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240 Singapore Academy of Law Journal (2003) Secured Creditors 48 At this juncture, it should be noted that this discussion does not concern the secured creditor. The secured creditor is assured of repayment—from the particular asset which he holds as security for his loan. He does not need an order from the court dealing with the ancillary matters in order to recover his loan. Whether the money loaned by the secured creditor was actually used for the benefit of the family or not is a matter about which the husband and wife may be in dispute. The court’s findings in this regard may affect the orders made in respect of the division of the matrimonial assets. However, such disputes and findings will not concern nor affect the secured creditor, who will be able to recover his debt from the particular asset which he holds as security before it can be divided between the husband and wife. Unsecured creditors 49 Unsecured creditors would range from judgment creditors who are institutions—credit card companies, for example, to friends and relatives who lent the money for a specific purpose (for example, to buy the matrimonial home, or to pay for the children’s school fees). If the unsecured creditors are not given an order to be repaid their loans from a particular asset, or from the pool of matrimonial assets, then their only recourse is in commencing proceedings in the civil courts. It is submitted that a distinction should be drawn between the scenario where the debt can be linked to a particular matrimonial asset, and when it cannot. (i) Where debt can be linked to a particular matrimonial asset 50 Certainly, if the debt to the 3 rd party can be linked to the acquisition of a particular matrimonial asset, that would be a very strong factor in the 3 rd party’s favour. It is submitted that if such a factor exists, then the court need not go on to consider any other factors before ordering that the 3 rd party be repaid his loan from that particular matrimonial asset. One concern with this approach is that this may place the 3 rd party in the position of a secured creditor when he never had any security for the loan which he made. However, this can be rationalised by adopting the High Court’s reasoning in Lee Sew Iam Richard, supra, where the High Court opined that the 3 rd party lender without security played the same role vis-à-vis the husband and wife as a secured creditor, and should therefore be entitled to repayment of the loan in the same way as a secured creditor would.
15 SAcLJ Matrimonial Assets and the 3 rd Party 241 “Another bone of contention between the parties was as to whether the husband’s mother should be repaid her loan with interest and if so, at what rate. The first issue was easily disposed of by asking, what would have been the alternative if the mother had not extended the loan The answer must surely be that the parties or one of them would have had to borrow the required sum from a financial institution. Why then should there be any difference when the mother lent the parties the monies drawn from her overdraft account with DBS Bank… I could see no distinction between a direct borrowing by the parties from a bank and indirect borrowing by them through the husband’s mother; in both instances interest is payable and I held that the repayment to the husband’s mother should include reimbursement of interest at a lower rate (6%) than what she had to pay DBS Bank (7%) on her overdraft facility.” (per Lai Siu Chiu J) 51 It should be noted, in this regard, that the 3 rd party lender who is not a secured creditor would often be a close family member or friend of the husband and wife. The money would have been lent on the strength of the personal relationship the lender had with either or both the husband and wife. In this regard, the husband and wife would have benefited from a loan of money, which they may not have been able to obtain from a commercial source. Even if they had managed to obtain such a loan from a commercial source, there would often be no interest charged in respect of the “friendly” loan, and no need to provide any security. Since both the husband and wife would have benefited from the 3 rd party’s generosity in this respect during the marriage, it seems only equitable that upon the breakdown of the marriage, the 3 rd party should be repaid the monies he had advanced with interest. (ii) Where debt cannot be attributed to any particular matrimonial asset 52 Where the debt cannot be attributed to any particular matrimonial asset, the court should consider a whole range of factors in deciding whether to order the 3 rd party to be repaid from the pool of matrimonial assets (“the repayment order”). 53 Although the English case of Harman v Glencross 45 involves a discussion of legislation of which there is no equivalent in Singapore, it 45 [1986] 1 All ER 545
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