E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd

Judgment Date19 July 2013
Date19 July 2013
Docket NumberOriginating Summons No 1357 of 2009
CourtHigh Court (Singapore)
E C Investment Holding Pte Ltd
Ridout Residence Pte Ltd and another (Orion Oil Ltd and others, interveners)

Quentin Loh J

Originating Summons No 1357 of 2009

High Court

Trusts—Trust estate—Unsecured trust creditor claiming equitable assignment—Whether claim constituted res judicata—Whether there had been equitable assignment

Trusts—Trust estate—Unsecured trust creditor claiming right of equitable set-off—Whether there was a right of equitable set-off—Whether right of equitable set-off had been extinguished

Trusts—Trust estate—Unsecured trust creditors claiming share of trust assets—Priority inter se and vis-à-vis trust beneficiary—Whether remedy of subrogation of trustee’s right to be indemnified out of trust assets available—Whether trust beneficiary’s bankruptcy would have effect on claims

The present proceedings concerned the priority of unsecured trust creditors inter se as well as vis-à-vis the trust beneficiary in respect of the distribution of S$4,248,240.91, being the remaining balance purchase price from the sale of 39 A Ridout Road (“the Property”).

The present originating summons had been filed in 2009 by the plaintiff, E C Investment Holding Pte Ltd (“ECIH”) seeking specific performance for the sale of the Property pursuant to an option to purchase granted by the first defendant, Ridout Residence Pte Ltd (“Ridout”), on 5 June 2009. The second intervener, Thomas Chan, also sought specific performance for the sale of the Property pursuant to an option to purchase granted by Ridout on 7 October 2009 (“the 2nd OTP”).

In E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd[2011] 2 SLR 232, the court granted specific performance to Thomas Chan and held also that ECIH was entitled to damages. The decision was upheld by the Court of Appeal in E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd[2012] 1 SLR 32. It was held on appeal that Ridout was a trust vehicle created by one Mr Agus Anwar (“Anwar”), who was its sole director and shareholder and that the Property was held on trust by Ridout for Anwar at all material times.

Pursuant to the decision, the Property was transferred to Thomas Chan, who then paid the balance purchase sum of S$14,728,240.91 into court. Subsequently, S$10,500,000 of this balance purchase sum was paid out to the first intervener, Orion Oil Ltd, by agreement of parties in Originating Summons No 1 of 2011, Orion Oil Ltd having taken out the originating summons in order to enforce its charge over the sale proceeds of the Property which it had registered on 24 September 2008, in consideration of a S$10,000,000 loan made to Anwar.

Four parties laid claim to the balance purchase sum which remained in court. ECIH claimed against Ridout in Summons No 45 of 2012 for damages. Thomas Chan claimed against Ridout in Summons No 475 of 2012 for late completion interest under the terms of the 2nd OTP. TYF Realty Pte Ltd (“TYF”), the third intervener, claimed against Ridout its estate agent’s service fee or commission of the successful sale of the Property pursuant to cl 14 of the 2nd OTP in Summons No 475 of 2012. Finally, the Official Assignee (“OA”) claim was made on behalf of Anwar’s estate for the benefit of his creditors, following his being adjudged a bankrupt on 3 March 2011.

Held, ordering that the plaintiff, second and third interveners share pari passu:

(1) A trustee acting as a principal in connection with the administration of the trust incurred personal liabilities to creditors even where acting in accordance with his powers and duties in the administration of the trust. However, where a trustee incurred such a liability, he or she was entitled to an indemnity effected by a lien or charge over the trust property conferring an equitable interest in the trust property to the extent of the liability. This right of indemnity took priority over the claims of any beneficiary: at [12] and [13] .

(2) Ridout had entered into and breached contracts with each of the three creditors: ECIH, Thomas Chan and TYF in the course of administering the trust. On the facts, it was clear that Ridout would be entitled to an indemnity from the trust property for liability caused by these breaches of contracts and its right of indemnity would take priority over the claim of the beneficiary Anwar: at [16] .

(3) Typically, the trust creditor could only institute its claim against the trustee personally. However, where a trustee did not or was unable to invoke that right of indemnity to pay the creditor, the creditor might obtain an order of court to be subrogated to the trustee’s right of indemnity. The result of which the creditor’s in personam right against the trustee would be elevated to a claim in rem over the trust assets. The creditor’s claims would take priority over the claims of the beneficiaries of the trust assets: at [14] and [15] .

(4) Subrogation was an equitable remedy not granted as of right but in circumstances where it was appropriate to do so. Where the trust creditor sought to subrogate to a trustee’s right of indemnity out of trust property, there was no need to make the trustee a bankrupt or wind up the trustee. The remedy of subrogation was available where it would be reasonable to assume that it would be pointless for the trust creditor to pursue its common law remedy first: at [24] to [27] .

(5) On the facts, Ridout had no assets other than the Property which had since been sold and the proceeds of which had been paid into court. Ridout’s creditors were also all known and it was clear that Ridout could not satisfy all their claims. Hence, it would have been pointless and a waste of time and costs to have Ridout wound up before its creditors could enforce their remedies of subrogation: at [28] .

(6) The remedy of subrogation was an exercise of a prior right conferred upon the trustee as a necessary incident of his office. It was not a security interest or right which had been created: at [30] .

(7) Between trust creditors subrogating to the trustee’s right of indemnity against the trust assets, the courts had intimated a preference for distribution pari passu to avoid difficult and cumbersome enquiries: at [34] .

(8) Equitable set-off was permitted only if equitable considerations supported such an exercise. Cross-claims had to arise out of the same transaction or were so closely connected to the plaintiff’s claim that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into account the defendant’s cross-claim. The right to an equitable set-off did not automatically extinguish cross-demands; the cross demands remained in existence and retained their separate identities until extinguished by judgment or agreement: at [39] and [47] to [49] .

(9) The order of court for Thomas Chan to pay the balance of the purchase price for the Property into court extinguished Ridout’s right to seek the balance purchase price for the Property from him. Thomas Chan therefore lost the opportunity to invoke his right of equitable set-off in relation to his late completion interest claim vis-à-vis Ridout’s claim: at [50] .

(10) A broad, merits-based approach should be taken in determining if res judicata applied. The crucial question was whether in all the circumstances, a party was abusing the process of the court by seeking to raise before it an issue which could have been raised before. Had cl 14 of the 2nd OTP been operative, TYF would have been able to pursue both an in personam remedy against Ridout and an in rem claim to the service fee; both claims were inextricable and should have been raised before the District Court. TYF’s position that it had not raised its proprietary claim in its suit in the District Court as it was strategically unnecessary would not function as a defence to the res judicata doctrine: at [54] and [55] .

[Observation: TYF’s proprietary claim raised an interesting issue, viz,the nature of the assignee’s interest before the chose in action actually materialises. However, given that this issue was not strictly necessary for the disposal of TYF’s claim, the court would go no further than to observe that this would require more substantial and full argument than those before the court: at [59] to [62] .]

Abdul Salam Asanaru Pillai v Nomanbhoy & Sons Pte Ltd [2007] 2 SLR (R) 856; [2007] 2 SLR 856 (refd)

Aries Tanker Corp v Total Transport Ltd [1977] 1 WLR 185 (folld)

Blundell, Re (1889) 44 Ch D 1 (refd)

British Power Traction and Lighting Co Ltd, Re [1910] 2 Ch 470 (refd)

Cathay Theatres Pte Ltd v LKM Investment Holdings Pte Ltd [1999] SGHC 171 (refd)

Cator v Croydon Canal Co (1841) 4 Y & C Ex 593; 160 ER 1149 (refd)

Chan Ah Beng v Liang and Sons Holdings (S) Pte Ltd [2012] 3 SLR 1088 (refd)

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 (refd)

Deposit Protection Board v Dalia [1994] 2 AC 367 (refd)

Dowse v Ann Elizabeth Gorton [1891] AC 190 (refd)

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 (refd)

E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2011] 2 SLR 232 (refd)

E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2012] 1 SLR 32 (refd)

Edward Tailby v The Official Receiver (1888) 13 App Cas 523 (refd)

Frith, Re [1902] 1 Ch 342 (refd)

Garland, Ex parte (1804) 10 Ves Jun 110; 32 ER 786 (refd)

Goh Nellie v Goh Lian Teck [2007] 1 SLR (R) 453; [2007] 1 SLR 453 (folld)

Geary, Re [1939] NI 152 (refd)

Grimthorpe, Re [1958] Ch 615 (folld)

Henderson v Henderson [1843–1860] All ER Rep 378 (refd)

Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999 (refd)

Hong Leong Finance Ltd v Tan Gin Huay [1999] 1 SLR (R) 755; [1999] 2 SLR 153 (refd)

Johnson, Re (1880) 15 Ch D 548 (refd)

Jennings v Mather [1901] 1 KB 108 (refd)

Jennings v Mather [1902] 1 KB 1 (refd)

Johnson v Gore Wood & Co [2002] 2 AC 1 (refd)

Lai Swee Lin Linda v AG [2006] 2 SLR...

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1 cases
  • Lalwani Shalini Gobind and another v Lalwani Ashok Bherumal
    • Singapore
    • High Court (Singapore)
    • 24 April 2017
    ...as against the trust property in priority over the claims of any beneficiary (E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2013] 4 SLR 123 at [13]). However, in the present case, while that right of indemnity existed, the Defendant did not adduce sufficient evidence to show th......
1 books & journal articles
  • Equity and Trusts
    • Singapore
    • Singapore Academy of Law Annual Review No. 2013, December 2013
    • 1 December 2013
    ...Tote Board who was entitled to claim any interest in the trust property. 15.8 E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd[2013] 4 SLR 123 (‘E C Investment’) (a more comprehensive note of this case is found in H W Tang, ‘Creditors, Trusts and Insolvency’(2014) 20(4) T&T 383) is......

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