Kenso Leasing Pte Ltd v Pang Kek alias Chang Siew Ching t/a New Lai Lai Motors and Another

• Jurisdiction: Singapore
• Judge: Laura Lau Chin Yui
• Judgment Date: 30 September 2005
• Neutral Citation: [2005] SGDC 199
• Court: District Court (Singapore)
• Year: 2005
• Published date: 31 October 2005
• Plaintiff Counsel: Vijai Parwani (Parwani and Co)
• Defendant Counsel: Sankar s/o Saminathan (Sankar Ow and Partners)
• Subject Matter: Commercial Transactions,Sale of goods,Buyer purchasing car from dealer and taking possession of car,Car not registered in buyer's name and subsequently repossessed by finance company, purportedly pursuant to terms of a floor stock agreement between dealer and finance company,Whether buyer having title to car,Whether dealer having title in car to pass to buyer at material time,Whether buyer entitled to rely on 25 Sale of Goods Act,Whether court entitled to consider argument that buyer's title to car was perfected by subsequent sale of car by seller to dealer,Section 25 Sale of Goods Act (Cap 393, 1999 Rev Ed),Personal Property,Title,Title to motor vehicle,Dealer entering into "floor stock agreement" with finance company under which finance company to lend money to dealer to pay for vehicles and to register itself as owner of vehicles,Agreement providing that title and property of vehicles to pass to finance company or its nominee upon dealer's default on 60th day from date of agreement,Finance company repossessing car prior to 60th day,Whether finance company in breach of agreement,Whether registration card of car bearing finance company's name a document of title or conclusive evidence thereof,Whether finance company having title to car
• Citation: [2005] SGDC 199

30 September 2005 Judgment reserved.

District Judge Laura Lau Chin Yui:

1 The trial of this action involved the Plaintiff, Kenso Leasing Pte Ltd (“Kenso”) and the 2^nd Defendant, Ong Poh Eng (“Mr Ong”). The 1^st Defendant, Pang Kek @ Chang Siew Ching trading as New Lai Lai Motors (“Mdm Pang”), having been adjudicated a bankrupt on 9 January 2004, did not partake in the trial.

2 In this action, I was to determine as between Kenso and Mr Ong, which of these 2 parties had good title to and was entitled to the vehicle in question, namely a Rover 820 SL1 motor car bearing registration number SCQ9906C (“the Rover car”). Having considered the evidence adduced by the parties and the submissions of their counsel, including their further arguments, I decided that neither Kenso nor Mr Ong had good title to the Rover car. Accordingly, I declared that neither Kenso nor Mr Ong was entitled to the sum of $39,506, being the net sale proceeds of the Rover car. I further dismissed Kenso’s claims against Mr Ong for damages for loss of use of the Rover car, or alternatively, damages to be assessed. Mr Ong’s counterclaim against Kenso for damages, inter alia, for conversion, was also dismissed. Kenso, being dissatisfied, has appealed against the declaratory order and the dismissal of their claims. I now give my reasons for the orders which I made against Kenso.

Undisputed facts

3 The facts were essentially not disputed. At the trial, the affidavits of evidence-in-chief of Kenso’s general manager Mr Lim Woon Cheng, Anthony (“Mr Anthony Lim”) and assistant manager, Ms Goh Poh Tin were admitted without cross-examination of the deponents by Mr Ong’s counsel, Mr Shankar. Similarly, the affidavits of evidence-in-chief of Mr Ong and his brother, Mr Ong Poh Pieow, were admitted without cross-examination of the deponents by Kenso’s counsel, Mr Parwani. As the evidence adduced by each of the parties was not challenged by the other, my decision turned on the issues of law arising from the facts.

4 But first, the facts. Kenso is a finance company. One of Kenso’s core businesses is to provide floor stock financing to car dealers to assist them in procuring new or second hand vehicles for their businesses. This is effected, not by an outright loan, but by entering into a floor stock agreement with the dealers. In the words of Mr Anthony Lim, the floor stock agreement “works like a mortgage”. However, according to Mr Anthony Lim, the practice prior to 2002 was that finance companies like Kenso did not transfer the title in the car to themselves as owners at the time the loan was extended to the dealer. Finance companies were deterred from so doing by the high transfer fee of a few thousand dollars and by the fall in the value of the car owing to the larger number of owners reflected on the registration card. Hence, prior to 2002, Kenso only required the dealer to provide the original registration card and a transfer form pre-signed by the vendor which they would “keep as collateral”. Only in the event of a breach in the repayment terms under the floor stock agreement would Kenso present these documents to LTA and thereby acquire title to the car.

5 This practice changed after 2002 with the introduction of electronic transfer or ‘E-transfer’ by LTA. According to Mr Anthony Lim, finance companies like Kenso could after 2002, register themselves as owners of vehicles for a maximum period of 6 months without increasing the number of owners as reflected on the registration card or incurring the hefty transfer fees. Kenso did not conduct any inspection of the vehicles for which they were to provide financing. As long as the dealer produced the original registration card and duly signed transfer form, Kenso would enter into a floor stock agreement with them. The vehicle would then be registered in Kenso’s name as owner. Ownership would be transferred back to the dealer or as per their instructions upon the dealer discharging their obligations under the floor stock agreement.

6 I turn now to the transaction which led to the court proceedings between Kenso and Mr Ong. The 1^st Defendant, Mdm Pang, was at the material time, a car dealer. On 24 March 2003, Mr Ong purchased the Rover car from New Lai Lai Motors (Mdm Pang’s sole-proprietorship business) for $44,923. In the course of the purchase, Mr Ong dealt with one Mr Wong Sang Keng (“Mr Wong”) who was Mdm Pang’s husband and the manager of her business. Mr Wong informed Mr Ong that the Rover car was at that point in time, registered in the name of Canon Engineering (S) Pte Ltd (“Canon”) and produced to him a copy of the vehicle log card as proof. It is shown on the registration card that Canon became the registered owner of the Rover car on 7 December 2000. After he had made payment, Mr Ong took possession of the Rover car. Mr Wong then said that he would process the transfer of the Rover car and Mr Ong was to collect the vehicle log card in due course. It turned out that neither Mr Wong nor Mdm Pang procured the transfer of the Rover car in Mr Ong’s name at all. When queried, Mr Wong gave excuses that his vendor client, a Japanese of Canon, had gone back to Japan and his return to Singapore had been delayed up to end June 2003, firstly by the SARS outbreak and later, by problems with his passport. On 15 July 2003, a note was left in Mr Ong’s home by Mdm Pang’s employee informing him that the Rover car had not been transferred to his name and it was likely to be repossessed by Kenso.

7 After Mr Ong had bought the Rover car for $44,923 on 24 March 2003, Mr Wong approached Kenso for floor stock financing for the same Rover car on 24 April 2003. To obtain financing, Mr Wong produced a copy of the vehicle registration card which showed that the owner of the Rover car was one Khong Guan Motor Trading (“Khong Guan”), whose ownership was effective from 20 March 2003. Mr Wong also produced a copy of the sale and purchase agreement made between Khong Guan as vendor and Mdm Pang as purchaser, dated 23 April 2003. Kenso’s searches at LTA on 24 April 2003 confirmed that Khong Guan was indeed the owner of the Rover car. On the next day, 25 April 2003, Kenso entered into a floor stock agreement with Mdm Pang. Pursuant to the floor stock agreement, Kenso issued a cheque dated 25 April 2003 for the purchase price of $40,000 in favour of Khong Guan. After the cheque had cleared, Kenso received from Mr Wong the original vehicle registration card and the transfer form duly signed by Khong Guan. Application for change of ownership was then made to LTA on 28 April 2003. On 29 April 2003, LTA issued a new registration card showing Kenso as the new owners of the Rover car.

8 In late June 2003, Mdm Pang requested for another 2 months to sell the Rover car. Hence, on 23 June 2003, Kenso entered into a second floor stock agreement with Mdm Pang giving her another 2 months to redeem the financing.

9 It will be relevant to highlight certain salient features about the floor stock agreement made between Kenso and Mdm Pang. The agreement provided that Mdm Pang was to redeem the loan of $40,000 within 60 days with interest at 1.25% per month. According to Mr Anthony Lim,

“Although the practice of ‘E-transfer’ was in place, the floor stock agreement signed between the Plaintiffs and the 1^st Defendant unfortunately reflected the practice of the Plaintiffs prior to 2002. When the changes were introduced in that year, we did not re-draft our floor stock agreement forms, as all our dealers were aware of the ‘E-transfer’ practice. On hindsight perhaps we should have done so…. It was a simple mistake on the part of the Plaintiffs in not updating their agreements and if any party wishes to take advantage of this mistake, if at all, it would be the 1^st Defendants and no one else.”

10 This was not the only transaction which Kenso had with Mdm Pang. In another transaction, Kenso provided Mdm Pang with financing in the sum of $140,000. In purported redemption of the loan, Mdm Pang issued Kenso a cheque for $140,000 and requested Kenso to transfer title in the vehicle concerned to a third party. The cheque was dishonoured and Mdm Pang could not be located. Since the amount involved was large, Kenso took steps to repossess all the vehicles for which they had provided financing at Mdm Pang’s request, including the Rover car, to mitigate their loss.

11 Having traced the Rover car to Mr Ong, Kenso’s solicitors issued a letter of demand on 24 September 2003 for the return of the car. When no positive reply was forthcoming, Kenso commenced legal proceedings and obtained a mandatory injunction against Mr Ong for delivery of possession of the Rover car. Committal proceedings followed when Mr Ong failed to deliver the Rover car, as ordered. Before the hearing of the committal proceedings, it was agreed that Mr Ong would deliver up the Rover car to Kenso for disposal and the sale proceeds be held by their solicitors as stakeholders pending the outcome of this action. Mr Ong then delivered possession of the Rover car to Kenso on 15 January 2004. The net amount recovered, after de-registering the Rover car and paying incidental charges was $39,506.

12 Subsequently, Kenso obtained judgment against Mr Ong in a summary judgment application, pursuant to which Kenso’s solicitors released the $39,506 to them. The decision was overturned on appeal to the District Judge when Mr Ong was granted unconditional leave to defend the action. Kenso, however, continued to retain the $39,506 “as no order was made with respect to the monies released to us”.

13 On his part, Mr Ong commenced proceedings against Mdm Pang to recover the sum of $44,923 that he had paid to her for purchase of the Rover car. Default judgment was entered against Mdm Pang which till now, remains wholly unsatisfied.

The Plaintiffs’ pleaded case

14 Kenso claimed that they were the true owners of the Rover car. They then proceeded to explain in their statement of claim how...