Divorce is on the rise in Hong Kong. Around 19,000 couples applied for a divorce last year - eight times more than in 1981. This figure means that around one in four couples who say 'I will' are doomed to eventually say 'I want out'. But despite the growing number of divorces in the city, most couples facing up to this daunting challenge have very little or no knowledge about how the courts will divide up the money and assets they have accumulated during their marriage or how much the divorce will cost. It's not an easy situation for anyone, and is made worse by the breakdown of trust and bitterness it often engenders. How difficult it gets depends on the couple involved, says family lawyer Sharon Ser, a partner with Facey & Co in association with Withers, Hong Kong. 'A small proportion of couples will have already reached an agreement before meeting a lawyer and they just want the lawyer to make it legal,' Ser says. 'A good proportion will start off on very bad terms but after mediation will settle on an agreement. A huge proportion will settle after the financial disclosure of each party when everyone knows what's on the table and you can work towards a pragmatic settlement.' The rest are the ones who dig in for the fight and take the battle to the bitter end - sometimes at a huge cost to both parties. Here are some of the vital aspects of divorce proceedings and the costs involved: The cost According to Ser, most divorces are completed within a year, with the total cost ranging from around HK$15,000 to HK$20,000 per party for a straightforward divorce in which everyone agrees on finances and matters concerning children. Mediation - a process whereby the couple engages a professional third party - will probably add at least another HK$10,000 to the bill. It's an extra cost, but one that is recommended by Ser. 'It's a very grown-up and mature approach to resolving your differences, sitting in a room with a stranger and someone you have really come to dislike, mistrust, or you are terribly hurt by.' Some people come out of a mediation session of two or three hours absolutely wrung out. But in the end it can be more satisfactory because the couple get to do things in their own time frame and without the rancour of constant court appearances and letters going back and forward from lawyers. It is when mediation fails or a couple opt to go down the court route that the costs really start to escalate, jumping to around HK$50,000 per party in a case with mild disputes over money and children, Ser says. 'But if you have major arguments concerning finances, you are probably talking about a minimum of HK$80,000 to HK$100,000 plus and, although rare, in major financial cases each spouse will easily spend US$500,000 and even up to a million dollars plus.' Making the split The big question for most couples - and one capable of creating the most animosity - is: 'Who will get what of the matrimonial assets?' These include all property, investments and savings acquired by either one or both parties during the course of the marriage. Individual assets, such as inheritance or those acquired before a marriage, are often not counted as matrimonial assets in the case of short marriages but are more likely to be included otherwise. The process of deciding who gets what begins with each party disclosing all their assets and liabilities in a document called 'Form E'. 'It's an absolute horrific financial document but a great one to do because for the first time in years, these people have to put down in one legal document all their various financial circumstances, good and bad, in order to work out where they stand,' Ser says. 'Many people will do anything rather than fill out this form, which is why people often choose to go to mediation and engage in negotiations.' Once the court has this information, the judge has to decide the fairest way of dividing the assets. It's not easy and can result in a long, drawn-out court affair. However, a landmark ruling this month in the Court of Final Appeal has made the process somewhat easier, according to divorce lawyer Jonathan Mok Chi-ying, a partner with Mayer Brown JSM. The ruling, involving a childless couple who had been married for seven years and had joint assets of HK$5.3 million, upheld a ruling by the Court of Appeal that the husband and wife were each entitled to an equal share of the matrimonial assets, and awarded the wife HK$2.68 million. In doing so, the ruling set out the five-step process it used to reach its judgment - and this will make things easier for lawyers, Mok says. 'The first step is to ascertain what the matrimonial assets are,' Mok says. The second is to look at the financial needs of the claimant. This is not a mathematical calculation in that if you need HK$10 you are given HK$10 and that's the end of it. It is interpreted on a very generous basis. 'The judge actually pointed out that there are a lot of cases in Hong Kong whereby there won't be any surplus assets once the claimant's needs are met, and if that is the case, that would be the end of it and the process ends at step two. 'However, if there are surplus assets, as there are in big-money cases, we embark on the third step - whether or not there should be a division of matrimonial assets. The presumption here is that there should be equal division of the assets unless there are particular reasons to depart from it.' Whether to depart from that equal split is the focus of the fourth step, says Mok, and here the judge would look at a list of factors that include such things as the length of the marriage, conduct of the husband and wife in the marriage, compensation for relationship-generated disadvantages, and the contribution they each made to the marriage. 'I think there is an unspoken rule that if we are talking about a short marriage [less than five years], then equal division will be departed from,' Mok says. The final step involves the decision. Here, the ruling stressed the discretion of the court in deciding how much weight is placed on the above factors. A clean break In the case of a short marriage or one not involving children - and when there is enough capital - fairness might be achieved by something called a 'clean break' settlement, Mok says. This involves paying a lump sum as compensation instead of ongoing maintenance. The beauty of the clean break, Ser says, is that it allows the couple to get on with their lives and be financially independent of each other. However, when children are involved, there is no escaping maintenance payments. 'This is ongoing no matter what happens and that continues until the child has finished full-time education - whether that's college or university,' Ser says. 'Even if a wife gets a clean-break final settlement, the husband will still be paying maintenance for the children.' The level of maintenance is based on part or the whole of the costs involved in bringing up the children, and includes everything from school fees to haircuts, shoes, living costs, rent or utilities, and sometimes even holidays. The approach of the court and of the parents generally is that the children's lives should be affected as little as possible by the divorce and normally the primary carer will be allowed to stay in the family home as long as possible so that there is minimal disruption. Business and pensions Couples who ran a business together present further challenges for divorce lawyers, who have to come up with an arrangement satisfactory to each party while at the same time allowing the business to continue operating. It is sometimes totally unrealistic to put a value on a business, and if you try to divide it up the business could fold, Ser says. Divorce is not like liquidation. The idea is not for divorce proceedings to dissolve everything but to ensure both people can move forward with their lives. The solution might be to allow one spouse to run the business and pay maintenance to the other from the income produced by the business rather than trying to realise their capital interest in the business. Likewise, pensions can cause difficulties, Mok says, especially when held only by one spouse. 'If a pension is generated during a marriage, it is a matrimonial asset,' Mok says. 'What usually happens in these cases is that the judge will award a portion of the surrender value of the pension on the date of the proceedings. 'However, if both parties have a pension, you throw it into the matrimonial pot, or you can offset one against the other. Generally we prefer not to touch pensions and look at them as a final resort. 'If there are other assets, like land or property, we prefer to use those because they can be realised immediately.' At the end of the day, Ser says, it is important for couples to try to be realistic throughout the process, and this is where the lawyer and mediators can help. 'It really is the duty of the divorce lawyer and the mediator to get a couple to be realistic' Ser says, particularly when you have one party who doesn't believe what he or she has been told by his or her spouse with regards to financial disclosure. 'You have to get them to see if that bucket of gold didn't exist while they were married, where can it be hidden now? You need them to do a reality check so they don't spend more in legal fees than they will eventually get by way of a financial settlement.' Opting out One in four couples in Hong Kong are likely to end up divorced Last year, 19,000 couples applied for a divorce - about this many times the number in 1981: 9