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Tru. L.I. 2011, 25(2), 66-86 (Cite as: ) Tru.L.I. 2011, 25(2), 66-86 Trust Law International

Tru. L.I. 2011, 25(2), 66-86

(Cite as: )

Tru.L.I. 2011, 25(2), 66-86

Trust Law International

2011

Page 1

An impregnable fortress?Possible attacks on the Singapore trust?

Tang Hang Wu

© 2014 Bloomsbury Professional Ltd

Subject: Trusts . Other Related Subject: Family law. Insolvency. Legal systems. Succession

Keywords: Bankruptcy; Divorce; Family provision; Islamic law; Settlors; Singapore; Trusts

Legislation cited: Trust Companies Act 2006(Singapore) s.2,s.49,Sch.3 Residential Property Act 2009(Singapore) s.3,s.25 Trustees Act 2005(Singapore) s.90

Cases cited: CH v CI [2004] SGDC 131 (District Ct (Sing)) Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 A.C. 709 (PC (IoM))

*66 Introduction

In the past ten years, Singapore has emerged as one of the most important wealth management centres in Asia. 1 This development can be attributed to a number of factors.First, favourable laws were enacted to encourage high net worth individuals to ‘park’ their money in Singapore.These include changes to laws governing trust companies, confidentiality, taxation rules with regard to foreign earned income, abolition of estate duty and amendments to the Trustees Act. 2 Secondly, both the private and public sectors embarked on an aggressive marketing campaign to promote Singapore as a wealth management centre. 3 Thirdly, Singapore has one of the most liberal immigration policies in the world with regard to high net worth individuals.Until recently under the Financial Investors Scheme, a foreigner is able to obtain Permanent Resident status in Singapore if he or she maintains S$5 million of assets to be booked and managed by a financial institution regulated by the Monetary Authority of Singapore for a period of five years.This scheme enables the foreign person to obtain Permanent Resident status for his or her immediate family members as well.The amount required under this scheme has currently been changed to S$10 million. 4 The Financial Investors Scheme does not mandate any language, education or age requirements.It would seem that these laws and policies as well as the marketing efforts have paid off handsomely.The amount of wealth that has been flowing into Singapore has been nothing short of startling.Between the years 2000 to 2006, Singapore's fund management industry grew from S$280 billion to more than S$600 billion. 5 In fact, *67 the wealth management industry increased by a staggering 24 per cent in 2005--2006 alone.

With the influx of wealth into Singapore, it is inevitable that the local courts will have to deal with various challenges to trust structures set up in Singapore from both domestic and overseas pressures.Such pressures might take the form of requests from foreign governments to Singapore trustees to disclose information pertaining to settlors and/or beneficiaries for tax collecting purposes.In this regard, Singapore has recently endorsed the Organization for Economic Cooperation and Development's (OECD) standard on the exchange of information for tax purposes. 6 OECD's standard envisages an exchange of information with foreign

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jurisdictions under Avoidance of Double Taxation Agreements.Singapore has passed the Income Tax (Amendment) (Exchange of Information) Act 2009 which facilitates such requests from foreign governments.Quite apart from foreign revenue authorities, a Singapore trust structure might come under attack from private law claimants.This is the primary focus of this article.In this article, the author investigates the possible lines of attack on the Singapore trust, namely from divorcing spouses, bankruptcy creditors and disgruntled heirs.It should be noted that under Singapore law, it is also possible to set aside a trust by characterising the trust as a sham.While there is no direct Singapore case law on sham trust, there is no reason to think that the law of sham in Singapore is any different from that of English law. 7 For this reason, this paper does not consider the doctrines relating to sham trust in any detail. 8

Before proceeding further with this article, it is helpful to provide a brief background of Singapore jurisprudence.With regard to contract and commercial law, Singapore has endeavoured to mirror English law.True to its status as an international commercial hub, Singapore has since its earliest days attempted to retain the purest form of English commercial law because as Voules J explained in Seng Djit Hin v Nagurdas Purshotumdas & Co, 9 this policy was ‘to inspire confidence amongst merchants by assuring them that any questions arising in regard to their commercial transactions will be decided in the like case at the corresponding period in England…’.Although the formal reception of English commercial law was discontinued in 1993, English contract and commercial decisions are, up to today, invariably cited by counsel in court, accepted as persuasive and routinely applied by the Singapore courts.In other words, while English decisions are not binding in a stare decisis sense on the Singapore courts, they are nevertheless regarded as highly persuasive authority.This is not to suggest that the entire jurisprudence in Singapore is a pale carbon copy of England.In recent times, there have been some attempts to develop an autochthonous local jurisprudence. 10 This article considers the relevant Singapore case law and statutes as well as extra- judicial comments by the current Chief Justice in analysing the issues.Where there are no local sources on point, case law from other parts of the Commonwealth is considered since it is likely that these sources will be regarded as persuasive by the Singapore courts.

*68 Setting the stage: the fixed and discretionary trust

Before embarking on an investigation of the various ways in which a Singapore trust might be attacked, it is necessary to consider the type of trust that is used in modern private client business.A trust may take the form of a fixed interest trust where the shares of the beneficiaries are explicitly set out in detail from the outset.Assuming that the settlor is not named as a beneficiary, then the trust is not susceptible to being attacked in the event of the settlor's bankruptcy, death or divorce.This is because the settlor no longer has any interest in the property settled on a fixed trust in favour of third party beneficiaries.Effectively, the settlor drops out of the picture unless the settlor reserves certain powers.The only way in which the settlor might have a residual interest in such a fixed trust is if there happens to be a gap in the beneficial ownership.In such a case, the beneficial interest reverts to the settlor by reason of a resulting trust.This will rarely occur in a well drafted fixed trust.In fixed interest trusts , the attackers are likely to be the beneficiary's creditors, spouse or heirs.Since the beneficial interest vests at the outset, the trust is clearly relevant in situations where the fixed interest beneficiaries pass away, become bankrupt or divorce their spouses.In other words, the beneficiaries' share in the trust ought to be regarded as the property of the beneficiaries and is certainly relevant in these situations.

Matters become more complicated when the trust that is settled is a discretionary trust. 11 Anecdotal evidence suggests that this is more commonly used than a fixed trust in wealth management. 12 A settlor might wish to declare a discretionary trust because such trust affords flexibility to cater to the settlor's change of circumstances.Moreover, the trust may be drafted in a way to give the settlor some influence over the trustee's exercise of discretion in the appointment of the beneficiaries.Such discretionary trust may also confer on the trustee a general power to add anyone in the world as a beneficiary. 13 As such, any change in

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the familial situation of the settlor (divorce, new children etc) could be accommodated by the trustees.The settlor may inform the trustee of his wishes from time to time through a letter of wishes as to the settlor's wish on the appointment of the beneficiary. 14 The letter of wishes is usually drafted as a non-binding expression of wishes.Under orthodox English trust law, a settlor's wishes is certainly a relevant factor that a trustee ought to take into account when exercising his or her discretion.This is consistent with Viscount Dilhorne in McPhail v Doulton 15 where he said: ‘the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor's or testator's intentions.’If the class of beneficiaries is drafted widely enough, the settlor might even be a potential beneficiary through an exercise of the trustee's discretion. 16 In addition, the settlor might wish to include Tabular or graphic material set at this point is not displayable.

*69 a protector, ie a third party who will have a role in the administration of the trust. 17 Typically, the protector is given the power to veto or authorise a trustee's action in certain matters.A pictorial representation of the discretionary trust is shown above in Figure 1. Since a discretionary trust is more commonly used in wealth management these days, this paper considers the possible avenues of attacks on a Singapore discretionary trust.

An unresolved question in Singapore trust jurisprudence is how the Singapore courts will construe the office of the protector if it is included in a trust deed.There are a couple of difficult issues related to introducing the concept of the protector into an onshore trust jurisdiction like Singapore.The first issue is this: will the office of a protector be recognised by a Singapore court?Second, if protectors are recognised by the courts, what are the duties owed by protectors?Finally, what are the remedies available if protectors breach these duties?It should be noted that there are no Singapore cases or statutes which deals directly with the office of the protector.A local commentator expressed reservations on the trust protector as follows:

‘… although trust protectors may be an important component of offshore trust structure, such an office is actually unnecessary in onshore trusts , which are functioning perfectly well with the traditional trust structure.Indeed, introducing the trust protector in onshore trusts may introduce much uncertainty into the existing trust structure which would be undesirable to all concerned.’ 18

With respect to the learned author, his cautious view on trust protectors essentially conflates two distinct questions.The two inquiries are: first, how would a Singapore court *70 interpret a trust deed which attempts

to incorporate a trust protector?; and, secondly, what are the duties of the trust protector?While it is true that the second inquiry is still an unresolved question, it could be that the uncertainty on the scope of the protector's duty is a risk that settlors are prepared to undertake in order to ensure that there is a third party who can act as the trustee's watchdog.In any case, the protector is usually someone who is closely connected with the settlor or the beneficiaries and, hence, would in most cases discharge his or her function properly.Thus, the more important question for trust practitioners is this: would the incorporation of a trust protector invalidate a Singapore trust?This is a most unlikely outcome.After all, a reference in a trust deed to

a third party is not unknown under English trust jurisprudence.In a recent example a reference to a third

party by the trustee on whether to accept a proposed settlement was upheld in Citibank NA v QVT Financial LP. 19 Thus, the principle that emerges from this case is that a reference to a third party will not be struck

down so long as it does not take the trustee's duties below the ‘irreducible core’ 20 of trust obligations. 21 My own view is that the Singapore courts will recognise the office of a protector.This conclusion is implicitly supported by the Honourable Chief Justice Chan Sek Keong's extra-judicial comments on the trust protector

at the 10th Singapore Conference on International Business Law: The Regulation of Wealth Management.In

describing the office of the protector, the Chief Justice said that this is something that ‘is not new to practice, but may have been fully explored in the decided cases.’ 22 While the Chief Justice did not state a final opinion on the office of the protector, he concluded the paragraph by saying:

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‘Given the flexibility of the trust device, however, it may be that much more can be done in using Singapore law to meet client needs for wealth management and protection than has hitherto been the case here.’ 23

The Chief Justice's comments suggest that Singapore courts will not be hostile to the office of a protector.Thus, the primary difficulty lies in defining the precise scope of duties owed by the protector 24 and the remedies associated with a breach of such duties.This uncertainty is a problem that is faced not just in Singapore but in other parts of the Commonwealth.It is beyond the scope of this paper to consider this issue

at length.Ultimately, this uncertainty is a matter of risk management that the settlor might wish to consider if

the settlor chooses to include a trust protector in the trust deed.

Confidentiality and disclosure of documents

A perennial difficulty for any party who intends to challenge the validity of a trust or the trustee's exercise of

discretion is access to trust information.Without access to trust information, it is difficult to work out precisely the grounds of challenge in the first place.As such, access to trust information is a preliminary but crucial step to any attack on a trust.It is *71 foreseeable that many such challenges will fail at this early stage due to a lack of information.Non-beneficiaries who wish to obtain trust information would be met by trustees who will resist requests for information because trustees are under an equitable duty of

confidentiality not to disclose information to third parties. 25 Thus, disappointed heirs under forced heirship regimes, divorcing spouses and bankruptcy creditors who might wish to attack the trust would encounter problems obtaining detailed information about the trust.

Quite apart from the equitable duty of confidence, a licenced trust company in Singapore would have additional onerous statutory duties of confidence under the Trust Companies Act. 26 Section 49(1) of the Trust Companies Act provides that licenced trust companies are not entitled to disclose information regarding a protected party or the business or other affairs of the protected party (referred to as protected information) to any other person except as expressly provided in this Act.Section 2 of the Trust Companies Act defines a ‘protected party’ as follows: ‘in relation to a trust company, means a trust for which the trust company provides trust business services and includes the settlor and beneficiary under the trust.’The Third Schedule of the Trust Companies Act provides for the following situations when information may be disclosed:

(1) where the settlor or a protected party consents to disclosure;

(2) where the settlor passes away and there is no personal representative and the licenced trust company deems disclosure to the relevant parties necessary in discharge of its duties;

(3) disclosure is in connection with an application for a grant of probate or letters of administration in respect of a protected party's estate;

(4) disclosure is solely in connection with a situation where the protected party has become bankrupt or wound up;

(5) disclosure is solely with a view to the institution of, or solely in connection with, the conduct of proceedings relating to a trust that is administered by a licensed trust company;

(6) where disclosure pertains to the investigation of an offence that is alleged or suspected to have been committed under any written law;

(7) where disclosure is necessary for compliance with a garnishee order served on a licensed trust company attaching assets in a trust; and

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(8) where disclosure is in compliance with any notice by the Monetary Authority of Singapore.

The penalty for breaching this statutory duty of confidentiality is quite onerous.An individual guilty of breaching the duty of confidentiality may be fined up to S$75,000 and/or imprisoned up to three years while companies that are in breach might be fined up to S$150,000.The upshot of these provisions is that licenced trust companies are under very strict duties of confidence in Singapore.

There are a few important points to note with regard to the duties of confidence pursuant to the Trust Companies Act.First, the Trust Companies Act empowers the court to *72 order the proceedings to be in camera where disclosure is necessitated in the following situations:

(a)

where a protected party is insolvent or wound up; and

(b)

where there are proceedings relating to a trust that is administered by a licensed trust company.

This is no doubt to ensure the protected party's confidentiality.Otherwise, if an application for access to information is subject to a written judgment, this would mean that details of the protected party will be put in the public domain. 27 Secondly, it should be noted that the Trust Companies Act does not provide for disclosure in circumstances where the protected party is undergoing a divorce.Therefore, divorcing spouses will face difficulties in obtaining disclosure of information from licenced trust companies.This issue of divorce will be considered in the next section.

Divorce

Recent case law indicates that divorcing spouses have mounted numerous challenges to trusts which have been settled by the other spouse prior to the divorce. 28 The main contention in these cases is that the assets held by the trustee ought to be taken into account in the exercise of the division of matrimonial property.From the perspective of Singapore, I consider the following scenarios:

Scenario A: The divorce proceeding takes place in Singapore.One of the spouses has previously settled a discretionary trust in Singapore.Scenario B: The divorce proceeding takes place outside Singapore.One of the spouses has previously settled a discretionary trust in Singapore.

Scenario A

The Family Court in Singapore has the jurisdiction to hear proceedings for a divorce if either of the parties to the marriage is domiciled in Singapore at the time of commencement of the proceedings or habitually resident in Singapore for the period of three years immediately preceding the commencement of the proceedings. 29 In terms of division of matrimonial property, the Singapore courts have given a range of orders dividing the property between the couple in shares of 50-50 per cent to 65-35 per cent. 30 In two cases involving high net worth individuals, the court ordered division of the property in the following shares:

70-30 per cent 31 and 75-25 per cent. 32

Again, the issue of disclosure of information becomes paramount in ancillary proceedings concerning the division of matrimonial property.It is interesting to note that *73 Form 35 33 which is the standard form of the Affidavit of Assets and Means which must be filed in ancillary proceedings makes no reference to an interest in a trust.Therefore, it is entirely foreseeable that some unscrupulous spouses would not declare any trust which has been previously settled.Singapore's Affidavit of Means and Assets is unlike the English Financial Statement found in form E which must be filed before ancillary proceedings. 34 Box 2.17 of the English form explicitly states that parties are to give details of any other assets including:

Trust interests (including interests under a discretionary trust), stating your estimate of the value of the

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interest and when it is likely to become realisable.If you say it will never be realisable, or has no value, give your reasons.’ (Emphasis in the original).

As the learned editors of International Trust and Divorce Litigation 35 note, if this part of the form is completed in an unsatisfactory manner, the non-disclosing spouse can expect a lengthy follow up from his or her spouse seeking clarification on the trust interests.

Quite apart from the issue of disclosure (or lack thereof) there is also some uncertainty as to whether the courts will regard a discretionary trust as matrimonial assets which are subject to division between the spouses. CH v CI 36 suggests that where a spouse declares an irrevocable fixed trust where a third party is a beneficiary, the Family Court will not consider such trusts as falling within the concept of matrimonial assets. 37 However, in CH v CI a statutory trust created over an insurance policy in favour of the wife was held to be part of the matrimonial assets.The position is unclear with regard to a discretionary trust as there is no direct case law on this.An extra-judicial anecdote by the Chief Justice Chan Sek Keong suggests that the Singapore courts will regard a discretionary trust as part of the couple's matrimonial assets.The Chief Justice said:

‘A case that may have some relevance to the trust as a vehicle for wealth management and which I heard as Judge was a matrimonial dispute concerning maintenance.The couple had lived in the UK where the husband sold his business for a considerable sum of money.The couple then migrated to Australia where the husband found the tax regime intolerable.So he put his capital into a Cayman Island discretionary trust to avoid having to pay either income tax or estate duty should he die.They then came to Singapore where the marriage fell apart, resulting in a claim by the wife for maintenance and custody of the two children of the marriage.The husband appeared in person and offered a ridiculously small sum for maintenance on the ground that he had no money as he no longer had a proprietary interest in the capital in the trust fund which was no longer under his control.When I asked him who owned the fund, he replied that it was the bank which had legal title to the funds.I replied that I would *74 only accept his argument if the bank concerned was prepared to testify that it had beneficial ownership of the fund.End of argument.’ 38

Section 114(1) (a) of the Women's Charter is also relevant when a discretionary trust has been settled.This section provides that the court in determining the amount of maintenance payable to the other spouse shall have regard to various factors which include ‘other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future’.A discretionary trust has been interpreted as a ‘financial resource’ available to the spouse. 39 The recent case of TQ v TR 40 also displays the court's hostile attitude to a trust which was settled when the divorce proceedings were ongoing.In this case, the husband settled a trust in Mauritius for the benefit of the children after decree nisi had been granted.Andrew Phang JA, delivering the judgment of the Court Appeal, characterised this as a naked attempt to present the court with a fait accompli in respect of issues pertaining to maintenance and distribution of matrimonial assets.As such, the Court of Appeal ordered the husband to pay an equivalent sum into a Singapore bank account which could be used by either parent for the benefit of the children.

In England, one of the main lines of attack on the trust has been applications to the courts to vary the trust to provide a non-beneficiary spouse with money from the trust.This power to vary nuptial trusts is found in various English statutes. 41 Is a variation of a trust possible under Singapore law?In Singapore, the court is unlikely to entertain such an application to vary a trust.This is because there is no explicit provision under the Women's Charter 42 which allows for variation of a nuptial trust.It should also be noted that Singapore does not have the equivalent of the English Variation of Trusts Act 1958.The power of amendment is usually found in the trust deed and s 56 of the Trustees Act. 43 Even if the power of amendment is written into the trust deed, it is unlikely that the trustee would exercise this power in favour of a non-beneficiary spouse.Section 56 of the Trustees Act allows for the court to authorise dealings with trust property arising

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from the management or administration of the trust property if it is in the court's opinion that the act is

expedient. 44 A literal construction of this section suggests that this provision does not allow the court to vary

a settlement pursuant to matrimonial proceedings.However, it should be noted that in CH v CI 45 the Family

Court regarded a statutory trust created over an insurance policy where the wife is named as the beneficiary to be part of the matrimonial assets.In this case, District Judge Lim Hui Min held that the court had the power pursuant to the Women's Charter to make such orders in relation to such a life insurance policy as it sees fit including ordering the removal or a change of the named beneficiaries.It remains to be seen whether the Singapore court will extend the reasoning of CH v CI to a discretionary trust where one of the spouses is a potential beneficiary.

Although the Women's Charter does not have any provision which allows for the *75 Family Court to vary a nuptial trust, s 132 of the Women's Charter allows a non-beneficiary spouse to apply to set aside a disposition of property if he or she can prove that the disposition was made with the object of either reducing the amount of maintenance payable or to deprive the spouse of rights to the property.The relevant time period in which such dispositions of property are vulnerable to being set aside is within the preceding three years before the application pursuant to s 132 is made to the court.Presumably, s 132 of the Women's Charter allows the Family Court to set aside a trust if the pre-conditions are met.However, it should be noted that Singapore courts have not invoked this particular section lightly.In NI v NJ, 46 the husband created a family trust where he settled a New Zealand property, stocks and investments for the benefit of the children.VK Rajah J (as he then was) noted that the husband had declared the trust because he was concerned that the children's interest be protected since the wife had ‘adopted a rather generous spending approach from time to time’. 47 As such, the learned judge declined to set aside the trust.

Quite apart from s 132 of the Women's Charter, a spouse may also rely on s 73B of the Conveyancing and Law of Property Act 48 (‘CLPA’) to set aside a trust which was meant to put assets out of his or her reach.Section 73B of the CLPA provides that a conveyance ‘with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced’.In Ng Bok Eng Holdings Pte Ltd and another v Wong Ser Wan, 49 the husband transferred a property worth S$8 million to a third party for a consideration of US$2 million.The wife found out about it and successfully applied for the transfer to be set aside.

Scenario B

Where the divorce proceedings take place overseas and there are assets settled on trust in Singapore, it is foreseeable that the Singapore trustee might possibly be faced with several lines of attacks.First, there might be a letter of request sent to judicial authorities in Singapore asking them to examine the trustees for information pertaining to the trust.Secondly, the trustees might be presented with a foreign court order which could affect the trust.And finally, the foreign divorce court might treat the Singapore trust as a financial resource which is available to one of the spouses.The final point of treating the Singapore trust as a financial resource would only work practically if there are substantial assets in the jurisdiction where the divorce is taking place. 50 By treating the Singapore trust as a financial resource available to one spouse, the foreign court would then be able to apportion a larger share of the assets within that jurisdiction in favour of the other spouse. 51 Since there are substantial assets within the jurisdiction, there is no difficulty with enforcing the court order.Hence, this issue is essentially governed by the law where the divorce is taking place and not Singapore law.Since the trust as a financial resource aspect has already been well covered in pre-existing literature 52 and is not really a point of Singapore law, this paper will not consider this issue in any detail.

A foreign divorcing spouse might procure a letter of request to be sent from the foreign court to the relevant

Singaporean authorities to examine the trustees and asking the trustees *76 to produce trust documents.A

letter of request from a contracting State of the Hague Convention on the Taking of Evidence Abroad in

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Civil or Commercial Matters would prima facie be taken seriously since Singapore is party to this Convention. 53 Thus far, there is no Singapore case law on letters of request sent to licenced trust companies pursuant to divorce proceedings abroad.There are two possible views on whether such letter of requests would be entertained by Singapore courts.The first view is that the courts will conduct a balancing exercise in deciding whether to accede to such letters of request.As Kerr LJ said in Re State of Norway's Application 54 the balancing exercise entails the following considerations:

‘In the scales on one side must be placed the desirable policy of assisting a foreign court, in this case supported by both parties to the litigation before it.On the other side there is the opposing principle that the court will give great weight to the desirability of upholding the duty of confidence in relationships in which, as here, it is clearly entitled to recognition and respect.Which way the balance then tilts depends upon the weight which is properly to be given to all the other circumstances of the case.’ 55

While this is an English case which deals with duty of banking confidentiality, Singapore courts have always regarded English cases as highly persuasive and it is possible that a Singaporean judge would adopt a similar approach with regard to licenced trust companies. 56 It should be pointed out that the House of Lords in Re State of Norway's Application 57 felt that since the letter of request did not amount to a ‘fishing expedition’, the public policy of assisting the Norway courts outweighed the duty of banking confidentiality.

However, it is suggested there is another possible approach with regard to letters of request, ie that the Singapore courts will not compel licenced trust companies to give evidence.This argument is based on s 5(1) of the Evidence (Civil Proceedings in Other Jurisdictions) Act 58 which provides that a ‘person shall not be compelled…to give any evidence which he could not be compelled to give -- (a) in civil proceedings in the High Court of Singapore’.It could be argued that since the Trust Companies Act 59 does not allow for disclosure of information in matrimonial proceedings, the licenced trust companies are under a statutory duty of confidence.As such, since the licenced trust company cannot be compelled to give evidence about the trust in the High Court of Singapore, the licenced trust company similarly cannot be compelled to give evidence pursuant to a letter of request. Re State of Norway's Application 60 may be distinguished because this case dealt with the law of English banking secrecy which is governed by the common law.It has long been recognised in England that banking secrecy is qualified by several exceptions. 61 Kerr LJ in Re State of Norway's Application was particularly influenced by Lord Wilberforce's judgment in British Steel Corporation v Granada Television Ltd 62 who said that in all cases of confidence (including *77 banking confidentiality), the court may have to decide whether the interest ‘in preserving this confidence is outweighed by other interests to which the law attaches importance.’Thus, Re State of Norway's Application approached the issue of whether to accede to a letter of request as essentially a balancing exercise between two competing policies.In contrast, Singapore's Trust Companies Act does not contain such a wide public policy qualification to a duty of confidence.Instead, the Trust Companies Act provides for specific instances when the duty of confidentiality is exempted.Thus, there is a persuasive case to be made that the Singapore authorities will be justified in refusing to accede to letters of request to examine Singapore licenced trust companies in the context of assisting foreign divorce proceedings since this is not within the excepted statutory categories.

Another possible attack arising from a foreign divorce is the foreign court issuing an order purporting to vary a Singapore trust. 63 Are such variation orders enforceable in Singapore?It is suggested that such a variation order is unenforceable in Singapore. 64 The general principle on enforceability of a foreign judgment is encapsulated in the following statement by Chief Justice Chan Sek Keong in Poh Soon Kiat v Desert Palace Inc (trading as Caesars Palace): 65

‘An in personam final and conclusive foreign judgment rendered by a court of competent jurisdiction, which is also a judgment for a definite sum of money (hereafter called a ‘foreign money judgment’), is enforceable

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in Singapore unless: (a) it was procured by fraud; or (b) its enforcement would be contrary to public policy; or (c) the proceedings in which it was obtained were contrary to natural justice.’

As the learned editor of the Halsbury's Laws of Singapore Vol 6(2), Conflict of Laws writes:

‘There is no authority in Singapore or English law for the enforcement of a foreign judgment ordering final specific relief (eg, injunction or specific performance), and such judgments are assumed to be unenforceable.’ 66

Since an order to vary a trust is an order for a specific relief, it should be unenforceable in Singapore.Furthermore, as pointed out above, save for an express provision in the trust deed, Singapore courts have limited statutory powers to vary a trust.

The settlor's bankruptcy

Another possible avenue a trust may come under attack from is the settlor's creditors in the event of the settlor's bankruptcy.Viewed from this perspective, the settlor's creditors must be able to demonstrate that the bankrupt is the settlor of the trust in the first place.In modern trust structures, there is the practical preliminary problem of establishing the identity of the *78 settlor. Schmidt v Rosewood Trust Ltd 67 is an ideal case to illustrate the difficulties of establishing the identity of the settlor.It is helpful to examine the facts of this case in some detail.Vitali Schmidt, a wealthy Russian oil and gas man, was the alleged co-settlor of two trusts , the Angora Trust and the Everest Trust.The trustee was Rosewood Trust Ltd (‘Rosewood’) which was based in the Isle of Man.The salient features of the trust were as follows:

(1) there was initially some dispute as to the identity of the settlor because the money was channelled by Schmidt through a company (Pacqurette Ltd);

(2) Schmidt was named as the protector of the trust;

(3) there was a wide power of appointment exercisable by the trustees with prior consent of the protector;

(4) the potential class of beneficiaries were defined as the Royal National Lifeboat Institution and persons listed in a schedule; and

(5) in the Everest Trust, there was a wide power for the trustee to add any person or charity (except the current trustee) as a beneficiary.

There was evidence that Schmidt wrote two letters to the trustees expressing his wish that his son, Vadim, was to benefit from these two trusts in the event of his death.Schmidt subsequently died under mysterious circumstances.Schmidt's wishes were not fulfilled and Vadim brought proceedings seeking disclosure of documents.Imagine a hypothetical situation of Schmidt becoming bankrupt and Schmidt's creditors attempting to claw back assets settled on trust.If Schmidt's creditors wanted to attack the Angora and Everest Trusts , they would have the practical hurdle of proving that Schmidt was indeed the settlor of the trust in the first place.Recall that since the money was channelled through a company (Pacqurette Ltd), the creditors would have to demonstrate that the true settlor was Schmidt.This is not an easy task as the creditors might not have access to the trust documents.

Assuming that the practical hurdle of discovering the identity of the settlor can be overcome, what is the position of Singapore law on foreign bankruptcies and its impact on a trust structure set up in Singapore?Let us consider the following scenario: X, a person domiciled in Ruritania, settles a discretionary trust in Singapore.X becomes bankrupt in Ruritania.X's creditors want to claw back the trust assets in Singapore.As compared to the divorcing spouse, X's creditors would have an easier task in obtaining discovery from the

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trustees.This is because the Third Schedule of the Trust Companies Act 68 allows for disclosure of information in connection with the bankruptcy of the protected party.Recall that the protected party includes the settlor and beneficiary of the trust. 69 The court has the power to order the proceedings to be conducted in camera. 70 Despite the fact that X's creditors might be able to obtain discovery of trust documents, it is not

easy for X's creditors to succeed in claiming that X retained beneficial interest in the trust.This is because it

is

likely that the class of beneficiaries under the discretionary trust would be drafted widely without naming

X

explicitly as a potential beneficiary.Even if X was a potential beneficiary, X merely has a spes or hope of

being a beneficiary.As such, it would be extremely difficult to argue that the assets held on trust belonged to X. 71 X's creditors might try to argue that the Singapore trust is a sham.However, such an argument is notoriously hard to prove in the *79 absence of clear evidence of a ‘shamming intention’. 72 X's creditors must demonstrate a ‘shamming intention’ on the part of X and the trustees.As Singer J said in Minwalla v Minwalla and DM Investments SA, Midfield Management SA and CI Law Trustees Ltd: 73

‘In order for a trust to be found to be a sham, both of the parties to the establishment of the trust (that is to say the settlor and the trustees in the usual case) must intend not to act on the terms of the trust deed.Alternatively in the case where one party intends not to act on the terms of the trust deed, the other party must at least be prepared to go along with the intentions of the shammer neither knowing or caring about what they are signing or the transactions they are carrying out.’

If the trustees are a reputable bank or licenced trust company, it is highly unlikely that the sham argument

will prevail.Another possible argument is to try to set aside the trust using s 73B of the Conveyancing and Law of Property Act 74 (‘CLPA’).In order to do so, the creditors would have to demonstrate that the trust was

declared with the intent to defraud the creditors.If the trust was declared long before X's bankruptcy, then it

is unlikely that this argument will prevail.

Yet another possibility is for X's creditors to file for bankruptcy proceedings in Singapore and attempt to set aside the trust on the ground that trust is a transaction at an undervalue.This avenue is also fraught with practical difficulties.In order for X's creditors to file for bankruptcy in Singapore, they must cross two hurdles.First, the creditor must demonstrate that X was:

(i)

domiciled in Singapore;

(ii)

has property in Singapore; or

(iii) has, at any time within the period of one year immediately preceding the date of the making of the application:

(a)

been ordinarily resident or has had a place of residence in Singapore; or

(b)

carried on business in Singapore. 75

Secondly, since the debt is probably a foreign debt, the creditor must demonstrate that the debt is payable by the debtor to the applicant creditor by virtue of a judgment or an award which is enforceable by execution in Singapore. 76 The Bankruptcy Act allows the Official Assignee to set aside a transaction at an undervalue if the transaction was made within the period of five years ending on the day of the making of the bankruptcy application on which the individual is adjudged bankrupt. 77 If the trust was settled before the statutory claw back period, then the trust may not be attacked as a transaction at undervalue.

Matters become slightly trickier if X is a foreign company.X's foreign liquidator would *80 have to apply to wind up X in Singapore pursuant to ss 350-354 of the Companies Act. 78 Such a winding up order will then allow the liquidator and/or the creditors to rely on s 329 of the Companies Act which empowers the court to

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set aside transactions on the ground of unfair preference.Section 329 of the Companies Act specifically refers to the Bankruptcy Act and provides that the ground of setting aside a transaction on unfair preference under the Companies Act is identical to the Bankruptcy Act. 79

Forced heirship rules 80

In some countries, a person who is subject to Muslim or civil law may not have full testamentary capacity because the law prescribes that a certain percentage of his or her estate must go to a fixed list of beneficiaries.This is sometimes known as ‘forced heirship’ rules. 81 Individuals who are subject to such regimes might, for reasons of their own, try to get around these requirements by settling an inter vivos trust. 82 For example, let us consider the following scenarios:

(1) the settlor, X, is a Muslim person domiciled in Malaysia.X has assets in Malaysia worth S$1 million and S$9 million in Singapore.X has three children, amongst whom is Y, who is a special needs child.X settles a trust in Singapore naming Y as the sole beneficiary for the entire S$9 million;

(2) the same facts as example (1), but assume that X is a Singaporean Muslim or a Muslim person domiciled in Singapore.

In both examples, X is subject to Islamic rules of inheritance known as faraid which only allow a testator to dispose of a third of his assets. 83 Under Islamic law, the other two thirds of the assets must go to prescribed beneficiaries.In these scenarios, the inter vivos trust, if upheld, would frustrate the operation of the forced heirship rules because Y would stand to benefit up to 90 per cent of the X's wealth. 84 It is therefore foreseeable that the faraid beneficiaries would challenge the trust.

1. X, a Muslim person domiciled in Malaysia, settles a trust in Singapore

The faraid beneficiaries might challenge the trust on the ground that the settlor, X, does not have the capacity to settle the trust.The question of capacity of the settlor is a complex inquiry.Essentially, there are two questions bound up within this challenge.First, did the settlor have the capacity to transfer the property to the trustee?Secondly, did the settlor have the capacity to create the inter vivos trust?

*81 Capacity to transfer the property to the trustee

To answer the property question, it is helpful to consider whether the property that has been settled on trust in Singapore consists of immoveables or moveables.If the property concerned is land, then it is likely that a Singaporean court would adopt the principle that immoveables are governed by the law of the lex situs. 85 Thus, if X settled real property held in Singapore on trust for Y, Singapore law would apply.The question of whether X has the capacity to transfer the property under Singapore law would depend on whether there are any Singapore statutes prohibiting the transfer of real property to the trustees.Singapore law allows foreigners a free hand in purchasing and selling private flats and condominiums. 86 Thus, there are no restrictions on X in transferring the flat or condominium to the trustee.

Matters become more complicated when the property concerned is considered to be restricted residential property as defined under the Residential Property Act. 87 Restricted residential property’ includes vacant residential land, landed property (ie detached house, semi detached house, terrace house (including linked house or townhouse), as well as landed property in strata developments which are not approved condominium developments under the Planning Act. 88 Prima facie, a foreigner is not entitled to acquire residential property. 89 However, pursuant to s 25 of the Residential Property Act, a foreign person may apply to the Minister of Law through the Controller of Residential Property for permission to purchase restricted residential property.The Minister of Law may in his discretion grant such approval to a person

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who intends to purchase or acquire restricted residential property for the purpose of his or her own occupation and that of his family as a dwelling-house in the following situations:

(1)

the foreign person is a permanent resident of Singapore;

(2)

the foreign person is of economic benefit to Singapore; or

(3)

the foreign person possesses professional or other qualifications or experience which are of value or of

benefit or advantageous to Singapore.

Suppose X acquires restricted residential property after obtaining permission from the Minister of Law.Is X then entitled to settle the residential property on trust for his special needs child, Y? Assuming that Y is a foreigner, then the answer to this question is ‘no’.Section 3(b) of the Residential Property Act is quite clear in stipulating ‘no person shall create any trust for sale in respect of any residential property or any estate or interest therein in favour of any foreign person’.If X attempted to settle the restricted residential property on trust for Y, then presumably the trust is void and the property is held on resulting trust for X's estate.However, this does not necessarily mean that the faraid beneficiaries will automatically be able to ‘claw back’ the residential property fully.Assuming that X died intestate with regard to the residential property, then the next issue would be what is the choice of law of intestate succession?It is likely that Singapore law would follow the English rule that the succession of immovables to an intestate is governed by the lex situs. 90 The *82 Administration of Muslim Law Act 91 does not apply because it only affects Muslim persons domiciled in Singapore.Instead the applicable statute governing this issue would be the Intestate Succession Act. 92 Section 4(2) of the Intestate Succession Act specifically provides that the ‘distribution of the immovable property of a person deceased shall be regulated by this Act wherever he may have been domiciled at the time of his death’.

If the trust property consists of moveables such as cash, then there should be no restrictions for X to transfer the property to the trustees to hold on trust for Y.

Capacity to create an inter vivos trust

With regard to the settlor's capacity to create an inter vivos trust, there are three possibilities for the choice of law governing this issue:

(i)

the proper law of the trust;

(ii)

the law where the moveables are situated; or

(iii) the law of the settlor's domicile. 93

In Singapore, the question is governed by s 90(1) of the Trustees Act 94 which provides that:

‘… where a person creates a trust or transfers movable property to be held on an existing trust during his lifetime, he shall be deemed to have the capacity to so create the trust or transfer the property if he has capacity to do so under any of the following laws:

(a)

the law applicable in Singapore;

(b)

the law of his domicile or nationality; or

(c)

the proper law of the transfer.’

Section 90(2) explicitly states:

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‘No rule relating to inheritance or succession shall affect the validity of a trust or the transfer of any property to be held on trust if the person creating the trust or transferring the property had the capacity to do so under subsection (1).’

Thus, the resultant effect of ss 90(1) and 90(2) of the Trustees Act is that the issue is divided into two stages.First, s 90(1) provides that the capacity to create the trust or transfer movable property is governed by either Singapore law, the law of domicile or the proper law of the transfer.As long as the settlor has the capacity to create the trust or transfer movable property under any of the following laws, then the settlor will be deemed to have the capacity to create the trust or transfer the property.It is suggested that for a foreign settlor the most helpful reference would be to Singapore law since this would exclude any foreign forced heirship laws.Section 90(4) makes it clear that the reference to ‘ “law” does not include any choice of law rules forming part of that law.’This section appears to be designed to eliminate the possibility of the operation of inter-personal choice of law rules which might lead to the application of the foreign forced heirship rules.The upshot of this sub-section is that the reference to Singapore law in s 90(1) of the Trustees Act is a reference to domestic civil law.Thus, in the hypothetical, *83 X would have the capacity to create the trust and transfer the property pursuant to s 90(1) of the Trustees Act even if this was in breach of the forced heirship laws of X's domicile.This is because under Singapore law, X does not face any legal impediment to creating the trust or transferring the property.Second, s 90(2) stipulates that the question of the validity of a trust or the transfer of any property to be held on trust specifically excludes inheritance or succession rules if the person had the capacity to do so under s 90(1) of the Trustees Act.Read together, ss 90(1) and 90(2) are intended to exclude the operation of foreign inheritance or succession rules which might invalidate a Singapore trust.

It is also vital to highlight the significance of s 90(3) of the Trustees Act.Section 90(3)(a) provides that s 90(1) does not apply if the person creating the trust or transferring the property is a citizen of Singapore or is domiciled in Singapore.This suggests that s 90(1) is not meant to affect the issue of interpersonal conflict of laws with regard to Singaporeans or persons domiciled in Singapore.Section 90(3)(b) is also important because it provides that s 90(1) only applies ‘in relation to a trust only if the trust is expressed to be governed by Singapore law and the trustees are resident in Singapore’.Therefore, settlors who wish to take advantage of the operation of s 90(1) of the Trustees Act ought to include Singapore as the choice of law in their trust deed and select Singapore trustees.

Despite the wide ambit of s 90 of the Trustees Act it may not be wholly effective especially where there are complex cross border issues.An example would be a purported trust consisting of shares in foreign companies. 95 While s 90(1) of the Trustees Act may arguably apply and deem the settlor as having both the capacity and the right to transfer the shares, this position might not be recognised by the law of the country in which the company was incorporated or the country where the register of the company is situated.The foreign jurisdiction might decide that the foreign forced heirship rule take precedence over s 90(1) of the Trustees Act and as a result will not recognise the trust.If so, the Singaporean trustee will not be able to register his or her name as the legal owner of the shares or assert any rights associated with share ownership in the foreign company.This simple example illustrates the complexity involved in a trust holding shares of foreign companies.In any case, anecdotal evidence suggests that most professional trustees are quite reluctant to hold foreign shares on trust due to the onerous duties that this entails. 96

2. X, a Singaporean Muslim or a Muslim person domiciled in Singapore, settles a trust for Y

Matters become more controversial when the settlor, X, is a Muslim person and a Singapore citizen or a Muslim person domiciled in Singapore.Does X have the capacity to create such an inter vivos trust?This question is complicated by s 111 of the Administration of Muslim Law Act 97 which provides that:

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‘… no Muslim domiciled in Singapore shall…dispose of his property by will… except in accordance with the provisions of and subject to the restrictions imposed by the school of Muslim law professed by him.’

Can it be argued that the inter vivos trust is avoided as a result of a contravention of this provision?

*84 Although there are no cases directly on point, it is suggested that an inter vivos trust is not caught under the provisions of the Administration of Muslim Law Act.A literal reading of s 111 of the Administration of Muslim Law Act makes it clear that this is a prohibition in relation to a disposal of property by will and not an inter vivos transfer of property.If the property is settled on an inter vivos trust, then there is a strong argument to say that this matter is entirely outside the purview of this section.The recent Court of Appeal decision in Shafeeg bin Salim Talib and another v Fatimah bte Abud bin Talib and Others 98 implicitly supports this argument. Shafeeg was a case where the Singapore Court of Appeal considered whether the right of survivorship inherent in joint tenancies offended the provisions of the Administration of Muslim Law Act.In this case, the deceased, who is a Muslim person, held the property on joint tenancy with his wife.On his death, the faraid beneficiaries challenged the operation of the right of survivorship as being inconsistent with syariah law.In dismissing this challenge, Chan Sek Keong CJ relied on the Malaysian case of Re Man bin Mihat, Decd 99 and said:

‘…there is no restriction against a Muslim giving away all his property inter vivos during his lifetime to any person he wishes, and thereby depriving his legal heirs under Muslim law of any estate which they can inherit.’

The Malaysian case of Re Man bin Mihat, Decd 100 also suggests that an inter vivos trust is not subject to Muslim inheritance laws.The deceased created a statutory trust over his insurance policy in favour of his wife.On his death, one of the contentions was that the proceeds from the insurance ought to be subject to Muslim inheritance laws.Suffian J rejected this argument saying:

‘Muslim law rigidly prescribes the share of every heir and no alteration of these shares may be made by will, for a bequest to an heir requires the consent of all co-heirs and a bequest to strangers may not take effect beyond of the testator's estate, but there are no restrictions beyond these two limitations.So it is lawful for a Muslim to alter the prescribed shares of his heirs by disposing outright during his lifetime part or the whole of his property to a favoured wife, either directly by way of a gift inter vivos or indirectly through trustees.’

The passage above was cited with approval by Chan Sek Keong CJ in Shafeeg. 101 Thus, it is likely that a Singapore court would hold that it is lawful for a Muslim person to create an inter vivos trust.This position is bolstered by the fact a Muslim person is entitled to create irrevocable trust nomination for their insurance policies pursuant to s 49(L) of the Insurance Act. 102 Since a Muslim person is allowed to create such a trust over an insurance policy, it is contended that a Muslim person may similarly declare an inter vivos trust.

In any case, it might be advisable for a Muslim settlor to execute a nuzriah/nasr *85 contemporaneously with the settling of the inter vivos trust. 103 Sproules J described the nuzriah as follows in Re Fatimah binte Mohamed bin All Al Tway, Decd: 104

‘A Nasr is a kind of bargain with the Almighty.A donor vows, conditionally upon recovery from an illness, or the fulfilment of some other dear wish, that he will make a gift, it may be a sacrificial offering, it may be to charity or to some individual for the sake of God.If the heart's wish be granted then the vow in God's name becomes irrevocable by a devout Mohamedan.’

The nuzriah may lessen litigation risk faced by the beneficiaries of the inter vivos trust.It is interesting to note the Islamic Religious Council of Singapore's ( Majlis Ugama Islam ) position on the nuzriah. On their website, 105 the following examples are given:

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‘For example: making a nuzriah to give all of one's wealth to his wife with the intention of preventing his disobedient and disrespectful child from receiving anything is considered haram [forbidden] in Islam. [translation added]

On the other hand, making a nuzriah to ensure the well-being of another party after a person's death is permissible in Islam.For example: someone who makes nuzriah to give his house to his wife with the intention that the house will not be sold and distributed among his legal beneficiaries.This will ensure that his wife will still have a house after his death.The nuzriah is permissible in Islam.However, his other estates or wealth should be distributed among his legal beneficiaries according to the law of faraidh.’

The argument that a nuzriah may be used to validate an inter vivos trust under Islamic law is implicitly supported by Islamic Religious Council of Singapore's fatwa in 2008 on joint tenancies. 106 The fatwa declares that where no arrangements have been made between joint tenants, the surviving joint tenant will only have 50 per cent of the property upon the death of the other owner.The remaining 50 per cent of the property would presumably be distributed in accordance with faraid. However, the fatwa goes on to say that where there is a nuzriah:

‘… which expressly states that the property is to be given wholly to the surviving joint tenant, in the event of death of one of the joint tenants, then the entire property shall vest in the surviving joint tenant’.

Thus, it may be argued by analogy that a nuzriah might be used to validate an inter vivos trust under Islamic law.

*86 There are limitations to the use of the nuzriah. If the nuzriah is meant to take effect as a testamentary disposition, then it would probably be struck down.The courts will examine this question by looking at the substance of the transaction and not the form.In this regard, it is worth mentioning the judgment of Rubin J in Mohamed Ismail bin Ibrahim and another v Mohammad Taha bin Ibrahim 107 which considered the nuzriah. In Mohamed Ismail, the nuzriah was contained in a will and purported to take effect three days before or one hour before the death of the testator.As such, it was unsurprising that the learned judged held that the nuzriah was invalid because it transgressed Muslim inheritance laws. 108 However, it is interesting to note that Rubin J said:

‘If the portion delineated was given away during his lifetime by the testator to the named beneficiaries, it would have constituted a gift inter vivos and the plaintiffs would not have been in a position to challenge the said direction, for there is no legal impediment in Muslim law for a person to give away any amount of his wealth or assets during his lifetime.’

Thus, the takeaway lesson from Mohamed Ismail for persons who are drafting a trust for Muslims is to ensure that the trust is an inter vivos trust and that the property is transferred to the trust while the settlor is alive.Any transfer of property by will to the trust is vulnerable to being challenged as being inconsistent with the Administration of Muslim Law Act.

The conclusion on the use of the nuzriah is that while its binding effect is subject to some dispute under secular and syariah law, 109 the presence of a nuzriah might pose as a moral and psychological disincentive to some faraid beneficiaries from challenging the trust.This is because the nuzriah represents a solemn irrevocable vow with God that the deceased made to dispose his or her property in a certain way and faraid beneficiaries might be wary of disrupting the deceased's vow.

Conclusion

This paper has examined the various possible ways in which a Singapore trust might be attacked by private

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law claimants.It is foreseen that these claimants would principally be divorcing spouses, bankruptcy creditors and disappointed heirs.As demonstrated in this paper, the primary hurdle for such claimants is to obtain information and documents from the trustees.In this regard, Singapore law imposes an onerous duty of confidentiality on licenced trust companies.Compounding the difficulties for such claimants is the fact that the trust might be structured in such a manner where the settlor technically no longer has any beneficial interest in the trust.Thus, the upshot of this paper is that the Singapore trust if properly structured, while certainly not an impregnable fortress, would be able to withstand most attacks.

Associate Professor, Faculty of Law, National University of Singapore.I owe a debt of gratitude to the following people who have helped me with this paper: Tan Choog Ing, Dora Neo, Chan Wing Cheong, Lee Woon Shiu, Hans Tjio, Daphne Chang, Alfred Dodwell, Stephen Phua, KC Lye, Jeffrey Pinsler, Wee Meng Seng, Tracey Evans Chan, Barry Crown, Debbie Ong, Yeo Tiong Min, Rachel Leow, Shãn Warnock-Smith, Jonathan Speck, Joshua S Rubenstein, Tan Yock Lin and the anonymous referees.The usual caveats apply.This paper was first presented at Legalweek's Private Client Forum Asia Conference: Wealth Management for a New Generation, Shangri-La Hotel, Singapore, 12 October 2010.

1 . For a background of the rise of Singapore's trust industry see H W Tang, ‘Teaching Trust Law in the Twenty First Century’ in E Bant and M. Harding (eds), Exploring Private Law, (CUP, 2010), pp 125,

132-136.

2 . For an overview of the changes to the trust legislation see H W Tang and D P Sandrasegara, ‘Equity and Trusts ’ in KS Teo (ed), Developments in Singapore Law Between 2001 and 2005 (Singapore Academy of Law, Singapore, 2006) pp 892--94. 3 . These efforts are described in a speech by the Deputy Managing Director of Monetary Authority of Singapore, Mr Ong Chong Tee at a Private Wealth Management Conference in 2006 at

http://www.mas.gov.sg/news_room/statements/2006/Private_Wealth_Management_Conference.html

4 . ‘Tougher for Investors to Apply for PR Status’, in The Straits Times, (Singapore), 1 October 2010. 5 . See L Tan, ‘Spore Needs Up to 1,000 More Wealth Managers Now’ in The Straits Times (Singapore) 30 June 2006. 6 . E Leow and S Michaels, ‘Has Banking Secrecy Come to an End on Singapore?’, The Business Times (Singapore) 8 June 2010. 7 . The locus classicus on sham is of course Snook v London and West Riding Investments Ltd [1967] 2 QB 786. Snook has been applied in Singapore.See, eg Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and another [2008] 1 SLR(R) 375. 8 . See Midland Bank v Wyatt [1997] 1 BCLC 242 (noted S Warnock-Smith, ‘Midland Bank v Wyatt: Sham Trusts Come to the United Kingdom’ (1994) 6 PCB 410).See also M Conaglen, ‘Sham Trusts ’ (2008) 67 CLJ 176; P Matthews, ‘The Sham Argument and How to Avoid It’ (2007) 21 TLI 191. 9 . [1928] AC 444. 10 . See, eg A Phang, The Development of Singapore Law : Historical and Socio-Legal Perspectives, (Butterworths, 1990). 11 . See generally I J Hardingham and R Baxt, Discretionary Trusts , (Butterworths, 1975). 12 . See, eg Schmidt v Rosewood Trust Ltd [2003] AC 709 (noted by D Davies, ‘Integrity of Trusteeship’ (2004) 120 LQR 1).See also P Matthews, ‘Black Hole Trust: Uses, Abuses and Possible Reforms Part 1 and Part 2’ [2002] 1 PCB 42; [2002] 2 PCB 103. 13 . Ibid. 14 . On the trustees duties on appointment see J Mowbray, ‘Choosing Among the Beneficiaries of a Discretionary Trusts ’ [1998] PCB 239.See also Breakspear v Ackland [2009] Ch 32 (noted T H Tey, ‘Letters of Wishes and Trustee's Duties’ (2008) 22 TLI 126; G Griffiths, ‘An Inevitable Tension?The Disclosure of Letters of Wishes’ [2008] Conv 322; D Fox, ‘Disclosure of a Settlor's Wish Letter in a Discretionary Trust’

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(2008) 67 CLJ 252).A letter of wishes was used in a local context in Rajabali Jumabhoy and others v Ameerali R Jumabhoy and others [1997] 2 SLR(R) 296. 15 . See [1971] AC 424, 457. 16 . See, eg Charman v Charman [2007] EWCA Civ 503. 17 . On trust protectors see P Matthews, ‘Protectors: Two Cases, Twenty Questions’ (1995) 9 TLI 108; D W M Waters, ‘The Protector: New Wine in Old Bottles?’ in A J Oakley, (ed), Trends in Contemporary Trust Law (Clarendon, 1996), p 63; ‘Protectors’ in The International Trust, (Jordans, 2006), p 193; A Duckworth, ‘Protectors: Fish or Fowl?Parts 1, 2 and 3’ (1996) PCB 169, 245, 328; T H Tey, ‘Trust Protector’ (2008) 20 SAcLJ 99; G Thomas and A Hudson, The Law of Trusts , (OUP, 2010), paras 23.34-23.36. 18 . T H Tey, ‘Trust Protector’ (2008) 20 SAcLJ 99, 133. 19 . [2007] EWCA 11, 1 All ER (Comm) 475 (noted by A Trukhtanov, ‘The Irreducible Core of Trust Obligations’ (2007) 123 LQR 342). 20 . Armitage v Nurse [1998] Ch 241. 21 . If the protector is given too many duties, it may be that the protector ought to be treated as a trustee de son tort. 22 . ‘Opening Address by the Honourable Chief Justice Chan Sek Keong’ in H Tjio, (ed), The Regulation of Wealth Management, (NUS, 2008), xxvi. 23 . Ibid. 24 . G S Alexander, ‘Trust Protectors: Who Will Watch the Watchmen?’ (2006) 27 Cardozo Law Review 2807; S E Sterk, ‘Trust Protectors, Agency Costs, and Fiduciary Duty’ (2006) 27 Cardozo Law Review 2761; T Z W Tan, ‘The Irreducible Core Content of Modern Trust Law’ (2009) 15 Trust and Trustees 477,

482--485.

25 . The modern principles of disclosure of information have been restated in Schmidt v Rosewood Trust Ltd [2003] AC 709.See also L Ho, ‘Trustees' Duties to Provide Information’ in E Bant and M Harding (eds), Exploring Private Law (CUP, 2010), 343. 26 . (Cap 336, 2006 Rev Ed).Section 15 of the Trust Companies Act exempts certain institutions like banks and merchant banks from obtaining a trust licence.However, the Monetary Authority of Singapore may prescribe that certain portions of the Trust Companies Act would be applicable to such institutions. 27 . See, eg Schmidt v Rosewood Trust Ltd [2003] AC 709. 28 . See, eg JvV [2003] EWHC 31110; Minwalla v Minwalla [2005] 1 FLR 771; Charman v Charman [2007] EWCA Civ 503; AvA [2007] EWHC 99; Mubarak v Mubarak [2007] EWCA Civ 879, [2008] JRC 136. 29 . Section 93, Women's Charter (Cap 352, 2009 Rev Ed). 30 . For a comprehensive discussion of the case law see W K Leong,Elements of Family Law, (LexisNexis, 2007), 665-758. 31 . Chan Teck Hock David v Leong Mei Chuan [2002] 1 SLR 177. 32 . Ng Ngah Len @ Datin Sandra Kuah v Kuah Tian Nam @ Dato Peter Kuah [2003] SGHC 109. 33 . Found in The Subordinate Courts Practice Directions, (2006 Ed) at

http://app.subcourts.gov.sg/Data/Files/File/PracticeDirections/MasterPD_9_6_2010.pdf

34 . Form E may be found here http://www.hmcourts-service.gov.uk/courtfinder/forms/form_e_1205.pdf 35 . (Jordans, 2007), p 127. 36 . [2004] SGDC 131. 37 . See also Shi Fang v Koh Pee Huat [1996] 1 SLR(R) 906 which suggests that where the property is not considered to be matrimonial asset if a spouse is holding it on a purchase price resulting trust in favour of a third party. 38 . ‘Opening Address by the Honourable Chief Justice Chan Sek Keong’ in (H. Tjio, (ed), The Regulation of Wealth Management, (NUS, 2008), xxv. The case was not actually reported.However, the same parties came before Selvam J in Marie Eileen Guin Nee Fernandez v Arun Guin [1994] SGHC 157. 39 . See Marie Eileen Guin Nee Fernandez v Arun Guin [1994] SGHC 157. 40 . [2009] 2 SLR(R) 961, para 27.

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41 . See, eg s 24(1)(c) of the Matrimonial Causes Act 1973; s 6 of the Civil Partnership Act 2004. 42 . (Cap 352, 2009 Rev Ed).Cf CH v CI [2004] SGDC 131. 43 . (Cap 337, 2005 Rev Ed). 44 . This section is similar to s 57 of the UK Trustees Act 1925.See Sutton v England [2010] WTLR 335; Re Thomas [1930] Ch 194; Re Downshire [1953] Ch 218; Re Freeston's Charity [1978] 1 WLR 741. 45 . [2004] SGDC 131. 46 . [2007] 1 SLR(R) 75. 47 . Ibid, para 24. 48 . (Cap 61, 1994 Rev Ed).See Quah Kay Tee v Ong and Co Pte Ltd [1996] 3 SLR(R) 637. 49 . [2005] 4 SLR(R) 561. 50 . See, eg Charman v Charman [2007] EWCA Civ 503. 51 . Ibid. 52 . See Mark Harper et al (eds), International Trust and Divorce Litigation (Jordans, 2007), 67-77. 53 . See Ord 66 of the Rules of Court; J Pinsler et al (eds), Supreme Court Practice 2009, 1307-1312. 54 . [1987] QB 433.The result was overturned by House of Lords in [1990] 1 AC 723 but the ‘balancing exercise’ analysis was endorsed. 55 . Ibid, 486. 56 . See also Susilawati v American Express Bank Ltd [2009] 2 SLR(R) 737 where the Singapore Court of Appeal said that Singapore's statutory regime on banking secrecy left no room for the four general common law exceptions to co-exist. 57 . [1990] 1 AC 723. 58 . (Cap 336, 2006 Rev Ed). 59 . (Cap 336, 2006 Rev Ed). 60 . [1990] 1 AC 723. 61 . Tournier v National Provincial and Union Bank of England [1924] 1 KB 461. 62 . [1981] AC 1096, 1168. 63 . See discussion in Mark Harper et al (eds), International Trust and Divorce Litigation, (Jordans, 2007),

62-67.

64 . On Jersey's experience in dealing with such issues see D Hayton, ‘Death of a Marriage: Marital Breakups and Interests under Trusts ’ (2010) 16(8) Trust and Trustees 617. 65 . [2010] 1 SLR 1129, para 14. 66 . LexisNexis, 2009.See the difficult litigation Murakami Takako v Wiryadi Louise Maria [2008] 3 SLR(R) 198; Murakami Takako (executrix of the estate of Takashi Murakami Suroso, deceased) v Wiryadi [2007] 4 SLR(R) 565; Murakami Takako v Wiryadi Louise Maria and others [2007] 1 SLR(R) 1119; Murakami Takako (executrix of the estate of Takashi Murakami Suroso, deceased, Wiryadi [2009] 1 SLR(R) 508.However, it is impossible to draw definitive general principles from this series of litigation since they essentially involved questions of interlocutory procedure. 67 . [2003] AC 709 (noted by D Davies, ‘Integrity of Trusteeship’ (2004) 120 LQR 1). 68 . (Cap. 336, 2006 Rev Ed). 69 . Section 2, Trust Companies Act (Cap. 336, 2006 Rev Ed). 70 . Section 49(3), Trust Companies Act (Cap. 336, 2006 Rev Ed). 71 . Clarkson v Clarkson [1994] BCC 921. 72 . See eg Grupo Torras SA v Al-Sabah (No 8) [2004] WTLR 1. 73 . [2005] 1 FLR 771, paragraphs 54--55. 74 . (Cap 61, 1994 Rev Ed).Section 86 of the Trustees Act (Cap 337, 2005 Rev Ed) makes it clear that this section is applicable to a trust.See also Quah Kay Tee v Ong and Co Pte Ltd [1996] 3 SLR(R) 637.See also In re Butterworth (1881--1882) L R Ch D 588. 75 . Section 60 of the Bankruptcy Act (Cap 20, 2009 Rev Ed). 76 . See s 61(d) of the Bankruptcy Act (Cap 20, 2009 Rev Ed).See also Ambank Bank (M) Bhd v Yong Kim

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Yoong Raymond [2009] 2 SLR(R) 659. 77 . Sections 98 and 100 of the Bankruptcy Act (Cap 20, 2009 Rev Ed).Section 87(1) of the Trustees Act (Cap 337, 2005 Rev Ed) makes it clear that these bankruptcy provisions apply to a trust. 78 . (Cap 50, 2006 Rev Ed). 79 . See Companies (Application of Bankruptcy Provisions) Regulations.See also E B Lee, ‘The Avoidance Provisions of the Bankruptcy Act 1995 and Their Application to Companies’ [1995] Sing JLS 597. 80 . See generally T H Tey, Trusts and Forced Heirship (NUS, 2010).

81 . For an overview see P Matthews, ‘Capacity to Create a Trust: The Onshore Problems, and the Offshore Solutions’ (2002) 6 Edin L R 176; A Duckworth, ‘Forced Heirship -- Where Are We Now?’ (2005) 4 PCB

208.

82 . See, eg In re The Lemos Trust Settlement (1992-93) CILR 26 and Lemos & Others v. Coutts & Co (Cayman) Ltd and Others (1992-93) CILR 5. 83 . For Singapore see s 114 of the Administration of Muslim Law Act (Cap 3, 2009 Rev Ed); Mohamed Ismail bin Ibrahim and another v Mohammad Taha bin Ibrahim [2004] 4 SLR(R) 756.See also Y L Tan, Conflicts Issues in Family and Succession Law (Butterworths, 1993), pp 91-117. 84 . These two scenarios are constructed for the purposes of discussion.A settlor might well choose to settle a very widely drafted discretionary trust with a corresponding letter of wishes expressing the settlor's wish that Y is to be the primary beneficiary of the trust. 85 . See, eg Re Fatimah binte Mohamed bin All Al Tway, Deceased [1933] 1 MLJ 211.See L Collins et al (eds), Dicey and Morris The Conflict of Laws (Sweet & Maxwell, 2006), r 123. 86 . See s 4 of the Residential Property Act (Cap 274, 2009 Rev Ed).See also S Y Tan et al ( eds), Tan Sook Yee's Principles of Singapore Land Law (LexisNexis, 2009), Ch 10. 87 . (Cap 274, 2009 Rev Ed). 88 . (Cap 232, 1998 Rev Ed). 89 . Section 3 of the Residential Property Act (Cap 274, 2009 Rev Ed). 90 . See s 4(2) of the Intestate Succession Act, (Cap 146, 1985 Rev Ed).See alsoSoundara Achi v Kalyani Achi [1953] MLJ 147; Y L Tan, Conflicts Issues in Family and Succession Law, (Butterworths, 1993),

593-594.

91 . Section 112 of the Administration of Muslim Law Act (Cap 3, 2009 Rev Ed). 92 . (Cap 146, 1985 Rev Ed). 93 . See P Matthews, ‘Capacity to Create a Trust: The Onshore Problems, and the Offshore Solutions’ (2002) 6 Edinburgh Law Review 176 for a very thorough discussion of this issue. 94 . (Cap 337, 2005 Rev Ed). 95 . See generally M Ooi, Shares and Other Securities in the Conflict of Laws (Oxford, 2003). 96 . See Bartlett v Barclays Bank (Nos 1 and 2) [1980] 2 WLR 430. 97 . (Cap 3, 2009 Rev Ed). 98 . [2010] 2 SLR 1123. 99 . [1965] 2 MLJ 1. 100 . [1965] 2 MLJ 1. 101 . [2010] 2 SLR 1123, para 24. 102 . (Cap 142, 2002 Rev Ed).See also s 111 of the Administration of Muslim Law Act (Cap 3, 2009 Rev Ed). 103 . On the nuzriah see generally Hairani Saban Hardjoe, ‘Estate Planning for Muslims -- Industry and Legal Dilemmas’ (2010) Law Gazette at http://www.lawgazette.com.sg/2010-06/feature2.htm Cf. there might be technical difficulties in executing a nuzriah in Singapore because such an instrument would have to be sanctioned and validated or ratified in writing in accordance with Muslim law by the President of Islamic Religious Council of Singapore ( Majlis Ugama Islam ).See s 60 of the Administration of Muslim Law Act (Cap 3, 2009 Rev Ed). 104 . [1933] 1 MLJ 211.

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105 . http://www.muis.gov.sg/cms/oomweb/irsyad.aspx?id = 14408 106 . http://www.muis.gov.sg/cms/oomweb/fatwa.aspx?id = 14386 107 . [2004] 4 SLR(R) 756. 108 . Cf. it is interesting to note that such a gift would probably be valid under Jewish law.See, eg B C Wolf, ‘Resolving the Conflict between Jewish and Secular Law’ (2009) 37 Hofstra Law Review 1171, 1186-1188. 109 . ‘Report on the Muslim Law Practice Committee Roundtable: Implications of Shafeeg's Case’, Law Gazette, August 2010, 21.

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