Hong Kong case applying Prest v Petrodel

The recent judgment in SLA v HKL (FCMC 75000/ 2010) may be Hong Kong’s first case to apply the recent UK Supreme Court landmark decision of Prest v Petrodel [2013] UKSC 34.

In SLA, the couple were married for 17 years. The husband was an engineer by training and upon the family’s relocation from Sweden to Hong Kong, established and maintained a successful business which provided a comfortable lifestyle. This company was the family’s main and most valuable asset.

Following the commencement of divorce proceedings, the husband purported to transfer his shares in the company to a business associate based in Taiwan, via an intermediate transfer to a business associate in Hong Kong. The wife was successful in her application to set aside these dispositions; the court concluding that the transfers were a sham.

In the clearest support for Prest, Deputy District Judge Carlson stated:

“I apprehend that although not binding in our courts in Hong Kong, this decision will be followed here. It is persuasive authority of the highest order and insofar as it now becomes relevant to this case I respectfully propose to follow it.”

The Hong Kong Court affirmed the decision in Prest, and the manner in which the UK Supreme Court upheld the Saloman principle, in ruling that:

  1. the husband was the beneficial owner of the shares purportedly transferred to his business associates, and that the company held its assets on trust for the husband;
  2. the value of the shareholding and the known assets of the company were to be included in the asset pool for assessment of the wife’s ancillary relief application; and
  3. the company should not, however, have concurrent liability with the husband in making the lump sum payment to the wife.

This decision will reassure parties whose spouses attempt to conceal assets behind corporate structures so as to defeat claims for ancillary relief, and whose spouses attempt to transfer shareholdings in order to defeat applications for such relief.

The case is also noteworthy in that the judge decided to proceed with the ancillary relief hearing in the husband’s absence, with the husband, whose solicitors had only recently come off the record, having written to the court on the eve of the hearing to advise that, for medical reasons, he would not appear at the hearing.

- Sebastian Hughes, Counsel, Prince’s Chambers

- Sasha Allison, Solicitor, Hampton Winter & Glynn