Prenuptial Agreements in Hong Kong
Philippa Hewitt*
I. Legal Background
In Hong Kong, the Courts follow the law in the UK in relation to Family Law and this includes their approach to pre- nuptial agreements. As in the UK, pre-nuptial agreements in Hong Kong are agreements entered into before a marriage which set out the way in which the prospective husband and wife will hold their assets when they are married.
In Hong Kong, as in the UK, pre-nuptial agreements are not binding on the Courts, and are relatively uncommon as they have traditionally not been documents which have been allowed to fetter the Court's jurisdiction in family law matters. They can be taken into account when considering a division of the matrimonial assets, and can be relevant to the proceedings in the context of financial conduct under the factors of Section 25 Matrimonial Causes Act in the UK and Section 7 Matrimonial Proceedings and Property Ordinance in Hong Kong Cap 192.
There have been two recent cases which have an impact on the law relating to pre-nuptial agreements in Hong Kong. They are M v M (Pre-nuptial Agreement)[1] and K v K[2] In M v M the court was prepared to take the couple's pre-nuptial agreement into account as a factor tending to reduce the final award to the wife, and in K v K, a different judge held the wife to the capital terms of the agreement which she had signed, and identified some important factors for the court to bear in mind when considering the weight to attach to a pre-nuptial agreement. Following the House of Lords' decision in White v White, it may be that greater emphasis will be put on what the parties have brought into a marriage, although Hong Kong has yet to fully adopt the principles in White v White, the Courts are tending to go that way.
II. Jurisdiction
Hong Kong law follows English law in that no agreement between a husband and wife can prevent one of them from applying to the English court for financial relief, no matter what the circumstances. Any agreement which tries to stop one party applying to the court for such financial relief is not only unenforceable, it is void. A pre-nuptial agreement cannot, therefore, prevent the court from making what it considers to be a fair division of the matrimonial assets.
As mentioned above, however, a pre-nuptial agreement can be a material consideration when considering what adjustments to make to the couple's financial circumstances on divorce. If the agreement is relevant to the court's decision as to what was fair, it seems it will be treated as one of the circumstances of the marriage.
In M v M, the agreement in question, while not in any way binding on the court, was taken into account in the exercise of the court's discretion as 'one of the more relevant circumstances'. The judge said that it did not matter whether the pre-nuptial agreement was treated as a circumstance of the case, or as an example of conduct which it would be inequitable to disregard. Whichever approach the court took, it should look at any pre-nuptial agreement and decide, in those particular circumstances, what weight should be attached to the agreement. In this case it was relevant that the husband would not have married the wife without the pre-nuptial agreement, but it was also relevant that the wife was pregnant when the agreement was signed, and that she felt an urgent need to be married. In the judge's view it would have been as unjust to the husband to ignore the existence of the agreement and its terms as it would have been to the wife to hold her strictly to its terms. Although the judge went on to award the wife considerably more than she was entitled to under the terms of the agreement, he said that he bore the agreement in mind, 'as tending to guide the court to a more modest award than might have been made without it'.
In K v K, the judge went further, and applied the capital part of the pre-nuptial agreement, by awarding the £100,000 plus 10% per annum set out in the agreement, going on to interpret the phrase in the agreement, 'reasonable financial provision for the child', to mean £1.2 million for a house for the wife and child to be held in trust until the child finished full time education, and confirming agreed periodical payments for the child of £15,000. However, the judge was still prepared to order, in addition to the wife's entitlement under the pre-nuptial agreement, that the husband pay the wife £15,000 a year during the period of the trust.
In that case the Judge posed a number of questions: Did the Wife understand the agreement? Was she properly advised as to the terms? Did the Husband put her under any pressure to sign it? Was there sufficient disclosure of assets? Did the Wife press for values of the assets? Was either party put under pressure? Was the agreement willingly signed? Did the Husband exploit a dominant financial position? Have any unforeseen circumstances arisen that would make it unjust to bind the parties? Is there sufficient clarity of terms? Does the agreement preclude an order for periodical payments for the wife? Would injustice be done by holding the parties to the terms?
Pre nuptial agreements are on the increase in Hong Kong which is an international city and the concept suits clients with international interests who may wish to rely on the agreement in another jurisdiction.
III. Considerations which may be taken into account
More weight may be given to a pre-nuptial agreement which sets out significant assets owned by one of the parties before the marriage, than to one in which relatively few assets are set out.
If the circumstances at the time of the divorce are close to those envisaged in the original agreement, it is more likely that the terms of the agreement will have some impact on the terms of the order. Clearly, passage of time would be a factor, but even in a short marriage the arrival of children or unanticipated family responsibilities, a dramatic change in the couple's financial circumstances or in their health, indeed any serious change of circumstances, would make it less likely that the agreement would be considered relevant.
The length of the marriage will also be considered. Even if the agreement made before the marriage considered and provided for the current situation of the parties, having anticipated the arrival of children, health issues, assets acquired since the marriage and additional family responsibilities for either party, the court would be very unlikely to give any great weight to a pre-nuptial agreement in a long marriage, no matter how accurately the agreement had forecast the couple's circumstances, or how fairly it had provided for those circumstances. An agreement made between two 30 year olds might accurately predict the likely financial situation of the couple at the age of 50, but it could not possibly take account of their experiences over the 20 years of marriage.
IV. Conclusion
Notwithstanding that the courts are not bound by pre-nuptial agreements, and will not always consider them to be relevant to the division of assets between the parties, some people contemplating marriage may wish to consider making a pre-nuptial agreement, because, for example what principally concerns them is the possibility of a very short marriage having very serious long-term financial consequences. At the end of a short, childless marriage, it is likely that the English court would consider that a fair pre-nuptial agreement, signed by the parties freely, with the benefit of independent legal advice and full disclosure of the true financial position, was highly relevant to the question of the parties' financial relationship on divorce. In an extreme case, it is even possible that such an agreement would form the basis of the court's order.