How to Exclude Premarital Assets in Divorce Proceedings?

Given the property prices are constantly high in Hong Kong, not many young dating couples, or even newly-weds can afford purchasing a property for their own love nest. It has become this city’s phenomenon that parents would either allow their child and his/her partner to stay at one of the parents’ properties; or parents would “sponsor” them by paying downpayment of the couple’s new flat.

It is always tricky to determine the true beneficial ownership of premarital assets in divorce cases. In YKYM v YMCT [2013] HKEC 487, the Family Court had to determine whether the parties’ former matrimonial home in London was a joint wedding gift to the son and daughter-in-law from the mother, or such property was held on trust on her behalf. 

Background
The parties met in 1998 while studying in England, and thereafter started cohabiting in an apartment (the “Swiss Cottage Property”) owned by the Husband’s parents (the “Parents”). On 13 June 2006, a property in London was purchased in the sole name of the Husband (the “London Property”); the Husband’s mother (the “Mother”) paid the purchase price and all its related costs and expenses. The Husband proposed to the Wife shortly after purchasing the London Property and the two got married in December 2006. In September 2010, the parties decided to relocate back to Hong Kong and stayed in a flat owned by the Parents. 

Sadly, the parties started having martial problem and in November 2011, the Wife filed for divorce proceedings based on the Husband’s unreasonable behaviour; as there was no child of the marriage, the Wife sought general ancillary relief.

Issues
It was the Wife’s case that the London Property was the Mother’s wedding gift to the couples and the Husband who is holding her half share on trust for her. This is denied by the Husband who claims to have no beneficial interest in the property and he is merely holding it for his mother. The Mother denied the Wife’s case and joined the action as the Intervener.

It was not in dispute that the London Property was all paid for by the Mother. One of the factual issues before the court was to determine, at the time of purchase, was the London Property a wedding gift of the Mother for the parties?

Intention to Purchase

The Wife’s Case
The Wife had the onus to prove that the Mother intended to purchase the London Property as a wedding gift. She made such claim because:

1.         She dealt with the purchase and negotiated the terms of the agreement of the London Property. The Husband proposed to her shortly after the purchase.

2.         She agreed that she was not titled as the property’s legal owner because if the parties were later to purchase another flat, she could make use of the first time buyer benefit under the UK system. She also arranged renovation and furnished the property according to her own tastes and those expenses were bore by the parties.

3.         The Mother has been generously provided wedding gifts to the Husband’s two elder brothers and a sister; hence there is nothing unusual for the Mother to purchase a property for them as wedding gift.

The Mother’s / the Husband’s case
The Mother expressly denied that the London Property was a wedding gift for the parties. Her position was supported by her son. In her affirmation, she stated:

1.         The Parents purchased the Swiss Cottage Property in about 1990. Such purchase enabled the family to have a place to stay when they were in London. The Husband lived in the Swiss Cottage Property since 1995.

2.         In 2005, the Mother decided to purchase a property in London as her and her family’s accommodation when they visit.

3.         In April 2006, the Mother instructed her son to purchase the London Property on her behalf. At that time she did not know the parties were contemplating marriage. Even if she had known, she wouldn’t have purchased a property as their wedding gift as she had never purchase any property for any of her other children as wedding gift prior their marriage.

4.         The Mother kept her own key to the flat with her own bedroom to keep her clothes. She also paid for the Council Tax and management fees by wiring money to her son.

Judgment
When determining the factual issues, the court should only consider the intention of the parties at the time of the transaction. 

After hearing each party’s case, the court ruled in favour of the Mother because the intention to purchase the London Property was merely for her and her family use. As there was no wedding planned at the time of the purchase of the London Property, it would be impossible to consider the London Property as the parties’ wedding gift.

Conclusion
It is evident that each ruling will be different subject to the facts of each case.  To avoid any unnecessary presumption of interest in any premarital asset, parties (especially the true beneficial owner) have to be clear with the intention when providing other assets, or funds to close relatives for their use and think thoroughly whether or not they are meant as gifts.

Published by ONC Lawyers © 2016