WHEN do resulting trusts arise, and why? These questions were the subject of serious inquiry in the 1990s, following influential work by Peter Birks and Robert Chambers, which argued that resulting trusts arise to reverse unjust enrichment. The House of Lords in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] A.C. 669 remarked that the Birks/Chambers thesis was “avowedly experimental, written to test the temperature of the water”, but that “the temperature of the water must be regarded as decidedly cold”. Following Westdeutsche, the issue has received little consideration, although academic interest in the debate remains. The recent decision of the Singapore Court of Appeal in Chan Yuen Lan v See Fong Mun [2014] SGCA 36 considered this issue in detail and is therefore worth examining.
In Chan, a married couple had purchased a house which was then registered in the sole name of the wife. Their relationship broke down, and the husband brought proceedings claiming an equitable interest in the house. Unlike in England and Wales, where a common intention constructive trust would likely have been the first port of call following Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 and Jones v Kernott [2011] UKSC 53; [2012] 1 A.C. 776, Chan was argued on the basis of a resulting trust. The court found that the wife had contributed 15.83 per cent. of the purchase price to the property and the husband the remaining 84.17 per cent. The starting presumption was therefore that the beneficial interests of the parties in the property were in that ratio. As the court found that the husband did not intend to benefit the wife by his contributions to the property, it held that the wife held 84.17 per cent. of the beneficial interest in the property on resulting trust for the husband.
In a wide-ranging joint judgment of the court, delivered by Rajah J.A., many issues were considered. These include the interplay between the common intention constructive trust and the resulting trust in Singapore, and different approaches taken in jurisdictions such as England and Wales, Australia, and Canada towards quantifying beneficial interests in both “sole name” and “joint name” cases. These issues cannot be considered here for reasons of space. We focus instead on several pronouncements on Chambers's analysis of the resulting trust.
Chambers argues that all resulting trusts arise as a response to unjust enrichment. On his analysis, resulting trusts arise where there has been a transfer of property from A to B in circumstances where A does not intend to benefit B. This was termed the “lack of intention analysis” by the court in Chan, as contrasted to what the court saw as the opposing view in Westdeutsche, described as the “positive intention analysis” – that the resulting trust arises instead from the presumed common intention of both A and B.
Adjudicating between these two views of the resulting trust, Chan held that “going forward, the lack of intention analysis may potentially provide a more sensible basis for the principled yet pragmatic development of this equitable doctrine” (at para. [44]). Furthermore, Rajah J.A. pointed out that the previous leading case on the same issue in Singapore, Lau Siew Kim v Yeo Guan Chye Terence [2007] SGCA 54, and several subsequent Singaporean decisions applying Lau, also supported the lack-of-intention analysis. Any attempt to confine Chan's pronouncement to only domestic and not commercial contexts was pre-empted as the court thought a context-relative approach would “lead to the additional problem of identifying what cases are truly ‘domestic’” (at para. [140]). Chan thus appears to provide solid judicial support for Chambers's view of the resulting trust. But closer analysis reveals that Chan provides much weaker support than appears at first glance.
First, the values emphatically endorsed in the judgment may potentially conflict with Chambers's unjust enrichment analysis. Three in particular stand out: the need for (1) certainty and clear property rights, (2) reduced litigation costs, and (3) predictability of the law, which would facilitate settlements. Just after accepting the “lack of intention analysis”, Rajah J.A. cautioned: “We are mindful that the courts should tread carefully in this area of the law because an unduly wide doctrine of resulting trusts and the potential blurring of the distinction between claims based on unjust enrichment and claims based on resulting trusts might have unsettling effects on the rights of third parties and the security of commercial transactions” (at para. [48]). In effect, Chan adopted a variant of Lord Neuberger's dissenting view in Stack, rejecting the majority position because of the “large degree of subjectivity and uncertainty which the approach in Stack and Jones has introduced into the realm of property law” and the “risk of increased and disproportionate litigation costs” (at para. [152]). The court also disapproved of the possibility of imposing a remedial constructive trust in response to unjust enrichment for the same reasons.
Chan's recognition of the need for commercially consonant values is reminiscent of Lord Millett's judgment in Foskett v McKeown [2000] UKHL 29; [2001] A.C. 103: “Property rights are determined by fixed rules and settled principles. They are not discretionary. They do not depend upon ideas of what is ‘fair, just and reasonable’. Such concepts, which in reality mask decisions of legal policy, have no place in the law of property” (at p. 127). Foskett's holding that proprietary interests in substitute assets arise by the operation of property law, not unjust enrichment, also applies in Singapore: Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd [2002] SGCA 28, see Leow and Liau, [2013] Singapore Journal of Legal Studies 331, 345).
Unjust enrichment devotees might yet believe that Chan's endorsement of Chambers's lack of intention analysis heralds a resounding triumph. But think again. Besides the conflicting values endorsed by Chan, there is also conflicting precedent. Recent decisions by the Singapore Court of Appeal accepted that Singapore adopts the unjust factors approach to unjust enrichment, not an absence of basis approach: Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] SGCA 36, Alwie Handoyo v Tjong Very Sumito [2013] SGCA 44. But exactly what unjust factor would apply in these typical fact situations where resulting trusts are pleaded? “Want of authority” was rejected in Tjong Very Sumito. “Unconscionability” was rejected by Chan as being “unduly vague and uncertain” (at para. [150]). Chan itself acknowledged, albeit while discussing the possibility of imposing a remedial constructive trust, that “even assuming a proprietary remedy is available in a claim for unjust enrichment, it is uncertain what the unjust factor ought to be” (at para. [150]). And that is not all. Chambers himself has recently acknowledged that he might have been “struggling in vain” to fit the resulting trust within the recognised list of unjust factors: Chambers, in Mitchell (ed.), Constructive and Resulting Trusts (2010), 287. Perhaps, he suggests, “it might have been better to explain the law of unjust enrichment in terms of absence of basis rather than trying to explain the resulting trust in terms of unjust factors”. But the absence of basis approach is not the law in Singapore now.
Furthermore, it is perfectly possible to accept that resulting trusts arise as an equitable response to a lack of intention to benefit the transferee, without accepting that the rationale for this response is the reversal of unjust enrichment (Penner, in Mitchell (ed.), Constructive and Resulting Trusts (2010)). Lord Millett's analysis in Air Jamaica v Charlton [1999] 1 W.L.R. 1399 relies on Chambers's lack of intention thesis, while rejecting Chambers's unjust enrichment rationale (Lord Millett in Degeling and Edelman (eds.), Equity in Commercial Law (2005). Instead, the rationale is simply that what a man fails to give away, he retains. Given Chan's referral to Air Jamaica as “judicial support” for Chambers's “lack of intention analysis” in the self-same paragraph that it was accepted (at para. [38]), Chan is best read as standing for no more than what Air Jamaica stands for. Put simply, even though Chan accepts that resulting trusts arise because of the provider's lack of intention to benefit the transferee, it does not accept that this is to reverse the unjust enrichment of the transferee. Chan accepts Chambers's analysis only as to when resulting trusts arise, but not as to why they arise.
There is one further ambiguity. Chan's “lack of intention analysis” may differ sharply from Chambers's in one very important aspect. While Chambers is best interpreted as proposing that lack of intention to benefit the transferee is both a sufficient and necessary condition for a resulting trust to arise, Chan seems to read this requirement as only setting out a sufficient condition, contemplating the possibility that a resulting trust “may” arise even when the transferor intended to benefit the recipient (at para. [43]). But, if lack of intention to benefit were also a necessary condition as Chambers suggests, then a resulting trust could not arise where such intention to benefit is present. Practically speaking, Chambers's argument would conclusively deny a transferor's claim that a resulting trust exists in his favour where such an intention exists and is proven. By contrast, Chan's holding that “a resulting trust may not arise if it can be shown that the transfer was indeed intended to benefit the recipient” excludes that possibility (at para. [43], emphasis ). It leaves one wondering when resulting trusts may arise despite proof of intention to benefit the recipient – an odd possibility that will have to be addressed in a future case.
