Equity and Trusts

• Author: TANG Hang Wu LLB (National University of Singapore), LLM, PhD(Cambridge); Advocate and Solicitor (Singapore), Solicitor (England and Wales); Associate Professor, Faculty of Law, National University of Singapore.
• Published date: 01 December 2011
• Date: 01 December 2011

Express trust

14.1 Foo Jee Seng v Foo Jhee Tuang[2012] 1 SLR 211 (Foo Jee Seng) is an important decision involving a trustee's power of sale. Beyond the issue of the trustee's power of sale, this case also explores the court's philosophy in exercising their supervisory power over trustees. In this case, the subject matter of the trust was a property at 39 Lorong Marzuki. The settlor, the late family patriarch, had created a trust for sale of the property where he appointed his wife and his son, Foo Jhee Tuang (Jhee Tuang), to be the trustees by way of a will. In this trust for sale, the beneficiaries were the settlor's wife and children (which included Jhee Tuang). The settlor also gave the trustees the power to postpone the sale calling in and conversion as they shall in their absolute discretion think fit without being liable for loss . In 1979 the settlor passed away, when Jhee Tuang was 18 years old. It was only in 2009, four years after the settlor's wife passed away, that Jhee Tuang claimed that he discovered that he was a trustee of the property. The property was worth S$4m in 2010 and was in a shabby condition. It was described as a single storey old wooden zinc roof landed home which was partitioned into many rooms. By this time the entire family had moved out and the property was tenanted. The rental collected ranged from S$1,130 to $200 a month. In light of the poor returns, some of the beneficiaries applied for the property to be sold. This application was resisted by the trustee, Jhee Tuang.

14.2 In Foo Jee Seng, Judith Prakash J held that a trust for sale had been created by the settlor. The learned judge found that the father had created the trust for sale to avoid the application of the Settled Estates Act 1970 (Cap 293) which was in force at the time. The Settled Estates Act 1970 was an onerous statute that provided that settled estates could only be leased out with the consent of the court. Prakash J therefore concluded that the testator may have created a trust for sale as an alternative to creating a settlement of land. In declining to order that the property be sold, the learned judge held that the court is primarily informed by the principle of non-intervention, which states that where the trustees have absolute discretion to do or refrain from doing a particular action, and if their conduct is informed, bona fide and free from influence of improper motives, then the court will not interfere in the trustees' exercise of their powers: Foo Jee Seng at [26]. Prakash J held that there was no suggestion of mala fides. Her Honour asked rhetorically (Foo Jee Seng at [30]):

If the only ground of bad faith upon which the court would potentially interfere with a trustee's exercise of discretion was not relied upon, what more could the plaintiffs use to support their application? The plaintiffs' complaints that it was more than 30 years since the testator died, that they were more than 50 years old and not in the pink of health and could use a distribution of sale proceeds for their medical and living expenses were not sufficient.

14.3 It is respectfully suggested that the learned judge demonstrated an undue deference to the trustee's decision not to sell. First, the so-called principle of non-interference is incompatible with the modern approach that the court has the inherent power to supervise and, if necessary, the power to intervene in the administration of the trusts. As Lord Walker said in the context of disclosure of documents in Schmidt v Rosewood Trust LtdELR[2003] 2 AC 709 (Rosewood Trust) the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts [emphasis added]: Rosewood Trust at [51]. Such an approach is preferable because it enables the court to intervene where necessary in order to protect the beneficiaries' interest. Second, quite apart from a duty of good faith, a trustee must behave in a rational manner and be properly informed when exercising his or her discretion. The former duty is often expressed as a duty on the trustee's part not to act capriciously (see Re ManistyELR[1974] 1 Ch 17). With regard to the latter duty of making an informed decision, the trustee must take into account relevant consideration and ignore irrelevant considerations (see Tang Hang Wu, Rationalising Re Hastings-Bass: A Duty to Act on Proper Bases (2007) 21 Trust Law International 62). On the facts, the relevant considerations which ought to be taken into account when considering whether to sell the property include the needs of the beneficiaries, the value of the property and the potential rental yield of the property. As the rental yield was extremely paltry, it is suggested that the more pragmatic decision would be to order a sale of the property. The allegation that the settlor had intended the property to be an ancestral home and/or an investment property, even if true, cannot be a decisive factor in not ordering a sale of the property. After all, the hand of the dead cannot be used to rule the living especially where circumstances have changed drastically. Finally, as a matter of policy, this decision does not sit well with the social reality of Singapore being a land scarce country. The resultant effect of this decision is that the trustee could postpone the sale indefinitely leaving the property severely underdeveloped. Such a result is inconsistent with the policy of devising doctrinal rules which encourage optimal land use in Singapore (see the Honourable Chan Sek Keong CJ's foreword in Tan Sook Yee's Principles of Singapore Land Law (LexisNexis, 3rd Ed, 2009)).

14.4 Wong Chong Yue v Wong Chong Thai[2011] 2 SLR 804 was a family dispute involving an alleged express trust over shares of a company. The plaintiff and defendant were siblings and their father had transferred some shares to the defendant. It was alleged by the plaintiff that the father had intended to declare an express trust over the shares for the benefit of the plaintiff, the defendant and another sibling in equal shares. The difficulty with the assertion that there was an express trust was that there was no contemporaneous evidence of such a declaration. As such, Phillip Pillai J held that the plaintiff's claim failed and the shares were transferred absolutely to the defendant.

14.5 Chong Sze Pak v Chong Ser Yoong[2011] 3 SLR 80 is illustrative of an express trust which was avoided due to the operation of the Housing and Development Act (Cap 129, 1997 Rev Ed) (for a review of all the cases on Housing and Development Board flats and trust, see Tang Hang Wu, Housing & Development Board Flats, Trust and Other Equitable Doctrines ((2012) 24 SAcLJ Sept, forthcoming)). In this case, the plaintiff claimed that he had paid for all the outgoings of the Housing & Development Board (HDB) flat registered in the defendant's name including the instalment payments of the HDB loan. In return, the defendant agreed by way of a deed to hold the HDB flat on trust for the plaintiff. Under the terms...