Re Tararone Investments Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 04 September 2001
• Date: 04 September 2001
• Docket Number: Civil Appeal No 600022 of
• Court: Court of Appeal (Singapore)

Re Tararone Investments Pte Ltd

[2001] SGCA 57

Yong Pung How CJ

,

L P Thean JA

and

Chao Hick Tin JA

Civil Appeal No 600022 of 2001

Court of Appeal

Banking–Lending and security–Overdrafts–Security provided over an overdraft account by an associate company by way of a charge over a fixed deposit account–Overdraft facility terminated but bank continued to debit overdraft account–Whether bank was entitled to enforce the charge to satisfy the amounts owing under the overdraft account after both parties were placed under judicial management–Scope of “all monies” charge–Whether bank obliged to inform chargor of intention to restore overdraft facility after having terminated it–Contract–Contractual terms–Rules of construction–Principles of interpretation of clauses–Canons of constructions–Giving effect to the express and specific words of the clause

The respondents' (“Tararone”) associate company (“Sogo”) had an overdraft account with the appellant (“DBS”); Sogo was $18m in debt to DBS. DBS agreed to continue granting overdraft facilities, subject to Sogo reducing the outstanding overdraft, and the furnishing of security by Tararone in the form of a charge (the “charge”) over a fixed deposit account (the “FD”) placed with DBS by Tararone. Under cl 1, the charge was stated to be in respect of “advances, loans, credit and/or other banking facilities” given to Sogo, with Tararone covenanting to pay all sums owing by Sogo in respect of the banking facilities. Clause 6 reaffirmed cl 1, while cl 2 charged the FD with the repayment of all monies owing by Sogo to DBS.

DBS later notified Sogo, by letter, of its decision to terminate the overdraft facility and demanded the payment of the debt outstanding (the “termination letter”). However, DBS continued to honour cheques drawn by Sogo, and debited the overdraft account accordingly.

Both Sogo and Tararone were eventually placed under judicial management. DBS sought the consent of Tararone's judicial managers, pursuant to s 227D (4) (d)of the Companies Act (Cap 50, 1994 Rev Ed), to enforce the charge on the FD by appropriating the monies in it to satisfy Sogo's debt in the overdraft account.

The judge dismissed the application, holding that the charge was only to secure the $18m overdraft debt Sogo owed to DBS, and that DBS was not entitled to enforce it in respect of liabilities incurred by Sogo after the overdraft facility had been terminated.

The issues on appeal were, inter alia, the nature and scope of the charge; and whether DBS was obliged to inform Tararone of its intention to restore the overdraft facility after having terminated it.

Held, allowing the appeal:

(1) In each case, the relevant documents had to be considered as a whole to obtain their true, and more significantly, commercial sense so as to give effect to the parties' intention. However, there was no canon of construction which allowed the court to ignore the express words in a document, or to rewrite the terms which the parties had agreed, unless a plain construction of the words would lead to absurdity. In the instant appeal, there was no doubt that this was an “all money” charge: at [16], [17], [19] and [24].

(2) For estoppel to apply, three elements had to be satisfied, namely, representation, reliance and detriment. Further, the representation had to be clear and unambiguous. In the instant appeal, there was neither a representation nor reliance: at [35].

(3) While a bank had to disclose to a surety “unusual features” relating to a transaction, there was nothing unusual for a bank to terminate a facility and later upon representation, to either revive the facility or offer fresh facilities. Accordingly, the appeal was allowed: at [40].

Bank of India v Trans Continental Commodity Merchants Ltd [1982] 1 Lloyd's Rep 506 (refd)

Bank of India v Trans Continental Commodity Merchants Ltd [1983] 2 Lloyd's Rep 298, CA (refd)

Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13,146 (refd)

Habibullah Mohamed Yousuff v Indian Bank [1999] 2 SLR (R) 880; [1999] 3 SLR 650 (distd)

Rudd & Son Ltd, Re [1986] 2 BCC 98,955 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 227D (4) (d)

Leslie Chew SC and Chan Kia Pheng (Khattar Wong & Partners) for the appellants

Ronald Choo and Chio Yuen-Lyn (Rajah & Tann) for the respondents.

Judgment reserved.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This appeal raises a question of construction as to the scope of a charge over money in a fixed deposit account maintained by the respondents (“Tararone”) with the appellant bank (“DBS”).

The facts

2 The circumstances giving rise to the matter before us are not in dispute and are briefly as follows. In early March 1998, Sogo Department Stores (S) Pte Ltd (“Sogo”), an associate company of Tararone, was indebted to DBS to the tune of $18m in an overdraft account. There were some discussions between Sogo and DBS. On 4 March 1998, DBS informed Sogo (“the facility letter”) that they would be willing to continue granting the latter overdraft facility of up to $18m, subject to Sogo reducing the overdraft outstanding in accordance with the following repayment schedule:

Repayment Schedule
Repayment Date	Repayment Amount	Balance Outstanding After Repayment
31 Jul 1998	8,000,000	10,000,000
30 Oct 1998	1,000,000	9,000,000
29 Jan 1999	1,000,000	8,000,000
30 Apr 1999	1,000,000	7,000,000
30 Jul 1999	1,000,000	6,000,000
29 Oct 1999	1,000,000	5,000,000
31 Jan 2000	1,000,000	4,000,000
28 Apr 2000	1,000,000	3,000,000
31 Jul 2000	1,000,000	2,000,000
31 Oct 2000	1,000,000	1,000,000
31 Jan 2001	1,000,000	0

3 In addition, DBS also required, as a condition, that security be furnished and it was set out in the letter in these terms:

Security

The above facility together with all monies and liabilities which may be owing to the Bank from time to time shall be secured by:

1. (i) [not relevant]

2. (ii) a fixed deposit (FD) of S$18 million or its equivalent in ACU deposits to be placed with DBS Bank. In this connection, the pledgor of the FD, Tararone Investments Pte Ltd, shall furnish us with a Resolution (Specimen 1 attached) confirming its agreement to stand as surety and execute the charge document in a form acceptable to DBS Bank. The pledgor shall be permitted to withdraw sums from the FD corresponding to the amount of repayment made by your Company under the Repayment Schedule.

4 Accordingly, on 18 March 1998, Tararone executed a charge in respect of a $18m fixed deposit (“FD”), which they placed with DBS, to secure the facilities granted or to be granted to Sogo. The pertinent clauses of the charge are as follows:

1. 1 In consideration of (the DBS) agreeing at (Tararone's) requests to grant or continue to grant to Sogo … advances, loans, credit and/or other banking facilities or accommodation (hereinafter collectively called the 'banking facilities' which expression shall include any part thereof) to such an extent and for so long as (the DBS) shall deem fit, (Tararone) hereby covenant to pay to you on demand all sums of money which now or hereafter from time to time and at any time shall be owing or remained unpaid to you in respect of the banking facilities or incurred or assumed by (the DBS) on (Sogo's) behalf … and all (Sogo's) other liabilities … (the aggregate of all such moneys and liabilities being hereafter called the 'Obligations' which expression shall include any part thereof).

2. 2 We hereby charge with the payment of the Obligations and with payment of all moneys owing by (Sogo) and the discharge of all liabilities … to you (hereinafter called the 'Borrower's Liabilities') by way of first fixed charge the sums which have been or may from time to time hereafter be deposited by (Tararone) with (the appellants) under (the DBS) FD account … (Tararone) hereby agree and confirm that the FD shall be held by (the DBS) as continuing security for the due payment or satisfaction to (the DBS) of all the Obligations and the Borrower's Liabilities from time to time owing to (the DBS) until the same have been fully paid and discharged subject as provided in clause 4.

3. 3 (Tararone) hereby irrevocably authorise (the DBS) at any time and from time to time whenever (the DBS) think fit, without notice to (Tararone), to appropriate and apply all or any part of the FD …...