Kong Swee Eng v Rolles Rudolf Jurgen August: Sale of Shares, Overreaching, and Frustration
In Kong Swee Eng v Rolles Rudolf Jurgen August, the High Court of Singapore addressed a dispute arising from a sale and purchase agreement of shares in Golden Oriental Pte Ltd. Kong Swee Eng (Plaintiff) sought to be released from her obligation to complete the purchase and recover her deposit, arguing that the shares were encumbered by a subsequent charge. Rolles Rudolf Jurgen August (Defendant) counterclaimed for specific performance or damages. The court, presided over by Steven Chong J, dismissed the plaintiff's claim, finding that the sale was valid, the UOB charge was overreached, and the winding up of the company did not frustrate the agreement. The court ordered the plaintiff to pay the outstanding balance for the shares with interest.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Plaintiff's claim dismissed with costs; judgment for defendant on counterclaim.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Sale of shares dispute. The court found the sale valid, the UOB charge overreached, and the winding up of the company did not frustrate the agreement.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Kong Swee Eng | Plaintiff | Individual | Claim Dismissed | Lost | Alvin Tan Kheng Ann |
| Rolles Rudolf Jurgen August | Defendant | Individual | Judgment for Defendant on Counterclaim | Won | Pradeep Pillai, Zhang Xiaowei |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Steven Chong | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Alvin Tan Kheng Ann | Wong Thomas & Leong |
| Pradeep Pillai | Shook Lin & Bok LLP |
| Zhang Xiaowei | Shook Lin & Bok LLP |
4. Facts
- The defendant sold shares in Golden Oriental Pte Ltd to the plaintiff.
- The sale was pursuant to a Charge granted by Mr Guo Ze Ming in favor of the defendant.
- The plaintiff sought to be released from the obligation to complete the sale.
- The plaintiff claimed the shares were encumbered by a subsequent charge in favor of UOB.
- The Company failed to achieve listing by the deadline.
- The defendant exercised his put options under the respective Investment Agreements.
- The plaintiff was aware of the UOB charge when she entered into the S&P Agreement.
5. Formal Citations
- Kong Swee Eng v Rolles Rudolf Jurgen August, Suit No 630 of 2009, [2010] SGHC 300
6. Timeline
| Date | Event |
|---|---|
| First Investment Agreement signed. | |
| Charge granted by Guo Ze Ming. | |
| Plaintiff started investing in the Company. | |
| Second Investment Agreement signed. | |
| Third Investment Agreement signed. | |
| Ordinary share division resolution passed. | |
| Defendant's solicitors wrote to Guo regarding share certificates. | |
| Defendant exercised put options under Investment Agreements. | |
| Creditors declared an event of default. | |
| Originating Summons No 228 of 2009 filed. | |
| Plaintiff appointed as director of the Company. | |
| S&P Agreement entered into. | |
| Court Order granted in OS 228. | |
| Plaintiff issued notice for an extraordinary general meeting. | |
| Resolutions not carried at the EGM. | |
| ComLaw LLC filed a winding up petition against the Company. | |
| Order granted for Registrar to issue new share certificates. | |
| Defendant informed plaintiff of readiness to transfer shares. | |
| Plaintiff claimed she was not obliged to complete the S&P Agreement. | |
| Plaintiff claimed she was not obliged to complete the S&P Agreement. | |
| Plaintiff claimed she was not obliged to complete the S&P Agreement. | |
| Plaintiff commenced action against the defendant. | |
| Company ordered to be wound up. | |
| Plaintiff amended Statement of Claim to rely on fraud. | |
| Judgment reserved. |
7. Legal Issues
- Breach of Contract
- Outcome: The court found that the plaintiff was in breach of the S&P Agreement.
- Category: Substantive
- Overreaching
- Outcome: The court held that the defendant's sale of the Shares to the plaintiff had overreached UOB's charge such that the plaintiff took the Shares free from the UOB charge.
- Category: Substantive
- Related Cases:
- [2010] QSC 57
- Frustration
- Outcome: The court held that the winding up of the Company did not frustrate the S&P Agreement.
- Category: Substantive
- Related Cases:
- [2003] NSWSC 156
- [1981–1983] 1 NZCLC 98,081
- Fraud
- Outcome: The court found that the plaintiff's argument on fraud was misconceived.
- Category: Substantive
- Power of Sale
- Outcome: The court found that the defendant's sale of the Shares under the S&P Agreement was a valid exercise of the power of sale granted to him under the Charge.
- Category: Substantive
8. Remedies Sought
- Release from obligation to complete sale
- Refund of deposit
- Specific performance of the S&P Agreement
- Damages
9. Cause of Actions
- Breach of Contract
- Specific Performance
10. Practice Areas
- Commercial Litigation
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Power Knight Pte Ltd v Natural Fuel Pte Ltd (in compulsory liquidation) | High Court | Yes | [2010] 3 SLR 82 | Singapore | Cited to distinguish between a charge and an equitable mortgage based on the availability of self-help remedies. |
| Harrold v Plenty | High Court | Yes | [1901] 2 Ch 314 | England and Wales | Cited for the proposition that the deposit of share certificates accompanied by blank transfer forms gives rise to an equitable mortgage over the relevant shares. |
| Stubbs v Slater | High Court | Yes | [1910] 1 Ch 632 | England and Wales | Cited for the proposition that a transaction under which shares were handed over with a share transfer form executed in blank to secure a debt was a mortgage that gave the mortgagee the right of foreclosure. |
| Jordanlane Pty Ltd v Kimberley Jane Elizabeth Kitching Andrew | Supreme Court of Victoria | Yes | [2008] VSC 426 | Australia | Cited for the rationale behind s 468 of the Corporations Act 2001 (Cth), the Australian equivalent of s 259 of the Companies Act. |
| Commissioners of Inland Revenue v Crossman | House of Lords | Yes | [1937] AC 26 | England and Wales | Cited to support the position that shares are choses in action and are therefore excluded from the Sale of Goods Act. |
| British & Commonwealth Holdings Plc v Quadrex Holdings Inc | English Court of Appeal | Yes | [1995] CLC 1169 | England and Wales | Cited to support the position that the Sale of Goods Act does not apply to a chose in action such as shares in a company. |
| Ezishop.Net Ltd (in Liq) v Veremu Pty Ltd | Supreme Court of New South Wales | Yes | [2003] NSWSC 156 | Australia | Cited for the holding that the insolvency of a company does not frustrate agreements for the sale and purchase of shares in the company. |
| Koutsojiannis v Brown | High Court of New Zealand | Yes | [1981–1983] 1 NZCLC 98,081 | New Zealand | Cited for the holding that the doctrine of frustration does not apply to a contract for the purchase of shares which is unable to be performed because of the company being wound up. |
| Singapore Finance Ltd v Ben’s Electrical Engineering Pte Ltd | High Court | Yes | [1986] SGHC 55 | Singapore | Cited for the principle that notices related to the exercise of power of sale are intended to protect the interest of the mortgagor. |
| DBS Finance Ltd v Prime Realty Pte Ltd | High Court | Yes | [1990] 2 SLR(R) 740 | Singapore | Cited as one of the Singapore High Court decisions that considered s 26(1) of the CLPA. |
| Indian Overseas Bank v Cheng Lai Geok | High Court | Yes | [1991] 2 SLR(R) 574 | Singapore | Cited as one of the Singapore High Court decisions that considered s 26(1) of the CLPA. |
| Win Supreme Investment (S) Pte Ltd v Joharah bte Abdul Wahab (Sjarikat Bekerjasama Perumahan Kebangsaan Singapura, third party) | High Court | Yes | [1996] 3 SLR(R) 583 | Singapore | Cited as one of the Singapore High Court decisions that considered s 26(1) of the CLPA. |
| Horsham Properties Group Ltd v Clark | High Court | Yes | [2009] 1 WLR 1255 | England and Wales | Cited for a brief history of the statutory power of sale in England. |
| Directors of South Eastern Railway Company v Jortin | House of Lords | Yes | (1857) 6 HL Cas 425 | England and Wales | Cited for the proposition that overreaching applied at common law. |
| R v Registrar of Title; Ex parte Watson | Supreme Court of Victoria | Yes | [1952] VLR 470 | Australia | Cited for the proposition that overreaching applied at common law. |
| Banner v Berridge | Court of Chancery | Yes | (1880-81) LR 18 Ch D 254 | England and Wales | Cited for the holding that a first mortgagee, after exercising his power of sale, holds any surplus as a constructive trustee for the second mortgagee. |
| West London Commercial Bank v Reliance Permanent Building Society | English Court of Appeal | Yes | (1885) LR 29 Ch D 954 | England and Wales | Cited for the holding that the first mortgagee, who had notice of the second mortgage, was liable, at general law, to make good to the second mortgagee the surplus that had already been paid to the mortgagor. |
| St George Bank Limited v Perpetual Nominees Limited | Supreme Court of Queensland | Yes | [2010] QSC 57 | Australia | Cited for the holding that overreaching was not a creature of statute and applied to personal property at general law. |
| Re White Rose Cottage | High Court | Yes | [1965] 1 Ch 940 | England and Wales | Cited as an example of a mechanism that allows the transfer of the legal title out of court. |
| London and County Banking Co v Goddard | High Court | Yes | [1897] 1 Ch 642 | England and Wales | Cited as an example of a mechanism that allows the transfer of the legal title out of court. |
| Otter v Lord Vaux | Court of Appeal in Chancery | Yes | (1856) 6 De GM & G 638 | England and Wales | Cited for the rule that a mortgagor could not by purchasing from a mortgagee exercising a power of sale defeat a subsequent mortgagee’s interest in the property. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) s 259 | Singapore |
| Sale of Goods Act (Cap 393, 1999 Rev Ed) s 7 | Singapore |
| Sale of Goods Act (Cap 393, 1999 Rev Ed) s 61(1) | Singapore |
| Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) s 24(1)(a) | Singapore |
| Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) s 26(1) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Shares
- S&P Agreement
- Charge
- UOB charge
- Put option
- Investment Agreements
- Originating Summons
- Winding up
- Overreaching
- Power of sale
- Equitable mortgage
15.2 Keywords
- Shares
- Sale and Purchase Agreement
- Mortgage
- Overreaching
- Frustration
- Winding up
- Breach of Contract
16. Subjects
- Contract Law
- Company Law
- Mortgages
- Sale of Shares
- Civil Litigation
17. Areas of Law
- Contract Law
- Property Law
- Mortgages
- Sale of Goods
- Company Law