Judicious Encouragement & Third Parties

Judicious Encouragement & Third Parties

15th February 2013 – Court of Final Appeal KEWS v NCHC (FACV 18/2012), [2013] 2 HKLRD 314; (2013) 16 HKCFAR 1 – ‘it would be better if the term “judicious encouragement” were no longer to be used’.

The Court of Final Appeal unanimously and robustly dismissed the husband’s appeal with costs. It held inter alia that the Court of Appeal were correct, on the facts, to reverse the findings of the Family Court judgment and the (increased) orders of the Court of Appeal were entirely justified. The court further held that in the assessment of the financial resources of the parties to a marriage for the purposes of considering an application for ancillary relief under section 4 of the Matrimonial Proceedings and Property Ordinance (Cap 192), the court is guided only by section 7(1) and in particular section 7(1)(a). The term ‘judicious encouragement’ does not call for a different approach when third party assistance is involved – it would be better if the term “judicious encouragement” were no longer to be used.

The appeal involved a consideration of the court’s approach in applications for ancillary relief under section 4 where, in the assessment of the financial resources of the parties to a marriage, it is relevant to take into account the financial assistance provided by third parties to the husband or wife. This concerns the court’s approach in taking into account property or financial resources to which the husband or wife has or is likely to have access, but to which (until the property or financial resources are transferred) that party has no legal entitlement. For example, trust property to which a husband or wife has a legal entitlement, do not present any difficulties: such property will certainly be taken into account in ascertaining that party’s assets. But where discretionary trusts are involved or where the financial assistance has come from a party’s relatives (in the present case, the parents), difficulties may sometimes be encountered.

The width of the wording of section 7(1)(a) will include financial assistance made by third parties to the parties to a marriage. Accordingly, such assistance made by a third party to the husband or wife may be taken into account in the computation of that party’s overall financial resources. In every case where third party assistance is involved, there are two critical evidential questions for the court to consider: (1) What is the extent of the financial assistance provided by the third party to the husband or wife? and (2) What is the likelihood of such financial assistance continuing in the foreseeable future?

In the fact finding exercise, the court must look at the reality of the situation and have regard to matters of substance and not just form. In looking at reality, the court can take into account not only what a party actually has, but also what might reasonably be made available to him or her if a request for assistance were to be made. In O’D v O’D [1976] Fam 83, which involved the court taking into account the financial support given to the husband by his father, Ormrod LJ said at 90 D-E “In making this assessment the Court is concerned with the reality of the husband’s resources, using that word in a broad sense to include not only what he is shown to have, but also what could reasonably be made available to him if he so wished”. In addition, in looking at what may occur in the foreseeable future, past conduct is often a useful guide: see SR v CR (Ancillary Relief: Family Trusts) [2009] 2 FLR 1083, at 1091 (para 27).

Having ascertained the extent of the financial assistance provided by the third party and then finding on the evidence on a balance of probabilities that there is a likelihood of the continuation of such financial assistance in the foreseeable future, the court is then in a position in law first to take this into account in the identification of the financial resources of the parties and secondly, in determining the appropriate ancillary relief to be granted. This is an approach that is entirely consistent with the court’s duty under s 7(1) of the MPPO. Needless to say, the outcome in any given case is inevitably fact-sensitive.