A Case Study – The Father (“TGC”) Founded The Company In Question [2019] SGCA 15

March 24, 2019

Facts

The father (“TGC”) founded the company in question (“the Company”) with two of his nephews. TGC subsequently bought out the shares his nephews and installed some of his sons as directors of the Company.

While as the managing director, TGC and his wife bought a property at Surin Lane (“Surin Lane Property”), intended as their family home. The Surin Lane Property was bought under TGC’s eldest son’s name (“TTW”). The Surin Lane Property was then transferred to the Company’s name, allegedly on TGC’s instructions so that TTW’s would not get any share in the Surin Lane Property in the event of a divorce.

In the year 1976, the Company approved the purchase of the Glasgow Road Property (“the Property”). The Property was reflected in the Company’s financial statements as an asset since then. The Property was allegedly bought under the Company’s name to make it “divorce-proof” for TGC’s third’s son (“TTL”) just like the Surin Lane Property.

Some years later, TTL and his wife applied for a Housing Development Board flat (“HDB flat”) but was stopped by TGC on the further “assurance” that TTL and his wife already own the Property. TTL and his wife withdrew their application for the HDB subsequently.

The Property has been the family home till the present day. There were also various improvement and repair works taken up on the Property over the years.

In the year 2012, TTL made a will, referring to the Property as “his house” and gifting it to his wife. As things transpired, TTL went on to make a Statutory Declaration (“Declaration”) in relation to the Property when his siblings (the other directors of the Company) refused to return the Property to him.

When TTL passed away, his estate (“the Respondents”) sought, amongst other things, a declaration to vest the Property toTTL’s estate. The Company (“the Appellants”) counter-sued for vacant possession of the Property.

When the case was before the High Court (“HC”), the HC ruled in favour of the Respondents that the Property belongs to TTL’s estate. However, this ruling was overturned by the Court of Appeal (“the Court”). We now look into the issues that the Court considered.

Key issues that led to the overturn of the HC’s decision

As the bulk of the Respondents’ claim relied on TGC’s oral representation to TTL, the issues before the Court were as follows:

(i) Whether there was an expressed common intention constructive trust via the oral representation;

(ii) Whether the conduct of TTL and his wife could give rise to an inferred common intention;

(iii) Whether TTL suffered any detriment in reliance on TGC’s oral representation; and

(iv) Whether proprietary estoppel was made out.

Whether there was an expressed common intention constructive trust via the oral representation

To determine this, the Court needed to examine if an oral representation was indeed made out by TGC. As the Respondents sought to prove their case of expressed common intention constructive trust and proprietary estoppel, it was for the Respondents to prove that the oral representation was made and the content of that oral representation was true.

The Respondents argued that TTL’s Declaration was evident that an oral representation was indeed made by TGC. However, the Appellants argued otherwise, stating that none of the Respondents’ representatives had personal knowledge of the oral representation made by TGC to TTL.

“Divorce-proof”

Paragraph 3 of the Declaration states:

“Around that time, Dean, the original owner of the house at 17 Glasgow Road, offered me to buy his house. I discussed with my Dad about this and he told me that he would buy the house at 17 Glasgow Road for me since I will be staying behind and I am the main person handling the business to allow my younger siblings the opportunity to study abroad. However, he told me to put my house at 17 Glasgow Road under the [Company’s] name so that after I [sic] my marriage and in the event of a divorce, my wife would not get to share the property. Myself and my wife then moved into the house at 17 Glasgow Road. My father also instructed me to put all my savings and bonuses I received from Tong Bee finance into the [Company].”

With reference to the paragraph above, the Respondents argued that Property was intended to be TTL’s and was purchased under the Company’s name instead to make it “divorce-proof” similar treatment to the Surin Lane Property. However, the Court found difficulty in accepting this argument.

The Court was of the view that in order to render the Property as “divorce-proof”, both the legal and beneficial owner had to be the Company. Having beneficial ownership would mean that in the event of divorce, TTL’s wife would still be able to claim a share in the Property under the relevant common law. This particular risk, in which the Respondents claimed, does not diminish so long TTL was married and alive.

The Respondents also argued that a similar treatment of making it “divorce-proof” was first applied in the Surin Lane Property. They argued that this was relevant and therefore applied to TTL’s case. The Appellants counter-argued that it cannot be the case as Surin Lane Property was first bought under TTW’s name because, during the material time, the Company was co-owned by TGC and his 2 nephews. After TGC had bought out his nephews’ shares, the Surin Lane Property was then transferred to the Company. In light of this, the Appellants argued that TTW was never intended as the beneficial owner of the Surin Lane Property, and applying the same argument, TTL was never intended as the beneficial owner of the Property.

In ruling, the Court agreed with the Appellants’ argument that TTW was not intended as the legal or beneficial owner of the Surin Lane Property. In fact, the Court was of the view that TTW was holding the Surin Lane Property on trust for the Company due to the shareholding of the Company at the material time. In relation to the Property, the Court held that since the Property was purchased under the Company’s name on the outset, the argument that TTL was intended as the beneficial owner cannot stand.

Withdrawal of HDB purchase

In TTL’s Declaration, the Respondents argued that TTL and his wife had made an application to apply for an HDB flat but subsequently withdrew the application because TGC assured

The Appellants rebutted that if TTL and his wife had truly believed that the Property was theirs, then they would not have applied for the HDB flat in the first place.

The Court found that the circumstances leading to the application of the HDB flat and the subsequent withdrawal did not aid the Respondents in their case. It was noted that TTL’s wife could not give a satisfactory reply on the circumstances when being crossed-examined in court.

TTL’s conduct

For completeness, the Court also reviewed the conduct of TTL. The Court found it puzzling that TTL had not asserted his claim over the Property throughout his lifetime and made no objections when signing of the Company’s Directors’ resolution approving the Company to mortgage the Property for loan facilities that were used for the Company. TTL had also signed documents as the Company’s director, acknowledging that the Property had been correctly recorded in the Company’s financial statements.

Other than using the Property as collateral for loans benefiting the Company, the Company also paid the relevant insurance premiums and property tax for the Property throughout the years.

In adding up the conducts of TTL and of the Company, it was consistent that the Company has always been both the legal and beneficial owner of the Property and not TTL.

Reviewing the Declaration and the circumstances surrounding it

In reviewing the Declaration and the circumstances that were purported to support the Respondents’ claims that an oral representation was made, the Court found that:

(i) There was no other evidence to support that the oral representation was indeed made;

(ii) The parties, namely TGC and TTL, to the oral representation had already passed away. Therefore, no cross-examination was possible to ascertain the legitimacy of the said oral representation, resulting in having nothing to rebut the presumption that the legal owner is also the beneficial owner;

(iii) TTL’s conduct of not asserting his ownership and signing off the Directors’ resolutions as well as the Company’s financial statements was in contrary to the Respondents’ claim that TTL had a beneficial interest in the Property.

As such, the Court ruled that no expressed common intention constructive trust was established.

Whether the conduct of TTL and his wife could give rise to an inferred common intention;

Under common law, to establish inferred common intention, the question to ask them is if the person claiming beneficial interest made any direct financial contribution towards the purchase of the property. In the present case, it was not disputed that TTL did not make any financial contribution towards the purchase price of the Property.

The Respondents then went on to argue that under common law, common intention can also be inferred if the person claiming beneficial interest had carried out a significant improvement to the subject property. The Respondent sought to advance this through the improvement and repair works on the Property paid by TTL.

The Court rejected the Respondents’ argument. The Court clarified that under common law, significant improvements is the consideration of altering the party’s share of beneficial interest. In other words, the party seeking to claim that he has done significant improvements to alter his share of beneficial interest must have first acquired beneficial interest either by expressed common intention constructive trust or inferred common intention through direct financial contribution towards the property. TTL had neither.

The Court further indicated that TTL could not have relied on the improvement and renovation work for equity in the Property as it was extinguished when the family stayed in the Property free of rent.

Whether TTL suffered any detriment in reliance on TGC’s oral representation & whether proprietary estoppel was made out.

The following 2 questions could only be made out if there was indeed an oral representation. As discussed above, the Court has found that TGC’s oral representation was not made out. In light thereof, the Court was of the view that TTL could not have suffered any detriment and accordingly proprietary estoppel cannot be made out.

Conclusion

Having considered the facts and circumstance surrounding the case, the Court held that the Respondents had failed to prove their case that the Property belonged to TTL, and consequently the gift of the Property to his wife under his will failed.

The law in relation to claiming beneficial interest is well-established. In the absence of a trust deed, it would be difficult to prove that one, who has no legal interest, has a beneficial interest in a property. This case highlights the importance of proper wealth and legacy planning in order to protect the legacy that one worked so hard for and providing to loved ones.

 

Serena Wong
Advocate & Solicitor