Lie Hendri Rusli v Wong Tan and Molly Lim (a firm)

CourtHigh Court (Singapore)
JudgeV K Rajah JC
Subject MatterSolicitor's duty when acting for multiple parties in conveyancing transaction,Whether solicitor negligent in failing to disclose to plaintiff that he was concurrently representing supplier and bank,Whether solicitor properly advising plaintiff on import and consequences of "all moneys clause" in mortgage documents,Legal Profession,Duties,Conflict of interest,Client,Plaintiff mortgaging property to secure banking facilities extended to his supplier
Plaintiff CounselAndrew John Hanam and Lim Chong Boon (PKWA Law Practice LLC)
Defendant CounselMolly Lim Kheng Yan SC, Philip Ling Daw Hoang and Ambrose Chia Heng Guan (Wong Tan and Molly Lim LLC)
Date23 September 2004
Docket NumberSuit No 721 of 2003
Published date07 October 2004

23 September 2004

V K Rajah JC:

1 In these proceedings a former client claims against a law firm for failing to advise him on or alert him as to the nature and purport of legal documentation he has signed. Issues of adequate disclosure, conflict of interest in acting for multiple parties and a conveyancer’s responsibilities have all been squarely raised. It is also contended that a solicitor who fails to keep contemporaneous minutes of discussions with a client ought not to be believed. Can this be correct?

2 This case raises some interesting points of legal practice. Out of deference to counsel’s arguments, I shall set down my findings and views on these points, at the risk of overburdening a factually straightforward case.

Dramatis personae

3 The plaintiff is an Indonesian businessman of Chinese descent. He is the principal director cum shareholder of PT Bangun Persada Tata Makmur (“PTB”), an Indonesian distributor of electronic goods. PTB is an established business with an average annual turnover of $10m. The plaintiff also operates two other Indonesian companies, which were set up as tax shelters. Richard Tong (“RT”), a banker from Malayan Banking Berhad (“MB”), describes him as a “seasoned businessman”. In so far as his linguistic skills are relevant, the plaintiff asserts that while he completed his secondary school education in Singapore, his command of English is weak. His preferred language of business communication in Singapore is Mandarin.

4 The defendant used to be a firm of solicitors. It was dissolved in 2002. For the avoidance of doubt, it should be pointed out that the events culminating in these proceedings were not in any way responsible for this dissolution. Tan Yah Piang (“TYP”) was the senior conveyancing partner with the defendant and is its protagonist in these proceedings. After graduating from the National University of Singapore in 1984, he joined the Singapore Legal Service (“SLS”). Initially appointed an Assistant Registrar of Titles and Deeds, he was in due course promoted to the position of a Deputy Registrar. In 1985 he left SLS for private practice and was admitted to the Bar in 1986. He thereafter practised for varying periods of time in a few established law firms, namely, Freshfields, Arthur Loke & Partners and Wong Yoong Tan & Molly Lim, prior to joining the defendant in 1993. His principal area of practice has been and continues to be in conveyancing and he is, by all accounts, an experienced conveyancer. He has a working knowledge of Mandarin and secured an “O” level pass in the subject.

5 From about 1997, PTB established a significant and substantial business relationship with a group of related electronic distributors in Singapore. These companies were Alps Investment Pte Ltd (“Alps”), Macon Holdings Pte Ltd (“Macon”) and Victory Electronic Pte Ltd (“Victory”) (collectively referred to as “the Alps Group”). As business strengthened and the relationship matured, the Alps Group granted substantial enhanced credit facilities for goods supplied directly to PTB. By mid-1999, PTB was permitted credit ranging from between $1m to $1.5m for a 30 to 45-day grace period.

6 The principal officer in the Alps Group servicing PTB was its marketing manager, Agnes Goh (“AG”). AG testified that the Alps Group was one of the largest suppliers of goods to PTB and that PTB was in turn one of its largest customers. Most of the electronic goods supplied by the Alps Group to PTB originated from Samsung, a well-known Korean manufacturer of electronic appliances. PTB and the Alps Group shared a cordial, closely-knit relationship and each party at different points of time went so far as to quaintly describe the other “as part of the family”. The plaintiff and AG shared a similarly close and friendly working relationship; indeed AG ventured forth to give evidence on the plaintiff’s behalf in these proceedings despite having left the Alps Group in 2002.

Factual matrix

7 In or around November 1999, PTB’s business in Indonesia was severely tested when the Indonesian economy was confronted with the maelstrom of the 1997 Asian financial crisis. PTB faced severe cash flow problems. The plaintiff and PTB were unable to obtain financing to tide them over this period. By November1999, PTB owed the Alps Group about $4.5m, an amount well in excess of the agreed credit limit of $1m to $1.5m. The Alps Group pressed the plaintiff to settle PTB’s debts, putting a strain on the hitherto cordial “family” relationship. The plaintiff was in desperate, dire need of further financing to tide over his business liabilities.

8 With a view to resolving this unsatisfactory state of affairs, the plaintiff had discussions with AG in late 1999 about using Alps’ existing banking facilities. He learnt that Alps already had various facilities with MB and was in the process of applying for additional facilities. AG informed the plaintiff that if he were to mortgage his recently purchased apartment at 26 Paterson Road,
#06-06 The Paterson Edge (“the property”) to MB “for Alps’ benefit”, PTB would be entitled to obtain a higher credit limit utilising Alps’ letter of credit (“LC”) arrangements. In short, by mortgaging the property as part of the security arrangements between Alps and MB, PTB could potentially obtain access to a further $3.2m in credit facilities. The plaintiff readily agreed to AG’s proposal; it was to all intents and purposes an extremely attractive proposal. By offering his property, valued at about $1.7m as security, PTB would obtain additional facilities, for almost twice that value. In addition, his existing debt of $4.5m would be benignly dealt with by the Alps Group. It bears mention that AG, testifying on the plaintiff’s behalf, confirmed that if the plaintiff had not acceded to this arrangement, the Alps Group would have curtailed his existing overdue credit arrangements. This would have created a crisis for PTB and the plaintiff.

9 After these initial discussions, matters proceeded briskly. By an agreement dated 30 November 1999 (“the 30 November Agreement”), the plaintiff agreed to mortgage the property “to ALPS’ financier/banker as a third party mortgage to secure the credit facilities so offered by the financier/banker to ALPS”. The plaintiff also confirmed in the 30 November Agreement that he would not redeem the property as long as PTB owed money to the Alps Group. This document was prepared by Anthony Koh (“AK”) the Administrative Executive of Macon, the holding company in the Alps Group. When AK consulted TYP for input on the proposed draft, TYP’s suggestions were of a purely cosmetic nature. Pursuant to the 30 November Agreement the plaintiff undertook to permit his property to be mortgaged to secure all facilities extended by MB to Alps. There was no express constraint or limitation to the facilities that MB would extend to Alps. The plaintiff has at no point asserted that he did not comprehend the terms of the 30 November Agreement as explained to him by AK.

10 The plaintiff testified that in agreeing to the proposed mortgage, he relied on the sound financial strength of the Alps Group and the standing of its alter ego, Datuk Kang Hwi Wah (“Kang”) an established presence in the electronics wholesale industry in Singapore. He admitted that it had never crossed his mind at the time that the Alps Group might ever fail financially or default in its obligations to MB. He also claimed, “my own thinking was that if I were to lose, the most I would lose would be my property”.

11 The plaintiff did not appoint the defendant directly. At that point in time, another firm of solicitors had been acting for him in the purchase of the property. Title for the property had not been issued. Upon AK’s suggestion, he agreed to engage the defendant to act for him in the completion of the property purchase as well as in securing the proposed bank facilities. He was aware that the defendant also represented the Alps Group.

12 On 10 December 1999, TYP received instructions from AK to act for Alps in its restructured banking facilities with MB. AK also informed TYP that the plaintiff would be instructing the defendant to act for him in the completion of his property purchase as well as in the proposed mortgage to MB. TYP agreed to act in all these matters. Around the same time the defendant also received instructions from MB to act for it in the restructured facility arrangement with Alps.

13 AG liaised with AK and the plaintiff and the parties eventually fixed 21 December 1999 for the signing of the relevant papers at the defendant’s office. In the meantime, TYP had prepared a deed of assignment and mortgage-in-escrow (“mortgage documents”) to secure the proposed mortgage of the property to MB for Alps’ credit facilities. In addition, he prepared documentation for a few other properties, owned by a relative of Kang, that were to be concurrently mortgaged as security for the facilities. The preparation of the mortgage documents was a routine assignment for TYP. Included in all the mortgage documents was a clause stipulating that a mortgagor was to be personally liable for any outstanding facilities. This is a fairly prosaic clause that banks in Singapore routinely insert in their documentation to enhance their recovery prospects in the event of a default. It is usually referred to as an “all moneys clause”.

14 On 21 December 1999, AK arranged to meet the plaintiff and they proceeded together to TYP’s office. There are differing accounts with reference to the duration of the meeting and as to what transpired during the meeting. It is undisputed that TYP used both English and Mandarin in explaining to the plaintiff the legal responsibilities and liabilities he would be undertaking by signing the mortgage documents. The extent to which either language was used is however a matter of some controversy. The plaintiff did not ask any questions or communicate any concerns to TYP prior to and after signing the documents. The...

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