CH v CI

• Jurisdiction: Singapore
• Judge: Lim Hui Min
• Judgment Date: 03 June 2004
• Neutral Citation: [2004] SGDC 131
• Court: District Court (Singapore)
• Year: 2004
• Published date: 03 September 2004
• Plaintiff Counsel: Ms Anna Oei (Oei and Charles)
• Subject Matter: Family Law,S. 112 Women's Charter,Life insurance policy under Section 73 of the Conveyancing and Law of Property Act in which wife named as a beneficiary,Whether irrevocable trust created for the wife,whether court in the divorce proceedings may make orders in relation to the policy
• Citation: [2004] SGDC 131

[EDITORIAL NOTE: The details of this judgment have been changed to comply with the Children and Young Persons Act and/or the Women's Charter]

3 June 2004

District Judge Lim Hui Min:

The facts and the application

1 This case involves a husband who took out a life insurance policy in times when his marriage with his wife was still reasonably happy. He named the wife as the beneficiary of the policy. He paid the premiums faithfully. Over the years, the relationship between the husband and wife soured, and the husband then applied to the insurance company which issued the life insurance policy to remove the wife as beneficiary of the policy and to nominate a new beneficiary—a woman whom he was close to (and who has now become his wife), one A. He did not tell the wife what he had done. The insurance company did not object to the change of beneficiary at the time. They even let A take out a couple of loans on the insurance policy. Some years later, the husband filed for a divorce against the wife. He got his lawyers to write to the wife’s lawyers to tell them that he had changed the beneficiary on the life policy from the wife to A. The wife then got her lawyers to write to A to tell her that she thought the husband’s attempt to change the beneficiary was void, and that she would be taking out court proceedings to set the change of beneficiary aside. However, the wife never took out any such court proceedings. After a battle in court, a decree nisi was granted to the husband and wife. Happily, after that, the husband and wife decided to settle the ancillary matters amicably. They entered into a consent order which provided, amongst other things, that the wife would pay the husband the sum of $1,880,000, and that each party would return certain personal and artistic items to the other (for example, “Balinese sculpture of wooden fisherman”, “painting of Woman Near Lily Pond with Carved Wooden Frame (Otherwise Known as a Le Mayeur Painting)”, “Cast Iron Crest of Christ Church College Oxford” etc). Item 7 of the consent order states: “Each party shall not have any further claims against the other party.” Item 8 states “Parties be at liberty to apply.”

2 After this consent order was made, the husband and wife then proceeded to get on with their own lives, which, for the husband, involved marrying A. He continued to pay the premiums on the life insurance policy, believing that A would be the beneficiary in the event of his death. For her part, A took out a loan against the life insurance policy to which she had been named a beneficiary. This was all approved by the insurance company. Then in July last year, the insurance company dropped a bombshell on the husband. It informed him that it was of the view that under the law, a trust had been created for the wife when he named her as beneficiary of the life insurance policy. Therefore, in the event of his death, the wife would benefit, not A. In the meantime, A would not be able to alter, surrender or take a loan on the life insurance policy without the wife’s written consent.

3 Alarmed by this unexpected turn of events, the husband took out an application, summons-in-chambers no. 650393 of 2004 (“the SIC”) filed on 27 February 2004, which came up before me for hearing on 22 March 2004. The SIC prays, inter alia, that:

(a) The Insurance Policy No. [xxx] to be declared to be part of the matrimonial assets which belong to the Petitioner solely; and

(b) The assignment which the Petitioner executed on the 9^th October 1985 to A be declared as valid and binding.

4 At the hearing before me, the husband’s counsel informed me that the SIC had been served on the wife’s solicitors and also on the insurance company which issued the life insurance policy in question. The husband’s counsel further informed me that the wife’s solicitors had told her that they had informed the wife of the proceedings, but they had no instructions from the wife in the matter. The husband’s counsel had also spoken to the solicitors for the insurance company, who had told her that they would not be attending the hearing. In the circumstances, I proceeded to hear the SIC, with only the husband’s counsel in attendance.

5 I made the following orders on the SIC (extracted in an order of court filed on 2 April 2004):

(a) The Insurance Policy No. [xxx] be and is hereby declared to be part of the matrimonial assets which belong to the Petitioner solely.

(b) The Petitioner may remove the Respondent as the beneficiary of the said policy if the insurance company takes the position that the previous assignment of the said policy was invalid.

6 None of the parties appealed against my decision, but I have decided to write a judgment in the matter as it involves matters of some importance to the insurance industry, as well as to divorcing policyholders who have named their ex-spouses as beneficiaries in life insurance policies which they have taken out (and of course, to the ex-spouses themselves).

7 The facts which I have recounted in paragraphs 1-6 above are set out for easy reference in the table below, together with the relevant dates.

S/No.	Event	Date
1	Parties got married	31.12.55
2	Husband acquired life insurance policy [xxx] (“the policy”) and nominated the wife as the beneficiary.	01.06.79
3	Husband signed the necessary papers to change the beneficiary of the policy from the wife to A. This was acknowledged by the insurance company. (“the 1985 assignment to A”)	15.07.85
4	A took out a loan on the policy, for $24,366	15.04.86
5	A took out a loan on the policy for the sum of $34,300	1.06.94
6	Divorce petition filed by husband	28.01.97
7	Decree Nisi granted	14.01.98
8	Letter from wife’s solicitors to A informing her that the 1985 assignment to A was void and the wife would be taking out court proceedings to set it aside.	22.08.98
9	Consent order entered into between husband and wife in respect of the ancillary matters. (“the consent order”)	20.07.00
10	A repaid a loan she took out on the policy for the sum of $73,225.40 to the insurance company.	24.10.01
11	Insurance company wrote to the husband to inform him, inter alia, that the wife would be the beneficiary of the policy in the event of his death and that A could not alter, surrender or take a loan on the policy without her consent.	3.07.03

Section 73 Trust—Undefeated by Divorce

8 This is what the insurance company wrote in its letter to the husband dated 3 July 2003: “..we would like to inform you that given the law as it stands today, naming CI as the beneficiary in the Application Form creates a section 73 trust on this policy.”

9 The insurance company was referring to Section 73 (Moneys payable under policy of assurance not to form part of the estate of the policyholder.) of the Conveyancing and Law of Property Act (Cap. 61) (“Section 73”), the material provision of which states:

73. —(1) A policy of assurance effected by any man on his own life and expressed to be for the benefit of his wife or of his children or of his wife and children or any of them, or by any woman on her own life and expressed to be for the benefit of her husband or of her children or of her husband and children or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the policyholder or be subject to his or her debts.

10 What these words mean is that when a person who takes out a life insurance policy (“the policyholder”) names his spouse and/or his children as beneficiaries of the life insurance policy, a statutory trust is automatically created on the policy (“the Section 73 trust”). This means that if the policyholder dies, the monies payable on the policy will go to the spouse and/or the children who have been named as beneficiaries to the policy. The monies will not go to the estate of the policyholder, so they will not be liable to death tax. Neither can his creditors get any share of the monies. This means that without having to go through the usual expense and formalities of creating a trust (i.e. drawing up a trust deed and getting it signed and sealed), a policyholder can provide for his wife and children after his death, and the monies due to them will be protected both from the taxman and from his creditors. As stated in Kishabai v. Jaikishan [1980] 2 MLJ 289:

“…it seems clear that the purpose of the section [the English equivalent of Section 73] is to protect the interests of the widow and children of a deceased assured who has created a trust in their favour pursuant to its provisions. In other words, the legislature, viewing with sympathy any effort by a man to provide for his wife and family after his death, has provided that a man may insure his life at any time for their benefit and any moneys payable under the policy shall not go to pay his debts, but shall be held in trust for his family.” (per Lee J, at page 190)

11 Will a wife who is divorced still be able to benefit from the Section 73 trust?

12 It could be argued that the phrases “wife” and “husband” in Section 73 should be interpreted to refer to the person who is the wife or husband of the policyholder at the time of the policyholder’s death. Thus, even though a Section 73 trust had arisen in favour of a former wife who was named as a beneficiary of the husband’s life insurance policy, she would automatically be removed as beneficiary by the effect of a divorce. The policyholder may then do as he likes with the policy—either surrender the policy and keep the proceeds for himself, or name a new beneficiary. (See the discussion on this issue in Section 73 CLPA: Assurance for the Spouse and Children (1997) 9 S.Ac.L.J. 82, at pages 88-89 by Debbie Ong)

13 However, it is clear from both local and English authorities that this is not the law. The law is that if the...