Indian Overseas Bank v Abacus Realty Pte Ltd and Others

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 09 January 1998
• Neutral Citation: [1998] SGHC 9
• Docket Number: Suit No 1495 of 1990
• Date: 09 January 1998
• Published date: 19 September 2003
• Year: 1998
• Plaintiff Counsel: Vijayan Peter and Julia Eng (Ramdas & Wong)
• Citation: [1998] SGHC 9
• Defendant Counsel: Susheela Joseph (Chor Pee & Co)
• Court: High Court (Singapore)
• Subject Matter: Exercise of power of sale by bank,Default by purchaser,Whether mortgage binding on remaining signatories,Raising argument previously abandoned in proceedings involving same subject matter and counter party,Implied authority of agent,Res Judicata,Mortgage of real property,Credit and Security,Whether bank's claim time barred,Delay by bank in pursuing action against purchaser,Solicitor consents to the exclusion of two signatories,Whether estopped from raising argument,s 21(6) Limitation Act (Cap 163, 1996 Ed),Whether bank can claim interest and outgoings during period of delay,Agency,Solicitor acting for parties intending to be signatories to a mortgage,Whether mortgagee can act on consent conveyed by mortgagors' solicitor

Judgment:

CHAO HICK TIN J

Cur Adv Vult

The plaintiffs are bankers. They were at all material times carrying on banking business in Singapore. By this action the plaintiffs are claiming against the eight defendants for the balance sum due under the terms of a mortgage.

2. Background

It is necessary for me at the outset to set out the circumstances under which the mortgage came into existence. The second to eighth defendants were debtors of the plaintiffs pursuant to two judgments, one obtained on the 27 March 1978 and the other on 16 August 1978 in Suit No 417/1978 (judgment debtors), the particulars of which are as follows: (i). The 27 March 1978 judgment was obtained against the second to fifth, seventh and eighth defendants for a sum of $4,629,770.84 together with accrued interest amounting to $135,808.16 and further interest on $2,922,637.52 at 12.25%pa from 28 March 1978 until payment and costs of $350.

(ii). The 16 August 1978 judgment was obtained against the sixth defendant for a sum of $3,631,771.36 together with accrued interest amounting to $274,112.97 and further interest on $2,922,637.52 at 12%pa from 16 August 1978 until payment and costs of $329.

3.Both judgments relate to the same debt which I shall refer to as `the judgment debt`. Hereinafter I shall refer to all the defendants as `the eight defendants`, or `the defendants`; the first to fifth and eighth defendants as `the six defendants`; the second to fifth and eighth defendants as `the five defendants`; and the third to fifth and eighth defendants as `the four defendants`. The eighth defendant is now deceased and is represented by his estate.

4.The bank is suing in this action under the mortgage instead of the judgments because more than 12 years had elapsed before the commencement of the action.

5.The first defendant was at all material times the owner of the property known as Nos 27, 29, 31 and 33 Birch Road, Singapore (the property).

6.In consideration of the bank agreeing to stay or otherwise withhold execution against the second to eighth defendants on the two judgments, the first defendant was prepared to execute a mortgage of the property in favour of the bank and to which mortgage the second to eight defendants were also intended to be parties. Eventually all the defendants, except the sixth and seventh, signed it (the mortgage). Under the mortgage, the six defendants covenanted, inter alia, to pay to the bank on demand all sums owing to the bank by the judgment debtors. Some of the other pertinent covenants of the mortgage are the following:

Clause 1(a)

The mortgagor and the judgment debtors will pay, inter alia, all property tax in respect of the property and in default of payment as aforesaid it shall be lawful (but not obligatory) for the plaintiffs to pay all or any of such property tax on behalf of the mortgagor and all moneys so paid by the plaintiffs together with interest thereon at the judgment rate calculated from the date of the moneys having been so paid to the date of repayment shall on demand be repaid by them;

Clause 1(f)

The mortgagor shall insure and keep insured in the joint names of the plaintiffs and the mortgagor the property against loss or damage by fire, riots, lightning or such other risks to the full insurable value and in default thereof it shall be lawful for but not obligatory on the plaintiffs to insure and keep insured against such risks the property and all moneys so expended by the plaintiffs together with interest theron at the judgment rate shall be repaid by them on demand;

Clause 2(e)

The plaintiffs shall have the right to call for periodical inspection and appraisal of the property by some qualified person nominated by the plaintiffs and all expenses incurred by the plaintiffs shall be paid by the judgment debtors and the mortgagor on demand and until so paid shall bear interest at the judgment rate calculated from the date of the moneys having been so expended to the date of payment thereof;

Clause 2(h)

The interest on the judgment for the time being owing including capitalized interest shall at the end of each calender month be capitalized and added for all purposes to the judgment then owing and shall thenceforth bear interest at the judgment rate and be secured and payable accordingly and all the covenants and conditions contained in or implied by these presents and all powers and remedies conferred on the bank by law or by these presents and all rules of law or equity in relation to the judgment and interest shall equally apply to such capitalized arrears of interest and to interest on such arrears.

Clause 7(l)

All covenants, agreements, undertakings and other provisions shall be deemed to be made by and be binding on the judgment debtors and the mortgagor jointly and severally.

7.I should add that five other properties, owned by different people, were also mortgaged to the bank to secure the judgment debt.

8.Subsequently the six defendants defaulted in their obligations under the mortgage. In exercise of its power of sale as mortgagee, the bank on 2 July 1981 sold the property at an auction to one Cheng Lai Geok for a sum of $2.6m. On 3 July 1981 the bank, as mortgagee, took possession of the property. However, on that same day, Cheng Lai Geok repudiated the purchase and stopped the payment of the cheque for $650,000 given the previous day as deposit. On 7 October 1981, the bank sued Cheng Lai Geok (in Suit No 3734/81) for specific performance and for damages.

9.There was considerable delay on the part of the bank in pursuing the action against Cheng Lai Geok, so much so that it did not come on for trial until June/July 1991. In the meantime in 1984 the first and second defendants had been asking the bank for accounts and queried why the property had not been rented out. They also repeatedly requested the bank to put the property up for sale again. The bank did not respond to that request.

10.After almost ten years after obtaining possession of the property, the bank changed tack and decided on 11 April 1991 to resell the property by tender to two new buyers, Lim Choo Kuan and Lim Chor Pian (second transaction), for a sum of $2.33m and to proceed against Cheng Lai Geok only in damages. The second transaction was completed on 27 June 1991. The net proceeds, after deducting the expenses of sale, came to only $2,299,991.75.

11.The bank claims that as at 31 July 1991 after deducting all outstanding sum owing by the judgment debtors, a sum of $1,129,959.19 and costs of $350 were still owing under the judgment of 27 March 1978, which sum continues to incur interest at the rate of 12.25%pa.

12. Pleadings

In their defence, the defendants aver that the mortgage is unenforceable because when the six defendants signed it, it was in the belief that it would be signed by all the eight defendants named therein and each would be jointly and severally liable thereunder. In fact the sixth and seventh defendants did not sign. The reply of the bank to this is that the six defendants consented to the exclusion of the sixth and seventh defendants as signatories to the mortgage.

13.The defendants also deny being liable for the expenses incurred on the property and interest allegedly accrued and owing, as the defendants were not given notice of the same and allege that the bank was guilty of wilful default in the pursuit of the action against Cheng Lai Geok. In any event, the defendants say that, (i). the bank is not entitled to any interest on any outstanding sum under the judgment after the bank had taken possession of the property;

(ii). the bank should have rented out the property while the property was not being sold and such rental which could have been received should be taken into account; and

(iii). any claim for interest accrued prior to 21 August 1984 is time-barred.

14.By an order of court dated 14 August 1991 in OS 889/89 instituted at the instance of the first and second defendants herein against the bank, the court ordered the bank to render the following to the two defendants: (i). an account of any and all sums received by the bank from letting out the property or other income received from the property or which but for the wilful default of the bank might have been so received and such notional rental to be assessed by the registrar;

(ii). an account of the interest accrued and accruing on the moneys owing to the bank from 27 March 1978 to 14 August 1991, giving credit to the notional monthly rental;

(iii). an account of all sums received by the bank in reduction of the moneys that were owing to the bank under the 27 March 1978 judgment and/or the mortgage.

15.The defendants further say that by virtue of the order of 14 August 1991, the rights and obligations of the parties have been determined therein and the matter is thus res judicata. The first defendant also counterclaims on account of the bank`s failure to sell and/or rent the property as from the date the bank entered into possession.

16. Exclusion of sixth and seventh defendants

The defendants submit that as the six defendants signed the mortgage in the belief that it would be signed by all the eight defendants and as the sixth and seventh defendants did not sign it, it is unenforceable. The first issue I have to determine is whether the exclusion of the sixth and seventh defendants as parties to the mortgage was with the consent of the six defendants as conveyed by their solicitors.

17.Mr Lee Hock Seng and Mr Wong Chin Huat were the two solicitors in M/s Ramdas & Wong who handled the mortgage documentation on behalf of the bank. Both testified for the bank. The evidence shows that on 31 October 1978 M/s Chor Pee & Hin Hiong returned the mortgage deed on the property to M/s Ramdas & Wong duly executed by the defendants (in the case of the sixth defendant by his attorney). On 2 November 1978, Mr Lee called Mrs Helen Yeo of M/s Chor Pee & Hin Hiong to inform her that the mortgage deed was in the wrong form as...