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  • Management Corporation Strata Title Plan No 473 v De Beers Jewellery Pte Ltd[2002] 1 SLR(R) 418; [2002] SGCA 13
    appellant did not succeed on any defences pleaded i The appellant could not rely on the defence of laches because one not much time had lapsed since the respondent could first have been aware of its cause of action and two no prejudice had been caused to the appellant by the time lapse ii The appellant failed on the defence of promissory estoppel because the respondent had not made any relevant representations to it The respondent had merely accepted that the appellant had the power to make the demands The appellant did not seek to rely on this defence on appeal and its submissions before the judge will not be dealt with here iii The appellant could not establish the defence of change of position because one the demands for payment and that the respondent maintain the roof were ultra vires two the appellant would have had to upgrade the lifts anyway and three there was no evidence that the 170 000 had been used to maintain the common property h The parties were to pay interest as follows i The respondent was to pay the appellant simple interest on the maintenance contributions and other payments from the date of the summary judgment at 10 per annum this was not an issue in the appeal and will not be dealt with here ii The appellant was to pay the respondent simple interest A on 200 000 at 5 per annum from February 1992 to June 1995 and at 10 per annum thereafter and B on 170 000 at 5 per annum from September 1993 to June 1995 and at 10 thereafter The judge subsequently ordered that the respondent be awarded the full costs of the counterclaim The issues 5 The issues in this appeal were a Whether the appellant s demand for 200 000 was ultra vires the LTSA if it was whether the parties could and did contract around the LTSA b Whether the appellant s demand for 170 000 was ultra vires the LTSA if it was whether the parties could and did contract around the LTSA c Whether the law allows recovery of payments made under a mistake of law if so whether the respondent in fact paid out under a mistake of law d Whether the declarations relating to the maintenance of the roof above the units should have been granted e Whether the appellant should succeed on the defences pleaded before the judge time bar laches and change of position f Whether the appellant should succeed on the defences raised on appeal settlement of an honest claim compromise honest receipt estoppel by convention and abuse of process extended res judicata g Whether other defences should be recognised for example payment made under a closed transaction payment made under a settled view of the law promissory estoppel and passing on the burden of the payment h Whether the judge erred in awarding interest to the respondent at such rates and for such period as she did i Whether the judge erred in awarding the full costs of the counterclaim to the respondent First issue whether the demand for 200 000 was ultra vires Relevant facts 6 In a letter dated 13 April 1989 the appellant said that it would not object to the conversion of the four penthouse units to 18 maisonette units on condition that inter alia A one time contribution of 200 000 to the Management Corporation towards part of the cost for the modernisation of the 3 lifts serving the residential apartment sic The next day Mr Ow Chor Seng Mr Ow a director of the respondent signed on the letter to indicate acceptance of the conditions The respondent paid 200 000 by a cheque dated 10 January 1992 According to the appellant s accounts for 1992 the money was put into the sinking fund and used to upgrade the lifts 7 The appellant claimed that the reason for this demand was that the increased number of occupants in the top two storeys would place more pressure on the lifts However at the extraordinary meeting of the management corporation held on 29 September 1992 this reason was not mentioned Instead the explanatory notes to the special resolution passed at that meeting stated that the lifts had to be upgraded due to wear and tear that residents had complained about the waiting times for lifts and that shopkeepers had complained about the goods lift The appellant tried to explain away the fact that no mention had been made of the respondent s contribution in the explanatory notes by repeating the testimony of Mr Lim On Guan Mr Lim an employee of the appellant s managing agent Court Wouldn t it have helped you get the resolution passed if residents knew defendants were defraying part of this cost A No All kinds of questions could have come up like why not get them to pay all the costs or why convert the penthouses why not maintain them for a more exclusive environment We had to consider what would make it easier to get the resolution passed The role of a managing agent is to present all the facts to the subsidiary proprietors and allow them to decide whether to pass a resolution not to conceal material facts and manipulate the outcome of a vote Any misfeasance aside it was difficult to believe that the managing agent would have been motivated by such a minor consideration to risk misinforming the subsidiary proprietors The judge found that the impetus for upgrading the lifts was not the increased traffic that would allegedly have resulted from the conversion of the penthouse units There is no reason to overturn this finding Relevant LTSA provisions 8 The starting point was s 48 1 q of the LTSA which provides 1 A management corporation shall for the purposes of the subdivided building concerned q from time to time levy in accordance with section 42 on each person liable therefor a contribution to raise the amounts referred to in paragraphs m and n emphasis added Section 48 1 n ii allows a management corporation to raise contributions for the renewal or replacement of any electrical and mechanical installations existing for common use As the upgrading of the lifts fell within s 48 1 n ii contributions thereto should have been raised in accordance with s 42 Section 42 2 provides Contributions levied by a management corporation shall be levied in respect of each lot and shall subject to subsections 3 5 and 6 be payable by the subsidiary proprietors in shares proportional to the share value of their respective lots emphasis added As the appellant had demanded a flat rate contribution of 200 000 it had acted ultra vires the LTSA A contract circumventing the LTSA 9 The appellant s submission here was founded on two points Firstly a management corporation has the capacity to enter into contracts This argument according to the appellant would not be defeated even if the appellant was akin to a public body because public bodies also have the capacity to contract It was unfortunate that the judge likened the appellant to a licensing body because it allowed the appellant to go off on a tangent by submitting on principles applicable only to public bodies A management corporation is not a public body but an unlimited liability company In any case the issue was not whether the appellant had the capacity to contract but whether there were any contracts between the parties 10 The appellant s second point was that all the elements of a contract were present including an intention to create legal relations The judge had found that there was no such intention We accepted that the dealings took place in a commercial context but even if all the ingredients of a contract were established the appellant s contract argument was untenable for the following reasons Firstly it is trite law that a body created by a statute only has powers granted expressly or by implication in that statute A management corporation s power to raise contributions is clearly and exhaustively provided for in s 42 of the LTSA Anything done outside these powers is void ab initio Secondly upholding contracts which circumvent the detailed and carefully drafted provisions of the LTSA would drive a coach and horses through it Second issue whether the demand for 170 000 was ultra vires Relevant facts 11 The conversion entailed a subdivision of the four strata title lots into 18 It would also have resulted in the creation of a common corridor In a letter dated 5 May 1993 the appellant said it would approve the strata subdivision plans on condition that inter alia the respondent pay an outright contribution of 200 000 to the appellant for the maintenance of the additional common property The appellant later agreed to reduce the sum to 170 000 Mr Ow signed on the first letter to indicate acceptance of the conditions The respondent paid 170 000 by a cheque dated 25 August 1993 Relevant LTSA provisions 12 The starting point was s 48 1 q of the LTSA which is reproduced in 8 above Section 48 1 m i allows a management corporation to raise contributions for the purpose of meeting its actual or expected liabilities incurred or to be incurred under paragraph a b c or d Section 48 1 b further provides 1 A management corporation shall for the purposes of the subdivided building concerned b properly maintain and keep it in a state of good and serviceable repair i the common property Section 3 defines common property as c unless otherwise described specifically as comprised in any lot in a strata title plan and shown as capable of being comprised in such lot includes i foundations columns beams supports walls roofs lobbies corridors stairs stairways fire escapes entrances and exits of the building and windows installed in the external walls of the building emphasis added As the new corridor was common property within the meaning of s 48 1 b i contributions thereto should have been raised in accordance with s 42 Section 42 5 an exception to s 42 2 applied in this case Where a lot has been subdivided into 2 or more lots and the management corporation will incur additional expenditure in maintaining the new facilities or common property arising from the subdivision of the first mentioned lot the management corporation may levy such additional contributions as may be approved by the Commissioner on the subsidiary proprietor or his successors in title in order to recover the additional expenditure emphasis added 13 As Prof Teo Keang Sood Strata Title in Singapore and Malaysia Butterworths 2nd Ed 2001 has pointed out this provision recognises that a subsidiary proprietor should not be allowed to impose the additional cost of maintaining new common property on other subsidiary proprietors by subdividing his property However the interests of the subsidiary proprietor who intends to subdivide his property must also be safeguarded hence the Commissioner s role in ensuring that the contribution imposed by the management corporation is fair As the appellant had failed to raise the contribution in accordance with s 42 5 it had acted ultra vires the LTSA LTSA section 12 2 14 The appellant submitted that s 12 2 afforded it another route to raise contributions quite apart from s 42 Section 12 2 provides Where the subdivision of a lot or the amalgamation of 2 or more lots results in the creation of any additional or new common property the subsidiary proprietor shall obtain the approval of the management corporation before lodging the strata title plan for redevelopment with the Registrar The appellant relied on s 12 2 in respect of both payments However as s 12 2 deals only with the creation of new common property it was at most relevant only to the payment of 170 000 15 The appellant s lengthy exploration of the legislative history of s 12 2 did not aid its case It also claimed that a management corporation has powers incidental to those which are expressly provided for in the statute and hence the manner in which it raised the contribution was within the powers incidental to s 12 2 These arguments failed for three reasons Firstly s 12 2 makes no mention whatsoever of a management corporation s authority to raise contributions in connection with granting approval The judge did not rule out the possibility that it could charge an administrative fee but surely such a fee could not run into hundreds of thousands of dollars Secondly there was no need to speculate about the extent of powers to levy contributions incidental to s 12 2 as s 42 clearly delineates a management corporation s powers to raise contributions Thirdly recognising vague incidental powers would defeat the scheme of s 42 this rationale is akin to the one explored in 10 above 16 The appellant also sought to apply its contract argument to the 170 000 For the reasons discussed in 9 and 10 above this failed Third issue whether the sums are recoverable as payments made under a mistake of law Present law 17 The law in Singapore in this area since Serangoon Garden Estate Ltd v Chye Marian 1959 MLJ 113 has been that money paid out under a mistake of law as opposed to fact is not recoverable The key question here was whether Singapore law should follow the example of some other Commonwealth states and abrogate this rule If the answer was in the affirmative subsidiary questions included whether the rule should be abrogated legislatively as in Western Australia and New Zealand or judicially as in Australia Canada England and South Africa and what defences if any should be developed Should the law be changed 18 In Kleinwort Benson Ltd v Lincoln City Council 1998 4 All ER 513 the House of Lords unanimously decided that it was time to abrogate the rule by a majority it decided to do so judicially Lord Goff referred to the Law Commission s Consultation Paper No 120 on Restitution of Payments Made under a Mistake of Law 1991 which cited the following as the main criticisms of the rule a The rule was contrary to justice which demanded that money paid under a mistake of law should be repaid unless there were special circumstances justifying its retention by the payee b The distinction between mistakes of fact and mistakes of law could lead to arbitrary results c Courts were tempted to manipulate the fact law distinction in order to achieve practical justice This led to uncertainty in the application of the rule 19 The court also held that two factors in particular did not defeat a claim firstly that the payment had been made as part of a transaction which was now closed and secondly that the payment had been made on a settled view of the law These holdings are further discussed at 47 to 52 below 20 The appellant s first objection to the abrogation of the rule was that it was well entrenched Such an argument had no merit because the common law is no stranger to judicial activism The appellant s second objection was that the abrogation of the rule would undermine certainty as closed transactions would be reopened and unscrambled This contention will be addressed at 47 to 52 below It will suffice to say here that it was not a fatal objection to the abrogation of the rule 21 Most judicial and academic opinion is in favour of bringing the law on mistakes of law in line with that on mistakes of fact There does not seem to be any insurmountable objection once thought has been given to the scope of the new rule and the exceptions to it If the law is to be changed how should it be done 22 The arguments in favour of judicial abrogation were as follows Lord Lloyd in Kleinwort Benson Ltd 18 supra at 546 gave two Indeed I can imagine few areas of the law in which it would be more appropriate for the House of Lords to take the initiative The mistake of law rule is judge made law There are no considerations of social policy involved emphasis added Firstly as the mistake of law rule was not created by Parliament abrogating it judicially would not amount to defeating legislative intent Secondly as no social policy issues were involved abrogating the rule judicially would not amount to usurping the legislative function Thirdly the courts were not in a position to know if and when Parliament would change the law 23 The Law Reform Committee LRC of the Singapore Academy of Law SAL like the Law Commission in England recommended in its paper on Reforms to the Law of Restitution on Mistakes of Law 2001 that the rule be abrogated by legislation The key argument in favour of legislative intervention stemmed from a fear of opening the floodgates to the re litigation of closed transactions In particular it was thought that Parliament would be better able to address two issues The first was whether the change in the law should have retrospective effect The LRC of the SAL recommended that the Civil Law Act Cap 43 1999 Ed be amended to allow this However a judicial abrogation of the law could achieve the same if this court followed Kleinwort Benson Ltd 18 supra in holding that a payment made under a mistake of law could be recovered even if it had been made under a completed transaction see 47 and 48 below 24 The second issue was whether limitation periods should be introduced in respect of claims founded on a mistake of law and if so how long they should be Section 29 1 of the Limitation Act provides Where in the case of any action for which a period of limitation is prescribed by this Act c the action is for relief from the consequences of a mistake the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake as the case may be or could with reasonable diligence have discovered it emphasis added No legislative intervention was needed for two reasons Firstly s 29 does not specify mistake as either one of fact or one of law hence it can apply equally to both We noted that the LRC of the SAL recommended that s 29 be amended so as to clarify that it encompasses mistakes of law as well but we did not think it absolutely necessary Secondly the italicised words show that s 29 was intended to apply only to situations covered by the Limitation Act As there was no need to extend the scope of recovery under a mistake of law further than that under a mistake of fact there was no need to amend s 29 Application to the facts 25 In Nurdin Peacock plc v DB Ramsden Co Ltd 1999 1 All ER 941 a case decided after Kleinwort Benson Ltd 18 supra the court said at 963 it does seem to me clear that in order to found a claim for repayment of money paid under a mistake of law it is necessary for the payer to establish not only that the mistake was made but also that but for the mistake he would not have paid the money emphasis added The first requirement that there was a mistake was satisfied Firstly the judge found that the appellant itself had believed that it had the authority to make its approval conditional upon the respondent s paying the sums demanded Mr Lim had been cross examined in relation to the 200 000 payment Q At the time this letter dated 13 April 1989 see 6 above was written did you believe that the MC had the power to impose this condition A Yes He had also been cross examined in relation to the 170 000 payment Q At the time of this final offer you still believed that the MC had the power to impose the conditions it did A Yes 26 Secondly the judge found that Mr Ow had always been under the impression that the appellant s demands were lawful Mr Ow had been cross examined in relation to the 200 000 payment Q You said you had no choice Did you protest at the meeting A No because I believed they had the power to do so and I had no choice emphasis added He had been further cross examined in relation to the 170 000 payment Q Aware of the EGM held on 29 9 92 A Yes Q Agree you could have raised the issue of the payment of the sum of 200 000 which was later reduced to 170 000 at the EGM A Yes Q You did not do so A Agree Q Why not A Because at that time we were of the opinion that the plaintiffs action was lawful emphasis added This had not been helped by the fact that the respondent did not consult a lawyer or an architect on the issue of whether it had a legal obligation to meet the appellant s conditions 27 Thirdly the judge found that the respondent objected to the quantum demanded rather than its liability to pay 28 The second requirement that but for the mistake the respondent would not have paid was also met There was no reason to overturn the judge s finding that the respondent had not paid voluntarily The appellant argued that the respondent faced a time constraint and would have paid the money rather than run the risk of not obtaining the appellant s approval If as the appellant contended Mr Ow was a seasoned businessman and the parties had treated the transaction as a commercial one it would have been hard to believe that had the respondent known that the demands were ultra vires it would have paid any more money than it had to Fourth issue declarations requested by the respondent Relevant facts 29 In a letter dated 5 May 1993 the appellant said it would approve the strata subdivision plans on condition that inter alia The respondent cause to be registered as a covenant in each of the eighteen 18 Subsidiary Strata Certificates of Title for the 18 subdivided units to the effect that the subsidiary proprietors thereof shall maintain at their own cost the roof directly above the 18 units Mr Ow had signed on the letter to indicate acceptance of the conditions Relevant LTSA provisions 30 As was apparent from the strata plans the roof had never been part of the original four penthouse units The reasoning in relation to the new corridor applied here see 12 above As the roof above the units was common property as defined in s 3 within the meaning of s 48 1 b i the appellant had a duty to maintain it Moreover as the judge pointed out it was not only the roof of the units but also the roof of the entire development The appellant s imposition of the condition was ultra vires the LTSA hence the judge was right in granting the following declarations a The appellant not the respondent was legally obliged to maintain the roof above the units b The respondent was not legally obliged to register any covenant to the effect that the subsidiary proprietors of the 18 units had to maintain the roof above their units 31 The appellant also sought to apply its contract argument to the covenant For the reasons discussed in 9 and 10 above this failed Although the discussion in 10 above relates to s 42 it was equally true that parties should not be allowed to absolve a management corporation of its duties under s 48 Fifth issue defences pleaded before the judge Time bar and laches 32 A perusal of the Limitation Act showed that a claim for unjust enrichment which was neither grounded in contract nor tort and in which equitable relief was not sought did not fall within the scope of the Act Hence s 29 was irrelevant and there was no need for an inquiry as to when the respondent first knew of the mistake or could with reasonable diligence have known of the mistake 33 Laches is an equitable doctrine which considers the facts of the case rather than a fixed time bar In The Lindsay Petroleum Company v Prosper Armstrong Hurd Abram Farewell and John Kemp 1874 LR 5 PC 221 the court said that two important factors were the length of the delay and the acts done during that time In measuring the length of the delay the court in Beale v Kyte 1907 1 Ch 564 at 566 said in all cases of mistake in order that laches or acquiescence may be a defence there must be notice of the error and time runs from the date of the notice and not from the time when the error is committed emphasis added The judge found that the respondent did not know of its mistake until during the trial Mr Ow had paid the money while mistaken solicitors who had acted for the respondent in earlier matters had failed to notice the mistake and even the respondent s present solicitors had only raised the issue of mistake of law just before trial She also said that the respondent could not reasonably have known much earlier that it had a cause of action as money paid under a mistake of law was still not recoverable in Singapore 34 The second factor related to the acts done from the time the mistake was made to the time when the party or parties realised the mistake The judge found that the appellant would have upgraded the lifts anyway see 7 above and hence it had suffered no prejudice in relation to the 200 000 As for the 170 000 as no evidence was adduced as to whether and how it was spent the appellant could not argue that it had been prejudiced by the alleged delay Change of position 35 This was one of the defences overtly accepted in Kleinwort Benson Ltd Lord Goff said 18 supra at 538 I recognise that the law of restitution must embody specific defences which are concerned to protect the stability of closed transactions The defence of change of position is one such defence the defences of compromise and settlement of an honest claim the scope of which is a matter of debate are others It is possible that others may be developed emphasis added The defence of change of position was recognised some say created in Lipkin Gorman a firm v Karpnale Ltd 1991 2 AC 548 Lord Goff held that a bona fide change of position should of itself be a good defence He elaborated at 580 At present I do not wish to state the principle any less broadly than this that the defence is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution or alternatively to make restitution in full emphasis added In Seagate Technology Pte Ltd v Goh Han Kim 1994 3 SLR R 836 the court noted that this defence was also available in Singapore It would seem that there are three elements to the defence a The payee has changed his position b The change is bona fide c It would be inequitable to require him to make restitution or to make restitution in full 36 Could the appellant rely on this defence with regards to the 200 000 Firstly it had changed its position by expending the money to upgrade the lifts Secondly because the appellant too had been mistaken as to the validity of its demand and its ability to apply the money to upgrading the lifts its change of position was bona fide Thirdly however it would not have been inequitable to require the appellant to make restitution in full According to Lord Goff the mere fact that the defendant has spent the money in whole or in part does not of itself render it inequitable that he should be called upon to repay because the expenditure might in any event have been incurred by him in the ordinary course of things emphasis added This was because firstly the judge had found that the appellant would have upgraded the lifts in any case see 7 above Furthermore as the need for upgrading was not shown to be due even in part to the respondent s proposed subdivision the appellant was not allowed to retain any part of the 200 000 Secondly the appellant s demand was ultra vires 37 Could the appellant rely on this defence with regards to the 170 000 As there was no evidence as to how the 170 000 was spent the first requirement that the appellant had changed its position was not even met Sixth issue defences raised on appeal 38 On appeal the appellant raised the following defences for the first time The principles governing such situations are found in A G for the Straits Settlements v Pang Ah Yew 1934 MLJ 184 which cited Lord Herschell in The Tasmania 1890 15 App Cas 223 at 225 a Court of Appeal ought only to decide in favour of an appellant on a ground there put forward for the first time if it be satisfied beyond doubt first that it has before it all the facts bearing upon the new contention as completely as would have been the case if the controversy had arisen at the trial and next that no satisfactory explanation could have been offered by those whose conduct is impugned if an opportunity for explanation had been afforded them when in the witness box emphasis added 39 As we state below that honest receipt and estoppel by convention are not acceptable defences the above principles were applied only to the other grounds raised The facts necessary for deciding whether the defences are made out were a honest claim the payee s state of mind at the time of demand and the payer s state of mind at the time of payment b compromise the payer s state of mind at the time of payment and c abuse of process the respondent s state of mind at the time of the earlier suit in 1992 As for the first principle these facts did not go beyond those which were necessary for deciding whether the payment had been made under a mistake of law As for the second principle it was the respondent whose conduct was impugned whether by the suggestion that it knew or believed that the claim was invalid or was indifferent as to whether it was invalid The respondent did not have to do more to prove its state of mind at the relevant time than it had to for the purposes of showing that it had made a mistake of law Hence the appellant was allowed to raise these new grounds Settlement of an honest claim and compromise 40 These defences were recognised in Kleinwort Benson Ltd 18 supra though Lord Goff said there was uncertainty as to the scope of the former see 35 above The elements of the defence of settlement of an honest claim are a the payee honestly believes that he can legitimately demand payment and b the payer knows or believes that the payee s claim has no legal basis Element a was met see 25 above However element b was not the respondent believed that the appellant had the authority to impose the conditions see 26 above 41 To satisfy the defence of compromise it must be shown that the payer was indifferent as to whether the payee s claim had a legal basis The discussion above has concluded that far from being indifferent the respondent believed that the appellant s demands were legal see 26 above The payee s state of mind was irrelevant Honest receipt 42 The appellant cited Brennan J as he then was in David Securities Pty Ltd v Commonwealth Bank of Australia 1992 175 CLR 353 as support that this was a defence to a claim founded on mistake of law This defence has not been embraced by other courts It was in fact criticised by Lord Goff in Kleinwort Benson Ltd 18 supra at 540 541 Brennan J s proposed defence is so wide that if it was accepted these other defences would in practice cease to have any relevance in the case of money paid under a mistake of law Moreover in many cases of this kind the mistake is shared by both parties In such cases recovery by the plaintiff would automatically be barred by Brennan CJ s proposed defence We do not recognise this as a defence either Estoppel by convention 43 According to Halsbury s Laws of England vol 16 Butterworths 4th Ed 1992 Reissue para 1070 the scope of this estoppel is still unclear It was not appropriate at this juncture to accept it as a defence 44 In any case the appellant failed on this point Firstly the above mentioned passage in Halsbury s defines estoppel by convention as Where parties to a contract put a particular interpretation on it by a course of dealing on the faith of which each of them to the knowledge of the other acts and conducts their mutual affairs they are bound by that interpretation emphasis added As the parties relationship was not contractual the appellant could not rely on this doctrine Secondly the court would only uphold the common assumption if it would be unconscionable not to do so As the judge found that the appellant had suffered no prejudice see 34 above it was not unconscionable not to give effect to any common assumption which existed Thirdly this estoppel cannot be raised to deny one the protection afforded by a statute the terms of which cannot be circumvented by contract The discussion of the first and second issues see 6 to 16 above concluded that the relevant LTSA provisions could not be contracted out from Abuse of process extended res judicata 45 The appellant said that the respondent had an opportunity to raise the issues in its counterclaim when it was sued by the appellant in 1992 The simple answer to this was that the respondent did not know of and could not reasonably have known of its claim at that time Seventh issue whether other defences should be recognised 46 It may be fortunate that the Singapore courts can draw on the jurisprudence of other courts in this area but no body of judge made law comes ready made As was said by Lord Goff in Kleinwort Benson Ltd 18 supra at 541 The proper course is surely to identify particular sets of circumstances which as a matter of principle or policy may lead to the conclusion that recovery should not be allowed and in so doing to draw on the experience of the past looking for guidance in particular from the analogous case of money paid under a mistake of fact but also drawing upon the accumulated wisdom to be found in the writings of scholars on the law of restitution The following issues were not raised in this case but it was necessary to examine them to delineate however imprecisely the scope of the new rule In particular this would give Parliament an indication of the courts stand on this area of law should it later wish to pass relevant legislation Payment made under a closed transaction 47 The main argument against allowing recovery after the transaction in which the money was paid has been closed is that everyone

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  • E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd and others and another appeal
    Tan his evidence on this point was as follows note 20 Q W hen you buy a property from a company your contract is with the company and the personal circumstances of the shareholders or directors are not important A Yes generally that is so Based on the above evidence the three respondents submitted that the litigation search on Anwar would only make sense if the option fee was in truth a loan It was also pointed out that CS Lee had himself confirmed during cross examination that the existence of the trust deed under which Ridout held the Property on trust for Anwar and the various law suits against Anwar would not affect the sale of the Property note 21 Q To what extent would a trust arrangement affect the validity of any option given by Ridout to ECI A It will not affect the validity because they viz Anwar and Ridout are two different entities Q Y ou will confirm for us that the existence of the trust and the litigation suits against Anwar to the best of your professional expertise would not affect the sale of the P roperty from Ridout to ECI A Yes The three respondents further submitted that interestingly Poh admitted that ECI had been concerned about Anwar s ability to pay the 1 68m if the First Option were cancelled and that ECI had taken the opportunity of the searches on Anwar to press down the price note 22 This was despite the fact that CS Lee had testified that ECI could purchase the Property from Ridout without being affected by the financial difficulties of and the law suits against Anwar d CS Lee said that he had the Moneylenders Act in mind when he was drafting the documents note 23 but concluded that it had no application to the Transaction The three respondents submitted that it was precisely because the Transaction was a loan or contained features that came close to offending the prohibitions under the Moneylenders Act that CS Lee considered the implications thereof and sought to disguise the true nature of the Transaction by splitting up the instruments documenting it into two separate instruments viz the First Option and the Deed of Settlement as well as by inserting misleading wording into and post dating the Deed of Settlement e ECI s attempt to explain away the significance of the litigation search done on Anwar viz that it was necessary to ascertain whether Anwar the beneficiary under the trust held by Ridout on the Property had been made a bankrupt thereby vesting beneficial ownership of the Property in the Official Assignee was an afterthought as this was not brought out in evidence In fact the litigation search reflected ECI s concern about the risk of lending money to Anwar 2 Post contractual conduct 42 Turning now to the arguments of the parties based on their post contractual conduct ECI pointed to the following to show that Ridout had regarded the Transaction as a sale of the Property to ECI subject only to the right of cancellation within the 60 Day Period a All the correspondence issued on behalf of Ridout apropos the Transaction referred to that transaction as a sale of the Property to ECI eg the letter from NCH Ridout s then solicitors to TLP ECI s solicitors dated 8 June 2009 made reference to the Option Agreement note 24 and stakeholders note 25 b Ridout did not object to the lodgement of a caveat by ECI on 5 June 2009 indicating that it ECI had an interest in the Property as a purchaser note 26 c When asked by Orion about the First Option granted to ECI NCH in its letter of reply dated 6 July 2009 represented the Transaction as being for the Sale and Purchase note 27 underlining in original omitted of the Property to ECI d Anwar s police report lodged on 29 August 2009 made no allegation of illegal moneylending and acknowledged that ECI had the right to buy the Property e Even after raising the allegation that the Transaction was an illegal moneylending transaction Anwar himself wrote a letter dated 16 September 2009 using Ridout s letterhead ie the letter mentioned at 11 above wherein he stated that there was a valid agreement between the parties for the sale of the P roperty note 28 and requested for an early release of 1m of the purchase price of the Property f The alleged loan from ECI in the form of the 1 5m option fee paid by ECI was not recorded in Anwar s statement of liability when he filed an affidavit on 23 December 2009 pursuant to his application under s 45 of the Bankruptcy Act Cap 20 2009 Rev Ed g Neither Ridout nor its then solicitors NCH protested against the various references to the Transaction as a purchase of the Property by ECI in TLP s letters to NCH dated inter alia 27 August 2009 and 30 October 2009 note 29 NCH s response to those letters was merely that it was taking instructions from Ridout 43 ECI submitted that none of the above circumstances were considered by the Judge Instead the Judged inferred that ECI did not genuinely intend to purchase the Property based on what were really insignificant events such as ECI s failure to obtain financing for the purchase of the Property its late payment of the stamp fee on the First Option and its late making of legal requisitions when there were clearly plausible and credible explanations for those events 44 With regard to its delay in paying the stamp fee on the First Option and making legal requisitions ECI explained that the delay was the result of Anwar s persistent attempts to persuade it to forego its rights under the First Option in consideration of the payment of a settlement sum which was initially agreed at 3 5m under the September 2009 Settlement and later increased to 5m under the November 2009 Settlement It was submitted that it made sense for ECI to refrain from incurring further expenses towards the completion of the purchase of the Property while there appeared to be prospects of being able to reach an amicable settlement with Ridout vis à vis the latter s purported cancellation of the First Option After Ridout failed to pay the settlement sum of 5m due under the November 2009 Settlement by the stipulated deadline of noon on 16 November 2009 ECI decided to cease all further discussions with Ridout Anwar and proceeded to seek the completion of the purchase of the Property To that end legal requisitions were sent on 16 17 and 20 November 2009 note 30 and the stamp fee on the First Option was paid on 24 November 2009 note 31 45 Ridout on the other hand countered ECI s explanation for the late payment of the stamp fee on the First Option and the late making of legal requisitions by highlighting the various inconsistencies in ECI s ever shifting so Ridout submitted position on these matters a The evidence of KC Tan and Poh in their joint affidavit filed on 15 January 2010 was that ECI had always intended to complete the purchase of the Property despite Anwar s various attempts to reach a settlement by which ECI s intended purchase of the Property would be cancelled Notably at para 32 of their joint affidavit they stated that in early September 2009 Anwar contacted them again to try to convince ECI to enter into such a settlement but they were adamant about the purchase as by that time the property prices for Good Class Bungalows had risen significantly note 32 b However Poh eventually conceded under cross examination that on 3 September 2009 there was an agreement to settle at 3 5 million in principle note 33 Poh made this concession only when he was confronted with evidence produced by Anwar in the form of SMS messages that there was such a settlement c In short it was only at the trial that KC Tan and Poh admitted to the existence of the September 2009 Settlement and endeavoured to explain away their inaction in making legal requisitions on the ground that the parties were then still attempting to reach an amicable settlement 46 With regard to its delay in obtaining financing to effect the purchase of the Property ECI clarified that its ability to finance the Transaction was never an issue as that was not disputed by any party in any of the pleadings or affidavits filed in OS 1357 nor in the list of issues presented to the Judge for adjudication In this regard we note that there was a letter of offer dated 9 September 2009 from HLF offering ECI a loan of 18m for the purchase of the Property Ultimately ECI did not accept the offer It was confirmed by HLF s counsel that HLF s offer lapsed as ECI did not take steps to fulfil the condition precedent of the proposed loan ie to increase the paid up capital of ECI which then stood at only 2 000 to 100 000 ECI pointed out that both KC Tan and Poh had given evidence that ECI had sufficient funds from other sources to complete the purchase eg by drawing down on other lines of credit or utilising cash reserves from a related company note 34 ECI therefore submitted that the Judge erred at 81 of the Judgment in finding that it ought to have adduced more proof of its ability to finance the Transaction and that the time to produce such evidence had long passed 47 On its part Ridout with regard to ECI s submissions on Anwar s police report dated 29 August 2009 see sub para d of 42 above pointed out that although Anwar had not referred to the Transaction as a loan per se in the police report he had stated that he had been loaned money at an interest fee of 6 per month note 35 Further two days before lodging the police report he had sent a SMS message to Poh stating note 36 I will have to file a report of money lending The T ransaction was based on borrowing SIN 1 5mil for two months yielding SIN 1 68mil Thank you In any event Anwar had complained in his police report that ECI was trying to make more money out of the deal note 37 This Ridout submitted was consistent with its case that all that ECI was entitled to under the Two Instruments was a high interest rate for lending Anwar the option fee of 1 5m Inconsistencies in the evidence of Ridout s witnesses 48 We now turn to the respective parties submissions on the evidence of Ridout s witnesses 49 ECI submitted that the evidence proffered by Ridout s witnesses as to the true nature of the Transaction both on affidavit and at the trial was confusing Where Anwar s evidence was concerned ECI highlighted the following matters a At the trial Anwar s position was that throughout the course of the negotiations between the parties all that he had in mind was that the Transaction was an unsecured loan with the Property playing no role whatsoever note 38 b However in Ridout s pleaded case for OS 1357 it was stated that the true intent of the parties was to provide security to ECI for the loan of 1 5 million from ECI to Ridout note 39 emphasis added c In his affidavit of evidence in chief AEIC filed on 25 June 2010 Anwar deposed that he was surprised when YS Low informed him on or about 2 June 2009 that the documentation for the Transaction consisted of an option to purchase the P roperty followed by a so called Deed of Settlement note 40 As he was extremely uncomfortable to give an option for a loan note 41 he requested a meeting so that he could satisfy himself that the T ransaction was a loan note 42 d Under cross examination Anwar sought to retract the version of events set out in his AEIC as inaccurate On the stand he said that he first learnt about the structure of the Transaction in a conversation with Panthradil during the car journey on the way to the 5 June 2009 meeting note 43 e Anwar sought to shift the responsibility for all communications with YS Low apropos the Transaction to Panthradil note 44 This however was contradicted by Panthradil s evidence on the stand Panthradil testified that he had no substantive discussions with YS Low about the Transaction apart from the mechanics for paying the option fee note 45 50 ECI submitted that the aforesaid inconsistencies in Anwar s case were fabricated to mask the fact that Anwar knew that the Transaction involved the sale of the Property by Ridout to ECI ECI pointed out that the Judge had found Anwar to be an experienced business entrepreneur who had had the benefit of advice from both his lawyer and Panthradil the chief financial officer of another company owned by Anwar before he signed the Two Instruments see 56 and 58 of the Judgment Yet inexplicably in ECI s submission the Judge at 56 of the Judgment found that the Transaction was in fact a disguised loan coupled with security Under cross examination Panthradil said that he received the D raft O ption and the D raft D eed on or after 3 June 2009 and upon reading them said to Anwar Hey Pak this looks like you re selling the P roperty Panthradil said Anwar s response was No I will clear it before that Its sic just the structure to enable the borrowing I accept Panthradil s evidence over Anwar s version Panthradil said when he saw the cancellation and the factoring in of the interest he saw the documents as a secured loan structure Panthradil said they were desperate for funds because no one was going to lend Anwar 2m clean I therefore find that Anwar intended to use the Property as security for the loan 51 ECI argued that a careful examination of Panthradil s evidence showed that his evidence was in fact consistent with and supported its case viz that Anwar was well aware that Ridout had to sell the Property to ECI if Ridout did not cancel the First Option within the 60 Day Period Further Anwar s reference to the structure of the Transaction demonstrated that he knew that the Two Instruments did not simply provide for the grant of a loan to him but also something more 52 In countering ECI s argument on the alleged inconsistencies in Anwar s evidence Ridout submitted that the court was entitled to accept Panthradil s evidence that the 5 June 2009 meeting was more to lend money and KC Tan and Poh were more concerned of Anwar s ability to repay the money note 46 Although Panthradil was only an employee of Anwar there was Ridout submitted no suggestion that he was not truthful in his testimony In respect of ECI s criticism that the Judge erred in treating Panthradil s evidence as indicative of Anwar s intention Ridout submitted that ECI had mischaracterised the Judge s finding which simply put was that Panthradil s evidence was corroborative of Anwar s evidence that he did not want to sell the Property all along and had made this known to his employee viz Panthradil Whether the Transaction lacked the key features of a loan 53 We move now to the parties submissions on whether the Transaction lacked the key features of a loan 54 ECI submitted that the Transaction lacked many of the key indicia and features of a loan It cited the case of City Hardware where the High Court accepted at 23 the following definition of loan set out in Clifford L Pannam The Law of Money Lenders in Australia and New Zealand The Law Book Company Limited 1965 at p 6 A loan of money may be defined in general terms as a simple contract whereby one person the lender pays or agrees to pay a sum of money in consideration of a promise by another person the borrower to repay the money upon demand or at a fixed date The promise of repayment may or may not be coupled with a promise to pay interest on the money so paid The essence of the transaction is the promise of repayment emphasis added 55 ECI submitted that the case of In re George Inglefield Limited 1933 Ch 1 which discussed at 27 28 the difference between a sale and a mortgage or charge as follows was also instructive In a transaction of sale the vendor is not entitled to get back the subject matter of the sale by returning to the purchaser the money that has passed between them In the case of a mortgage or charge the mortgagor is entitled until he has been foreclosed to get back the subject matter of the mortgage or charge by returning to the mortgagee the money that has passed between them The second essential difference is that if the mortgagee realizes the subject matter of the mortgage for a sum more than sufficient to repay him with interest and the costs the money that has passed between him and the mortgagor he has to account to the mortgagor for the surplus If the purchaser sells the subject matter of the purchase and realizes a profit of course he has not got to account to the vendor for the profit Thirdly if the mortgagee realizes the mortgage property for a sum that is insufficient to repay him the money that he has paid to the mortgagor together with interest and costs then the mortgagee is entitled to recover from the mortgagor the balance of the money either because there is a covenant by the mortgagor to repay the money advanced by the mortgagee or because of the existence of the simple contract debt which is created by the mere fact of the advance having been made If the purchaser were to resell the purchased property at a price which was insufficient to recoup him the money that he paid to the vendor of course he would not be entitled to recover the balance from the vendor emphasis added 56 In this regard ECI highlighted that the following key features of a loan were missing from the Transaction a There was no provision for the payment of interest after the 60 Day Period if Ridout failed to cancel the First Option within that period b Likewise there was no provision for the enforcement of payment of the outstanding sum ie the 1 68m should Ridout fail to cancel the First Option within the 60 Day Period c The amount of compensation which Ridout had to pay for cancelling the First Option was 180 000 in respect of an option fee of 1 5m This worked out to an interest rate of 12 per annum or 6 per month This figure should be contrasted with the original provisions set out in the Draft Option and the Draft Deed which stipulated a cancellation fee of 250 000 in respect of an option fee of 2m see 6 above That arrangement would have yielded a higher interest rate of 12 5 per annum or 6 25 per month If ECI had intended the Transaction to be a loan it would not have sought to reduce the option fee to 1 5m and thereby earn a lower interest rate as that would not make commercial sense ECI submitted that had it truly intended to grant a loan to Anwar it would have taken a valid security over the Property and would have made appropriate provisions in the contractual documents to address the matters mentioned at sub paras a c above instead of doing what it did ie structuring the Transaction in the form of the Two Instruments 57 In rebuttal to ECI s point about the lack of provision for interest to be paid after the 60 Day Period if Ridout did not cancel the First Option Ridout stated that the Transaction was meant to be a short term loan to Anwar and therefore there was no provision for interest accruing after the 60 Day Period In the event of default ie in the event that Ridout did not cancel the First Option and therefore did not pay ECI the 1 68m there could be an implied term that ECI could sell the Property at its market price and recoup the amount lent to Anwar Ridout further submitted that the lack of provision for interest after the 60 Day Period was in any event irrelevant given KC Tan and Poh s motive for structuring the Transaction as a sale of the Property with a view to taking unfair advantage of the situation if Anwar was unable to pay the 1 68m within the 60 Day Period 58 As for the reduction of the interest rate for the loan of the option fee from 6 25 to 6 per month Ridout argued that this followed from the lower sum of 1 5m as opposed to the sum of 2m stated in the Draft Option which ECI was comfortable to lend to Anwar In any event Ridout submitted the difference was de minimis 59 Similarly counsel for Thomas Chan contended that all the hallmarks of a loan were present in the Transaction as the Judge found at 30 31 and 71 of the Judgment It was submitted that the absence of a term providing for continued interest after the 60 Day Period was not fatal to Thomas Chan s case as a windfall to ECI was still provided for in the form of ECI being able to purchase the Property at the knock down price of 20m which would easily exceed the interest accruing after the 60 Day Period had there been provision for such interest to be paid and which bore no relation to the loss that ECI would suffer if Anwar failed to pay the 1 68m within the 60 Day Period 60 Counsel for Thomas Chan also highlighted that there was no evidence of any real negotiation or agreement on the purchase price of the Property either before or at the 5 June 2009 meeting The purchase price of 20m was really the outstanding mortgage amount due from Anwar to HLF This emerged from KC Tan s evidence during cross examination as follows note 47 Q I would also like for you to confirm that in fact the sum of 20 million was arrived at by you or proposed by you and Poh after you had seen how much was owed to HLF under the mortgage that HLF had on the P roperty A Yes I suppose that was the case yes Thus even at the 5 June 2009 meeting itself there was no evidence of any negotiation on the purchase price of the Property It would appear Thomas Chan s counsel submitted that Anwar did not resist ECI s efforts to set the purchase price at 20m in the First Option because he did not contemplate a sale of the Property and felt sure that he could repay the loan amount viz the 1 5m option fee plus interest viz the 180 000 compensation fee within the 60 Day Period Notably ECI s evidence confirmed its knowledge of Anwar s nonchalant attitude towards the purchase price of the Property stated in the First Option Our decision on the true nature of the Transaction 61 It is not in dispute that the proper approach in determining the true nature of a transaction is to look at the substance as opposed to the form thereof see 30 31 above In so far as the documentation for the Transaction is concerned it is clear that the First Option contained a normal option in favour of ECI albeit with some unusual features as mentioned at 18 and 22 above eg the quantum of the option fee ie 1 5m which was much higher than the market norm of 1 of the purchase price and the validity period of the First Option ie 90 days The Deed of Settlement accorded to Ridout the right within the 60 Day Period to cancel the First Option by paying ECI the 1 68m There can be no doubt as to what the Two Instruments mean on their face 62 Like the Judge we also accept that Anwar the sole shareholder and director of Ridout who is also its directing mind did not want to sell the Property All he wanted was to get a temporary loan to tide him over so that HLF would not exercise its right of sale as the mortgagee of the Property Despite soundings made on his behalf no one was interested in lending him money bearing in mind that there was then a mortgage over the Property in favour of HLF and a charge for 10m in favour of Orion over the remaining proceeds of sale of the Property In view of those prior encumbrances and bearing in mind what was believed to be the market value of the Property there was really no value left in the Property which Anwar could use to obtain a loan It was against that backdrop that ECI came into the picture As mentioned at 5 and 25 above ECI being a property developer was likewise not interested in extending any loan to Anwar but it was willing to consider buying the Property 63 At this point we would observe as did the Judge that Anwar is unquestionably a seasoned businessman and entrepreneur He cannot claim to be a novice in business although he was financially very stretched at the material time due to the effects of the global financial meltdown of 2008 Similarly ECI s directors KC Tan and Poh are also men of business Thus neither Anwar and in turn Ridout nor KC Tan and Poh and in turn ECI can claim to be at a disadvantage in the business sense although as just mentioned Anwar and in turn Ridout was financially very stretched at the material time As observed by this court in Beckkett v Deutsche Bank at 114 reproduced at 40 above it is legally permissible for a man of business to squeeze the best deal for himself taking advantage of the economic weaknesses of the other party 64 It seems to us that having regard to what were clearly different objectives on the part of the parties concerned viz Anwar wanting to borrow money and ECI wanting to buy the Property at the best possible price the arrangement that was eventually worked out by the parties solicitors as reflected in the Two Instruments satisfied to an extent and certainly not completely the needs of both parties As the Judge noted at 58 of the Judgment Anwar was confident that he would be able to raise within the 60 Day Period the 1 68m which Ridout had to pay to have the First Option cancelled As for ECI it clearly wanted to buy the Property at the best possible price It obviously recognised that the Transaction as set out in the Two Instruments although not its preferred choice was in the circumstances the next best thing in the sense that should Anwar be unable to raise the 1 68m which Ridout needed to pay to have the First Option cancelled ECI would have the chance to purchase the Property at the extremely attractive price of 20m 65 In a case of this nature as between the oral evidence of the parties and the objective contemporaneous documentary evidence greater emphasis should be placed on the latter see Ng Chee Chuan v Ng Ai Tee administratrix of the estate of Yap Yoon Moi deceased 2009 2 SLR R 918 at 17 At the material time both parties were legally represented and the Two Instruments were considered and approved by the respective solicitors as representing what their clients were prepared to accept in contrast to what they would have preferred It would be fair to assume that the legal effect of the Two Instruments would have been explained to the parties by their respective solicitors It might well be true that Anwar never intended to sell the Property and certainly not at the price of 20m which was lower than even the forced sale value of 23 2m indicated in the Colliers Report although that was dated 15 April 2009 some seven weeks before the First Option was granted to ECI Be that as it may Anwar cannot deny that while he might not have wanted to sell the Property which as mentioned at 62 above we accept and he was even confident as the Judge noted at 58 of the Judgment that he would not have to sell the Property as he felt sure he could raise within the 60 Day Period the 1 68m needed for Ridout to cancel the First Option if he should fail to raise the 1 68m ECI would be able to exercise the First Option and buy over the Property This we find was precisely what happened It should be highlighted that the conversation which transpired between Panthradil and Anwar reproduced in the quotation at 50 above and Anwar s misplaced confidence in being able to clear it note 48 ie raise the 1 68m which Ridout had to pay to cancel the First Option clearly show that Anwar was fully aware of the fact that the Transaction was in fact an agreement for the sale of the Property by Ridout to ECI The arrangement set out in the Two Instruments gave Anwar some hope of keeping the Property but it does not lie in his mouth to now claim that he did not fully appreciate the consequential effects of his failure to raise the 1 68m which Ridout had to pay to have the First Option cancelled As it turned out Anwar s confidence was ill founded However that is hardly a proper basis or ground to hold that the Two Instruments do not mean what they say There is nothing in the Two Instruments which is unclear or ambiguous 66 We turn next to the three respondents argument that at the 5 June 2009 meeting there was no real negotiation on the purchase price stated in the First Option To say the least the state of the property market at that point in time was uncertain The Colliers Report which was dated 15 April 2009 placed a forced value of 23 2m on the Property while the Savills Report placed a forced sale value of 21 6m on it as at 5 June 2009 To put the matter most favourably to Anwar the only reason we could think of as to why he agreed to state the purchase price as 20m in the First Option was because he was confident extremely confident that he would not have to sell the Property and thus the purchase price stated in the First Option was in his view at that time no more than an academic figure 67 We would highlight that there is another implication which arises from the three respondents assertion that the Two Instruments were a disguise for what was in truth a secured loan with a high interest rate As mentioned earlier at 6 and 65 above the Two Instruments were drawn up and considered by solicitors If the three respondents claim were true it would mean that both ECI s solicitors and Ridout s solicitors were involved in creating the disguised loan It is not necessary for us at this point to offer any views on the impropriety or want of probity of such conduct on the part of the solicitors concerned if the claim is indeed true More significantly we note that at the trial Ridout s counsel did not put it to either YS Low or CS Lee that they were instructed to draw up the Two Instruments to disguise what was really a secured loan with a high interest rate 68 This brings us to a related issue raised by the three respondents viz the fact that CS Lee had considered the applicability and or the implications of the Moneylenders Act vis à vis the Transaction This was harped on by the three respondents to reinforce their claim that the Transaction was a moneylending transaction simpliciter In our opinion there is a leap in logic in this argument It is hard for us to see how the mere fact that CS Lee was thorough in his consideration of all the potential implications of the Transaction supports the view that the Transaction was a disguised moneylending transaction or for that matter the converse view that the Transaction was what it purported to be viz an agreement for the sale of the Property by Ridout to ECI The three respondents argument on this point is a non sequitur 69 We now turn to the three respondents arguments on ECI s tardiness in taking steps to complete the purchase of the Property after exercising the First Option on 27 August 2009 It was emphasised that ECI did nothing on the conveyancing front for a long period after it exercised the First Option Furthermore in spite of the fact that the purported date for the completion of the purchase of the Property was 19 November 2009 ECI only made the necessary legal requisitions on 16 17 and even 20 November 2009 note 49 The First Option was only stamped on 24 November 2009 note 50 five days after the purported completion date No financing arrangement was made to enable ECI to complete the purchase in this regard as mentioned at 46 above although HLF offered ECI a loan of 18m on 9 September 2009 to complete the purchase that offer was allowed to lapse At 44 and 46 above we have already set out the explanations of ECI on these matters In our view these matters are more germane to the Second Main Issue which we will consider at 75 et seq below viz the issue of whether if the Transaction was indeed for the sale of the Property by Ridout to ECI the latter should be granted specific performance of the Sale Agreement as defined at 15 above 70 We also note Ridout s contention that ECI s delay in taking steps to complete the purchase of the Property was due to the desire of KC Tan and Poh to extract the maximum monetary compensation from Ridout in return for withdrawing the two caveats lodged by ECI against the Property Put in another way Ridout s contention in essence was that completing the purchase of the Property was by the time of the September 2009 Settlement clearly no longer in the minds of KC Tan and Poh According to Ridout the exchanges between it and ECI showed that ECI exercised the First Option on 27 August 2009 merely for the purpose of preserving its bargaining portion as opposed to for the purpose of completing its purchase of the Property In support of this argument Ridout pointed to Poh s evidence that even though ECI exercised the First Option on 27 August 2009 it was still prepared to forego completion of the purchase if it received more compensation from Ridout note 51 Q So although in your minds on 27 August 2009 as you told us you have already exercised your option to buy the P roperty you were still prepared to give it back if you got an extra 2 million correct A Yes emphasis added We also note that the Judge

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  • Top Ten Entertainment Pte Ltd v Lucky Red Investments Ltd[2004] 4 SLR(R) 559; [2004] SGCA 43
    for the first months of 2000 were short On 6 September 2000 even when the respondent wrote expressing its dissatisfaction with the appellant being persistently late in making payment and at that point the July and August 2000 rent had yet to be paid the respondent merely warned the appellant of its intention to repossess the premises No mention was made of any shortfall 11 On 8 September 2000 the appellant replied to the respondent as follows Please note that we have always paid rent on a monthly basis We have omitted the payment in April and June 1999 this must have been due to an oversight I would like to recall our conversation regarding the rental reduction you have allowed us to take place from June 1999 onwards until the expiry of the existing contract Since then until the expiry of the present lease agreement you have allowed us to pay S 56 000 instead of S 70 000 per month As for repossession of the premises you seem to forget that we have a Rental Agreement starting the same day the present agreement ends You did sign the agreement and it has been engrossed with stamp duty paid This was a reference to the seventh tenancy agreement which had been executed in August 1998 Therefore we will continue to occupy the premises as agreed And continue to pay the rent 12 On 19 September 2000 Loi replied to the appellant as follows We refer to the rental of the above premises and note the September rental is still outstanding We have agreed to rental reduction from 70 000 to 58 000 from January 1999 to June 1999 however to assist you further during the economic crisis we extended the period of reduction to December 1999 However we note you have been paying us rental of 56 000 month for period January 1999 to December 1999 The rental reduction will no longer apply and has to revert back to 70 000 month with effect from January 2000 However again we note you have paid only 56 000 month In this respect we need to meet to resolve the issue and review the Tenancy Meanwhile please bear in mind rental for the premises is due and payable by the 8 th of each month and appreciate you pay us September 2000 rental of 70 000 promptly 13 Bader gave a rejoinder on 22 September 2000 It is with regret and disappointment to note that our relationship is turning sour What a shame After more than 15 years since December 1984 as your loyal tenant and friend You told me more than once that the r ental reduction will be in place until the end of this t enancy agreement I am surprised to find that you now all of the sudden change your mind and want the full r ental again This amounts to you reneging on your agreement which is not right We shall continue to pay as agreed the amount of 56 000 until the end of November and from then on the r ental agreed in the seventh Tenancy Agreement 14 On the respondent s reckoning then the appellant owed arrears of rent amounting to some 186 000 On 12 September 2001 the respondent s solicitors demanded payment of the same Part of the outstanding rent was paid On 12 March 2002 Leivest International Pte Ltd Leivest became the new owner of the premises Disputes arose between the new owner and the appellant An action was instituted by Leivest followed by a counterclaim by the appellant Leave was then obtained to make the respondent a party to those proceedings Happily the disputes between the appellant and Leivest were settled leaving outstanding two issues which concerned only the appellant and the respondent First was the appellant s claim for a refund of the hiring charges subject only to the limitation period on the ground that the hiring charges were paid pursuant to an illegal transaction Second was the respondent s claim for the shortfall of the rental paid in respect of the period January to November 2000 15 As indicated at the outset the appellant s claim for a refund of the hiring charges was rejected However the respondent s claim for the shortfall in rent was allowed by the court below The appellant thus appealed to us in respect of both these orders which were not in its favour Hiring charges 16 The appellant alleged that the apportionment of the overall rent payable under each of the tenancy agreements into two components the rent for the premises and the hiring charges for furniture and fittings was designed to distort revenue as it would mean that the respondent would pay less for property tax The respondent had submitted its return to the revenue authority in the same manner The appellant emphasised the fact that the amount allocated for hiring charges had no relation at all to the nature value or quantity of the furniture and fittings provided by the respondent There was no stock taking at the time when each new tenancy agreement was entered into The hiring charges were fixed by the respondent purely as a percentage of the overall rent This could be seen from the fact that in respect of the first tenancy agreement the hiring charges were fixed at 4 000 and with every increase in overall rent with each new tenancy agreement the amount set aside for hiring charges also increased even though no new furniture and fittings had been installed or added Indeed some items of furniture and fittings had been discarded because of wear and tear Some items were no longer on the premises and yet they remained in the inventory 17 Bader claimed that he did not realise the tax implications of separating the overall rent into the two components until October 2001 when the appellant s solicitors advised him of the same What he was trying to say was that as the matter of apportioning the overall rent into the two portions did not concern him he did not bother to find out why it was done in this manner 18 On the other hand Loi deposed that due to oversight some items which should have been deleted from the inventory had not been removed from it In any case the air conditioning system among others was still being used at all relevant times He agreed that in fixing the figure for hiring charges he did not have regard to the actual worth of the furniture and fittings but only the practice of landlords of adopting a percentage of the overall rent as hiring charges 19 In any event the appellant argued that the value of the items of furniture or fittings which were still being used in the premises would have by the time the fifth tenancy agreement was entered into and applying the normal depreciation formula been reduced substantially or even to zero In any case the hiring charges could not have been more than 4 000 which were the hiring charges under the first tenancy agreement 20 It was not in dispute that Loi negotiated with Bader only as regards the overall rent figure Loi never discussed with Bader the apportionment of the overall figure Quite rightly as Bader himself said this aspect did not concern him 21 The judge below having noted how the parties entered into the various tenancy agreements and how the overall rent was apportioned nevertheless felt that whatever were the items which remained on the premises they would have had some value and the respondent would have been entitled to charge for the same Perhaps the figure allocated for that was too high However the fact of the matter was that all these were declared to the revenue authority which had the clear opportunity to scrutinise each of the tenancy agreements if it had wanted to In any event Bader and in turn the appellant were clearly parties to the arrangement 22 Counsel for the appellant argued that it did not matter whether the revenue authority was in fact deceived The law should not enforce contracts which have as their object the hoodwinking of public officials The fact that the respondent had declared the apportionment to the revenue authority did not detract from the illegal intent In his submission the crucial question was whether the information contained in each tenancy agreement was basically false to the knowledge of the party who created and tendered it Once it was shown that the hiring charges could not be justified the illegal intent to defraud would have been established The appellant s counsel further contended that as the appellant was not in pari delicto with the respondent it was entitled to recover In the alternative counsel said that the appellant should be able to recover the money paid as money paid under a mistake of law 23 It was clear to us that in fixing the quantum for the hiring charges no objective yardstick was used by Loi He just adopted what he thought was the general practice in the rental property market None of the approaches discussed in Chartered Bank v The City Council of Singapore 1959 1986 SPTC 1 and Tan Chong Realty Pte Ltd v Chief Assessor 1959 1986 SPTC 338 as being the proper methods to arrive at the annual value of a property were adopted But it is important to note that these two cases were concerned with the review of the annual value of property fixed by the Chief Assessor which was being challenged by the property owner That was not the case here 24 There was no doubt that the amount set aside in the later tenancy agreements as being hiring charges was excessive But the parties would also have known that these particulars would have to be submitted to the revenue authority which would make its own independent assessment The full rent together with the apportionments were submitted by the respondent and the tenancy agreements were also available to the revenue authority for its examination No attempt was made to hide the amount set aside as hiring charges The revenue authority knew the amount of the overall sum received by the respondent in respect of the period covered by each tenancy agreement It was clear to us that the revenue authority was in no way deceived 25 It was of interest to note that even though the revenue authority was informed in respect of the period covered by the seventh tenancy agreement that the overall rent per month was 62 000 with 51 000 annually 612 000 being the rent for the premises and 11 000 being the hiring charges the revenue authority assessed the annual value of the premises at only 588 000 The reason given by the revenue authority for this downward revision was that it was in line with the general reassessment of similar properties This showed that the revenue authority exercised an independent judgment 26 The appellant relied upon three cases to argue that each of the tenancy agreements had the object of defrauding the revenue authority ie Miller v Karlinski 1945 62 TLR 85 Miller Napier v National Business Agency Ltd 1951 2 All ER 264 Napier and Alexander v Rayson 1936 1 KB 169 Alexander However in none of these cases which we will now examine was the subject matter or fact situation anywhere close to the present case 27 Miller was a case where the contract of employment provided that the employee was to recover from his employer the tax which the employee would be liable to pay on his salary and this amount was to be treated as travelling expenses It was clear beyond doubt that the whole scheme was to under declare the wages of the employee The Court of Appeal held reversing the judgment of the County Court that the entire contract was illegal as it had as its object the defrauding of the revenue authority and thus was contrary to public policy The entire contract was not severable and the court refused to entertain an action to enforce any of its terms Unlike the present case it was clearly the parties intention in Miller to keep the existence of the employment contract from the revenue authority 28 Napier was also concerned with a contract of employment There the contract besides providing a salary of 13 a week also provided for 6 a week for expenses an amount which was far in excess of what the parties knew would be the employee s actual expenses which could not have exceeded 1 a week Indeed except on very exceptional occasions the employee would not have incurred any expenses The entire 6 paid was reflected in the accounts as reimbursement of expenses Clearly the scheme was to enable the employee to pay tax only on 13 instead of 18 or 19 When the employee s employment was summarily terminated he sued for the wages due in lieu of notice The English Court of Appeal held that the entire contract was unenforceable as it was contrary to public policy having as its object the evasion of tax Again the critical difference here was that the parties acted on the scheme and never intended to and never did let the revenue authority have any insight into the scheme Of course if they had informed the revenue authority of the scheme that would have undermined the whole purpose of the scheme Thus the scheme had to be kept secret 29 In Alexander the defendant agreed to take a flat from the plaintiff at a rent of 1 200 a year which sum included the provision of certain services by the plaintiff The defendant was asked to sign two documents One was for the lease of the flat with certain services at 450 a year and the other for the provision of certain services at 750 a year Except for the addition of a fridge the services to be provided under the agreement were the same as those under the lease When the defendant defaulted the plaintiff sued under the two documents The English Court of Appeal held that although there were two documents there was in fact only one transaction the object of which was to deceive the Westminister City Council into thinking that the rent for the flat was only 450 The parties did not intend to disclose the existence of the agreement to the Council so that the Council would not know about the payment of 750 The court stated at 177 I t is obvious that the plaintiff attempted to perpetrate a gross fraud upon the rating authorities and through them upon the Inland Revenue T he plaintiff in causing the defendant s tenancy to be created and constituted by the unusual method that he adopted intended by means of that device to perpetrate the fraud 30 It would be seen that the circumstances in all these three cases were quite different from those of the present Even in Alexander which related to the renting of premises the critical fact which differentiated the present case from that in Alexander was that here it was always the intention of the parties to disclose the full terms of the tenancy agreement to the revenue authority Our case here would be nearer to Alexander if the tenancy agreement had provided that the rent was ABC and there was a further understanding that there would be an under the counter payment of XYZ Thus we agreed with the judge below that the three cases were irrelevant and had no application 31 Accordingly we held that the successive tenancy agreements were not illegal contracts This would have sufficed to dispose of the appellant s claim for the refund of the hiring charges 32 However even if we were to hold that the arrangement set out in the tenancy agreements were illegal in that its object was to evade tax we still did not think that the appellant was entitled to a refund of the same There was no mistake as to the amount which the appellant had agreed to pay for the use of the premises with whatever furniture and fittings were there At the time each new tenancy agreement was entered into the parties negotiated the overall rent that should be paid by the appellant There was no misunderstanding as to the sum on each occasion As far as the appellant was concerned it could not care less how the respondent would apportion the overall sum if at all The principle of law is that the court will not assist a party to enforce an illegal contract ex turpi causa non oritur actio Here the respondent was not seeking to recover any hiring charges it was the appellant who having paid what it had agreed to pay wanted a refund on a portion of that payment on the pretext that such a payment was contrary to law If indeed what was done by the respondent constituted an offence the remedies lay in the hands of the revenue authority 33 The law draws a distinction between an action brought to enforce an unlawful agreement and one brought to assert a right to property already acquired under such an agreement In Taylor v Chester 1869 LR 4 QB 309 the defendant who was the keeper of a brothel had supplied wine and supper to the plaintiff for the purpose of being consumed there by the plaintiff and divers prostitutes in a debauch there to incite them to riotous disorderly and immoral conduct at 312 After the debauch was over the plaintiff was not willing to pay the full amount at once and instead left with the defendant half of a 50 note as security Subsequently he decided not to pay at all and sought by an action to obtain the return of the half

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  • Pacific Rim Investments Pte Ltd v Lam Seng Tiong and another[1995] 2 SLR(R) 643; [1995] SGCA 58
    claim Secondly since the debtor is entitled to assert the right of equitable set off outside the legal proceedings the creditor is prevented from exercising extrajudicial rights and remedies for default which include the termination of a contract Lastly set off as a cross claim may be time barred if it is brought in a separate action by the debtor to enforce it However as a substantive defence it remains available to the debtor in legal proceedings brought by the creditor 20 Counsel for the vendors cited extensive passages from Legal Problems on Credit and Security by Professor R M Goode to show that equitable set off is merely a procedural remedy and does not operate as a substantive defence At pp 132 133 Professor Goode opined Set off is a procedural right by which a person against whom a claim for money or for other relief based on the non payment of money is made in proceedings may set up a countervailing claim in reduction or discharge of his liability on the plaintiff s claim It is to be distinguished from a substantive defence in that the defendant admits liability on the claim but contends that he ought not to be required to pay more than the balance if any remaining after deduction of his cross claim and that if there is no such balance then any other relief claimed by the plaintiff on the ground of the defendant s non payment should be denied Set off thus goes not to substantive liability on the claim but to the amount for which the plaintiff is entitled to obtain judgment and the availability of non monetary judicial relief based on non payment 21 Two grounds were provided by Professor Goode for his view both of which were adopted by counsel for the vendors These were at pp 138 139 The history of set off shows that it evolved as a purely procedural shield not a substantive defence The requirement of equity that the cross claim should impeach the claim might be thought to suggest that it operated as a substantive defence Nothing could be further from the truth If the plaintiff s performance of his counter obligation had indeed been a condition precedent to his own right of payment the assistance of equity would never have been required the defendant would simply have taken his stand on the contract The intervention of equity was required precisely because the cross claim did not constitute a substantive defence In matters of set off courts of equity like courts of law respected the agreement between the parties and intervened only to require account to be taken of the cross claim at the stage of judgment or execution Equitable set off was never invoked to override an express or implied contractual agreement that the promise and counter promise should be independent of each other still less that obligations under separate contracts should be kept separate So it has remained to this day Though in modern practice pleaded as a defence the defendant s cross claim does not constitute a denial of liability on the contrary it amounts to an admission that the defendant is liable on the claim and a contention that he is entitled to set off his cross claim in reduction or extinction of the amount for which the plaintiff is entitled to judgment S et off under English law is purely procedural and takes effect on and from the date of judgment Neither the plea of set off nor the judgment resulting from it operates retrospectively to validate the defendant s withholding of payment The courts of common law could have evolved a substantive defence doctrine comparable to that of the civil law treating the assertion of the cross claim as a deemed payment by force of law except where excluded by the contract but they did not do so and courts of equity left the determination of the substantive rights to the courts of common law intervening by injunction to require account to be taken of the cross claim for the purpose of judgment or enforcement where the justice of the case so required Hence the fusion of common law and equitable jurisdiction resulting from the Supreme Court of Judicature Act 1873 did not produce any new substantive right set off in equity remains what it has always been procedural only 22 Counsel for the purchasers submitted that Professor Goode s opinion on the nature of equitable set off is very much against the weight of authorities which clearly bear out that equitable set off is a substantive defence exercisable as a form of self help remedy 23 On this issue we take as the starting point the case of Hanak v Green 1958 2 QB 9 where the plaintiff sought to recover from the defendant a sum due under a building contract and the defendant counterclaimed or claimed by way of set off a a sum on quantum meruit for extra work carried out b that the loss was caused by the plaintiff s refusal to admit the defendant s workmen and c damages for trespass to the defendant s tools It was held by the Court of Appeal that there was an equitable set off of the cross claim by the defendant against the claim of the plaintiff and the court gave judgment to the defendant on the claim and judgment to him on the counterclaim for the balance In the course of his judgment Morris LJ gave a learned exposition of the origin of the doctrine of equitable set off He said at 18 19 Before the passing of the Judicature Acts there were circumstances in which a court of equity would restrain one who was a plaintiff in an action at law from proceeding until the further order of the court with the trial of his action at law or might restrain him until the further order of the court from levying execution upon a judgment obtained in his favour The court of equity would not act merely because there were cross demands The assistance of the court of equity would only be given to someone who could show some equitable ground for being protected against his adversary s demand Lord Cottenham LC made that clear in 1841 in his judgment in Rawson v Samuel 1841 Cr Ph 161 178 Lord Cottenham examined the reported cases dealing with what he said was familiarly spoken of as equitable set off and came to the conclusion that what had to be established was that there was an equity which went to impeach the title to the legal demand After the Judicature Acts were passed it was no longer necessary for a defendant to bring a separate action if he had a cross claim He could present his cross claim in the existing action brought against himself So counterclaim the creature of the Judicature Acts became possible If a plaintiff had a demand which was a matter of equitable jurisdiction and brought proceedings in a court of equity then not only could there be a set off in regard to any liquidated demand but the courts of equity allowed a defendant to defend by showing that he had what was called an equitable set off that is as Lord Cottenham pointed out some equitable ground for being protected against the claim 24 Developing parallel to equitable set off which evolved in the courts of equity were the rights of legal set off and abatement at common law In an action at law a defendant could only exercise the right of legal set off after the passing of the Statutes of Set off This statutory creation was a purely procedural right which allowed liquidated claims or mutual debts to be heard in the same action and to be set off even if the claims were not connected In contrast an unliquidated claim could not be set off in the same action To mitigate the unjustness of such a rule the common law courts developed the doctrine of abatement which allowed the set off of unliquidated claims However abatement was itself of limited application and was only available in respect of contracts for the sale of goods or for work or labour see Mondel v Steel 1841 151 ER 1288 Gilbert Ash Northern Ltd v Modern Engineering Bristol Ltd 1973 3 All ER 195 at 215 25 After the passing of the Judicature Acts equitable defences could be relied upon in actions at law Again we quote what Morris LJ said in Hanak v Green 23 supra at 23 24 The position is therefore that since the Judicature Acts there may be 1 a set off of mutual debts 2 in certain cases a setting up of matters of complaint which if established reduce or even extinguish the claim and 3 reliance upon equitable set off and reliance as a matter of defence upon matters of equity which formerly might have called for injunction or prohibition The cases within group 3 are those in which a court of equity would have regarded the cross claims as entitling the defendant to be protected in one way or another against the plaintiff s claim Reliance may be placed in a court of law upon any equitable defence or equitable ground for relief so also any matter of equity on which an injunction against the prosecution of a claim might formerly have been obtained may be relied on as a defence 26 The decision was followed by Parker J in Compania Sud Americana de Vapores v Shipmair BV The Teno 1977 2 Lloyd s Rep 289 where he allowed inter alia the charterer s claim for unliquidated damages for breach of the charterparty by the owner as a set off against the owner s claim for hire He said at 297 The whole matter of the development of the equitable right of set off was exhaustively dealt with by Lord Justice Morris in Hanak v Green 1958 2 QB 89 in a judgment described by Lord Diplock in his speech in Modern Engineering v Gilbert Ash at p717 as giving a masterly account of the subject From that judgment I conclude that where the cross claim not only arises out of the same contract as the claim but is so directly connected with it that it would be manifestly unjust to allow the claimant to recover without taking into account the cross claim there is a right of set off in equity of an unliquidated claim These conditions are clearly satisfied where an owner claims hire in respect of a period in which he has not provided his ship at all They are in my judgment equally satisfied when as here he claims hire in respect of a period when in breach of contract he has provided less than the full use of the vessel 27 The Teno was cited with approval by the Court of Appeal in Federal Commerce Navigation Co Ltd v Molena Alpha Inc 1978 QB 927 The Nanfri There the Nanfri was let to the appellant charterers on a time charter The charter agreement provided for certain deductions from hire There was an alleged loss of speed during one of the voyages undertaken by the Nanfri The appellant charterers sought to deduct the damages arising from the loss of speed from the hire due to the owners in respect of the Nanfri In retaliation the owners withdrew the Nanfri for non payment of hire The majority of the Court of Appeal Lord Denning MR and Goff LJ agreed that in the circumstances the appellant charterers were entitled to an equitable set off and to deduct from the hire sums as loss arising from the loss of speed because the claims were so closely connected provided that the unliquidated loss was quantifiable by means of a reasonable assessment made in good faith This was a right quite apart from the contractual entitlement Therefore the owners were in breach of the charter agreement when they withdrew the Nanfri from the appellant charterers Of the nature of equitable set off Lord Denning MR said as follows at 973 974 It is often necessary to distinguish between a set off or defence properly so called and a counterclaim or cross action Again take the case where the contract gives a creditor a right to take the law into his own hands to take a particular course of action if a sum is not paid such as to forfeit a lease for non payment of rent or to withdraw a vessel for non payment of hire There the distinction between set off and cross claim is crucial When the debtor has a true set off it goes in reduction of the sums owing to the creditor If the creditor does not allow it to be deducted he is in peril He will be liable in damages if he exercises his contractual right of withdrawal wrongly But when the debtor has no set off or defence properly so called but only a counterclaim or cross action then the creditor need not allow any deduction to be made He can exercise his contractual right without fear and leave the debtor to bring an action for damages on his counterclaim In making the distinction between set off and cross claim the courts of common law had their own special rules For instance in a series of cases they formulated rules saying when there could be an abatement of rent or an abatement of the sums due for work and labour done or an abatement of the price of goods sold and delivered So that the defendant could make deductions accordingly But the courts of equity as was their wont came in to mitigate the technicalities of the common law They allowed deductions by way of equitable set off whenever there were good equitable grounds for directly impeaching the demand which the creditor was seeking to enforce see Rawson v Samuel 1841 Cr Ph 161 178 179 per Lord Cottenham LC These grounds were never precisely formulated before the Judicature Act 1873 It is now far too late to search through the old books and dig them out Over 100 years have passed since the Judicature Act 1873 During that time the streams of common law and equity have flown together and combined so as to be indistinguishable the one from the other We have no longer to ask ourselves what would the courts of common law or the courts of equity have done before the Judicature Act We have to ask ourselves what should we do now so as to ensure fair dealing between the parties This question must be asked in each case as it arises for decision and then from case to case we shall build up a series of precedents to guide those who come after us 28 Goff LJ agreed with the pronouncements expressed by Lord Denning MR and said at 982 I n my judgment this defence by its nature is such that it must be open to the charterer to set it up before ascertainment not merely as a means of preventing the owner obtaining judgment or at any rate execution but also as an immediate answer to his liability to pay hire otherwise due Of course he acts at his peril and if he is wrong he will enable the owner to determine the charter party if he is willing for his part to act at his peril the other way It cannot be right in my judgment that this defence is not operative until the claim has been agreed or awarded or in other words that the hire must be deemed due upon the due date for payment notwithstanding the subsistence of a potentially valid equitable set off 29 A strong proponent of the view that equitable set off is a substantive defence Lord Denning MR had said in the earlier decision of Henriksens Rederi A S v T H Z Rolimpex The Brede 1974 QB 233 at 248 249 The scope of equitable set off was considered by Lord Lyndhurst LC in Rawson v Samuel 1841 1 Cr Ph 161 178 recently by this court in Morgan Son Ltd v Martin Johnson Co Ltd 1949 1 KB 107 and Hanak v Green 1958 2 QB 9 It is available whenever the cross claim arises out of the same transaction as the claim or out of a transaction that is closely related to the claim Although it is often described as an equitable set off it would I think be more accurately stated to be an equitable defence When the contractor sues for the contract price the employer can say to him You are not entitled to that sum because you have yourself broken the very contract on which you sue and you cannot fairly claim that sum unless you take into account the loss you have occasioned to me So also with any breach by the plaintiff of the selfsame contract the defendant can in equity set up his loss in diminution or extinction of the contract price It is in the nature of a defence As such it is not subject to a time bar 30 The Nanfri was followed in The Kostas Melas SL Sethia Liners Ltd v Naviagro Maritime Corp 1981 1 Lloyd s Rep 18 where the facts were similar Robert Goff J held that a charterer may relying on the principle of equitable set off set off certain claims including loss arising from slow steaming of the vessel against hire even where the contract did not expressly give him the right to do so In an instructive passage Goff J said at 26 Furthermore the exercise of a right of deduction or set off is essentially an act of self help it requires no order of the court or arbitrators for its enforcement If a party exercises it however he must have justification for doing so and in theory he should be able to prove at the time of its exercise that he has that justification it is in my judgment implicit in its very nature that it should only be exercised in good faith on reasonable grounds and furthermore if the other party considers that it is not being so exercised he should be able to obtain a rapid adjudication upon that question 31 In the Australian case of Knockholt Pty Ltd v Graff 1975 Qd R 88 a lessor sought summary judgment for the recovery of possession of the premises on the ground of non payment of rent In defence the lessees maintained that the lessor was in breach of a covenant to repair and as a result the lessees had incurred expenses in carrying out the necessary repairs to the premises The lessees therefore claimed to be entitled to set off the damages suffered by them consequent on such breach of covenant against the rental W B Campbell J of the Supreme Court of Brisbane said at 90 It seems to me that should I consider that the lessees are entitled to set off damages suffered by them by reason of the landlord s breach of covenant I could not hold that they have breached their obligation under the lease to pay the rental If they are justified in pleading a set off they would be entitled to retain the rental until at least the set off moneys equalled the rental payments due 32 His Honour then proceeded to find that the lessees were entitled to an equitable set off and to withhold the rental Accordingly the lessor s claim failed 33 A similar case concerning leases of premises was British Anzani Felixstowe Ltd v International Marine Management UK Ltd 1980 QB 137 There the plaintiffs the lessees of the premises in question claimed against the defendants the underlessees possession unpaid rents mesne profits and interests The defendants counterclaimed damages for breaches of obligations on the part of the plaintiffs to make good defects in the floor of the premises under a separate agreement made between them Forbes J held that the defendants could set off their claims for unliquidated damages against the plaintiffs claim for rent and that although the defendants claim for damages were under an agreement and not the underlease there was such a close connection between them that it was only fair and just that the defendants equity should be treated as impeaching the title to the plaintiffs demand for rent After reviewing the authorities Forbes J came to the following conclusion at 155 156 Applying these principles in the light of what is fair dealing between the parties I have come to the conclusion that despite the insistence on preserving the agreement as an entity separate from the underlease there is nevertheless here that close connection between claim and cross claim which equity requires The agreement was inter alia an agreement to enter into the underlease the terms of which were set out in the form annexed to the agreement The special provisions relating to the floor were obviously as much in the minds of the parties when making the agreement as any of the other terms It would in my view be manifestly unjust to allow the landlords to recover the rent without taking into account the damages which it is alleged the tenants have suffered through failure by the landlords to perform their part of the agreement Not only is there in my view an adequate connection between the transactions giving rise to claim and cross claim there is also the fact that the breach by the landlords is said to render the premises unfit at least in part for the purpose for which they were let For both these reasons it seems to me that the defendants cross claim can be said to impeach the title to the plaintiffs legal demand 34 Equitable set off is applicable in other situations For instance it has been applied in relation to employment contracts in Sim v Rotherham Metropolitan Borough Council 1986 3 All ER 387 Scott J said at 415 In my judgment if an employee in breach of contract fails or refuses to perform his contractual services his right or title to recover his salary for the period during which the failure or refusal occurred is impeached by the employer s cross claim for damages It would in my judgment be manifestly unjust in such a case to allow the employee to recover his salary in full without taking into account the loss to the employer of those services The aphorism no work no pay expresses in my view the equity of the situation 35 All these decisions clearly establish that equitable set off is a substantive defence The argument that equitable set off is merely a procedural right which apparently was based on the historical origin of the defence is unsustainable In our view whatever the means of enforcing the right of equitable set off by the courts of equity prior to and at the time of the passing of the Judicature Acts equitable set off now enjoys the status of a true substantive defence There are however three observations we wish to make First the exercise of equitable set off is only permitted if equitable considerations support such an exercise It arises where there are good equitable grounds for directly impeaching the title to the legal demand which the creditor is seeking to enforce As Lord Denning MR succinctly said in The Nanfri 27 supra at 974 975 I t is not every cross claim which can be deducted It is only cross claims that arise out of the same transaction or are closely connected with it And it is only cross claims which go directly to impeach the plaintiff s demands that is so closely connected with his demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross claim 36 Secondly the right to equitable set off may be expressly excluded by contract Such a possibility was recognised by Goff LJ in The Nanfri at 988 E quitable set off is part of the general law and can only be excluded by clear provisions to that effect 37 Thirdly there are exceptions and they include claims for freight in voyage charters actions on dishonoured bills of exchange and certain actions on bank guarantees Sim v Rotherham Metropolitan Borough Council 34 supra at 413 In these instances equity seems to have followed the common law by recognising the exceptions to common law abatement 38 We now revert to the facts in the instant case We find that all the essential ingredients were present for the purchasers to avail themselves of the equitable set off as a form of self help First of all the agreement did not exclude the right of set off in equity Counsel for the vendors relied on cl 3 1 i bb ie the words in parenthesis in that clause after any deduction has been made in accordance with cl 18 hereof and for moneys owing to the purchaser and argued that the purchasers were only entitled to set off the amount of liquidated damages against the 8 of the purchase price payable on the issue of the certificate of statutory completion which would normally take place after completion In our view although this clause made provision for a contractual set off at or after the completion stage it did not expressly exclude equitable set off against any of the payments prior to completion Secondly as at 18 January 1994 the claim for liquidated damages by the purchasers exceeded by far the claim for late payment interest due by the vendors Thirdly the vendors claims and the purchasers cross claim arose from the same transaction and were closely linked In our opinion there was an equity which directly impeached the vendors legal right to the demand for payment of interest for the late payment and the exercise of equitable set off as a means of self help was perfectly justified We are in entire agreement with the learned judge that it was the vendors who wrongfully repudiated the agreement by their letter on 25 January 1994 In the premises we affirm the decision of the learned judge to grant a decree of specific performance Relief against forfeiture 39 Our decision on the issue above is sufficient to dispose of this appeal However full submissions have been canvassed before us on the controversial question whether the courts have power to grant relief against forfeiture in a case such as this where there is a breach of a contractual provision as to payment in respect of which time is of the essence In the circumstances we consider we should also address this issue 40 Of the scope of the equitable right to relieve a party against forfeiture of property Lord Wilberforce in Shiloh Spinners Ltd v Harding 1973 AC 691 said at 722 There cannot be any doubt that from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property The jurisdiction has not been confined to any particular type of case The commonest instances concerned mortgages giving rise to the equity of redemption and leases which commonly contained re entry clauses but other instances are found in relation to copyholds or where the forfeiture was in the nature of a penalty Although the principle is well established there has undoubtedly been some fluctuation of authority as to the self limitation to be imposed or accepted on this power There has not been much difficulty as regards two heads of jurisdiction First where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money equity has been willing to relieve on terms that the payment is made with interest if appropriate and also costs Peachy v Duke of Somerset 1721 1 Stra 447 and cases there cited Yet even this head of relief has not been uncontested Lord Eldon LC in his well known judgment in Hill v Barclay 1811 18 Ves Jun 56 expressed his suspicion of it as a valid principle pointing out in an argument which surely has much force that there may be cases where to oblige acceptance of a stipulated sum of money even with interest at a date when receipt had lost its usefulness might represent an unjust variation of what had been contracted for see also Reynolds v Pitt 1812 19 Ves Jun 140 Secondly there were the heads of fraud accident mistake or surprise always a ground for equity s intervention the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults 41 Having set out the scope of such equitable relief his Lordship went on to say at 723 724 N o decision in the present case involves the establishment or recognition directly or by implication of any general power that is to say apart from the special heads of fraud accident mistake or surprise in courts exercising equitable jurisdiction to relieve against men s bargains I would fully endorse this it remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court and where the forfeiture provision is added by way of security for the production of that result The word appropriate involves consideration of the conduct of the applicant for relief in particular whether his default was wilful of the gravity of the breaches and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach 42 Although Lord Wilberforce laid down the courts power to grant relief against forfeiture in expansive terms he also spoke of the self imposed limitations In Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana 1983 2 AC 694 the House of Lords held that the equitable relief from forfeiture was inapplicable in that case where the shipowner who had chartered his vessel to the charterer under a time charter withdrew the vessel from hire for non payment of hire on the stipulated date Lord Diplock said at 702 that what Lord Wilberforce said in Shiloh Spinners Ltd 40 supra was never meant to apply generally to contracts not involving any transfer of proprietary or possessory rights The equitable relief has also not been granted to purely commercial contracts unconnected with any interests in land see Sport International Bussum BV v Inter Footwear Ltd 1984 1 WLR 776 There is no general principle that whenever a party to a contract is given a contractual right to terminate or rescind the contract for a breach which consists only of non payment of a sum of money and where the purpose of incorporating such right is to secure payment of that sum there is an equitable jurisdiction to grant relief against the exercise of such right of termination or rescission However in respect of contracts for the sale of land relief against forfeiture has been granted in appropriate cases and in two main forms First relief has been granted against the forfeiture by the vendor of the deposit or instalments of the purchase price or both paid by the purchaser in the exercise of the courts power to relieve against a penalty Mayson v Clouet 1924 AC 980 and Stockloser v Johnson 1954 1 QB 476 Secondly relief has also been granted against the forfeiture of interest in the land under the contract and such relief usually takes the form of the court refusing to recognise the termination or rescission of the contract by the vendor and giving to the purchasers additional time on terms to perform his obligations It is this latter form of relief with which we are concerned 43 Until the decision of the Privy Council in Steedman v Drinkle 1916 1 AC 275 of which more will be said later there were clear authorities for the view that equity would relieve a defaulting purchaser against the forfeiture of his interest in the land in question even where he had failed to comply with a provision as to payment of which time was of the essence We begin with the old case of Vernon v Stephens 1722 2 P Wms 66 There the plaintiff purchaser contracted to buy a piece of land and paid part of the purchase price However he failed to pay the balance By consent he was given an extension of time by the defendant vendor whereby he agreed to pay the balance by a certain date or lose both the contract and all that he had already paid The plaintiff was again in default of payment in accordance with the date as agreed Later he brought a claim for specific performance He was granted relief on payment of the principal interest and costs after the court took into consideration the special circumstances which led to the delay 44 Next was the case of In re Dagenham Thames Dock Company ex parte Hulse 1873 LR 8 Ch App 1022 where the purchaser company bought a piece of land for 4 000 of which 2 000 was to be paid at once and the remaining on a certain date It was further provided that if the remaining 2 000 was not paid by that day in respect of which time was of the essence the vendors were entitled to repossess the land without any obligation to repay any part of the purchase money already paid James LJ said at 1025 that this was an extremely clear case of a mere penalty for non payment of the purchase money and that the purchaser was entitled to be relieved on payment of the residue of the purchase money with interest Mellish LJ expressed himself thus at 1025 W here there is a stipulation that if on a certain day an agreement remains either wholly or in any part unperformed in which case the real damage may be either very large or very trifling there is to be a certain forfeiture incurred that stipulation is to be treated as in the nature of a penalty Here when you look at the last agreement it provides that if the whole 2000 with interest or any part of it however small remains unpaid after a certain day then the company shall forfeit the land and the portion of the purchase money which they have paid It appears to me that this is clearly in the nature of a penalty from which the Court will relieve 45 Finally we come to the Privy Council decision of John H Kilmer v British Columbia Orchard Lands Limited 1913 AC 319 There Kilmer contracted to purchase the land in question from the plaintiff company and paid the first instalment of 2 000 upon the execution of the contract The balance of the purchase price was to be paid by subsequent instalments Time was of the essence as regards regarded these payments In case of default of punctual payment of any one instalment the plaintiffs were entitled to forfeit both the contract and all the payments previously made Kilmer failed to pay the next instalment but obtained an extension of time for payment He was still unable to pay by the end of the grace period whereupon the plaintiffs terminated

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  • Goi Wang Firn (Ni Wanfen) and others v Chee Kow Ngee Sing (Pte) Ltd
    at 17 23 From the parties submissions as broadly outlined above it is clear that there are no material disputes of fact Although the parties disagree as to who had paid for the Leasehold in their pleadings I have explained that this was not put in issue before me This is neither a relevant nor material fact to determine the existence and validity of the express trust In this appeal it is important to note that the plaintiffs do not challenge the authenticity of the documents relied on by the defendant and thus prima facie there appears to be sufficient evidence that the Deceased had indeed declared an express trust over the Leasehold in favour of the defendant The plaintiffs however seek to undermine such a finding by arguing that the express trust which is purportedly borne out by these documents is invalid as a matter of law and that the reliance placed on some of these documents is in any event objectionable If these arguments fail it must follow that the plaintiffs action ought to be struck out on the basis that it is either plainly or obviously unsustainable or doomed to fail In the circumstances the determination of this appeal would entail an examination of the following issues raised by the plaintiffs legal arguments a Can an express trust be declared for the benefit of a company and if so must such a trust be i for a prescribed purpose to benefit human beings and ii limited in time within the common law perpetuity period the Corporate Beneficiary Issue b Is the alleged express trust void for the Deceased s lack of intention to create a trust owing to his mistaken belief that he was only ever a trustee of the Leasehold the Mistake Issue c Can the defendant rely on its audited accounts and the Deceased s two affidavits in DC 928 2000 as proof that he had made express declarations of trust the Evidentiary Issue 24 I shall proceed to examine each of these issues in turn Analysis The Corporate Beneficiary Issue Can a company be a beneficiary under an express trust 25 Mr Ponniah as mentioned earlier relied on a particular passage in Pettit to advance his submission that by operation of the beneficiary principle an express trust can only be created for the benefit of a human beneficiary or for a charitable purpose It bears reproducing this passage of Pettit at pp 59 60 in its entirety though with the footnotes omitted to appreciate the full context of the learned author s commentary Even where the purpose of a trust is clearly defined so that the trust cannot be said to be void for uncertainty further difficult problems may arise where the object of a trust is a non human beneficiary such as a dog an unincorporated association or a non charitable purpose The basic principle subject perhaps to the possibility of review of the decisions by the English Supreme Court and with the exception of charitable trusts is that a trust to be valid must be for the benefit of individuals This is the principle stated by Grant MR in Morice v Bishop of Durham that there must be somebody in whose favour the court can decree performance restated by Harman J in Re Wood who observed that a gift on trust must have a cestui que trust and since affirmed by Roxburgh J in Re Astor s Settlement Trusts and the Court of Appeal in Re Endacott Accordingly it has been said A gift can be made to persons including a corporation but it cannot be made to a purpose or to an object so also a trust may be created for the benefit of persons as cestuis que trust but not for a purpose or object unless the purpose or object be charitable The idea behind this seems to be that otherwise the validity of the trust would depend upon the whim of the trustee and a court of equity does not recognize as valid a trust which it cannot both enforce and control This beneficiary principle which operates to invalidate non charitable purpose trusts may however be held to be inapplicable in certain situations and is also subject to exceptions emphasis added in italics and in bold italics 26 Mr Ponniah relied on Pettit s specific use of the term non human beneficiary in the passage above to argue that it is implicit that the beneficiary principle strictly requires there to be a human beneficiary for a trust to be valid However since the purported trust here has been created for an incorporeal non human entity ie the defendant company it must accordingly be declared invalid 27 I disagree with Mr Ponniah s submission My understanding of the beneficiary principle has always been that it is intended through its insistence on the presence of some identifiable beneficiary to ensure that a trust can both be enforced against the trustee and controlled by the courts The aim of this is to nullify those trusts which have as their objects purely private purposes that by virtue of their wholly abstract nature cannot conceivably be enforced or policed Indeed this appears to be confirmed by the very passage of Pettit which Mr Ponniah has drawn my attention to The context of the passage was clearly in relation to purpose trusts in which a further difficulty was identified as regards non human beneficiaries It was therefore not immediately apparent to me where the objection lay in recognising that a company could own property beneficially under an express trust since it is trite that a company is a legal person capable of suing in its own right see s 19 5 of the Companies Act Cap 50 2006 Rev Ed and Walter Woon on Company Law Tan Cheng Han SC gen ed Sweet Maxwell Rev 3rd Ed 2009 at para 2 46 and can accordingly enforce a trust if necessary 28 However I was somewhat surprised by the apparent absence of any authorities local or foreign which have dealt directly with the issue before me While Mr Tan was able to identify some authorities which allude to the possibility of companies being beneficiaries under an express trust see eg Foreman v Hazard 1984 1 NZLR 586 at 596 note 51 I do not think that such passing references can of itself dispose of the present issue In the circumstances I was minded to survey other academic commentaries to see whether Mr Ponniah s submission found support elsewhere and this appears not to be the case Many other texts explicitly contemplate that a company can be a beneficiary under an express trust although none unfortunately have discussed the point extensively see eg John Mowbray QC et al Lewin on Trusts Sweet Mawwell 18th Ed 2008 Lewin on Trusts at para 2 30 Alastair Hudson Equity and Trusts Routledge 7th Ed 2013 at pp 197 and 202 AH Oosterhoff et al Oosterhoff on Trusts Text Commentary and Materials Carswell 7th Ed 2009 at p 185 and DWM Walters Law of Trusts in Canada Carswell 2nd Ed 1984 at p 122 I nevertheless refer to other contrasting commentaries as they did serve to reinforce my initial doubts over Mr Ponniah s submission and also because they appeared to suggest that it might well be self evident that there is no bar to a company holding property beneficially under an express trust 29 In my view the issue at hand is best resolved by examining the underlying cases cited in the quoted passage of Pettit itself to determine whether they truly stand for the proposition that an express trust cannot be created for a non human beneficiary These cases referred to are in the chronological order as set out in Pettit Morice v Bishop of Durham 9 Ves 399 Morice In re Wood decd 1949 1 Ch 498 Re Wood In re Astor s Settlement Trusts 1952 1 Ch 534 Re Astor s Settlement and In re Endcacott decd 1960 1 Ch 232 Re Endacott I should state that it is always good and sound practice for counsel in citing textbook authorities to examine the underlying authorities which were relied on by the author to support the proposition The obvious importance and value of such a practice is borne out below 30 Having reviewed these authorities which is a task which should have been undertaken by Mr Ponniah in presenting the submission to the court it is clear to me that none of them involved trusts for the benefit of corporate beneficiaries or any beneficiaries for that matter Instead all these cases concerned trusts which were held to be for non charitable purposes a in Morice a testatrix had bequeathed all her personal estate to the Bishop of Durham who was to dispose of the ultimate residue to such objects of benevolence and liberality as he in his own discretion shall most approve of b in Re Wood the trust in question was created for the particular society on whose behalf an appeal was transmitted by the British Broadcasting Corporation on their weekly programme titled The Week s Good Cause c in Re Astor s Settlement Viscount Astor had made a settlement of all the issued shares in the Observer newspaper the income of which was to be applied for inter alia the maintenance of good understanding between nations the preservation of the independence and integrity of newspapers and the protection of newspapers from being absorbed or controlled by combines and finally d in Re Endacott a testator had given his residuary estate to the North Tawton Parish Council for the purpose of providing some useful memorial to myself All the trusts in these cases failed in the absence of any beneficiary who could enforce them 31 When one appreciates the context in which these cases arose and were decided it becomes clear that the courts pronouncements were not in any way directed at making fine distinctions between human and non human beneficiaries as Mr Ponniah argued here After all there were no cognisable beneficiaries in any of these cases to begin with The true distinction being made in these cases rather was between trusts for beneficiaries and trusts for purposes non charitable purposes to be specific Therefore when for example Grant MR stated in Morice at 403 that t here must be somebody in whose favour the Court can decree performance emphasis added or when Roxburgh J in Re Astor s Settlement at 540 echoed Lord Parker s statement in Bowman and others v Secular Society Limited 1917 AC 406 that a trust to be valid must be for the benefit of individuals emphasis added I do not think that these statements can properly be understood in the lay sense as requiring there to be some human beneficiary This reads into the statements a qualification which the courts concerned had certainly not addressed their minds to and thus could not possibly have intended to impose 32 In my view all that is sought to be conveyed by the cases is that there must be some beneficiary as opposed to none at all who has the requisite legal personality and locus standi to come before the court to enforce the terms of the trust Whether that beneficiary takes the form of a human being or a corporate body is quite beside the point because as I have mentioned a company is no less a legal person than a human is among the many other incidents of incorporation is the crucial fact that a company can sue and be sued in its own name Pure private purposes trusts however are by their very nature not amenable to the court s control and that in my judgment is the true mischief at which the beneficiary principle is aimed and precisely the reason why the trusts in the aforementioned cases failed As Roxburgh J succinctly stated in Re Astor s Settlement at 541 542 I f the purposes are not charitable great difficulties arise both in theory and in practice In theory because having regard to the historical origins of equity it is difficult to visualize the growth of equitable obligations which nobody can enforce and in practice because it is not possible to contemplate with equanimity the creation of large funds devoted to non charitable purposes which no court and no department of state can control or in the case of maladministration reform emphasis added 33 It has been observed that since Re Astor s Settlement the contemporary rationale for the beneficiary principle is conventionally couched in terms of enforceability and control see Graham Moffat Gerry Bean Rebecca Probert Trusts Law Text and Materials Cambridge University Press 5th Ed 2009 Moffat Bean Probert at p 257 A trust created for the benefit of a company such as the defendant in the present case engages neither of these twin concerns Bearing this in mind I do not think that the learned author of Pettit in stating that a trust for a non human beneficiary raises potential problems can reasonably be said to have had in contemplation a trust for a corporate beneficiary Indeed this is clear when one sees that the examples given in Pettit of such non human beneficiaries include a dog an unincorporated association or a non charitable purpose 34 Accordingly it would be a wholly misguided application of the beneficiary principle if the express trust created over the Leasehold here was struck down simply on the basis that it was for the benefit of the defendant company I therefore find that Mr Ponniah s submission on the beneficiary principle is with respect legally unsustainable Must an express trust for a company be a for the benefit of human beings and b limited within the common law perpetuity period 35 Mr Ponniah had a further related submission He argued that even if it is accepted that a trust can be created for the benefit of a company the decision in Re Denley s Trust supports the view that such a trust for corporate beneficiaries must have a clearly prescribed purpose to benefit human beings which must further be limited in duration within the common law perpetuity period of a life in being plus 21 years 36 I pause here to make an observation regarding the circumstances in which this submission arose In this regard Mr Tan pointed out that at the hearing before the Assistant Registrar the plaintiffs took the position that the beneficiary principle operated as an absolute prohibition against corporate beneficiaries note 52 The plaintiffs made no mention of Re Denley s Trust at the time In these circumstances it is clear that the two qualifications mooted by Mr Ponniah on the basis of Re Denley s Trust in this appeal represent a rather significant shift in the plaintiffs position and that to my mind suggests that it was not a properly considered submission It was therefore not entirely surprising to find that Mr Ponniah s submission was in the final analysis founded on a misreading of Re Denley s Trust While Re Denley s Trust is admittedly not a straightforward case that has given rise to quite contrasting interpretations over the years to my knowledge it has never been suggested that the effect of the decision was to create a special exception to the beneficiary principle for trusts specifically involving corporate beneficiaries Such an interpretation was clearly misconceived as the following discussion will show 1 Distinguishing Re Denley s Trust 37 The case of Re Denley s Trust concerned a trust over land which had been conveyed by a company HH Martyn Co Ltd to trustees under a trust deed By cl 2 c of the trust deed it was stated that the land would be maintained and used as and for the purpose of a recreation or sports ground primarily for the benefit of the employees of the company The trustees could also allow the land to be used secondarily for the benefit of other persons The question which arose on these facts was whether the trust was void on the basis that cl 2 c amounted to a non charitable purpose trust that offended the beneficiary principle or because it was a trust for the benefit of individuals constituting an unascertainable class 38 Goff J upheld the trust as valid Regarding the latter issue on ascertainability it was not disputed that the employees of the company were an ascertainable class see 386G Goff J then went on to decide that the reference to other persons in cl 2 c constituted a power rather than a trust hence any difficulties encountered by the trustees in exercising it could be resolved with the help of the court see 388B I should also mention since it is relevant to Mr Ponniah s argument that the trust in Re Denley s Trust was also expressed to be limited within the common law perpetuity period and thus did not infringe the rule against perpetuities see 386E 39 The particular aspect of Re Denley s Trust which has given rise to controversy concerned the exact basis upon which Goff J upheld the validity of the trust Did Goff J create an exception to the general prohibition against purpose trusts by recognising as valid a purpose trust which was enforceable by an ascertainable class of persons ie the employees or was this simply treated as a persons trust for the employees as beneficiaries The relevant portion of Goff J s judgment on this point is as follows see 382G 384A I think there may be a purpose or object trust the carrying out of which would benefit an individual or individuals where that benefit is so indirect or intangible or which is otherwise so framed as not to give those persons any locus standi to apply to the court to enforce the trust in which case the beneficiary principle would as it seems to me apply to invalidate the trust quite apart from any question of uncertainty or perpetuity Such cases can be considered if and when they arise The present is not in my judgment of that character and it will be seen that clause 2 d of the trust deed expressly states that subject to any rules and regulations made by the trustees the employees of the company shall be entitled to the use and enjoyment of the land Apart from this possible exception in my judgment the beneficiary principle of In re Astor s Settlement Trusts which was approved in In re Endacott decd is confined to purpose or object trusts which are abstract or impersonal The objection is not that the trust is for a purpose or object per se but that there is no beneficiary or cestui que trust Where then the trust though expressed as a purpose is directly or indirectly for the benefit of an individual or individuals it seems to me that it is in general outside the mischief of the beneficiary principle emphasis added 40 As has been widely observed Goff J s classification of the trust is not absolutely clear see HAJ Ford WA Lee et al Principles of the Law of Trusts Thomson Reuters Looseleaf Ed 2013 Ford Lee at para 5 12710 there is no universal agreement as to whether Goff J understood it as a special kind of purpose trust or as an orthodox trust for persons see Lewin on Trusts at para 4 40 While some cases have interpreted the trust in Re Denley s Trust as involving more obviously a purpose trust see Strathalbyn Show Jumping Club Inc v Mayes 2001 SASC 73 at 50 per Bleby J others have found to the contrary that it falls on a proper analysis altogether outside the categories of purpose trusts see In re Grant s Will Trusts 1980 1 WLR 360 at 370H per Vinelott J see also PJ Millett The Quistclose Trust Who can Enforce it 1985 101 LQR 269 at pp 281 282 The reasons why Re Denley s Trust is capable of giving rise to such contrasting interpretations are well explained in the following passage of Geraint Thomas Alastair Hudson The Law of Trusts Oxford University Press 2nd Ed 2010 Thomas Hudson at para 6 16 It is not entirely clear how the trust in Re Denley was classified Goff J clearly accepted that a trust expressed as a purpose but indirectly for the benefit of an individual was outside the mischief of the beneficiary principle Moreover the purpose of extracting the relevant distinction from the authorities seems clearly to have been to justify the conclusion that the trust in question was valid notwithstanding the fact that it was expressed to be for a non charitable purpose On the other hand his concern that the employees to be benefited should be ascertained or ascertainable at any given time suggests that it was a trust for individuals and not a purpose trust at all 41 While the exact nature of the trust in Re Denley s Trust is not clear there is strictly no necessity for me to weigh in on the above debate This is because Mr Ponniah had advanced an interpretation of Re Denley s Trust which was entirely unique from the views I have canvassed above In Mr Ponniah s submission Re Denley s Trust was a case where the object of the trust was a corporation note 53 and from this premise he advanced the further argument that the trust in the present case should also likewise be expressed for the purpose of benefitting human beings and limited within the perpetuity period if it is to be upheld as valid 42 I am unable to agree with Mr Ponniah s interpretation of Re Denley s Trust There is nothing in Goff J s decision to suggest that he had treated the trust as being created for the benefit of the company there As a matter of fact the trust was clearly expressed to be for the purpose of benefitting the employees of the company While it is not so clear from the decision whether the trust was as a matter of law actually treated as one for purposes or for persons that as I have stated is not the issue which Mr Ponniah s submission raises Once it is recognised that Re Denley s Trust was not a case which involved a trust for a company Mr Ponniah s entire argument that Goff J had upheld an exceptional kind of trust for corporate beneficiaries fails There is therefore no sound basis for Mr Ponniah s attempt to draw certain features from that case viz the need of having a defined purpose to benefit humans and a defined duration and apply them as qualifications to the trust in the present dispute 43 Notwithstanding my finding that Re Denley s Trust has no application here I consider it useful to make some observations on the general thrust of Mr Ponniah s submissions which seemed to me to effectively suggest that the express trust here must in order to be valid specify a a defined purpose and b a defined duration In my view these submissions failed to fully appreciate certain fundamental areas of trusts law namely the distinction between express trusts for persons and for purposes as well as the common law rule against perpetuities hence it is worthwhile to take the opportunity here to examine these concepts more closely 2 Trusts for persons vs Trusts for purposes 44 An express trust must in addition to complying with any applicable formal statutory requirements such as those in s 7 1 of the CLA satisfy the three certainties of intention subject matter and objects in order to be valid see Joshua Steven v Joshua Deborah Steven and others 2004 4 SLR R 216 at 12 45 Importantly an express trust can be declared for different kinds of objects It should be clear from my earlier discussion of the beneficiary principle and Re Denley s Trust that an express trust can either be a trust for persons or a trust for purposes see also Ford Lee at paras 5 010 5 070 A trust for persons including a body corporate will generally be upheld as valid since such a trust does not usually create any difficulties in terms of enforceability and control On the other hand a trust for abstract purposes typically falls foul of the beneficiary principle for precisely the opposite reasons see 32 above The task of determining whether a trust is one for persons or for purposes will not however always be straightforward where a combination of persons and purposes appear see Moffat Bean Probert at p 258 and this is well exemplified by Re Denley s Trust In such circumstances it will be a question of construction as to whether the settlor had the primary object of making a gift to the person or having the specified purpose carried out see Ford Lee at para 5 090 46 It should be mentioned however that not all purpose trusts are void by operation of the beneficiary principle There are exceptions but these can only be appreciated if the broad class of purpose trusts is further sub categorised into charitable and non charitable ie private purpose trusts Charitable purpose trusts have long been recognised at common law as constituting a significant exception to the beneficiary principle It does not matter that there is no beneficiary who can compel performance of the charitable trust because the Attorney General may do so as the public guardian see s 9 1 Government Proceedings Act Cap 121 1985 Rev Ed As for non charitable purpose trusts there are also certain recognised classes of anomalous purpose trusts such as those for the erection or maintenance of monuments and graves which constitute exceptions to the beneficiary principle These trusts are generally recognised as valid notwithstanding the absence of any beneficiary for reasons which have more to do with human weakness or sentiment rather than legal logic or principle see Hongkong Bank Trustee Singapore Ltd v Tan Farrer and others 1988 1 SLR R 53 at 15 47 With this taxonomy of express trusts in mind it becomes clear that the express trust in the present case should be characterised as a trust for persons since there can be no doubt that it is for the benefit of an identifiable beneficiary viz the defendant company It is certainly not a particular variant of the altogether separate category of purpose trusts since the Deceased has never declared that he was holding the Leasehold for a specific purpose I do not think that Mr Ponniah views the trust in this case any differently However his argument on the basis of Re Denley s Trust seemed to suggest that insofar as the trust here is for a corporate beneficiary it must also prescribe a particular purpose to be valid Can this be correct In my view clearly not 48 The discussion above makes clear that a trust for persons and a trust for purposes are no more than distinct categories of express trusts which a settlor is entirely free to create although he would be wise to note the different possible legal outcomes that attach to either of them at law Mr Ponniah s submission however appears to advocate an entirely contrary position in suggesting that a settlor who intends to create a persons trust in the case of companies should nevertheless be obligated to further stipulate some purpose underlying the trust I do not understand the law of trusts as constraining a settlor in this way nor do I think it desirable that it should In fact I see no reason why a settlor should be placed in the rather invidious position of having to prescribe a purpose when that merely makes the trust more susceptible to being invalidated for offending the beneficiary principle For these reasons I see no basis for Mr Ponniah s argument that the purported trust here fails because the Deceased was required to have further specified that the trust should be for the particular purpose of benefitting human beings 3 The rule against perpetuities 49 I turn now to consider that part of Mr Ponniah s argument which suggested that the purported trust offends the rule against perpetuities because in the absence of any prescribed duration it can in fact subsist indefinitely It bears mention that this objection was not raised before the Assistant Registrar note 54 yet it featured prominently in the plaintiffs submissions on appeal Even then however the plaintiffs appear to have a somewhat superficial understanding of the rule which for their purposes may have seemed attractive at first glance I therefore find it crucial to first set out a clear understanding of the ambit of the rule against perpetuities in order to evaluate whether there is any substance in the plaintiffs submission This rule was considered by Tan Lee Meng J in State of Johor and another v Tunku Alam Shah ibni Tunku Abdul Rahman and others 2005 4 SLR R 380 State of Johor at 50 as follows 50 The effect of the rule against perpetuities is explained in Williams on Wills Butterworths 7th Ed 1995 vol 1 at p 820 as follows The rule is directed to ensure that interests shall vest within the period allowed by the rule and if an interest is immediately vested or must necessarily vest within the period allowed its validity cannot be questioned so far as this rule is concerned An interest becomes vested when first the person or persons or corporation or body of persons to whom or to which it is limited is or are ascertained and in existence and capable of taking secondly the quantum of the interest is ascertained and thirdly all other events have happened to enable the interest to come into possession at once subject to the determination at any time of the prior interests emphasis added 50 The broad rationale underlying this rule is to prohibit owners of property from rendering their properties inalienable It is important however to focus on how exactly the rule seeks to achieve this purpose In this regard the passage above makes clear that the rule against perpetuities is at its heart concerned with the time within which future interests shall vest By requiring that any interest must vest within the perpetuity period if it vests at all the rule prevents the settlor from controlling who should be entitled to his property too far into the future thereby obviating control by the dead hand see Tan Sook Yee Tang Hang Wu Kelvin FK Low Tan Sook Yee s Principles of Singapore Land Law LexisNexis 3rd Ed 2009 at para 6 15 A succinct explanation of the competing interests at play which this rule has a prominent role in balancing is provided by Ruth L Deech in her article Lives in Being Revived 1981 97 LQR 593 at p 594 also noted in United Kingdom Law Commission The Rule Against Perpetuities and Excessive Accumulations Law Com No 251 of 1998 Law Commission Report at para 1 9 The most convincing modern explanation of the functions of the Rule against perpetuities is the so called Dead Hand Rationale According to this doctrine the Rule is necessary in order to strike a balance between on the one hand the freedom of the present generation and on the other that of future generations to deal as they wish with the property in which they have interests If a settlor or testator had total liberty to dispose of his property among future beneficiaries the recipients being fettered by his wishes would never enjoy that same freedom in their turn The liberty to make fresh rearrangements of assets is necessary not only in order to be rid of irksome conditions attached by earlier donors to the enjoyment of income but also in order to be able to manoeuvre in the light of new tax laws changes in the nature of the property and in the personal circumstances of the beneficiaries unforeseeable by the best intentioned and most perspicacious of donors 51 The name given to the rule viz the rule against perpetuities has unfortunately become a trap for the unwary and created confusion through the years As the learned author John C Gray has observed in the preface to his seminal treatise on the subject The Rule Against Perpetuities Little Brown and Company 4th Ed 1942 at p x its name serves as a constant temptation to treat it as aimed against restraints on the alienation of present interests emphasis added when in truth it is only concerned with the vesting of future interests It has therefore been astutely observed that despite its name the rule against perpetuities should properly be understood as being concerned with the commencement of interests rather than with their duration original emphasis though by restricting the time within which future interests must vest the rule will commonly have the effect of limiting the life of a trust see Law Commission Report at para 1 6 The same point was also made by Mr Tan who in his submissions note 55 pointed out the following observation in AJ Oakley Parker and Mellows The Modern Law of Trusts Sweet Maxwell 9th Ed 2008 at para 7 009 which is particularly instructive for the present case The rule requires only that gifts must vest within the perpetuity period This rule has no application to the length of time during which property may be enjoyed once it has vested Accordingly if an outright gift is made to a limited company so that the gift vests in the company immediately that company may hold the property for more than a thousand years without ever infringing the rule against remoteness original emphasis 52 In the present case there can be no dispute that the interest in the Leasehold vested immediately in the defendant company upon the Deceased s declarations of trust It is clear from the Deceased s declarations see 16 above that he did not attach any conditions to postpone the vesting of the Leasehold Viewed simply this was a case in which A declared that he held the property on trust for B and beneficial interest in the property vested in B forthwith In the absence of any future interests being created by the Deceased the rule against perpetuities is simply not engaged at all The defendant company as the beneficial owner of the Leasehold is free to deal with it as indeed it has over the years There are simply no concerns regarding inalienability and there can be no objection to the fact that the Deceased did not go on to explicitly stipulate the duration within which the trust should come to an end That as I have explained would be to misunderstand what the rule against perpetuities is directed at but unfortunately Mr Ponniah s submission appears to suffer from the confusion which I had highlighted above That also occurred in State of Johor where it was argued that a bequest of property in Singapore known as Tyersall under the will of the late Sultan Abu Bakar of Johor in favour of the reigning Sultan of Johor as State property was invalid because it infringed the rule against perpetuities After setting out his understanding of the rule against perpetuities see 49 above Tan J went on to observe as follows at 51 52 51 The bequest of Tyersall as State property did not offend the rule against perpetuities because it is a bequest to a corporation sole Black s Law Dictionary West Group 7th Ed 1999 defines a corporation sole as follows A series of successive persons holding an office a continuous legal personality that is attributed to successive holders of certain monarchical or ecclesiastical positions such as

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  • Chan Yuen Lan v See Fong Mun
    allegedly prepared on the same day as the Second Memo A visual inspection of the Second Memo suggests that the body text was written only after the signatures of SHC SSM and SHY were already on that memo as the last line was deliberately written closer to the penultimate line so as to avoid crossing over the signatures note 4 In fact some of the words in the last line appear to curve over the top of SHC s signature in order to avoid crossing over his signature In our view this is somewhat suspicious and indicates that the Second Memo was probably fabricated Given that the First Memo was written on the same day as the Second Memo it would be reasonable to infer that the First Memo was likely to have been fabricated as well 70 Further it was undisputed that the originals of the two Memos were inspected by Mdm Chan s solicitors on 8 June 2012 and that following such inspection notice was given by Mdm Chan s solicitors on 18 June 2012 challenging the authenticity of these two documents Notwithstanding that on the first day of the trial Mr See explained to the court that he had lost the originals of the two Memos and confirmed the next day that he was still not able to find them At no time was there an explanation by Mr See as to why he decided to take possession of these documents notwithstanding the notice of challenge as to their authenticity This was highly suspicious to say the least Given these circumstances we are of the view that the Judge ought to have drawn the appropriate adverse inferences against Mr See and SHC 71 This leads us to our seventh and final observation On the whole it appears to us that SHC and SHY were the real litigants behind this action and that the respective cases put forth by Mr See and Mdm Chan were largely an attempt by SHC and SHY to reconstruct versions of the material events which would be favourable to their cause based on whatever documentary evidence there was available We are therefore of the view that the evidence of Mr See Mdm Chan SHC and SHY as to the parties intentions had to be approached with extreme caution and that the documentary evidence played a central role in this case Issue 1 Did Mr See pay the whole of the purchase price of the Property 72 We turn now to Issue 1 The Property is held in Mdm Chan s sole name and hence she is deemed to be absolutely entitled to the Property unless the presumption of resulting trust arises The question in the present appeal however is not whether the presumption of resulting trust applies it patently does since Mdm Chan conceded that she did not contribute the whole of the purchase price of the Property Instead the question is whether Mr See contributed the whole of the purchase price Where this is concerned it is not in dispute that the funds listed at 18 d 18 f above should be attributed to Mr See We therefore turn to examine to whom the 290 000 the HSBC Term Loan and the TMPL Overdraft ie the items at 18 a 18 c above should be attributed The 290 000 contribution by Mdm Chan 73 As mentioned Mdm Chan s case was that the 290 000 was her contribution of her life savings towards the purchase price of the Property and not a loan In this regard besides relying on her own evidence she pointed to a handwritten note made by SHC prior to the Purchase note 5 which categorised the 250 000 as CASH from MUM ie Mdm Chan and not as a LOAN there is a 40 000 difference between the sum stated in that note and the amount eventually contributed by Mdm Chan because Mdm Chan subsequently found out that she actually had 290 000 in her life savings The relevant parts of that handwritten note read as follows note 6 24 CHANCERY LANE FUNDS CASH 630 000 CPF 250 000 MUM 390 000 BORTHWICK 1 270 000 LOAN 400 000 1 670 000 underlining in original emphasis added in bold and bold italics 74 In our view the appropriate inference to be drawn from this handwritten note which was used for the See family s own reference is that Mr See and SHC were discussing at that time how much they would have to borrow in the form of bank loans in an attempt to minimise the amount of interest to be paid Therefore we are unable to accept Mdm Chan s construction of the handwritten note as it is not supported by its context 75 Mdm Chan however made a valid point about one part of the Judge s reasoning The Judge believed Mr See s account that Mdm Chan had advanced a loan which was repaid in 1986 using the sale proceeds of the Joo Chiat property Mdm Chan s failure to request for repayment over the years was seen by the Judge as supporting the inference that Mr See had indeed repaid the said loan see the Judgment at 8 With respect we find ourselves unable to agree with the Judge Mdm Chan never said that she asked for repayment of the 290 000 which she contributed In fact her case rested on the premise that that sum was not lent to Mr See Her failure to request for repayment was therefore at best equivocal 76 As there is no doubt that the 290 000 initially belonged to Mdm Chan the burden was on Mr See and not Mdm Chan to show that that sum was properly characterised as a loan In this regard Mr See s evidence that he agreed at the 1983 Meeting to take a loan from Mdm Chan was supported only by SHC s evidence of what transpired at that meeting There was no document executed pursuant to the alleged agreement that Mr See would take a loan of 290 000 from Mdm Chan so what existed was a purported oral agreement The only other evidence supporting the characterisation of the 290 000 as a loan was Mr See s testimony that he repaid this loan in 1986 out of the proceeds of sale of the Joo Chiat property SHC supported this story in fact it was SHC who claimed that he issued the cheque from TMPL for Mr See to sign and repay Mdm Chan Yet neither a copy of the said cheque nor the corresponding cheque stub was produced in evidence Nor did Mr See produce any evidence from TMPL s records to show that TMPL had indeed issued such a cheque to Mdm Chan Given that the Joo Chiat property was sold for 265 000 it seems odd that no record was kept of the issuance of a cheque for such a large sum In this regard we note that Mdm Chan said in cross examination that she had been repaid the 290 000 note 7 However for the reasons stated above at 63 we would be hesitant to take Mdm Chan s evidence at face value 77 Given that there was simply no documentary evidence whatsoever that the 290 000 from Mdm Chan was a loan or that it had been repaid much came down to the self serving statements of Mr See and SHC In view of that we respectfully disagree with the Judge s conclusion that the 290 000 was properly characterised as a loan On the contrary we find that the 290 000 should properly be attributed to Mdm Chan as her contribution to the purchase price of the Property The TMPL Overdraft 78 Mdm Chan s case on the TMPL Overdraft of 400 000 was twofold On the one hand she argued that the whole of that overdraft should be attributed to her on the sole account of her having signed a guarantee for the overdraft note 8 In the alternative Mdm Chan pointed out that Mr See had conceded in cross examination that there was an agreed arrangement between them whereby she was to receive about 65 of what he received from SEPL and TMPL except for dividends and profit She asserted that she allowed her future income from SEPL and TMPL to be applied towards the repayment of the TMPL Overdraft and thus part of that overdraft should be attributed to her as her contribution to the purchase price of the Property note 9 79 SHC testified that the use of the 400 000 from the TMPL Overdraft was purely fortuitous as the plan was for TMPL to sell the Borthwick property and use its sale proceeds to partially fund the Purchase However as the completion date of the Purchase was one month before the completion date of the sale of the Borthwick property the lack of synchronisation necessitated drawing down from the TMPL Overdraft as a form of bridging finance SHC further testified that the TMPL Overdraft was repaid in November 1983 following the completion of the sale of the Borthwick property This date was confirmed by SHC s handwritten notes and was also accepted by Mdm Chan note 10 80 It was not disputed that at the material time Mr See owned all but one of the 50 002 shares in TMPL On that basis the Judge treated the use of the sale proceeds of the Borthwick property as Mr See s direct contribution to the purchase price of the Property Oddly despite Mdm Chan s contentions above she did not challenge this finding We therefore see no reason to interfere with the Judge s finding on this point and it necessarily disposes of both of Mdm Chan s arguments on the TMPL Overdraft Accordingly we are in agreement with the Judge that that 400 000 overdraft should be attributed to Mr See The HSBC Term Loan 81 It is not disputed that the HSBC Term Loan of 400 000 was granted to Mdm Chan and not Mr See A letter from HSBC tendered in evidence shows that Mdm Chan executed a first registered mortgage for 1 4m over the Property to secure the payment obligations under the HSBC Term Loan as well as her guarantees of up to 1m in relation to an overdraft facility for SEPL and the TMPL Overdraft Neither Mr See nor SHC were named as guarantors in HSBC s letter and they did not claim to be 82 Subject to what we have discussed briefly at 53 57 above the HSBC Term Loan would be attributed to Mr See if he can establish that a he repaid this loan and b he made repayment pursuant to an agreement which he had with Mdm Chan at the time the mortgage was taken out see Lau Siew Kim at 116 Who repaid the HSBC Term Loan 83 SHC claimed that he issued cheques quarterly from SEPL and TMPL to Mr See for him to repay the HSBC Term Loan There was no documentary evidence such as cheque stubs to support this Notwithstanding this Mdm Chan did not appear to deny that Mr See made those repayments In any event the Judge noted that there was no credible evidence that Mdm Chan had contributed to the repayment of this loan Again before this court Mdm Chan asserted that she allowed her future income under her agreed arrangement with Mr See see 78 above to be applied towards the repayment of the HSBC Term Loan which was in her name However she stopped short of claiming that Mr See agreed that he would use the sums representing her future income to repay the loan and in any event she had no documentary evidence to support such a contention In the premises we see no reason to disturb the Judge s finding that it was Mr See who repaid the HSBC Term Loan Was there sufficient evidence of a prior agreement that Mr See would repay the HSBC Term Loan 84 SHC s evidence was that at the 1983 Meeting it was agreed that Mdm Chan need not worry about repaying the HSBC Term Loan even though it was in her name as Mr See would take care of that There was no documentary evidence of this alleged agreement Hence there was only Mdm Chan s evidence that she could not recall exactly what was agreed at the 1983 Meeting against the evidence of Mr See and SHC both of whom said that it was with Mdm Chan s agreement that Mr See took on the obligation of repaying the HSBC Term Loan 85 The Judge was of the view that Mdm Chan did not give a cogent reason as to why the parties would have reasonably accepted that she had the means to repay the HSBC Term Loan By 1983 she had been a housewife for at least 25 years and there was no evidence of her actual financial position The Judge concluded that it was implausible that the parties would have agreed that Mdm Chan who was dependent on the household income which Mr See gave her would be responsible for discharging the HSBC Term Loan We agree with the inference drawn by the Judge It was inconceivable that Mdm Chan a homemaker who had just contributed her entire life savings towards the purchase price of the Property would have undertaken the risk of being personally exposed to HSBC without at least some form of tacit assurance from Mr See that he would be responsible for paying off the HSBC Term Loan 86 In any event even if we were not prepared to find the existence of a prior arrangement that Mr See would pay off the HSBC Term Loan given that Mr See repaid the whole of that loan by himself we would be willing to consider the remedy of equitable accounting to adjust Mr See s and Mdm Chan s respective shares of the beneficial interest in the Property so as to attribute the 400 000 from the HSBC Term Loan to Mr See see our discussion above at 53 57 87 On that basis we are of the view that the 400 000 from the HSBC Term Loan was properly attributed to Mr See Our conclusion on Issue 1 88 In view of the foregoing analysis we find that Mdm Chan contributed a total of 290 000 and Mr See a total of 1 541 758 90 to the 1 831 758 90 purchase price of the Property The starting point therefore is the presumption that Mdm Chan holds 84 17 of the beneficial interest in the Property on a resulting trust for Mr See Issue 2 Did Mr See intend to benefit Mdm Chan by his contributions to the purchase price of the Property 89 Given the existence of the presumption of the aforesaid resulting trust we move on to consider whether Mr See intended to benefit Mdm Chan by his contributions to the purchase price of the Property This depends on what was actually said at the 1983 Meeting details of which can be found at 14 16 above To recapitulate Mdm Chan claimed that she wanted the Property to be put in her name because she was feeling insecure due to Mr See s infidelity It was therefore inherently probable that Mr See bought the Property in her name to appease her and to assuage his guilt 90 In our view the main obstacle in Mdm Chan s case was the existence of the POA see 17 above According to Mr See at the 1983 Meeting an agreement was reached between him and Mdm Chan that the Property would be put in her name so that she could brag about it to her friends on condition that she acknowledged him as the true owner of the Property in an appropriate legal document Mr See claimed that the POA which was subsequently executed was the embodiment of that acknowledgment SHC confirmed that that was indeed how the POA came about The Judge agreed with Mr See He said that the POA when viewed in the light of the circumstances at the time of the Purchase supported Mr See s account 91 On appeal Mdm Chan challenged Mr See s account of the events surrounding the execution of the POA on the basis that the POA could not be considered an appropriate legal document She argued that a The POA was wholly ineffective to show that the designated attorney was the true beneficial owner of the Property A declaration of trust should have been but was not used b That a declaration of trust should have been but was not used was even more glaring given that Mr See had executed a written declaration of trust not too long before the Purchase see 9 above c The only reason why a power of attorney and not a declaration of trust was executed was because Mr See wanted at that time only to retain control over the Property and not to claim beneficial ownership over it as well This could be seen from the fact that SHC was also named as one of the attorneys in the POA there was no reason to do so if Mr See intended to retain beneficial ownership of the Property himself We appreciate the force of these arguments and agree with Mdm Chan that the POA is ineffective in showing the existence of any agreement between the parties that Mr See was to be the true beneficial owner of the whole of the Property 92 However Mdm Chan s submissions still do not explain why if the Property was truly a gift to her she willingly allowed Mr See to exercise control over the Property Mdm Chan claimed that the POA was not explained or translated to her in Cantonese and she therefore never understood the effect of the POA In the proceedings below the Judge took the view that Mdm Chan s signature on the POA was prima facie evidence that she had acceded to its contents moreover the court must assume that the lawyer drafting the POA would have explained its effect to Mdm Chan There being no evidence to the contrary apart from Mdm Chan s words we respectfully agree with the Judge that Mdm Chan did not discharge the burden which lay on her of proving that she did not understand the effect of the POA We also agree with the Judge that Mdm Chan s story was unrealistic and incredible there was no convincing reason why Mr See a man nearing retirement who had just begun an affair would make the biggest purchase of his life only to gift it to someone who was his wife in name only We therefore find that Mr See had no intention to benefit Mdm Chan by his contributions to the purchase price of the Property 93 For the sake of completeness we would add that any presumption of advancement in this case which would have been weak in view of the state of the relationship between the parties at the time of the Purchase would have been negated by the circumstances discussed above and thus it is unnecessary for us to deal with Issue 3 at 58 c above The common intention constructive trust a sounder solution 94 Our analysis at 58 93 above is sufficient to dispose of this appeal We now turn to address the Judge s comment at 19 of the Judgment that the common intention constructive trust analysis is a sounder solution than the resulting trust analysis In coming to this view the Judge referred to two recent English decisions Stack and Jones v Kernott 2012 1 AC 776 Jones Overview of the common intention constructive trust 95 The foundational authorities in English law on the common intention constructive trust are Pettitt v Pettitt 1970 AC 777 Pettitt and Gissing v Gissing 1971 AC 886 Gissing The common intention constructive trust was developed to mitigate the arithmetic rigour of the resulting trust when ascertaining property rights upon the breakdown of a relationship in the domestic context At the time Pettitt and Gissing were decided the Matrimonial Causes Act 1973 c 18 UK the MCA 1973 UK had not been enacted yet and the English courts lacked a flexible discretionary power to depart from a strict application of hard nosed property law when dividing matrimonial assets The common intention constructive trust still remains relevant today in England in cases which fall outside the scope of matrimonial legislation 96 Prior to Stack and Jones the leading case on the essential elements of a claim by one party for a common intention constructive trust over a property held in the sole name of another party was Lloyds Bank Plc v Rosset and Another 1991 1 AC 107 Rosset In Rosset a married couple purchased a property in the husband s sole name with the aid of a mortgage and cash from the husband s family trust The wife made no financial contribution to the acquisition of the property or the cost of renovating it but assisted in the building works The mortgagee bank subsequently brought possession proceedings and the question was whether the wife had acquired any interest in the property that had priority over the mortgagee s claim The House of Lords held that the wife had failed to establish any interest in the property The following passage in the speech of Lord Bridge of Harwich in Rosset at 132 133 encapsulates his view as to when a common intention constructive trust arises The first and fundamental question is whether independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs there has at any time prior to acquisition or exceptionally at some later date been any agreement arrangement or understanding reached between them that the property is to be shared beneficially The finding of an agreement or arrangement to share in this sense can only be based on evidence of express discussions between the partners however imperfectly remembered and however imprecise their terms may have been Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust In this situation direct contributions to the purchase price by the partner who is not the legal owner whether initially or by payment of mortgage instalments will readily satisfy the inference necessary to the creation of a constructive trust But it is at least extremely doubtful whether anything less will do 97 Lord Bridge s dicta in Rosset was approved and applied by this court in Tan Thiam Loke v Woon Swee Kheng Christina 1991 2 SLR R 595 Tan Thiam Loke at 18 Under the approach in Rosset X acquires a beneficial interest in a property by way of a common intention constructive trust when he relies to his detriment on a common intention that the beneficial interest in the property is to be shared Such a common intention may a arise from an express discussion or b take the form of an inferred common intention as evidenced by direct financial contributions by X to the purchase price of the property or c in exceptional situations arise from other conduct by X which gives rise to an implied common intention Rosset however left it unclear where the resulting trust fit into the analysis For example since it appeared possible from Rosset that direct financial contributions to the purchase price of a property could lead to the acquisition of a beneficial interest in the property both under a resulting trust and a common intention constructive trust it was uncertain whether the applicable principles for quantifying the parties respective shares of the beneficial interest in the two situations would be the same or different 98 There appears to have been a dearth of reported cases on common intention constructive trusts in Singapore ever since the decision in Tan Thiam Loke One reason could be the perceived restrictive nature of this remedy following Rosset Whatever the reasons the court is generally constrained by the manner in which counsel decide to present their clients cases For example in Lau Siew Kim both the appellant and the respondents were content to rely on the law of resulting trusts to resolve their dispute Similarly in this case notwithstanding the Judge s references to Stack and Jones both Mr See and Mdm Chan perhaps for reasons of economy declined to take up his invitation to consider the applicability of the common intention constructive trust and the appeal before us was argued purely on the basis of resulting trust principles Nevertheless we note that there have been cases of property disputes as defined at 3 above where the parties advanced their claims on the alternative bases of a a resulting trust b a common intention constructive trust and c proprietary estoppel see for example the recent case of Quek Hung Heong v Tan Bee Hoon executrix for estate of Quek Cher Choi deceased and others and another suit 2014 SGHC 17 Quek Hung Hong 99 We acknowledge that the interaction between the resulting trust and the common intention constructive trust and dare we say proprietary estoppel is complex and confusing and has given rise to much controversy see for example the observations of Vinodh Coomaraswamy J in Quek Hung Hong at 116 and those of Chadwick LJ in Oxley v Hiscock 2005 Fam 211 at 71 Further we are mindful of the importance of identifying the correct default legal regime to apply to property disputes especially in the domestic context In this regard we agree with what A J Cloherty and D M Fox said in their article Proving a trust of a shared home 2007 CLJ 517 at p 518 Identifying the applicable regime is obviously important if the parties separate it determines what share if any each party has in the equity in the house Once identified it is equally important to know the starting point for that regime s application to a particular case In principle it should give a structure to the parties negotiations and in the heat of post separation animosity help to distinguish relevant from irrelevant evidence Ideally a clear view of that starting point should prevent litigation which is often paid for out of the shrinking sale proceeds of the parties former home 100 It is thus hoped that the following discussion on the common intention constructive trust will provide some clarity for lawyers when advising their clients on this difficult area of the law The English position 101 The House of Lords case of Stack and the UK Supreme Court case of Jones firmly establish that under English law the common intention constructive trust is the more appropriate tool for quantifying each party s share of the beneficial interest in domestic property disputes as defined at 3 above where the property concerned is a family home purchased in the joint names of a cohabiting couple Both cases are difficult to reconcile with Pettitt Gissing and Rosset although none of the latter three cases has been overruled The decision in Stack 102 The salient facts of Stack are as follows S and D were in a 19 year relationship They were not married and hence fell outside the scope of the MCA 1973 UK A few years into their relationship D bought a house in her sole name where the parties lived together and raised four children The 30 000 purchase price of the house was financed by a a 8 000 down payment from D s building society account and b a 22 000 mortgage in D s name which D repaid on her own It was unclear whether S made any contributions to D s building society account Extensive improvements were made to the house Although S was responsible for most of these renovations it was difficult to put a figure on how much they affected the final sale value of the house The house was sold some years later and D received a net amount of about 66 000 from the sale The parties subsequently bought another property in their joint names the joint names property for 190 000 Over 65 of the purchase price of that property ie 129 000 came from funds in D s building society account which at that time included the 66 000 from the sale of the previous house The balance of the purchase price came from a 65 000 loan secured by a mortgage in the joint names of D and S and two endowment policies one in the parties joint names and the other in D s sole name The interest on the mortgage and the premium on the endowment policy in the parties joint names eventually totalling about 34 000 were paid by S S contributed 27 000 and D over 38 000 towards repayment of the mortgage loan The parties did not execute a declaration of trust over the joint names property It was undisputed that both parties had a beneficial interest in that property the issue in Stack therefore was simply the quantification of the parties respective shares of the beneficial interest The judge at first instance held that the beneficial interest in the joint names property should be split 50 50 between D and S D appealed The English Court of Appeal disagreed with the judge at first instance and held that the beneficial interest should be split 65 35 in favour of D S then appealed The House of Lords upheld the English Court of Appeal s decision but with Lord Neuberger adopting a different line of reasoning from that adopted by the other law lords viz Lord Hoffmann Lord Hope of Craighead Lord Walker of Gestingthorpe and Baroness Hale of Richmond collectively the majority in Stack 1 The approach of the majority in Stack 103 In what appears to be a recasting of the law as traditionally understood the majority in Stack held that the resulting trust analysis ought not generally to play any role in the resolution of domestic property disputes For instance Lord Walker held at 31 of Stack In a case about beneficial ownership of a matrimonial or quasi matrimonial home whether registered in the names of one or two legal owners the resulting trust should not in my opinion operate as a legal presumption although it may in an updated form which takes account of all significant contributions direct or indirect in cash or in kind happen to be reflected in the parties common intention 104 Similarly Baroness Hale with whom the other members of the majority in Stack agreed cited with approval at 60 of Stack the following passage from Kevin Gray Susan Francis Gray Elements of Land Law Oxford University Press 4th Ed 2004 Elements of Land Law 4th Ed at para 10 21 In recent decades a new pragmatism has become apparent in the law of trusts English courts have eventually conceded that the classical theory of resulting trusts with its fixation on intentions presumed to have been formulated contemporaneously with the acquisition of title has substantially broken down Simultaneously the balance of emphasis in the law of trusts has transferred from crude factors of money contribution which are pre eminent in the resulting trust towards more subtle factors of intentional bargain which are the foundational premise of the constructive trust T he undoubted consequence is that the doctrine of resulting trust has conceded much of its field of application to the constructive trust which is nowadays fast becoming the primary phenomenon in the area of implied trusts 105 Baroness Hale continued likewise at 60 of Stack There is no need for me to rehearse all the developments in the case law since Pettitt v Pettitt 1970 AC 777 and Gissing v Gissing 1971 AC 886 The law has indeed moved on in response to changing social and economic conditions The search is to ascertain the parties shared intentions actual inferred or imputed with respect to the property in the light of their whole course of conduct in relation to it emphasis added in italics and bold italics 106 The majority in Stack held that in the domestic context if the property concerned was held in joint names the starting point was the presumption that the parties were also joint tenants in equity regardless of whether or not they had made equal contributions to the purchase price of the property cf the resulting trust approach where there is a presumption that the beneficial interest in the property is held in proportion to the contributions made by each party to the purchase price regardless of how the property is held in law The burden the majority in Stack held was on the party seeking to displace the equal division of the beneficial interest to show that the parties had a different common intention and this was not a task to be lightly embarked upon see Stack at 68 This was evidentially the case because the court was dealing with the allocation of property rights an area where certainty in the law was a principal consideration In fact Baroness Hale went so far as to say at 69 of Stack At the end of the day cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual emphasis added 107 In the same paragraph Baroness Hale attempted to give a non exhaustive list of factors which might shed light on the parties intentions In law context is everything and the domestic context is very different from the commercial world Each case will turn on its own facts Many more factors than financial contributions may be relevant to divining the parties true intentions These include any advice or discussions at the time of the transfer which cast light upon their intentions then the reasons why the home was acquired in their joint names the reasons why if it be the case the survivor was authorised to give a receipt for the capital moneys the purpose for which the home was acquired the nature of the parties relationship whether they had children for whom they both had responsibility to provide a home how the purchase was financed both initially and subsequently how the parties arranged their finances whether separately or together or a bit of both how they discharged the outgoings on the property and their other household expenses When a couple are joint owners of the home and jointly liable for the mortgage the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home The arithmetical calculation of how much was paid by each

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  • Thahir Kartika Ratna v PT Pertambangan Minyak dan Gas Bumi Negara (Pertamina)[1994] 3 SLR(R) 312; [1994] SGCA 105
    deposits Pertamina on the other hand disputed this and posited a single essential issue whether Pertamina were entitled to the Deutsch mark deposits under either Singapore or Indonesian law on any of the grounds stated in the amended first issue As we see it the appellant and Pertamina are competing claimants to the ACU deposits As the amended first issue recognises the essence of it is entitlement to the moneys Hence even if what Pertamina maintain is the essential issue their entitlement to the deposits must still be founded on some title or proprietary interest they have in the deposits It is not enough for Pertamina to show that they have a personal claim against Gen Thahir and or the appellant for recovery of the bribes They must show that on one or more of the grounds stated in the amended first issue they have some title or proprietary interest in the deposit Counsel for the appellant is therefore right when he contended that Pertamina must establish a proprietary claim in order to succeed on the amended first issue 15 In Tay Yok Swee v United Overseas Bank Ltd 1994 2 SLR R 36 this court held that a party s claim adverse to the claim of another party to a fund in respect of which an interpleader relief is sought must be one relating specifically to the fund and must be a proprietary claim to the fund and not a personal claim against the other party for an unliquidated amount or for an account In holding that the interpleader relief was not available to the applicant who took out the interpleader summons this court concluded thus at 25 In our opinion on the material before us the second and third respondents have no claim on the remaining one third surplus that surplus belongs to the appellant They may have a claim against the appellant in contract and for an account that is a personal claim and has yet to be determined Such a claim is not adverse to the appellant s claim to the fund 16 Accordingly in this case if the claim of Pertamina is only a personal claim against Gen Thahir and the appellant as opposed to a proprietary claim to the deposits such claim does not confer on Pertamina any entitlement interest or title in the moneys such as to enable them to succeed in the interpleader proceedings In our judgment in order to succeed Pertamina must show that they have a proprietary claim to the moneys under the system of law that governs the claim Second issue whether deposits were proceeds of bribes 17 This issue raises several questions of fact The first is whether Pertamina had established that all or substantially all of the 19 ACU deposits emanated from or were directly linked to their payments to the German contractors under their contracts in relation to the Krakatau steel project or some other projects of Pertamina This in turn involves consideration of two questions a whether Pertamina did in fact pay to the German contractors the amounts or some of the amounts as they alleged and b whether the 19 ACU deposits denominated in Deutsch marks were proceeds of bribes and or secret commissions which the contractors paid to Gen Thahir in return for the payments made to them by Pertamina Pertamina sought to prove that they had from time to time made payments to Siemens and Klockner pursuant to their contracts or PTKS contracts with them for materials supplied and work done in relation to the Krakatau steel mill and the infrastructures in Cilegon industrial complex and these payments were those as set out in Annexure B that Klockner had paid to Gen Thahir bribes at the rate of 13 of each payment made by Pertamina and similarly Siemens had paid bribes to him but at the rate of 5 of each of Pertamina s payment that Gen Thahir had opened his ACU account with the Singapore branch of the bank and placed to the credit of his account 19 deposits 17 denominated in Deutsch marks and two denominated in US dollars and that 11 out of the 19 ACU deposits matched the instalments paid by Pertamina to the German contractors in the sense that each of these deposits represented a precise or substantially precise percentage of the relevant instalment and was paid to the ACU account of Gen Thahir soon after the payment of the instalment to the contractors In respect of the eight unmatched deposits this was divided into the six unmatched Deutsch mark deposits and the two US dollar deposits the latter two deposits are not relevant and will not be dealt with here as it has been held by the learned judge that Pertamina had no claim to them Voluminous documentary and viva voce evidence was adduced by Pertamina In particular there was the evidence given by one Mr Nur Usman who was treasurer of the foreign currency department of Pertamina responsible for payments to foreign contractors including Siemens and Klockner and also the evidence of several officers in the accounts department of Pertamina Having considered their evidence and the documents produced with regard to payments made to Siemens and Klockner the learned judge said at 96 Having considered their oral evidence I am satisfied that in truth and in fact Pertamina had paid Siemens and Klockner sums of money in respect of the Krakatau steel project and the infrastructure facilities 18 The learned judge proceeded further and dealt with the evidence relating specifically to the 11 instalments paid to the German contractors as set out in annexure B and examined the documents produced evidencing such payments see 97 of his judgment He then came to the following conclusion at 98 In the circumstances my finding is that Pertamina by the oral evidence of Mr Nur Usman and the other officers whom I have named have proved their payments to Siemens and Klockner which are set out in Annexure B Further the evidence of Mr Balasubramaniam and Mr Muthu Palaniappan have also proved Pertamina s payments through BNP In the course of the trial I had also allowed and admitted evidence pursuant to s 32 of the Evidence Act Cap 97 These evidence independently satisfied me that Pertamina had made payments to Siemens and Klockner as they allege and as set out in Annexure B 19 The learned judge next turned to another source of evidence led by Pertamina to prove their payments to Siemens and Klockner that was the evidence of one Mr Ronald Grund an accountant who had worked in the audit department of Arthur Yong Co the accountants of Pertamina Grund was engaged by Pertamina to examine all the relevant accounting and other records of Pertamina and see if there was any relationship between Pertamina s payments to the contractors and Gen Thahir s ACU deposits He collected and collated all the accounting and other records and documents of Pertamina showing payments made to the contractors and related these payments to the ACU deposits and it was his evidence that there were linkages between the 11 matched ACU deposits with the instalment payments made to the contractors The learned judge accepted his evidence He said at 100 It was Mr Grund who first discovered the linkages between Pertamina s payments and General Thahir s ACU deposits By a sophisticated computerised programme he was able to pair off Pertamina s payments and the ACU deposits The percentages of 13 for the Klockner matches 5 for the Siemens matches and the 10 for Match 11 were established by his investigative efforts His entire methodology and the validity of his findings were confirmed by a piece of evidence which emerged in the early stages of this trial I refer to the lack of any documentary evidence bearing on Pertamina s payments so far as the 10 Match 11 is concerned As has been noted earlier documents which emerged from discovery during the trial confirmed that Pertamina had paid Siemens for the power station and the airport projects in Batam Island Indonesia Having reviewed his evidence I was satisfied that his evidence proved two important issues of fact in this case Firstly his evidence as a whole proved that Pertamina had paid Siemens and Klockner the sums set out in Annexure B Secondly his evidence also proved the linkages between Pertamina s payments and General Thahir s Deutsch marks ACU deposits 20 In addition to all this evidence there was the appellant s own affidavit affirmed on 1 February 1980 and filed in the proceedings below in which she made no attempt to deny receipt by her husband of the moneys in the said deposits Her position was that Pertamina were aware of it and that there was nothing surreptitious about her husband s activities She said inter alia the following My late husband s only position with Pertamina was that of assistant to the president director Lt Gen Dr Ibnu Sutowo As head of Pertamina Gen Sutowo was second only to the President of Indonesia and he was Pertamina My late husband never acted in any manner concerning his role in Pertamina either directly or indirectly without the knowledge permission and consent of the president director In particular the president director was fully aware of my late husband s financial affairs and of the fact that he received and held the moneys in the said deposits There was never any suggestion that any part of these moneys belonged to or was intended for the benefit of Pertamina or that he must account therefor to Pertamina It is quite wrong therefore to suggest that my late husband received or held any funds in secret 21 Lastly there was also the evidence of General Moerdani Gen Moerdani Minister of Defence and Security of the Republic of Indonesia He was instructed by the President of Indonesia to recover the bribes taken by Gen Thahir Accordingly he established contact with the appellant and had several meetings with her in Geneva Switzerland In summary his testimony was to the effect that the appellant had told him at a meeting in Geneva sometime before 19 or 20 September 1977 that the moneys at the Singapore branch of the bank came from the Krakatau Steel project She further told him that the account at the bank was some sort of collecting point for moneys that had been paid by Pertamina to Klockner and Siemens She specifically mentioned that DM15m and DM35m came from Siemens and Klockner respectively and that payments were made on every occasion when Pertamina made a payment to its contractors and that it amounted to 21 at a particular time The appellant also told Gen Moerdani that this account would be divided into three equal parts the first to Gen Sutowo the second to Mr Junus Rani and the third to Gen Thahir She further disclosed that there were two other accounts at the Singapore branches of the Chase Manhattan Bank and the Hong Kong Bank but the amounts in these accounts were relatively small and that they were to cover daily expenses They amounted to US 1 2m Gen Moerdani was severely cross examined by counsel for the appellant and at the end of the day his testimony was accepted by the learned judge who said at 86 At the end of the day I was left in no doubt that he was clearly and unquestionably undergirded by the armour of truth I have no hesitation in accepting his evidence as the whole truth I therefore find as a fact that Mrs Kartika Thahir did admit to General Moerdani that the moneys in Sumitomo Bank came from Siemens as to DM15m and Klockner as to DM35m 22 It was argued before us on behalf of the appellant that Gen Moerdani s evidence was untrue and or unreliable and or irrelevant But no basis for any such assertion was put forward On the evidence before him the learned judge was justified in accepting his evidence 23 In conclusion the learned judge found that all the 17 ACU Deutsch mark deposits were bribes which Siemens and Klockner had paid Gen Thahir He said at 102 In view of the overwhelming evidence I find that in truth and in fact all 17 ACU deposits denominated in Deutsch marks were bribes which Siemens and Klockner had paid General Thahir I would summarise my reasons as follows I rely on the admissions of Mrs Kartika Thahir which she made to General Moerdani Secondly there is no evidence that General Thahir or Mrs Kartika Thahir had any fortune anywhere near the sums we are looking at General Thahir s tax returns do not begin to explain any legitimate source or sources of the ACU DM deposits Thirdly the 11 matched deposits their percentages in relation to Pertamina s payments and the dates of their initial deposits in most part following such payments are all telltale indications of bribes Fourthly I refer to General Thahir s and Mrs Kartika Thahir s misrepresentations to Mr Hotta and Mr Yamaura of the Sumitomo Bank I am convinced that General Thahir had struck his dishonest deals with the German contractors and to the knowledge of Mrs Kartika Thahir they were making banking arrangements to deposit the bribes in a shroud of secrecy Fifthly I turn to the six unmatched deposits in Deutsch marks I place great reliance on Mrs Kartika Thahir s admissions She confessed to General Moerdani that the DM50m in the bank came from Siemens as to DM15m and Klockner as to DM35m Quite apart from her admissions and some of the foregoing reasons it is not unlikely in this case as Mr Grund had explained that there could be a number of reasons why these six deposits were unmatched emphasis in original 24 The appellant took issue with the findings of the learned judge and contended that the payments made by Pertamina to the German contractors were not proven that there was no sufficient evidence to justify the conclusions on the 11 matches that as far the six unmatched Deutsch mark deposits were concerned Pertamina had not adduced any admissible evidence to prove any payments which Pertamina might have made to Siemens or Klockner from or out of which those parties might have paid commissions to Gen Thahir We find no merit in these submissions The learned judge s findings of fact were arrived at after a detailed examination of the evidence before him The findings were reinforced by the appellant s failure to explain the source or sources of the deposits and her admissions to Gen Moerdani in Geneva In our opinion these findings are unassailable 25 It was submitted that the learned judge appeared to suggest that there was a duty on the part of the appellant to explain the source of the ACU deposits and in the absence of such explanation he drew inferences adverse to the appellant by so doing the learned judge reversed the burden of proof which should have been on Pertamina This contention is unfounded The learned judge was fully aware as to where the burden of proof lay he discussed this at some length in his judgment see 88 Pertamina had satisfied him that they had made out their case He then looked to the appellant for some explanations as he was entitled to do but no explanation was forthcoming There was ample evidence adduced before the learned judge which showed that Pertamina had paid to the German contractors the instalments detailed in annexure B that over a period of about two and a half years 17 ACU deposits denominated in Deutsch marks had been made to the credit of the ACU account of Gen Thahir with the Singapore branch of the bank that of these deposits 11 of them matched the instalments in annexure B and that at the date of Gen Thahir s death the aggregate amount of these 17 deposits was DM53 972 374 12 Taking a common sense approach any reasonable and sensible tribunal would look to the appellant or those representing the estate of Gen Thahir for an explanation for or information of the source or sources of such enormous wealth which came to Gen Thahir in such a short space of time No explanation or information whatsoever was forthcoming either from the appellant or anyone on her behalf or on behalf of Gen Thahir 26 For the reasons we have discussed we are in entire agreement with the learned judge s finding that all the 17 ACU deposits denominated in Deutsch marks were bribes which Siemens and Klockner had paid Gen Thahir On the evidence before the learned judge we do not see how he could have arrived at any other conclusion 27 The next question is whether the appellant was privy to Gen Thahir s receipt of the bribes The learned judge found that she was hand in glove with Gen Thahir in his dishonest schemes to receive the bribes and that she participated in and or was privy to the receipt by Gen Thahir of the bribes which funded the 17 ACU deposits denominated in Deutsch marks This finding was challenged before us and it was submitted on behalf of the appellant that the learned judge was wrong to infer her knowledge and participation in her husband s schemes to receive the bribes We are unable to agree There was ample evidence available for such an inference to be drawn There was the evidence that the appellant actively participated with Gen Thahir in opening the accounts and negotiating the precise terms with Mr Shozo Hotta chairman of the Sumitomo Bank Ltd The appellant s own affidavit affirmed on 1 February 1980 to which we have referred is particularly telling as to her knowledge of her husband s activities In addition there were her admissions made to Gen Moerdani in their discussions In the face of all this evidence she had not come forward to give any evidence to the contrary Third issue which is the governing law 28 This is a conflict of laws issue and the question is which of the two systems of law Singapore law or Indonesian law governs the determination of the claim of Pertamina Before the learned judge and also before us parties have in their arguments dealt with the claim as follows a claim at common law and b claim in equity The learned judge has considered this issue on that basis As a matter of convenience we shall also consider this issue along that line first with reference to the claim at common law and secondly the claim in equity though it seems to us unnecessary to categorise common law claims and equitable claims in an issue involving conflict of laws for the purpose of determining the relevant substantive law applicable 29 On this issue the arguments before the learned judge as well as before us centred around the following rule stated in Dicey Morris on The Conflict of Laws 12th Ed 1993 at p 1471 Rule 201 1 The obligation to restore the benefit of an enrichment obtained at another person s expense is governed by the proper law of the obligation 2 The proper law of the obligation is semble determined as follows a If the obligation arises in connection with a contract its proper law is the proper law of the contract b If it arises in connection with a transaction concerning an immovable land its proper law is the law of the country where the immovable is situated lex situs c If it arises in any other circumstances its proper law is the law of the country where the enrichment occurs 30 With reference to this rule the learned judge said as follows at 120 I shall now set out what in my view is a proper reading of r 203 of Dicey and Morris Whilst the obligation to restore an unjust benefit may or may not arise in connection with a contract the receipt of bribes in all circumstances will always fall under sub r 2 c The primary concern of parties in such a case is always to obtain recovery of moneys in the place of receipt or the place of enrichment Its law should logically be the proper law of the obligation I am aware that the Dicey and Morris explanation of sub r 2 c of the rule refers to the situation where benefit is conferred upon another person with whom no prior contract exits In the authors contemplations were circumstances where moneys were wrongly credited due to a mistake of fact eg Chase Manhattan 116 supra 31 The appellant s argument is that r 201 2 a is the rule that provides the relevant choice of law in this case and that r 201 2 c only applies in any other circumstances that is in circumstances where the obligation does not arise in connection with a contract and a transaction concerning an immovable The present case was founded on the assertion that Gen Thahir was in breach of some duty as an employee of Pertamina ie in connection with a contract of some kind and therefore the proper law was Indonesian law Counsel for the appellant relied on the following commentary on r 201 2 c in Dicey Morris at 1476 Where money is paid to or a benefit is conferred upon another person with whom no prior contract exists and it is alleged that the money is recoverable eg because of a mistake of fact the enrichment is likely to be most closely connected with the law of the country in which it accrued Thus if A who is resident in England owes money to B but by mistake pays it to X who is resident in France X s enrichment and therefore A s claim for its restitution are likely to be most closely connected with French law In this case the proper law of the obligation is that of the country in which the immediate benefit was received If the payment had been made at the Paris branch of an English bank to be credited to the account of X at the London office of the same bank it is arguable that the proper law of the obligation is English law ie that in this case the law of the country in which the immediate benefit was received is less closely connected with the obligation than the law of the country in which the ultimate enrichment occurred 32 He submitted therefore that r 201 2 c only applied when there was no prior contract This in our opinion is too restricted a reading of the commentary and it detracts from the all other circumstances role of r 201 2 c The above commentary should be read in the context of restitution for moneys paid under a mistake of fact 33 It is important to set out the following passage in Dicey Morris which states the scope of r 201 2 a Although the obligation to restore an unjust benefit does not arise from a contract it may and very frequently does arise in connection with a contract This is the case where a party seeks to recover money paid pursuant to an ineffective contract eg by reason of a total failure of consideration or as a repayment of money paid under an illegal contract or where he claims a quantum meruit for work done or services rendered under a contract which turned out to be void In all these and similar cases it is submitted that the existence and the scope of the obligation to restore the benefit are governed by the law which governs the contract or by what would have been the governing law of the contract if it had been validly concluded emphasis added 34 It is clearly not possible to say that recovery of bribes falls within the category of recovery of money paid pursuant to an ineffective contract or that it constitutes a similar case 35 In this case Pertamina s claim at common law is for money had and received With regard to the basis of this claim it is instructive to refer to T Mahesan s o Thambiah v Malaysia Government Officers Co operative Housing Society Ltd 1979 AC 374 1978 2 All ER 405 in which the Privy Council held that where an agent has been bribed the principal has as against the briber and the agent bribed two distinct remedies a he may recover the bribes as money had and received and b he may recover damages for fraud under which he can recover the amount of actual loss sustained in consequence of his entering into the transaction in respect of which the bribe was given Lord Diplock in delivering the judgment of the Board explained the basis of such claim at 380 By the early years of the 19th century it had become an established principle of equity that an agent who received any secret advantage for himself from the other party to a transaction in which the agent was acting for his principal was bound to account for it to his principal Fawcett v Whitehouse 1829 1 Russ M 132 The remedy was equitable obtainable in the Court of Chancery and there appears to be no reported case at common law for the recovery of a bribe by a principal from his agent before the Judicature Act 1875 This right of the principal to recover the amount of the bribe from the agent does not depend upon his having incurred any loss as a result of his agent s conduct Reading v A G 1949 2 KB 232 1951 AC 507 But the giving of the bribe was treated in equity as constructive fraud on the part of the giver and where it was given in connection with a contract between the principal and the briber the principal was entitled to rescission of the contract emphasis added 36 Later after referring to the case of Bagnall v Carlton 1877 6 Ch D 371 and The Mayor Aldermen and Burgesses of the Borough of Salford v Lever 1891 1 QB 168 he said at 381 The liability of the briber to the principal for damages for the loss sustained by him in consequence of entering into the contract in respect of which the bribe was given is a rational development from his former right in equity to rescission of the contract The cause of action against the briber was stated by Lord Esher MR and Lopes LJ in Salford Corp v Lever to be fraud and since the agent was necessarily party to the bribery it follows that the tort was a joint tort of briber and agent for which either or both could be sued emphasis added 37 It is clear from the judgment that the basis or origin of the claim lay in the fact that equity regarded the giving of a bribe as a constructive fraud on the part of the giver and as the bribed agent was necessarily a party to the bribery it follows that the receiving of the bribe was equally a constructive fraud on the part of the bribed agent In our opinion the principal s remedies against the briber and the bribed agent have no contractual origin or connection In our opinion the basis of this claim is equity In so far as the bribed agent is concerned in equity it is unconscionable for him to retain the bribe and he is obliged to hand it over to the principal We agree with the trial judge that in this case the obligation to restore the bribes does not arise in connection with the contract and that it falls within r 201 2 c Accordingly in our judgment it is governed by Singapore law 38 We find support for our view in the case of In re Jogia a bankrupt ex parte Trustee of the Property of the Bankrupt v D Pennelier Co Ltd 1988 1 WLR 484 1988 2 All ER 328 There an action for money had and received was brought by the trustee in bankruptcy to recover inter alia moneys paid out by the bankrupt s agent to the defendant a French company after the date of the receiving order The main question was whether leave to serve the writ out of jurisdiction under O 11 of the English RSC should be granted The arguments before the court raised inter alia the question whether such a claim fell within what is now the English RSC O 11 r 1 1 d on the basis that the quasi contractual obligation of the French company to restore the payments to the trustee fell to be treated as made in England and therefore governed by English law Sir Nicolas Browne Wilkinson V C did not regard such obligation as made or arising in England notwithstanding the fact that payment in that case was made pursuant to a contract between the bankrupt and the French company He held that r 201 2 c in Dicey Morris was sound in principle and applied it He said at 495 As at present advised I am of the view that quasi contractual obligations of this kind arise from the receipt of the money I find it difficult to see how such obligation can be said to be made or arise in any place other than that of the receipt As to the proper law Dicey Morris The Conflict of Laws 10th Ed 1980 p 921 expresses the view that save in cases where the obligation to repay arises in connection with a contract or an immoveable the proper law of the quasi contract is the law of the country where the enrichment occurs This accords with the American Restatement and seems to me to be sound in principle 39 Both counsel for the appellant and Pertamina addressed this court on two additional cases reported since the decision of Lai Kew Chai J The first is Hongkong and Shanghai Banking Corp Ltd v United Overseas Bank Ltd 1992 1 SLR R 579 There U an employee of the plaintiffs in their branch in Manila transferred moneys belonging to the plaintiffs from their branch in Manila to New York and finally to Singapore U then collected a substantial part of the funds by means of separate demand drafts one of which was for the sum of US 200 000 The draft for US 200 000 was used to establish an ACU account with the defendants The plaintiffs sought a declaration that they were entitled to the moneys in the ACU account with the defendants One of the issues raised was what law governed the plaintiffs claim to the money Michael Hwang JC in determining this question applied r 201 2 c of Dicey Morris on The Conflict of Laws and held that the law of the obligation to restore the benefit of an enrichment is the law of the country where the ultimate enrichment occurred and in that case the ultimate enrichment occurred in Singapore Accordingly the law of Singapore was held to be the governing law Rule 201 2 a however was not considered notwithstanding the existence of a contract of employment between U and the plaintiffs which presumably was governed by the law of the Philippines and consequently the distinction between paras a and c of r 201 2 was not argued In the circumstances the learned judicial commissioner was bound to apply Singapore law For that reason this case is not of much assistance here 40 It is the second case Arab Monetary Fund v Hashim No 9 1993 1 Lloyd s Rep 543 which is of importance and the facts there bore some similarity with those in the case at hand It arose out of a single payment of US 1 8m made by a company BSS to a Swiss bank account in Switzerland The plaintiffs alleged that the payment was a bribe paid to their president Hashim as their agent in connection with the building of their offices in Abu Dhabi The building contract for the offices was made between the plaintiffs and a company BSME Both BSS and BSME were part of the Bernard Sunley group of companies The plaintiffs claimed the amount or damages from BSS and BSME as payers and from Hashim as payee There was no shortage of foreign ie non English connections in the case First the contract of employment between the plaintiffs and their agent Hashim was governed by the law of Abu Dhabi and was performed in Abu Dhabi where the plaintiffs and Hashim for the period of his employment were resident Secondly the building contract for the construction of the offices in Abu Dhabi was governed by the law of Abu Dhabi Thirdly payments were made by the plaintiffs to BSME a Lebanese company registered in Abu Dhabi for the purposes of the building contract and administered locally in the Gulf from Dubai Fourthly although the agreement between Hashim and the Bernard Sunley group to pay the bribe was made in London it resulted in the US dollar payment being made by BSS in London to a Swiss bank account for Hashim in other words the place of receipt of the fund was Switzerland 41 The plaintiffs argued that the claims should be governed by English law The claim arose directly or indirectly out of a corrupt agreement between the contractors and the plaintiffs agents and the agreement was made in England This and other factors led to the conclusion that English law should govern the claims The defendants on the other hand contended to the effect that the law of Abu Dhabi governed all the claims Hashim was employed in Abu Dhabi and their relationship was governed by the law of Abu Dhabi The building was built in Abu Dhabi and the building contract was governed by the law of Abu Dhabi Evans J after having referred to these rival contentions then considered r 201 2 of Dicey Morris on The Conflict of Laws and held that the law of Abu Dhabi governed the claims 42 It seems to us clear that from the facts and arguments in that case there emerged three choices before Evans J the law of Switzerland which was the place of receipt of the bribe the law of England as strongly contended by the plaintiffs and lastly the law of Abu Dhabi which was clearly the proper law of contract The learned judge could not hold that the law of Switzerland should govern the claims as Switzerland was at best a temporary staging post for the money and was never its journey s end and from there the money was disbursed to many international destinations He said at 565 566 T he place of enrichment described in sub r 2 c makes obvious sense when the defendant to a restitutionary claim has received a sum of money in a foreign country where either he is resident or for some other reason he receives the benefit of the enrichment there But Dr Hashim had no connection with Switzerland apart from his interest in the JOJ bank account and the money paid into that account was dispersed to a number of other jurisdictions presumably on his instructions and for his enjoyment there Switzerland was at best a temporary staging post for the money and never its journey s end A substantial part of it was used to purchase the English property which Dr Hashim intended to buy and has since made his home None or no significant amount went to Abu Dhabi 43 Nor was it possible for Evans J to hold that English law should govern the claims as contended by the plaintiffs as England

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  • Ho Kon Kim v Lim Gek Kim Betsy and others and another appeal[2001] 3 SLR(R) 220; [2001] SGCA 62
    to her free of any payment If the development as contemplated had been successful Mdm Ho would at the end of the day have re transferred to her a subdivided lot with a detached house built on it free of any payment and the developer would retain or sell to third parties the other two subdivided lots with similar houses built on them respectively Putting it in another way if subdivision approval of the property into three subdivided lots had been obtained and separate document of title to each lot had been issued the contemplated sale would be an out and out sale of two of the subdivided lots at a price comprising a a certain sum in cash and b the construction of a house on the unsold subdivided lot retained by Mdm Ho As this was not the case the property could not be dealt with in that way hence the parties proceeded by way of an agreement with a view to giving effect to what the parties then contemplated On that basis rightly or wrongly the agreement was drawn up and the terms were agreed to It was in the form of an option which was exercised by Ms Lim We do not find it necessary for our purpose to pass any judgment on the merits of the sale agreement We are only concerned with the construction of the sale agreement as agreed to by the parties The subject of the sale 24 We now turn to the terms of the sale agreement The subject of the sale was expressed to be the whole of the property and that was also expressed to be so in the transfer which was registered and on the register of title Ms Lim is the sole registered proprietor of the entire property The consideration for the sale as expressed in the agreement had two components a the sum of 4 2m and b the construction of a house estimated to cost about 700 000 on the subdivided lot of the property which Mdm Ho had selected and agreed to by Ms Lim namely the lot marked as plot 3 which was to be re transferred to Mdm Ho free of any payment In so far as the first component is concerned it had been paid and nothing in the point arises The second component is provided for in special conditions 18 a and 18 b the full terms of which have been set out in 9 above Under special condition 18 a Ms Lim agreed to deliver to Mdm Ho a completed detached bungalow unit and to allow Mdm Ho to choose one of the three units The second part of this condition had been satisfied in that Mdm Ho had chosen the unit namely plot 3 Special condition 18 b was inserted as required by OCBC and was intended to limit expressly the area of the subdivided lot to be re transferred to Mdm Ho such subdivided lot not to exceed 5 030sq ft which is approximately one third of the area of the land There was certainly an obligation on the part of Ms Lim to build a house on the subdivided lot marked as plot 3 lot estimated to cost about 700 000 and on completion to re transfer that lot to Mdm Ho free from encumbrances and without any payment from Mdm Ho The end result is that no amount will be paid by Mdm Ho for this subdivided lot The question is whether any amount was paid by Ms Lim for this particular lot in the purchase of the property under the sale agreement Plainly not as a matter of simple deduction Obviously the price of 4 2m as stated in the sale agreement was calculated on the basis of the area of the land alone and obviously too that price did not on our analysis include a sum payable for the particular lot earmarked for Mdm Ho In so far as any payment is concerned no amount was paid by Ms Lim for that lot upon the purchase of the property by her under the sale agreement and by the same token no amount will be paid by Mdm Ho on the retransfer As this lot was to comprise only an area of 5 030sq ft which is about one third of the area of the land Ms Lim paid only a price representing approximately two thirds of the agreed value of the property 25 As between the parties to the sale agreement a subdivided lot namely plot 3 had been earmarked for Mdm Ho and was intended to be hers There was certainly an obligation on the part of Ms Lim to build a house thereon and on completion to re transfer that lot to Mdm Ho Special condition 19 of the sale agreement gave Mdm Ho the right to lodge a caveat as soon as the private lot was allotted to her unit subject to the consent of the paramount mortgagee The requirement of obtaining such consent did not detract from the right of Mdm Ho to lodge a caveat in respect of the lot selected by and earmarked for her It is also significant that in the facility agreement made between OCBC and Ms Lim a clause was inserted there to provide for the unconditional discharge of Mdm Ho s unit without any payment once the private lot had been allotted Such a clause was intended to protect Mdm Ho s interest in the property notwithstanding the mortgage of the entire property From the transaction as structured in the sale agreement it was intended that Mdm Ho should retain and have a beneficial interest in the plot selected by her namely plot 3 and in our judgment Mdm Ho has a beneficial interest in that plot and Ms Lim holds the beneficial interest of Mdm Ho in trust for Mdm Ho The judge below with respect erred in holding that Mdm Ho had no equitable interest in the property on the ground that she had transferred the entire property to Ms Lim who became the registered proprietor thereof Indefeasibility of title of Ms Lim 26 What Ms Lim did at the trial and before us in defence of the claim by Mdm Ho is to set up the absolute character of the transfer of the property to her and her title to the property as the registered proprietor to defeat the equitable interest of Mdm Ho This defence is presumably based on s 46 1 of the Land Titles Act Cap 157 1994 Ed the Act which is to the effect that a proprietor of registered land holds the land free from all encumbrances liens estates and interests whatsoever except such as may be registered or notified in the Land Register On the basis of this section it is submitted on behalf of Ms Lim that as Mdm Ho had not lodged a caveat to protect her equitable interest Ms Lim by virtue of that section holds the property free from that interest We shall consider this section together with s 47 of the Act in a moment For the present purpose it is sufficient to say that the short answer to this argument is that s 46 1 has no application as between Ms Lim and Mdm Ho Section 46 2 of the Act provides Nothing in this section shall be held to prejudice the rights and remedies of any person a b to enforce against a proprietor any contract to which that proprietor was a party c to enforce against a proprietor who is a trustee the provisions of the trust d e Therefore as between Mdm Ho and Ms Lim who were the parties to the agreement it is not open to Ms Lim to say that the title she acquired to the property was held free of that equitable interest of Mdm Ho 27 If any further authority is required in support we need only to quote the following passage of the judgment of Skerrett CJ of the New Zealand Supreme Court in Tataurangi Tairuakena v Mua Carr 1927 NZLR 688 at 702 It was further contended that the registration of the lease under the provisions of the Land Transfer Act confers an indefeasible title upon the respondent Carr I think that this contention is wholly untenable The provisions of the Land Transfer Act as to indefeasibility of title have no reference either to contracts entered into by the registered proprietor himself or to obligations under trusts created by him or arising out of fiduciary relations which spring from his own acts contemporaneously with or subsequent to the registration of his interest This principle appears to be well settled in Australia see Cuthbertson v Swan 11 SALR 102 Groongal Pastoral Co Ltd v Falkiner 35 CLR 157 163 and Barry v Heider 19 CLR 197 This passage was quoted with approval by this court in HSBC Trustee Singapore Ltd v Lycée Francais de Singapour 1996 1 SLR R 451 at 37 Breach of trust by Ms Lim 28 There is no doubt that the sale of the property by Mdm Ho to Ms Lim in terms of the sale agreement was closely linked to the overdraft facility provided by OCBC and secured by the mortgage over the property During their negotiations for the sale and purchase of the property Ms Lim or Mr Wee gave to Mdm Ho a copy of the letter of offer of facility by OCBC and the facility offered was expressly required by OCBC to be used for the construction of the development on the property This was in a way an assurance to Mdm Ho that there would be a source of funds available for the development as contemplated by the parties The sale agreement in draft at that time it was a draft option was shown to OCBC which was fully apprised of the transaction and OCBC required the area of the lot earmarked for Mdm Ho to be limited to 5 030sq ft which is about one third of the area of the property and this was provided for in special condition 18 b of the sale agreement Thus the sale agreement as drafted incorporated the requirement of OCBC OCBC in turn in the facility agreement which was supplemental to the mortgage by cl 15 2 recognised Mdm Ho s interest in the property This provision is of great importance to Mdm Ho and Ms Lim was clearly aware of it It was a stipulation agreed to between her and OCBC and was intended to give some protection to Mdm Ho of her interest in the property notwithstanding the mortgage of the whole property to OCBC 29 It is true that there was nothing in the agreement that prohibited or restrained Ms Lim from switching from OCBC to RHB and obtaining fresh finance from the latter Nor had Ms Lim given an undertaking separately to that effect However what Ms Lim did was more than merely switching banks to obtain finance for the development to be carried out on the property She made use of the property purely for her own purposes she used the property to secure loans and advances made or to be made to her three dollar company for purposes which had no relation to the proposed development of the three houses on the property Mdm Ho has an equitable interest in the property which Ms Lim holds in trust for her Mdm Ho It is implicit in that trust that Ms Lim was to use the property to secure facilities to be used for carrying out the proposed development on the property There is no question that Ms Lim was aware of her obligation to Mdm Ho She surreptitiously switched the banks and deliberately hid from Mdm Ho the fact that she had discharged the OCBC mortgage over the property and remortgaged it to RHB to secure facilities granted or to be granted to Earling This is evident from the fact that as late as July and August 1997 when Mr Wong very belatedly wrote to Ms Leong seeking the consent of OCBC to lodge the caveat not a word was forthcoming from Ms Leong or for that matter from Ms Lim of the change of banks and the facilities then granted and secured by the mortgage on the property The only response from Ms Leong was that she was awaiting her clients instructions Ms Lim s conduct was truly indefensible and there was clearly a want of probity on her part In our judgment Ms Lim committed a breach of trust in relation to Mdm Ho s equitable interest in the property Appeal against RHB 30 The appeal against RHB raises a difficult point of law The facts however are clear In mid April 1997 or thereabouts Ms Lim and Mr Wee sought financing from RHB for their company Earling on the security of the property There was evidence that in their application to the bank for finance Ms Lim and or Mr Wee disclosed the sale agreement made with Mdm Ho Certainly the bank was aware of the proposed development of three detached houses on the property Ms Leong again acted for RHB as well as Ms Lim in the mortgage It is not in dispute that the bank had notice of Mdm Ho s interest in the property and in particular was aware that one of the three subdivided lots was earmarked for Mdm Ho and Ms Lim had an obligation to build a house thereon and to re transfer it to Mdm Ho free of payment Further the bank must have known that plot 3 had been selected by Mdm Ho and that that was the lot earmarked for Mdm Ho which was to be retransferred to her Certainly Ms Leong was fully aware that plot 3 was the particular lot earmarked for Mdm Ho which was to be re transferred to her and acting for RHB she must have informed the bank of that fact After all she had previously acted for OCBC in the mortgage and knew that this information was required by OCBC in connection with the mortgage of the property and in her advice to RHB she must have conveyed this information to the bank 31 In the credit application form of RHB dated 14 April 1997 the following note was made One of the detached houses will be given to the previous owner as part of the deal and in addition the following comment was stated as the background information Mr Wee bought the property at 124 Branksome Road Singapore for S 4 2m with the condition that one of the newly constructed detached house be given to the seller One of the remaining 2 units will be sold to his good friend and a valued customer of Bukit Timah Branch Mr Tan Ang Piow of Sitley Timber Pte Ltd for S 3 5m The other unit will be sold and is expected to fetch at least S 4m Further in the internal memo dated 5 May 1997 and written by Mr Choong Siew Meng the branch manager to Ms Fadlum A Kadir the manager of the legal department the following observation was made 1 OD is not meant for construction loan 2 Note that T L of S 3m is to be repaid upon the issuance of TOP ie one unit will be sold to repay the T L 3 Balance S 2m will therefore be secured by the last unit valued for S 4 2m upon completion Currently there is an offer to buy over the 2nd unit for S 3 9 million 4 Whilst the 3rd unit is to be transferred to the previous land owner free of payment Therefore we do not see the need to impose any condition in view that the borrowing is based on land prices valued for 8m and T L to be repaid upon the issue of TOP Thus in their evaluation of the security RHB valued the property in a sum between 7m and 8m excluding the value of the lot agreed to be re transferred to Mdm Ho 32 Finally in the regulating agreement made between Ms Lim as the mortgagor Earling as the borrower and RHB as the mortgagee which was expressed to be supplemental to the mortgage of the property and was dated the same date as the mortgage ie 9 May 1997 cl 6 of the agreement provided as follows REPAYMENT 1 The Mortgagor and the Borrower hereby jointly and severally covenant to pay to the Bank in full the Term Loan on the expiry of three 3 months from issuance by the relevant authority of the Temporary Occupation Permit for the three 3 units of 2 storey detached houses on the land comprised in the Mortgaged Property or by the 31st day of March 1999 whichever is the earlier 2 In the event that partial discharge of any of the three 3 units of 2 storey detached houses is required all payments received by the Bank from the sale price of the units shall be applied towards repayment of the Term Loan and any of the banking facilities or any moneys owing to the Bank in any manner deemed fit by the Bank subject as follows a A partial discharge of the Legal Mortgage will be given for the first unit upon the Bank s receipt of eight five percent 85 of the sale price which shall have to be sufficient to make full payment of all moneys outstanding under the Term Loan b A partial discharge of the Legal Mortgage will be given free of payment for the second unit provided that the second unit is transferred to the previous land owner or as he may direct in accordance with the agreement between the Mortgagor and the previous land owner c The third unit will remain mortgaged to the Bank to secure the balance of the banking facilities and the Mortgagor and the Borrower shall seek the Bank s prior consent in writing on the sale price prior to selling the third unit A discharge of the third unit will be given upon the Bank s receipt of eight five 85 of the sale price which shall have to be sufficient to make full payment of all the banking facilities then outstanding by the Mortgagor and the Borrower to the Bank under the Mortgage this agreement and the loan Agreement 33 Before we proceed further we should deal with the construction of this clause It provided for a partial discharge of the three units of detached houses intended to be built on the property and was expressed to be subject to the three paragraphs following namely a b and c It is quite clear from the contents of these paragraphs that each paragraph was independent of the others and each applied to a particular situation when it came to discharging the particular unit concerned First para a applied to the unit which was to be sold The bank would discharge the mortgage on this unit upon receipt of 85 of the proceeds of sale of that unit which would be sufficient to pay off the full amount of the term loan As stated in the internal memo of 5 May 1997 referred to in 31 above the term loan of 3m was to be paid from the proceeds of sale of one of two units intended to be sold Next we come to para b That paragraph applied to the second unit ie Mdm Ho s unit and it provided specifically that a discharge of the mortgage over this unit was to be given free of payment and the only condition or term attached to it was this provided that the second unit is to be transferred to the previous landowner ie Mdm Ho or as she may direct in accordance with the sale agreement Lastly para c applied to the third unit which was to remain mortgaged to the bank to secure the balance of the banking facilities and would be discharged only on certain terms and conditions We are therefore unable to accept the contention advanced on behalf of RHB that the discharge of the mortgage of Mdm Ho s unit was subject to the payment of 85 of the proceeds of sale of the first unit or the third unit 34 Returning to cl 6 2 and in particular para b thereof we do not think that it is a term or condition which RHB on their own initiative offered or provided They were advised by Ms Leong and they knew that Mdm Ho had an equitable interest in the property and that interest was an unregistered interest At least Ms Leong acting for them certainly knew this and this information must have been conveyed to them The inference we draw is that Ms Leong must have advised the bank accordingly They could as a mortgagee have taken the mortgage of the property free of any unregistered interest They did not have to acknowledge or recognise such interest But the fact of the matter was that they did Indeed they did more than recognise it 35 There was evidence that cl 6 2 was a term which was specifically negotiated and agreed to between Ms Lim and RHB which reflected their common understanding of Ms Lim s obligations to Mdm Ho under the sale agreement Ms Lim in her affidavit evidence said that by that provision namely cl 6 2 she had taken the necessary precautions to preserve the plaintiff s Mdm Ho s interest in obtaining one 1 bungalow unit free from encumbrances as was Ms Lim s obligations under the agreement She then said This understanding is bolstered by the fact that Sime Bank RHB Bank was always aware of my said obligations to the Plaintiff Sime Bank had clearly informed me that they would respect my said obligations within the Regulating Agreement between Sime Bank and me so that the Plaintiff would receive her bungalow unit free from encumbrances In her evidence in court she said that if cl 6 2 were not inserted in the regulating agreement she would not have taken the loan from RHB There was no finding by the judge below on this point however it seems to us that what she said was substantially the truth We think that the term was specifically negotiated and agreed to between Ms Lim and RHB In that respect Ms Leong as the lawyer acting for both parties must have played her part in advising on the requirement of that clause Her understanding of the purpose of this clause is also significant In her letter to Mr Wong on 23 August 1999 Ms Leong said Sime Bank RHB Bank acknowledges that one unit your client s will be discharged free of payment on condition that the said unit is transferred to your client being the previous land owner or as she may direct in accordance with the agreement between your client and Madam Betsy Lim 36 Therefore in taking the mortgage on the property RHB not only had notice and full knowledge of the equitable interest of Mdm Ho in the property but also acknowledged and recognised her interest In their evaluation of the property as security for the facilities granted to Earling they had discounted the value of her interest and were quite prepared to discharge the mortgage over her lot free of any payment In addition by the regulating agreement they not only acknowledged the interest of Mdm Ho in the lot earmarked for her but also agreed with Ms Lim that the lot would be discharged without any payment In these circumstances the question that arises is whether it is unconscionable for the bank to assert their absolute rights as a mortgagee over the whole of the property and repudiate that interest of Mdm Ho in respect of which they had earlier acknowledged and agreed with Ms Lim and whether a constructive trust should be imposed on RHB in respect of Mdm Ho s interest Land Titles Act 37 If the property is not held under the Act the position is very clear As RHB took the mortgage with the full knowledge of Mdm Ho s interest in the property and also acknowledged her interest their interest as the mortgagee would be subject to the prior interest of Mdm Ho Equity would impose a constructive trust on RHB to protect the interest of Mdm Ho As the property is registered land held under the Act the question is whether such a constructive trust could and should be imposed in the circumstances 38 The main argument advanced on behalf of RHB is that there was no entry in the register of titles of Mdm Ho s interest and therefore they took the property as a mortgagee free of that interest They rely on the absolute character of their title as the registered mortgagee The relevant provisions of the Act which they invoke are ss 46 and 47 which so far as relevant are as follows 46 1 Notwithstanding the existence in any other person of any estate or interest whether derived by grant from the State or otherwise which but for this Act might be held to be paramount or to have priority and notwithstanding any failure to observe the procedural requirements of this Act any person who becomes the proprietor of registered land whether or not he dealt with a proprietor and notwithstanding any lack of good faith on the part of the person through whom he claims shall hold that land free from all encumbrances liens estates and interests whatsoever except such as may be registered or notified in the land register 2 Nothing in this section shall be held to prejudice the rights and remedies of any person a to have the registered title of a proprietor defeated on the ground of fraud or forgery to which that proprietor or his agent was a party or in which he or his agent colluded 47 1 Except in the case of fraud no person dealing with a proprietor or with a person who is entitled to become a proprietor shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which the current proprietor or any previous proprietor is or was registered or to see to the application of the purchase money or any part thereof or is affected by notice actual or constructive of any bankruptcy proceeding trust or other unregistered interest whatsoever any rule or law or equity to the contrary notwithstanding and the knowledge that any unregistered interest is in existence shall not of itself be imputed as fraud 39 It is clear that both these sections are designed to provide for indefeasibility of title of a registered proprietor of the land held under the Act On the basis of these provisions persons dealing with the registered proprietor are not required to go behind the title in order to investigate the history of the latter s title and to satisfy themselves of its validity per Lord Watson in Gibbs v Messer 1891 AC 248 at 254 40 There are of course exceptions to the indefeasibility of title In Teo Siew Peng v Neo Hock Pheng 1998 3 SLR R 472 Lai Siu Chiu J considered two of such exceptions as relevant to the case before her She said at 18 19 T here are two exceptions to the indefeasibility of title conferred on the plaintiffs that are of relevance here Firstly s 38 2 provides for the fraud exception and makes clear that the fraud necessary to defeat the title of a proprietor must be brought home to the proprietor or his agent In Grgic v Australian and New Zealand Banking Group Ltd 1994 33 NSWLR 202 while commenting on similar Torrens legislation the New South Wales Court of Appeal reaffirmed per Powell JA at 221 the position still remains that for the purposes of s 42 of the Real Property Act fraud comprehends actual fraud personal dishonesty or moral turpitude on the part of the registered proprietor of the subject estate or interest or that registered proprietor s agents Although it is now accepted that not all species of equitable fraud stand outside the concept of fraud those species of equitable fraud which are regarded as falling within the concept of fraud are those in which there has been an element of dishonesty or moral turpitude on the part of the registered proprietor or his agent Secondly cases such as Frazer v Walker 1967 1 AC 569 and Bahr v Nicolay No 2 1988 62 ALJR 268 established that the indefeasibility of title conferred by s 38 does not prevent claims in personam being made against the registered proprietor by reason of his own conduct Such an exception was accepted by the recent local decision in United Overseas Finance Ltd v Victor Sakayamary 1996 2 SLR R 20 as being consistent with the scheme of registration under the Act Her decision on appeal was reversed in part however the above passage of her judgment remained unaffected 41 For our purposes we need to consider only these two exceptions In this regard we find helpful the decision of the High Court of Australia in the case of Bahr v Nicolay No 2 1988 164 CLR 604 78 ALR 1 It is necessary to deal with this case in some detail and consider the judgments there in extenso The facts were not too complicated The appellants had a licence to occupy certain Crown land known as Lot 340 The licence carried with it the right to call for a Crown grant of Lot 340 upon the erection of commercial premises by 14 August 1980 In order to finance the building on Lot 340 the appellants entered into an agreement with the first respondent the first agreement under which they would sell Lot 340 to the latter lease it back for three years and thereafter buy it back Clause 6 of the first agreement provided as follows The vendors hereby further agree that upon the expiration of the lease contained in cl 5 hereof they will enter into a contract with the purchaser for the purchase by the vendors of the land for a sum of FORTY FIVE THOUSAND DOLLARS 45 000 payable by way of TEN 10 per cent deposit with the balance of the purchase moneys to be paid at settlement Settlement is to be effected thirty 30 days after payment of the deposit The appellants interest was never at any material time noted on the register of titles On 26 December 1981 the first respondent sold Lot 340 to the second respondents under an agreement the second agreement Clause 4 of this agreement merely provided that the second respondents acknowledged that an agreement exists between the appellants and the first respondent The second respondents subsequently became the registered proprietors of Lot 340 Soon thereafter the second respondents through their solicitors wrote to the appellants solicitors confirming that they would sign an offer to sell Lot 340 to the appellants for 45 000 plus any improvement at cost Prior to the lease expiring the appellants solicitors confirmed that their clients intended to purchase the land and sent a cheque for 4 500 by way of deposit This was not accepted by the second respondents who then refused to sell the land to the appellants The appellants brought an action against the first and second respondents claiming inter alia specific performance of the first agreement The claim was resisted and ss 68 and 134 of the Australian Transfer of Land Act 1893 the equivalent of ss 46 and 47 of our Land Titles Act were relied upon in the defence The High Court of Australia held unanimously that in the circumstances a trust arose in favour of the appellants and the second respondents held Lot 340 subject to the rights of the appellants However the reasoning of the judges in arriving at this conclusion differed 42 Mason CJ and Dawson J in their joint judgment held that cl 6 of the first agreement created an equitable estate or interest in Lot 340 enforceable against the first respondents and the second respondents Turning to cl 4 of the second agreement they construed it as follows 164 CLR 604 at 612 78 ALR 1 at 4 5 By cl 4 of the agreement between the first respondent and the second respondents the second respondents acknowledged that an agreement exists between the appellants and the first respondent that agreement being the undated 1980 agreement The clause does not purport to create in favour of the appellants new rights over and above those previously existing In terms it acknowledges the existence of the earlier agreement Although the precise effect of the clause must be left for later consideration it necessarily involves an acknowledgment of such rights as the appellants may have had under the earlier agreement Their Honours later considered the matrix of circumstances and said 164 CLR 604 at 616 78 ALR 1 at 7 Viewed in this setting cl 4 of the later agreement was designed to do more than merely evidence the fact that the second respondents had notice of the appellants rights If that were the only purpose to be served by the acknowledgment it would achieve nothing It would enable the second respondents to destroy the appellants interest and would leave the first respondent exposed to potential liability for breach of contract at the suit of the appellants In the circumstances outlined it is evident that the purpose of cl 4 was to provide that the transfer of title to Lot 340 was to be subject to the appellants rights under cl 6 of the 1980 agreement in the sense that those rights were to be enforceable against the second respondents Their Honours found that cl 4 of the second agreement constituted an express trust and held 164 CLR 604 at 619 78 ALR 1 at 9 The trust is an express not a constructive trust The effect of the trust is that the second respondents hold Lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement the first agreement Even if we had not reached this conclusion we would not have regarded the registration of the transfer in favour of the second respondents as destroying the appellants rights Having regard to the intention of the parties expressed in cl 4 of the later agreement the subsequent repudiation of cl 6 of the 1980 agreement constituted fraud The case therefore fell within the statutory exception with the result that the appellants prior equitable interest prevails over the second respondents title the second respondents taking with notice of that interest 43 Wilson and Toohey JJ in their joint judgment held also that cl 6 of the first agreement created an equitable estate or interest in favour of the appellants Their Honours did not find that there was sufficient evidence to impute fraud on the part of the second respondents but they found that the second respondents bought the property on the understanding that they would be bound by the obligation to the appellants as contained in the agreement between the appellants and the first respondent and held 164 CLR 604 at 638 639 78 ALR 1 at 24 The second respondents bought Lot 340 on the understanding common to vendor and purchasers that they were so bound and cl 4 was included to give effect to that understanding Clause 4 may have been of itself insufficient for that purpose but the second respondents letter of 6 January 1982 and their two offers of

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