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Break-up clauses

Chris Davis

It all fell apart with a slip of the finger. Gossips in the business community had a field day earlier this year when a prominent executive sent a text message meant for a girlfriend to his wife instead. What was meant to be a light-hearted romp ended in tears and recrimination, and it ended his marriage.

Whatever your views on matrimonial vows, couples are calling it quits far more readily than before. Divorce has increased rapidly over the past 30 years from about 2,000 cases in 1980 to more than 20,000 last year. And infidelity, lawyers say, is by far the most common factor, and the most expensive.

While local tabloids thrive on tales of cheating partners, there are few high-profile cases of the level of Tiger Woods. The golfer wound up paying an estimated US$100 million (HK$775m) settlement when former model Elin Nordegren sought divorce after discovering his serial infidelity involving 14 women.

Nevertheless, Hong Kong has its share of farcical disputes and settlements. One couple, for instance, is spending a fortune in legal fees to decide who should keep a collection of plastic ducks. Another wealthy pair fought as fiercely over custody of a pet pedigree dog as they did the family home and mega-bucks.

Regardless of the circumstances that lead to the family court, divorce is an emotionally upsetting and costly phase for most.

Longtime Hong Kong resident Elaine considered herself quite composed when she decided to file for divorce several years ago after discovering that her husband had been having an affair.

'It wasn't until I went to the family law courts in Wan Chai to file the petition that the enormity of what was happening really hit me,' she says. 'I remember walking away from the court with a file number, and thinking all the things we had planned together as a family had been reduced to a number. It was the lowest point in my life,' recalls Elaine.

To seek a divorce in Hong Kong, either or both spouses must file a petition and submit the original marriage certificate or a certified true copy along with the official forms. If the court accepts the application, a case number is issued which activates the decree nisi proceedings. When couples have children, the divorce will not be made absolute until the court is satisfied with the arrangements made for the youngsters.

Elaine and husband, a senior corporate executive, decided to work through the process as amicably as possible for the sake of their two teenage children. They had considerable assets to divide: there was their three-bedroom house in Hong Kong that had a small mortgage outstanding, a home in Britain and a paid-up for holiday home in Thailand. They also had a substantial investment portfolio that was badly affected by the financial crisis before the settlement was finalised.

After taking the difficult decision to end a marriage, choosing the right lawyer who can competently handle the divorce can be one of the most crucial decisions an individual will ever make.

David Glynn, a senior partner with Hampton, Winter and Glynn, says a good divorce lawyer should have the knowledge and experience in handling emotionally charged situations. 'While not qualified as psychologists, a good divorce lawyer needs to show empathy and have some counselling skills so they can help a client to get through the anguish. He or she should also serve as a guide through the various processes of divorce.'

Glynn, a Briton who came to Hong Kong in 1975 while working on a high net-worth divorce case, says it's not difficult to identify lawyers with an established record, especially in a city like Hong Kong where a single tweet can virtually make or break a reputation.

Contrary to the stereotypes of lawyers as self-serving, money-grubbing Rottweilers in television dramas, Glynn says good divorce lawyers aim to help their client achieve a fair and reasonable settlement, at reasonable cost.

But to avoid misunderstandings, lawyers usually explain to clients the fees involved and what is achievable.

In situations that involve assets in several jurisdictions, it is also important that their lawyers can tap into a network of legal professionals in other countries to carry out cross-border work, says Glynn, whose firm was named Matrimonial Law Firm of the Year for the past eight years by Asian Legal Business. Divorces involving competing jurisdictions need particularly careful consideration before any proceedings are commenced.

A lawyer with a reputation for aggressive tactics can change the dynamics for a spouse considering an amicable settlement or dialogue, says Winnie Chow, a partner at Hampton, Winter and Glynn. To give her clients a reality check, she asks them to consider what they want in the long term. Do they want to find themselves in a situation where the terms of a settlement could compromise their children's relationship with either or both parents? Chow says she tries to explain to clients right away what is achievable, and this may mean giving advice they may not want to hear.

Hostility can develop even in situations such as Elaine's when divorcing partners are well-intentioned.

'Although I was extremely unhappy, I thought we were doing okay at first; we were behaving like sensible adults making the best of a bad situation,' she recalls. 'But this changed when letters from my husband's solicitor started to arrive. The formal tone, legal jargon and the way the terms and conditions were attached, seemed unfair and one sided.'

There were several months when the couple avoided each other's phone calls or engaged in bitter arguments. Eventually, their children persuaded them to call a truce and both agreed to instruct their legal representatives to be less aggressive.

By the time the decree absolute was granted 18 months after Elaine filed her petition, they had sold their house in Thailand for a profit and divided the proceeds 60-40 in her favour. She also received 65 per cent from the sale of their Hong Kong home.

Their home in Britain was signed over to the children under the control of a trustee, with the monthly rental income deposited into a separate account for them. Her ex-husband also pays the children a monthly allowance.

The former partners now jointly manage their investment portfolio with the help of an independent financial adviser.

Two years after her marriage was formally dissolved, Elaine and her children still live in Hong Kong. She has also started studying for a new career as a teacher. 'I still experience unsettling feelings but now I am beginning to feel there is life after divorce,' she says.

Chow encourages couples to draw up amicable agreements rather than depend on a decision laid down by a court. A keen advocate of alternate dispute resolution, she is working to introduce the concept of collaborative practice to the Hong Kong legal community.

Under this system, lawyers serve as facilitators to help divorcing couples reach agreement on custody, property, support and maintenance without going to court. Spouses can also enlist the assistance of other professionals, such as their financial advisers, and if necessary, child welfare professionals.

But for those seeking court adjudication, rulings in Britain continue to hold sway here more than a decade after the handover. Under the current guidance system, Hong Kong courts tend to follow a 1996 case in Britain known as White v White. Using the White principle, judges use a 50-50 split of assets as the starting point, with additional consideration made for children and special circumstances. In essence, it makes very little difference if you happen to own a company generating profits of US$20 million a year or just US$200,000; the assets are divided equally.

However, a new ruling in Britain could have implications on future divorce settlements in the territory. Its Supreme Court recently ruled in a dispute between Nicholas Granatino, a former banker with JP Morgan, and his ex-wife, Katrin Radmacher, a German heiress to a US$100 million fortune.

Although he was originally awarded HK$73.38 million, Granatino eventually wound up with a greatly reduced HK$13 million settlement under a 'reasonable requirements' clause because he had signed a pre-nuptial agreement (see box).

The landmark case could be good news for two wealthy business people now applying to Hong Kong's highest court to overturn previous judgements that gave their former spouses far more generous awards than they thought was fair. It remains to be seen whether Hong Kong adopts the 'reasonable requirements', but for most observers here, the key question continues to be: who gets to keep the plastic ducks?

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