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The Singapore Law Gazette

Entitlement and Eligibility – Regulating Trusts Over HDB Properties

This article critically examines the legal controversy that arose in a recent spate of cases on the proper interpretation of s 51(10) of the Housing and Development Act, which regulates resulting and constructive trusts over HDB properties.

Introduction

The past two years have seen an unusual number of long-drawn family disputes in court concerning trusts over HDB properties under what was formerly section 51(8)-(10) of the Housing and Development Act (HDA).1Effective 31 December 2021, s 51(8)-(10) of the HDA have been re-enacted identically as s 58(9)-(11) of the Housing and Development Act 1959. For convenience, this article will refer to the predecessor HDA. The surge in such cases has unexpectedly revealed a schism in interpreting section 51(10) of the HDA, which forbids any person to “become entitled” to an HDB property (or an interest therein) “under any resulting trust or constructive trust whensoever created or arising”.

The root of the legal controversy lies in whether the prohibition in section 51(10) is targeted only at persons who are otherwise ineligible to acquire an interest in an HDB property, or extends to persons who are otherwise eligible to do so. Up until September 2020, the Singapore courts had consistently adopted the former position.

In land-scarce Singapore, regulating trusts over HDB properties is an important, though less frequently discussed, issue. Public housing in Singapore, which caters to 80 per cent of Singapore’s resident population, is significantly subsidised to make the purchase of HDB properties “more affordable for eligible Singapore citizens and Singapore permanent residents”.2 Per Ah Seng Robin and another v Housing and Development Board and another (2016) 1 SLR 1020 at (1). The Government has consistently emphasised that affordable home ownership is the cornerstone of its public housing policy,3See e.g. “Policy of Providing HDB Flats to 80% of Singapore’s Resident Population”, Official Reports – Parliamentary Debates (Hansard) vol 95 (5 March 2021)(Desmond Lee, Minister for National Development) with strict eligibility criteria imposed on the purchase of HDB flats. Eligibility to own an HDB property is therefore closely intertwined with its affordability and, consequently, its entitlement.

This article critically examines the reasoning of the courts in recent cases on interpreting section 51(10). To appreciate their complexity, we begin with a brief historical survey.

Historical Background

Before 1984, a blanket ban had been imposed under section 44(4) of the HDA on all forms of trusts over HDB properties so as “to prevent abuse by persons not eligible for HDB flats from purchasing a flat in the name of nominees”.4“Housing and Development (Amendment) Bill”, 2nd reading, Official Reports – Parliamentary Debates (Hansard) vol 44 (24 August 1984) at col 2025 (Teh Cheang Wan, Minister for National Development). This prohibition was partly relaxed in 1984 as the Government recognised the “increasing need for the HDB to permit the creation of trusts for legitimate reasons”, such as where trustees needed to hold HDB flats in trust for minor children.5Ibid. To implement this policy, section 44(4) of the HDA was amended to read:

“(4)(a) No trust in respect of any such flat, house or other building shall be created by the owner thereof without the prior written approval of the Board.

(b) Every trust which purports to be created in respect of any such flat, house or other building without the prior written approval of the Board shall be void.” [emphasis added]

These provisions were subsequently re-enacted identically as s 51(4)-(5) in the 1985 Revised Edition of the HDA. Between 1995 and 2000, a series of cases interpreted the scope of s 51(4)-(5), in particular the phrase “created by the owner”. In Tan Poh Soon v Phua Sin Yin,6(1995) 2 SLR(R) 583. the High Court held that the wife had an interest in an HDB flat bought by her husband in his sole name, which was in the form of a constructive trust (a type of trust imposed in equity where it is inequitable for the property owner to hold the property for his benefit).7See Cheong Yoke Kuen v Cheong Kwok Kiong (1999) 1 SLR 1126 at (17). Section 51(4) did not nullify the Court’s power under the Women’s Charter to declare such an interest because the constructive trust was “not created by the owner”, but “decreed by the court under a statutory power”.8Id, at (15).

On the other hand, a resulting trust could be “created by the owner” under section 51(4) in certain circumstances. A resulting trust arises where A transfers a property to B but upon specific facts occurring, B is recognised as holding the property in trust for A because A did not intend to benefit B of the property.9See e.g. Christopher Hare & Vincent Ooi, Singapore Trusts Law (Singapore: LexisNexis, 2021) at (10-3). In Cheong Yoke Kuen v Cheong Kwok Kiong,10(1999) 1 SLR(R) 1126. the son had transferred his entire interest in the HDB flat to his mother so as to be eligible to buy another HDB flat. He claimed to be the beneficial owner of the first flat under a resulting trust on the basis that it was not prohibited by section 51(4). The Court of Appeal dismissed the son’s claim, observing that resulting trusts over HDB properties fell within the purview of section 51(4), in view of its underlying purpose to prevent “abuse by persons who would and could easily purchase HDB properties through nominees”.11Id, at (19). In any case, the son had, through the transfer, “in effect ‘created’ a trust of the flat in his favour”.12Id, at (20). As there was no evidence that the son had obtained HDB’s prior written approval, the resulting trust was prohibited by section 51(4) and void under section 51(5).

A resulting trust would, however, not be “created by the owner” if it arose by presumption of law. In Sitiawah Bee bte Kader v Rosiyah bte Abdullah,13(1999) 3 SLR(R) 606. the High Court distinguished Cheong Yoke Kuen as unlike the son who had “created” the trust so as to “make it appear that he had no interest in the first flat”, the joint tenants (mother and daughter) of a HDB flat in Sitiawah had “no intention … to ‘create’ a resulting trust to defeat the objectives of the [HDA]”.14Id, at (19). Subsequently, in Neo Boh Tan v Ng Kim Whatt,15(2000) SGHC 31. which involved the joint owners of an HDB flat (mother and son), the High Court similarly held that the mother’s equitable interest in the flat had been “implied in her favour by law (to reflect the equities of the situation) rather than created by her”.16Id, at (18). Such an interest could be given effect to as the mother did not create the resulting trust “either literally or in the sense given to that word by the Court of Appeal [in Cheong Yoke Kuen]”.17Id, at (19).

These decisions attracted a fair amount of academic criticism, which pointed out the difficulties in reconciling the differing judicial interpretations of the word “created” and that the express language of section 51(4)-(5) did not reflect the ostensible policy concerns of preventing nominee ownership or undermining the objectives of the HDA.18See e.g. Michael Hwang, Andrew Chan and Low Fatt Kin, “Developments in the Law of Equity” at pp. 456-460 in Kenneth Tan Wee Kheng (gen. ed.), Developments in Singapore Law Between 1996 and 2000 (Singapore: Sweet & Maxwell Asia, 2001).

These issues appeared to have been put to rest in 2005 when a new section 51(6) of the HDA was introduced vide the Housing and Development (Amendment) Act 2005, and specifically referred to resulting and constructive trusts “created” over HDB properties:

“(6) No person shall become entitled to any such flat, house or other building under any resulting trust or constructive trust, whensoever created.” [emphasis added]

Shortly after, in Tan Chui Lian v Neo Liew Eng,19(2007( 1 SLR(R) 265. the High Court interpreted section 51(6) as “[codifying] the position as declared in Cheong Yoke Kuen”, which did not “amend the previously existing substantive law in this regard”.20Id, at (15). Drawing from the Minister’s speech in the Hansard, Sundaresh Menon JC (as he then was) observed that the purpose of section 51(6) was “not to prevent any interest in an HDB flat arising under a resulting trust or a constructive trust regardless of the circumstances” [emphasis in original].21Id, at (10). Rather, it was “to prevent any entitlement to own an HDB flat arising in favour of a person by virtue of the law implying a resulting or constructive trust, where that person would otherwise have been ineligible to acquire such an interest” [emphasis added].22Ibid. The words “become entitled” in s 51(6) strongly supported this purposive interpretation, as it appeared to exclude persons who were already entitled to or had acquired any interest in the HDB property. In these excluded categories, “no issue could arise as to their eligibility to such entitlement”.23Ibid.

On the facts of Tan Chui Lian, the High Court held that section 51(6) did not apply as there was no evidence that the disputing parties were “ineligible or did not already have some entitlement to the flat”.24Supra, n 19 at (17).

In 2010, s 51(4)-(6) were re-enacted as s 51(8)-(10) vide the Housing and Development (Amendment) Act 2010, which were in pari materia with their predecessor provisions and read as follows:

“(8) No trust in respect of any protected property shall be created by the owner thereof without the prior written approval of the Board.

(9)  Every trust which purports to be created in respect of any protected property without the prior written approval of the Board shall be null and void.

(10) No person shall become entitled to any protected property (or any interest in such property) under any resulting trust or constructive trust whensoever created or arising [emphasis added]”

A question then arose as to whether the addition of the words “or arising” in s 51(10) had changed the law as stated in Tan Chui Lian. In the 2011 decision of Koh Cheong Heng v Ho Yee Fong,25(2011) 3 SLR 125. the High Court affirmed the position in Tan Chui Lian, noting that section 51(10), which retained the words “become entitled”, merely clarified that a resulting or constructive trust “may be more properly said to arise by operation of law, rather than by the creation of parties”.26Id, at (56). The High Court emphasized that there was no evidence that Parliament had “intended to prohibit all trusts, regardless of the beneficiary’s eligibility” [emphasis in original].27Ibid. The position that section 51(10) was targeted at only ineligible persons was not controverted in subsequent cases applying section 51(10)28See e.g. Low Heng Leon Andy v Low Kian Beng Lawrence (2013) 3 SLR 710 at (19). until the High Court’s decision in September 2020 in Lim Kieuh Huat v Lim Teck Leng (“Lim Kieuh Huat (HC)”).29(2020) SGHC 181.

The Current Debate: Does Section 51(10) Extend to Eligible Persons?

To simplify the facts, Lim Kieuh Huat (HC) concerned a claim by the owner’s parents to be beneficially entitled to an HDB flat that was bought in their son’s sole name, so as to avoid paying a $40,000 resale levy to the HDB and to allow their son to obtain a housing loan from the HDB. It was clear that the parents had contravened section 51(8)-(9) of the HDA by not obtaining the HDB’s prior written approval in purportedly creating a trust over the flat. The less straightforward issue was whether section 51(10) operated to bar the parents’ claim to become entitled to the flat under a resulting or constructive trust.

The parents had argued that they would have been eligible to buy the HDB flat because they formed the requisite family nucleus. The High Court rejected this argument because, in the first place, section 51(10) did not expressly distinguish between eligible and ineligible persons as to whether they can “become entitled” to an HDB flat. In essence, the facts had disclosed a nominee ownership arrangement, where the parents were not the registered owners and were not already entitled to the flat. The parents had therefore claimed to “become entitled” to the flat, which was barred by section 51(10). Moreover, section 51(10) “[did] not allow persons to become entitled to an HDB flat (or an interest in it) in circumvention of HDB regulation or policy”.30Id, at (87). In any case, the High Court rejected the narrow concept of eligibility adopted by the parents and held that they would have been ineligible to buy the flat “without paying a resale levy or with the benefit of an HDB housing loan”.31Id, at (61) and (83).

On appeal, the Court of Appeal in Lim Kieuh Huat v Lim Teck Leng (Lim Kieuh Huat (CA))32(2021) 1 SLR 1328. affirmed the High Court’s decision on section 51(8)-(9), but observed that on section 51(10), the High Court had “[gone] further than the existing authorities which have hitherto focused on ineligibility as the central consideration”.33Id, at (13). The Court of Appeal, however, left the issue open as it held that the parents were ineligible owners based on a purposive, not an “abstract”,34Id, at (14). notion of eligibility. The correct question was “whether the particular person could purchase the particular flat, and what conditions must be met before that purchase would be approved”.35Ibid. If the parents were held to be eligible to buy the flat without paying the resale levy, it would unravel “the entire subsidy scheme operated by the HDB” because “every purchaser would be able to get around paying the resale levy by entering into such an arrangement”.36Ibid.

Following hot on the heels of Lim Kieuh Huat (CA), another High Court Judge had to apply section 51(10) in Ong Chai Koon v Ong Chai Soon37(2021) SGHC 76. in the context of a family dispute as to whether the plaintiffs were entitled to an interest in a HDB shophouse under a constructive or resulting trust, where they were eligible to do so. Noting that “the state of the law on section 51(10) is unclear and has been left open by the Court of Appeal in Lim Kieuh Huat (CA)”,38Id, at (154). the High Court applied both the established “ineligibility” approach and the more recent “textualist” approach adopted in Lim Kieuh Huat (HC), and reached the same outcome that section 51(10) did not bar the plaintiffs’ claim in either case. Interestingly, the High Court in Ong Chai Koon expressed a tentative preference for the “textualist” approach based on the framework of statutory interpretation established in Tan Cheng Bock v Attorney-General.39Id, at (152). In sum, the High Court observed that the meaning of the word “entitled” under section 51(10) could not be equated or supplemented with the concept of eligibility as that “would be stretching the words in that provision beyond their natural and ordinary meaning”.40Id, at (153).

The latest decision to apply section 51(10),41See also Ong Swee Geok v Gee Ah Eng (2021) SGHC 119, where the High Court considered but did not need to apply s 51(10). Lim Choo Hin v Lim Sai Ing Peggy,42(2021) SGHC(A) 22. concerned whether a resulting trust held by the deceased owner’s daughter (the sole legal owner of the HDB flat) for the estate was void under s 51(8)-(9) of the HDA. The Appellate Division of the High Court (AD) held that section 51(8)-(9) only applied to express trusts (which requires a clear intention to create a trust), and not resulting trusts. Turning to section 51(10), the AD noted the divergent judicial approaches in its interpretation but held that in either case, the deceased owner did not “become entitled” to an interest in the flat under the resulting trust as he had already possessed an interest in the flat at the material time.43Id, at (28).

Critique of Both Approaches

The interpretational rift has resulted in an unusual situation, where two lower court decisions – Ong Chai Koon and Lim Choo Hin – have adopted a neutral stance as to whether ineligibility is the focal point of section 51(10). Although the High Court in Ong Chai Koon tentatively preferred the “textualist” approach, this approach merits closer scrutiny.

In summary, the “textualist” approach further bars eligible persons who “become entitled” to an HDB property under a resulting or constructive trust, where, for example, they are not registered persons of the property.44Supra, n 37 at (159). It contemplates that expressly incorporating the notion of eligibility into the language of section 51(10) (“no ineligible person”) is the “plainer, simpler and indeed, clearer formulation” of Parliament’s intent.45Supra, n 29 at (80). That may be so, but it is unclear whether the omission of a single word runs contrary to established drafting conventions or would have the effect of giving the provision a completely different meaning. In any event, does it necessarily mean that reading the notion of eligibility into the words “become entitled” is clearly wrong?

This leads to the second point. Whilst the High Court in Ong Chai Koon was probably correct in positing that entitlement (a legal right) and eligibility (satisfying the relevant conditions) are not exactly synonymous concepts, eligibility can still be a condition in determining entitlement, and need not only be equated with, or supplement, entitlement. Indeed, the words “become entitled” should not be read in a vacuum. In the statutory context of the HDA, the word “entitled” has a unique meaning that is strongly linked to eligibility. This is evident from section 47 of the HDA, where a person is not “entitled” to purchase an HDB flat if he does not satisfy the eligibility conditions, for example, if he owns another HDB property. Dissociating eligibility from entitlement under section 51(10) only does not appear to be justified.

Thirdly, a logical consequence of the “textualist” approach seems to be that section 51(10) would need to be amended to clarify that it applies to ineligible persons only. However, significant structural changes to the HDA may be required to specifically define the notion of eligibility, which will not be straightforward. This is because there is no single definition of eligibility in the HDA. As stated above, section 47 of the HDA stipulates some eligibility requirements. Other eligibility requirements are set out in the rules made by the Minister under section 65 of the HDA, as well as in terms and conditions that are set out from time to time by the HDB.46Tan Sook Yee, Private Ownership of Public Housing in Singapore (Singapore: Times Academic Press, 1998) at pp. 39-40. Any legislative amendment will need to encompass these different facets of eligibility. While this is not an insurmountable obstacle, the draftsman will also need to take heed of the decision in Lim Kieuh Huat (CA) by, for example, incorporating a purposive or non-abstract conception of eligibility to ensure that resulting or constructive trusts do not indirectly circumvent HDB policies. The end result may be to introduce an unnecessarily complex and technical definition of eligibility in the HDA.

This is not to say that the established “ineligibility” approach is free from difficulties. An inherent problem with the orthodox approach is that the expressed Ministerial policy of preventing ineligible persons from becoming entitled to own an HDB property had, in effect, been collapsed into the prohibition in section 51(10). In other words, the policy had become the rule. Why is this an issue? From a legal reasoning perspective, because “policies function to provide an interpretive context for rules”, they “must be stated at a higher level of generality than the rule itself”.47Kenneth J. Vandevelde, Thinking Like a Lawyer: An Introduction to Legal Reasoning (United States: Westview Press, 2nd edition, 2011) at p. 177.

Several of the cases examined above had framed the policy behind section 51(10) at a higher level of generality in terms of circumventing HDB regulation or preventing nominee ownership. Admittedly, the more general the policy, the more indeterminate the rule can be.48Ibid. For example, a broad policy based on contravening HDB regulation will not only be concerned with ineligibility, but also with breaches of other HDB rules. This will make it uncertain as to who section 51(10) is actually targeted at. Nevertheless, pegging the policy at a level too close to the rule also carries a great risk – that of the courts “inadvertently re-writing legislation”49PP v Low Kok Heng (2007) 4 SLR(R) 183 at (57). to fit the policy, which is anathema to the rule of law.

This is perhaps why the AD in Lim Choo Hin chose a third way, namely, by interpreting the words “become entitled” as bereft of the notion of eligibility. In essence, the AD held that section 51(10) does not apply “where the person in whose favour the trust arises already has an interest in the flat in question” [emphasis in original].50Supra, n 42 at (28). Eligibility does not enter into the equation at all.

More fundamentally, the well-entrenched “ineligibility” approach relied on a single factual matrix in Cheong Yoke Kuen to determine the scope of section 51(10). Cheong Yoke Kuen was decided more than 20 years ago, while section 51(10) of the HDA was first enacted more than 15 years ago. New and diverse factual scenarios, beginning with Lim Kieuh Huat (HC), have called into question the legal efficacy of the eligible-ineligible distinction. Has the time come to reassess the viability of the orthodox approach? It has been observed elsewhere that “the law is seldom static and develops over time”.51Iskandar bin Rahmat v Law Society of Singapore (2021) 1 SLR 874 at (96). It may also be possible for the courts to apply an “updating construction” to refresh the interpretation of section 51(10) in light of changed circumstances.52See e.g. Wong Souk Yee v Attorney-General (2019) 1 SLR 1223 at (63) for a fuller discussion of the concept of “updating construction”.

Conclusion

The continuing impasse on the interpretation of section 51(10) reinforces concerns alluded to in Lim Kieuh Huat (HC) that litigants may take advantage of the uncertainty of the eligible-ineligible distinction to argue that they are entitled to HDB property under a resulting or constructive trust.53Supra, n 29 at (46), (78) and (94). As analysed in this article, neither the orthodox nor the “textualist” approach is completely convincing as to the proper interpretation of section 51(10). The latest decision of Lim Choo Hin merely offers a stop-gap solution which did not address the policy behind section 51(10). If the present trajectory of section 51(10) cases continues, it would be desirable for the courts to undertake a full analysis of the relationship between entitlement and eligibility and determine whether legislative amendment is the only way to break the stalemate.

Endnotes

Endnotes
1 Effective 31 December 2021, s 51(8)-(10) of the HDA have been re-enacted identically as s 58(9)-(11) of the Housing and Development Act 1959. For convenience, this article will refer to the predecessor HDA.
2 Per Ah Seng Robin and another v Housing and Development Board and another (2016) 1 SLR 1020 at (1).
3 See e.g. “Policy of Providing HDB Flats to 80% of Singapore’s Resident Population”, Official Reports – Parliamentary Debates (Hansard) vol 95 (5 March 2021)(Desmond Lee, Minister for National Development)
4 “Housing and Development (Amendment) Bill”, 2nd reading, Official Reports – Parliamentary Debates (Hansard) vol 44 (24 August 1984) at col 2025 (Teh Cheang Wan, Minister for National Development).
5 Ibid.
6 (1995) 2 SLR(R) 583.
7 See Cheong Yoke Kuen v Cheong Kwok Kiong (1999) 1 SLR 1126 at (17).
8 Id, at (15).
9 See e.g. Christopher Hare & Vincent Ooi, Singapore Trusts Law (Singapore: LexisNexis, 2021) at (10-3).
10 (1999) 1 SLR(R) 1126.
11 Id, at (19).
12 Id, at (20).
13 (1999) 3 SLR(R) 606.
14 Id, at (19).
15 (2000) SGHC 31.
16 Id, at (18).
17 Id, at (19).
18 See e.g. Michael Hwang, Andrew Chan and Low Fatt Kin, “Developments in the Law of Equity” at pp. 456-460 in Kenneth Tan Wee Kheng (gen. ed.), Developments in Singapore Law Between 1996 and 2000 (Singapore: Sweet & Maxwell Asia, 2001).
19 (2007( 1 SLR(R) 265.
20 Id, at (15).
21 Id, at (10).
22 Ibid.
23 Ibid.
24 Supra, n 19 at (17).
25 (2011) 3 SLR 125.
26 Id, at (56).
27 Ibid.
28 See e.g. Low Heng Leon Andy v Low Kian Beng Lawrence (2013) 3 SLR 710 at (19).
29 (2020) SGHC 181.
30 Id, at (87).
31 Id, at (61) and (83).
32 (2021) 1 SLR 1328.
33 Id, at (13).
34 Id, at (14).
35 Ibid.
36 Ibid.
37 (2021) SGHC 76.
38 Id, at (154).
39 Id, at (152).
40 Id, at (153).
41 See also Ong Swee Geok v Gee Ah Eng (2021) SGHC 119, where the High Court considered but did not need to apply s 51(10).
42 (2021) SGHC(A) 22.
43 Id, at (28).
44 Supra, n 37 at (159).
45 Supra, n 29 at (80).
46 Tan Sook Yee, Private Ownership of Public Housing in Singapore (Singapore: Times Academic Press, 1998) at pp. 39-40.
47 Kenneth J. Vandevelde, Thinking Like a Lawyer: An Introduction to Legal Reasoning (United States: Westview Press, 2nd edition, 2011) at p. 177.
48 Ibid.
49 PP v Low Kok Heng (2007) 4 SLR(R) 183 at (57).
50 Supra, n 42 at (28).
51 Iskandar bin Rahmat v Law Society of Singapore (2021) 1 SLR 874 at (96).
52 See e.g. Wong Souk Yee v Attorney-General (2019) 1 SLR 1223 at (63) for a fuller discussion of the concept of “updating construction”.
53 Supra, n 29 at (46), (78) and (94).

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