Lin Chao-Feng v Chuang Hsin-Yi

• Judge: Judith Prakash J
• Judgment Date: 17 June 2010
• Neutral Citation: [2010] SGHC 178
• Court: High Court (Singapore)
• Hearing Date: 07 August 2009,06 August 2009,05 August 2009,09 March 2010
• Subject Matter: Resulting trusts,Trusts,Presumed resulting trusts,Pleadings,Civil Procedure
• Docket Number: Suit No 296 of 2008
• Defendant Counsel: Lok Vi Ming SC, Edric Pan Xingzheng and Vanessa Yong Shuk Lin (Rodyk & Davidson LLP)
• Published date: 29 June 2010
• Plaintiff Counsel: Tan Cheng Han SC (instructed) and Lim Kim Hong (Kim & Co)

Judith Prakash J:

The question to be determined in this action is whether the defendant is the beneficial owner of 480,000 ordinary shares of $1 each in the capital of Chun Cheng Fishery Enterprise Pte Ltd (“CCFE”) or whether he holds those shares on trust for the plaintiff.

The plaintiff, Lin Chao-Feng, who was originally Taiwanese, and his wife, Mdm Tan Guan Ngo (“Mdm Tan”), a Singaporean, are the founders of a group of companies (“the Group”) which is in the business of supplying and trading in fish and fish products. The plaintiff and his wife are the major shareholders of the companies in the Group, most of which are Taiwanese companies, and the plaintiff is the chairman of the Group. CCFE, which was incorporated in Singapore in January 1994, is a member of the Group. At all material times, the directors of CCFE were Mdm Tan (the managing director), the plaintiff and Ms Tan Lay Hoon (“TLH”), the plaintiff’s sister-in-law.

CCFE carries on the business of the import/export and processing of marine products and frozen seafood and also cures and preserves fish and seafood. It has a factory in Singapore.

In early 1999, one Mr Chuang Hern Hsiung (“CHH”) who is the father of the defendant, was appointed as group president of the Group. His direct employer was a company called Terng Sheng International Co Ltd From about 2000, CHH concentrated his efforts on CCFE’s business and moved to Singapore. He took on the title of chief executive officer (“CEO”) and president of CCFE. The employment of CHH ended in July 2005.

At the beginning of 2002, CCFE had an issued share capital of $4.8m comprising 4.8m ordinary shares of $1 each. The plaintiff held 2,160,000 shares in CCFE (45% of the capital), while Mdm Tan had 2,287,799 shares (47.66%). The remaining shares (7.34%) were held by Mdm Tan’s siblings. On 21 May 2002, 480,000 CCFE shares (“the shares”), representing ten percent of the issued capital, were transferred from the plaintiff to the defendant. It is these shares that form the subject matter of this action. It is not disputed that although the transfer form indicated that the consideration for the shares was the payment of $1 per share and stamp duty was paid on the basis of a consideration of $480,000, in fact no money changed hands and the plaintiff did not receive any payment for the shares either from CHH or the defendant. At that time, the defendant was working in the United States and had no connection with CCFE.

On 1 April 2008, the plaintiff’s solicitors wrote to the defendant demanding that the shares be re-transferred to the plaintiff. The defendant failed to respond and this action was started on 25 April 2008 to enforce recovery of the shares.

Pleadings

The statement of claim recited the position of the plaintiff in CCFE and the fact that CHH was employed by CCFE as the group president of the Group including CCFE from 1999 until 11 July 2005. The material paragraphs of the statement of claim are paragraphs 3, 4 and 5 which read as follows: 3. On 21st May 2002, the Plaintiff had transferred 480,000 ordinary shares of $1.00 per share in CCFE (“the said Shares”) registered under his name to the Defendant, who is the son of [CHH]. The Plaintiff shall refer to the Share Transfer documents at the trial of this action for their full terms and effect. 4. The Transfer of the said Shares was made with the concurrence of the parties that the Defendant shall hold the said Shares in trust for the Plaintiff until such time when the Plaintiff makes a demand for the return of the said Shares. 5. The said Shares have belonged, at all times, beneficially to the Plaintiff and no valuable consideration was paid to the Plaintiff for the transfer to the Defendant.

The reliefs sought by the plaintiff are, inter alia, the following: (a) a Declaration that 480,000 ordinary shares now standing in the name of the Defendant are held by him on trust for the Plaintiff absolutely; (b) an Order that the Defendant do deliver up to the Plaintiff a transfer duly executed of the 480,000 ordinary shares to the Plaintiff.

In Further and Better Particulars furnished by the plaintiff, the plaintiff specified that the alleged concurrence of the parties that the defendant was to hold the shares on trust for the plaintiff was established by oral communication in or about the months of January/February 2002. It was further pleaded that the plaintiff had conveyed to CHH that the shares were to be held on trust for the plaintiff and CHH had confirmed that the shares would be held accordingly by his son, the defendant.

In his defence, the defendant denied that the shares were held on trust. Instead, the defendant averred: the shares were given by the plaintiff to CHH in recognition of the contributions made by CHH towards CCFE and, inter alia, to make good the plaintiff’s promise to CHH made at the time he recruited CHH in 1999 that he would treat CHH as a business partner and give him a stake in the business; in the alternative, the plaintiff transferred the shares to the defendant at the request of CHH in appreciation of CHH’s continued efforts in building and developing the business of CCFE; even after the transfer took place, the plaintiff told CHH on numerous occasions that he would reward CHH with more shares if CHH continued to develop CCFE; the plaintiff never indicated or conveyed (either orally or otherwise) to CHH or to the defendant that the shares were to be held on trust for the plaintiff; CHH did not at any time agree or concur that the shares would be held on trust for the plaintiff and the defendant also had not agreed or concurred that he would hold the shares on trust for the plaintiff; at all times, the defendant was treated as a shareholder of CCFE; and on 12 December 2006, the defendant wrote to CCFE’s special accountant and stated that he was one of the shareholders of CCFE. This letter was forwarded to CCFE and its legal advisers. Thereafter, none of CCFE, the legal advisers or the plaintiff raised any objection or sought in any way to refute the defendant’s assertion to be a shareholder of CCFE.

Accordingly, at para 6 of the defence, the defendant averred that he was the legal and beneficial owner of the shares and was under no obligation to transfer them to the name of the plaintiff or to deliver up the shares to the plaintiff.

Certain obvious factual issues arise out of the pleadings. There is, additionally, a legal issue arising out of the phraseology of the statement of claim that has to be decided before the factual issues can be examined. This is whether the plaintiff is entitled by virtue of his pleading to claim that the trust arrangement that he relies on arose out of a resulting trust created upon the transfer of the shares for a nil consideration or whether his pleading only allows him to prove the existence of an express trust.

Pleading issue

The defendant asserted that the plaintiff was not entitled to assert a resulting trust because his pleading was not sufficient to encompass such a claim. The plaintiff had taken the position that he had pleaded an express trust at para 4 of the statement of claim and, in the alternative, a resulting trust at para 5 of the statement of claim. The defendant submitted that this was not so and that it was clear from the said paras that there was no plea in the alternative. It was clear that paras 4 and 5 were always intended to be read conjunctively and that both paragraphs went towards a plea of an express trust. The thrust of these two paragraphs was that the transfer of the shares was made with the concurrence of the parties that the defendant would hold them in trust for the plaintiff and, consequentially, the shares had belonged to the plaintiff at all times.

The defendant also reminded me that the plaintiff had, initially, sought and been granted leave of court to amend his statement of claim to include an alternative claim in resulting trust. However, upon sighting the defendant’s amendments to his defence in response to the plaintiff’s amended pleading, the plaintiff decided to withdraw his amendments and revert to his original statement of claim. Accordingly, the defendant argued, the plaintiff had spurned the opportunity to plead resulting trust and should be held to his original pleading of an express trust. The plaintiff’s response to this point was that the original pleading was, in his view, adequate to permit him to raise the issue of a resulting trust but that he had sought, out of an abundance of caution, to state this expressly as the defendant had raised the pleading issue. Subsequently, however, there had been an agreement that the pleading should revert to the original form.

Having considered paras 4 and 5 of the statement of claim, I have come to the conclusion that the plaintiff is entitled to put forward an express trust and, in the alternative, a resulting trust. It is a basic principle of pleading that facts not law have to be pleaded and once the material facts have been averred, the legal consequences of the same can be developed in submissions. This means that in order for the plaintiff to argue that there was a resulting trust he must plead the necessary factual ingredients on which a legal submission of resulting trust can be made.

The text, Resulting Trusts by Robert Chambers (Clarendon Press, Oxford 1997), states at p 32 that the facts which give rise to a resulting trust are: a transfer of property to another, in circumstances in which the provider does not intend to benefit the recipient. This statement of the law was accepted by the Court of Appeal in Lau Siew Kim v Yeo Guan Chye Terence and another [2008] 2 SLR(R) 108 (“Lau Siew Kim”) at [35].

In para 3 of the statement of claim, the plaintiff pleaded that on 21 May 2002 he transferred the shares to the defendant. This pleading satisfied the first factual...