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    01:04 AM Tan Zhi Xiang (LLB, King's College London)

    Fairness for Divorcing Homemakers? – TNL v TNK and another appeal and another matter [2017] SGCA 15

        

    Introduction

    It has long been recognised that marriage is a partnership of equals. As the Court of Appeal noted in NK v NL [2007] 3 SLR(R) (“NK”) “[t]he contributions of both spouses are equally recognised whether he or she concentrates on the economics or homemaking role (NK at [20]). However, how does one give effect to this principle when dividing matrimonial assets in a divorce? The different methodologies which the courts have adopted over the years expose the difficulty in answering this question. In TNL v TNK and another appeal and another matter [2017] SGCA 15 (“TNL”), the Court of Appeal introduced a further refinement to the jurisprudence by holding that the prevailing methodology (the ANJ approach, which will be explained below) should not be applied to marriages where “one spouse was the sole income earner and the other played the role of homemaker”.

    Summary of TNL

    Background

    The parties were married in November 1978. During the marriage, the husband worked while the wife was a full-time homemaker. They had three adult children. Divorce proceedings were commenced in March 2013 and interim judgment was granted in May 2013 (TNL at [2] and [3]). As the value of the matrimonial assets exceeded $5 million, the ancillary matters fell to be determined by the Family Division of the High Court. After hearing parties, Valerie Thean JC held that each spouse was entitled to half of the pool of matrimonial assets. Her Honour also ordered the husband to pay the wife a lump sum of $171,517 as maintenance and made no order as to costs.

    Both parties appealed against Thean JC’s decision. The issues before the Court of Appeal relate to (a) division of matrimonial assets (b) maintenance of the wife; and (c) cost of the ancillaries.

    Delineation of the Pool of Assets

    The Court first considered whether the Judge had correctly excluded certain sums of money from the pool of assets. In relation to this, it held that where (a) divorce proceedings are imminent or (b) after interim judgment for divorce has been granted (but before ancillaries are concluded), any party who expends a “substantial sum” without the other party’s consent must return that sum to the asset pool for division. Significantly, this will be done even if the expenditure was for the benefit of the parties’ children and did not amount to a “deliberate attempt to dissipate matrimonial assets” (TNL at [24]). Applying these principles, the Court notionally returned certain sums of money to the pool of assets.

    Division of the Pool of Assets

    The Court then proceeded to divide the assets. It first noted that the Judge had adopted the “ANJ approach”, which consists of three steps (TNL at [38]):

    “(a) express as a ratio the parties’ direct contributions relative to each other, having regard to the amount of financial contribution each party made towards the acquisition or improvement of the matrimonial assets (“Step 1”);

    (b) express as a second ratio the parties’ indirect contributions relative to each other, having regard to both indirect financial and nonfinancial contributions (“Step 2”); and

    (c) derive the parties’ overall contributions relative to each other by taking an average of the two ratios above, keeping in mind that, 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 (“Step 3”).”

    By way of background, the ANJ approach was laid down relatively recently by the Court of Appeal in ANJ v ANK [2015] 4 SLR 1043 (“ANJ”). Prior to ANJ, the lower courts commonly adopted the “uplift” approach, under which the court will “start from the proportions of the spouses’ financial contributions to the acquisition of matrimonial assets before adjusting those proportions by giving the spouse who had made more significant non-financial contributions an ‘uplift’” (ANJ at [18]). However, the “uplift” approach may yield results which undervalue non-financial contributions (ANJ at [19]). Therefore, the Court of Appeal has previously emphasised that instead of focusing on direct and indirect contributions, the courts must consider all the factors in s 112(2) of the Women’s Charter (Cap 353, 2009 Rev Ed) (“the Charter”) in the round (NK at [29]). Professor Leong Wai Kum  termed this the “multi-factorial approach” (Leong Wai Kum, Elements of Family Law in Singapore (LexisNexis, 2nd Ed, 2013) at p 625).

    Returning to TNL, the Court noted that in single-income marriages, the ANJ approach (which the the lower court adopted) “tends to unduly favour the working spouse over the non-working spouse” because “financial contributions are given recognition under both Steps 1 and 2 of the ANJ approach” (TNL at [44]). I pause here to note that for this reason, a full-time homemaker would, if the ANJ approach were applied rigidly, probably never receive more than 25% to 35% of the assets in a divorce.

     

    The Court recognised that it could ameliorate this unfairness by according more weight to indirect contributions in Step 3 of the ANJ approach (which was in fact the approach that the lower court adopted), but it held that this “would almost inevitably result in some degree of artificiality” (TNL at [45]). Therefore, the Court concluded that the ANJ approach ought not to be applied to single-income marriages (TNL at [46]). Nevertheless, as the lower court’s order of equal division was in line with the relevant precedents, the Court found no reason to vary the ratio. (TNL at [54]).

    Maintenance for Wife and Costs

    Given that the wife’s share of the assets would leave her financially secure, the court reduced the lump sum maintenance awarded by the  lower court from $171,517 to $100,000 (TNL at [64]).

    Finally, the Court upheld the Judge’s decision not to award costs and declined to order costs for the appeals because each appeal was allowed in part. Pertinently, the Court held cautioned that in the future, costs may be awarded against a successful appellant if the appeal was “a disproportionate imposition on the unsuccessful party”. As a rough gauge, this is when “the result is a potential adjustment of the sums awarded below that works out to less than 10% thereof” (TNL at [68]).

    Commentary

    Division of Matrimonial Assets

    This decision is to be welcomed insofar as it ensures that the contributions of working and non-working spouses are equally recognised. However, the approach adopted in TNL is not without its problems.

    First, the Court drew a clear line between “dual-income marriages” (i.e. marriages where both spouses are working) (TNL at [42]) and “single-income marriages” (i.e. marriages where one spouse is the sole income earner and the other plays the role of homemaker) (TNL at [43]). Henceforth, the ANJ approach will apply to the former but not the latter. However, it is respectfully submitted that not all marriages fall neatly into either category. For instance, where a spouse worked for two years out of a 20-year marriage, would the marriage be considered single-income or dual-income?

    Secondly, where there is a dispute over whether a spouse was employed during the marriage, the court may need to make a preliminary finding to ensure that parties are on the same page, because the applicable methodology for division of assets will depend on the resolution of that dispute. This would introduce an additional step (or steps, if interlocutory appeals against such findings were entertained) in what may already be protracted proceedings.

    Thirdly, and more fundamentally, it is respectfully submitted that the ANJ approach is inherently unfair when applied to almost all marriages, not merely single-income ones. To recap, the Court held that the ANJ approach is unfair when applied to single-income marriages because “financial contributions are given recognition under both Steps 1 and 2 of the ANJ approach”. If that is correct, the ANJ approach will occasion unfairness when applied to dual-income marriages where one spouse earns more than the other, especially where the income disparity is significant. This is because the higher earner is generally better placed to contribute financially, thereby receiving more credit under both Steps 1 and 2 of the ANJ approach. Thus, a spouse who earns $10,000 a month will be unduly advantaged under the ANJ approach compared to a spouse who earns $1,000, even if the latter makes substantially greater non-financial contributions. Therefore, it is respectfully submitted that the ANJ approach will only be fair when applied to the minority of marriages where both spouses earn comparable incomes and are therefore equally able to contribute financially.

    Where does this leave us? The key drawback of the “uplift” approach has been stated above. The remaining approach (the multi-factorial approach) is problematic as well. To recap, this approach requires the court to assess parties’ contributions against all the factors in s 112(2) of the Charter. However, there are a total of 14 factors for the court to consider (by virtue of s 112(2)(h), the factors in s 114(1) may be relevant). Since the court must adopt a “broad brush” approach when dividing assets (NK at [68]), it will also not be open to any court to assign a value to each factor. It therefore appears that the court must conjure a figure after considering all the factors in the round. With respect, it is submitted that this approach will lead to opaque decisions which are difficult to review on appeal.

    However, the approach that the Court ultimately adopted in TNL is interesting. After dismissing the ANJ approach, the Court immediately stated that “[i]n long Single-Income Marriages, the precedent cases show that our courts tend towards an equal division of the matrimonial assets. We are in general agreement with this approach” (TNL at [48]). It then considered various precedents before concluding that the lower court’s order of equal division should be upheld (TNL at [48] to [54]). In short, the court laid down and applied a specific guideline in relation to long single-income marriages.

    It is humbly submitted that moving forward, the courts should adopt this approach for all cases. Specifically, instead of adopting the ANJ or “uplift” approach, the courts should proactively lay down and apply numerical guidelines for various types of marriages (along the lines of whether the spouses are working, whether they have children, the length of the marriage etc.). If this suggestion were adopted, guidelines would not merely be used to verify the results obtained from applying another approach; instead, they would serve as default positions which could be departed from when considering the factors in s 112(2) of the Charter. This would be akin to sentencing - the appellate courts lay down broad sentencing guidelines for specific offences which can be departed from depending on the circumstances of each case.

    First, this approach, unlike the “uplift” and ANJ approaches, is not inherently unfair. Although some mathematical precision would be lost, “it is better to be roughly right than to be precisely wrong” (Sim Kim Heng Andrew v Wee Siew Gee [2014] 1 SLR 1276 at [51]). Secondly, as pointed out by Professor Leong, the adoption of guidelines is entirely consistent with the multi-factorial approach (Elements of Family Law in Singapore at p 629, citing ATT v ATS [2012] 2 SLR 859). Thus, it can be seen as a natural development from an approach which has been repeatedly endorsed by the Court of Appeal. Thirdly, the adoption of guidelines in the division of assets would be consistent with a proposed new methodology for determining child maintenance – Valerie Thean JC (in her capacity as the Presiding Judge of the Family Justice Courts) spoke about the possibility of adopting “child maintenance tables” (essentially guidelines) in her speech at the Family Justice Courts Workplan 2017.

    Expenditure on Children

    The Court also made some other interesting comments in TNL. As noted above, the court held that when divorce proceedings are imminent or ongoing, a parent who intends to spend a substantial sum of money on a child of the marriage must seek the other parent’s consent. Otherwise, the expended sum will be returned to the matrimonial pool for division. This is so even if the expenditure did not amount to asset dissipation. The result of this is that the parent who incurred the expenditure must bear it solely.

    It is respectfully submitted that this holding may not be consistent with the spirit of s 112(2)(b) of the Charter, which states that “[i]t shall be the duty of the court in deciding whether to exercise its powers under subsection (1) and, if so, in what manner, to have regard to all the circumstances of the case, including… any debt owing or obligation incurred or undertaken by either party for their joint benefit or for the benefit of any child of the marriage”.

    Admittedly, s 112(2)(b) pertains to obligations incurred for the benefit of, inter alia, a child while the Court in TNL was concerned with expenditure on the same. However, it is submitted that the distinction ought not to matter in this context. For example, why should a parent who withdraws $5,000 from his or her own bank account to pay a child’s tuition fees be in a different position from a parent who borrows $5,000 from the bank for the same purpose?

    If that is correct, the court ought to have regard to any expenditure incurred for the benefit of a child even if one spouse did not consent to that expenditure (note the underlined words in s 112(2)(b) above) and even if the expenditure was substantial (since the said provision is not so qualified). At the very least, this would mean that the court must not prima facie disregard such expenses (which is, in effect, the approach adopted in TNL).

    However, it does not follow that any parent should have unfettered discretion to spend large sums on their children. The court could find that any grossly disproportionate expenditure was not incurred for the benefit of the child, but for dissipating matrimonial assets.

    Separately, it would also be most unfortunate if divorcing parents were to become less generous towards their children as a result of this decision. This is likely to be the case in acrimonious divorces (which are sadly not uncommon) where parties are literally unable to agree on anything.

    Costs in Matrimonial Appeals

    The indication that the court may award costs against a successful appellant if the appeal was “a disproportionate imposition on the unsuccessful party” was justified on the ground that “there is a clear interest in encouraging the parties to move on to face the future instead of re-fighting old battles” (TNL at [68]). In a similar vein, the Thean JC recently remarked in TYU v TYV [2017] SGHCF 08 (at [45]) that in matrimonial proceedings, “costs still play a crucial role in regulating the process of litigation and incentivising good litigation conduct”.

    These judicial sentiments can be compared with those expressed by Debbie Ong JC in JBB v JBA [2015] 5 SLR 153 (“JBB”). In JBB, her Honour observed that costs may not be ordered in matrimonial appeals if this is necessary to “reduce and not further increase hostility between the parties who must continue to co-operate in jointly parenting their children long after the divorce is concluded” (JBB at [23]). Her Honour cited BNS v BNT [2015] 3 SLR 973 (where the Court of Appeal declined to order costs against the unsuccessful respondent) as authority for this proposition.

    Although the above approaches are not necessarily inconsistent, they may not be easy to reconcile in every case. Consider the following hypothetical. A husband appeals an order pertaining to the division of matrimonial assets. The appeal is allowed but his share of the assets is increased by 1% only. Following TNL, costs should prima facie be awarded against him. However, the parties are also granted joint custody of three young children. Thus, they have a legal obligation to co-operate with each other in caring and providing for them (TUV v TUW [2016] SGHCF 15 at [5]). In such circumstances, will the considerations in TNL or JBB prevail?

    Conclusion

    By giving credit to the wife’s substantial indirect non-financial contributions, the Court of Appeal in TNL reached a result which was, it is submitted, just and equitable. However, that a significant exception had to be carved out of the ANJ approach to reach the outcome reveals the inherent unfairness of the ANJ approach. I have, in my analysis above, proposed an alternative approach for consideration. Nevertheless, it is submitted that this area of law is ripe for reform and more extensive revisions may be necessary to pave a better path forward. To obviate all the problems described above, it is suggested that Parliament could simply amend s 112 of the Charter to mandate equal division as a starting point. Such an approach would, it is submitted, give full effect to the ideal of marriage as a partnership of equals.

    * This blog entry may be cited as Tan Zhi Xiang, “Fairness for Divorcing Homemakers? – TNL v TNK and another appeal and another matter [2017] SGCA 15” (28 March 2017) (http://www.singaporelawblog.sg/blog/article/179)

    ** A PDF version of this entry may be downloaded here

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