Popping the question and sealing the deal: nuptial agreements since SPH

298月2018

Just over four years ago the Court of Final Appeal endorsed nuptial agreements in Hong Kong, in SPH v SA (2014) 17 HKCFAR 364, [2014] HKCFA 56. “Full weight” should now be given to a pre or post nuptial agreement, provided that it was not vitiated in some way, provided that that the parties were fully informed, and subject to the overriding requirement of fairness discerned from the statutory scheme.

This post looks at the Hong Kong case law since SPH, and identifies four glosses that have been added to the nuptial agreement landscape. Before we turn to that, however, a quick recap of what SPH itself tells us:

  • The old rule that pre nuptial agreements are contrary to a public policy supporting the institution of marriage is now obsolete (§40). Consequently, pre nuptial agreements stand to be respected when the court comes to order relief under section 7, just as separation agreements have been since the Court of Appeal’s decision in L v C [2007] 3 HKLRD 819, [2007] HKCA 210, there being no difference in principle between a pre and post nuptial agreement (§§39–40).
  • The principles of Radmacher v Granatino [2010] 2 FLR 1900, [2010] UKSC 42, and particularly §§68–73 of that judgment, should be regarded as law in Hong Kong (§§35, 39).
  • What that means is that decisive weight should (not may: should) be accorded to a pre nuptial agreement where (1) parties entered voluntarily, without undue pressure and informed of its implications (2) intending to be bound, which question may be informed by their understanding of applicable foreign law and (3) subject to requirements of fairness in the instance, since the court is still fundamentally conducting a section 7 exercise even where decisive weight is afforded the agreement (Radmacher at §§68–76).

As we know, pre marital deeds are now common in Hong Kong. Turning then to the four glosses.

[1] Whether a deed is valid may not be suitable for preliminary determination, particularly where needs are in issue, or where parties were not advised. This has happened twice.

In the unusual case of FHM v KYM & Ors [2015] HKFC 24, the husband had accumulated significant wealth since 1991, having lived apart from his wife since 1985, when they had signed a deed of separation capping relief at $100,000. The court declined the husband’s application to try validity as a preliminary issue, reasoning that (1) validity and weight remained part of the section 7 exercise, the statutory regime not being ousted in any way (2) the wife’s needs would have to be assessed in any event and thus (3) a full trial was inevitable, and costs would not be saved: §§23, 32, 34.

In CKK v WMY [2014] HKFC 124 by contrast a “homemade” agreement had been adduced in two previous divorce actions that were discontinued, but not in the third, before the court. The central issue was whether the agreement’s terms had been complied with, there being evidence of asset transfers in accordance with its terms as allegedly amended (§61). Accordingly, disposing of the validity issue would not dispose of the trial proper, and whatever the result of such an enquiry, the section 7 exercise would still have to be undertaken (§63). There was also a prospect that findings of a preliminary issue trial would encroach upon hotly disputed issues at trial (§§67–68) Consequently, and given that costs would be “jack[ed] up”, a preliminary issue trial would not have been just and convenient (§69).

[2] A nuptial “agreement” is just that, at law, so an absence of corresponding offer and acceptance will defeat a claim under Radmacher / SPH. This is the WKK v LMY [2015] HKFC 35 case, where the wife issued two maintenance proposals to her husband in the course of their separation. The husband rejected both, but in the interim issued a counter-offer, that was not accepted. First principles of contract law meant simply that no agreement came into being, and the wife could not rely on the husband’s counter-offer as terms of an agreement.

[3] Inherently unfair and informal agreements will likely carry no weight at all. This happened in BWBP v T-KP [2017] HKFC 98, where an order by consent required the father to pay for school fees. A “side agreement” was then made by email and orally, that the mother would contribute $10,500 toward the younger son’s boarding fees. The side agreement was not reduced to a consent summons, although the father subsequently sought to rely upon it. The mother pleaded duress, on the basis that she had no option but to agree to those terms, as the father would otherwise have reneged on his own agreement to place the child at the school. The court accepted this evidence, and added that the agreement seemed “inherently unfair” given the parties’ financial circumstances. It was therefore afforded “no weight”: §20.

[4] Radmacher / SPH does not support a broader principle that parties who maintain separate finances can expect that to be reflected in the order for ancillary relief. The Family Court considered this exact submission in MKK v YSM [2015] HKFC 67 (§142), where the wife of a long marriage sought to resist any application of the sharing principle, on the basis that she built her real estate investment business with pre marital assets, and subsequently kept her portfolio entirely separate from her husband’s finances. This led to pre-trial open offers that differed by over $25m (§56). The court rejected the wife’s contention and proceeded to apply the sharing principle, drawing from the Court of Appeal’s decision in ARAV v VP [2011] 3 HKLRD 759, [2011] HKCA 131. There, a similar challenge had been mounted and rejected, principally as an agreement (still less a mere practice) to maintain separate finances during a marriage, does not of itself infer an agreement to ring-fence them come divorce.

Looking forward

A number of the questions that SPH throws up have therefore yet to be determined.

Agreements regarding finances for children will likely be given considerably less weight, or none at all, though that has not been expressed yet (it was acknowledged by parties B, L v K, WS [2015] HKFC 71 (§8), a case that predates SPH by just two months, and see §77 of Radmacher itself).

We also know following WKK that contract law will have a role to play, though whether and how far the jurisprudence of promissory estoppel will assist is yet to be discerned. The majority in Radmacher approved an old passage from authority cautioning against the use of misrepresentation and estoppel to decide whether weight should be given to a separation agreement (§38), and an argument that an agreement should be ignored where a party had promised not to enforce it was rejected on the facts in Z v Z (No 2) Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam) (§54). But neither answers the slightly different question of whether, absent an agreement, a party may rely decisively on a promise regarding the provision of assets on separation that they have subsequently relied upon. The answer to that question depends on how much Radmacher is about fairness as well as it is parties’ autonomy.

We can also look forward, we think, to argument about the effect of third party agreements with spouses, as well as contentions over dated, informal and “homemade” agreements, such as that in the CKK case.

If you would like to discuss any of the matters raised in this article, please contact:

Joanne Brown
Partner | E-mail

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.