Citibank NA v Lee Hooi Lian and Another

• Jurisdiction: Singapore
• Judgment Date: 15 April 1999
• Date: 15 April 1999
• Docket Number: Originating Summons No 1426 of
• Court: High Court (Singapore)

Citibank NA

Plaintiff

and

Lee Hooi Lian and another

Defendant

[1999] SGHC 92

Goh Joon Seng J

Originating Summons No 1426 of 1998

High Court

Credit and Security–Mortgage of real property–Mortgage covenants–Whether breach of conditions under loan facility–Whether bank entitled to terminate facility–Credit and Security–Mortgage of real property–Mortgagee's power of sale–Whether breach of mortgagee's duty to obtain best price–Credit and Security–Mortgage of real property–Mortgagor's rights–Set-off–Whether mortgagor could set off counterclaim

The plaintiff bank granted the defendant a loan facility secured by a mortgage over property. The facility included the following conditions: (a) interest to be paid monthly; (b) the security to be topped up or the outstanding paid down if the total principal and interest outstanding exceeded 80% of the value of the property; and (c) the mortgaged property not to be leased out without the bank's consent.

The plaintiff terminated the facility on account of the defendant's breach of these conditions and commenced these proceedings to claim vacant possession and payment of the principal and interest owing under the facility. Vacant possession was obtained from the defendant's tenant and the mortgaged property was put up for sale by auction. There was no bid at the opening price and the property was withdrawn from the auction. The bank eventually sold the property by private treaty at a price above the forced sale value as advised by its valuer. At the hearing before the assistant registrar, the defendants denied that the bank was entitled to judgment on its claims and contended that she had a counterclaim arising from the bank's sale of the property at an undervalue. The assistant registrar gave judgment in the bank's favour and the defendant appealed.

Held, dismissing the appeal:

(1) The defendant was in breach of all the three conditions and the bank was entitled to terminate the facility: at [43] to [48].

(2) The bank had not breached its duty of obtaining the best price reasonably obtainable at the time as the sale price was above the forced sale value as advised by its valuer: at [52].

(3) Even if the defendant had a valid counterclaim it could not be set off against the plaintiff's claim in view of the express prohibitions under the security documents: at [54].

Bangkok Bank Ltd v Cheng Lip Kwong [1989] 2 SLR (R) 660; [1989] SLR 1154 (folld)

Coca Cola Financial Corp v Finsat International [1998] QB 43; [1996] 2 Lloyd's Rep 274 (folld)

Good Property Land Development Pte Ltd v Société Générale [1989] 1 SLR (R) 97; [1989] SLR 229 (refd)

Hongkong and Shanghai Banking Corporation v Kloeckner & Co AG [1990] 2 QB 514 (folld)

Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) s 25

Land Titles Act (Cap 157, 1994 Rev Ed) s 75 (2)

Supreme Court Act 1981 (c 54) (UK) s 49 (2)

Michael Khoo SC and Peter Ng Lee Tong (Peter Ng & Co) for the appellant

Joyce Hee (Yeo-Leong & Peh) for the respondents.

Goh Joon Seng J

1 This is an appeal by the first defendant (“the defendant”) against the order of the assistant registrar that the defendant pay the plaintiff:

(a) the sum of $4,364,122.23 inclusive of interest as at 8 October 1998 and further interest thereon at the rate of 13.75% per annum from 8 October 1998 to date of payment;

(b) all rents and mesne profits owing by the second defendant (“Seagate”) as tenant of 46 Namly Crescent, Singapore (“the property”) from 1 October 1998 to date of the order; and

(c) costs on an indemnity basis fixed at $7,000.

2 Idismissed the appeal with costs and refused an application to convert these proceedings to a writ. I also dismissed the defendant's application for stay of execution pending trial of the counterclaim. I now give my reasons.

The facts

3 The plaintiff is a company incorporated in the United States of America and carries on banking business in Singapore.

4 The defendant was a customer of the plaintiff.

5 At the request of the defendant, the plaintiff granted her a secured short-term demand loan facility (“the facility”). The terms of the facility were contained in a letter of 6 December 1996 (“the facility letter”). The facility was to be secured by a mortgage of the property. The property at the time was let out to Seagate.

The facility letter

6 The amount of the facility was $4,200,000 or 70% of the current market value of the property as determined by a panel of valuers approved by the plaintiff.

7 Other material terms of the facility letter were:

(a) Interest rate was to be 2% per annum over the plaintiff's cost of funds.

(b) Interest was “to be paid at the end of each loan period selected” by the defendant. At the material time, the defendant had elected to pay interest monthly.

(c) By condition 1:

If the total principal and interest outstanding and owing to the [plaintiff] under the facility exceeds 80% of the aggregate value of the [property] … the [defendant] shall within 14 days of being given notice of the same either:

1. (i) pay down the outstanding; or

2. (ii) provide additional security acceptable to the [plaintiff] so as to restore the ratio of the loan to security value to maximum 70%.

(d) By condition 2, the plaintiff reserved “the right to request for periodic valuation of the property, the costs of which will be borne by the [defendant]”.

(e) By condition 8, notwithstanding anything else contained in the facility letter, the plaintiff:

… may at any time and with notice cancel any part or the whole of the facility and demand immediate repayment of all amounts payable under the facility. Upon the [plaintiff's] written notice to [the defendant] declaring that the facility is cancelled in full or in part and demand for payment, the facility shall be cancelled to that extent and all sums (whether principal, interest, costs, expense or otherwise), payable thereunder shall immediately become due and payable.

(f) In addition and without prejudice to the rights under condition 8, the plaintiff under the events of default clause had the right “to cancel the facility at any time without notice and demand immediate repayment of all outstanding principal amounts and accrued interest” if inter alia:

1. (i) the [the defendant] fails to pay any amount due in respect of the facility on its due date or on demand as the case may be; or

2. (ii) the [defendant] is in breach of the terms or conditions of [the facility letter] and/or any of the security or other documents; or

…

1. (v) if there has been, [in the plaintiff's opinion], a material adverse change in the financial condition … of the [defendant] since the first disbursement under the facility …

(g) By the default interest clause:

Any amount whether of interest or principal which is not paid on due date or on demand as the case may be shall carry interest at the rate of six per cent per annum above the [plaintiff's] prime rate from date of default until payment.

8 Pursuant to the terms of the facility letter, and by way of security for the facility, the defendant executed a mortgage of the property in favour of the plaintiff.

The mortgage

(a) By cl 1 (e), the defendant covenanted with the plaintiff to perform, observe and be bound by the terms and conditions of the facility letter and the plaintiff's memorandum of mortgage filed with the Registry of Titles and numbered MM/I017615K (“the memorandum”).

(b) By cl 9 (b), in the event of any inconsistency between the terms and conditions contained in the mortgage and those contained in the facility letter, the terms and conditions of the facility letter should prevail.

The memorandum

9 By cl 2.14, the defendant agreed not to let, lease or otherwise part with possession of the property without the prior written consent of the plaintiff, and if such consent was given all rentals received would be paid into the defendant's account with the plaintiff.

10 By cl 4.1, if at any time after the moneys secured by the mortgage became payable under the mortgage, the plaintiff would be entitled forthwith to exercise all or any of the statutory powers of sale by public auction or private treaty by giving 14 days' notice in writing without any of the restrictions imposed by s 25 of the Conveyancing and Law of Property Act (Cap 61).

11 By cl 5.9:

The Bank may from time to time review alter or cancel any banking facilities granted to the Borrower and/or Mortgagor. Nothing contained in the Mortgage and/or collateral security shall be deemed or render it obligatory upon the Bank at law or in equity to extend or continue to extend any advances, loans, credit or other banking facilities …

12 By cl 5.18:

… a statement signed by an Authorised Officer of the [plaintiff] stating:

1. (a) amount of the moneys for the time being due or owing to the [plaintiff] or any part thereof; and/or

2. (b) the amount of interest due and payable under the Mortgage, shall in the absence of manifest error be conclusive evidence as to its contents without the [plaintiff] being required to produce any books of account or other records or any copies of any of them to the [defendant] or any other person. [“the conclusive evidence clause”]

13 By 30 June 1998, the amount outstanding under the facility was $4,262,285.59 whereof $4,200,000 being the principal and $62,283.59 being arrears of interest.

14 On 9 July 1998, the plaintiff through its solicitors, wrote to the defendant:

9 July 1998

Lee Hooi Lian BY HAND & AR REGISTERED

119A Whitley Road

Singapore 297812

Dear Madam

Mortgage of 46 Namly Crescent Singapore 267561

We act for Citibank NA.

We are instructed that as at 30 June 1998, there is due and owing from you to our clients the sum of S$62,283.59 being the arrears of interest payments.

We are further instructed that the total principal and interest outstanding and...