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Grounds publishedDecided 26 Feb 2013
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High Court

Chng Bee Kheng and another (executrixes and trustees of the estate of Fock Poh Kum, deceased) v Chng Eng Chye

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[2013] SGHC 48Case no. Suit No 860 of 2011

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  1. Chan Seng Onn J:

  2. Introduction

  3. [1] The dispute arises out of the administration of the estate of the parties’ deceased mother, the late Mdm Fock Poh Kum (“Mdm Fock”). It concerns the beneficial ownership of a two-storey linked house with a land area of approximately 5,712 square feet or 531 square metres at 7 Robin Walk Singapore 258152 (the “Property”), which is the subject of a trust deed. The disputing parties are family members. The Plaintiffs, who are the executrixes and trustees of Mdm Fock’s estate, claim that the Property is held on trust for Mdm Fock’s estate. The Defendant, who is the brother of the Plaintiffs and the legal owner of the Property, alleges that the trust deed is a sham and does not mean what it says. Mdm Fock’s estate therefore is not the beneficial owner of the Property.

  4. Background

  5. [2] Although the trial was relatively short with just five witnesses from both sides, the dispute revolves around events which took place over the course of four decades. The determination of the key issues, in my view, turns on one’s interpretation of the factual matrix, particularly the intention of the key family members at the material time and the nature of the relationships between the family members. I have therefore endeavoured to illustrate as much of the context as is relevant to the ascertainment of the intention and knowledge of the key protagonists.

  6. The family

  7. [3] Mdm Fock married Mr Chng Gim Cheng (“Mr Chng”) in 1944. They have six children. The Defendant is the second eldest, while the 1 and 2 Plaintiffs are the fourth and sixth child respectively. Mr Chng passed away on 3 September 1988, while Mdm Fock passed away more recently on 23 November 2009. The other three children are Chng Bee Suan (“Bee Suan”), the eldest; Chng Eng Hwee, the third eldest; and Chng Bee Choo, the fifth eldest. The Defendant’s wife, Augustine Chng (“Augustine”), moved in and stayed with the family at the Property when she married the Defendant in 1977.

  8. The Property

  9. [4] The Property was purchased for $260,000 and was paid for in various tranches, as evidenced by receipts signed off by Mr Robert Hsieh of Boswell, Hsieh & Lim (“Mr Hsieh”), who was the solicitor acting for Mr Chng. The last tranche was paid on 21 February 1974. The transfer of the Property was executed and lodged on 23 February 1974, though the Property was only registered in the Defendant’s sole name on 11 March 1974. It is not clear why there was this lapse of time of 16 days between the execution and lodgement of the transfer and the registration of the Defendant as the owner of the Property.

  10. [6] The entire family of eight stayed in a flat at 33-B Tiong Poh Road (the “Tiong Poh flat”) before they moved into the Property in 1974. The Tiong Poh flat was fully paid for by Mr Chng, but was registered in Mdm Fock’s name to protect it from Mr Chng’s potential business creditors. At the Property, Mr Chng and Mdm Fock occupied the master bedroom, while the six children shared the other three rooms. After the Defendant got married in 1977, he and Augustine stayed in the Defendant’s room. Except for the Defendant, Mr Chng’s other five children moved out of the Property when they got married. The 2 Plaintiff was the last to move out in 1987. When Mr Chng passed away, Mdm Fock continued to occupy the master bedroom.

  11. The Trust Deed

  12. [7] A trust deed was executed by the Defendant as trustee on 23 February 1974 (the “Trust Deed”), even though the Defendant was only registered as the owner of the Property 16 days later on 11 March 1974. However, it is significant to note that the Trust Deed was executed on the same day that the transfer of the Property was executed and lodged on 23 February 1974. The Trust Deed, which was drafted and witnessed by Mr Hsieh, reads:

  13. [8] In essence, the Trust Deed states that: (a) the purchase price of the Property was provided by Mdm Fock; and (b) the Property was transferred to the Defendant to be held on trust for Mdm Fock.

  14. Key events after Mdm Fock’s death

  15. (i) The 31 January 2010 meeting

  16. [11] On 10 January 2010, the 2 Plaintiff distributed copies of the Will to the family. On 31 January 2010, there was a meeting at the 1 Plaintiff’s home to discuss the administration of Mdm Fock’s estate. All six children were present. The Plaintiffs informed everyone of the Trust Deed at this meeting. At this point, there is a divergence of views as to what transpired. According to the 2 Plaintiff, the Defendant said that he had signed the Trust Deed and that it remained valid. When the 1 Plaintiff stated that the Property had to be included in the Schedule of Assets as part of Mdm Fock’s estate, the Defendant purportedly replied that the Plaintiffs could “go ahead”. The Defendant’s version, however, was that he had maintained that he was the rightful owner of the Property.

  17. (ii) The 19 April 2010 letter

  18. [12] On 19 April 2010, the Defendant wrote a letter to the Plaintiffs marked “Without Prejudice” (“the 19 April 2010 Letter”). In the letter, he disagreed that he was holding the Property on trust for Mdm Fock (or her estate). The Defendant also asserted that “the money to purchase the Property came from [him]”, and that the Trust Deed was executed “simply to give [Mdm Fock] peace of mind so that she could live in the Property without fear of being evicted one day”. The Plaintiffs responded with a letter on 4 May 2010 and proposed a meeting to “address and resolve the issues at hand”.

  19. (iii) The 24 May 2010 meeting

  20. [13] A meeting took place on 24 May 2010 at the Defendant’s office at Sumber Holdings (“the 24 May 2010 Meeting”). It was attended by Bee Suan, the Plaintiffs, the Defendant, and the Defendant’s son, William Chng. The conversation at the meeting was recorded on tape. From the transcript of the recording, the Defendant stated that it was Mr Chng who had paid for the Property. The Defendant also repeated that the Trust Deed had been executed to give Mdm Fock the peace of mind that she would not be evicted from the Property, and he said that it was Mdm Fock who had wanted the Trust Deed.

  21. The present proceedings

  22. [14] On 8 July 2010, the Plaintiffs’ solicitors wrote to the Defendant for the return of the Property to Mdm Fock’s estate. The Defendant did not comply and the Plaintiffs commenced the present proceedings on 24 November 2011 seeking, inter alia, a declaration that the Property is held on trust by the Defendant for the Plaintiffs as the executrixes and trustees of Mdm Fock’s estate.

  23. Summary of the parties’ respective cases

  24. [15] As the Plaintiffs’ starting point is premised simply on the existence of the Trust Deed and its terms, it will be more useful in the present case to first set out the salient features of the Defendant’s case as to why the Property belongs to the Defendant, notwithstanding the Trust Deed, before turning to the Plaintiffs’ case.

  25. The Defendant’s case

  26. (i) The Sham Argument

  27. [17] In support of the Sham Argument, Mr Bull made the following points.

  28. (1) The purpose of the Trust Deed

  29. [18] First, the only purpose of the Trust Deed was to protect the Property from creditors. The Defendant’s case on this aspect is somewhat unclear. Initially, the focus appeared to be on Mr Chng’s intention. Hence, Mr Bull argued that Mr Chng had to choose someone whom both he and the Defendant could trust to repose the beneficial interest in the Property in for the purposes of protecting the Property from creditors, and Mdm Fock was that trustworthy someone. It was this premise, coupled with Mr Chng’s instruction to Mr Hsieh that the purchaser was the Defendant, which prompted Mr Hsieh to suggest using the Trust Deed with the Defendant as the legal owner. Mr Bull then posed the following hypothesis. If Mr Chng had wanted Mdm Fock to have the Property, he could easily have registered the Property in her name, just as he had registered the Tiong Poh flat in her name to protect the latter property from creditors. Thus, if Mr Chng had simply wanted to protect the Property from creditors without at the same time giving the entire interest in the Property to the Defendant, he could have similarly registered the Property in Mdm Fock’s name. The fact that he had not done so, when he could easily have done so, suggested that the purpose of the Trust Deed was not to gift the Property to Mdm Fock.

  30. [19] Up to this point, the focus was squarely on Mr Chng’s intention and knowledge. Subsequently, however, Mr Bull asserted that the Defendant was the sole settlor and trustee of the alleged trust, and “therefore the only relevant intention is the Defendant’s intention”. This argument is briefer: since the Defendant did not have any intention to declare a trust in favour of Mdm Fock, the Trust Deed was a sham.

  31. (2) Purchase price of the Property

  32. [20] Second, Mr Bull pointed out an inconsistency in the wording of the Trust Deed. Apart from the initial deposit of $26,000 which was paid for by Mr Chng, the remainder of the purchase price of the Property came from the Defendant. Thus, contrary to the express wording of the Trust Deed, no part of the purchase price of the Property came from Mdm Fock. Mdm Fock also never paid for the maintenance and upkeep of the Property.

  33. (3) Mdm Fock’s subsequent conduct

  34. [21] Third, Mr Bull submitted that Mdm Fock’s own conduct was consistent with the Defendant’s position that the Trust Deed was a sham. First, the Property was not named as one of Mdm Fock’s assets in her Will, even though it would have been her most valuable asset. Second, Augustine stated that when Mdm Fock passed the certificate of title to the Property to her in 2002, Mdm Fock told her that the Property belonged to the Defendant and that the Defendant should therefore keep the certificate.

  35. [22] Fourth, Mr Bull argued that Mr Chng favoured the Defendant and wanted the latter to take over the family business. Thus, Mr Chng gave the Defendant the Property – which was to be the Defendant’s matrimonial home – in return for the Defendant agreeing not to pursue further studies and to stay in Singapore and start learning the ropes of the family business. Alternatively, Mr Chng wanted to help the Defendant purchase the Property simply as a parent helping his child. Whatever funds Mr Chng provided the Defendant with for the purchase of the Property were obviously Mr Chng’s gifts to the Defendant. Mr Bull submitted that there was no evidence that Mr Chng wanted to make a gift of the Property to Mdm Fock, or to give Mdm Fock the funds to purchase the Property.

  36. (ii) The Estoppel Argument

  37. [23] The Defendant’s case for an estoppel is that Mdm Fock had promised, represented or conducted herself in such a manner that it led the Defendant to believe that he was the beneficial owner of the Property. Consequently, the Defendant had detrimentally relied on Mdm Fock’s promise, representation or conduct by paying for most of the expenses relating to the upkeep of the Property, including fire insurance and property tax, while none of the other children had contributed to any of the household expenses. Mdm Fock, too, had not paid for any of the maintenance or upkeep of the Property despite having had the means to do so. Furthermore, the Defendant had spent a substantial sum on renovations when Mdm Fock was alive, and after she passed away. At no point did either Mdm Fock or the Plaintiffs (after they discovered the Trust Deed) prevent the Defendant from spending money on the renovations.

  38. The Plaintiffs’ case

  39. [24] The Plaintiffs’ positive case is simple. It is founded on the existence of the Trust Deed and the words contained in it, which, they claim, unambiguously provide that the Defendant holds the Property on trust for Mdm Fock’s estate. Invariably, the crux of the Plaintiffs’ case centred on the submission that the Trust Deed was not a sham. According to the Plaintiffs, the Trust Deed was executed to enable Mdm Fock to beneficially own the Property so that the family would be taken care of and so that the creditors of the family business could not take the Property should the business run into financial difficulties. The Defendant therefore did not beneficially own the Property. The Plaintiffs’ alternative argument is that even if the Trust Deed was for a sham purpose, the Defendant cannot rely on his sham purpose to invalidate the Trust Deed (the “Illegality Argument”). Lastly, the Plaintiffs deny that they are estopped from asserting beneficial interest in the Property.

  40. (i) The Sham Argument

  41. [25] Counsel for the Plaintiffs, Mr Alvin Yeo SC (“Mr Yeo”), accepted that the Defendant was both the settlor and the trustee. Consequently, he also accepted that it was the Defendant’s intention behind the constitution of the trust that mattered. In this respect, the Plaintiffs’ and the Defendant’s respective cases are on common ground. Mr Yeo, however, argued that Mr Chng’s intention was more important from an “evidential point of view” as he was “the soul and spirit behind the purchase of the Property (having paid the entire purchase price) and the execution of the Trust Deed”. It appears that the Plaintiffs’ case is that both the intention of Mr Chng and that of the Defendant were identical inasmuch as Mr Chng intended the Defendant to hold the Property on trust for Mdm Fock and the Defendant intended likewise – whether out of filial piety, obedience or some other reason – when he executed the Trust Deed.

  42. (1) Mr Chng’s intention

  43. [26] On Mr Chng’s intention, Mr Yeo argued that Mr Chng could not have intended his 24-year-old son to beneficially own the Property in 1974 when the Property was a substantial asset of the family, especially when Mr Chng, Mdm Fock and the remaining five children who were between 17 and 26 years old then were still staying with the family. First, the Defendant had just completed National Service in 1974. Second, Mr Chng was not the kind who favoured sons over daughters such that he would have intended to reward the Defendant in 1974 with the Property over all his other children. Third, Mr Chng also could not have intended to compensate the Defendant for agreeing not to pursue further studies overseas; the Defendant did not find studying easy and had done poorly in his various school examinations and courses up till then.

  44. [27] Thus, Mr Yeo submitted that Mr Chng wanted Mdm Fock to own the Property beneficially so that the family would be taken care of and so that the creditors of Mr Chng’s sole proprietorship could not take the Property should the business fail. It is pertinent to note that the latter purpose is incidentally also an integral aspect of the Defendant’s Sham Argument. Mr Yeo suggested that it was for these reasons that Mr Chng had previously registered the Tiong Poh flat in Mdm Fock’s name. Mr Yeo proffered that the reason why Mr Chng had not simply registered Mdm Fock as the legal owner of the Property was because Mr Chng had foreseen the need for the Defendant to sign guarantees on behalf of the family business and it would have been easier for the Defendant to provide a guarantee if he held the Property under his name.

  45. (2) The Defendant’s intention

  46. [28] Mr Yeo pointed out that the Defendant had admitted that: (a) Mr Hsieh had explained to him the true effect of the Trust Deed, ie, that the beneficial ownership of the Property would vest in Mdm Fock; (b) he understood Mr Hsieh’s explanation; and (c) he had signed the Trust Deed willingly. At no time had Mr Hsieh said that the Trust Deed would have no effect except when the Defendant chose to use it against his creditors. Based on these circumstances, Mr Yeo argued that the Defendant had intended the beneficial interest in the Property to vest in Mdm Fock.

  47. (3) Mdm Fock’s subsequent conduct

  48. [29] Although Mr Yeo stressed that Mdm Fock’s conduct as a beneficiary of the trust was not determinative of the validity of the Trust Deed, he submitted that her conduct was in any event consistent with the Trust Deed as having created a trust. First, Mdm Fock was in possession of the Trust Deed until after she passed away, when it was discovered in her UOB safe deposit box in 2009. If the Trust Deed had merely been a sham to fend off potential creditors, it would have been logical for the Defendant to hold on to the Trust Deed. Second, when asked why he had not kept the Trust Deed, the Defendant could only reply that he had not thought of it. Third, the Defendant never asked for the Trust Deed back from Mdm Fock in the 1980s even though by that time, the relationship between the Defendant and Mdm Fock had worsened. Fourth, the Plaintiffs testified that Mdm Fock had told them on separate occasions that she was the owner of the Property.

  49. (ii) The Illegality Argument

  50. [30] The substance of this argument is that the Defendant cannot fashion a trust for the purpose of defrauding his potential future creditors only to subsequently rely on that same fraudulent purpose to revoke the trust. This is so whether the fraudulent purpose is ultimately carried out.

  51. (iii) The Estoppel Argument

  52. [31] Lastly, Mr Yeo submitted that the Defendant could not rely on any form of estoppel. First, the alleged promise, representation or conduct of Mdm Fock relied upon by the Defendant to found an estoppel was equivocal at best. Second and more importantly, the Defendant could not have been induced by any promise, representation or conduct which Mdm Fock was alleged to have given. This was because the Estoppel Argument was an alternative argument that was premised on the Trust Deed being valid, ie, that the beneficial interest in the Property belonged to Mdm Fock. The Defendant therefore would have known of Mdm Fock’s beneficial interest and could not have been induced by Mdm Fock’s representation, promise or conduct to the effect that he was the beneficial owner of the Property.

  53. The issues

  54. [32] The parties’ submissions reveal three major issues:

  55. (a) whether the Trust Deed was a sham, and if so, what are the consequences of a sham trust;

  56. (b) if the Trust Deed was a sham, whether the Defendant can nevertheless rely on the sham purpose to invalidate the Trust Deed; and

  57. (c) if the Trust Deed was not a sham, whether the Plaintiffs are estopped from asserting that Mdm Fock’s estate is the beneficial owner of the Property.

  58. Analysis

  59. Evidential considerations

  60. Witnesses’ testimonies

  61. (1) Intention and knowledge of Mr Chng and Mdm Fock

  62. [33] It is common ground that how Mr Chng and Mdm Fock acted, and what they intended or knew at the material time in 1974 (when the Property was purchased and the Trust Deed executed) are key to the dispute. However, I am somewhat handicapped in my assessment of the factual matrix with respect to the intention and knowledge of the two key protagonists as both have since passed away. While both sides’ witnesses – which include the Defendant and the Plaintiffs – have given evidence on what Mr Chng and Mdm Fock had apparently told or said to them, I am extremely cautious in treating the generally self-serving evidence as proof of Mr Chng’s and Mdm Fock’s intention and knowledge at the material time. A testimony by a witness who claims to have firsthand knowledge of specific events and conversations that took place only gives evidence of the fact that such events did take place and of what was in fact said by various parties during those conversations. A third party cannot purport to reveal the actual and true intention and knowledge of Mr Chng or Mdm Fock. If Mr Chng and Mdm Fock during those conversations had disclosed what was their intention or knowledge during a particular conversation which was in fact heard by a witness, then the witness can do no more than give evidence of what Mr Chng or Mdm Fock had in fact said or disclosed (to the witness) as their intention or knowledge, and no more than that.

  63. [34] Furthermore, the only surviving witness to the various events and conversations in 1974 (assuming all of those did take place) is the Defendant. Mr Chng, Mdm Fock and Mr Hsieh, who are the only other proper contradictors or affirmers of some of the key events and conversations which are said to have taken place in 1974, are no longer able to give evidence. In these circumstances, the court should not simply accept the Defendant’s evidence on what had transpired in 1974 at face value. This is not to say that the Defendant should not be believed from the outset. Whatever evidence adduced by the Defendant as to what was told or said to him by Mr Chng and Mdm Fock, which might reveal what could have been the intention and knowledge of Mr Chng and Mdm Fock, must be assessed in the light of and tested against all the circumstances subsisting at the relevant time, including the available documentary evidence and good common sense. As Lord Blackburn once said, “the weight of evidence depends on rules of common sense”: Lord Advocate v Blantyre (1879) 4 App Cas 770 at 792.

  64. (2) The respective witnesses’ credibility

  65. [35] As both sides have alleged that the other party’s evidence is unreliable and untruthful, it is necessary for me to clarify how I perceived the respective parties’ credibility in the course of their oral testimonies.

  66. (A) The Defendant

  67. [36] I found the Defendant to be generally evasive and shifty in his evidence. Four instances stand out, although there are other examples.

  68. [37] First, at the 24 May 2010 Meeting, where, inter alios, the Plaintiffs were present, the Defendant said that it was Mdm Fock who wanted to have a trust deed, and the Trust Deed was accordingly executed to give her the peace of mind that she would not be evicted from the Property. This seems to suggest that the idea of having a trust deed originated from Mdm Fock. However, in his affidavit of evidence-in-chief, the Defendant stated that it was Mr Chng who first suggested that the Defendant “create a document which could be shown to any future creditors who might be after my [the Defendant’s] assets. The document he [Mr Chng] suggested was a trust deed in favour of my late mother [Mdm Fock].” Further, the Defendant gave evidence during cross-examination that the first time that the concept of a trust was brought to Mr Chng’s attention was in a meeting with Mr Hsieh where the Defendant was also present. It was Mr Hsieh, not Mr Chng or Mdm Fock, who suggested the concept of a trust to hold the Property.

  69. [38] Second, at the trial, the Defendant tendered the 19 April 2010 Letter. In that letter, he stated that “the money to purchase the Property came from me and did not come from Mother [Mdm Fock]. The trust deed was simply to give Mother peace of mind so that she could continue to live in the Property without fear of being evicted.” Ostensibly, the purpose of the Trust Deed stated by the Defendant in his letter is false, as the Defendant later admitted that he knew that the Trust Deed was intended to protect the Property from his potential future creditors (see [65]–[67] below). Indeed, that is now his case for this suit. The Defendant’s sole explanation for misleading the Plaintiffs in the 19 April 2010 Letter was that he was “not really ready to disclose why the [T]rust [D]eed was made”.

  70. [39] Third, the Defendant provided numerous varied explanations for the sources of his funds for the payment of the Property. He oscillated between claiming that the monies came from him, and that the monies were provided by Mr Chng. For instance, in the 19 April 2010 Letter, the Defendant stated that the money for the Property came from him and not Mdm Fock. Yet, at the 24 May 2010 Meeting, the Defendant admitted in the presence of the Plaintiffs and others that the money for the Property came from Mr Chng. By the end of the trial, it was plainly evident to me that most, if not all, of the funds used to pay for the Property either came directly or indirectly from or were arranged by Mr Chng. In my view, it is unlikely, even with the passage of time, that the Defendant could have been unclear or confused at any time about where the funds to purchase the Property actually came from. The Defendant was in 1974 only a young man of 24 years of age who did not have any savings or the means to purchase the Property, a large and expensive house by any measure. Without Mr Chng acting as the guarantor, I doubt that the Defendant could have obtained any bank loan or overdraft facilities in his name to finance the balance of the purchase price of the Property. In my view, the Defendant could not possibly have had the financial capacity to buy the Property, nor could he possibly have serviced and eventually repaid the loan from Far Eastern Bank (see [5] above) without Mr Chng’s financial support. I do not believe that the Defendant could have forgotten that he was never the source of any funding to finance the purchase of the Property. This kind of discrepancy is not about a particular date or year in which a particular event took place, where a person is likely to remember wrongly or be confused in his recollection of the date or year with the passage of time.

  71. [40] Fourth, I find the Defendant’s evidence over how he came into possession of $100,000 apparently gifted to him by one Mr Chng Pik Cong (“CPC”) – whom the Defendant initially purported to be “a relative of [his] in Indonesia” – to pay for the Property to be incredible. According to the Defendant, when CPC heard that the Defendant wanted to buy a house, he, apparently as a generous relative, offered to sponsor $100,000 towards the Defendant’s purchase:

  72. [41] However, it was revealed later during cross-examination that: (a) CPC was not a blood relative of the Defendant; (b) CPC was in fact Mr Chng’s business partner; and (c) without Mr Chng’s intervention and arrangements with CPC for the money to be furnished, CPC would not likely have transferred the $100,000 to the Defendant:

  73. [42] These examples highlight the shifts and inconsistencies in the positions taken by the Defendant on a spectrum of issues from the time the dispute arose to the conclusion of the trial. Coupled with the fact that the Defendant was visibly evasive at various points during the cross-examination, I am of the view that his evidence must be treated with a healthy dose of suspicion. I am therefore more sceptical of the Defendant’s evidence, particularly where it relates to what the Defendant recalls as having been told to him by Mr Chng and Mdm Fock, including what they might have said or disclosed to him as to their knowledge and intention.

  74. (B) The Plaintiffs

  75. [43] Mr Bull, too, submitted that the Plaintiffs were unreliable and untruthful witnesses. He referred to the 2 Plaintiff’s evidence on two joint accounts which Mdm Fock had opened with the 2 Plaintiff. At the trial, the 2 Plaintiff was confident that the accounts were opened before 1987. However, upon Mr Bull’s request, the 2 Plaintiff checked and found out from the bank that the joint accounts were opened in 1996. Mr Bull therefore urged the court to treat the 2 Plaintiff’s evidence with circumspection. I accept that the 2 Plaintiff’s memory may be somewhat patchy with regards to her recollection of the year in which the accounts were opened. However, given that these events took place many years ago, it is unrealistic to expect the witness to have perfect memory in recalling the date or the year when those events took place. In any event, I did not find the 2 Plaintiff’s evidence to be of much direct assistance in helping me to arrive at my conclusions on the various issues. The Plaintiffs’ credibility did not have any material impact on the factors which I have relied on in arriving at my decision.

  76. Whether the Trust Deed was a sham

  77. (i) Was there even a valid trust?

  78. [44] Before delving into the crux of the Sham Argument, I shall briefly deal with an associated argument canvassed by Mr Bull. He suggested that on a strict construction of the words of the Trust Deed, there could not have been any valid declaration of trust on 23 February 1974. This was because the Defendant was not the registered proprietor of the Property on that date; he only became the registered proprietor on 11 March 1974. He could not have constituted a valid trust without first being the legal owner of the Property. Mr Bull’s explanation for the “erroneous” Trust Deed was that it was all intended to be a sham. In other words, the accuracy and wording of the Trust Deed were inconsequential since the Trust Deed was intended to be a sham. Mr Bull cited Yeong Ah Chee v Lee Chong Hai & Anor [1994] 2 MLJ 614, a decision of the Malaysian Supreme Court, for the proposition that in order for a trust to be valid, the settlor must vest the trust property in the trustee completely, both in law and equity. Mr Bull also brought to my attention a High Court of Kuching decision, Cheu Kuok King v Jurudaya Construction Sdn Bhd [2007] 4 MLJ 720, where the court found at [20] that there was no valid trust because the defendant settlor of the trust was not the registered owner of the property at the time the trust deed was executed on 1 November 1991. The memorandum of transfer was dated 31 October 1991, but was only registered on 2 November 1991. Mr Bull further contended that on the Plaintiffs’ case, if it was indeed Mr Chng who had paid the purchase price of the Property, he would have been the beneficial owner, not the Defendant. As Mr Chng never executed any written instrument of transfer to dispose of his equitable interest, as required by the then equivalent of s 7(2) of the Civil Law Act (Cap 43, 1999 Rev Ed), he retained beneficial interest in the Property at all times. The Defendant therefore could not have purported to declare that he held the beneficial interest on trust for Mdm Fock.

  79. [45] Mr Yeo responded first by arguing that the Defendant had consistently taken the position, both in his affidavit of evidence-in-chief as well as in his closing submissions, that he was the sole settlor and trustee of the Trust Deed. The argument that the Defendant could not have settled the trust because he did not have legal interest in the Property was therefore an afterthought that should not be entertained. On the point that the beneficial interest resided in Mr Chng and not the Defendant, Mr Yeo submitted that although Mr Chng had paid for the Property, he had not intended to obtain any beneficial interest for himself and had, through the procurement of the Trust Deed, intended that Mdm Fock should own the Property beneficially. The Property was to be transferred from the previous registered proprietors to the Defendant absolutely, and the Defendant was to vest the beneficial interest of the Property in Mdm Fock, which he did through the Trust Deed. Mr Chng had not disposed of any beneficial interest in the Property; it was the Defendant who had disposed of his beneficial interest in the Property to Mdm Fock. This disposition was effected by the Trust Deed, which was in writing and thus did not offend the then equivalent of s 7(2) of the Civil Law Act.

  80. [46] While Mr Bull’s argument may appear tenable at first blush, I do not think that this was an avenue which the Defendant could legitimately pursue while at the same time maintaining that the Trust Deed was a sham. For the Sham Argument to have any traction, it must be predicated on the assumption that in principle, the Trust Deed was capable of giving rise to a trust in the first place, albeit one which ought not to be recognised retrospectively because of the sham (see [50]–[57] below). The Defendant’s case was not that he could not have declared the trust; it was that notwithstanding that he had declared a trust, it should not be given effect as it was a sham. It was, of course, open to Mr Bull to argue that the Sham Argument would apply as an alternative argument if the court found that the Trust Deed could have given rise to a trust. However, that was not the position taken in the Defendant’s affidavit of evidence-in-chief, as well as in his closing submissions, as Mr Yeo correctly pointed out. More importantly, the Defendant’s case was not framed as such. In his pleadings, the Defendant averred:

  81. [47] The above already seems to suggest that the Defendant accepted that he had executed the Trust Deed, albeit he did not have any intention at the material time to hold the Property on trust for Mdm Fock, ie, the Sham Argument. This is markedly different from Mr Bull’s submission now that the Defendant could not have constituted a trust without holding legal interest in the Property. In his particularisation of the defence that the Trust Deed was a sham and therefore invalid, the Defendant stated:

  82. Therefore, the entire substratum of the Defendant’s case is that he had executed the Trust Deed, but the reason why beneficial interest did not pass was because he never intended to pass it to Mdm Fock. That was the sham. His case is not that he had no beneficial interest to pass because he had no legal interest, and, hence, no trust could be constituted under the Trust Deed. The Defendant finally concluded in no uncertain terms (at paragraph 6 of the Defence):

  83. In consequence of the Defendant’s unambiguous pleadings, I agree with Mr Yeo that Mr Bull’s argument – viz, that there was no valid trust because the Defendant was not the registered proprietor of the Property at the point of execution of the Trust Deed – should not be entertained at this stage.

  84. [48] In any case, even on the merits, I would have concluded that Mr Bull’s clever but technical argument does not carry the Defendant very far. Although it is unclear who the contracting parties to the contract for the sale of the Property were, the instrument of transfer recorded that the Property was transferred to the Defendant “in consideration of ... [$260,000] paid ... by [the Defendant]”. As such, at least as of 23 February 1974 when the transfer was executed, the Defendant had beneficial interest in the Property. At this juncture, it is evident that Mr Bull’s point that Mr Chng retained the beneficial interest falls away. The more important question is whether the Trust Deed was effective to convey beneficial interest to Mdm Fock, given that at the time of its creation, the Defendant only had the beneficial interest but not the legal interest in the Property. In my view, the answer must be yes. A person can establish an express trust even if he is not the absolute owner of the property. Thus, a lease over land may be the subject matter of a trust: Keech v Sandford (1726) Sel Cas Ch 61. Likewise, an equitable interest in a trust may itself be the subject matter of a trust: Geraint Thomas & Alastair Hudson, The Law of Trusts (Oxford University Press, 2nd Ed, 2010) at para 1.02. The definition of what may constitute trust property is expressed in even wider terms in another leading textbook, Philip H Pettit, Equity and the Law of Trusts (Oxford University Press, 12th Ed, 2012) (“Pettit”). The learned author in Pettit commented (at p 51):

  85. [49] This is not a case of a trust over some future property which has not come into existence, which Mr Bull appeared to be alluding to in his submissions. The Property existed at the time of the execution of the Trust Deed; it was explicitly identified in the Trust Deed. The prohibition against constituting trusts of future property covers, for instance, property that a person may have or will take under the exercise of a special power of appointment, future royalties, or proceeds of any future sale of specific property. The commonality across these types of future property is the fact that they do not exist at the material time and, for that reason, cannot be assigned either at law or in equity or held on trust: Pettit at p 120. With respect, I am unable to agree with the Malaysian decisions cited to me by Mr Bull. The fact that the Defendant only held the beneficial interest but not the legal interest in the Property at the time of the execution of the Trust Deed is not a bar to the constitution of a trust to hold the Property beneficially for Mdm Fock. I would add, for completeness, that in Re Ralli’s WT [1964] 1 Ch 288, the court held that a settlor who had a remainder interest under another trust could create a valid trust over that remainder interest. With this out of the way, I turn now to the main thrust of the Defendant’s case, viz, the Sham Argument.

  86. (ii) Concept of a sham

  87. (1) Generally

  88. [50] The basic idea of a sham can be found in Lord Diplock’s statement in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802:

  89. [51] There are two important general points to note in relation to the Sham Argument raised by the Defendant. First, the person alleging that a document is a sham has the burden of proving that the parties intended the document to be a pretence: National Westminster Bank plc v Rosemary Doreen Jones & Ors [2001] 1 BCLC 98 (“National Westminster Bank”) at [68]. Second, there is a very strong presumption that parties intend to be bound by the provisions of agreements which they enter into. As Neuberger J (as he then was) explained in the same case (at [59]):

  90. (2) Need for common intention to mislead

  91. [52] The crux of the sham concept is a common intention to mislead: Matthew Conaglen, “Sham Trusts” (2008) 67(1) CLJ 176 (“Conaglen”) at pp 183–184. As Neuberger J explained in National Westminster Bank at [59], a sham is “a provision or agreement which the parties do not really intend to be effective, but have merely entered into for the purpose of leading the court or a third party to believe that it is to be effective”. In the absence of a common intention to mislead, the court will simply construe an agreement according to the actual objective intention of the parties (Yorkshire Railway Wagon Company v Maclure (1882) 21 Ch D 309 at 318):

  92. [53] In TKM (Singapore) Pte Ltd v Export Credit Insurance Corp of Singapore Ltd [1992] 2 SLR(R) 858 (“TKM”), G P Selvam JC (as he then was) stated (at [48]):

  93. Selvam JC’s formulation was recently applied by Belinda Ang Saw Ean J in Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and another [2008] 1 SLR(R) 375 (“Koon Seng”) at [64].

  94. (3) Test of parties’ intention to enter into a sham agreement is “subjective”

  95. [54] It has been said that the test of whether the parties intend their agreement to be a sham is subjective: Hitch v Stone [2001] STC 214 (“Hitch”) at [66]. Professor Conaglen explains (Conaglen at p 186):

  96. [55] Because the inquiry is one into the subjective intention of the parties, the court is not restricted to the usual rules governing the interpretation of documents. It appears that the court may have regard to a wider category of evidence, such as the parties’ subsequent conduct: Hitch at [65]. Thus, in AG Securities v Vaughan and others [1988] 3 WLR 1205, Lord Jauncey stated (at 1227) that “although the subsequent actings of the parties may not be prayed in aid for the purposes of construing the agreements, they may be looked at for the purposes of determining whether or not parts of the agreements are a sham in the sense that they were intended merely as ‘dressing up’ and not as provisions to which any effect would be given”. Both parties accepted this approach.

  97. (4) Common intention must generally belong to both the settlor and the trustee

  98. [56] The relevant common intention generally refers to the intention of the settlor and the trustee: see In re Esteem Settlement (2003) JLR 188 at [53]–[54]; Shalson and others v Russo and others [2003] EWHC 1637 at [188]. What is clear is that the beneficiary’s intention at the time of the constitution of the trust is strictly irrelevant for the purpose of determining or ascertaining if a trust is a sham when it was first created, save perhaps in one circumstance (see [57] below). Mdm Fock’s knowledge or intention at the time of the execution of the Trust Deed and, consequently, her conduct are therefore inconsequential, unless they can count as supporting evidence of the settlor’s and the trustee’s intention.

  99. [57] The one circumstance alluded to above where the beneficiary’s intention may be relevant is this: a beneficiary’s intention subsequent to the formation of a trust may transform what was a properly constituted trust which was not ab initio a sham into a sham. For that to occur, all the beneficiaries to the trust must join together with the trustees in that sham purpose: A v A and St George Trustees Limited and others [2007] EWHC 99 (“A v A”) at [44]. However, this principle has no application here as the Defendant has not pleaded that the Trust Deed became a sham only sometime after it was executed, or that Mdm Fock had, through her conduct, displayed an intention to collude with the trustee (ie, the Defendant) to use the Trust Deed subsequently as a sham even though it was not intended to be a sham when the Trust Deed was first made. The Defendant’s case is that the Trust Deed was a sham from its very inception. Thus, Mdm Fock’s intention qua beneficiary does not inform whether the Trust Deed is a sham. The sole intention that is determinative is the Defendant’s qua settlor and trustee of the Trust Deed, albeit Mdm Fock’s conduct and intention may be indicative of what the Defendant’s intention might have been at the time of the execution of the Trust Deed (see [56] above and [67] below).

  100. (5) The present case

  101. [58] Before applying the applicable principles, it is necessary to first establish the identity of the settlor of the trust under the Trust Deed. If the settlor is a different person from the trustee, then both the settlor and the trustee must have the common intention to perpetuate the sham in order for the Trust Deed to be considered a sham. On this point, the parties were in agreement that the Defendant was both the settlor and the trustee (see [19] and [25] above). The Trust Deed amounts to a unilateral declaration of trust. As stated in Lewin on Trusts (Sweet & Maxwell, 17th Ed, 2000) at para 4-23, where a trust is unilaterally declared, only the settlor’s intention is “conceivably relevant”. Therefore, I find that the only intention that matters is the Defendant’s, especially in the light of both parties’ starting position that the Defendant was the sole settlor and trustee under the Trust Deed. That said, as I will elucidate below, I accept that Mr Chng’s intention is relevant in ascertaining what the Defendant intended in executing the Trust Deed.

  102. [59] In my view, the proper question to be answered is: did the Defendant – whether in consequence of Mr Chng’s instructions or not – intend the Trust Deed to be a sham at the time he signed the Trust Deed? The answer is no. Applying the test formulated in TKM and applied in Koon Seng, I am unable to reach the conclusion that the Defendant intended the Trust Deed to be a sham at the time it was made. I shall elaborate now.

  103. [60] The context in which the Property was purchased is crucial. When the Property was purchased in 1974, the Defendant was only 24 years old and had just completed National Service. He did not appear to have fared well in school, and had just joined the family business as an office boy. The Property was purchased to serve as the family home for a family of eight persons. Notwithstanding that on paper, a large chunk of the purchase price was paid by the Defendant in cash and through his overdraft facility with Far Eastern Bank (albeit with Mr Chng as the guarantor), there is no denying that the source of these funds was ultimately Mr Chng. There is no credible evidence or explanation before me that suggested that an office boy with a monthly salary of $800 could have financed the purchase of a $260,000 house. As I have found earlier (see [40]–[42] above), I rejected the Defendant’s evidence that he had, on his own, obtained substantial funding from a supposed blood relative, CPC. On balance, I find that the Property was purchased entirely with Mr Chng’s direct and indirect financial assistance to the Defendant.

  104. [61] More pertinently, Mr Chng was not simply the de facto purchaser of the Property. He was also the provider of the whole family at that time in 1974, and all his six children were then staying with him and Mdm Fock in the Tiong Poh flat. I find it extremely implausible that in the light of the above context and factors, Mr Chng would have intended to simply allow the Defendant to register the Property in his own name, and to retain the beneficial interest completely. There is no evidence that Mr Chng had such an intention, and I do not accept that that could have been his intention. I accept that Mr Chng may have had some general desire to “compensate” or “reward” the Defendant for helping out with the family business. However, compensation or reward in the form of full legal and beneficial ownership of the family home worth $260,000 in 1974 for the second eldest child out of six children at a time when Mr Chng and Mdm Fock were 51 and 46 years old respectively is, to put it mildly, irrationally excessive and quite inconceivable. After all, three of Mr Chng’s other children also did not attend university and helped out with the family business.

  105. [62] The Defendant gave evidence that Mr Chng had expressly told Mr Hsieh that he wanted the Defendant, and not Mdm Fock, to own the Property:

  106. [63] I do not believe that this conversation, if it did take place, was accurately depicted by the Defendant. In any event, this purported conversation does not unequivocally evidence an intention by Mr Chng that beneficial ownership of the Property should rest with the Defendant and not with Mdm Fock. All that this purported conversation shows is that Mr Chng had an intention to protect the Property from the Defendant’s potential future creditors, a position which even Mr Yeo accepts. In fact – and this is the crux of my decision – both sides’ arguments have the same premise, namely, that the Trust Deed was intended to protect the Property from Mr Chng’s and/or the Defendant’s potential future creditors. I agree that the Trust Deed was entered into for that purpose and, on its face, does in fact achieve that purpose. That per se is not a sham. The only point of departure is whether Mr Chng intended the Defendant or Mdm Fock to ultimately own the beneficial interest in the Property. As I have already explained (at [60]–[61] above), I find it unlikely that Mr Chng intended, by this arrangement, to confer on the Defendant the full legal and beneficial ownership of the Property when, on the face of the Trust Deed, vesting the beneficial ownership in Mdm Fock would eminently achieve Mr Chng’s objective of protecting the Property from potential future creditors. After considering all the surrounding facts and circumstances of this case, I prefer Mr Yeo’s explanation that Mr Chng had intended Mdm Fock to beneficially own the Property as that was how he wanted to protect the Property from potential future creditors.

  107. [64] Nevertheless, it must be cautioned, once again, that Mr Chng’s intention is strictly speaking irrelevant except to the extent that it may shed light on what the Defendant had intended in executing the Trust Deed. Thus, even if Mr Chng had intended Mdm Fock to beneficially own the Property, it is still necessary to establish that the Defendant had the same intention, and not the contrary intention that he would be both the legal and beneficial owner notwithstanding what was stated on the face of the Trust Deed. This brings us back to the circumstances surrounding the execution of the Trust Deed.

  108. [65] I reiterate the parties’ common premise that the Trust Deed’s purpose was to protect the Property from the Defendant’s potential future creditors. This was the same reason, according to the Defendant, why the Tiong Poh flat was registered in Mdm Fock’s name even though Mr Chng paid for it. I also accept that Mr Chng wanted the Defendant to be the registered owner of the Property. As to why Mr Chng wanted to have the Property registered in the Defendant’s and not Mdm Fock’s name, I find Mr Yeo’s case theory that Mr Chng foresaw that eventually, the Defendant would need to sign guarantees on behalf of the family business to be tenable. Therefore, although Mr Chng wanted to help the Defendant appear more creditworthy, he was at the same time afraid that the Defendant’s future potential creditors might enforce the Defendant’s debts against the Property, which was, at that time, functioning as the family home. This was why Mr Chng intimated to Mr Hsieh that the Property should be owned in a manner which protected it from the Defendant’s potential future creditors. Mr Hsieh then proposed the idea of a trust to Mr Chng and the Defendant, and explained the mechanism of the Trust Deed and its legal consequences to Mr Chng and the Defendant. The Defendant’s own account of Mr Hsieh’s explanation is telling as it shows what the Defendant understood the Trust Deed to mean and to be its legal effect at that time before he signed it:

  109. [66] The Defendant’s oral evidence speaks for itself. At the time when the Trust Deed was signed, the Defendant was aware of Mr Chng’s intention that the Property would be in the Defendant’s name, but to protect it from his potential future creditors, Mdm Fock would beneficially own the Property. Mr Hsieh (a) explained that the Property would not be seized by creditors if it was held on trust for Mdm Fock; (b) drafted the terms of the Trust Deed on that basis; and (c) explained the effect of the Trust Deed to both Mr Chng and the Defendant. The Defendant then signed the Trust Deed with the knowledge of how the Trust Deed was to work as explained by Mr Hsieh. The simple fact of the matter is that at the time that the Defendant signed the Trust Deed, his understanding of the document was that it was to have the precise effect that a trust would ordinarily have. That makes perfect sense because the understanding and common intention all along of Mr Chng and the Defendant, after the explanations given to them by Mr Hsieh, was that the Trust Deed would secure the Property in the family’s hands and keep it safe from creditors because the beneficial ownership would truly vest in Mdm Fock. That was the basis upon which Mr Hsieh drafted the Trust Deed for the Defendant to sign. None of the parties at that time intended the Trust Deed to be a sham in the sense that beneficial ownership of the Property was not to vest in Mdm Fock but was to remain with the Defendant after the Trust Deed was signed. No one intended a situation contrary to what was stated in the Trust Deed. I do not believe that Mr Hsieh was likely to have prepared the Trust Deed for the purpose of implementing some sham. More likely than not, Mr Hsieh would have prepared the Trust Deed to give effect to a genuine trust, in accordance with the instructions of Mr Chng. The Defendant was not likely to have given a different set of instructions to Mr Hsieh as the Defendant was at that time entirely dependent on Mr Chng financially for the purchase of the Property. I cannot see how the Defendant could have had some other say in the matter that was different from Mr Chng’s. He simply would have had to obey Mr Chng’s wishes and fall in line with what Mr Chng intended. Further, the Defendant admitted on more than one occasion that at no time right up to the signing of the Trust Deed did he have the understanding that the Trust Deed would have no meaning or effect:

  110. [67] On the basis of the above excerpt, there is really no basis for me to find that the Defendant had any other conception of the Trust Deed except that which was explained by Mr Hsieh, namely, that Mdm Fock would own the beneficial interest in the Property and that was how the Property would be protected from the Defendant’s potential future creditors. On the whole, it is clear to my mind that the strong presumption (per Neuberger J in National Westminster Bank) that the Trust Deed means what it says has not been displaced. I reiterate that the mere fact that the Trust Deed was intended by Mr Chng, Mr Hsieh and the Defendant as a means to protect the Property from the Defendant’s potential future creditors does not make the Trust Deed a sham. Indeed, as the Defendant conceded, the Trust Deed would serve that very protective purpose if it were to operate on its true and express terms without any qualification. To say that the Trust Deed is a sham means that while the Trust Deed professed to accord beneficial ownership to Mdm Fock, it in fact meant something different in that the true beneficial owner of the Property was the Defendant and not the person stated on the face of the Trust Deed (see W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300 at 323). In other words, that something different, as Mr Bull has sought to argue, is that the beneficial ownership resided with the Defendant notwithstanding the Trust Deed. However, the Trust Deed was clearly part of the composite arrangement which included the purchase of the Property, a decision which was undertaken and financed by Mr Chng. As mentioned earlier, I find that it is extremely implausible that Mr Chng had contemplated the composite transaction to result in the Defendant having both legal and beneficial ownership of the Property in the circumstances and context subsisting in 1974. To put it simply, when the Property was purchased and the Trust Deed entered into, the Defendant was an obedient son who was merely following his father’s instructions. From the way the Property was to be owned legally and beneficially for the purpose of protecting it from creditors to the way its purchase was to be financed, Mr Chng was the mastermind and the Defendant was the pliant executioner. A doubt raised by Mr Bull as to why the Trust Deed had stated that the Property was “transferred” [emphasis added] to the Defendant to hold on trust for Mdm Fock may be explained on the basis that the Defendant received the Property from someone else – ostensibly Mr Chng – and the Defendant was merely a conduit for a collateral purpose. Indeed, the Defendant admitted in his Defence that “as a young man and a filial son ... [he was following] his father’s wishes”. He was carrying out Mr Chng’s instructions (see the excerpt at [47] above). At 24 years of age and having been given the opportunity to work in the family business, there is no reason to expect the Defendant to have done otherwise. This inference is also consistent with the fact that Mdm Fock kept the Trust Deed ever since it was executed till the time she passed away. If the Trust Deed was truly intended by the Defendant to be a sham in the sense of showing it to his potential future creditors and nothing else, one would expect that he would be the one keeping the Trust Deed, not Mdm Fock. It would appear that Mdm Fock also kept the certificate of title to the Property for some 28 years from 1974 to 2002, demonstrating that from the very beginning, she regarded the Property as beneficially owned by her.

  111. [68] Therefore, in my judgment, there is no doubt that the Defendant, in executing the Trust Deed, was obeying Mr Chng’s instructions and wishes “down to a T”. For all intents and purposes, Mr Chng’s intention was tantamount to the Defendant’s intention. Given what Mr Chng’s intention was and what Mr Hsieh explained to the Defendant prior to the signing of the Trust Deed, I find it nigh implausible – beyond the realm of conceivability – that the Defendant could have had a contrary intention, viz, that he was instead the beneficial owner because the Trust Deed was not meant to have any real effect. For completeness, I also reject the argument that the Defendant’s subsequent change of intention rendered what was a valid trust a sham. As a matter of principle, a trust which is not initially a sham cannot subsequently become a sham simply because the settlor or trustee does not wish to recognise the trust deed after it has been duly created. Once a trust has been properly constituted, the property which is the subject matter of the trust cannot lose its character as trust property save in accordance with the terms of the trust itself: A v A at [42].

  112. [69] Hence, unless the Plaintiffs are estopped from asserting that Mdm Fock’s estate is the beneficial owner of the Property (see [93]–[113] below), their claim must be allowed. However, before considering the Estoppel Argument, in deference to the efforts of both parties’ counsel and in the event that I am wrong on the Sham Argument, I shall first address the Illegality Argument.

  113. Whether the Defendant can rely on the sham purpose to invalidate the Trust Deed

  114. [70] If I had found that the Trust Deed was intended to be a sham, Mr Yeo argued that the Defendant could not rely on his sham purpose to invalidate the Trust Deed to benefit himself. He cited a New Zealand Court of Appeal decision, Official Assignee v Wilson [2008] 3 NZLR 45, in support of this proposition. There, the Official Assignee sought a declaration that the trust which Mr Reynolds, the settlor-bankrupt, had set up was a sham. The Official Assignee argued that the court, as a result of Mr Reynolds’ “improper, overbearing and perhaps unlawful activities, should treat the legitimate rights of the discretionary beneficiaries as being extinguished”. The court declined to grant the declaration, stating (at [23]):

  115. [71] Mr Yeo also cited an old decision of the Supreme Court of the Federated Malay States, Au Phin Yeang v Kan Tak Fee, Ng Ah Hoe, Foo Lin Yin [1934] FMSLR 5, which held that the defence of fraud could only be pleaded by an innocent party. The defendant there had accepted the transfer of ten pieces of land belonging to one Mr Kan, who was the first plaintiff’s father and the second and third plaintiffs’ husband, to defeat the creditors of Mr Kan. The court found that the defendant’s subsequent declaration of trust over the ten pieces of land for the plaintiffs was a further protection of the properties from Mr Kan’s creditors. The plaintiffs did not know of either the original transfer or the subsequent declaration of trust when those transactions were made. When the plaintiffs commenced court proceedings for breach of trust with respect to the defendant’s dealing with two of the pieces of land held on trust, the defendant alleged that the trust was only a fictitious transaction and he was never in fact a trustee for the plaintiffs. Rejecting the defendant’s argument, the court held:

  116. [72] Mr Bull did not have a direct response to this plank of the Plaintiffs’ case. He did not deny that the Defendant could not invalidate the Trust Deed for his own benefit, given that on the Defendant’s case, the Defendant was the perpetrator of the sham purpose. Mr Bull, however, attacked the right of the Plaintiffs to rely on the Trust Deed on two grounds. First, Mdm Fock herself was a party to the sham. Her estate, therefore, could not rely upon the fraud to which she was a party to assert title to the Property. Second, the sham purpose was never carried out. Mr Bull argued that where the fraudulent or illegal purpose behind a transaction had not been carried out, the rule that a party could not raise or rely on his own fraud or illegality to found a claim did not attach. I shall consider these two arguments in turn.

  117. (i) Was Mdm Fock a party to the sham?

  118. [73] Mr Bull’s indirect approach is conceptually sound. The Plaintiffs bear the burden of proving their claim. Since their claim is founded on the validity of the Trust Deed, if Mdm Fock was a party to the sham, the very rule that Mr Yeo argued precludes the Defendant from invalidating the Trust Deed will apply to preclude the Plaintiffs from relying on the Trust Deed – what is sauce for the goose is sauce for the gander.

  119. [74] The question turns on what it means to be a party to a sham. Obviously, if Mdm Fock shared the sham intention either at the time of the execution of the Trust Deed or subsequent to it, she would be a party to the sham. A party who displays reckless indifference to a sham will also be considered to be a party to the sham: Midland Bank PLC v Wyatt [1995] 1 FLR 696 at 699. It is apposite to reiterate that the sham here is not that the Trust Deed would protect the Property from the Defendant’s potential future creditors per se, but that the beneficial ownership was to reside with the Defendant notwithstanding the Trust Deed.

  120. (1) At the time the Trust Deed was executed

  121. [75] I am not persuaded that Mdm Fock even had knowledge of the Trust Deed before or at the time that it was executed (although she did have knowledge of it after it was executed (see [9] above)), with the corollary being that she could not have had an intention qua beneficiary to defraud the Defendant’s potential future creditors into believing that she was the beneficial owner when she knew that she was not. I have come to this conclusion for two reasons. First, the Defendant had testified that the idea of the Trust Deed was mooted by Mr Hsieh. It was not the case that Mr Chng had knowledge of structuring trusts and then discussed with Mdm Fock first before seeing Mr Hsieh together with the Defendant, and thereafter instructed Mr Hsieh to prepare the Trust Deed. Second, the only evidence that Mdm Fock might have had an inkling of the Trust Deed is from an inference made by the Defendant. He claimed that as Mdm Fock did not look surprised when Mr Chng informed her of the Trust Deed after it had been executed, he (the Defendant) himself inferred that Mr Chng could have previously discussed the “issue of the protection of the Property” with Mdm Fock without his presence.

  122. [76] Even if I accept that such a conversation between Mr Chng and Mdm Fock took place, I have difficulty accepting that Mdm Fock did not display any discernible look of surprise, or that the absence of any look of surprise on Mdm Fock’s face leads to the reasonable inference that she must have discussed the Trust Deed with Mr Chng prior to its being executed. The Defendant’s evidence on this particular conversation is contradictory:

  123. [77] Pausing here for a moment, there are two points to be observed. First, according to the Defendant, immediately after the Trust Deed was executed, it was brought back to be given to Mdm Fock. It was not to be kept by the Defendant, which is what one would expect if the sole intention of executing the Trust Deed was for him to show it to potential future creditors. Second, Mr Chng explained to Mdm Fock that the Trust Deed stated that she was the one who had paid for the Property, a point which Mdm Fock denied. If Mr Chng had already discussed the Trust Deed with Mdm Fock, as the Defendant said he had inferred (see [75] above), Mr Chng would not have had to tell Mdm Fock that piece of information, and, more importantly, Mdm Fock would not have contradicted Mr Chng. Moving on with the Defendant’s evidence on this point, after the Defendant and Mr Chng left Mr Hsieh’s office with the Trust Deed, the following conversation took place when they went home and saw Mdm Fock:

  124. [78] As I alluded to during the cross-examination of the Defendant, Mdm Fock was unlikely to have understood what a trust encompassed. It would be surprising that Mdm Fock was indeed not in the least surprised when told of the Trust Deed and its terms. Even if Mdm Fock was not surprised, she must have been confused at the very least. She was clearly disagreeable insofar as the language of the Trust Deed, which provided that she had paid for the Property, was concerned. Even if the Defendant’s description of the way the conversation (or explanation) went is accepted, it still does not justify the inference that Mr Chng and Mdm Fock had previously discussed the “issue of the protection of the Property” such that it can be said that Mdm Fock was a participant of the sham. Finally, even if Mr Chng and Mdm Fock might have discussed the creation of a trust over the Property with the Defendant as the trustee and Mdm Fock as the beneficiary to protect the Property from the Defendant’s potential future creditors, there is no basis to impute into that discussion a further purpose that such a trust arrangement was to be a sham in that the true beneficiary was to be the Defendant in spite of what the Trust Deed said, with Mdm Fock being the beneficiary in appearance only in the eyes of the Defendant’s potential future creditors and in no other circumstance. This inference requires a leap of logic which I am not prepared to take. The Defendant’s inference is, as he admits, speculative. For these reasons, I find it unlikely that Mdm Fock had any knowledge of the Trust Deed at the time that it was executed.

  125. [79] Assuming arguendo, on the Defendant’s best case, that Mdm Fock might have known of the purpose of the Trust Deed (viz, to protect the Property from the Defendant’s potential future creditors) at the time when the Trust Deed was executed, such knowledge does not make Mdm Fock a party to the sham unless she was aware that under the arrangement, the true intention was for the Defendant, and not her, to have the beneficial ownership. There is no indication that she had this knowledge or was recklessly indifferent to this arrangement at the time the Trust Deed was executed.

  126. (2) After the Trust Deed was executed

  127. [80] Mr Bull then argued that Mdm Fock knew of the sham purpose after the Trust Deed was executed. He referred again to the Defendant’s evidence of how Mr Chng had explained the purpose of the Trust Deed to Mdm Fock:

  128. [81] I am unable to accept that from this brief explanation (even on the assumption that it took place), Mdm Fock knew of the sham purpose and was a participant in the transaction. All that the Defendant testified is that Mr Chng told Mdm Fock that: (a) the Trust Deed was to protect the Property; (b) the Trust Deed might be used in the future; and (c) if the Trust Deed was not used, it had no effect. There is no indication that Mdm Fock understood the concept of a trust and its prophylactic effect against the Defendant’s potential future creditors. The requisite degree of assent in terms of knowledge of and participation in the sham purpose (see Ashmore, Benson Pease & Co Ltd v AV Dawson Ltd [1973] 1 WLR 828 at 836) which is necessary to preclude Mdm Fock and, by extension, the Plaintiffs from relying on the Trust Deed is lacking. Apart from her allegedly unsurprised look, Mdm Fock’s response, if any, upon hearing what Mr Chng told her about the Trust Deed was not presented to the court. There is therefore no evidence on whether Mdm Fock had expressly stated that she understood and agreed with what was simply told to her by Mr Chng, namely, that the Trust Deed was to have “no effect”, other than “basically to protect” the Property. For the avoidance of doubt, I am not saying that Mdm Fock must have been educated on the legal nuances of a trust before she could qualify as a participant of a sham trust. However, if Mdm Fock did not know of the alleged sham purpose or effect of the Trust Deed in terms of how it affected the beneficial ownership of the Property, there is no basis to hold that she had become a participant to the sham even on the shaky assumption that the conversation at [80] above had taken place.

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