KHOO JEE CHEK v LIM BENG TIONG

1 The appellant is Mr Khoo Jee Chek (“Mr Khoo”), while the respondent is Mr Lim Beng Tiong (“Mr Lim”). They are co-owners of a two-storey commercial property (“the Property”), which they have held on a joint tenancy in law since September 2017.

2 Mr Lim is the founder, manager, and owner of the Zhun Ti Tang temple (“the Temple”). Mr Khoo was a Buddhist worshipper at the Temple who was actively involved as a volunteer there from 2016–2018. Prior to the parties’ acquisition of the Property, the Temple was housed at Mr Lim’s residential address. In 2017, Mr Lim wished to move the Temple to a separate location. Mr Lim approached Mr Khoo and proposed purchasing a commercial property in their joint names for the Temple. The parties thus agreed to purchase the Property together for use as the Temple’s premises. To assist in their acquisition of the Property, the parties obtained a mortgage loan in their joint names, for which they are jointly and severally liable to the mortgagee-bank. The second floor of the Property was then used as the premises for the Temple, while the first floor was used for a business selling handicrafts, collectibles, gifts, and Buddhist idols and statues, known as Zhen Ru Ge. Mr Lim is the sole proprietor of this business (“the Business”).

3 In 2018, the parties decided to part ways but could not agree on what their respective beneficial ownership in the Property was. They brought their dispute to court. Mr Lim asserted beneficial ownership of 99% or 100% on the basis of a common intention trust. Mr Khoo claimed 50% beneficial ownership based on a different common intention.

4 In Khoo Jee Chek v Lim Beng Tiong [2023] SGHC 233 dated 23 August 2023 (“the Judgment”), the Judge rejected both parties’ primary cases, holding that there was insufficient evidence of common intention. Instead, she gave judgment based on a presumption of resulting trust analysis, in respect of which she had heard parties’ submissions concerning their respective contributions to the purchase price. Noting that they were both jointly liable for the mortgage, the Judge counted the mortgage loan as contribution by them both equally and consequently concluded (after considering the proportions of their initial contributions to the purchase and other ancillary payments) that Mr Khoo’s beneficial ownership was 38.38% while Mr Lim’s was 61.62%.

5 A further hearing was fixed on 11 September 2023 for the court to decide on the necessary orders on how the sales proceeds of the Property should be apportioned between the parties. On 1 November 2023, the Judge dealt with how the net sale proceeds of the Property would be divided between the parties in the event of a sale (“the Order”). The Judge held that there should be an equitable accounting of the parties’ respective contributions towards the repayment of the mortgage loan, and she was not functus officio to make that order because her Judgment dealt only with the question of their beneficial shares in the Property based on their presumed resulting trust, and not how the net sale proceeds should be divided in the event of a sale.

6 The Judge further held that the process of equitable accounting should not take into account the fact that Mr Lim had enjoyed sole occupation of the Property, as she had already attributed the mortgage loan amount equally to the parties due to Mr Lim’s sole occupation of the Property. Moreover, she held that Mr Khoo was not entitled to “occupation rent” as of right just because Mr Lim was in sole occupation of the Property.

7 In AD/CA 130/2023 (“AD 130”), Mr Khoo does not appeal against the Judgment but rather, appeals against the Order on the apportionment of the sale proceeds from the Property. Mr Khoo submits on appeal that the Judge was functus officio regarding any issue of equitable accounting upon delivery of the Judgment. Alternatively, he submits that there should have been no equitable accounting in respect of Mr Lim’s repayments of the mortgage loan or that there should also be an equitable accounting of Mr Lim’s sole occupation of the Property in the division of the net sale proceeds between them.

8 While the Judge had used the phrase “equitable accounting” in the Judgment, this was used in a different sense, referring to a different exercise concerning a different issue, namely as a mechanism for retrospectively adjusting, after the date of acquisition of the property, the parties’ respective shares of the beneficial interest in the property under the resulting trust analysis. Equitable accounting on partition or sale of a co-owned property is distinct from the question of determining the parties’ respective proportions of beneficial ownership. Furthermore, it was implicit in the Judgment that the Judge had reserved matters not expressly dealt with by her already to the intended subsequent hearing on necessary orders relating to the sale of the Property: at [46] and [48].

9 According to Su Emmanuel v Emmanuel Priya Ethel Anne and another [2016] 3 SLR 1222 (“Su Emmanuel”), the basis of equitable accounting rests on the right of contribution as between co-owners where there was disproportionate expenditure by one co-owner improving the value of their co-owned asset or preserving or enhancing the equity of redemption, for the benefit of both: at [51].

10 The starting point in the equitable accounting of mortgage repayments is to consider the proportions in which the co-owner borrowers are expected to repay the mortgage loan amount as between them. In line with Su Emmanuel, where there is a specific agreement between them on that very issue, that agreement will determine the proportions in which they are expected to repay the loan, such that, if co-owners pay in accordance with that agreement, in “such circumstances, equity will not require a co-owner to contribute”. Where there is no such express agreement, it remains to be determined “the extent to which each party is expected to contribute to mortgage repayments” to ascertain whether equity will or will not “require a co-owner to contribute”. Further, where there is an agreement or common understanding but there is then a material departure from it, equitable accounting may be brought into play unless it can be shown that the party making the larger contribution intended to gift that portion to the other: at [55].

11 Where two parties, as in the present case, agree to joint and several liability for a loan, the lender may proceed to recover the full amount of the loan from either borrower. The borrower who repays the lender would be entitled to contribution from the other borrower up to half of what he has repaid. When parties are under a common obligation to pay the debt, the general principle is that both law and equity obliges them to bear the burden equally with the consequence that, if one discharged more than his or her proper share, he or she could call upon the other for contribution: at [56].

12 As liability for the mortgage loan was 50/50, departure from that position would attract equitable accounting. The Judge was entitled in the Judgment to find that, in the absence of any agreement or understanding concerning the parties’ joint and several liability for the mortgage loan, their ultimate responsibility for it was shared equally: at [57].

13 A co-owner in occupation of co-owned property generally has no liability to pay co-owners any occupation fee or rent, unless there is an agreement to that effect or there has been actual or constructive ouster of the other co-owners. Moreover, while co-owners are liable to account to each other for receiving more than his share or proportion of any rents or profits arising from the property, this is limited to receipt of rents or profits and does not extend to any inquiry into rents or profits that could have been earned but were not in fact received: at [62].

14 Once there is an order for partition or sale in lieu of partition, the court has the discretion as part of equitable accounting to make an adjustment for sole occupation by one party of co-owned property, where this would achieve broad justice between the parties. The courts as seen in cases such as Suttill v Graham [1977] 3 All ER 1117 (“Suttill v Graham”) have also allowed the recovery of the interest element of mortgage payments but would often apply a setoff against any occupation rent chargeable for sole occupation by the co-owner paying the mortgage: at [63].

15 While the Court of Appeal in Su Emmanuel held that there is no distinction between mortgage payments which go towards capital and those which go towards interest, this observation was made in the context of not distinguishing between the interest element and capital element of the mortgage for the purpose of reimbursing a party who contributed towards both elements of the mortgage loan liability. This is because both these payments ultimately preserve or enhance the equity of redemption and accordingly there will generally be a right of contribution as between co-owners. This remark cannot be taken out of context and be applied to the different situation of setting-off of the notional value of occupation rent against the interest element of an occupying co-owner’s contribution towards the repayment of the same: at [64].

16 It was not fair for Mr Lim to receive the benefit of an adjustment for his repaying part of Mr Khoo’s share of the mortgage instalments while retaining the benefit of his own financial gain derived from his use and occupation of the Property, namely for the Temple and Business, without any consideration of any allowance for notional occupation rent: at [67].

17 Mr Lim did not disclose the income of the Business but neither did Mr Khoo seek such information. Mr Khoo for his part did not adduce evidence of the rental that the property might fetch on the market. The question is how, in the absence of full information, the court should account for the benefit of occupation that Mr Lim, unlike Mr Khoo, had. According to Suttill v Graham, the practice as described in that case is a rule of convenience that allows the court to avoid protracted inquiries and treats the interest element of the mortgage instalments as set off against a notional occupation rent: at [69].

18 The relationship between parties in the present case differs from the spousal context in the English cases where the rule of convenience was developed. The present case involves a friendship that broke down rather than a marriage. Their relationship was informal and initially based on mutual trust. In these circumstances, a broad-brush approach may be justified, in order to avoid protracted and costly inquiries that may not ultimately achieve the clarity required for a more precise answer. The adoption of the rule of convenience by treating the interest element of the mortgage instalments as set off against a notional occupation rent achieves broad justice between the parties. This is also justified by several factors: (a) equitable accounting was raised by Mr Lim as a matter consequential to the Judgment, without it having been pleaded in the action; (b) although Mr Khoo raised the objection that the Judge was functus officio, all parties appeared content to deal with equitable accounting summarily, without further discovery or evidence; and (c) the amount of income derived from the Business is within Mr Lim’s knowledge and it is not apparent how readily accounts of such income could be drawn up or verified. Mr Lim did not volunteer this information to the court: at [71] to [73].

19 The Court allows the appeal in AD 130 in part and varies the Judge’s Order as follows: (a) upon the disposal of the Property, the sale proceeds shall be utilised first to discharge the remaining mortgage amount and to pay the expenses relating to the sale of the Property; (b) the net sale proceeds of the Property are to be divided between parties in the proportions of their beneficial interests in the Property, based on the shares recognised in the Judgment; (c) Mr Lim shall then be reimbursed out of Mr Khoo’s share of the remaining balance of the sale proceeds by such amount as equalises their respective contributions towards repayment of the principal of the mortgage loan; and (d) Mr Lim shall not be reimbursed for any part of his contributions towards the interest accruing on the mortgage loan, which are in effect to be set-off against a notional occupation rent to credit Mr Khoo for Mr Lim’s sole use occupation of the Property. As Mr Khoo has been partially successfully in the appeal, he was awarded costs in the amount of $20,000 all-in: at [74] to [75].