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Ezane Chong discusses the effectiveness of a postnuptial agreement

The Singapore Court of Appeal in the case of Surindar Singh v Sita Jaswant Kaur [2014] SGCA 37 recently held that a settlement agreement, which included provisions for the division of matrimonial assets, between a former husband and wife after an interim judgment of divorce was issued, was a "binding" agreement.

The settlement agreement, which in essence was a postnuptial agreement, was signed after a mediation session where both parties were represented by lawyers. As the children of the marriage were by then adults, the mediation process focused on the issues of maintenance and division of matrimonial property.

In according conclusive weight to the settlement agreement, the Court of Appeal overturned the ruling of the High Court where the judge awarded equal share of the matrimonial assets of about SGD7.4 million, to each party. Division according to the settlement agreement gave the husband the lion's share of the matrimonial assets, i.e. 58.9%, while the wife received 41.1%.

The Court of Appeal held that as there were no good and substantial grounds to justify the conclusion that holding the parties to their agreement would cause injustice and since the distribution effected by the settlement agreement was not inequitable, the Court of Appeal upheld the agreement.

DISTRIBUTION UNDER SINGAPORE LAW

The starting point with respect to the division of matrimonial assets under Singapore law is section 112 of the (Singapore) Women's Charter ("the Charter") which confers powers on the court to order the division of matrimonial assets in such proportions as the court thinks "just and equitable" having had regard to "all the circumstances of the case".

The circumstances include the matters enumerated under the list of factors set out in section 112(2) of the Charter. Whether there is "any agreement between the parties with respect to the ownership and division of matrimonial assets made in contemplation of divorce" is expressly set out as one of the factors which the court must consider (section 112(2)(e)).

The other factors include the extent of contributions made by each party in money or money's worth towards acquiring the matrimonial assets, contributions made to the welfare of the family, debts owing by either party for their joint benefit and for the benefit of any children of the marriage, the needs the children, if any, any benefit enjoyed by one party to the exclusion of the other, and the giving of financial or non-financial assistance and support to the other which aids the other in the carrying out of his or her occupation or work.

DISTRIBUTION UNDER MALAYSIAN LAW

The law governing marriage and divorce in Malaysia is primarily contained in the Law Reform (Marriage and Divorce) Act 1976 ("the Act").

The court's power, when granting a decree of divorce, to order the division between the parties of any assets acquired during the marriage, is provided under section 76 of the Act. In this regard, a distinction is drawn between the assets acquired by the joint efforts of both parties to the marriage, and those acquired by the sole effort of one party.

Jointly acquired assets

Where the assets are jointly acquired, the court is directed to incline towards equality of division, having regard to the following matters:

  1. the extent of the contributions made by each party in money, property or work towards the acquiring of the assets;
  2. any debts owing by either party which were contracted for their joint benefit; and
  3. the needs of the minor children, if any, of the marriage (section 76(2)).

Assets acquired solely by one party

Where the assets are solely acquired by one spouse, the factors to be taken into consideration are:

  1. the extent of the contributions made by the party who did not acquire the assets to the welfare of the family by looking after the home or by caring for the family; and
  2. the needs of the minor children, if any, of the marriage,

and subject to those considerations, the court may divide the assets or the sale proceeds in such proportions as it thinks reasonable but in any case the acquirer shall get a greater proportion (section 76(3)).

Referral of agreements to court

Unlike section 112(2) the Charter, sections 76(2) and 76(3) of our Act makes no reference to "any agreement between the parties with respect to the ownership and division of matrimonial assets made in contemplation of divorce" as a factor to be considered by our courts in determining the division of matrimonial assets.

However, there is express provision in section 56 of the Act, for "any agreement or arrangement made or proposed to be made between them, being an agreement or arrangement which relates to, arises out of, or is connected with the proceedings for divorce which are contemplated", to be referred to court to enable the court to express an opinion as to its reasonableness.

In Lim Thian Kiat v Teresa Haesook Lim nee Teresa Haesook Dean & Anor [1997] 5 CLJ 358, a deed of separation ("Deed") was entered into between a husband and his wife, which settled the wife's claims to matrimonial properties and maintenance. By this Deed the parties agreed that its terms would be incorporated into a joint petition for divorce in the event that either spouse demands for a divorce.

The husband eventually petitioned for divorce and made an application for the court to determine, under section 56 of the Act, the subsistence and validity of the Deed. The wife attempted to vary the terms of the agreement on matrimonial assets but the court found that the Deed was valid and binding on the parties as the terms were arrived at voluntarily with the advantage of the wife possessing adequate legal advice.

PRENUPTIAL AGREEMENTS v POSTNUPTIAL AGREEMENTS

The difference between a prenuptial agreement and a postnuptial agreement is that a prenuptial agreement is a contract entered into prior to marriage, usually when the couple are still in love and filled with hopes of marital bliss, whereas a postnuptial agreement is a contract executed after the wedding vows have been exchanged and often, when the marriage has already broken down.

So whilst both prenuptial and postnuptial agreements essentially serve the same purpose,both seek to settle the couple's affairs and assets in the event of divorce, there is a difference in terms of the degree of weight in which the courts may attach to them.

The Court of Appeal in Surindar Singh added that a postnuptial agreement relating to the division of matrimonial assets may be given more weight than a prenuptial agreement because the circumstances surrounding the execution of a postnuptial agreement are very different from those relating to a prenuptial agreement. Parties to a postnuptial agreement would have already been appraised of their respective rights and obligations towards each other and be in a better position to make a more accurate estimation of the value of the assets owned by them either jointly or separately and to assess each party's financial or non-financial contributions to the acquisition of those assets, based on their knowledge of facts which only they are truly privy to.

However, the Court of Appeal was quick to point out that the weight to be allocated to any agreement, whether prenuptial or postnuptial, would still depend on the precise circumstances. Where parties had properly and fairly come to an agreement with the benefit of legal advice the court will generally attach "significant weight" to it.

NO CONTRACTING OUT

Notwithstanding the above, it is important to note that parties to a marriage cannot oust the jurisdiction of the court or contract out of statutory provisions and any clause in a postnuptial (or prenuptial) agreement attempting to do so will be bad under law and not be tolerated (Tan Kai Mee v Lim Soei Jin [1981] 1 MLJ 271]).

In clarifying what it meant when it ruled in Surindar Singh that the settlement agreement between Mr. Singh and Ms. Kaur was "binding", the Court of Appeal said:

"In this judgment, we use the phrase "binding agreement" ... to mean a settlement contract that is validly formed in accordance with the legal requirements of the common law of contract, but it should be noted that if such a contract is caught by s 112(2) of the Charter, it will not be directly enforceable. ... If there is a binding agreement between the parties with respect to the ownership and division of matrimonial assets made in contemplation of divorce, that will be a relevant factor in the court's determination of what is a just and equitable division of matrimonial assets under the Charter."

Although it is possible for postnuptial agreements to carry significant and even conclusive weight, it appears that the Singaporean and Malaysian courts, guided by the principles of justice and fairness, still retain the power to decide how matrimonial assets should be divided.

Writer's e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

WRITER'S NAME: EZANE CHONG

WRITER'S PROFILE:

Ezane is a Partner in the Dispute Resolution Division of SKRINE. Her main practice areas are civil and commercial litigation and family law.

SUBJECT : FAMILY LAW

 
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