This case is the leading authority for the division of assets in Hong Kong. The Court of Final Appeal confirmed that the previous guideline that the financially weaker party would be restricted to his or her ‘reasonable needs’ was no longer good law and that, following the House of Lords case of White v White [2001], the court should measure its decision against a ‘yardstick of equality’ between the parties. This was an unusual case to choose as a test case as it involved a childless marriage of only seven years. The highest court provided guidelines which are daily used by the courts in Hong Kong to ascertain a fair outcome for asset division with a view to encouraging consistency and predictability. While some uncertainty is inescapable, as the family courts are bound by the provisions of section 7 of the Matrimonial Proceedings and Property Ordinance Cap 192 which confers a very broad discretion on judges dealing with financial provisions, the guidelines in this case have provided invaluable clarity to the judiciary and practitioners.
The four guidelines were (1) the objective of fairness; (2) the rejection of discrimination in respect of any gender or role discrimination; (3) the ‘yardstick of equality’, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a “yardstick of equal division” which should be departed from only for good, articulated reasons; (4) the rejection of minute retrospective investigations, where the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement.
The five steps to assist the judge in making his decision were:
Step 1: Identification of the assets to ascertain the financial resources of the parties as at the date of the hearing;
Step 2: Assessing the parties’ financial needs, which may be the final step if resources are insufficient to go beyond needs;
Step 3: Deciding to apply the sharing principle, unless there was good reason to depart from that approach;
Step 4: In considering whether there were good reasons for departing from equal division, such good reasons may include:
- Source of assets as a material factor, non-matrimonial asset may provide a reason for exclusion.
- Conduct as a material factor would only be considered a factor if such negative conduct was ‘obvious and gross’, and if it was such that it would in the opinion of the court be inequitable to disregard it.
- Financial needs as a material factor, other than the needs considered at (Step 2) above, so where one party was left with a significantly more onerous obligation or responsibility than the other.
- Duration of the marriage as a material factor; short marriages would normally not result in an equal division.
- Contributions to the welfare of the family as a material factor. Only in rare and exceptional cases would “special” or “stellar” contribution be a factor to depart from equality.
- Compensation as a material factor, which included the loss of a benefit derived from the marriage but also a disadvantage incurred as a result of the way the parties arranged their affairs during the marriage.
Step 5: Deciding the outcome, taking into account the above and bearing in mind the principles.
In most cases, the available assets are insufficient to cater for the needs of both parties after termination of the marriage so that the exercise would not progress beyond consideration of their needs at Step 2. It is therefore only in cases where surplus assets remain to be distributed after seeing to the parties’ needs that Steps 3-4 may require consideration.