[2017] 1 HKLRD 187

A
and
B (Ancillary Relief)
————
(District Court)
(Matrimonial Causes No 10937 of 2013)
————

Judge Bruno Chan in Chambers

1, 5 April, 27 May, 5 August 2016

Family law — divorce — ancillary relief — identification and division of

matrimonial assets — whether lump sum and monthly payments by husband
to girlfriend to be taken into account, and if so how — whether husband’s
enhanced future earnings and earning capacity to be taken into account, and
if so how — whether such financial disparity good reason to depart from
equal division — whether entire former matrimonial home, which represented
bulk of matrimonial assets, should be transferred to wife to achieve clean
break
Family law — divorce — ancillary relief — post-marriage career-enhanced
earnings — whether part of matrimonial assets — wife’s fair share in
husband’s enhanced earning capacity — clean break capital award
家庭法 — 離婚 — 附屬濟助 — 婚姻資產的確定和分配 — 是否考慮丈夫
對女朋友的一次性支付和每月支付，及如何考慮 — 是否考慮丈夫未來
增加的收入及賺取收入的能力，及如何考慮 — 這樣的財政差異是否構
成偏離平等分配的理由 — 代表大部分婚姻資產的整個早前的婚姻居所
是否該轉移給妻子以達致徹底斷絕關係
家庭法 — 離婚 — 附屬濟助 — 婚後事業提升及收入增加 — 是否屬婚姻
資產 — 給予妻子公平分享丈夫的增加收入能力 — 授予資本性的配給以
達致徹底斷絕關係
H and W applied for ancillary relief following the dissolution of
their 14-year marriage. The matrimonial assets had a total net value
of not more than $15 million, comprising the former matrimonial
home consisting of two adjoining flats with one valued at $5.5
million held in H’s name (Flat D) and the other at $5.3 million held
in W’s name (Flat C), personal bank balances, insurance policies
and pensions. H practised as a senior junior barrister and his earnings
had increased quite substantially since separation. H earned much
more than W, who worked as a contract and risk manager and had
been granted custody of their two daughters aged 14 and 17. The

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family had lived a frugal lifestyle throughout the marriage. However,

since separating, H, who now lived with his girlfriend, C, had
substantially raised his own standard of living. Both parties sought
a clean break. W proposed to be given the entire former matrimonial
home. H disagreed, claiming that the net effect of this would be
that W would receive almost all of the marital assets. At issue, inter
alia, was first, whether, and if so how, to take into account the
transfers by H to C of two lump sum cash payments totalling $1.2
million made respectively the day before H and W separated in
June 2011 and several months thereafter, and monthly “pocket
money” of $20,000 to $30,000 since late 2011. Second, whether
H’s prospects of advancement in his career in the foreseeable future
should be taken into account and, if so, how this could be quantified
as part of the matrimonial assets for division.

Held, ruling that to effect a clean break, W was to receive the

entire former matrimonial home:
H’s cash gifts and monthly payments to C
(1) The first two payments H made to C totalling $1.2 million
could be characterised as “wanton”, “reckless” or
“extravagant” in amount relative to the parties’ standard of
living during the marriage and the overall size of their
matrimonial pot, or the reasonableness of their payments in
the circumstances. They should in the circumstances of the
parties be added back to the matrimonial pot or reattributed
to H’s assets (Norris v Norris [2003] 1 FLR 1142, Vaughan
v Vaughan [2008] 1 FLR 1108 applied). (See paras.58, 143.)
(2) Insofar as H’s monthly payments of $20,000 to $30,000 to C
as her pocket money were concerned, it was relevant to first
consider such spending in the context of the standard of living
and lifestyle which the parties used to enjoy as well as their
respective financial resources and expenses. Although it could
be said that such expenses were a depletion of H’s resources
and might thus reduce his ability to meet W or their daughters’
needs and that they had not benefited from such expenditure,
there was simply a lack of evidence or information to safely
conclude that these payments amounted to financial
irresponsibility and dissipation of assets that was “wanton,
reckless or extravagant”. Neither could it be said that such
conduct was so obvious and gross that it would be inequitable
to disregard to justify their being added back, but rather as
part of W’s argument for departing from equal division of the
matrimonial property to achieve a fair result (Norris v Norris
[2003] 1 FLR 1142, ARAV v VP [2011] 3 HKLRD 759
considered). (See paras.59–60, 145.)

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H’s enhanced future earnings and earning capacity

(3) Whilst there was a divergence in the judicial approach to
post-separation accruals both in the UK and Hong Kong, the
starting point for such analysis had always been the approach
in Rossi v Rossi. This broader approach was preferred to deal
with the issue of H’s enhanced future earnings and earning
capacity which could neither be quantified, and to which there
could not be attributed any direct contribution from W after
the divorce, and since W was not seeking any periodical
payments (Rossi v Rossi [2007] 1 FLR 790, Kan Lai Kwan v
Poon Lok To Otto (2014) 17 HKCFAR 414 applied). (See
paras.139–140.)
(4) Whilst there was no doubt that H’s enhanced earning capacity
was due mainly to his own talent and energy, it must also be
the product of the parties’ contribution, lifestyle and spadework
during the marital partnership, which was however denied
not only to W but also their daughters, for whom H had
admitted he had not been paying his share of their living
expenses once he left in June 2011. In applying the principles
of non-discrimination and equality in the assessment of the
fruits of the marital partnership, fairness required the Court
to address such disproportionate financial loss to W who not
only during the marriage had earned, and who would continue
to earn a much lower income than H, but who since 2011
had become their daughters’ primary carer and would continue
to make such contribution, as a good reason to depart from
equality (Miller v Miller, sub nom McFarlane v McFarlane
[2006] 2 AC 618 applied). (See paras.155–157.)
Appropriate order
(5) It was fair and necessary for W to be allowed to continue to
make her home at both Flats C and D and to enable her to
provide a home for their daughters until they became
financially independent. This was an appropriate case to depart
from equal division and a fair result in the circumstances would
be achieved by ordering H to transfer Flat D to W, subject
to the outstanding mortgage and on a clean break basis, and
on the basis that he was to be responsible only for the
maintenance and support of their daughters. (See paras.158,
163, 168–169.)

Application
This was an application for ancillary relief pursuant to divorce
proceedings by the petitioner husband and the respondent wife. The
facts are set out in the judgment.

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Mr Richard Todd QC, Mr Robert Pang SC and Mr Jeffrey Chau,

instructed by Cheung Fung & Hui, for the petitioner.
Mr Bernard Man SC and Mr Raymond Chu, instructed by Tung,
Ng, Tse & Heung, for the respondent.

Legislation mentioned in the judgment

Matrimonial Proceedings and Property Ordinance (Cap.192) s.7,
7(1)

Cases cited in the judgment

ARAV v VP [2011] 3 HKLRD 759, [2011] 4 HKC 486, [2011]
HKFLR 330
B v B [2010] EWHC 193 (Fam), [2010] 2 FLR 1214
B v S (Financial Remedy: Marital Property Regime) [2012] EWHC
265 (Fam), [2012] 2 FLR 502
CR v CR [2007] EWHC 3334 (Fam), [2008] 1 FLR 323
Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR
1246
GW v RW (Financial Provision: Departure from Equality) [2003]
EWHC 611 (Fam), [2003] 2 FLR 108
H v H [2007] EWHC 459 (Fam), [2007] 2 FLR 548, [2008] 2 FCR
714
Jones v Jones [2011] EWCA Civ 41, [2012] Fam 1, [2011] 3 WLR
582, [2011] 1 FLR 1723
Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414, [2014]
6 HKC 111, [2014] HKFLR 329
LKW v DD (2010) 13 HKCFAR 537, [2010] 6 HKC 528, [2011]
HKFLR 106
Lambert v Lambert [2002] EWCA Civ 1685, [2003] Fam 103, [2003]
2 WLR 631, [2003] 4 All ER 342, [2003] 1 FLR 139
Lawrence v Gallagher [2012] EWCA Civ 394, [2012] 2 FLR 643
MKKWH v RKSH [2013] HKFLR 540
Miller v Miller, sub nom McFarlane v McFarlane [2006] UKHL 24,
[2006] 2 AC 618, [2006] 2 WLR 1283, [2006] 3 All ER 1, [2006]
1 FLR 1186
Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung (2014) 17
HKCFAR 585
Norris v Norris [2002] EWHC 2996 (Fam), [2003] 1 FLR 1142
Pearce v Pearce [2003] EWCA Civ 1054, [2004] 1 WLR 68, [2003]
2 FLR 1144
Rossi v Rossi [2006] EWHC 1482 (Fam), [2007] 1 FLR 790
SS v NS (Spousal Maintenance) [2014] EWHC 4183 (Fam), [2015]
2 FLR 1124
Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 FLR 1108
Vaughan v Vaughan [2010] EWCA Civ 349, [2011] Fam 46, [2010]
3 WLR 1209, [2010] 2 FLR 242

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 A v B (Ancillary Relief)
[2017] 1 HKLRD 187 Judge Bruno Chan 191

Judge Bruno Chan

1. This is the parties’ ancillary relief application upon the
dissolution of their 14-odd years’ marriage, essentially over division
of their marital assets with a total net value of no more than $15
million, the bulk of which is typically represented by the former
matrimonial home consisting of 2 adjoining flats with one valued
at $5.5 million held in the petitioner Husband’s name, and the other
at $5.3 million in the respondent Wife’s, with the remaining balance
made up of personal bank balances, insurance policies and pensions.
2. There is of course also the relatively straightforward issue
over the Husband’s maintenance by way of periodical payments for
their two daughters both now in secondary school and whose
custody has been granted to the Wife, but as will be apparent from
the parties’ respective Open Proposal, at the heart of the dispute is
whether the Husband’s prospects of advancement in his professional
career as a practising barrister in the foreseeable future should be
taken into account, and if so how they can be quantified as part of
the assets for consideration as to whether the entire former
matrimonial home should be given to the Wife so as to achieve a
clean-break situation, which according to the Husband would mean
that she would exit the marriage with a net effect of almost all of
the marital assets, which has thus become the major stumbling block
to what could have been an early straightforward settlement of an
otherwise uncomplicated divorce, as pointed out in the commencing
paragraph of the Opening Submission of his counsel Mr Richard
Todd QC and Mr Robert Pang SC leading Mr Jeffrey Chau:

1. This is a case which should have been capable of early

resolution but it has become mired in the intellectually
interesting but financially disastrous (for these parties) debate
about whether a work capacity is an asset which is capable
of sharing …

3. Indeed financial disaster would appear to be the result when

that kind of seniority, calibre and expertise are involved as the Wife
is no less well represented by Mr Bernard Man SC leading Mr
Raymond Chu and with legal costs from both sides totalling more
than $3.2 million, but she insists that early resolution could have
been achieved by the Husband acknowledging and accepting her
request for his flat of approximately $5.5 million as both fair and
justified taking into account her entitlement to share in his enhanced
earning capacity and post-separation profits, his various cash gifts
to his girlfriend including a sum of $1 million made right before he
walked out on their marriage, as well as his long-term responsibility
to provide appropriate accommodation for her and their daughters
by allowing them to continue to reside in the former matrimonial

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home intact with the two adjoining units. But first some relevant
factual background of both the marriage and the proceedings should
shed some light on how the parties eventually arrived at their present
entrenched position.

Background
4. Both the Husband, now aged 4x, and the Wife, now aged
4x, grew up in Hong Kong where they met while attending xxx
University of Hong Kong (then known as xxx) in 1991 with him
for the Bachelor of Laws and her for Business Administration. Upon
graduation the Wife in 1993 started her employment with xxx XY
(Hong Kong) Ltd, a power and automation technology company
where she now holds the position of a Contract and Risk Manager,
while the Husband was called to the Hong Kong Bar in the same
year, went on to obtain his LLM from the xxx College in London
before returning to Hong Kong where he commenced his practice
in 199x.
5. On xxx 1997 the parties registered their marriage and made
their home in Tsuen Wan, and on xxx 1999 the Wife gave birth
to the elder daughter, D1 now aged 17, and 3 years later the
younger daughter D2, on xxx 2002 who is now aged 14.
6. In 2003 the parties purchased 2 adjoining flats in xxx Terrace,
Tsuen Wan for their matrimonial home with, as noted above, Flat
C registered in the Wife’s name and Flat D in the Husband’s, of
which they knocked down the adjoining walls and turned into a
single home with 3 bedrooms to accommodate their family of 4
plus a domestic helper.
7. The parties continued to work to support the family and in
2008 the Wife obtained her masters degree, but notwithstanding
their relatively good income it is common ground that they had
lived frugally during the marriage which sadly became unravelled
one day on 28 June 2011 when the Wife learned from their banker
that the Husband had just withdrawn $1 million from his account,
which he admitted gifting to a female friend C who was subsequently
to become his present girlfriend. On the following day the Husband
packed his belongings and moved out of the matrimonial home to
some rented accommodation, and eventually to his present rented
apartment in Bel-Air Residence, Pokfulam, Hong Kong in September
2012 where he has been cohabiting with C.
8. On 1 August 2013 the Husband commenced these
proceedings for divorce based on the ground of the parties’
separation for two years since 29 June 2011 upon which the decree
nisi was granted on 3 October 2013, and at the 1st Appointment
Hearing on 21 October 2013, the parties were also able to agree
on the custody, care and control of both daughters to be granted

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 A v B (Ancillary Relief)
[2017] 1 HKLRD 187 Judge Bruno Chan 193

to the Wife and reasonable access to the Husband, and for the
parties to exchange their Form E.
9. In his Form E filed on 18 November 2013, the Husband
disclosed a total income from his practice for the year of 2012/2013
of just over $3.2 million but more than double the year before at
only $1.35 million, and thus a monthly average of about $273,000
at the time of his Form E. He also worked as a part-time university
lecturer but the total income from that source is negligible at about
$4,000 for the whole year.
10. Apart from his joint interests with the Wife in Flats C and
D xxx Terrace that made up the former matrimonial home and
which he gave a total net value at $6.8 million, the Husband also
disclosed bank savings of just over $1 million, some insurance
policies worth about $368,000, and a MPF accumulated at just over
$180,000, but he also claimed to have substantial debts and liabilities
of more than $2.5 million including the outstanding mortgage of
the former matrimonial home, thus giving him a total net worth of
just over $2.5 million.
11. For his monthly expenditure, the Husband put the total
amount at just over $340,000, of which $67,140 was for his general
household including $11,200 for the mortgage payment of the former
matrimonial home, $269,370 for his personal expenses including
almost $100,000 for his legal practice and $64,000 for his profit tax
liability, and $6,450 for the daughters’ expenses but which as will
become apparent later he has not been paying since July 2011. It is
not in dispute that his post-separation spending reflects a much
higher standard of living than that during the marriage, including
$32,000 for renting his apartment, $10,000 for meals out of home,
$16,000 for clothing and shoes, $35,000 for entertainment/presents,
$18,000 for holidays, as well as a regular payment of
$20,000–$30,000 as pocket money for C, an item which he somehow
did not include in his Form E but admitted later in his evidence that
he has been doing since C became his girlfriend in late 2011.
12. As for her Form E filed on the same date, the Wife
disclosed an average income of about $54,000 per month including
double pay and bonuses, and in addition to her interest in Flat C
of xxx Terrace she also disclosed about $1.68 million in bank savings
and $1.3 million in MPF, and with no declared debts or liabilities,
she revealed a higher net worth in excess of $6.3 million.
13. For her monthly expenditure, the Wife claimed just over
$20,000 on general household mainly on food and a domestic helper
as the mortgage payments and utilities for the matrimonial home
were being directly paid for by the Husband, about $24,300 on her
personal expenses and $15,300 on the daughters including their
school fees, making her total expenditure for herself and the
daughters just under $60,000 per month.

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14. After the usual rounds of questionnaires and further

disclosure, and after an unsuccessful FDR hearing before Judge
Melloy on 13 March 2015, the matter eventually came before me
for trial upon the parties filing their narrative affirmation and setting
out their respective Open Proposal revealing those major issues first
mentioned at the beginning of this judgment with the following
details, starting with the Husband’s which came first in time.

Husband’s open proposal

15. The Husband’s open proposal was first made in his affidavit
of 21 January 2015 [B/133] as set out in the exhibited draft consent
summons [C2/295] and his subsequent letter of 18 February 2015
[C2/398] which can be summarised as follows:

(a) the Wife and two daughters to reside in the former

matrimonial home for free until the younger daughter reaches
the age of 21;
(b) the Husband to continue to pay the outstanding mortgages of
both flats until their discharge;
(c) the Husband to pay the Wife nominal maintenance of $1.00
per annum until she dies or remarries whichever is earlier;
(d) each party to retain their own assets investments and properties
in their own name possession or control, including for the
Wife to keep Flat C and he is to keep Flat D, and upon the
younger daughter reaching 21, the internal wall adjoining the
2 units shall be restored so that he can sell Flat D to fund the
purchase of his own accommodation;
(e) the Husband to pay the daughters’ past maintenance at $8,000
per month from 1 July 2011 to Decree Absolute;
(f) the Husband to pay $10,000 per month for each daughter for
their future maintenance with an annual adjustment for
inflation until the age of 21 or ceases full time education
whichever is later;
(g) the Husband to pay for the daughters’ secondary and tertiary
school tuition fees subject to his consent for them to pursue
any overseas education outside Hong Kong and two round-trip
economy class airfares for each daughter for each academic
year of such full time overseas tertiary education;
(h) the Husband to continue to pay the premium of each
daughter’s insurance policy until maturity date on 20
November 2019;
(i) Upon compliance of these terms all other claims of the parties
for ancillary relief shall be dismissed.

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 A v B (Ancillary Relief)
[2017] 1 HKLRD 187 Judge Bruno Chan 195

16. As will be apparent below, some of these terms would

either be slightly modified or accepted by the Wife by the time of
the trial, but not all of course, and in particular as to the former
matrimonial home.

Wife’s open proposal

17. The Wife’s open proposal was made on 8 May 2015
[C2/404] which can be summarised below, and it was apparent that
the parties were in fact not far apart in most areas, but as noted
above, with Flat D as the major stumbling block to an overall
settlement:

(a) she and the daughters to reside in the former matrimonial

home for free until the younger daughter reaches 21 or ceases
full time education whichever is later;
(b) the Husband to pay all outstanding mortgages of both Flats
C and D until their discharge;
(c) the Husband to transfer Flat D to daughters at nil consideration
upon the younger daughter reaching 21;
(d) the Husband to pay her a lump sum of $500,000 for the
children’s past maintenance dating back to July 2011;
(e) the Husband to pay her $5,000 per month for her maintenance
from 1 June 2015 to 1 June 2020;
(f) the Husband to pay $15,000 per month as maintenance for
each daughter until each reaches 21 or completes full time
education whichever is later;
(g) the Husband to continue to make payments on the insurance
policy for each daughter until maturity date and to pay for all
their secondary and tertiary education expenses.

18. According to the Husband, the net effect of the respective

proposal of the parties is that the Wife would receive 73% of the
assets while the Husband would receive only 27% on the basis of
the Net Effect Table in Appendix 1(a) of his Closing Submission,
whilst on the Wife’s proposal she would receive more than 100%
of the assets according to the Net Effect Table at Appendix 1 (b)
which he argues cannot be a fair outcome. On the other hand, the
Wife argues that the Husband’s “Net Effect Tables” are unreliable
and unfair in that they are not accurate representations of the parties’
respective net value and do not delineate the proper scope of the
sharing claim, of which no doubt I will have more to say later in
this judgment, but the upshot is that the parties were unable to
reach agreement at the FDR Hearing before Judge Melloy, hence
the ancillary relief application proceeded to trial before this Court.

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19. By the commencement of the hearing the parties were able

to however narrow down further their differences when the Husband
offered to settle the daughters’ past maintenance in arrears
accumulated since 1 July 2011 to the trial by capitalising them at
$500,000 payable within 4 months of Decree Absolute, and a lump
sum of $300,000 for the Wife’s maintenance at $5,000 per month
for 5 years payable within 2 months of Decree Absolute in lieu of
the nominal maintenance as a clean break between them, leaving
essentially the following issues for the Court’s determination:

(a) Should Flat D be in the circumstances of the case transferred

to the Wife instead of the daughters as she subsequently
confirmed at the trial as part of a fair division of the marital
assets?
(b) What should be the Husband’s monthly maintenance for the
daughters?

20. The dispute over Flat D has, as noted, raised further issues,
both factual and legal, such as the Husband’s future earnings and
prospects of enhancement, and whatever they may be whether they
can or should be taken into account or subject to the sharing
principle, and whether his spending on his girlfriend should be added
back into the marital pot or to be regarded as such conduct which
the Court should not disregard.
21. For the purpose of the trial of these issues, which were
mainly uncontroversial as far as their factual matrices are concerned,
or even as to their applicable law and principles according to the
Husband’s legal team, but when the parties proceeded to file their
narrative affidavit setting out their respective cases and then gave
their evidence at the trial, the difference in the attitude and approach
adopted by them to make out their case cannot be more telling or
even striking.
22. The Husband’s affidavit, which came first on 22 January
2015 [B/133-190] and which seems unsurprisingly a product of his
own hands and design in view of his profession, ran to some 57
pages with 212 paragraphs of narratives including detailed historical
background and information which were mostly uncontroversial,
but were sadly also punctuated by what seems to me self-centred,
self-serving and blame-shifting accusatory attempts to justify, for
example, his post-separation lifestyle and spending or the current
state of his income and career, of which I will no doubt have much
more to say when I come to consider them later in this judgment.
23. In telling contrast, the Wife’s main affidavit [B/191-201],
which was filed some 5 months after the Husband’s on 25 June
2015, and despite being presented with a golden opportunity to
retaliate with an equally lengthy “tit-for-tat” narrative with her own

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[2017] 1 HKLRD 187 Judge Bruno Chan 197

share of fault-finding accusations, particularly given the way her

marriage was ended, a tactic sadly all too often adopted in this
jurisdiction, instead produced a much briefer 11 pages with 39
paragraphs of straightforward “tell-it-like-it-is” statement focused
mainly on her own resources and needs and those of her children,
and almost devoid of any emotion except how she felt devastated
by the abrupt way the Husband ended their relationship, which was
nevertheless still remarkably understated under the circumstances.
24. The same can also be said about her evidence in court, of
which Mr Todd for the Husband commented in para.3 of his Closing
Submission: “… Given the freedom of talking on her own, the Wife
adopted a reasonable and considered approach to her evidence.
Where she has been in error, she has admitted it. Where there were
weaknesses in her case, she accepted them …”
25. Again, no doubt I will have more to say about this, but it
would first be relevant to set out the general principles applicable
to ancillary relief applications, of which there seems to be little
controversy between the parties, but not for those relating to the
particular issues raised above, which I propose to do separately later
in this judgment.

General applicable principles

26. In deciding on ancillary relief claims between the parties
to the marriage, the court is required by s.7(1) of Matrimonial
Proceedings and Property Ordinance (Cap.192) (MPPO) to have
regard to the conduct and all the circumstances of the case including
the following matters:

(a) the income, earning capacity, property and other financial

resources which each of the parties has or is likely to have in
the foreseeable future;
(b) the financial needs, obligations and responsibilities which each
of the parties to the marriage has or is likely to have in the
foreseeable future;
(c) the standard of living enjoyed by the family before the
breakdown of the marriage;
(d) the age of the party to the marriage and the duration of the
marriage;
(e) any physical or mental disability of either of the parties to the
marriage;
(f) the contributions made by each of the parties to the welfare
of the family, including any contribution made by looking
after the home or caring for the family;
(g) in the case of proceedings for divorce or nullity of marriage,
the value to either of the parties to the marriage of any benefits

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(for example, a pension) which, by reason of the dissolution

or annulment of the marriage, that party will lose the chance
of acquiring.

27. The Court of Final Appeal has provided guidance on how

this s.7 discretionary exercise should be undertaken in LKW v DD
(2010) 13 HKCFAR 537 which is now well known to all but it
would still be helpful to remind ourselves of the process set out in
the judgment of Ribeiro PJ as follows, starting first with the 4
principles to be borne in mind when embarking on the exercise:

— Objective of Fairness
— Rejection of Discrimination
— Yardstick of Equal Division
— Rejection of Minute Retrospective Investigation

28. I do not propose to go into the reasoning enunciated in

the judgment behind these principles on which there is no
controversy between the parties, other than to refer to the following
points made by Ribeiro PJ:

[52] Accordingly, the first point to be made in the present

context is that the principles enunciated in this judgment
are in the nature of guidelines. Financial provision
applications are highly fact-specific and judges dealing
with them must ultimately be guided by section 7 and
the implicit aim of arriving at a fair financial outcome as
between the parties.
[53] Moreover, the guidance given in this judgment cannot
be and does not purport to be comprehensive. Thus, in
Charman v Charman (No 4), referring to the guidance
given in White and Miller. Sir Mark Potter P noted that
‘there is no doubt that, under that guidance, the House
has left much for the courts to develop’. The recent
Supreme Court decision in Granatino v Rachmacher,
provides an example of the courts working out the status
of pre- and post-nuptial agreements against the
background of the scheme laid down by White and
Miller/McFarlane.

29. With these principles in mind, the court is then to undertake

the following steps outlined by Ribeiro PJ in the judgment, whose
reasoning I propose to set out, in particular those which I believe
are apt to the issues raised in the present case:
E.2 Step 1: Identification of the assets

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[71] The first step in the exercise is to ascertain the financial

resources of each of the parties calculated as at the date
of the hearing. In particular, under section 7(1)(a), the
court must have regard to ‘the income, earning capacity,
property and other financial resources’ which each of the
parties ‘has or is likely to have in the foreseeable future’.
The object will of course be to compute the net financial
resources, taking account of all material liabilities. At this
stage, the court need not attempt to distinguish between
matrimonial and non-matrimonial property, that being
an exercise best undertaken (if necessary) when
considering distribution of the assets.
[72] The court should, as Sir Mark Potter P stated, carry out
this first stage exercise ‘with whatever degree is apt to the
case’. In White v White, reflecting the fourth principle
discussed above, Lord Nicholls cautioned against turning
the clock back to the pre-1970 position when the courts
‘often had to attempt to unravel years of matrimonial
finances and reach firm conclusions on who owned
precisely what and in what shares’. No such attempt is
called for and generally, a broad brush approach will be
all that is required …

E.3 Step 2: Assessing the parties’ financial needs

[74] The next step is for the court to assess the parties’ financial
needs. As has been noted, the section 7 exercise often
stops at this point since the total resources may be
insufficient to go beyond or even to meet both parties’
needs. If so, no room is left for the application of any
sharing principle. Addressing the needs of say, the wife
and children may immediately absorb more than half of
the total assets. If so, ‘needs’ are, for want of any
alternative, determinative. Where the assets are meagre,
a ‘clean break’ may not be possible and it may be
necessary to have recourse to an order for periodical
payments.
[75] The position is neatly summarised by Sir Mark Potter P
in Charman v Charman (No 4) as follows:
“… when the result suggested by the needs principle is
an award of property greater than the result suggested by
the sharing principle, the former result should in principle
prevail: per Baroness Hale in Miller at [142] and [144]. …
It is also clear that, when the result suggested by the needs
principle is an award of property less than the result

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suggested by the sharing principle, the latter result should

in principle prevail: per Lord Nicholls in Miller at [28] and
[29] and Baroness Hale at [139].”
[76] This is an approach which should dispel the fear expressed
in Figgins v Figgins, that ‘rule equality’ is likely to work
injustice where the assets are meagre.
[77] As section 7(1)(b) indicates, the process of evaluating
‘needs’ involves assessing the financial needs, obligations
and responsibilities which each of the parties has or is
likely to have in the foreseeable future in the light of
present and foreseeable resources. The matters referred
to in section 7(1)(c) to (e), that is, standard of living, age
and disability, will often be relevant. As Lord Nicholls
put it in White:
“Financial needs are relative. Standards of living vary. In
assessing financial needs, a court will have regard to a
person’s age, health and accustomed standard of living.”
[78] And in Miller/McFarlane His Lordship stated in respect of
‘needs’:
“When the marriage ends fairness requires that the assets
of the parties should be divided primarily so as to make
provision for the parties’ housing and financial needs,
taking into account a wide range of matters such as the
parties’ ages, their earning capacity, the family’s standard
of living, and any disability of either party. Most of these
needs will have been generated by the marriage, but not
all of them. Needs arising from age or disability are
instances of the latter.”
[79] Baroness Hale stressed that the parties’ needs should be
‘generously interpreted’. Accordingly, in trying to ensure
that each party and their children have enough to supply
their needs set at a level that equates, in so far as resources
allow, to the standard of living they enjoyed during the
marriage, those needs should not be assessed according
to some perceived lowest common denominator, but
with flexibility in the light of all the relevant
circumstances.

E.4 Step 3: Deciding to apply the sharing principle

[80] If surplus assets would remain after the parties’ needs have
been catered for, the next step in the exercise should
generally be for the court to apply the sharing principle

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to the parties’ total assets, leaving the ‘needs’ question

previously considered to be dealt with under that principle
(as pointed out by Sir Mark Potter P in Charman v
Charman (No 4) cited above. In other words, the court
should not make an immediate allocation but should
return to ‘needs’ for them to be dealt with alongside all
other material factors in the processes described below as
Steps 4 and 5.
[81] In B v B (Ancillary Relief), Hughes LJ summarises the
purpose of the sharing principle, with the yardstick of
equal division seen as part of such principle:
“The sharing principle gives rise to the general
proposition that no distinction is to be made, when
considering the contributions of the spouses to the
marriage (section 25(2)(f)), between monetary and
non-monetary contributions. Thus there also follows the
requirement to test the outcome of the exercise against
the yardstick of equality, and to depart from it only if and
to the extent that there is a good reason for doing so: see
Lord Nicholls in White at 605f. Lord Nicholls there
expressly adverted to the fact that, more often than not,
it is necessary to depart from it … The importance of the
‘yardstick of equality’ is twofold. First it underlines the
necessity not to treat financial contributions differently
from those in non-monetary form. Second, it underlines
the essential fairness of equal division in a large number
of cases of shared matrimonial life.”
[82] The point reached at this third stage of the section 7
exercise therefore involves the court deciding that the
sharing principle applies unless there is good reason,
capable of articulation, for departing from an equal
division. It is worth emphasising, however, that as pointed
out by Lord Nicholls, the court will often ultimately not
arrive at an equal division.

E.5 Step 4: considering whether there are good reasons for departing from
equal division

[83] The fourth step therefore involves considering whether

good reasons exist for departing from the principle of
equal division. Any such departure means increasing or
reducing one party’s share and correspondingly reducing
or increasing the share of the other. The question for the
court is whether the balance ought to be shifted from a
point of equality to some other point in the circumstances

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of the case. This is necessarily a complex question which

raises a range of separate issues.
[84] What then are potentially good reasons for such a
departure? The answer is to be found in the terms of
section 7 and the implicit objective of a fair distribution
of the assets. Any of the matters listed in paragraphs (a)
to (g) of section 7(1) may provide an appropriate reason,
as may the ‘conduct of the parties’ and ‘all the
circumstances’ referred to in section 7(1). The catch-all
category of ‘all the circumstances’ makes relevant any
matter which bears on the fairness of the financial
outcome in a matrimonial context.
[85] It is impossible to stress that while such factors,
individually or cumulatively, are potentially capable of
resulting in a departure from an equal division, a finding
that one or more of those factors are engaged does not
necessarily mean that a departure must occur. The weight
to be given to such factors is in the court’s discretion to
be exercised in Step 5 as described in Section E.6 below.
It cannot be over-emphasised that the matter is
fact-specific and discretionary. The sharing principle must
not be mechanically applied.

30. It is with these principles and guidance in mind, in particular

relevant to this case those under Step 4 stated above, I now start
the s.7 exercise by first identifying the matrimonial assets, from
which as noted above arose the 1st major issue between the parties
over whether those cash payments by the Husband to his girlfriend
should be added back.

Identification of assets
31. As noted above, the main asset is the former matrimonial
home comprising Flats C and D held separately and respectively by
the Wife and Husband, and separately valued at $5,370,000 and
$5,560,000 respectively but somewhat higher at $11,520,000 as a
complete unit, and subject to any add-back of cash given by the
Husband to his girlfriend, and not putting any capitalised value on
his earning capacity, the so-called matrimonial pot is in the main
non-controversial on the basis of either the Wife’s Opening
Submission [para.20 p.6] or the Husband’s Closing Submission
[Appendix 1(a) & (b)], and which I set out below:

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Assets Husband (HK$) Wife (HK$)

Matrimonial Flat D: $5,560,000 Flat C: $5,370,000
Home:
Cash in Bank: $1,094,260 $1,515,524
Insurance Policies: $368,024 $312,951
Personal Items: $5,000 $20,000
Pensions/MPF: $180,261 $1,622,484
Total Assets: $7,207,546 $8,840,959

32. Setting this off against the parties’ disclosed liabilities

including the outstanding mortgages for the 2 flats and the parties’
income tax and other liabilities totalling just under $2 million would
bring the total net value of the matrimonial pot down to about
$14.6 million, which then brings me to the issue of whether the
Husband’s cash gifts to his girlfriend C should be added back to the
matrimonial pot for distribution.

Husband’s cash gifts to C

33. The Husband has admitted to gifting the following sums
to C, allegedly both before and after she became his girlfriend:

(a) $1 million on 28 June 2011 before he moved out of the

matrimonial home on the next day;
(b) $200,000 several months thereafter;
(c) Monthly sums of $20,000–$30,000 as pocket money since
their cohabitation.

34. It is the Wife’s case that these amounts are significant and
even extravagant especially when juxtaposed against the frugal
lifestyle thitherto adopted by the family, and the $1 million gift
which was made pre-separation and clearly matrimonial property
must be accounted for. Insofar as the sum of $200,000 and monthly
pocket money are concerned, she submits that such spending of the
Husband was most likely from matrimonial property as well, and is
in any event conduct “so obvious and gross that it would be
inequitable to disregard” and should be added back as they were
“reckless and extravagant”.
35. Mr Man for the Wife submits that there are two ways in
which the court may approach these gifts by the Husband either to
depart from equal distribution of assets in the Wife’s favour, as
perARAV v VP [2011] 3 HKLRD 759; MKKWH v RKSH [2013]
HKFLR 540; Mimi Kar Kee Wong Hung v Raymond Kin Sang

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Hung (2014) 17 HKCFAR 585; or by adding back these sums to

the matrimonial pot for distribution as per Norris v Norris [2003]
1 FLR 1142, Vaughan v Vaughan [2008] 1 FLR 1108.
36. In the case of ARAV v VP, the parties set up a family
business known as BT of which they were equal shareholders,
drawing a monthly salary and sharing the declared dividends during
the marriage. However, unbeknownst to the wife, the husband
formed another company FC and when their family business
collapsed, the wife alleged that was because the husband had secretly
transferred $32.5 million in loans, trade debts and outstanding
commissions from BT to FC. In the ancillary relief proceedings
pursuant to their divorce, the court found that the matrimonial assets
totalled $65 million for distribution between the parties, but declined
the wife’s request to add back the $32.5 million to the matrimonial
pot to reflect the husband’s “underhand” and “deliberate”
misconduct, noting that his undertaking to account for any sums
retrieved had dealt with any residual concerns the wife might have.
37. In dismissing the wife’s appeal, the Court of Appeal held
that where a spouse had frittered away assets by extravagance or
reckless speculation, the court could take that into account in
ancillary relief proceedings by notionally adding back the value of
such assets to that spouse’s matrimonial assets, and by doing so, the
reckless spouse was deemed still to have those assets to be shared
with the other spouse, but reckless financial conduct covered a wide
spectrum of behaviour and would be highly fact-sensitive. A finding
of misconduct would not inevitably lead to the reattribution of assets
to the pot, as Cheung JA commented on misconduct to be regarded
as a factor in ancillary relief proceedings:

[4] The wife argued that the division is incorrect because of the
misconduct of the husband and $32.5 million frittered away
by the husband should be added back to the total assets.
[5] Section 7(1) of the Matrimonial Proceedings and Property
Ordinance (Cap.192) expressly provides that the exercise of
the court’s power in relation to financial provisions, is to
have regard to the conduct of the parties and the circumstances
of the case.
[6] In LKW v DD [2010] 6 HKC 528, the Court of Final Appeal
(per Ribeiro PJ) held that:

[104] Conduct, or more accurately negative conduct, is

therefore only to be regarded as a material factor
if it is ‘obvious and gross’ in the sense explained in
Wachtel v Wachtel or, which comes to the same
thing, if it is such that it would in the opinion of
the court be inequitable to disregard it.

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[7] The conduct may be in many forms. The wife relied on

financial misconduct of the husband. If conduct (which must
be obvious and gross or inequitable to disregard) is one of
the factors to be taken into account, then obviously the
Court is not hamstrung in the precise way in which it will
recognise this factor. Where the misconduct involves the
wastage of the matrimonial assets, one way is to order the
wasted funds to be added back to the joint assets before the
Court makes the distribution: Rayden & Jackson on Divorce
and Family Matters (18th ed., 2005) para.16.54 and Norris v
Norris [2003] 1 FLR 1142. However, in my view, that is
not the only way to give recognition to misconduct. Another
approach which is consistent with the Court’s power to
achieve what is fair to the parties is to depart from the
yardstick of equal division and equal sharing principle as
explained by Ribeiro PJ in LKW v DD at para.58–61.

38. In the present case, whilst the Husband does not dispute
his payments to C, it is his argument that they were part of his
normal spending post-separation which are no different from those
of the Wife and hence should not be taken into account in
considering the ancillary relief application. Hence it would be
relevant to first consider how and why he came to make those
payments particularly the sum of $1 million, which he explained in
his narrative affidavit [B/156]:

[92] In 2010, a good friend of mine C who was then a

practising barrister in Hong Kong was accepted by the
xxx School for Design in New York, U.S.A. (xxx) into
their Interior Design program. However, because of the
lack of funds for full-time tuition and living expenses, she
deferred the enrolment to the following year. At the time,
C was dating … and I thought he would be helping her,
but subsequently I found out that he did not. In the
summer of 2011, I decided to help her out. I told C that
she could pay me back in due course.
[93] On 28 June 2011, I transferred HK$1 million to C from
my STC Bank account in order to help her with her plans
to study abroad at parsons. I then informed W, as my
wife at the time, of the bank transfer transaction on the
same day. I had not disclosed this confidential fact to
anyone except to W and C prior to the mandatory
disclosure requirement in Form E filed on 18 November
2013 by me (Petitioner’s Form E). Furthermore, I had
not authorised anyone and/or given consent to anyone
to disclose this confidential fact of the transfer of HK$1

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million to C by me to anyone and I had not waived my

right to confidentiality. W and I had a big quarrel over
my decision to help C and W and I separated on 29 June
2011. The fact of the transfer of HK$1 million was not
mentioned between W and me until the present
proceedings in correspondence exchanged between the
parties and documents filed into Court. As a result of my
predicament, C decided to stay in Hong Kong and to
forego her plan to study at xxx. C and I started dating in
about late 2011 and I told her to keep the HK$1 million.

39. The Husband then went on to admit that he did give C

another sum of $200,000 after they started dating, and a monthly
sum of $20,000–$30,000 for her pocket money since their
cohabitation. It is against this evidence of his that Mr Todd submits
that the Husband making gifts or payments to his girlfriend and
spending on the person he loves is no more egregious than the
Wife’s spending on the church which she loves, and as they both
kept their finances independent of one another, they both felt
entitled to indulge their respective passions, and while it is
profoundly upsetting for the Wife to know that the Husband is
supporting his unemployed girlfriend, it is not an actionable conduct
of which the Wife has failed to establish not only that it is
unreasonable but that it is the sort of misbehaviour which fits into
the vanishingly small category of misconduct cases, as there is
nothing wrong for a party, post-separation to spend some of their
resources on their new girlfriend, and Mr Todd asks rhetorically
this question: Would an ordinary reasonable individual have a sharp
intake of breath if they heard a man was spending money on his
girlfriend or a woman was gifting a tenth of her income to the
church? Of course not, he proffered his answer.
40. With respect, and I say straight away, it is neither fair nor
proper to take the Wife’s donations to her church of a few thousand
dollars each month, a practice which she as a devout Christian (as
described by the Husband) had been doing regularly throughout
the marriage, and which was something well known to the Husband
and most likely with his implicit understanding or approval, and to
compare it with the Husband gifting $1 million, which was almost
half his entire savings at that time [C2/263] and without any prior
discussion with his spouse, to a fellow practising barrister who later
turned out to be his girlfriend. Even assuming what the Husband
said about the circumstances of this payment is true, in my view
these two spendings of the parties simply cannot and should not be
mentioned in the same breath, sharp intake or not.
41. It is in fact worth noting that whilst the Husband in his
affidavit never admitted that when he paid the $1 million to C, that

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it was a gift but only to help out a friend and that he did tell her
that she could pay it back in due course, and that it was later when
they started dating in late 2011 that he told her to keep the money
as referred above, yet as pointed out by Mr Man for the Wife, this
seems inconsistent with his earlier Answer to her Second
Questionnaire dated 8 April 2014 where he did refer to that payment
as a gift, in fact not just once but twice when he stated: ”… the
Petitioner wished to help out his friend and therefore gifted her the
sum of $1,000,000 on about 28 June 2011. On the same day, the
Petitioner told the respondent about this gift. As a result, the
Petitioner and respondent separated on about 29 June 2011 …”
[B/66].
42. While the Wife might not have stated in so many words,
it is clear to me that she did not believe the Husband’s evidence in
his affidavit as to his payment of the $1 million to C or of their
relationship at that time. She said this in her narrative affidavit
[B/193-194]:

[11] On 28 June 2011, a bank staff of Standard Chartered Bank

telephoned me asking me to confirm whether the
Petitioner actually wanted to transfer a large amount of
money from his bank account … to a third-party. Upon
my asking the Petitioner later that evening, he told me
that he had transferred HK$1 million to his girlfriend.
This was the first time that the petitioner had admitted
to having an affair.
[12] The day after, on 29 June 2011, the Petitioner packed
up his belongings and moved out of the FH deserting
myself and his daughters. This put an abrupt end to our
marriage of 14 years.
[13] I was utterly devastated at the cruel and abrupt way the
Petitioner had put an end to our relationship and family.
At the time, I was still in love with the Petitioner, and
finding out about his extra-marital affair was a huge shock
to me. What especially pains me is how he had gifted
such a large amount of money to his paramour, whilst
our family had to live in frugality all throughout the
marriage.

43. Under these circumstances I agree that the Wife had every
right to feel not just upset but also betrayed, which according to
the Husband led to a big quarrel between them, but if C was indeed
not a girlfriend at that time and the Husband was merely helping a
good friend in need, why did he choose to move out the next day
to live apart from the Wife and his daughters for good? In fact there
are other questions about his evidence over this issue that should

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have been clarified during the trial when the Wife did make it clear,
if not earlier but at least by the time of her Opening Submission,
that this and other payments to C were to become the heated subject
of add-back. Hence it was pertinent for him to clarify the
circumstances around these payments, such as why C who was then
a practising barrister had not thought it through about her financial
ability to study abroad before actually making her application for
enrolment, or why he would later allow her to keep the $1 million
when she decided to forego her plan as a result of “his predicament”,
and what predicament was he referring to? The Husband never did
clarify, or clarify adequately.
44. If he was in fact referring to the alleged breach of
confidentiality about this payment detailed in his same affidavit
under a later topic of “WRONGFUL DISCLOSURE OF MY
CONFIDENTIAL INFORMATION BY W AND/OR HER LEGAL
REPRESENTATIVES TO OTHERS” in which he accused the
Wife and/or her lawyers of wrongfully disclosing to third parties
various confidential information from his Form E and other
documents filed in these proceedings, including this payment to C
that had caused damage to his career including the rejection of his
earlier application for appointment to be a senior counsel in late
20xx [B/182-188], then I fail completely to see how that could
have caused C to forego her plan.
45. Whilst his counsel has refrained from raising such accusation
at the trial, quite properly so if I may add, whether as a misconduct
against the Wife or as justification of what he claims to be limitations
to his future earnings or career prospects, of which I will no doubt
have much more to say later in this judgment, but the point is that
even if his allegation is true, which was as noted never dealt with
in court during the trial, it could only take place after he had filed
his Form E in November 2013, and I fail to see how that
“predicament” of his could have caused C to come to such a
decision 2 years earlier in 2011?
46. Whatever the case may be in respect of the Husband’s
payments to C, Mr Todd argues that it is not actionable conduct,
as it is for the Wife to show conduct which is inequitable to
disregard, ie to show an element of “wantonness” (Vaughan),
“reckless frittering” and “extravagance”, or that it was conduct “so
obvious and gross that it would be inequitable to disregard”
(ARAV), and that where it was needed as C had no income, then
it cannot be reckless (MKKWH). Is it legitimate, Mr Todd asks,
for a party, post-separation to spend some of his resources on his
new girlfriend? He submits that the Wife has to establish not only
that it is unreasonable but that it is the sort of misbehaviour which
fits into the vanishingly small category of misconduct cases.

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47. Ultimately the question must be whether the Husband’s

payments to and spending on C should be taken into account by
the court in these proceedings, and if so, how? In Norris v Norris
[2003] 1 FLR 1142, the wife sought a lump sum from the husband
on the basis of a clean break upon the dissolution of their 23 years’
marriage, by which time the husband was having an affair with
another woman Q with whom he later cohabited and had 2 children.
The wife’s current assets amounted to over £3,600,000 including
significant inherited assets and the former matrimonial home which
the husband had already transferred his half-share in the property
to her, while his assets including pension fund were approximately
£4,160,000. The wife argued that the husband’s recent habit of
spending more than he had earned should be taken into account,
and that his total overspend of about £350,000 should be added
back to his assets, and that she was entitled to more than half the
entire matrimonial assets. In ordering the husband to pay the wife
a lump sum of £360,000, Bennett J held that while a spouse could
spend his money as he chose, it was only fair to add back into the
spouse’s assets the amount by which he recklessly depleted the assets
and thus potentially disadvantaged the other spouse within ancillary
relief proceedings, and as the scale and extent of the husband’s
overspend since the separation had been reckless, £250,000 would
be added back into his assets so that his reckless expenditure did
not disadvantage the wife.
48. Most of the husband’s overspend were found to be on Q
including expensive jewellery, of which Bennett J said:

[44] The husband has spent lavishly on jewellery for Q to the

tune of £30,000, including a ring for £19,500. The
husband has already accepted that Woodlands House
jointly owned by him and Q should be treated as his,
similarly to Q’s premium bonds. One might ask — and
why not the jewellery? Why should that be put into a
special category, bearing in mind that it was bought at a
time after the marriage had broken down? Why give her
such expensive jewellery when he could have spent far
less and thus depleted his assets less? In my judgment,
there is no answer to the argument that the jewellery at
£30,000 should be put back into the husband’s assets.

49. As for the husband’s obligation to support Q and their two

young children, Bennett J said this:

[45] Of course, the husband does have these obligations.

However, in this case, there is more than enough money
on the husband’s side, even if he has to pay a lump sum

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to his wife, for him to comfortably support Q and their

children. The husband chose to enter into that
relationship and to have children. To say to the wife that
after such a long marriage she must be at risk of taking
less out of the marriage because the husband, a wealthy
man, has chosen to incur the responsibility of living with
and supporting another woman and their children is, put
simply, unfair.

50. He then arrived at his conclusion over the husband’s

overspend at [77]:
The overspend, ie the expenditure over income of £350,000 in a
little over 2 years, at a time when he was about to and then did
enter into protracted litigation with the wife, can only be classified
as reckless, and particularly at a time later on when the dot.com
and the stock market collapsed. A modest overspend in the context
of a rich man would be understandable and could not be classified
as reckless. But in the circumstances of this case, as I have set them
out, in my judgment, the scale and extent of the overspend was
reckless. I do not think it appropriate to add back the entire
overspend, but I do not consider it unfair to add back into the
husband’s assets the figure of £250,000. In my judgment, there is
no answer that the husband can sensibly give to the question, ‘Why
should the wife be disadvantaged in the split of the assets by the
husband’s reckless expenditure?’ A spouse can, of course, spend
his or her money as he or she chooses, but it is only fair to add
back into that spouse’s assets the amount by which he or she
recklessly depletes the assets and thus potentially disadvantages the
other spouse within ancillary relief proceedings.
51. In Vaughan v Vaughan [2008] 1 FLR 1108, the husband
suffered a serious depressive illness following the breakdown of the
marriage, leading to his suspension as a pilot and loss of his pilot’s
licence. Between the separation and the ancillary relief proceedings
he dissipated a large sum gambling away and wasted over £80,000.
The District Judge found his conduct ‘bizarre and inexplicable and,
objectively, profoundly irresponsible’, but did not reattribute any
sums to the husband, observing that there were apparently no legal
principles to be applied. The Judge went on to assess the matrimonial
assets and awarded the wife 60% of the family’s capital but did not
include the capital value of the parties’ adjusted pension rights. Both
parties appealed the District Judge’s order. In allowing the appeal,
the Court of Appeal reaffirmed the principle of reattribution applied
in Norris and held that it was appropriate to reattribute a sum to
the husband in view of his dissipation, as Wilson LJ stated at [14]
of his decision:

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Such was a rare legal error on the part of the District Judge. Miss
Ward tells us that it was curious that he should refer to an absence
of legal principles in that she and counsel for the husband had
referred him to a recent example of such reattribution, namely
Norris v Norris [2002] EWHC 2996 (Fam), [2003] 1 FLR 1142.
Although such was a decision at first instance, it is the last in a line
of authority which stretches back to the decision of this Court in
Martin v Martin [1976] Fam 335 that, in the words of Cairns LJ, at
342H:
“a spouse cannot be allowed to fritter away assets by extravagant
living or reckless speculation and then to claim as great a share of
what was left as he would have been entitled to if he had behaved
reasonably.”
The only obvious caveats are that a notional reattribution has to be
conducted very cautiously, by reference only to clear evidence of
dissipation (in which there is a wanton element) and that the fiction
does not extend to treatment of the sums reattributed to a spouse
as cash which he can deploy in meeting his needs, for example in
the purchase of accommodation …
52. These two approaches of adding back of specific sums as
in Norris and Vaughan, or departure from equal distribution as in
ARAV, were considered by our Court of Appeal in MKKWH v
RKSH [2013] HKFLR 540, where the parties had been married for
37 years and built up a successful business together which was listed
on the Hong Kong Stock Exchange, and although the husband
subsequently left the marital home in 1999 the parties remained
involved in the business. In their divorce and ancillary relief
proceedings in 2010 the judge of first instance ordered a general
50/50 split of the assets between the parties with value in excess of
$1 billion. The wife appealed on a number of counts, including one
that centred on the conduct of the husband and his substantial
payments to his mistresses and their children over the years, and
argued that there should be an add back of some $71 million for
distribution.
53. In allowing the wife’s appeal in respect of the claw back
provision but dismissing the one on adding back, Cheung JA stated
the court’s approach to those payments of the husband to his
mistresses and children which were described as non-marital
expenditure and which formed the basis of the wife’s claim for
unequal distribution as follows:

[52] … Counsel for the wife in both of his opening and closing
submissions had identified the non-marital expenditure
by the husband to his three other families as the basis of
the wife’s claim for unequal distribution. The underlying

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ethos in ancillary relief is to achieve fairness. The position

is made clear by Ribeiro PJ in LKW v DD (2010) 13
HKCFAR 537 at 551:

[24] Without the target provision it is natural to

assume that a fair financial outcome must be the
implicit statutory aim. As Lord Nicholls of
Birkenhead pointed out in White v White:
“This tailpiece was later deleted from the
legislation, and nothing inserted in its place. In
consequence, the legislation does not state
explicitly what is to be the aim of the courts
when exercising these wide powers. Implicitly,
the objective must be to achieve a fair outcome.
The purpose of these powers is to enable the
court to make fair financial arrangements on or
after divorce in the absence of agreement
between the former spouses …”
[25] ln Cowan v Cowan, Thorpe LJ referred to Lord
Nicholls’s view as ‘the almost inevitable judicial
conclusion that the unexpressed objective of the
exercise is to imagine that the legislature might
have intended the courts to reach an outcome
which is other than fair.’

[53] The non-marital expenditure clearly has an impact on

the issue of fair distribution. Family practitioners
(particularly of the calibre of the husband’s counsel) must
be aware that, within the narrow confine of ancillary
relief, conduct is relevant to the question of extra marital
expenditure. Conduct is one of the express factors to be
taken into account under section 7(1) of Matrimonial
Proceedings and Property Ordinance (Cap.192). It was
open to the husband to canvas the issue at the trial.
[54] Further this Court held in ARAV v VP [2011] 3 HKLRD
750 at [7] that if conduct is one of the factors to be taken
into account then the Court is not hamstrung in the
precise way in which it will recognise this factor. Hence
the Court can either add back the wasted fund to the
joint assets before distribution or it can depart from
equality in the distribution. ARAV is an example where
there was departure from equality because of a spouse’s
financial misconduct. Examples of adding back by reason
of a spouse’s financial misconduct can be found in Norris
v Norris [2003] 1 FLR 1142 and Vaughan v Vaughan [2007]

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3 FCR 533. See also Rayden’s Matrimonial Finance 9th

Ed. Para 3.71. Although BJ v MJ [2012] 1 FLR 667 at
[51] described re-attribution as a process of penalisation
and should be applied cautiously and truly where the
dissipation is demonstrably wanton, it is nonetheless a
well recognised approach.
[55] In this case the Judge found that there was no ground for
departure from equality. He held that:

[31] In closing, Mr Pang has quite properly

abandoned the point about the wife not owning
a home. He has now set out his stall on the basis
that the husband has had far greater
remuneration from the company and that this
would therefore justify more going to the wife
on a capital distribution. He has somewhat
amended this heading by describing it as
‘Inequality of Post-Separation Spending’.
[32] What the submission comes to is that since the
separation in 1999 the husband has received
more from the company which he has spent, to
a significant extent, on his subsequent families.
I have seen a figure of $28 million put forward
as the amount that he has spent on maintenance
and educating his two other families.
[33] In relation to this, it should be remembered that
whilst the husband may well have drawn more
from the company this is justified by the fact
that in the post-separation period, certainly till
2010 or even early 2011, he has played the far
greater role in its operation, added to which, as
Mr Yu correctly points out, he has put back a
great deal of money into the company in
subscribing to a rights issue by ADHL. Had he
not done so the family’s controlling
shareholding would have been diluted and
control may well have been lost.
[34] In respect of the new aspect to this justification,
relating to post-separation spending, what Mr
Pang says is that had the husband not spent these
substantial amounts on funding his subsequent
families, these amounts would now form part
of the matrimonial assets.
[35] It seems to me that the correct response to this
is to be found in the fact that post-separation
the husband was perfectly entitled to behave in

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a way that he did. Life goes on and, relative to

the assets in this case, the amounts spent were
not inordinately or recklessly high, nor were
they spent on trivial matters. Looking at
everything in the round, the husband more than
did his fair share in earning his way by taking
all of the important and difficult decisions in the
operation of ADHL.
[36] Therefore, my conclusion is that Mr Pang must
fail in this submission. There is simply no valid
reason to depart from a 50:50 split.
Notwithstanding the hitherto disastrous course
of this litigation and the consequently massive
costs incurred, there is still a very large asset pool
to fund a secure, and indeed luxurious, way of
life for these parties for the rest of their lives.

[56] Clearly both the husband and the Judge were aware of
the issue at stake and the husband had put forward
arguments against this claim (which was in a different
form but not in substance). In my view the wife is entitled
to pursue this point on appeal.
[57] The law is clear that the relevant date of assessing the
financial position of the parties for the purpose of ancillary
relief is the date of trial or appeal (Cowan v Cowan [2002]
Fam 97 at [70]). The wife’s reliance on the period
between 1999 and 2012 is because the available evidence
identified the expenditure from this period of time. The
husband’s Form E (dated 3 March 2010 and 30 June 2011
respectively) and his oral evidence confirmed the
expenditure from this period of time. I do not see any
contradiction in term of principle.

54. His Lordship however reminded himself of LKW’s

disapproval of the court indulging parties in post-mortem
investigations as to their failed marriage or conduct in ancillary relief
proceedings that tend to be costly and time-wasting but otherwise
serve no useful purpose:

[58] LKW at [62]–[69] disapproved a minute retrospective

investigation of the failed marriage in order to laud a
party’s contribution or denigrate that of the other party.
The same sentiment must of course apply to the issue of
misconduct where one party relies on misconduct to
justify a departure from equality. As Coleridge J said in
G v G (Financial Provision : Equal Division) [2002] 2 FLR

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1143 at 1155 ‘What is ‘contribution’ but a species of

conduct? … (adopted by Baroness Hale of Richmond in
Miller v Miller [2006] 2 AC 618 at [146]).
[59] In LKW, the Court of Final Appeal has stated that the
relevant conduct must be obvious and gross or inequitable
to disregard [[41]. The Court of Final Appeal then
reminded us:

[100] However, the courts have recoiled from

permitting the parties to indulge in a post
mortem of their marriage in order to find fault
with each other or to air ‘their mutual
recriminations and go into their petty squabbles
for days on end’. As Sir George Baker P stated
in Campbell v Campbell, ‘ … everything should
be done by the court to avoid costly, indecent
and time-wasting investigations’ regarding
conduct in relation to ancillary relief
proceedings. Otherwise the court will be faced
with ‘ … a lengthy, costly and, most likely,
pointless investigation stretching over days,
when allegations and counter-allegations are
made by the ex-spouses or spouses, one against
the other’. These sentiments are just as pertinent
today and are reflected in the fourth
underpinning principle referred to above.

[60] And at [131] it is stated that the decision is fact-specific

and discretionary:
E.6 Step 5: Deciding the outcome

[131] It is worth reiterating that, having gone through

the processes I have compendiously called ‘Step
4’, the court is not bound to depart from
equality in the division of the parties’ assets even
if one or more of the factors considered are
engaged on the facts. The weight to be given
to such considerations is a matter of discretion
for the court. Stepping back and looking at the
overall impact of the factors found to be
relevant, the court may decide that certain
factors carry such weight that a departure from
equality is called for. The decision is fact-specific
and discretionary. But where there is a
departure, the court should explain its basis since

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the articulation of reasons provide a useful check

on the fairness of the outcome.

55. His Lordship went on to consider whether in principle

non-marital expenditure should be added back, and if so how in
each case justification for adding back is fact-specific and ultimately
an issue of fairness for the court’s consideration:

[61] The facts of each case are different. The wife in the Court
below and here is not asking the Court to examine the
history of the husband’s philandering as a cause of the
breakdown of the marriage. She simply invited this Court
to look at the husband’s own evidence which disclosed
these expenditures. Hence it is not strictly a situation
envisaged and disproved by LKW. The real issue is
whether, first, as a matter of principle the non-marital
expenditure should be added back and second, on the
existing evidence an adding back of the non-marital
expenditure is justified. In Norris the husband’s gift of
jewellery to his mistress valued at £30,000 was ordered
to be added back to the husband’s assets. The issue of
fairness was considered. Bennett J held that … (see above)
[62] In Norris the husband had moved in with the mistress and
had two children. In respect of the husband’s obligations
to her and the children, Bennett J held that … (see above)
[63] Mr Yu submitted that Bennett J was referring to the
future and not to the past expenditure already incurred
by the husband. That may be so but the real point is that
Bennett J considered the issue of fairness.
[64] In H-J v H-J (Financial Provision: Equality) [2002] 1 FLR
415, the parties were married for 25 years. The husband
had association with another woman and a son Samuel
was born of their relationship. Coleridge J refused to
make allowance for the provision of Samuel in the
financial provision of the wife. He also refused to add
back the money spent by the husband on Samuel. He
held at 428 that:
“In cases where every pound has to be considered and
weighed in the division between the parties, of course,
by necessity and in the real world, it is necessary to ensure
that there is enough money to go around for all. But
where, as here, there are sufficient resources whether you
split them 45/55 or 50/50, it is not, in my judgment,
necessary to make allowance in the calculation for the

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figures that the husband contends for in relation to

Samuel. The assumption of this liability is entirely the
husband’s choice, and, in my judgment, principally his sole
responsibility. To ask the wife, in effect, to take less and/or
share in the cost of supporting this further child cannot, I say
straight away, in my judgment, be fair. In cases of this kind
I think it would normally be wrong in principle to
include in calculations liabilities to children from further
relationships. I am not prepared to take those into account
here.
However, by the same token, nor am I prepared to add back the
costs that have already been expended by Mr H-J. I see the force
of the argument, but at the same time they were incurred, in my
judgment, they were reasonably and honestly incurred, and
again, chaos will reign in these cases if adding back generally is
allowed as part of the mechanism except in exceptional cases.”
(Emphasis added.)
[65] It is not necessary to come to a view on whether
Coleridge J was correct or not on his refusal to add back.
Cases like this depend very much on their facts. It is, after
all, an exercise of discretion. The point to make is that
Coleridge J recognised the issue of fairness and adding
back in exceptional cases.
[66] The Court is of course not a court of morals. If the
husband chose to be a philanderer and have mistresses
and children born from these relationships, it is not for
the Court to condemn his behaviour as being immoral.
But when these activities caused funds (which should be
in the matrimonial pot) to be depleted, then clearly the
Court is entitled to ask whether unfairness has been
caused to the other spouse because of the non-marital
expenditure. If this matter is considered under the ambit
of conduct, then one has to examine whether the financial
misconduct by way of depletion of the matrimonial funds
(and not the husband’s moral conduct in respect of his
association with other women) is obvious and gross or
inequitable to disregard. The amount, the duration and
the number of non-marital relationships involved are
some of the relevant considerations. The distinction may
be a fine one but nonetheless a real one. The reliance by
the husband on comments in Roberts v Roberts [1970] P
1 that ‘… no hard and fast line can be drawn between
‘legal’ and ‘moral’ obligations …’ is not helpful and does
not advance his case. When the Court referred to
‘wanton’, ‘reckless’ or ‘extravagant’ financial conduct or
‘wastage’ of matrimonial assets, they are merely

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descriptions or illustrations of conduct which fulfilled the

threshold requirement. These terms do not constitute
separate categories of misconduct. This does not require
elaboration.

56. In reaching the conclusion that there would not be adding

back of the husband’s non-marital expenditure in the circumstances
of this case, His Lordship explained:

[67] In principle, I find Mr Fung’s submission that the wife

should not subsidize the expenditure spent on the
husband’s non-marital families from her share of the
matrimonial pot to be indefensible. This non-marital
expenditure is not compatible with the principle of
fairness. A comparison with examples like the expensive
hobbies of a spouse is simply not appropriate. As Lord
Nicholls of Birkenhead said in Miller v Miller at [9]:

[9] “The starting point is surely not controversial. In

the search for a fair outcome it is pertinent to have
in mind that fairness generates obligations as well
as rights. The financial provision made on divorce
by one party for the other, still typically the wife,
is not in the nature of largesse. It is not a case of
‘taking away’ from one party and ‘giving’ to the
other property which ‘belongs’ to the former. The
claimant is not a supplicant. Each party to a
marriage is entitled to a fair share of the available
property. The search is always for what are the
requirements of fairness in the particular case.”

…
[69] A further difficulty is about the assessment of the
evidence. The available evidence is extremely brief and
the Judge had not made findings on the individual items.
The individual items can be divided into two categories.
The first not being related to the husband’s non-marital
families and the second related to those families.
[70] In respect of the first category, there are the donation to
the university and the graduation gift to M. On appeal,
this Court is placed in an almost impossible position to
find such expenditure amounts to financial misconduct
on the part of the husband simply by its size and nature.
One also has to bear in mind that M is the natural son of
the husband and wife.

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[71] In respect of the second category, the amount spent on

the first family is about $7.9 million, the second family
about $26.9 million and the third family about $28.8
million. In terms of the expenditure spent on these three
non-marital families, a distinction has to be drawn
between the first two families and the third (i.e. the
current) family. In respect of the current family, the
husband’s association with B began after the parties’
separation and the decree nisi. Other than the formal
decree absolute, the husband and wife were by then
leading separate lives. The husband’s expenditure is not
strictly a financial misconduct during marriage situation.
[72] As to expenditure on the first two families, while I accept,
in principle, that it is unfair to the wife and may amount
to financial misconduct and in an appropriate case should
be added back to the joint assets, however, I do not find
the Judge’s decision to be plainly wrong when he refused
to make adjustments in equal distribution. While the
Judge was in error on the number of companions and
children the husband has had outside the marriage, this
is not something so fundamental as to vitiate his exercise
of discretion. More importantly he had properly regarded
the contribution of the husband in the post-separation
period. Despite the force of Mr Fung’s submission, with
reluctance, I will not add back the expenses.

57. Sitting in the same Court and whilst agreeing with Cheung
JA’s conclusion, Lam V-P found it necessary to examine the
relationship between the two routes to achieve fairness in dealing
with non-marital expenses at the beginning of the judgment:

[1] Subject to what I shall say below, I respectfully agree with

the judgment of Cheung JA which I have read in draft.
In respect of the adding-back of non-marital expenditure,
I would arrive at the same result by a different route.
There are two alternative ways to achieve a fair result in
dealing with non-marital expenses.

(a) Adding back of specific sums as in Norris and

Vaughan;
(b) Departure from equal distribution as in ARAV.
No matter which route one pursues, the ultimate
goal is to achieve fairness.

[2] In the context of ancillary relief, bearing in mind the

stricture against costly, indecent and time-wasting post

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mortem, only conduct which is so obvious and gross that

it would be inequitable to disregard may (but not must)
require adjustment on account of fairness.
[3] No matter which route one is pursuing, fairness should
lead to the same result in terms of whether any adjustment
should be made.
[4] Thus, not every item of non-marital expense can be added
back even though it could be said that such expense was
a depletion of the matrimonial pot and as such it reduces
the share of the spouse who was not benefited from such
expenditure. By way of example, in the present case, the
wife had spent substantial sums by way of legal costs in
her litigation with the company concerning the ownership
of the property. The husband did not derive any benefit
from it. There is no suggestion that the expenses should
be added back.
[5] Assessment of fairness depends on a global assessment. In
this respect, the first instance judge is usually in a better
position to make such assessment when an appeal is
confined to the narrow limit of certain aspects of the case
which the parties chose to appeal against.
…
[10] The relationship between these two routes has not been
subject to much discussion in the authorities. In ARAV
both Cheung JA and Fok JA considered the submissions
of add-back under the umbrella of misconduct. In that
case, it was held that it is a matter of the discretion of the
judge to decide what would be the appropriate relief in
light of a finding of such misconduct.
[11] Following that approach, whether the conduct is so
obvious and gross that it would be inequitable to disregard
must be the threshold. The Norris route can be regarded
as a means to deal with such misconduct. But it suffers
from the drawback that one may lose sight of the overall
assessment on fairness in light of other factors since in
adding-back one would usually focus on the nature of
the expenditure. For this reason, a higher threshold is
adopted for this approach in the English cases where the
frittering away of assets was described as ‘wanton’,
‘reckless’ or ‘extravagant’. Thus, the English cases
suggested a cautious approach is to be adopted: Vaughan;
H-J and BJ. The rationale was explained by Mostyn J in
N v F (cited at [50] of BJ) in terms of the separate
ownership of property between husband and wife,
“In this country we have separate property. If a party
disposes of assets with the intention of defeating the other

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party’s claim then such a transaction can be reversed under

s.37 of the MCA 1973. Similarly, where there is ‘clear
evidence of dissipation in which there is a wanton
element)’ then the dissipated sums can be added back or
re-attributed … But short of this a party can do what he
wants with his money …”
[12] In the present case, the wife conceded before the Judge
that the spending in question was not reckless, see para.20
of Mr Pang’s closing submission.
[13] In light of that, the Judge can hardly be criticised for not
granting any relief by way of adding-back.
[14] Before us, Mr Pang did not feel able to characterise these
expenses as wanton, reckless or extravagant. Instead, he
contended a wider doctrine of adding back of non-marital
expenses. Whilst he accepted (as he had to) that not every
item of expenditure of non-marital nature has to be added
back, he tried to persuade the court to add back the
expenditure in question because they stemmed from
conduct which go to the destruction of marriage.
[15] With respect, such an approach is wrong in principle
because it would necessitate the court to examine whether
the conduct in question caused the destruction of
marriage. This is precisely what the authorities said the
court should not do.
[16] Nor can this objection be met by formulating it in terms
of conduct which is so obvious and gross that it would
be inequitable to disregard. For reasons set out above, if
one were to restrict one’s consideration to the nature of
spending as opposed to an overall assessment of fairness,
a higher threshold and a more cautious approach should
be adopted.
[17] For these reasons, I would reject Mr Fung’s submission
for adding-back non-marital expenditure.

58. In the present case, at least with the first two payments the
Husband made to C in 2011 in the total sum of $1.2 million, I do
not think there is any difficulty for the Wife to characterise them
as “wanton”, “reckless” or “extravagant” in terms of their amount
relative to the parties’ standard of living during the marriage and
the overall size of their matrimonial pot, or the reasonableness of
their payments in the circumstances, which the Wife argues were
simply extravagant gifts to his girlfriend. Even if the first payment
of $1 million was indeed as alleged by the Husband just to help out
a good friend in need, in my judgment it would still amount to
“wanton” or “reckless” when he later let her keep the money after

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she decided to forego her plan to study abroad, and instead gave
her a further sum of $200,000 without any good reason other than
the fact that they had by then started dating, which is in my
judgment no less “extravagant” than those non-marital spending in
Norris or Vaughan. As a matter of fact, had the Wife, for example,
donated the same amounts to her church during the same period
of time, I have no doubt that the Husband would have insisted that
they be added back to the matrimonial pot or re-attributed to her
assets.
59. The Wife further argues that the same approach should
apply as well to the Husband’s monthly payments of
$20,000–$30,000 to C as her pocket money since November 2011,
and at the average sum of $25,000 per month for the next 4 years
up to the trial would amount to some $1.3 million which she submits
as further extravagant spending so substantial that should be added
back to the matrimonial pot which the court should not disregard,
given the fact that C has her own earning capacity and is a
non-dependent.
60. Whether or not it is right or fair for the Husband to spend
this kind of money on his girlfriend after separation as part of his
spending on his lifestyle without being accounted for in his assets
or the marital pot, which Mr Todd submits is not misconduct, any
more than if he had spent the money on shooting or yachting, it
would be relevant for me to first consider such spending within the
context of the standard of living and lifestyle which the parties used
to enjoy as well as their respective financial resources and expenses,
starting first with the Wife’s which are relatively less controversial.

Wife’s financial situation

61. As noted above the Wife has since 2014 been promoted
to her present position in XY as Contract and Risk Manager, and
for the financial year 2014/2015 her monthly income was
$57,586.50. She has since updated her current income to $66,922
per month on average [E/338].
62. Much has been said of the Wife’s non-disclosure of her
other rights and benefits under her employment terms with xxx
XY, and while the Husband did not go so far to say that she was
dishonest, she was nevertheless criticised for being careless and
casual in her disclosure about her shares benefits and long service
payment, and for her failing to produce her employment contract
for his inspection.
63. The Wife has denied any wrongdoing on disclosure,
claiming that she has answered all the queries raised by the Husband
of her employment terms and benefits by her subsequent affidavits.
As far as her long service payment, which the Husband estimated

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at more than $338,000 which was never mentioned by her, but

under the labour law in Hong Kong as I understand, long service
payment is payable only when the employee is redundant by the
employer. In the present case, there is no evidence or suggestion
that that is going to happen to the Wife’s employment. I accept
that she has made full and proper disclosure of all of her financial
resources.
64. As for her monthly expenses and those of the daughters,
the Wife put their total amount at just below $60,000, with the
following breakdown in her Form E as follows:

General Household Expenses:

Food HK$ 13,000
Household HK$ 3,000
Insurance HK$ 100
Domestic Helper HK$ 3,740
Others HK$ 400
Sub-Total: HK$ 20,240
Personal Expenses:
Meals out of home HK$ 4,800
Transport HK$ 800
Clothing/Shoes HK$ 1,000
Personal grooming HK$ 1,500
Entertainment/presents HK$ 600
Holiday HK$ 900
Tax HK$ 1,800
Insurance HK$ 4,333
Contribution to parents HK$ 4,500
Others including church donation HK$ 4,100
Sub-Total: HK$ 24,333
Children's Expenses:
School fees HK$ 1,300
Extra tuition fees HK$ 1,240
School books and stationary HK$ 800

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Transport to school HK$ 1,900

Medical/Dental HK$ 300
Extra-curricular Activities HK$ 1,000
Entertainment/presents HK$ 4,000
Holidays HK$ 1,800
Clothing/Shoes HK$ 1,000
Lunch and pocket money HK$ 1,000
Other Transport HK$ 1,000
Sub-Total: HK$ 15,340
Total: HK$ 59,913

65. These monthly expenses of the children at $15,340 have

not of course included their share of the general household expenses
of $20,240, and at their present age and needs it would be fair and
proper in my view to apportion 2/3 thereof to them at $13,493 per
month, thus bringing their total expenses to $28,833, or at $14,416
for each on average per month. Also as noted above, since he has
not been paying for the daughters’ maintenance since separation in
June 2011, the Husband has now agreed to capitalise such
maintenance in arrears totalling $500,000 to be paid within 4 months
of Decree Absolute.

Husband’s financial situation

66. The Husband is described as a senior junior barrister having
been in practice for more than 20 years, and his earnings for the
past 4 years, based on his tax returns and set out in both his narrative
affidavit and his Closing Submission, are as follows:

Financial Year Gross Income Net Income Average

Monthly
2011/2012 HK$2,323,875 HK$1,357,746 HK$113,068
2012/2013 HK$4,305,368 HK$3,279,073 HK$209,084
2013/2014 HK$4,052,275 HK$2,620,217 HK$194,667
2014/2015 HK$4,137,093 HK$2,440,970 HK$176,809

67. It is clear from these figures that his earnings have gone up
quite substantially since separation, but it is also his evidence that
such earnings have fluctuated greatly from month to month and

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cannot be guaranteed, with months when his gross income was less
than $100,000, and for a senior barrister like him, his earnings would
not escalate substantially unless appointed as a Senior Counsel, for
which he made his application in 20xx but it turned out unsuccessful,
and according to him was due to damage caused by certain wrongful
breach of confidentiality by the Wife and/or her lawyers as detailed
in his narrative affidavit [B/182-188], of which I will have more to
say later in this judgment, but the upshot is that he now intends to
apply to be a judge which is something he has always aspired for
and did sit as a Deputy District Judge back in 20xx, as he said in
para.160 of his affidavit [B/173]:
For a senior junior barrister like me, the only plausible career
change is to join the Judiciary and to become a District Court
Judge. The monthly salary of a judge of the District Court is about
$160,000. Yet, it is uncertain whether I would be appointed as
one.
68. While certainly I cannot disagree with that last sentence
of the Husband, he was in fact not quite up-to-date as to the
monthly salary of a District Court Judge, which was pointed out to
him at the trial, as according to the recent recruitment exercise
information provided by the Judiciary Administrator in late May
2016 for that position, the pay scale is currently $180,650 as entry
pay and up to $191,500 per month, plus fringe benefits including
paid leave, leave passage allowance, medical and dental benefits,
education allowances for children, and housing benefits in the form
of a non-accountable cash allowance which is currently $38,560 per
month, which would give him a total take-home pay of $219,210
per month if the Husband is to apply and be successfully appointed
in this recruitment exercise, not to mention his entitlement to a
substantive pension upon retirement.
69. There was however no evidence from him at the hearing
in April 2016 that he would make the application this year, and that
at the time the recruitment exercise had not yet been announced
by the Judiciary. Be that as it may, on the basis of the Husband’s
figures as reflected by his tax returns of his current practice, there
does not seem to be much differences in earnings between him as
a senior junior barrister and a District Court Judge, and that either
way even a minimum average ballpark figure of $200,000 per month
would still be about 3–4 times more than that of the Wife, which
seems to be the crux of her argument for a sharing of that “enhanced
earning capacity”. Before considering this argument of the Wife,
and let me stress here that she does not in fact accept that that is
all the Husband can earn, it would be relevant to first look at what
was the standard of living of the parties during the marriage and
what the Husband now claims to be his current needs and expenses,

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which she believes should shed more light on the true picture of
his earnings and/or earning capacity.

Standard of living
70. There is no dispute that the family did have a frugal lifestyle
throughout the marriage, as described by the Husband in his
affirmation as follows [B/146]:

[47] After getting married and up to the date of separation,

W (the Wife) and I have lived together in the Tsuen Wan
area in private housing. W, D1, D2 and one domestic
helper continue to live in the Matrimonial Home …
[48] W is a devout Christian and she had always been frugal
and had insisted that the family live in a simple manner
and the benefits provided by AB to its employees
supported her preferred lifestyle. By way of example, xx
XY provides free transportation to its office in Tai Po
and free meals are provided to employees therein. As for
the family, the usual modes of transport were by MTR,
public buses and minibuses. During the hot summer
months, W did not allow the family to turn on the
air-conditioners even when D2 and I suffered from
outbreaks of eczema. Even though I obtained full
membership to the Hong Kong Jockey Club … in about
2001, our family seldom used the clubhouse or other
facilities of the Jockey Club. Up until we separated on
29 June 2011, I purchased necessary casual clothing from
inexpensive chain stores. My suits were made by a budget
tailor in Sai Wan. W herself usually only bought items
of clothing during sale periods from inexpensive chain
stores.
[49] On weeknights after work and school, W, our daughters
and I usually had dinner at home prepared by the
domestic helper. On Saturdays, we usually had dinner
with my father, who is retired, and my sister in Pokka
Café, an inexpensive chain restaurant in Tsuen Wan.
When we did dine out on other occasions, we usually
dined in similarly priced restaurants in the Tsuen Wan,
Jordan or Yau Ma Tei area.
…
[52] W planned our family holidays abroad around once a
year taken with our daughters. We usually travelled by
budget airlines if available, stayed at three to four-star
hotels (or upgraded hotels and/or motels), and took public
transportation whenever possible.

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71. This frugal lifestyle was not just for the parties themselves
but also for their daughters, as the Husband elaborated in his
affidavit:

[53] Likewise, W and I maintained a simple lifestyle for D1

and D2 prior to our separation in June 2011. We do not
want them to develop materialistic outlook on life …
[54] The main activities outside of school of D1 and D2
included visiting my parents’ home which is also in Tsuen
Wan on weekdays, visiting the public library to borrow
books and having one meal away from home with W
and I on Saturdays, playing badminton with my father
and my sister, attending church on Sundays and finishing
the week off by dining out with my father and my sister
at Pokka Café. Apart from weekly private piano lessons,
D1 and D2 had no other extra-curricular activities which
required additional payments by W or me …
…
[58] W and I used to only buy presents for D1 and D2 for
Christmas and for their birthdays and the value of each
gift would usually not exceed HK$500.00 …
…
[61] Up to the date of separation, W and I rarely had to
purchase clothing (except for school uniforms) for D1
and D2 as our friends and my relatives would gift clothes
for them. I routinely purchased one pair of athletic shoes
for each daughter each year with their growing needs.

72. On the basis of this indeed very frugal standard of living

and according to his Form E, the Husband is currently meeting the
following post-separation expenses of the Wife and the daughters:

(a) mortgage instalments of both Flats C & D HK$ 11,200

(b) Rates of both flats HK$ 520
(c) Utilities of both flats HK$ 4,800
(d) Management fees of both flats HK$ 2,020
(e) Insurance for Wife and daughters HK$ 7,550
(f) Entertainment/pocket money for daughters HK$ 3,500
Total: HK$ 29,590

73. It is however instructive to note that the Husband has

substantially raised his own standard of living since he separated

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from the Wife in June 2011 for which he gave the following
explanations and justifications [B/151]:

[67] After separation from W, to establish my own personal

belongings and to improve my image and/or appearance
in support of my business, I began to purchase clothing,
shoes and accessories commensurate with expectations of
the image of a barrister in a large and established set of
chambers.
[68] In January 201x, upon assuming the post of xxx, my social
circle substantially widened. I became acquainted with
many more people within and outside of the legal
profession. I began to spend more on socializing and
entertaining. I believe that my greater exposure helped
very greatly in developing my practice.
[69] In about September 2012, I moved into my current
rented residence at … Bel-Air on the Peak Island South,
Residence Bel-Air … Hong Kong (My Current
Residence).
[70] My Current Residence has a saleable area of about 912
square feet and a net area of 723 square feet. Residence
Bel-Air where My Current Residence is situated is a
residential complex popular amongst lawyers and judges.
In Tower xxx alone where I live, one senior counsel and
two other junior counsel live here as well, albeit in the
much larger flats. In about September 2014, I renewed
the tenancy with the landlord at the same monthly rent
of $32,000 for a term of two years.
…
[72] My main form of transportation …, is by way of taxi
when travelling on Hong Kong Island and by way of
public transport when travelling to Kowloon or the New
Territories.
[73] As my schedule is now more flexible without having to
accommodate the school and work schedule of our
daughters and W, I have been going on holidays overseas
more often than prior to the separation for much needed
relaxation from the highly stressful work of a barrister.
On average, I went on long-distance vacations overseas
about twice a year and on a few short-distance vacations
when my diary allowed. I have also begun to travel by
flying in business class for long distance flights so that I
could return to work refreshed upon arriving in Hong
Kong.
[74] I believe that after separating from W, the changes to and
improvements to my lifestyle and the increased

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investments in my career in the form of time and money

contributed to the substantial enhancement to my career
prospects.

74. It is with this changed and improved lifestyle of his since

separation that the Husband put his current monthly expenditure
in his said Form E at $342,960 as follows [B/20-22]:

General Expenses:
Rent HK$ 32,000
Mortgage instalments for Flats C&D HK$ 11,200
Utilities for both Wife and himself HK$ 4,800
Management fees for Flats C&D HK$ 2,020
Food & household expenses HK$ 12,000
Insurance for Wife HK$ 4,600
Rates for Flat C&D HK$ 520
Sub-Total: HK$ 67,140
Personal Expenses:
Meals out of home HK$ 10,000
Transport HK$ 6,000
Clothing/Shoes HK$ 16,000
Personal grooming HK$ 2,000
Entertainment/presents including for legal HK$ 35,000
practice
Holidays HK$ 18,000
Medical/dental HK$ 2,000
Tax (of both parties) HK$ 64,170
Insurance HK$ 19,200
Chambers rent and expenses HK$ 74,000
Miscellaneous expenses of legal practice HK$ 21,000
Hong Kong Jockey Club membership fees HK$ 2,000
Sub-Total: HK$ 269,370
Children's Expenses:
Entertainment/present HK$ 3,000

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Insurance premia HK$ 2,950

Lunches and pocket money HK$ 500
Sub-Total: HK$ 6,450
Total: HK$ 342,960

75. On this basis the Husband would need to earn more than
$4 million for the year to meet these monthly expenses, but
notwithstanding that they have already exceeded his stated current
average income by some 50%, he now proposes to set aside a further
substantial sum from his monthly income for his future needs
including those of the family which he plans to set up with C after
the divorce as follows.

Husband’s future and retirement plan

76. The Husband’s evidence on this is first set out in detail in
paras.121–132 of his affidavit [B/164-167] which can be summarised
as follows:

(a) he intends to retire by 20xx at age 65 but his MPF is wholly

insufficient for his retirement protection;
(b) he also plans to marry his girlfriend C after these proceedings
to start a family with children of their own, for which he
hopes to be able to purchase a flat for their home in Bel-Air
Residence of about the same size as his current rented flat,
but on his present earnings that would not be fulfilled in the
near future;
(c) he estimates that such a flat would cost between $12–$13
million, and to purchase it at or around his age of 50 when
he would still be able to obtain a mortgage for 15 years
payable until his retirement at 65, he figures that if he is to
make a down payment of 50% of the purchase price so that
the monthly mortgage payments would be within his means,
he would have to save up $7 million by then to meet that
down payment and the purchase expenses including estate
agent commission, legal costs and stamp duty etc over the
next 5 years at the rate of just over $118,000 per month;
(d) furthermore, he plans to save an additional sum of $33,400
per month for the daughters’ future overseas tertiary school
fees and hopes to be able to have $1 million set aside by 2018
on top of the proceeds of 2 insurance policies purchased by
him with AIA for that purpose;

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(e) lastly, he proposes to put aside $40,000 per month for his
retirement fund which he hopes will provide him with $10
million in 20 years;
(f) in summary, he plans to set aside a total sum of $173,400 per
month from his income to meet those needs of his, which he
insists has not taken into account the future expenses of his
new family with his girlfriend and the need to save for their
future and their children.

77. Mr Man for the Wife however submits that, taking into
account his current monthly expenditure at $342,960, if indeed the
Husband needs to save a further sum of $173,000 per month for
his future needs, realistically he would be expecting to earn at least
$540,000 per month or close to $6.5 million per annum, which he
agreed under cross-examination to be his best estimation and his
hope to achieve.
78. Mr Man therefore argues that it is clear that these figures,
based on the Husband’s own sworn evidence, must have been
regarded by himself to be realistic and achievable, as otherwise it
would make no sense for him as an established barrister to put them
forward as evidence, and to put this in context, this “best estimation”
of his future income is almost 10 times of the Wife’s average
income.
79. Indeed, Mr Man submits, this expectation of earning high
income by the Husband is indicated by the fact that at one point
he had offered $130,000 monthly maintenance to the Wife plus
Flats C and D, as he confirmed in para.189 of his narrative affidavit
[B/183]. To be fair to the Husband, that paragraph of his also clearly
indicated that the offer was made on his belief that he could afford
it should his SC application made in xxx 20xx be successful and
that his income “would rise exponentially”. However, the fact is
that his application, for whatever reason, turned out to be
unsuccessful.
80. As noted above, he has in fact put the reason down to what
he alleged to be wrongful disclosure by the Wife and her entire
legal representatives, each and every one of them named and
identified in his narrative affidavit, of his confidential information
in his Form E and other documents filed in these proceedings but
specifically his payment of the $1 million to C, to third parties
including members of the Bar, thereby causing his application to be
rejected by the Chief Justice.
81. Whilst it is not necessary for me to deal with this allegation
of the Husband, as it was never raised at the trial, quite rightly so
on the part of his counsel given its sensitive and inflammatory nature,
it appears to have been based essentially on suspicions rather than
any direct or solid evidence, and hence realistically incapable of

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being substantiated but seems to me for the purpose of putting all

the blame of his unsuccessful SC application on the Wife, and at
the same time, no doubt unintentionally, trivialising the whole
evaluation process of such a solemn and important application of
his profession if he truly believed that was the reason why his own
application was rejected.
82. There are other examples of such self-serving blame game
of the Husband against the Wife in his narrative affidavit over the
progress of his career, such as his allegation of having to pick her
up every evening after work and to tend to her needs and those of
the daughters thereby preventing him from carrying out other
activities which would serve to benefit and advance his career:

[44] As W was focused on building her own full-time career

throughout the marriage, she had little positive
contribution towards the building of my career
throughout the years. For example, since I had to pick
her up every evening after work and to tend to her needs,
I could not stay beyond 5:30 pm to work in chambers
except for extraordinary exceptions. Also, as socializing
and entertainment with friends (apart from people from
church) including with peers from the legal circle was
discouraged by W, my professional contacts and contacts
with instructing solicitors remained scarce up to the time
of our separation on 29th June 2011. As a result of my
choice to put the needs of W and the two girls above my
own, my career remained stagnant as compared with
many of my peers for many years …
…
[46] In about xxx 20xx after separating from W, I assumed
the post of … of the Hong Kong Bar Association {the
Bar} which substantially widened my social circle. If I
were still living with W, I would not be able to discharge
the heavy and time consuming duties and responsibilities
of … whilst practising full-time. Upon taking up the post,
I became acquainted with many more people within and
outside the legal profession. With these opportunities at
my doorstep, I believed that I should invest more on
building new relations and on my career in order for my
career to improve. By adopting a new lifestyle as I will
explain herein below, I was able to do so and as a result
my career began to improve noticeably.

83. Concerning his post-separation financial improvement, it

is necessary to first note that in his Form E the Husband put his
annual income in net amount after deductions for his legal practice

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expenses including rent and other Chambers expenses. For

2011/2012 he gave a net profit of $1,357,748 which would average
$113,145 per month, and for 2012/2013 a net profit of $3,279,073
or a monthly average of $273,256 [B/19], but when he set out his
monthly expenditure in the same Form E, he included the rent and
miscellaneous expenses of his legal practice respectively at $74,000
and $21,000 as part of his personal expenses [B/20], which seems
to me double-counting and gives the impression that his then
monthly expenditure exceeded his monthly income.
84. As pointed out by Mr Man for the Wife, there also appears
to be inaccuracies in his financial statements and business expenses,
or what seems to me double-counting of some of his expenses stated
in his Form E when he in fact already in his Profit & Loss Account
for 2014 [C2/418, 420] set off similar expenses from his gross
income, such as $295,584 ($24,632 pm) for business entertainment,
$4,577 for medical expenses, or $42,855 for local and $5,579 for
overseas travelling.
85. Whatever the true position of his post-separation income,
and I agree that the Wife does have valid reasons to suspect that
he is capable of earning more than he has disclosed, there is no
question that he has, as put by the Wife, been living in luxury since
their separation as follows:

(a) he now lives on the Peak while his former family lives in
Tsuen Wan;
(b) he spends $16,000 per month on clothing which is 16 times
that of hers at $1,000;
(c) he spends $18,000 per month on holidays which is 20 times
that of hers at $900;
(d) he takes taxi instead of MTR to work and flies business class
for overseas trips;
(e) he spends $35,000 per month on meals with solicitors and
another $10,000 on meals out of home.

86. Mr Man submits that this claim of the Husband that his
elevated spending is justified because he has adopted a new modus
operandi for his business, and that he must spend more on himself
for his clothes, meals and residence, etc in order to be able to earn
more as a barrister, must be rejected as it is contrary to common
sense, since a barrister’s earnings depends on his ability, his
experience, his learning, his reputation and rapport with clients and
courts, and not on how he dresses. I cannot disagree.
87. Mr Man further submits that, even given the opportunity
at the trial, the Husband was unable to explain how his elevated
personal expenses could contribute to the success of his practice,
and hence his attempts to say that his reputation and learning built

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throughout the marriage is now of no value to him must be rejected,

which Mr Man argues only demonstrates his willingness to give
evidence as favourable to him, regardless of what he believes to be
the truth. Again I agree, which was in fact the impression that I
had from reading his narrative affidavit and which seems to me, as
I noted above, both self-serving and misleading.
88. Another example of such claim of the Husband, the Wife
argues, is the need to save $33,400 per month for $1 million by
2018 for their daughters’ tertiary education which she says is
unnecessary, as the AIA insurance policies purchased for them during
the marriage were for that purpose and would be adequate for
attending local universities in Hong Kong, and which has always
been their plan according to the Husband’s own evidence in his
narrative affidavit:

[63] Regarding D1 and D2’s tertiary education, they had both

always indicated to W and me that they wish to study
medicine in Hong Kong for their tertiary education as
they hope to practice as medical doctors in Hong Kong
to help people and I had always planned that D1 and D2
would pursue their tertiary education in Hong Kong.
[64] In order to practice in Hong Kong as a medical doctor,
all medical graduates must first register as medical
practitioners with the Medical Council of Hong Kong
… with the exception of graduates of the University of
Hong Kong and the Chinese University of Hong Kong.
Hence, overseas medical graduates must study for and
pass the MCHK’s Licensing Examination and successfully
complete a period of pre-registration internship training
and assessment in approved hospitals or institutions. The
passing rate for this stringent process relating to overseas
medical graduates has remained very low in the past years,
therefore in order to practice in Hong Kong, it is almost
imperative that D1 and/or D2 pursue their tertiary
education in Hong Kong.
[65] … Since entering Secondary 4, D1 has told me during
our weekly Saturday meetings that she has developed an
interest in economics and that she wishes to study
economics at university in Hong Kong instead. In fact
she has consistently obtained high scores in the subject
of Economics.
[66] D2 is consistently ranked top in her grade and she has
told me that her plans to study medicine and to become
a medical doctor in Hong Kong remains unchanged.

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89. It is on this basis that the Wife argues that the Husband’s
claim to have to save up as much as $33,400 per month for the
daughters’ tertiary education as if for the much more expensive ones
in overseas is unconvincing. Whilst accepting that future education
plans may change, the proposed savings of the Husband for that
purpose seems to me unjustified, if not downright contradictory.
90. In the premises the Wife believes that the Husband will
have the following disposable income as a barrister or a judge
according to her Closing Submission [88]:

(a) as junior counsel at $5m gross p/a or $290,000 net per month;
(b) as senior junior counsel at $8.5m gross p/a or $390,000 per
month net;
(c) as District Judge at $210,000 per month;
(d) as High Court Judge at $260,000 per month.

91. As already noted above, while it is true that there is no

evidence that the Husband has actually applied to join the Bench
and at best it can be said to be just his ambition or hope in the
future, there is no doubt that he can well earn more than $4 million
gross per annum and averaging more than $200,000 per month as
a senior junior counsel. Ultimately, Mr Man submits, whatever his
future income or expenses, it would be wrong for him to be allowed
to keep all the fruits of the matrimonial partnership, and not to
share with the Wife any of his enhanced earnings and earning
capacity, to which I shall now come to examine the case law and
principles, which can in some cases be far from clear and potentially
confusing.

Sharing of “enhanced earning capacity”

92. The Wife’s case is that since the parties and their daughters
had throughout the marriage lived frugally and accumulated limited
capital, during which the Husband was able to build his reputation
and as a result his law practice has flourished, yet when the parties
were finally about to reap the fruits of his enhanced earning capacity,
the Husband left the marriage with his paramour to start a new
luxurious lifestyle whilst leaving behind his old family in parsimony.
93. The Wife therefore argues that by his proposal the Husband
is effectively asking the court to approve his current high-spending
lifestyle made possible by his enhanced earning capacity built during
the marriage, and to reap all their benefits with his paramour without
giving due recognition to his former wife’s efforts in helping to
build it, which she says cannot be right and that the award should
reflect some sharing of his enhanced earning capacity.

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94. In other words, Mr Man submits for the Wife, that this is
a sharing case where the parties’ needs will be adequately met, and
hence the surplus created by the Husband’s enhanced earning
capacity should be shared as it is part of the fruits of the marriage
partnership, and fairness dictates that the award to the Wife should
give effect to that by accepting her proposal instead of the
Husband’s.
95. On the significance of a husband’s substantial earning
capacity, it would be relevant to remind myself of what Baroness
Hale said in Miller v Miller / McFarlane v McFarlane [2006] 2 AC
618 at 660:

[140] A second rationale, which is closely related to need, is

compensation for relationship-generated disadvantage. Indeed,
some consider that provision for need is compensation
for relationship-generated disadvantage. But the economic
disadvantage generated by the relationship may go beyond
need, however generously interpreted. The best example
is a wife, like Mrs McFarlane, who has given up what
would very probably have been a lucrative and successful
career. If the other party, who has been the beneficiary
of the choices made during the marriage, is a high earner
with a substantial surplus over what is required to meet
both parties’ needs, then a premium above needs can
reflect that relationship-generated disadvantage.
[141] A third rationale is the sharing of the fruits of the matrimonial
partnership …
[142] Of course, an equal partnership does not necessarily
dictate an equal sharing of the assets. In particular, it may
have to give way to the needs of one party or the
children. Too strict an adherence to equal sharing and
the clean break can lead to a rapid decrease in the primary
carer’s standard of living and a rapid increase in the
breadwinner’s. The breadwinner’s unimpaired and
unimpeded earning capacity is a powerful resource which
can frequently repair any loss of capital after an unequal
distribution: see, eg, the observations of Munby J in B v
B (Mesher Order) [2002] EWHC 3106 (Fam); [2003] 2
FLR 285. Recognising this is one reason why English
law has been so successful in retaining a home for the
children …

The ultimate objective?

[144] Thus far, in common with my noble and learned friend,

Lord Nicholls of Birkenhead, I have identified three

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principles which might guide the court in making an

award: need (generously interpreted), compensation, and
sharing. I agree that there cannot be a hard and fast rule
about whether one starts with equal sharing and departs
if need or compensation supply a reason to do so, or
whether one starts with need and compensation supply
a reason to do so, or whether one starts with need and
compensation and shares the balance. Much will depend
upon how far future income is to be shared as well as
current assets. In general, it can be assumed that the
marital partnership does not stay alive for the purpose of
sharing future resources unless this is justified by need or
compensation. The ultimate objective is to give each
party an equal start on the road to independent living …

…
[149] The question, therefore, is whether in the very big money
cases, it is fair to take some account of the source and
nature of the assets, in the same way that some account
is taken of the source of those assets in inherited or family
wealth. Is the ‘matrimonial property’ to consist of
everything acquired during the marriage (which should
probably include periods of pre-marital cohabitation and
engagement) or might a distinction be drawn between
‘family’ and other assets? Family assets were described by
Lord Denning in the landmark case of Wachtel v Wachtel
[1973] 1 All ER 829 at 836, [1973] Fam 72 at 90:
“It refers to those things which are acquired by one or
other or both of the parties, with the intention that there
should be continuing provision for them and their
children during their joint lives, and used for the benefit
of the family as a whole.”
Prime examples of family assets of a capital nature were
the family home and its contents, while the parties’
earning capacities were assets of a revenue nature. But
also included are other assets which were obviously
acquired for the use and benefit of the whole family, such
as holiday homes, caravans, furniture, insurance policies
and other family savings. To this list should clearly be
added family businesses or joint ventures in which they
both work. It is easy to see such assets as the fruits of the
marital partnership. It is also easy to see each party’s efforts
as making a real contribution to the acquisition of such
assets. Hence it is not at all surprising that Mr and Mrs
McFarlane agreed upon the division of their capital assets,

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which were mostly of this nature, without prejudice to

how Mrs McFarlane’s future income provision would be
quantified …

…
[154] There is obviously a relationship between capital sharing
and future income provision. If capital has been equally
shared and is enough to provide for need and compensate
for disadvantage, then there should be no continuing
financial provision. In the McFarlane case, there has been
an equal division of property, but this largely consisted
of homes which can be characterised family assets. This
was not enough to provide for needs or compensate for
disadvantage. The main family asset is the husband’s very
substantial earning power, generated over a lengthy
marriage in which the couple deliberately chose that the
wife should devote herself to home and family and the
husband to work and career. The wife is undoubtedly
entitled to generous income provision for herself and for
the sake of their children, including sums which will
enable her to provide for her own old age and insure the
husband’s life. She is also entitled to a share in the very
large surplus, on the principles both of sharing the fruits
of the matrimonial partnership and of compensation for
the comparable position which she might have been in
had she not compromised her own career for the sake of
them all …

96. However, the argument that a party’s earning capacity can

be regarded as an asset and hence subject to the sharing principle
was noted by the Court of Appeal in Charman v Charman (No 4)
[2007] EWCA Civ 503, although not directly arising for its
determination, as an area of complexity and potential confusion at
para [67]:
Irrespective of whether the assets are substantial, likely future
income must always be appraised for, even in a clean break case,
such appraisal may well be relevant to the division of property
which best achieves the fair overall outcome. We appreciate that
remarks of Baroness Hale in Miller at [154] are also said to permit
argument that a party’s earning capacity is itself an asset to which
the other has contributed and which might to some extent be
subject to the sharing principle; this seems to us an area of
complexity and potential confusion which in this case it is
unnecessary for us to visit.

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97. The law on this issue was restated by Mostyn J in B v S

[2012] EWHC 265 (Fam) at [75]–[79] where he referred to what
Baroness Hale stated above and commented as follows:

[75] … This would, taken by itself, suggest that the sharing

principle as well as the compensation principle justified
an uplift over needs. But earlier in the same paragraph
Lady Hale stated:
“If capital has been equally shared and is enough to
provide for need and compensate for disadvantage, then
there should be no continuing financial provision. In
McFarlane’s case, there has been an equal division of
property, but this largely consisted of homes which can
be characterised as family assets. This was not enough to
provide for needs or compensate for disadvantage.”
This would suggest that the only factor that would ever
justify an uplift over need would be compensation. This
accords with the view of Lord Nicholls of Birkenhead
who stated at [93]:
“Clearly in this situation the wife is entitled to a periodical
payments order in respect of her financial needs. She
needed money to live in the former matrimonial home
which was to be the continuing home for her and the
children. But it would be manifestly unfair if her income
award were confined to her needs. This is a paradigm
case for an award of compensation in respect of the
significant future economic disparity, sustained by the
wife, arising from the way the parties conducted their
marriage.”
[76] The reason that the sharing principle is sometimes
advocated as being applicable to a periodical payments
claim is to reflect the theory that post-separation earnings
derive from an earning capacity built up during the
marriage which is, in some intangible way, a piece of
matrimonial property there to be equitably or fairly
shared. The high point of that theory is the dictum of Lady
Hale which I have quoted above viz ‘the main family
asset is the husband’s very substantial earning power,
generated over a lengthy marriage’. As a theory it is
problematic, because at the end of the day the only reason
there is income after separation is because of work done
after separation. A footballer who earns £100,000 per
week earns that because he is on the pitch playing

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football. Certainly, the skills he was born with, and the

development of those skills (which may well have
happened during his marriage), are all reasons why he
can command his salary, but he will not get paid it unless
he plays football. The footballer has to fill the unforgiving
minute with 60 seconds’ worth of distance run after the
marriage.
[77] I turn to consider the decision of Hvorostovsky v
Hvorostovsky [2009] EWCA Civ 791, [2009] 3 FCR 650,
[2009] 2 FLR 1574. In that case Judge Horowitz QC
varied an existing periodical payments order to £120,000
annually to the wife and £12,500 to each of two children.
The wife relied on the sharing and compensation
principles to seek an uplift above her assessed needs. In
the Court of Appeal the reliance on the latter principle
was described as a ‘departure from reality’ by Thorpe LJ
in [38]. But the award was increased to £140,000 and
£17,500 for each child. In his judgment Thorpe LJ at
[37] specifically commended this dictum of Charles J in
Cornick v Cornick (No 3) [2001] 2 FLR 1240 at [106]:
“the court should not rely on the judicial concept of
‘reasonable requirements’ as a determinative or limiting
factor in cases where a payer has, or acquires, an ability
to pay more than the payee’s financial needs even if they
are interpreted generously and called ‘reasonable
requirements’ …”
But he went on in the same paragraph to commend
equally this dictum from Sir Mark Potter P in VB v JP
[2008] EWHC 112 (Fam) at [59], [2008] 2 FCR 682 at
[59], [2008] 1 FLR 742:
“Second, on the exit from the marriage, the partnership
ends and in ordinary circumstances a wife has no right or
expectation of continuing economic parity (sharing) unless
and to the extent that consideration of her needs, or
compensation for relationship-generated disadvantage so
require.”
[78] Moreover at [33](iii)], Thorpe LJ commended the utility
of a percentage comparison between the original order
and the order on variation, which would seem to suggest
some kind of sharing approach. In this regard I note that
the well-known and binding decision of Lewis v Lewis
[1997] 3 All ER 992, [1997] 1 WLR 409 was not referred
to in judgment, where Ormrod LJ specifically disapproved

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such an approach and stated that ‘the court should have

as unfettered a discretion as possible to deal with the
situation as it is where the matter comes before it’ ([1977]
3 All ER 992 at 994, [1977] 1 WLR 409 at 412).
[79] In my judgment simplicity and clarity are just as much
needed in this part of the field as in the part designated
‘division of capital’. Simple and fair guidance is needed
so that the majority of cases can be settled. Settlement is
almost always better that adjudication for a divorcing
couple. And the functioning of the family justice system
depends on a high rate of settlement of these cases. Save
in the exceptional kind of case exemplified by Miller v
Miller, McFarlane v McFarlane [2006] 2 FCR 213, [2006]
3 All ER 1 a periodical payments claim (whether
determined originally or on variation) should in my
opinion be adjudged (or settled), generally speaking, by
reference to the principle of need alone. Of course needs
are elastic in concept and there is much room for the
exercise of discretion in their assessment. But to allow
consideration of the concept of sharing to intrude in the
assessment of a periodical payments award seems to me
to be based on a doubtful principle, and is replete with
problems of quantification by any sure standard.

98. Mostyn J went on to explain the rationale behind the dicta

above in SS v NS [2014] EWHC 4183, where the husband and
wife were married for 6 years and had three minor children together.
During the marriage the husband was a banker and the wife a
full-time mother. When the marriage came to an end, the wife
applied for financial remedy. Following the husband’s battle with
cancer, he moved to a less challenging role at a different bank.
When he moved roles, the existing earned but deferred
compensation with the first bank was relinquished and replaced by
mirror arrangements by and in the second bank. There was a
condition of continued employment for the receipt of the unvested
compensation. If the husband were to quit the second bank or die,
those unvested rights would be forfeited. On receipt they were
taxed as income. The total matrimonial assets including property,
bank accounts and shares amounted to £3,290,367. Since the
separation, the husband had formed a relationship with another
woman who was expecting his baby. The wife had obtained
employment earning £26,500 pa and was training to be a pilates
instructor.
99. In awarding the wife a lump sum of £1,183,500, spousal
maintenance of £30,000 pa and index-linked for an extended term
until 2015, 20% of the husband’s net bonus capped at £26,500 pa

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and index-linked until 2021, and child support of £7,500 per child
pa and index-linked, His Lordship set out the relevant principles in
play on an application for spousal maintenance as follows:

(i) a spousal maintenance award was properly made where the

evidence showed that choices made during the marriage
had generated hard future needs on the part of the claimant.
The duration of the marriage and the presence of children
were pivotal factors;
(ii) an award should only be made by reference to needs, save
in a most exceptional case where it could be said that the
sharing or compensation principle applied;
(iii) where the needs in question were not causally connected
to the marriage the award should generally be aimed at
alleviating significant hardship;
(iv) in every case, the court must consider a termination of
spousal maintenance with a transition to independence as
soon as it was just and reasonable. A term should be
considered unless the payee would be unable to adjust
without undue hardship to the ending of payments. A
degree of (not undue) hardship in making the transition to
independence was acceptable;
(v) if the choice between an extendable term and a joint lives
order was finely balanced the statutory steer should militate
in favour of the former;
(vi) the marital standard of living was relevant to the quantum
of spousal maintenance but was not decisive. That standard
should be carefully weighed against the desired objective
of eventual independence;
(vii) the essential task of the judge was not merely to examine
the individual items in the claimant’s income budget but
also to stand back and to look at the global total and to
ask if it represented a fair proportion of the respondent’s
available income that should go to the support of the
claimant;
(viii) where the respondent’s income comprised a base salary and
a discretionary bonus the claimant’s award may be
equivalently partitioned, with needs of strict necessity being
met from the base salary and additional, discretionary, items
being met from the bonus on a capped percentage basis;
(ix) there was no criterion of exceptionality on an application
to extend a term order. On such an application, an
examination should be made of whether the implicit
premise of the original order of the ability of the payee to
achieve independence had been impossible to achieve and,
if so, why;

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(x) on an application to discharge a joint lives order, an

examination should be made of the original assumption
that it was just too difficult to predict eventual
independence;
(xi) if the choice between an extendable and non-extendable
term was finely balanced, the decision should normally be
in favour of the economically weaker party.

100. While there is no such statutory requirement on our courts

in Hong Kong to consider terminating spousal maintenance under
(iv) above which remains only as one of the circumstances to which
the court shall have regard, it is true that in the present case both
parties seem to opt for such a course to be adopted by capitalising
the periodical payments for the Wife. Mr Todd for the Husband
argues that the development of the jurisprudence in this area has
been wholly against the treatment of work capacity as an asset
available for sharing, an approach adopted by the English Court of
Appeal in Lawrence v Gallagher [2012] EWCA Civ 394 in which
the part of the award which consisted of 45% of the appellant’s
deferred bonuses were removed from the divisible pool which would
constitute future earnings, as Thorpe LJ explained:

[52] … These bonuses were not vested and, even on the view
most favourable to the respondent half of them were
acquired post-separation.
[53] Apart from the factual errors these were annual bonuses
deferred in collection and conditional on performance.
They were not capital assets but part of the appellant’s
income stream upon which he is taxed at top rate. I can
see no principled basis upon which the respondent should
be awarded 45% of that as though it were a present capital
asset. I would delete this element of the judge’s award
entirely.

101. However, since it can clearly be argued that a deferred

or unvested bonus is an income which a party is likely to have in
the foreseeable future (s.7(1)(a) of MPPO), how should the court
approach such an income when an applicant seeks a joint-lives
periodical payments order or its capitalisation, a problem also noted
by Thorpe LJ who did not find it necessary to deal with on that
occasion, as he explained at [54]:
No doubt in those cases where the applicant seeks a joint lives
periodical payments order the frequent replacement of cash bonuses
by deferred bonuses presents a problem for practitioners and for
judges. Should future projections be variable upwards if the bonus

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is paid at the end of the three year deferment or should the order
be variable downward if the bonus does not become due for
payment? No submissions were made as to what the general
approach is or ought to be. We are not in the present appeal
concerned with a continuing periodical payments order and the
appellant’s hope or expectation of future receipt does not to my
mind have much bearing in the present division of the available
assets.
102. Mr Todd for the Husband however submits that there is
an analogy with capitalisation of periodical payments in that in
England this may be compelled by the court on a variation
application, and the principles to be applied are that the court’s
discretion is limited to capitalising needs and does not permit an
enhanced award on the basis of sharing: Vaughan v Vaughan [2010]
2 FLR 242, where the husband applied for a termination of the
wife’s periodical payments of £27,175 per annum, while the wife
cross-applied for capitalisation, and the Court of Appeal held that
when deciding whether a husband should be ordered to pay a lump
sum to a wife by way of capitalisation of any obligation to continue
to make periodical payments to her, applying Pearce v Pearce [2003]
EWCA Civ 1054, per Wilson LJ, at [28]:
… It is a decision which has rightly received wide approbation,
no doubt because, in the words of Thorpe LJ, at [39], it identifies
‘a relatively simple, certain and predicable method for the
calculation of the capital sum’. So the first inquiry is to identify the
level of periodical payments which should in principle continue
to be made by the payer to the payee (including, in the present
case, whether they should continue to be made at all and thus
whether the payee can — within the meaning of s.31(7)(a) —
adjust without undue hardship to their termination): per Thorpe
LJ, at [37]. If the result of the first inquiry is a conclusion that
periodical payments at a specified level should in principle continue
to be made, the second (ignoring, for this purpose, the need to
identify what would be the appropriate date for the start of
periodical payments at any changed level) is to calculate their capital
equivalent according to the Duxbury formula: per Thorpe LJ, again
at [37]. For the sake of completeness, I would add that the court
must finally survey whether it is fair to both parties to capitalise
the periodical payments and, no doubt in particular, whether it is
reasonably practicable for the payer to pay the capital sum rather
than to make the periodical payments. At all events the court has,
thank goodness, only a narrow discretion to arrive at a capital sum
otherwise than by application of the Duxbury formula and it should
exercise it in order only to reflect special factors: per Thorpe LJ, at
[38].

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103. Mr Todd further submits that the development of the

jurisprudence in this area has been wholly against the treatment of
work capacity as an asset available for sharing, where the case law
which began with Miller was considered and adopted in Jones v
Jones [2011] EWCA Civ 41, where the wife applied for ancillary
relief after 10 years of marriage, with the main asset being a company
involved in the oil and gas service industry founded by the husband
some 10 years before the marriage and which had been valued at
about £2m at the time of the marriage. The husband had been
employed in the oil and gas service industry for 19 years before he
founded the company, and its success was in large measure reliant
on his understanding of that industry. Before the hearing the husband
sold the company for £25m net, and he subsequently accepted that
the company had been worth about £12m at the date of separation.
At the hearing, which took place about 4 years after the separation,
the wife sought a clean break lump sum of £10m, on the basis that
this represented 40% of the total assets. The husband was offering
the wife one-half of the net increase in the value of the company
shares between the date of marriage and the date of separation, ie,
about £5m. The husband emphasised that the wife had access to
substantial wealth, in that she received large sums from her mother
on request, and also that during the marriage the couple had, in the
main, kept their finances separate, owning and running separate
properties. On the basis that the total net assets were in the region
of £25m, the judge awarded the wife £5.4m, concluding that,
given the importance of the husband’s personal abilities and
experience to the success of the company, 60% of the value of the
company at the date of the separation, and also 60% of the net
proceeds of the ultimate sale of the company (£15m), represented
a non-matrimonial asset belonging to the husband, which should
not be shared. In his judgment the judge expressed the view that
if an application of the needs principle led to a result that was less
than an equal division of the assets, this could in some cases inform
or influence the extent of any principled departure from equality
within the sharing principle. The wife was granted permission to
appeal the approach taken by the judge to the company, but not
his comments concerning the relationship between the sharing
principle and the needs principle.
104. In allowing the wife’s appeal and awarding her £8 million,
the English Court of Appeal held that a spouse’s earning capacity
at the date of the marriage was not an asset and was not to be
capitalised, thus overruling GW v RW (Financial Provision:
Departure from Equality) [2003] EWHC 611, and similarly a spouse’s
earning capacity at the date of the hearing was not to be treated as
an asset or capitalised. Even making allowance for the ‘springboard’
or latent potential within the company at the date of the marriage,

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when it was valued at only £2m, the judge’s finding that the
husband’s non-matrimonial stake in the company was £15m at the
hearing date placed a massive capital value on the personal capacity
of the husband to make money in his chosen field. The judge had
effectively, and wrongly, ascribed a capital value to the husband’s
earning capacity at the date of the marriage, and then treated such
capital as a non-matrimonial asset, as articulated by Wilson LJ in
the following:

[23] That for the purposes of the sharing principle it might be

appropriate to capitalise the earning capacity brought by
one spouse into the marriage was an approach first
favoured by Mr Nicholas Mostyn QC, as he then was,
when sitting as a deputy judge of the Division in GW v
RW (Financial Provision: Departure from Equality) [2003]
EWHC 611 (Fam), [2003] 2 FLR 108. The husband was
employed by an American bank in the City. At the date
of the marriage he had assets of $500,000 and was earning
$400,000 pa. Mr Mostyn said:

[50] H here brought into the marriage assets with a

value in money today of $781,000 …
[51] H also brought to the marriage a developed
career, existing high earnings and an established
earning capacity. I cannot see why this should
not be treated as much as a non-matrimonial
asset as the provision of hard cash. In argument
I suggested that H here was in terms of his
career ‘fledged’ at the time of the marriage,
rather than being the fledgling, which is so often
the case. [Counsel for the husband] stated that
his client was far more than fledged: he was fully
airborne. I tend to agree …

Thus, as a result of his choice of metaphor, Mr Mostyn’s

approach became known as fledging: if at the date of the
marriage the spouse was successfully launched in
employment, or fledged, his earning capacity was
somehow to be capitalised; then, like the husband’s actual
capital in GW (which the deputy judge uprated from
$500,000 to $781,000), the figure was, I presume, to be
uprated for inflation, and then allowance was to be made
for it, as a non-matrimonial asset justifying departure from
equality, in the application of the sharing principle upon
divorce. I am unclear how the earning were thus to be
capitalised; still less how such allowance was thus to be

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made; and in particular whether, if at the date when the

financial proceedings were heard, the spouse still enjoyed
an established earning capacity, such also fell to be
capitalised and also in some way to be taken into account.
[24] In the decision of the House of Lords in Miller v Miller;
McFarlane v McFarlane [2006] UKHL 24, [2006] 2 AC
618, [2006] 2 WLR 1283, [2006] 1 FLR 1186, Lord
Mance commented on Mr Mostyn’s approach as follows:

[172] A possible difficulty about this approach is that

it reintroduces, at the commencement of the
marriage, a requirement to attempt to assess and
compare the value of the contributions which
each party is or would be likely to make during
or apart from the marriage. I am not very
confident that an established earning capacity
or very valuable acquired expertise and acumen
would, if viewed as ‘assets’ brought into a
marriage, be easily or reliably measurable or
comparable with other qualities, or indeed how
far would one carry the inquiry into expertise
or acumen. The concept of ‘fledging’ is
probably anyway one which would diminish in
relevance, the longer the marriage …
[173] On the other hand, where at the beginning (or
end) of the marriage an actual transaction is
under way or in view which in due course
yields a considerable new asset, there is no
difficulty in principle (even if there may be some
difficulty in valuation) in accepting that part of
the asset may have to be excluded from any
assessment of the matrimonial acquest or included
in what the parties brought into the marriage.

[25] In [172], quoted above, Lord Mance articulated three

objections to the capitalisation of a spouse’s earning
capacity at the date of the marriage. With respect, I agree
with all of them.

(a) The capacity is not easily measurable in capital

terms. The judgment of the judge in the present
case is replete with objections to the adoption of
arbitrary percentages in application of the sharing
principle. In the end, however, without having
canvassed such a percentage — or in this context
any other — with counsel, the judge adopted 60%

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as the proportion of the company’s sale price in

2007 which was attributable to a mixture of its
value in 1996 and the husband’s personal capacity
to expand it (or earning capacity) established by
1996. What could have been more arbitrary than
that?
(b) The proper depth of any inquiry into a spouse’s
expertise and acumen is unclear. What contributed
to the substantial capacity of this husband to
generate earnings (or profits) in his chosen field?
The judge rightly laid stress on the knowledge
which he had gained during employment in the
field from 1967 to 1986. But, without his having
other qualities, whether inherited or acquired as a
child at home or at school or otherwise, he would
not have been able to put his knowledge to
profitable use. In truth the judge was placing a
substantial capital value on the husband as a person;
I am convinced that such is no function of the
divorce court. I also consider that a dangerous
degree of hindsight is likely to be deployed in
analysing the extent of a person’s (say a husband’s)
earning capacity at a date long past. If later (as in
this case) he generated substantial earnings, the
court would be likely to find that he had had a
substantial earning capacity but, if later he failed to
generate them, it would be likely to find that he
had not had a substantial earning capacity. But
neither of those obverse conclusions is necessarily
valid.
(c) Above all, capitalisation of the earning capacity
established by one spouse by the date of the
marriage is likely to be unjustly discriminatory if
the other had not by then established an earning
capacity. In the present case the wife had no
earning capacity at all in 1996. What had she been
doing in 1967 when the husband was apprenticed
to Brown Brothers? The answer is that she had
been crawling around the floor aged one. She must
have been at school until 1984; thereafter, as we
know she became a wife to her first husband and,
ultimately, a mother. Although the generosity of
her parents made her early adulthood financially
comfortable, was it not discriminatory for the judge
to write off, without any real analysis, whatever
the wife had achieved by his ascription to the

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husband of a substantial capitalisation of his earning

capacity without making any countervailing
ascription to her in other respects?

[26] In my view the adoption and development of the doubts

expressed by Lord Mance in Miller/McFarlane at [172],
quoted above, should lead this Court today formally to
overrule the decision of Mr Mostyn in GW that a spouse’s
established earning capacity at the date of the marriage
falls to be capitalised, or otherwise brought into account,
for the purpose of the sharing principle.
[27] In [23] above I questioned whether Mr Mostyn’s
approach also required capitalisation of any such
established earning capacity as still subsisted at the date
when the financial proceedings were heard. Were we to
overrule his decision, my question would not need to be
answered. There is, however, a separate, wider question
whether it is ever necessary or appropriate for the court
to capitalise the earning capacity which a party has at the
date of the hearing. There is no denying the extreme
importance of an inquiry into the earning capacity of
each party at that date: indeed s.25(2)(a) of the
Matrimonial Causes Act 1973 makes it mandatory. A
spouse’s earning capacity will usually be a central
foundation of an order for periodical payments, and thus
of any order by way of capitalisation thereof, pursuant to
the principles of need and/or of compensation. Even if,
however, an earning capacity may also sometimes be
relevant to a fair distribution of the assets pursuant to the
sharing principle, it does not follow that the earning
capacity should itself be treated as one of those assets, still
less that an attempt should be made to capitalise it. Today
I have as little appetite for such costly artificiality as when,
in 2007, I subscribed to the judgment of this Court in
Charman v Charman (No 4) [2007] EWCA Civ 503,
[2007] 1 FLR 1246, and thus to the reservations in this
respect which the court expressed at the foot of [67] of
it.
[28] It follows that in my view the judge’s decision is flawed
in that it ascribed a capital value to the earning capacity
of the husband at the date of the marriage.

105. Mr Todd therefore submits that in any event the assessment

of matrimonial and non-matrimonial assets does not ever descend
to a valuation of the Husband’s work capacity, for which accountants
would need to be instructed but was not done in the present case,

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and that since the time of Lambert v Lambert [2003] Fam 103 the
courts have been concerned with marriages as partnerships, and
when the partnership ended, as in the present case in 2011, the
courts have expressly acknowledged the important distinction which
needs to be drawn between matrimonial and non-matrimonial
property. He therefore submits that any post-separation endeavours
by the Wife over the Husband’s work capacity simply falls outside
the marital partnership.
106. Mr Todd further argues that plainly work capacity is highly
relevant to needs, but the Wife’s needs here are fully addressed,
including by agreed capitalisation of periodical payments and
provision of a home by Flat C whilst her other stated needs and
expenses of $59,913 will be adequately met by her current income
of $66,922 per month, hence it would be wrong to seek to add
further value to her claim on the controversial basis that she is
entitled to share the Husband’s future earnings.
107. Mr Man for the Wife however submits that this being a
sharing case, although the parties’ needs will likely be adequately
met, the question remains whether the surplus created by the
Husband’s enhanced earning capacity should be shared, and that
although Baroness Hale in that dicta of hers referred to above in
Miller/McFarlane where Her Ladyship was addressing the situation
of a wife such as Mrs McFarlane who gave up her career to look
after the family, it is noteworthy, he submits, that Her Ladyship
expressly pointed out that the wife’s entitlement in such a case is
based on both “sharing” and “compensation”.
108. Similarly, he submits, although Lord Nicholls described
Mrs McFarlane’s case as a “paradigm case for an award of
compensation” [93], His Lordship’s summary of the relevant
circumstances of the case in an earlier passage emphasises the
importance of awarding the wife a “fair share” of her husband’s
rewards reaped through the “spadework” of marriage [85]:
… part of the overall circumstances was that the joint decision of
the parties to concentrate on the husband’s career in order to fund
the family’s lifestyle resulted in the greatest fruits of his endeavours
being available towards the end of the marriage and after its
breakdown. The spadework for these rewards was carried out over
a long period, and it would be unfair to take the view that the wife
had not contributed to the recent increases in the husband’s earnings
after the separation. The wife’s contributions enabled the husband
to create a working environment which had produced greater
rewards, ‘of which she should have her fair share’. She had
continued to make a contribution to the family in the nurturing
of the children in a single parent household. That contribution had
not come to an end when the parties separated.

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109. These dicta of Baroness Hale and Lord Nicholls, in

particular the concept of “spadework” of the marriage, Mr Man
submits, formed the foundation of the decision in H v H [2008] 2
FCR 714, where Charles J explored at length the principles
applicable to the sharing of a party’s “enhanced income” and
“enhanced earning capacity”.
110. That was one of the “big money” cases where the husband
was a banker and the wife a teacher and they had four children.
They built up substantial wealth over the course of a long marriage
as a result of the earnings of the husband while the wife was the
primary caretaker of the children. In January 2005, the husband left
the matrimonial home. There were attempts at reconciliation but
the parties were finally divorced in December 2005. In the course
of ancillary relief proceedings, the wife sought to claim a half-share
in the bonuses the husband had or would receive for the years 2006
and 2007. She claimed that it constituted part of the matrimonial
property, and that according to House of Lords authority, she was
entitled to a half share of all matrimonial property. The husband
denied that the 2007 bonus formed part of the matrimonial property.
Both parties proceeded on the basis that the correct approach was
to identify the matrimonial property and then divide it in half, to
produce an unalterable part of the award.
111. In finding that in January 2005 the underlying foundation
of the marital partnership had been brought to an end and was not
re-established, Charles J held that the bonuses for the years 2006
and 2007 did not therefore form part of the matrimonial property,
however the principles of fairness, equality and non-discrimination
required that the wife receive an additional award as well as one-half
of the matrimonial property to reflect her contribution over the
years of the marital partnership that had resulted in the husband’s
enhanced or greater earning capacity, as the wife’s incalculable, but
in purely economic terms small, contribution to the husband’s
enhanced or greater earning capacity founded an award that eased
her transition to independent living. The additional sum would be
equivalent to the total of one-third of the income earned in 2005,
a sixth of the income earned in 2006 and one-twelfth of the income
earned in 2007.
112. Charles J at the very beginning readily noted that it was
not a case in which the wife gave up a career that was likely to
provide substantial income or monetary reward, as it was common
ground that the choices made by both the husband and the wife
were ones they both made willingly, and that until the breakdown
of their marriage those choices were ones that led to a successful
emotional and economic result. He also identified two central points
raised in argument both related to the husband’s earnings and
effectively to his bonuses, which were (i) what bonuses should be

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included within the matrimonial acquest or family assets or

matrimonial property, and (ii) what award, if any, should be made
in respect of future bonuses falling outside the matrimonial property.
113. His Lordship then reminded himself of those relevant
speeches of Lord Nicholls and Baroness Hale in Miller & McFarlane,
and proceeded to articulate his approach towards those issues,
starting by identifying what he perceived to be the central problem
where a wife, as in the present case before me, did not give up her
earning career and hence the argument that she may not rely on
McFarlane being a paradigm case in her application, and a clean
break was now possible as urged upon by both sides, but he
recognised that the husband’s enhanced income was a product or
fruit of the marital partnership and thus a value added by the
common endeavours of the parties during the marital partnership:

[74] … In my view the reference by Lord Nicholls to a ‘loss

in a share of the husband’s enhanced income (my emphasis)
rather than to his income or earning capacity is a reference
to a product or fruit of the marital partnership and thus
a ‘value added’ by the common endeavours of the parties
during the marital partnership. This is likely to be
unquantifiable but it is at least arguably reflected by a part
of the husband’s future earnings. This echoes what Lord
Nicholls said in White [2000] 3 FCR 555 at 564 …
[75] To my mind Lord Nicholls in para [13] of Miller &
McFarlane is therefore identifying something created
during the marital partnership that but for that partnership,
and the common endeavours of the parties to it, would
not have existed, or may not have existed. That product
is, or may only be, realisable in the future, but in one
sense it is not a future resource because it has been created
during the partnership. It is something intangible that will
continue over a period of time to produce an enhanced
income for the husband, so long as he continues to be
employed in equivalent work. It therefore fits within the
heading ‘compensation’ together with other elements of
the concept. If, as might be the case, with a royalty or
the profits (after deduction of remuneration) of a company
a capital value can be placed on such an asset I accept that
the wife’s entitlement and award by reference to it might
be classified as one based on sharing rather than
compensation. Normally such a capital value would be
based on a multiple of earnings or profits and is time
limited in this way.
[76] In my view, a reasoning process that brought enhanced
income or earning capacity into account by reference to

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the concept of sharing rather than compensation is

permissible. The categorisation within the rationale and
reasoning process are not so distinct and watertight.
Indeed Lord Nicholls recognises the overlap between
financial needs and compensation in para [15], and his
description of sharing in para [16] is wide enough to cover
an award in respect of an enhanced income or earning
capacity and thus economic disparity flowing from it.
Also he points out that double counting should be
avoided, as does Baroness Hale in [137] where she also
indicates that any or all of the elements of the rationale
might provide the basis for an award.
[77] Thus it seems to me that a wife who was never on the
road to becoming a high earner could have disadvantage
by reference to (a) her potential level of income in the
job market arising from her role in the marriage (which
could extend to a practical inability to obtain any
appropriate employment or an income that should be
taken into account), and (b) her loss of a share in a fruit
of the marital partnership namely the product of the
husband’s enhanced income and earning capacity, covered
under the headings needs and sharing rather than
compensation. But they could also be included under the
heading compensation.
[78] In para [154] Baroness Hale refers to the wife being
entitled to a share in a large surplus, part of which will
relate to this enhancement of income or earning capacity
on the principles both of sharing the fruits of the
matrimonial partnership and of compensation. Also in
my view:

(i) the passage in para [144] relied on by the

husband is qualified by the words ‘in general’
and is not directed to this point, but to the
question whether the marital partnership should
stay alive and therefore, for example, to the
point whether a continuing commitment by the
wife as the primary caretaker of the children
should have this effect, and
(ii) the passage in para [154] relied on by the
husband does not preclude the enhanced earning
capacity or income of the husband being taken
into account as compensation, or as part of the
capital division.

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[79] More generally if enhanced income or earning capacity

was excluded from compensation and, as a result, from
being taken into account at all in determining what the
overall fair result should be under either needs or sharing,
in my view this would fly in the face of an application of
the principles of equality and non-discrimination in the
assessment of the fruits of the marital partnership, and the
point that fairness requires the court to address a
disproportionate financial loss to the party who during
the marriage has earned, and who will continue to earn,
a lower or no income …

114. Charles J found it necessary to compare and distinguish

between future income and earning capacity with an enhanced
income and earning capacity as a fruit of marital partnership during
its existence and when it ends, and explained how they should be
approached after the end of such marital partnership:

[80] I accept that there is at least the potential for overlap

between future income and earning capacity and
enhanced future income and earning capacity and the
dividing line between them is not capable of precise
definition. I use the descriptions primarily to distinguish
between the part of the husband’s future income that can
be said to be a fruit of the marital partnership and the part
that cannot.
[81] All of the husband’s future income and earning capacity
cannot be described as a fruit of the marital partnership.
Indeed if a ‘but for’ test is applied it is easy to say that but
for the talents and energy of the husband he would not
have achieved the earnings and earning capacity he has,
but this cannot be said of the contribution made by the
wife to his home life and the ability it gave him to
concentrate on and prioritise his work (see for example
para [151] of the speech of Baroness Hale referring to the
point that if the money maker had not had a wife to look
after him no doubt he would have found others to do it
for him).
[82] The acknowledged fact in this case that the wife’s role
and contribution to the marital partnership was of great
assistance to the husband in furthering his career is a
consequence of the choices made by the parties to the
marriage. Such a contribution as a supporter of the
husband’s career, as a home maker and as a caretaker of
the children by a wife is substantial. In general, depending
on, and subject to, factors such as the position at the start

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of the marital partnership and its length, on a

non-discrimination, equal and fair approach it founds the
conclusion that pursuant to the yardstick there should be
an equal division of the product of the husband’s income
earned during the marital partnership.
[83] In my view the position changes when the marital
partnership ends. This is because the joint venture and
participation of the parties as equal partners in that marital
partnership whose contributions to it are to be assessed
in a non-discriminatory way ends. After that termination
the focus is no longer on the effects of the contributions
of the parties as equal partners in assessing the product of
their partnership but with the effects of their separate
contributions as the source of the husband’s income in
the future.
[84] In considering the position after the termination of the
marital partnership in my view it is the role and
contribution of a wife during the marital partnership that
forms the basis of the element of the husband’s earning
capacity and future income (ie his enhanced income or
earning capacity) that can be said to be a fruit of that
partnership. As Lord Nicholls points out in para [85] in
Miller & McFarlane the spadework for rewards received
towards the end, and after the end, of the marital
partnership has been done during it. The wife’s role and
contributions have enabled the husband to create a
working environment which has produced greater
(enhanced) rewards of which she should have a fair share.
[85] However, in my view the balance of his future income
and earning capacity is the product of the husband’s
talents, energy and good fortune, notwithstanding that
he has been supported by the wife, and they have been
applied, expended and enjoyed during the marital
partnership.
[86] I, of course, accept that a wife who continues to act as
the primary caretaker of the children of a marriage in a
separate household continues to make a contribution to
the family (my emphasis), or the marriage, after the end
of the marriage (see for example Lord Nicholls at para
[85]). In my view so does the husband who continues to
meet their financial needs. But as this is looking at the
position after the marriage is over these contributions
whether described as being to the family or the marriage
are not, in my view, contributions to the marital
partnership because that is over.

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[87] I do not accept that such contributions by a wife to the

family after the end of the marital partnership can
generally be said to warrant a conclusion that a proportion
of the husband’s future income continues to be
attributable to the wife’s domestic contribution and thus
a fruit of the marital partnership.

115. His Lordship however noted a key feature where the

husband may be said to have given the wife a legitimate expectation
that, for example, by adopting a frugal lifestyle during their marital
partnership, as in the case before me, that in future she would be
able to enjoy a much higher economic plane that is relevant to the
treatment of both future income generally and the loss by the wife
of a share of his enhanced future income and earning capacity. He
agreed with the speech of Lord Nicholls in Miller that such statement
went too far to be acceptable:

[88] Lord Nicholls refers to this in paras [56] to [58] of his

speech:

[58] … No doubt both parties had high hopes for

their future when they married. But hopes and
expectations, as such, are not an appropriate
basis on which to assess financial needs. Claims
for expectation losses do not fit altogether
comfortably with the notion that each party is
free to end the marriage. Indeed, to make an
award by reference to the parties’ future
expectations would come close to restoring the
‘tailpiece’ which was originally part of s.25. By
that tailpiece the court was required to place
the parties, so far as practical and, having regard
to their conduct, just to do so, in the same
financial position as they would have been had
the marriage not broken down. It would be a
mistake indirectly to re-introduce the effect of
that discredited provision.

116. Charles J recognised that all this also brought out another
point or argument that a wife who continues to care for children
after the breakdown of a marriage has a continuing entitlement to
a share of the future wealth of the husband, as it was so argued in
McFarlane, on which he commented:

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Non discrimination and a wife’s contributions in looking after the home

and family

[93] In this context counsel for the wife adopted and praised
the arguments advanced in the House of Lords by counsel
for Mrs McFarlane as reported in [2006] 2 AC at 626/7.
That argument includes the following:
“… A wife who continues to care for the children after
the breakdown of a marriage has a continuing entitlement
to a share of the future wealth of the bread-winning
husband because that constitutes recognition that an
ex-husband’s earning capacity is a resource to which the
ex-wife may have contributed; an ex-wife may be making
an ongoing contribution by looking after the children
after separation; an ex-wife may have been economically
disadvantaged by her domestic contributions; an ex-wife
may have sacrificed a successful career during the
marriage. The principles on entitlement and compensation
can co-exist. In the context of giving up a career
compensation is the more appropriate. It is important
that ex-wives should not be regarded as supplicants merely
because their contribution has been domestic rather than
financial, for that would be to reintroduce the very
discrimination which White v White sought to remove.”
…
[95] What this argument advanced … does not include is an
assertion as to how in general terms the domestic
contribution should be taken into account so as to avoid
the discrimination removed by White.
[96] In the context it seems to me important to remember
that a non-discriminatory, equal and fair approach is
two-sided and an approach that has to be assessed and
applied against the background and nature of a marital
partnership. Therefore it seems to me important to ensure
that the pendulum does not swing too far from:

(i) a discriminatory and unfair award based on

‘reasonable requirements’ and a Duxbury capital
sum giving the ex-wife enough to meet those
requirements until the date of her death assessed
on an actuarial basis and nothing more, to
(ii) an award that is unfair and discriminates against
the party that has made the main direct financial
contribution …

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[99] Naturally the striking of a fair balance involves issues of

degree and evaluation. The wife recognises this by
capping her claim in respect of future earnings and
thereby recognising that if, as is expected, the husband
continues to earn at at least the present level, in a few
years his capital wealth will on the award she seeks pass
that of the wife and will continue to grow much faster.
That cap is an acknowledged and inevitable value
judgment and it is put by the wife at £1.5m, on the basis
of there first being an equal share of the 2006 and 2007
bonuses.

117. Charles J proceeded to examine how the disparity of

financial position between the parties after the end of the marriage
by reason of the larger earnings or earning capacity usually of the
husband should be addressed by reference to the speeches of the
House of Lords, and for example through periodical payments, in
funding the borrowing for a lump sum on a clean break, or as the
reason to depart from equal sharing of the matrimonial property on
the basis that the disparity of financial position between the parties
can be made up:

[102] Disparity of financial position after the end of the marriage

by reason of the larger, or much larger, earning capacity
of one party (generally still the husband) is mentioned in
a number of places and contexts in the speeches in the
House of Lords (see for example paras [39], and
[142]–[143]).
[103] Whether classified as a family asset or as future income
or as a powerful resource, it is clear that a husband’s future
income is an asset that often falls to be utilised in
achieving a fair result. This can be through periodical
payments (not restricted to needs), in funding the
borrowing for a lump sum on a clean break, or as the
reason for an unequal distribution of capital on the basis
that the disparity will be made up. There are other
examples that could be given and which could be based
on one or more of the concepts of needs, compensation
or sharing.
[104] The wife advanced the following propositions by
reference to the foreign cases but it was submitted and I
agree that they accord with the guidance given by the
House of Lords, namely:

1.1 An earning capacity developed and nurtured during

a marital partnership is a thing of value which falls

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to be fairly or equitably shared at the end of the

relationship.
1.2 A non-working party can validly claim by virtue
of her domestic contributions to have contributed
substantially to the creation and development of
this earning capacity.
1.3 The sharing can be effected by means of
augmenting the capital award or by means of a
direct spousal periodical payments award.
1.4 In determining the extent of the sharing the court
must not be falsely confined by ‘needs’, ‘reasonable
requirements’ or ‘marital standard of living’.
1.5 Rather the court should recognise that marriage is
an ‘economic partnership’ or ‘an economic unit
which generates financial benefits’ or ‘a joint
endeavour’ where the ‘partners should expect and
are entitled to share [its] financial benefits’.
1.6 In determining the extent of the sharing the court
should have regard primarily to principles of
compensation and in particular should have regard
to the sacrifices and economic disadvantages
suffered by the non-working spouse. The principle
of non-discrimination requires this. This process
‘seeks to recognise and account for both the economic
disadvantages incurred by the spouse who makes such
sacrifices and the economic advantages conferred upon the
other spouse.’
1.7 Furthermore, ‘great disparities in the standard of
living that would be experienced by spouses in the
absence of support are often a revealing indication
of the economic disadvantages inherent in the role
assumed by one party’.

118. Charles J then went on to consider the rationale for an

award in respect of future income by first identifying those which
do not justify such an award:

[107] When, as here, a share of future income or earning

capacity cannot be justified by:

(i) needs (generously applied),

(ii) compensation (in the sense of an award to meet
the disadvantages and losses to the wife in
earning an income arising from the choices
made during the marriage whether that be the

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loss of a high earning career or difficulties in

entering the job market, because of absence
from it and/or the continuing care of children,
or
(iii) by the sharing of the existing and marketable
capital assets built up during the marital
partnership as the product of the husband’s
earnings or work and the lifestyle of the parties,

the question arises: What is the rationale for an award in

respect of the husband’s future earnings?

119. To answer that question, and in determining what a fair

award should be, Charles J stated that the court should take into
account the length of time that the wife has enjoyed the fruits of
the spadework and joint endeavours of the parties, the likely future
product of that spadework and endeavour, an evaluation of the
effects of the respective past and future contributions of the parties
on the ability of the husband to earn his future income and thus on
his earning capacity in the future, and the overall effects of an award
with and without a provision in respect of future income:

[109] To my mind the answer is not that a wife should receive

a payment for her continued care of the children and thus
an award for the performance of that role akin to a
payment for service. In my view that aspect of an award
is covered by needs or compensation in the sense set out
in [107] (ii) above.
[110] In my view key factors in answering the general question
as to the rationale for making an award in respect of future
income that will as time passes create a disparity between
the earning husband and the non-earning wife are the
issue relating to enhanced income, legitimate expectation,
non-discrimination, disparity and the underlying aim
discussed earlier.
[111] To my mind it is in particular the concept of an award
in respect of the loss of a share in the enhanced or greater
income or earning capacity created by the contributions,
lifestyle and spadework of the parties during the marital
partnership, and thus an award in respect of that fruit or
product of the joint endeavours of the parties during the
marital partnership, that provides the answer to the
general question. In my view that rationale could be
classified as either compensation or sharing.

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[112] In my view the quantification of any such additional

award is fact-sensitive and difficult to describe in general
terms or by reference to a formula.
[113] Where, as here, an award is offered, or can be made, on
a clean break basis that provides the wife with capital that
will meet:

(i) her entitlement based on needs, and

(ii) all other aspects of compensation and sharing as
described in para 107 (ii) and (iii) above, in that
it enables her to live at a standard at least
comparable to that enjoyed in the later years of
the marriage and to make substantial savings.

In my view the focus should be on the added effects of

the provision to address the ‘run off ’ from the marital
partnership, and thus the transition to independent living,
considered in the context of the overall award.
[114] It is therefore in large measure part of the overview of
fairness by reference to the reasoning process adopted.
Factors to be taken into account will include the length
of time that the wife has enjoyed the fruits of the
spadework and joint endeavours of the parties, the likely
future product of that spadework and endeavours, an
evaluation of the effects of the respective past and future
contributions of the parties on the ability of the husband
to earn his future income and thus on his earning capacity
in the future (as opposed to an assessment of the effects
of their contributions during the continuation of the
marital partnership) and the overall effects of an award
with and without a provision in respect of future income.

120. While accepting earning and earning capacity can be

regarded as part of the matrimonial property, Charles J was of the
view that for the yardstick of equality to apply readily and with
force for its fair division, it must be based on the concept of an
equal and voluntary partnership providing mutual emotional,
economic and general support and matching contribution, and hence
a point or line for defining the matrimonial property should therefore
be a date when that mutual support ends, and not thereafter in
relation to future income, as otherwise it would be stretching the
concept and identification of matrimonial property too far, although
the application of the yardstick of equality should remain flexible.
However, where the main family assets of the marriage were the
husband’s very substantial earning power and the properties and
investments acquired as part of, and by the expenditure of, his

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income, and that his earning power increased during the marriage
when very considerable financial benefits were derived from it and
in, and by, the later years of the marriage it and the lifestyle of the
parties had produced substantial capital assets, His Lordship stated
the correct application of the guidance given by the House of Lords,
and thus the correct process of reasoning in that case:

[116] In my view, the concept of the matrimonial property to

which the yardstick of equality applies readily and with
force is based on the concept of an equal and voluntary
partnership providing mutual emotional, economic and
general support and matching contributions to it of
different kinds. A point, or line, for defining the
matrimonial property is therefore a date when that mutual
support ends see, for example, para [174] of the speech
of Lord Mance where he says:
“To the extent that the focus is on the matrimonial
acquest, the period during which the parties were making
their different mutual contributions to the marriage has
obvious relevance … it seems to me therefore natural in
this case to look at the period until separation.”
…
[126] In my judgment the correct application of the guidance
given by the House of Lords, and thus the correct process
of reasoning, in this case is to:

(i) start with the common ground, namely that the

assets of the parties as at January 2005 were
matrimonial property to which the yardstick of
equality applies readily and with such force that
(subject to adjustment in an overview) they
should be equally divided,
(ii) accept and acknowledge that the relevance of
the argument over the identification of the
matrimonial property and thus its extension
beyond January 2005 relates to the application
of the yardstick and that its application is
flexible,
(iii) reject, or abandon consideration of, the
arguments that whether by reason of proximity
or otherwise the matrimonial property can be
increased to include further bonuses, and
proceed on the basis that the matrimonial
property to which the yardstick of equality

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applies readily and with force comprises the

assets of the parties as at 1 January 2005, and
(iv) consider the award that should be made in
respect of further bonuses, including the wife’s
loss of a share in the husband’s future income
and the product of his enhanced or greater
income and earning capacity to which she
contributed, against that background.

121. In applying this guidance to his reasoning over the

treatment of the husband’s bonuses, Charles J found that in January
2005 the underlying foundation of the marital partnership having
been brought to an end and not re-established, the bonuses for the
years 2006 and 2007 did not therefore form part of the matrimonial
property, but the principles of fairness, equality and
non-discrimination required that the wife receive an additional award
as well as one-half of the matrimonial property to reflect her
contribution over the years of the marital partnership that had
resulted in the husband’s enhanced or greater earning capacity, as
the wife’s incalculable but in purely economic terms small,
contribution to the husband’s enhanced or greater capacity founded
an award that eased her transition to independent living, hence the
additional sum would be equivalent to the total one-third of the
income earned in 2005, a sixth of the income earned in 2006 and
one-twelfth of the income earned in 2007.
122. Mr Todd who in fact represented the wife in H v H with
Mr Nicholas Mostyn QC (as he then was) submits that the law on
whether a work capacity is an asset capable of sharing was then still
very much in flux, but a decade later it is now clear, as shown in
B v S, Lawrence v Gallagher and in particular Jones v Jones, all
already cited above, that it is decisively against the submission made
on behalf of the Wife. But even if H v H taken at the highest does
not assist her, as there Charles J backdated the wife’s maintenance
to the date of separation and then allowed a “run off ” to compensate
her for her loss of a share in the husband’s future income by
awarding her in diminishing scale 3 years of his bonuses, which
would mean that the Wife’s claim in the present case on an H v H
basis would have been fully disposed of in 2014. However H v H
is both controversial and hugely different on its facts, and in any
event the Wife’s claim, he argues, is overly ambitious as the
Husband is already giving her almost everything, with the result
that she thus exits the marriage with all the parties’ capital and
almost 100% of the matrimonial property.
123. H v H was of course not the only case in which
post-separation income was made a subject of a sharing claim. In

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CR v CR [2008] 1 FLR 323, the marriage lasted for 24 years with

2 children and neither the husband nor the wife had brought any
significant resources into the marriage, during which the wife had
given up her job to join the husband in Hong Kong as his job
required, and she had for the most part concentrated on her domestic
role. The husband was nearing the age at which he would be able
to retire, but as a very senior figure in his industry he was likely to
earn in the region of £1m a year net until he chose retirement. The
assets at the date of separation were said by the husband to be a
little over £8m; by the date of hearing the assets had grown to
about £16m, the growth being due in large part to the significant
increase in the husband’s shareholdings in the companies for which
he worked, both in terms of value and size of holding. The husband
offered the wife £6.843m as a clean break, justifying the departure
from equality on the basis, inter alia, of the significant post-separation
increase in the assets. The wife sought 50% of the assets, plus
£350,000 pa over 5 years to compensate her for her inability to
share in the husband’s prospective income and, in addition, a
proportion of any gain in the value of the husband’s shareholdings
at the time of sale after 3 years, whichever was earlier.
124. In awarding the wife £9m, of which £1m was to be paid
in instalments over 3 years, Bodey J held that whilst the matrimonial
property might nowadays need to be identified, the court should
still strive to take as broad a view as possible of the assets available
at the hearing, and there was no good reason for the wife to leave
the marriage with less than half of the total assets at the date of the
hearing, including the post-separation accruals, as he explained:

[40] … the key point is that the assets accruing to the husband
post-separation (and the mortgage reduction) were only
able so to accrue to him by reason of the wife’s sustained
commitment to the family and the domestic infrastructure,
whilst he was making his way up the ladder of his chosen
career. This applies particularly to his sizable interests
under the two share investment schemes, whatever may
be their formally stated objectives …
[41] Without the wife’s support, the husband would not have
had that important role and status within the group by
virtue of which he came by those assets for which he
seeks differential and favourable treatment. In other words
this was a financial continuum, the groundwork for which
was laid and the seeds sown during the parties’ married
life together, through how they chose their respective
marital roles. Attempted forensic distinction between the
differing assets in the kitty creates issues which are in
many (though not all) cases sterile. In my view, therefore,

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whilst the ‘matrimonial property’ may nowadays need to

be identified, the court should still strive to take as broad
a view as possible, especially in cases such as this, where
the husband’s asset-accruing role has not changed in any
way since the separation and where the accruals have not
come from any new source of risk, endeavour, or luck.

125. Bodey J proceeded to consider the most contentious issues

between the parties as to whether the husband’s shares in the group
investment schemes are likely to rise in value in the foreseeable
future, and whether the wife should be “compensated” for her
inability to share in the “powerful resource” which is the husband’s
earning capacity:

[68] It seems to me reasonable to conclude that in the future

the value of the husband’s shares will probably increase,
since from everything I have read the group seems to be
large, in good fettle and competently managed.
Quantification, however, is so unforeseeable as to be
impossible. I have no idea and no way of telling how
much more than at present his shares are likely to become
worth …
…
[93] This leaves only the factor of the husband’s likely future
income stream, estimated above at getting on for £1m
per annum net, much more than that needed objectively
for the requirements of a very comfortable lifestyle.
Would it be fair to ignore this feature, bearing in mind
first and foremost the wife’s ‘needs’ (generously
interpreted) and also that she provided the domestic
infrastructure and support which enabled the husband,
through talent and hard work, to have that likely future
income?
[94] This is an area of some difficulty which, although not
arising directly for determination in Charman v Charman
(No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246 led
the Court of Appeal to say this at para [67]:
“Irrespective of whether the assets are substantial, likely
future income must always be appraised for, even in a
clean break case, such appraisal may well be relevant to
the division of property which best achieves the fair
overall outcome. We appreciate that remarks of Baroness
Hale in Miller at [154], are also said to permit argument
that a party’s earning capacity is itself an asset to which
the other has contributed and which might to some extent

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be subject to the sharing principle; this seems to us an

area of complexity and potential confusion which in this
case it is unnecessary for us to visit.”
[95] Reluctant though I am to venture into any area of
complexity or potential confusion, the financial
ingredients of the instant case require a decision to be
taken. My conclusion is that it would not be fair here to
ignore the big income imbalance. Some recognition is
required of the fact that the wife’s half share of the overall
resources is ‘all’ she will have to provide for her reasonable
needs in the context of the overall resources; whereas the
husband will have the same share of the assets plus the
likelihood of a very large ongoing income, much greater
than his generously assessed reasonable requirements.
[96] How is that imbalance to be resolved, or mitigated, and
by what quantification? The most straightforward and
least controversial way is to link the required recognition,
if the figures permit, to the degree of generosity of the
assessment of the wife’s reasonable requirements — an
approach which brings me back to the figures …

126. By adopting this approach Bodey J assessed the wife’s

income requirements at about £160,000 pa and found that she
would require a £5m investment fund, adding this to the
matrimonial home and a holiday home, together worth £4m. He
therefore held that the wife was entitled to about £9m, £1m more
than on an equal division.
127. Another case in which the court also awarded the wife a
share in certain future income of the husband in addition to an equal
division of the parties’ wealth is B v B [2010] 2 FLR 1214, where
the parties had been married for over 10 years after a relationship
lasting more than 15 years, there were 3 children with the husband
working as a trader and the wife unemployed. By the date of the
ancillary relief proceedings, more than 2 years after separation, the
husband’s assets had increased considerably as a result of
performance-related bonuses, although payment of an element of
each of his annual bonuses, in both cash and shares, had been
deferred over 3 years. The resources available at trial were £12.3m,
but the husband was due to receive an additional £2.7m in deferred
instalments within a few months. The husband was also due to be
paid further deferred instalments in subsequent years, which might
total as much as £3.5m, but it was also possible that his entitlement
to these would be affected by his plan to retire as a trader at the
end of the year. The wife argued that she was entitled to half the
assets at the date of trial including any deferred elements of bonuses

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already earned, ie about £9m, while the husband argued that her
award should be restricted to £6.5m to reflect the fact that a
substantial part of his assets had accrued post-separation in the form
of performance-related bonuses some of which had not yet been
paid, but also to enable him to set aside a sum of for educating the
children.
128. In awarding the wife £7m plus 15% of certain additional
sums subsequently received by the husband, Moylan J held that
while there was no justification for the wife to receive any further
share of wealth generated by the husband whatever his future
employment path, and hence an equal division of the parties’ wealth
as at the date of trial was not justified in this case due to the fact
that a substantial part of the wealth had accrued directly as a result
of the husband’s endeavours since separation, but if the husband
was to receive additional capital from deferred instalments, the wife
should also be entitled to a share thereof, as His Lordship explained
in para [48]:
… the sharing principle is not confined to ‘matrimonial property’
but applies to all the parties’ resources. The search for ‘… the
division of property which best achieves the fair overall outcome’:
para [67] Charman v Charman: ‘… the requirements of fairness in
the particular case’ para [9] Miller/McFarlane.
129. In the more recent decision of the Court of Final Appeal
in Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414,
it was held that the profits accruing to the husband’s company during
the post-separation period were to be shared equally between the
parties, as they arose out of the business which had been built up
in the course of the marriage in respect of which the wife can
legitimately assert an unascertained share on the principles accepted
in LKW v DD, as Ribeiro PJ explained:

[128] When considering ancillary relief, the financial position

is generally approached on the basis of the values existing
at the date where the hearing takes place.
[129] Where, however, there has been a substantial period of
separation prior to the hearing and where during that
period, there has been a steep increase in the value of the
matrimonial assets attributable to the independent business
or professional efforts by one spouse, unmatched by any
contribution from the other spouse, grounds may exist
for departing from equality. In some such cases, fairness
may dictate that the non-contributing spouse has no claim
to share equally in the post-separation accrual to the
matrimonial assets.

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[130] there are opposing arguments as to whether a spouse

should be excluded in such case. As Nicholas Mostyn
QC explained in Rossi v Rossi:
“… it can legitimately be argued that the party in question
has traded with the other party’s undivided share and so
should share with that party the profit that has been
generated. On the other hand it can equally convincingly
be said that the second party has not contributed to the
industry or endeavour that gave rise to the profit or
growth and so it is unfair that the second party should
share to the same extent in that profit as the first who
made all the effort …”
[131] In Cowan v Cowan [2002] Fam 97, Thorpe LJ favoured
the former approach and visualised only rare and
exceptional departures from equality by reason of
post-separation accruals:
“The assessment of assets must be at the date of trial or
appeal. The language of the statute requires that.
Exceptions to that rule are rare and probably confined to
cases where one party has deliberately or recklessly wasted
assets in anticipation of trial. In this case the reality is that
the husband traded his wife’s unascertained share as well
as his own between separation and trial … The wife’s
share went on risk and she is plainly entitled to what in
the event has proved to be a substantial profit. If this factor
has any relevance it is within the evaluation of the
husband’s exceptional contribution.”
[132] His Lordship’s reference to ‘exceptional contribution’
was a reference to cases where it can be established that
the increase is only attributable to what has been called
one spouse’s ‘stellar’ contribution. As discussed in LKW
v DD, cases in that class are necessarily rare and
exceptional. H makes no claim to ‘stellar contribution’
in respect of the increased profits of the business in the
present case.
[133] The summary of the principles provided in Rossi v Rossi
is broader than Thorpe LJ’s stricter approach and is, in
my view, preferable. It points to various factors relevant
to deciding whether a post-separation accrual justifies
departure from equality, including the length of the
marriage and separation, the nature of the property
accruing and the means or efforts by which it was

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acquired, and so forth. Of particular present relevance is

the following passage:
“Assets acquired or created by one party after (or during
a period of) separation may qualify as non-matrimonial
property if it can be said that the property in question
was acquired or created by a party by virtue of his
personal industry and not by use (other than incidental
use) of an asset which has been created during the
marriage and in respect of which the other party can
validly assert an unascertained share. Obviously, passive
economic growth on matrimonial property that arises
after separation will not qualify as non-matrimonial
property.”
[134] In my view, the increased Analogue Group profits do
not provide a ground for departure from the equal sharing
principle in the present case. The parties married in
January 1968 and separated in mid-2008, over 40 years
later. The period of separation prior to the hearing date
was relatively insignificant. The profits accruing to the
Analogue Group during the post-separation period arose
out of the business which had been built up in the course
of the marriage, in respect of which W can legitimately
assert an unascertained share on the principles accepted
in LKW v DD.

130. Mr Man for the Wife concludes in his submission that

these cases illustrate the court’s sensible and broad-brush approach
towards sharing the fruits of the matrimonial partnership, and that
the court does not blindly exclude assets coming into a party’s hands
post-separation or post-decree and say that those assets must not be
shared in any way, as such a rigid and unprincipled approach would
be as surprising as it is wrong.
131. On the contrary, he submits, the court will examine
whether the post-separation earnings in question derive from an
earning capacity built up during the marriage, or otherwise represent
the fruits of a marital partnership. If so, the court would award the
other spouse a fair share in these post-separation resources in a way
that “best achieves the fair overall outcome”: per Charman v
Charman.
132. Mr Man further submits that the Husband’s argument that
H v H should not be followed because subsequent cases are against
the sharing of earning capacity whether by way of periodical payment
out of future income stream, the capitalisation of earning capacity
as an asset or the sharing of post-separation accruals, do not upon
close scrutiny hold water.

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133. The most obvious problem with this argument, Mr Man

submits, is that the Wife is not claiming periodical payments but
rather a clean break capital award, which is also the common ground
of the Husband, hence what Mostyn J stated in B v S above is not
applicable, and that insofar as the Husband seeks to rely on the
reasoning by Mostyn J by analogy, Mr Man submits that they would
not assist either.
134. He further argues, these reasons do not exclude an award
giving recognition to the Wife’s fair share in the Husband’s earning
capacity —

(a) it is incorrect to presuppose, in all cases, that there is only one

cause to the husband’s ability to earn his income after a
marriage, as it ignores all other causative factors at play, such
as the “groundwork” laid in the marriage, the wife’s emotional
support, the existence of a “stress-free” environment, the
accumulation of experience, reputation, goodwill over the
years, and particularly so for a barrister’s practice;
(b) the fact that a husband has to do the work to earn the money
does not mean that he is not benefiting from the fruits of a
marital partnership, as there are multiple “but for” causes for
earning money, and there is no warrant to just focus on one
“but for” cause to the exclusion of all others and say that all
of the husband’s earnings are caused by his hard work, and
hence the fact that post-separation income will not be earned
“but for” the husband’s own hard work should not, and has
never been, a reason for excluding such income from sharing,
as such an argument ignores the relevance of a host of other
“but for” causes, and is flatly inconsistent with the court’s
recognition that the husband’s pre-separation and
post-separation successes are often on a “financial continuum”
which are not distinctly separate.

135. Mr Todd however argues that even if an earning capacity

may sometimes be relevant to a fair distribution of the assets pursuant
to the sharing principle, the assessment of matrimonial and
non-matrimonial assets does not ever descend to a valuation of the
Husband’s work capacity, and that even if the Wife’s contentions
were correct, then it would be necessary to instruct accountants to
undertake this but it is never done in any case, and to do so would
be to conflate need with sharing, which was criticised by Wilson
LJ (as he then was) in Jones v Jones:

[31] … I feel emboldened to suggest obiter that the proposition

of Charles J is confusing and unhelpful; that, in applying
the principles of need and of sharing, the court is engaged

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[2017] 1 HKLRD 187 Judge Bruno Chan 271

in two separate exercises, which require it to refer to

different considerations (Charman, cited above, at [70]
and [72]); and that the suggestion that the result of the
assessment under the need principle can be introduced
into the assessment under the sharing principle in order
to identify the extent of departure from equality is
inconsistent with the guidance given in Miller/McFarlane,
as recognised in Charman at [73] and as noted by the judge
himself at [410], that in principle the higher assessment
should found the award.

136. This argument that the development of the jurisprudence

“has been wholly against the treatment of work capacity as an asset
available for sharing” cited in Jones is, according to Mr Man,
incorrect in that Jones concerned the proper valuation of the
husband’s pre-marital business for the purpose of excluding it from
the matrimonial pot, where the Court of Appeal held that Charles
J was wrong to have ascribed a capital value to the husband’s earning
capacity at the date of the marriage and uprated the value of the
business by the same.
137. On a conceptual level, Mr Man submits, that this objection
against the sharing of earning capacity as an asset, and the
capitalisation thereof, stems from the oft-cited principles that there
is in general no sharing of “future resources” upon the dissolution
of marriage, and capitalisation of a spouse’s earning capacity
obviously violates this principle as it treats all future earnings as a
relevant asset to be shared, but the Wife’s claim here is miles from
that extreme position, as her claim is confined to the sharing of
post-separation resources that can be “attributable to a fruit or
product of the matrimonial partnership”, as per Charles J in H v
H, and that she is not seeking to share all of the Husband’s earnings
post-separation, but only to share a part of his earnings which reflect
his enhanced earning capacity.
138. Mr Todd however argues that at least since the time of
Lambert v Lambert when the courts have been concerned with
marriages as partnership, such partnership usually ended on
separation, and thereafter there is an absence of spousal support (not
to be confused with child support). The courts have expressly
acknowledged the important distinction which needs to be drawn
between matrimonial and non-matrimonial property, thus
post-separation endeavours such as the Husband’s future income
clearly falls outside the marital partnership, and while his work
capacity is highly relevant to need, those of the Wife here are fully
addressed including agreed capitalisation of periodical payment and
provision of a home which is met by Flat C, whilst all her other
needs, either $59,913 (her Form E) or $57,713 (her answers) are

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fully met by her own income of $66,922, it would therefore be an

error to seek to add further value to her claim on the controversial
basis that she is entitled to share in the Husband’s future earnings.
139. For the current state of the law in relation to
post-separation accruals, given the divergence of the judicial
approach referred to above being considered and analysed by
different judges in both UK and Hong Kong from the standpoint
of different factual matrices of each case over recent years, in my
view the starting point for that analysis has always been the oft-cited
passage from the decision of Deputy Judge Nicholas Mostyn QC,
as he then was, in Rossi v Rossi [2006] EWHC 1482 (Fam), [2007]
1 FLR 790 , where he provided the following guidance at [24], and
as applicable to this case:

24.1 The statute requires all the assets to be valued at the date
of trial.
…
24.3 Assets acquired or created by one party after (or during
a period of) separation may qualify as non-matrimonial
property if it can be said that the property in question
was acquired or created by a party by virtue of his
personal industry and not by use (other than incidental
use) of an asset which has been created during the
marriage and in respect of which the other party can
validly assert an unascertained share. Obviously, passive
economic growth on matrimonial property that arises
after separation will not qualify as non-matrimonial
property.
24.4 If the post-separation asset is a bonus or other earned
income then it is obvious that if the payment relates to a
period when the parties were cohabiting then the earner
cannot claim it to be non-matrimonial. Even if the
payment relates to a period immediately following
separation I would myself say that it is too close to the
marriage to justify categorisation as non-matrimonial.
Moreover, I entirely agree with Coleridge J when he
points out that during the period of separation the
domestic party carries on making her non-financial
contribution but cannot attribute a value thereto which
justifies adjustment in her favour. Although there is an
element of arbitrariness here, I myself would not allow a
post-separation bonus to be classed as non-matrimonial
unless it related to a period which commenced at least
12 months after the separation.
24.5 By this process the court should, without great difficulty,
be able to separate the matrimonial and non-matrimonial

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property. The matrimonial property will in all likelihood

be divided equally although there may be deviation from
equal division: (a) if the marriage is short; and (b) part of
the matrimonial property is ‘non-business partnership,
non-family assets’ (or if the matrimonial property is
represented by autonomous funds accumulated by dual
earners).
…
24.7 In deciding whether a non-matrimonial post-separation
accrual should be shared and, if so, in what proportions,
the court will consider, amongst other things, whether
the applicant has proceeded diligently with her claim;
whether the party who has the benefit of the accrual has
treated the other party fairly during the period of
separation; and whether the money-making party has the
prospect of making further gains or earnings after the
division of the assets and, if so, whether the other party
will be sharing in such future income or gains and if so
in what proportions, for what period, and by what means.

The proper approach

140. I propose to adopt this approach, which as noted above
was preferred by the Court of Final Appeal in Kan Lai Kwan as the
broader one, to deal with the issue over the Husband’s enhanced
future earnings and earning capacity which can neither be quantified,
nor could it be attributed to any direct contribution from the Wife
after the divorce, and since she is not seeking any periodical
payments as it is common ground that there be a clean break
between the parties by applying the sharing principle on the
matrimonial property.
141. Firstly, since all the assets are to be valued at the date of
the trial, if the Husband’s post-separation accruals of earnings are
to be treated as matrimonial property on the basis that the payments
related to the period when the parties were still cohabiting, their
value should be reflected in the assets acquired by him
post-separation, and in this case the only relevant asset would be
his cash/bank balance disclosed in his Form E of just over $1 million,
but that was then in November 2013 and was never updated at the
trial.
142. Whatever may be the true cash balance of the Husband
in 2015, the Wife argues that it should be added back all his
payments made to C, which thus brings me back to the remaining
issue over the pocket money averaging $25,000 per month and
totalling $1.3 million calculated to the trial, against which the

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Husband argues as part of his post-separation spending and hence

should not do so.
143. In [58] above I already found the Husband’s two earlier
payments to C totalling $1.2 million as “wanton, reckless or
extravagant” non-marital spending either pre-separation or so soon
thereafter that they should in the circumstances of the parties be
added back to the marital pot or re-attributed to his assets, but can
the same be said about these payments of pocket money made
regularly post-separation?
144. In MKKWH v RKSH referred to above, the Court of
Appeal refused the wife’s request to add back the husband’s
non-marital expenditure of $71 million on his children born out of
wedlock and their mothers as they were not “wanton, reckless or
extravagant”, and that it was wrong in principle for the court to
examine whether they amounted to such conduct that caused the
destruction of marriage.
145. Here whilst the Husband’s girlfriend C clearly has earning
capacity and is not a proper or necessary dependent, it is not clear
why she has not been earning or anything about her financial
situation other than the fact that she has been cohabiting with him
over the past 4 years, and that these pocket moneys were, as what
they are called, for her daily use. Although it could be said that
such expense was a depletion of the Husband’s resources and may
thus reduce his ability to meet the Wife’s needs or those of the
daughters and that they have not benefited from such expenditure,
there is simply a lack of evidence or information to enable me to
safely conclude that these payments amount to financial
irresponsibility and dissipation of assets that is “wanton, reckless or
extravagant”, or to such conduct which is so obvious and gross that
it would be inequitable to disregard to justify their adding back
through the Norris route, but rather as part of her arguments for
departing from equal division of the matrimonial property as in
ARAV to achieve a fair result.
146. The next step would be for me to revisit the matrimonial
property identified and valued at the trial together with the
added-back cash to the Husband’s assets which reveals a very similar
position between the parties:

Assets Husband Wife

Matrimonial Flat D HK$ 5,560,000 Flat C HK$ 5,370,000
Home:
Cash in Bank HK$ 1,094,260 HK$ 1,515,524
Added Back Cash HK$ 1,200,000
Insurance HK$ 368,024 HK$ 312,951

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Assets Husband Wife

Personal items HK$ 5,000 HK$ 20,000
Pensions HK$ 180,261 HK$ 1,622,484
Total Assets: HK$ 8,407,545 HK$ 8,840,959

147. I shall now turn to consider the parties’ open proposal,

starting first with the Husband’s by reference to his “Net Effect
Table” at Appendix 1(b) where he has included the parties’ liabilities,
being $3,653,504 for him and $784,837 for the Wife, from which
he then set off against their respective assets and by adding his
proposed lump sum of $300,000 for the Wife and $500,000 of
capitalised maintenance for the daughters to arrive at what he claims
to be the net effect of the Wife getting 73% of the total matrimonial
property and him only 23%.
148. In fact, by adding back the $1.2 million to the Husband’s
asset, as I have found above, the net effect of his proposal would
be somewhat lower for the Wife getting instead 67% of the total
assets while his share would accordingly go up to 33%. However,
as noted above, Mr Man argues that either way the Husband’s “Net
Effect Table” is not an accurate representation of the parties’
respective net value and does not delineate the proper scope of the
sharing claim for the following reasons:

(a) the value of Husband’s “cash in bank” is as of November

2013 only while that of the Wife is as of June 2015, hence
with at least two years of his profits excluded from the table
which is significant given that his annual gross income had
been over $4 million in the past 3 years;
(b) the inclusion of the outstanding mortgage of $1.4 million
which is not proper as they represent his future instead of
current liability which is being met on a monthly basis from
his monthly income, and hence its inclusion understates his
net asset position;
(c) the inclusion of “Westone Notice-to-quit” of $666,000 as a
liability is not justified as the payment would not be necessary
if the Husband is to give 6 months’ notice to terminate his
tenancy, and there is no indication of why he will not do so;
(d) the inclusion of his outstanding legal fees as a liability when
there is no equivalent deduction from the Wife’s assets.

149. I agree that the Husband’s cash in bank was not updated
at the trial and may not accurately reflect the true position, but as
it was never raised either before or during the trial, it is simply
impossible to quantify it at this stage, but I agree with the Wife’s

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argument against the inclusion of the outstanding mortgage of the

former matrimonial home which the Husband has clearly proposed
to discharge on a monthly basis from his future income rather than
from his existing capital, while the “Westone payment” is just a
possible liability which can and should be avoided. As for the
Husband’s own outstanding legal costs as a liability, in the absence
of the Wife’s equivalent figure which may possibly even out each
other, plus the fact that it may well be an issue which needs to be
dealt with after the delivery of this judgment, I agree that it should
also not be included in the Husband’s Net Effect Tables for the
present purpose.
150. Henceforth, the exclusion of these sums would bring the
Husband’s total liabilities down to only $1,134,204 which would
put his total net assets at a much higher amount at $7,273,342, with
the Wife getting about 57% and the Husband 43% of the
matrimonial property instead of the respective 73% and 27% as
stated in his Net Effect Table at Appendix 1(a).
151. If accordingly the same adjustments of adding back of
$1.2 million to his cash and the exclusion of those sums from his
liabilities are to be applied to his other Net Effect Table based on
the Wife’s case at Appendix 1(b) if she is to get Flat D as well, the
Wife would end up with total assets of $15,185,796, representing
89.8% rather than 100% of the matrimonial property, which would
still appear highly disproportionate to the Husband’s 10.2%.
152. In applying the principles of equality and
non-discrimination in the assessment of the fruits of the marital
partnership so as to arrive at a fair result, fairness requires the court
to also address what seems to be a highly disproportionate financial
loss to the Husband who during the marriage has no doubt
contributed his fair share to the acquisition of Flat D as part of the
matrimonial property.
153. This brings me back to the issue over the Husband’s future
plan including primarily to purchase a flat in Bel-Air Residence of
similar size to his current apartment of about 900 sq ft which he
estimates would require $6–7 million for down payment. Whether
he is going to save $100,000 per month for the next 5 or 6 years
for that purpose as he proposed in his narrative affidavit, or to sell
Flat D upon the younger daughter reaching 21 to fund his purchase,
clearly he would then have his own property of similar size and
value of both Flats C and D together which constituted the former
matrimonial home, while the Wife would likewise have her own
property but in Flat C only at half the size and value of the
Husband’s property at Bel-Air Residence, not to mention the stark
contrast in terms of location, standard and prestige in the Husband’s
favour. That cannot in my view be said to be a fair result.

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154. No doubt the Husband would argue that the fact that he
has offered to allow the Wife to continue to use Flat D until the
younger daughter reaches 21 and to continue to pay for the
mortgage of both flats until their discharge would form part of the
fair result, it seems to me that it is more to do with his obligation
to meet the daughters’ accommodation needs until they become
financially independent rather than to add more value to his proposal
for the Wife on the division of the matrimonial property.
155. What further underlines the unfairness inherent in this
proposal of the Husband is the significant factor of the very frugal
lifestyle adopted by the parties and the family throughout the
marriage which had given the Wife a legitimate expectation that in
future she would be able to enjoy a much higher economic plane,
but under his proposal not only would she be denied such, but by
the time the younger daughter reaches 21, her frugal lifestyle would
suffer even further when her home would be reduced in size by
half, while the Husband who has since separation in 2011 been able
to enjoy a much more luxurious lifestyle would be able to reap the
fruit or product of his enhanced earning capacity by being able to
amass more capital and acquiring a bigger and much more luxurious
home for himself. Whilst no doubt such enhanced earning capacity
of his is due mainly to his own talents and energy, but it must also
be the product of the contributions, lifestyle and spadework of the
parties during the marital partnership, which has however been
denied not only to the Wife but also the daughters, for whom on
his own admission he has not been paying his share of their living
expenses since he left in June 2011, and for which he has only
agreed to capitalise by way of a lump sum payable within 4 months
after Decree Absolute.
156. Furthermore, in applying the principles of
non-discrimination and equality in the assessment of the fruits of
the marital partnership, fairness requires the court to address such
disproportionate financial loss to the Wife who not only during the
marriage has earned, and who will continue to earn a much lower
income than the Husband, but who has since 2011 when he left
and when the daughters were merely 9 and 12 respectively, also
become their primary carer in a separate household, and will
continue to make such a contribution to the family after the end of
the marriage. Whilst the Husband does so too by continuing to
meet the daughters’ monthly expenses and their tertiary education
fees, it is essentially a financial one only.
157. Such disparity of financial position after the end of the
marriage by reason of the much larger earning capacity of one party,
generally still the husband, as is the case here, was recognised by
the House of Lords in Miller/McFarlane as good reasons to depart
from equality:

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[142] Of course, an equal partnership does not necessarily

dictate an equal sharing of the assets. In particular, it may
have to give way to the needs of one party or the
children. Too strict an adherence to equal sharing and
the clean break can lead to a rapid decrease in the primary
carer’s standard of living and a rapid increase in the
breadwinner’s. The breadwinner’s unimpaired and
unimpeded earning capacity is a power resource which
can frequently repair any loss of capital after an unequal
distribution: see, eg, the observations of Munby J in B v
B (Mesher Order) [2003] 2 FLR 285. Recognising this is
one reason why English law has been so successful in
retaining a home for the children.

158. In the premises it is my judgment that not only will it be

fair but also necessary for the Wife to be allowed to continue to
make her home at both Flats C & D, and also to enable her to
provide a home for the daughters not just until D2 reaches 21 but
until such time when they become financially independent including
finding their own accommodation.
159. To do so it would be in my view fair for Flat D to be
transferred to the Wife, but not necessarily all on the terms of her
Open Proposal, in which she also suggests that the Husband should
continue to pay for the mortgage of both Flats C and D until their
discharge before transferring Flat D to her, and to pay her a lump
sum of $300,000 calculated at $5,000 per month for 5 years for her
maintenance as a clean break between the parties. Whilst this
payment is acceptable to the Husband, it is however not clear how
that amount of maintenance was arrived at, and the figures seem
to me somewhat arbitrary.
160. Given the Husband’s proposal to pay $10,000 per month
as maintenance for each daughter, and while the Wife is seeking a
higher sum at $15,000 for each, as I have found above that the
daughters’ expenses actually amount to more than $14,400 per
month for each taking into account their share in the general
household expenses, and if the Husband is to pay the Wife’s
requested sum for the daughters’ reasonable needs (generously
interpreted), it seems to me in the circumstances that she would no
longer justify any maintenance either by way of periodical payments
or lump sum for herself if she is allowed to continue to make her
home in both Flats C & D.
161. The Wife’s current average income stands at $66,922 per
month, and if the Husband is to pay $30,000 per month for the
daughters, she would have almost $97,000 to meet the monthly
expenditure of both herself and the daughters, of which she has
stated at no more than $60,000 in her Form E, which means she

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would have some $37,000 per month to spare to enable her to take
over the monthly mortgage payments of both Flats C & D at $11,200
as well as their rates, management fees and utilities of her household
currently being met directly by the Husband at about $5,500 per
month. It seems to me therefore both fair and financially feasible
for the Wife to take upon all these expenses by herself as a clean
break from the Husband.
162. On the other hand, if Flat D is to be retained by the
Husband, whether or not he needs to sell it to finance his purchase
of his own bigger and better accommodation, it would in my view
only be fair in the circumstances that the Wife be allowed to do
the same for her own accommodation, in which case she may well
require financial assistance from the Husband by way of substantial
periodical payments, which would however appear to be contrary
to the desire of both parties for a clean break situation.
163. It seems to me therefore a clean break can in the
circumstances of this case be achieved for the Wife to keep the
entire matrimonial home for herself without any further financial
provisions from the Husband either for her future maintenance or
for the mortgage payments. The question must however be asked
whether this would also be a fair result to the Husband? As pointed
out by Mr Man for the Wife, with such substantial earnings and
earning capacity of his, the Husband should have no difficulty
amassing sufficient funding to purchase the property of his choice
without resorting to the sale proceeds of Flat D. In his affidavit he
proposed to save $100,000 per month for the next 5–6 years for $7
million for the down payment of his future home. The Wife does
not think it is necessary for him to do so, and I agree.
164. Firstly, his estimation that he would require a down
payment for 50% of the purchase price rather than the customary
30% is too conservative and not consistent with his current income
and earning capacity.
165. Secondly, he has not taken into account the cash which
he already has including the added back $1.2 million, plus whatever
additional savings which the Wife believes he has been able to
accumulate since the balance disclosed in his Form E in 2013, and
based on her argument referred to above, it could be substantial.
Furthermore, there would be a saving of $300,000 if he need not
pay any lump sum to the Wife.
166. Above all, even putting his net income at the lowest at
only $200,000 per month, which as noted above the Wife believes
to be much higher, if the Husband is to be responsible, on a clean
break basis, only for the daughters’ monthly maintenance and
insurance for which he will need to set aside a monthly sum of no
more than $33,000 at the rate proposed by the Wife, hence there
would be at least $170,000 per month, which Mr Man for the Wife

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has put as much as $399,153 as a senior junior counsel, at the

Husband’s disposal to meet that purpose as well as his other needs
and expenses.
167. Whilst it is correct for the Husband to argue that
post-divorce he is entitled to spend his future income in whatever
way he wants, as he has since paid $1.3 million as pocket money
to his girlfriend who has substantial earning capacity and is perfectly
capable of working to earn her own pocket money, and if he chooses
to continue to do so at $20,000–$30,000 per month, or to continue
to spend, for example, on his meals, clothing, entertainment and
holidays at a much higher rate than he used to during the marriage
or is necessary, when some of the expenses as noted above have
already been accounted for as part of the outgoings of his practice,
then in my view he should not be allowed to cry poor or argue that
he cannot afford to purchase his own property.
168. Whilst it may appear that for Flat D to be transferred to
the Wife on the terms referred to above, and I do not need a net
effect table to tell me so, that the Wife is to exit the marriage with
the bulk of the matrimonial property, but if that is to be in lieu of
any periodical payments or further financial provisions which the
Wife would otherwise be entitled to and would likely be substantial
for years to come, if not for life; in view of the great disparity of
the parties’ financial position, and for all the reasons articulated
above, in applying the principles of non-discrimination and equality,
it is my judgment that this would be an appropriate case to depart
from equal division, and that a fair result in the circumstances of
the case would be achieved by the Husband transferring Flat D to
the Wife subject to the outstanding mortgage and on a clean break
basis, and on the basis that he is to be responsible only for the
maintenance and support of the two daughters in arrears since June
2011 by way of the agreed capitalised lump sum of $500,000, and
in future by periodical payments at $15,000 per month (generously
interpreted) for each of them, and for their insurance premium as
well as their tertiary education expenses.

Conclusion
169. Accordingly, and upon the Husband agreeing and
undertaking to continue to be responsible for the daughters’
insurance premium and their tertiary education expenses, and on
the basis that the Wife shall upon the transfer of Flat D to her be
responsible for all the outstanding mortgage of both Flats C and D
as well as their rates, management fees and utilities and her own
insurance premium, my orders are:

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(a) The Husband shall upon Decree Absolute transfer all his
interests in Flat D to the Wife absolutely subject to the existing
mortgage, whereupon all claims the parties may have against
each other do stand dismissed;
(b) The Husband shall from 1 September 2016 and thereafter on
the 1st day of each month pay the Wife for the two daughters
periodical payments at the rate of $15,000 per month for each
until the age of 18 or completion of full time education;
(c) The Husband shall within 4 months of Decree Absolute pay
to the Wife a lump sum of $500,000 being agreed maintenance
for the daughters in arrears from 1 July 2011.

170. As for the question of costs, if it remains at issue between

the parties, I would prefer that it be argued and dealt with on paper
without any attendance in court.
171. Lastly, in echoing Mr Todd’s remarks in his Closing
Submission, and my earlier criticisms of the Husband’s narrative
affidavit aside, I agree that the parties here are decent hard working
people who are both doing their best for their family and their
children, but who have had the great misfortunate of not being able
to resolve the difficulties on their divorce and the legal issues raised
as a result which admittedly turned out somewhat more complicated
than expected. Nevertheless, I hope that this will now enable them
to close the last unhappy chapter of their marriage, and that they
can find comfort from their faith to move on with their new life.
172. I must however not end my judgment without expressing
my utmost gratitude to counsel for both sides, not only for their
valuable assistance rendered throughout the trial, but also for their
concerted efforts in adopting a most courteous, sensible and fair
approach towards each other and the parties particularly in
cross-examination with appropriate restraint, and above all by
steering clear of the many highly emotional allegations enmeshed
in the evidence of otherwise little relevance but no doubt embittered
by the way their marriage ended, which are in my view truly
exemplary but sadly too rarely adopted by practitioners in what are
usually highly charged situations, and for which they deserve the
highest praise from this Court.

Reported by Sasha Allison

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