Grey Divorce – hidden battles for protection and succession of family assets

13 November 2020, Family Law, Legal Alert by Paul Kwan, Cecilia Lau, Mandy Pang

In recent years, there has been an increasing divorce rate for older couples in long marriages. A “grey divorce” of “silver splitters” can be more than just a relationship breakdown. It may be due to a desire to effect an early distribution of family assets amongst family members of the second or even third generations. Any such distribution of family assets pursuant to court orders during the lifetime of the parties can disrupt estate planning that is already in place.

In making a will, a testator is free to decide how his/her estate will be distributed after his/her death. He/she may even decide not to leave any assets to their spouse or children (albeit that such spouse or children may in such circumstances have a claim under the Inheritance (Provision for Family and Dependants) Ordinance (Cap.481)) for a portion of the estate, on the basis that they were financially maintained by the deceased during his/her lifetime. It is not uncommon (particularly in the past) for some men to establish families and have children with female partners other than their wives. Some husbands maintain more than one family for decades, or perhaps separate with their legal wife without divorcing, until some financial concern arises in the family, prompting them to seek financial relief in divorce proceedings and, in passing, putting an end to their marriage. CSH v LS or LS formerly known as CYY (FCMC 12435/2016; [2020] HKFC 143) (the CSH case) is a case on point.

In the CSH case, the parties married in Mainland China in 1962 and had two children. The husband smuggled himself into Hong Kong when the Cultural Revolution started in 1967. Subsequently, the husband entered into a bigamous marriage in Hong Kong with a second wife (W2) in 1970. The husband and W2 lived as man and wife from then onwards and had a daughter in 1972.

The first wife (W1) and two children (a daughter and son) came to Hong Kong in about 1980. W1 said that it was only upon her arrival in Hong Kong, that she discovered that her husband had gone through a bigamous marriage with W2. Although the husband and W1 never lived together after her arrival in Hong Kong and were not in any way intimate, they met every two or three weeks for lunch or dinner.

In 2016, W1 decided to divorce the husband and claim for ancillary relief, by which time, he had been living with W2 and their daughter for over 40 years.  The proceedings were triggered by a dispute over a jadeite boat (regarded as a family heirloom) and the husband’s/ W2’s family’s refusal to give it to W1’s son.

After divorce proceedings began in 2016, the husband announced in local newspapers that he was disowning his son. By the time of the trial, W1 was already aged 77, while the husband was 86 and in ill health. This was not only a divorce, but in effect, a legal battle over family assets involving the next generations. The judge stated in her judgment that these proceedings were to secure the son’s inheritance, which both W1 and the son knew were not forthcoming.

During the proceedings, W1 attempted to stretch the computation of matrimonial assets to cover almost all of the assets given by the husband to W2 and their daughter over the past decades, by arguing that that was wanton spending on the husband’s part. The Court pointed out that although the marriage between the husband and W2 was void ab initio (since it was bigamous), W2 still had substantial rights under the Matrimonial Property and Proceedings Ordinance (Cap.192). W2 was entitled to claim for relief if the husband failed to maintain her during their marriage i.e. she had legitimate rights to be supported by the husband. As for the husband, the Court said that he was free to spend his money as he wished, unless there was clear evidence of dissipation with a wanton element, e.g. assets deliberately or recklessly wasted in anticipation of trial or with an intention to defeat and extravagant spending. The husband had in fact given substantial sums of money from time to time, not only to W1 and W2, but also to all his children. Legitimate and illegitimate children have equal rights under the law.  W2’s daughter had divorced and she and her daughter (i.e. W2 and the husband’s granddaughter) had been living with the husband, who maintained them.

The Court found that W2 had contributed to the welfare of the husband, which enabled him to build up his business. The husband alleged that W2 worked on the accounting side of his business. Further, the Court found that W2 had been providing the husband with companionship and moral support, running his household and bearing and bringing up his child. On the facts, W1 had failed to satisfy the Court that the husband’s distributions to W2 and their daughter were wanton.

The CSH case is a case where resources exceeded financial needs. The Court took the position that when the assets are more than enough to provide adequately for the parties, the decision in LKW v DD (FACV16/2008) will be followed and the sharing principle applied i.e. if there are surplus assets after the parties’ financial needs have been catered for, these must be shared amongst the parties. That sharing is undertaken on the basis that the total assets should be divided equally between the parties, unless there is a good reason, capable of articulation, for departing from an equal division.

Although the judge found that over the past 50 years, W1 had received more than ample financial support from the husband, W1 asked the Court to consider her wish to leave a legacy to her children. The judge ruled that this was in complete disregard of the husband’s distribution of very substantial sums to her two children over the years. The judge found that throughout the years, the husband had actually given W1 and her children more funds than he had given to W2, her daughter and granddaughter.  The judge said that W1 had decided to realise her investment and was now jealous of W2 and her daughter, who had kept their investments to generate more wealth. Hence, W1’s wish to leave a legacy was not considered. Finally, on a clean break basis, the Court ordered the husband to pay W1 a lump sum, which was less than 1/10th of the HK$66 million she had claimed in her open offer.

Conclusion

At the trial, the husband collapsed shortly after he started to give evidence. Like for many elderly litigants, it was too tough a process for him. It is regrettable to note that the fortune he earned and accumulated to provide a better life for his families became a source of family disputes. Family disputes may be inevitable, but can also be avoidable. Litigation may not be the only way out. Silver splitters may consider resorting to alternative dispute resolution at an early stage (e.g. negotiation, mediation, private financial adjudication etc) to assert their needs and rights with their spouses and other family members in a more harmonious and relationship-saving way.