Being a divorce lawyer in Hong Kong, I often need explain to clients the law on the distribution of matrimonial assets and maintenance on divorce in Hong Kong. Actually, adjustment of matrimonial assets and maintenance are generally two related aspect of one issue, which means the transfer of property from one party of the marriage to another party or the provision of financial support by one party to the other party on divorce.
There is no legal concept of “community property” in the family law of Hong Kong as that in the Mainland China or USA. For the assets under one party’s name, that party has the legal title fo the assets. The other party of the marriage do not have legal title to the assets which are not under his/her own name even if that assets are acquired during the period of marriage.
On the other hand, upon divorce, the court may exercise its discretion to make order on the adjustment of assets under the two parties’ name meaning ordering one party to transfer certain property to the other party or to provide financial support to the other party.
Therefore, in Hong Kong family law, the concept “division of matrimonial assets” is used as there is no community assets to be divided. Instead, we use the word “adjustment” meaning the the transfer of assets from one party to the other party of the marriage.
The Statute Laws on the Adjustment of Property and Provision of Maintenance on Divorce in Hong Kong
Under s 7(1) of the Matrimonial Proceedings and Property Ordinance (Cap 192)(MPPO), the factors which a court are bound to take into account before exercising its discretion as to matrimonial property division are:
- the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the standard of living enjoyed by the family before the breakdown of the marriage;
- the age of each party to the marriage and the duration of the marriage;
- any physical or mental disability of either of the parties to the marriage;
- 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;
- in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage that party will lose the chance of acquiring.
The court will look into all the facts especially the the above factors in deciding on the adjustment of property and provision of maintenance on divorce on the basis of fairness.
The Common Law on the Adjustment of Assets and Provision of Property on Divorce
The common law principles on this point is provided in the leading case of LKW v DD decided by the Court of Final Appeal in 2008. The court will use a three-step measure to decide the adjustment of assets and provision of maintenance.
(1) Identify the net value of all the assets under both parties’ name
By this step, the court will identify all the assets under both parties’ name, which include not only the assets the two parties acquire during marriage, but also include the assets that one party acquire before the marriage. At this step, the court will not differentiate the source that the assets were acquired, which means assets acquire by one party by inheritance or gift from his/her parents will also be included.
For any dispute on whether any asset or debt exist, the court will decide on evidence submitted by the parties. At law the parties will need provide all the details of their financial resources to the Court for its consideration by filing a form (Form E).
(2) Assessing the parties’financial needs
The court will then assess both parties’ financial need for the life after divorce as follows:-
- The court will make a general and generous assessment of the two parties financial needs after divorce;
- The parties’ financial need will be measured at the standard of maintaining the parties’ pre-divorce standard of living;
- The court will also consider the financial burden that the parties will undertake after the divorce, such as the expenditure for raising the children.
After the assessment of the parties’ financial needs has done, the court will then first apply the assets on the “assets pool” (meaning all the assets under both parties name as identified by the court in step one) to meet the financial need of the parties.
Where the assets in the “assets pool” are limited and not enough for meeting both parties’ financial need, the court will apply all the assets to meet the parties’ financial needs and the court’s exercise of adjustment of assets will end there. If there is not enough assets in the “assets pool” to meet one party’s financial needs, but the other party is in a substantially better financial position (eg. have a good income) the court may order that party to provide periodical maintenance to the other party to meet its financial needs.
If after applying the assets in the “assets pool” to meet the parties’ financial needs, there are assets surplus, the court will then move on to the third step for adjustment.
(3) Division of Surplus Assets
If there are surplus assets after step two, in principle the court will divide the assets between the two parties equally unless the court decides to depart from this equality principle based on the facts of the case for good reason.
The court may, after considering the source of assets, duration of the marriage, one party’s sacrifice to the marriage, each party’s contribution to the family and other relevant factors, decide that it would be more fair to depart from equality principle. If there is a departure, the court shall clearly state the factors that has been taken into account to decide on the departure.
The typical factors that may lead to a departure from the equality principle include:-
- Duration of the marriage.
Duration of the marriage is an important factor that must be taken into account. A typical Short marriage may be a good reason for departing from equality principle. For a typical long marriage, the equlity principle will be applied without considering any other factors.
There is no clear definition what is a long marriage and what is a short marriage. For reference, a marriage less than 5 years would be a typical short marriage, while a marriage over 20 years would be long typical long marriage.
- The source of assets.
If the marriage is a short one, assets acquired by either party prior to the marriage, assets inherited or gifted from a party’s parents to the the party alone may be well excluded from the surplus assets to be equally divided. Such assets may be ordered to belong to the receiving party alone. However, if the only matrimonial house is acquired by one party prior to the marriage, it will not be excluded from the surplus assets.
If the marriage is a long one, no distinction will be made whether the assets was acquired before or after the marriage and the source of the assets.
- Contributions to the family.
There is no gender discrimination as the court recognizes that the efforts of a housewife in taking case of the children are as valuable as those of the breadwinner.
- Misconduct of the parties during the marriage, unless “obvious and gross”, will be taken into account in division of the assets;
- Financial responsibility of caring for young children or elderly dependents, or financial need arisen from the disability of one party to the marriage, is a factor to which the court should have regarded;
- Any benefit that a party will lose as a result of the dissolution of the marriage. The Court will take into account any benefits that the parties will lose upon divorce. For instance, the loss of married person’s allowance, the loss of benefits used to receive from another party’s family trust, etc.
- Other circumstances of the case, e.g. whether the two parties have signed a pre-nup or post nuptial agreement.
Whether the equality principle should be followed or departed will depend on the facts of the case. If a departure is made, “the court should explain its basis since the articulation of reasons provides a useful check on the fairness of the outcome.”
Any inquiry, please contact our Hong Kong divorce lawyer team by writing to [email protected]. We will reply to your inquiry ASAP.