DBS Bank Ltd v Davis, Colin Niel and others

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 15 October 2019
• Neutral Citation: [2019] SGHC 245
• Plaintiff Counsel: Sasha Koh Yeong Hung (Yeo-Leong & Peh LLC)
• Docket Number: Originating Summons No 985 of 2019
• Date: 15 October 2019
• Hearing Date: 26 September 2019,25 September 2019
• Subject Matter: Caveats,Remedies under uncompleted contract,Land,Sale of land,Remedies of caveatee
• Published date: 18 October 2019
• Defendant Counsel: Zhong Zewei (Insolvency & Public Trustee's Office),Perry Elizabeth Wong Zhan Yan (Tan Rajah & Cheah),Zheng Sicong (Inland Revenue Authority of Singapore),Thomas Ng Hoe Lun (Circular Law Chambers LLP)
• Court: High Court (Singapore)
• Citation: [2019] SGHC 245
• Year: 2019

Choo Han Teck J:

Jannie Chan Siew Lee (“Chan”) and her daughter, Tay May Yi Sabrina (“Tay”), owned an apartment unit at 33 Keppel Bay View (“the Property”) as tenants-in-common. DBS Bank Ltd (“DBS”) was the mortgagee of the Property. When Chan and Tay defaulted on mortgage payments, DBS obtained possession of the Property by a court order on 4 May 2018 and sold the Property on 13 May 2019 for $3.85m. The balance sale proceeds was $420,943.04 and DBS filed the present interpleader application to determine the respective claims of the respondents to the balance remaining.

In the ordinary course of events, the sale proceeds would be released to the owners, Chan and Tay, but on 17 September 2018, before the mortgagee sale, Chan and Tay had granted an Option to Purchase (“the Option”) to Davis Colin Niel and Kim Ji Soo (“the Purchasers”) to purchase the Property for $3.755m. The Purchasers exercised the Option on 28 September 2018 and lodged a caveat against the Property on 8 October 2018 as “purchaser”. Completion was scheduled for 23 November 2018.

On 2 November 2018, a bankruptcy application was filed by Chan’s other creditors against her. As a result, Chan and Tay failed to complete the sale, and on 15 January 2019, the Purchasers commenced legal proceedings against them for return of the deposit and damages for breach of the Option. They obtained default judgment against Tay on 11 March 2019 and against Chan on 27 March 2019. Chan and Tay were ordered to pay the Purchasers $187,750 as a refund of the deposit, $18,007.53 as damages for breach of the Option, and $4,242.80 as costs. As of 27 March 2019, the total judgment debt including interest was $212,163.66.

A further complication arose when Chan was declared bankrupt on 27 May 2019, two weeks after the mortgagee sale. Chan’s property then vested in the Official Assignee (“OA”) pursuant to s 76(1)(a) of the Bankruptcy Act (Cap 20, 2009 Rev Ed), who appears as Chan’s trustee in bankruptcy in the present proceedings.

Parties accepted that Tay is entitled to half of the sale proceeds, or $210,471.52, as a co-owner of the Property and so I ordered the release of her share to the Purchasers in partial satisfaction of the judgment debt. Chan’s half share remains in dispute (“the Disputed Sum”).

The Comptroller of Income Tax (“the Comptroller”) initially submitted that it was entitled to part of the Disputed Sum as Chan owes $141,946.88 in income tax. The Comptroller later stated that it would defer to the OA’s determination, and filed two proofs of debt with the OA.

The remaining issue is the competing claims of the OA and the Purchasers. The OA submits that the Disputed Sum forms part of Chan’s estate in bankruptcy and should be paid to the OA for the benefit of all of Chan’s creditors. It submits that the Purchasers’ claim is a mere judgment debt that is provable in bankruptcy, and the Purchasers must file proofs of debt like all other creditors.

On the other hand, counsel for the Purchasers, Mr Thomas Ng, submits that they have an equitable lien over the balance sale proceeds and that their claim should be paid in priority to all other creditors. Their initial claim was for $187,750 as the deposit for the Property, $18,007.53 as damages for breach of the Option, $4,242.80 as costs, $2,163.33 as interest on the judgment debt, $95,000 as the appreciation in the price of the Property, and continuing interest. After the release of Tay’s half share, their remaining claim to the Disputed Sum is for $96,692.14 and continuing interest.

Mr Ng relies on s 74(1) of the Land Titles Act (Cap 157, 2004 Rev Ed), which states:

The money received by a mortgagee who has exercised his power of sale, after discharge of prior encumbrances to which the sale is not made subject (if any), or after payment into court under the Conveyancing and Law of Property Act (Cap. 61) of a sum to meet any prior encumbrances, shall be held by him on trust to be applied — (a) firstly, in payment of all costs and expenses properly incurred as incidental to the sale or any attempted sale, or otherwise; (b) secondly, in discharge of the mortgage money, interest and costs, other money and liability (if any) secured by the mortgage; and (c) ...