Matrimonial Disputes: The Same Financial Provision Available for Children Irrespective of Their Parents’ Marital Status

By Jonathan CY Mok, Partner and Solicitor Advocate, Mayer Brown JSM Carmen KY Cheng, Associate, Mayer Brown JSM

"Married or not, [there is] no difference to the financial provision orders available to children."

With an increasing number of couples who choose not to marry, the law too has evolved in the area of maintenance orders for children born out of wedlock. There was a time when financial provision orders available to children of married and unmarried parents were different, with limited provisions to the latter, but that disparity has long been removed in England. A recent Court of Appeal judgment confirmed that the financial provision orders available in Hong Kong legislation are also the same for all children.

Lump Sum and Settlement of Property Orders for Children

Under the United Kingdom’s Children’s Act, which applies to all children irrespective of their parents’ marital status, the courts can order lump sum payments for any purpose. There is similar provision in Hong Kong under section 5(2)(c) of the Matrimonial Proceedings and Property Ordinance (Cap. 192) (“MPPO”), which does not impose any limitations on lump sum payments ordered for the benefit of children of marriages; however, it only applies to divorces.

In contrast, under Hong Kong’s Guardianship of Minors Ordinance (Cap. 13) (“GMO”), which also applies to all children, section 10(2)(a) states that lump sum payments are for the “immediate and non-recurring needs” of minors. Thus, there is a stark difference between the power to order a lump sum under the MPPO and GMO, and it would appear (at first glance) that there are greater limitations to lump sum orders available for children of unmarried parents.

In IDC v SSA (Unrep. CACV 91/2013, [2014] HKEC 951), the Court of Appeal recently considered this issue and reviewed the relevant statutes regarding financial orders available to children of married and unmarried parents.

Background

IDC v SSA concerned the daughter of unmarried parents who were in a four-year relationship that began in 2006 and included a period of cohabitation when the father lived with the mother and her daughter from a previous marriage. In 2009, the couple had a child, Z, but their relationship subsequently broke down and they separated in 2010. The mother moved out with the two children and the father continued to pay maintenance and rent for the mother and for Z’s accommodation.

The mother subsequently issued proceedings for Z’s custody and financial provision which included an order under section 10(2)(a) of the GMO for a lump sum to purchase a property for Z. Alternatively, she sought an order that a property be purchased on trust for Z during her minority with a reversionary interest to the father under section10(2)(e) of the GMO.

Sections 10(2)(a) and (e) of the GMO stipulate that:

(2) The court may as regards a minor, on the application of a person with whom, whether by virtue of an order under subsection (1) or otherwise, custody of the minor lies at law, make in respect of the minor any one or more of the following orders:-

(a) an order requiring payment to the applicant by the parent or either of the parents of the minor of such lump sum (whether in one amount or by instalments) for the immediate and non-recurring needs of the minor or for the purpose of enabling any liabilities or expenses reasonably incurred in maintaining the minor before the making of the order to be met, or for both, as the court thinks reasonable having regard to the means of that parent (emphasis added);

….

(e) an order requiring the settlement for the benefit of the minor, to the satisfaction of the court, of such property, being property to which such parent or either of such parents is so entitled, as the court thinks reasonable having regard to the means of that parent.

The mother’s application for a lump sum payment under section 10(2)(a) of the GMO was on the basis that accommodation is an “immediate and non-recurring” need. The court however accepted the father’s argument that accommodation is an on-going everyday need, which is neither immediate nor urgent in nature. The judge held the court had no jurisdiction to make a lump sum provision or settlement property order for the purchase of a property and dismissed this part of the mother’s claim. The father was ordered to pay periodical payments of HK$118,000 which included rent for the mother’s accommodation with Z, and to continue his on-going payments for Z’s school fees, extra-curricular activities and domestic helper’s salary, among other things.

The mother appealed against the court’s finding that it had no jurisdiction to make a lump sum provision or settlement of property order for purchase of accommodation for Z. She also challenged the quantum of periodical payments awarded, which she considered was too low.

The Appeal Proceedings

The Court of Appeal reviewed the legislative history of the relevant provisions under section 10(2) of the GMO, particularly the phrase “immediate and non-recurring needs” which is a distinctive feature in the Hong Kong legislation. No such limitation exists in the relevant UK Children’s Act or under the MPPO in Hong Kong.

Section 10(2)(a) of the GMO - Lump Sum Payment Orders

The power to award lump sum payments was added to section 10(2)(a) of the GMO in 1986. In the memorandum for Executive and Legislative Councils regarding the 1986 amendments to the GMO, it stated that the amendment to section 10(2)(a) was to bring the GMO in line with legislation in England, and empower the court “to order payment in the form of a lump sum either in one amount or by instalments and to permit such order to be made either in addition or instead of an order for periodical payments. To ensure that a lump sum payment in respect of a child is limited to one for the child’s immediate and non-recurring needs”.

The memorandum explained that the purpose of a lump sum order was to make financial provision for non-recurring expenses of the minor which periodical payments would be unsuitable for, or for reasonable expenses already incurred before the order, such as medical treatment. It was envisaged that a child would occasionally require expenses, which would be more appropriately provided by way of a lump sum rather than periodical payments. Notwithstanding that the GMO was further amended twice in 1993 and 1997, the phrase “immediate and non-recurring needs” remains in section 10(2)(a).

The Court of Appeal did not find there was discrimination between children of married and unmarried parents as a result of the wording in section 10(2)(a). First, the nature of the lump sum awards under the MPPO and the GMO are different. It could not have been the legislative intent for the power under section 10(2)(a) to be exercised just once. There was no express wording in the statutory provision to this effect, and the power was intended to cater for the needs of a child which may span over a long period of time thereby possibly requiring a further order. The words “immediate and non-recurring needs” indicate that lump sum orders may be made if and when the needs of a child arise during the course of his minority.

This was contrasted with the court’s power to make lump sum orders under the MPPO. Where it is appropriate in divorce proceedings for one lump sum to be made so as to achieve a “clean break” between the spouses, it would be inappropriate to apply the “clean break principle” to a parent and child relationship. Parents have an on-going financial responsibility for their children and funds would be required from time to time for various expenses. A parent could accordingly apply under section 10(2)(a) to seek a lump sum payment for further maintenance needs of the child, or reimbursement of funds, if and when necessary.

The mother argued that a child’s accommodation need arises at birth and does not need to be met again once it is fulfilled. The court however agreed with the father that housing is an on-going and recurring need of a child. Even if the need was satisfied by the child residing in a property owned by one of the parents, the child’s housing need remains of a recurring nature. If the child were to relocate to other residences or countries, her housing needs would have to be satisfied again. After the parties’ separation, the father continued to pay rental for Z’s accommodation and she had no immediate accommodation need.

The court also noted that lump sum orders are to be paid once and should not be used if there is an intention for the paying party to reserve a reversionary interest. Lump sum orders under section 10(2)(a) should not be used for purchase of accommodation for minors.

Section 10(2)(e) of the GMO – Settlement of Property Orders

The father argued that the words “being property to which such parent or either of such parents is so entitled” under section 10(2)(e) should be construed to apply only to landed property to which the relevant parent is entitled, but not property to which a parent might become entitled.

The mother disagreed and the court accepted her argument that the meaning of “property” under section 10(2)(e) included money for the purchase of a property. It did not find any statutory policy underlying the section to prevent settlement of money for purchase of property to meet a minor’s accommodation needs. The judgment confirmed the Hong Kong courts’ jurisdiction under the GMO to order a settlement of a sum of money to be held on trust for the purchase of a property, with a reversionary interest to the paying parent.

The Court of Appeal Confirms the Trial Judge’s Exercise of Discretion

Based on the Court of Appeal’s statutory interpretation of both sections under the GMO, it concluded that no lump sum order could be made under section 10(2)(a) for the purchase of property. Even though the court also held that a settlement of property could be made under section 10(2)(e), no such order was made as the court did not find that the trial judge was wrong in exercising his discretion not to order settlement of a cash sum for the purchase of property, or in his finding that the existing housing arrangement for Z was reasonable. Although the purchase of property would provide greater security to the housing need of a child, there was no evidence showing there were issues with Z’s housing. The father continued to pay rental, including a rental increase upon the renewal of tenancy.

Besides, the father confirmed his willingness to consider purchasing a property for Z but was waiting for the right timing given the volatility of the local property market. The court agreed the father’s concern about timing of investing in the property market in Hong Kong was a real and reasonable one. The mother never suggested there was any problem with their chosen residence, in which they had been residing since the parties’ separation.

Further, the Court of Appeal found that the periodical payment amount was appropriate and reiterated that unmarried mothers seeking maintenance for the minor would not be entitled to claim on the same basis as wives for ancillary relief. The court cited J v C [1999] 1 FLR 152 where Hale J (as she then was) stated that “one has to guard against unreasonable claims made on the child’s behalf with the disguised element of providing for the mother’s benefit rather than the child.”

There were obvious figures in the mother’s claim that went beyond her reasonable needs as Z’s carer. The trial judge was not required to review each item and explain how it should be treated, as that would effectively be an acceptance of all of the mother’s claimed expenses for her reasonable needs as the carer for Z. The father also had no obligation to pay for the claims the mother sought in respect of her first daughter.

This judgment provides a clearer understanding of Hong Kong’s legislation regarding financial provisions available to children of married and unmarried parents and confirms that all children are treated equally under the law. They will not be treated differently because of their parents’ decision to marry or not.