Rainforest Trading Ltd v State Bank of India: Enforceability of Equitable Mortgage and Conversion of Originating Summons

Rainforest Trading Ltd and another appealed against the decision of the Judge in favor of State Bank of India Singapore regarding the enforceability of an equitable mortgage over pledged shares and the refusal to convert an originating summons to a writ action. The Court of Appeal, comprising Chao Hick Tin JA, Andrew Phang Boon Leong JA, and Tay Yong Kwang J, dismissed the appeal, holding that valid consideration was given for the equitable mortgage and that the conversion to a writ action was not warranted. The court agreed with the Judge's reasons and found no merit in the Appellants' arguments.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal concerning the enforceability of an equitable mortgage and the refusal to convert an originating summons to a writ action. Appeal dismissed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Rainforest Trading LtdAppellantCorporationAppeal DismissedLost
State Bank of India SingaporeRespondentCorporationAppeal DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Andrew Phang Boon LeongJustice of the Court of AppealYes
Chao Hick TinJudge of AppealNo
Tay Yong KwangJudgeNo

4. Counsels

Counsel NameOrganization
Samuel ChackoLegis Point LLC
Yeo Teng Yung ChristopherLegis Point LLC
Charmaine ChanLegis Point LLC
Pradeep PillaiShook Lin & Bok LLP
Koh JunxiangShook Lin & Bok LLP

4. Facts

  1. Teledata expressed interest in investing in the Second Appellant.
  2. A share subscription agreement was entered into between Mr Goel, the Second Appellant and Teledata.
  3. The Respondent entered into a Facility Agreement with Baytech to provide a US$80m loan facility.
  4. The loan was to be used to acquire majority shareholding in the Second Appellant.
  5. The First Appellant pledged 51% of the Second Appellant’s share capital to the Respondent.
  6. Baytech failed to make payment on US$13 million due and owing to the Respondent.
  7. The Respondent sought to enforce its security over the Pledged Shares.

5. Formal Citations

  1. Rainforest Trading Ltd and another v State Bank of India Singapore, Civil Appeal No 107 of 2011, [2012] SGCA 21
  2. State Bank of India Singapore v Rainforest Trading Ltd and another, , [2011] 4 SLR 699

6. Timeline

DateEvent
Teledata expressed interest in investing in the Second Appellant.
Share subscription agreement entered into between Mr Goel, the Second Appellant and Teledata.
Teledata decided to obtain financing from the Respondent.
Facility Agreement entered into between the Respondent and Baytech.
Baytech fully drew down on the US$80 million facility.
The First Appellant delivered share certificates representing the Pledged Shares to the Respondent.
The First Appellant sent a signed blank share transfer form to the Respondent.
The Second Appellant sent a letter to the Respondent, indicating that it had noted the Respondent’s interest in the Register of Members.
The First Appellant and Baytech each registered a charge over the Pledged Shares in favour of the Respondent.
Baytech failed to make payment on US$13 million due and owing to the Respondent.
The Respondent declared an event of default had occurred under the Facility Agreement.
The Respondent sought to enforce its security over the Pledged Shares by commencing Originating Summons No 958 of 2010.
Judge directed valuation of Pledged Shares.
Court of Appeal dismissed the appeal.

7. Legal Issues

  1. Enforceability of Equitable Mortgage
    • Outcome: The court held that valid consideration was given for the equitable mortgage.
    • Category: Substantive
    • Sub-Issues:
      • Past Consideration
      • Validity of Consideration
    • Related Cases:
      • [1980] AC 614
      • [1994] 2 SLR(R) 910
      • [1995] 1 SLR(R) 886
  2. Conversion of Originating Summons to Writ Action
    • Outcome: The court held that the conversion to a writ action was not warranted.
    • Category: Procedural
    • Sub-Issues:
      • Allegations of Fraud
      • Disputes of Fact
    • Related Cases:
      • [2011] 4 SLR 777

8. Remedies Sought

  1. Declaration
  2. Enforcement of Security
  3. Power of Sale

9. Cause of Actions

  • Enforcement of Security
  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation

11. Industries

  • Banking

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
State Bank of India Singapore v Rainforest Trading Ltd and anotherHigh CourtYes[2011] 4 SLR 699SingaporeThe appeal was against the decision of the judge in this case.
Pao On and others v Lau Yiu Long and othersPrivy CouncilYes[1980] AC 614Hong KongEstablished the exception to the rule against past consideration.
Woon Brothers Investments Pte Ltd v Management Corporation Strata Title Plan No 461 and othersCourt of AppealYes[2011] 4 SLR 777SingaporeAppellants relied on this case to argue that the OS should be converted to a writ Action.
Sim Tony v Lim Ah Ghee (trading as Phil Real Estate & Building Services)High CourtYes[1994] 2 SLR(R) 910SingaporeRespondent relied on this case to argue that valid consideration had been provided.
Sim Tony v Lim Ah Ghee (trading as Phil Real Estate & Building Services)Court of AppealYes[1995] 1 SLR(R) 886SingaporeRespondent relied on this case to argue that valid consideration had been provided.
Ang Sin Hock v Khoo Eng LimCourt of AppealYes[2010] 3 SLR 179SingaporeThe general principles governing the introduction of new arguments on appeal were set out by this court.
Panwah Steel Pte Ltd v Koh Brothers Building & Civil Engineering Contractor (Pte) LtdCourt of AppealYes[2006] 4 SLR(R) 571SingaporeThe general principles governing the introduction of new arguments on appeal were set out by this court.
The Owners of the Ship ‘Tasmania’ and the Owners of the Freight v Smith and others, The Owners of the Ship ‘City of Corinth’ (The ‘Tasmania’)House of LordsYes[1890] 15 App Cas 223EnglandThe classic statement of principle is, of course, that of Lord Herschell in the House of Lords decision of The Owners of the Ship ‘Tasmania’
Connecticut Fire Insurance Company v KavanaghPrivy CouncilYes[1892] AC 473CanadaThe following observations by Lord Watson in the Canadian Privy Council decision of Connecticut Fire Insurance Company v Kavanagh are, especially (as we shall see) in the context of the present proceedings, also apposite
Susilawati v American Express Bank LtdCourt of AppealYes[2009] 2 SLR(R) 737SingaporeReference may also be made to the decision of this court in Susilawati v American Express Bank Ltd
Gay Choon Ing v Loh Sze Ti Terence Peter and another appealCourt of AppealYes[2009] 2 SLR(R) 332SingaporeA concise summary and exposition of the law in this area particularly in relation to the conditions of the Pao On exception is found in the decision of this court in Gay Choon Ing
Lampleigh v BraithwaitCourt not specifiedYes(1615) Hob 105; 80 ER 255EnglandEstablished that what looks at first blush like past consideration will still pass legal muster if there is, in effect, a single (contemporaneous) transaction
In re Casey’s PatentsCourt of AppealYes[1892] 1 Ch 104EnglandThe joint owners of certain patents promised the manager who previously worked on the patents a one-third share of the patents. The court held that the promise was enforceable since it was understood that at the time the previous work on the patents was rendered it was to be subsequently paid for and the subsequent promise to pay merely fixed the amount to be paid.
Kickapoo (Malaysia) Sdn Bhd and another v The Monarch Beverage Co (Europe) LtdCourt of AppealYes[2010] 1 SLR 1212SingaporeThis court has observed, the common law (and the allied principles of equity) comprise “an organic, coherent as well as holistic system out of which justice and fairness flow”
Eastwood v KenyonCourt not specifiedYes(1840) 11 Ad & E 438; 113 ER 482EnglandThe doctrine has the effect of preventing an otherwise valid contract from being formed.
Roscorla v ThomasCourt not specifiedYes(1842) 3 QB 234EnglandThe doctrine has the effect of preventing an otherwise valid contract from being formed.
In re McArdle, decdCourt not specifiedYes[1951] 1 Ch 669EnglandThe doctrine has the effect of preventing an otherwise valid contract from being formed.
Thorner v FieldCourt not specifiedYes(1611) 1 Bulst 120; 80 ER 816EnglandThe doctrine has the effect of preventing an otherwise valid contract from being formed.
Williams v Roffey Bros & Nicholls (Contractors) LtdCourt not specifiedYes[1991] 1 QB 1EnglandIntroduced the concept of “practical benefit” constituting good consideration
Chwee Kin Keong and others v Digilandmall.com Pte LtdHigh CourtYes[2004] 2 SLR(R) 594SingaporeThe modern approach in contract law requires very little to find the existence of consideration
Chwee Kin Keong and others v Digilandmall.com Pte LtdCourt of AppealYes[2005] 1 SLR(R) 502SingaporeThe modern approach in contract law requires very little to find the existence of consideration
Pillans and Rose v Van Mierop and HopkinsCourt not specifiedYes(1765) 3 Burr 1663; 97 ER 1035EnglandHad Lord Mansfield in Pillans and Rose v Van Mierop and Hopkins prevailed in establishing moral consideration as constituting sufficient consideration in law, the common law position today might well have been different
Guthrie Waugh Bhd v Malaippan MuthuchumaruHigh CourtYes[1972] 1 MLJ 35MalaysiaThe language of s 2(d) of the Malaysian Contracts Act 1950 (Act 136) (“Contracts Act”) might suggest – at first blush at least – that past consideration could nevertheless constitute valid consideration in the eyes of the law
Guthrie Waugh Bhd v Malaiappan MuthuchumaruCourt not specifiedYes[1972] 2 MLJ 62MalaysiaThe language of s 2(d) of the Malaysian Contracts Act 1950 (Act 136) (“Contracts Act”) might suggest – at first blush at least – that past consideration could nevertheless constitute valid consideration in the eyes of the law
Kepong Prospecting Ltd & Ors v SchmidtPrivy CouncilYes[1968] 1 MLJ 170MalaysiaThe language of s 2(d) of the Malaysian Contracts Act 1950 (Act 136) (“Contracts Act”) might suggest – at first blush at least – that past consideration could nevertheless constitute valid consideration in the eyes of the law
South East Asia Insurance Bhd v Nasir IbrahimSupreme CourtYes[1992] 2 MLJ 355Malaysias 2(d) was interpreted as recognising the principles laid down at common law in Pao On
Wong Hon Leong David v Noorazman bin AdnanCourt of AppealYes[1995] 3 MLJ 283Malaysias 2(d) was interpreted as recognising the principles laid down at common law in Pao On
GBH Ceramics Sdn Bhd v How It @ Low Aik & OrsHigh CourtYes[1989] 2 CLJ 427Malaysias 2(d) was interpreted as recognising the principles laid down at common law in Pao On
Hongkong and Shanghai Banking Corporation v Syarikat United Leong Enterprise Sdn Bhd & AnorHigh CourtYes[1993] 2 MLJ 449Malaysias 2(d) was interpreted as recognising the principles laid down at common law in Pao On
Affin Bank Berhad v Precision Tube Product (Malaysia) Sdn Bhd & OrsHigh CourtYes[2010] MLJU 119Malaysias 2(d) was interpreted as recognising the principles laid down at common law in Pao On

13. Applicable Rules

Rule Name
O 57 r 13(4) of the rules of Court (Cap 322, R 5, 2006 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Equitable Mortgage
  • Facility Agreement
  • Pledged Shares
  • Past Consideration
  • Originating Summons
  • Writ Action
  • Share Subscription Agreement

15.2 Keywords

  • Equitable Mortgage
  • Past Consideration
  • Originating Summons
  • Singapore
  • Contract Law
  • Banking Law

17. Areas of Law

Area NameRelevance Score
Banking and Finance75
Contract Law70
Mortgage65
Company Law50
Estoppel30
Fraud and Deceit25
Misrepresentation25

16. Subjects

  • Contract Law
  • Banking
  • Civil Procedure
  • Mortgages