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Do trusts not work? Are trust assets no longer safe?

A closer look at the Singapore High Court’s judgment in La Dolce Vita Fine Dining Company Limited v Zhang Lan and others [2022] SGHC 278


Zhang Lan (Ms Zhang) is one of China's most successful businesswomen. She came under intense media scrutiny in 2015 after private equity group CVC Capital Partners won a court order in the US to freeze her assets. The US District Court ruled that in the case of La Dolce Vita Fine Dining Company Limited v Zhang Lan, the proceeds from the sale of a New York apartment owned by Ms Zhang and her company belonged to La Dolce Vita.

Now, after recent decisions in the Hong Kong and Singapore courts, various property that Ms Zhang contended were assets of a family trust has been recognised as her personal property and creditors have been granted authorisation to take enforcement measures against those assets. The judgment gives rise to fresh concerns about the viability of trusts and how safe trust assets are from the advances of creditors.

The recent case in Singapore of La Dolce Vita Fine Dining v Zhang Lan and others [2022] SGHC 278 highlights the importance of the effective formalities of the establishment of trusts, the appropriate management of them and the need for proper and continued legal advice to preserve the effectiveness of structures in the face of creditor claims.


The background facts are as set out below:

  • Ms Zhang was the owner of two companies incorporated in the British Virgin Islands (the BVI Companies), which were the second and third defendants in the case. She was also previously the owner of Success Elegant Trading Limited (SETL), the fourth defendant. SETL had bank accounts held in its name, one at Credit Suisse AG and one at Deutsche Bank AG (the Bank Accounts).
  • In 2013, La Dolce Vita (the Plaintiff) acquired shares in companies beneficially owned by Ms Zhang which ultimately held the South Beauty chain of restaurants in mainland China. The proceeds of sale totalling US$254 million were paid to her account with Bank Safra Sarasin Hong Kong. There has since been an underlying dispute between La Dolce Vita and Ms Zhang concerning the acquisition.
  • During the period of March 2014 to November 2014, payments totalling US$142 million were made from the account with Bank Safra Sarasin Hong Kong to SETL’s Credit Suisse account and from this, transfers totalling US$85 million were made to SETL’s Deutsche Bank account.
  • In June 2014, Ms Zhang established a Cook Islands family trust, known as the Success Elegant Trust, for the benefit of her son, his children and remoter issue (the Trust). In the Hong Kong proceedings, Ms Zhang stated in evidence that the Trust was an irrevocable trust and that she was “excluded completely from any direct or indirect interests derived from the properties, assets and revenues generated under the trust” and held “no rights under the trust, including rights to dismiss or appoint the Trustee or increase/decrease beneficiaries”.
  • Also in June 2014, the day after the Trust was established, Ms Zhang transferred the sole share in SETL to AsiaTrust Limited as trustee of the Trust.
  • In March 2015, these Bank Accounts held by SETL were subsequently frozen when the banks were served with freezing orders directed against Ms Zhang.
  • In May 2020, La Dolce Vita as creditors of Ms Zhang and the two BVI companies were awarded two judgements in Hong Kong which recognised and enforced arbitral awards rendered in CIETAC arbitration proceedings in their favour. Registration orders for these two judgements were granted in Singapore in November 2020. Following these orders, La Dolce Vita sought to enforce these in Singapore and appoint receivers over the cash and securities held in the Bank Accounts (the Monies). The enforcement proceedings were brought on the contention that, notwithstanding SETL’s legal ownership of the Bank Accounts, Ms Zhang remained the beneficial owner, rendering the Bank Accounts susceptible to challenge from Ms Zhang’s creditors. 

The issues

In considering the claim, the Court sought to determine two issues: 1) whether Ms Zhang as the debtor beneficially owned the Monies, and 2) whether receivers could be appointed over property in which she no longer had an equitable interest in but did have effective control.

1. Were the monies beneficially owned by Ms Zhang?

The Court objectively assessed Ms Zhang’s subjective intention at the time of the transfers of property into and out of the Bank Accounts.

In particular, the Court noted the contents of an internal email of Bank Safra Sarasin Hong Kong dated 13 March 2014 indicating their understanding that the transfers to the CS Account were “not only for tax planning purpose, but [Mdm Zhang’s] lawyer [was] helping her to ease the concern on the with-recourse term of her business sold to an PE”. From this, the Court inferred that the transfers were motivated by an intention to protect herself from potential claims in due course.

The Court also noted a number of examples of Ms Zhang's direct interference in trust assets, despite her not being a beneficiary of the trust. For example, some US$35 million was transferred out of the Deutsche Bank account with several of the payment instructions marked “Top Urgent” being given in the 2 days following Ms Zhang becoming aware of the freezing orders.  The transfer of funds from the Deutsche bank account in November 2014 was also eventually traced back to the purchase of the apartment in New York. In addition, the Court was shown that Ms Zhang directly asked Credit Suisse twice in September 2014 and February 2015 to transfer US$3 million and was unable to explain the purpose of these transfers to the Court, instead saying that she was unable to locate relevant documents and information.

On reviewing the evidence, the Court found that Ms Zhang “was motivated by a desire to protect her funds from potential claims by La Dolce Vita arising from the sale without giving up her ability to make use of those funds for her own benefit” and that Ms Zhang had had no intention to surrender her beneficial interest in the Monies or the Bank Accounts, the latter of which she personally maintained and considered herself to have free use of. Her intentions regarding both Bank Accounts were held to be the same: to retain beneficial ownership, avoid giving the monies to SETL and to protect herself from potential claims by La Dolce Vita.

2. Did the creditors have a right to the monies?

The Court identified a distinction between any rights a debtor may have over trust assets and any factual control they have over them. Since Ms Zhang did not have any rights over the Monies, any receivers appointed by her creditors could not compel the trustee of the Trust to comply with any receivership orders. This was particularly the case since the Bank Accounts were not in Ms Zhang’s name as the judgement debtor, thus preventing the normal processes of enforcing creditor judgement orders to be effective (and the Court identified garnishee orders by way of example).

However, because the Court found that the Monies continued to be beneficially owned by Ms Zhang, notwithstanding she had transferred these to the Bank Accounts of SETL many years earlier, they found that it was just and convenient given the circumstances to allow the appointment of receivers in this instance, so that the judgements could be satisfied in the most cost-effective and least burdensome method.


The outcome is an unsurprising one and the facts of the case demonstrate how a trust structure operated in an incorrect way might leave its assets susceptible to challenge from third party creditors. Ms Zhang's excessive actual control over the funds in the Bank Accounts, and SETL’s apparent willingness to overlook the cited transaction was what ultimately led to the Court making the receivership orders. 

Whether transferring assets or buying real estate, Ms Zhang's control over the so-called family trust was too great, exceeding the power of a settlor. Where no intention can be found for the property in the trust to be held for the beneficiaries as a gift, the assets of the trust can continue to be recognised as personal property. Individuals should therefore be wary of having an active involvement with and the maintaining of trust property if they wish to uphold their trust’s property preservation function.

This is not the first time, and will certainly not be the last, where the assets of a trust have been successfully challenged. In 2014, in the Hong Kong case of Poon Lok To Otto v Kan Lai Kwan and another [2014] 6 HKC 111, the Hong Kong Court of Final Appeal held that the trust assets are matrimonial assets and therefore the ex-wife was entitled to half of the trust assets.  Similarly, the Court decided that the settlor had retained too much control of the trust.

So what should we be taking away from this case?

1. In light of the above decision, do trusts still work?

Unequivocally, yes. This case is distinguishable on its facts. Here, a creditor seeks the assistance of the courts to access to funds transferred by a debtor into the accounts of a company (held within a trust) with the intention of placing those assets out of the reach of creditors whilst maintaining access and control over those funds. That SETL as an asset of the Trust is a distraction and does not render other trusts susceptible to challenge from the creditors of their settlors. It is probable that the Court would have reached the same decision whether SETL was a trust asset or not.

2. Are trust assets safe or are they at risk at being “looked through”?

Trust assets are as safe as they have always been, and this case does not change their position. The above decision involves a fact specific scenario in which assets legally held within a trust structure (here, the bank account of a company held by a trust) were challenged by the creditor of a settlor. This case should however serve as a warning to those settling assets on trust that maintaining control over assets and continuing to treat them for one’s own benefit without the scrutiny of the trustees (or directors) may inadvertently leave those assets vulnerable to third party creditors’ allegations of resulting or sham trusts.

Here, it is quite probable that, had Ms Zhang transferred the funds to SETL and had no further dealings with those funds, La Dolce Vita would have struggled to persuade the Court that the funds were held on resulting trust for Ms Zhang and so were accessible to it as her creditor.

3. Are trusts no longer confidential?

The default position continues to be that trust information is confidential. However, there are several circumstances in which trustees might receive requests for information, for example by way of a court order, an approach from an insolvency practitioner, or beneficiaries of the trust. Each request should be considered on its merits and trustees are always recommended to seek immediate legal advice upon receipt of such a request.

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