NK v NL

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 01 September 2010
• Neutral Citation: [2010] SGCA 32
• Plaintiff Counsel: Luna Yap Whye Tzu (Luna Yap & Co)
• Docket Number: Civil Appeal No 86 of 2006 (Summons Nos 1083 and 1092 of 2010)
• Date: 01 September 2010
• Hearing Date: 18 May 2010
• Subject Matter: Civil Procedure,Family Law
• Year: 2010
• Citation: [2010] SGCA 32
• Defendant Counsel: N Sreenivasan and Ramesh Bharani Nagaratnam (Straits Law Practice LLC)
• Court: Court of Appeal (Singapore)
• Published date: 14 September 2010

Chan Sek Keong CJ (delivering the judgment of the court): Introduction

The present proceedings relate to two applications arising from orders we made (“the Court Order”) in NK v NL [2007] 3 SLR(R) 743 (“the main judgment”).

Background

In the main judgment, we held, inter alia, that several companies (collectively, “TFI”) were part of the matrimonial assets to be divided upon the divorce of the parties (whom we shall refer to as “the wife” and “the husband” respectively). Consequently, we made the Court Order as follows (the main judgment at [54] and [82]): 54 ... [TFI] should be valued by a valuer to be appointed by agreement between the parties. However, if the parties do not agree, they will each submit the names of up to two valuers to this court within three weeks of the date of this judgment. The court will then select a valuer, from the names submitted by the parties, whose valuation of [TFI] shall, for the purposes of the present appeal, be final. ... 82 We ... make the following orders: (a) that the wife be awarded 40% of the matrimonial home and 60% of the other matrimonial assets (which amounts to $931,612.38), as well as 60% of the total value of [TFI] (if a positive value (overall) results from the valuation ordered at [54] above);

...

(c) that [TFI] be valued in the manner set out at [54] above (with liberty to apply);

...

[emphasis added]

It may be noted that the Court Order did not stipulate any particular method of valuation of TFI, but left it to the valuer to decide the proper method of valuation.

The dispute between the parties first came before the courts in 2004. It did not end with the main judgment. After we gave the Court Order, the parties could not agree on a valuer. Hence, on 23 October 2007, we appointed KPMG Singapore (“KPMG”) as the valuer, on the application of the wife. The husband refused to co-operate with KPMG to provide a valuation as soon as possible. On the wife’s application, we made an order authorising KPMG to investigate the financial records of TFI. We also ordered that the valuation exercise be completed within three months. This was on 14 November 2008. More than a year later, on 18 January 2010, KPMG issued its final valuation report. The report stated the value of TFI to be between $2.22m and $2.43m, with a median value of $2.32m.

After KPMG’s valuation was released, the husband was advised by his solicitors that the methodology used by KPMG was not in accordance with the terms of the Court Order (see [2] above). The husband appointed M/s Ferrier Hodgson (“FH”) to review and comment on KPMG’s valuation. FH’s opinion at para 2.3.12 of its report dated 12 February 2010 was that KPMG’s valuation of $2.32m for TFI was too high for the following reasons: (a) the earnings multiple applied by KPMG was too high; (b) the control premium was too high; (c) the discount for lack of marketability was too low; (d) the net debt figure was too low; and (e) the estimate of earnings was not appropriate.

The instant applications

Following from his refusal to accept KPMG’s valuation, the husband invoked the “liberty to apply” clause in the Court Order to dispute the validity of KPMG’s valuation and to seek a revaluation of TFI by way of Summons No 1092 of 2010. The wife, for her part, is applying by way of Summons No 1083 of 2010 to compel the husband to pay her share of the value of TFI as valued by KPMG. There were other prayers but in light of what follows it is not necessary to refer to them.

The husband’s application to review KPMG’s valuation was based on two main grounds as follows: KPMG had materially departed from the terms of the Court Order in that it should have valued TFI on the basis of its net asset value or liquidation value, and not on a going concern basis as it had done; and in any case, there were manifest errors in KPMG’s valuation. In support of his arguments, counsel for the husband, Mr N Sreenivasan, referred to a number of authorities, eg, Tan Yeow Khoon and another v Tan Yeow Tat and others [2003] 3 SLR(R) 486; Riduan bin Yusof v Khng Thian Huat and another [2005] 2 SLR(R) 188; Hoban Steven Maurice Dixon and another v Scanlon Graeme John and others [2005] 2 SLR(R) 632; Evergreat Construction Co Pte Ltd v Pressscrete Engineering Pte Ltd [2006] 1 SLR(R) 634; and The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2009] 2 SLR(R) 385. The cases cited concerned experts appointed and instructed by parties and are not directly relevant. But, for present purposes, we accept that, by analogy, a court can intervene if a court-appointed valuer does not act in accordance with his terms of reference, or if his valuation is patently or manifestly in error. This is subject to the caveat that the court will be slow to find that the valuation is in error, since by appointing an expert in the first place it has taken the position that the matter is best left to the expert. On this basis, we turn to the first ground advanced by the husband.

Was KPMG’s valuation a departure from the terms of the Court Order?

Mr Sreenivasan argued that this court had intended that TFI be valued on a net asset value or liquidation value basis as the Court Order provided for TFI to be put into the pool of matrimonial assets, only if it has a “positive” value (see [2] above). Accordingly, the purpose of the valuation was to distribute the matrimonial assets, and not for a business takeover or a court-ordered buyout in an oppression action.

Mr Sreenivasan also referred to the cases of Hatrick v Commissioner of Inland Revenue [1963] NZLR 641 and Mallet v Mallet (1984) 156 CLR 605, on the basis of which he submitted as follows: where shares are not traded on the open market, the method of valuation is based on the earnings or assets of the business; the earnings capitalisation method can be applied when the company has a history of profitable trading in a reasonably open business environment with a professional or independent management; the net asset backing basis (liquidation basis) would be appropriate when the company is not a profitable trading concern and/or there is no ready third party buyer; and in a matrimonial dispute where a valuation of family-owned companies is required for division and distribution, a liquidation approach should be used to value the companies as the predominant purpose is to distribute the existing value of assets and not to compel one party to continue the business to (maybe) recover the value paid.

Mr Sreenivasan also pointed out that TFI is family-owned, and as such there is no recognised...