Sri Jaya (Sendirian) Berhad v RHB Bank Berhad

• Jurisdiction: Singapore
• Judge: S Rajendran J
• Judgment Date: 10 October 2000
• Neutral Citation: [2000] SGHC 206
• Date: 10 October 2000
• Subject Matter: Lifting corporate veil,Equity,Duty to publicise sale of property,Whether mortgagee under duty to obtain valuation on "redevelopment basis",Whether plaintiffs' claim mala fide,Whether mortgagee negligent in conduct of sale of mortgaged property,Mortgagee's sale,Lack of reliance on representation,Companies,Whether defence of estoppel made out,Mortgages,Estoppel,Land,Duty to obtain best price possible
• Docket Number: Suit No 253 of 1999
• Published date: 19 September 2003
• Defendant Counsel: Tan Bar Tien (BT Tan & Co)
• Court: High Court (Singapore)
• Plaintiff Counsel: Denis Tan and Alvin Chang (Toh Tan & Pnrs)

: The plaintiffs, Sri Jaya (Sdn) Bhd (`Sri Jaya`) were the owners of a property in Paya Lebar Close (the `property`). The defendants, RHB Bank Bhd (`RHB Bank`) are a Malaysian bank with a Singapore branch. In October 1969, Sri Jaya mortgaged the property to RHB Bank and obtained a loan of nearly $1.5m to construct two blocks of flats - one consisting of 15 units and the other consisting of 32 units - on the property.

Chip Hua Contractors Pte Ltd (`Chip Hua`), whose shareholders were Ng Kheng Chye, Ng Keng Thye and members of their family (`the Ngs`) were the sub-contractors for the construction of the two blocks of flats. Sri Jaya had difficulty in paying Chip Hua the construction costs. To resolve this difficulty, Sri Jaya, by an agreement for lease dated 11 June 1975 (`lease agreement`) granted to Chip Hua a 199-year lease for the 32-unit block for a consideration of $912,000. Chip Hua, upon obtaining the leasehold interest, sold off the units in the 32-unit block to various purchasers (`the occupants`). It appears that Sri Jaya sold the other block to a Malay co-operative society which in turn sold the 15 units therein to its members (`the occupants`).

Disputes arose between Sri Jaya and Chip Hua over the lease agreement. An action was commenced in the High Court by Sri Jaya which culminated when the Court of Appeal, in 1992, gave judgment in favour of Chip Hua with damages to be assessed.

The sale of the leasehold interest to Chip Hua and the sale of the 15-unit block to members of the Malay co-operative society had, contrary to the terms of the mortgage agreement with RHB Bank, been entered into without the knowledge and consent of RHB Bank. The various sums of moneys received by Sri Jaya from the sales were also, in breach of the mortgage terms, not used to pay off the outstandings under the mortgage. RHB Bank therefore, in October 1983, commenced proceedings against Sri Jaya for these breaches. The suit was heard in October 1991. At the hearing, a consent judgment was entered against Sri Jaya for the sum of $2.8m and an order was made that the property be sold by RHB Bank.

RHB Bank, after obtaining the judgment, tried to negotiate with the occupants to obtain vacant possession. These negotiations were not successful and RHB Bank, in September 1993, commenced legal proceedings to evict the occupants. Soon thereafter RHB Bank decided that, rather than be involved in litigation with the occupants, it would be in RHB Bank`s interest to sell the property on an `as is` basis.

From the end of 1993, RHB Bank began to receive offers for the sale of the property. RHB Bank did not advertise the property for sale for fear that that might prompt the occupants into taking action to block any sale. On 31 December 1993, Ng Kheng Chye procured Chrisvin, another company which belonged to the Ngs, to write directly to Sri Jaya offering to buy the property at $6.3m. Sometime in early 1994, Ng Kheng Chye learnt from one Lim Fong (whom he knew to be a property speculator) that the latter was negotiating with RHB Bank`s solicitors to buy the property. He therefore instructed his solicitors to make an offer of $6.3m on behalf of Chrisvin to Mr Tan Bar Tien (`Mr Tan`) who was RHB Bank`s solicitor.

Mr Tan indicated a price of $8m for the property. Ng Kheng Chye felt that that price was too high as, to his knowledge, bids for the property were in the region of $6m. Ng Kheng Chye, however, was still interested in purchasing the property. He therefore made another offer of $6.5m through his nominee, Chua Tiong Loo (`Chua`), on 24 May 1994. This was the highest bid received by RHB Bank at that time. RHB Bank informed the next highest bidder, Housing Development Pte Ltd (`Housing Development`), that it had received a higher bid and, as a consequence, Housing Development increased its bid to $6.5m. On 31 May 1994, without reverting to Chua, RHB Bank sold the flats on an `as-is, en bloc` basis to the nominee of Housing Development - Win Supreme Investment (S) Pte Ltd (`Win`) - for $6.5m. At that time there were still some 44 occupants in the two blocks. Unaware that the property had, on 31 May 1994, been sold to Win, Ng Kheng Chye, in June 1994, through Chrisvin, made another written offer to buy the property at $6.3m.

The sale proceeds of $6.5m were not sufficient to discharge Sri Jaya`s outstandings to RHB Bank. In January 1995, RHB Bank sent a letter of demand to Sri Jaya for $795,087.19 being the shortfall and accrued interest due to RHB Bank. As Sri Jaya had no assets RHB Bank did not pursue the matter further.

At the time of the sale to Win, the property had an approved plot ratio of 2.072. In August 1994, the authorities released a new Development Guide Plan under which the plot ratio of the property was increased to 2.8. On 4 August 1994, the Urban Redevelopment Authority granted provisional permission for a 12-storey condominium with an approved plot ratio of 2.9176 on the property.

In August 1994, within three months of the sale by RHB Bank to Win, Win re-sold the property to a Lim Kim Yan for $14m. Lim Kim Yan in turn re-sold the property, the same day, to Hillwood Development Pte Ltd (`Hillwood Development`) for $27m. Hillwood Development was a company owned by the Ngs.

The Ngs remained interested in Sri Jaya as Chip Hua`s judgment against Sri Jaya was still unsatisfied. Ng Kheng Chye told the court that he had heard certain rumours regarding RHB Bank`s sale of the property to Win. He felt that the property had been sold to Win at an under-value. He also felt aggrieved that he had not been given an opportunity to better his bid. He therefore instructed valuers to do a retrospective valuation of the property.

At all relevant times, Sri Jaya had been managed by a prominent Singapore lawyer, Tan Sri Syed Esa Almenoar. It was in evidence that at a meeting with RHB Bank officials (before higher bids came in) Tan Sri Almenoar had indicated his agreement to the property being sold to Chrisvin at $6.3m. Tan Sri Almenoar passed away in November 1994. From about the time of his demise, Sri Jaya was a dormant company.

In April 1998, Ng Kheng Chye approached the two shareholders of Sri Jaya at that time - one Salleh bin Mat and one Abdul Kadir bin Haji Manjoorshah - and they agreed to transfer their shares in Sri Jaya to the Ngs. The evidence before me was that this transfer was made gratis.

At the time of the trial before me, vacant possession of all the units on the property had been obtained and the development of a condominium was underway.

Lydia Sng, a director of Knight Frank Pte Ltd (`Knight Frank`), a firm of valuers and estate agents, was called by Sri Jaya as an expert witness on property values. She testified that the open market value of the property as at 31 May 1994 on an `encumbered` basis was $25.5m based on its `highest and best use` as a residential redevelopment site. Knight Frank had been informed that there were 47 occupants on the property and that the developer, Hillwood Development, had paid about $5m as compensation to the occupants to vacate the property.

Lydia Sng, in arriving at a valuation at $25.5m on a `highest and best use` basis, used an assumed approved plot density of 2.772, even though the property, as at 31 May 1994, had a lesser approved plot density of 2.072. Lydia Sng had used the higher plot density of 2.772 on the basis that the higher plot density was physically achievable given the plot size and she was of the view that it was a fair basis to adopt for a `highest and best use` valuation given the guidelines from the authorities as to how much one can exceed the approved plot density when applying to the planning authority. In any event, Lydia Sng opined that even if the then existing density of 2.072 was used, the open market value of the property based on `highest and best use` as a residential redevelopment site was $20.5m as at 31 May 1994.

Sri Jaya tendered a second valuation report from Jones Lang Wootton Property Consultants Pte Ltd (`Jones Lang`), another firm of property valuers and consultants. This report valued the property as a redevelopment site at $24.75m as at 31 May 1994 on an `encumbered` basis, assuming a plot density ratio of 2.8 and assuming that $5m was payable to obtain vacant possession. If the then approved plot density of 2.072 was used, Jones Lang valued the property on a `redevelopment` basis at $19.475m as at 31 May 1994.

Conduct of sale

Ong Boon Hoo (`Ong`) was the bank officer in the employ of RHB Bank who overseered the mortgagee sale of the property. He was stationed in Kuala Lumpur, Malaysia. He became involved with the property from about July 1993. Ong, who said that he had some knowledge of the Singapore property market, relied mainly on RHB Bank`s Singapore solicitors and valuation reports on the property given to RHB Bank by the property consultant firm of Richard Ellis (Pte) Ltd (`Richard Ellis`), to form a view as to what price the property could fetch on the market.

In December 1992, RHB Bank had asked for a valuation of the property from Richard Ellis. Richard Ellis had at that time valued the open market value of the property at $4.6m on an `as is, en bloc` basis. As a residential redevelopment site Richard Ellis valued the property at $6.2m (based on the existing plot ratio of 2.072) on a `vacant possession` basis. RHB Bank had, at that time in 1992, asked for a valuation on a `redevelopment` basis as it had considered redeveloping the property itself. By July 1993, when Ong took over the matter, RHB Bank no longer considered redeveloping the property themselves as a viable option.

Ong sought a revaluation of the property in late 1993 and asked Richard Ellis for a desk-top revaluation, both on a with and without vacant possession basis. In Ong`s letter to Richard Ellis, he did not specifically mention that he wanted a revaluation on an `en bloc` basis only. Because of the uncertainties arising from the fact that the units in the property had...