Pars Ram Brothers v ANZ: Distribution of Assets in Winding Up
In Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others, the Singapore High Court addressed the method of distribution for sale proceeds of pepper stock held on trust for the company's creditors. The liquidators applied under s 310(1)(a) of the Companies Act, seeking the court's determination on the appropriate distribution method when commingled assets are insufficient to satisfy all claims. The court determined that the rolling charge method should be adopted for distributing the sales proceeds of the disputed pepper categories.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
The court ordered that the rolling charge method be used in respect of sales proceeds for all of the Disputed Categories.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court determines the appropriate method for distributing commingled assets with insufficient funds to satisfy creditor claims.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| RHB Bank Berhad | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| DBS Bank Ltd | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Standard Chartered Bank | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Indian Overseas Bank | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| CIMB Bank Berhad | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Indian Bank | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) | Plaintiff | Corporation | Application granted | Won | |
| Australian & New Zealand Banking Group Limited | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Bank of Baroda | Defendant | Corporation | Outcome determined by distribution method | Neutral | |
| Bank of India | Defendant | Corporation | Outcome determined by distribution method | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Audrey Lim | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Pars Ram Brothers (Pte) Ltd was in the spice business, trading primarily in pepper and cashew nuts.
- The company financed its import of stock mostly through trade financing facilities granted by banks.
- The company would pledge the shipping documents for the financed stock to the relevant bank as security for the loan.
- The bank would release the relevant shipping documents to the company in consideration for a trust receipt.
- The company held the financed stock or its proceeds of sale on trust for the bank.
- The company became insolvent, and liquidators were appointed.
- The liquidators were informed of stock in the company’s possession held in a warehouse in Singapore.
- The stock included 17 different categories of pepper.
- The plaintiff proposed to sell the stock and hold the proceeds on trust for the creditors.
- The claims in respect of the stock under the Disputed Categories exceed their respective sale proceeds.
- Stock for the Disputed Categories have been commingled into a mixed bulk.
5. Formal Citations
- Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others, Originating Summons No 970 of 2017, [2018] SGHC 60
6. Timeline
| Date | Event |
|---|---|
| Plaintiff’s application under s 310(1)(a) of the Companies Act heard | |
| Court hearing regarding method of distribution | |
| Hearing date | |
| Judgment date |
7. Legal Issues
- Method of distribution of commingled assets
- Outcome: The court determined that the rolling charge method should be adopted.
- Category: Substantive
- Sub-Issues:
- Application of 'first in, first out' rule
- Application of pari passu method
- Application of rolling charge method
8. Remedies Sought
- Determination of the method of distribution of assets
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Commercial Litigation
- Insolvency
- Banking
11. Industries
- Spice Trading
- Banking
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others | High Court | Yes | [2017] 4 SLR 264 | Singapore | The grounds for the decision in this case can be found in this cited case. |
| Devaynes v Noble | N/A | Yes | [1814-23] All ER Rep 1 | N/A | Set out the “first in, first out” approach, more commonly known as Clayton’s Case. |
| Barlow Clowes International Ltd (in liq) and others v Vaughan and others | English Court of Appeal | Yes | [1992] 4 All ER 22 | England and Wales | Discussed the “first in, first out” approach, the pari passu approach and the rolling charge approach. |
| Re Diplock’s Estate, Diplock v Wintle | N/A | Yes | [1948] 1 Ch 465 | N/A | Discussed the scope of application for the rule in Clayton’s Case. |
| Re Ontario Securities Commission and Greymac Credit Corp | N/A | Yes | (1986) 55 OR (2d) 673 | N/A | Discussed the scope of application for the rule in Clayton’s Case. |
| Q & M Enterprises Sdn Bhd v Poh Kiat | High Court | Yes | [2005] 4 SLR(R) 494 | Singapore | Observed that the rule was applied almost invariably in the context of running accounts. |
| Re Walter J Schmidt & Co, ex p Feuerbach | N/A | Yes | (1923) 298 F 314 | N/A | Discussed the fiction of the “first in, first out” method. |
| Russell-Cooke Trust Co v Prentis | N/A | Yes | [2003] 2 All ER 478 | N/A | Rejected the use of the rule in Clayton’s Case and adopting the pari passu method instead. |
| Re Hallett’s Estate | N/A | Yes | (1880) 13 Ch D 696 | N/A | The operative presumption would be the one that works best in favour of the claimant and against the fiduciary. |
| Re Oatway | N/A | Yes | [1903] 2 Ch 356 | N/A | The operative presumption would be the one that works best in favour of the claimant and against the fiduciary. |
| O’Connor Rosamund Monica v Potter Derek John | High Court | Yes | [2011] 3 SLR 294 | Singapore | Whether Clayton’s Case is even applicable in the context of tracing remains unresolved. |
| Boughner v Greyhawk Equity Partners Limited Partnership (Millenium) | Ontario Supreme Court of Justice | Yes | 111 OR (3d) 700 | Canada | The court ordered the funds to be distributed on that basis as “justice dictates that the funds should be distributed proportionately based on the interests of the parties at the time of commingling” |
| Shalson v Russo | N/A | Yes | [2005] Ch 281 | N/A | An application of the pari passu method may potentially be unfair to the most recent contributors as they may have their interests in the fund diminished by withdrawals prior to their contribution |
| Charity Commission for England and Wales v Framjee and others | N/A | Yes | [2015] 1 WLR 16 | N/A | The pari passu method is often preferred for considerations of costs, practicality and relative simplicity in implementation. |
| Re International Investment Unit Trust | N/A | Yes | [2005] 1 NZLR 27 | New Zealand | The parties’ intentions are a key consideration to bear in mind when selecting the appropriate method of distribution. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap. 50) | Singapore |
| Section 310(1)(a) of the Companies Act (Cap. 50) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Commingled assets
- Rolling charge method
- Pari passu method
- Trust receipt
- Creditors’ voluntary liquidation
- Security interest
- Mixed bulk
- Liquidators
- Trade financing facilities
15.2 Keywords
- Winding up
- Distribution of assets
- Commingled funds
- Rolling charge
- Pari passu
- Companies Act
- Singapore
- Insolvency
17. Areas of Law
16. Subjects
- Insolvency
- Companies Act
- Distribution of Assets
- Trusts