3. What guidelines and steps will the court follow to decide on the division of matrimonial finance?
Courts in Hong Kong used to follow the approach in C v C, which many people call the need-based approach which focus on the wife’s ‘reasonable requirements’ to work out a sum of money to achieve a clean break so that she can live comfortably for the rest of her life. However, many have criticised that this as discriminatory because if the husband was the breadwinner of the family and wife was only entitled to money that was sufficient for her living requirements, the husband would be left with a much larger sum to enjoy. Also, if the wife was relatively old or older than the husband, her needs for the rest of her life would be less, resulting in a smaller proportion of assets despite contributing to a long marriage.
About a decade later, courts in Hong Kong no longer followed the approach in C v C, but adopted the principles used in the English case of White v White. This case set down the rule for an equal split of matrimonial assets between husband and wife when they divorce. The court would only be allowed to depart from this 50/50 split rule if there was a very good reason to do so. The term used for this approach is famously called the ‘yardstick of equality’.
In 2010, the court in LKW v DD made the guidelines for the division of matrimonial assets / finance even clearer. This is the guiding case that courts still follow to this day in applying the factors listed under section 7(1) of MPPO. LKW v DD laid down 4 principles and 5 steps to guide a court’s decision:
- The objective of fairness – the result must be fair and just;
- The rejection of discrimination – the husband and wife hold an equal status even if they had different roles in the family during the marriage;
- The yardstick of equality – the court’s starting point should be to split the matrimonial assets equally and only depart from this if there is a good reason; and,
- The rejection of minute retrospective investigations into conduct and why the marriage failed, or who made the bigger contribution to the marriage.
- Identify the assets, liabilities, income, and expenses of each party as of the date of the hearing;
- Assess the parties’ financial needs;
- Deciding to apply the 50/50 sharing principle;
- Consider whether there are good reasons for departing from the 50/50 equal division; and,
- Deciding the outcome as to how to distribute the marital assets of the parties.
On top of the 4 principles and 5 steps, the court should at the same time consider the 7 non-exhaustive factors laid down in section 7(1) of the Matrimonial Proceedings and Property Ordinance (Cap. 192).
Often times, the parties only have enough assets to meet their financial and housing needs. If there is no money left after satisfying the needs of the parties, the court would not need to go through step 3 and step 4 in the 5-step approach. The outcome would be decided based on how much each party needs.
Only in big money cases or where there is still money left from the matrimonial assets after satisfying the parties financial needs, does the court need to go through steps 3 and 4.