The law of trust: Case analysis of Chai v Chai [Civil Appeal No.: W-02(NCvC)(W)-1728-10/2024]

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The factual background

The Grounds of the High Court are carried at Chai v Chai [2024] MLJU 2914.

The Grounds of the CA may be accessed here: Chai v Chai [Civil Appeal No.: W-02(NCvC)(W)-1728-10/2024]

Mr Chai Yen Chong (Yen Chong) had 2 brothers, being Chai King Chong (King) and Chai Fook Chong (Fook).

CYC purchased 2 properties and placed them in his brothers’ names. Those 2 properties are:

a.       A property in Australia (Nutting property, registered in Fook’s name);

b.       A parcel of land in Puchong (Puchong land, registered in King’s name).

Yen Chong died. Chai Jook Kew (Jook Kew) was appointed as his administrator.

King also died. Chai Jen Chiew (Jen Chiew) was appointed as personal representative of the estate of King. Jen Chiew was also a practicing advocate and solicitor.

The Nutting property was registered in the name of Fook. It was sold for AUD$7.35m and after deducting expenses, the total cash value of the land was AUD$6,982,737. Yen Chong’s Estate claimed to be entitled to 2/3 of this cash value.

Of the cash value, the bulk of it was paid to King and AUD$1m was paid to Jen Chiew.

Before his death, King had caused the Puchong land to be transferred to Jen Chiew, on the basis of love and affection.

The core issue was this: Yen Chong had not registered the Nutting property and Puchong land in his own name. Was there a trust operating in his favour (and by extension, his Estate and beneficiaries)?

Jen Chiew maintained that King had paid for the Puchong land by himself.

Jen Chiew also denied that Yen Chong had paid for the Nutting property. Jen Chiew acknowledged that yearly payments were made to Yen Chong but this was out of gratitude by Fook, for bringing him up.

Salient facts to establish a trust over the Nutting property and Puchong Land

To establish a trust over both properties, Yen Chong (through his Administrator, Jook Kew) produced handwritten notes.

Yen Chong also relied on the conduct of the parties when they were all alive.

Oral testimony of Fook (the only surviving sibling) was front and centre.

Finally (and most interestingly), the Will of Yen Chong was also utilised. In the Will (which was prepared by Jen Chiew), showed that Yen Chong had listed both the Nutting property and Puchong land as part of his Estate.

The proceedings in the High Court

At the HC, the handwritten notes were accepted as authentic. An interesting discussion was undertaken with regard to S. 73A EA 1950, regarding the evidence of a deceased person.

One interesting observation was the HC’s findings on Yen Chong and his financial means (paras. 19-24). Jen Chiew argued to the contrary but this was rejected. The HC noted that Yen Chong had interests in investing (NB: This is definitely an issue that must be considered and canvassed in any claim involving trust).

The evidence of Fook

Fook maintained that Yen Chong paid for the Nutting property. It would be a 2/3 split to Yen Chong and 1/3 to King. Fook executed a Statutory Declaration to this effect and it bolstered his evidence at trial (paras. 25-30).

The Will of Yen Chong

The HC also considered the Will of Yen Chong. In it, he clearly made out that the Nutting property was his. This Will was prepared by Jen Chiew, who couldn’t now claim otherwise (paras. 31-33).

The HC made adverse observations on the conduct of both King and Jen Chiew (paras. 34-40). The HC observed that their silence when queried about the sale proceeds of the Nutting property would weigh against them.

Findings on the Nutting Property

The HC then concluded that the Nutting property would be divided equally (50-50) between Yen Chong and King. This ran contrary to the 2/3 agreement (paras. 41-49).

On the Puchong land, the HC held that it had not been sufficiently identified in the Will. The evidence that it belonged to Yen Chong was also hearsay. As a result, Jen Chiew (who had received it from King) was entitled to retain it (paras. 55-59).

Yen Chong’s claim was partially allowed by the HC (paras. 60-62).

THE APPEAL

At the CA, the findings of the HC were maintained in part but reversed elsewhere.

There were 2 appeals lodged, being Appeal 1728 (dismissal of the Puchong Land claim) and Appeal 1759 (dismissal of the claim of AUD1m for the Nutting Property).      

Observations on the law made by the CA

Having recited the facts (paras. 1-15), the CA outlined several salient legal principles pertaining to trust law. These are set-out below:

1.       On express trusts and the duties of trustees (paras. 16-18);

2.       A sole trustee cannot be the sole beneficiary of trust property. Where one person holds both capacities entirely, legal and equitable title merges and ceases to exist, and the property is held outright (para. 17);

3.       Resulting and constructive trusts (paras. 19-20);

4.       On hearsay evidence (para. 22);

5.       The burden of proof and the drawing of adverse inferences under S. 114(g) EA 1950 (paras. 23-26);

6.       Indefeasibility of title under S. 340 NLC 1950 (paras. 27-28)

I would recommend anyone serious about trusts to have a full read of the CA’s Grounds. There are so many interesting points and discussions outlined that must be appreciated in the first person.

Findings on the Puchong Land

The CA then observed that when the facts of Chai v Chai were put in totality, it was clear that the Puchong Land was trust property held by King. The CA outlined 6 salient factual features (paras. 36(a)-(f)) and concluded that the evidence of a trust was overwhelming (para. 37).

The propositions in opposition were dismissed (para. 38-39).

Jen Chiew also attempted to argue that with the Puchong Lands having been transferred to him, he enjoyed indefeasibility of title. The CA gave this short shrift.

Jen Chiew, being a volunteer and not a purchaser for good consideration, would not enjoy the protection of S. 340 NLC 1950 (paras. 40-42). He also had actual knowledge of the equity of Yen Chong, thereby leading his receipt to be tainted.

The CA unanimously held the HC to be in error and the Puchong Land was reverted to Yen Chong (paras. 43-44).

The Nutting Property cash proceeds

On the Nutting Property cash proceeds, the CA held that Yen Chong was entitled to 2/3s of the proceeds. The CA took Fook’s evidence into account and there was also an observation on the mismatch between the HC’s Grounds of Judgment and the sealed Order (the sealed Order shall prevail) [paras. 45-52].

On the AUD$1m taken by Jen Chiew

On the AUD$1m taken by Jen Chiew, Yen Chong’s Estate attempted to ask that this be returned to the Estate. This was rejected by the CA on the basis of simple mathematics. In this regard:

a.       The total sale value of the Nutting property was AUD$6,982,737;

b.       Yen Chong owned 2/3 (AUD$4,655,158), whereas King owned 1/3 (AUD$2,327,579);

c.       King was entitled to give his money away as he saw fit. That he gave it to Jen Chiew would be his right (para. 54);

d.       The CA made an observation on dishonest assistance and the factors for it to arise (para. 55). As the AUD$1,000,000 that Jen Chiew received came out of King’s 1/3 share, there would be no dishonest assistance;

e.       Yen Chong’s appeal on this was thus dismissed.

There was further discussion on a claim about conspiracy which was not made out on the facts. It was dismissed outright (paras. 57-58).

Key takeaways

When one boils down this claim, it is clear that the single most crucial thing in any trust dispute is EVIDENCE.

The evidence of Yen Chong (handwritten notes and conduct), coupled with the (thankfully truthful) evidence of Fook, were the defining factors. They lead the Court to make findings on what would be otherwise unsustainable claims.

In any trust dispute (especially one which goes back ~36 years), there must be a concerted effort to unearth and discover random bits of evidence to piece together a story. Without this, one can do very little.  

GAVIN JAYAPAL

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