Pacific Recreation v S Y Technology: Enforceability of Indemnity Deed & Choice of Law

The Singapore Court of Appeal heard appeals by Pacific Associates Pte Ltd (PAPL) and Pacific Recreation Pte Ltd (PRPL) against a decision to wind them up, following an application by S Y Technology Inc. The dispute arose from a Deed of Indemnity executed by the appellants in favor of the respondent, securing financial assistance provided to Shanghai Pacific Club Co Ltd. The court dismissed the appeals, holding that Singapore law governed the Deed and that the Deed was enforceable independently of the underlying contract. The court found no substantial and bona fide dispute over the debt claimed by the respondent.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeals dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal rules on the enforceability of a deed of indemnity and determines Singapore law governs the deed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Pacific Recreation Pte LtdAppellantCorporationAppeal DismissedLost
Pacific Associates Pte LtdAppellantCorporationAppeal DismissedLost
S Y Technology IncRespondentCorporationJudgment for RespondentWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeNo
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealYes

4. Counsels

Counsel NameOrganization
Chia Ho ChoonKhattarWong
Leow Yuan An Clara VivienKhattarWong
Foo Maw ShenYeo Wee Kiong Law Corporation
Ong Wei ChinYeo Wee Kiong Law Corporation

4. Facts

  1. Respondent provided financial assistance to Shanghai Pacific for a project in Shanghai.
  2. The 2003 contract stipulated terms for the financing arrangements, including standby letters of credit.
  3. Mr. Lee pledged shares in Laien as security for Shanghai Pacific's repayment obligations.
  4. A Deed of Indemnity was executed by the appellants and Mr. Lee in favor of the respondent.
  5. Shanghai Pacific failed to repay loans, leading to ICBC Shanghai drawing down on the letters of credit.
  6. The respondent reimbursed the US Bank for the amounts drawn down under the letters of credit.
  7. The respondent initiated winding-up proceedings against the appellants based on the Deed of Indemnity.

5. Formal Citations

  1. Pacific Recreation Pte Ltd v S Y Technology Inc and Another Appeal, CA 136/2006, 137/2006, [2008] SGCA 1

6. Timeline

DateEvent
2003 contract signed between the respondent, Shanghai Pacific and Mr. Lee.
Mr. Lee issued a letter of indemnity to the respondent.
Mr. Lee and the appellants deposited share certificates with the respondent.
September 2003 supplementary agreement signed.
Deed of Indemnity executed by the appellants and Mr. Lee.
Loan of RMB7.85m from ICBC Shanghai to Shanghai Pacific due and payable.
ICBC Shanghai presented the US Bank with documents to draw down US$1m.
ICBC Shanghai presented the US Bank with documents to draw down US$4m.
Loan of RMB30m from ICBC Shanghai to Shanghai Pacific due and payable.
Respondent's solicitors sent a letter of demand to the appellants.
Mr. Lee initiated arbitration proceedings at CIETAC.
CIETAC accepted the request for arbitration.
Respondent initiated winding-up proceedings against the appellants.
Court of Appeal dismissed the appeals.

7. Legal Issues

  1. Enforceability of Deed of Indemnity
    • Outcome: The court held that the Deed of Indemnity was enforceable under Singapore law, independently of the validity of the underlying contract.
    • Category: Substantive
    • Sub-Issues:
      • Validity of indemnity independent of underlying contract
      • Interpretation of indemnity clause
  2. Choice of Law
    • Outcome: The court held that Singapore law was the governing law of the Deed of Indemnity, based on the closest and most real connection test.
    • Category: Substantive
    • Sub-Issues:
      • Implied choice of law
      • Closest and most real connection
  3. Winding Up Application
    • Outcome: The court held that there was no substantial and bona fide dispute over the debt, and the winding-up application was justified.
    • Category: Procedural
    • Sub-Issues:
      • Existence of substantial and bona fide dispute
      • Standard of proof for resisting winding up
  4. Admissibility of Expert Evidence on Foreign Law
    • Outcome: The court provided guidance on the admissibility and use of expert evidence on foreign law, emphasizing the expert's duty to the court and the requirements for expert reports.
    • Category: Procedural
    • Sub-Issues:
      • Requirements for expert report
      • Duties of foreign law expert
      • Duties of solicitor engaging foreign law expert
  5. Natural Justice
    • Outcome: The court found that the judge should not have determined the governing law without allowing the parties an opportunity to address the court on the appropriateness of such a conclusion.
    • Category: Procedural
    • Sub-Issues:
      • Right to be heard
      • Decision based on unraised grounds

8. Remedies Sought

  1. Winding Up
  2. Monetary Damages

9. Cause of Actions

  • Breach of Contract
  • Indemnity

10. Practice Areas

  • Commercial Litigation
  • Winding Up
  • Insolvency
  • Arbitration
  • Conflict of Laws

11. Industries

  • Finance
  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
S Y Technology Inc v Pacific Recreation Pte LtdHigh CourtYes[2007] 2 SLR 756SingaporeThe judgment under appeal; the Court of Appeal reviewed and affirmed the High Court's decision to wind up the appellants.
Chip Yew Brick Works Sdn Bhd v Chang Heer Enterprise Sdn BhdMalaysian Supreme CourtYes[1988] 2 MLJ 447MalaysiaCited for the principle that a court can evaluate evidence to determine if a substantial and bona fide dispute exists in a winding-up application.
Re Welsh Brick Industries LtdUnknownYes[1946] 2 All ER 197EnglandCited for the principle that the court can allow evidence to be adduced to determine whether a dispute is bona fide. The court in De Montfort University disagreed with the approach indicated in this case.
Brinds Ltd v Offshore Oil NL (No 3)Privy CouncilYes(1985) 10 ACLR 419UnknownCited to illustrate a case where deciding whether a substantial and bona fide dispute existed involved a decision on the merits of the dispute itself.
In Re QBS Pty LtdSupreme Court of QueenslandYes[1967] Qd R 218AustraliaCited for the principle that the court must exercise its discretion as to how far it will allow the question whether or not the dispute is bona fide to be explored.
De Montfort University v Stanford Training Systems Pte LtdHigh CourtYes[2006] 1 SLR 218SingaporeCited for the principle that once unconditional leave has been granted to a defendant, another forum should not revisit and reopen the same issues.
Re Great Britain Mutual Life Assurance SocietyUnknownYes(1880) 16 Ch D 246EnglandCited for the principle that it is not sufficient for the respondents to say 'We dispute the claim'. They must bring forward a prima facie case which satisfies the Court that there is something which ought to be tried.
Metalform Asia Pte Ltd v Holland Leedon Pte LtdCourt of AppealYes[2007] 2 SLR 268SingaporeCited for the principle that the commercial viability of a company should not be put in jeopardy by the premature presentation of a winding-up petition where it has a serious cross-claim based on substantial grounds.
Overseas Union Insurance Ltd v Turegum Insurance CoUnknownYes[2001] 3 SLR 330SingaporeCited for the three-stage test in determining the governing law of a contract.
Las Vegas Hilton Corporation v Khoo Teng Hock SunnyUnknownYes[1997] 1 SLR 341SingaporeCited for the factors to be considered when inferring a common intention as to the proper law of the contract.
Re United Railways of Havana and Regla Warehouses LtdUnknownYes[1960] Ch 52EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
Hamlyn v Talisker DistilleryHouse of LordsYes[1894] AC 202ScotlandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
Pilkington v HarrisonUnknownYes[1937] Ch 574EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
Chamberlain v NapierUnknownYes(1880) 15 Ch D 614EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
The NjegosUnknownYes[1936] P 90EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
The AssunzioneUnknownYes[1954] P 150EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
Keiner v KeinerUnknownYes[1952] 1 All ER 643EnglandCited as an example of a circumstance where an inference may be drawn as to the proper law of the contract.
Amin Rasheed Shipping Corporation v Kuwait Insurance CoHouse of LordsYes[1984] AC 50EnglandCited for the principle that the use of specific legal concepts can support the inference that a particular law was not the governing law of the contract.
Chatenay v The Brazilian Submarine Telegraph Company, LimitedUnknownYes[1891] 1 QB 79EnglandCited for the principle that the place of contracting is generally not important in determining the governing law of a contract.
Sinotani Pacific Pte Ltd v Agricultural Bank of ChinaUnknownYes[1999] 4 SLR 34SingaporeCited as a case where the court moved straight from the first stage to the third stage of the test for determining the governing law of a contract.
Shaikh Faisal v Swan Hunter Singapore Pte LtdUnknownYes[1995] 1 SLR 394SingaporeCited as a case where the court moved straight from the first stage to the third stage of the test for determining the governing law of a contract.
Rex v Paddington and St Marylebone Rent Tribunal, Ex parte Bell London & Provincial Properties LdDivisional CourtYes[1949] 1 KB 666EnglandCited for the principle that a court or tribunal which decides a case on a basis that has not been raised or contemplated by the parties may have committed a breach of natural justice.
Board of Education v. Rice and othersHouse of LordsYes[1911] AC 179EnglandCited for the principle that a court or tribunal which decides a case on a basis that has not been raised or contemplated by the parties may have committed a breach of natural justice.
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte LtdCourt of AppealYes[2007] 3 SLR 86SingaporeCited for the principle that a court or tribunal which decides a case on a basis that has not been raised or contemplated by the parties may have committed a breach of natural justice.
Wong Kai Woon v Wong Kong HomHigh CourtYes[2000] SGHC 176SingaporeCited for the principle that certain raw sources of foreign law can be adduced despite not being part of a foreign law expert’s evidence.
Ong Jane Rebecca v Lim Lie HoaHigh CourtYes[2003] SGHC 126SingaporeCited for the principle that a written opinion of an expert may be proved without calling the expert to give oral evidence only if the requirements of s 62(2) of the Act are satisfied.
Said Ajami v Comptroller of CustomsUnknownYes[1954] 1 WLR 1405EnglandCited for the principle that the precise character of the question upon which expert evidence is required must be taken into account when deciding whether the qualifications of a person entitle him to be regarded as a competent expert.
The H156High CourtYes[1999] 3 SLR 756SingaporeCited for the principle that it is the duty of an expert to assist the Court on the matters within his expertise and that this duty overrides any obligation to the person from whom he has received instructions or by whom he is paid.
Vita Health Laboratories Pte Ltd v Pang Seng MengHigh CourtYes[2004] 4 SLR 162SingaporeCited for the principle that an expert should neither attempt nor be seen to be an advocate of or for a party’s cause.
Whitehouse v JordanHouse of LordsYes[1981] 1 WLR 246EnglandCited for the principle that expert evidence presented to the court should be, and should be seen to be, the independent product of the expert, uninfluenced as to form or content by the exigencies of litigation.
JSI Shipping (S) Pte Ltd v TeofoongwonglcloongCourt of AppealYes[2007] 4 SLR 460SingaporeCited as an example of partiality in an expert’s evidence.
Gunapathy Muniandy v Khoo JamesHigh CourtYes[2001] SGHC 165SingaporeCited for the principle that the expert must not only be impartial but must also appear to be so.
MCC Proceeds Inc v Bishopsgate Investment Trust plcUnknownYes[1999] CLC 417EnglandCited for the function of the expert witness on foreign law.
Baron de Bode’s CaseUnknownYes(1845) 8 QB 208EnglandCited for the principle that the nature of expert evidence is not to set forth the contents of the written law, but its effect and the state of law resulting from it.
King v Brandywine Reinsurance CoUnknownYes[2005] 1 Lloyd’s Rep 655EnglandCited for the principle that the role of an expert, unless the court is concerned with special meanings, is to prove the rules of construction of the foreign law, and it is then for the court to interpret the contract in accordance with those rules.
National Bank of Egypt International Ltd v Oman Housing Bank SAOCUnknownYes[2003] 1 All ER (Comm) 246EnglandCited for the principle that the expert should not express any opinion on issues outside the area of his competence as well as issues which are not part of his brief.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 2006 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Evidence Act (Cap 97, 1997 Rev Ed)Singapore
Civil Evidence Act 1972 (c 30) (UK)United Kingdom

15. Key Terms and Keywords

15.1 Key Terms

  • Deed of Indemnity
  • Standby Letters of Credit
  • Winding Up
  • Governing Law
  • Pledged Shares
  • CIETAC Arbitration
  • Substantial and Bona Fide Dispute
  • Expert Evidence
  • Natural Justice
  • Conflict of Laws

15.2 Keywords

  • winding up
  • deed of indemnity
  • conflict of laws
  • contract law
  • singapore
  • arbitration
  • companies act
  • evidence act

17. Areas of Law

Area NameRelevance Score
Winding Up95
Conflict of Laws80
Contract Law70
Guarantees and indemnities60
Commercial Law60
Civil Procedure50
Evidence50
Banking and Finance40
Corporate Law30
Arbitration20

16. Subjects

  • Contract Law
  • Conflict of Laws
  • Company Law
  • Civil Procedure
  • Insolvency Law
  • Evidence Law