Hong Kong does not have a statutory matrimonial property regime as such. There is no system of ‘community of property’ and property rights are not in principle affected by marriage. Instead, the family courts have very broad discretion to make a range of financial orders upon a decree of divorce pursuant to the Matrimonial Proceedings and Property Ordinance (Cap 192), namely for: periodical payments, secured periodical payments, lump sum payments, transfers or sale of property, settlement of property (into a trust), and variation of settlements.

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Courts also have the power to make orders for maintenance pending suit once divorce proceedings have begun. These are interim measures that will end once the final divorce decree is granted: see section 3 of Cap 192. In such applications, it is usually not appropriate to undertake a detailed financial investigation. The sole criterion applied by the courts is “reasonableness” or “fairness”, and the marital living standard is but one important factor. The applicant should provide an “MPS budget” excluding long-term/capital expenditure: see HJFG v KCY [2011] HKCA 402; [2012] 1 HKLRD 95.

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In making final financial orders in favour of a spouse, courts are guided by four principles: (i) the objective of fairness, (ii) rejection of discrimination, (iii) the yardstick of equal division, and (iv) rejection of minute retrospective investigation: see LKW v DD [2010] HKCFA 70; [2010] 6 HKC 528. They are also required to consider the following non-exhaustive list of factors (see section 7(1) of Cap 192):

the conduct of the parties and all the circumstances of the case including the following matters, that is to say —

(a) 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;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) 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;

(g) 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.

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In making final orders for children, the courts are required to consider another non-exhaustive list of factors (see section 7(2) of Cap 192):

all the circumstances of the case including the following matters, that is to say —

(a) the financial needs of the child;

(b) the income, earning capacity (if any), property and other financial resources of the child;

(c) any physical or mental disability of the child;

(d) the standard of living enjoyed by the family before the breakdown of the marriage;

(e) the manner in which he was being and in which the parties to the marriage expected him to be educated;

and so to exercise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a) and (b) of subsection (1), just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him.

 

There are five steps in the “section 7 exercise” leading to a final order. The first step is to identify the parties’ financial resources and liabilities. The second step is to assess the parties’ financial needs “generously interpreted”. If there are sufficient resources for both parties’ financial needs, courts will then decide to apply the ‘sharing principle’, and the fourth step is to consider whether there are good reasons to depart from equal division of the family assets. Finally, the courts will then determine the outcome of the financial proceedings.

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The identification of the parties’ assets can involve disputes about (i) valuation, as well as (ii) whether certain assets are in fact beneficially owned by a third party or (iii) have been wrongfully transferred by one of the parties: see section 17 of Cap 192. The latter two are usually dealt with before the FDR as ‘preliminary issues’: see TL v ML [2005] EWHC 2860 (Fam); [2006] 1 FLR 1263.

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The parties’ financial needs are a question of fact for the court. However, in most cases their main needs will be for housing and a regular income. Parties’ needs should be “generously interpreted” to try to ensure that they and their children can maintain, as far as possible, the standard of living enjoyed during the marriage. If the assets are insufficient, a ‘clean break’ may not be possible, and the court may order periodical payments.

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Where the financial resources exceed the parties’ needs, the courts will apply the sharing principle. Reasons to depart from equality may include: the source of the assets (e.g. pre-marital assets, inheritances, unilateral/separate assets, and assets generated post-separation); “gross and obvious” conduct (the courts are not concerned with deciding why a marriage failed); parties financial needs (such as child/elderly care, a diminished capacity to find work, or a physical/mental disability); the length of the marriage; contributions to the welfare of the family (the courts  have firmly rejected any discrimination on the basis of gender roles, and only in rare and exceptional circumstances will “stellar” or “special” contribution play a role); and compensation for relationship-generated disadvantages (this is generally covered by the sharing principle, but may be justified in exceptional cases).

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In order to promote settlement and the speedy resolution of financial disputes upon divorce, the courts have adopted PD 15.11, which requires parties to fill out and exchange a ‘Form E’ sworn financial statement, and provides for judge-led mediation (i.e. a Financial Dispute Resolution or ’FDR’ hearing). Parties have a duty to make full and frank disclosure of their assets, and courts may make adverse inferences against parties who fail to do so.