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Lcyp v Jek And Another

Judgment Cited authorities 18 Cited in Precedent Map Related
Vincent
Judgment Date08 July 2019
Neutral Citation[2019] HKCFI 1588
Year2019
Judgement NumberHCMC3/2018
Subject MatterMatrimonial Causes
CourtCourt of First Instance (Hong Kong)
HCMC3D/2018 LCYP v. JEK AND ANOTHER

HCMC 3/2018

[2019] HKCFI 1588

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO. 3 OF 2018

________________________

BETWEEN
LCYP Petitioner
and
JEK 1st Respondent
CTC 2nd Respondent

________________________

Before: Hon Anthony Chan J in Chambers (Not Open to Public)

Dates of Hearing: 15 – 17, 20 – 21 and 24 May 2019

Date of Judgment: 8 July 2019

________________

J U D G M E N T

________________

1. This is the application of the Petitioner (“Wife”) for ancillary relief against the 1st Respondent (“Husband”). There is also an application by her to set aside a number of dispositions by the Husband made in favour of a trust in his name (“Trust II”) pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“Ordinance”). The Trustee, a Delaware company, is the 2nd Respondent (“R2”) in these proceedings. Although R2 had been served with these proceedings, it takes the position that this court has no jurisdiction over it and has not made an appearance.

2. There is an interesting point of law involved in these matters, namely, the standard at which the Wife’s needs are to be assessed in the context of an unvitiated[1] Pre-Nuptial Agreement (“PNA”).

Background

3. Save where indicated otherwise, the background facts are not in dispute. The Husband is now aged 47. He was born in New York. The Wife was born in Hong Kong and is now 46 years old. They met in Hong Kong in 1994 and were married in New Jersey, USA, in September 1997. They have 2 boys, X (now 18) and Y (14 years old). Both the Husband and Wife are US citizen, the latter acquiring her citizenship in February 2004.

4. When the couple met, the Husband, who had a degree in business administration, was working for the business of his family in the garment industry, ABC and its affiliates. The business was started by his father (“Father”) and in which the Husband had a 10% shareholding. The relationship of the Husband and Father in the business may be described as partners.

5. Just before the marriage, the Wife was working in Hong Kong as an executive secretary in an international investment bank earning between HK$18,000 to HK$20,000 per month. She was serving 2 directors of the human resources department. She had completed her Form 5 education and attended a 1-year course in secretarial training between 1990 and 1991.

6. The Wife just turned 25 when she got married (the Husband was about 4 months older). It was a first marriage for both of them. They lived in New Jersey after marriage, and both continued to work – Husband for the family business and the Wife as an executive secretary for the same company (after she had obtained a work permit in late 1997). They lived in a house acquired by the Husband in anticipation of the marriage.

7. According to the unchallenged evidence of the Wife, the couple had a joint bank account into which she paid her income. It was the only account she had in the US, whilst the Husband maintained his personal bank account(s). The Wife contributed to the family expenses, including the mortgage repayments, whilst she was employed.

8. The financial situation of the family improved significantly after the marriage. The family business was doing well and the Husband’s income increased. In 1999, the couple enjoyed a comfortable life and wanted to expand the family. They decided that the Wife should cease working to become a full-time housewife in preparation for the enlargement of their family. X was born the next year, and Y was born in 2005.

9. Nine months after Y was born, the family moved into a large house in New Jersey (November 2005), which was financed partly with the proceeds of sale of the previous home, acquired in the joint names of the couple (“House”). It stood on a plot of land 1.3 acres in size and had an area of about 10,000 sq ft. There were 2 storeys and a furnished basement, 6 en suite bedrooms and 4 covered car parking space. It was generously furnished as a dream home, eg, there was a custom designed theatre and an additional sitting room with a grand piano.

10. It is quite clear from the improvements in the quality of life enjoyed by the family that the financial position continued to improve. The family went to cruises, ski trips, and holidays in Europe, North America, Central America, South America, Africa, India and South East Asia. They stayed at top hotels and enjoyed privileges on flights. Money was not a concern and no budget was set for monthly expenses. The Wife enjoyed the use of credit cards with no spending limit. In addition to settling the card expenses, the Husband also replenished the funds in the joint account as and when needed.

11. In December 2012, the assets of ABC and 5 of its affiliates (I shall refer to them as ABC and Company 2 to Company 6) were sold to a subsidiary, NN, of a listed conglomerate of Hong Kong at, according to the Husband, the total consideration of US$70,067,872 (“Proceeds”). The amount of Proceeds received from the sale of the family business (“Sale”) is in dispute. The Husband said that his shareholding in the family business was increased to 30% shortly before the completion of the Sale by way of gifts from his parents. The amount of shares owned by the Husband, and consequently his share of the Proceeds are also in dispute.

12. Shortly before the completion of the Sale, the Husband set up Trust II, and in which he later injected much of his share of the Proceeds. These injections are the subject matters of the s.17 Application.

13. In June 2013, the House was transferred into a company. Later, 99% of the shares in that company were also injected into Trust II. The remainder 1% share was (and is) held by the Husband.

14. In mid-2013, the Wife and the children moved to Hong Kong. It is disputed whether such move was intended to be temporary or permanent. However, it was a time when the marriage was at a low point. According to the Wife, her husband had to spend a substantial amount of time away from the family due to business commitments[2]. It is uncontroversial that the Husband started an extra-marital relationship not later than April 2012. In any event, the Wife’s case is that although the move to Hong Kong was initially intended to last 1 to 2 years, she was determined to stay in Hong Kong permanently after the breakdown of her marriage. She petitioned for divorce on 17 April 2014.

15. The Husband was shocked by the Petition. Jurisdictional challenge was made by him against the Petition on the basis that the appropriate forum was New Jersey court. The Husband also made an application to have the children returned to the US under the Hague Convention. These applications were decided against the Husband after 2 years’ of litigation, which resulted in delay in these proceedings, eg, the parties only exchanged their Forms E in August 2016. The decree nisi was pronounced on 1 February 2018.

16. Care and control of the children with the Wife was not disputed. The children have been attending school in Hong Kong since the end of 2013. X will commence his graduate study in the US this September. Y is in grade 8 at an international school.

17. After the move to Hong Kong, the Wife and the children stayed at a development in Tai Kok Tsui for about 1 year. They then moved to another place in Tai Tam (“OO”), which was very close to the school, to avoid the long travelling time. They have been staying in OO ever since.

Issues

18. It is uncontroversial that having been entirely dependent on the Husband since 1999, at the end of a marriage lasting over 16 years the Wife’s financial needs have to be provided by the Husband. The controversy concerns the amount of funds sufficient to meet the Wife’s needs. There is no dispute that the Husband will have to continue to provide for the children, but there is also arguments over the quantum.

19. The appropriate financial provision for the children is fairly straightforward. That cannot be said in the case of the Wife. In fairness, although there is a significant gap between the Open Proposals of the Wife and the Husband, one cannot say that either one is entirely unreasonable. However, to determine the appropriate financial provision for the Wife, there are a number of issues to be decided.

20. Firstly, the assets of the Husband, under that heading there are a number of sub-issues, namely, his non-disclosure, his share of the Proceeds, whether the assets in a number of Trusts should be regarded as his financial resources, the s.17 Application and whether certain sums should be added-back as part of the assets of the Husband. It will be seen below that it is unnecessary to determine each of the disputes because the Husband clearly has sufficient assets to meet the appropriate award for the Wife.

21. Secondly, the financial needs of the Wife, bearing in mind the existence of the PNA the validity of which is not in dispute. In particular, the Husband takes issue with the Wife’s earning capacity and whether he should be funding a whole life order.

General legal principles

22. The general principles applied for ancillary relief are not in dispute: see WYSL v FHCBA [2018] HKCFI 1543, [34] to [39] and [42] to [45]. In trying to reach a fair result, the court will have to bear in mind the provisions of s.7 of the Ordinance and the guidance in the authorities.

23. Of the 5 steps exercise (WYSL, [37]): identification of assets, assessing financial needs, deciding to apply the sharing principle, consider whether there are good reasons for departing from equal division and deciding the outcome, steps 3 and 4 must be considered in light of an unvitiated nuptial agreement. It may be said that such an agreement may justify the departure...

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