Fighting over $3m some 15 years after couple split

It was a case of better late than never for a woman who discovered that her crafty ex-husband had hidden around $3 million from the asset split when they divorced 15 years earlier.

The ex-wife now wants her rightful share of the hidden stash, estimated at $1.4 million as she claims she was entitled to 44.5 per cent of their overall matrimonial assets.

The couple had agreed to split their asets worth $4.5 million when their marriage ended in 2010 with a “consent order” that awarded the woman $2 million, or 44.5 per cent.

All was well for a decade until the parties clashed over the amount of maintenance the ex-husband should pay for their two children.

He had asked a court to reduce the sum from about $5,800 a month to $2,500 but blundered by inadvertently talking about a foreign bank account that was not disclosed in their past dealings.

With the cat out of the bag, the ex-wife engaged a financial sleuth to look into that account. The “forensic investigative report” that followed revealed that there was a balance of about US$1.9 million around the time when they split.

Further checks also uncovered that the ex-husband had a stake of US$800,000 in a company that was also not disclosed during their divorce settlement.

This meant the couple should have been looking at an asset division of $7.7 million instead of $4.5 million.

Disclosure is mandatory 

Cases like this highlight the risk of one party hiding assets whenever couples make decisions without any inquiry or a court order for a full and frank disclosure of just what each party owns.

In this case, the husband’s lawyer argued that a full disclosure might not be mandatory for all negotiations for divorce settlements, especially when couples were in touch directly.

For instance, spouses might sometimes agree to divide the matrimonial home and retain any assets held in their sole names without disclosing the full list of all assets.

In this case, when the wife said she would accept $2 million in full settlement, the husband actually replied that he would only accept this proposal “under protest” pending a “global settlement of all the ancillary matters”.

If he had dishonestly concealed his assets, his lawyer said, he would have immediately accepted the offer without any condition. Moreover, he would also not have asked for more time to pay as this could risk scuttling a settlement that was in his favour.

But High Court Judge Choo Han Teck did not buy the argument because the responsibility of full and frank disclosure applies not only to contested divorces but also to exchanges of information between parties and their lawyers. After all, the outcome of such negotiations is still subject to the court’s approval.

If the husband had been forthright from the start by disclosing all his assets while asserting that he would be willing to divide only some of them, he would have avoided the current dispute, the judge added.

Hiding assets from ex-spouse

The husband claimed that the disputed sum was not relevant to the divorce because the funds were loans from his former business partner who later died.

He added that his then wife knew about this and the late partner’s relatives were willing to waive the loans in exchange for help in procuring certain assets. He added that the documents did not reveal any fraud and that he never told his ex-wife during their negotiations that he had disclosed all his assets then.

But Justice Choo noted that the husband’s conduct revealed “a pattern of deliberate concealment rather than mere oversight”.

For instance, he first claimed that the money in the bank account originated from the sale of stock options but later changed this story to claim the funds were loans for investments that were subsequently waived.

“His inconsistent narratives suggest an attempt to conceal his assets rather than a genuine explanation for their non-disclosure,” Justice Choo added.

Similarly, the husband was not justified in giving a false statement to claim that his undisclosed company was registered in 2018, when the evidence showed that he had owned it since 2004.

“Such a significant misrepresentation about a company he owned for two decades cannot be an innocuous error,” Justice Choo added.

Effect of non-disclosure

If the wife knew from the start that her ex-husband had stashed away assets but chose to accept a fixed settlement sum of $2 million, she would not be permitted to renege on the deal based on the fraudulent non-disclosure.

Justice Choo noted that the wife probably knew her ex-husband might have other assets since she knew that he “came from money” and owned shares in the family company. Yet, she never asked to include those assets in the joint asset list during their negotiations.

But the million-dollar question has yet to be answered: Would the parties have been able to reach a deal if all the assets were on the table then and, if so, would the wife have still been able to get 44.5 per cent of the total pool of matrimonial assets?

Justice Choo noted that even if he had found that the hidden assets should have been considered in the split, the solution cannot be to retrospectively increase the pool of matrimonial assets and award the wife 44.5 per cent of the undisclosed sum.

In past cases, the courts had used such a “quantification approach” to increase the shares for spouses during ongoing hearings when there was evidence of non-disclosure.

But the judge said that this approach could not be used in this case because the terms of the deal were agreed upon 15 years ago, and the wife had also received the $2 million settlement sum.

So there was no legal basis to allow her to keep this sum and simultaneously receive an additional award based on the undisclosed assets.

The wife cannot have her cake and eat it too because the rule that “fraud unravels all” means that once fraud is established, the settlement deal must be set aside entirely, and not partially varied.

In the end, the court did not make a ruling on the hidden stash because both sides would need to present fresh arguments for it.

What this means is that with more money on the table now, both sides must decide whether they should start a new court action or reach a new settlement on the division of their matrimonial assets.

If there is a lesson in this case, it is that spouses should always be upfront with each other when things go wrong so that they avoid prolonging the pain and incurring more legal costs.

After all, some secrets can’t stay hidden forever and if it happens like in this case, the parties have to relive the nightmare of fighting with each other again.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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