Articles

1. One of the main issues, if not the main issue, in any divorce proceeding is the division of the assets that were accumulated by one or both spouses during the marriage. This article, which is in 2 parts, is intended to provide a broad perspective as to how the courts approach the matter.

2. The court's power of division is found in section 112 (1) Women's Charter (the "Charter"). We have described the court's exercise of its power as an art (rather than a science) because the courts have consistently emphasised that the process should not degenerate into one of precise mathematical calculations. Rather, it involves a process of applying broad-brush strokes.

3. In exercising its power under s 112 (1), the courts go through 4 steps in the order stated: (a) identify the assets that are liable to be divided ("Step 1"), (b) determine the value of the identified assets ("Step 2"), (c) apportion the identified assets with ascertained values between the parties ("Step 3"), and (d) determine how the court's award is to be implemented ("Step 4"). In this part, we discuss the first 2 steps.

Step 1: Identifying the assets

4. The first step is to identify what assets go into the pool for division. 2 questions invariably arise in this connection: (a) what is the appropriate date for determining the pool of assets? (b) what are the assets that should be included in the pool?

The appropriate date for determining the pool of assets

5. One spouse may seek to exclude certain assets by seeking a date which pre-dates the commencement of the divorce action. This may occur, for example, where parties were separated for a long period before one spouse files for divorce and the other spouse had acquired assets during the separation period. In that situation, the acquiring spouse will seek to exclude the assets acquired post‐separation to shrink the pool and keep the assets out of the other spouse's reach. In ARY v ARX and another appeal [2016] 2 SLR 686, the Court of Appeal ruled definitively that the default date is the interim judgment date. This means that the interim default date applies unless the spouse who contends for another date to be adopted provides compelling reasons for departing from the default date. If the default date i.e. date of interim judgment is applied, the assets acquired during the separation period form part of the pool. (Note: Interim judgment, in a contested divorce, is when the court rules that the marriage is at an end but has not determined the division of assets yet, and typically occurs about 3 months from the date of first filing for divorce and 6 months to 1 year before the court rules on the division of assets).

Determining what goes into the pool of assets

6. Not every asset in the name of either spouse at the time of the divorce is to be divided. Under s 112 (1) Charter, the court is empowered to divide only "matrimonial assets". That term is defined in s 112 (10). In USB v USA and another appeal [2020] 2 SLR 588 ("USB"), the Court of Appeal identified 4 different asset categories at the end of a marriage of which at least 3 categories may be subject to the court's powers of division under s 112 (1) Charter. The 4 categories are: (a) quintessential matrimonial assets, (b) pre-marriage assets, (c) transformed matrimonial assets, and (d) gifts and inherited assets.

(a) Quintessential matrimonial assets

7. These are assets acquired by either one or both spouses during the marriage. It does not matter whether the assets were purchased in sole or joint names. The entire value of the assets goes into the pool for division.

(b) Pre‐marriage assets

8. These are assets that either spouse acquired before the marriage. A pre‐marriage asset stays out of the pool unless it was (a) substantially improved by the other spouse during the marriage, or (b) ordinarily used or enjoyed by both parties or their children while residing together for shelter or transportation or for household, education, recreational, social, or aesthetic purposes, i.e., it becomes a transformed matrimonial asset and the whole asset is included in the pool.

9. However, to qualify as an asset "acquired before the marriage," it must be fully paid for before the marriage. If not, and payments were made towards its acquisition cost during the marriage, then the proportion of the value of the asset that was acquired during the marriage will go into the pool. This was what happened in USB. There, the wife had purchased multiple properties before the marriage with the assistance of bank loans. She continued to make monthly mortgage repayments on those loans during the marriage. It was held that a proportion of those properties, based on the mortgage repayments made during the marriage, was matrimonial assets.

(c) Transformed matrimonial assets

10. These denote assets which were acquired before the marriage by one spouse (or, more rarely, by both spouses), i.e., pre‐marriage assets, but which have been substantially improved during the marriage by the other spouse or by both spouses, or which were ordinarily used or enjoyed by both parties or their children while residing together for shelter or transportation or for household, education, recreational, social, or aesthetic purposes. Once transformed, the whole asset goes into the pool.

(d) Gifts and inherited assets

11. Under s 112 (10), these assets whenever acquired by either spouse, i.e., whether before or during the marriage, are not part of the pool unless they become transformed matrimonial assets in one of 2 ways: (a) by substantial improvement by the other spouse, or (b) if used as the matrimonial home. If transformed, they are treated in the same way as other transformed assets, i.e., the entire value goes into the pool.

12. However, in the very important 2023 case of CLC v CLB [2023] 1 SLR 1260, the Court of Appeal ruled that there is a third way (in addition to the 2 ways prescribed under s 112 (10) just discussed) whereby gifts or inherited assets are transformed into matrimonial assets. It is where the spouse who is the beneficiary of the gift or the inherited asset evinces an intention to deal with that asset by either giving it to the other spouse or incorporating it into the family estate. In other words, he treats the gift or inherited asset as a matrimonial asset. The court's task then is to ascertain whether such intention is established, which is a matter dependent on the facts of each case. If such intention is proved, then the entire asset (which originated as a gift or inherited asset) becomes a matrimonial asset.

13. Incidentally, where the evidence shows that the (third party) donor of a gift intended it to be for the benefit of both spouses, then the asset is included in the pool. An example is the case of VOD v VOC [2022] SGHC (A) 6 where the court held that a father who presented a red packet of S$1 million during the tea ceremony at the wedding intended it to be a gift for both spouses.

What constitutes "substantial improvement"

14. As explained above, a pre‐marriage asset and a gift or inherited asset is an excluded asset unless the other spouse contributes to its substantial improvement (whereupon it becomes a transformed matrimonial asset). As to what effort amounts to "substantial improvement", it was said in USB that:

• 22 First, the improvement of such an asset must entail the investment of money or money's worth for the improvement of the asset. The mere increase in the value of the asset does not mean that the asset has "improved". In order for the asset to be transformed into a matrimonial asset, there must have been investment of some kind in the asset. The paradigm example would be renovation works performed on a residential or commercial property. These can easily be understood as increasing the sale value of such a property. However, even if the resale value does not increase because of market forces, a substantial renovation which makes a previously barely habitable home very much more comfortable or able to attract higher rental income could be considered a substantial improvement. Second, the improvement must arise from effort which can be understood as having economic value. For example, if the asset is a business belonging to one spouse, then development of the business by the other spouse or by both spouses during the marriage by sustained efforts could transform that asset into a matrimonial asset. In this regard, however, carrying out administrative or minor public relations activities or being a nominal director may not be sufficient. There should be an increase in turnover or in profitability or some other measurable improvement. It will always be a question of fact as to how the efforts of the non-owning spouse have contributed to an improvement in the asset. Ultimately, the court's focus is on whether there has been some expenditure or application of effort towards the improvement of the asset (in an economic sense).

What constitutes "ordinary usage"

15. As seen, a pre‐marriage asset becomes a transformed matrimonial asset by way of "ordinary usage". 2 cases illustrate how these words are to be interpreted. First, in TNC v TND [2016] 3 SLR 1172, it was held that the requirement of ordinary use would not be satisfied if the parties' use of or stay at the property was "occasional or casual". Examples of casual residence are staying in a property for no more than 21 days out of 14 years of marriage or on only two occasions throughout the marriage. On the other hand, residence in the property for 15 months is sufficient to constitute ordinary use for shelter.

16. Second, in similar vein, in USB, it was stated that:

• 24 ....such use must be usual and relatively prolonged rather than casual. As an example, a pre‐owned saloon car which is regularly used to ferry family members around for activities like school and shopping and family outings would be transformed into a matrimonial asset, whereas a pre‐owned sports car which is generally driven only by the owning spouse with the children being taken out for a spin once in a blue moon would remain in category (c).

What happens if there is a third-party claim on the asset

17. This can occur in 2 scenarios. The first is where the asset is held in the name of one of the spouses who nonetheless asserts that he is holding it in trust for a third party, i.e., it is not a matrimonial asset. The second is where the asset is in the name of a third‐party and one spouse contends that it is being held in trust for the other spouse, i.e., it is a matrimonial asset.

18. In either scenario, the issue will have to be resolved by commencing a separate legal action involving the third party. This follows the decision in UDA v UDB and another [2018] SCGA 20 where the Court of Appeal held that family justice courts (which hear disputes over matrimonial assets) have no jurisdiction to decide claims by a third party over property which was alleged by one or both spouses to be a matrimonial asset.

Step 2: Determining the value of the matrimonial assets

19. Whilst the interim judgment date is the default operative date to determine what constitutes matrimonial assets, the position is as follows in relation to the appropriate date to value those assets:

(a) All cash, bank and CPF balances are to be valued as at the date of the interim judgment.

(b) For all other assets, the default position is that they are to be valued as at the ancillary matters hearing date (or a date closest to that date). The court however retains the discretion to adopt an earlier hearing date where there are good grounds for doing so: TDT v TDS and another appeal and another matter [2016] 4 SLR 145 ("TDT"). TDT itself provides an example of the court departing from the default date. In that case, the court valued a company of which the spouses were directors on a date even prior to the breakdown of the marriage. This was because the husband had alleged that the wife had diverted the company's business away to other companies. In addition, there was the possibility that the husband had managed the company's finances to the wife's detriment after removing her as a director.

20. At the end of Steps 1 and 2, the court would have ascertained the total value of the pool of matrimonial assets. Thereafter, its task is to rule on how much each spouse should get out of that ascertained value followed by how the pie is to be carved up, including which of the assets each spouse is entitled to retain or "chope", i.e., Steps 3 and 4. Please look out for Part 2 (soon to be published on this website) where we discuss Steps 3 and 4.

Josephine Chong, LLB Hons 2^nd Class, Upper Division, NUS Law (1989), Advocate & Solicitor Singapore

*Please note that the above is not to be construed as legal advice by Josephine Chong LLC, which can only be given upon knowledge of all circumstances.