Land Law
| Citation | (2005) 6 SAL Ann Rev 387 |
| Date | 01 December 2005 |
| Published date | 01 December 2005 |
| Author | TEO Keang Sood LLM (Malaya), LLM (Harvard); Advocate and Solicitor (Malaya); Professor, Faculty of Law, National University of Singapore. |
17.1 The year under review saw several interesting decisions in the areas of indefeasibility, landlord and tenant, strata title and adverse possession. They have further clarified certain difficult aspects of the law in these areas and added to the corpus of Singapore land law.
17.2 In United Overseas Bank Ltd v Bebe bte Mohammad[2005] 3 SLR 501, the plaintiff had commenced action in the High Court for, inter alia, delivery of vacant possession of the defendant”s mortgaged property upon default of payment of the outstanding loan by the latter. The defendant raised a number of arguments in her defence to defeat the mortgage. It was alleged that she was of unsound mind at the time the mortgage was executed. The plaintiff”s solicitors were also alleged to be guilty of fraud. It was further argued that the registration of the mortgage was procured through a mistake and that the land register should be rectified by the court on this ground. The defendant further submitted that she had a personal right in equity against the plaintiff to set aside the mortgage on account of the plaintiff”s agents” conduct in obtaining registration of the mortgage.
17.3 On the evidence, Lai Kew Chai J held that the defendant could not rely on the defence of unsoundness of mind. He found that the plaintiff was not aware of the defendant”s condition at the time of execution of the mortgage. Accordingly, the legal disability exception provided in s 46(2)(d) of the Land Titles Act (Cap 157, 1994 Rev Ed) did not assist the defendant as it was inapplicable.
17.4 Lai J, however, found for the defendant on the other grounds and dismissed the plaintiff”s claim. In the instant case, prior to the execution of the mortgage, the defendant had obtained a replacement certificate of title in place of the lost original duplicate certificate of title to the land concerned.
Under s 43(5) of the Land Titles Act, the issue of a replacement certificate operates to cancel the lost original certificate for all purposes notwithstanding that the latter may subsequently be recovered. It was also a criminal offence under r 24 of the Land Titles Rules (Cap 157, R 1, 1999 Rev Ed) to be in possession of the original duplicate certificate of title. It was established on the evidence, that the lost original duplicate certificate of title subsequently came into the possession of the plaintiff and that the plaintiff”s conveyancing clerk ‘knew or deliberately turned a blind eye to the fact that the firm had received a document which was cancelled and of which it was illegal for the firm to be in possession’ (at [38]). Notwithstanding this, the conveyancing clerk proceeded to obtain registration of the mortgage on the strength of the document. Both Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd[1923] NZLR 1137 at 1175 and Assets Company, Limited v Mere Roihi[1905] AC 176 at 210 have made it clear that fraud under the Torrens system is not limited to cases of actual and certain knowledge. On this issue, Lai J concluded thus (at [38]):
In the case of wilful blindness, I rely on what was stated by Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd[1998] 3 VR 133, where it was pointed out that wilful blindness could in certain circumstances be ‘akin to fraud’. In my view, this was the situation in the instant case, if [the conveyancing clerk”s] conduct was not fraudulent in the first place. On either basis, the defendant is entitled to defeat the Mortgage registered pursuant to s 46(2) of the LTA on the ground of fraud.
17.5 Lai J was also of the view that the staff concerned at the Land Registry made a mistake in accepting the lost original duplicate certificate of title to facilitate registration of the mortgage. In the circumstances, the court was empowered to act under s 160(1)(b) of the Land Titles Act to rectify the land register by cancelling the registration that was effected. In his opinion, the plaintiff should not obtain any benefit arising from the registration given that the use of the cancelled original duplicate certificate was wrongful and illegal. In this regard, it is clear that s 157 of the Land Titles Act should have no application.
17.6 He further ruled that the defendant had a personal equity against the plaintiff to set aside the transaction on the ground of the unconscionable behaviour of the latter”s agents. Lai J found support for this in the Australian case of Mercantile Mutual Life Insurance Co Ltd v Gosper(1991) 25 NSWLR 32 where a forged variation of mortgage was involved. The husband of the mortgagor had perpetrated the forgery when the mortgagee, in breach of its obligations, handed over the certificate of title without the authority of the
mortgagor. As in the Australian case, no bona fide third-party rights had yet to accrue in United Overseas Bank v Bebe bte Mohammad.
17.7 In Ho Soo Fong v Standard Chartered Bank[2005] 1 SLR 316, the plaintiffs, who were directors of Ho Pak Kim Realty Co Pte Ltd (‘HPKR’), entered into loan facility agreements with the defendant bank which incorporated the latter”s standard terms and conditions (‘STC’). The facility letters set out the terms of the arrangements which required the plaintiffs to give a first legal mortgage on their properties and ensure that the actions commenced against HPKR were fully settled before disbursement of the loans. It was also provided that, in the event the facilities were aborted, the plaintiffs were required to pay all abortive legal costs and expenses as well as a cancellation fee of 1% of the loans cancelled. Clause 17.2(c) of the STC provided as follows:
Upon the occurrence of any of said Events of Default and/or any other events deemed as an event of default by the Bank on the part of the Borrower in any of the Security Document:-
…
(c) the Bank shall in addition to the rights set out herein, be entitled (as equitable chargee) to attach the liabilities to any of the Borrower”s the Mortgagor”s … property or security (whether real or personal) and to lodge a caveat against any real property that may now or hereafter be registered against the Borrower”s the Mortgagor”s … name whether singly or jointly.
17.8 When the loans were not disbursed after a year, the plaintiffs terminated the banking facilities. The defendant had maintained that the plaintiffs did not meet the condition of settling all legal actions referred to in the facility letters. This was disputed by the plaintiffs. With the termination of the banking facilities, the defendant claimed from the plaintiffs a sum representing the 1% cancellation fee as well as a sum for abortive legal fees. The plaintiffs denied liability for the fees as claimed. Between 2001 and early 2004, the plaintiffs repeatedly requested the defendant to remove the caveats lodged against their properties but the latter refused to do so. This was purportedly to protect its interest in the properties pending payment of the cancellation and legal fees. The caveats were only removed by the defendant on 30 June 2004 after the plaintiffs commenced action against the defendant. Pursuant to s 128 of the Land Titles Act (Cap 157, 2004 Rev Ed) (‘the 2004 Act’), the plaintiffs sought an order that there be an inquiry as to the
damages suffered by them for the period of 21 October 2002 to 30 June 2004. Under s 127(1) of the 2004 Act, the burden was on the defendant as caveator to show that it was right not to have withdrawn the caveats during the period in question.
17.9 The defendant argued that at the outset, it had a caveatable interest in the properties as equitable mortgagee. Its interest as equitable mortgagee was independent of cl 17.2(c). The equitable mortgage was created upon acceptance of the facility letters by the plaintiffs. Belinda Ang Saw Ean J approached the issue as follows (at [21] and [22]):
In the present case, what was the intention evinced by the facility letters? For an answer to this question, which is to be objectively determined, the court would have to ask: What was the relevant background in this case? The facts and circumstances giving rise to the right to lodge the caveat are important. …
… Significantly, what is clear from the facility letters is that the properties identified in the facility letters were already mortgaged to other financial institutions. In the context of this case and in the light of the evidence before me, I was of the view that no security interest ranking after the existing mortgages was intended to be conferred by the acceptance of the facility letters. Equally, the mere identification of each of the properties in the respective facility letters was insufficient to create an immediate security interest by agreement, especially where the properties were not available and hence not intended as security until the existing mortgages were discharged.
17.10 Clause 28.1 of the STC which also supported this conclusion provided that:
The grant of the banking facilities are subject to final documentation and such further legal or other requirements as may be deemed necessary by the Bank.
17.11 It was clear that the words therein did not indicate, as an interim measure, the immediate creation of an equitable mortgage by the acceptance of the offer contained in the facility letters. As Ang J further elaborated (at [24]):
In my judgment, the existence of the facility letters with their express reference to a first legal mortgage left no room for any implication that the bank intended to create (let alone effectively create) an immediately enforceable equitable mortgage over the properties. The facility letters did not purport to create an immediate equitable mortgage on anything. In my
view, if the parties to the facility letters had intended to create an immediate equitable mortgage in respect of the cancellation...
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