Equity and Trusts

• Publication year: 2016
• Citation: (2016) 17 SAL Ann Rev 436
• Author: TANG Hang Wu LLB (National University of Singapore), LLM (Cantab), PhD; Advocate and Solicitor (Singapore); Professor, School of Law, Singapore Management University.
• Published date: 01 December 2016
• Date: 01 December 2016

Express trusts

15.1 Kuntjoro Wibawa v Harianty Wibawa1 is an interesting case which deals with the world of offshore trusts in relation to modern wealth management. The Wibawa family was a wealthy Indonesian family. The family patriarch died in 2000 and the matriarch, Harianty Wibawa, was appointed to be the sole executrix and trustee of the patriarchs Will. While the Will provided for the patriarchs property to be distributed to Harianty and their sons and daughters, the distribution never took place. Instead, Harianty settled a trust called the Pride Wise Trust. The Pride Wise Trust was set up because the family received letters from the Indonesian tax authorities inviting the family to attend at their offices in Jakarta to discuss their US-dollar denominated assets. The structure of the Pride Wise Trust is shown in the diagram below:

15.2 The Pride Wise Trust was a discretionary trust governed by Jersey law. It had a total asset value of US$33m and the potential beneficiaries included members of the Wibawa family. The plaintiff who was one of the sons, Kuntjoro Wibawa, was named the first protector and a potential beneficiary. Harianty's planning objectives for setting up the trust was to facilitate a family succession plan, asset protection, privacy, and avoiding of probate. Belinda Ang Saw Ean J explained the rationale of the trust succinctly as follows:2

… As is the usual way with an offshore discretionary trust, the beneficiaries would not be regarded as having any direct legal rights over any particular portion of the trust fund; they only had a right to be considered when the trustees exercised their discretion. In such trusts, the paramount desire and expectation is for financial information to be kept private and confidential. The use of a discretionary trust in conjunction with an underlying company was designed to protect assets in a tax haven. This combination would interpose an additional layer of confidentiality in the chain of ownership of the trust fund …

15.3 Subsequently, Kuntjoro had a fallout with his mother, Harianty, and brought the present suit against her. Kuntjoro's primary complaint was that he had not received his inheritance and he sued Harianty for failing to apply for grant of probate and withholding his inheritance from his late father. After a careful review of the evidence, Ang J dismissed Kuntjoro's claim because her Honour found that Kuntjoro had consented to the setting up of the Pride Wise Trust. In fact, Ang J said that Kuntjoro was instrumental in setting up the Pride Wise Trust and he knowingly transferred assets belonging to the patriarch's estate to the offshore company in order to enable Harianty to set up the trust. The learned judge held that by virtue of the defence of concurrence, Kuntjoro was estopped from claiming against Harianty for settling the estate's assets into the Pride Wise Trust.

15.4 The State-Owned Company Yugoimport SDPR v Westacre Investments Inc3 contains useful observations in relation to the requirements of an express trust. The following passage by Sundaresh Menon CJ explaining the certainty of intention appears destined to be regarded by lawyers and law students as the primary definition:4

[C]ertainty of intention … requires clear evidence of an intention on the part of the alleged settlor to create a trust and to subject the trust property to trust obligations, as opposed to creating any other form of

binding legal relationship (for example, a contractual relationship). The intention of the alleged settlor must be to dispose of the property so that somebody else to the exclusion of the disponent acquires the beneficial interest in the property … [emphasis in original]

15.5 On the facts, the learned Chief Justice held that there was no trust because the agreement was entered on the basis of Yugoslav law rather than Singapore law. Yugoslav law had no concept of the trust as a legal mechanism and, hence, the parties could not have contemplated that they were creating a trust. Furthermore, the parties could not have intended to create a trust given they had no knowledge of Singapore law and did not seek Singapore legal advice prior to signing the agreement.

15.6 This case is also important because the Court of Appeal discussed the beneficiary's entitlement to sue third parties in relation to trust property. The judgment creditor was a company called Westacre Investments Inc (“Westacre”), and the judgment debtor was a state-owned company called The State-Owned Company Yugoimport SDPR (“Yugoimport”). Yugoimport wholly owned a subsidiary called Deuteron (Asia) Pte Ltd (“Deuteron”), which was a Singapore company. Deuteron had funds in the Singapore branch of a bank called DnB Nor Bank. Westacre obtained provisional garnishee orders against Yugoimport and DnB Nor Bank and sought to make these garnishee proceedings absolute. In order for Westacre to succeed in obtaining a garnishee order against Deuteron, Westacre must show there was a debt owing from Deuteron to Yugoimport. Westacre argued that Deuteron owed Yugoimport a debt because Deuteron held some funds on a bare trust for Yugoimport. It was argued that this gave rise to a debt. Looking at the various financial documents, Menon CJ found that Deuteron did hold the funds on a bare trust for Yugoimport. The learned Chief Justice also held that a bare trustee was “obliged to convey the moneys it holds on trust for the beneficiary as and when the beneficiary demands for them”.5 His Honour accepted the submission that a bare trustee owes the beneficiary a debt in equity once the beneficiary has demanded that the trust moneys be handed over to him. In other words, the bare trustee and beneficiary are simultaneously in a debtor–creditor relationship and a trustee–beneficiary relationship. On the facts, Deuteron owed an equitable debt to Yugoimport which could be garnished.

15.7 With regard to the garnishee order against the DnB Nor Bank, the Chief Justice refused to make the garnishee order absolute. His Honour reasoned that in garnishee proceedings, a pre-existing debt must be shown to exist and the judgment creditor merely intercepted

the debt already owing to the judgment debtor. Here, DnB Nor Bank only owed a debt to the legal owner of the accounts, that is, Deuteron and not Yugoimport. The fact that a legal procedure known as the Vandepitte6 procedure existed, whereby Yugoimport as a beneficiary could sue Deuteron and join DnB Nor Bank as a party to the action, did not have the effect of making DnB Nor Bank the debtor of Yugoimport. Therefore, there was no basis for the garnishee order.

Resulting trusts

15.8 The case law on resulting trusts this year is full of examples of family disputes over property. Chia Hang Kiu v Chia Kwok Yeo7 involved a dispute between siblings over a bungalow in Jalan Kechubong (“bungalow”). The bungalow was initially registered in the names of the late father, the late mother, and their fourth son who is called Chia Kok Weng as tenants in common in equal shares. A series of transfers over the years resulted in the property now being registered in the names of Chia Kwok Yeo (the third son) and his wife, Ng Chui Guat (“Angie”). In the present suit, the estate of the late father was suing Angie and Yeo claiming that there was a resulting trust of the bungalow in favour of the estate. Consolidated with this suit was the action that Weng was taking against Angie and Yeo, claiming one-third beneficial interest in the bungalow. This claim arose from the fact that Weng had transferred his one-third share of the property to Yeo for a purported price of S$126,000. The parties did not dispute that this sum was not paid. With regard to the estate's claim, it was asserted that the late father's sole intention in transferring the property to Yeo was to prevent the bungalow from being seized by creditors since the late father's business was in financial difficulty. In fact, the late father was made bankrupt. After a careful review of the evidence, Valerie Thean JC found that Yeo had provided full consideration for the late father's share of the bungalow by taking up a fresh loan in his own name. Therefore, any claim based on resulting trust in this context failed. Similarly, there was no common intention to hold a share of the bungalow for the late father and, hence, the claim for common intention constructive trust also failed. With regard to Weng's claim, Thean JC found that Weng had intended an outright transfer to Yeo. Two factors persuaded the learned judicial commissioner to reach this conclusion. First, Weng applied for a Housing & Development Board (“HDB”) flat and declared that he did not own any interest in private property. Second, Yeo's conduct in investing substantial amounts of money to rebuild the bungalow was consistent with Yeo being the absolute owner of the bungalow. An

interesting and unexplored issue in this case is whether the declaration to HDB that Weng did not own any private property might give rise to a plea of illegality in relation to a trust claim over the bungalow. No doubt, this is an issue which will arise in subsequent cases.

15.9 Chin Kim Yon v Chin Kheng Hai8 was a dispute between a father and a son over ownership of a property. The father paid for the purchase of a Hillview condominium and registered it initially in the names of his daughter and son. Subsequently, the son refused to sell the property or transfer the property to his father. The son relied on the presumption of advancement in his favour to resist a resulting trust claim by his father. Tan Lee Meng SJ reviewed the case law and state and nature of the relationship to determine whether the presumption of advancement was relevant in the present context. In the end, Tan SJ held that a presumption of advancement applied in the present case. This decision is notable because the presumption of advancement was applied in a situation of a parent and an adult...