Podcast S1E6 | Family: Divorce and Division of the Matrimonial Pot

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Podcast S1E6 | Family: Divorce and Division of the Matrimonial Pot

Podcast S1E6 | Family: Divorce and Division of the Matrimonial Pot 1400 788 Alfred Ip
Reading Time: 38 minutes

Alfred Ip and Thelma Kwan discuss the crucial steps of divorce proceedings and split of assets, giving some real-life examples and advice on how to try and reach an amicable settlement between spouses.

SHOW NOTES

07:04 Starting a divorce
15:41 Financial claims
20:46 Filing for divorce
25:36 Form A
30:01 Full and frank disclosure
34:17 Litigation funding
51:51 Financial Dispute Resolution
59:50 Enforcement of orders


TRANSCRIPT

00:01 Welcome to The HIP Talks podcast, a series of discussions about current legal issues hosted by Hugill & Ip Solicitors. We are a young independent law firm but with decades of experience providing bespoke legal advice and exceptional client service to individuals, families, entrepreneurs and businesses, both in Hong Kong and internationally.

Alfred Ip  00:21
Hi, everyone, I’m Alfred Ip, a partner of Hugill & Ip. Today we have the pleasure to have Thelma Kwan, a very experienced barrister in family law who shares with us her experience in dealing with family issues. Hi Thelma. Hello, hi. Hi, perhaps we can start with explaining a bit about the dispute profession. A lot of people are very confused about the role of a barrister and a solicitor. Can you tell us a little bit more about your work?

Thelma Kwan  00:48
Well, as a barrister, my work is predominantly court work, which means there are fights. By the time the matter comes to me it’s more likely than not that they will end up in a fight in court.

Alfred Ip  00:59
So, in other words, um, if the party’s not going to fight, not like most likely they don’t need you.

Thelma Kwan  01:07
Probably

Alfred Ip  01:08
You’re right. Yeah. But then that means that they won’t have the experience or the opportunity to have your insight about the issues.

Thelma Kwan  01:17
Well, there’s always a chance of advising them beforehand. And if it’s not something that they should be fighting on, that’s what I’ll tell them.

Alfred Ip  01:26
Or actually, in a divorce situation, a lot of times people are in a very acrimonious relationship. Perhaps they’re not making the decision very sensibly. Perhaps what they should do is to come to you to talk about the issue and decide whether is worth a fight.

Thelma Kwan  01:46
I think the starting point will always be a client coming to talk to you first, and you always have that first opportunity to listen to the story and to advise them at that preliminary stage.

Alfred Ip  01:58
True and usually the client comes to us, we’ll be talking about the background, understanding a little bit more about the dynamic between the parties and understanding the real issues behind because a lot of time when the client first comes to me, they actually don’t understand what’s the underlying problem and what’s the implication. In particular, if they make any drastic decision, like, suddenly pick up everything and moved out, they may regret it in future.

Thelma Kwan  02:31
I agree. I think one of the worst thing is for any party just to pack up and go, I mean, once a thought of probably needing to leave a relationship, they should first talk to a lawyer.

Alfred Ip  02:44
Yeah, I know that a lot of times is not easy to talk about things like that, especially when they’re embarrassed about the situation. Some of the times, things can be quite embarrassing, like domestic abuse or extramarital affairs. Some of the issues could be a little bit embarrassing, but I think it’s very important for them to have an open and honest discussion with us.

Thelma Kwan  03:11
I think so too. I think in a in a divorce context, it makes sense to, first of all to make them comfortable. And you’re right. It’s very personal issues they need to talk about. I often tell clients when they come to me that the issues they have extramarital affairs or domestic violence, they are things that actually is quite unfortunately common, and happens a lot. So as long as you can get them comfortable and talk to you about the issues. I think that’s where their advice can start.

Alfred Ip  03:41
Yeah, a lot of time, they’re not aware that it’s actually fairly common for these kind of issues to arise in a relationship. Thinking about two people being together. There has to be differences and there will be differences that people may not be able to be solved among themselves, especially when there are other issues, for example, communication breakdown, or other reason for them or internal drama, or a lot of times, they simply cannot express themselves very well.

Thelma Kwan  04:18
I think I’d like to add here that for intending divorce parties, they should know that throughout the divorce process, there are various stages, which there can be in a amicable discussion between the parties so that they don’t have to fight. And we’re going to talk more about that, obviously,

Alfred Ip  04:39
Obviously, at the same time, they need to be upfront about the issues that they’re facing. Sometimes it’s very difficult to tell the other half that “Oh, actually, I’m not very happy about this”. Sometimes, they don’t say in the right way that actually escalate the differences between two parties. And currently we may come to a point that is very difficult for them to talk in future, which actually is not so helpful because when we talk about divorce, actually we are talking about exit strategy. How are two people going to exit from the marriage? And how are they going to resolve the issues that arise, like to two major issues would be money and children. What are they going to do?

Thelma Kwan  05:29
I think I would actually flip it around as that children then money, because that’s the way that the court will approach it. They always handle the children’s matter first before they deal with the financials

Alfred Ip  05:39
It is actually very true, because without looking after the children, the court would not be interested to hear how the party is going to fight over money. Yeah, so um, perhaps we before we talk about money, we can talk about how to get a divorce. In that respect, I think I can share a little bit of experience about how to commence a divorce. Commencing a divorce involves a couple of documents. And these documents we enforce are: the first document is called the petition. The petition is about basically stating out to material facts pertaining to the marriage, including: When did they get married? Where did they get married? Where are they living? How many children are there? Well, why are they going divorced and what the party asking for divorce is also asking for. We are talking about the relief to be sought. And at the same time, there will be another document called statement as to arrangements for the children. Actually, that document is very important, and we’ll talk about it a little bit later. But before we go into that, I want to understand a little bit about jurisdiction. One of the facts that we have to plead in the petition would be the jurisdiction of the Hong Kong court to deal with this divorce. Can you talk about and tell us something about jurisdiction?

Thelma Kwan  07:04
Right, for the party to start to divorce in Hong Kong and with regard to jurisdiction, there are three basis, the party has either need to be domiciled in Hong Kong, or they have been residing in Hong Kong for two years, or they have substantial connection in Hong Kong. Now, that last leg is vague, and therefore open to interpretations. But I would generalize it by saying that there needs to be maybe at least a residence in Hong Kong, or assets in Hong Kong to at least start thinking whether there is substantial connection in Hong Kong, and this usually involve people who have moved here from overseas or working here. And they are not from Hong Kong, and they might need to plead this particular limb to bring them within the jurisdiction of the Hong Kong courts.

Alfred Ip  07:58
Let’s say we want to get divorced, and I live in China and you live in Taiwan. Can the Hong Kong court deal with our divorce?

Thelma Kwan  08:08
Well, I think if you live in China and I live in Taiwan, I think that’s a good start as to why we probably need a divorce, being so far apart…

Alfred Ip  08:17
Exactly. People being drawn apart because of the distance.

Thelma Kwan  08:21
But the parties and cause for them to be to be for example, if I’m living in Taiwan, I would say actually, I am only temporary living in Taiwan. But I’m actually from Hong Kong. My family’s there. I intend to go back. Come on only a temporary resident, then I can, rightly so say that I’m domiciled in Hong Kong that will bring me within the jurisdiction of Hong Kong.

Alfred Ip  08:44
Okay, but if you’re not…

Thelma Kwan  08:45
Then if I’m not then if I’m from Taiwan, living in Taiwan, then if I have nothing in Hong Kong, it’s very difficult to bring me within the jurisdiction of Hong Kong.

Alfred Ip  08:53
But how about if I have a house in Hong Kong? Um, can you rely on the substantial connection ground to get divorced in Hong Kong?

Thelma Kwan  09:04
I think one needs to look at the whole context of the matter. And I just cannot say for sure whether one house in Hong Kong where you may live sometime constitutes substantial connection. And very often that, as I said that this actually difficult to plead and meet more information to substantiate.

Alfred Ip  09:27
Actually, I think apart from that we also need to look into whether there are other assets. Perhaps I also have a house in China, and you also have a very, very valuable company in Taiwan. Yes. So, the matrimonial assets together, Hong Kong property is only a very small part, that may not be sufficient for a substantial connection, right.

Thelma Kwan  09:49
So that’s why I said that you need to look at it in context, and you can’t just say I have a house in Hong Kong, therefore I claim to divorce in Hong Kong.

Alfred Ip  09:56
Yeah, but then why would people choose to divorce in Hong Kong?

Thelma Kwan  10:00
Well, Hong Kong has a very generous approach to looking at divorcing. And that is based on the UK common law. And we have followed the UK approach in starting to look at division of assets on a 50/50 basis. Now, this is a very generalized comment and it’s very unfair to just take it out of context, but people come here because the court will look at asset pool, and they will look at needs of parties. And they just not only look at what the husband has been paying the wife for the last 20 years, if you know, I mean, so basically, it’s more generous and more.

Alfred Ip  10:44
In other words, you may get more you get divorce.

Thelma Kwan  10:46
Yeah, you can put it that way.

Alfred Ip  10:48
And London has already been regarded as a divorce capital. And perhaps Hong Kong is trying to build his name as a divorce capital in Asia as well.

Thelma Kwan  10:57
Well, somebody has described Hong Kong as a divorce capital in Asia already already? Yes.

Alfred Ip  11:02
Yeah. So there’s clearly an advantage on getting divorced in Hong Kong? Okay, but let’s talk about, let’s say we can get divorced in Hong Kong and then we’ll be talking about the grounds of divorce, we need to justify only one thing that is the marriage has been broken down irretrievably. Marriage broken down irretrievably: how do we prove that?

Thelma Kwan  11:27
And that that’s basically the basis of the court willing to declare that the marriage has come to an end, okay, that the parties, that the marriage itself has broken down in an irreconcilable way.

Alfred Ip  11:43
Okay. And actually, there are five ways that we can prove that: either we’ve been separated for one year and we’re both consenting to the divorce, or we’ve been separated for two years and I can petition for divorce without even asking whether you consent or not. Or I can say that you have been behaving in such an unreasonable way that I cannot be expected to live with you anymore. Or I can say that you have been committing adultery, that will be another ground for a divorce. Or you have been disserting me for over one year that you’re not coming back anymore. So that’s why I need to get the divorce. But adultery is actually not a very common ground to be relied on. Mainly because in order to rely on that ground, as to name the other person as well, it is quite difficult sometimes. Can you imagine a lot of time when someone has an affair and it’s quite difficult to find that person, the third one, the other woman or we call it and… or man. Or man, yeah. And to call that person and to find that person find where he or she lives, and to prove that they’re actually having an affair at times is quite difficult. But can we use this as a ground for unreasonable behavior?

Thelma Kwan  13:10
You mean tying it to adultery or…

Alfred Ip  13:12
Tying it to adultery

Thelma Kwan  13:14
Well, you’re right. I hardly see any adultery cases and probably for the reason that you mentioned. The one that I see most would be unreasonable behavior. And of course in the plead all in divorce proceedings or paperwork, you would see that you need to list out what is the alleged unreasonable behavior of the party and, and therefore whether you can say he has extramarital affairs is one of the many factors. You can throw it in there as part of it, I guess.

Alfred Ip  13:54
But is it absolutely necessary to plead all the unreasonable behavior?

Thelma Kwan  13:58
No, no, you would plead as much as you want, I would say.

Alfred Ip  14:03
And a lot of time actually, if the parties can agree upon to divorce, the parties can consider whether to plead – we call it – mild unreasonable behavior, some mild as the loss of love and connection, the loss of love and care, attention, or failing to contribute to the financial affairs of the family, some more general grounds.

Thelma Kwan  14:29
I think that’s correct, because you’re trying not to get the other party all worked up when you are making allegations…

Alfred Ip  14:36
…especially when those allegations could be sometimes quite embarrassing.

Thelma Kwan  14:39
That’s right. So you’re right. People would try their best to call it watered down basis of these unreasonable behavior and therefore put it as mild in terminology as possible.

Alfred Ip  14:52
Yeah, but it very much depends on whether the parties have consensus over getting divorced or not because if the parties cannot agree on the divorce, they may defend the suit which we will cover it a little bit later. Let’s talk about other things that we have to plead in the petition that is the relief. Apart from the usual relief will also be asking for the court to dissolve a marriage and which is one of the main things that we will be asking about, but also we’ll be asking for custody of children and ancillary relief. What sort of ancillary relief… actually what’s ancillary relief because actually is a term that is not very commonly used in normal language.

Thelma Kwan  15:41
Well, that’s in essence the financial claim you’re making against the other party.

Alfred Ip  15:45
Yeah. And financial claims involve for example.

Thelma Kwan  15:50
You can ask for periodical payments, monthly payment…

Alfred Ip  15:54
or Americans call it the alimony…

Thelma Kwan  15:57
Yes. Or, of course, you can ask for a lump sum. And we call it a clean break, meaning that you walk away from it, the relationship is over, and that there is no longer and ongoing payment on a monthly basis which, which is sometimes a drag, honestly.

Alfred Ip  16:12
Okay. And apart from the payment of a sum of money. Can we ask for other things like, transfer the matrimonial home to me or transfer a valuable painting to me?

Thelma Kwan  16:26
Yes, there is the possibility of getting the court or asking the court to have the property transferred to one party. So for example, if the party’s co-owned by the husband and wife jointly, then you can go to court and say, I want to have the property as part of the lump sum payment due to me and have the property transferred to me.

Alfred Ip  16:49
How about if the husband has already transferred a variable property to his brother, for example,…

Thelma Kwan  16:56
That’s a separate conversation completely, but we can talk about that later.

Alfred Ip  17:00
Okay, so but it’s possible.

Thelma Kwan  17:02
Yeah, yeah, you have to if if, and I think in a very general way just to answer that particular question is if you, if the other party has wrongly, quote unquote, transfer our property to a third party, there are process in place to bring the property back.

Alfred Ip  17:19
So if the party is trying to defeat the matrimonial claim by transferring out some of his own property to someone else to someone else, yeah, it can, it can be claimed back,…

Thelma Kwan  17:30
…there’s a process whereby you can try to claim it back.

Alfred Ip  17:32
Okay. Very good. So,

Thelma Kwan  17:34
Sorry, just to come back to the relief that you can sort you mentioned transfer property, there’s also court can also order for property to be sold, okay. So, a sell property order is sometimes quite common to be done.

Alfred Ip  17:48
Especially when a lot of time matrimonial property is the only valuable property in the matrimonial pot…

Thelma Kwan  17:55
And you need some liquidity for the parties to live on.

Alfred Ip  17:58
Yeah, okay. So apart from the petition, we also have another document called statement for arrangement of children, which I mentioned very early on. The purpose of that document is to give the court a very good idea about the current status of the children, the current arrangement, including where they’re living, who they’re living with, which school they are going, and what is the future arrangement, whether there’s any agreement among the parties over the future arrangement in order to satisfy to the court that children are being looked after in the event of there is no agreement then it has to be something that will be solved by the court process, and that will be dealt with in other proceedings, which we will talk about it in another podcast. How about mediation? In one of the document that we have to start is to put in a certificate of mediation. This document is to confirm with the court that whether the parties are willing to attempt mediation to resolve the dispute among themselves. And, Thelma, have you been to mediation before?

Thelma Kwan  19:08
Well, I have been to mediation: I’m a qualified mediator.

Alfred Ip  19:13
So you only have been to a mediation, you have tried to have a mediation to resolve parties dispute before…

Thelma Kwan  19:19
…not in the context of divorcing parties. Okay, because the general concept of mediation I would be able to share.

Alfred Ip  19:27
Okay, um, so what is the benefit of mediation? Why can parties just some resolve the dispute over court?

Thelma Kwan  19:34
Well, in mediation you’re sitting down with a mediator who’s trying to bring two parties together and understand what the issues are and what they’re trying to achieve. The mediator will definitely cost less than bringing any matter to a full-fledged proceeding. So cost is the main concern. And mediation will bring that cost down. I think a good mediator will be able to resolve the differences between the parties. And hopefully if it’s, for example, an argument over money, whether it could be possible to come to an arrangement or compromise between the parties through a mediation process.

Alfred Ip  20:17
What is the consequences of the parties not believing in the process of mediation and don’t think that our mediation can help them resolve into dispute? In other words, they think that it’s just a waste of time.

Thelma Kwan  20:29
Well, they either they can try it first, I think, and if they don’t believe in it, then I guess they have to move forward with the whole proceeding.

Alfred Ip  20:37
Would they be penalized in any form?

Thelma Kwan  20:40
I think not at that stage. Okay. You will be able to tell me more.

Alfred Ip  20:46
Okay. Let’s talk about a little bit about what is it going to happen after filing for divorce? When one party let’s say for the sake of discussion, the wife started divorce, the next step she has to do is to rely on her lawyer to serve the papers on the husband. The husband after receiving the papers will have to indicate to the court whether he intends to defend the proceedings. A lot of times, the only differences are either children or money. They’re not going to defend about the main suit that is whether to divorce or not. We are just talking about the five grounds if there’s no context about those five, any facts, pleaded in those five grounds, the wife who is the petitioner can make an affidavit by way of Form 21 and swear to the court that the fact pleaded in the petition are correct, and ask the court to set it down for trial. And the court would then pronounce the decree nisi. After the decree nisi if the court is satisfied, the children’s affairs have carefully or the children’s arrangement as satisfactory, the court will issue a Section 18 declaration. And after six weeks, they will issue an order, quote, decree absolute that will be an absolute order that the parties are officially divorced, and the parties will be free to marry again. But what if the parties cannot agree on the divorce, for example, the husband received a petition and think that “Oh, I didn’t know that my wife wants to divorce me and what she has said in the petition is not true”. Would he be having the right to have his version of the story heard?

Thelma Kwan  22:44
I think you’re talking about the husband in that situation preparing for an answer to the petition meaning that everything the wife said in her petition is not true. The allegations are all wrong. And “I’d like to answer to that”. So there’s a chance for the respondent husband to respond to the reasons put forward by the wife as to why the marriage is over. So that would appear as what we call it an answer to the petition.

Alfred Ip  23:16
And if the husband believes that a marriage is over, but he does not agree with the ground relied on by the wife, can he rely on other ground to get the divorce as well?

Thelma Kwan  23:28
Well, and in addition to answering what the wives is alleging, which he probably don’t agree, he can then have something called the cross petition, which is usually follows the answer to the petition, and the cross petition will basically state out his grounds as to why he thinks the marriage is over. So, he can argue that the wife’s allegation is incorrect. And then he said, he will go to the court and says, “Please grant me a divorce based on my reasons”, and that would be the cross petition.

Alfred Ip  24:00
Let’s say I’m the husband you are the wife, I say that you have been behaving unreasonably. That’s why we need to divorce, you can then put forward another ground.

Thelma Kwan  24:09
Yes, I can say you committed adultery.

Alfred Ip  24:12
And then I can defend it and say that I didn’t commit adultery. It is only because of unreasonable behavior that we have to get the divorce…

Thelma Kwan  24:22
Then I probably have to put forward an answer to answer your allegation about unreasonable behavior.

Alfred Ip  24:27
But then we go to trial.

Thelma Kwan  24:30
That’s… yes, that’s a way because, but if you ask me, if both parties are in agreement that the marriage is over, it’s just a matter of on what reason? Yes. And that is a basis for the fight, then I would say, it might well be a waste of cost.

Alfred Ip  24:52
Yeah. And I think the court would not very much like it. Right. Yeah. So, in practice. The parties may be encouraged to put forward a ground that both parties can agree for example, if the parties have been separated for more than one year…

Thelma Kwan  25:13
Yes, that would be the case because by the time that this matter’s dragged on, it may well be one year since they have separated or the divorce proceeding has started, then it’s quite common for the parties to reissue a new petition and to base it on a one year separation with consent and then proceed on that basis.

Alfred Ip  25:36
Okay, very well. Um, let’s talk about money. Since today after issuing the petition, there will be another document has to be filed if the parties cannot agree on the money issue, and we call it Form A and the purpose of the Form A is basically to ask the court to give you a date for a hearing called first appointment. The first appointment will take place around four months after the petition is issued. And 28 days before the first appointment, the parties have to exchange a document called Form E. Form E is called financial statement is 20 odd pages long of documents, allowing the parties to set out their assets, liabilities, income and expenses. And it’s quite detailed and comprehensive. That includes the relief that the parties will seek an explanation over the respective situation. The Form E is a little bit like we call pleadings to set out the important financial facts, in particular, those assets, liabilities, income and expenses, because in the future, the parties will be relying on those that are set out in the Form E to argue whether a party is having the financial resources to provide for another party. So that document is actually very important. After the exchange of the Form E at the first appointment, there would usually be some directions being sought, and Thelma, what sort of directions would they be?

Thelma Kwan  27:20
Well, in the first appointment hearing, the court would have already have before them the Form E from both parties, usually, because there are occasions that the Form E are just not there, they’re not prepared, not done in time. But assuming the normal circumstances the Form E will be before the court and the court will therefore look at the various issues based on the Form E the court may allow for further questions to be put forward, asking for more details which are stated in the Form E. So, for example, if the if one of the parties said I have a property in Shenzhen and that’s all he said, then the other party is entitled to ask questions about what is this property? When was it purchased? Who paid for the purchase price? Is it mortgaged? And produce documents that support all the above. So that would be a questionnaire that could be asked. Sometimes valuation comes into play, but the valuation might take place closer or later closer to actual hearings or later process because valuation should be updated. Also, the court will look at whether there are allegations of side issues that is in the proceeding. For example, a side issue would be one of the parties may jointly have a bank account with his father and mother. He would say the money doesn’t belong to me and therefore the bank account or the money in the bank account should not be taken into consideration. And so in that circumstances, the court may first of all the other party may say “That’s not true, that money is yours. The addition of your parents name is just for convenience. I do not believe that this money is not yours”. So, there are situations where the court will come in and says, look here, we have to determine whether that money in that bank account is actually part and parcel of the family assets. So, side issues like that will be investigated and looked at and if need be, a separate proceeding might need to be called in to determine this particular question. So first appointment hearing and there could be several first appointment hearings, the court will look at all these various factors just to make sure that all the information the court would have is required to eventually lead to a hearing on the financial matters.

Alfred Ip  29:53
To make sure to all the information are in place. That’s correct. And there’s no more outstanding question to be answered.

Thelma Kwan  30:01
Yes. Now, I must put here first one of the very important principles of the divorce proceeding in Hong Kong court: we always rely on full and frank disclosure. And that is really paramount in the proceedings. And full and frank disclosure literally means what it says meaning that I have to give you a full and frank disclosure of all the assets I have, and you have to do the same thing.

Alfred Ip  30:29
That means don’t try to hide or…

Thelma Kwan  30:31
Don’t hide. That’s right.

Alfred Ip  30:32
And I forgot to mention that actually Form E has to be signed and sworn by the parties who make it. So, if anyone is lying on the Form E the consequences can be serious.

Thelma Kwan  30:46
That’s right. And I think when you are caught out that you haven’t say everything, it doesn’t look very good on you. So for example, if you, you declared that you have two properties, but actually your wife then says “No, he has four. I know there are two more in Shanghai that he hasn’t mentioned”, then, then you would probably have to sheepishly go back to court and say “Oh, I do yes, I do have two properties in Shanghai, and I’ll tell you about them”. So that’s one example, that the court doesn’t look very happily on people who doesn’t put everything on the table.

Alfred Ip  31:20
Their credibility would definitely be damaged in that case. That’s correct. The court would not believe in what you say. And most likely we’re going to make an order against it.

Thelma Kwan  31:30
That’s right. And I think you can only say I forgotten a few times. And “Oh, I forgot about that property in Shanghai. Oh, I forgot that bank account in that particular bank, which I haven’t gone to for last five years”. But you can’t keep saying that I forgotten. So full and frank disclosure is actually one of the most important pillars of divorce proceedings in Hong Kong.

Alfred Ip  31:52
If only the court believes that you have forgotten about your property in Shanghai, for example. I mean, you forget your property. That’s not very credible, is it?

Thelma Kwan  32:04
Oh, yeah. But you hear stories like oh, but it doesn’t belong to me is actually my father’s but it’s put in my name, therefore, I don’t remember it.

Alfred Ip  32:11
I see. Um, apart from the discovery, is there any other things that the court would decide at first appointment?

Thelma Kwan  32:19
I think mostly there will also be a tendency to look at whether the financially weaker party is able to look after himself or herself. So, for example, where, let’s say it’s a wife petitioning, she’s always been a housewife, the husband is the breadwinner. And she’s always been financially dependent on the husband. So suddenly, when she decided to initiate divorce, she has no money. She may be living in the matrimonial home. There might be two young ones to look after, but she has no financial assets to her name. In those circumstances, the court and on her application would consider to give her some sort of maintenance to at least keep her going until the hearing – final hearing – takes place. And this we call the maintenance pending suit. So for the wife it would be called the maintenance pending suit. And if she’s seeking payment for the children, for example towards school fees or transport or food for the kids, it will be maintenance, interim maintenance for the children.

Alfred Ip  33:23
Okay. And the wife can actually ask for these at the first appointment hearing.

Thelma Kwan  33:30
The right process is actually to put in a summons, meaning an application for maintenance for the wife herself and for the children. And these summons will usually be heard where the court will look at her application and give a chance for the husband to respond to the application. In the meantime, the court is sometimes also minded to give her what we call it an interim maintenance payment to tie her over to the next hearing so that she has something to live off on during the period.

Alfred Ip  34:10
How about the legal fees, if you cannot afford the legal fee, she also ask for some support from the husband?

Thelma Kwan  34:17
Yes, that is also possible. It’s possible for a wife who is in the case, a financially weaker party to seek as maintenance something we call litigation funding. So it’s a separate budget, which is a breakdown of what is contemplated to be incurred in the coming months. So other than for example, she said “Oh, I need $50,000 for me and my children. And for these legal proceeding, I probably need about $30,000 more”, then she can put all this into an application for the court to consider.

Alfred Ip  34:54
And the husband will have the opportunity to oppose. Yes, either on the liability to pay or the amount.

Thelma Kwan  35:01
Well, he will always… I’m dwelling on your liability to pay because if he’s always been the breadwinner and he earns money and he pays the wife regularly, he will probably be bound to pay something. The usual dispute of course is she’s asking for too much and I can’t afford it. So, at the end of the day, it will come to a balancing exercise between how much she said she needs against how much the husband said he’s able to pay.

Alfred Ip  35:28
We mentioned earlier that there could be chances that the husband transfers his own property to another person, probably family members in order to defeat the matrimonial claim. Probably he was already contemplating a divorce, so he’s doing some preparation work, we call it, quote, preparation work. How do we deal with those issues?

Thelma Kwan  35:52
Well, if this has been in his preparation work has transferred his asset out of his name to for example, a brother or friend and the wife in the suspicion that he has done so, believes that he had done it with the intention to deprive her of her claim, then she can apply for something we call it Section 17 application, which is where the husband intend to dispose all his disposing or had disposed assets of the matrimonial pot away from himself. Now, it gets a little bit technical here, but there is sometimes the situation where if he actually has transferred these assets three years prior to the application under Section 17 then it is up to him to prove that he has not done it with the intention to deprive the wife, but if he has transferred away more than three years prior to the application of Section 17, then it is the wife’s turn to prove that he has done so with the intention to deprive her.

Alfred Ip  37:12
This is the burden of proof.

Thelma Kwan  37:13
The burden of proof that has sort of shifted depending on this three-year time. But coming back to your question, it is indeed true that there are people who have done it. So the preparation work in contemplation of a breakdown, they will transfer assets out, sometimes not to a family member, maybe to a girlfriend. And so in those situation, maybe it’s a property, maybe it’s a $10 million from bank account under certain guises or excuses or pretext. And the wife seeks to bring it back. And that’s when the Section 17 application is required.

Alfred Ip  37:51
It sounds like then that actually putting some property into a trust, doesn’t really work in terms of defeating a matrimonial claim. Sometimes we receive inquiries like ‘Can I set up a family trust and put the property into it in order to avoid wife claim from me?”

Thelma Kwan  38:12
Well, that is actually a really big topic and probably deserve another hour.

Alfred Ip  38:17
Okay, but we were talking about another time,

Thelma Kwan  38:20
But then but just to answer that question generally there they I have also seen clients who came to me and this is a wife saying that the husband had transferred the property into a trust, but shortly before the divorce, and personally it is a Section 17 situation where of course he has transferred assets out from the matrimonial pot and put it somewhere else. So be it a girlfriend or a friend or sibling or a trust, the same thing will apply because he has moved assets out of touch. Now, if it’s ended up with a trust, it is a different ballgame, because then it looks very much into what sort of trust is it? When was it set up? Who is the beneficiary? What else is in the trust? And where is the trust situated? Where are the trustees? And whether and how long is that trust I might have repeating myself, but how long has that trust been in existence? Then all that will come into play and whether the wife can then attack the trust to bring the asset back.

Alfred Ip  39:30
So it sounds like a fairly complicated issue that we should definitely talk about it again next time. Okay. When we have an hour in our hands. Let’s talk about something more simple. Earlier we mentioned about the litigation fundings, that is the wife who has the financially weaker party asking the breadwinner husband to provide for her in terms of legal costs. Um, what is it that the court will look into when the court is considering whether it’s necessary?

Thelma Kwan  40:04
Well, in the court, where the court is considering a litigation funding application, they will look at a few criteria. They will look at whether the person applying has assets himself or herself in their own name, which they can use, or assets which they can deploy – mean they have access to it and they can bring it in and use it. Or they’re looking at whether there’s any asset that this applicant has which can be used as security, to borrow money and use it as litigation funding. And in consideration this, of this asset use as a security of course, the court will look at whether the applicant has the ability to service alone, right? So if you have a property in your name, which you can use to borrow, but because you don’t make any money and you can’t repay then it’s nonsense. Something that’s feasible. Okay. There’s also the criteria of whether the applicant can have a charge on the outcome of the proceeding. Now, this is not something that’s applicable in Hong Kong. And the last criteria that is being looked at is whether the applicant has access to legal funding, sorry, public funding for the litigation process, meaning that can he or she apply for legal aid. So those are the things that the court will look at, in considering whether this person can successfully claim for litigation funding. Now, of course, at the back of that, the court also feels that the person being responding to that has the ability to pay this amount.

Alfred Ip  41:45
Okay, but let’s say that I’m the financially weaker party has nothing in his or her name, should he or she go to apply for legal aid or apply for litigation funding?

Thelma Kwan  41:59
Just nothing to her name?

Alfred Ip  42:00
She has nothing in her name and there’s no regular income, he or she has always been a cared for, um, a homemaker. And actually, there’s barely anything that he or she can use to sustain herself. That’s why she’s asking for the maintenance pending suit. Um, there is actually the public system, as you mentioned, that is legal aid, and a lot of times those people are eligible to apply for legal aid in order to fund his or her divorce. So he or she go for legal aid instead?

Thelma Kwan  42:37
Right. So there are two parts to this, to answering this question. So the first part is, should a person be going to public funds. One of the factors that the court is likely to look at is should this person be turning into public funding for to assist her in her application That means if the family generally is a very comfortable, financially, comfortable financially, then the court will look at them and says, if the husband has a lot of money, and he makes $200,000 a month, except the wife has nothing, then it’s more likely than not that the court will say this family can actually afford to have the wife applying for legal funds out of the husband’s pockets, so to say. So if the family is comfortable enough financially, then the court will say there’s no need for the wife to turn to public funding for litigation funding purposes.

Alfred Ip  43:38
So in other words, the court would be very careful in pushing the parties to rely on public funding to fund their own legal proceedings, unless there’s a genuine need, otherwise the court would not let them get out of it.

Thelma Kwan  43:54
I think the court won’t push as a starting point. The court will consider whether this is a family that likely to have the resources to, for example, to be more specific, the court will say, look here, if the husband out of his own pocket, can pay the wife’s maintenance, and also her ask for litigation funding, then why should the wife turn to public fundings for that purpose? So, of course, generally, the idea is, of course, to protect the proper use of public funding, so that so that the right party will get it. And on the flip side, if the party is actually more financially, not as well resourced, and they make less money, but there is still a need for interim maintenance payment, that may be the wife should go and apply. Now, the other side to this question that I was about to say is that applying for legal aid goes into a rather complex formula. So, it’s not just about how much you make right you look at the way we’ll look at what assets you have, your income, your expenses and the merits of your case. So it’s not a straightforward process. And they’re very, very difficult to say off the top of one’s head, whether the person is eligible can or should. But the point that is more relevant to this is whether the court will direct or will consider that this is the right party to seek public funding or, or from the other side.

Alfred Ip  45:27
Actually, I can share my experience that I’m from my clients that I’m applying for legally is a fairly complicated and painful process. A lot of time it would take weeks if not months, for the process to be completed and a lot of times they may get declined only because they have some assets. So, it’s not that easy, perhaps in that situation is easier to get the litigation funding from the other side rather than dwelling on the bureaucracy. But what if the husband says to me “Actually, I have absolutely no money because those assets in my name do not belong to me”.

Thelma Kwan  46:06
Well, yes, actually, you’d be surprised that happens quite a bit. There are claims where there are two types of claims: one type, which is what you just said, the husband in this example would say “I have nothing. I have nothing myself because everything I own actually belongs to someone else”. So, therefore, anything that’s legally owned by him legally, for example, bank account, or property, he would say actually belongs to a third party.

Alfred Ip  46:38
Actually, I can come up with an example that a lot of people nowadays would pay for the down payment to buy a property, put it in the name of the son. That would be a very good example or even like paying the whole thing in one go, and then put it in the son’s name, only for the benefit of stamp duty treated as a gift to the son. When the son get divorced, he may claim “Oh, actually I didn’t pay for it. It’s my father’s and now only holding on trust for him”.

Thelma Kwan  47:08
Yeah. And in that situation, because the son said that it belongs to my father, then that may be a situation where the father maybe need to be brought into the proceedings to actually state that the property belongs to himself and against the son.

Alfred Ip  47:25
And likely that his father will say something like that, because the son’s getting a divorce and the soon to be daughter in law, ex daughter in law, sorry, will claim against his own son for the property.

Thelma Kwan  47:39
Yes, so that is one scenario where we said there’s a third party involved. The other example where third parties may be involved is where for example, the wife would say “Oh, I know that you have purchased a property for your father and put it in his name, but I know that it actually belongs to you”. So therefore in this situation the legal ownership is with the father in law, when she claims that it actually belongs to the husband. In those cases, again, we need to bring in this third party to the whole proceeding to determine who actually owns the assets. Now, in situations like these, we bring in a proceeding called the preliminary issue proceeding. And because there is a need to determine who actually owns these assets, and also because one of the most important step towards deciding the financial claim of the parties is to determine what is in the matrimonial pot meaning that does this property is the property part of the family assets or is the bank account part of the family assets. And because they are third party owning it or allegedly holding it for one of the parties, there’s a need to determine who actually owns it. And very often in the preliminary issue proceeding this will take place prior to the actual financial hearing, so that the court can decide whether this falls into part of the matrimonial assets.

Alfred Ip  49:06
So, let me understand you a little bit clear: just because I own a property, and somebody bought it for me, doesn’t mean that that belongs to me, it can belong to the person who bought it from me. And vice versa, if I buy something for, let’s say, my father, your example and then that I can be attacked for buying that property for my father, being a part of the matrimonial assets only because it’s funded by myself.

Thelma Kwan  49:41
I think it would depend on the allegation. So if I’m the wife attacking this latter scenario, I would say you told me, for example, yeah, that it’s actually as your property but you have put it in your father’s name for certain reasons. And because it’s actually your property, it should be the value of it should be brought back. To be calculated for the financial divisions.

Alfred Ip  50:03
Can I deny that I’ve ever said it to you?

Thelma Kwan  50:05
…oh, you can try.

Alfred Ip  50:07
Okay, interesting: just because a property is vested in a name doesn’t mean that the ownership belongs to that person.

Thelma Kwan  50:16
That’s right. And one of the key steps in a financial claim hearing is to determine what is the pot that needs to be shared between the parties, so they need to put in all the correct stuff, and therefore the preliminary issue hearing will help to determine what goes into this pot, the size of the pool the size of the pot.

Alfred Ip  50:38
I see, that’s actually very interesting. A lot of people are using many different names to hold many different properties just to avoid being claimed by somebody else. And actually, this card trick doesn’t really work.

Thelma Kwan  50:51
Well, I think one has to be conscious that family members or friends or third parties are being joined into these proceedings to give evidence and it will be something that you know you will affect, it’s basically affecting people around you. So, if the claim is in that letter example is about your father then sure your father has to come into court to give evidence and sometimes when older man it’s not a very amicable process.

Alfred Ip  51:27
Oh, so that means that if someone’s buying a property for me, I may be called to testify to justify the actual property belongs to me.

Thelma Kwan  51:36
And you have to be, if to give evidence you have to be cross examined by the other side. And so it’s not a necessarily a very pleasant experience.

Alfred Ip  51:44
Okay. Um, after all these are sorted out that is the size of the matrimonial pool what will be next?

Thelma Kwan  51:51
Well, in the divorce proceeding, after having determined what the assets are, and usually having a look at the values of these assets, it can be properties or companies. Then there is a proceeding called financial dispute resolution. And this is a very important part of the divorce proceeding because this is an attempt by the court to facilitate discussions between the husband and the wife to come to an amicable settlement of their claims without needing to proceed to a full-fledged trial. So, in what we call an FDR – financial dispute resolution – what we’ll be before the court is, of course, the parties’ assets. And there will also be some sort of proposals to each other as to what I want to give you or you want to give me or what I want to ask from you. And what the court needs to do is to bring them in and tell them among others, if you proceed to trial, what is likely to be the finding of the financial relief claim of the parties, there will be of course, some reality checking. There will be also the consideration of if they want to fight this all the way how long this is going to take, or how, how much is going to take, and the parties, hopefully guided by their lawyers or counsels are going to make some decision about whether they want to settle it with the assistance of the judge or move on to a fight.

Alfred Ip  53:36
Okay, so, um, the FDR is actually a process conducted by the judge without the judge actually making a decision. The ultimate outcome is an agreement among the parties. That’s correct. That’s actually quite interesting because a lot of times when people go to court default that they’re going to get the justice that they deserve, but actually is not something that you’re going to get at FDR.

Thelma Kwan  54:04
Well, depends on what you mean by justice…

Alfred Ip  54:07
It’s a very fluid concept.

Thelma Kwan  54:09
I think sometimes one of the best FDR says where both parties come out with an agreement, but neither are completely happy. So it is a sense of, okay, I’ve come to compromise, I want to get $20 million, I got maybe 15. But he pays me immediately and not to over two years, you know, that sort of arrangement can be discussed at an FDR. And the good thing is that the judge is actually facilitating it. So there are a certain amount of respect for the person who is guiding us through the process because the judge will necessarily be saying, if this comes before me in trial, this is likely to happen or not likely to happen or your asking looks a bit unrealistic. And maybe there’s a need to massage it a little bit. And because it was guided by the judge, it’s easier for legal representation of both parties to then come together and talk and say, look here, this is what the judge seems to indicate. Can we use that as a starting point for discussion? So, it’s usually, or it should be amicable. And, of course, the parties can be stressed out. And I think that’s why having legal representation there and having the judge to guide the process is very important.

Alfred Ip  55:32
So they actually understand what’s the pros and cons of accepting or not accepting a certain settlement proposal? Absolutely. And to make the right decision.

Thelma Kwan  55:41
That’s right. Hopefully,

Alfred Ip  55:43
If they’ve made an agreement, are they going to sign an agreement on spot?

Thelma Kwan  55:49
Practically, I would always like to see parties actually signing something. Okay, which they have agreed to during the day before they leave the court. Okay. Because sometimes people sleep on it and wake up thinking, that doesn’t sound too good.

Alfred Ip  56:04
Buyer’s remorse.

Thelma Kwan  56:06
So it’s always my principle to at least get signatures on paper before everybody takes off for the day, if there is an ability to come to an agreement.

Alfred Ip  56:17
Okay, so there will be an agreement drawn up between both parties to sign.

Thelma Kwan  56:21
And then the judge will look at it and basically give an order in those terms.

Alfred Ip  56:27
Okay. So it’s not just an agreement between the parties: the court actually needs to look at it and make an order in terms of those agreements.

Thelma Kwan  56:36
That’s right. That’s one possible outcome of the FDR.

Alfred Ip  56:40
Okay. What if the parties cannot agree after the FDR?

Thelma Kwan  56:43
Well, there are a few options. One of them is they are close to a compromise, but it would be six o’clock in the evening and everybody’s tired. And they would go back to the court and says “Can we have another FDR to conclude this?”. Or they will say “This is not happening. Unfortunately, we have to go to trial”. Okay. So they’ll go back to court and ask the judge to give directions regarding a trial.

Alfred Ip  57:12
What sort direction will the court give?

Thelma Kwan  57:14
Well, the court will basically look at where things are at and see whether any further discovery of information is required from the parties. Maybe updated valuation, give a date for the trial hearing, and all that sort of thing the court will then consider after an FDR has failed.

Alfred Ip  57:37
Will the same judge hear the trial?

Thelma Kwan  57:39
No, actually, that’s a very good question. It will never be the same judge to hear the financial claim of the parties. The reason is, in an FDR is more likely than not that the parties have put forward what they asked and want, which means sometimes you hear their ultimate position…

Alfred Ip  58:00
… or bottom line…

Thelma Kwan  58:00
…bottom line, and when they want to proceed to a hearing, they might just go back up and ask for more. So, if a judge has actually heard your bottom line, then it might well affect the judges listening to the case where the financial claim is being heard. So they they’ll always be a change of judge.

Alfred Ip  58:20
Understood. Um, according to your experience, if the parties cannot agree after FDR, how long do they need to wait for the trial?

Thelma Kwan  58:29
That’s a difficult question to answer. And that will very much depend on the court diary. But I’d say it will first depend on whether there’s any more information that is needed to go to the trial. And let me rewind just a little bit because sometimes for the purpose of financial dispute resolution, the parties are more easygoing on agreeing to values so for example, if there is a property that needs to be valued, they may say “Okay, let’s use the XYZ bank website valuation and that will be it”. But if they are then proceeding to trial, they might want to have a proper valuer for that property. Okay. So and those are the things that need to be sought and done before the actual trial takes place. So subject to any further information that’s required to go to trial, and to the courts dairy, we may be talking about six months or more before the trial will be heard.

Alfred Ip  59:29
Depending on the length of the trial.

Thelma Kwan  59:32
Oh, yes, that too, because sometimes is the hearing can be one day or the hearing can be three days or five. So it really depends on all these factors.

Alfred Ip  59:42
So actually a divorce can go on for years in that case.

Thelma Kwan  59:48
Yes. For some of them. Yes.

Alfred Ip  59:50
Okay. Um, let’s say that the parties have made an agreement or eventually the court has made a final verdict after the trial, when one party is ordered to pay another party, what happens if that party refuses to pay or fail to pay, for example, a husband is ordered to pay $50,000 per month to the wife and children, and he failed to pay?

Thelma Kwan  60:19
Well, they are enforcement process for orders that are made by the court. So for example, in your scenario where the husband has to pay $50,000 to the wife, and he paid three months and then he lapsed and nothing is heard of him, then the wife can always come back to court and says “Look here he owes me for the last nine months and he has not paid up and therefore I go to the court to enforce the payment of these sums”. Now, this process involves something called judgment summons, and a judgement summons proceeding there are two steps. The first step is called examination summons, which means the wife in this case, who is the recipient of the money, will go to court and call the husband into court and examine him on his ability to pay that money. So what she’s trying to establish here is that the husband actually has the money, but just not paying her. So it would involve cross examination of her husband’s means. That usually be called his updated bank statements, his spending pattern and his income before the court will be able to hear whether he actually has the money. So that’s an examination summons process, so is a gathering of information, updated financial information to support the wife’s case. Subsequent to an examination summons the wife then need to consider if she thinks she has a good case. She will need to go back to court to seek the leave of the court to proceed to committal – committal meaning that throw the guy into prison. Right, simply put, and so she would need the leave of the court. And if the court and the court will need to see what factual basis is she relying on to support a claim that he actually has the money but chose not to pay her. So if the court is satisfied with that, there will be a second hearing, again, bringing the guy in, where he’s being challenged on his ability to pay and his refusal or neglect to pay the wife.

Alfred Ip  62:32
So if the husband lost his job, and he lost his income and he cannot afford to pay, the wife cannot commit him to prison.

Thelma Kwan  62:42
I think in those cases, yes. If he has really lost his job, and this is the basis for his non payment, then it is actually the husband’s duty, say to go back to court and says “Hi there. I am no longer making this because I’ve just lost my job, and I can’t pay 50,000 anymore, I can probably pay for the children’s school fees. I therefore seek the court to vary the order that was made”. And if he’s able to come up to prove of his change of circumstances, then the court will listen and consider a variation in his favour.

Alfred Ip  63:19
So it’s like applying for a payment holiday, in the sense of losing his job, losing the income abatement of a certain period for paying the maintenance that he’s ordered to pay. But will he be ordered to pay the same amount again, if he finds a job later on?

Thelma Kwan  63:38
I think that will be, it will depend on what he’s asking for, right, if he says “I will, I have lost my job. I will look for a new job. In the meantime, can I pay less?” and if he’s being reasonable, but “I will keep the court apprised of my job hunting process. And once I’m able to find a job or comparable job, I will come back and inform the court”, and that will be a very responsible husband, by the way in those circumstances.

Alfred Ip  64:05
Perhaps in these circumstances, the first thing the husband should have done is to immediately inform the wife or ex wife about the change of circumstances, and ask the ex wife to be a little bit more understanding and work out a solution over how to maintain the needs of the wife or probably the children who are his own children as well. And at the same time, trying to get back on its own feet in order to maintain the family again

Thelma Kwan  64:38
That would be ideal, but very often, what actually happens in reality is that he stopped paying, he wasn’t talking to the wife. And it’s not until the wife chased him that he suddenly said “I have no job anymore”. So as I said, it would be a very responsible man to say “Look here, this is my present situation. I can’t afford it now. I’ll pay you back later”. That would, of course be ideal.

Alfred Ip  65:03
Actually, it brings up a very interesting question that is just because two people are no longer husband and wife doesn’t mean that their relationship ends because they’re still the father or mother of the children. So there are certain links between the two of them, especially when there’s a payment obligation from one party to another. It is still important to maintain a certain level of communication in order to avoid any unnecessary legal proceedings that may get into further trouble. Dealing with the legal proceeding is definitely not pleasant.

Thelma Kwan  65:40
That’s correct. And I think one of the advice that could be given and sometimes a woman that’s not receiving the money for the man would not be thinking straight, is they said “Okay, good, throw him into jail”. And I said “That’s not the point. If you put him in jail, then he can’t, he won’t be able to make some money so that you will be paid or the child will be paid the school fees. So let’s not go there. But let’s come back and see if you can negotiate the position”. The other point that you are most correct about is that they will always be the parents of the child. And although their obligations towards the child will end when the child turns 18 they will always be the father and mother. And, and the court protects children. And the court will always put the interests of the children as the paramount consideration. And the last thing that it would like to see is that the parents fighting over each other or fighting over maintenance that is due to the child.

Alfred Ip  66:38
So actually, there’s part of my advice to a lot of people going through a divorce process is that they are actually ending a relationship but at the same time starting a new relationship, but not as husband and wife, but co-parent. Actually, it is a transformation from one relationship to another. So it’s not the end of a matter, it is actually the start of an other matter, among many other matters that has to be resolved. Thank you very much, Thelma, today for sharing a lot of experience with us about divorce.

67:36
Be sure to catch our other episodes of The HIP Talks podcasts by checking the insights section of our website at www.hugillandip.com and please send us your comments by writing to our email address hello@hugillandip.com. Also, please feel free to share this episode of The HIP Talks podcasts with your friends, family and associates. For the hearing impaired you can find the notes and the transcript of this episode on our website.

This podcast is for informational purposes only. Its contents do not constitute legal or professional advice.

Alfred Ip

Alfred Ip

Alfred assists high net-worth individuals (HNWIs) in handling their wealth-related issues, such as contentious and non-contentious trust and probate, mental capacity, family office, amongst other wealth management matters. He is also a leading Dispute Resolution lawyer with over 20 years of experience in Hong Kong. Moreover, Alfred helps clients with issues regarding Family Law.

All articles by : Alfred Ip
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