IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 7746 OF 2004

_________________
BETWEEN
F Pe titioner

and

F Respondent

_________________

Coram : H.H. Judge Bruno Chan in Chambers

Date of Hearing : 25 October, 3 November & 23 November 2005
Date of Judgment : 14 December 2005

_____________________

JUDGMENT
_____________________

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
 - 2 -

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.

Background
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
 - 3 -

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
 - 4 -

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 HK$5,500,000
 - 5 -

Less :
ANZ mortgage HK$1,497,925
Second Charge HK$450,000
Loan from the HK$300,000 (£20,000)
Husband’s mother
_____________________
net : HK$3,252,075
===================

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.
 - 6 -

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
 - 7 -

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.

The Issues
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.

The Valuation
16. There is no dispute that the 1 st 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 more up-to-date. It is lower by NZ$40,000
at NZ$960,000. The Husband’s 2nd valuation (CB : 74) was also
obtained at about the same time but puts the Property at only
NZ$800,000, some 16% less than the Wife’s valuation which is quite
significant. The Husband puts the GST sales tax as the reason for the
difference as it was included in his 2 nd valuation but not in the Wife’s.
 - 8 -

According to his evidence, GST is charged at the rate of 12.5% and is

paid by the seller of the Property. If it is to be applied to the Wife’s
valuation, he says it would bring the value down to NZ$840,000, much
closer to his at NZ$800,000. He therefore proposes to take the mid-point
between the 2 valuations inclusive of GST at NZ$820,000 or the
equivalence of HK$4,428,000 at the then exchange rate of $5.4, as the
correct valuation of the Property for the purpose of these proceedings, as
it is necessary to take into account the GST since if he cannot afford to
keep the Property and has to sell it now, he will incur this tax, and that as
GST reduces the available equity in the Property, and therefore whenever
it is sold, it must be taken into consideration when determining the actual
value of the Property now.

18. While the Wife does not appear to dispute that GST is the
essential difference between the 2 valuations, she argues that it does not
need to be a factor to be taken into account as there is no intention on the
part of the Husband to sell the Property.

19. She also submits that her report is a more accurate reflection
of the market value as the comparables used are of a more similar nature
to the subject Property than those used in the Husband’s valuation report
which all relate to much smaller properties of considerably lower value.

20. All 3 reports clearly indicate that values of properties within

the city of Christchurch, including the subject Property, have increased
significantly in the last 2 to 3 years. The Wife’s valuation was prepared
for matrimonial settlement purpose (CB : 46), whereas the Husband’s 2nd
valuation was for mortgage purposes (CB : 76), which may tend to be
 - 9 -

more conservative and may account for the difference between them.
Although the difference is not significant, I am inclined to accept the
Wife’s valuation on the Property at NZ$960,000. The next issue is
whether I should take into account of GST and accordingly reduce the net
equity by 12.5% as proposed by the Husband.

21. GST, or Goods and Services Tax, is a tax on the supply of

most goods and services in New Zealand, which includes the sale of real
properties, and is generally charged at a rate of 12.5% on the seller. It is
not clear, nor is it argued between the parties, whether GST is chargeable
in the event of the Wife transferring her interest in the property to the
Husband as proposed by him. The issue before them is whether GST,
which is chargeable to the Husband in the event of the sale of the
Property, should be taken into account in determining the value of the
Property for the purpose of these proceedings.

22. The 3 reports made their valuation based on the market or

sale value of the property, and according to the Wife’s report, market
value is defined as “the estimated amount for which the property
should exchange on the date of valuation between a willing buyer and
a willing seller in an arm’s length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently and
without compulsion”. In other words, if the property is put in the open
market for sale, the estimated amount that it would normally and fairly
get, in which case the GST would be chargeable to the seller. The Wife
argues that the Husband may not sell the Property in the future, and the
evidence is clearly that he likes the Property and has no intention of
selling it, but such a possibility can never be dismissed, as people do
 - 10 -

change in life, and as pointed out by the Husband, he may have no choice
but to sell the property after all if he cannot afford the kind of lump sum
which the Court may order him to pay to the Wife. It is unfortunate that
it is not clear in similar situation in New Zealand whether GST would
normally be included in the valuation of properties to be divided between
divorcing couples in their divorce proceedings, but I am inclined to agree
with the Husband that GST should be included in the valuation of the
Property, and by adopting the Wife’s valuation, it would be NZ$840,000
inclusive of GST, or the equivalence of HK$4,620,000 at the current
exchange rate of $5.5.

23. The next issue is what deductions, if any, that the Husband
should be allowed to make before arriving at the net equity of the
property, and there are quite a few according to the Husband.

The Outstanding Mortgage

24. The outstanding mortgage due to ANZ Bank stood at
HK$1,479,925 at the time of the Husband’s Financial Statement. This is
agreeable to the Wife to be deducted from the value of the Property, and
is the only one that she is prepared to agree.

The Second Charge

25. This is for HK$450,000 borrowed for the construction of a
fairly big barn of about 420 square metres on the Property. The
Husband’s evidence is that as the Property is planted with walnut trees
which in a few years will start to produce a large crop, hence the barn is
required for processing the nuts including harvesting, washing and
storing them before they can be sold.
 - 11 -

26. The Wife argues that the barn is in fact intended entirely for
the Husband’s garage business for which she will receive no benefit and
hence it would be wrong and unjust to have her equity in the Property
reduced accordingly. In any event, she argues, that there is no evidence
that the barn adds any value to the Property and as such should not be
deducted from the overall equity. She in fact commented that the barn
would be “a bit of an eyesore” for someone looking for a nice property in
the area.

27. The Husband denies that the barn is intended for his garage
business, and argues that in fact in order to build this barn he required an
Agricultural Resource Consent and hence it would be illegal for him to
operate a garage business on the farm. In his evidence he said he had
been investigating working from a nearby garage as it is quite clear that
an agricultural building may not be used for a garage business.

28. Whatever purpose the barn was built for, it is not in dispute
that the Wife did agree to it bring built, or at least to the Husband
obtaining the second charge for it, as she had signed on the relevant
documents for the charge. The question therefore is whether the barn
adds value to the Property.

29. The Husband’s 1st valuation report clearly stated that the
barn did add value to the Property as follows : -
“The improved block is that of a very well developed block
by way of the superior nature of the dwelling, good
landscaping together with outbuildings there has been
developed on this block the large building containing a
total floor area of award 420 m2.
 - 12 -

While this could be considered a relatively specialist

building for such a smaller rural block, we believe that it
certainly does add significant value”. (B1 : 64 – 65).

30. While the Wife’s report does not specifically say so, it did
include the barn in its valuation, whereas the Husband’s 2nd report called
the barn as part of the improvements made to the Property upon which it
arrived at its apportionment of the valuation. The evidence is that the
barn does add value to the Property, the 2 nd charge required for the
building of the barn, in the same sense of the original mortgage for the
Property which is not opposed by the Wife, should therefore also be
allowed as part of the deductions.

The £20,000 from the Husband’s Mother

31. It is not in dispute that the parties needed the money from
the Husband’s mother to meet the deposit payment in June 2002. The
Husband’s evidence is that it was a loan from his widowed mother and
that he has been repaying her interest at 4% per annum which she would
have earned if the money had remained in her bank account.

32. The Wife argues that it was a gift from a mother to her only
son, as there is no loan documentation or timeframe for repayment, and
that even if it was a loan, the mother has left it up to the Husband to
decide whether or not to pay her back.

33. The mother, who lives in UK, has filed an affidavit alleging
that she lent the money on the understanding that she would be repaid if
and when her son felt able to do so or if the Property was sold. She has
also acknowledged that interest at 4% has been paid to her. She was not
 - 13 -

called by the Wife for cross-examination, probably because of where she

lives and also because of her age, but in any event there was no evidence
to the contrary from the Wife who has acknowledged that interests were
being paid to the Husband’s mother which goes to support his case that it
was not a gift from her. It is also his evidence that if his mother dies
before he could afford to repay her or to sell the Property, he would then
pay the interest and eventually a share of the capital to his sister, his only
other sibling who would be entitled to share in the mother’s estate.

34. I agree with the Wife that given the good relationship
between the Husband and his mother, barring the happening of either of
the 2 conditions mentioned in her affidavit that would require repayment
to her, the mother probably would have left it up to the Husband when to
repay her, but it is also entirely possible that during her lifetime, one of
the 2 conditions may actually occur that would trigger the repayment, it is
also worth stating another fact of life which is this : in the absence of
evidence to the contrary it is natural to assume, now that the Husband’s
mother knows about his son’s divorce and that her loan would have an
impact, albeit not significant, on the amount of lump sum to be paid by
him to his divorced wife, it would be a simple matter for her to insist on
repayment of the loan before the division of the parties’ interest in the
Property. For the reasons aforesaid, I agree with the Husband that his
mother’s loan of £20,000, or HK$270,000 at the exchange rate of $13.50
should be allowed in the deductions.

Maintenance and Upkeep Expenses

35. In his offer letter of 13th January 2005, the Husband put the
total maintenance and upkeeping costs that he had then incurred at HK$1
 - 14 -

million. Since then he claims to have incurred further maintenance costs

of about HK$260,000 in mortgage and insurance payments, plus further
running costs. The Wife disputes all these expenses either as double
accounting, unnecessary or unsubstantiated by evidence, and that it is
wrong and unfair to allow her equity in the Property to be reduced by
them accordingly.

36. The Husband submits that it is unrealistic to imagine that

such costs would not be incurred on a property of this size, and given that
he is obliged to be away from New Zealand when he is working, it is
inevitable that costs are going to be incurred in doing work on the
Property, such as regularly cutting down grass and weeds, irrigation and
planting, which previous owners might have done themselves.

37. The simple fact is, the Husband argues, that the Wife has no
idea at all of what is required on this Property as she has spent less than 2
weeks there and has played no part in the day-to-day running of it. What
is clear, he says, is that not only has he paid for this maintenance over the
years, he has also done a lot of work on the Property himself, the
particulars of which he says have all been already set out in his Answer
to the Request for Further and Better Particulars.

38. In his Answer (B2 : 438) given on 12th April 2005, the
Husband gave a breakdown of these expenses as follows : -
HK$
(a) ANZ loan interest payments 81,697.62
(b) Quantum Policy HQU5000035 324,497.38
payments
 - 15 -

(c) Friends Provident policy 24,778.31

12579430 payments

(d) Out Building balance of 117,380.92

payments (over and above loan)

(e) Toyota Hilux Deposit 100,299.17

(f) Mortgage set up costs 10,457.87
(g) Farm Operating expenses 57,106.50
Year end March 2003
________________

Total HK$716,217.44
==============

39. This total has fallen short of the HK$1 million claimed by
the Husband, but he explained in the Answer that he had not included
other expenses such as the costs of shipping household goods to New
Zealand, or the costs of maintaining the migration requirement or the
farm operating expenses for 2004.

40. For the alleged expenses under items (a) to (d), the Wife
argues that during the period up to August 2004 when they were incurred,
she did regularly pay her monthly contribution of HK$10,000 into the
joint account for the Property as well as half of the living expenses on the
matrimonial home in Sai Kung, as was the parties’ agreement, it is
therefore incorrect for the Husband to claim such as the expenses
incurred by him and that it is wrong to reduce her equity in the property
by these amounts.

41. Furthermore, she argues, to have such payments of the

insurance policy listed as a deduction from the overall equity is
 - 16 -

fundamentally wrong as it amounts to double accounting as the policy

secures the mortgage and that the Husband will ultimately get the benefit
of this policy when the property is paid for.

42. She does accept that US$640 has been paid by the Husband
per term towards the Scottish Provident Policy since September 2004
when she stopped her payments, but they amount only to HK$68,992
which is considerably less than HK$324,497.38 as claimed by the
Husband, and that in any event, she argues, that they were not paid by
him but rather by his company and that he will retain the benefit of this
policy alone.

43. It is not in dispute that throughout the marriage the parties

would contribute towards their family expenses about equally, including
the rental and household expenses of the matrimonial home in Hong
Kong, as well as the costs and expenses of the purchase of the Property in
New Zealand, and the mortgage payments thereafter until August 2004
when the Wife stopped her payment of HK$10,000 into their joint
mortgage account. It is her evidence, and as there is no evidence to the
contrary from the Husband, I agree with her that these expenses under
items (a), (c), (d) and (f) were of and incidental to the Property in New
Zealand and would have already been covered by the parties’ equal
monthly contribution of HK$10,000 up to at least August 2004, while
item (b) would also have been paid for jointly by the parties throughout
the marriage, it would therefore not be right or proper for the Husband to
deduct them from the value of the Property, at least not for the period up
to August 2004. I agree only those payments made by the Husband after
August 2004 should be taken into account, including HK$58,000 for
 - 17 -

further mortgage payments, HK$69,888 for the Quantum Policy,

HK$15,000 for Friends Provident Policy, and HK$117,936 for the
Second Charge Instalments, totalling HK$260,824. However he would
have paid his own half share of these expenses anyway, hence it is only
for the other half share which he has paid on behalf of the Wife since
August 2004 that should be allowed for the deduction i.e. HK$130,412.

44. As for item (e), the Toyota Hilux Deposit, the Wife says it is
outrageous to suggest that this should be taken from her equity in the
property as it is a large sum of money for a luxury vehicle that is totally
for the Husband’s benefit and is not necessary for the Property since the
parties had already purchased a tractor specifically for the purpose of
maintaining the Property, and that it was the Husband’s evidence that a
retired farmer runs the tractor and does the mowing. Hence she says this
expenses is totally not justified as necessary or as adding any benefit to
the Property.

45. While the evidence is not clear whether the purchase of the
Toyota was necessary for the running of the Property, I agree with the
Wife that unlike the other items of expenses, the vehicle does not add any
value to the Property and hence it would not be proper to allow its
purchase to be deducted from the equity of the Property.

46. As for the Farm Operating expenses of HK$57,106.50, plus

additional updated expenses of NZ$47,730 claimed by the Husband
which is supposed to take the total expenditure to HK$1 million, the Wife
argues that before the Court can begin to consider adjusting the equity in
the Property to take into account this expenditure, the Husband must
 - 18 -

show and the onus is on him to do so (i) that he actually spent the money
as alleged, (ii) that the money went toward improving the overall value of
the Property to her benefit and (iii) that there was an agreement between
the parties that this would be done.

47. It is submitted for the Wife that the Husband has failed to do
so on all 3 accounts. Firstly, she argues that he has failed to produce any
receipts to substantiate such expenditure and the accounts which he has
produced are heavily qualified and accordingly unsafe for the Court to
rely on, as it was stated in the report that it was a special purpose report
prepared for taxation purposes only and not in conformity with
acceptable accounting principles.

48. Furthermore, she argues, that the Husband has

acknowledged in his evidence-in-chief that the expenditure he is claiming
as shown in the accounts to March 2004 for NZ$47,730 should not be
counted entirely as related to the Property as some of them may be
related to his business or his personal expenses and hence should not all
be counted as expenditure on the Property for the purpose of these
proceedings.

49. There is no evidence, suggested by the Wife, that any of the

alleged expenditure actually adds any value to the Property or what value
it would add, she therefore does not accept that it has been necessary for
the Husband to expend large amounts of money on maintenance and
upkeep in order to maintain the value of the Property, as there was no
agreement between the parties to do anything that go above and beyond
simple maintenance and that it is the Husband who derives the entire
 - 19 -

benefit of such as he is living in the Property and will continue to do so.

It is therefore wrong to suggest that her equity should be reduced in order
to pay for his household utilities, his motor vehicle expenses and tolls, his
accountancy and legal expenses, interest paid on hire-purchase
agreement, unspecified insurance, his stationary and printing costs or for
his protective clothing which made up the bulk of his claimed expenses.

50. The alleged farm operating expenses for 2003 and 2004 are
set out in the financial statements on B2 : 479 and B2 : 687 respectively
prepared by a chartered accountant for taxation purpose for the parties as
partners in equal share. While some of the expenses listed in the
accounts such as mowing walnuts, plant hire, repair and maintenance are
clearly related to or of and incidental to the running and maintaining the
Property, others such as motor vehicle expenses, accountancy and legal
expenses, electricity, light and heat do appear, as pointed out by the
Wife, unrelated to the Property, while the figures attributed to the
depreciation of the building and plant and equipment are merely for
accounting purpose and are not real expenses.

51. I accept the Husband’s evidence that these accounts were

necessary for taxation purpose in relation to the Property and I have no
reason to doubt the accuracy of the figures therein. I also agree that had
the parties gone on to live in this Property as husband and wife, they
would still have prepared these accounts with all these expenses
included. However, for the purpose of ascertaining the net equity of the
Property in these proceedings, the Wife is correct to say that it is not fair
to include some of the expenses which appear to be totally unrelated.
Unfortunately, in the absence of any further details in the evidence before
 - 20 -

me, I can only take a broad brush approach in allowing a sum of

NZ$10,000 for 2003 and NZ$20,000 for 2004, and adopting a similar
figure for 2005, the total amount for the Farm Operating Expenses up to
date should be NZ$50,000 which, at an average sum of NZ$20,000 per
year for the past 2 years for a property of this size, cannot be said to be
unreasonable or excessive, in particularly in view of the fact that the
Husband does have to travel quite a lot over his business and therefore
has to hire others to do the maintenance while he is away.

52. The total maintenance and upkeep expenses that I would

allow are therefore as follows : -
(i) Further mortgage and HK$130,412
insurance payments since
August 2004 paid by
the Husband on behalf of
the Wife

(ii) Farm Operating Expenses HK$275,000

(NZ$50,000) ________________
Total : HK$405,412
==============

53. In conclusion, a summary of the deductions that I would

allow to be made from the value of the Property is as follows : -
Value of Property HK$4,620,000
(NZ$840,000 inclusive of GST)

Less :
ANZ Mortgage HK$1,497,925
Second Charge HK$450,000
Loan from the Husband’s mother HK$270,000
(£20,000 at $13.5)
 - 21 -

Maintenance and Upkeep Expenses HK$405,412

_______________
Net Equity : HK$1,996,663
==============

54. I shall next deal with the other less contentious matters
under section 7 and I shall start with the parties’ financial position.

55. The Husband puts his average total income at about

HK$35,000, including basic salary of HK$9,000 plus housing and
entertainment allowances from his R Ltd as well as income from
servicing about 8 race meetings per year. The Wife however believes
that he has in fact earned a great deal more than the average sum of
HK$5,000 per month that he has declared from race meetings, as his
bank statements show that he has received the equivalent of over HK$1.5
million as payments for race meetings, and that although some of these
payments were used to cover expenses related to his work including
purchasing spare parts for his customers, she believes that a substantial
part of these payments should be treated as his income, as many of them
ended up being transferred into his personal bank accounts.

56. In addition, the Wife argues that as much as HK$607,000 of

the Husband’s credit card payments over the same period were paid with
these payments through “personal transfer”, while many of his personal
expenses are also paid for by his company including his medical and
dental expenses, meals out of home, clothing and shoes as well
entertainments expenses, all of which show, the Wife says, that the
Husband has received a lot more income and benefits then he has
declared.
 - 22 -

57. Ms Irving for the Husband however argues that while the
section 7 criteria need to be borne in mind, in this case, because the
matter in hand is simply how to deal with the New Zealand Property, and
not periodical payments, the criteria do not, by and large, require minute
examination, therefore although it was suggested to the Husband in cross-
examination that he is in fact earning much more than he has stated, he
explained in his oral evidence how finances work in his car business, that
sums of money are transferred to him and used by him for purchasing of
parts needed, based on trust. Counsel argues that he was never asked to
clarify or explain the movement of funds in and out of his accounts
associated with the motor racing business following the comprehensive
disclosure in his Reply to the Wife’s Questionnaire, nor was he asked to
produce any evidence from any of the car owners as to their financial
arrangements, which he would have done if she was to require proof but
which she had not prior to the trial.

58. While it is true that there were substantial transactions and

activities in the Husband’s bank accounts that appear to support the
Wife’s allegation that his income from race meetings appear to be more
complicated and substantial than a mere average of only HK$5,000 per
month as alleged by the Husband, I do agree with his Counsel that as
periodical payment was never an issue between the parties, it would not
be fair for the Wife to now argue that as the picture about his dealings
from race meetings is not clear, which she could have sought for
clarification at the discovery stage, therefore the Court should draw
inferences that he has failed to properly disclose all his income.
 - 23 -

59. I have heard the Husband’s evidence under cross-

examination as to the income he has received from these race meetings,
and although he has not produced any documentary evidence in support,
given the circumstances mentioned, I find no valid reason to doubt his
explanation. After all, the Wife has accepted that throughout the
marriage the parties would share all family expenses equally including
the purchase of the Property, and if the Husband was in fact earning a lot
more than he has declared, I doubt that she would have agreed to such an
arrangement.

60. In his Form E the Husband also put his savings at more than
HK$330,000 which has since been reduced substantially due mainly to
payment for legal costs, and other personal assets worth slightly over
HK$400,000 including 2 Porche 911 vintage sport cars which the Wife
suspects may now be worth a lot more than the NZ$17,000 – NZ$18,000
each as estimated by the Husband, but has not produced any evidence in
support.

61. There are also the 2 insurance policies referred to above in

relation to the Property in New Zealand which the Wife has agreed to
transfer to the Husband upon the divorce. The only remaining
meaningful asset of the Husband are his shareholdings in R Ltd and
another company known as E Promotions Ltd, neither of which the Wife
takes any issue and that it is not necessary to deal with their value here
other than the fact that they, or at least R Ltd is the main income source
of the Husband and hence its disposition is not part of the consideration.
 - 24 -

62. The Wife admits that she has a maximum income of

HK$39,000 per month although she does not always earn this much as all
of her work is on a part-time basis, nor does she agree that she has any
greater earning potential and has explained in her evidence why it is
unlikely that she will be able to go beyond being a paralegal to become a
qualified lawyer. There is no dispute that she receives no pension
provision apart from her MPF and has no medical or dental benefits or
insurance. It is however noted that she has been taking yoga teacher
training courses and has spent HK$50,000 for such courses which may
enhance her future earning capacity. There is no evidence to suggest that
she has any other assets with virtually no savings but more than
HK$100,000 in credit card debts and tax liabilities. I agree that her
assets situation appears much less favourable than the Husband’s and that
she is totally dependent upon the settlement that she will receive from
these proceedings.

63. It is further submitted by Ms Rattigan for the Wife that her

position is markedly different to that of the Husband that there is a great
disparity in their living standards which must be taken into account, of
which she refers to his evidence when asked why he was so keen to keep
the Property and when he replied that it was “a dream come true, a
great property, a great country. I intend to spend the rest of my days
there”.

64. Ms Rattigan argues that it was also the Wife’s dream

property and the Court should take into account that she has lost the
opportunity to live there, nor will she be able to purchase a home like this
for herself, and further that she has also lost the opportunity to live in
 - 25 -

New Zealand as her right to do so has now lapsed as a result of the

divorce, and that the Court should take into account the fact that she
stayed behind in Hong Kong to work to continue paying for the Property
and as a result, when the marriage broke down and the parties divorced,
she lost out in terms of living in the Property as well as living in New
Zealand, as she was always keen to move there, but was prevented from
doing so by the Husband’s injunction proceedings in New Zealand which
was wrongly initiated as the matter was already dealt with in this
jurisdiction.

65. In all the circumstances, it is submitted for the Wife, that the
Husband’s earning capacity is far greater then that of the Wife as is his
entire standard of living. These are both factors that the Court should
take into account and balance in the equity to be awarded to the Wife
who is therefore not being unreasonable in asking for a 50% share of the
Property.

66. While it is also agreed by the Husband that during the

marriage the parties shared common expenses equally but otherwise had
separate finances, it is submitted on his behalf that had they separated
before the purchase of the Property, they would have had nothing to
discuss, as there were no joint investments, the finances had been kept
separate and there was no other investments, as it was on purpose that
they managed their finances in this way, there being no intention to prove
income and resources in the way that may be common in many
marriages. That being so, he says it is appropriate that this Property is
viewed not as the family home where both resided and which was a home
to them both, since that was not what happened, but as an investment, the
 - 26 -

parties’ respective beneficial interests in which should be assessed by

reference to their respective contributions, more by way of partnership,
not on the basis of 50 : 50 interest, as he says this was how finances were
dealt with during the marriage, by the evidence of the both, and this is
how finances now ought to be dealt with also, as in effect they operated
as simple people, not as married couple, and it is submitted that the Court
should treat the division of the equity of the Property in this way. He
relies on the case of Springette v DeFoe [1992] 2 FLR 388.

67. In that case where the parties lived together as man and wife
and bought a house jointly with the aid of a mortgage for which by
agreement they each contributed half of the mortgage instalments, with
the balance of the purchase price provided mainly by the plaintiff. Later
the relationship broke down and the defendant left. The plaintiff then
issued an originating summons claiming that she was entitled to a 75%
share of the proceeds of sale of the house as representing nor contribution
to its purchase. The Court decided that the beneficial interest in the
Property was held by the parties in equal shares, on the basis that
although neither of them had ever said anything to the other as to the
proportion of their beneficial interests, there was evidence from both
parties that each of them had in his or her own mind an uncommunicated
belief or intentions that they were to share the property equally. The
plaintiff appealed.

68. In allowing the appeal and awarding the plaintiff 75% of the
sale proceeds, Dillon LJ said this :
“ …… the fact that after the purchase the mortgage was
paid in equal shares is not evidence that they had a
common intention that the property itself should belong to
 - 27 -

them in equal shares beneficially. It is merely evidence

that, as the recorder found, they had agreed that they
would each pay half of the mortgage payments; it goes no
further than that.
Accordingly, the case for equal beneficial shares must rest
on the uncommunicated belief / intention of each that they
would he sharing benefit as well as burden equally.
.
.
.
The common intention must be founded on evidence such
as would support a finding that there is an implied or
constructive trust for the parties in proportions to the
purchase price. The Court does not as yet sit, as under a
palm tree, to exercise a general discretion to do what the
main the street, on a general overview of the case, might
regard as fair. But the common intention of the parties
must, in any judgment, mean a should intention
communicated between them. It cannot mean an intention
which each happened to have in his or her own mind but
had never communicated to the other”.

69. I have no difficulty in finding such common intention

between the parties in this case. It is the Husband’s own submission that
during the marriage they shared common expenses equally. They then
jointly purchased the Property with about equal contribution towards its
initial deposits and expenses, and then opened a joint account into which
they were to contribute equally towards the mortgage payments and other
relevant expenses, with the joint intention to settle in New Zealand and to
live in the Property. I cannot imagine that such common intention would
not have been discussed between the parties and communicated to each
other.

70. This does not, of course, necessarily follow that the parties,
now that they are divorced, should automatically be given their beneficial
half interest in the Property, at least not according to the Husband, hence
this exercise of my consideration of the relevant section 7 matters.
 - 28 -

71. One of the matters relied on by the Husband against the

Wife is over her contribution financially and otherwise, made to the
Property to justify her claim for half of its equity. According to the
Husband, the Wife’s total contribution in cash terms was HK$116,615 to
the deposit, then from August 2002 to July 2004, a period of 24 months,
she deposited sums of money into the joint account which he believes to
be an average of only HK$7,500 per month and comes to a total of
HK$180,000 over a period of 24 months. On the other hand, the
Husband says, as he had paid the Wife’s rent of HK$5,000 per month
until January 2004, which comes to HK$90,000, and deducting this from
the sums paid by her, the balance is therefore HK$90,000. Adding this to
the payment made to the deposit, the Husband argues that the Wife’s
financial contribution was only HK$206,615, much less than what he had
paid including all other outgoings on the Property, plus all the expenses
including mortgage, insurance, maintenance, etc since August 2004 when
the Wife withdrew any sort of financial contribution. This the Husband
submits, plus the fact that the Wife did not make other contribution to the
Property by being there, doing work on the Property, care for the house
or the garden, doing all of the tasks that a property of this sort requires,
after she left New Zealand in January 2003 and never went back to the
Property again and decided not to fulfil the original plan of jointly
migrating to New Zealand, leaving him to do everything in regard to the
Property on his own, clearly do not justify the Wife’s claim.

72. Whilst it is true that the Wife stopped her financial

contribution to the Property since August 2004, I agree with her that it is
not fair for the Husband to simply rely on incomplete bank statements to
 - 29 -

allege that she paid only HK$7,500 per month when her evidence at the
trial was that sometimes she would pay more, sometimes less, but it
would always amount to an average of HK$10,000 per month, and as the
Husband had never raised this issue until during cross-examination of
her, it was then not possible for her to produce all her bank statements in
rebut.

73. Furthermore, the facts that the Husband had also stopped his
contribution towards the Wife’s rent much earlier in January 2004, and
that his financial contribution to the Property since August 2004 have
already been allowed in the various deductions to be made from the
valuation of the Property, I do not think it is fair that he be entitled to rely
on this matter again to argue against the Wife’s entitlement.

74. On the other hand, I believe it is equally unfair for the Wife
to blame the Husband for her lost opportunity to emigrate to New
Zealand as it was she who changed her mind about joining him in New
Zealand in 2003 or thereafter, and failed to inform him properly of her
future plan including about her emigration to New Zealand, and that
although the Husband’s subsequent injunction application in New
Zealand could be said to be an overblown reaction on his part, I do not
think it was the main reason that caused her to lose her emigration. Had
she really wanted to do so, she should have properly informed the
Husband so that some arrangement may possibly be made for her, but
there is simply no evidence to suggest that it was the case.

75. What remains of the relevant issue between the parties is the
Husband’s criticism of the Wife’s conduct of the litigation as he argues
 - 30 -

that she refused to participate in these proceedings until such time as she
was ordered by the Court to do so which, he says, was clearly nothing to
do with any belief that the marriage could be saved, as she had not even
wished to see him when he was in Hong Kong as evidenced in Exhibit P
– 2, and when he tried to raised the matter of settlement with her, she
again refused to do so thereby caused escalation of legal costs, as
evidenced by the fact that his offer of 13th January 2005 was not
responded to until 18th October 2005, shortly before trial.

76. If the Wife had wished to obtain her own evaluation of the
Property, it is submitted for the Husband, there is no reason why that
should have taken so long. To say, as she did, that she did not realise she
was being slow as she has never done it before, is simply not credible,
especially since she was legally represented. The Wife by her conduct of
the proceedings has escalated costs, and that she failed to negotiate as she
was obliged to do, are matters, according to the Husband, which must be
taken into account by the Court.

77. Whilst I agree that the Wife could have done better and
sooner in responding to the proceedings or the Husband’s offer, I also
accept that she was entitled to seek and obtain her own valuation of the
Property, and to challenge or at least to seek further clarification by way
of cross-examination of the Husband’s assessment of the net equity of the
Property in particularly his calculation of the various deductions at the
trial, the result of which cannot be said to be wholly without merits or
unsuccessful. It is unfortunate, as pointed out by the Husband, that a
case like this with straightforward issues over mainly one property, that
costs and time appear to have escalated, but even though the Wife’s
 - 31 -

conduct may deserve some criticism, it is in my view not severe enough

to justify being taken into account against her claim.
Conclusion
78. This has been a 7 years marriage with no children where the
parties have many things in common in terms of age, earning capacity
and financial situation, and that, as submitted by Ms Irving for the
Husband, had they not jointly purchased a property, they would have
gone their separate way after the breakdown of the marriage without any
financial claims against each other.

79. The facts that they used to share their common family
expenses equally and had about equally contributed towards the purchase
and the maintenance of this property until about April 2004 when for all
intents and purposes their marriage was near the end, in my view, goes to
support the argument that it would be natural and appropriate for the net
equity of the property be divided equally between the parties. I have
already found that the net equity of the property at HK$1,996,663. The
Husband has offered to pay the Wife HK$1 million, just slightly over
50% of the net equity, for her share in the Property as he wishes to be
able to continue to live in it. This offer is in my view fair and reasonable
in the circumstances and given my findings that his assets situation is
slightly better than hers but has continue liabilities and outgoings to meet
in future in respect of the Property. For the reasons aforesaid my order is
therefore the Husband shall pay the Wife a lump sum of HK$1 million
within 28 days of this judgment whereupon the Wife shall transfer all her
share and interest in the New Zealand Property to the Husband absolutely
but subject to the existing mortgage and charge. There may be some
joint bank accounts and insurance policies which I understand are of no
 - 32 -

issue between the parties and can be dealt with by themselves. The
above arrangements shall be in full and final settlement of the parties’
claims against each other which claims shall stand dismissed.

80. Lastly, on the question of costs, notwithstanding the offer of

the Husband made before the trial, for the reasons given above, I believe
it would be appropriate in this case to make no order as to costs which is
an order nisi to be made absolute at the expiration of 21 days.

81. I must not end without expressing my gratitude to Counsel

for both parties for their valuable assistance without which my exercise in
dealing with so many figures involved in this case would have been
insurmountable.

( Bruno Chan )
District Judge

Ms Frances Irving instructed by Messrs. Hampton, Winter & Glynn for

the Petitioner.
Ms Mairead Rattigan instructed by Messrs. Haldanes for the Respondent.