Do not break the trust after a trust is created - The law on concurrence examined

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Introduction

Dentons Rodyk acted for Mdm Harianty Wibawa, the settlor of an offshore discretionary trust which has a value exceeding US$45 million (taking into account distributions of some US$10 million). One of the beneficiaries and the named Protector of the trust (her eldest son) disputed that his elderly mother, Mdm Harianty Wibawa, was the beneficial owner of the funds settled into the offshore trust hence she was in breach of her duty as executrix of the estate of his deceased father, Mdm Harianty Wibawa’s husband. Instead the eldest son alleged that he was entitled to a part of the trust assets as a beneficiary under the father’s will. The High Court dismissed the eldest son’s claims and ruled in favour of his mother.

Background to the Plaintiff’s claims

In 2011, Mr Kuntjoro Wibawa (the Plaintiff) brought a civil suit against his elderly mother, Mdm Harianty Wibawa (Mother), and siblings, the trust vehicle, the trustee, and the private bank who had advised to set up the offshore discretionary trust in 2003. The Plaintiff alleged that the funds settled into the trust (which originated from seven bank accounts in various names of the family members) belonged to his late father and should be distributed under a will made in 1996. The Plaintiff alleged that Mother had wrongfully used the deceased’s estate to set up the trust and breached her duty as executrix and trustee.

Alternatively, the Plaintiff alleged breaches of trust against Mother and his siblings in respect of the funds settled into the trust, in that he was entitled to such a part based on a constructive trust as a joint bank account holder (the Account Holders’ Trust).

There were complex issues of whether the offshore discretionary trust was properly settled, the accuracy of the dispositions made by Mother, and the actions of the Plaintiff himself, including his role in setting up the trust, and whether he retained any interest in the assets before they were settled into the trust. The suit was tried in the Singapore High Court over 16 days in 2015. The judgment in favour of Mother was delivered by the court in June 2016.

The Plaintiff was intimately involved in the creation of the offshore discretionary trust (the Trust) with the advice and assistance of a wealth planner, a senior officer of the private bank. The siblings were not aware of, and not involved in, the setting up of the Trust. The use of the Trust in conjunction with an underlying company to hold the trust funds under the trust structure was designed to protect the family’s wealth and privacy. Mother was named as the settlor of the Trust and the Plaintiff was its first protector. The beneficiaries of the Trust were Mother, the Plaintiff and his siblings (the family members).

After the Trust was constituted and properly settled, the Plaintiff made investment decisions pursuant to his role as protector of the Trust.

However, at the trial, the Plaintiff claimed that he was unaware of the terms of the trust instrument that his Mother signed as he was not present at the material time and did not know about the setting up and administration of the Trust at all. The Plaintiff alleged that the trust discussed with the wealth planner was not the Trust that was eventually set up, i.e. Mother had set up her own private trust and it was a different trust.

The High Court’s decision in dismissing the Plaintiff’s claims

The judge analysed the Plaintiff’s alternative claim first, and held that the Plaintiff’s argument regarding the Account Holders’ Trust should be rejected because he had not put forward the basis, legal and factual, for his assertion. Thus, the Plaintiff was unable to prove his alternative claim.

The judge held that the assets in the seven bank accounts were estate assets but noted that the events in 2003 were pivotal in dismissing the Plaintiff’s claims against his Mother.

The judge examined the extent of the Plaintiff’s knowledge and involvement in the setting up of the Trust in 2003 because it went to the heart of his case. It was established that Mother understood only Mandarin and was neither able to read nor speak English. The trust instrument documents from the wealth planner were in English. The wealth planner spoke English and depended on the family’s relationship manager to translate the documents in Mandarin to the Mother before requesting her signature. The judge also found that the private bank’s file notes and the paper work involved prior to the creation of the Trust revealed that the Plaintiff was very much involved. Mother had placed a great deal of trust in the Plaintiff in the creation and setting up of the Trust.

The court found that the Plaintiff appreciated the benefits of a discretionary trust and that it provided an efficient vehicle for the transfer of beneficial ownership interests on the death of a settlor without the need to obtain a grant of probate or similar formalities.

The Plaintiff was comfortable with the creation of the Trust and thereafter acted as the protector and investment manager. This could only have come about because the Plaintiff consented to the setting up of the Trust so as to protect the family wealth.

Concluding points

The judge held that consent or concurrence is a positive defence to the Plaintiff’s claims. In the circumstances, it could not be fair and equitable that, having given his concurrence, the Plaintiff should now turn around and sue his Mother for setting up the Trust.

The judge also noted that there were other defences available to Mother or reasons for dismissing the Plaintiff’s claims, even if she was found to have been in breach of trust. The judge observed that, after the Plaintiff knew about his father’s will, the Plaintiff did not detract from the objective to protect the family wealth with the use of an offshore discretionary trust with Mother as settlor of the Trust. Hence, the Plaintiff had acquiesced to the Mother’s settlement of the Trust with the estate assets.

Moreover, the defence of estoppel by convention would have applied to stop the Plaintiff’s claims about Mother’s alleged breach of trust, from going back on the assumptions that the Trust was to be set up with the estate assets settled therein for the protection of family weath, that Mother was the settlor of the Trust, and that distribution of the family wealth would be from the trustee under the terms of the Trust.


Dentons Rodyk’s Litigation & Arbitration Practice Group partner Lek Siang Pheng led the defence at trial as lead counsel; he was assisted by his team comprising partners Koh Kia Jeng, Tan Yee Siong and senior associate Amogh Chakravarti.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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