1 February, 2017
INTRODUCTION
In the July-September 2016 edition of RHTrospect, we examined a decision of the Court of Appeal, Su Emmanuel v Emmanuel Priya Ethel Anne [2016] 3 SLR 1222 (“Su Emmanuel”), which clarified the applicability of the principles of equitable accounting in apportioning the beneficial interests of each co-owner. To recap, equitable accounting
can be used if:
- one party repays more of the mortgage than was initially envisaged;
- such repayment constitutes a material departure from the common understanding between the parties as to the repayment of the mortgage at the time it was obtained; and
- the payor did not intend to benefit the other co-owners at the time the mortgage repayments were made.
This article reviews a recent High Court decision, Foo Jee Boo v Foo Jee Seng [2016] SGHC 225, which applied the principles of equitable accounting to a dispute over the beneficial interests of tenants in common.
BRIEF FACTS
The disputants in this case were brothers who owned a property known as 6 Geylang East Avenue 2 #08-02 Singapore 389756 (“the Property”) as tenants in common. The legal interests of the Plaintiff and the Defendant were in the shares of 44% and 56% respectively.
The Property was purchased for $685,900 shortly after the Plaintiff’s graduation from university, with the aid of a housing loan of S$160,000 (“the Loan”). The Defendant paid most of the Loan instalments, although the Plaintiff had also made some contributions towards the Loan repayments.
The Defendant contended that his beneficial interest in the Property was much higher (93.4%) than his legal interest as compared to the Plaintiff’s (6.6%). In this regard, the Defendant pointed to the progressive payments made by him to the developer of the Property from his sole bank account, his CPF accounts as well as his servicing of the Loan. The Defendant also pointed to the payments made from the OUB joint account he held with his mother (“the OUB Payments”).
The Plaintiff disagreed with the Defendant’s claim and asserted thatthe parties’ beneficial ownership of the Property was the same as their legal ownership. This was because the OUB Payments used towards the purchase of the Property were a gift from the parties’ mother to the Plaintiff, which represented a significant portion of the sums paid.
ISSUES
This article focuses on two of the main issues in this case:
a. whether each party’s beneficial interest in the Property differed from their legal interests and if so, whether such apportionment would be on the basis of a constructive trust or a resulting trust; and
b.if each party’s beneficial interest in the Property was the same as their legal interests, whether the principles of equitable accounting applied.
DECISION
The High Court ordered a sale of the Property, with the proceeds divided in the proportion of the parties’ respective interests found to be 44% for the Plaintiff and 56% for the Defendant, subject to an option exercisable by the Defendant to purchase the Plaintiff’s share of the Property.
Apportionment of beneficial interests
The High Court held that each party’s beneficial interest in the Property was the same as their legal interests, i.e. the Plaintiff had a 44% legal and beneficial interest and the Defendant a 56% legal and beneficial interest in the Property.
In determining the parties’ beneficial interests under a resulting trust, the crucial factor was the parties’ intention at the time of acquisition of the Property, as established by the Court of Appeal in Su Emmanuel.
Based on a table prepared by the Plaintiff before the parties’ interests were registered (“the Table”), the High Court noted that there was a logical basis for deriving the parties’ respective shares in the Property that were eventually registered. In particular, the Table showed:
- the cash, CPF and Loan contributions of each party which in total worked out to the 44:56 ratio submitted by the Plaintiff;
- that the OUB Payments were credited to the Plaintiff and contributed to his 44% share in the Property. Although the OUB Payments came from a joint account held between the Defendant
- and his mother, the High Court found that the latter was entitled to use the monies as she wished and had used the OUB Payments towards the purchase of the Property on the Plaintiff’s behalf; and that the parties intended that the Plaintiff would bear a larger sum of the Loan ($88,888.89) as compared to the Defendant’s share ($71,111.11).
Accordingly, the High Court held that the Table reflected the common understanding between the parties at the time of the purchase of the Property, i.e. that the legal interest of the Property reflected the parties’ beneficial interests based on the 44:56 ratio.
The High Court also found that a constructive trust had not arisen as the Defendant had not provided evidence proving a common intention that the parties were to hold beneficial interests in the Property which differed from their legal interests.
Equitable accounting
Turning to the issue of the Defendant’s mortgage payments, the High Court noted that the Defendant had paid a much higher amount than contemplated by the parties at the time of the purchase. The Defendant’s payments, however, could not be counted as direct contributions to the purchase price under a resulting trust as they were not consistent with the parties’ prior agreement that the Plaintiff was to be responsible for a larger sum of the Loan.
Nevertheless, as the Defendant’s payments had represented a material departure from the parties’ common understanding (as shown by the Table) that the parties were to be responsible for the Loan repayments in accordance with their legal and beneficial interests, the Defendant was entitled to rely on the principles of equitable accounting.
Accordingly, the High Court ordered the Plaintiff to reimburse the Defendant for the sums paid by the Defendant towards the mortgage in excess of the sum that the Defendant had initially agreed to pay.
CONCLUSION
This case illustrates how the principles of equitable accounting enunciated by the Court of Appeal in Su Emmanuel may be applied in a dispute between tenants in common over their beneficial interests in a property.
In addition, the equitable accounting doctrine can be used to strike a balance to enable the payor to recover the monies he paid in excess of that originally intended by the parties, so as not to unjustly enrich the other party
1 According to the judgment at [6], the Defendant has appealed against the High Court’s decision.
For more information, please contact:
Sandra Han, Partner, RHT Taylor Wessing
sandra.han@rhtlawtaylorwessing.com
