IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
SUIT NO. 7746 OF 2004
Coram : H.H. Judge Bruno Chan in Chambers
Date of Hearing : 25 October, 3 November & 23 November 2005
Date of Judgment : 14 December 2005
J U D G M E N T
1. This is the parties’ application for ancillary relief upon the dissolution of their 7 years childless marriage, basically over their joint property in New Zealand where the Petitioner Husband has made his home since about late 2002. The parties are in fact agreed in principle on a clean-break settlement by the Respondent Wife transferring all her interests in the Property to the Husband for a lump sum payable by him to her, but are unable to agree on the amount of the lump sum, as the Wife takes issue of the Husband’s calculation of the net value of the Property upon which the lump sum is based, including whether some of the maintenance and expansion costs and expenses which he has allegedly made to the Property should first be deducted from the capital value of the Property, and whether her various contribution to the Property have been properly taken into account in the calculation of her entitlement.
2. The Husband, who was born in the Isle of Man, is a 43 years old motor technician and director of a company known as R Ltd that provides services for motor car racing events in Asia. He met the Wife, who was from England, in Hong Kong where she has lived and worked since 1989. She is a 39 years old part time teacher and paralegal. The parties were married on 9th March 1996 in the Isle of Man and thereafter made their home in Hong Kong where they would share their household expenses equally including the rental for their flat in Sai Kung.
3. In June 2002 they jointly purchased the said Property in New Zealand in Christchurch during a visit with the intention to apply for residency there. The Property comprises of 8 hectares and is planted in walnut trees with a residence. It was purchased for NZ$550,000, with NZ$100,000 contributed by the parties and £20,000 from the Husband’s mother, with the balance of NZ$390,000 by means of a mortgage from ANZ Bank, for which the parties opened a joint account with the Standard Chartered Bank in Hong Kong into which each would deposit HK$10,000 per month towards the mortgage payments and other relevant expenses.
4. The parties’ plan then was for the Husband, whose job was more flexible, to move into the said Property in New Zealand to fulfil the residency requirements, with the Wife following later in the year after she had sorted out matters in Hong Kong such as her jobs and the shipment of their pets including a dog and 3 cats to New Zealand. Accordingly, the parties returned to New Zealand in Christmas 2002 to take possession of the Property where the Husband stayed behind while the Wife returned to Hong Kong about 2 weeks later.
5. However in March 2003 while the Husband was visiting the Wife in Hong Kong, he heard rumours that she was having an affair, which she denied at that time, but one month later in April 2003 she informed him that she no longer wished to live with him and moved out of their matrimonial home in Sai Kung into another flat in the same neighbourhood.
6. Thereafter the Husband made several trips to Hong Kong between April and October 2003 in an attempt for reconciliation, during which the parties spent a short holiday together in UK in September 2003. They also took out a second mortgage for NZ$70,000 to finance the building of a barn on the Property in New Zealand.
7. Unfortunately the attempt for reconciliation turned out unsuccessful, and in October 2003 the Husband returned to New Zealand by himself, with little contact between the parties since. In July 2004 the Husband filed for divorce in these proceedings, and about one month later in August 2004 the Wife stopped paying her monthly contribution into their joint mortgage account.
8. At about the same time the parties started to discuss about the divorce proceedings during which they had a dispute over the shipping of their pets to New Zealand, ended with the Wife’s announcement of her intention to go to New Zealand and to stay in their joint Property, apparently against the Husband’s wishes. This led him to apply in the Family Court in Christchurch in August 2004 for an injunction restraining the Wife from entering the said Property. As a result the Wife did not go to New Zealand.
9. On 7th October 2004 the Husband was granted the decree nisi of divorce in these proceedings, with the question of ancillary relief adjourned for argument. The decree nisi has since been made absolute.
10. By a letter of 13th January 2005 from his solicitors to the Wife’s, the Husband proposed to pay her a lump sum of HK$900,000 in return for her transferring her interest in the property to him in full and final settlement of the parties’ financial claims against each other. This proposal was on the basis that the value of the property had gone up since its purchase to about NZ$1 million, or the equivalence of HK$5,500,000 according to the valuation report obtained by the Husband on 27th July 2004, which should then be set off against the following outstanding mortgages and charges :
|Value of Property
|Loan from the Husband’s mother
||HK$ 300,000 (£20,000)
11. This sum should, proposed by the Husband, be further reduced by HK$1 million being the maintenance and improvement costs incurred by him on the Property, and by some HK$575,000 being the estate agent’s commission, legal fees and GST sale tax payable on the sale of the Property, bringing the net equity down to about HK$1.7 million to be divided between the parties. Since he would like to retain the Property and hence to have the same transferred into his sole name, the Husband therefore proposed to pay the Wife the sum of HK$900,000, representing about 55% of the net equity in the Property.
12. The Wife however claimed that she was unable to consider the Husband’s proposal until after he had complied with her very extensive request for further and better particulars, which was eventually done in April 2005, but by then the Wife believed that the market value of the Property should have gone up and suggested that an updated joint valuation report be obtained. When this was not agreeable to the Husband, the Wife went ahead to obtain her own valuation report which was only available on 18th October 2005, only a week before the start of this trial. The report valued the Property at NZ$960,000, some NZ$40,000 less than the one obtained by the Husband in 2004.
13. On the same day of 18th October 2005 the Wife through her solicitors rejected the Husband’s offer of lump sum of HK$900,000 for the transfer of her interest in the Property to him as she did not agree with the deduction of various sums in his calculation of the net value of the Property save for the outstanding mortgage as they were either exaggerated or unsubstantiated such as the alleged maintenance and running expenses, or unreasonable such as the alleged loan from his mother or the GST sale tax, or that it was solely for the Husband’s benefit and hence should not be included such as the 2nd charge for the building of the barn. She therefore proposed that the updated market value of NZ$960,000, equivalent to HK$5,196,595.20 at the then exchange rate, should only be reduced by the then outstanding ANZ mortgage of HK$1,497,925, giving a net equity of HK$3,698,670.20, from which she was prepared to accept a lump sum of HK$1,850,000 in return for her transfer of her interests in the Property to the Husband, which was 50% of the net equity, in full and final settlement of the parties’ respective claims for ancillary relief against each other. This counter-proposal is not acceptable to the Husband who now believes that the market value of the properties has dropped even further to only NZ$800,000 according to the 2nd report recently obtained by him, and that it is unfair for the Wife to ignore the monies that he has paid out towards the maintenance and improvement of the property, without which it would not have reached the value it has.
14. The Husband also believes that the further expenses that he has borne exclusively over the past year without any further contribution by the Wife should be taken into account when calculating the net equity of the Property. On the other hand, he argues that the Wife’s proposal does not do justice between the parties, as she ignores all running and operating expenses and takes no account of the work he himself has put in to maintaining and improving the property, while her own financial contribution as well as her effort and work on the Property have all been limited compared with his. Nevertheless the Husband increased his lump sum offer to $1 million at the trial which was again rejected by the Wife.
15. The central issues between the parties are clearly over the Property, in particularly as to its valuation and what deductions, if any, should be made to arrive at its net equity, which must first be resolved before I am to consider the other relevant matters and circumstances of the case in deciding what lump sum should be payable to the Wife.
16. There is no dispute that the 1st valuation report (B1: 64), obtained by the Husband in July 2004, is now outdated as to its valuation of the Property at NZ$1 million which is no longer relied on by either party.
17. The Wife’s valuation (CB : 45) was obtained shortly before the trial and must therefore be...