Hong Leong Singapore Finance Ltd v United Overseas Bank Ltd

CourtHigh Court (Singapore)
JudgeSundaresh Menon JC
Judgment Date23 November 2006
Neutral Citation[2006] SGHC 205
Citation[2006] SGHC 205
SubjectEstoppel,Section 76 Land Titles Act (Cap 157, 2004 Rev Ed),Applicable principles,Development mortgaged by developer to defendant bank,Whether defendant bank estopped from denying plaintiff contractor's interest in development,Defendant bank foreclosing on mortgage and denying plaintiff contractor's claim to unit in development,Developer allegedly promising unit in development to plaintiff contractor in return for plaintiff continuing work on development,Proprietary estoppel,Equity
Defendant CounselThio Shen Yi, Karen Teo and Angela Thiang (TSMP Law Corporation)
Plaintiff CounselT P B Menon, Tan Soo Kiang and Daniel Tan (Wee Swee Teow & Co),Harish Kumar and Adrian Tan (Engelin Teh Practice LLC)
Publication Date24 November 2006

23 November 2006

Judgment reserved.

Sundaresh Menon JC:

1 The economic crisis that affected a number of Asian countries in the late 1990s claimed its share of casualties in Singapore. This case concerns one of those casualties. The Ban Hin Leong Group (“the BHL Group”) was a well-regarded real estate developer with a number of projects under development at that time. One of these was a substantial 37-storey commercial development known as Springleaf Tower. The developer, a joint-venture entity in which the BHL Group had an interest (see [5] below), ran into financial straits amidst several uncompleted projects including this one. An uncompleted building does not generate revenue. Moreover, property prices were falling. The developer’s banker was exposed. So too was the second plaintiff in Originating Summons No 20 of 2003 (“OS 20/2003”), Yongnam Engineering & Construction Pte Ltd (“YEC”) who was one of the contractors for Springleaf Tower and who had substantial sums owed to it at that time. Despite this, the building was eventually completed. The contractor claims it went ahead with its work and effectively financed a part of the cost to completion because it was led by the bank to believe it would get a floor of the completed development as consideration for completing the work. The bank however foreclosed on its mortgage and denied the contractor’s claim. The contest between the contractor and the bank has given rise to these proceedings. There was no concluded contract between them. The question is whether the contractor nonetheless can get an equitable remedy by way of estoppel which after all is founded upon the conscience rather than upon a consensus.

The parties, the players and the property

2 It is useful to begin by identifying the parties. There were two related proceedings before me. The defendant in both sets is the United Overseas Bank Ltd. I refer to it as “the defendant” or “the bank”. In fact, the developer’s banker at the time of the transaction was the Overseas Union Bank Ltd but that was taken over by the defendant and the proceedings were commenced and continued against it. Where I refer to the bank, it includes the predecessor institution where appropriate. The bank was represented by Mr Thio Shen Yi.

3 There are two plaintiffs in OS 20/2003. They are Yongnam Development Pte Ltd (“YDP”) and its related company YEC. As I have noted, YEC was in fact the company engaged as the contractor for a part of the works. For convenience, where I refer to “Yongnam” I refer to the Yongnam group generally without regard to any particular corporate entity. YEC and YDP were jointly represented by Mr Harish Kumar.

4 The plaintiff in Originating Summons No 10 of 2003 (“OS 10/2003”) is Hong Leong Singapore Finance Ltd. I refer to it as “Hong Leong”. When YEC proceeded with the works after it became apparent that the developer was in no position to pay, YEC needed financing and it eventually obtained this from Hong Leong who took a security interest in the floor that Yongnam thought it would acquire for carrying on the works. Hong Leong was represented by Mr T P B Menon and Mr Tan Soo Kiang. Although it was separately represented and did make some submissions, it was common ground that Hong Leong’s rights were entirely dependent upon YEC and/or YDP succeeding.

5 Aside from the parties to these proceedings, there were some other players whom it is useful to identify. Springleaves Tower Ltd whom I refer to as “STL” is a company that is a part of the BHL Group. STL entered into a joint venture with a company now known as Somerset Development Pte Ltd but then known as Liang Court Development Pte Ltd and I refer to the latter as “Liang Court”. Springleaf Tower was developed as a joint venture of STL and Liang Court.

6 The main contractor for the development was an entity known as Tuan Kai Construction Pte Ltd whom I refer to as “Tuan Kai”. Tuan Kai also was a company within the BHL Group.

7 Tuan Kai appointed YEC as the sub-contractor for the design, fabrication and installation, among other things, of some piles and struts and for the execution of the structural steelwork as a whole.

8 YEC was represented, at the time the construction works were being done, by a law firm known as Yeo Wee Kiong & Partners whom I refer to as “YWKP”. STL was represented at the material time by a law firm known as May Oh & Wee whom I refer to as “MOW”. The bank was represented then, as now, by Thio Su Mien & Partners whom I refer to as “TSMP”. The latter firm has since been corporatised.

9 At various times, several individuals were involved and some of them gave evidence before me.

10 Those giving evidence included the ones I now mention. Mr Seow Soon Yong, whom I refer to as “Mr Seow” was the managing director of YEC. His counterpart at STL was Mr Richard Lim, whom I refer to as “Mr Lim”. The principal officers from the bank who were involved in this matter were Mr Sam Tan (“Mr Tan”) and Mr Jimmy Lek (“Mr Lek”).

11 The dispute centred on the rights of the parties to the 23rd floor of Springleaf Tower. I refer to this as “the Unit”. YEC, YDP and Hong Leong lodged caveats against the Unit. The bank on its part sought to register the foreclosure it had obtained. The plaintiffs contend that the foreclosure was bad in law. YEC further seek an order that the Unit be released and discharged from the mortgage registered by the bank.

The background

12 The development of Springleaf Tower had been jointly undertaken by STL and Liang Court. The land on which Springleaf Tower was to be built was owned by these two companies as tenants-in-common in the proportion of 70:30 in favour of STL. Under the terms of a document known as the “Supplemental Joint Development Agreement”, the individual strata units in the project were to be allocated between the parties and as it turned out the 23rd floor of the building was allocated to STL.

13 The developer obtained financing for the project from the bank which held a paramount mortgage over the development, and it appointed Tuan Kai as the main contractor. Tuan Kai in turn entered into two separate sub-contracts with YEC to do certain structural works including the structural steelwork. The structural steelwork contract was entered into in June 1997 and it was for a contract sum of $12.1m. The works were to be completed by 31 July 1998.

14 YEC started work under these sub-contracts sometime in September 1997 and submitted its first progress claim for payment of a sum of about $2m in November that year. Payment was not immediately forthcoming from Tuan Kai ostensibly because the financing arrangements for the project had not been completed. By late March 1998, YEC threatened to stop work if payment was not made. There followed exchanges between YEC and Tuan Kai, with the former doing its best to coax, cajole or otherwise coerce the latter to meet its payment obligations. A guarantee agreement was eventually entered into with STL guaranteeing payment to YEC.

15 Payments were made but not in accordance with the contractual requirements. Nonetheless, YEC did carry on with its works. By May 1998, the first progress payment had still not been paid in full and the second progress payment for a sum of around $2.2m certified by the architect was overdue. By October 1998, YEC appeared to have reached the limit of its ability to shoulder the burden of working without a regular and predictable flow of cash. It issued an ultimatum to the effect that unless arrangements were made to assure regular payments, it would stop work. This led to further discussions. These initially involved YEC, Tuan Kai and STL.

16 During the course of these discussions, the idea was floated that, given the cash flow pressure faced by the BHL Group, YEC might consider taking a floor in the completed development as payment in kind for the unpaid work it had already done and for that which remained to be done. The upshot of these discussions was that YEC would continue its work, and STL undertook to transfer title to the 23rd floor of Springleaf Tower upon completion to YEC or its nominee (which, as it transpired, was YDP) in lieu of Tuan Kai’s payment obligations under its sub-contracts with YEC. In line with this, on 13 February 1999, YEC, Tuan Kai and STL entered into a settlement agreement (“the settlement agreement”) giving effect to the broad understanding between them. The key terms included the following:

(a) Upon completion, the developer would transfer the Unit to YEC or its nominee in consideration of the purchase price of $13,964,6000. This was arrived at on the basis of a price of $1,300 per square foot (“psf”).

(b) YEC was entitled to set off money owing by Tuan Kai for the construction work against the purchase price of the Unit.

(c) As the total sum that would be due and owing to YEC by Tuan Kai under the sub-contracts was estimated to be $11,234,487.80, inclusive of interest for late payment, a compensatory credit of $2,730,112.20 (“the compensatory credit”) was allowed to YEC by Tuan Kai and STL. The compensatory credit was to be applied as payment towards the purchase price of the Unit.

(d) The compensatory credit was further explicitly acknowledged as being a discount on the purchase price of the Unit given by STL to YEC. This was done in a separate side letter of the same date as the settlement agreement (“the side letter”).

17 Additionally, it is relevant here to note that cl 7.5 of the settlement agreement specifically acknowledged the existence of the bank’s paramount mortgage over the development. That clause provided as follows:

The parties acknowledge that the Bank has a paramount mortgage (“the Paramount Mortgage”) over the Springleaf Tower development, including the Floor, and STL hereby agrees and undertakes to Yongnam that STL shall procure that the Bank shall release its mortgage over the Floor on or before the Agreed Date.

18 As the consideration for the proposed transfer of the Unit from STL to YEC...

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