British & Malayan Trustees Ltd v Abdul Jalil bin Ahmad and Others

• Jurisdiction: Singapore
• Judge: L P Thean J
• Judgment Date: 15 November 1990
• Neutral Citation: [1990] SGHC 88
• Citation: [1990] SGHC 88
• Defendant Counsel: TPB Menon (Wee Swee Teow & Co),Aloysius Leng (Abraham Low & Partners),The eighth defendant in person,The seventh defendant in person,The third defendant in person,Harry Elias and TA Karthigesu (Harry Elias & Partners),Michael Khoo Kah Lip (Michael Khoo & BB Ong)
• Published date: 19 September 2003
• Plaintiff Counsel: KS Lo and Lim Soo Peng (Allen & Gledhill)
• Date: 15 November 1990
• Docket Number: Originating Summons No 387 of 1990
• Court: High Court (Singapore)
• Subject Matter: Trusts,Application by trustees to court to order sale of trust property,Powers,Trustees,ss 2(2) & 59 Trustees Act (Cap 337),Whether court had power to order sale where trust instrument expressly excluded power of trustees to apply for court order,Power to sell trust property,ss 4 & 6 Settled Estates Act (Cap 293)

Cur Adv Vult

British & Malayan Trustees Ltd are presently the trustee (the trustee) of a settlement created by an indenture dated 7 October 1933 between the settlor, Shaik Sallim bin Mohamed bin Sallim bin Talib (the settlor) of the first part, the settlor and Shaik Abdullah of the second part and Shaik Mohsin of the third part. I shall refer to this indenture as ` the settlement` . In these proceedings, the trustee applies under s 4 of the Settled Estates Act (Cap 293) and s 59 of the Trustees Act (Cap 337) for an order authorizing the sale of the land and premises marked on the government resurvey map as lot 524 of town subdivision 25, which has a land area of 16,978.0 sq m. On the land were built seven blocks of three-storey apartments and a row of garages; there are altogether 60 apartments and 30 garages. I shall refer to the land and premises as ` the property`. At the initial stage of the application, various orders and directions were made, including the addition of the necessary parties as defendants in these proceedings. In particular, orders were made for the first defendant to be joined as a party representing himself and 59 named income beneficiaries, for the second defendant to be joined as a party representing himself and 14 other named income beneficiaries and for Mr Michael Khoo to be appointed to represent all the corpus beneficiaries under the settlement. All those income beneficiaries, who do not wish to be represented by either the first or the second defendant, are joined as parties to these proceedings. There are now before me all the parties who have an interest in the settlement.

By the terms of the settlement, the settlor revoked the trusts, which he had created in respect of certain immovable properties, and settled two formidable lists of immovable properties described in the first and second schedules to the settlement in trust for himself during his life and after his death in trust, as to the net income from the settled properties, for the beneficiaries named or described therein, ie the income beneficiaries under cl 3 of the settlement, during ` the period of settlement` (as defined in cl 3), and after the expiration of the period of settlement in trust for the beneficiaries under cl 6, ie the corpus beneficiaries.

The property is not one of the immovable properties described in the first schedule or the second schedule to the settlement. It was acquired out of the capital moneys paid upon compulsory acquisition of some immovable properties comprised in the settlement. Linda Ho, the assistant manager of the trustee, in para 4 of her affidavit affirmed on 22 April 1990 said:

The property which is the subject of the present application - lot 524 of town subdivision 25 (No 7, Orange Grove Road) (hereinafter referred to as the property) - was purchased in 1952/1953 by the then trustees of the family settlement with capital moneys arising from compulsory purchase or acquisition of settled property and comes within the family settlement by virtue of the definition. ` The settled property` in cl 1 which states that expression means also ` any immovable property purchased with such money... by the trustees` . The purchase price paid by the then trustees was $500,000. The property was then developed by the then trustees and seven three-storey walk up apartment blocks and a row of garages were erected at a total costs of $1,760,159.

The reasons for this application as set out in the affidavit of Linda Ho are as follows. The trustee has consulted a firm of property consultants, Knight Frank Cheong Hock Chye & Baillieu (Knight Frank) in respect of the property and, in particular, its value and poten tial and the categories of land use to which the property could be put. Knight Frank has valued the property at $61,500,000 on the basis of residential land which has potential for the development of service apartments. The net rental income from the prope rty, at present, is low, and on the basis that the true market value of the property is $61,500,000, the annual rental return, net of property tax, is about 1%. The trustee has been advised by Knight Frank that the current annual rental yield of first-clas s residential property in Singapore is in the region of 4.5% to 5% (net of property tax) and that of the first-class commercial property in Singapore is in the region of 4% to 4.5% (net of property tax). The gross rental income (based on the return in 1989 ) presently derived from the property represents 95% of the total gross rental income of all the immovable properties comprised in the settlement and ` 73.3% of all the gross income presently accruing to the family settlement` , apart from the rental income from rent controlled premises and dividends from stock and shares. As for the categories of land use to which the property could be put, Knight Frank has advised the trustee of the various options open, such as redevelopment of the land alone or in a joint venture with an experienced and reliable developer and retaining some units in the new development or an outright sale of the property and re-investment of the proceeds of sale in suitable buildings.

There is also the question of rising costs of maintenance which the trustee has considered. The buildings on the property were built in 1953- 1954, and as the buildings age further, heavier repair and maintenance costs would be expected and the rate of such expenses in relation to the rental income would increase with the passage of time, thus further diminishing the net annual rental return from the property.

The trustee has also been advised by Knight Frank that there is a risk of the property being compulsorily acquired by the government, if it is allowed to remain in its present state and without adequate maintenance. The size and location of the prope rty and its present development thereon may make the property a prime target for such acquisition: the existing development is an under-utilization of the land and does not appear to keep pace with the development of other properties in the surrounding area. In addition, the property is adjoining a large plot of state land. All these are risk factors which the trustee has considered. If the property i s compulsorily acquired, the compensation payable would be assessed on the basis of the market value of the property as at 1 January 1986, if that market value is lower than its market value at the time of the compulsory acquisition. The current market val ue of the property greatly exceeds that as of 1 January 1986. Hence, if the property is compulsorily acquired, a great capital loss would result to the corpus.

For these reasons, the trustee is of the opinion that the property should be sold and the proceeds of sale therefrom be reinvested in the purchase of first-class residential and/or commercial properties in Singapore, which are expected to produce a b etter rental income and which are also likely to attract a rate of increase in the capital value which approximates to that of the property. In carrying out such an exercise, there is likely, unfortunately, to be a time gap between the receipt of the proceeds of sale and the reinvestment thereof in other properties. During this interim period, it is proposed to place the proceeds on deposits with banks or financial institutions. Should the court be disposed to make the order for sale of the property, the trustee applies for Knight Frank to be appointed as the sole marketing agent for the sale of the p roperty upon the terms and conditions proposed by them, which are acceptable to the trustee.

When the application for the substantive order, ie the order authorizing the sale of the property, first came on for hearing, there was no objection, in principle, from the beneficiaries, both the income and the corpus beneficiaries. The main critici sms from the beneficiaries were then mainly these. First, the trustee did not have an adequate valuation of the property. The valuations given by other valuers obt ained by the beneficiaries show that the property is worth more than $61,500,000. Some beneficiaries suggested that there should be at least two detailed valuations carried out by independent valuers. Secondly, the trustee has not shown any concrete scheme or plan for reinvestment, and this is extremely important, because under cl 18 of the settlement the trustee is directed not to invest any capital money or accumulation of income in interest bearing securities authorized by law for the investment of trust funds. The trustee, however, is authorized to place capital moneys or accumulations of net income, for the time being not invested as directed by the settlement, with one or more banks in Singapore but shall not demand interest on such moneys on current a ccount or deposit. The trustee may, nevertheless, receive any interest paid on any banking account but such interest so received shall not form part of the income of the settled property or be appropriated to accumulations of income but ` shall from time to time be distributed amongst poor persons of the Mohamedan religion resident in Singapore or elsewhere in any country in such manner as the [trustee] shall think fit` . Hence, during the interim period, ie the period between the sale of the property and the reinvestment of the proceeds of sale, if the proceeds are placed on fixed deposits with banks or financial institutions the interest accruing therefrom cannot be treated as income distributable to the beneficiaries, and thus the income beneficiaries would be deprived of the income which they would otherwise be receiving from the net rental of the property. The income beneficiaries were therefore very concerned of the delay in the reinvestment of the proceeds of sale.

Lastly, some of the beneficiaries objected to the appointment of Knight Frank as the sole marketing agent, and one of the grounds of the objection was that their fees quoted were higher than...