Equity and Trusts

• Author: TANG Hang Wu PhD, LLM (Cambridge), LLB (National University of Singapore); Advocate and Solicitor (Singapore), Solicitor (England and Wales); Associate Professor, Faculty of Law, National University of Singapore.
• Citation: (2008) 9 SAL Ann Rev 295
• Date: 01 December 2008
• Published date: 01 December 2008

Express trust

13.1 Although Loh Sze Ti Terence Peter v Gay Choon Ing[2008] SGHC 31 has been recently overturned by the Gay Choon Ing v Loh Sze Ti Terence Peter[2009] SGCA 3, it remains a noteworthy decision in the area of equity and trusts. The Court of Appeal overturned this case essentially on the point of whether a valid settlement agreement was concluded by the parties. Therefore, save for the point on settlement contracts, it is arguable that the observations made by Belinda Ang Saw Ean J on the principles of the express trust in the first instance of Loh Sze Ti remain good law. In this case, the plaintiff invested some money in the defendant”s family company for the redevelopment of a hotel in Little India known as Tai Hoe Hotel. In order to reflect this investment, a trust deed was drawn up whereby the defendant was referred to as the trustee for the plaintiff in respect of S$1.5m shares in the defendant”s family company. The plaintiff alleged that there was a breach of trust by the defendant. On the defendant”s part, he denied that there was a trust relationship between the parties and that the arrangement was merely a loan. Ang J”s contribution to trust law in Loh Sze Ti is the careful methodology to the principles relating to the interpretation of a trust deed. Ang J”s approach was to prima facie start with the nature and text of the trust deed, and where the text is unclear, to determine whether extrinsic evidence is admissible in the circumstances. On the facts, Ang J found that upon construction of the trust deed, it was plain that the defendant was to hold the shares beneficially for the plaintiff. Nevertheless, Ang J thought that the context in which the trust was executed was also important. Her Honour then proceeded to consider the factual matrix of the execution of the trust and investigated the purpose of the declaration of the trust. The learned judge concluded that the facts of the case did not suggest that this arrangement was a loan and not a trust.

13.2 Having concluded that there was a trustee/beneficiary relationship, Belinda Ang J went on to consider whether there was a breach of fiduciary duty by the defendant (on fiduciary duties: see generally Conaglen, ‘The Nature and Function of Fiduciary Loyalty’(2005) 121 LQR 452; Davies, ‘Keeping Fiduciary Liability within Acceptable Means’(1998) Sing JLS 1; Tey, ‘Fiduciary Duty: A More

Cautious Approach’(1998) Sing LR 15). The general principles governing fiduciaries which may be gleaned from this case are as follows. First, the judge accepted that the test of whether there is a conflict of interest between a fiduciary and his principal is whether ‘the reasonable man looking at the facts of and circumstances of the particular case would think there was a real sensible possibility of conflict’: Loh Sze Ti Terence Peter v Gay Choon Ing[2008] SGHC 31 at [85]. This observation is significant because it represents an endorsement of Lord Upjohn”s dissenting approach in Boardman v Phipps[1967] 2 AC 46 at 124. Second, the learned judge stressed that a fiduciary cannot act for his own benefit without the informed consent of his beneficiary. Third, ‘[c]onsent that is needed to uphold the transaction is predicated upon full and frank disclosure of all material facts in relation to the transaction’: Loh Sze Ti Terence Peter v Gay Choon Ing[2008] SGHC 31 at [85]. Fourth, the burden is placed on the fiduciary to demonstrate that he obtained the beneficiary”s consent in the context of full and frank disclosure. Finally, it is not a defence for the fiduciary to argue in the face of non-disclosure that the beneficiary could have obtained the necessary information.

Resulting trust

13.3 The jurisprudential basis of the resulting trust remains a live issue in the Singapore courts this year. Lai Siu Chiu J grappled with this difficult question in Yong Ching See v Lee Kah Choo Karen[2008] 3 SLR 957 (‘Yong Ching See’). At the risk of oversimplification, this case dealt with a plaintiff who had provided a sum of money to finance the subscription of company shares which were registered in the defendant”s name. The plaintiff alleged that there was a resulting trust in his favour over the shares. Like the Court of Appeal decision in Lau Siew Kim v Yeo Guan Chye Terence[2008] 2 SLR 108 (‘Lau Siew Kim’) (which was reviewed last year, see (2007) 8 SAL Ann Rev 215), the difficulty with this case is that the learned judge appeared to endorse two different jurisprudential bases for the resulting trust. It was said that ‘resulting trusts are founded on the presumed intention of the transferor of property’: Yong Ching See, at [35]. This is orthodox trust law and uncontroversial. However, later in the judgment, Lai J quotes Lord Millett in Air Jamaica Ltd v Joy Charlton[1999] 1 WLR 1399 at 1412 who said that the resulting trust ‘responds to the absence of any intention on his part to pass a beneficial interest to the recipient’: Yong Ching See v Lee Kah Choo Karen[2008] 3 SLR 957 at [39]. The learned judge also found support for the ‘absence of intent’ basis for the resulting trust in the Court of Appeal”s decision of Lau Siew Kim.

13.4 The introduction of two competing bases for the resulting trust in Yong Ching See v Lee Kah Choo Karen[2008] 3 SLR 957 (‘Yong Ching See’)

introduces formidable complexity to the law of resulting trust in Singapore. Although the difference may seem prima facie slender, there is a significant difference between saying that the resulting trust arises due to (a) a presumed intention of a trust on the transferor”s part, and (b) an absence of intent by the transferor to benefit the transferee. This is because the ‘absence of intent’ theory (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 theory in support of the argument that the resulting trust is a response to some unjust enrichment claims. If the absence of intent analysis is accepted, then a resulting trust would be possible in cases where the transferor”s intent to transfer the property was vitiated by mistake, duress, undue influence, etc. This is because in such situations, the transferor could say that the transfer was clearly not meant to benefit the transferee, ie, there was an absence of intent to benefit the recipient. Lai Siu Chiu J appears to recognise this possibility when she quoted academic writing (Yong Ching See, at [41]) which asserted that the resulting trust is the proprietary response to an unjust enrichment claim. If this part of the judgment is taken literally and as an endorsement of the absence of intent/unjust enrichment theory, this decision represents a significant enlargement of available proprietary remedies.

13.5 However, on closer reading of Yong Ching See v Lee Kah Choo Karen[2008] 3 SLR 957, it is suggested that support for the absence of intent/unjust enrichment theory is at best equivocal. First, the learned judge also cited the decision of Westdeutsche Landesbank Girozentrale v Islington London BC[1996] AC 669 (‘Westdeutsche’) and William Swadling”s essay ‘A New Role for Resulting Trusts?’(1996) 16 LS 110. It will be recalled that the House of Lords in Westdeutsche gave a sustained critique of the absence of intent theory and ultimately rejected this argument. Furthermore, Swadling”s work also does not support the absence of intent theory. Second, Lai Siu Chiu J”s analysis of the facts is essentially a two-stage process which is consistent with orthodox resulting trust jurisprudence. In the first stage, she noted that a presumption of resulting trust arises when there is a purchase in the name of another. Once the presumption arises, the second stage is to determine whether the presumption is rebutted on the facts of the case. On the facts, Lai J declared that the defendant held the shares on trust for the plaintiff. Therefore, it is highly unlikely that the learned judge intended to lay down principles leading to a radical widening of categories of the resulting trust to include unjust enrichment claims, especially when this was not a ‘live’ issue between the parties. Nevertheless, the jurisprudential confusion surrounding the resulting trust requires urgent clarification from the Court of Appeal.

13.6 Lim Chen Yeow Kelvin v Goh Chin Peng [2008] 4 SLR 783 is also an important decision dealing with joint bank accounts and the presumption of a resulting trust. In this case, the plaintiff was the sole executor of the estate of Madam Lim Bee Bee. The defendant was Madam Lim”s boyfriend and cohabitant. Madam Lim had a joint bank account with the defendant. Since all the money in the bank account came from Madam Lim, the dispute was whether there was a presumption of resulting trust in favour of Madam Lim”s estate. On the facts of the case, there was clear evidence of Madam Lim”s intention to benefit the defendant. As such, there was no need to apply the presumption of a resulting trust. Nevertheless, Chan Seng Onn J made several important observations on the nature of resulting trusts and joint bank accounts. First, the court”s primary task is to discern the...