Introduction

The Family Court in Hong Kong has jurisdiction to deal with a petition or joint application for divorce only if at the time when the divorce is filed, the husband or the wife (i) is domiciled in Hong Kong; (ii) has been habitually resident in Hong Kong for the three years immediately before the divorce; or (iii) has a substantial connection with Hong Kong. In the recent case of PH v DL [2021] HKFC 166, the Respondent (“Husband”) challenged the claim of the Petitioner (“Wife”) that he has a substantial connection with Hong Kong to dismiss the divorce petition for lack of jurisdiction.

Background

The Husband and Wife got married in Mainland China and have three children (“Children”). It is not in dispute that neither the Wife nor the Husband are domiciled or habitually resident in Hong Kong. The Wife and the Children are habitual residents of the US, whereas the Husband is a Singaporean national who holds a Hong Kong Identity Card but habitually resides in Singapore and Mainland China.

The Wife admits that she has always intended to live and raise the Children in the US. According to the Wife’s Form E (Financial Statement), she holds 3 properties in the US, Mainland China and Singapore. On the other hand, the Husband is the founder and shareholder of about 75% of a company (“LIT”) which is listed in Hong Kong since 2010. The Wife commenced divorce proceedings in Hong Kong in around November 2019. The Husband commenced divorce proceedings in Singapore in 2020.

Legal principles

The issue of jurisdiction is governed by section 3 of the Matrimonial Causes Ordinance (Cap. 179) (“MCO”), which states that:

“The Court shall have jurisdiction in divorce proceedings under this Ordinance if:

(a)   either of the parties to the marriage was domiciled in Hong Kong at the date of the petition or application;

(b)   either of the parties to the marriage was habitually resident in Hong Kong throughout the period of three years immediately preceding the date of the petition or application; or

(c)   either of the parties to the marriage had a substantial connection with Hong Kong at the date of the petition or application.”

It is not in dispute that only section 3(c) of the MCO is relevant in the present case as neither party was domiciled in Hong Kong or habitually resident in Hong Kong immediately before the divorce.

The court adopts a two-step test, namely (i) whether the party concerned has a connection with Hong Kong, i.e. physical presence in Hong Kong, and if so, (ii) whether the connection is substantial.

In determining whether a party has a substantial connection with Hong Kong, the courts will take into account all circumstances of the case. Notably, a party is allowed to have substantial connection with more than one place.

The arguments

The Wife’s submissions

The Wife submitted that LIT is a business of the family and the shares of LIT should be included as matrimonial assets of the family as (i) she was the Chief Financial Officer and a director of LIT’s related company in the US (“US Company”) for 18 years, and (ii) she assisted in the listing and post-listing compliance of LIT in the capacity as a spouse and associate of the Husband, who is the controlling shareholder of LIT. On this basis, she contended that since the shares of LIT being the majority of the matrimonial assets are listed and traded in Hong Kong, and the Husband is the chairman, executive director and controlling shareholder of LIT, the Husband should have a substantial connection with Hong Kong.

The Husband’s submissions

The Husband submitted that he never intended to reside in Hong Kong and he only visited Hong Kong for business or transit purposes. He spends most of his time in Singapore and he pays income tax in Singapore instead of Hong Kong. Since the breakout of the COVID pandemic, the Husband has been working in Mainland China for several months as the principal business of LIT is operated there. Only very minor production activities and trading are conducted in Hong Kong.

The ruling

As a starting point, the Wife bears the onus to prove that the Husband has a substantial connection with Hong Kong. The court in tackling the factual issue of whether a party has substantial connection with Hong Kong will identify all relevant factors and give appropriate weight in the overall circumstances.

Business of LIT

First, the court rejected the Wife’s main argument that LIT is a family business and holds that the fact that the matrimonial assets comprised mainly of the Husband’s shares in LIT is not in itself sufficient to establish a substantial connection with Hong Kong. Notwithstanding the Husband holds about 75% of shares in LIT, he is only 1 of 4 directors and the Wife is not. Meanwhile, the Wife’s purported role in the US Company is irrelevant to the present proceedings.

In any event, LIT has no substantial business or operations in Hong Kong, which is supported by the fact that only 7 out of 10,000 LIT staff are based in Hong Kong. The court accepted the Husband’s explanation, which is not opposed by the Wife, that LIT was listed in Hong Kong for its proximity to both Mainland China and Singapore. Indeed, it is not uncommon for Mainland Chinese or expatriate workers to obtain permanent residency in Hong Kong, and for companies to be listed in Hong Kong. The listing of LIT in Hong Kong is a commercial decision which was unrelated to the Husband, and does not assist the Wife’s case.

The Husband’s pattern of life and family

Second, the court considered the Husband’s pattern of life and concluded that the Husband never intended to reside in Hong Kong. Although the Husband is engaged in business in Hong Kong, his engagement here is unsubstantial compared to other places, such as Singapore and Mainland China. As a matter of fact, the Husband has not frequently visited Hong Kong and according to his travel records, he has only visited Hong Kong for an average of 38 days per year for the past 6 years, inclusive of same day returns and short overnight stays. The husband never stayed for more than 7 days in Hong Kong. 

The court further noted that the Wife and Children never resided in Hong Kong for a substantial time. Meanwhile, the Husband has no beneficial ownership in any property in Hong Kong and no family home established in Hong Kong. These factors are all unfavourable to the Wife’s case.

Whether substantial family income derived in Hong Kong

Lastly, the Wife contended that a substantial portion of family income comes from distribution of dividends by LIT which is derived from Hong Kong, and thus, a substantial connection with Hong Kong is established. On the facts, the court found that the financial resources of the Husband are strong enough to support the entire family without relying on the aforementioned dividends. It also acknowledged that both the Wife and the Husband solely and/or jointly owned many properties, including in the US, Mainland China and Singapore, and none of their bank accounts, including their retirement accounts, are located in Hong Kong.

All in all, the court held that the Wife failed to establish that the Husband has a substantial connection with Hong Kong having regard to all the circumstances. The divorce petition was therefore dismissed for lack of jurisdiction.

Takeaway

In this modern age, it is not uncommon for Mainland Chinese or expatriate workers to own Hong Kong properties and local bank accounts. This does not necessarily establish a substantial connection here. In considering whether a party to a divorce application has a substantial connection with Hong Kong, the courts will take into account a myriad of factors including the nature of employment / business in Hong Kong and the family’s pattern of life.