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Justice Philip Jeyaretnam: Speech delivered at SMU's Trusts, Wealth Management and Philanthropy Conference

Singapore Management University
27 July 2023

Meaning and Doing What You Say

The Honourable Justice Philip Jeyaretnam 
President, Singapore International Commercial Court

1. Readers of Alice in Wonderland will recall the admonition of the March Hare to Alice that she should say what she means, to which she replies that she does, that is she means what she says. Alice suggests that meaning what one says is the same thing as saying what one means. To this the March Hare scornfully rejoins that it’s not the same thing at all: “Why, you might just as well say that ‘I see what I eat’ is the same thing as ‘I eat what I see’”. From the law’s perspective, it is not always the case that people need to say what they mean – it is often considered acceptable to leave things unsaid, except where there is a duty to speak – but the law abjures saying things that one does not mean (for example so as to deceive others). Moreover, the law takes what a person says to be what they mean, unless their actions show that it is a pretence or at least not the complete picture. In the case of trusts, this has important practical implications.

2. The institution of the express trust has many socially important uses, including enabling property to be held for the benefit of minors and other vulnerable persons. What makes trusts suitable for this purpose are the strict legal obligations placed on the trustee in whose name the property is held. However, this structure has also lent itself to the avoidance of legal obligations, such as concealing or withholding assets from the reach of creditors or government authorities. Over the past two decades, much effort has been expended on legal regulation of the wealth management industry to limit such avoidance. In some jurisdictions competing to be offshore havens, there has been enactment of countervailing measures: anti-anti-avoidance legislation, if you will. I do not intend to survey those efforts in these opening remarks, nor will I venture into the thorny question of where exactly the line is or should be drawn between legitimate avoidance and illegitimate evasion. Instead, I wish to commend to all practitioners the salutary principle that settlors of trusts must both mean and do what they say they are doing when they set up trust structures with your advice and guidance. The structures set up on paper must match the settlor’s intention, and the settlor, the trustees and the protector, if there is one, must act in accordance with them.

3. Let me illustrate this with a common hypothetical. Founders of successful businesses may sometimes sell out for large sums of money to new investors. As a result they may find themselves, for the first time in their lives, with far more money than they know what to do with. They may then seek advice on succession planning and asset protection. On the basis of such advice they may set up a trust. Often this raises no difficulties. But sometimes there may be potential claims from the buyers of the business. Such claims could include claims for breach of warranty or for misrepresentation. To the extent that there might be a proprietary claim, for example where there was fraudulent misrepresentation, there could be tracing of the sale proceeds into the hands of third parties. This would potentially include tracing into a trust into which such sale proceeds were transferred. Even if there are no proprietary claims, there may be personal claims against the settlor. In such a case, their assets will be liable to execution if the buyers obtain a judgment. Two questions may arise. One question is whether the trust itself is genuine. Another question is whether the settlor’s assets were genuinely transferred into the trust. It is a common set up for the trust to be formed in an anti-anti-avoidance jurisdiction with the trustees holding the shares of an offshore corporate vehicle. If so, the question could be whether the assets were genuinely transferred into the corporate vehicle whose shares are held on trust for the beneficiaries.

4. So let us say a settlor sets up a trust under your advice and guidance with a corporate vehicle to hold the assets. Sometimes professional trustees appoint the settlor as the sole director of the offshore corporate vehicle. Leaving the settlor in effective control of the assets supposedly ultimately owned by the trust or its beneficiaries raises questions about the true intention of the settlor. Worse still, professional trustees may not even check on what the settlor is doing.

5. It is not enough that the settlor has de facto or effective control over assets said to ultimately belong to the beneficiaries of the trust for the trust to be disregarded or considered a sham, but it may be evidence of a lack of genuine intention to declare a trust which may mean that it was a sham. Alternatively, it could be evidence that those assets were not genuinely transferred into the corporate vehicle held by the trustees, and that instead the settlor retained beneficial ownership of them under a resulting trust. This will depend on the facts of the case.

6. This hypothetical is a simple illustration of the important principle I began with, namely that when trusts are set up the settlor must mean it and act in accordance with that intention. Professional trustees too must accept the settlor’s word as expressed in the trust deed and take immediate steps to determine what the intended trust assets are and then assert and establish control over them. It can be difficult for professional trustees. First, settlors are typically successful strong-willed people, who expect to get their way. Secondly, the settlor is the initial client, and the person who chooses the trustees in the first place. But neither of these points excuse a trustee’s inaction.

7. As should be clear from my remarks, this principle is not limited to the question of whether a trust is real or a sham but extends to questions such as what assets are subject to a trust. It is sensible not to leave the settlor in effective control of any assets meant to be ultimately for the benefit of the trust beneficiaries. If the trustees hold assets via a corporate vehicle, the trustees should take immediate control of that corporate vehicle and not leave it in the control of the settlor. If this is not done, there is always the risk that creditors may be able to have recourse to those assets on the ground that they in fact remained the property of the settlor. I repeat that this is relevant in the context of personal claims and not so much for proprietary claims where there is in any case the possibility of tracing into assets settled or disposed of by the debtor otherwise than to a bona fide purchaser without notice.

8. This is something that is first and foremost a principle of integrity, propriety and due care on the part of professional trustees. But it is also in the interests of professional trustees to act properly and diligently as otherwise they may be exposed to potential claims whether from the settlor or disappointed beneficiaries.

9. That ends my words of caution and admonition. Let me now conclude with some remarks on this excellent conference. Having reviewed the programme, I must say that I am heartened both by the topicality of the sessions as well as the expertise of the speakers and moderators. I only wish I were able to stay on. I have no doubt that the deliberations will yield much of value and significance and hope that this will be shared more widely in due course. While all the sessions look fascinating, I am especially interested by those in fields where I have recently had to deliver judgments such as the topics of personification without legal personality, anti-avoidance responses and the regulation of charities. I congratulate the organisers on a searching and in-depth programme, and wish you all a fruitful and enjoyable conference.


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