25 November, 2016
In a recent case, the Singapore High Court has held that a plaintiff's agreement to the setting-up of a trust to protect a family's wealth (including the assets of a deceased family member) was a valid defence for a defendant facing claims of breach of duty as executrix and breach of trust.[1] The case illustrates that the setting up of a trust structure designed to protect family wealth can defeat a claim for subsequent allegations of breach of trust.
Background
The plaintiff ("Kuntjoro") was the eldest son of the Wibawa family and a beneficiary under an offshore discretionary trust (the "Trust"). The first defendant ("Harianty") was Kuntjoro's mother and another beneficiary under the Trust. The second to sixth defendants were Kuntjoro's siblings (also beneficiaries under the Trust). The ninth defendant was the Trust (even though it has no separate legal personality), who held the sole issued share in the seventh defendant, an offshore holding company. The eighth defendant was the trustee of the Trust (the "Trustee").
Harianty's husband (also Kuntjoro's father) died in 2000 leaving a Will under which Harianty, Kuntjoro and Kuntjoro's siblings were all beneficiaries. Harianty was the named executrix of the Will and it was Kuntjoro's case that Harianty failed to apply for grant of probate and withheld his inheritance in breach of her duty as executrix. Further, Kuntjoro alleged Harianty used assets held in several bank accounts in Singapore held jointly in the names of Kuntjoro and a combination of Harianty and/or Kuntjoro's siblings to set up the Trust. Then, the Trustee made payments out of the Trust, which Kuntjoro alleged deprived him of his inheritance under the Will or alternatively deprived him of his share of the assets as one of the account holders of the bank accounts. Kuntjoro alleged that his portion of the assets in the accounts which Harianty had used to set up the Trust should be held on constructive trust for Kuntjoro. Kuntjoro claimed damages against Harianty for breach of trust and declaratory orders for, among other things, the assets of the Trust to be distributed in a manner consistent with his inheritance or alternatively his interest as a joint account holder.
The Court found that contrary to Kuntjoro's assertions, Kuntjoro had good knowledge of the Trust and was heavily involved in its establishment. The trust instrument for the Trust named Harianty as settlor and Kuntjoro as protector. As protector, once the Trust was established, Kuntjoro made investment decisions for the Trust.
Judgment
The Court rejected Kuntjoro's allegation that the funds from the jointly-held bank accounts were held on constructive trust for Kuntjoro. In doing so, the Court noted that Kuntjoro had not established that the deceased intended to give the assets in the accounts to the account holders in equal shares. During the deceased's lifetime, all withdrawals were made for the benefit of the deceased alone and the Court accepted Harianty's evidence that there were good and prudent reasons to have the children (including Kuntjoro) as joint account holders of offshore accounts.
The Court then considered whether the assets in the jointly-held bank accounts formed part of the deceased's estate. The Court was satisfied that on the balance of probabilities they did, finding that the funds from the accounts derived from the deceased business as a sole proprietor. It further concluded that Kuntjoro and Harianty set-up the Trust to hold the estate assets, meaning that any distribution of the estate assets would devolve from Harianty as executrix of the Will to the Trustee.
The Court held that given Kuntjoro's pivotal role in setting up the Trust, he could not now complain as to its set-up and operation nor that Harianty acted in breach of trust in relation to any act done in accordance with the terms of the Trust.
Accordingly, the claim was dismissed.
Comment
The case illustrates that for reasons of fairness, consent and/or acquiescence to the setting up of a trust structure designed to protect family wealth can defeat a claim for subsequent allegations of breach of trust. Further, the case shows the Court will be keen to look at the deceased's intention in deciding whether certain assets will be held on constructive trust for the benefit of a beneficiary.
[1] Kuntjoro Wibawa v Harianty Wibawa and others [2016] SGHC 109
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