Equity and Trusts

Citation(2015) 16 SAL Ann Rev 450
Date01 December 2015
Published date01 December 2015
Express trust

15.1 MF Global Singapore Pte Ltd v Vintage Bullion DMCC[2015] 4 SLR 831 (‘MF Global’) is an important decision on the principles of the certainties required to settle an express trust. This case dealt with the aftermath of the insolvency of MF Global Singapore Pte Ltd (‘MFGS’). Some customers had invested in MFGS and the issue was whether these investments were held on trust for these customers. Clause A15.1 of the Master Trade Agreement with the customer provided:


15.1 MFGS shall keep all funds and other assets held by MFGS on trust for the Customer separate from the funds and assets of MFGS. The Customer's funds and assets shall be placed into a trust account, where they may be held commingled with excess funds or assets of other Customers in accordance with Applicable Laws.

15.2 Hoo Sheau Peng JC made the following pertinent observations in relation to the principles applicable in determining whether there was a valid express trust. Her Honour said:

(a) ‘an intention to create a trust may be inferred by examining evidence of the alleged settlor's words and conduct as well as the circumstances surrounding the alleged express trust, and through the interpretations of any agreements that the parties might have entered into’ (MF Global at [172]);

(b) the commercial context of the parties' relationship must be considered;

(c) generally, the courts are disinclined to find a trust in everyday commercial context;

(d) in order to displace the general disinclination, there must be clear evidence of an intention to create a trust; and

(e) mere segregation of money by itself is not conclusive as to an intention to create a trust.

15.3 On the facts, Hoo JC held that MFGS's intention to create an express trust for the customers in terms of the unrealised profits and forward value had not been proven.

15.4 A dispute over a private equity arrangement gave rise to the decision of Cheong Soh Chin v Eng Chiet Shoong[2015] SGHC 173. In this case, the plaintiffs transferred more than US$100m to the defendants to invest in some private equity funds and direct investments. These investments were structured through a web of special purpose vehicles (‘SPVs’) controlled by the defendants. Unfortunately, the relationship between the parties soured and the plaintiffs sought from the defendants, inter alia, the following orders: (a) transfer of all the moneys and properties including the SPVs; (b) an account of all the moneys transferred to the defendants and SPVs; (c) a tracing order; and (d) a judgment of moneys due after the account. The learned judge held that the plaintiffs were entitled to (a), (b) and (d) but not the tracing order because this was premature. Vinodh Coomaraswamy J found that the defendants were the plaintiffs' trustees either on a presumed resulting trust or an agency relationship to hold and manage the investments. As such, the defendants were under a duty to account to the plaintiffs.

15.5 The express trust was also considered in Westacre Investments Inc v The State-Owned Company Yugoimport SDPR[2015] 4 SLR 529 (‘Westacre Investments’). This case is significant because it suggests that a judgment creditor may garnish a bank account held by a bare trustee for a beneficiary who is a judgment debtor. Westacre Investments was a long running dispute and the plaintiff in this case obtained a judgment against the defendant in the English High Court for £41m. This judgment was registered in Singapore after the plaintiff discovered that the defendant's subsidiary, Deuteron, maintained bank accounts in Singapore. The plaintiff contended that the money in this bank account was held on trust for the defendant. The plaintiff therefore garnished these bank accounts on the ground that the moneys belonged to the defendant. During the garnishee proceedings, three parties (‘other parties’) claimed, inter alia, that the moneys belonged to them because there was an express trust in their favour. After examining the facts of the case, Edmund Leow JC held that the other parties merely had a contractual claim against the defendant. Furthermore, the relationship between the parties was governed by foreign law and there was no concept of beneficial interest under Yugoslav or Serbian law. It was unlikely that the parties intended for a trust relationship to arise. Even if Singapore law governed the relationship, Leow JC was not prepared to hold that there was sufficient certainty of intention to infer an express trust of the moneys for the other parties. The fact that the moneys were mixed and shifted between accounts demonstrated that there was no requisite certainty of intention to create a trust for the other parties. On the facts, the learned judicial commissioner held that Deuteron was a bare trustee of the moneys for the defendant. In other words, the defendant had a right to collapse the trust vis-à-vis Deuteron. Therefore, Leow JC ordered that the garnishee order against Deuteron's bank be made absolute.

15.6 The issue of mental capacity to declare a trust came to the fore in Re BKR[2015] 4 SLR 81. This decision is a landmark decision on mental capacity and undue influence involving an elder. For the purposes of the review in this part, ‘P’ refers to the person whose mental capacity to declare a trust was in question. This decision will no doubt be of interest to trust companies and banks that work with elderly clients. In Re BKR, the Court of Appeal could not discern any good reason for settling the trust concerned. P already had a pre-existing trust with another bank that could accomplish the stated purpose of the new trust. Sundaresh Menon CJ thought that P could achieve the same purposes by drawing up an appropriate will. Menon CJ was very careful to say that an unwise or imprudent decision to settle a trust did not mean that P lacked the capacity to declare a trust. The learned Chief Justice gave the following guidance on the mental capacity to declare a valid trust (Re BKR at [177]):

But it is less clear whether she has the ability to use and weigh the information relevant to her decision to set up the Trust. What this requires of her is an ability to engage with the countervailing considerations relevant to the decision – pros and cons, costs and benefits – and to measure them one against another in a non-arbitrary manner. This is not to suggest that feelings and intuition ought never to play a part in the process of decision-making; taking for instance a man who spends a great deal of money participating in a lottery which he knows he has a miniscule chance of winning because he has a strong intuition that it will be his lucky day, we would not necessarily conclude that such a man lacks the ability to use and weigh the information relevant to the decision he has made. Human experience shows that we do make decisions on the basis of rational reasons as well as irrational impulses or instincts or feelings; and even though these rational and irrational factors may be incommensurables, the reality is that we have nonetheless to reckon with them in the same decision-making equation. What matters is the ability to engage with all these factors, rather than allowing one or some of them to dominate the decision-making process such that the other relevant factors are effectively excluded from that process.

15.7 On the facts, P could not explain the reason for settling the trust. In fact, P's primary reason for settling the trust was because she believed her son, CK, was after her money and would leave her bereft and destitute. On the facts, there was simply no evidence to support this belief. Therefore, Menon CJ surmised that the trust was motivated by an unfounded paranoid belief which arose due to P's mental impairment.

15.8 Tanaka Lumber Pte Ltd v Datuk Haji Mohammad Tufail bin Mahmud[2015] SGHC 276 was a dispute on whether there was a trust over moneys which were transferred by the plaintiff company to the defendants who were directors of the plaintiff. The dispute between the parties was about the moneys that were transferred between 27 May 1992 and 26 March 1996 from the plaintiff company, Tanaka Lumber Pte Ltd's (‘Tanaka’), HSBC accounts to the defendants. Tanaka claimed that the moneys were to be held on trust by the defendants for the purposes of Tanaka's investments in Malaysia pursuant to two oral shareholders' agreements in 1993 and 1994 to invest those moneys in two Malaysian companies. In contrast, the first defendant contended that the moneys were...

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