R
58. In the court below, the wife sought a 45% share of the total assets.
S S
This court was not informed as to the basis upon which the wife sought 45%
T
rather than equality. Although on this appeal Mr Shieh has argued that the T
assets should be split equally, I consider that there would be difficulties in
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permitting the wife now to seek a higher proportion, particularly as the assets in
B B
question were investments.
C C
59. Mr Mostyn, for his part, has not pursued the husband‟s case in the
D D
court below that the distribution should be based upon the reasonable
E requirements of the parties. He has argued the case on the basis that this court E
should follow the decision in White v White and what was said in that case as
F F
has been modified, refined and adjusted in subsequent cases. Essentially, he
G has sought to maintain the 65/35 ratio distribution. G
H 60. In this case I consider that it is fair that the wife should have 45% H
I
of the total assets. That is the percentage which was sought in the court below, I
doubtless for good reasons. If the wife considered that 45% was a fair
J J
distribution, having regard to the way the case was argued on her behalf, that is
K
some indication of what could be considered fair. It is fair to the husband K
because it does no more than give the wife what she had sought originally. It
L L
is a percentage which he would have appreciated at the time of the hearing
M below, he might have to cater for. M
N The Vancouver property N
O O
61. One of the matters which Mr Shieh sought on this appeal was that
P the case should be remitted to the court below for an assessment of the value of P
what has been referred to as the Vancouver property. At the relevant time that
Q Q
was an interest which the husband had in a property that was being built. No
R doubt because many other issues were being ventilated in the court below, this R
aspect of the case attracted very little attention. It has to be said that any
S S
complaint in respect of the value attributed to the husband‟s interest in the
T development was very much an afterthought. Given the overall value of the T
assets that are in issue in this case, I do not consider it is warranted that this
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matter should, in effect, be raised at a very late stage and, primarily, in this
B B
court.
C C
The respondent’s notice
D D
62. As already stated, an application was made on behalf of the
E E
husband for leave to file a respondent‟s notice out of time. That was refused
F after hearing argument at the commencement of the hearing. Quite simply, it F
was the husband‟s case that the court should reassess the value of the joint
G G
assets in a way which would require of the wife to repay some of the money
H which had been ordered to be paid to her. The reason put forward was that the H
I
assets which the husband retained and controlled had diminished in value after I
the order had been made and complied with, in a way which he had not
J J
anticipated.
K K
63. In paragraphs 225-227 the judge considered whether, despite the
L fact that the necessary preconditions for making orders under section 17 had L
been established, such orders should be made. The judge recorded that the
M M
wife did not consider it necessary that the Charitable Foundation and the Family
N Trust should be dismantled provided that her entitlement could be met by the N
husband. Although the judge was clearly at a loss to understand how the
O O
husband would meet his obligations without, in some way, disturbing part of the
P investments in the Charitable Foundation and the Family Trust, he acceded to P
the husband‟s request saying:
Q Q
“Further, it appears to me that the husband wishes to be in a situation
R whereby, if he can meet any order that may be made, without the R
dismantlement of the Charitable Foundation and the Family Trust, then
S he would prefer to keep them intact. I have to confess that I find S
Mr Coleman‟s final submissions in this respect to lack clarity as to the
precise position he sought. But it does appear to me that the husband
T would prefer not to dismantle the Charitable Foundation or the Family T
Trust.”
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64. On that basis the judge simply made an order for payment by the
B B
husband. It is quite clear that the husband chose to keep the investments intact
C as they were and to handle them according to the way he saw fit. In doing so, C
he strenuously resisted any order which would have prevented that. The court
D D
is not ignorant of the fact that shares and financial securities have diminished in
E value in the last year to an enormous extent. But how the husband chose to E
handle the assets and investments under his control was a matter for him. It
F F
can only be considered ironic that a person who has sought to convince a court
G that his investment ability and past success should be recognised by giving him G
a higher proportion of the family assets, should a year after the original order
H H
was made ask the court to give him back some of the money on the basis that
I I
the wife had held cash whereas he had deliberately chosen to keep investments.
J J
Conclusion
K K
65. I would therefore allow this appeal and order that the wife should
L L
be entitled to 45% of the whole of the parties assets namely, the amount of
M $304,700,000 plus the sums aggregating US$3,092,552.18 referred to in M
paragraph 36 above. I would make an order nisi of costs of this appeal in
N N
favour of the wife.
O O
Hon Le Pichon JA:
P P
66. I agree with the judgment of Rogers VP.
Q Q
Hon Stone J:
R R
S 67. I have read in draft, and agree with the judgment of Rogers VP. I S
also agree with the Order proposed by the Vice President.
T T
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68. For my part I wish to add a few words upon two issues which arose
B B
during argument in this appeal.
C C
(i) Subsequent ‘dramatic events’
D D
69. The argument which was advanced by Mr Mostyn QC at the outset
E E
of this appeal, pursuant to the husband‟s Respondent‟s Notice, that the court
F also should consider a variation on the basis of the dimunition in the husband‟s F
wealth consequent upon the current financial contagion, was not a contention I
G G
found persuasive.
H H
70. As the Vice President has commented (at paragraph 64 above), the
I I
husband‟s argument in this regard was particularly ironic when viewed against
J the backdrop of his stance as to his “stellar” financial contribution within the J
marriage arising from his fund management skills, and it is not difficult to
K K
surmise what would have been the husband‟s reaction had the positions been
L reversed, and instead had it been the wife who had returned to court to complain L
about the vicissitudes of the market, and accordingly to request a corresponding
M M
variation of the percentages of matrimonial assets as apportioned by the trial
N judge. With due respect to Mr Mostyn‟s apparent enthusiasm for the point, it N
strikes me that those who choose to live by the market also die by the market.
O O
P 71. No more than a week after this court‟s summary rejection of the P
husband‟s attempt to recompute the award on Barder principles (Barder v
Q Q
Calouri [1988] AC 20), the English Court of Appeal also sounded to the like
R issue in Myerson v Myerson, Approved Judgment dated April 1, 2009, Times R
Online.
S S
T
72. In that appeal Mr Mostyn QC, appearing on that occasion on the T
other side of the fence on behalf of the wife in opposition to a similar „financial
U U
contagion‟ argument mounted by the husband, succeeded in roundly defeating
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the husband‟s contention that the forces within the global economy and the
B B
collapse in his company‟s share price had rendered the original compromise
C financial resolution order “both unfair and unworkable”. C
D D
73. In Myerson, the husband had retained 57% of the matrimonial
E assets (consisting of shares in his company and properties, worth £14.5 million), E
and the wife had received 43% amounting to £11 million, comprising cash of
F F
£9.5 million, together with a house worth £1.5 million.
G G
74. In rejecting the husband‟s argument, which in substantial part was
H based upon the destruction of the “fundamental assumption” upon which the H
I
agreed compromise had been made, and that the drop in share prices and house I
values, together with the global economic collapse, constituted new events
J J
sufficient to satisfy the analysis in the speech of Lord Brandon in Barder, op cit.,
K
Thorpe LJ (with whom Smith and Sullivan LJJ agreed) reviewed the existing K
case law on the point, and concluded (at paragraph 30) that:
L L
“…the circumstances in which this can happen [the Barder principle
M may apply] are very few and far between. The case-law, taken as a M
whole, does not suggest that the natural processes of price fluctuation,
whether in houses, shares or any other property, and however dramatic,
N fall within this principle…” N
O 75. I respectfully agree with this observation. It is wholly likely that O
were governing principle to be less rigorous, and less rigorously applied in
P P
Hong Kong, the floodgates would be opened with a vengeance, and that
Q numerous attempts would be mounted to re-open and to vary existing ancillary Q
relief orders on the purported basis of subsequent and alleged dramatic „change
R R
of circumstance‟.
S S
T T
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B B
(ii) Applicable law
C C
76. A further curiosity in this appeal is that it was decided at first
D instance on the basis of the principles adumbrated in White v White [2001] 1 AC D
596 (HL), notwithstanding that, on behalf of the husband in the court below
E E
Mr Coleman SC had argued, in the event unsuccessfully but in my view
F probably correctly, that the appropriate principle to be applied in the division of F
matrimonial assets was that of „reasonable requirements‟ as established in C v C
G G
[1990] 2 HKLR 183 (CA).
H H
77. As Rogers VP has pointed out (at paragraph 45 above), Mr Justice
I I
Saunders had rejected the C v C approach on the basis either that the true ratio
J of C v C “is not merely that reasonable requirements is the law in Hong Kong, J
but that whatever English law was, would also be the law in Hong Kong”,
K K
alternatively that the effect of the Bill of Rights produced the like result; as the
L judge pithily put it (at paragraph 74 of his judgment), “the end result is the L
same”.
M M
N 78. It is clear that when he rendered his judgment Saunders J felt N
constrained, for the reasons he gave, to circumvent C v C and to apply White v
O O
White, op cit., although for my part I would observe that this approach does not
P sit well with the decision of the Court of Appeal in L v C, CACV 169 of 2006 & P
L v L, CACV 181 of 2006 (Stock and Yuen JJA, Hartmann J), Judgment dated
Q Q
25 May 2007, wherein – as indeed the learned judge recognised (at
R paragraph 29) – Stock JA expressly had stated (at paragraph 106) that: R
S “the law is at present governed by the 1990 decision of the Court of S
Appeal in C v C by reason of which there is an evaluation of the wife‟s
reasonable requirements, a quantification of needs, rather than the
T approach adopted in England by the House of Lords in the landmark T
cases White v White and Miller v Miller…”
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79. The issue of the applicable law inevitably would have been a focus
B B
of the current appeal had it not been for the subsequent decision of the Hong
C Kong Court of Appeal in DD v LKW [2008] 2 HKLRD 523 (Cheung, Yuen JJA C
and Lam J), which landmark judgment, as the Vice-President has noted, was
D D
issued but a few days after the judgment of Saunders J in the present case, and
E in which that division of the Court of Appeal firmly grasped the nettle, holding E
that the „reasonable requirement‟ principle in C v C was outdated, and in future
F F
should be replaced by the new „fairness‟ approach of White v White – a result
G which no doubt resulted in the pragmatic approach adopted by both parties to G
the present appeal, who chose to argue this appeal solely upon White v White
H H
principles.
I I
80. However, we have been told that DD v LKW, op. cit., is to go
J J
further, and whilst it is clear that this case currently represents the applicable
K law in this jurisdiction, I respectfully venture to suggest that unqualified K
acceptance and adoption of the approach in White v White – which appears to
L L
have encountered its share of difficulties in its application in „big money‟ cases
M in England – ultimately may not provide the appropriate prescription for Hong M
Kong, with its different social and cultural norms.
N N
O 81. As Rogers VP has pointed out (at paragraph 47 above) the Hong O
Kong courts are not bound by decisions of the House of Lords, notwithstanding
P P
the respect that such decisions automatically engender, and for my part I would
Q respectfully agree with the obiter observation of Yuen LJ in DD v LKW; whilst Q
her Ladyship clearly felt bound to apply the House of Lords interpretation of the
R R
like legislation in the cases of White and Miller, nevertheless she expressed the
S view (at paragraph 90) that “there is much to be said” for the Australian position S
as set out in such cases as Figgins v Figgins [2002] Fam CA 688; [2003] 2 FLR
T T
299 – an approach which also echoes the sage observations of Stock JA in L v C
U & L v L, op cit., (at paragraphs 106-108), although the court in this latter case U
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expressly did not form any conclusion as to competing principle because in that
B B
instance it was common ground that those parties always had intended an equal
C division of assets. C
D D
E E
F F
(Anthony Rogers) (Doreen Le Pichon) (William Stone)
G Vice-President Justice of Appeal Judge of the G
Court of First Instance
H H
Mr Paul Shieh SC & Mr Jeremy S K Chan, instructed by Messrs Hampton,
I I
Winter & Glynn, for the Petitioner/Appellant
J Mr Nicholas Mostyn QC, Mr Russell Coleman SC & Ms Sara Tong, instructed J
by Messrs Haldanes, for the 1st Respondent/Respondent
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
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