Court of Appeal clarifies scope of HDB Act prohibition on trusts over HDB Property in the case of Ong Chai Soon v Ong Chai Koon

Introduction

The Singapore Court of Appeal recently issued its judgment in Ong Chai Soon v Ong Chai Koon and Ors [2022] SGCA 36 (“Ong Chai Soon”), which contained important guidance on resulting and constructive trusts over HDB properties.

Facts

The Ong siblings had a dispute over a HDB shophouse in Hougang, which was purchased with a bank loan and registered under eldest son Chai Soon’s name. The Ong family operated a hairdressing salon from the commercial space of the shophouse, with Chai Soon registered as sole proprietor and his sisters working there. Chai Soon’s siblings brought legal proceedings against him—the sole registered owner of the shophouse—to seek an order that the property be sold, and the sale proceeds divided equally among all siblings. The siblings claimed that the property was a family asset held by Chai Soon on a common intention constructive trust for each of the siblings, who were entitled to equal beneficial shares.

After the High Court found in favour of the siblings that the shophouse and its sale proceeds were subject to a common intention constructive trust, Chai Soon appealed the decision, arguing that section 51(10) of the Housing and Development Act barred his siblings from becoming entitled to a beneficial interest in the shophouse under any resulting or constructive trust.

What are resulting and constructive trusts?

If you’re scratching your head wondering what resulting or constructive trusts are, here is a quick explainer.

Simply put, a trust is a device whereby ownership of a property is divided between two (sets) of parties—trustees and beneficiaries. The trustees hold the legal ownership (or legal interest) of the property, whereas the beneficiaries hold the equitable ownership (or beneficial interest). Usually, trusts are established for the benefit of individual beneficiaries, e.g., for a private purpose such as minimising tax liabilities or protecting privacy, or for a public purpose such as charity.

However, even if a trust is not explicitly created, it can still arise out of implication. A resulting trust arises where X transfers a property to Y but upon specific facts occurring, Y is deemed to be holding the property in trust for X because X did not intend to benefit Y of the property. For instance, X pays for a HDB flat that is registered in Y’s name. Although Y is the sole legal owner of the flat, X holds beneficial interests in it as the one who has financed the purchase. As such, Y is said to hold the property on resulting trust for X.

Separately, a constructive trust can arise from a wide range of situations, including but not limited to:

  1. Fraud Where Y procures a transfer of X’s property to themselves through fraud, Y holds the property on constructive trust for X.
  2. Common intention  Where X and Y jointly occupy a property and express an agreement to share in the property irrespective of their actual financial contributions towards its acquisition. If Y is the sole registered legal owner of the flat, Y holds the property on constructive trust for X. This is called a common intention constructive trust.

The bottom line is, under either of these types of implied trusts, X would be the equitable owner of the property even if they are not registered as the legal owner, and could thus claim equitable interests over it.

What restrictions are there against resulting and constructive trusts over HDB properties?

Given that HDB properties serve the public policy purpose of providing affording housing in land-scarce Singapore, there are strict regulations over how owners and occupants could exploit them—including creating or benefitting from trusts. Section 51(10) of the Housing and Development Act forbids any person to “become entitled” to a HDB property (or an interest therein) “under any resulting or constructive trust whensoever created or arising”.

However, two competing interpretations of section 51(10) has emerged in the past two years, arising out of court cases over family disputes over HDB property. At the heart of the controversy is a question over the scope of the prohibition: who does section 51(10) seek to prevent from becoming entitled to any interest in a HDB property under a resulting or constructive trust? Does the law bar all individuals from asserting claims to HDB property through such means, or only ineligible persons—i.e., those who are unable to apply for and purchase a HDB property themselves under HDB’s policy?

Court of Appeal’s Ruling in Ong Chai Soon

In its ruling, the Court of Appeal held that the Ong siblings are not prevented from asserting their claim to the shophouse under a constructive trust, given that they are eligible to own the property by HDB’s criteria. This means that so long as a person could purchase a particular HDB property and meet all the conditions before such a purchase would be approved, section 51(10) does not stop them from staking their claim to the property under a resulting or constructive trust.

Having examined the history of the Housing and Development Act, the Court concluded that Parliament’s intention in passing section 51(10) was meant to prevent ineligible persons from circumventing regulatory restrictions imposed by the HDB in acquiring HDB property. It found that Parliament’s consistent policy concern was to prevent the abuse of the privilege of subsidised public housing, under the principle that public housing is for owner-occupation rather than for speculation or investment.

An example of such abuse could be found in the case of BWU v BWW [2019] SGHC 128, which concerned the ownership of more than one HDB property. The case concerned the division of matrimonial assets between a husband and wife, where a dispute arose over the husband’s mother’s beneficial interest in an Ang Mo Kio HDB flat which the couple jointly owned. The mother claimed that, as an occupier of the flat, she owned a 50% beneficial interest in it that was held on constructive trust by the husband. However, the Court found that the mother was no longer eligible to hold any beneficial interest in the Ang Mo Kio flat when she became a joint owner of another HDB flat in Owen Road. As such, section 51(10) prevents her from being entitled to any interest in the Ang Mo Kio flat by way of a constructive trust.

However, in Ong Chai Soon, the Court of Appeal upheld the factual finding of the High Court that the Ong siblings were eligible to own the Hougang shophouse. While the High Court held that the burden falls on the party claiming beneficial interest in a HDB property to prove their eligibility, it accepted that the eligibility of the Ong siblings was an undisputed fact that was not contested by either party. Consequently, the Court of Appeal affirmed the High Court’s decision to grant the Ong siblings beneficial shares of the shophouse and its sale proceeds, as well as its order of sale of the shophouse.

Conclusion

In summary, being a legal owner of a HDB property does not mean that one is immune from claims of equitable ownership by other parties. This is especially relevant in the domestic context, where relatives and spouses who have previously financed or occupied the property may assert their beneficial interest over it—so long as they meet HDB’s eligibility criteria.

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