(delivering Judgment of the Board): The question raised by this appeal is whether the respondent Industrial & Commercial Realty Company Limited is entitled and bound to be registered as the holder of 332,500 fully paid shares of $1.00 in the appellant Merchant Credit Private Limited or whether, as the respondent claims, it is instead an unsecured creditor of the appellantor company in the sum of $332,500.

The appellant ("Merchant Credit") was incorporated pursuant to a shareholders' agreement dated March 28, 1972 and made between the Industrial & Commercial Bank Limited ("I.C.B."), Arthur Lipper International Limited ("A.L.I.") and a Mr. Sinclair. Clause 2 provided that all the issued share capital of Merchant Credit should be subscribed for in the proportions of 47.5% by I.C.B., 47.5% by A.L.I. and 5% by Mr. Sinclair. By Clause 3 I.C.B. and A.L.I. agreed, upon the request of the Board of Directors of Merchant Credit, to advance to Merchant Credit by way of loan in equal shares all monies required from time to time by Merchant Credit for its operating expenses. The primary objects of Merchant Credit were intended to be the carrying on of the business of merchant banking, underwriters, financiers and ancillarypurporses but the memorandum of association of Merchant Credit enabled the Company to indulge in the purchase and development of land and to engage in any trade or speculative venture.

Merchant Credit was incorporated in Singapore and by April 1973 had an authorised share capital of 1,000,000 shares of $1.00 each. 300,000 shares had been subscribed for and issued in the agreed proportions. The directors of Merchant Credit were Mr. Hwang, who was the chairman and was the nominee of I.C.B., Mr. Crafter who was the nominee of A.L.I. and also the secretary of Merchant Credit, and Mr. Sinclair.

In April 1973 Mr. Crafter and Mr. Hwang inspected and approved the purchase by Merchant Credit of a site at Kuala Lumpur which was zoned for residential purposes which they hoped to develop as an ice skating complex. They also approved the purchase of certain ice skating equipment.

On May 11, 1973 Mr. Crafter wrote to Mr. Hwang and Mr. Sinclair informing them that the cost of the equipment was $585,851 and the cost of the site a further $484,000. After taking into account certain expenses and cash in hand Mr. Crafter concluded that:—

"I therefore see our immediate needs for additional capital or loan as follows: I.C.B.479,700 A.L.I.479,700 Sinclair50,500

Our authorized is presently $1,000,000 and paid up $300,000. Will you please

1. arrange to pay into Merchant Credit the above amounts?

2. inform me whether you consider that these payments to be an increase of paid up capital (authorized must be increased) or as loan funds. I recommend that it should be additional paid up."

At an extraordinary General Meeting of Merchant Credit held on June 20, 1973 attended by the three directors by the unanimous agreement of all the shareholders the authorised capital was increased from $1,000,000 to $2,000,000 by the creation of a further 1,000,000 shares of $1 each.

I.C.B. and A.L.I. each agreed to subscribe 332,500 shares. I.C.B.'s shares were to be paid for and taken up the respondent company Industrial & Commercial Realty Company Limited ("I.C.R.") which was a wholly owned subsidiary of I.C.B. Accordingly on June 28, 1973 I.C.R. wrote to Merchant Credit applying for 332,500 shares and enclosing a cheque for $332,500. On the same day Merchant Credit acknowledged receipt from I.C.R. of $332,500 "in payment of application for 332,500 shares of $1 each".

The monies required by Merchant Credit to pay for the ice skating equipment and the site were initially advanced by A.L.I. When I.C.R. applied and paid for 332,500 shares, A.L.I. also applied for 332,500 shares and credited the purchase price against their outstanding loans to Merchant Credit. Merchant Credit applied the monies received from I.C.R. and A.L.I. towards the purchase of the