Ng Hock Kon v Sembawang Capital Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 20 October 2009
• Neutral Citation: [2009] SGCA 50
• Docket Number: Civil Appeal No 191 of 2008 (Originating Summons No 1480 of 2007)
• Date: 20 October 2009
• Year: 2009
• Published date: 26 October 2009
• Plaintiff Counsel: Ronald Choo Han Woon and Loke Shiu Meng (Rajah & Tann LLP)
• Citation: [2009] SGCA 50
• Defendant Counsel: Suresh Sukumaran Nair, Jonathan Tan and Muralli Rajaram (Allen & Gledhill LLP)
• Court: Court of Appeal (Singapore)
• Subject Matter: Contract,Agency,Credit and Security

20 October 2009 Judgment reserved.

V K Rajah JA (delivering the judgment of the court):

Introduction

1 This appeal concerns the rights of an owner, Ng Hock Kon (“the Appellant”), who is resisting enforcement proceedings against his property, 73 Jalan Seaview (“the Property”). The Property is the subject of an action for possession brought in the High Court by the mortgagee, Sembawang Capital Pte Ltd (“the Respondent”), which, at the material time, was in (inter alia) the business of property financing. The mortgage in question (“the Mortgage”) was granted on 12 June 2000 pursuant to a deed of settlement of the same date entered into between the Appellant and the Respondent (“the Deed”). Under the Deed, the Appellant agreed to repay his debts to the Respondent via monthly instalments. Any default on an instalment would entitle the Respondent to enforce its rights in accordance with a prescribed procedure. In this appeal, the Appellant contends that, having merely defaulted on three instalments amounting collectively to $5,400, he is entitled to relief from enforcement. We ought to mention that, according to the Deed, the total amount which the Appellant owed the Respondent was a sum in excess of $4m. This sum was repayable in monthly instalments in the manner set out at [9] below.

2 On 23 October 2008, the trial judge (“the Judge”) ordered, inter alia, delivery of vacant possession of the Property to the Respondent (see Sembawang Capital Pte Ltd v Ng Hock Kon [2009] 1 SLR 833 (“the Judgment”) at [48]). Dissatisfied with the Judge’s decision, the Appellant appealed to this court primarily on the grounds that: (a) the Judge took into account irrelevant factors in granting vacant possession of the Property to the Respondent; and (b) the circumstances of the case entitled him to relief from enforcement of the Mortgage, which was in substance a form of forfeiture.

3 After hearing counsel on 9 and 20 April 2009, we reserved judgment, but not before indicating our concerns over the unsatisfactory nature of the various notices that had been sent by the Respondent to the Appellant pursuant to the prescribed enforcement procedure. We granted the parties time to make further submissions on this issue. After a careful consideration of these submissions as well as all the material circumstances of this case, we have decided to allow the appeal. These are our reasons.

Background facts

The events leading to the execution of the Deed

4 In 1995, a company, HSC International Investment Pte Ltd (“HSC”), entered into a facility agreement with the Respondent (“the HSC facility”) to borrow $2m to purchase various units in an apartment/office building known as Golden Lion International Investment Centre (“GLII Centre”) in Zhenjiang, China. The Appellant, together with his fellow directors at HSC, one Lee Keng Soon (“Lee”) and one Chia Meng Seng (“Chia”), executed personal guarantees to secure the HSC facility. The Appellant also decided to purchase for himself several units in GLII Centre and obtained a separate personal term loan of $1m from the Respondent for that purpose. The personal loan to the Appellant was granted on 16 July 1996, and was jointly and severally guaranteed by HSC as well as Lee and Chia. On 7 April 1997, the Appellant, again in his personal capacity, entered into a second facility agreement with the Respondent for $400,000. This second loan, which was for the Appellant’s purchase of yet more units in GLII Centre, was also jointly and severally guaranteed by HSC, Lee and Chia.

5 The Appellant and HSC subsequently defaulted on their respective loans and, eventually, judgments in default of appearance were obtained against the Appellant, Lee and Chia as guarantors. In a surprising turn of events, Lee later sought to set aside one of the default judgments entered against him (viz, the default judgment in Suit No 2250 of 1998) on the ground that the Respondent had fallen foul of the Moneylenders Act (Cap 188, 1985 Rev Ed) (which has since been repealed) in extending loans to the Appellant and HSC. Consequently, Lee argued, the default judgment entered against him should be set aside since the loans upon which that judgment was based were illegal and unenforceable. Lee succeeded in his argument and, on 12 August 1999, the default judgment entered against him in Suit No 2250 of 1998 was conditionally set aside. The Respondent filed a notice of appeal against the decision, but, on 25 November 1999, it withdrew the said notice. In February 2000, Lee successfully set aside the two remaining default judgments entered against him (viz, the default judgments in Suits Nos 2251 and 2252 of 1998).

6 The Appellant, who, from a legal standpoint, was arguably in a similar position as Lee apropos the legality of the loans from the Respondent, did not, however, adopt the same legal tack. Instead, in June 2000, he proceeded to enter into the Deed with the Respondent, which provided, amongst other matters, for the repayment in instalments of the loans made to him. The legal purport of some of the terms of the Deed and the Mortgage now take centre stage in the present appeal.

Relevant recitals and clauses of the Deed

7 As mentioned at [1] above, both the Deed and the Mortgage were dated 12 June 2000. The Deed was, according to its preamble, made “supplemental to the Mortgage”,^{[note: 1]} with the latter constituting “security for [the Appellant’s] liabilities arising under [the] Deed”^{[note: 2]} (see recital E of the Deed, which is also reproduced at [8] below).

8 In the Deed, the Appellant (referred to therein as “the Debtor”) acknowledged his indebtedness to the Respondent (referred to therein as “the Creditor”) of approximately $4m in the following terms:^{[note: 3]}

(A) The Debtor is, at the date of this Deed, indebted to the Creditor in the sum of S$ 1,720,877.34 under two Facility Agreements dated 16 July 1996 and 7 April 1997 …

(B) The Debtor is, at the date of this Deed, further indebted to the Creditor in the sum of S$ 2,651,083.85 under Guarantees in respect of loans made by the Creditor to various third parties …

(C) The said sums of S$ 1,720,877.34 and S$ 2,651,083.85 constitute the total indebtedness of the Debtor to the Creditor, including legal costs, interest and any other costs (hereinafter referred to as “the Total Debt”) …

(D) The Debtor has proposed to make payment to the Creditor of the sums specified in this Deed in full and final settlement of the Total Debt to the Creditor … by payment of the amounts and in the manner appearing below …

(E) The Debtor has agreed to execute a Mortgage over his property at 73 Jalan Seaview [ie, the Mortgage as defined at [1] above] … in favour of the Creditor by way of security for his liabilities arising under this Deed …

…

(G) The Creditor has agreed to accept the said payments … and Mortgage in full, final and complete discharge and satisfaction of the Creditor’s claims against the Debtor … subject to the conditions herein …

9 While there was nothing peculiar in the Deed’s recitals, we note that the specific terms relating to the duration of repayment were nothing short of extraordinary. Clause 1 of the Deed stipulated that:^{[note: 4]}

The Debtor hereby irrevocably and unconditionally covenants with the Creditor that he will pay the following sums to the Creditor in the manner herein specified (hereinafter referred to as the “Instalments”):–

(i) S$1,000 within the first 7 days of each calendar month for six months commencing 1 May 2000; and

(ii) Thereafter, $1,800 within the first 7 days of each calendar month until the Total Debt is fully and finally discharged.

10 A simple calculation reveals that, according to the repayment scheme, the Appellant was given around 200 years to repay his (approximately) $4m debt. Further, it appears from the Deed that no interest was charged on the instalments. The Respondent has not deigned to explain the reason for this generous repayment schedule. Be that as it may, we can safely infer from this arrangement that the parties never considered that time was to be of the essence apropos the full repayment of the Appellant’s outstanding debts. This is an important consideration in construing the Deed, which we shall return to later (at [57] below).

11 We now turn to the other salient terms of the Deed. Less atypical but no less relevant are the clauses governing default on the instalments to be paid. Clause 7 provided, inter alia, that:^{[note: 5]}

This agreement shall terminate upon the occurrence of any of the events listed below provided always that the Creditor shall give the Debtor two weeks [sic] notice in writing to rectify any default on the Debtor’s part:–

a. if the Debtor fails to pay any Instalment on the due date (including, without limitation, when any payment by cheque is dishonoured for any reason whatsoever) …

…

[emphasis added]

Clause 8 provided that:^{[note: 6]}

Upon the termination of this agreement by virtue of Clause 5 above, all the sums owed by the Debtor then outstanding under this Deed shall become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Debtor; and the Creditor shall be entitled to exercise all such rights and remedies as it shall or would have been entitled to exercise, including but not limited to the Creditor’s right to foreclose on the Mortgage.

It should be noted that, although cl 8 of the Deed referred to “the termination of this agreement by virtue of Clause 5”^{[note: 7]} [emphasis added], the relevant termination clause was actually cl 7 instead.

Relevant clauses of the Mortgage

12 While the repayment terms of the Deed were nothing short of extraordinary, the Mortgage itself contained the standard terms for loans given by financial institutions. We highlight now the salient clauses of the Mortgage:^{[note: 8]}

5. Where the monies hereby secured are not payable on demand such monies shall immediately be...