July 17 (Bloomberg) -- An engineer’s ex-wife won a ruling from Hong Kong’s highest court giving her the right to half of the trust fund that holds his business as part of a HK$840 million ($108 million) divorce award.
The Jersey trust holding 85 percent of Otto Poon’s engineering company Analogue Holdings Ltd. is clearly part of his financial resources and should be considered in the settlement, Justice Roberto Ribeiro of the Court of Final Appeal wrote in a 54-page judgment issued today.
Poon had previously persuaded two lower courts that one third of the family trust’s HK$1.56 billion value should be protected for his daughter, and excluded from the matrimonial assets. Poon and Kay Kan, both in their 70s, ended their marriage after more than 40 years. During that time, their two other children died and Poon had an affair with a younger woman employed by Analogue, according to the ruling.
“This is not a trust in which the trustee manages and invests the fund to produce income,” Ribeiro said. “The modus operandi is revealing.” Its only income is dividends declared by Analogue, decided by a board controlled by Poon, he said.
Analogue had net income of HK$293 million in 2010, soaring from HK$12.5 million in 2000.
The ruling shows that Hong Kong courts will look into the situation surrounding trusts and corporate structures, not just the theoretical protection they can provide, said Gareth Thomas, the head of commercial litigation in Hong Kong at Herbert Smith Freehills.
“Many people in this part of the world want to use trusts to protect their assets from dispersal but at the same time don’t want to give up control,” he said. “The trustee must in fact have genuine discretion for the structure to work.”
Kan’s increased award represents half of the combined matrimonial assets of HK$1.68 billion, according to today’s ruling. Kan, who had worked as a nurse, had her initial 2012 award of HK$370 million raised on appeal by HK$140.4 million last year.
Poon didn’t immediately return a call to his mobile phone seeking comment.
The case is FACV20/2013, KLK and PLTO, in Hong Kong Court of Final Appeal.
To contact the reporter on this story: Douglas Wong in Hong Kong at firstname.lastname@example.org
To contact the editors responsible for this story: Chris Anstey at email@example.com Andrea Tan, Anthony Aarons