Xia Zheng v Lee King Anne: Sham Loan, Nominee Shareholding & Resulting Trust

In Xia Zheng v Lee King Anne, the High Court of Singapore addressed a dispute over shares in USP Group Limited. Xia Zheng sued Lee King Anne for repayment of a loan or return of shares, claiming Lee failed to repay a loan used to purchase the shares. Lee counterclaimed for compensation for acting as a nominee shareholder. The court dismissed Xia's primary claim, finding the loan agreement a sham, but declared Lee held the shares on trust for Xia. The court dismissed Lee's counterclaim in full. Li Hua was the second defendant in the counterclaim.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

Judgment for Plaintiff in part; declaration granted that Defendant holds shares on resulting trust for Plaintiff; Counterclaim dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court dismisses loan claim, finds sham agreement, and declares defendant holds shares on trust for plaintiff.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Xia ZhengPlaintiff, Defendant in counterclaimIndividualClaim Allowed in PartPartial
Lee King AnneDefendant, Plaintiff in counterclaimIndividualClaim DismissedLost
Li HuaDefendant in counterclaimIndividualCounterclaim DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Seng OnnSenior JudgeYes

4. Counsels

Counsel NameOrganization
Goh Seow HuiBird & Bird ATMD LLP
Chong Kar Yee CristelBird & Bird ATMD LLP
Luo Ling LingLuo Ling Ling LLC
Joshua Ho Jin LeLuo Ling Ling LLC

4. Facts

  1. Xia Zheng and Lee King Anne signed documents purporting to be interest-free loan agreements.
  2. The agreements stated that Xia loaned money to Lee to purchase shares in USP Group Limited.
  3. Lee was to hold the shares as a nominee shareholder.
  4. Xia sought repayment of the loan or return of the shares; Lee counterclaimed for compensation.
  5. The court found the loan agreements were shams, lacking intention to create legal relations.
  6. Xia provided the funds for the share purchase, not undisclosed Chinese investors.
  7. Lee held the shares in her name for the purpose of an EGM to vote in a new board of directors.

5. Formal Citations

  1. Xia Zheng v Lee King Anne, Suit No 242 of 2021, [2024] SGHC 253

6. Timeline

DateEvent
WhatsApp message sent regarding Lee & Lee being the lawyer for the purchaser.
WhatsApp message sent regarding Eric not entering into the Bestway contract.
WhatsApp message forwarded from Tony stating Chinese investors gave money to buy shares.
Notice sent to requisition an EGM for 20 February 2020.
Xia's cashier's order issued for Zeng.
Lee concluded share purchases with Zeng.
Xia's cashier's order issued for Bestway; Zeng acknowledged receipt of purchase moneys.
Disputed Documents dated.
Lee concluded share purchases with Bestway.
Extraordinary General Meeting held.
Tony sent WhatsApp message regarding Ann needing to pay money to Chinese investors.
Billy sent WhatsApp message to Tony regarding shares put with Anne.
Xia signed Letter of Waiver and Release.
Lee signed Acknowledgement letter.
Lee signed SGX form for Request for Transfer of Securities.
Xia filed Claim against Lee.
Lee filed Defence.
Xia filed Striking Out Application and Summary Judgment Application.
Xia filed summons for an interim injunction.
Interim Injunction granted against Lee.
Lee filed application to discharge the Interim Injunction.
Xia and Tony filed affidavits–in–reply.
AR granted Striking Out Application and Summary Judgment Application.
Tan Siong Thye J allowed appeals against AR's decision.
Tony filed his memorandum of appearance.
Tony filed his defence against the third-party claim.
Tony filed a debtor’s bankruptcy application.
Tony was made a bankrupt.
A private trustee being appointed over Tony's estate.
Agreed Bundle of Documents dated.
Civil trial of the Claim and Counterclaim heard.
Civil trial of the Claim and Counterclaim heard.
Civil trial of the Claim and Counterclaim heard.
Civil trial of the Claim and Counterclaim heard.
Civil trial of the Claim and Counterclaim heard.
Civil trial of the Claim and Counterclaim heard.
Plaintiff’s Closing Submissions dated.
Defendant’s Closing Submissions dated.
Plaintiff’s Reply Submissions and Defendant's Reply Submissions dated.
Judgment reserved.

7. Legal Issues

  1. Intention to Create Legal Relations
    • Outcome: The court found that the parties did not intend to create legal relations regarding the loan agreement, rendering it a sham.
    • Category: Substantive
    • Sub-Issues:
      • Sham agreement
      • Absence of genuine intention
    • Related Cases:
      • [2021] 1 SLR 1176
      • [2023] 1 SLR 1085
  2. Resulting Trust
    • Outcome: The court declared that Lee held the shares on a resulting trust for Xia, as Xia did not intend to gift the shares to Lee.
    • Category: Substantive
    • Sub-Issues:
      • Presumption of resulting trust
      • Absence of intention to gift
    • Related Cases:
      • [1996] AC 669
      • [1999] 1 WLR 1399
      • [2014] 3 SLR 1048
      • [2008] 2 SLR(R) 108
  3. Misrepresentation
    • Outcome: The court found that Lee failed to prove that she was induced by the misrepresentation or that the misrepresentation caused her losses.
    • Category: Substantive
    • Sub-Issues:
      • Inducement
      • Causation of loss
    • Related Cases:
      • [2018] 2 SLR 110
      • [2008] 2 SLR(R) 909
      • [2024] 1 SLR 524
  4. Quantum Meruit
    • Outcome: The court found that there was no agreement for Lee to be compensated on a quantum meruit basis.
    • Category: Substantive
    • Sub-Issues:
      • Implied contract
      • Reasonable remuneration

8. Remedies Sought

  1. Repayment of Loan
  2. Return of Shares
  3. Damages
  4. Declaration of Trust
  5. Compensation
  6. Indemnity

9. Cause of Actions

  • Breach of Contract
  • Unjust Enrichment
  • Misrepresentation

10. Practice Areas

  • Commercial Litigation
  • Trusts
  • Contract Disputes

11. Industries

  • Investment
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Toh Eng Tiah v Jiang Angelina and another appealCourt of AppealYes[2021] 1 SLR 1176SingaporeCited for the principle that the legal basis for courts not enforcing a sham agreement lies in the absence of an intention to create legal relations.
Ivy Ng Soh Peng v Solution Aircon & Engrg Pte LtdHigh CourtYes[2023] 1 SLR 1085SingaporeCited for the essential elements of a sham, including the absence of an intention to create legal relations.
Xia Zheng v Lee King AnneHigh CourtNo[2021] SGHC 199SingaporeCited for triable issues raised by Lee, particularly that the Disputed Documents were signed to show Tony’s purported Chinese investors that their moneys had been used to acquire the Shares, which Lee would hold on to on their behalf.
Westdeutsche Landesbank Girozentrale v Islington London Borough CouncilHouse of LordsYes[1996] AC 669England and WalesCited for the distinction between 'automatic resulting trust' and 'presumed resulting trust'.
Air Jamaica Ltd and others v Joy Charlton and othersPrivy CouncilYes[1999] 1 WLR 1399United KingdomCited for the 'lack of intention' analysis of resulting trusts.
Chan Yuen Lan v See Fong MunCourt of AppealYes[2014] 3 SLR 1048SingaporeCited for approving the 'lack of intention' analysis of resulting trusts.
Lau Siew Kim v Yeo Guan Chye Terence and anotherHigh CourtYes[2008] 2 SLR(R) 108SingaporeCited for the presumption of resulting trust and the intention to obtain an equivalent equitable interest in the property acquired.
Loo Chay Sit v Estate of Loo Chay Loo, deceasedHigh CourtYes[2010] 1 SLR 286SingaporeCited for the burden of proof in establishing the existence of a contract.
Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appealCourt of AppealYes[2013] 4 SLR 193SingaporeCited for the high standard required for implying a term in a contract.
Goh Sin Huat Electrical Pte Ltd v Ho See Jui (trading as Xuanhua Art Gallery) and anotherHigh CourtYes[2012] 3 SLR 1038SingaporeCited for the principle that an indemnity can arise from contract, conduct, or the parties’ relationship.
Tan Juay Pah v Kimly Construction Pte Ltd and othersHigh CourtYes[2012] 2 SLR 549SingaporeCited for the principles for determining when an equitable “assumed promise” to indemnify may be found.
Tan Yok Koon v Tan Choo Suan and another and other appealsCourt of AppealYes[2017] 1 SLR 654SingaporeCited for the principle that a fiduciary relationship is voluntarily undertaken.
Cheong Soh Chin and others v Eng Chiet Shoong and othersCourt of AppealYes[2019] 4 SLR 714SingaporeCited for the circumstances in which a resulting trustee can be a fiduciary.
Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appealCourt of AppealYes[2018] 2 SLR 655SingaporeCited for the definition of a fiduciary as one who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
Combe v CombeCourt of AppealYes[1951] 2 KB 215England and WalesCited for the principle that promissory estoppel does not create new causes of action.
Tong Seak Kan and another v Jaya Sudhir a/l JayaramHigh CourtYes[2016] 5 SLR 887SingaporeCited for the principle that promissory estoppel is used as a shield, not a sword.
Amalgamated Investment & Property Co Ltd (in liquidation) v Texas Commerce International Bank LtdCourt of AppealYes[1982] QB 84England and WalesCited for the principle that equity acts as a shield and not as a sword.
Baird Textiles Holdings Limited v Marks & Spencer plcCourt of AppealYes[2001] EWCA Civ 274England and WalesCited for the principle that equity acts as a shield and not as a sword.
Trans-World (Aluminium) Ltd v Cornelder China (Singapore)High CourtYes[2003] 3 SLR(R) 501SingaporeCited for the objective construction of representations.
Audi Construction Pte Ltd v Kian Hiap Construction Pte LtdHigh CourtYes[2018] 1 SLR 317SingaporeCited for the objective construction of representations.
Broadley Construction Pte Ltd v Alacran Design Pte LtdHigh CourtYes[2018] 2 SLR 110SingaporeCited for the elements of actionable misrepresentation.
Wishing Star Ltd v Jurong Town CorpHigh CourtYes[2008] 2 SLR(R) 909SingaporeCited for the elements of actionable misrepresentation, specifically causation of loss.
Axis Megalink Sdn Bhd and another v Far East Mining Pte LtdHigh CourtYes[2024] 1 SLR 524SingaporeCited for the elements of actionable misrepresentation, specifically inducement and causation of loss.
Panatron Pte Ltd and another v Lee Cheow Lee and anotherHigh CourtYes[2001] 2 SLR(R) 435SingaporeCited for the requirement that the representation played a real and substantial part in the representee's mind.
Liberty Sky Investments Ltd v Aesthetic Medical Partners Pte Ltd and other appeals and another matterCourt of AppealYes[2020] 1 SLR 606SingaporeCited for the requirement that the representation played a real and substantial part in the representee's mind.
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and anotherCourt of AppealYes[2013] 3 SLR 801SingaporeCited for the requirement that the representation played a real and substantial part in the representee's mind.
Zurich Insurance Co plc v HaywardSupreme CourtYes[2017] AC 142United KingdomCited for the requirement that the representation played a real and substantial part in the representee's mind.
Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd and other companiesHigh Court of JusticeYes[2023] EWHC 2759 (Comm)England and WalesCited for the requirement that the representation played a real and substantial part in the representee's mind.
Eastern Shipping Company, Limited v Quah Beng KeePrivy CouncilYes[1924] AC 177MalaysiaCited for the principle that an obligation to indemnify can arise from statute or from an equitable duty to indemnify.
Birmingham and District Land Company v London and North Western Railway CompanyCourt of AppealYes(1886) 34 Ch D 261England and WalesCited for the principle that a trustee may claim an indemnity from the cestui que trust, and vice versa.
Checkpoint Fluidic Systems International Ltd v Marine Hub Pte LtdHigh CourtYes[2009] SGHC 134SingaporeCited for the principle that an equitable right to indemnity had arisen in favour of the respondent against the appellant in view of the fact that the transaction in question had been entered into by the respondent for the appellant’s benefit.
Hygeian Medical Supplies Pte Ltd v Tri-Star Rotary Screen Engraving Works Pte LtdHigh CourtYes[1993] 2 SLR(R) 411SingaporeCited for the principle that the third party was to indemnify the defendant.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Evidence Act 1893Singapore
Misrepresentation Act 1967Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Nominee Shareholder
  • Resulting Trust
  • Sham Agreement
  • Intention to Create Legal Relations
  • Extraordinary General Meeting
  • Advanced Sum
  • Interest-Free Loan Agreement
  • Beneficial Ownership
  • Concert Party
  • Inducement

15.2 Keywords

  • contract
  • trust
  • misrepresentation
  • shares
  • nominee
  • loan
  • Singapore
  • equity

17. Areas of Law

Area NameRelevance Score
Sham Agreements90
Trusts and Estates80
Nominee Shareholder75
Misrepresentation70
Intention to create legal relations65
Breach of Contract60
Quantum meruit55
Property Law50
Unjust Enrichment40
Fiduciary Duties30
Corporate Law20

16. Subjects

  • Contract Law
  • Trusts
  • Equity
  • Misrepresentation
  • Company Law