Seah Teong Kang v Seah Yong Chwan

• Jurisdiction: Singapore
• Judgment Date: 10 September 2015
• Date: 10 September 2015
• Docket Number: Civil Appeal No 40 of 2014
• Court: Court of Appeal (Singapore)

Seah Teong Kang (co-executor of the will of Lee Koon, deceased) and another

Plaintiff

and

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

Defendant

[2015] SGCA 48

Sundaresh Menon CJ

,

Chao Hick Tin JA

and

Andrew Phang Boon Leong JA

Civil Appeal No 40 of 2014

Court of Appeal

Probate and Administration—Distribution of assets—Assents—Principles relating to doctrine of assent

Probate and Administration—Distribution of assets—Specific bequest of shares of company in winding up—Executor of estate distributing liquidation surplus of company to specific legatees in lieu of bequeathed shares—Whether specific bequest of shares failed so that liquidation surplus fell into residuary estate—Whether executor's distribution of liquidation surplus effective to pass any interest in bequeathed shares to specific legatees—Whether mandatory to obtain court's sanction for any interest in bequeathed shares to pass to specific legatees post-winding up—Section 259 Companies Act (Cap 50, 2006 Rev Ed)

On 19 December 2007, the shareholder of a company (‘the Testator’) made a will (‘the Will’) in which he bequeathed his entire shareholding of 1.2 mshares to certain of his family members as specific legatees. One million of these shares were bequeathed to the Testator's youngest son who was also appointed as the sole executor of the estate. He was the Respondent in this appeal. 100,000 of the Testator's shares (‘the Shares’) were bequeathed to his wife (‘the Gift’) who was also named as the sole residuary beneficiary of the estate. She had commenced these proceedings through two of her children as her attorneys. (Although she passed away by the time of the appeal, and it was her attorneys (in their capacity as the co-executors of her estate) who were before this court as appellants, she was referred to as the Appellant for expedience.) The Testator's remaining 100,000 shares were bequeathed to his eldest daughter (‘Chiew Tee’). She was one of the Appellant's attorneys.

The Testator died on 2 March 2011. At this time, the company was in the midst of being wound up pursuant to a court order dated 22 July 2008. The company was only finally dissolved on 19 June 2013. In the meantime, as the company was being wound up, a net liquidation surplus of $177,550.95 (‘the Sum’) was declared and paid out to the Testator's estate. The Respondent, as executor, proceeded to distribute the Sum among the specific legatees in lieu of the shares they had been bequeathed under the Will. He did so on 20 June 2012 by presenting a cheque to both the Appellant and Chiew Tee for a sum representing the value of their bequeathed shares. However, neither the Appellant nor Chiew Tee accepted the cheques. On 22 March 2013, the Respondent attempted to distribute the Sum a second time by making out a fresh cheque to the Appellant but, again, this was rejected. The Respondent made his third and final attempt to distribute the Appellant's aliquot share of the Sum to her on 26 September 2013, but this was also rejected.

On 18 September 2013 (which was prior to the Respondent's third attempt at distributing the Sum), the Appellant commenced this action for a declaration that the entire Sum fell into the Testator's residuary estate to which she was solely entitled. Her position at the hearing below (and in this appeal) was that the Gift of the Shares to her had failed because s 259 of the Companies Act (Cap 50, 2006 Rev Ed) (‘s 259’) - which provided that ‘any transfer of shares’ in a company made after the commencement of winding up ‘shall unless the Court otherwise orders be void’ - was a mandatory legal requirement that the Respondent had not taken any steps to comply with; hence no interest in the Shares (legal or equitable) could pass to her under the Will. Without any interest in the Shares passing to her, the Appellant said it followed that she was not entitled to receive any part of the Sum as well in her capacity as a specific legatee under the Will.

The judge at first instance (‘the Judge’) agreed with the Appellant that she never became the legal or beneficial owner of the Shares because s 259 had not been complied with. Nevertheless, the Judge found that it did not follow from this that the Appellant was necessarily precluded from receiving any part of the Sum. Accordingly, he held that the Sum could validly be distributed in lieu of the Shares (as the Respondent had sought to do) such that the Gift did not fail. The Appellant appealed against the Judge's decision.

Held, dismissing the appeal:

(1) The underlying premise of the Appellant's argument was that s 259 was such an integral and (more importantly) indispensable requirement that had to be complied with in order for the Gift to take effect. If, however, it could be demonstrated that s 259 did not have this effect inasmuch as the Gift could nevertheless take effect (even if it was in a more limited fashion) without complying with it, then the Appellant's argument would fail. In order to determine which of these two polar (and opposite) arguments was correct, it was necessary to examine the precise legal consequences that obtained vis-à-vis the Shares themselves upon the Testator's death: at [17] .

(2) It was clear that no interest (whether legal or equitable) in the Shares could pass directly to the Appellant under the Will upon the death of the Testator because it was the executor who had to execute the Will, after which the specific bequests (including the Shares) would be distributed to the respective specific legatees under the Will. Further, this passing of the whole interest in the Shares to the Respondent qua executor upon the death of the Testator was, as the Judge had correctly characterised, via the process of transmission (which took place by operation of law) and not by a transfer (which occurred as a result of an act of the parties): at [19] and [22] .

(3) The Judge, however, had erred in basically accepting the Appellant's argument that s 259 had to be complied with in order for any interest (whether legal or equitable) in the Shares to pass to the Appellant. In this regard, he had entirely omitted to consider the vital concept of assent in the context of the law of wills: at [24] .

(4) An assent was an acknowledgment by a personal representative that an asset of the deceased was no longer required for the payment of the debts of the estate, funeral expenses or general pecuniary legacies. Its effect, in the context of a specific bequest under a will, was to turn the executor into a trustee of the bequeathed asset because equitable ownership moved to the specific legatees upon the assent who, for their part, were turned into beneficiaries: at [25] .

(5) The Appellant relied on academic commentary to submit that the doctrine of assent had no application whatsoever where the bequeathed asset consisted of shares because the passing of interest in this particular species of property turned on the conventional notions of share transfer and registration. However, once the relevant commentary was read in its proper context, it was clear that its intention was simply to state that, in so far as what was sought to be transferred was the legal title to shares, a simple assent by the executor was not ordinarily effective because registration in accordance with the company's articles was strictly required for this purpose. The commentary in question said nothing which detracted from the general principle that an assent remained effective to pass the equitable interest in the bequeathed asset to the specific legatee: at [28] to [33] .

(6) In determining the existence of an assent, the inquiry was necessarily a fact-sensitive one. What was sought was an indication by the executor that the bequeathed asset was no longer required for the purposes of administration and that it could pass under the testator's will - and this he or she could do informally and it could be inferred from his or her conduct: at [27] .

(7) In the present case, it was clear from the Respondent's first attempt at paying out part of the Sum to the Appellant on 20 June 2012, which sum represented the monetary value of the Shares upon the company's winding up, that he was, for all intents and purposes, assenting (in his capacity as the executor) to the passing of the interest in the Shares under the Will to the Appellant - and, as explained, the precise nature of this interest was the equitable interest in the Shares. The Respondent's second attempt at paying out part of the Sum on 22 March 2013 would similarly have constituted an implied assent to the passing of the Shares. However, as far as the Respondent's third attempt on 26 September 2013 was concerned, this had occurred after the company was ordered to be fully and finally dissolved - as the Shares would have been extinguished from that point onwards, it would not have been possible for any equitable interest therein to have passed to the Appellant thereafter. Nevertheless, the fact remained that there were already two separate occasions on which the Respondent had assented to the Shares. This was effective to constitute the Appellant as the beneficial owner of the Shares. On this analysis, it was clear that no compliance with s 259 was required in order for the Gift to take effect pursuant to the Will itself, at least to the extent of the Appellant acquiring an equitable interest in the Shares: at [34] and [35] .

(8) Section 259 had no application in the present case because it was explicitly stated to be relevant only to the ‘transfer’ of shares post-winding up whereas - in relying on the Supreme Court of Queensland decision of Re Kenzler(1983) 7 ACLR 767 - the Respondent had correctly argued that the passing of equitable interest in the Shares upon the Respondent's assent qua executor was more properly characterised as a ‘transmission’ instead. Therefore, the present case fell outside of the express ambit of s 259...