Parents' claim for an interest in son's flat dismissed

The Court of Appeal delivered its judgment in Lim Kieuh Huat v Lim Teck Leng on 29 March 2021.

This claim arose out of a divorce proceeding where the wife had obtained an order for sale of the matrimonial flat, a HDB flat in Kim Tian Road. The husband's parents made a claim that they had a beneficial interest in the flat. The husband was the person named as the legal title holder. The parents claimed that they had contributed financially to their son in the purchase of the Kim Tian Road flat.

Generally, under the law, it is possible that apart from a person holding a legal title in a property, another person could have beneficial or equitable interest in the property. The circumstances under which such an interest could arise are very narrow. One such possibility is what is termed as the "common intention constructive trust". Another possibility is that the legal title holder could have expressly created a trust in favour of another person as a beneficiary.

In Lim Kieuh Huat v Lim Teck Leng, the Court of Appeal has clearly held that the HDB's prior approval is needed in instances where parties seek to create a trust.

The Court referred to the following provision of the Housing and Development Act:

s.51(8) No trust in respect of any protected property shall be created by the owner thereof without the prior written approval of the Board.

s.51(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.

In addition, s.51(10) also operated in relation to any constructive trust or resulting trust through which a person may claim an entitlement to the property

s.51(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.

In any event, the parents in this case had claimed that the reason why they made the arrangement of purchasing the flat under the son's name was to avoid having to meet the resale levy requirement if they purchased the flat themselves. Essentially, they were circumventing the law.

The court noted:

"The authorities are clear that s 51(10) of the HDA prevents a person who is ineligible to acquire an HDB flat from obtaining or becoming entitled to an interest in such a flat by way of a resulting or constructive trust: Tan Chui Lian at [10]; Koh Cheong Heng at [57]."

The court went on to hold that the parents were ineligble by virtue of the resale levy requirement and as such they could not claim an interest in the flat by relying on a resulting trust or constructive trust.

The actual intention of the parties was for the son to be a nominee for the parents and this had the effect of creating an express trust. As the Court observed:

"In this context, the arrangement would have been, in substance, for the Son to hold the Kim Tian Flat as a bare trustee on behalf of the Parents. Although the Parents and the Son have eschewed the language of an express trust (in what we believe was an attempt to get around ss 51(8)–(9) of the HDA), that is the effect of their allegations. However one describes it, it is clear to us that this would be a trust which was “created” or “purports to be created” in respect of the Kim Tian Flat, in the language of ss 51(8) and (9) of the HDA."

That being the case, HDB's prior written consent was required. This consent had not been obtained. The parents' claim failed.

In summary, the legal position is:

a) prior written consent from HDB is needed if parties intend to create a trust on the property

b) persons ineligible to acquire a HDB flat cannot gain an interest in that flat by way of a resulting trust or constructive trust.