Ho Soo Fong and Another v Standard Chartered Bank and Other Applications

• Judge: Belinda Ang Saw Ean J
• Judgment Date: 18 November 2004
• Neutral Citation: [2004] SGHC 258
• Citation: [2004] SGHC 258
• Defendant Counsel: Quek Mong Hua, Michael Kuah, Gan Theng Chong and Mervyn Foo (Lee and Lee)
• Published date: 19 November 2004
• Plaintiff Counsel: Molly Lim SC and Rokiah Pillay (Wong Tan and Molly Lim LLC)
• Date: 18 November 2004
• Docket Number: Originating Summonses Nos 257-259
• Court: High Court (Singapore)
• Subject Matter: Defendant bank failing to remove caveat despite repeated requests to do so,Application by plaintiffs for inquiry as to damages and pecuniary loss recoverable,Wrongful lodgment,Caveats,Lending and security,Equitable mortgages,Section 128 Land Titles Act (Cap 157, 2004 Rev Ed),Banking,Whether caveat lodged with reasonable cause,Whether court should grant application,Whether defendant bank having caveatable interest in property,Intention of parties objectively ascertained,Land,Loan facility agreement,Compensation payable,Whether equitable mortgage over property in favour of defendant bank created upon acceptance of facility letter by plaintiffs

18 November 2004

Belinda Ang Saw Ean J:

1 The three applications before me were each made by originating summons and brought against the Standard Chartered Bank (“the bank”). The plaintiffs in Originating Summonses Nos 257 of 2004 and 258 of 2004 are Ho Soo Fong (“HSF”) and Ho Soo Kheng. They are brothers and the joint owners of two properties known as 77 Syed Alwi Road, Singapore 207656 and 150 Braddell Road, Singapore 359933. They are also directors of Ho Pak Kim Realty Co Pte Ltd. The plaintiffs in the third originating summons, No 259 of 2004, are HSF and his wife, Lin Siew Khim. Both are the joint owners of the property known as 26F Poh Huat Road, Singapore 545074.

2 I heard all three applications together. The proceedings overlapped in that the issues raised were identical and the facts in evidence relating thereto were common. Apart from the type and quantum of the respective loans, rate of interest and the properties to be secured, the relevant terms of the three facility letters under review were essentially the same. In addition, the facility letters incorporated by reference the bank’s Standard Terms and Conditions Governing Mortgage Related Banking Facilities no 738-09/99 (“the STC”).

3 By three separate loan facility letters, which were dated 11 May 2001, 1 August 2001, and 24 August 2001, the bank offered to make available three separate loans to the plaintiffs. The respective plaintiffs accepted the offers on 29 May 2001, 3 August 2001 and 1 September 2001 respectively.

4 For convenience, I shall refer to the facility letter dated 1 August 2001 for some of the relevant terms, which are common to all three loans. The facility of 1 August 2001 was to be used to assist the plaintiffs to re-finance the indebtedness (ie take over the overdraft) owed by the two brothers to the Oversea-Chinese Banking Corporation: see cl 1 of the facility letter.

5 By cl 2, the plaintiffs were to deliver a first legal (all moneys) mortgage on 77 Syed Alwi Road, Singapore. Under cl 6(iii), prior to disbursement of the loans, the various actions commenced in the subordinate courts against Ho Pak Kim Realty Co Pte Ltd had to be fully settled. That was the first of the conditions precedent to draw down the facility.

6 By cl 7(i) of the facility letter, the bank agreed to bear legal costs relating to the mortgage of the property. There would be no contribution by the bank towards legal costs if the facility were, for whatever reason, aborted. In the event, the plaintiffs were required to pay all abortive legal costs and expenses. Additionally, by cl 8.1 of the STC, the plaintiffs were required to pay a cancellation fee of 1% of the loan cancelled by them after acceptance of the facility letter. By cl 17.1 of the STC, the “Events of Default” included:

(a) if the Borrower fails or omits to perform and comply with any of the terms and conditions in any of the Security Document;

(b) if the Borrower defaults in the payment to the Bank of any moneys due on the banking facilities or part thereof or any interests accrued thereon or any other moneys payable under the Security Document or otherwise; …

7 Clause 17.2 of the STC provided:

Upon the occurrence of any of said Events of Default and/or any other events deemed as an event of default by the Bank on the part of the Borrower in any of the Security Document:-

….

(c) the Bank shall in addition to the rights set out herein, be entitled (as equitable chargee) to attach the liabilities to any of the Borrower’s the Mortgagor’s … property or security (whether real or personal) and to lodge a caveat against any real property that may now or hereafter be registered against the Borrower’s the Mortgagor’s … name whether singly or jointly.

8 None of the three loans were disbursed even after a year. On the bank’s part, the reason for that was because the plaintiffs had not settled all the legal actions referred to in the facility letters. The plaintiffs, however, maintained that they had complied with the bank’s condition. Yet, the bank found their efforts wanting. As a result, the plaintiffs, who were by then frustrated and disgruntled with the bank, wrote to the bank on 7 October 2002 to terminate the banking facilities. Nothing turned on the rival views as to whether or not the condition to draw down was complied with. With the termination of the banking facilities, the bank claimed from the plaintiffs two different sets of fees. The first was for a total sum of $21,380.00 being the 1% cancellation fees. The second was for abortive legal fees totalling $4,476.05. The plaintiffs denied that they were liable to the bank for the fees as claimed. Between 21 October 2001 and early 2004, the plaintiffs repeatedly requested the bank to remove the caveats lodged, but the bank steadfastly refused to do so. The bank was told that the presence of the caveats prevented the plaintiffs from successfully securing alternative financing from other financial institutions. The bank maintained that it was compelled to leave the caveats on the land register to protect its interest in the properties pending payment of the cancellation and legal fees.

9 On 27 February 2004, the plaintiffs issued these proceedings. On 6 July 2004, the bank’s lawyers notified their counterparts that the caveats were withdrawn on 30 June 2004. However, the withdrawal was without prejudice to the bank’s position that it was right in the first place to lodge the caveats. By the time the applications came on for hearing before me, it was no longer necessary for the plaintiffs to seek an order that the caveats be removed. Pursuant to s 128 of the Land Titles Act (Cap 157, 2004 Rev Ed) (“the Act”), the plaintiffs duly sought an order that there be an inquiry as to the damages suffered by them for the period 21 October 2002 to 30 June 2004. It was still necessary to determine whether the caveats lodged against the three properties described above were wrongful or without reasonable cause as the bank at all material times had no caveatable interest in the three properties for cancellation and legal fees. It was argued that neither cancellation fee nor abortive legal fee was due and payable at the time of lodgment of the caveats, namely CV/27166J on 29 May 2001, CV/42696J on 14 September 2001 and CV/053540J on 10 December 2001. Before 7 October 2002, the plaintiffs did not object to the caveats as they anticipated disbursements of the loans. That acquiescence would have a bearing on the pecuniary loss recoverable, but not the specific argument relating to the bank’s caveatable interest. The pecuniary loss the plaintiffs sought was confined to the period of the bank’s refusal or failure to remove the caveats. It was common ground that by s 127(1) of the Act, the burden was on the bank as caveator to show why the bank was right not to have withdrawn the caveats between 21 October 2002 and 30 June 2004.

10 According to the first affidavit of Ho Yee Foong, the product manager of the bank, the interest in land claimed by the bank stemmed from the plaintiffs’ failure to pay the cancellation and legal fees as that event of default triggered the provisions of cl 17.2(c) of the STC. The same position was maintained in his second affidavit where he again asserted that the defendant had a caveatable interest under cl 17 of the STC by reason of the plaintiffs’ failure to pay the cancellation fees and legal fees. Notably, nothing was said in his affidavits about the bank’s intention to immediately obtain an equitable mortgage over the respective properties upon the plaintiffs’ acceptance of the facility letters. I shall come back to this point later on.

11 Ms Molly Lim SC for the plaintiffs submitted that the claim made by the bank to a caveatable interest in the respective properties by virtue of cl 17 of the STC was baseless. She referred me to the decision of the Court of Appeal in The Asiatic Enterprises (Pte) Ltd v United Overseas Bank Ltd [2000] 1 SLR 300 (“The Asiatic Enterprises”). She argued that on the authority of that case, neither the bank’s facility letters nor cl 17.2(c) of the STC conferred on the bank any caveatable interest in the properties. The plaintiffs’ acceptance of the bank’s offer did not immediately create or give to the bank any claim to an interest in the properties. If anything, it only had an in personam claim for moneys for cancellation fees and legal fees against the plaintiffs but not against the properties. Thus, the bank was not entitled to lodge the caveats or to have the caveats remain on the land register. Besides, cl 17.2(c) of the STC was triggered after the occurrence of the event of default. However, the caveats were lodged prior to the occurrence of the event of default. At any rate, the wording of cl 17.2(c) did not create or confer on the bank any interest in the properties capable of being protected by a caveat.

12 The facts of The Asiatic Enterprises are that the appellant failed to pay United Overseas Bank (“UOB”) some sums due under several trust receipts. By a letter dated 16 June 1998, UOB informed the appellant that its failure to pay the sums due constituted an event of default under cl 10 of UOB’s standard terms and requested payment of outstanding sums due under the banking facility. When the appellant again failed to make payment, UOB lodged a caveat against each of the appellant’s properties claiming “an estate or interest” in the properties as an “equitable chargee” by virtue of the facility letter. On 15 July 1998, UOB duly registered a charge under s 131(1) of the Companies Act (Cap 50, 1994 Rev Ed). On 29 July 1998, UOB applied to court for an order that its equitable charge over the properties be enforced by sale.

13 The appellate court in The Asiatic Enterprises considered the facility letter issued by the UOB and, in particular, cl 10 of UOB’s standard terms. Counsel for the defendant in the present case, Mr Quek Mong Hua, rightly conceded that the...