Teo Siew Har v Oversea-Chinese Banking Corp Ltd

• Judge: Karthigesu JA
• Judgment Date: 01 June 1999
• Neutral Citation: [1999] SGCA 43
• Citation: [1999] SGCA 43
• Defendant Counsel: Woo Bih Li SC and Koh Chia Ling (Bih Li & Lee)
• Published date: 19 September 2003
• Plaintiff Counsel: Arthur Leolin Price QC and Jaganathan (JB Jeyaratnam & Co)
• Date: 01 June 1999
• Docket Number: Civil Appeal No 225 of 1998
• Court: Court of Appeal (Singapore)
• Subject Matter: Lending and security over mortgage property -Mortgagor defaulting on payment,Drop in value of property,Mortgagee not exercising power of sale,Whether mortgagee has duty to exercise power of sale early in mortgagee's interest,Banking

Judgment:

LP THEAN JA

(delivering the judgment of the court): This appeal arose from the decision of Chao Hick Tin J, in which he dismissed an appeal from the decision of the Deputy Registrar giving judgment to the respondents in the sum of $3,532,168.67 plus interest from 1 March 1998 until full payment at the rate as claimed in the OS 371/98. The summons was taken out by the respondents against the appellant under O 83 of the Rules of Court.

2. The facts

The appellant is a housewife and was the owner of No 75 Hua Guan Avenue (`the property`), which was given to her by her husband, Mr Tang Liang Hong (`Mr Tang`). By an instrument of mortgage dated 5 October 1993 and registered with the Registry of Titles as No I/47839H, the property was mortgaged to the respondents as security for an overdraft facility. The mortgage payments were made by Mr Tang.

3.During the period approximately between December 1996 and January 1997 several defamation actions were commenced against Mr Tang by several Ministers and Members of Parliament (`PAP leaders`). In January 1997, Mr Tang was unable to continue with the mortgage payments. The appellant being the housewife had no means of making these mortgage payments either. Attempts were made by the appellant to sell the property and the respondents were informed that the appellant wished to sell the property and to use the proceeds to pay off the amount owing and secured by the mortgage. The respondent had no objection to such sale. On 27 January 1997 the PAP leaders joined the appellant as the second defendant in the defamation actions and obtained a Mareva injunction against her and her husband. Thus, she could not sell or in any way deal with the property. On 17 February 1997, the PAP leaders obtained another order, namely, an order appointing a receiver over the appellant`s and Mr Tang`s assets. Under this order, the receiver had the sole right and power to sell or deal with their assets, but the receiver could only sell the appellant`s assets on the joint request of the appellant and Mr Tang.

4.Sometime in March 1997, Mr Tang spoke to Mr Amin, the respondents` branch manager, asking the respondents to sell the property in exercise of their power of sale as mortgagees. The appellant claims that there was no response. On 21 March 1997 she applied to court for an order permitting her to sell the property by public auction but the receiver objected to this on the ground that the sale should be by public tender as this method would fetch a better price. This objection was upheld by the court. On 2 April 1997, the appellant made another application to court for leave to sell the property by private treaty through her firm of solicitors and this was again turned down and the court held that the receiver should retain conduct of the sale. Those applications by the appellant were made in the defamation actions in which she was joined as the second defendant and in which the respondents were not a party; they did not concern the respondents at all.

5.No action was taken by the respondents until July 1997. By a letter dated 22 July 1997, the respondents demanded payment of a sum of $3,351,434.96 and $75,000 (but the claim for this latter sum was withdrawn on 20 October 1997). On 29 August 1997, the respondents` solicitors wrote to the appellant again demanding payment. By a letter dated 27 September 1997, the respondents` solicitors required the appellant to deliver possession of the property within one month of receipt of the letter, failing which the respondents would apply for a court order for possession of the property.

6.On 9 October 1997, the receiver`s solicitors wrote to the respondents enquiring whether the respondents might exercise their rights as mortgagees, and if so, when they would do so, and stating that the appellant was keen to sell the property as soon as possible to prevent interest from further accruing. However, on 15 October 1997, the receiver`s solicitors informed the respondents that the receiver would be selling the property and requested the title deeds from the respondents, and in response the respondents forwarded the title deeds to them.

7.On 20 October 1997, the respondents` solicitors wrote to the appellant reminding her of their demand for possession made on 27 September 1997. On 27 January and 9 February 1998, the respondents` solicitors wrote to the receiver`s solicitors requesting an up-date on the intended sale of the property. On 9 February 1998, the latter replied saying that the highest offer he had received was $2.3m to which the appellant was not agreeable, and on 11 February 1998 the receiver enquired if the respondents would like to take over the sale of the property.

8.The respondents` solicitors subsequently wrote to the appellant`s solicitors on 26 February 1998 seeking possession of the property by 6 March 1998. It also stated that possession was sought with a view to the respondents exercising their right to sell the property. The appellant`s solicitors replied on 5 March 1998, seeking an extension of time to the end of that week to revert on the issue. However, no response was forthcoming, and on 31 March 1998, the respondents` solicitors informed the appellant that they were instituting an action for possession of the property and judgment for payment of what was due. The OS 371/98 was taken out by the respondents. Personal service of the summons could not be effected on the appellant and on 14 May 1998, an order was obtained for substituted service, and this was effected on 15 May 1998.

9.The matter was heard before the Deputy Registrar on 24 June 1998, and an order was granted in terms of the respondents` application. The appellant appealed to a judge in chambers against that part of the order for payment of $3,532,168.67 (as at 28 February 1998), plus interest, but not against the order for possession.

10. The decision below

Chao Hick Tin J found that the proposed sale by the receiver had been delayed because the appellant did not wish to obtain the consent of Mr Tang to the sale, as she took the view that he had nothing to do with the property. The learned judge found this glaringly clear from the appellant`s letter of 30 September 1997 addressed to the receiver. As soon as the appellant and Mr Tang consented to the sale, the receiver proceeded to act on it; he obtained the title deeds from the respondents and took steps to have a sale by public tender. At the same time, instructions were given to James Lang Wootten to prepare a valuation report and the report was prepared on or about 13 November 1997 which ascribed a figure of $4.7m as the open market value of the property. Despite the efforts of the receiver and his property agents from October 1997 to February 1998, there were no takers.

11.The learned judge noted that there was no authority that a mortgagee was under a duty to exercise the power of sale upon the request of the mortgagor. Counsel for the appellant was not able to cite any authority to this effect. All the cases cited to the learned judge related to the failure by the mortgagee to exercise proper care in the conduct of the sale. The learned judge referred to Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949, 965-966 and Warner v Jacob [1882] 20 Ch D 220, 224. Applying the principle that the power of sale was not held by the mortgagee as trustee for the mortgagor, but that instead it was given to the mortgagee for his benefit which could be exercised by him at any time at his discretion, the learned judge held that the mortgagee was not obliged to comply with the request of the mortgagor to exercise the power of sale. A mortgagee could not reasonably owe a mortgagor such a duty. Such an argument was wholly inconsistent with the basic nature of the power and amounted to saying that the mortgagor could unilaterally impose an obligation upon the mortgagee; such a proposition must surely fail.

12.On the facts, Chao Hick Tin J found that the appellant could have had the property sold earlier if she had truly wanted to. She was holding up the sale by the receiver during the period from February to September 1997. During that period, Mr Amin had advised the appellant, through her daughter, to co-operate with the receiver. The appellant had also been informed that the respondents had not yet decided whether or not to exercise their power of sale. From mid-October 1997 to February 1998, the receiver attempted to sell the property but was unsuccessful. The respondents had assisted the receiver`s endeavour by forwarding title deeds of the property. By end March 1998, the respondents commenced this action with a view to exercising their power of sale. In the circumstances, the learned judge felt that it was unfair to blame the respondents or to hold that they had acted unreasonably.

13. The appeal

The appellant`s main argument is that the respondents, as the mortgagees, were under a duty to protect the interest of the mortgagor in the very special circumstances of this case, and were in breach of duty when they refused or failed to exercise their power of sale at an early stage at the request of the appellant, thereby sacrificing the interests of the appellant and resulting in loss to her for which the respondents should be held liable. It is submitted that in the very special circumstances of the case the respondents should have exercised their power of sale in March 1997 or thereabouts at the request of the appellant. By virtue of the Mareva injunction and the appointment of a receiver, the appellant could not sell the property despite her intentions to do so from the outset. The appellant`s daughter, Megan Tang Siau Feng (`Ms Tang`), a solicitor in Hong Kong, was in Singapore in January 1997 to arrange for the sale but her attempts were thwarted by the Mareva injunction. There was extensive media coverage of the events, and the respondents clearly knew of the appellant`s dire...