Teo Ai Hua (alias Teo Jimmy) and another v Teo Mui Mui

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 04 April 2011
• Neutral Citation: [2011] SGHC 81
• Plaintiff Counsel: Brown Anthony Pereira (Brown Pereira & Co)
• Docket Number: Suit No 538 of 2010
• Date: 04 April 2011
• Hearing Date: 17 January 2011,25 January 2011,19 January 2011,02 March 2011
• Subject Matter: Trusts
• Published date: 15 April 2011
• Citation: [2011] SGHC 81
• Defendant Counsel: Choa Sn-Yien Brendon (Acies Law Corporation)
• Court: High Court (Singapore)
• Year: 2011

Steven Chong J: Introduction

This case involves a dispute between siblings over the ownership of a property at People’s Park Complex (“the Property”). The Property was registered solely in the name of the defendant, the sister. There is, however, no dispute that the bulk of the purchase price for the Property, some 85%, was funded by her two brothers, the plaintiffs. The parties were at loggerheads whether the funding by the plaintiffs was by way of “friendly loans” or as a co-investment in the Property. However, if they were loans as alleged by the defendant, based on the monthly repayment to the 2nd plaintiff from the distribution of the rental income earned from the Property, it would take the defendant almost thirty years to repay the “friendly loan” to the 2nd plaintiff.

After the purchase of the Property, the defendant wrote to the 1st plaintiff to suggest that they buy “one more PPK complex unit”. In her effort to persuade the 1st plaintiff to purchase another unit at People’s Park Complex (“PPK”) with her, the defendant assured the 1st plaintiff that she would not cheat him or “makan the hse [sic] for herself”. Ironically the plaintiffs’ worst fears were confirmed when the defendant refused to recognise their respective shares in the Property and sought to claim the Property for herself thereby necessitating the commencement of the present proceedings.

When it became clear that the defendant’s “loan” case theory was tenuous, she resorted to rely on the defence of illegality to preclude the plaintiffs from claiming their proportionate shares in the Property. Not only was this defence not pleaded, which is not necessarily a bar in itself, a review of the relevant cases exposed the defence to be devoid of any merit.

Background

The plaintiffs’ claim is for a declaration that the Property is held by the defendant in resulting trust for the benefit of the plaintiffs and the defendant in proportion to each party’s direct capital contributions and that the Property be sold and proceeds divided according to the parties’ respective shares.

The purchase price of the Property was $320,000.00. There is no dispute that the plaintiffs contributed an aggregate sum of $285,436.04 towards the purchase price of the Property (“the Sums”). Specifically, the 2nd plaintiff paid $3,200.00 as the initial option fee of 1%. The balance deposit of 9% ($28,800.00) was paid by the 1st plaintiff. At completion, the 1st plaintiff and the 2nd plaintiff paid further amounts of $126,200.00 and $127,236.04 respectively. In contrast, the defendant contributed only a total sum of $50,000.00 towards the purchase price of the Property. However notwithstanding the plaintiffs’ respective contributions, the 1st and 2nd plaintiffs agreed between themselves (settling their own accounts vis-a-vis each other) that their respective shares in the Property were 64.1% and 20.3% instead. The defendant’s contribution was 15.6% ($50,000 of $320,000).

However, the parties offered very different versions as regards the purpose for the payments of the Sums. The plaintiffs’ case is that the purchase of the Property was a co-investment by all parties and that the Sums constituted their contributions to that investment. In contrast, the defendant argued that the Sums were simply loans, “repayable on demand”, which were advanced to her by the plaintiffs, as her brothers, to enable her to purchase the Property.

Neither the co-investment nor the loan was documented in any formal agreement. After the purchase of the Property was completed, two documents were prepared in connection with the Property. First, a Power of Attorney dated 27 November 2005 (“POA”) was executed by the defendant in favour of the 1st and 2nd plaintiffs. Under the POA, the plaintiffs were empowered by the defendant to carry out various acts on behalf of the defendant in relation to the Property including, inter alia, collection of rent, granting of leases and tenancies, payment of taxes, rates, charges and other outgoings and instituting legal proceedings to recover possession of the Property. In executing the POA on 29 November 2005, the defendant added the words “for purpose of collecting rent & tenancy” in her own handwriting next to her signature. Second, a Memorandum of Understanding (“MOU”) was prepared by the plaintiffs which was allegedly to be executed by all parties to reflect the proper percentages and other terms of the co-investment to avoid any future dispute. According to the plaintiffs, the MOU was allegedly forwarded to the defendant in December 2005, a claim which the defendant denied. She alleged that the first time she received the MOU was on 14 November 2008 at the office of the plaintiffs’ solicitor but she refused to sign the MOU because she did not agree with its terms.

Issues before this Court

There are two main issues before this Court: (a) whether the Sums were disbursed as the plaintiffs’ contributions as co-investment in the Property or as loans to the defendant; and (b) if the Sums were disbursed as the plaintiffs’ contributions to the co-investment, whether the doctrine of illegality operates to rebut the resulting trust in favour of the plaintiffs. I will deal with each issue in turn.

The purpose for which the Sums were disbursed

Before I begin my evaluation of the evidence as to whether the Sums were disbursed as the plaintiffs’ contributions to the co-investment in the Property or as loans to the defendant, it is important to highlight that there is no halfway house between the two competing case theories. If I find that the Sums were not loans, then it must follow that they were instead the plaintiffs’ contributions as co-investment in the Property.

The defendant sought to rely on the following to either prove the loans or to disprove the alleged co-investment with the plaintiffs: The plaintiffs did not inform the solicitor who was engaged to handle the purchase of the Property of any trust arrangements in relation to the Property. The unchallenged evidence of the defendant’s daughter that the defendant had told the plaintiffs at a meeting in the plaintiffs’ solicitor’s office on 14 November 2008 that the draft MOU to reflect the proper percentages of the parties and other terms of the co-investment was not previously provided to the defendant as alleged by the plaintiffs. The POA dated 27 November 2005 supports the defendant’s case that she had executed the POA in favour of the plaintiffs merely to allow either of them to collect the monthly rents from the tenant(s) directly, deduct the respective sums of $1,147.00 and $358.00 in accordance with the monthly instalment plan (being repayments of the respective loans to the plaintiffs) and for reimbursement of outgoings, before paying the balance amounts over to the defendant.

While it is true that none of the above proved that the Property was a co-investment by the parties, it is equally true that they do not inexorably establish that the monies were advanced as loans for the purchase of the Property. Therefore, even if the defendant’s arguments are taken at its highest, it is clear that they are, at best, neutral with respect to either of the case theories put forward by the plaintiffs and the defendant. Sums entirely consistent with co-investment

Having reviewed the evidence before me, I find that the Sums were disbursed by the plaintiffs as their contributions to the co-investment in the Property and not as loans to the defendant. There is a multitude of reasons to support this finding, to which I elaborate below: First, I accept the evidence of the plaintiffs that the agent for the Property, Ms Koo Suit Har (“Ms Koo”), was appointed by the 1st plaintiff. This was corroborated by the evidence of Ms Koo who testified that all instructions in respect of the purchase of the Property came from the 1st plaintiff. Although the defendant alleged in her affidavit of evidence-in-chief that she had specifically instructed Ms Koo to approach the owners of the Property to find out whether they were willing to sell the Property, Ms Koo testified under cross-examination that there was no such instruction from the defendant. In fact, Ms Koo further testified that the defendant’s name was inserted in the option to purchase the Property on instructions from the 2nd plaintiff and interestingly, she verified those instructions not from the defendant, but from the 1st plaintiff instead. If the monies were extended as loans to the defendant, there would be no conceivable reason for the 1st plaintiff to appoint an agent to source for a unit at PPK. Such an act, in addition to the fact that the 1st plaintiff had issued all instructions in respect of the purchase of the Property down to naming the defendant as the purchaser, was more consistent with the plaintiffs having an investment interest in the Property. Second, the defendant’s claim that she was “a bit tight with money at that point of time” and hence had requested the plaintiffs to advance her $3,200.00 and $28,800.00 for the 1% option fee and the 9% balance deposit respectively is not supported by the objective evidence. The defendant admitted during cross-examination that at the material time, she owned four properties, including two condominiums in Singapore, a “5-star” condominium in Malaysia and a Housing Development Board (“HDB”) flat at Tanglin Halt Road (“the Other Properties”). Moreover, she also had about $150,000.00 in her various fixed deposit accounts which were “liquid”, ie, they could be withdrawn anytime. Therefore, by her own evidence, there was strictly no necessity for the defendant to borrow any money from the plaintiffs to purchase the Property in the first place. If the Property was intended as a purchase for the benefit of the defendant alone, she could have easily utilised her own financial resources to purchase the Property as she did for her purchase of the Other...