Equity and Trusts

Citation(2007) 8 SAL Ann Rev 215
Published date01 December 2007
Date01 December 2007
General principles of equity/resulting trust and the presumption of advancement

13.1 V K Rajah JA”s decision in Lau Siew Kim v Yeo Guan Chye Terence[2008] 2 SLR 108 (noted Low, ‘Apparent Gifts: Re-examining the Equitable Presumptions’ 124 LQR (forthcoming, 2008)) appears set to become the locus classicus in introducing law students to the history and general principles of equity. Rajah JA traced the historical origins of equity and highlighted the underlying policies in equity with admirable clarity. Several themes on the future development of this body of law emerge from this important judgment. First, the theoretical basis of the existence of equity is to function as a ‘body of principles which has evolved progressively to mitigate the severity sometimes occasioned by the rigid application of the rules of the common law’ (at [24]). Invoking Aristotle, the learned judge of appeal saw this branch of jurisprudence as a ‘rectification of law where the law falls short by reason of its universality’ (at [24]). Second, there is a desire to develop equity in a principled and certain manner and avoiding ‘palm tree’ justice where the law is dispensed based on the subjective notion of an individual judge”s view of fairness. Finally, care must be taken so as not to calcify equity so much so that it is incapable of developing in a way which mitigates the rigours of the common law. These policy concerns present an inherent tension in equity. In balancing these competing concerns, Rajah JA said ‘courts should be principled and pragmatic when resolving the tension of applying an unguided and untrammelled discretion as an antidote to the blind acceptance of inflexible hard and fast rules’ (at [28]). Reiterating Bagnall J”s iconic statement in Cowcher v Cowcher[1972] 1 WLR 425 at 430 that ‘[t]his does not mean that equity is past childbearing; simply that its progeny must be legitimate — by precedent out of principle’, Rajah JA identified four primary perspectives as guidance for the court in the future development of equitable principles. The learned judge of appeal said that when a court is presented with a legal dispute, it must pay regard to: (a) precedent; (b) principle; (c) policy; and (d) pragmatism. The learned judge of appeal succinctly said that ‘[p]rincipled pragmatism should be the key to the court”s approach in the application of equitable principles’ (at [33]). In so far as general principles of equity are concerned,

Rajah JA”s decision is likely to be a major influence on the development of the law, often cited and gratefully received for the clarity in which he tackled the various policy concerns that underpin equity.

Resulting trust and presumption of advancement

13.2 Lau Siew Kim v Yeo Guan Chye Terence [2008] 2 SLR 108 involved a dispute between Lau Siew Kim, the third wife of the late Yeo Hock Seng, and Yeo Hock Seng”s sons. Although Yeo made an earlier Will before his marriage to Lau Siew Kim, this Will was deemed to have been revoked by the subsequent marriage between Yeo and Lau. The resultant position is that Yeo died intestate. At the heart of the dispute were two properties which were held on joint tenancy in the names of Yeo and Lau. Yeo”s sons attempted to challenge the operation of right of survivorship in Lau”s favour which arose by reason of the joint tenancy in these properties. Yeo”s sons alleged that there was a presumption of a resulting trust over the said properties in favour of their late father because their late father had contributed more than Lau with respect to the purchase price. As such, Yeo”s sons argued that the right of survivorship did not apply and that their father”s share of the properties should be divided according to the Intestate Succession Act (Cap 146, 1985 Rev Ed).

13.3 This section concentrates on the Court of Appeal”s analysis of the resulting trust and presumption of advancement (for a recent review of Singapore”s jurisprudence on presumption of advancement, see Tey, ‘Singapore”s Muddled Presumption of Advancement’[2007] Sing JLS 240). In analysing the theoretical basis of the presumption of a resulting trust, Rajah JA appeared to endorse two different rationales. The first rationale, as advanced by Professor Robert Chambers, is that a resulting trust arises in circumstances where the transferor of the property does not intend to benefit the recipient. The second rationale, according to Rajah JA, is ‘the presumption of resulting trust is an inference or even an estimate as to what a party”s intention is likely to be, based on certain assumptions arising from a set of given facts’ (at [37]). What is unfortunate is that Rajah JA did not clarify which of these rationales is a preferable explanation for the presumption of a resulting trust. The unresolved uncertainty on the underpinnings of the law of resulting trust creates some instability in the law in Singapore. This is because Chambers”‘absence of intent’ analysis (first developed by Birks in ‘Restitution and Resulting Trusts’ in Equity and Contemporary Legal Developments (S Goldstein ed) (Hebrew University, 1992) at p 335) is part of a wider thesis arguing that the resulting trust is equity”s response to an unjust enrichment claim. If Chambers” argument is accepted, a proprietary response is possible in circumstances where the transfer was vitiated by mistake, duress, undue influence, etc, because in such circumstances it could be argued that the transferor did not intend to

benefit the recipient. Such an analysis represents a major extension of the law of proprietary remedies and was roundly rejected by the House of Lords in Westdeutsche Landesbank Girozentrale v Islington London BC[1996] AC 669. Rajah JA”s endorsement of the Chambers” thesis leaves the possibility open in Singapore for the wider application of the resulting trust in unjust enrichment claims. However, it is suggested that for the reasons mentioned by the majority of the House of Lords in Westdeutche Landesbank Girozentrale v Islington London BC[1996] AC 669, Chambers” wider argument on the resulting trust should not be adopted in Singapore.

13.4 Rajah JA made a number of important observations on the presumption of resulting trust and presumption of advancement. At the risk of over-simplification, he said:

(a) the presumption of resulting trust is a rebuttable presumption. It is a mixed presumption of law and of fact (at [46]).

(b) The ‘strength of the presumption must vary according to the facts of the case and the contemporary community attitudes and norms’ (at [46]). Courts should not rigidly adhere to the application of the presumption of resulting trust but should ‘examine each set of facts which comes before them against the backdrop of contemporary practice and attitudes’ (at [55]).

(c) There is a two-stage test in analysing a claim involving a presumption of a resulting trust and a presumption of advancement. First, the court must determine whether the presumption of a resulting trust arose on the facts. This will depend on whether parties contributed unequally to the purchase price. Second, if a resulting trust is presumed, then the court must investigate whether a presumption of advancement would apply to displace the initial presumption (at [57]).

(d) A presumption of advancement applies between a husband and wife. The court declined to extend the presumption of advancement to unmarried couples. He said, ‘given that legislative recognition and public consensus about the status of de facto relationships have yet to emerge locally’ the extension of the presumption of advancement to these relationships is unwarranted (at [76]).

(e) In assessing whether a presumption of advancement applied, all factors must be considered. The financial dependence of the recipient on the transferor is one factor which might affect the strength of the presumption. Two key elements are also crucial in determining the strength of the presumption, namely: (i) the nature of the relationship between

the parties; and (ii) the state of the relationship, ie, whether the relationship is a close and caring one or whether it is one of formal convenience (at [78]).

(f) Where there are unequal contributions to the purchase price, the presumption of resulting trust and presumption of advancement may feature whenever there is a legal joint tenancy. Where joint tenants are spouses, the presumption of advancement may apply to presume an intention on the part of the parties for the rule of survivorship to operate (at [102]).

(g) In the case of joint bank accounts, there will be a strong inference that the rule of survivorship is intended to apply (at [108]).

13.5 After a careful assessment of the evidence, the Court of...

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