JARRET PEREIRA V MASCREENOS BRIDJET W/O MOSES AND ANOTHER [2018] SGHC 120

Introduction

The High Court was faced with an interesting question in this case. In a case where 2 owners legally has equal stake in a property, for example, where each has 50% in a property, does each owner’s stake supposedly become more or less based on each of their financial contributions towards the purchase of the property?

Facts

The 1^st and 2^nd defendants purchased a Housing Development Board flat (the “property”) as joint tenants. The 1^st defendant is the 2^nd defendant’s mother. The property was financed by a loan in the 1^st and 2^nd defendants’ joint names. In 2006, the 2^nd defendant transferred her interest in the property to the plaintiff who is her brother, in order to purchase another flat with her then-husband. In exchange, the plaintiff paid the 2^nd defendant an amount equivalent to her Central Depository Fund (“CPF”) contributions towards the property, with accrued interest. The plaintiff and 1^st defendant were then registered as joint tenants. They jointly obtained a fresh mortgage, repayments of which have solely been paid by the plaintiff. The plaintiff also paid the utility and conservancy fees, and payment of property tax for the property.

The relationship between the parties soured, prompting the plaintiff to apply for the property to be sold and for the parties’ respective interests in the property to be severed.

The Plaintiff’s claim

Counsel for the plaintiff, Mr Koh, submitted that the plaintiff’s interest in the property ought to be 70-73.36%, taking into account the plaintiff’s repayment of the mortgage. Mr Koh provided a range, instead of a specific figure, as the parties did not have certain information relating to the initial purchase of the property, such as the purchase price and the loan amount. The plaintiff’s exact interest was thus contingent on the assumptions adopted. In the alternative, Mr Koh submitted that if the plaintiff’s mortgage repayments cannot be taken into account in calculating his interest in the property, the plaintiff should be reimbursed for mortgage repayments made in excess of his share, by way of equitable accounting. Mr Koh further sought equitable accounting for utility and conservancy fees, property tax, and renovation expenses incurred by the plaintiff, and rental income received by the 1^st defendant.

The Defendants’ Submissions before the High Court

Counsel for the defendants, Mr Chiok, submitted that the beneficial interest in the property ought to be 42:58 in favour of the 1^st defendant. In response to the plaintiff’s claim for equitable accounting, Mr Chiok submitted as follows:

(a)    Equitable accounting in relation to the mortgage repayments would result in double recovery;

(b)   There should be no equitable accounting in relation to the plaintiff’s renovation expenses as they included items such as television sets, a gate, and an air-conditioning unit, which did not enhance the value of the property, and the benefit of which was enjoyed by the plaintiff;

(c)    There should be no equitable accounting in relation to the utility and conservancy fees, and property tax as the plaintiff would have expended the sums in any event; and

(d)   There should be no equitable accounting in relation to the rental income as there is no evidence of the amount of rental income collected.

The High Court’s Decision 

Choo Han Teck J sitting in the High Court did not accept either counsel’s argument as to the proportion of beneficial interests in the property. Both counsel proceeded on the basis that there was a resulting trust; they calculated the parties’ shares in the property based on their contributions towards the property. However, a resulting trust could not have arisen in the circumstances. The Plaintiff purchased his share in the property from the 2^nd defendant, and therefore could not have obtained more than what the 2^nd defendant had to sell.

The question then was – what was the 2^nd defendant’s share in the property? As mentioned above, the parties were not able to furnish information relating to the initial purchase of the property. Without such information, the court was unable to determine the 2^nd defendant’s exact interest in the property. Equity thus presumes, as a joint tenant, the 2^nd defendant’s – and hence the plaintiff’s – beneficial interest in the property was 50%.

Since the plaintiff’s beneficial interest in the property was 50%, he was entitled to equitable accounting for the mortgage repayments, utility and conservancy fees, and property tax paid by him in excess of his share. The fact that the expenses would have been incurred by the plaintiff in any event did not mean that the 1st defendant need not account for her share of the expenses.

The High Court declined to include the claim for renovation expenses as the purported renovations did not enhance the value of the property. He noted that, in fact, the bulk of the expenses related to chattels such as television sets. Choo Han Teck J sitting in the High Court further declined to include the claim for rental income as the amount claimed was speculative – the plaintiff merely asserted that the 1st defendant received a regular rental income of $500 to $800 per month.

On 7 May 2018, Choo Han Teck J sitting in the High Court proceeded to make the following orders:

(a)    In full and final settlement, the property shall be sold in the open market within 6 months from the date of this order. They shall be joint conduct of sale of the property, with liberty to apply if counsel is unable to come to an agreement;

(b)   Property tax, utilities and conservancy fees incurred in relation to the property from the date of this order to the date of sale are to be borne equally by the plaintiff and 1^st defendant;

(c)    From their share of the sale proceeds, both parties shall refund to their respective CPF accounts all monies utilized for the property together with accrued interest. Any deficiency is to be made up by the respective party;

(d)   In addition, the plaintiff is entitled to $69,726.50 by way of equitable accounting. This is to be paid to the plaintiff out of the 1^st defendant’s share of the sale proceeds;

(e)   Each party to bear his own costs.

Defendants’ Further Submissions

On 8 May 2018, counsel for the defendants, Mr Chiok, made further submissions. Mr Chiok submitted that:

(a) The orders would result in double recovery for the plaintiff as the CPF that had been advanced by the plaintiff will be refunded to his CPF account from his 50% share of e net proceeds, and yet he receives another 50% equal to his CPF monies used from the 1^st defendant; and

(b) The orders would result in an imbalance in the distribution of the sale proceeds as the plaintiff would gain $42,846.52 from the sale, whereas the 1^st defendant would only gain $3,511.32. In the alternative, he sought equitable accounting for the 1^st defendant’s CPF monies used for the acquisition of the property.

In response, Choo Han Teck J stated that he did not see how his orders would result in double recovery for the plaintiff. The 1^st defendant as the owner of 50% of the beneficial interest in the property, was liable for 50% of the mortgage. Since she did not make any of the mortgage repayments, she was liable to account to the plaintiff for her share of the mortgage. The fact that the plaintiff’s CPF account will be refunded using his share in the sale proceeds, is completely irrelevant. The money used to refund his CPF account is effectively coming out of his own pocket; as the owner of 50% of the beneficial interest in the property, he was entitled to 50% of the net sale proceeds. If equitable accounting was not granted, the plaintiff would effectively receive less than 50% of the net sale proceeds, as he suffered a “loss” in paying for the mortgage.

The High Court also found that Mr Chiok’s submission as to the imbalance in the distribution of the sale proceeds had no merit. While it was true that the 1^st defendant was receiving “less” from the sale proceeds, this was only because she was receiving “more” throughout the years, by not contributing towards the mortgage repayments, utility and conservancy fees, and property tax.

The High Court further rejected Mr Chiok’s alternative argument for equitable accounting for the 1^st defendant’s CPF monies. First, the claim was belated as it was only brought up in further submissions. Second, the 1^st defendant’s CPF monies were only utilised during the initial acquisition of the property. That is to say, before the plaintiff entered into the picture. Equitable accounting for any imbalance between the contributions of the 1^st defendant and the other joint tenant at the time – the 2^nd defendant – should have been brought against the latter.

Consequently, on 10 May 2018, Choo Han Teck J directed that no further submissions were required from the plaintiff as Mr Chiok’s further submissions were misguided. His orders, therefore, still stand.

Conclusion

In conclusion, the law applies the presumption that legal ownership reflects the beneficial interests of the owners to a property, unless there is evidence that a trust has arisen in the circumstances.

Should there be any unfairness in the division of the net sale proceeds according to each owner’s legal entitlement, for example, in a case where one owner has contributed more than his/her share towards the purchase of a property and towards enhancing the value of the property, equitable accounting could prove to be one remedy for an owner who has contributed more to “clawback” from the other the excess that was spent. What is, however, notable about this remedy is that not all expenses incurred may be taken into account. For example, in this case, renovation works incurred by the plaintiff and rental income presumably received by the 1^st defendant.

Therefore, where families and/or friends purchase property together, it is important for all parties to seek proper legal advice as to what their rights and/or interests are in regards to the property.