Fong Wai Lyn Carolyn v Kao Chai-Chau Linda

• Judge: Steven Chong JA
• Judgment Date: 23 May 2017
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 725 of 2016
• Date: 23 May 2017

Fong Wai Lyn Carolyn

and

Kao Chai-Chau Linda and others

[2017] SGHC 111

Steven Chong JA

Originating Summons No 725 of 2016

High Court

Civil Procedure — Parties — Locus standi — Commencing proceedings on behalf of estate — Beneficiary of estate seeking declaration of estate's beneficial interest in company shares — Executor unwilling or unable to commence action — Whether beneficiary had capacity to maintain action — Whether special circumstances existed to allow action

Probate and Administration — Executors — Locus standi — Commencing proceedings on behalf of estate — Beneficiary of estate seeking declaration of estate's beneficial interest in company shares — Executor unwilling or unable to commence action — Whether beneficiary had standing to bring action — Whether special circumstances existed to allow action

Trusts — Beneficiaries — Remedies — Executor or trustee unwilling or unable to commence action — Whether beneficiary had standing to seek remedy on behalf of estate

Trusts — Express trusts — Construction of trust deed — Whether trust deed granted beneficial interest to settlor — Whether settlor's estate entitled to beneficial interest — Whether recital of trust deed created absolute gift to third parties

Trusts — Trustees — Powers — Beneficiary directing trustee on exercise of voting rights of shares — Beneficiary directing trustee on disposal of shares — Whether beneficiary could direct trustee how to exercise powers over trust property — Whether trustee powers circumscribed by trust deed

The plaintiff, a beneficiary of the estate of her father (“PF”), sought a declaration that (a) 600,000 ordinary shares (“trust shares”) in the second defendant (“Airtrust”) were held on trust by the first defendant for the estate; and (b) the first defendant was obliged to comply with any direction from the estate's executors as regards the exercise of the voting rights attached to the trust shares and the disposal of the trust shares. It was common ground that the substantive merits of the declaration were to be determined as a matter of construction of a trust deed executed by PF (“the 2000 Trust Deed”).

At the hearing, the first defendant for the first time took the position that the 2000 Trust Deed created an absolute gift to the other existing shareholders in proportion to their shareholding at the date of PF's demise. As regards the second declaration, she argued that unless a trustee had improperly exercised his/her discretion, the court should not direct how a trustee exercised his/her discretion.

The first defendant also raised a threshold objection that the application should have been brought by the third defendant (“the executor”). The executor supported the plaintiff's application and took the same position that the trust shares were held on trust by the first defendant for the estate. The plaintiff explained that the executor could not have brought the action as it was filed urgently two days before an annual general meeting (“AGM”) of Airtrust. The immediate objective was to obtain an injunction restricting the first defendant's exercise of the voting powers attached to the trust shares at the AGM. Given the short notice, the executor could not take further steps to secure the estate's interest beyond writing to the first defendant to instruct her not to exercise the voting rights.

Held, granting the declaration:

(1) Ordinarily, the proper party to obtain a remedy on behalf of and for the benefit of the estate was the executor, so as to avoid multiplicity of suits and to control unilateral actions by beneficiaries. In special circumstances, the court would permit an action to be brought by a beneficiary on behalf of the estate. Special circumstances were not confined to an executor's default. It was not a closed category and was a fact-specific inquiry, evaluated in the light of all the circumstances of the case. The courts had adopted a flexible approach to “special circumstances”, taking cognisance of factors such as the executor's unwillingness or inability to sue, the merits of the case, and the potential loss to the beneficiaries: at [7] to [9].

(2) Special circumstances existed to justify the plaintiff in making the application as beneficiary instead of the executor. The executor consented to the plaintiff's application, such that the predominant mischief behind the locus standi requirement was no longer in play. There was urgency at the time of the application, yet the executor was clearly unwilling to take further steps to secure the estate's interest before the AGM. Further, the plaintiff's case had merits and should be allowed to proceed. Finally, it would have been prejudicial to the estate to deny the plaintiff locus standi as the same substantive arguments would be raised if the executor were to start a fresh application, incurring further costs: at [19], [29], [32] and [35].

(3) A recital in a deed could only assist in the construction of the substantive terms of the deed; it could not override or control the operation of the substantive terms where such terms are clear and unambiguous: at [51].

(4) The first defendant held the shares on trust for the estate. The operative part of the deed expressly identified PF as the beneficiary; its silence as regards the treatment of the trust shares in the event of PF's demise did not give rise to ambiguity. There was nothing in the language of the recital which supported the argument that a gift had been made to the shareholders absolutely: at [57], [58] and [66].

(5) The first defendant was obliged to comply with the executor's directions as to the exercise of the voting rights attached to the trust shares and the disposal of the trust shares. The trustee's discretion to vote in relation to the trust shares was expressly circumscribed by the 2000 Trust Deed. Since the estate was absolutely entitled to the whole beneficial interest in the trust shares, it was entitled to direct the trustee as regards the disposal of the trust shares: at [73], [74] and [76].

A S Nordlandsbanken v Nederkoorn Robin Hoddle [2000] 3 SLR(R) 918; [2001] 1 SLR 466 (refd)

Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda [2014] 2 SLR 673, HC (refd)

Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda [2014] 2 SLR 693, HC (refd)

Alexander v Perpetual Trustees WA Ltd [2004] HCA 7 (refd)

Atkinson, Re [1971] VR 612 (refd)

Barlow's Will Trusts, Re [1979] 1 WLR 278 (refd)

Brockbank, Re; Ward v Bates [1948] Ch 206 (refd)

Burns v Steel [2006] 1 NZLR 559 (refd)

Butt v Kelson [1952] Ch 197 (refd)

Dawes, Ex parte; Re Moon (1886) 17 QBD 275 (refd)

Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd [2011] 3 SLR 980 (refd)

Foo Jee Boo v Foo Jhee Tuang [2015] SGHC 176 (refd)

Foo Jee Seng v Foo Jhee Tuang [2012] 4 SLR 339 (refd)

George Whichelow Ltd; Bradshaw v Orpen, Re [1954] 1 WLR 5 (refd)

Hong Alvin v Chia Quee Khee [2011] SGHC 249 (refd)

Hotung v Ho Yuen Ki [2002] 4 HKC 233 (refd)

HSBC Trustee (Singapore) Ltd v Carolyn Fong Wai Lyn [2016] SGHC 31 (refd)

Joseph Hayim Hayim v Citibank NA [1987] AC 730 (refd)

Kao Chai-Chau Linda v Fong Wai Lyn Carolyn [2016] 1 SLR 21 (refd)

Kirby v Wilkins [1929] 2 Ch 444 (refd)

Lee Pei-Ru Alice v Airtrust (Singapore) Pte Ltd [2013] SGHC 259 (refd)

Low Gim Har v Low Gim Siah [1992] 1 SLR(R) 970; [1992] 2 SLR 593 (refd)

MCST Plan No 1933 v Liang Huat Aluminium Ltd [2001] 2 SLR(R) 91; [2001] 3 SLR 253 (folld)

Porker v Richards [2016] SASC 98 (refd)

Ramage v Waclaw (1988) 12 NSWLR 84 (refd)

Saunders v Vautier (1841) 4 Beav 115 (refd)

Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597 (refd)

Tiger Airways Pte Ltd v Swissport Singapore Pte Ltd [2009] 4 SLR(R) 992; [2009] 4 SLR 992 (refd)

Walsh v Trevanion (1850) 15 QB 733 (refd)

Wong Moy v Soo Ah Choy [1996] 3 SLR(R) 27; [1996] 3 SLR 398 (folld)

Civil Law Act (Cap 43, 1999 Rev Ed) s 24

Intestate Succession Act (Cap 146, 2013 Rev Ed) s 10

Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 59 r 6(2)

Kee Lay Lian and Lim Wen Juin (Rajah & Tann Singapore LLP) for the plaintiff;

Mahesh Rai s/o Vedprakash Rai and Huang Junjie (Drew & Napier LLC) for the first defendant;

Chan Yi Zhang (Tan Kok Quan Partnership) for the second defendant;

Vincent Lim (Shook Lin & Bok LLP) for the third defendant.

23 May 2017

Judgment reserved.

Steven Chong JA:

Introduction

1 Airtrust (Singapore) Pte Ltd (“Airtrust”), the second defendant, was started in 1972 by the late Peter Fong. By the time he passed away in April 2008, Airtrust had developed into a successful company. Unfortunately since then, its principal activity has been litigation, though on this occasion its involvement is only as a nominal defendant. Airtrust, Peter Fong's estate, related parties and the directors of Airtrust have been embroiled in numerous legal proceedings, most of which have some bearing on the tussle for control of Airtrust. Tragically as a consequence of the interminable disputes, Airtrust's business dealings have practically reached a standstill although it remains asset-rich. Receivers and managers, who were appointed by consent in January 2012 to manage and carry on the business of Airtrust, have since been discharged. This is hardly surprising given that Airtrust is now dormant with no significant business to be managed.

2 The numerous disputes between the various factions have to-date already generated at least seven reported decisions: Hong Alvin v Chia Quee Khee [2011] SGHC 249; Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd [2011] 3 SLR 980; Lee Pei-Ru Alice v Airtrust (Singapore) Pte Ltd [2013] SGHC 259; Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda suit [2014] 2 SLR 673; Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda [2014] 2 SLR 693; Kao Chai-Chau Linda v Fong Wai Lyn Carolyn [2016] 1 SLR 21; and HSBC Trustee (Singapore) LTd v Carolyn Fong Wai Lyn [2016] SGHC 31. From the list of pending suits, this catalogue of reported decisions is likely to accumulate.

3 The present action...