Tan Siah Poh v Orient Consumer Credit Pte Ltd (Fullhouten Credit Pte Ltd and Another, Third Parties)

• Judge: Warren Khoo L H J
• Judgment Date: 17 May 1999
• Neutral Citation: [1999] SGHC 130
• Citation: [1999] SGHC 130
• Defendant Counsel: Ng Hwee Lon and Carolyn Khng (Colin Ng & Pnrs),Phua Siow Choon (Michael BB Ong & Co)
• Published date: 19 September 2003
• Plaintiff Counsel: Alan Shankar (Alan Shankar & Lim))
• Date: 17 May 1999
• Docket Number: Suit No 2035 of 1997
• Court: High Court (Singapore)
• Subject Matter: Leasing,Entitlement to ownership of vehicle,Whether registration card document of title,Vehicle registration card,Commercial Transactions,Vehicle hire-purchase agreement,Entitlement to possession of registration card

: This case is essentially about the difficulties between two innocent parties arising from the frauds of a rogue in connection with dealings concerning a motor car, or more correctly, documents pertaining to it.

The rogue in this case was a man by the name of Michael Loh. He was the managing director of a car dealership known as Fullhouten Credit Private Ltd. He is now nowhere to be found. Fullhouten has been served a third party notice to this action, but no further steps have been taken against it. The contest here is essentially between the defendant Orient Consumer Credit Pte Ltd and the third party Sime Diamond Leasing (S) Pte Ltd.

The facts are fairly straight forward, but the effect of what happened is less so. Both Orient and Sime Diamond are in what may generally be called the vehicle financing business. Fullhouten was a dealer to both Orient and Sime Diamond, but the business arrangement it had with one was slightly different from that it had with the other. In Orient`s case, Fullhouten was its agent in the hire purchase of vehicles. Fullhouten was one of Orient`s network of dealers who were such agents. It introduced to Orient customers who intended to buy motor vehicles on hire purchase. The potential hirers did not deal with Orient direct, but through Fullhouten. They submitted their hire purchase applications to Orient through Fullhouten. When Orient had approved the application, Fullhouten would arrange for the hire purchase agreement to be signed at Fullhouten`s offices. Fullhouten was also given authority to collect the monthly hire purchase rentals from the hirer. At the end of the hire purchase term, Orient would return the registration card of the vehicle, which it had retained as security for the hire purchase financing, to the hirer. It did not do so to the hirer direct; it did so through Fullhouten.

Sime Diamond`s arrangement with Fullhouten in this case was not in relation to financing of vehicles for end-customers. It was to provide financing to Fullhouten itself to assist Fullhouten to purchase vehicles for Fullhouten`s own business of buying and selling of vehicles. Under a facility called a revolving floor stock facility, Fullhouten could draw up to $500,000 to finance the purchases of vehicles. All that Fullhouten needed to do was to submit documents to show the purchase of the vehicle for which the financing was required. These included an invoice from the vendor, the vehicle registration card and a vehicle transfer form signed by the vendor. Sime Diamond dealt only with Fullhouten. There was no contact between Sime Diamond and the vendor. Sime Diamond did not inspect the particular vehicle for which financing was sought, although it did at intervals of months conduct general audit of Fullhouten`s floor stock. So, like Orient, Sime Diamond relied solely on documents provided by Fullhouten when granting facility for any particular vehicle that Fullhouten proposed to buy.

There is a voluntary association called the Association of Hire Purchase and Finance Companies. The association membership consists of finance companies, banks, used car dealers, insurers and leasing companies. Not all such firms are members, but most are. Both Orient and Sime Diamond were members. The association maintains a computerised system for recording outstanding hire purchase agreements against vehicles. When a member enters into such an agreement, it notifies the association by lodging a form (Form A). When the hire purchase has been discharged, it also notifies the association, by lodging Form B. The forms include particulars of the vehicle and hirer, the date when the hire purchase agreement was entered into or discharged. When a member wishes to find out the status of a particular vehicle, it contacts the association. Staff at the association will then check its computerised record. If there are no encumbrances outstanding, they will reply `OK`. The computerised system covers only vehicles in respect of which forms have been lodged.

Now back to the case at hand. The plaintiff Mr Tan was buying a new Mercedes Benz 300 car. He needed financing. He entered into a hire purchase agreement with Orient, through Fullhouten. Orient, technically speaking, purchased the car from Cycle & Carriage, the distributors, and hired it to Mr Tan. Orient was the owner; Mr Tan, the hirer. The hire purchase agreement, dated 10 February 1993, provided for 48 monthly repayments, the first of $4,065 and the remaining 47 of $4,055. Orient told Mr Tan in writing to pay the monthly instalments to Fullhouten. Mr Tan arranged for his company to do so. He himself was mostly out of the country. The instalments were duly paid. The last one was paid in December 1996. By right, the registration card, which Orient had been holding as security, should then have been returned to Mr Tan. But Mr Tan did not miss it until October 1997, when he wanted to sell the car.

It was then found out that the registration card was no longer in Orient`s possession. It had been released to Fullhouten in October 1994 when Fullhouten told Orient, falsely, that Mr Tan had decided to settle the hire purchase agreement early. Fullhouten sent a cheque purportedly in settlement of the balance due. Orient received the money, closed the file, and sent the registration card to Fullhouten. Orient also notified the association accordingly by filing a form B. The association`s database thus showed the vehicle as free of encumbrances. Mr Tan was completely unaware of all these happenings. He knew nothing about what Fullhouten told Orient. He knew nothing about the release of the registration card to Fullhouten. He did not receive the card from Fullhouten.

It appears that on almost the very day Fullhouten got the registration card from Orient, it had submitted an application for financing to Sime Diamond, using the card and other, no doubt forged, documents. Fullhouten got a credit facility of $300,000 for 90 days for the supposed purchase of the vehicle. This loan was extended four times, the last extension being on or about 15 September 1995. Sime Diamond was not prepared to give any further extension. The loan appears to have been settled on or about 13 October 1995. It seems that Fullhouten then used the registration card to get money or facility from Mayban Finance. We do not have much detail about that. And then, on 6 December 1996, Fullhouten came back to Sime Diamond again and made an application for a facility of $150,000, again using the vehicle`s registration card and false documents. Sime Diamond`s officers were not aware that the same vehicle was being used again for this application. The documents appeared to be in order. They checked with the association and got confirmation again that there were no outstanding encumbrances on the vehicle. Sime Diamond then approved the application. The $150,000 facility extended was used to set off other accounts between Fullhouten and Sime Diamond. The facility was for 60 days, expiring on 6 February 1997. Again, it had to be twice extended. By October 1997, Fullhouten`s account with Sime Diamond had become of concern to Sime Diamond`s management. Sime Diamond`s anxieties were confirmed when, on 7 November 1997, it received a letter from the plaintiffs` solicitors claiming that the vehicle belonged to the plaintiff and that Sime Diamond did not have the right to hold the registration card. In December 1997, Orient also wrote to Sime Diamond claiming that it was the true owner of the vehicle and demanded the return of the registration card

The claims

Mr Tan has been in possession of the car throughout. He has the car, but he does not have the registration card. So he claims against Orient for a declaration that he is the lawful owner and is entitled to the return of the registration card. Orient rightly concedes that it has no defence to Mr Tan`s claim. Orient joined Sime Diamond as a third party. Orient pleads in the third party proceedings that it was induced by Fullhouten`s misrepresentation to part with the registration card. It pleads:

Due to the misrepresentation of [Fullhouten], Orient remained at all times the true legal owner of the said motor car.

It then pleads:

As [Orient] was at the material time the true legal owner of the said motor car, [Sime Diamond] was not entitled to a charge created in their favour over the said motor car ... [Sime Diamond] is also not entitled to possession of the original vehicle registration card.

Sime Diamond in its defence to Orient`s claim recites the fact that before extending the facility to Fullhouten, it had checked with the association and had received a written confirmation that there were no encumbrances on the vehicle. Sime Diamond pleads that in reliance on this information, and in reliance on the fact that Fullhouten had possession of the registration card, it extended the facility to Fullhouten. Sime Diamond then pleads:

By reason of the above, [Sime Diamond] says that it is entitled to retain the registration card as it had

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