Case Details
- Citation: [2023] SGHC 196
- Title: Lau Sheng Jan Alistair v Lau Cheok Joo Richard and another
- Court: High Court of the Republic of Singapore (General Division)
- Originating Application No: 492 of 2022
- Date of Judgment: 21 July 2023
- Judgment Reserved: 29 March 2023
- Hearing Dates: 29 March 2023 and 19 April 2023
- Judge: Goh Yihan JC
- Applicant/Respondent: Applicant: Lau Sheng Jan Alistair; Respondents: (1) Lau Cheok Joo Richard (father) and (2) Sng Gek Hong Cynthia (mother)
- Legal Areas: Trusts — Unlawful trusts; Trusts — Unlawful trusts (illegality); Trusts — Sham trusts
- Statutes Referenced: Criminal Justice Act; Criminal Justice Act 1993; Defence Service Homes Act; Defence Service Homes Act 1918; Evidence Act; Evidence Act 1893; Residential Properties Act; Supreme Court of Judicature Act
- Procedural/Statutory Hook: Application in the matter of Section 18(2) of the Supreme Court of Judicature Act 1969
- Key Trust Doctrine(s) Discussed: Rule in Saunders v Vautier; Illegality defence in trusts; Sham trust analysis
- Judgment Length: 46 pages; 14,380 words
Summary
This case concerns an application by a sole beneficiary to terminate a trust and obtain immediate transfer of the trust property to himself. The trust deed was executed by the applicant’s parents in July 2020 in connection with the purchase of a residential property. The applicant invoked the rule in Saunders v Vautier, arguing that as the sole beneficiary he was entitled to bring the trust to an end and vest the property absolutely in him.
The dispute turned on two interlinked factual and legal questions. First, whether the trust deed was a sham instrument designed not to benefit the applicant but to achieve an improper tax-related outcome—specifically, to avoid Additional Buyer’s Stamp Duty (ABSD). Second, if the trust were not enforceable due to illegality, whether the applicant could still obtain restitutionary recovery notwithstanding the illegality doctrine.
The High Court (Goh Yihan JC) dismissed the challenge. The court found that the trust deed was not a sham and that it was not constituted for an illegal purpose. Accordingly, the applicant’s entitlement to terminate the trust under Saunders v Vautier was not defeated by illegality. The decision provides a structured approach to illegality in the trusts context and clarifies that the “formal reliance principle” associated with Tinsley v Milligan should not be applied in the present trusts setting.
What Were the Facts of This Case?
The applicant, Lau Sheng Jan Alistair, was 26 years old at the time of the proceedings. The respondents were his parents: the first respondent, Lau Cheok Joo Richard (father), and the second respondent, Sng Gek Hong Cynthia (mother). The applicant lived at the property that was the subject of the trust together with the second respondent and the applicant’s sister. The first respondent lived separately at another property.
On 13 July 2020, the respondents entered into an option to purchase the property for a total consideration of $4.925 million. At that time, the respondents were in their mid-50s, and the first respondent had retired. The purchase sum was raised through various loans, which were later repaid through the sale of three other properties and liquidation of some personal assets. The trust was drafted and executed soon after, in July 2020, by solicitors from Lee & Lee.
Under the trust deed, the respondents were to hold the property (or, alternatively, the net proceeds of sale) as joint trustees for the applicant’s sole benefit. The deed therefore created a trust with the applicant as the sole beneficiary. A crucial feature of the deed was a clause dealing with “dealing in the Property”: if the property was not sold, then upon the applicant attaining the age of 40 years old, the trustees were to transfer the legal title to the applicant upon his request and at his cost. This clause became central to the parties’ competing narratives about the trust’s purpose.
The parties’ dispute focused on why the trust was created. The applicant and the second respondent said the trust was intended as a gift or legacy property for the applicant while the respondents were still alive. The first respondent, however, alleged that the trust deed was created to avoid the payment of ABSD. He characterised the trust as a sham instrument—essentially a paper arrangement to “buy time” for the respondents to dispose of other assets and avoid ABSD that they could not afford. The respondents also differed on what their solicitor, Ms Sharon Tay, advised during the meeting: the first respondent alleged advice about collapsing the trust after an ABSD-related period, while the second respondent alleged advice that the applicant could legally request transfer before age 40 despite the deed’s clause.
After the trust was executed, the respondents’ relationship deteriorated. In 2021, the second respondent commenced divorce proceedings against the first respondent. In response, the applicant sought to terminate the trust so that the property would vest in him immediately. He wanted to prevent further disputes between his parents and to ensure that he and his sister would have a place to stay after the divorce proceedings were finalised. The second respondent agreed to the termination, but the first respondent objected, maintaining that the trust was a sham and/or illegal.
In addition to the sham and illegality allegations, the first respondent relied on an alleged loan agreement dated 4 August 2020. The loan agreement purportedly recorded that the respondents loaned the applicant $4.925 million to purchase the property. The applicant and the second respondent disputed whether the applicant had signed the loan agreement at all. They also disputed the purpose of the loan agreement. The first respondent’s position shifted: he initially claimed the loan agreement protected the applicant in the event of divorce, but later claimed it protected himself and the second respondent. The applicant and second respondent maintained that the loan agreement, if anything, was intended to protect the applicant’s capital in the event of the applicant’s divorce.
What Were the Key Legal Issues?
The High Court identified the main issue as whether, following the rule in Saunders v Vautier, the applicant could terminate the trust and vest the absolute interest in the property in himself. While the rule is often stated in straightforward terms—where all beneficiaries are sui juris and absolutely entitled—the case was complicated by factual disputes that went to the enforceability of the trust itself.
Two further legal questions followed from those factual disputes. First, whether the trust deed should be invalidated as a sham. A sham trust is one where the parties do not intend the legal arrangement to operate according to its terms; instead, the arrangement is a façade for some other purpose. If the trust were a sham, it would not be capable of being enforced, and Saunders v Vautier could not be relied upon to terminate an arrangement that never truly took effect as a trust.
Second, the court had to consider whether the trust should be unenforceable for illegality. The first respondent argued that the trust was created to avoid ABSD and therefore had an illegal purpose. This raised the broader doctrinal question of how the illegality defence operates in trusts cases, and whether the applicant could obtain any relief even if the trust were tainted by illegality.
How Did the Court Analyse the Issues?
The court began by addressing the sham allegation. The judge emphasised that the disputes of fact about the purpose of the trust were central. The court therefore directed cross-examination to resolve competing accounts, particularly on what the solicitor advised and what the parties intended when executing the trust deed. The sham inquiry required the court to determine whether the respondents intended the trust to operate as a genuine trust for the applicant’s benefit, or whether it was merely a façade to achieve an improper tax outcome.
On the evidence, the court concluded that the respondents intended to benefit the applicant by the trust. The judge accepted that the trust deed was supported by the surrounding circumstances, including the manner in which the trust was drafted and the role of the solicitor in advising on conveyancing and the possibility of “collapsing” the trust. The court treated the solicitor’s advice as consistent with a bona fide estate-planning or family arrangement rather than a purely tax-driven façade. In particular, the court found that the loan agreement narrative, even though disputed as to signature, did not undermine the conclusion that the trust deed reflected genuine intention to benefit the applicant.
The court also considered the internal logic of the parties’ competing versions. The first respondent’s account—that the trust was created to avoid ABSD and could be collapsed after a period—was weighed against the applicant and second respondent’s account that the trust was intended as a gift/legacy property. The judge’s reasoning indicates that the court was not persuaded that the trust deed was a mere instrument to circumvent ABSD obligations. Instead, the court found that the loan agreement (as a supporting documentary context) supported the trust deed being a bona fide instrument. The court therefore held that the trust deed was not a sham.
Having rejected the sham challenge, the court turned to illegality. The judge noted that the illegality doctrine in trusts cases requires careful analysis because trusts are equitable arrangements, and the consequences of illegality can differ from those in purely contractual settings. The court reviewed the “formal reliance principle” associated with Tinsley v Milligan, which had previously been applied in local decisions. Under that approach, the court asks whether the claimant can establish a cause of action without relying on the illegality itself, often focusing on the form of the pleadings and the legal basis of the claim.
However, the judge departed from the formal reliance principle in the present case. The court explained that developments in Singapore illegality jurisprudence—particularly in the contractual context—had already rejected the formal reliance principle and reformulated the illegality defence. The judge referred to Ting Siew May’s rejection of the formal reliance principle and the adoption of a more substance-oriented approach. The court also drew on the two-stage framework in Ochroid Trading, which had been applied in the contractual context to determine (i) whether the claim is enforceable and (ii) whether restitutionary recovery is available even if enforceability is denied.
Importantly, the court adapted this framework for the trusts context. The judge proposed a modified Ochroid Trading framework applicable to trusts. Under this modified approach, the first stage asks whether the trust is enforceable. This includes examining whether trusts are prohibited, or whether the trust was created for an illegal purpose or arose as an incidental consequence of an illegal purpose. If the trust is not enforceable, the second stage asks whether restitutionary recovery is still possible, even though the trust cannot be enforced.
Applying the modified framework, the court held that the trust was not constituted for an illegal purpose. The judge’s conclusion followed from the earlier finding that the trust deed was not a sham and that the respondents intended to benefit the applicant. The court therefore did not accept that the trust was created to avoid ABSD in the manner alleged by the first respondent. Because the trust was not tainted by an illegal purpose, the illegality defence did not arise in a way that would prevent the applicant from terminating the trust under Saunders v Vautier.
In practical terms, the court’s analysis shows that illegality in trusts is not assessed in the abstract. It is assessed through the lens of intention and purpose, supported by evidence about what the parties actually intended when creating the trust. The court’s structured approach also signals that Singapore courts are moving away from purely technical pleading-based approaches to illegality and towards a principled inquiry into enforceability and the availability of recovery.
What Was the Outcome?
The High Court dismissed the first respondent’s objections and granted the applicant’s application to terminate the trust. The court declared that the trust deed dated 27 July 2020 could be terminated, and ordered that the property held by the trustees be transferred from the joint trustee respondents to the applicant.
Because the court found that the trust was neither a sham nor constituted for an illegal purpose, the applicant’s rights under the rule in Saunders v Vautier were upheld. The practical effect is that the applicant obtained immediate vesting of the property, rather than being confined to the deed’s deferred vesting mechanism (including the age-40 clause) or being forced to litigate further on enforceability grounds.
Why Does This Case Matter?
This decision is significant for two main reasons. First, it illustrates how courts approach disputes about the purpose of a trust where one party alleges that the trust is a sham or created for an illegal purpose. The court’s willingness to direct cross-examination and to scrutinise the evidence surrounding the solicitor’s advice and the parties’ intentions underscores that sham and illegality allegations are fact-intensive and require credible proof.
Second, the case contributes to Singapore’s evolving illegality doctrine in the trusts context. By departing from the formal reliance principle associated with Tinsley v Milligan, the court aligned trusts illegality analysis with the more modern, substance-oriented approach developed in Singapore contract cases. The modified two-stage Ochroid Trading framework provides practitioners with a structured method for analysing enforceability and potential restitutionary consequences where illegality is alleged in trust arrangements.
For practitioners, the case offers practical guidance on drafting and litigation strategy. Where a trust is challenged as a sham or for illegality, the evidential record—such as solicitor correspondence, meeting notes, and contemporaneous documents—may be decisive. Additionally, the case suggests that courts will look beyond tax-related narratives and focus on whether the trust was genuinely intended to operate as a trust for the beneficiary’s benefit. Finally, the decision is a reminder that Saunders v Vautier remains a powerful tool for beneficiaries, but its operation can be blocked only if the trust is shown to be unenforceable due to sham or illegality.
Legislation Referenced
- Criminal Justice Act
- Criminal Justice Act 1993
- Defence Service Homes Act
- Defence Service Homes Act 1918
- Evidence Act
- Evidence Act 1893
- Residential Properties Act
- Supreme Court of Judicature Act 1969 (including Section 18(2))
Cases Cited
- Saunders v Vautier (1841) 4 Beav 115
- [2011] SGHC 179
- [2013] SGHC 261
- [2023] SGHC 196
- Tinsley v Milligan
- Ochroid Trading Ltd v Chua (“Ochroid Trading”)
- Ting Siew May
Source Documents
This article analyses [2023] SGHC 196 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.