An Introduction to Trust Law in Singapore
Hang Wu Tang ＊1. Characteristics of Singapore Trust Law1
1.1 Creation of a TrustSingapore, being a former British colony, inherited the common law
legal system. One of the unique features of the common law model isthe dualism which is inherent in the legal system. Common law legal
systems are largely precedent-based and the precedents can be divided
roughly by their origins, namely, Law and Equity. Equity may be defined as a body of rules, principles and remedies initially developed andadministered in the English High Court of Chancery before 1873. Bothbranches of the law are historically distinct although both are now administered by the same courts concurrently (see section 3 of the Civil
Law Act (Cap 43, 1994 Revised Ed.) and section 26 of the Subordinate
Courts Act (Cap 321, 2007 Revised Ed.)). Another unique feature of
the Singapore system is that syariah law applies to Muslims domiciledin Singapore with regard to their inheritance (see section 111 of the
Administration of Muslim Law Act (Cap 3, 2009 Revised Ed)). Thus, it
is possible for Muslims domiciled in Singapore to create Muslim charitable trusts i.e. a wakaf in their wills. All wakafs are administered by theIslamic Council of Singapore (Majlis Ugama Islam Singapura). This paper
will not explicate the principles governing wakafs.
* Professor and Director Centre for Cross-Border Commercial Law in Asia, School of Law, Singapore
Management University. I am grateful to Rita Lam and Charlotte Gill from the SMU’s Li Ka Shing
Library and Carolyn Wee from NUS CJ Koh Law Library for assistance in locating some of the material relied on in this paper. For purposes of full disclosure, I am a director of the Special Needs Trust
Company which is discussed in this paper.
1 Some parts of this paper are adapted from the Equity and Trusts chapter written by the authoron www.singaporelaw.sg― 163 ―

信託法研究第40号（2015）

One of the unique features of the common law system is the existence of a dual ownership of property. Ownership of property can bedivided into the following: a legal interest and an equitable interest. A
legal interest is enforceable against the whole world while an equitableinterest is enforceable against the whole world except for the bona fidepurchaser for value without notice. For example, where the property isheld on trust, a trustee holds the legal title of the trust property, whereas
the beneficiary has the equitable interest in the trust property. It must
be noted that in matters of priority, the position might be decided by
the relevant statute e.g. the Land Titles Act (Cap 157, 2004 Revised Ed.)
will govern issues of priority with regard to registered land. The duality of property ownership also enables the creation of security interests
such as mortgages, floating charges and fixed charges. Usually in thesesecurity interests, the debtor is the legal owner whereas the creditor isthe equitable owner of the property. The equitable ownership can be asserted as a proprietary claim if the debtor becomes insolvent. It must be
noted that some security interests must be perfected under the relevant
statutory regime (see e.g. Companies Act (Cap 50B, 2006 Revised Ed.)).
This paper concentrates on the express trust. An express trust
is a trust which is expressly created to achieve certain desired consequences. The usual pattern of an express trust is as follows: a settlor
transfers trust property to the trustee on trust for the beneficiaries andspecifies the terms of the trust. A settlor may also declare himself or
herself to be a trustee for the beneficiaries.
1.1.1 Elements of a Valid Express Trust
The initial transfer of the trust property must comply with relevant formalities (e.g. see section 7 of the Civil Law Act (Cap 43, 1999
Revised Ed)) which requires a trust in respect of immovable property to
be manifested and proved in writing signed by some person who is able
to declare such trust. Apart from real property, there are no formalities
associated with the declaration of an express trust. In order to be considered a validly constituted trust, the `three certaintieś must be met― 164 ―

(see Joshua Steven v Joshua Deborah Steven and others [2004] 4 SLR(R) 216
at [12]). First, the intention of the settlor to create the trust must be certain. Second, the identity of the trust property must be certain. Finally,
the identity of the beneficiaries must be defined with some precision.
With regard to certainty of intention, it is not necessary to use
the word “trust” to settle a trust. Rather, the focus of the inquiry is“whether it was possible and appropriate to infer an intention to create
a trust by looking at evidence not only of the alleged settlor’s words andconduct, but also of the surrounding circumstances and the interpretation of any agreements that might have been entered into” (per Menon
CJ in Guy Neale and others v Nine Squares Pty Ltd [2015] 1 SLR 1097 at [58]).
The issue surrounding certainty of subject matter revolves aroundthe question whether the subject matter of the trust is defined with
sufficient clarity. For example, a trust fails if a settlor declares a trust
over a ‘bulk’ of his or her estate. Such a trust is not valid because thesubject matter is not described with sufficient certainty and the court
would not be able to enforce the trust. A trust over future property isalso regarded as invalid. Future property is property which the settlor
does not presently own but property which the settlor hopes he or she
will own in future. An illustration of future property is property which
the settlor may inherit in future. Thus, if a person purports to declarea trust for certain beneficiaries over property which he or she may
inherit from his or her parents, this is not regarded as binding on the
person as there is no certainty of subject matter. This means that even
if the person actually inherits the property in future, he or she is not
obligated to settle the property on trust. The fact that it is not possible
to create a trust over future property does not mean that the settlor
may not transfer further property into the trust after the trust has beencreated. It is quite common for a trust to be declared over an initiallynominal sum. Further transfers of property will then be made from thesettlor to the trustee.
With the exception of a charitable trust, the general rule with re― 165 ―信託法研究第40号（2015）

gard to certainty of objects means that a trust must be declared for the
benefit of identifiable legal persons. In Singapore, it is possible to declarea trust where the beneficiary is a company (see Goi Wang Firn (Ni Wanfen) and others v Chee Kow Ngee Sing (Pte) Ltd [2015] 1 SLR 1049).
A trust may be created by a contract between the settlor and thetrustee. In Singapore, this is the common arrangement between settlors
and professional trustees.
An express trust may be a fixed or discretionary trust. A fixed
trust is a trust where the shares of the beneficiaries are fixed from theoutset. In contrast, a discretionary trust is a trust where the potential
beneficiaries and their shares are not fixed. Instead, the trustee is given
the discretion to decide on potential beneficiaries and their shares. A
typical discretionary trust confers on the trustee a wide power of selecting potential beneficiaries from anyone in the world and the discretion
to determine the amount to be paid to each beneficiary. This powerof appointment may be drafted as a general power, special power or
hybrid power. A general power of appointment allows the donee to appoint anyone he or she wishes. In contrast, a special power authorizes
the donee to exercise his or her discretion in favour of a defined classof persons. Finally, hybrid powers are powers which entitle the donee
to appoint anyone in the world except members of a specified class. In
addition, the settlor might wish to include a protector i.e. a third party
who will have a role in the administration of the trust. Typically, theprotector is given the power to veto or authorise a trustee’s action incertain matters. A pictorial representation of the discretionary trust is
shown below in Figure 1.
A common reason why a settlor might wish to declare a discretionary trust is that such a trust is able to cater to the settlor’s change ofcircumstances such as divorce, the addition of new family members etc.
If the class of beneficiaries is drafted widely enough, the settlor mighteven be regarded as a potential beneficiary through an exercise of thetrustee’s discretion. In addition to these benefits, the settlor may also
― 166 ―

Figure 1
Power to vetoorDiscretionary
Settlor

Letters ofwishesauthorisetrustee’s action
Protector

Trustee
DiscretionNon-binding

to choose

expression ofwishesPower to add
Beneficiaries

beneficiaries

inform the trustee of his wishes from time to time through a letter ofwishes as to the appointment of beneficiaries. Although the letter ofwishes is often drafted as being non-binding, the settlor’s wish is certainly a factor which the trustee may legitimately take into account inexercising his or her discretion. Thus, the letter of wishes gives thesettlor a degree of influence over the trustee’s exercise of discretion in
the appointment of the beneficiaries. Due to its inherent flexibility, thediscretionary trust is a popular method of wealth transmission for highnet worth individuals.
1.1.2 Creation of Trust by Will
Besides a lifetime declaration, a trust may also be created by a will
as long as it complies with the Wills Act (Cap 352, 1996 Revised Ed.).
There are reported cases in Singapore where a trust is created by a will(see e.g. Foo Jee Seng v Foo Jhee Tuang [2012] 4 SLR 339).
1.1.3 Declaration of Trust (Self-Trust)
While it is more common to ask a third party to be a trustee, it isalso possible for the settlor to be the trustee for the beneficiaries of thetrust. Outside real property, there are no formalities associated with a― 167 ―

信託法研究第40号（2015）

declaration of a trust. For settlors who wish to protect their assets, it ismore common to use a discretionary trust and appoint a third party to
be the trustee. Under a discretionary trust, it is possible for the settlor
to be a potential beneficiary depending on the wording of the trust deed.
However, if the settlor is meant to be the primary beneficiary, then thetrust may be subject to attack by the settlor’s creditors or divorcing
spouse (see HW Tang, “An Impregnable Fortress? Possible Attacks on
the Singapore Trust?” (2011) 25 Trust Law International 66).
1.2 Fundamental Structure of a Trust
1.2.1 T rust Property Legally Separated from Trustee’s Individual
Property
A trust is not regarded as a separate legal entity. However, theconventional understanding is that once a trust is declared over property, title to the property is split into legal and equitable title. The trustee holds the legal title while the beneficiaries hold the beneficial title.
Therefore, the personal creditors of the trustee are not entitled to reachthe trust property to satisfy the personal claims of the trustee. Thereis no requirement for trust property to be registered as trust property.
1.2.2 Beneficial Interest and its Nature
The nature of beneficial interest under a trust is still a debatedconcept. A recent English textbook has helpfully summarized the four
different ways to conceptualise the beneficial interest in a trust (seeG. Virgo, The Principles of Equity and Trusts, (OUP, 2012), 51-57). This isa much debated issue and it is only possible to present an outline of
the arguments here. First, the beneficial interest is characterized as aright in rem. However, it has been pointed out that the in rem model isinconsistent with the fact that the beneficial interest under a trust is
not good against the whole world. It is an axiomatic principle that anequitable interest is only good against the whole world except for thebona fide purchaser for value without notice. Second, the beneficiary’s
equitable rights have been regarded as personal (in personam) rights― 168 ―

against the trustee. The difficulty with this approach is that it does notprovide an explanatory force as to why the beneficial interest is capableof binding third parties who are not good faith purchasers. Third, somescholars have argued the beneficial interest is a right against rights (seeB. McFarlane and R. Stevens, “The Nature of Equitable Property” (2010)
4 Journal of Equity 1). In other words, the beneficial interest describes
the beneficiary’s rights against the trustee’s right of ownership. It is said
that this right against rights model explains why the beneficiary’s rights
bind third parties. When the property is transferred to a third party
who is not a good faith purchaser, the beneficiary continues to assert aright against the third party’s right of ownership. The main weakness
with this model is that the case law has never used the language of aright against rights. Finally, the beneficial interest is seen as a uniqueform of proprietary right. It is a lesser right as compared to a fullyfledged in rem right because it does not defeat all third party interests
i.e. a beneficial interest is defeated by a bona fide purchaser for value
without notice.
1.3 Administration of Trust
1.3.1 Trustee’s Power1.3.1.1 Trustee’s Power in General
The trustee’s power is derived from the trust deed. Certain powers
are also found in the Trustee Act (Cap 337, 2005 Revised Edition). The
trustee may be empowered under the trust deed to decide as to when
to sell the trust property. However, the courts may intervene with thedecision not to sell the trust property in appropriate circumstanceswhere the trustee has ignored relevant considerations and taken on
board irrelevant considerations (see Foo Jee Seng v Foo Jhee Tuang [2012]
4 SLR 339).
1.3.1.2 Delegation of Trustee’s Power to a Third Party
Under section 27 of the Trustee Act (Cap 337, 2005 Revised Ed.), atrustee may by power of attorney delegate his or her power to a third― 169 ―

信託法研究第40号（2015）

party. Such a delegation may continue for a period of 18 months or any
shorter period provided by the instrument creating the power. The
delegation permitted by section 27 is to accommodate trustees when
they are unable to perform his or her duties for a period of not morethan 18 months. An illustration of such a situation is when the trustee
is abroad for a short period of time. Section 27 of the Trustee Act (Cap
337, 2005 Revised Edition) is almost identical to section 25 of the English
Trustee Act 1925.
1.3.2 Trustee’s Duties
1.3.2.1 Duty of Loyalty and Conflict of Interest
A trustee is a fiduciary of the beneficiary. It has been said the‘standard of duty imposed by law on a fiduciary is the highest standard
known to the law. It is a duty to act for someone else’s benefit by sacrificing one’s own personal interest to that of the other. If the fiduciary is
not prepared to make such sacrifice he will never be able to protect andadvance the interest of the other. Selfishness is the antithesis of selflessness. The office of a fiduciary is founded on selflessness. Selfishness isabsolutely prohibited’ (per GP Selvam in Kumagai-Zenecon Construction
Pte Ltd and Another v Low Hua Kin [1999] 3 SLR(R) 1049 at [13]; upheld by
the Court of Appeal in Low Hua Kin v Kumagai-Zenecon Construction Pte
Ltd (in liquidation) and another [2000] 2 SLR(R) 529). Thus, a fiduciary has
a duty not to put himself or herself in a position of conflict of interests,
not to misuse trust property and confidential information, and not tomake an unauthorised profit by reason of his position as a fiduciary. It
has been suggested that the test of “mere possibility” of conflict is thepreferable test in Singapore (per Rajah JA in Ng Eng Ghee and others v
Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) andanother appeal [2009] 3 SLR(R) 109). The remedies against a fiduciary
who makes an unauthorised profit may be personal or proprietary. A
fiduciary may in appropriate circumstances be made to account for an
unauthorised profit or to hold a property acquired in breach of a fiduciary duty on a constructive trust for the plaintiff. Furthermore, a fidu― 170 ―ciary may be ordered to make equitable compensation to the principal
for losses suffered.
A trustee is not allowed to engage in self-dealing i.e. to purchasetrust property or sell his or her property to the trust. Such a transaction would be voidable due to the inherent conflict of interest because
the trustee acts as both the vendor and purchaser. The law is less strict
when it comes to a beneficiary selling his or her interest in trust property to the trustee. Such a transaction is not set aside automatically atthe beneficiary’s option. Instead, such a transaction is allowed to standif the trustee can demonstrate that he or she has not taken advantageof the beneficiary, disclosed all relevant information to the beneficiaryand the price was fair.
1.3.2.2 Duty of Care
Not all breaches of duties by trustees are necessarily breaches offiduciary obligations. A breach of fiduciary duty must be distinguishedfrom mere incompetence. The latter does not attract equitable rules
but is governed by tort principles. In other words, a breach of duty carewould attract a remedy whereby the trustee must compensate the beneficiary for his or her loss instead of an account of profits or a declaration of a constructive trust. Although there is no direct case law in pointin Singapore, it is likely that it is possible to exempt a trustee’s liability
for a duty of skill and care. Only fundamental duties of a trustee may
not be excluded. Such fundamental duties include the duty to carry out
the trust honestly and in good faith.
1.3.3 Expenses of Trust Administration
A trustee is in a different position from an agent because a trustee
acts as principal in connection with the administration of the trust andincurs personal liabilities to the creditors. Where a trustee incurs aliability towards a creditor in the proper discharge of the trust, thetrustee is entitled to an indemnity out of the trust property to meetthat liability. There are two types of a trustee’s indemnity−a right― 171 ―

信託法研究第40号（2015）

to be indemnified out of the trust property and a personal indemnity
against the beneficiary which extends beyond the trust assets (see EC
Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2013] 4 SLR 123).
The existence of the personal right of indemnity against the beneficiaryis somewhat controversial (the debate is summarized in R. Flannigan,“Trust or Agency: Beneficiary Liability and the Wise Old Birds” in Equity and Contemporary Legal Developments, (S. Goldstein, ed), (Hebrew University, 1992), 275). The right to be indemnified out of the trust property
is effected by a lien or charge over the trust property and confers anequitable interest in the trust fund to the extent of the amount of the liability. Hence, the trustee’s right of indemnity takes priority over claimsof any beneficiary.
1.4 Beneficiary
1.4.1 T he Nature of the Beneficial Interest (Already Explained
Above)
1.4.2 Acquisition of Beneficial Interest
In a fixed trust, where the beneficiaries are fixed from the outset,
the beneficial interest is acquired once the trust is properly constituted.
This means that the beneficiaries would obtain a beneficial interest once
the three certainties are satisfied (certainty of intention, subject matterand objects). However, in a discretionary trust where the shares are
dependent on the exercise of the trustee’s discretion, a potential beneficiary does not acquire a beneficial interest until the trustee exercises
his or her discretion. Up until the time of the exercise of the trustee’s
discretion, the potential beneficiary merely has a hope or spes of acquiring a beneficial interest.
It is possible to stipulate in a trust deed that a particular beneficiary enjoys a life interest and the remainder to another beneficiary.
Non-charitable trusts are subject to the perpetuity rule. This meansthat the trust will only be valid if it is vested in the beneficiaries within
the perpetuity period. The perpetuity period in Singapore is 100 years.
Thus, if a settlor declares a trust for the benefit of A, A’s first born and― 172 ―

A’s first born grandchild, the trust will only be valid if it vested in each
person within the perpetuity period.
1.4.3 T rust Administrator, Trust Supervisor, Agent of the Bene­ficiary
In Singapore, there is no concept of trust administrator, trust supervisor and beneficiary’s agent.
1.5 Termination of a Trust
For a fixed trust, a trust may be terminated by all the beneficiaries
if they are of full age, under no disability and absolutely entitled under
the trust (see Saunders v Vautier (1841) 4 Beav 115). This rule probably
does not apply in the context of a discretionary trust.
1.6 Special Types of Trust
1.6.1 Trust without Beneficiaries
Singapore follows the English law position that a non-charitablepurpose trust is generally regarded as void. There are several exceptions to this rule. The most well-known case being the Re Denley [1969] 1
Ch 373 trust (discussed in Goi Wang Firn (Ni Wanfen) and others v Chee Kow
Ngee Sing (Pte) Ltd [2015] 1 SLR 1049). Re Denley was a trust over land tobe “maintained and used as and for the purpose of a recreation or sports
ground primarily for the benefit of the employees of the company”. Goff
J upheld the trust and said: “[w]here, then, the trust, though expressed
as a purpose, is directly or indirectly for the benefit of an individual orindividuals, it seems to me that it is in general outside the mischief ofthe beneficiary principle”.
However, there are some exceptions to the rule that a non-charitable purpose trust is invalid. Notable exceptions include trusts forthe maintenance of animals, trusts for maintenance of monuments andgraves and trusts for the performance of certain religious rites provided
they do not offend the rule against the perpetuities. For example, a trust
for the performance of Sin Chew rites in the memory of settlor was― 173 ―

信託法研究第40号（2015）

upheld (see In The Matter of The Estate of Khoo Cheng Teow, Deceased [1932]
SSLR 12). However, trusts for the performance of Sin Chew rites arerare these days. There is one case where the court had to terminate
the trust because all the children had become Christians and refused
to perform the Sin Chew rites (see Bermuda Trusts (Singapore) Ltd v Wee
Richard and others [1998] 3 SLR(R) 938).
1.6.2 Charitable Trust
A charitable trust is exempt from the beneficiary principle andthe rule against perpetuity (on charities see generally R. Leow, “FourMisconceptions about Charity Law in Singapore” [2012] 1 SJLS 37). The
method of creation of a charitable trust is similar to a non-charitable
trust. A charitable trust is subject to governance by the Commissionerof Charities and Charities Act (Cap 37, 2007 Revised Edition). In modern times, it is increasingly common to structure a charity by way of
a company limited by guarantee instead of declaring a charitable trust.

２. Trust Business in Singapore
2.1 License for Trust BusinessIn order to carry out trust business in Singapore, a company must
be a licensed trust company (see Trust Companies Act, Cap 336, 2006
Revised Ed.). The licensing regime is governed by the Monetary Authority of Singapore. Banks which are licensed under the Banking Act(Cap 19, 2008 Revised Ed.) are also entitled to carry out trust businessin Singapore.
2.2 Commercial Trusts and Trusts in Wealth Management
Singapore is one of the leading preferred places of residence forhigh net worth individuals in Asia. The Monetary Authority of Singapore reports that assets under management in Singapore have grownfrom S$ 864 billion dollars in 2008 to S$ 1.8 trillion dollars in 2013. A
breakdown of these figures is shown in Figure 2 below. Although theMonetary Authority of Singapore’s report does not give a precise break― 174 ―Figure 2
ASSETS UNDER MANAGEMENT( AUM )Chart 1: Assets under Management
2,000
1,800

1,818

Advisory
Discretionary

1,626

1,600

S$ Billion

1,400
1,200
1,000

1,354

1,338

2010

2011

1,208

864

800
600
400
200
0
2008

2009

2012

2013

down of the proportion of these assets which fall within the ambit ofprivate client business, these figures certainly suggest the emergenceof Singapore as a major wealth management centre in Asia. Indeed, thefact that many international banks and trust companies and Singapore
banks have set up specialized private banking arms in recent years is
a testament to the rapid growth of the business of wealth managementin Singapore.
There are several anecdotal reasons to account for Singapore’s recent emergence as a major wealth management centre in Asia. These
include a combination of legal and non-legal factors. From the legal
perspective, Singapore’s comparative low income tax (the maximum
income tax rate in Singapore is 22 % for income above S$ 320,000 for
the year of 2017 onwards), comparatively liberal immigration policies
for high net worth individuals and the relatively few legal restrictions
on foreigners purchasing Singapore property make the country an attractive place of residence. Further, the existence of strict banking and― 175 ―

信託法研究第40号（2015）

trust secrecy laws coupled with amendments to Singapore’s trust laws
ensure that the needs of these high net worth individuals are protected
especially with regard to privacy considerations. The favourable legal regime coupled with non-legal factors such as the existence of amultitude of excellent international schools, good air quality, low crime
rate and stable political environment render Singapore to be a popular
choice of residence for high net worth individuals especially those withschool going children.
The trust is used in both in wealth management and in business. In
the sections below, I will elaborate on the Real Estate Investment Trust,Business Trust and the Special Needs Trust Company.
2.3 The Real Estate Investment TrustSingapore is a major centre for the listing of the Real Estate Investment Trust (REIT) (see generally J. Koh, “Singapore Chapter” inReal Estate Investment Trusts, (Globe Business Publishing, 2006), (Booth andBoyle, eds), 175). Singapore was one of the earliest Asian jurisdictions
to change its regulatory framework and tax incentives in 1999/2000
in order to encourage the listing of the REITs. The REIT market in
Singapore has been nothing short of phenomenal. Currently, there are
28 REITs and six stapled trusts listed on Singapore Exchange, with a
combined market capitalisation of S$66.7 billion. The following diagramin Figure 3 explains the REIT:
Figure 3
Unit Holders
Management

Acts for unit holders

TrusteeManager

REIT
Income from property

Property
Manager

Properties
Management― 176 ―

Essentially, the REIT involves large real estate like shopping complexes, factories, hotels or hospitals which are settled on trust and soldto investors. The owner of these properties would sell the property toa REIT; shares or beneficial units in the REIT would then be sold to investors who hold shares or beneficial units in the REIT as unit holders.
Income generated from these properties (e.g. rental income) would
eventually be paid to the unit holders after paying off the various fees
involved in running the REIT. The REIT is usually managed by a trustee and a manager while the underlying property would be managed bya property manager. For listed REITs, this is subject to listing requirements prescribed by the Singapore Stock Exchange.
Why would property owners want to divest their property into
the REIT structure? There are several commercial advantages to theowner in divesting the property to a REIT. First, the owner eliminates
the property holding costs of a large piece of real estate by selling itto the REIT. In other words, the REIT removes the following risks forthe owner: (i) fluctuating interest rates associated with borrowing costs;(ii) voids in rental; and (iii) potential falls in the value of the property.
Second, a related point is that by divesting the property, the REIT
frees up valuable capital to the owner which can be used more profitably elsewhere. This is especially vital for property owners who have
many building projects in markets like India and China. Thus, a successful owner can build a commercial property, divest it into a REIT
structure and move on to the next building project. Third, the REIT
also overcomes the difficulties in locating suitable institutional investors
to purchase the property. Many of the properties managed by REITs
are worth hundreds of millions of dollars. As such, it may not be soeasy to find large institutional investors who have the financial muscle
to purchase the properties. Furthermore, negotiations for the purchaseof such properties may be unduly protracted. In contrast, the REIT isnot sold to a single institutional investor but to members of the public
via the unit holding structure. Therefore, it could be easier to structure
a REIT than to actually sell the property to an institutional investor.
― 177 ―

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Finally, the REIT assures the owner a steady stream of income evenafter the property is transferred to the REIT. Usually, the owner or its
subsidiary company remains as the management company or property
manager. Fees are payable to the owner or its subsidiary company forplaying this role. It could be argued that these fees represent an incomethat is ‘locked in’ free from the risk associated with ownership of theproperty. Correspondingly, why would a unit holder wish to invest in
the REIT? First, the REIT allows the individual investors to invest in adiversified property portfolio. Second, there are sometimes tax advantages in investing in a REIT. And finally, before the economic crisis, thereturns on the REIT have been generally quite favourable.
2.4 The Singapore Business Trust
Eager to repeat the success of the REIT, Singapore’s authorities
changed its laws to facilitate the listing of other assets to accommodate
businesses which manage non-real estate assets. Since the REIT only
deals with real estate or real estate related assets, it is conceptuallydifficult to structure other income generating assets such as ships andinfrastructure projects as a REIT. The business trust appears to be alogical extension of the REIT due to the fact that the business trust
can accommodate various kinds of assets. The business trust was introduced to create a new asset class for investors, and potentially add
depth and sophistication to Singapore’s capital markets. As such, theBusiness Trusts Act (Cap 31A, 2005 Revised Ed.) was enacted in October 2004 after a consultation paper was published seeking views ofvarious stakeholders in Singapore.
A simplified pictorial representation of the Singapore Business
Trust is shown in the Figure 4 below. In order to structure a Singapore
Business Trust, the sponsor would transfer income generating assets
to the trustee-manager for a consideration which would be raised fromthe unitholders. Thus, the unitholders own a proportionate share of theunderlying assets and a corresponding share in the returns generated.
The trustee-manager would manage the assets and income generated― 178 ―

Figure 4
Unit Holders
Trustee

Income from assets

Sponsor

Trust

Trustee-ManagerBusiness Trust

Sells assets to
the

and

management

Manages

Business

Assetsfrom the assets would be distributed to the unitholders after paying off
the trustee-manager’s fees.
It can be argued that the Singapore Business Trust is essentially an
orthodox trust where legal and beneficial interests are split between thetrustee-manager and the unitholders. In other words, the trustee holds
the legal interest in the underlying assets whereas the unitholders holdthe equitable interest. Therefore, conceptually there is no distinction between orthodox trust principles and the Singapore Business Trust. The
main difference between a traditional trust and the Singapore Business
Trust lies essentially in the purpose in which the trust is constituted.
The traditional form of trust is usually constituted as a form of gratuitous transfer whereas the Singapore Business Trust is constituted
primarily to manage an income generating asset for the purpose ofgenerating returns for the unitholders. The traditional trust normally
involves the following scenarios. The settlor will transfer property to atrustee to manage the asset for the benefit of certain named beneficiaries or a discretionary class of beneficiaries. Alternatively, the settlor
may declare himself or herself as the trustee for certain beneficiaries ora discretionary class of beneficiaries. Once the trust is constituted, thetrustee will have the duty to manage the assets in order to bring in the― 179 ―

信託法研究第40号（2015）

best possible returns for the beneficiaries according to the standard of
the prudent man of business test. In contrast, the Singapore Business
Trust is constituted primarily for a profit making purpose. The sponsor
would transfer certain assets to the trustee for consideration and units
representing shares in the beneficial ownership in the trust propertyof the business trust will be offered to members of the public. Thus,
the primary objective of the Singapore Business Trust is not a gratuitous transfer of property but a profit making venture utilizing funds
raised from members of the public. Since there is the added elementof raising funds from members of the public, the Business Trusts Act
provides the main regulatory and governance framework in setting up
the fundamental rights of the unitholders and the duties and accountability of the trustee-manager companies and the directors who sit onthese companies. These duties are explored elsewhere (see HW Tang,“The Resurgence of “Uncorporation”: The Business Trust in Singapore”(2012) Journal of Business Law 683). One major difference between the
Singapore Business trust and the orthodox trust is the extent of liabilityof the beneficiaries. Section 32 of the Business Trusts Act explicitly
provides that a unitholder’s liability is only limited to the amount which
the unitholder expressly agreed to contribute to the Business Trust.
This limitation of liability shall apply notwithstanding any provision to
the contrary in the trust deed or in the event of the winding up of theSingapore Business Trust. Section 32 of the Business Trusts Act is anextremely important provision because it effectively limits the unitholders’ liability. Therefore, even though the Singapore Business Trust is
not a separate legal entity, the liability of the unitholders is limited byreason of the statute.
Having outlined the basic features of the Singapore Business Trust,the question is this: what is the attraction of the Singapore Business
Trust as an organization structure over the company? First, the Singapore Business Trust allows the trust to pay returns to the unitholders
from its cash profits. In contrast, a company can only pay dividends
out of its accounting profits i.e. non-cash expenses such as depreciation― 180 ―

must be taken into consideration. Therefore, the Singapore Business
Trust is particularly suited to manage income generating assets withhigh levels of depreciation. Second, the Business Trusts Act prescribes
an onerous threshold before a trustee-manager may be changed. Section 20 of the Business Trusts Act provides that a trustee-manager may
be removed by the unitholders only by a resolution approved by notless than three-fourths of the voting rights of all the unitholders whoare entitled to vote in person or where proxies are allowed, by proxypresent at a meeting of the unitholders of the registered business trust.
A three-fourth majority at a meeting is not an easy figure to achieve
and this provision makes it difficult for the unitholders to remove thetrustee-manager. It may very well be that this particular feature makes
the Singapore Business Trust attractive to the sponsoring entity. Since
the sponsoring entity is likely to control the trustee-manager company
by way of majority shareholding, a sponsoring entity may prevent thepossibility of removal of the trustee-manager by retaining 25% of theunits plus one. Finally, the Singapore Business Trust provides a very
well-defined and understandable picture to potential investors on theinvestment portfolio of the business enterprise. For example, in a shipping trust, it is very clear to the investor that the business is essentiallymanaging a particular fleet of ships owned by the Business Trust inorder to obtain returns for the unitholders.
2.5 The Special Needs Trust Company
Parents with children with special needs often worry what will
happen to their children after they pass away. Even if these parents
are financially able to bequeath their child with a sizeable estate, thereis the concern as to who should manage their estate for the benefit of
the child. In Commonwealth jurisdictions where the trust exists, theobvious solution would be for the parents to settle a trust in favour ofthe child with special needs. However, this solution only gives rise toa whole host of further questions which may include: (i) who should be
the trustee?; (ii) should a lay trustee be used or a professional trustee be
engaged?; (iii) what are the fees associated with engaging a professional― 181 ―

信託法研究第40号（2015）

trustee?; and (iv) is the value of the estate sufficient to afford the fees ofa professional trustee? Of course, the perennial fear of every parent inthis situation is that a trustee may mismanage or embezzle the estateleaving the person with special needs impoverished when the parents
are no longer around. Unlike other beneficiaries, a person with special
needs does not have the ability to take the trustee to task if the estateis mismanaged or embezzled.
In Singapore, the concerns highlighted above have led to the setting
up of a non-profit company called the Special Needs Trust Company(“SNTC”). Essentially, SNTC is a government funded non-profit charity which works with the Insolvency and Public Trustee’s Office (“thePublic Trustee”) to hold and manage funds on trust for the benefit of
persons with special needs. SNTC is subject to several layers of governance. First, SNTC as a company limited by guarantee is overseen by aboard of directors. The current board of directors comprise of members
from government, civil service, the medical profession, the legal profession and the business community. As such, SNTC is able to tap into theboard of directors’ expertise in various fields to deal with difficult issues
which may arise from time to time. Second, SNTC as a registered charity is also overseen by the Commissioner of Charities. Third, since thegovernment provides SNTC with funding, SNTC works closely with
the Ministry of Social and Family Development in developing the trust
scheme. Finally, the trust monies are not kept by SNTC but are actuallydeposited with the Public Trustee.
The basic idea is that the parents will develop a care plan and letter of intent before settling a trust account with SNTC. Monies settled
into the trust account would be deposited with the Public Trustee whowill manage the fund. As such, SNTC does not manage the investment
aspects of the trust fund. The scheme is represented pictorially in Figure 5 below:
When the parents are no longer around, the trust is then activated.
Under the care plan and letter of intent, the parents would have stipu― 182 ―Figure 5
Settles a trust
Parent/Settlor

Beneficiary

Deposits trust fundPublic

SNTC

Trustee

Instructs the Public Trustee
Disburses
funds

Persons with Special Needs/Beneficiary

Caregiver/Home

Other
Expenseslated how the money ought to be disbursed. For example, SNTC would
disburse stipulated sums to the caregiver of persons with special needs,
fees for their home (if they are staying in a home) and perhaps a monthly stipend to the persons with special needs if they are high functioning
individuals. Of course, the letter of intent is stated to be not binding on
SNTC and SNTC is able to depart from the letter of intent if it is in
the beneficiary’s best interest to do so. An illustration of this would be
if the beneficiary requires funds for a medical emergency which is notprovided in the letter of intent. In these circumstances, SNTC may depart from the letter of intent if SNTC is of the opinion that such medical
treatment is in the best interest of the beneficiary.
Legally, this structure is easily achieved through settling a fixed
trust where the person with special needs is named as the life beneficiary of the trust. With regard to potential surplus of the trust fund, thesettlor would name people whom the surplus funds are to be distributed
after the life beneficiary passes on. It is made clear in the trust deedthat the persons entitled to the surplus are not regarded as beneficiariesof the trust. This alleviates SNTC from the burden of having to manage
the trust fund while balancing the interest of a life interest and remainderman. Also, by stating explicitly that the funds are to be placed with
the Public Trustee, SNTC is also freed from the tricky task of manag― 183 ―信託法研究第40号（2015）

ing the investment of trust assets especially in a volatile and complex
financial environment. These points are important because they lessen
SNTC’s litigation risk. SNTC also explains to the parents that thistrust scheme is not meant to grow the asset through the modest interest rate provided by the Public Trustee. Instead, the scheme is meant toprotect the asset for the benefit of the person with special needs.
There is no need for the parents to settle all their assets into thetrust from the onset. After settling a trust with SNTC with a modest
sum, the parents may provide the necessary bequest by Will to the relevant trust account. An example of how the special needs trust may be
used is represented pictorially in the Figure 6 below.
Figure 6
SNTC

Parent/Settlor
Directs assets to be
paid

to

accountthetrust
Liquidates
assets and pay

Executor
Of the Will

themonies to

SNTC― 184 ―

Person with Special Needs/
Beneficiary