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Divorce for British expats in Singapore: comparing the approaches to matrimonial and non-matrimonial assets in England and in Singapore

Sonny Patel, Partner in the Singapore office of Expatriate Law, explains some fundamental differences between England and Singapore in their respective approaches to the financial matters on divorce.



Sonny Patel, Partner Expatriate Law (Singapore office).


Introduction

British expats living in Singapore who are considering a divorce, should be aware that divorce proceedings can take place either in Singapore or in England.

The jurisdiction in which the divorce takes place fixes the framework of law which applies to the division of the parties' assets and income. The choice of jurisdiction for a divorce can have dramatically different implications in respect of the eventual financial outcome, depending on the specific facts of the case.

Although Singapore's legal system is rooted in English common law, Singapore applies an entirely separate body of law which reflects local customs and values.

There are a number of fundamental differences between England and Singapore in their respective approaches to the financial matters on divorce. A stark example is how each country's legal system defines and then treats non-matrimonial assets on divorce.

In Singapore, if an asset is categorised as non-matrimonial, the asset can be definitively ring-fenced during the divorce, regardless of the needs of the party making the financial claims.

In England, non-matrimonial assets are available for (or vulnerable to) division if "needs" cannot be met from matrimonial assets alone. There is no statutory definition of "needs" in English law.

The debate about what amounts to "needs" can be fiercely contested during the divorce process. In high net worth cases, it is not uncommon for the court to determine "needs" measured in seven-figure sums.

In very broad terms, "needs" will be measured by assessing the standard of living during the marriage against the available financial resources, the length of the marriage, the age of the parties and choices made by the couple regarding childcare. It is generally accepted that it is not appropriate for the divorce to entail a sudden and dramatic disparity in the parties' lifestyles.

Fluidity in the definition of "needs" means that, in English law, there is no definitive dividing line between matrimonial and non-matrimonial assets.


Defining matrimonial assets in Singapore

Section 112(10), Women's Charter defines matrimonial assets as any asset of any nature acquired during marriage by one or both parties.

Any asset acquired by a party before marriage is not a matrimonial asset unless:

• The asset is ordinarily used or enjoyed by both parties or one or more of their children for shelter or transportation or for household, education, recreational, social or aesthetic purposes.

• The asset has been substantially improved during the marriage by the other party or both parties.

Any asset acquired at any time by gift or inheritance is not divisible, unless substantially improved during the marriage by the other party or by both parties to the marriage.

A party claiming rights over assets of the other spouse acquired before marriage, or by gift or inheritance, must be able to prove direct significant contributions to their substantial improvement.


Division of assets in Singapore

In Singapore law, only matrimonial assets can be subject to orders and divided or reallocated from one party to the other.

Section 112(2) Women's Charter details the factors that will be considered by the court when deciding how to divide matrimonial assets. 

Although judges in Singapore have a wide discretion to apply the s112(2) factors to make bespoke decisions on a case by case basis, that discretion will typically be exercised around a structured approach to the division of matrimonial assets, as described in the leading case of ANJ v ANK [2015] 4 SLR 1043; [2015] SGCA 34.

First, the court will assign a preliminary ratio to the parties based on the parties' direct financial contributions to the matrimonial assets. Then the court will assign another ratio based on the parties' indirect contributions to the family. Using these two percentage ratios, the court will take an average to form the basis of the proportions.

Depending on the circumstances of each case, the direct and indirect contributions may not be accorded equal weight and one of the two ratios may be accorded more significance than the other. The "average ratio" can be adjusted by attributing different weights to the direct and indirect contributions of the parties in the following circumstances:

• in longer marriages, indirect contributions are given more weight as compared to short, childless marriages;

• if the pool of matrimonial assets is extraordinarily large and accrued by one party's exceptional efforts, direct contributions will likely be given more weight than indirect contributions;

• the extent and nature of the indirect contributions can affect the weight to be attributed to those indirect contributions.

In the later case of TNL v TNK [2017] SGCA 15 the Court of Appeal refined the approach described in ANJ v ANK by deciding that the structured approach should not be applied to long marriages where one spouse was the sole income earner and the other was the home maker. Generally, the starting point in such cases is the equal division of the matrimonial assets.

Although the decision of TNL v TNK corrected, in the view of some, unfairness caused by rigidly following the ANJ v ANK structured approach, it is notable that no mention is made of making non-matrimonial assets available for division to meet needs.

Apart from considering the parties' contributions (both direct and indirect) to the marriage, the court can, under section 112, consider other factors, including the needs of the children, when dividing assets. However, the scope of section 112 is confined only to assets that fall within the definition of matrimonial assets. It does not extend the court's powers to divide non-matrimonial assets, even for the purposes of meeting the needs of the children.


Defining matrimonial assets in England

There is no legislation which defines matrimonial assets in English law. The concept of non-matrimonial property was entirely developed and refined by the judiciary through case law, starting with White v White [2000] UKHL 54.

The origin of the distinction between matrimonial and non-matrimonial assets is found in the speech of Lord Nicholls in White v White. Lord Nicholls explained the arguments in favour of designating non-matrimonial property as follows:

"Property acquired before marriage and inherited property acquired during marriage come from a source wholly external to the marriage. In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely, the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property."

Precise definitions of matrimonial property and non-matrimonial property in English law can be found at paragraphs 18 to 20  of JL v SL (No 2) [2015] EWHC 360.

Matrimonial property is: "the property which the parties have built up by their joint (but inevitably different) efforts during the span of their partnership."

Non-matrimonial property is: "property received or created outside the span of the partnership, or gratuitously received within the partnership from an external source. Such property has little to do with the endeavour of the partnership."

The "span of the partnership" in this context means the date of permanent cohabitation (even if cohabitation began many years pre-marriage) through to the date of separation.

Although matrimonial and non-matrimonial assets are defined reasonably clearly, there are various circumstances where the non-matrimonial assets may lose their character of being non-matrimonial.

K v L (Non-Matrimonial Property: Special Contribution) [2011] EWCA Civ 550 details three situations in which the importance of the source of the assets may be said to have diminished over time:

a) matrimonial property of such value has been acquired so as to diminish the significance of the initial contribution by one spouse of non-matrimonial property;

b) non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult; and

c) the contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has come over time to be treated by the parties as a central item of matrimonial property.


Division of assets in England

In English law, all of the parties' assets, no matter how or when they were acquired, can potentially be subject to orders and divided or reallocated from one party to the other.

Section 25 of the Matrimonial Causes Act 1973 details the factors that will be considered by the court when deciding how to divide matrimonial assets.  There are no binding formulas. English judges apply principles that have been developed in a vast body of case law, but they retain a notoriously wide band of discretion within which to impose bespoke outcomes.

In the simplest possible terms the headline principles are as follows:

• In higher value cases, the starting point is that matrimonial assets are to be divided equally.

• The matrimonial home is normally considered a matrimonial asset, so it is usually divided equally between the parties even if it was owned by one of the parties before the marriage or acquired from an external source.

• Equal sharing does not apply to non-matrimonial property unless such property has become part of the matrimonial assets.

• Strictly non-matrimonial assets are likely to be shared to the extent necessary to meet the applicant's needs (if they cannot be met from the matrimonial assets). Those needs are generously interpreted and will be assessed within the discretionary exercise of applying the Section 25 factors.

In Hart v Hart [2017] EWCA Civ 1306 Lord Justice Moylan made the following observations:

"Put in simple terms, the court ultimately has to decide, as part of the discretionary exercise, how to weigh or reflect the existence of non-matrimonial property when determining the award" [Para 68]

"The principle which is being applied is that the sharing principle applies with force to matrimonial property and with limited or no force to non-matrimonial property" [Para 88]

"The court may decide that the non-marital contribution is not sufficiently material or bears insufficient weight to justify a finding that any property is non-matrimonial. Alternatively, if the evidence establishes a clear dividing line between matrimonial and non-matrimonial property, the court will obviously apply that differentiation at the next, discretionary stage." [Para 92 and 93]

"If, however, at the other end of the spectrum, there is a complicated continuum, it would be neither proportionate nor feasible to seek to determine a clear line. In those circumstances the court will undertake a broad evidential assessment and leave the specific determination of how the parties' wealth should be divided to the next stage. As I have said, where in the spectrum a case lies depends on the circumstances of the case and is for the judge to decide" [Para 94]

"The third and final stage of the process is when the court undertakes the section 25 discretionary exercise. Even if the court has made a factual determination as to the extent of the parties' wealth which is matrimonial property and that which is not, the court still has to fit this determination into the exercise of the discretion having regard to all the relevant factors in this case." [Para 95]

"If the court has not been able to make a specific factual demarcation but has come to the conclusion that the parties' wealth includes an element of non-matrimonial property, the court will also have to fit this determination into the section 25 discretionary exercise…the court does not have to apply any particular mathematical or other specific methodology. The court has a discretion as to how to arrive at a fair division and can simply apply a broad assessment of the division which would affect "overall fairness"." [Para 96]

The above summary of the headline principles and the description of the approach to be taken mask the complexity that is often encountered when applying the principles to the infinitely variable and messy circumstances of real lives.

Disputes can arise about the length of pre-marriage cohabitation, the date of effective separation, the value of pre-marital assets before parties began their relationship and the value now, how to treat any increase in the value of the pre-marital asset depending on whether that increase is passive or a result of active input during the marriage, whether a non-matrimonial asset has been mingled with matrimonial assets, the parties standard of living, what the parties' needs are moving forward and the extent that each party should be expected to meet those own needs from their own endeavours.

In IX v IY [2018] EWHC 3053 Mr Justice Williams captures the potential complexity of the subject:

"the task of Judges up and down the country in seeking to apply the law which now derives from a myriad of cases is not an enviable one…for the busy Family Court Judge having to determine whether the case might be a 'Charman (no.4)' case where awarding less than one third of the assets would be entering dangerous territory, or how the 'springboard' value of a pre-existing business is to be quantified or what indexation should be applied to passive growth of a non-marital asset, or whether the case was properly characterised as a short marriage, dual career case seems to me to be a big ask. Happily, recent decisions of the Court of Appeal in the field appear to support a less technical, more flexible and more common-sense approach to such issues."


The principles applied

We can illustrate the potential for hugely different outcomes in a case depending on whether it is heard in Singapore or in England by posing a simplified set of facts. Consider a scenario where:

• The husband acquired a portfolio of valuable rental properties and investments long before he met the wife. Let's say that the husband's net worth prior to marriage was £3m.

• The parties marry in England and move to Singapore where their first child is born.

• In Singapore the parties live in rented accommodation.

• The parties' second child is born while they are living in Singapore.

• The wife is financially dependent on the husband.

• During the marriage the parties do not live in any of the husband's rental properties, they do not use any of the husband's investments to fund their lifestyle, and they do not improve upon the assets during the marriage.

On these facts, if the parties were to divorce in Singapore, the husband's pre-acquired properties and investments would be definitively categorised as non-matrimonial. The wife's capital claims would therefore be limited to any savings they might have acquired since marrying, regardless of her needs and regardless of the fact that the husband retains the remaining £3m worth of assets.

By way of contrast, if the divorce took place in England there is no doubt that the husband's pre-acquired assets would be used to meet, at the very least, the wife's housing needs. Those "needs" would be assessed generously. The wife could comfortably expect to receive sufficient funds to purchase a mortgage-free three-bedroom home for her and the children (although the location and the standard of the property would be subject to discussion).


Conclusion

To English family lawyers, dealing with English divorces, the suggestion that a financially dependent mother of young children in the above circumstances could be left with next to no capital while the husband retains a substantial property portfolio and valuable investments is unthinkable.  

However, to lawyers immersed in the Singapore legal system, the suggestion that pre-acquired assets or inheritances should automatically be vulnerable on divorce might seem unattractive.

Given that the financial outcomes on divorce can vary so wildly from country to country, it is important that bespoke strategic advice is taken at the earliest possible opportunity. Even when proceedings are already underway, it is still possible to contest an existing divorce petition and seek to have a divorce heard in the alternative jurisdiction of choice. Careful advice is needed from lawyers working collaboratively in both jurisdictions.

Contested jurisdiction proceedings are complex, time-consuming, and expensive so it is important that the client is given the correct information to be able to make fully informed decisions. There must be a careful assessment of the proportionality of a proposed cost of a particular course of action, compared to the value of the possible difference in outcome.

Finally, a British expat choosing to divorce through the Singapore courts and/or to contest English jurisdiction, must be aware of the potential subsequent financial claims that could be made through the English courts by their spouse for a financial settlement after a foreign divorce, under Part III Matrimonial & Family Proceedings Act 1984. The English courts can grant financial relief to alleviate adverse consequences where no financial provision is made by the foreign court, or where the provision made is deemed to be inadequate. Therefore, for British expats abroad, care should be taken to ensure that the financial outcome does not wholly contradict English principles about what constitutes a fair outcome, or they may find themselves in a second round of litigation. 


Sonny Patel is a Partner in the Singapore office of Expatriate Law. He advises British expats worldwide in respect of and divorce proceedings via the English courts.

With thanks to Linda Ong for her input into Singapore family law. Linda is a Director at Engelin Teh Practice . She advises Singaporeans and Expats living in Singapore in respect of Singapore family law.

12.8.20