Disputes
Myanmar
UPDATE
A recently published Supreme Court
case (Supreme Court decision dated
16 February 2015) is casting additional
uncertainty on structures in Myanmar
where persons hold property on behalf
of someone else, a widespread practice in
various segments of the economy.
17 January 2017
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Disputes
Supreme Court Decision Casts Doubt
on Certain Nominee Structures in
Myanmar
A recently published Supreme Court case
(Supreme Court decision dated 16 February
2015) is casting additional uncertainty
on structures in Myanmar where persons
hold property on behalf of someone else, a
widespread practice in various segments of the
economy.
In a case where it was obvious a property
was held in the name of one person (let’s call
him the nominee), but paid for with monies
provided by another person, the Supreme
Court upheld the rights of the nominee, and
refused to transfer the legal ownership to the
person who paid for it and who claimed to be
the beneficial owner.
In a country where nominee or trustee
transactions are fairly frequent, even in certain
FDI situations, the decision calls into question
the limits of such structures when holding
property such as land or shares on behalf
of someone else. After this Supreme Court
decision we would do well to ask ourselves:
in which situation do nominee structures still
work?
Facts of the case
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A married couple, “A” and “B” (plaintiffs)
purchase land in the name of their children
“C”, “D”, “E”, and “G” (defendants) in 1974. The
existing building on this land was demolished
four years later for the construction of a threestorey residential property that was entirely
financed by A and B.
In 1994, the land grant document expired and
it was renewed with C, D, E and G (who was
Highlights of this note
Facts of the case
On what basis did the beneficial
owner claim his property back?
Supreme Court reverses the
lower court decisions
Some nominee structures under
fire?
married to “F”) as the new land owners.
In 2010 G, the daughter of A and B passed
away, after which her husband F sought to
inherit the share of land that belonged to
his deceased wife. This did not sit well with
A and B, who clearly did not have a high
opinion of F. To prevent F from getting the
ownership in the land, A and B filed for a suit
of declaration on 4 August 2010 claiming
ownership in the land, as being the real
owners.
The suit was filed at the West District Court
of Yangon, where the judge ruled in favor of
A and B. F appealed against this judgment
at the High Court of the Region, which,
incidentally, confirmed the District Court’s
decision. F filed a second appeal at the
Supreme Court of Myanmar (governed by
1 judge), which confirmed the lower courts’
decision in favor of A and B.
Page 1
“Benami transactions are never
made among Burmans except for
purposes of fraud.
In his final attempt, F submitted a special
appeal to the Supreme Court (before the
full bench of 7 judges).
On what basis did the beneficial
owner claim his property back?
The beneficial owners A and B claimed
that this was a so-called “Benami”
transaction. Benami is a concept known
–mostly- in Indian law, with at least some
acceptance in Myanmar law. It essentially
refers to a land or a property without a
name. Under a Benami transaction, the
person(s) who pays for the purchase
of the property or land does not buy it
under their name. Instead, the purchase
is made under someone else’s name.
The person whose name the property
or land has been purchased is called
the “Benamidar” and the property or
land thus purchased is called a Benami
property/land.
They are much less common in
this country than they are in India
proper where they are supposed to
be customary. Even in cases where
the money with which the property is
bought is provided by a person who
claims the beneficial ownership, the
pre¬sumption that the purchase in
the name of the ostensible owner is
a benami transaction is weaker in
Burma than in other parts of India. In
Burma it may in ‘particular cases be
too weak to displace the presumption
of advancement which would arise in
the absence of a presumption that a
transaction is benami,”
All India Reporter – Rangoon, 8
April 1927.
Nevertheless, the West District Court’s
decided to rule in favor of A and B, given
that A and B paid for the land purchase
but bought it under the names of their
children, the District Court considered
this to be a “Benami transaction”. It stated
that as a benami transaction, A and B
will have complete ownership in the
land (because they paid for it) and that
ownership cannot be transferred to C, D,
E, and F. This judgment was confirmed
by the High Court and the initial decision
of the Supreme Court of Myanmar.
Things were looking very well for A and
B.
Supreme Court reverses the lower
court decisions
However, the Special Appeal judgment
stated that although the land purchase
was financed by A and B, the land was
actually transferred for the benefit of its
transferees (originally C, D, E and G). The
Supreme Court set aside the Benami as a
separate legal basis and instead referred
to section 82 of the Trusts Act 1882. This
states as follows:
“82. Where property is transferred to
one person for a consideration paid
or provided by another person, and
it appears that such other person
did not intend to pay or provide
such consideration for the benefit of
the transferee, the transferee must
hold the property for the benefit of
the person paying or provided the
consideration”
– Chapter 9, Of Certain Obligations
in the Nature of Trusts, The Trusts
Act, 1882
This provision essentially says that
when you receive a property paid for
by someone else, and the payer did not
have the intention for you to benefit
from that consideration, then you are
required to hold that property for the
payer.
So, the Supreme Court basically viewed
that who paid for it, in and of itself, does
not matter. What is more important, is
the intent. When the property was put in
the name of C, D, E and F, in this situation,
In Myanmar, there is no actual statute to
base the legal concept on, except, in our
view, the Myanmar Trust Act. Indeed, the
Supreme Court will look in its decision
at Benami from the perspective of the
Trust Act. Indeed, in many respects
the Benamidar and the trustee are
comparable, in that they both hold
property for the benefit of another.
However, a trustee has legal ownership
(but not beneficial ownership) and a
Benamidar is merely a nominee.
Nevertheless, Benami is also widely
acknowledged in practice in Myanmar.
An classic case on Benami in Myanmar
makes a rather interesting mention
on Benami transactions in preindependence Myanmar:
Page 2
Based on the Supreme Court decision
we discussed above, we need to apply
the intention test. In that regard, is it
possible to say that it must have been
the intention of M and F that M was
the owner of the shares, otherwise
they would not have complied with
the regulation requiring 20% local
shareholding? In other words, the whole
purpose of putting M in the picture was
that M had to be an owner of C. That
must thus have been the intention, and
if that was the intention, the Supreme
Court might not uphold F’s right to the
shares.
there was no intent for A and B to be the
owners. The intent was for C, D, E and
F to be the owners. So, the transferees
must be considered as the owners the
Supreme Court argued. And therefore,
there is no reason why F should be
denied ownership in the property, of
which his deceased wife was an owner.
The Special Appeal judgment also
pointed out that civil courts do not have
the jurisdiction to determine ownership
of the above-mentioned land, as per
section 41 of the Lower Burma Town and
Village Lands Act.
“No civil Court shall have jurisdiction
to determine any matter which under
this Act, is to be determined by the
Revenue Officer,”
- Chapter 9, Lower Burma Town and
Village Lands Act.
Some nominee structures under fire?
Benami transactions were finally almost
entirely outlawed in India in 1988
(Repeal Ordinance dated 19.5.1988 of
sec. 82 Trust Act. In the era of combating
money laundering and tax fraud, the
Benami concept does not sit well.
Even though the Supreme Court’s
emphasis on the intention is fully in
line with earlier Myanmar and Indian
decisions, this decision serves to
recall that there may be limits to the
effectiveness of certain beneficial
ownership-like structures in Myanmar.
If intention is crucial to decide who land
or the shares belong to, as the Supreme
Court has finally held, how does this play
out in a typical nominee structure for a
foreign investor?
Imagine Myanmar citizen M who holds
shares on behalf of foreigner F in a
company C. C has a business activity
which is open to foreign investment with
a maximum of 80%. M therefore holds
20% in C on behalf of F as Benamidar,
F paying for the entire shareholding. F
legally owns the remaining 80%. After
the structure was put into place, M lets
F know that he in fact regards himself
as the real owner of the 20% shares in
C. F sues M, claiming to be the owner,
to transfer the 20% to another Myanmar
citizen allied to F.
A related problem is how foreign
investors can explain what the motives
for the nominee structure were
without raising various questions and
consequences related to the object and
purpose of the transaction.
There is a wide range in structures used
in Myanmar to hold a property on behalf
of someone else. Each case would have
to be looked at on its own merits to
decide on validity and effectiveness. This
Court decision does not change that.
But it is telling that the Supreme Court is
willing to correct its own decisions with
a special appeal just to point out that
the ostensible owner may very well be
the legal owner despite that someone
else obviously paid for the property and
simply put it in that owner’s name, and
despite that someone else financed the
improvements and stayed in possession.
Finally, the emphasis the Supreme Court
places on the intention of the parties
may be a difficult test for some nominee
structures where Myanmar assets or
property is held on behalf of foreigners.
Of interest in this case are the distinct
ways in which the lower courts and the
Supreme Court of Myanmar (Special
Appeal) interpreted the case. As seen
above, the District Court, High Court and
the Supreme Court interpreted the land
transfer as a Benami transaction and
concluded that the party who paid for
the land will enjoy complete ownership.
The Special Appeal judgment, on the
other hand, placed emphasis on the
intentions behind the land transfer as
per section 82 of the Trusts Act 1882.
Page 3
Court
Judgment
West District Court
•
•
•
High Court of the Region
Supreme Court of
Myanmar
Special Appeal to the
Supreme Court of
Myanmar
Related vDB LOI Publications
Land and property purchase were financed by A and B,
even though the sale of contract carries the names of
their children C, D, E and G
The land is considered to be Benami land and
transferees cannot be considered owners, and thus A
and B become land owners
F, who was married to G (who passed away in 2010),
does not have any ownership in the land since he is a
transferee in this case.
•
•
Confirms the West District Court’s judgment
The land in considered to be benami land, A and B are
land owners and F has no ownership in the land.
•
Confirms West District Court’s and High Court’s
judgment
The land in considered to be benami land, A and B are
land owners and F has no ownership in the land.
•
•
•
•
Land transfer cannot be considered a benami
transaction.
Parties under whose name the land and property were
purchased become the rightful owners. Land owners: C,
D, E and F, and property owners: A and B.
In short, the Special Appeal overrules the Supreme
Court’s decision in favor of F. A and B have no ownership
in the land.
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Edwin Vanderbruggen
Senior Partner, VDB-Loi
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Aye Kyaw
Team Leader
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Edwin is a prominent foreign legal advisor living and working
U Aye Kyaw is a Myanmar qualified lawyer and the principal of U
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