Of a Family Feud, Indonesian Tax, the Singapore Courts and an Offshore Trust

Bernard Chung

Partner, Advocate & Solicitor, Supreme Court of Singapore


The recent Singapore High Court case of Kuntjoro Wibawa v. Harianty Wibawa and others, [2016] SGHC 109 makes for interesting reading, in the context of the recent Indonesian government tax amnesty offer, and centres around a protector-beneficiary’s ultimately futile claim against the settlor of an offshore discretionary trust established to protect her family’s wealth.

On the face of it, the case is yet another tale of a family squabble over the estate of a deceased patriarch, in this case, between mother and son, who are respectively, Defendant and Plaintiff. The son’s allegations were that his mother had, in setting up a trust over the estate of the patriarch instead of applying for grant of probate, breached her duty as executrix and constructive trustee.

The case is particularly instructive for trustees in respect to claims by beneficiaries for breach of trust, as it closely examines the operation of the defence of consent, as well as acquiescence and estoppel by convention, with a thorough analysis of the factual and legal bases for each of these defences.



On 30 January 2000, Mr. Purnakarya Wibawa, a wealthy Indonesian man, passed away and was survived by his wife, Mdm Harianty Wibawa, and six children.

Before his death, he saw fit to:

(1) place a substantial part of his considerable wealth in various USD-denominated bank accounts in Singapore, which were jointly-held in the names of his wife and children, and

(2) have a will prepared on 13 February 1996, appointing Mdm Wibawa as the sole executrix of the will, naming her and their six children as beneficiaries.

Sometime in 2003, the Indonesian tax authorities invited Mdm Wibawa and her two sons, one of whom was the Plaintiff, to their office to discuss the bank accounts.

This worried the Plaintiff and the Defendant, and prompted the Plaintiff to seek advice from a private wealth adviser (the “Adviser”), who recommended that an offshore discretionary trust be set up together with an underlying offshore company, so that the monies in the bank accounts would no longer be connected with the Wibawa family.

On 18 December 2003, the Pride Wise Trust was set up as an irrevocable and discretionary trust in Jersey, together with an underlying offshore company, which Mdm Wibawa initially owned the sole share of but thereafter transferred to the trustee. The trust instrument named her as the settlor of the trust and Kuntjoro as its first protector, with the beneficiaries of the trust named as Mdm Wibawa, Kuntjoro and his siblings. 

With the Adviser’s assistance, the monies in the various bank accounts were transferred to the bank account of the offshore company, and were treated as shareholder loans by Mdm Wibawa for the benefit of the offshore company. A debt of indebtedness was then prepared and used to assign the shareholder loans to the trustee, and Mdm Wibawa then assigned her sole share in the offshore company to the trustee.

Under the trust instrument, powers were reserved for Kuntjoro as the protector, to direct the trustees to make or sell investments in accordance with his decision, and to change trustees, and he did indeed make investment decisions after the trust was constituted, in his capacity as the protector of the trust. Kuntjoro was also appointed as the investment manager of the offshore company.

Unfortunately, sometime in 2005, Kuntjoro fell out with Mdm Wibawa, apparently over his poor investment decisions on behalf of the trust, and he left the family home in Indonesia and relocated to Singapore.


The Plaintiff’s Claims

The Plaintiff subsequently commenced legal proceedings against Mdm Wibawa, his siblings, the offshore company, the trustee and the Adviser, on 21 September 2011, alleging:

– that the funds from the bank accounts were held on trust for the estate of the deceased, and should have been distributed by way of probate of the deceased’s will, and that in settling the trust, she had breached her duty as executrix in treating the estate’s assets as her own; and

– in the alternative, the account holders of the bank accounts held the funds on trust for themselves in equal shares, and in receiving these funds in settling the trust, Mdm Wibawa held them as constructive trustee and was accountable to the Plaintiff.

Notwithstanding that the Plaintiff claimed against his siblings, the offshore company, the trustee and the private wealth advisers, the High Court’s judgment was only in respect of his claim against Mdm Wibawa.

Breach of Duty as Executrix Argument

In respect of the breach of duty as executrix argument, the Court found his numerous disclaimers as to his knowledge of and involvement in the establishment of the trust to be less than creditable, and determined that the facts showed that he was directly involved in the setting up of the offshore trust. This was arrived at based on various pieces of evidence, including Mdm Wibawa’s inability to read or speak English – when the trust instrument, documents and discussions with the Adviser were all in English – the Adviser’s file notes, and the Plaintiff’s role in making investment decisions for the trust, pointed conclusively to the Plaintiff’s role – and the Defendant’s trust in and reliance on the Plaintiff – in the setting up and administration of the trust.

Having found that the elements of the defence of consent were established, the Court was bound to examine also all the circumstances to see if it would be just and equitable for a plaintiff-beneficiary to, having given consent, turn around and sue the trustee, which in the present case, it answered in the negative.   

As to the constituents of consent, the Court also elaborated on the requirements for the beneficiary to, inter alia, be of full age, sound mind, have freely given consent, and to know of all key facts and the relevant surrounding circumstances concerning what the trustee seeks to do, all of which were made out in the case.

Crucially, the Court affirmed that the defence of consent in the context of a breach of trust, is a positive one, i.e. once established, it defeats the legal consequences of the defendant’s otherwise unlawful conduct by disentitling the beneficiary from reneging on his consent.

Argument as to Constructive Trusts

As to the argument based on the constructive trusts, the Court found that the Plaintiff had not established that the deceased meant to give the funds in the accounts to the account holders in equal shares, and that the Plaintiff had failed to put forward any factual or legal basis for his assertion that the family members held the monies in the bank accounts on trust for each other. In other words, the Court was keen to examine the intention of the deceased; were the account holders to take the funds beneficially or on trust, and if on trust, what type of trust?

The Plaintiff failed to adduce evidence that the deceased meant to give away the beneficial interest in the bank accounts. In fact, during the deceased’s lifetime, withdrawals were made only for the benefit of the deceased and his business, and the Court accepted evidence that the Wibawa children were named as joint account holders only to give them access to the family’s assets, should the parents be unable to leave Indonesia or if something untoward were to happen to them.

The Court also gave weight to the Defendant’s intentions in respect to the trust arrangement, and emphasised that she never meant to deprive her children (including Kuntjoro) of their share of the family wealth, as represented by the estate assets, and that the imposition of a trust was only to protect the family wealth and there was no evidence of any intention or attempt on her part to “short-change” her children.

Defence of Acquiescence

The Court very helpfully considered the efficacy of alternative defences, such as acquiescence, which is used in cases where the relevant act or conduct occurs after the date of the breach. The Plaintiff was held to have acquiesced in the setting up of the trust, because even after he learnt about the deceased’s will, he did not do anything to detract from the goal of protecting the family’s wealth through the offshore trust, when he could easily have done so. Even after the trust was set up, he continued to be involved with it by acting as its protector, and even made investment decisions as the investment manager of the offshore company.

It was clear that by the time the Plaintiff had objected to the estate assets being used to settle the trust, he had already performed several acts of affirmation and acquiescence. The facts also show that the Plaintiff only started objecting to the trust after his relationship with the Defendant had soured, which was long after he knew of the will.

Estoppel by Convention

The next defence that the Defendant could have relied against the Plaintiff’s claims, is estoppel by convention, which is where the parties transact on the basis of a shared assumption – of an incorrect state of fact or law; neither of whom can go back on that assumption when it would be unfair or unjust to allow that party to do so.

The Court was of the view that both the Plaintiff and Defendant had incorrectly assumed that the deceased’s estate was gifted to the Defendant, and that she was entitled to settle the assets into the trust. Nonetheless, the strategy of settling the deceased’s estate assets into the offshore discretionary trust was one that the both of them had shared, and had come about only because the Indonesian tax authorities had been making enquiries as to the estate assets. A key element of estoppel by convention is unjustness on the part of the person said to be estopped to assert the true legal or factual position, and to this end, the Court was not keen to allow the Plaintiff to back-track on the implementation of the trust and cause the Defendant to be potentially liable for the way that she had dealt with the estate assets as part of the trust set up.


Commentary and Conclusion

It is unclear what motivated the Plaintiff to commence legal action, when on the facts, the Defendant had not exercised her power under the trust instrument to remove him from the class of beneficiaries, nor was there any indication that she might do so.

One also wonders if, on hindsight, might not the Adviser have advised the Defendant to prepare a deed of family arrangement for all the beneficiaries to sign, including the Plaintiff, to alter the terms of the deceased’s will to set up the trust, and to document the beneficiaries’ agreement?

Also, while not pleaded by the Defendant, she may also have been able to rely on the Trustee’s Act to seek relief from personal liability in respect of her role as executrix or as trustee of the deceased’s will, based on the facts, though this is beyond the scope of this article for reasons of brevity.

Nonetheless, the case illustrates that the Singapore Courts will intervene, on the grounds of equity, to disallow a beneficiary, whose conduct not only constitutes consent – but constitutes positive action – towards the setting up of a trust to protect a family’s wealth, from suing on the grounds of breach of trust.

It also provides instruction for trustees, in dealing with allegations of breach of trust, on how the Courts here will construe beneficiaries’ behaviour, and how to invoke the defences of consent, acquiescence and estoppel by convention.