Sudha Natrajan v The Bank of East Asia Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 29 November 2016
• Neutral Citation: [2016] SGCA 66
• Plaintiff Counsel: Tang Hang Wu (instructed counsel), Ng Lip Chih and Tan Jieying (NLC Law Asia LLC)
• Date: 29 November 2016
• Docket Number: Civil Appeal No 7 of 2016
• Hearing Date: 27 July 2016
• Subject Matter: Deed,Avoidance,Deeds and Other Instruments
• Year: 2016
• Defendant Counsel: Chua Beng Chye, Raelene Pereira and Cherie Tan (Rajah & Tan Singapore LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2016] SGCA 66
• Published date: 23 December 2016

Sundaresh Menon CJ (delivering the judgment of the court):

The core issue in the appeal is as it was before the learned judicial commissioner (“the Judge”) who tried this matter and whose decision is reported as The Bank of East Asia Limited v Sudha Natrajan [2015] SGHC 328 (“the Judgment”): did the appellant execute a Deed of Assignment of Proceeds (“the Deed”) in duplicate on 10 January 2014? The appellant testified that she did not sign the Deed. The signatures affixed on each copy of the Deed bore no resemblance to the appellant’s usual signature. But the signing of the Deeds were evidently witnessed by a solicitor. The answer to the question comes down, first, to the inherent probabilities of the case advanced by each party, and second, to the evidence of two crucial witnesses – Mr Yap Bei Sing (“Mr Yap”), a consultant forensic scientist with the Document Examination Unit of the Health Sciences Authority (“HSA"); and Mr Johnny Cheo Chai Beng (“Mr Cheo”), the solicitor who witnessed the signing of the Deed. The Judge favoured the evidence of the latter. For reasons which we set out below, we consider, having regard also to the probabilities inherent in each party’s case, that the Judge erred in his analysis and evaluation of the evidence and we therefore allow the appeal.

Facts Parties to the dispute

The appellant is a former Human Resource Manager of Tecnomic Processors Pte Ltd (“Tecnomic”), a company that has since been wound up. Her husband, Rajan Natrajan (“Rajan”), was the major shareholder and principal director of Tecnomic and was adjudicated a bankrupt on 12 June 2014, some months after the events that are central to this matter. The appellant and Rajan are joint owners of their matrimonial home located at 41 Eng Kong Place, Singapore 599113 (“the Property”).

The respondent is a bank registered in the Hong Kong SAR, and carries on business in Singapore through its local branch. It is the beneficiary under the Deed, to which the appellant (allegedly) and Rajan are co-signatories.

Background to the dispute

Rajan was one of two guarantors under a guarantee dated 7 September 2012 (“the Guarantee”) given in favour of the respondent. The other guarantor was one Sarada Devi Krishna Pillai Suresh Kumar (“Pillai”). Under the terms of the Guarantee, Rajan and Pillai were jointly and severally liable to pay on demand all sums owed by Tecnomic to the respondent in respect of banking facilities granted by the respondent to Tecnomic (“the Banking Facilities”). Tecnomic subsequently defaulted on its obligations to service the Banking Facilities and as a result, the respondent terminated these on 2 December 2013. Rajan and the respondent then entered into discussions pertaining to the repayment of the outstanding sum and it was agreed between the respondent and Rajan that Rajan, the appellant and Tecnomic would jointly and severally covenant to pay the respondent all sums owed by Tecnomic to the respondent. Additionally, the Property (or the sale proceeds therefrom) would be furnished as collateral for these sums. In return, the respondent would forebear from instituting proceedings to recover the sums due in respect of the Banking Facilities. This agreement was reduced to writing in the Deed, which for avoidance of doubt, was executed as a deed. There is no evidence to suggest that the appellant was party to any of the discussions between Rajan and the respondent that culminated in these arrangements. Indeed it does not appear that the respondent ever communicated with the appellant at any time before it received copies of the Deed on 10 January 2014.

Rajan produced, on 3 January 2014, a first set of what appeared to be signed copies of the Deed (“the Original Copies”). But this was rejected by the respondent on the ground that the signing of the documents had not been witnessed. A week later, on 10 January 2014, Rajan returned with two signed copies of the Deed, this time with what purported to be the signatures of Rajan and the appellant. Additionally, the Deed itself indicated that Mr Cheo witnessed the signing of the document. The respondent accepted the copies and lodged a caveat against the Property (“the Caveat”) on 20 January 2014 on the basis of its interest under the Deed.

Unknown to the respondent, winding-up proceedings had been commenced by a third party against Tecnomic on 20 December 2013 and Tecnomic was wound up 10 January 2014, which was the very day on which Rajan had produced the signed copies of the Deed that were accepted by the respondent. In fact, Tecnomic had been wound up that morning. Rajan, as a director of Tecnomic, had stated on oath in an affidavit filed in the winding-up proceedings on 6 January 2014 that Tecnomic was indebted to the creditor seeking the winding-up order in the amount of $21.1m and that it would not resist its winding-up because it was unable to pay this debt. The Deed was allegedly signed by the appellant in the afternoon of 10 January 2014, by which time, Tecnomic had already been wound up. The respondent maintained that it only discovered this fact upon receiving notice of the liquidation from the liquidator of Tecnomic on or about 28 January 2014. It subsequently commenced Suit No 751 of 2014 (“S 751”) against the appellant for the amounts due under the Deed, having received no payment in response to its letter of demand dated 17 March 2014 (“the LOD”) that was addressed to the appellant. The appellant’s defence was straightforward – she said that she had not signed the Deed.

Decision Below

The Judge found in favour of the respondent for the following reasons: He considered that the appellant’s evidence was not credible. The fact that it had not been the appellant’s case that Rajan had forged her signatures on the Deed appeared to have played a significant role in the Judge’s reasoning (the Judgment at [30]). An adverse inference was drawn against the appellant on the basis of illustration (g) of s 116 (“s 116(g)”) of the Evidence Act (Cap 97, 1997 Rev Ed) (“the Act”) because she failed to call Rajan as a witness without good reason (the Judgment at [75]). The evidence of Mr Cheo, which was “clear and cogent”, was preferred over that of Mr Yap (the Judgment at [46] and [66]).

The appellant contests each of these planks of the court’s reasoning. Additionally, she says that any doubt as to whether she had signed the Deed should be resolved in her favour in light of the respondent’s “poor and oppressive banking practices which deviated from industry norms”, and that the Deed should be set aside in any case as it “shocks the conscience of the court”. We first address the evidence that was before the Judge and then we consider the appellant’s alternative arguments, which we must emphasise were not raised in the court below.

The findings of fact The appellant’s evidence at the trial

The first main plank on which the decision of the court below stood was the lack of credibility in the appellant’s evidence and the case that she advanced. Her case was essentially that she had been ignorant of Rajan’s financial dealings and more specifically, of the very existence of the Deed. She testified that when she subsequently confronted Rajan about the Deed, he denied forging her signature. Rajan told her that he had passed the Deed to Pillai with only his signature and Pillai then passed the signed Deed to the respondent. The Judge highlighted numerous deficiencies in the appellant’s evidence at [39]–[44] of the Judgment and in our judgment, his scepticism as to the alleged role played by Pillai is entirely justified. The Judge outlined several pertinent considerations at [41] of the Judgment, of which we highlight two: (a) the assertion that Pillai had handed the Deed to the respondent was inconsistent with the police report filed by the appellant and the evidence of the respondent’s employee, Mr Heng Juay Yong (“Mr Heng”), both of which attest to the fact that it was Rajan who handed the Deed to the Respondent; and (b) there was no reason for Rajan to have handed the Deed to Pillai since it was the appellant’s signature that was required. Furthermore, insofar as the appellant’s evidence is intended to support the truth of the matters purportedly asserted by Rajan, it is hearsay evidence. Like the Judge, we are not satisfied that Pillai had any role to play in the alleged forgery. But this was only one aspect of the appellant’s evidence. As the appellant stresses, all she has to prove is that she did not sign the Deed; it is not necessary for her to establish who the forger was.

The foundation for the Judge’s reasoning is at [23]–[29] of the Judgment, where he spelt out the essence of his reasons for disbelieving the appellant. The first step in this process was the conclusion that Rajan must have intended the Deed to bind because it was not suggested by anyone (including Rajan) that his own signature had been forged. With respect, there is a fallacy here. The Deed needed the signatures of both Rajan and the appellant to be legally binding because the entire purpose of the Deed was to give the respondent security in the form of the appellant’s and Rajan’s home. It is not possible, in our view, to draw the conclusion that Rajan subjectively intended that the Deed should be binding just from the fact that he alone had evidently signed the Deed.

The next step in the Judge’s reasoning was based on his first premise, which, as we have noted, is flawed. He reasoned that because Rajan intended the Deed to be binding, he would have acted bona fide and persuaded the appellant (as joint owner of the Property) to sign the Assignment. But since the basis of this second step, ie the Judge’s first premise, is flawed, we do not think this step in the reasoning can stand either.

But there is more to be said about this. Given the disastrous state of Tecnomic’s finances in early January 2014 (see [6] above), it seems unlikely to...