Case Summaries

Chan Yun Cheong (trustee of the will of the testator) v Chan Chi Cheong (trustee of the will of the testator)

SUPREME COURT OF SINGAPORE

9 March 2021

Case summary

Chan Yun Cheong (trustee of the will of the testator) v Chan Chi Cheong (trustee of the will of the testator) [2021] SGCA 33
Civil Appeal No 63 of 2020

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Decision of the Court of Appeal (delivered by Judith Prakash JCA):

Outcome: The Court of Appeal allowed the appeal and set aside the order of the High Court Judge which directed the appellant to sign two deeds, one of which was to consent to the retirement of his co-trustee, and the other was to confirm the valid retirement of a previous co-trustee.

Pertinent and significant points of the judgment

  • There is no legal basis for a court to compel a trustee to consent to a co-trustee’s retirement in a situation in which any decision to give consent is wholly discretionary: at [26] to [38].
  • Section 40 of the Trustees Act (Cap 337, 2005 Rev Ed) (“the Trustees Act”) provides a statutory power of retirement which is separate and independent from an express power to retire found in a trust instrument. Thus, the conditions in s 40 of the Trustees Act do not have to be met if a trustee seeks to retire pursuant to an express power: at [41] to [48].

Background to the appeal

1 The appellant and respondent are two out of three trustees of a trust arising out of the will (“Will”) of their late grandfather (“the Testator”). Each of them said that he had validly retired and no longer held the position of trustee. It was common ground that s 38(1)(c) of the Trustees Act prevents a trustee from being discharged unless there will be either a trust corporation or at least two trustees remaining, which meant that if either the appellant or respondent had validly retired, the other would not be able to retire unless he found a replacement trustee.

2 The respondent sought to retire as a trustee pursuant to s 40 of the Trustees Act, which provides that such retirement can only be effective if it is by deed and the remaining trustees consent, also by deed, to his discharge. The respondent’s solicitors sent a draft deed of retirement (“Draft Deed”) to the appellant and the third trustee, one Chan Chee Chiu (“CCC”). While CCC consented to the Draft Deed, the appellant refused to give his consent and instead sent a letter of resignation to the respondent and CCC. The respondent’s solicitors replied asserting that the appellant was still a trustee and would remain so until a proper deed of retirement was executed. The appellant replied contesting this, claiming that clause 3 of the Will entitled him to retire by way of letter, and cited the example of a previous trustee, Chan Fatt Cheung (“CFC”) who had retired by letter. Thereafter, CFC signed a deed seeking to confirm his retirement (“Confirmation Deed”), and the respondent requested that the appellant sign both the Confirmation Deed and the Draft Deed (“the Deeds”). The appellant refused to sign, whereupon the respondent filed an originating summons to seek orders for the appellant to sign the Deeds.

3 The High Court Judge (“Judge”) granted the orders sought. He found that the requirements in s 40 of the Trustees Act must be met even if a trustee seeks to retire pursuant to an express power of retirement found in the trust instrument. The appellant was still a trustee as he had not complied with the requirements of s 40. The Judge also held that he had the power to order the appellant to sign the Deeds pursuant to s 14 and/or s 18 of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“SCJA”), as well as pursuant to the inherent power of court found in O 92 r 4 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”). He found that a trustee’s consent to a co-trustee’s retirement cannot be unreasonably withheld, and that the appellant had unreasonably withheld his consent to the respondent’s retirement and the confirmation of CFC’s retirement. Thus, he ordered the appellant to sign the Deeds. The appellant appealed.

The Court of Appeal’s decision

4 The Court of Appeal allowed the appeal.

5 Section 14 of the SCJA does not grant the court the power to compel a co-trustee to consent to a trustee’s retirement. This is clear from a plain reading of the provision and the cases relied on by the Judge did not assist him: at [26] to [32].

6 While the powers granted by s 18 read with the First Schedule of the SCJA are wide ranging and can theoretically encompass the power to compel a co-trustee to consent to a trustee’s retirement, the court’s powers must be exercised in accordance with law. The Judge cited no authority to show that this power has ever been exercised to compel consent in a situation in which it was clear that the decision to give consent was wholly discretionary. The Judge also cited no authority, and gave no explanation, for imposing a “reasonableness test”: at [33] to [36].

7 The court also cannot compel consent pursuant to O 92 r 4 of the ROC as compelling consent is contrary to the proper interpretation of s 40 of the Trustees Act. Further, the situation here was the very one contemplated by the law so could never be described as one requiring the court to use inherent powers to do justice or avert injustice [37] to [38].

8 As there was no basis to compel the appellant’s consent to the Deeds, the orders were set aside and the appeal allowed. However, the court made further observations on the trusteeship status of the appellant, respondent and CFC: at [39] and [40].

9 Section 40 of the Trustees Act provides a statutory power of retirement which is separate and independent from an express power to retire found in a trust instrument. Thus, the conditions in s 40 of the Trustees Act do not have to be met if a trustee seeks to retire pursuant to an express power: at [41] to [48].

10 On a proper construction of clause 3, the Testator intended that a trustee could retire if he found a replacement trustee, and if the continuing trustees appointed the replacement trustee in place of the outgoing trustee by way of writing: at [49] to [76].

11 The appellant and respondent both remained as trustees as neither of them complied with the requirements of either s 40 of the Trustees Act or clause 3 of the Will: at [78].

12 While it could be contended that CFC’s retirement had been invalid, the appellant, respondent and CCC may be estopped from contending that CFC was still a trustee as they had administered the trust and acted as if CFC’s retirement had been valid. CFC should be treated as having validly retired from the date of his letter of resignation: at [79] and [80].

 

This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s judgment.

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