If you make a share transfer to someone, when is it considered a gift? Under what circumstances could it be returned to you or your estate?
In Ng Kong Yeam (suing by Ling Towi Sing (alias Ling Chooi Seng) and others) v Kay Swee Pin, the Plaintiff had made a share transfer to the Defendant, whom he had been living with for about 30 years. The Plaintiff argued that this transfer had been held on resulting trust by the Defendant on his behalf. The Defendant argued in turn that the share transfer had been a gift.
The Plaintiff’s argument was premised on the presumption of resulting trust, which states that property transferred without consideration is presumed to be held on trust for the transferor. This presumption can be rebutted in a number of ways, two of which were explored in this case.
The transfer is a gift
In this case, the evidence provided by the Defendant in her cross-examination made it clear that the share transfer had been a gift, and the presumption of resulting trust could be rebutted. Although the Defendant testified that the $1 million consideration stated in the share transfer agreement reflected past loans and household expenses, the Court of Appeal opined that the rule against past consideration, as a matter of law, prevented the share transfer from being characterised as a sale with valid consideration. Hence, the transfer was a gift and the presumption of resulting trusts could be rebutted.
The transfer was intended to benefit the transferee
Furthermore, the facts of this case strongly indicated that the Plaintiff intended to benefit the Defendant by transferring the shares to her, and that both legal and beneficial interest in the shares had indeed been transferred to her. Notably, the Plaintiff had made no provision for the particular shares in his will, which would have been consistent with the view that the Plaintiff no longer retained beneficial interest in those shares.
Application of the parol evidence rule
The Plaintiff also argued that the written contract of sale in the share transfer agreement could not be recharacterized as a gift because of the parol evidence rule under s 94 of the Evidence Act. Nonetheless, the Court of Appeal opined that the parol evidence rule involves the terms of the share transfer form, and the issue at hand did not relate to the terms, and thus the parol evidence rule could not apply.
If you are a party managing someone’s estate, and acting for them in legal proceedings, you can seek advice from our lawyers.
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