SECTION 73 CLPA1: ASSURANCE FOR THE SPOUSE AND CHILDREN
| Date | 01 December 1997 |
| Author | DEBBIE ONG SIEW LING |
| Citation | (1997) 9 SAcLJ 82 |
| Published date | 01 December 1997 |
It is common for an assured who insures his own life to nominate one or more beneficiaries in his policy intending that these nominees or beneficiaries will be entitled to the policy proceeds upon his death. However, the naming of nominees to receive the proceeds in itself may not have the effect intended. The insurer may pay the proceeds upon the death of the life assured to the assured’s personal representatives or executor who may use the proceeds to satisfy the debts of the assured. If the policyholder has willed all his property to other beneficiaries, the executor may distribute his estate which will include the proceeds, to the beneficiaries named in the will. Similarly, where the policyholder dies intestate, the personal representatives may distribute the estate according to the Intestate Succession Act2. The nominees named in the insurance policy will have no recourse since there is no privity of contract between them and the insurer3.
Section 73 of the Conveyancing and Law of Property Act4 (hereafter referred to as the CLPA) protects the position of the spouse and children of the policyholder. It provides that5
(1) A policy of assurance effected by any man on his own life and expressed to be for the benefit of his wife or of his children or any of them, or by any woman on her own life and expressed to
be for the benefit of her husband or of her children or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured or be subject to his or her debts.
The provision is modeled after the English equivalent in section 11 of the Married Women’s Property Act 18826 (hereafter called the MWPA). The purpose behind section 11 of the MWPA is to protect the immediate family members from the policyholder’s creditors7. In Kishabai v Jaikishan8, Lee J said of the provision:
Upon reading the section, it seems clear that the purpose of the section is to protect the interests of the widow and children of a deceased assured who has created a trust in their favour pursuant to its provisions. In other words, the legislature, viewing with sympathy any effort by a man to provide for his wife and family after his death, has provided that a man may insure his life at any time for their benefit and any moneys payable under the policy shall not go to pay his debts, but shall be held in trust for his family.
The section automatically creates a statutory trust in favour of the named beneficiaries whenever a person takes out a policy of assurance on his own life expressed to be for the benefit of his or her spouse and/or children. An obvious advantage of this is that a trust is created without the requisite formalities. Further, these beneficiaries cannot be unilaterally removed by the policyholder9. The proceeds of the policy do not form part of the estate of the policyholder and thus the beneficiaries are protected against his creditors.
In Singapore, the case of Eng Li Cheng Dolly v Lim Yeo Hua10 makes it clear that section 73 need not be mentioned in the policy in order for the section to apply. GP Selvam J thought that invoking the section “is not a requirement of the section”. In this case, the substantial assets left by the deceased were two real properties and three insurance policies. The plaintiff Dolly Eng was the ex-wife of the deceased who had been bequeathed “40% of his “real property” and nothing else. She claimed to be entitled to the proceeds of one of the insurance policies which was obtained before the parties were divorced. The policy contained the following provision: “Beneficiary. Mdm Eng Li Cheng, wife of the life assured.” without any reference to section 73. Although section 73 had not been mentioned in the policy, the fund generated by the insurance policy went to the ex-wife of the deceased and did not form part of the estate of the deceased policyholder. His honour held that a wife who is named a beneficiary obtains an immediate trust in her favour which is not defeated by divorce, even though section 73 has not been specifically invoked.
It is understood that in practice, some insurance companies in Singapore encourage policyholders to use a form which specifically invokes section 73 of the CLPA. Although it is not necessary to do so, this is probably good practice, since it may help solve conflict of laws problems. For example, if the policyholder is domiciled in a foreign country and the insurance office is established in Singapore, invocation of the section will make it clear that the parties intend section 73 of the Singapore CLPA to govern their contract and not the law of the place in which the policyholder is domiciled.11
Section 73 only applies to “a policy of assurance effected by any man (or woman) on his own life”. Suppose a policy provides that moneys are payable in other events such as on disablement of the policyholder or that at maturity date the surviving policyholder may receive a substantial sum of money, are these policies excluded from the Act? Dolly Eng has reinforced the old local position12 and the English position13 that as long as one of the
contingencies upon which the moneys is payable is death, the fact that it is also an endowment policy will not bring it outside the Act. The policy in question in Dolly Eng attracted the operation of section 73 despite the provision that the moneys were payable to the policyholder at a maturity date14.
If the policy is expressed to be for the benefit of persons other than the spouse and children of the assured, section 73 does not come into operation. However, it is unclear whether section 73 will apply where the policy is expressed to be for the benefit of one or more persons listed in the section as well as for other persons not falling within the categories listed. MacGillivray & Parkington15, using Re Parker’s Policies16 as authority, suggest that the English section 11 of the MWPA will not apply at all and consequently even those persons falling within the categories will not be afforded protection. In that case, Swinfen Eady J said
If the second wife is not within the terms of the Act, what is the alternative? The only alternative is that the settlor has introduced into the policies a stranger — a person who is not a wife within the meaning of the Act — and has attempted to make provision for that stranger. That is not authorized by the Act… as soon as you introduce as an object of the trust a person not a member of the limited class, then the policy is not within the Act.17
Houseman & Davies18 reject such an interpretation of the case and prefer instead the position taken by Re Clay’s Policy19. It was suggested there that a trust for the protected categories will be created by the statute. The policy in Re Clay’s was stated to be for the benefit of the wife and if she were dead, for the benefit of the named “adopted” daughter of the assured. As the daughter was not legally adopted under the Adoption Act 1926, she did not fall within the class to be protected by section 11 of the MWPA. The court held that the assured and the wife were entitled to deal with the policy without reference to the daughter.
The position suggested in Re Clay’s is more consistent with the purpose of the section. If protection for the spouse and children is intended, the mere naming of a person or persons outside the protected class ought not to
deprive the spouse and children the statutory protection. It is noted that the effect of Re Clay’s Policy is to disregard totally the other beneficiaries not within the protected class. For example, if the policy is expressed to be for the benefit of the wife and sister of the policyholder in equal shares, then if the policy is affected by the Act, the wife is wholly entitled to the policy. The estate cannot argue that the wife is entitled to half the interest while the other half, not being affected by any trust, reverts to the estate. It is submitted that a similar position should be taken in our local section 73 situation; Re Clay’s Policies is consistent with the words of section 73 and there is nothing in the section that justifies the interpretation suggested in Re Parker’s Policies.
Where the spouse and children are named in the policy, the identity of the beneficiaries is clear. A policy expressed to be for the benefit of named beneficiaries without further limitation will give the beneficiaries an immediate vested interest in the policy. Death and divorce do not in themselves destroy the interest created for an identified spouse. In Cousins v Sun Life Assurance Society20, the policy was issued “for the benefit of Lilian Cousins, the wife of the life assured, under the provisions of the Married Woman’s Property Act 1882”. The named wife died during the lifetime of the policyholder. The widower life assured brought an action for a declaration that the sole beneficial interest in the policy be vested in him. The court found that there was nothing in the policy which introduced a contingency to negative the creation of a vested interest in favour of the named wife. In consequence, the trust created in her favour remains unperformed until the date when she or her personal representatives receive the money. The policyholder therefore failed to obtain any interest in the policy.
Similarly, a former spouse who is named in the policy will remain entitled to the policy proceeds despite a divorce. In the local case of Dolly Eng21, the ex-wife of the deceased policyholder took an immediate vested interest
...
To continue reading
Request your trial