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Beneficial Ownership and Effective Control in the Context of Trusts:Lesson from the case of Zhang Lan

Updated: Feb 9


The breakdown of a family trust may result from the issues with the individuals responsible for administering the trust, rather than the flaws in the structure of the trust itself. An example is shown in the recent Singapore High Court case, La Dolce Vita Fine Dining Group Holdings Limited v. Zhang Lan and Grand Lan Holdings Group (BVI) Limited [2022] SGHC 278, where the Singapore High Court ruled that the debtor retained beneficial ownership over the trust assets and hence a receiver may be appointed by way of equitable execution to access the assets held by a trust. This sparks the question of whether family trust is still a useful legal tool.


It is worth noting that while the Singapore High Court has ruled against Madam Zhang Lan (“Madam Zhang”) and appointed a receiver over the trust assets, it has also clarified the general principle of trust that had Madam Zhang effectively transferred and settled the disputed assets into the trust, the trust assets would have still been protected by the “firewall” of the trust and be held for the benefit of the beneficiaries of the trust, against any creditors’ claims despite Madam Zhang’s indebtedness. 

The deviation from the general principle stems from the defective operation of the trust, in the sense that the settlor (Madam Zhang), the trustee, and the settlor’s solicitors have carried out or failed to carry out certain actions resulting in the adverse outcome of this case. The following are the critical considerations in determining whether a trust is valid in this case: - 

  • Madam Zhang remained as the sole director and bank signatory of the trustee company even after establishing the trust and transferring all her rights of ownership of the relevant assets to the trust;

  • Madam Zhang’s name was shown on the application forms of the bank accounts held under the trust as the beneficial owner;

  • The absence of any interference by the trustee for almost 7 years regarding the inappropriate disposition of the trust assets ordered by Madam Zhang;

  • The lack of thorough communication between Madam Zhang and her solicitors regarding the operation of the trust, which resulted in the use of controversial wordings (against the notion of a genuine trust having been established) by her solicitors in their correspondence which were eventually used as evidence against Madam Zhang; and 

  • Madam Zhang’s immediate reaction to the freezing orders issued by the Hong Kong and Singapore Courts, i.e. her withdrawal of the trust assets. 

Case Background

To go into detail, the case concerns the application by La Dolce Vita Fine Dining Company Limited and La Dolce Vita Fine Dining Group Holdings Limited (collectively, “Judgment Creditors”) to enforce two Hong Kong judgments that are registered in Singapore against Madam Zhang, Grand Lan Holdings Group (BVI) Limited and Qiao Jiang Lan Development Limited (collectively, “Debtors”), for the recovery of a sum of US$254,419,156 which was paid by the Judgment Creditors to Madam Zhang as the total consideration of a series of acquisitions between 2013 and 2014 (“Sum”), pursuant to the ruling of the Hong Kong Court that negligent misrepresentation was found in such transactions. 

The Sum was transferred to Madam Zhang’s bank account held with Bank Safra Sarasin Hong Kong, before she transferred US$142,051,618 out of the Sum to the bank account held in the name of Success Elegant Trading Limited (“SETL”) with Credit Suisse AG (“CS Account”) in 2014. Subsequently in the same year, Madam Zhang transferred US$85,225,000 from the CS Account to the bank account of SETL held with Deutsche Bank AG (“DB Account”). 

SETL is a BVI Company previously established by Madam Zhang in 2014, which  she was the sole shareholder and director. Madam Zhang later established a family trust with AsiaTrust Limited (“AsiaTrust”) as trustee for the benefit of her son and his children and remoter issue, and subsequently transferred all her shares in SETL to AsiaTrust in 2014. In 2015, the Singapore Court froze the CS Account and the DB Account (collectively, “Bank Accounts”) for the aforementioned matters between the Judgment Creditors and the Debtors, and Madam Zhang then resigned as director of SETL. 

In this case, the Judgment Creditors sought the appointment of receivers by the Singapore High Court over the cash and securities held in the Bank Accounts in order to recover the Sum. As the Bank Accounts were not held in the name of Madam Zhang but rather in the name of a third party (i.e. SETL, which was held on trust by AsiaTrust for the beneficiaries), the issue of beneficial ownership over trust assets arose. 

Issue 1: Can receivers be appointed over property in which Debtors have only effective control but no equitable interests?

The Singapore High Court considered the English cases JSC VTB Bank v Skurikhin and others [2015] EWHC 2131 (Comm) and JSC VTB Bank (a company incorporated in Russia) v Skurikhin and others [2019] EWHC 1407 (Comm), and found that effective control of trust assets may, in appropriate circumstances, be sufficient evidence to infer, on a balance of probabilities, that a debtor does have a beneficial interest in trust assets or has a legal right of control over those assets. Nonetheless, the Singapore High Court found that, effective control does not in and of itself, warrant the treatment of the trust assets as belonging to a debtor and hence available to be enforced against, unless the inference that the person exercising effective control is the ultimate beneficial owner of the trust assets can be properly drawn in all the circumstances, as there may be other explanations for the appearance of the control which do not justify drawing the inference. 

Moreover, the Singapore High Court made a distinction between a right of control and a merely factual control over the trust assets, stating that whilst the holder of the former can compel compliance from third parties, the holder of the latter will not be able to compel compliance from third parties, who are free to withhold cooperation from the instructions given by such factual controller. Consequently, if a receiver were appointed with respect to relevant assets where a debtor has only factual control but not the legal right of control, the receiver would not be able to enforce compliance from third parties with instructions given by the receiver in place of the debtor. Accordingly, a receiver should not be appointed towards trust assets only under the mere factual control of a debtor as having such factual control on trust assets per se does not always infer ultimate beneficial ownership. 

Issue 2: Is Madam Zhang the beneficial owner of the Bank Accounts?

Furthermore, the retention of beneficial ownership by Madam Zhang over the trust assets would justify the court to appoint receivers over such assets. The burden of proof was on the Judgment Creditors to prove that Madam Zhang is the beneficial owner of the Bank Accounts. The duty of the Singapore High Court was to objectively assess Madam Zhang’s subjective intention at the time of the establishment of the trust (Tan Yok Koon v Tan Choo Suan and another and other appeals [2017] 1 SLR 654), and how actions subsequent to the establishment will also be relevant and useful evidence, even when they were not carried out close in time to the establishment of the trust.

After reviewing all of the evidence, the Singapore High Court found that Madam Zhang was driven by a desire to protect her funds from potential claims by the Judgment Creditors arising from the sale without sacrificing her ability to make use of those funds for her own benefit. The following evidence was relied on by the Singapore High Court in its rulings that Madam Zhang did not intend to relinquish but rather retained her beneficial interest in the Bank Accounts:

  • Madam Zhang made two transfers from the CS Account for her own benefit between 2014 and 2015, not long before the freezing orders were granted by the Hong Kong and Singapore Courts in respect of the Bank Accounts, without any complaints from SETL regarding the inappropriate disposition of trust assets without prior approval from the trustee until 2022. The Singapore High Court inferred that Madam Zhang considered herself free to make use of the funds in the Bank Accounts as Madam Zhang had never intended to pass the funds to SETL; 

  • Madam Zhang transferred moneys out of the DB Account 2 days after noticing the freezing orders issued by the Hong Kong Court and marked her instructions to DB as “TOP URGENT”, which the Singapore High Court inferred that she did it precisely because the funds under the trust were at risk and in need of protection from Judgment Creditors’ claims; and

  • Madam Zhang’s lawyers had previously contacted DB regarding the DB Account in 2015, stating that “Ms. Zhang maintains the account” and that DB “owes a duty of confidentially towards Ms. Zhang”. The Singapore High Court held that these two phrases used could only mean that Madam Zhang considered herself as the owner of the DB Account.

At last, the Singapore High Court held that Madam Zhang’s subjective intention at the time when she transferred the monies into the Bank Accounts was not to make a gift to her son but was instead to retain the beneficial interest in them. On this basis, the Singapore High Court granted the appointment of receivers over the Bank Accounts.

Practical Takeaways

  • In general, it is advisable to establish a trust as early as possible in order to have sufficient time for a comprehensive planning of the trust structure and to avoid structural and evidential flaws that may potentially weaken the trust's protection of the assets against risks of future litigation and claims.

  • Once the ownership of the trust assets have been transferred to the trust by the trust settlor, the trust settlor should refrain from controlling the trust assets by any means, such as directing or making transfers of funds out of the trust for personal interests without the approval of the trustee (as seen in Madam Zhang’s case), in order to avoid the inference of the trust settlor retaining the beneficial ownership of the trust assets.

  • If needed, a trust settlor is advised to establish more than one trust and each trust may have a different purpose (and may hold different trust assets). For instance, one trust for managing day-to-day expenses and one for inheritance or contingency (with a strong ‘firewall’ avoiding the pitfalls pointed out above). Although the trust for managing day-to-day expenses may have a weaker ‘firewall’ (e.g. under which it may be necessary or expedient that the trust settlor has a relatively higher degree of direction/control over the trustee), such trust will still carry a lower risk of exposure to liabilities and claims than the trust settlor personally holding the same assets. 

  • It is recommended to have an overall conductor to oversee and manage the affairs of the trust, and a family office adviser can often professionally and efficiently fulfil this role. Such overall conductor will be in a position to:

  • gain a comprehensive understanding of the trust settlor’s personal and financial situations;

  • tailor-make a comprehensive structure of trusts (with or without family office services); 

  • act as a professional trustee and train relevant persons whose behaviour shall ensure and coincide with a valid trust structure; and 

  • anticipate and mitigate potential legal issues and risks, 

so as to safeguard the trust assets for various purposes, including without limitation wealth protection, tax planning, inheritance and succession purposes. 

DISCLAIMER: Please note that the information above is general in nature and a preliminary overview of this specialized area of law. As every case depends on its facts, it is imperative to state that the above does not constitute legal advice. We do not accept any responsibility whatsoever in respect of this publication. Should you wish to seek our advice or assistance, please do not hesitate to contact us by email at


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