Division of Matrimonial Assets and Pre-nuptial Agreements: CLB v CLC [2021] SGHCF 17

Division of Matrimonial Assets and Pre-nuptial Agreements: CLB v CLC [2021] SGHCF 17

The Family Division of the Singapore High Court delivered a very valuable decision on the division of matrimonial property, and what property could be included in the matrimonial pool. The case revolved mainly around a list of assets excluded from the pool of matrimonial assets in a prenuptial agreement entered by the parties.

Summary

In CLB v CLC [2021] SGHCF 17, the court held that although the court may have regard to prenuptial agreements, it does not detract from the court’s ultimate power to divide matrimonial assets fairly and justly. The court will scrutinise prenuptial agreements to decide what weight to attach to the prenuptial agreement. The parties’ conduct during the marriage may be a determining factor.

The Facts of the Case

The parties married on 15 September 2003 and remained married until 26 July 2019, when they obtained an interim divorce judgment. During the 16-year marriage, two children were born, now aged 16 and 14. Both parties are 53 years old.

The wife is a compliance officer at a bank and earns about S$25,238 per month. The husband earns about S$22,799 per month from personal investments.

The parties entered into a prenuptial agreement five days before their marriage. The agreement sought to protect their separate property from claims by each other if they separate. The agreement excluded a list of properties owned by each party at the date of the agreement (and any property acquired in exchange for such property) from the pool of matrimonial property. It further excluded any gifts or inheritance later received by each party and all property acquired in exchange of such property. It also excluded all income or other gains derived from the separate property of each party.

The husband wanted the list of pre-marriage assets and/or gifts excluded from the pool of matrimonial assets. The wife wanted the assets to be included as matrimonial assets. They agreed on some matrimonial assets and their values but disputed that several as-sets held in their own names were matrimonial assets.

Should the list of assets be excluded from the pool of matrimonial assets?

The Legal Principles

Before dealing with each disputed asset, the court discussed the applicable legal principles and what amounts to “matrimonial assets”.

Section 112(10) of the Women’s Charter defines matrimonial assets to include:

Assets “acquired before the marriage by one or both parties to the marriage”. Such assets can form part of matrimonial assets if it has been:

  • ordinarily used or enjoyed by both parties or one or more of their children while the parties are residing together for shelter or transportation or for household, education, recreational, social, or aesthetic purposes; or
  • substantially improved during the marriage by the other party or by both parties to the marriage.

Gifts and inheritance, but only if it is a matrimonial home or has been substantially improved during the marriage by the other party or by both parties to the marriage. If these criteria aren’t met, the gift or inheritance is excluded from the matrimonial pool regardless of when they are acquired.

Including Gifts in Matrimonial Assets

The court referred to Chen Siew Hwee v Low Kee Guan (Wong Yong Yee, co-respondent) [2006] 4 SLR(R) 605 to explain that the reason for the exclusion is to prevent unwarranted windfalls accruing to the other party to the marriage. Thus, only in limited circumstances will a gift or an inheritance lose their character and form part of the matrimonial pool. If the other spouse, who is not the recipient of the gift or inheritance, makes an effort to improve the gift or inheritance substantially, then that spouse can share in the asset.

Alternatively, if the recipient makes an effort to convert the gift or inheritance into a different asset, and the new asset loses its quality as a gift, it can be treated as part of the matrimonial pool. Whether a gift loses its character as a gift depends on the real and unambiguous intention of the recipient of the gift that the asset was to form part of the matrimonial pool of assets. Mere literal transformation does not convert it from a gift to a matrimonial asset.

Who carries the burden of proof?

Generally, when a marriage breaks down, all the parties’ assets will be regarded as matrimonial property unless a party can prove that the asset was acquired before the marriage, or it was a gift or inheritance.

The court confirmed the approach in USB v USA and another appeal [2020] 2 SLR 588 that the party who claims that an asset is not part of the matrimonial pool bears the burden of proving this on a balance of probabilities.

The same applies to the opposite. If an asset is prima facie not part of the matrimonial asset pool, the party claiming that it should be part of the matrimonial pool must show how it was transformed. This was also the decision in TQU v TQT [2020] SGCA 8, which the court referred to.

In the present case, the parties did not dispute that the assets were gifts to the husband or pre-marital assets. Therefore, the burden was on the wife to show that the assets were transformed according to the formulae in sec 112(10).

Effect of the Prenuptial Agreement

The court quoted TQ v TR and another appeal [2009] 2 SLR(R) 961 confirming that it is established law that prenuptial agreements “cannot be enforced in and of itself”. The court may have regard to the prenuptial agreement under sec 112(2)(e) of the Women’s Charter, but it does not detract from the court’s ultimate power to divide matrimonial assets in such a way as the court thinks just and equitable.

In this case, the husband wanted the prenuptial agreement to be given its full weight and his separate property excluded from division of the matrimonial pool. The wife, however, although she agreed that the prenuptial was valid, argued that the parties’ conduct after the marriage demonstrated that they abandoned the prenuptial agreement. She submitted that they never kept their finances separate and operated in a “community of property” manner.

The court evaluated all the relevant circumstances, including correspondence from the husband suggesting that he had considered the matrimonial assets as pooled together regardless of the prenuptial agreement. He would refer to “their total wealth” or “our net wealth”. There were indications that the husband and the wife operated on a mutual understanding and managed their finances in a way that did not seem entirely consistent with the prenuptial agreement.

The court considered that the prenuptial agreement was signed 16 years ago at the beginning of the marriage before they had any children. During the marriage, the husband’s conduct relied on some of the “excluded” assets to provide for the family. The court found that this conduct influenced how the wife conducted her life and finances.

Given all the circumstances of the case, the court decided to give the prenuptial agreement some weight but not enforce it fully.

The court instead evaluated the relevant facts of each asset. The court’s attitude was that the parties should move on after the divorce with a just and equitable share of the net marital gains of their marriage.

Adverse Inference Against the Husband

Following the criteria in UZN v UZM [2021] 1 SLR 426, the court drew an adverse inference against the husband for failing to disclose all his assets fully and frankly. As a result, the court added an unaccounted-for amount of S$496,419 to the matrimonial pool of assets for division. Following the decision in BPC v BPB [2019] 1 SLR 608, this amount would not be credited to the husband as a direct contribution.

The Court’s Decision

After evaluating each asset on the list, the court included some in the pool of matrimonial assets. The court included money in an account acquired due to the sale of property that the husband listed in the prenuptial agreement as his separate property. It was not disputed that the money in that account was used to fund the family’s expenses, and the husband showed an intention to use that money for the family’s benefit.

The court found that any pre-marriage money in that account was co-mingled with other funds that formed part of the matrimonial assets. It was no longer separately identifiable. The court referred to UYP v UYQ [2020] 3 SLR 683 when coming to this conclusion. The court also included some money derived from the husband’s inheritance in the matrimonial pool. It was clear that both parties understood that the money was for the family’s use, and it was co-mingled with matrimonial money.

Having regard to both the direct contributions of the parties and the indirect contributions (both financial and non-financial) of the parties, the court applied the broad-brush approach in ANJ v ANK [2015] 4 SLR 1043. It concluded that a 50:50 division would be just and equitable on the facts of the case.

The total pool of matrimonial assets of S$13,233,139 was divided equally between the parties.

Comments

This case provides excellent guidance on how the court will approach the division of matrimonial property. How the court views the transformation of non-matrimonial assets to matrimonial assets, and how the court will treat gifts and inheritance.

How the court treated the prenuptial agreement should serve as a warning to parties that the court will not necessarily enforce the prenuptial in its entirety. The prenuptial agreement is a factor that the court will consider, but the parties’ conduct during the marriage will determine what weight the court will attach to the prenuptial agreement.

Where parties act consistently with the prenuptial agreement, the court is more likely to enforce it fully.

If the parties conduct themselves in a way that is not consistent with the prenuptial agreement, the judge may decide not to attach weight to the prenuptial. Ultimately, the court will aim to divide the matrimonial assets in a way that is just and equitable.

In this case, the parties didn’t dispute the prenuptial agreement or which assets were pre-marital assets. They disputed what happened after they were married and how their behaviour affected the prenuptial agreement, and the subsequent division of their matrimonial assets.

This case is a good reminder that parties should conduct their affairs according to the prenuptial agreement if they want to rely on it later.

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