Rajabali Jumabhoy and Others v Ameerali R Jumabhoy and Others

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 17 June 1997
• Neutral Citation: [1997] SGHC 168
• Date: 17 June 1997
• Subject Matter: Whether option void,Lack of oppression or abuse of confidence,Transfer of settlement property,Actual or presumed,Formalities,Board of directors given insufficient time to consider proposal to grant option,Whether option could be challenged on basis of unconscionability,Grant of option approved by shareholders in general meeting,Settlement not vested,Whether valid if settlors had not previously surrendered interests,Whether sale authorised under terms of settlement,Whether transfer of shares to another company valid under Trustee Act,Requirement of wrongful exercise of influence to constitute actual undue influence,Failure to obtain advice of experts on exercise price for shares,s 14(4) Class of beneficiaries not closed at time of deed Trustees Act (Cap 337),Duty to obtain best possible price for company's shares,Undue influence,Whether deed of release effectively varied settlement to permit transfer,Whether presumption of undue influence by father over children applicable,Contract,Directors,Whether each director acted in breach of fiduciary duty,Trusts,Share options,Claim for breach of trust,Parties,Duties,Unanimous consent of all adult beneficiaries required for termination of trust,Whether new settlement valid,Companies,Locus standi,Lack of actual undue influence and coercion,Civil Procedure,ss 160 & 160A, 213 Companies Act (Cap 50, 1994 Ed),Construction of settlement clause restricting trustees' investment power,Family run board of directors,Whether trustees acted in breach of trust by accepting shares in company as sale consideration,Settlors previously surrendered interests settled under new settlement,Beneficiaries not ascertained,Option to purchase shares,Sale of settlement property,Whether settlement valid, subsisting and irrevocable,Settlement consisted of shares in company,Unconscionability,Whether beneficiaries had locus standi to complain of breach of trust after settlor's re-assignment of their respective interests under the settlement back to them,Whether second company owned shares free from settlement constrictions,Whether settlor had locus standi to complain of breach of trust after assignnment,Beneficiaries' assignment of equitable interests under settlement back to settlor,Trust estate,Fiduciary duty,Creation of new settlement,Express trusts
• Docket Number: Suit No 1801 of 1995
• Published date: 19 September 2003
• Defendant Counsel: Chong Boon Leong and Eric Chan (Rajah & Tann),Michael Hwang SC, K Shanmugam and Edwin Tong (Allen & Gledhill),Davinder Singh SC, Harpreet Singh and Ameera Ashraf (Drew & Napier)
• Court: High Court (Singapore)
• Plaintiff Counsel: Harry Lee Wee, Lim Chor Pee and Lim Tanguy Yuteck (Chor Pee & Co)

Introduction

This sad and complex case arises out of the breakdown of the ties of affection and trust in a wealthy Singapore family. The first plaintiff, Rajabali Jumabhoy, is the patriarch of the family. He and his wife, Fatimabai, now deceased, had four children. Their second son, Yusuf R Jumabhoy (Yusuf), their third son, Mustafa R Jumabhoy (Mustafa), and their youngest and only daughter, Perin A Mooraj (Perin), are the second, third and fourth plaintiffs respectively. The remaining plaintiffs are the three sons of Mustafa whom I shall refer to as Anwar, Faez and Saleem. The defendants comprise Rajabali`s eldest son, Ameerali R Jumabhoy (Ameerali) as the first defendant, Ameerali`s own eldest son, Rafiq Jumabhoy (Rafiq) as the second defendant, Ameerali`s second son, Iqbal Jumabhoy (Iqbal) as the third defendant, and a company called Scotts Investments (Singapore) Pte Ltd (SIS) as the fourth defendant.

Rajabali, who was born in India in 1898, came to Singapore in 1916 and went into business. He was successful as a businessman in the trading and ship agency lines and also active in public life. In the 1950s, however, a substantial portion of his wealth consisted of two properties at Scotts Road. The first, No 6 Scotts Road, was owned by Fatimabai and the second, No 8 Scotts Road, was owned by Rajabali. The properties covered a total area of approximately 80,299 square feet. In 1956, Rajabali and his wife decided to make irrevocable trusts of their respective properties for the benefit of their children with the intention that the capital and income of the trust funds of the settlements be held intact and only be distributed to the beneficiaries at the expiry of the period of accumulation.

It was this decision that led, ultimately, to the present action. The events at issue in this case span almost 40 years from the initial establishment by Rajabali of his settlement of No 8 Scotts Road (the settlement) until 1995 when the writ herein was filed. The basic complaint which is made by the plaintiffs is that assets subject to the settlement have been dissipated and dealt with in breach of trust. In this connection, the most hotly contested issue relates to an option granted by SIS over an asset which the plaintiffs say belongs to the settlement. The plaintiffs want what they believe are the assets of the settlement to be restored to it and an account and inquiry. They also ask for various other reliefs involving documents executed and actions taken over the past decade.

Background

In order that the reliefs which the plaintiffs are asking for can be understood, I will first set out an account of the essential facts of the action, indicating those which are disputed.

The settlement

The settlement was made by deed on 17 January 1957. Rajabali appointed Ameerali and Yusuf the trustees of the settlement and conveyed to them No 8 Scotts Road to be held on trust on, inter alia, the following terms: (1). to permit Rajabali and Fatimabai to reside there during their lifetimes;

(2). with the consent of Rajabali and his wife or the survivor of them to `sell [No 8 Scotts Road] in such manner as they may think proper`;

(3). to hold the proceeds of sale and invest the same in any of the investments authorised by the deed and hold the investments and the income (the trust fund) during the joint lives of Rajabali and his wife or the survivor of them or for the period of 20 years from the date of the settlement whichever shall be the longer (the period of accumulation);

(4). at the expiration of the period of accumulation (the distribution date), the surviving children of Rajabali would be entitled to the trust fund in equal shares absolutely but if during that period one or more of the children had died then if he left a surviving child or children who attained 21 then that child or children would take the share which his parent would otherwise have taken;

(5). the power of appointing new trustees was vested in Rajabali and his wife.

As a result of the above terms Rajabali`s four children were the primary beneficiaries and each gained a contingent equitable interest in the trust property which would pass to their children should he or she not be living at the distribution date. Thus, any child of the primary beneficiaries who was alive on 17 January 1957 or who was born thereafter during the period of accumulation would also have a contingent interest in the settlement.

The only clause of settlement which in any way related to the type of investments which could be purchased with the proceeds of the sale of No 8 Scotts Road was cl 5. In view of later events this should be set out in full. It reads:

The trustees shall not invest any money for the time being subject to the trusts of this settlement in any securities of or in the colony of Singapore but subject to the aforesaid may invest any such money in any securities for the time being authorised by law in England or the Federation of Malaya for the investment of trust funds.

In exercise of his power of appointment of trustees, Rajabali appointed three further trustees of the settlement. First was the appointment of Mustafa on 29 March 1966. Secondly, on 19 February 1988, Ameerali`s third son, Asad Jumabhoy (Asad) was appointed the fourth trustee of the settlement. Asad purportedly resigned his appointment in March 1992 and one of the issues in the case is whether he in fact ever enjoyed the status of trustee and, if he did, whether his purported resignation was effective. In September 1992, Mustafa resigned as a trustee and in March 1993, exercising his power of appointment for the third time, Rajabali appointed Iqbal a trustee. Subsequently, Mustafa was re-appointed. Since, under s 39 of the Trustees Act (Cap 337), there cannot be more than four trustees at any time, whether Iqbal ever became a trustee or Mustafa ever lost (or regained) that status depends on the effectiveness of Asad`s and Mustafa`s purported resignations.

Fatimabai had made her own settlement in respect of No 6 Scotts Road in November 1956. That trust (the Fatimabai trust) was in practically identical terms to the settlement. Ameerali and Yusuf were also appointed the original trustees under the Fatimabai trust.

The development of the trust properties

Fatimabai died in 1964. This meant that the property of the Fatimabai trust would vest in her four children 20 years after its date, ie in 1976. By 1975, Ameerali, Yusuf and Mustafa were seriously considering what they should do with the two trust properties. The possibilities were either to sell them and reinvest the proceeds or to develop them as a composite site into a commercial complex. Ameerali was the most enthusiastic about the redevelopment possibility as he saw great potential in such a project since by that time the area in which the properties were located had become Singapore`s prime shopping and hotel district. He managed to convince his father that the land should not be sold despite the several attractive offers that had been received and instead should be redeveloped.

In 1978, Ameerali put forward a proposal to develop the properties into a shopping centre cum hotel which the other trustees and Rajabali accepted. Such a development project could not be carried out by trustees as this was not within the powers conferred on them by the settlement or by statute. Accordingly, it was decided to form a limited company to carry out the development and, on 29 March 1979, Scotts Holdings Pte Ltd (SHPL) was incorporated for this purpose. The three trustees together with Rafiq became directors of SHPL with Ameerali being the chairman and managing director.

In April 1979, SHPL agreed to purchase Nos 6 and 8 Scotts Road from the trustees of the two settlements at a purchase price of $625 per square foot. The purchase consideration was to be satisfied by the allotment of shares in SHPL to the vendors. Subsequently, 24,039,375 fully paid redeemable non-cumulative 5% preference shares of $1 each were allotted to the trustees of the settlement and five million such preference shares and 20,103,750 ordinary shares of $1 each were allotted to the trustees of the Fatimabai trust. In addition, Ameerali, Yusuf and Mustafa each subscribed and paid for, in cash, 5,000 ordinary shares. In March 1980, each of them increased their shareholding in SHPL by subscribing to an additional 30,000 ordinary shares of $1 each.

After the Fatimabai trust vested, Rajabali suggested, and his children agreed, that the shares in SHPL owned by the Fatimabai trust should be distributed to each of the sons and that Perin receive a cash payment of $5m instead of shares in SHPL. In 1990, the Fatimabai trust was formally dissolved and all shares which it then owned in SHPL were distributed equally among Ameerali, Yusuf and Mustafa.

In the meantime, after the transfer of the properties, SHPL proceeded to obtain a bank loan supported by the mortgage of the properties and to develop a commercial cum residential complex on the site. As approval for a hotel was not given by the authorities, the residential portion of the project was turned into serviced apartments. As the project advanced, further financing was required and two more loans both supported by similar mortgages were obtained. By 1982 the value of the site and its partially completed development was estimated at approximately $200m.

Originating Summons No 867 of 1983

In 1982, interest rates escalated to very high levels. The mortgagee bank pressured SHPL to increase its equity. Negotiations were conducted with Orient Leasing Company (Orient), a Japanese entity, for this purpose and subsequently that company`s Singapore subsidiary, Croissant Investment Pte Ltd, invested in SHPL and became the holder of 20% of SHPL`s issued share capital. During the course of these negotiations, some doubt arose as to the validity of the sale of No 8 Scotts Road by the trustees to SHPL. As a result, the trustees and the...