August 2023

The customary equal sharing principle laid down in LKW v DD (2010) 12 HKCFAR 582 has long been adopted as a thermometer of division of assets upon divorce. A party’s pension, though not crystalized immediately or in near future, must be treated as part of the family assets for distribution so the estimated value of the pension has to be disclosed in the Financial Statement (Form E). The nature of pension falls into the ambit of one of the considering factors under section 7(1)(a) of the Matrimonial Proceedings and Property Ordinance Cap.192 that the court has to regard “the income……and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future”.

In the appeal decision of Chan v Chung (2023) HKCA 560, the Court of Appeal overturned a family court decision and held that 80% of the husband’s pension should be treated as the family asset and awarded 40% of the same to the wife. Some salient factors could be observed from Chan v Chung:

1. The husband worked in the Police Force from 1986 until 2023 with pension of approximately six million. The marriage lasted for approximately 10 years from October 2003 to August 2014. At the time of marriage, the husband worked in the Police Force for 17 years. The husband’s entitlement to the pension had not emerged during the marriage.

2. While the lower court had the discretion to apportion the pension benefit in view of the length of marriage, the Court of Appeal put emphasis on the authority of Z v X (C Intervener) (2015) HKLRD 719 that the husband’s pension benefit had gradually evolved into one as time passed during the long marriage. The length of marriage of 10 years in this action was good enough to justify to exercise a wider discretion to allocate a larger portion of the pension benefit to the wife upon divorce.

In view of this lenient approach adopted by the Court of Appeal in Chan v Chung, practitioners would be mindful in giving advice on possible distribution of non-matrimonial assets like inherited assets and family gifts upon divorce which unfettered discretion is vested in the court.