Oversea-Chinese Banking Corporation Ltd v Tan Teck Khong and Another (committee of the estate of Pang Jong Wan, mentally disordered) and Others

Judgment Date30 March 2005
Date30 March 2005
Docket NumberOriginating Summons No 614 of 2002
CourtHigh Court (Singapore)
Oversea-Chinese Banking Corp Ltd
Plaintiff
and
Tan Teck Khong and another (committee of the estate of Pang Jong Wan, mentally disordered) and others
Defendant

[2005] SGHC 61

Kan Ting Chiu J

Originating Summons No 614 of 2002

High Court

Credit and Security–Mortgage of real property–Discharge of mortgage–Whether mortgage unenforceable by plaintiff because executed under undue influence–Whether defendants affirming existence of mortgage by calling for its discharge–Equity–Undue influence–Presumed–Whether mortgage executed by mother voidable because executed under undue influence of son–Whether transaction readily explicable by mother-son relationship–Whether presumption of undue influence rebutted by son–Legal Profession–Duties–Client–Whether solicitor under duty to take particular care to advise and consult with client in situation of possible undue influence–Whether private consultation impossible in presence of interested party–Whether meaning and effect of documents satisfactorily explained to client by interpreter without explanation by lawyer–Tort–Negligence–Breach of duty–Whether solicitor failing to take sufficient and adequate steps to ascertain whether client having mental capacity and acting on own free will when executing mortgage–Whether solicitor negligent in failing to hold private consultation with client in situation of possible undue influence–Whether solicitor failing to ensure meaning and effect of documents satisfactorily explained to client

The plaintiff was the successor-in-title of Keppel TatLee Bank Ltd (“KTB”). The first defendants, Tan Teck Khong and Tan Teck Hing, the first and second sons of Pang Jong Wan (“Mdm Pang”), were sued in their capacity as the committee of Mdm Pang's estate. The second defendant, Tan Pian Meng, is Mdm Pang's third son. The third defendant, M/s Ng Yap & Partners, acted for KTB, Mdm Pang and the second defendant in the execution by Mdm Pang of a mortgage over her property (“the Property”) in favour of KTB to guarantee certain loans granted by KTB to the second defendant. Ms Annie Yap (“Ms Yap”), a partner in the third defendant, was the solicitor who acted for Mdm Pang and the second defendant in relation to the mortgage.

Mdm Pang was not in good health when she executed the mortgage, having previously suffered two strokes. The first defendants were subsequently appointed the committee of her estate under the Mental Disorders and Treatment Act (Cap 178, 1985 Rev Ed).

The first defendants had instituted an earlier action against the second defendant alleging that Mdm Pang had executed two wills and the mortgage while physically and mentally incapacitated, and under the undue and improper influence of the second defendant. The first defendants sought, inter alia, orders that the second defendant repay all moneys he borrowed from KTB to secure the discharge of the mortgage, and declarations that the two wills were null and void and of no effect. It was held that even if Mdm Pang had the mental capacity to execute the mortgage and her second will, she had been unduly influenced by the second defendant to do so. The two wills were declared null and void, and the second defendant was ordered to account to Mdm Pang the amount owing to the plaintiff under the facilities granted. Notably, the first defendants did not bring either the plaintiff or the third defendant into the earlier action.

In the present action, the plaintiff claimed against the first and second defendants for delivery of vacant possession of the Property, and an order that the mortgage be enforced by the sale of the Property and payment of the sum due under the mortgage. In the contingency that the mortgage was unenforceable, the plaintiff claimed against the third defendant for allegedly failing to discharge its duty as the plaintiff's solicitors by failing to take sufficient and adequate steps to ascertain whether Mdm Pang had the mental capacity and was acting on her own free will when she executed the mortgage. The questions also arose as to whether the decision in the earlier action was a decision in rem, whether it gave rise to res judicata, and whether it estopped the parties from taking positions inconsistent with the earlier action.

The first defendants claimed that they and Mdm Pang were not liable under the mortgage and sought to rely on the earlier action, alleging that the third defendant did not exercise reasonable care and diligence to ensure that Mdm Pang had the mental capacity to understand and execute the mortgage. There was no allegation of her having acted under the undue influence of the second defendant. The first defendants also counterclaimed against the plaintiff for a declaration that the mortgage was null and void and that it be set aside.

The second defendant accepted that the mortgage was valid and enforceable by the plaintiff, and wanted the plaintiff to recover its loans to him from the proceeds of the sale of the Property.

The third defendant pleaded that Mdm Pang had appeared to be of sound mind and had acted of her own free will, having understood the nature and contents of the documents she had executed. In the alternative, the third defendant claimed that the plaintiff's bank had caused or contributed to the loss suffered by the plaintiffs because the bank and/or its officers did not take reasonable steps to meet Mdm Pang personally regarding the mortgage, even though the plaintiffs were aware that Mdm Pang was the registered owner of the property.

Held, allowing the plaintiff's claim:

(1) The onus was on the plaintiff to prove that the mortgage was valid and enforceable, and if it was not, that the third defendant was negligent when it acted for the plaintiff and Mdm Pang in the execution of the mortgage. The onus was on the first defendants to prove that Mdm Pang executed the mortgage when she lacked the mental capacity to do so, or that she executed it while she was under undue influence from the second defendant, and that the mortgage was not valid and enforceable. As the second defendant accepted the validity of the mortgage, there was nothing in his defence that he needed to prove. The third defendant needed to make good its defence that it had properly carried out its professional duties. While the onus of proving negligence was on the plaintiff and the first defendant who alleged it, the burden shifted to the third defendant to explain and justify its conduct in relation to the execution of the mortgage: at [18] to [21].

(2) The earlier action could not be a judgment in rem because it was not a finding as to Mdm Pang's mental capacity at that time. A person of sound mind could act under undue influence. The judge had limited himself to a finding that Mdm Pang had executed the will and mortgage while under undue influence, and had declared the wills null and void on that basis alone. The third defendant was not a party to the earlier action. Furthermore, the nature of the second defendant's alleged culpability for exerting undue influence with regard to the mortgage and the third defendant's alleged culpability in negligence were different, and they shared no common interest in that action. There was really no basis for raising any estoppel against the third defendant to prevent it from disputing that undue influence was exerted, or from refuting the allegation that it was negligent for not detecting it. The earlier judgement therefore bound only the parties therein (ie,the first defendants and the second defendant), and not the plaintiff or the third defendant. The plaintiff and the third defendant had to deal with the allegations relating to mental capacity and undue influence as though they had been brought up for the first time: at [23] to [27].

(3) The first defendants' defence failed because there was no evidence before the court on which a finding on Mdm Pang's mental condition could be made. This was a matter for which medical evidence was necessary, but no medical evidence had been adduced: at [28] and [29].

(4) Class 2 (A) presumed undue influence occurred where there was a legally recognised relationship of trust and confidence or ascendancy between the complainant and the wrongdoer and the transaction was not readily explicable by the relationship of the parties. Where there was no such type of relationship between the parties, but there was a relationship of trust and confidence or ascendancy and a similar inexplicability for the transaction, that would constitute Class 2 (B) presumed undue influence. When a claim was made on the basis of the presumption, there had to be proof of the existence of the relationship. When a Class 2 (A) or Class 2 (B) relationship was proved and the transaction was not readily explicable, a rebuttable presumption arose that undue influence had been exerted. The burden of proof was shifted to the wrongdoer to offer a proper explanation for the transaction: at [34] and [35].

(5) Mdm Pang and the second defendant were in a Class 2 (B) situation. The transaction was manifestly one-sided and not readily explicable by the mother-son relationship. The mortgage Mdm Pang executed was clearly beneficial to the second defendant and disadvantageous to her. The second defendant did not seek to rebut the presumption of undue influence because he had not appealed against the earlier judgement, and had conceded in clear terms that he had exerted undue influence on his mother. Mdm Pang had therefore executed the mortgage under the undue influence of the second defendant: at [38] to [44].

(6) It had to be apparent to a prudent solicitor that particular care had to be taken when something as sensitive as undue influence by someone close to the client was being probed. That would at all times be a difficult task, and it would be impossible to do this properly in the presence of the interested party. Ms Yap did not have a private person-to-person consultation with Mdm Pang to ensure that...

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6 cases
  • BLL v BLM and another
    • Singapore
    • High Court (Singapore)
    • September 10, 2019
    ...Banking Corp Ltd v Tan Teck Khong and another (committee of the estate of Pang Jong Wan, mentally disordered) and others [2005] 2 SLR(R) 694 at [24], the High Court stated that an adviser who exercises due care might still not be able to detect undue influence. However, the defendants are n......
  • Malayan Banking Berhad v Sivakolunthu Thirunavukarasu and Others
    • Singapore
    • High Court (Singapore)
    • September 28, 2007
    ...Oversea-Chinese Banking Corp Ltd v Tan Teck Khong and Another (committee of the estate of Pang Jong Wan, mentally disordered) and Others [2005] 2 SLR 694 and the instructive and authoritative decisions of the House of Lords in Barclays Bank plc v O’Brien and another [1993] 4 All ER 417 and ......
  • BOK v BOL and another
    • Singapore
    • High Court (Singapore)
    • December 11, 2017
    ...Banking Corp Ltd v Tan Teck Khong and another (committee of the estate of Pang Jong Wan, mentally disordered) and others [2005] 2 SLR(R) 694 (“Tan Teck Khong”) at [34]. It is also well-established that husband and wife is not one of the relationships to which the Class 2A principle applies:......
  • Malayan Banking Berhad v Sivakolunthu Thirunavukarasu and Others
    • Singapore
    • High Court (Singapore)
    • September 28, 2007
    ...Oversea-Chinese Banking Corp Ltd v Tan Teck Khong and Another (committee of the estate of Pang Jong Wan, mentally disordered) and Others [2005] 2 SLR 694 and the instructive and authoritative decisions of the House of Lords in Barclays Bank plc v O’Brien and another [1993] 4 All ER 417 and ......
  • Request a trial to view additional results
6 books & journal articles
  • Case Comment ASSESSING MENTAL CAPACITY
    • Singapore
    • Singapore Academy of Law Journal No. 2020, December 2020
    • December 1, 2020
    ...The categories of wrongdoer and complainant respectively are parent and child, solicitor and client, medical adviser and patient. 65 [2005] 2 SLR(R) 694 at [34]. This case involved a class 2B presumption of undue influence. One material difference is that the person executing the mortgage w......
  • Tort Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2005, December 2005
    • December 1, 2005
    ...had discharged their duty by completing the settlement agreement. 21.60 The case of Oversea-Chinese Banking Corp Ltd v Tan Teck Khong[2005] 2 SLR 694 involved a mortgage, undue influence, a family dispute and a negligent solicitor. The third defendant was a solicitor who acted for the bank,......
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2005, December 2005
    • December 1, 2005
    ...test was in fact utilised in the almost contemporaneous decision of the High Court in Oversea-Chinese Banking Corp Ltd v Tan Teck Khong[2005] 2 SLR 694. 9.68 In Oversea-Chinese Banking Corp Ltd v Tan Teck Khong, an elderly lady had executed a mortgage over her property in favour of the plai......
  • Equity and Trust
    • Singapore
    • Singapore Academy of Law Annual Review No. 2005, December 2005
    • December 1, 2005
    ...Bank of Scotland plc v Etridge (No 2)[2002] 2 AC 773 (‘Etridge’) remains unsettled. In Oversea-Chinese Banking Corp Ltd v Tan Teck Khong[2005] 2 SLR 694 (‘OCBC Ltd v Tan Teck Khong’), Kan Ting Chiu J appeared to favour, following Etridge, examining whether a transaction was readily explicab......
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