LKW v DD -‘equal sharing’ principle

In LKW v DD ((2010) 13 HKCFAR 537) the Court of Final Appeal had to deal with the issue of the division of assets between a divorcing couple where the available assets exceeded the parties’ needs. Ribeiro PJ gave the only full judgment.

The principles that govern the making of an ancillary relief order are those contained in section 7 of the Matrimonial Proceedings and Property Ordinance. Given the close structural similarities between it and section 25 of England’s Matrimonial Causes Act 1973 it is unsurprising that Hong Kong’s courts have had regard to the English authorities on section 25 ([11]). Had the applicable principles in Hong Kong changed given the House of Lords decisions in White v White and Miller v Miller and McFarlane v McFarlaneC V C represented the law in Hong Kong before White v White. Wives in ‘big money’ cases got enough to meet their reasonable requirements and any surplus over joint needs went to the husband unless the wife could show that she had ‘earned’ a share in the surplus. The C v C approach was not good law since it gave excessive weight to ‘needs’ / ‘reasonable requirements’ which is only one of the section 7 criteria.

The overarching requirement is to achieve a fair solution:

‘what is fair treatment upon the dissolution of a marriage involves concepts which ‘change from one generation to the next’ and the values underlying C v C do not reflect elementary notions of fairness as between husband and wife in present day Hong Kong. To confine a non-working wife’s award to the sum needed to meet her “reasonable requirements” and to permit the husband to keep the remaining assets is patently unfair and discriminatory’ ([28]).

It was argued that to follow White v White would be to apply western values to Hong Kong’s Chinese population ([37]). Ribeiro PJ rejected this. White v White‘s insistence on fairness was equally relevant in Hong Kong ([40).

Ribeiro PJ emphasised that the guidance that he would give later in his judgment was only that. He was providing guidelines to assist judges in the exercise of their section 7 discretion case-by-case. The guidelines represent an attempt to balance flexibility and legal certainty ([47] – [53]). They only apply where there is a surplus of assets over needs ([54] – [55]).

Ribeiro PJ identified five steps to be followed:

  1. Identify the parties’ assets ([71] – [73]);
  2. Assess the parties’ financial needs ([74] – [79]);
  3. Apply the sharing principle if assets exceed needs ([80] – [82]);
  4. Consider whether there are good reasons for departing from equal division (equal sharing should not be applied mechanistically) ([83] – [86]);
  5. Decide the outcome ([131] – [132]).

He also identified four principles to be gathered from White v White which judges should bear in mind in applying section 7:

  1. The objective of fairness ([56]);
  2. Rejection of discrimination ([57]);
  3. Apply the yardstick of equal division ([58] – [61]);
  4. Avoid ‘minute retrospective investigations’ (a lengthy and pointless trawl through the details of the parties’ conduct over the course of the marriage) ([62] – [69]).

The judgment contains useful guidance on the application of several of the steps.

In the present case, the Court of Appeal had awarded the wife half of the total assets and there was no basis for interfering with this award.

Michael Lower

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