UBD v UBE

• Jurisdiction: Singapore
• Judge: Valerie Thean JC
• Judgment Date: 29 May 2017
• Neutral Citation: [2017] SGHCF 14
• Court: High Court (Singapore)
• Docket Number: Divorce Transfer No 5830 of 2014
• Published date: 12 December 2017
• Year: 2017
• Hearing Date: 09 February 2017
• Plaintiff Counsel: Yee May Kuen Peggy Sarah and Audrey Liaw Shu Juan (Liao Shujuan) (PY Legal LLC)
• Defendant Counsel: Parhar Sunita Sonya (S. S. Parhar Law Corporation)
• Subject Matter: Family law,Matrimonial assets,Division,Maintenance,Wife
• Citation: [2017] SGHCF 14

Valerie Thean JC: Introduction

The plaintiff (“the Husband”) and the defendant (“the Wife”) married on 6 April 1988 in Singapore. They have two sons, aged 25 and 21 respectively. The Husband is a doctor and works as a general practitioner at his one-man clinic in Serangoon Central. The Wife, previously a teacher, has been a professional counsellor since September 2016.

The Husband moved out of the matrimonial home (“the Property”) on 1 January 2011. Some three years later, on 9 December 2014, the Husband commenced divorce proceedings. Interim judgment (“the IJ”) was granted on 19 January 2015 (“the IJ Date”) by consent.

On 9 February 2017, I heard and dealt with the parties’ ancillary matters, being: (i) the division of their matrimonial assets; and (ii) the appropriate maintenance for the Wife. The Husband has appealed, vide, Civil Appeal No 38 of 2017, and these grounds of decision explain my orders made.

Division of Assets Constitution of the matrimonial assets

Parties were largely in agreement on the constitution of the pool of matrimonial assets and the respective values of these assets. The Husband’s medical practice (“the Medical Practice”) was the main point of contention. I deal with this first before setting out the overall matrimonial pool that was found liable for division.

Valuation of the Medical Practice

The Medical Practice is physically situated in a HDB two storey shophouse (“the Shophouse”). Parties agreed on a joint valuation in respect of the Shophouse.¹ As regards the Medical Practice, parties obtained a joint valuation report prepared by Acumen Assurance (“Acumen”) dated 26 April 2016.² Acumen’s desktop value of the Medical Practice based on their assessment ranged from an “indicative value” of S$12,000 to a “business value” of S$102,000. The indicative value was premised on the adjusted book value of the Medical Practice as at 31 December 2015, which is an accounting value calculated by subtracting the Medical Practice’s total liabilities from its total assets. Acumen opined that “[c]onsidering the transactions of the [Medical Practice] are mainly cash transactions with little or no off balance sheet items, book value appears to be approximate to the fair value of the business”. As for the business value, this was derived based on a discounted cash flow analysis of the Medical Practice’s income and earning potential. Acumen opined that this value provided a “highly accurate estimate of business value based on the business earning potential” [emphasis added].

Notwithstanding the above, the Husband submitted that the Medical Practice should be valued at S$15,346, which was the figure for the net tangible assets of the clinic reflected on its balance sheet dated 31 December 2014.³ In essence, the Husband argued that a book value based approach was more useful, echoing Acumen’s observation that such an approach was appropriate for a “cash business” and thus proposed to use the higher figure of S$15,346. In response, the Wife submitted that an income based approach was more appropriate. The Husband had been operating the clinic since 1989 and was well established in the neighbourhood, and the clinic’s profit over the last four years was about S$190,000 – a figure that was far higher than the book value based figures.

I agreed with the Wife that an income based approach was the better method of valuation in the circumstances. Even if the Husband chose to discontinue the Medical Practice, he would likely sell the business which has significant goodwill associated with it given its location in a HDB precinct and its existing clientele. Further, as noted by Acumen, such family clinics belonged to a “recession proof industry as the patients will consult doctor[s] regardless of the economic outlook. Walk in patients usually opt to visit [a] particular clinic for one of two reasons: its proximity to the patients’ workplace or home to the clinic and the familiarity of the patients with the doctor practicing in the clinic.”⁴ While the income based method utilised a projection of cash flows for four years going forward, this anticipated cash flow would be similar to that used by any medical practitioner seeking to buy a practice within a HDB precinct. However, even though Acumen set the clinic’s business value at S$102,000 under its income based analysis, I adopted a more conservative figure of S$80,000 because any contemplated sale of the Medical Practice would be dependent upon the vagaries of the market and buyer-seller uncertainties.

Other assets

The inclusion and valuation of most of the other matrimonial assets were agreed between the parties, save in relation to the following assets to which I turn.

In respect of the Husband’s shares in DBS Bank, there was initially a dispute as the Wife’s submission put the figure as S$74,450, whereas the Husband’s submissions had used S$61,354.⁵ Counsel for the Wife clarified at the ancillaries hearing, however, that S$74,450 was the value of the DBS shares used by the Husband himself in his 1st Affidavit of Assets and Means.⁶ Counsel for the Husband therefore agreed to using this figure of S$74,450 to value the DBS shares.

Regarding the parties’ personal bank accounts, three DBS bank accounts on the part of the Husband, and two POSB accounts on the part of the Wife, I used the figures of the deposited sums nearest to the IJ Date.⁷ In my view, this was appropriate in the context of this case.

The legal context should first be set out before we turn to the case on the facts. The Court of Appeal has reiterated, after I gave my decision, that generally, once an asset is regarded as a matrimonial asset, it ought to be valued as at the date of the ancillaries hearing, unless a departure is warranted by the facts (“the Valuation Rule”) (see TND v TNC and another appeal [2017] SGCA 34 (“TND v TNC”) at [19], commenting on TDT v TDS and another appeal and another matter [2016] 4 SLR 145 (“TDT v TDS”) at [50]). This Valuation Rule comes logically subsequent to a preceding inquiry: whether any particular asset forms part of the matrimonial pool in the first place. For this preceding inquiry, which involves determining the appropriate operative date for delineating the pool of matrimonial assets, the law set out by the Court of Appeal is that “unless the particular circumstances or justice of the case warrant it, the starting point or default position should be the date that interim judgment is granted” (“the Delineation Rule”) (see ARY v ARX and another appeal [2016] 2 SLR 686 at [31]). Two separate default operative dates are therefore relevant for dividing matrimonial assets: for delineation issues, the date of the interim judgment generally prevails; for valuation matters, the default position leans in favour of the date of the ancillaries hearing.

In this case, I was of the view that a departure from the default position under the Valuation Rule was warranted in relation to the bank accounts: these bank accounts were delineated and valued as at the IJ Date instead. This was because the parties had lived separate and independent lives for more than 6 years since January 2011 when the Husband moved out of the matrimonial home. It was thus a reasonable expectation on their part that they would be free to spend from their bank accounts as they saw necessary from the date at which their separation formalised (ie, the IJ Date), without having to account ex post for or rebut contentions of wrongful dissipation. Therefore, if either spouse, for instance, invested funds from his or her bank account, it would be just and reasonable that he or she should have to bear the liabilities of, or enjoy the profits from, such investment, so long as the original funds used for that investment were restored to the common pool (Yeo Chong Lin v Tay Ang Choo Nancy and another appeal [2011] 2 SLR 1157 (“Yeo Chong Lin”) at [40]).

In the present case, a further benefit would accrue if both the delineation and valuation dates for the bank accounts were set as the IJ Date: this would minimise the incentive for, and any subsequent argument about, issues of wrongful dissipation from these accounts post-IJ. Particularly in relation to bank accounts, this would enable much desired simplicity and certainty in the litigation process. Indeed, at least in the present case, if the court held otherwise that the valuation date of such liquid assets was the date of the ancillaries hearing, which took place long after the IJ Date and after both parties had clearly started to lead separately financial lives utilising funds from their largely segregated bank accounts, unfairness may result from the division process: neither party would had been able to expend what they commonly and reasonably hold to be separate funds with a peace of mind. Instead, going forward, a perverse incentive for attempted dissipation in the interim between the date of the IJ and the date of the ancillaries hearing may be created in the shadow of the law.

In considering the above, a distinction may usefully be drawn between bank accounts and other kinds of assets. This is because funds in bank accounts are by their nature easily moved or spent; concerns about deterring wrongful dissipation and permitting legitimate expenditures thus come prominently to the fore. In contrast, different considerations often underlie the division of other properties. In particular, for real properties, values may fluctuate significantly between the date of the IJ and the date of the ancillaries hearing. The accommodation needs of the family may require realisation of particular properties: in a falling market, if the valuation date is much earlier, hardship may arise; conversely, in a rising market a division using too early a valuation may result in the allocation carrying an unintended and uneven windfall effect. In this context, the Court of Appeal has allowed, in Yeo Chong Lin at [39],...