Are Pre Nuptial Agreements Enforceable in Hong Kong?

In this blog FLiP Associate Rebecca Alexander looks at how the courts in Hong Kong view Pre Nuptial (or Pre Marital) Agreements and whether they are likely to be enforced by the Hong Kong courts. Rebecca practiced family law in Hong Kong before joining Family Law in Partnership in London. 

Background

On divorce, in England & Wales and in Hong Kong, the courts look at all financial resources, however they are held and wherever they are. Typically, all of the wealth built up during a marriage will be shared and often divided equally, and what is referred to as ‘non-matrimonial’ wealth such as inherited wealth, gifted wealth, money that was brought into the marriage can, in certain circumstances, also be divided. No assets are automatically ringfenced.

England & Wales and Hong Kong are financially far more generous in the treatment of finances on a divorce than pretty much any other jurisdiction in the world.

The term “nuptial agreements” refers to both pre and post nuptial agreements. They are written contracts entered into by the parties to a (prospective – in the case of a pre nuptial agreement) marriage. The agreement will usually deal with how the assets and liabilities of the parties are to be divided if the marriage is later dissolved. The terms will usually cover the divisions of capital and earnings. However, the jurisdiction of the court over children can never be ousted.

We know from the statistics that sadly divorce rates remain high these days. A pre nuptial or post nuptial agreement can make a marriage more secure. Attitudes towards them are changing as more traditional jurisdictions begin to feel more culturally comfortable with them and the courts are now likely to adopt them or give weight to the intentions set out in the agreement unless they are unfair.

Despite widespread belief to the contrary, pre nuptial and post nuptial agreements are not automatically legally binding under English or Hong Kong law as the courts in both jurisdictions believe they should retain the right to make the final decision regarding the division of assets at its discretion taking into account all the circumstances of the case.

Financial impact of divorce in Hong Kong

The financial impact of divorce in Hong Kong is potentially very significant. In LKW v DD (2010) 13 HKCFAR 537 the Hong Kong Court of Final Appeal endorsed the English House of Lords (as it then was) decision in White v White [2000] UKHL 54. In doing so, the court brought an end to discrimination between the breadwinner and homemaker on divorce and ushered in an era of ‘fairness’.

Wealth is now shared on divorce in Hong Kong. All wealth (including corporate and trust assets) is potentially vulnerable. This has led to a string of a substantial financial awards being made by the Hong Kong courts.

Jurisdiction

The courts in Hong Kong have jurisdiction in divorce proceedings if either party to the marriage satisfies the three main criteria specified in Section 3 of the Matrimonial Causes Ordinance (Cap 179):

• one of the parties was domiciled in Hong Kong at the date of the petition for divorce;

• one of the parties was habitually resident in Hong Kong throughout a three year period immediately before filing the petition for divorce; or

• one of the parties has a substantial connection with Hong Kong at the date of filing the petition for divorce.

It does not matter where the marriage took place or where the pre nuptial or post nuptial agreement was entered into provided the validity of the marriage and the agreement are not in doubt.

The case law

English authorities are persuasive in the Hong Kong courts but they are not binding.

Statutory law in Hong Kong sets out the factors to be taken into account by a court when resolving financial matters. The list of factors under Section 7 of the Matrimonial Proceedings and Property Ordinance does not include an agreement between the parties.

However, in the case of SPH v SA [2014] HKCFA 56 concerning a German prenuptial agreement, the Hong Kong Court of Final Appeal confirmed that the decision of the UK Supreme Court enunciated in Radmacher v Granatino [2010] UKSC 42, [2011] 1 A.C. 534 should also be regarded as the law in Hong Kong. This gave qualified effect to prenuptial agreements in Hong Kong.

Hong Kong’s Court of Final Appeal made it clear that, although the court is not bound to give effect to such an agreement, it will give decisive weight to it where it is fair to do so. Accordingly, a prenuptial agreement will carry full weight if each party entered into it of his or her own free will, without undue influence or pressure, having all of the information material to his or her decision to enter into the agreement and intending that it should be effective to govern the financial consequences of the marriage coming to an end.

In Radmacher, the Court ruled that a prenuptial agreement might have decisive weight but must always be reviewed on a case-by-case basis for fairness.

Anthony Chan J’s LCYP v JEK [2019] HKCFI 1588 final judgment was handed down in the Hong Kong High Court on 8 July 2019. Anthony Chan J cited a key passage from the Radmacher, ‘The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement’. The case provided guidance on the financially weaker party’s needs if there is an unvitiated prenuptial agreement.

Key considerations

In summary, there are guiding principles that are applied by the Hong Kong court when considering the weight to be attached to a prenuptial agreement such as:

• Ideally, the agreement should be signed at least 4 weeks before the date of any marriage. Careful thought will need to be given as to how and when the issue of the agreement will be raised. This requires very sensitive handling.

• Both parties should receive independent legal advice. It is important that each party is given the opportunity to obtain legal advice. Nevertheless, one party may feel they are happy to proceed without advice and the agreement should record that they will not rely on that in an attempt to challenge the agreement later down the line.

• There are no vitiating factors such as duress, undue influence.

• There should be full and frank disclosure by each party of their assets, interests in trusts and any expectation of future wealth. It is crucial that the pre nuptial agreement carefully records that the other party is satisfied with the disclosure which has been produced.

• Enforcement should not result in significant injustice for one party. An agreement which leaves a financially weaker spouse with very little is likely to be worthless. Suitable provision to cover, at the very least reasonable needs, should be included in any pre nuptial agreement. Without that, it will almost certainly be considered unfair and be afforded very little or no weight.

• As mentioned above it should not purport to oust the court’s jurisdiction nor govern arrangements for children.

Conclusion

In Hong Kong a carefully considered and properly executed pre or post nuptial agreement can provide the parties with some certainty and reduce the risk of stressful litigation in the event of a marriage breakdown.

For more information on the way that the courts in other jurisdictions deal with finances on divorce and separation take a look at our guest blogs:

British Expats Divorcing in Hong Kong

Should I Divorce in England or Singapore?

Should I Divorce in England or New York?