HOUSING AND DEVELOPMENT BOARD FLATS, TRUST AND OTHER EQUITABLE DOCTRINES

Date01 December 2012
Published date01 December 2012

Although 85% of the population of Singapore reside in Housing and Development Board (“HDB”) flats, this area of the law remains largely under investigated. A perennially contentious issue is the complex interplay between equitable doctrines and the Housing and Development Act. In this article, the author reviews the jurisprudence pertaining to express trust, resulting trust and common intention constructive trust and the HDB flat. This article will also examine the applicability of other doctrines such as donatio mortis causa and proprietary estoppel in relation to the HDB flat. In particular, this article will explore the applicability of the common intention constructive trust and proprietary estoppel in providing a potential remedy to disinherited wives and caregivers.

I. Introduction

1 This essay investigates the interplay between equitable doctrines and the Housing and Development Act (“HDA”).1 As we will see, the drafters of the HDA initially started with an express prohibition against all forms of trust over Housing and Development Board (“HDB”) flats. Since the HDB has strict rules on eligibility of ownership, it was concerned that persons who were ineligible to own a HDB flat might create trusts to circumvent these rules.2 However, HDB discovered that such a blanket prohibition was an over-inclusive rule as it did not cater

to HDB flat owners who might legitimately want to create a trust in favour of their minor children. Early versions of the HDA also did not deal with the issue of the application of a resulting and constructive trust over HDB flats. Despite the legislator's hostility to the trust, the Singapore courts have interpreted the HDA purposively and held that resulting and constructive trust claims were not barred if it did not offend the HDB rules on eligibility of ownership. Various apparent attempts were then made by the drafters of the HDA to extinguish the resulting and constructive trust which proved to be unsuccessful; the courts continued to adopt a purposive reading of the HDA to preclude a resulting or constructive trust only in instances where it arises in favour of ineligible owners. The main argument in this paper is that modern equitable concepts are not to be feared; properly used, these doctrines might achieve fine-tuned justice between parties. In fact, as this essay will demonstrate, a complete prohibition against all forms of trusts arising over a HDB flat has the potential to create even more injustice between parties who might have a stake in the flat.

2 The main aim of this paper is to study the complex interplay between equitable doctrines and the HDA. In this article, the jurisprudence pertaining to express trust, resulting trust and common intention constructive trust and the HDB flat are reviewed. This article will also examine the applicability of other equitable doctrines such as donatio mortis causa and proprietary estoppel in relation to the HDB flat. In particular, this article will explore the applicability of the common intention constructive trust and proprietary estoppel in providing a potential remedy to disinherited wives and caregivers.

II. Eligibility conditions of ownership of HDB flats3

3 In order to make sense of the jurisprudence in this area, the eligibility conditions of ownership of HDB flats need to be understood. Under the HDA, the HDB is empowered to make rules with regard to a myriad of matters concerning the HDB flat.4 This power includes the right to dictate conditions pertaining to the acquisition and the alienation of the flat, such as the person to whom the flat may be sold, the income ceiling of the potential purchaser, the citizenship status of buyer and the persons who are allowed to stay in the flat. The overarching

philosophy of the HDB's housing policy on eligibility conditions is stated to be “pro-family.” Hence, the usual scheme5 in which a person is eligible to buy a HDB flat is if he or she forms what is known as a “family nucleus”. A “family nucleus” is defined by the HDB as consisting of a buyer and one of the following: (a) a spouse; (b) parents; (c) children (for a widower or divorcee); and (d) fiancé/fiancée. For potential purchasers of HDB flats who are orphans, the family nucleus may consist of siblings.

4 At this point, a few observations need to be made about these HDB rules on eligibility of ownership. First, these rules are dynamic and may be subject to change. For example, there has been a softening of the “pro family” policy as single persons over the age of 35 years are now allowed to purchase three room or smaller flats on the HDB resale market under the Single Singaporean Citizen Scheme.6 Another example of such a change in policy is the Joint Singles Scheme, where two unrelated and unmarried Singaporeans who are older than 35 years old are eligible to jointly purchase a HDB flat. Second, while HDB insists in most cases that a purchaser must form a family nucleus, it does not mandate that the husband and wife must be registered as co-owners. Thus, it is possible for the husband or the wife to be registered as the sole owner and the other spouse who is not an owner to be listed as a permitted occupier. Finally, some important pre-conditions of acquiring a HDB flat include: (a) being a Singaporean or a Singapore permanent resident; (b) not owning another HDB flat7 or private residential property in Singapore or elsewhere; and (c) being at least 21 years old.

III. Express trusts over HDB flats

5 As mentioned above, the original HDA contained a blanket prohibition on trusts created over HDB flats. This rule was contained in the former s 44 of the HDA, which provided that every such trust shall be regarded as null and void. Section 44(4) of the HDA used to provide:8

Every trust or alleged trust, whether the trust is express, implied or constructive, which purports to be created in respect of any such flat, house or other building by the owner thereof shall be null and void and shall be incapable of being enforced by any court.

6 The rationale for this bright line rule was to prevent ineligible persons purchasing a HDB flat through nominees by way of a trust.

While the original aim of this section was laudable, the general bar on the creation of a trust proved to be an overly wide rule. There are some circumstances, especially when minors are involved, where people may legitimately wish to settle an express trust over a HDB flat. As the then Minister for National Development, Mr Teh Cheang Wan, explained:9

Over the years, however, there has been increasing need for the HDB to permit the creation of trusts for legitimate reasons. For example, it is necessary to empower trustees to hold flats in trust for minor children who are citizens in the event of death of the lessee parent, and where the surviving parent is neither a citizen nor a permanent resident and therefore not eligible to assume ownership of the flat. Similarly, in some cases of legal separation or divorce, flats have to be held in trust for minor children until they reach the age of 21 years.

7 Consequently, the HDA was amended to allow for trusts to be created in these circumstances. The current version of the legislation governing the express trust is contained in s 51(9) of the HDA,10 which reads as follows: “[e]very trust which purports to be created in respect of any protected property without the prior written approval of the Board shall be null and void”. Thus, the current position is this: the creation of an express trust over a HDB trust is not prohibited per se, only trusts which have not obtained prior written approval from the HDB are considered to be null and void. However, there is an aspect which remains unclear: the situations in which the HDB would consider the creation of a trust as being legitimate, apart from a trust created for minor children on the death of the lessee parent. For example, would the HDB approve a trust in the following circumstances: (a) a trust in favour of an offspring with special needs on the passing of the lessee parent?; and (b) a trust in favour of a lessee who has lost mental capacity? Logically, the HDB should have no objections to the creation of such trusts. It is suggested that the HDB should state clearly either on its website or subsidiary legislation instances in which it would approve the creation of a trust over a HDB flat. Such a move would certainly assist lessees, especially those with minor children and special needs dependents in planning their affairs.

8 The recent case of Chong Sze Pak v Chong Ser Yoong11 is illustrative of an express trust which was clearly in breach of the HDA. In this case, the plaintiff claimed that he paid for all the outgoings of the 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 of

the trust, the defendant was to transfer the HDB flat to the plaintiff's son when he turned 35 years old. The difficulty with the plaintiff's trust claim was the fact that the plaintiff was ineligible to purchase a HDB flat. Similarly, the plaintiff's son was also not entitled to purchase a HDB flat in his own name until he turned 35 years old. As such, Woo Bih Li J had no difficulty in holding the purported express trust in favour of the plaintiff and his son null and void.

9 There are numerous issues surrounding an approved express trust over a HDB flat which remains unanswered. For example, the precise procedure involved in obtaining approval for the creation of an express trust from the HDB is not found anywhere. The following hypothetical facts are used as an illustration to demonstrate the myriad of difficult issues that may arise due to this lack of clarity in procedure. Suppose X has a HDB flat which was purchased in his own name when he was 35 years old and a single person. Subsequently, X...

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