When creditors go after half of a couple’s $5m home

A couple who tried to shield their $5 million luxury condominium from creditors pursuing the husband over huge debts received a nasty surprise when their defence was shot down by the courts.

The couple had asserted that the condo unit was owned entirely by the wife and so should be out of reach by those chasing payments from the husband, who was in a $10 million debt hole.

The case highlights the shaky ground couples are on if they think making bare claims about the ownership of a property can give them some protection should debt collectors come calling for one of them.

Creditors are entitled to seize assets of debtors who are joint owners of real estate and auction off the property so that proceeds that belong to them can be used to pay down their debts.

The condo in this case was registered in both the couple’s names, but the wealthy Malaysian woman said her husband had intended for her to own it solely when they bought it over a decade ago.

She hoped that this claim would protect the unit from creditors, as she had nothing to do with the huge sums owed by her husband, a businessman.

It was not disclosed how he had chalked up the $10 million debt to a fund investment company, which filed a lawsuit to stake a claim on the husband’s half share of the property.

The High Court ruled that it was entitled to do so and dismissed the wife’s claim that she was the sole owner.

This case shows that it is never easy to avoid paying debts, especially when the only defence consists of flimsy claims not supported by any convincing evidence.

There have been cases here involving people who tried to avoid creditors by transferring their assets to spouses who were not being sued.

But most of these attempts failed, simply because drastic action to hide assets right after debts were incurred would naturally invite retaliation by creditors, who can get court orders to freeze bank accounts and halt asset transfers.

Moreover, very few couples would organise their assets separately in anticipation of being sued and their decision to own a property jointly or to co-mingle bank accounts would give fruitful ammunition to creditors to stake claims on half of these assets.

Here are three key observations from this case.

Couple paid for and owned the property jointly

When the couple bought the $5.2 million condominium in 2012, they paid about $1 million in cash and took out a mortgage of $4.2 million or so in both their names.

They claimed that even before they bought the apartment, there was “a common intention” that the wife would hold the entire beneficial interest even though the property was in both their names.

But High Court Judge Valerie Thean noted that other than their bare claims, there was no written record of this intention. If this was what they had wanted, they could not explain why both were named as joint owners and why they took out a joint mortgage to finance the property.

They also did not explain why they repaid the loan in almost equal amounts.

The wife sought to explain that her husband’s name was included in the title because it would be easier to obtain a loan with his high salary. She added that it was difficult for her as a foreigner to open a bank account in Singapore.

But Justice Thean noted the couple’s conduct was inconsistent with their claims that the property was bought for the wife’s sole benefit. For instance, while the wife was based in Kuala Lumpur, her husband was living and working in Singapore.

“The benefit of the property was not hers alone. Her evidence revealed, as well, that after (they) purchased the property, the couple lived in it together when they were in Singapore,” the judge said.

Justice Thean found it hard to believe that despite her family’s affluence, the wife had difficulty in opening a bank account in Singapore. Moreover, her husband did not mention during the trial that it was inconvenient for his wife to open an account or obtain a loan in Singapore owing to her status as a foreigner.

Personal documents not credible

You cannot just create your own spreadsheet and use that as proof of your transactions unless it is also backed by proper records.

In this case, the judge found that the husband’s attempt to use his own spreadsheet to show that his wife had paid the bulk of the mortgage was “not credible”.

For instance, his document noted various fund transfers to his account but no such transactions were captured in bank records.

Aside from 13 such “anomalies”, there were 19 instances where transfers listed for 2023 and 2024 lacked any contemporaneous supporting documentation at all.

In contrast, the creditors were able to produce bank documents that showed the wife had repaid into her husband’s account, at regular intervals, sums equivalent to approximately half of what was paid out.

Justice Thean noted that the wife’s payment patterns were consistent with how they owned the property jointly and not consistent with her claim that she was the sole owner.

Gifts between spouses

Spouses who hold properties jointly are usually deemed to be equal owners.

In this case, the wife claimed that her husband had intended to give his share to her and was merely holding it on her behalf.

If that were the case, there was no need for her to reimburse her husband almost exactly half of the amounts he paid out for their mortgage.

She contradicted herself in court by saying that she repaid “every single cent that he paid out” but this did not gel with her subsequent comment that her husband gave her the property because he was flush with cash and “super-liquid”.

Justice Thean found it “difficult to understand” why she had instructed her own companies in Malaysia to reimburse her husband for 50 per cent of the outflows from his bank accounts if he had intended to give his share of the property to her.

“The explanation for this was relevant because such a standing instruction could be consistent with an intention on the part of both parties to share the mortgage equally as beneficial owners in equal shares,” the judge added.

Similarly, the husband also had problems explaining why he would give the property to his wife and yet have about half the sums paid back into his bank account for the same gift.

All the inconsistencies led Justice Thean to find that the couple were not credible witnesses and to rule that they had no common intention to let the wife be the sole beneficial owner of the condo.

Indeed, documents related to the purchase of the apartment showed that they had meant to hold the property as joint owners as both names were registered, and that they also applied for the home loan together.

In addition, they had made mortgage repayments equally: The husband initially withdrew the full amount from his account and then his wife reimbursed him for about half the sum.

The ruling meant that the creditors were entitled to auction off the apartment so that half of the sales proceeds can be used to set off part of the debt.

If there is a lesson to be learnt from this case, it is that all debts must eventually be paid and that it is hard to try to circumvent the recovery process by making bare claims that are not supported by evidence.

Tan Ooi Boon is the Invest Editor of The Straits Times

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

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