SINGAPORE - Mr Lee Kuan Yew decided to will his 38 Oxley Road house to Prime Minister Lee Hsien Loong in August 2011 as he was the only one who was prepared not to benefit financially from the property.

PM Lee said this on Tuesday (Dec 1), on the second day of his defamation suit against Mr Terry Xu, editor of The Online Citizen (TOC) website.

Mr Xu's lawyer Lim Tean had contended that the late Mr Lee had decided to bequeath the house to PM Lee as he had been misled by the Prime Minister into thinking the property had been gazetted - a suggestion that PM Lee rejected.

The issue was not about gazetting but a "political one", PM Lee told the court. It would be untenable and unacceptable for the family to insist on knocking down the house and redeveloping it for private profit, or seeking compensation for the acquisition - a point he made during family discussions - he said.

Mr Lee Kuan Yew agreed with this, he added.

PM Lee acknowledged that he and his siblings Lee Hsien Yang and Lee Wei Ling had discussed demolishing the house and building sub-units, but said he had flagged the problem of how it would look if the family were seen to be profiting from it. "I said, proceed but... donate the proceeds to charity and initially my siblings agreed. Later on, they changed their minds."

PM Lee said: "We discussed it in the family. I made my point of view clear. My father weighed it and he eventually decided on that basis that he would will the house to me. He made a judgment and it is quite clear that this was one of the factors in the judgment."

The lawsuit centres around a TOC article published in August last year. It references a Facebook post by Dr Lee Wei Ling in which she claimed PM Lee had misled Mr Lee Kuan Yew into thinking 38 Oxley Road had been gazetted by the Government.

Mr Lee Kuan Yew had, in August 2011, told the family of his decision to will the house to PM Lee as part of his share of the estate.

This came after he met the Cabinet on July 21 that year, where ministers were unanimous in expressing their opposition to knocking down the house, with the exception of PM Lee, who did not express a view.

After meeting the Cabinet, Mr Lee Kuan Yew had asked PM Lee for his view on what the Government would do with the house after he died.

Said PM Lee: "I gave him my honest assessment. I told him that he had met the Cabinet and heard the ministers' views... it would be very hard for me to override them and knock the house down.

"I added that I would have to agree that the house had to be gazetted to be kept, and if I was not the prime minister or I did not chair the meeting, all the more likely the house would be gazetted. Mr Lee understood. I did not tell him then or at any time that the house had been gazetted."

Asked by Mr Lim whether he had proposed to his father that the house be given to him, PM Lee said he had made such a suggestion, but the decision was for his father to make.

Mr Lim also asked if PM Lee would accept that at some point, his father thought the house would be gazetted.

PM Lee replied that he did not have any information on that, but judging from e-mails in 2012, it would appear that his father believed so at some stage.

Mr Lim suggested that PM Lee never challenged his father's understanding of the gazetting, to which he replied that there was no misunderstanding.

Referencing an e-mail by Mr Lee Kuan Yew to the Cabinet in December 2011, PM Lee said: "He didn't say since the house had been gazetted, therefore we will reinforce it and let it out. It is just that he has heard the ministers' views. If the house is to be retained then the following should happen... So it is quite clear what he meant."

Mr Lim later pointed to e-mails, including one Mr Lee Kuan Yew sent to his lawyer Kwa Kim Li on Sept 6, 2012, that he said showed Mr Lee believed 38 Oxley Road had been gazetted. He suggested PM Lee had misled his father to believe this.

Rejecting Mr Lim's point, PM Lee said he had not discussed the matter with his father, and had no motive to do so.

"It is not whether the house has been gazetted or not, and if gazetted, it cannot be developed, but whether or not it is tenable for the family to redevelop the house, even if it is not gazetted in the face of public demand that it be preserved and kept as a heritage site," he added. "And therefore, nothing turned on whether it was gazetted or not."

PM Lee's lawyer, Senior Counsel Davinder Singh, asked if gazetting was even a relevant point.

The Prime Minister replied: "No, because even if it had not been gazetted, and I, after inheriting the house, had been allowed to redevelop it and I had profited from it, I think it would have been a humongous stink. It is impossible."