Commingled assets of a liquidated company with competing secured claims – how do we fairly distribute the secured mix? - Determining a just and equitable distribution amongst creditors whose security assets have been commingled – the Pars Ram Brothers case

by Dentons


[co-author: Priscilla Wee]

What is a fair and just method of distribution of an insolvent company’s assets amongst creditors if its assets have been commingled into a single mixed bulk, and the proceeds are insufficient to satisfy every secured claim?

This issue arose for determination in the recent Singapore High Court decision of Pars Ram Brothers (Pte) Ltd (in creditors’ voluntary liquidation) v Australian & New Zealand Banking Group Ltd and others [2018] SGHC 60. The High Court considered the distribution of commingled assets (i.e. mixed four categories of stocks of black pepper corn) of Pars Ram Brothers (Pte) Ltd (the Company) amongst its secured and general creditors, all of whom have a security interest in the mixed bulk assets, and none of whom are wrongdoers vis-à-vis each other.

Prior to this decision, there was a paucity of Singapore case authority on the issue. In this article, we explore (A) a brief background of the facts in the Pars Ram Brothers case, (B) the basis of the Court’s reasoning in favouring the “rolling charge” method of distribution; and (C) some practical implications for creditors.

A. Brief Background Facts

Prior to its liquidation, the Company was in the spice business, trading primarily in pepper and cashew nuts and financing its import mostly through trade financing facilities granted by banks. The banks would disburse funds directly to the relevant stock supplier upon proof of the Company’s purchase and subsequently release relevant shipping documents to the Company to allow the Company to sell the stock to its end-customers. In exchange, the Company would execute a trust receipt in favour of the banks on terms that the Company would hold the financed stock or proceeds of sale on trust for the bank. 

The Company subsequently became insolvent and its Liquidators proposed that the stock in the Company’s possession (which included 17 different categories of pepper) be sold and the proceeds distributed. In a separate judgment, it had been determined that four of the 17 categories of pepper would be distributed amongst secured and general creditors of the Company – the issue for determination in this case was what an appropriate method of distribution should be used since there was no enough stock / proceeds to pay off all interested creditors.

B. Various Methods of Distribution  

Three possible approaches were identified and considered by the High Court, as summarised in the table below:

 S/No.  Approach  What is it?  Supported by


“First in, first out”

(famously known as the rule in Clayton’s Case)

When sums are mixed in a bank account as a result of a series of deposits, withdrawals are treated as withdrawing the money in the same order as the money was deposited.

 All parties confirmed that they were not advocating this approach.


Pari passu

The pari passu sharing of the total pool of assets according to what each of the claimants are owed, ignoring the dates on which they have made their respective investments.

 5th and 6th Defendants (DBS Bank Ltd and Indian Bank)


Rolling charge

Similar to pari passu method in that calculations are done on a pari passu basis, but additionally, the contributor’s rateable interest in the mixed fund vis a vis the other contributors are to be recalculated at every instance of withdrawal.

 2nd Defendant (Bank of Baroda) and Liquidators.

The High Court ultimately preferred the rolling charge method for the following reasons: -

  1. The “first in first out” method favours later contributions over earlier contributions and could be perceived as arbitrary and unfair. For this reason, this method should only be used on an exceptional basis.
  2. As between the pari passu and rolling charge method, the rolling charge method more fairly takes into account the rateable interests of each contributor to the mixed fund immediately before any withdrawal, and is thus more precise and deemed to produce “the most just result”.
  3. That said, High Court also acknowledges that the pari passu method is often preferred for considerations of costs, practicality and relative simplicity in implementation. Hence, unless the rolling charge method was impracticable or unworkable (e.g. because of a prohibitively large number of claimants or transactions), it should be the preferred method.

On the facts of the case, the High Court found that the objections to adopting the rolling method were not made out on the facts for the following key reasons:-

  1. First, there was no system for incoming stock to be stored in the Company’s warehouse (as appeared to have been suggested) which would make the adopting of a rolling charge method objectionable.
  2. Second, and contrary to the objectors’ argument that there was evidential uncertainty regarding the order of same-day entries in the warehouse ledger, the High Court found that the order in which the entries were recorded was the order in which incoming and outgoing shipments were made. Hence, there was no insuperable difficulty in applying the rolling charge method.

Additionally, a key consideration relevant on the appropriate method to adopt is the parties’ intentions, whether express, inferred or presumed.

The High Court found that the terms of the trust receipts in this case (stating that the Company should hold or store goods in a manner capable of separate identification) pointed away from the creditors’ intention to accept a pari passu distribution.

C. Practical Implications for Creditors

The tenor of the Pars Ram Brothers decision suggests that the rolling charge method of distribution is likely to be the way forward in such situations, provided that such application would not be too complicated or costly.

When providing lending facilities, lenders should ensure that their security, as well as any proceeds of sale held on trust for them, are clearly segregated or paid into a separately designated account. This would go towards demonstrating that any monies held on trust for the lender is intended to be treated separately / being capable of separate identification, and not to be distributed on a pari passu, or even on a rolling charge, basis in the event of a borrower’s liquidation.

Lenders are also reminded to undertake practical checks from time to time on the mechanisms and obligations of segregation to ensure that their interests continue to be safeguarded.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:


Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.