Answer ... (a) What orders can the court make in relation to the division of assets on divorce or judicial separation?
The court can make the following orders in relation to the division of assets:
- an order for a lump-sum payments, requiring one party to pay the other party a lump-sum payment either on a one-off basis or in instalments;
- a property transfer/settlement order, requiring one party to transfer the ownership of a property to the other party;
- a variation of settlement order, varying the terms of a trust/settlement in place;
- a sale of property order; and
- other remedies as the court sees fit.
(b) What general principles apply to the division of assets? What specific factors will the court consider in deciding which orders to make in this regard?
In ancillary relief proceedings, the court will undertake an inquiry into all the circumstances of the case, having regard to the factors set out in Section 7 of MPPO (see question 6.2(a)). In LKW v DD [2010] 6 HKC 528, the Court of Final Appeal established that this inquiry is undertaken having regard to the “underpinning principles” in White v White [2001] 1 AC 596 – namely:
- the objective of fairness;
- the rejection of discrimination;
- the yardstick of equal division; and
- the rejection of ‘minute retrospective investigation’.
If the parties have only limited financial resources, the court will focus on dividing the assets of the parties fairly so as to make provision to satisfy the needs of the parties and the children, including their housing and financial needs, if any. With regard to the available assets beyond satisfying the parties’ financial needs, the starting point is a more or less equal division. The ultimate goal is to achieve reasonableness and fairness in the distribution of the couple’s assets, not necessarily a strict 50/50 division. In particular, the court will consider all circumstances: not only the financial contribution of the parties, but also other circumstances – including a party’s non-financial contribution to the family and the household – will be taken into consideration and given sufficient weight as appropriate.
(c) How does the court treat unreasonable conduct during the marriage in relation to financial matters (eg, reckless spending, gambling, dissipation of assets) when determining on capital division in divorce?
While the court generally rejects ‘minute retrospective investigation’ of the parties’ misconduct, it will still consider the parties’ misconduct; but such misconduct must be obvious and gross. A party may ask the court to ‘add back’ the value dissipated arising from the wanton dissipation/reckless dissipation of assets by the other party for the purpose of capital division, as in MD v PIB [2011] HKFLR 351. Material financial non-disclosure and/or a failure to give full and frank financial disclosure may be regarded as misconduct, leading to adverse inferences being drawn by the court against the party at fault in ancillary relief proceedings.
(d) Is it common for expert evidence to be adduced and used in court (eg, forensic accountants, valuations of companies/properties)?
Yes, this is routinely used for the valuation of:
- shares;
- companies;
- landed properties; and
- more recently, non-fungible tokens and cryptocurrencies.
(e) Is the family home treated differently compared to other family assets on divorce or judicial separation? If so, how?
It is very likely that the family home, having been the primary residence of the parties during the marriage, will be regarded as part of the parties’ matrimonial assets. Even if it is legally held by one party to the marriage, it is generally accepted that:
- the other party will have a 50% interest in the family home; and
- the court may order that the home be sold and the proceeds be split between the parties.
However, the court will consider all circumstances regarding the purchase or similar of the property in order to make an order which is fair.
(f) Are trusts recognised in your jurisdiction? How are they treated on divorce or judicial separation?
Trusts are recognised in Hong Kong and will be considered by the court in:
- the determination of the parties’ ancillary relief claims; and
- the assessment of the available financial assets and means for the parties.
While it is generally accepted that the assets that are subject to a trust no longer belong to the settlor and rather belong to the beneficiaries of the trust, the family court is in a position to set aside or vary a trust and/or settlement under specific circumstances after considering all factors, such as the power given to one of the parties over the trust. This will depend on factors such as:
- the type and nature of the trust; and
- how and when the trust was created and set up.
(g) What are the main enforcement methods to ensure compliance with financial orders issued on divorce or judicial separation? What are the typical consequences of breach?
Apart from the enforcement methods referred to in question 6.2(h) which are commonly used in the pursuit of outstanding maintenance payments, the payee party make also:
- apply to the court for a charging order on the payor’s landed property; and
- enforce that charging order by applying to sell the landed property charged to satisfy the debt owed.
Similarly, the payee party may also issue a writ of fieri facias to apply for the court to instruct a bailiff to seize movable valuable assets of the debtor and sell them to pay the debt owed.
The receiving party may also initiate garnishee proceedings obligating a third party (which owes debts to the payor party) to pay the outstanding amount directly to the receiving party instead of repaying the payor party. A common example is for the receiving party to apply to the court for the bank with which the debtor has an account to directly pay the receiving party the outstanding amount owed from the debtor’s bank account.
(h) If the parties are in agreement on financial matters, is non-judicial resolution of these possible? What requirements and restrictions apply in this regard and how does the process typically unfold?
If the parties are in agreement on financial matters, they should record and reflect their agreement by way of a consent summons to be filed with the court for approval and made into an order of the court. The court will not approve terms which fall out of its jurisdiction and/or may not be enforceable as an order, despite those terms being agreed and jointly sought by the parties.
It is crucial for the terms of the financial settlement agreement to be recorded in an order of the court; otherwise, it would be difficult for the parties to seek judicial redress or to enforce such agreement in case of non-compliance or breach.
(i) Can the courts make financial orders in relation to a foreign divorce? What requirements and restrictions apply in this regard and who can apply for such orders?
The Hong Kong courts can make financial orders in relation to a foreign divorce, including to order financial relief for an ex-spouse whose marriage has been dissolved or annulled outside of Hong Kong, as governed by Part IIA of the MPPO.
The party seeking financial relief must first satisfy the court that there are substantial grounds for the intended application and thus obtain leave from the court to proceed.
The jurisdictional basis for the court to consider an application for financial relief is similar to its jurisdiction in divorce proceedings in Hong Kong – for example, if it appears to the court that the applicant or any child of the family is in immediate need of financial assistance, the court may make interim maintenance orders.
The Mainland Judgments in Matrimonial and Family Cases (Reciprocal Recognition and Enforcement) Ordinance (Cap 639) also sets out the rules and jurisdiction of the Hong Kong courts to enforce financial orders under specific categories from the mainland.