What could happen to your wealth and assets if your marriage goes south? What if your spouse is instrumental in preserving your wealth? What happens to shares gifted by your father that are now worth S$11.7 million? Would you try to delay the inevitable and dangle the transfer of interest in a property to get your wife to agree not to proceed with a divorce?
The husband in the recent decision of CLT v CLS and another matter [2021] SGHCF 29 (“CLT“) learned the tough answers to these questions first-hand in an insightful judgment released by the Family Division of the High Court, where the wife walked away with over S$16 million in addition to retaining assets in her name.
Brief background
The husband and wife were married for close to 17 years and have a 19-year-old child together. The wife was a homemaker throughout the marriage, receiving an income from rental proceeds and investments. She was 49 years old. The husband was 68 and was a retired businessman. He has another child from a previous relationship whom the wife had cared for since 2005. There was significant wealth in the family, including shares in valuable companies and property in Singapore and overseas.
The wife commenced divorce proceedings on 2 separate occasions in October 2012 and January 2018, but she withdrew these proceedings. It appeared that they both agreed that she would not proceed with the divorce in 2012 in exchange for the husband transferring her a property. Ultimately, reconciliation was unsuccessful (CLT makes reference to the husband having a mistress) and the wife finally proceeded with the divorce in July 2018.
Crucial findings by the Court
The wife’s successful inclusion of shares worth S$11.7million into the matrimonial pool of assets to be divided
The husband disputed the inclusion of the shares in two companies, Company LB and Company J, into the pool of assets. He claimed that they were premarital gifts acquired before the marriage and should be excluded.
With respect to Company LB, the husband claimed that the initial shares were gifts by his father who set up Company LB in 1974. However, the husband ran into difficulty as he could not distinguish his current shares with the original shares gifted to him by his father. The burden of proof was on the husband, and he failed to demonstrate this. The wife was successful in her argument that of the 250,000 shares, at least 70% were acquired during the marriage due to a series of transfers made with family members (including the wife) after the marriage for tax purposes. These were transferred to the wife with a consideration of S$1 per transfer. The husband’s hands were tied as he could not argue that the shares were premarital assets, as doing so would mean he would need to take a position that the transfer of the shares to the wife were not ‘genuine’ and were done to evade tax.
With respect to Company J, this was a company set up by the husband’s father in 1972. Similarly, the husband made transfers of the shares to family members during the course of the marriage and again was unable to trace the original shares which had been owned by the husband prior to the marriage. As such, the entirety of the 50,000 shares in Company J which were valued at over S$5.4 million were included in the pool of assets to be divided.
The husband’s transfer of property to the wife in exchange for her not proceeding with the divorce in 2012
As part of the wife discontinuing her previously filed divorce proceedings in 2012, the husband transferred Property B to the wife pursuant to a Deed of Arrangement. The wife tried to argue that given this, the husband should be unable to claim for a share of this property and this property should not be included in the pool of assets to be divided.
Generally, gifts between spouses will form part of the asset pool, but the gift could be taken into account when the Court considers what would achieve a just and equitable division of assets – such that the Court could award the donee a larger share of the overall assets than it would otherwise have ordered.
Crucially, the husband successfully argued that the manner in which the Deed of Arrangement was drafted indicated that the husband never intended to permanently renounce his title in Property B as the Deed of Arrangement clearly prevented the wife from selling the property, and mortgaging or encumbering the property without his permission. He argued that this was done in order to give the wife financial security, but he did not intend to divest himself of that asset. In addition, the Deed of Arrangement was entered into in contemplation of the wife discontinuing divorce proceedings, and not in contemplation of divorce itself. Hence, it was not regarded as a postnuptial agreement in relation to division of the matrimonial assets.
As part of the deferred community property regime in Singapore, the Court agreed with the husband’s reasoning and included Property B into the pool of assets to be divided.
The wife’s successful inclusion of a property into the matrimonial pool of assets to be divided.
The husband disputed that a property purchased by him in 1994 should be included in the pool of assets to be divided. However, the Court decided to include this into the pool of assets as the mortgage had been paid off during the marriage and the couple used it as shelter for about 5 years during the marriage. The usage of the property transforms it into an asset to be divided under the Women’s Charter.
Can you be deemed to be dissipating assets when divorce proceedings have been previously commenced twice before?
The position in law is that when a party transfers assets at a time when divorce is imminent, the Court can consider such transfers to be a wrongful dissipation of assets made with an intention to deplete the pool of assets.
In CLT, the wife alleged that the husband dissipated assets by transferring the value of a house and course fees to his mistress around March to May 2018 when the husband and wife were attempting to reconcile. In addition, the wife also alleged that the husband dissipated some assets in 2016 and 2017 to his brother in law and former spouse. However, the Court in CLT found that even though the wife had issued divorce proceedings in October 2012, January 2018 and finally July 2018, the two former dates were not considered the period when the divorce was imminent as the wife had discontinued those proceedings. As such, the husband was not found to have been dissipating assets.
Should the husband get a larger split of the assets just because he acquired the majority of assets?
The general position in law is that the Court tends to lean towards equal division of assets in long single-income marriages. The Court will also take into account the pool of assets to be divided. However, the Court in CLT clarified that equality of division is not the starting point or the norm, but the Court would support this finding it if it is supported by the facts of the case.
In CLT, the husband argued for a 20:80 division in favour of himself. He argued that he acquired all of the assets in the marriage, and he was involved in the upbringing of the children. The Court disagreed with the husband and found that his arguments undermined the philosophy of marriage as an equal partnership of efforts. The Court was also of the view that the husband’s argument that he was involved in the upbringing of the children should not devalue the wife’s efforts and contributions in homemaking, as both spouses are expected to mutually cooperate with each other to safeguard the interests of the union and in caring and providing for the children.
Instead, the Court in CLT awarded division of 30:70 in the husband’s favour as the pool of assets was large enough for each party to be well taken care of, and as the bulk of the assets were earned by the husband’s efforts.
Conclusion
CLT is an interesting decision for many reasons. It explores the pitfalls of the lack of clarity and intention behind transfers of assets between spouses. While things are going well in a marriage, this is of no concern. However, when things fall apart and divorce is imminent, the express intention of parties is key.
The husband learned this the hard way with his involvement of the wife in the transfer of the company shares to her and his inability to trace the original shares gifted to him by his father. This decision unfortunately cost the husband, and he was unable to justify his intention for doing so to the Court. As such, he was unsuccessful in excluding the shares from the pool of assets.
Similarly, the wife’s decision to accept the transfer of property from the husband in exchange for her discontinuation of the previous divorce proceedings might have been a decision she was happy with at the time. However, when she finally proceeded with the divorce, she unfortunately realised that the Deed of Arrangement she signed was insufficient to exclude the property from being divided between them.
CLT is a good reminder of the importance of clarity, and the necessity of having specialist family lawyers draft agreements between spouses that sufficiently express their intentions and which would be upheld in Court.
This article is written by Ivan Cheong & Shriveena Naidu from Withers KhattarWong.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.