Uvh v Uvj

• Judge: Valerie Thean J
• Judgment Date: 03 June 2019
• Court: High Court (Singapore)
• Docket Number: Suit No 6 of 2016 (Taking of Accounts or Inquiries No 1 of 2017)
• Date: 03 June 2019

UVH and another

and

UVJ and others

[2019] SGHCF 14

Valerie Thean J

Suit No 6 of 2016 (Taking of Accounts or Inquiries No 1 of 2017)

High Court (Family Division)

Equity — Fiduciary relationships — Duties — Beneficiaries under will claiming that executors who were also beneficiaries had failed in their fiduciary duties — Whether consequential orders following taking of accounts should be granted

Equity — Remedies — Account — Beneficiaries under will claiming that executors who were also beneficiaries had failed in their fiduciary duties — Executors using estate's shares to vote in favour of resolutions re-appointing themselves as directors and approving their remuneration as such — Whether account of profits ought to be ordered in relation to directors' remuneration

Evidence — Adverse inferences — Beneficiaries under will claiming that executors had failed in their fiduciary duties — Account ordered to be taken on wilful default basis — Reversal of order of witnesses — Whether adverse inference could be drawn from beneficiaries' decision not to give evidence

Probate and Administration — Executors — Beneficiaries under will claiming that executors had failed in their fiduciary duties — Whether executors should be removed and replaced

Held, allowing the application in part:

(1) The statement of claim had sufficiently prayed for the remedies requested. Prayer B, which requested an account of what was due and payment of the amount found due, envisaged that the Sisters would claim any entitlement arising from an account, including any account of profits that was due. The Sisters had also, in their notice of objections and non-admissions, specifically included a surcharge for an account of profits. There was no requirement for an additional summons or other step in order for consequential relief to be granted: at [20] and [25].

(2) The present taking of accounts was ordered on a wilful default basis. Misconduct that was neither pleaded nor mentioned at the hearing at which the accounting was directed could nevertheless be investigated: at [24].

(3) Where an account was ordered on a wilful default basis, the onus lay on the fiduciary to explain his actions. In assessing the Brothers' attempt to discharge their liability, the court would assess the totality of the evidence before determining the credibility of their evidence. The Sisters' decision to refrain from giving evidence did not necessarily mean that an adverse inference had to be drawn against them: at [29] and [31].

(4) Fiduciaries had to seek informed consent when in a position of conflict. Although the Brothers were appointed as directors prior to their becoming executors, such a prior appointment did not exculpate them from their responsibilities as fiduciaries. The conflict of interest arose because the directors' remuneration and the dividends payable to shareholders came from the same pool of funds. The use of the Estate's shares, without the informed consent of the beneficiaries, while not instrumental in procuring the passing of resolutions that granted the Brothers' their remuneration, constituted a breach of the no-conflict rule. It was the very fact of non-disclosure that allowed the Brothers to continue throughout many years to draw down on the proceeds of properties sold by the Companies through their remuneration: at [40] to [43].

(5) [E] Shelford Road and [F] Shelford Road, owned by the Companies, was rented out to the Brothers for many years at prices below the annual value of the properties. This difference between the market value of the rental and the rent paid was impermissible benefit-in-kind: at [48] and [49].

(6) As fiduciaries, the Brothers bore the burden of demonstrating that any entry was properly made. The Brothers failed to discharge this burden in relation to the debt of $1m that was purportedly owed to the Mother's estate – the proceeds from the sale of land, the lack of repayment to the Mother and the lack of any entry in the accounts demonstrated that the Mother had waived her entitlement to her portion of the residual Estate from the sale of the JB Land. The sum of $1m was to be removed as an outstanding liability from the Estate account: at [54].

(7) The Brothers' decision to allow Mdm Kok to reside in the Eastern Mansion property rent-free until the time of the en bloc sale was pursuant to the Testator's wishes and was, in the circumstances, reasonable. The evidence showed that the late Testator had been paying for the utility bills for his mistress and her family since 1993, that he had issued a cheque of $150,000 to her and that her daughter was an employee of one of the Companies at the time of his passing. Although they ought to have kept the Sisters informed, the Sisters would have in all probability agreed with the course of action: at [63] to [65].

(8) The expenses for OS 1241/2002 were not reasonably incurred and should not have been charged to the Estate. It was the Brothers' refusal to provide any information or explanation to their Half-Siblings that led to OS 1241/2002 being taken out. The legal fees of OS 1241/2002 could not be considered as reasonable testamentary expenses that could otherwise be charged to the Estate's funds under s 67(1) of the Probate and Administration Act (Cap 251, 2000 Rev Ed) (“Probate and Administration Act”): at [67] and [68].

(9) Any evidence of misconduct on the part of executors that demonstrated undue and improper administration of the estate in total disregard of the interests of the beneficiaries would be sufficient to revoke probate under s 32 of the Probate and Administration Act. The Brothers had acted in conflict with, and to the detriment of, their Sisters' interest. It was appropriate to appoint a new executor, or executors: at [72] to [74].

Case(s) referred to

ADP v ADT [2014] 3 SLR 904 (refd)

Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 (refd)

Bristol and West Building Society v Mothew [1998] Ch 1 (refd)

Cheong Soh Chin v Eng Chiet Shoong [2019] 4 SLR 714 (refd)

Chng Weng Wah v Goh Bak Heng [2016] 2 SLR 464 (refd)

Fong Wai Lyn Carolyn v Kao Chai-Chau Linda [2017] 4 SLR 1018 (refd)

Gee, Re [1948] Ch 284 (refd)

Jigarlal Kantilal Doshi v Damayanti Kantilal Doshi [2000] 3 SLR(R) 290; [2000] 4 SLR 273 (folld)

Lalwani Shalini Gobind v Lalwani Ashok Bherumal [2017] SGHC 90 (refd)

Libertarian Investments Ltd v Thomas Alexej Hall [2013] HKCFA 93 (refd)

Lo Khi On v Tanjong Aru Hotel Sdn Bhd [1994] 3 MLJ 766 (refd)

Mona Computer Systems (S) Pte Ltd v Singaravelu Murugan [2014] 1 SLR 847 (folld)

Murad v Al-Saraj [2005] EWCA Civ 959 (refd)

Sandz Solutions (Singapore) Pte Ltd v Strategic Worldwide Assets Ltd [2014] 3 SLR 562 (folld)

Surender Singh s/o Jagdish Singh v Li Man Kay [2010] 1 SLR 428 (refd)

Then Khek Koon v Arjun Permanand Samtani [2014] 1 SLR 245 (refd)

Tongbao (Singapore) Shipping Pte Ltd v Woon Swee Huat [2019] 5 SLR 56 (refd)

Townsing Henry George v Jenton Overseas Investment Pte Ltd [2007] 2 SLR(R) 597; [2007] 2 SLR 597 (refd)

Wong Moy v Soo Ah Choy [1996] 3 SLR(R) 27; [1996] 3 SLR 398 (refd)

Facts

Two sisters (“the Sisters”), the third and fourth children of their father (“the Testator”), brought suit against their three brothers (“the Brothers”), contending that the Brothers had failed in their fiduciary duties as executors of the Testator's estate (the “Estate”).

The Testator had passed away on 30 May 1997. His will, which provided that the Brothers would serve as executors of the Estate, did not provide them with any power to postpone the getting in, conversion or distribution of the assets. Clause 2 of the will contained a specific devise to two half-siblings (the “Half-Siblings”) in the sum of $500,000 each. Clause 3 of the will devised the Testator's real and personal property to the five children (the Sisters and the Brothers) and the Mother.

The Estate included a sizable real estate portfolio, held in the main through four private companies. These were [A] Trading, [B] Development, [C] Investments and [D] Company (collectively “the Companies”). Prior to the Testator's demise, the Brothers had been appointed as directors in the Companies (save for UVJ's directorships in [A] Trading, [B] Development and [C] Investments), and had held shares in their own names.

From 1997, the Brothers used the Estate's shares to vote in favour of resolutions re-appointing themselves as directors and approving their remuneration as directors in the Companies. The sisters were not consulted on these various decisions.

Around December 2000, the Half-Siblings started asking the Brothers for information relating to the latter's administration of the Estate as well as a statement of the Estate's account. None was supplied. On 4 September 2002, the Half-Siblings filed Originating Summons No 1241 of 2002 (“OS 1241/2002”) to compel the Brothers to accede to their requests for information and a statement of the Estate's account. This was resolved on 4 December 2002 with no substantive orders made, although costs were ordered against the Brothers. The Brothers charged these costs, together with the legal fees incurred through defending the action, to the Estate. On 19 October 2004, the Half-Siblings were each paid their entitlement of $500,000. The Sisters were not informed of these events.

In May 2006, an apartment at Jalan Kechil (“the Eastern Mansion property”), which belonged to the Testator's Estate, was sold for $909,207.90. Prior to this, the Testator's mistress, Mdm Kok, had lived there from 1993. The Sisters were not informed of Mdm Kok's residence at the Eastern Mansion property. However, they signed their consent to the sale as beneficiaries of the Estate.

From 1 January 2008, the first defendant, UVJ, started staying at [E] Shelford Road, which was owned by the Companies. Similarly, the second defendant, UVK, started staying at [F] Shelford Road (which was also owned by the Companies) from 20 December 2000. The rentals paid by...