When couples go through a divorce, one of the most significant steps is deciding how to divide their shared assets. To make this decision fair, both parties are required to fully disclose their financial situation, including all assets and sources of income. This transparency is crucial for the Court to ensure that the division of assets is just and equitable.
While the idea of disclosing all financial information seems straightforward, it often becomes a contentious issue in divorce proceedings. This is especially true when the Court is asked to take action against someone who fails to disclose their assets honestly.
In a recent example of this, in WRX v WRY, [2024] SGHC(A) 22, the Appellate Division of the High Court imposed a rare ‘double penalty’ on a party whom it described as having intentionally concealed and dissipated her assets.
In this article, we explore the concept of disclosure in greater detail, and explore the Court’s decision in WRX v WRY.
Disclosure Requirements
A party to any ancillary matters hearing (i.e., the process of determining children’s and financial issues after a divorce is granted) is under a duty of ‘full and frank disclosure’. This means, in the context of division of assets, that the party has to disclose all assets, income, and financial resources, that would be relevant to the just and equitable division of the parties’ assets. Parties need to make such disclosure in their affidavits filed for the ancillary matters.
As far as assets are concerned, parties need to disclose all assets that are of substantial monetary value. This includes but is not limited to the following:
- Immoveable property: The HDB flat, condominium, or landed property that the family lives in, as well as any properties owned by both or one of the parties for investment purposes, need to be disclosed.
- Motor vehicles.
- Investments: This includes fixed deposit accounts, bonds or other fixed-income investments, units in unit trusts, shares in publicly listed companies, cryptocurrency, private equity investments, precious metals for investment etc.
- Insurance policies: Insurance policies must be disclosed, especially insurance policies that have a surrender value or are of an investment-linked nature.
- CPF accounts and pension accounts: Even though there are generally restrictions on the use and withdrawal of such funds, they are still assets that are taken into consideration by the Court and must be disclosed.
- Personal items of substantial value: Examples of these include luxury watches, handbags and jewellery made of precious metals or gemstones.
Parties should seek advice from a specialist family lawyer on their disclosure obligations. In addition, after the first round of disclosure is made through their first ancillary affidavits, most ancillary matters proceedings go through a process known as discovery. In discovery, both parties are entitled to ask the other party for additional disclosure. If, pursuant to such requests, disclosure is not forthcoming, the aggrieved party can apply to the Court for orders for discovery.
The Court has the discretion to make orders for discovery if the specified requirements (which will not be covered in this article) are met. Once an order for discovery is made, it must be complied with. Compliance with a discovery order is not a matter for negotiation or interpretation. The breach of a discovery order alone will warrant the Court imposing penalties for non-disclosure.
Penalties for Non-Disclosure
What happens when the Court deems that a party has failed to make full and frank disclosure?
There are generally two ways for the Court to give effect to a finding of non-disclosure:
- The notional addition of a quantified sum to the wrongdoing party’s pool of assets. For instance, if a party has declared assets worth S$100,000, and the Court finds that S$100,000 has not been disclosed, the Court will divide the wrongdoing party’s as though he / she had S$200,000 instead. Notably, when the Court does this, the amount notionally added back will not be taken into account for the purposes of direct financial contributions. In other words, that party will be considered to have made only S$100,000 in direct financial contributions.
- An increase in the aggrieved party’s share of the known matrimonial assets. For instance, if the Court would have divided the assets 50/50 between the parties, on a finding of non-disclosure the Court may divide the assets 55/45 in favour of the aggrieved party instead.
- The Court usually does only one or the other, but in cases of egregious non-disclosure the Court can apply both penalties at once. This is what happened in WRX v WRY, [2024] SGHC(A) 22.
What happened in WRX v WRY?
WRX v WRY, [2024] SGHC(A) 22, concerned an appeal by an aggrieved husband against orders on the division of assets made by the lower Court. Amongst other things, the husband’s argument on appeal was that the lower Court’s penalties for the wife’s failure to make full and frank disclosure were insufficiently robust.
On appeal, the Appellate Division of the High Court found that:
- The wife had breached a discovery order. She was ordered to provide ‘quarterly bank statements for 2017, and monthly bank statements for 2018 and 2019’, but failed to do so.
- The wife had dissipated from her bank accounts the sum of ‘at least $1,258,047’ in one year. Furthermore, this dissipation took place shortly after the husband left the home, and the wife also admitted closing several bank accounts during this time.
- The wife’s failure to provide the ordered bank account statements meant that the Court had ‘no material to contextualise the transfers’. Furthermore, the wife gave no explanation as to her withdrawals.
- The findings above led the Court to conclude that the wife was engaged in intentional concealment of these transfers, and that there was a ‘real possibility that she could have concealed or depleted assets even exceeding the known dissipated sum of $1,258,047’.
As a result the Court both (1) restored S$1,258,047 to the pool of assets, and (2) gave the husband an uplift of 5% in the division of assets.
Lessons to be Learned
The result in WRX v WRY demonstrates the importance that the Court places on parties making proper disclosure in ancillary matters proceedings. In imposing the robust penalties that it did, the Court showed that it will not hesitate to impose stringent penalties when the circumstances warrant it. Ultimately, the Court’s decision was a signal to litigants that it expects the duty of full and frank disclosure to be fully complied with.
As litigants, the takeaways are as follows. Firstly, when a discovery order is made, it must be complied with. Compliance with any order of Court is non-negotiable, discovery orders inclusive. Secondly, disclosure must be complete. If one comes to the crossroads between partial and fuller disclosure, one should err on the side of fuller disclosure. Parties often have legitimate concerns about making too much disclosure to their soon-to-be ex-spouses. However, such parties prioritise their confidentiality and privacy at the risk to the outcome on the division of assets.
We believe, ultimately, that greater and fuller disclosure is generally in the interests of all. A party making full disclosure can rest assured that the risk of an adverse inference being drawn is mitigated. A party receiving full disclosure can elect not to pursue courses of inquiry that are not borne out by the documents disclosed, thereby saving on time, energy, and legal fees.
It is important that parties consult with a family law specialist in relation to their disclosure obligations to avoid situations where they are heftily penalized by the Court on the financial matters.
For further information, please contact:
Ivan Cheong, Partner, Witherworldwide
ivan.cheong@withersworldwide.com