Chia Ah Sng v Hong Leong Finance Limited

• Jurisdiction: Singapore
• Judge: G P Selvam J
• Judgment Date: 14 December 2000
• Neutral Citation: [2000] SGHC 273
• Docket Number: Originating Summons No 668 of 2000
• Date: 14 December 2000
• Year: 2000
• Published date: 19 September 2003
• Plaintiff Counsel: Lew Meow Fah (Lew Meow Fah & Co)
• Citation: [2000] SGHC 273
• Defendant Counsel: Suresh Nair (Allen & Gledhill)
• Court: High Court (Singapore)
• Subject Matter: Res Judicata,Judgment by assistant registrar,Application made two years later to set aside judgment,Whether matter res judicata

: In June 1995, when the property market was buoyant, the plaintiff, Madam Chia Ah Seng, purchased a shophouse from the Housing and Development Board. The purchase price was $2,346,000. To finance the acquisition she had to borrow. She did so from Hong Leong Finance Limited, the defendants (`Hong Leong`).

The total amount of the loan granted by Hong Leong was $2,350,000. It was made up of $2,162,000 and $188,000. The smaller amount was the final 8% of the price.

The first loan attracted an initial interest rate of 5.75% p payable in monthly rests for the first year. From the second year it was 6.75% pa also at monthly rests. Hong Leong had the `absolute discretion` to vary the interest rates to reflect the prevailing market rate. The loan was for a term of 20 years. The repayment was to be in monthly instalments.

One of the `other terms and conditions for both loans` was:

`Instalments and other moneys in arrears: 1.5% per month. Late payment interest shall be calculated on the basis of 360 days per year.

The principal security for the loan was a mortgage of the leasehold of the property in favour of Hong Leong. It was contained in and evidenced by a deed of assignment made on 16 June 1995. Then there was a memorandum of mortgage in favour of Hong Leong. In addition there was a guarantee in favour of Hong Leong by one Fok Wing Tin which was also executed on 16 June 1995.

By April 1996 expectations of the plaintiff went awry. The market turned against her. She was unable to service her loan. So by a letter dated 26 April 1996, Hong Leong`s lawyers demanded payment of the sum of $2,195,034.83 as at 22 April 1996 and interest at the rate of $1,095.72 per day until payment. This was calculated at 18% pa. They also demanded possession of the property after the lapse of one month in accordance with s 75 of the Land Titles Act.

On 6 November 1996 Hong Leong`s lawyers sent a letter of demand to the guarantor.

OS 1165/96

In these circumstances on 25 November 1996 the lenders took out OS 1165/96 against the borrower, (that is the plaintiff in this case) and the guarantor. The principal reliefs sought were these :

1 Payment of $2,271,608.86 being the principal amount and interest as at 31 October 1996.

2 Further interest at the rate of $1,075.18 per day from 1 November 1996 until payment.

3 Possession of the property.

The summons was supported by an affidavit of the deputy manager of Hong Leong. The borrower appointed a firm of solicitors to act for them - namely Chan Kum Foo & Associates. The borrower did not file an affidavit. The summons came up for hearing on 20 June 1997. It was adjourned by consent to 24 March 1997 as the parties were negotiating a settlement.

The summons came up for hearing before Assistant Registrar Phang on 24 March 1997. Further adjournment of the application was refused. Then the assistant registrar asked counsel for Hong Leong whether there was any substantive defence to the claim. Counsel replied `No` and added that there was a part-payment. Nothing was said about the default interest rate being penal. Counsel for Hong Leong asserted that the part-payment went to reduce interest first. The assistant registrar then made the following principal orders:

D1 and D2 do pay plaintiff outstanding sums due as at 24 March 1997 under the deed of assignment dated 16 June 1995 and the deed of guarantee dated 16 June 1995 respectively.

Plaintiff shall by 31 July 1997 file and serve a further affidavit exhibiting and verifying a statement of account as at 24 March 1997 pursuant to cl 36 of the memorandum of mortgage registered as MMI/11341G at the Registry of Titles and Deeds.

He also made an order for possession.

Hong Leong filed an affidavit setting out the computation of the amount due as at 24 March 1997. They did so on 31 March 1997. It was apparent from the computation that the computation was done on the basis of 18% pa It was not on a monthly rest basis. It was on a rate of $1,075.21 which reflected an interest rate of 18% pa on $2,180,218.56. Five payments had been made. This was applied to set off against interest. In the result the bottom-line amount due as at 24 March 1997 was $2,332,698.63. The property was then sold by Hong Leong. Even then, according to Hong Leong , part of the debt still remained unpaid.

OS 78/98

Some ten months after assistant registrar made the above order Hong Leong had commenced proceedings in connection with another entirely unconnected loan transaction with another customer. By OS 78/98, Hong Leong claimed against Tan Gin Huay and Sim Sai Quek outstanding loan moneys. They were secured by a mortgage of a food-stall purchased from HDB. The facts appear in a succinct summary form in Hong Leong Finance Ltd v Tan Gin Huay & Anor [1999] 2 SLR 153 . The originating summons came up for hearing before Warren LH Khoo J. The defendants appeared in person. The judge, inter alia, said this in his judgment which has not been reported:

The 18% default interest

In the course of writing this judgment, something which I had been completely unaware of has struck me as I looked more closely at the exhibits to the plaintiffs` affidavit. That is an 18% per annum default interest imposed by the plaintiffs on the outstanding balance and which the plaintiffs had sought to recover. The 18% figure did not appear in the body of the affidavit; only the sum of $56.81 a day was mentioned. The 18% figure appears in the monthly statements exhibited to the affidavit, but I must say I did not notice it at the time of the hearing. Counsel did not refer to it, although he did refer to the monthly statements generally. I assume that he was not aware of it, or, if he was, he did not think anything of it. There is no mention of it in the letter of offer of 26 November 1996. One has to look through the fine print of the memorandum of mortgage to find the provision. That is a document on file with the Registry of Titles and incorporated by reference as part of the mortgage documents executed by the defendants.

The monthly statements show that as from the date of the notice of 4 November 1997, the default interest of 18% was imposed instead of the 5.5% normal interest. This works out to $56.81 a day, or about $1,750 a month. The penalty interest alone far exceeds the original monthly repayment sum of $949.65 (which included part repayment towards principal).

A default interest rate of this magnitude smacks of a penalty. I doubt if it can be justified by the extra cost and time

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