ICB Ltd v P. D. International: Rectification of Security Memorandum for MEP Facilities

In Industrial & Commercial Bank Ltd v P. D. International Pte Ltd, the High Court of Singapore heard a case regarding a security memorandum. Industrial & Commercial Bank Ltd (ICB) sought a declaration that 30,660,000 Twinwood shares deposited by P.D. International Pte Ltd (PDI) served as security for PDI’s liability to ICB under P.D. Manufacturing International Pte Ltd’s (PDMI) guarantee. PDI sought rectification of the Security Memorandum, arguing it was intended to secure only Manufacture Element Prefabricate Pte Ltd’s (MEP) liabilities. The court dismissed ICB’s claims and granted PDI’s application for rectification, finding a common mistake.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Defendant

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

ICB sought to enforce a security memorandum against PDI for PDMI's debt. The court allowed PDI's rectification claim, finding a common mistake regarding the memorandum's scope.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Industrial & Commercial Bank LtdPlaintiffCorporationClaim DismissedLostHri Kumar, Gary Low
P. D. International Pte LtdDefendantCorporationRectification GrantedWonVinodh S Coomaraswamy, Chua Sui Tong

3. Judges

Judge NameTitleDelivered Judgment
S RajendranJudgeYes

4. Counsels

Counsel NameOrganization
Hri KumarDrew & Napier LLC
Gary LowDrew & Napier LLC
Vinodh S CoomaraswamyShook Lin & Bok
Chua Sui TongShook Lin & Bok

4. Facts

  1. ICB provided credit facilities to PDMI, secured by a corporate guarantee from PDI.
  2. ICB approved a revolving credit facility to MEP, secured by a corporate guarantee from PDI and deposit of ADL shares.
  3. The market value of ADL shares declined, leading to PDI depositing Twinwood shares as additional security.
  4. ICB sent a standard Security Memorandum to PDI for execution.
  5. The Security Memorandum contained clauses securing not only MEP's obligations but also PDI's obligations to ICB.
  6. PDI claimed the intention was only to secure MEP's liabilities, not PDI's other liabilities.
  7. ICB's internal documents suggested the Twinwood shares were to be held only until the MEP account was regularized.

5. Formal Citations

  1. Industrial & Commercial Bank Ltd v P. D. International Pte Ltd, OS No 601461 of 2001, [2002] SGHC 269

6. Timeline

DateEvent
ICB provided credit facilities to PDMI.
PDI issued the PDMI guarantee.
ICB approved a revolving credit facility to MEP.
MEP deposited $1.5 million to reduce its outstandings.
PDI authorized the execution of the Security Memorandum.
PDI deposited a further 4,896,984 Twinwood shares with ICB.
PDMI account went into default.
KPMG Consulting Pte Ltd replaced M/s Arthur Andersen as special consultants to PDI.
ICB sold the ADL shares.
ICB recalled the PDMI facilities and demanded payment.
Meeting held between ICB, PDI and KPMG.
PDI challenged ICB’s rights to the Twinwood shares.
ICB commenced proceedings by way of originating summons.
Decision Date

7. Legal Issues

  1. Common Mistake
    • Outcome: The court found that the Security Memorandum was signed under a common mistake and granted rectification.
    • Category: Substantive
    • Sub-Issues:
      • Terms of security memorandum contrary to parties' intention
    • Related Cases:
      • [1996] 2 SLR 572
  2. Admissibility of Evidence
    • Outcome: The court admitted the affidavit of Cheang, noting that the inability to cross-examine her would be taken into account in assessing the overall merit of each party’s case.
    • Category: Procedural
    • Sub-Issues:
      • Admissibility of affidavit if deponent not present for cross-examination
    • Related Cases:
      • [1990] 3 MLJ 360
  3. Excess of Authority
    • Outcome: The court did not consider the alternative defence raised that as ICB knew that the Security Memorandum was executed in excess of the relevant director’s authority as stated in Board resolutions, the Security Memorandum was to that extent unenforceable against PDI.
    • Category: Substantive

8. Remedies Sought

  1. Declaration
  2. Rectification of Security Memorandum

9. Cause of Actions

  • Breach of Contract
  • Rectification of Contract

10. Practice Areas

  • Commercial Litigation
  • Banking
  • Security

11. Industries

  • Banking

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
UMBC Finance Ltd v Woon Kim YanMalaysian Supreme CourtYes[1990] 3 MLJ 360MalaysiaCited for the principle that the discretion to admit the affidavit of a person not called as a witness at the trial should not be exercised if the evidence was strongly contested or where the evidence related closely to the credibility of the witness.
Kok Lee Kuen & Anor v Choon Fok Realty Pte Ltd & OrsUnknownYes[1996] 2 SLR 572SingaporeCited for the principle that a party seeking rectification of a document will be required to show "convincing proof" not only that the document to be rectified was not in accordance with the parties’ true intention at the time of its execution but also that the document in its proposed form would accord with that intention.
Taylor Barnard Ltd v Tozer & AnorUnknownYes(1984) 1 EGLR 21England and WalesCited for the principle that if it was reasonable to expect the other party to check the draft of the agreement, rectification will not be allowed.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Security Memorandum
  • Twinwood shares
  • PDMI guarantee
  • MEP facilities
  • Secured Obligations
  • Common mistake
  • Rectification
  • Corporate guarantee
  • Advance margin
  • Board resolution

15.2 Keywords

  • Security Memorandum
  • Rectification
  • Banking
  • Contract Law
  • Singapore
  • Common Mistake

16. Subjects

  • Banking
  • Contract Law
  • Security
  • Mistake

17. Areas of Law

  • Contract Law
  • Banking Law
  • Evidence Law
  • Rectification