Equity and Trusts

Citation(2012) 13 SAL Ann Rev 284
Published date01 December 2012
Date01 December 2012
Express trust

15.1 The recent decision of Foo Jee Seng v Foo Jhee Tuang[2012] 4 SLR 339 (‘Foo v Foo’) (noted in Hang Wu Tang, ‘The Court's Supervisory Power over the Exercise of Trustee's Discretion: A Contribution from Singapore’ (2013) T&T, forthcoming) relating to a dispute on a trust for sale displayed a masterful and sophisticated grasp of trust law jurisprudence drawing from a wide and impressive array of sources including case law, legislation and law review articles from the Commonwealth. It is expected that Foo v Foo will be the locus classicus in Singapore on the trustee's duties in relation to the exercise of his or her discretion and the circumstances when a court may interfere with the trustee's decision. In this case, the trust comprised of a house near Kembangan which was settled by a father for his children in 1979. The trust was drafted as a power of sale with a power of postponement given to the trustee (for a history of a trust for sale, see J M Lightwood, ‘Trusts for Sale’(1927–1929) 3 Camb LJ 59). It should be noted that the trustee is also one of the beneficiaries. The other beneficiaries who are the trustee's siblings wanted the property to be sold and the proceeds divided among the siblings. However, the trustee refused to sell the property despite the fact that the property which was worth $4m was only collecting a monthly rental between $1,130 and $200. In the High Court, the judge refused to order a sale. Judith Prakash J held that the court may only intervene in circumstances where mala fide was established. In last year's SAL Ann Rev, the present author respectfully suggested that the learned trial judge had shown undue deference to the trustee's decision not to sell. In allowing the appeal, the Court of Appeal applied a more robust approach in setting out the circumstances when a court may review a trustee's discretion. Such an analysis is more consistent with recent trust jurisprudence.

15.2 Foo v Foo is important because Chao Hick Tin JA provided valuable guidance on how a trustee should act in the exercise of his or her discretion. His Honour succinctly set out the following principles governing the exercise of a trustee's discretion:

(a) ‘the discretion exercised by the trustees should, as a rule be respected’ (at [51]);

(b) ‘where the discretion is vested in a trustee, that duty has to be exercised properly. The court cannot intervene unless the discretion is either improperly exercised, or not exercised at all’ (at [52]);

(c) the ‘beneficiaries cannot dictate the way a trustee should exercise his discretion’ (at [54]); and

(d) while there is no obligation to follow the beneficiaries' wishes, the trustee cannot completely disregard the beneficiaries' wishes and their objective needs and interests (at [54]).

15.3 With regard to the question of when the exercise of the trustee's discretion is considered to be improper, the following principles seem to emerge:

(a) The trustees should have regard to the settlor's intention in the exercise of the discretion (at [65]–[67]).

(b) In ascertaining the settlor's true intention, the trust document ‘should be construed as a whole in the light of the circumstances prevailing when it was made’ (at [77]).

(c) ‘What is clear is … trustees do not have absolute discretion’ (at [55]). In certain instances, the courts may intervene with the trustee's exercise of discretion.

(d) Chao JA accepted the authority of Re Beloved Wilkes' Charity(1851) 3 Mac & G 440; 42 ER 330 that the court's supervision will be confined to the ‘honesty, integrity, and fairness with which the deliberation has been conducted, and will not be extended to the accuracy of the conclusion arrived at’ (at [55]).

(e) Absence of good faith would be a ground for the court to intervene (at [55]). Nevertheless, the court also seemed to have rejected the proposition of law accepted by the trial judge that the court may only interfere if bad faith on the trustee's part is established. Chao JA said, ‘[w]hat we do acknowledge is that if [the] exercise of statutory powers, even if there is no bad faith, could be subject to judicial review, it does seem strange that a trustee's exercise of discretion would fall outside the purview of the court unless bad faith is shown’ (at [64]).

(f) The court did not state a final view as to whether reasonableness of the trustees' exercise of discretion is a criteria for interference beyond noting Dundee General Hospital Board of Management v Walker[1952] 1 All ER 896 at 901 where Lord Normand doubted that reasonableness was an appropriate benchmark for interference (cf at [35]–[39], where Chao JA cited the Canadian cases which suggest that the court may interfere with the trustees' discretion if the exercise of discretion was unreasonable).

(g) The court also did not state a final view whether the public law concept of Wednesbury reasonableness is a ground for the court's interference. Chao JA said (at [64]) this issue ‘deserves further mature consideration’, although later in the judgment his Honour expressed ‘caution against extending [the Wednesbury principle] to the area of trust law’ (at [64]).

(h) The court did not think that the so-called Hastings-Bass principle was relevant in this case (on this principle, see Hang Wu Tang, ‘Rationalising Re Hastings-Bass: A Duty to Act on Proper Bases’(2007) 21 Trust L Int'l 62).

15.4 In the present case, the following facts persuaded the court to order a sale of the property. First, the beneficiaries were all getting on in years and none of them were staying in the property. Second, the property was in a dire state of repair and the rental income was meagre, ie, less than $2,000 on a property estimated to be worth $4m. The unsatisfactory returns looked set to continue as the trustee had no concrete plans on how to redevelop the property. Third, the majority of the beneficiaries were in favour of selling the property. Furthermore, one of the beneficiaries had already passed away. Chao JA reasoned (at [66]) ‘there is also the risk that the longer the sale is postponed, one or more beneficiaries may not even live to enjoy their inheritance’. Fourth, the Court of Appeal did not accept that the settlor had intended the property to be kept as an ancestral home. This contention was inherently implausible in light of the fact that the trustee himself chose not to live on the property. Given that there was only one property and the settlor had six children, the court said that a sale and the division of the proceeds must be the only sensible way forward.

15.5 Although the Court of Appeal rejected the application of the principle in Re Hastings-Bass, deceased[1975] Ch 25 (‘Hastings-Bass’), Chao JA said in a crucial passage reminiscent of the language used in Hastings-Bass (at [67]):

… In our judgment, we think that [the trustee] has failed to take into account, in arriving at his decision not to effect the sale of the Property at this time, considerations which he should have taken into account and/or he has taken into account considerations which he should not have taken into account (eg, it was the Testator's intention to retain the Property as an ancestral home …)

15.6 The Court of Appeal held that in refusing to sell the property, the trustee had taken into account an irrelevant consideration, namely, that the settlor had intended for the property to be an ancestral home and ignored a relevant consideration, ie, that the continued retention of the property would not benefit the beneficiaries of the trust. In light of this, the Court of Appeal ordered that the property be sold no later than six months from the date of the judgment.

15.7 Tee Yok Kiat v Pang Min Seng[2013] SGCA 9 is an unusual case which turns on its facts. In this case, the plaintiff, Sarah, sued the first defendant, Andy, claiming that she had given Andy a sum of $608,700 to hold on trust for her for the purposes of investing in land and property in China. Andy's defence was that the money was given to him as a gift since they were in an intimate relationship. After carefully going through the evidence, Chao Hick Tin JA held the money was given to Andy to hold on an express trust for Sarah in order to invest in land and property in China. Chao JA was also not convinced by the defence that Sarah intended to make a gift of such a magnitude to Andy. The learned judge rightly observed (at [29]):

It was nonetheless evident from the available evidence that although Sarah was not a woman of little means, the Trust Money represented a not insignificant portion of her total assets … it did not make sense at all for Sarah to give such a large sum to Andy, especially when Andy himself had not even asked for it.

Resulting trusts

15.8 Neo Hui Ling v Ang Ah Sew[2012] 2 SLR 831 (‘Neo Hui Ling’) is a significant decision on resulting trust because of the way the judge analysed the intention of the parties. A daughter and mother held a house as joint tenants. Unfortunately, they could not get along and the house was eventually sold. The issue before the court was the proportion in which the parties were entitled to the sale proceeds. Although the property was held in joint...

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