Land Law
| Published date | 01 December 2006 |
| Citation | (2006) 7 SAL Ann Rev 343 |
| Date | 01 December 2006 |
| Author | TEO Keang Sood LLM (Malaya), LLM (Harvard); Advocate and Solicitor (Malaya); Professor, Faculty of Law, National University of Singapore. |
18.1 Several interesting decisions were handed down by the courts in the year under review. These were mainly in the areas of indefeasibility of title and interests, caveats, covenants in leases and compulsory acquisition. The most prominent decision is undoubtedly that of the Court of Appeal in United Overseas Bank Ltd v Bebe bte Mohammad[2006] 4 SLR 884, which clarifies the law on several aspects of the principle of indefeasibility, such as the power of the court to rectify the land register on account of fraud, omission or mistake and the application of personal equities in the context of the Singapore Torrens system.
18.2 It is trite law that wilful blindness can in certain circumstances amount to fraud. The kind of conduct that can constitute wilful blindness was explained in the following cases. In Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd[1923] NZLR 1137 at 1175, Salmond J in the New Zealand Court of Appeal stated as follows:
[F]raud is not limited to cases of actual and certain knowledge. The true test of fraud is not whether the purchaser actually knew for a certainty of the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand, and either to make further inquiries before purchasing, or to abstain from the purchase, or to purchase subject to the claimant”s rights rather than in defiance of them. If, knowing as much as this, he proceeds without further inquiry or delay to purchase an unencumbered title with intent to disregard the claimant”s rights, if they exist, he is guilty of that wilful blindness or voluntary ignorance which, according to the authorities, is equivalent to actual knowledge, and therefore amounts to fraud.
18.3 In Assets Company, Limited v Mere Roihi[1905] AC 176 at 210, Lord Lindley, in delivering the decision of the Privy Council in an appeal from New Zealand, explained thus:
[T]he fraud which must be proved in order to invalidate the title of a registered purchaser for value … must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him.
18.4 In United Overseas Bank Ltd v Bebe bte Mohammad (supra para 18.1), one of the issues which arose for the consideration of the Court of Appeal was whether there was wilful blindness amounting to fraud on the part of the appellant”s solicitors (‘MDP’) through their conveyancing clerk (‘Ms Loo’) so as to render the mortgage executed in favour of the appellant null and void. The appellant had appealed against the decision of the trial judge (see [2005] 3 SLR 501), inter alia, declaring null and void and setting aside the mortgage registered against the respondent”s property and ordering the Registrar of Titles to rectify the land register by cancelling the mortgage. In the instant case, the respondent alleged, inter alia, that MDP were guilty of fraud in registering the mortgage. Earlier, after the original certificate of title of the respondent”s property was found missing, the daughter of the respondent (‘H’), on behalf of the respondent, had obtained a replacement certificate of title. The appellant had offered credit facilities to a company, JSN Enterprises, whose partners (‘the borrowers’) were the other daughter of the respondent (‘S’) and her husband, to be secured by a legal mortgage of the respondent”s property. The appellants appointed MDP to process and complete the transaction. The solicitor in charge of the matter was one ‘MDN’, but it was Ms Loo who did all the work. The borrowers and the respondent were represented by the same solicitors (‘J & J’). Upon execution of the mortgage by the respondent, J & J handed the mortgage and original certificate of title to MDP.
18.5 H had withdrawn the caveat which she had lodged against the respondent”s property, supposedly as a result of a misrepresentation by S. H also had no knowledge of S”s plan to use the property as security. The replacement certificate of title which was, at all material times, in the possession of H, was not used in the registration of the mortgage. In due
course, the mortgage, together with the original certificate of title, was presented for registration and duly registered. Upon the borrowers defaulting in repaying the outstanding loans, the appellant issued a letter of demand for payment. When the appellant sought to enforce the mortgage against the respondent, the latter alleged, inter alia, that the mortgage was invalid as the original certificate of title used by MDP to register the mortgage had already been cancelled and replaced by a replacement certificate of title. In the circumstances, the trial judge found that there was wilful blindness akin to fraud on the part of MDP through Ms Loo.
18.6 Chan Sek Keong CJ, who delivered the judgment of the Court of Appeal, rejected the trial judge”s finding that Ms Loo must have known that the original certificate of title had been cancelled and that she deliberately turned a blind eye to the fact that MDP had received a document which was cancelled. He was of the view that Ms Loo only knew from the search at the Land Titles Registry that a replacement certificate of title had been applied for, and not that it had been issued. In addition, the original certificate of title in the possession of Ms Loo would not show that it had been cancelled. Furthermore, there was no evidence that she had seen a replacement certificate of title before, and the fact that she was a conveyancing clerk, even one who was fairly experienced, could not, ipso facto, lead to such a conclusion. Even if she had seen a replacement certificate of title previously, this fact would not be relevant if she did not know that the original certificate of title had been cancelled.
18.7 The court was also unable to agree with the trial judge that Ms Loo could properly be deemed to know that it was an offence to be in possession of the cancelled original certificate of title, which should have been surrendered to the Singapore Land Authority, and that she knew or deliberately turned a blind eye to that fact and proceeded with the registration of the mortgage. As Chan CJ explained (at [26]):
In our view, a conveyancing clerk of Ms Loo”s experience would have known that (because of s 42(1) of the [Land Titles Act (Cap 157, 1994 Rev Ed)]), she would not have been able to register the Mortgage if she had merely produced a cancelled CT [certificate of title]. It would have been foolish for her to have proceeded thus as the registration process was not within her control. To obtain registration of the Mortgage, she would have had to collude with the registry staff to overlook the non-production of the replacement CT. This circumstance alone would suggest that Ms Loo did not know or suspect that anything wrong was going on. It also shows that she could not have acted out of dishonesty or a desire to deprive the
respondent of her rights in proceeding with the registration of the Mortgage.
18.8 The court, accordingly, set aside the finding of the trial judge that Ms Loo”s actions were akin to fraud. There was no evidence to support the finding that MDP had been wilfully blind to the existence of a fraud against the respondent by the borrowers. The mere failure to make further inquiries could not amount to wilful blindness akin to fraud as there was no dishonesty, moral turpitude, want of probity or intent on the part of MDP to disregard the respondent”s rights. At worst, Ms Loo was guilty of negligence or a failure to exercise due diligence. In the result, the evidence showed that the conduct of MDP amounted to no more than negligence or lack of due diligence in finding out the true state of affairs. For the reasons above, the mortgage could not be set aside under s 46(2)(a) of the Land Titles Act (Cap 157, 1994 Rev Ed) (‘1994 LTA’) on the ground of fraud. The appeal was, accordingly, allowed.
18.9 The court referred to well-established authorities from Australia and New Zealand in determining the meaning of fraud in the LTA. These included, among others, Assets Company, Ltd v Mere Roihi (supra para 18.3) at 210, Waimiha Sawmilling Company, Limited v Waione Timber Company, Limited[1926] AC 101 at 106, Bahr v Nicolay (No 2)(1988) 164 CLR 604 at 614 and Grgic v Australian and New Zealand Banking Group Ltd(1994) 33 NSWLR 202 at 221.
18.10 The court also took the opportunity to comment on why court actions against lending banks for fraud were unlikely to succeed. As Chan CJ explained (at [34]):
The hallmark of fraud is dishonesty or moral turpitude, which usually stems from greed, and greed simply means taking something of value which does not belong to you. However, when a financial institution, such as [the appellant], gives a secured loan to a customer, its primary interest in the security is in ensuring that it is a valid and enforceable security. It has no commercial interest beyond that. Accordingly, in ordinary banking transactions, there is no reason for the bank to act dishonestly or to seek to defraud the customer of his property in the security. There may be the rare occasion where a bank might be tempted to claim a larger security than that to which it is entitled (as in the case of Ho Kon Kim v Lim Gek Kim Betsy[2001] 4 SLR 340…), but this would normally occur when a shortfall in recovery is evident. When fraud occurs in connection with bank mortgages, it...
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