Malayan Banking Berhad v Sivakolunthu Thirunavukarasu and Others

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 28 September 2007
• Neutral Citation: [2007] SGHC 161
• Date: 28 September 2007
• Subject Matter: Transfer and mortgage of property procured by fraud,Registration of title,Indefeasibility of title,Presumption of undue influence by solicitor,Land titles act,Section 160(1)(b) Land Titles Act (Cap 157, 2004 Rev Ed),Land,Whether mortgagee guilty of wilful blindness akin to fraud so as to defeat principle of indefeasibility
• Docket Number: Originating Summons No 1009 of 2005
• Published date: 16 October 2007
• Defendant Counsel: Philip Fong and Navin Lobo (Harry Elias Partnership)
• Court: High Court (Singapore)
• Plaintiff Counsel: Ng Yeow Khoon and Seah Yi Lein (Shook Lin & Bok)

28 September 2007

Kan Ting Chiu J:

Background

1 This is yet another case where a fraud is committed, the prime suspect flees, and the victims are left to dispute over who is to bear the loss.

2 The prime suspect in this case is the first defendant, Sivakolunthu Thirunavukarasu, an advocate and solicitor who practised as a consultant in the firm of M/s M Dass & Co. She has absconded after this matter came to light.

3 The second, third and fourth defendants are siblings. The three of them and a fourth sibling, Sim Thiam Oh (“STO”) were involved in litigation which was eventually settled between them.

4 The terms of the settlement are only relevant to the present action where they affect the property known as No 23 Senang Crescent (“the property”). Under the terms of settlement, STO was to transfer his 25% share in the property to the second, third and fourth defendants. This transaction will be referred to as Transaction 1. Transaction 1 took place simultaneously on 17 March 2004 with two other transactions, Transaction 2 and Transaction 3. All these transactions related to the property.

5 In Transaction 2, the second, third and fourth defendants transferred their interests in the property to the first and second defendants to be held by them as tenants-in-common, with the first defendant holding a 75% share and the second defendant holding a 25% share.

6 In Transaction 3, the first and second defendants mortgaged their respective interests in the property to the plaintiff, Malayan Banking Berhad, to secure a loan of $700,000 (“the loan”) from the plaintiff to the first defendant alone.

7 As the property came under the Land Titles Act (Cap 157, 2004 Rev Ed) (“LTA”), the transfers in Transaction 1 and Transaction 2 and the mortgage in Transaction 3 were registered in the Registry of Land Titles.

The solicitors involved

8 In Transaction 1, M/s Lee Bon Leong & Co acted for STO as vendor and Mr M Dass (“Mr Dass”) of M/s M Dass & Co, the husband of the first defendant (they are now estranged), appeared on the record to have acted for the second, third and fourth defendants as purchasers.

9 On the record, Mr Dass also acted for the second, third and fourth defendants as the transferors and the second defendant as transferee, and Mr Chua Soo Kok (“Mr Chua”) of M/s S K Chua & Co acted as the solicitor for the first defendant as transferee in Transaction 2.

10 In Transaction 3, Mr Norman Ho (“Mr Ho”) of M/s Rodyk & Davidson, acted for the plaintiff, and on the record, Mr Chua acted for the first defendant, and Mr Dass acted for the second defendant. In the earlier stages leading up to the three transactions, the first defendant was represented by M/s M Dass & Co. However, M/s S K Chua & Co appeared on the record to act for her by the time of the completion of the transactions, probably to avoid the manifest conflict of interest of M/s M Dass & Co acting for the vendors when a member of the firm was the purchaser.

11 I have used the term “on the record” in the foregoing paragraphs because Mr Dass and Mr Chua did not actually act in the transactions, and the evidence points to that being part of the fraud perpetrated by the first defendant.

The fraud perpetrated

12 There was no sale of any interest in the property to the first defendant, and the second defendant did not mortgage his interest in the property to secure any loan to the first defendant. The second, third and fourth defendants accepted that Mr Dass and Mr Chua did not perpetrate or participate in the fraud and they were not involved in these proceedings as parties or witnesses. [note: 1] The evidence suggested that the first defendant was the person responsible for the fraud.

13 The second, third and fourth defendants never had the intention to enter into Transaction 2 and Transaction 3, and their signatures on the documents recording those transactions were forged, apparently by or with the knowledge of the first defendant.

The plaintiff’s claim

14 The plaintiff filed the present action after the fraud was uncovered and the first defendant had absconded. At that stage, the plaintiff knew that the second, third and fourth defendants denied the validity of Transaction 2 and Transaction 3.

15 The plaintiff was not a party to Transaction 1 where STO sold his share in the property to the second, third and fourth defendants. Its interest was as the mortgagee in Transaction 3. In this action it sought:

(a) a declaration that the mortgage is valid and the plaintiff’s title under the mortgage is indefeasible;

(b) a declaration that the plaintiff is entitled to enter into possession of the property, to receive rents and profits thereof and to exercise their mortgagee’s power of sale over the property; and

(c) judgment against the first defendant for $752,637.60 and interest in respect of the loan.

The counter-claim

16 The first defendant whose present whereabouts are unknown did not defend the claim after the cause papers were served on her by substituted service. The second, third and fourth defendants resisted the plaintiff’s claim and counter-claimed for:

(a) a declaration that the transfer in Transaction 2 was invalid as it had been obtained by fraud and/or forgery and that the true owners of the property are the second, third and fourth defendants; and

(b) a declaration that Transaction 3 was invalid as it had been obtained by fraud and/or omission and/or wilful blindness and/or voluntary ignorance; and for consequential orders thereto.

17 As the documents in Transaction 2 and Transaction 3 were registered in the Registry of Land Titles, the issue before me was whether the registered instruments should be valid and effective despite the forgery of the signatures of the second, third and fourth defendants. (These three defendants shall be referred to henceforth collectively as “the defendants”).

18 The defendants contended that the plaintiff’s registered title is not indefeasible because “the conduct of the Plaintiff or their agent (i.e. Mr Ho) in this matter was so willfully blind or voluntarily ignorant that it amounted conduct (sic) akin to fraud”, and they set out three “major factors” which they relied on:

(a) The Plaintiff’s knowledge and notice of the undue influence between [the first defendant] and [the second defendant] that renders Transaction 2 and 3 (sic) voidable;

(b) The Plaintiff’s knowledge and notice that the terms set by Mr Ho for Completion were not met;

(c) The Plaintiff’s knowledge and notice that the Completion Accounts did not tally. [note: 2]

19 The defendants identified the legal bases on which the mortgage should be declared invalid, i.e.:

(a) Under Section 46(2)(a) of the Land Titles Act (Cap 157) (“LTA”);

(b) Under Section 46(2)(b) of the LTA; and/or

(c) That at least the 2^nd Defendant has an enforceable personal equity against the Plaintiff which would defeat its title under the Mortgage. [note: 3]

and they also relied on s 160(1)(b) read with s 46(1)(v) of the LTA for the right to rectify the land register. [note: 4]

20 It is useful to set out relevant provisions of the LTA. The most important provision is s 46(1), which confers indefeasibility on a registered title:

46.–(1) Notwithstanding —

(a) the existence in any other person of any estate or interest, whether derived by grant from the State or otherwise, which but for this Act might be held to be paramount or to have priority;

(b) any failure to observe the procedural requirements of this Act; and

(c) any lack of good faith on the part of the person through whom he claims,

any person who becomes the proprietor of registered land, whether or not he dealt with a proprietor, shall hold that land free from all encumbrances, liens, estates and interests except such as may be registered or notified in the land-register, …

21 Section 46(2)(a) and (b) on which the defendants relied read:

46. – (2) Nothing in this section shall be held to prejudice the rights and remedies of any person –

(a) to have the registered title of a proprietor defeated on the ground of fraud or forgery to which that proprietor or his agent was a party or in which he or his agent colluded;

(b) to enforce against a proprietor any contract to which that proprietor was a party;

(The defendants did not explain how s 46(2)(b) would apply in their case, as there was no contract between them and the plaintiff which they can or wanted to enforce.)

22 Section 160(1)(b) reads:

(1) Subject to subsection (2), the court may order rectification of the land-register by directing that any registration be cancelled or amended in any of the following cases:

…

(b) where the court is satisfied that any registration or notification of an instrument has been obtained through fraud, omission or mistake;

The relevant case law

23 When the defendants made the counter-claim on 16 February 2006, a leading case on s 46(2) and s 160 of the LTA was the High Court decision in United Overseas Bank Ltd v Bebe bte Mohammad [2005] 3 SLR 501 (“UOB v Bebe No 1”), and it can be inferred that the defendants drew encouragement and support from that decision when they made their counter-claim.

24 In that case, the plaintiff, a bank, sought to enforce a mortgage it held over a property. In the course of preparing the mortgage, the solicitors acting for the plaintiff were aware that a replacement certificate of title had been issued for the property. Notwithstanding that, when the borrowers’ agent handed to the solicitors the original duplicate certificate of title, the solicitors prepared the mortgage and had it registered on the strength of the original duplicate certificate of title.

25 When the bank sought to enforce the mortgage, its action was dismissed by the trial judge on the grounds summarized in the headnote, that:

Wilful blindness could in certain circumstances be “akin to fraud”. This was a situation of wilful blindness on the part of the plaintiff’s conveyancing clerk, if her conduct was not fraudulent in the first...