Lee Koon v Seah Yong Chwan

• Jurisdiction: Singapore
• Judgment Date: 30 December 2013
• Date: 30 December 2013
• Docket Number: Originating Summons No 875 of 2013
• Court: High Court (Singapore)

Lee Koon (by her attorneys Seah Teong Kang and Seah Chiew Tee)

Plaintiff

and

Seah Yong Chwan (executor of the estate of Seah Eng Teow, deceased)

Defendant

[2013] SGHC 285

Edmund Leow JC

Originating Summons No 875 of 2013

High Court

Probate and Administration—Distribution of assets—Bequest of shares of company in winding up—Executor of estate distributing liquidation surplus of company to beneficiaries of bequest in lieu of shares—Whether bequest failed so that liquidation surplus fell into residue of estate

The plaintiff was the specific legatee under her late husband's will of 100,000 of her husband's 1.2 million shares in a company and was also the residual beneficiary under the will. At the time her husband passed away, the company was in the process of winding up. In the event, there was a gross liquidation surplus of 15.488 cents per share. The defendant, the executor of the husband's estate, did not seek to transfer the shares to the plaintiff or any other specific legatee, and instead gave the plaintiff a cheque for $15,488 in lieu of the specific legacy of shares. The plaintiff refused to accept the cheque, claiming that she had been willed shares and upon the dissolution of the company, the specific legacy of shares failed. Therefore, the plaintiff submitted that the liquidation surplus received by the executor in respect of the plaintiff's late husband's entire holding of 1.2 million shares should have fallen into the residue of the estate, and this amounted to $177,550.95. The plaintiff sued for a declaration that she was entitled to this sum as residual beneficiary.

Held, denying the claim:

(1) Because of the operation of s 259 of the Companies Act (Cap 50, 2006 Rev Ed), a specific legatee of shares of a company in winding up could not become the legal or beneficial owner of those shares, without the sanction of the court: at [22] .

(2) A shareholder in a company in a winding up had a right to participate in the distribution of the assets of the company after all its debts had been paid. This right or chose in action necessarily carried with it the right to receive the fruits of the chose in action once ascertained so that the holder of the chose in action obtained some kind of ‘interest’ in the fruits of the chose in action once ascertained: at [23] and [26] .

(3) The person to whom the chose in action was transmitted or assigned has the right also to receive the fruits of that chose in action. It could be said that arising from this right he had obtained some kind of ‘interest’ in those fruits: at [29] .

(4) Therefore upon the death of the plaintiff's late husband, his rights as shareholder of the company were transmitted to his personal representative or executor. Through this, the executor obtained an ‘interest’ in his aliquot share of the liquidation surplus of the company. At the same time, the plaintiff as a specific legatee of the shares obtained a right against the executor during the period of administration to have the estate properly administered. She obtained thereby an interest in the liquidation surplus of the company even if she did not become the legal or equitable owner thereof, and this interest had attached by the time the liquidation surplus was paid out to the defendant. Therefore the bequest did not fail and the liquidation surplus did not fall into the residuary estate.

[Observation: The exact nature of the ‘interest’ of a specific legatee in the liquidation surplus was not entirely clear but was not an interest that rose to the level of a proprietary beneficial interest. Our legal language had not yet developed the appropriate shades of meaning to include such a non-proprietary interest: at [29] and [30] .]

Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 (refd)

Fry, Re [1946] Ch 312 (refd)

Hemming, Re [2009] Ch 313 (refd)

Jiangshan Investment Consortium Ltd, Re [2007] 3 SLR (R) 614; [2007] 3 SLR 614 (refd)

Leigh's Will Trusts, Re [1970] Ch 277 (refd)

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

Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 (refd)

Companies Act (Cap 50, 2006 Rev Ed) ss 121, 126 (1) , 259

Wills Act (Cap 352, 1996 Rev Ed) ss 3 (1) , 19

Companies Act 1985 (c 6) (UK) s 183 (2)

Earnest Lau and Tan Tian Luh (Chancery Law Corporation) for the plaintiff

Tay Yong Seng and Alexander Yeo (Allen & Gledhill LLP) for the defendant.

Judgment reserved.

Edmund Leow JC

Introduction

1 The issue in this case is whether a specific bequest of company shares made under a will was defeated by the winding up of that company so that the liquidation surplus paid out in relation to those shares falls into the residue of the estate. If so, the plaintiff is entitled to the entire surplus as she is the residuary beneficiary under the will, even though she was a specific legatee of only some of those shares.

2 On 7 November 2013, I heard arguments from the parties and thereafter reserved judgment. That same evening, solicitors for the defendant wrote to the Registry of the Supreme Court requesting leave to make further arguments. On 11 November 2013, solicitors for the plaintiff wrote to object to the defendant's request. I declined to hear further arguments and now give my judgment.

The facts

3 The plaintiff is the widow of one Seah Eng Teow (‘the Deceased’). She is now 83 years old and is suing by her attorneys, her elder son Seah Teong Kang (‘Teong Kang’) and her daughter Seah Chiew Tee (‘Chiew Tee’). The defendant is her younger son and executor of the Deceased's estate.

4 The Deceased owned 1.2 million shares (‘Shares’) in Teow Aik Realty (S) Pte Ltd (‘the Company’). The Company was incorporated on 2 March 1983 and had a paid up capital of $5 m in the form of 5 million shares of $1 each. It was evidently a family owned and run company. The shareholders who were also the directors were:

(a) Teong Kang: 1.8 million shares

(b) Chiew Tee: 200,000 shares

(c) The Deceased: 1.2 million shares

(d) The defendant: 1.8 million shares

5 By way of a will dated 19 December 2007 (‘the Will’), the Deceased bequeathed his 1.2 million Shares in the following manner: 1,000,000 to the defendant; 100,000 to the plaintiff and 100,000 to Chiew Tee. These were what I will term the ‘specific legatees’ of the Shares. The plaintiff was also named the residuary beneficiary of the estate. There were other bequests that are not material.

6 On 17 December 2007, which I note was just two days before the execution of the Will, the Company's shareholders applied to put it into winding up. The High Court granted the application and ordered winding up on 22 July 2008; winding up was completed on 19 June 2013. There was a liquidation surplus to be distributed to the members of 15.488 cents per share. On 30 May 2012, a total of $177,550.95 (‘the Sum’) in surplus was paid to the estate of the Deceased as the Deceased had passed away earlier, on 2 March 2011. It was not disputed that the Shares were never transferred to the legatees at any time.

7 In June 2012, the defendant sent to the plaintiff and Chiew Tee each a cheque for $15,488, being the liquidation surplus received in respect of each of their entitlements to the Shares under the Will. The defendant claimed the remainder of the Sum. Neither the plaintiff nor Chiew Tee ever accepted the cheques. Instead the plaintiff demanded the entire Sum. She asserted her claim as the residual beneficiary. She said she had been willed Shares and so she could get only Shares; the surplus from liquidation was not the same as the Shares. All of this surplus should have fallen into the residuary estate of the Deceased and thereby have come to her in full.

8 Chiew Tee, who is currently living with and looking after the plaintiff, accepted that she was not entitled to any money, but said the entire Sum should be paid to the plaintiff to be used for her upkeep and medical expenses. She filed an affidavit to that effect. Her brother, Teong Kang, who together with her is looking after the plaintiff in her old age, also filed a brief affidavit in support.

9 The defendant filed an affidavit. He averred that the liquidation surplus from the Shares of 15.488 cents per share was a gross value, and after adjustments for sums due and from the estate, the net payment came to about 14.796 cents per share. Nevertheless he was willing to pay to the plaintiff and his sister Chiew Tee the gross value of their share of the Shares and did in fact send them cheques for that amount at 15.488 cents per share. He said that on 28 March 2013, he had received a letter of demand from the plaintiff stating that she was entitled to the entire Sum. The defendant said he disagreed and sent a fresh cheque for $15,488 as the previous one had been issued more than six months previously.

10 On 18 September 2013, the plaintiff filed this originating summons for a declaration that the Sum forms part of the residuary estate and for a...