Under section 7(1)(a) of the Matrimonial Proceedings and Property Ordinance (Chapter 192 of the Laws of Hong Kong) (the "MPPO"), when deciding what orders to make in a divorce, the court will take into account, among other things, 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. According to section 4(1) MPPO, the court may make a number of orders on granting a decree of divorce including periodic payments and lump sums specified.
In divorce proceedings, the court looks into the financial resources of the parties in order to determine the appropriate ancillary relief to be granted where third party assistance to the parties was involved. The general principles governing this issue are now laid down in the judgement by the Court of Final Appeal in KEWS v NCHC (2013) 16 HKCFAR 1 (the "KEWS Case").
The husband and the wife in the KEWS Case were married in the year 2000. They did not have any children. The husband had incredible qualifications, including a Harvard degree in 1998 and an Executive MBA degree from a prestigious business school in 2010. The wife was unable to work due to sickness and the husband did not work for most of the years during their marriage to care for her. The husband was from a rich and well-known family in Hong Kong. The parents of the husband provided financial support to both of them during the marriage.
Eventually, the husband and the wife separated in 2006. After separation, parents of the husband continue to support the husband financially, allowing him to live a high standard of living despite having little assets of his own. In 2008, the husband filed a petition for divorce based on two years' separation according to section 11A(2)(d) of the Matrimonial Causes Ordinance (Chapter 179 of the Laws of Hong Kong). The issue was whether, and if so the extent to which, the third party's resources form part of the Financial Resources of the husband under section 7(1)(a) of the Ordinance.
The Family Court ordered that the husband should make periodic payments of $14,000 per month (which would be increased to $21,000 at the end of 2010). The Court of Appeal varied the decision of the lower court and held that parental support to the husband should be taken into account. The husband was ordered by the Court of Appeal to pay to the wife periodic payment of $42,500 per month and a lump-sum payment of $1.5 million. The husband appealed against the Court of Appeal's decision.
In terms of identification of the assets, s.7(1)(a) of the MPPO includes "other financial resources", which means the court may take into account financial resources which the husband and the wife have no legal entitlement to and financial resources which a party presently has or likely to have in the foreseeable future.
Therefore, when there is third party financial assistance, the court will ask 2 evidential questions, namely:
(1) What is the extent of the financial assistance provided by the third party to the husband or the wife?
(2) What is the likelihood of such financial assistance continuing in the foreseeable future?
The court looks at what the party actually has and will reasonably be made available to him if a request for assistance were to be made. Past conduct is a useful guide for determining what may occur in the foreseeable future. When it is likely that the financial assistance will continue in the future, it will be taken into account in the computation of that party's overall financial resources.
In relation to the concept of judicious encouragement, it has led to confusion and the court advises against using such term in the future. Normally, court orders would only apply to parties to the litigation rather than non-parties. Therefore, the court would not impose orders to require third parties to provide financial resources to a divorcing party if the evidence suggests that they would not do or were unlikely to do so.
The Court of Final Appeal considered the following material facts when deciding what ancillary relief orders should be made:
(1) there was evidence suggesting that the husband would be getting a significant increase in salary at the end of the year, from a monthly salary of $14,000 to around $30,000-$40,000;
(2) the EMBA qualification obtained by the husband put him in a strong position in terms of earning capacity; and
(3) the parents of the husband had generously supported the husband and the wife during marriage and the support towards husband has continued after the separation. There was no reason to believe such support will discontinue.
The appeal was therefore dismissed and the court held that the periodic payment of $42,500 and a lump-sum payment of $1.5 million from husband to the wife were both correct orders.
The principle laid down in the KEWS case clarifies the scope of financial resources under s.7(1)(a) MPPO. As it has become more common for husband and wife, especially newlywed, to receive financial support from parents, it is believed that disputes of this kind may become more common in the future.
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