Library
21 December 2011
HONG KONG AS THE DIVORCE CAPITAL OF ASIA?
A recent string of high profile divorce cases in Hong Kong has left no doubt that Hong Kong, like London, is fast become a divorce mecca for the super rich.
In 2010, the case of DD v LKW must have cause many wealthy spouses sleepless nights when the HK Court of Final Appeal affirmed the English test case of White v White and held that the correct principle when distributing matrimonial assets in a divorce is not according to the ‘reasonable requirement’ of the claimant, but equal division. In some wealthy divorcing families, after parties have taken away their shares measured according to their ‘reasonable requirement’, there could still be left, a huge residue of assets. In the past, the claimants’ quests stop at the ceiling of reasonable requirement. The residue would go to the payer. After DD v LKW, equality among the parties, not reasonable requirement will be the yardstick.
This was followed by the recent High Court case involving Samathur Li Kin-kan, who has been ordered to pay HKD1.2 billion to his wife of eight years, Florence Tsang Chiu-win in what is believed to be the largest sum ever awarded in Hong Kong. In an attempt to conceal and protect the family’s assets from divorce proceedings, Li and his father may have fraudulently concealed assets. As part of the High Court judgment, the court referred the case to the Director of Public Prosecution for criminal investigation after it was found that the father and son might have committed forgery and perjury.
What these cases highlight is that the important time to take steps to protect family assets is prior to marriage, and not at a time when divorce is contemplated. A properly administrated trust, established in good faith as part of family succession planning, remains a legitimate and effective asset protection tool.
It should be noted that neither one of these high profile cases challenge the validity of assets in a HK trust. In DD v LKW, the judges indicated that in splitting assets ‘equally’, they would not necessarily be confined by what are strictly ‘matrimonial assets’ (i.e. assets which are acquired or earned jointly during the marriage) and ‘non-matrimonial assets’ (assets in trust or inherited by one of the parties). The starting principle is that all assets could be shared equally. However, the leading judge accepted that the ‘sharing principle’ may not be applied in certain circumstances and certain assets may be excluded altogether from being shared. The existing case law supports the fact that ‘unilateral assets’, being assets which derive by a spouse from a source wholly external to the marriage, such as by gift or by inheritance and which is kept apart from matrimonial assets, may be excluded from the ‘sharing principle’.