Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee

• Jurisdiction: Singapore
• Judgment Date: 22 May 1997
• Date: 22 May 1997
• Docket Number: Civil Appeal No 78 of 1996
• Court: Court of Appeal (Singapore)

Citicorp Investment Bank (Singapore) Ltd

Plaintiff

and

Wee Ah Kee

Defendant

[1997] SGCA 64

Yong Pung How CJ

,

M Karthigesu JA

and

L P Thean JA

Civil Appeal No 78 of 1996

Court of Appeal

Banking–Lending and security–Loan and security agreement–Bank having charge over shares bought by borrower with loan–Bank having option to buy part of shares–Whether option a clog on borrower's equity of redemption–Whether option a valid collateral bargain–Borrower fully discharging loan–Bank retaining part of shares pursuant to charge–Whether bank can do so–Whether bank to return these shares to borrower–Evidence–Admissibility of evidence–Parol evidence rule–Disagreement between parties as to construction of written agreement–Bank calling for admission of extrinsic evidence to aid interpretation–Situations where extrinsic evidence admissible and inadmissible–Scope of application of s 94 (f) Evidence Act (Cap 97, 1990 Rev Ed)–Whether extrinsic evidence admissible to aid interpretation–Section 94 (f) Evidence Act (Cap 97, 1990 Rev Ed)

The appellant bank agreed to advance to the respondent Wee some moneys to buy shares in a company. Under the loan agreement, the bank held a charge over a certain number of the company's shares held by Wee, to cover any indebtedness that Wee might owe it, as well as an option to buy a certain number of shares which Wee bought under the loan. The loan agreement was later amended by a letter (“the letter agreement”), which stated that the call option “shall be terminated subject to” Wee paying a sum of money to the bank and fully discharging the loan.

Wee repaid the loan in full, but did not pay the sum of money under the letter agreement. The option lapsed without the bank exercising it. The bank however held on to some of the shares under the charge while returning the remainder.

Wee applied for summary judgment for the return of the shares. The assistant registrar refused the application and gave the bank leave to defend. At the hearing, the bank contended that, by the letter agreement, in consideration for the option being terminated immediately, Wee promised to pay the additional sum of money. As the money was never paid, the charge was still effective and the bank was entitled to retain a number of shares. Wee submitted that the option would be terminated subject to the two conditions, and, as he had not paid the additional sum, the charge was still effective and the bank could exercise it if it so wished. However, as he had discharged the loan, there was no indebtedness which entitled the bank to retain the shares. Wee further argued that the option was void as it was a clog on the equity of redemption. The judicial commissioner held the option was void as it was a clog on the equity of redemption, and declared that the bank could not retain the shares (see [1996] 3 SLR (R) 623). On the bank's appeal, the issues were whether: (a) the option was a clog on the equity of redemption; and (b) extrinsic evidence could be adduced to ascertain the meaning of the letter agreement.

Held, dismissing the appeal with costs:

(1) The option was a preliminary and separable condition of the loan and security agreement and was a valid collateral bargain. There was also no unfairness, oppression or unconscionability that justified equitable intervention. Wee was an experienced businessman who received advice on the loan agreement from competent lawyers. The option granted to the bank was therefore valid, not being a clog on the equity of redemption: at [40], [41] and [43].

(2) While extrinsic evidence of surrounding circumstances was admissible in appropriate cases to aid the interpretation of a document, the application of s 94 (f) of the Evidence Act (Cap 97, 1990 Rev Ed) was limited to situations where the proposed alternative meaning was one which the words of the document could properly bear. Where the words of a document had a clear and fixed meaning, extrinsic evidence to show a contrary meaning was inadmissible. In the present case, the language of the letter agreement was plain and unambiguous. There was no need to resort to the surrounding circumstances or extrinsic evidence to ascertain its meaning: at [62], [63], [67] and [68].

(3) As the option had lapsed without the bank exercising it, and Wee had fully discharged the loan, the bank was not entitled to retain the remaining shares: at [80], [86] and [87].

Bank of New Zealand v Simpson [1900] AC 182 (folld)

Chew Tong Shing v Hotel Royal Ltd [1992] 2 SLR (R) 320; [1992] 2 SLR 787 (distd)

G & C Kreglinger v New Patagonia Meat and Cold Storage Company Limited [1914] AC 25 (folld)

Jennings v Ward (1705) 2 Vern 521; 23 ER 935 (not folld)

Knightsbridge Estates Trust Limited v Byrne [1940] AC 613 (refd)

L Schuler AG v Wickham Machine Tool Sales Ltd [1974] AC 235 (folld)

Mt Elizabeth Hospital Ltd v Allan Ng Clinic for Women [1994] 1 SLR (R) 821; [1994] 3 SLR 639 (folld)

North Eastern Railway Company, The v Lord Hastings [1900] AC 260 (folld)

Petrol Filling Station, Vauxhall Bridge Road, London, Re;Rosemex Service Station Ltd v Shell Mex and BP Ltd (1968) 20 P & CR 1 (refd)

Prenn v Simmonds [1971] 1 WLR 1381 (folld)

Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (folld)

Samuel v Jarrah Timber and Wood Paving Corporation Limited [1904] AC 323 (not folld)

Shore v Wilson (1842) 9 Cl & Fin 355; 8 ER 450 (folld)

Vernon v Bethell (1762) 2 Eden 110; 28 ER 838 (refd)

Wong Kai Chung v Automobile Association of Singapore [1993] 2 SLR (R) 71; [1993] 2 SLR 577 (folld)

Evidence Act (Cap 97, 1990 Rev Ed) s 94 (f) (consd);s 95

Evidence Act (India) s 92

Tan Cheng Han and Kareen Looi (Drew & Napier) for the appellant

Jason Lim Chen Thor and Eric Siow (Winston Chen & Partners) for the respondent.

Yong Pung How CJ

(delivering the grounds of judgment of the court):

Background

1 This was an appeal concerning the retention of shares by the appellant (“the bank”). After hearing the appeal on 22 April 1997, we dismissed it. We now give our reasons.

2 This case arose out of a loan agreement dated 21 July 1993 between the bank and the respondent. Under the agreement, the bank agreed to advance to the respondent up to an aggregate principal sum of US$4,250,000 for the purchase of shares in a Hong Kong company called Crownhampton International Ltd (“CIL”).

3 However, there was a condition precedent before the respondent could make his first request for an advance. The bank must first confirm to the respondent that it had received, inter alia,the following documents duly executed by the respondent:

1. (a) acharge which shall take effect as a first legal mortgage over the 11,900,000 CIL shares which the respondent already held and all other stocks, shares, property, time deposits and other securities beneficially owned by the respondent which would then or thereafter at any time during the continuance of the security created by the charge be deposited with the respondent; and

2. (b) an option whereby the respondent would grant irrevocably to the bank a call option to purchase, during the option period, from the respondent 30% of the total number of shares in CIL bought by the respondent under the loan at the specified price.

4 These documents were executed by the respondent on 22 July 1993. On 28 July 1993, the bank confirmed the fulfilment of the condition precedent.

5 The respondent proceeded to purchase 33,920,000 CIL shares under an advance of US$4,104,722.07. Together with the 11,900,000 CIL shares which the respondent already held, all these shares were deposited with and registered in the name of Citibank NA (Nominees) Ltd Hong Kong, a nominee company of the bank.

6 CIL subsequently changed its name to Sum Cheong International Ltd (“SCIL”), and the respondent carried out a share restructuring. The total amount of shares secured to the bank under the charge became 11,455,000 consolidated shares at HK$2 each.

7 On 15 December 1995, the respondent repaid the bank a total of US$4,313,411.07 in full discharge of the advances made under the loan agreement, including interest down to the date of repayment. The option was never exercised by the bank.

8 Notwithstanding this, the bank delivered only 8,480,000 consolidated shares to the respondent on 12 January 1996 and held on to the remaining 2,975,000 consolidated shares.

9 Thereafter, the respondent applied for summary judgment before the assistant registrar for the return of these consolidated shares. The application was refused and the bank was granted unconditional leave to defend.

10 At the hearing below, the learned judicial commissioner set aside the assistant registrar's decision. He proceeded to enter judgment in favour of the respondent and declared that the bank was not entitled to retain possession of the shares or any part thereof. The bank appealed.

The bank's case

11 The bank relied on the affidavit of one Soon Tit Koon (“Soon”) who was the managing director for the bank. The thrust of its case centred on what Soon claimed at para 7 of his affidavit dated 11 March 1996:

Shortly before 6 December 1994, it was agreed further between the plaintiff [the respondent] and the defendants [the bank] that in consideration of the defendants allowing the plaintiff an extension of time to 15 December 1995 to repay the advances made under the loan agreement, and the defendants agreeing to terminate the call option granted under the option agreement, the plaintiff would pay the defendants the sum of US$800,000.00 on or before 15 December 1995. This agreement is evidenced by, or contained in, a letter wrongly dated 6 November 1994 from the defendants to the plaintiff and signed by the plaintiff on 12 December 1994. A copy of the letter is exhibited as 'WAK-9' in the plaintiff's affidavit.

12 There was no dispute that the respondent had repaid the advances under the loan agreement, but he never paid the...