Wan Lai Cheng v Quek Seow Kee

Kan Ting Chiu J:

[1] This is the concluding chapter of a long marriage which ended in an acrimonious divorce with the division of matrimonial assets and the maintenance for the plaintiff/wife to be dealt with.

[2] The parties are 62 years old and have been married for 36 years. The defendant/husband came from a wealthy family and was self-employed. The plaintiff was a teacher until she retired. They have two sons, Darren and Daniel, both in their 30s, for whom no provisions have to be made in the divorce.

[3] On the division of matrimonial assets, there was a sub-issue whether shares registered in the plaintiff’s name in three companies, Hawick Property Investment Pte Ltd (‘Hawick”), Kelso Property Investment Ptd Ltd (“Kelso”) and Skeve Investment Pte Ltd (“Skeve”) belonged to her beneficially, or were held by her on trust for the defendant. This was a significant issue because the plaintiff is the registered owner of the 40% of the shares in Hawick and Kelso, and 10% of the shares of Skeve, and each of these companies owned a unit of valuable residential property.

[4] On the division of the matrimonial assets, the parties agreed that the division of the matrimonial home at No. 2 Draycott Park #03-01 Hampton Court, Singapore was to be dealt with separately from the division of the rest of the matrimonial assets.

[5] These three companies are family companies of the parties and were under the control of the defendant. The plaintiff became a shareholder and director of Kelso and Hawick in 1992 and of Skeve in 1983. The defendant deposed that that was done on the advice of consultants, but he was reticent about the advice he received. He did not disclose the content of the advice or the person who rendered it. Indirectly, there was some information on this because an affidavit was deposed by Wong Cecil Vivian Richard (“Cecil Wong”) who was a partner of the accountancy firm Ernst & Young (“E&Y”) till his retirement in 1985 stating that:

[6] As the Kelso and Hawick shares were issued to the plaintiff in 1992, and Cecil Wong retired from E&Y in 1985, the extent of his input and knowledge of the advice was not clear, but this was the best evidence of the advice there was. He only deposed that the defendant and his brothers were advised to set up individual companies to hold each of their allotted units in Hampton Court. While there was no reference to any advice about issuing shares in the company to the wives as part of the corporate structuring, financial planning advice and estate duty planning advice, there was no issue that such advice would come within that ambit. The plaintiff also recalled that shares were issued to her under professional advice, although she remembered it as solicitors’ advice. She may have made the mistake as the advice was rendered to the defendant and not to her directly and she may also have confused this with the subsequent wealth plan proposed by solicitors, which will be dealt with in a later part of this judgment.

[7] Accepting that the defendant issued the shares to the plaintiff on the basis that the shares were issued on E&Y’s advice for estate duty planning purposes, the question still remained whether those shares were to be held by the plaintiff beneficially, or as a trustee for the defendant as he contended. I raised this with counsel during the hearing. I pointed out that the court should be slow to find that Cecil Wong or E&Y had advised the defendant to evade estate duty by arranging for shares to appear as the plaintiff’s shares when he was the beneficial owner, under a secret trust. I made the point because if the advice was the disputed shares in the family companies were to fully held by the plaintiff, that would result in a legitimate reduction in the estate duty payable on the defendant’s estate. However, if the advice was to issue the shares to the plaintiff without transferring the beneficial ownership of the shares a question arises over the probity of the advice.

[8] The plaintiff’s solicitors had captured the issue and stated the plaintiff’s position when it submitted that:

(The sham shareholding-or-gift analysis is apt and relevant to the question whether these shares are matrimonial assets).

[9] It was plain that the critical issue was not over the creation of the shareholding, but the shareholding created was a sham shareholding. When Cecil Wong was asked to depose on the advice given to the defendant and his brothers, that would be an important point of his evidence, but Cecil Wong made no mention of that, and the defendant did not follow up on that with him or Graham Clark who was also involved in giving the advice, or E&Y to confirm or comment on the sham shareholding.

[10] There is more on this issue. The ownership of the shares was the subject of serious discussion again. In March 2007, the defendant wanted to create a wealth plan for the family to save on estate duty. His lawyer, Tan Hin Tat, proposed a plan which involved the setting up of the Wen-Ping Trust and for all shares in Hawick, Kelso and Skeve to be owned by a new company, Great Hampton Pte Ltd. At that time, the marriage between the parties was already strained. The plaintiff believed that the defendant was having an extra-marital affair, and was suspicious of his motives. When Tan Hin Tat and his colleagues explained the wealth plan to the plaintiff, she declined to put her shares in the companies into the proposed trust.

[11] Tan Hin Tat confirmed in an affidavit that when he explained the wealth plan to the plaintiff, he was not aware that she was holding the shares on trust for the defendant; neither the defendant nor the plaintiff had informed him of that. It would have been reasonable for the defendant to have informed Tan Hin Tat of the circumstances and manner under which the plaintiff came to own the shares, and of the alleged advice of E&Y on the “sham shareholding” when he instructed Tan Hin Tat on the wealth plan.

[12] When the defendant came to know that the plaintiff and their sons had reservations over the wealth plan, he did not take it kindly. His anger and frustration was luminous in his email to them of 16 April 2007 –

[13] But while he was unhappy with the plaintiff he did not remind her that she was only holding the shares in trust for him, and that she should do at his bidding. Although he gave notice that there will be changes, he did not follow that up by revoking the trusts and having the shares returned to him.

[14] Subsequently, he cooled down and the parties were able to communicate over the wealth plan more calmly. On 9 July 2007, the plaintiff wrote to the defendant:

and the defendant responded on 18 July 2007 that:

[15] The defendant did not dispute the plaintiff’s plain assertion that he told her that the shares given to her in 1992 (the shares in Kelso and Hawick) were hers and that she owned 40% of the companies. He was not uneducated, inarticulate nor diffident, and was the dominant spouse. If the plaintiff was mistaken over her ownership of the shares, his passivity is hard to understand.

[16] It is common ground that (i) the defendant controlled the companies and had managed them to the exclusion of the plaintiff, (ii) that the plaintiff did not pay for the shares, and was never in physical possession of the share certificates, and (iii) it was also not disputed that when dividends were paid by Hawick and Kelso, the payments were paid to the defendant (probably on his instructions).

[17] Insofar as the shares were issued to the plaintiff at the initiative of the defendant without any payment from the plaintiff, a resulting trust can subsist over the shares in his favour, but all the relevant circumstances must be considered. If it is assumed that Cecil Wong and E&Y had acted properly, they would have advised the defendant to make genuine transfers of the shares to the plaintiff. In the absence of clear and credible evidence, a court will be slow to find that reputable and established professionals and firms like Cecil Wong and E&Y would advise their clients to create sham shareholdings, particularly when Cecil Wong and E&Y had not been notified of the defendant’s allegation, and had not been given the opportunity to respond to it. Independent of the professional advice, the defendant’s conduct was inconsistent with his claim that the disputed shares were his shares held by the plaintiff as his trustee. He did not inform Tan Hin Tat of that when he engaged him to put up the wealth plan, and he did not assert his beneficial ownership when the plaintiff rejected the plan. He also did not deny that he had told her that the shares were hers, and did nothing to assert his ownership till he was confronted with the division of matrimonial assets.

[18] On the conclusion of a review of the facts, I find that the defendant had transferred the disputed shares to the plaintiff as gifts upon professional advice as part of a financial and estate duty planning exercise, and not as a sham transaction. In the circumstances, the presumption of a resulting trust is displaced by the presumption of advancement in favour of the plaintiff/wife, and my finding of fact that the shares were transferred to the plaintiff absolutely.

[19] Under s 112(10) of the Women’s Charter (Cap 353, 2009 Rev Ed):

On a plain reading of the provision, the disputed shares are the plaintiff’s assets, and are not matrimonial assets.

[20] However, there is a view that inter-spousal gifts are matrimonial assets. Professor Leong Wai Kum’s Elements of Family Law in Singapore (LexisNexis 2007) states at p 602:

[21] Tianzon was commenced in 1993, and the judgment of the Court of Appeal was delivered on 26 March 1996. The former s 106 which applied over the division of matrimonial assets made no reference to gifts. The Court of Appeal in Tianzon referred to a dicta in Soon Geok Hong v Ong Yeow Tiong [1995] SGHC 78 that when a gift is made between spouses, it must be implied that the donor will not seek to be entitled to any share in them if the marriage is dissolved. The Court of Appeal held at [12] that:

[22] From a reading of this passage, the Court of Appeal did not rule that the property involved should not be regarded as a gift. The Court’s ruling was that although the asset was a gift, it was also a matrimonial asset. The importance of this distinction can be seen in the next paragraphs.

[23] The provisions on the division of matrimonial assets have been amended after the decision in Tianzon. The former s 106 has been replaced by s 112 in 1996, and s 112(10) states specifically that “matrimonial asset” –

(There was a minor amendment in 2006 which did not affect the definition).

[24] If an inter-spousal gift is not regarded as a gift, then it falls outside the exemption under s 112(10), and it is a matrimonial asset. But when it is regarded as a gift, then it comes under the exemption, and it is not to be included as a matrimonial asset.

[25] When amendments to the Women’s Charter were under consideration in 1996, Professor Leong presented a paper to the Select Committee on the Women’s Charter (Amendment) Bill [Bill No.5/96] dated 21 May 1996, after the delivery of the judgment in Tianzon. The paper advocated that inter-spousal gifts be included as matrimonial assets. Professor Leong put forward a definition of “matrimonial asset”:

but her proposed definition was not adopted, and the definition in its current form was enacted.

[26] The Law Reform Committee of the Singapore Academy of Law also presented its views to the Select Committee on the definition of matrimonial asset. It also proposed that a distinction be made between an inter-spousal gift and a third-party gift, and suggested that matrimonial asset be defined to mean:

but the suggestion was not taken up.

[27] In the result, it can be seen that attention was drawn by Professor Leong and the Law Reform Committee to the possibility of drawing a distinction between inter-spousal gifts and third-party gifts, but the definition of matrimonial asset enacted did not reflect these views. It cannot be supposed that the Select Committee or Parliament overlooked and did not consider the views of authoritative parties as Professor Leong and the Law Reform Committee. It is much more probable that the views were considered, but were rejected. If that was the case, the rejected definitions should not be applied to the enacted provision.

[28] In the circumstances, I do not think that inter-spousal gifts are matrimonial assets under s 112(10). I come to this conclusion because:

(i) the law before the enactment of the amendment, as stated in Tianzon, was that inter-spousal gifts are gifts and are matrimonial assets;

(ii) the definition did not change the Court of Appeal’s ruling that inter-spousal gifts are gifts; and

(iii) the definition changed the Court of Appeal’s ruling that inter-spousal gifts are matrimonial assets by stating that a gift (which would include an inter-spousal gift) is not a matrimonial asset.

[29] Should the definition be construed such that a gift should be read as a gift other than an inter-spousal gift ie a third-party gift? I do not think that such a construction is justified because:

(i) although a distinction between an inter-spousal gift and a third-party gift was made in Tianzon, the definition enacted made no distinction between such gifts;

(ii) the proposed definitions of Professor Leong and the Law Reform Committee were not adopted, and the enacted amendment excluded all gifts as matrimonial assets; and

(iii) there is nothing in the parliamentary records and other material within s 9A(3) of the Interpretation Act (Cap 1, 2002 Rev Ed) which suggests that the definition should not bear its clear and unambiguous meaning, and should be given a restricted meaning.

[30] As there was no claim or evidence that the defendant or the parties had substantially improved the value of the shares, the shares are not subject to division as matrimonial assets. This does not, however, mean that the plaintiff will have the advantage of keeping the shares for herself, without this being taken into account in the division of the matrimonial assets.

[31] Section 112(2)(h) requires a court ordering a division of matrimonial assets to have regard to, inter alia:

and s 114(1)(a) provides that:

As the disputed shares are the plaintiff’s property, they are to be taken into consideration in determining her share of the matrimonial assets.

[32] The matrimonial home is held in the name of the defendant. This was a unit in Hampton Court, a high-end housing development consisting of 12 units undertaken by the defendant, his mother and brothers on land inherited from his father and his grandfather. The plaintiff acknowledged that she made no financial contributions to the acquisition of the property, but she relied on her contributions as the homemaker when the parties and their sons resided in the property.

[33] There is no agreement on the value of the property. The plaintiff had obtained a valuation at $12.5m, but that was not accepted by the defendant. In the written submissions in the hearings before me, he argued that “not more than 35% of the market value of the matrimonial home” should go to the plaintiff. The plaintiff, on the other hand, claimed 40% share of the net asset value of the property as at 31 July 2007. (The 31 July 2007 date was probably used as it was the last day of the month following 27 July 2007, the date when the divorce proceedings were filed.)

[34] It was pointed out during the hearing that the matrimonial home cannot be divided by reference to its market value because the property was mortgaged to secure financial facilities. Counsel was quick to see that, and revised the defendant’s offer to 35% of the net asset value of the property, without identifying the point of time at which the net asset value is to be taken. The time element is significant in this case because the encumbrances on the property which stood at $533,428.18 on 31 July 2007 had increased to about $4.1m at the time of the hearing.

[35] Having regard to the facts, the plaintiff had been content to let the defendant manage the matrimonial assets including the matrimonial home in the normal course of the marriage. In the circumstances she cannot complain over the encumbrances on the property created when the marriage was running smoothly. However, once divorce proceedings are commenced and the likelihood of the issue of the matrimonial assets arises, the single and non-consultative control by the defendant cannot continue without justification, and he cannot use his control to diminish the asset value of the property by using it as security for facilities used for his own benefit.

[36] In the present circumstances, as the starting point, the time of commencement of proceedings should be used to determine the net asset value of the property, but if the defendant can show that the encumbrances on the property had increased in value after that date which were for the benefit of both parties, these additional subsequent amounts can be taken into account. As there is no claim or evidence of that, the asset value of the property should be taken as at 27 July 2007, or rounded off to 31 July 2007 if it does not prejudice the defendant.

[37] What should be the plaintiff’s share of the matrimonial home? The plaintiff claims 40%, and the defendant offers 35%. The plaintiff referred to one case – Chen Siew Hwee v Low Kee Guan [2006] 4 SLR(R) 605 where Andrew Phang Boon Leong J awarded the wife 35% of the matrimonial assets acquired with no financial contribution from her in a 17 year childless marriage.

[38] The defendant justified his 35% offer by referring to two cases. In Ong Chen Leng v Tan Sau Poo [1993] 2 SLR(R) 545, the Court of Appeal awarded a wife 35% of the matrimonial property paid for by the husband in a 23-year marriage with 3 children. In Kwok Wai Leng v Chan Sooi Hong [2004] 2 SLR(R) 386, a wife was awarded 35% of the matrimonial flat in a 37-year marriage during which the wife’s contribution towards the acquisition amounted to 16.7%.

[39] Taking into account the fact that the plaintiff had not contributed financially in the acquisition of the matrimonial home, I award her 35% of its net asset value.

[40] The assets that are subject to division in a divorce are set out in s 112(10). In the present case, after dealing with the matrimonial home separately, the matrimonial assets would be the assets acquired separately by each party, as there were no assets acquired by their joint efforts.

[45] As I have noted, there is insufficient material before me to work out the actual amounts, and I direct that the amounts be determined by a Registrar. For the purpose of clarity, I find that:

(i) the asset value of the Costa Rhu property should be taken at the time of the division, deducting any amount of any loan secured on the property as at the time of the commencement of the divorce proceedings,

(ii) the bank balances of each party are also to be taken as at that date,

(iii) the boat “Delightful Dream” registered in the name of the defendant and held in trust for Skeve is not to be included in the division, and

(iv) the Renault car registered in the name of the defendant and given as a wedding present to Daniel is not to be included in the division.

[46] After the values of the plaintiff’s assets and the defendant’s assets are ascertained, the amount due to the plaintiff can be worked out. I will explain how this is to be done. I will refer to the value of the defendant’s assets as A, and the plaintiff’s assets as B, and the total of A and B as C. The defendant’s share is D (75% of C) and the plaintiff’s share is E (25% of C). As the plaintiff is keeping her assets, a sum representing E – B is due from the defendant to her.

[48] The process of working out the plaintiff’s share could be painstaking and contentious. It would be in the best interests of the parties to try to come to an agreement on the overall amount, or on as many of the components thereof as possible, and I hope that they will make a serious attempt to do that.

[49] The plaintiff wanted a lump sum payment on the ground of the defendant’s intention to make his future in China, and she worked out $432,000 at $4500 a month for eight years. The defendant disagreed with the monthly figure and contended that it should be $2668, and objected to any lump sum payment.

[50] The Court of Appeal have set out the guidelines for lump sum maintenance payments in Lee Puey Hwa v Tay Cheow Seng [1991] 2 SLR(R) 196 at [9]:

If the plaintiff can show that there is a reasonable risk that the defendant would refuse to comply with an order to make periodic payments of maintenance, a lump sum order may be made, but I am not persuaded on the evidence that there is a real risk that the defendant will settle in China and evade paying maintenance to the plaintiff. He is born and bred in Singapore and has substantial links and properties here. It is unlikely and impractical for him to uproot himself from Singapore to evade paying monthly maintenance which is within his ability to pay. He should pay maintenance in the normal way, by monthly payments.

[51] Section 114 sets out the circumstances to be considered in determining the amount of maintenance. The first two circumstances are of particular relevance in the present case:

[52] Both parties are 62 years old, and have considerable assets to live on. The plaintiff would have to pay for alternative accommodation if the matrimonial home is sold or her share in it is bought over by the defendant, and this is a financial need that should be taken into account under s 114(1)(b). Nevertheless, the defendant should not have to pay for all the plaintiff’s financial needs, and she should contribute towards them out of her own assets. Taking all the matters into consideration, I order the defendant to pay the plaintiff monthly maintenance of $2000.