Court ruling opens floodgates for prenups in Hong Kong (Feature)

By Hazel Parry Nov 23, 2010, 7:28 GMT

Hong Kong - Five years ago Hong Kong family lawyer Sharon Ser would have thought it remarkable had she done five prenuptial agreements a year. This year she has already done 50.

It was sign of the times, she said, as the former British colony follows the worldwide trend of rising divorce rates and people marrying later seeking ways to protect the wealth they accumulated in their single days.

In 2009, around 20,000 couples petitioned for divorce in the city of 7 million, compared to around 13,500 in 2001 and 2,000 in 1981.

The number of postnuptial agreements has also increased with self-made entrepreneurs and the second-generation rich the ones most likely to go down this route.

Now lawyers are gearing up for more work following two landmark rulings by courts in Hong Kong and in Britain which added legal clout to the prenup and introduced the principle of equal sharing of assets between a husband and wife seeking a divorce.

'I easily do around 30 to 50 prenups a year and about half that for postnups,' Ser said.

Unlike many countries, such as New Zealand and Australia, Hong Kong has no legislation making a prenuptial a legal binding agreement.

However, a ruling last month by the Supreme Court in London, has given the prenuptial better legal status after it upheld the conditions of a prenup protecting the premarital assets of German heiress Katrin Radmacher in a divorce from her investment banker husband.

According to Jonathan Mok Chi-ying, a partner with Mayer Brown JSM, the Radmacher judgement was very likely to have a knock-on effect in Hong Kong because the British laws and statutes have a 'persuasive' influence due to the city's colonial past.

In addition, a ruling earlier this month by Hong Kong's Court of Final Appeal has made the prenup an even more attractive proposition for those with assets they want to protect, Mok said.

The ruling introduced the principle of 'equal sharing' as the starting point in deciding how to divide surplus assets in a divorce. Previously, the surplus was awarded to the main breadwinner after the other spouse's financial needs had been met.

'The Radmacher judgment is a landmark ruling and one that has been much eagerly awaited. It is a conclusive Supreme Court decision on the validity of the prenuptial agreement and it is very likely that Hong Kong will follow suit. I can see the floodgates opening with more people signing them,' Mok said.

Mok said those signing nuptial agreements tended to fall in two categories. The first is the self-made type, like an investment banker or young entrepreneur, who wanted to ring-fence the assets they acquired before marriage.

'The other type is the second generation of wealthy families where you have the patriarch or matriarch who doesn't want to see their hard-earned money being frittered away in a divorce after a short marriage.'

Ser believes it is Hong Kong's cosmopolitan outlook and the fact that many people were marrying later at between 28 and 32 that was influencing the growth.

'There is a very different approach to finances in a marriage today,' she said. 'A lot of that has been a reaction to what has gone on in England particularly with the changes a far as divorce is concerned.

'I believe the number of prenuptials has also increased because of access to information through computers, news, and anecdotes. There is always someone going through a divorce. Everyone has anecdotal stories about what has happened to their friend's money,' she said.

'This means there is now a social network giving informal advice as well as lawyers giving the more formal advice.'

Winnie Chow, a family law specialist and partner with Hampton, Winter and Glynn, said in the week following the Radmacher judgement she received three inquiries about nuptial agreements.

'There has definitely been an increase in nuptial agreements, particularly where there is disparity of wealth, in second marriages, or where two young people have premarital family assets and are both wealthy.

'Often it is the parents saying to their child we want to continue to give you gifts but we want to make sure your spouse doesn't get half of it. It's a sort of dynasty protection approach,' Chow said.

'Divorce is on the increase and I think it is losing its stigma. People with assets are becoming savvy and more alert to asset protection and what could happen in the event of a divorce.'

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