United Malayan Banking Corp v Goodhope Realty and Others

• Jurisdiction: Singapore
• Judge: L P Thean J
• Judgment Date: 16 February 1989
• Neutral Citation: [1989] SGHC 14
• Date: 16 February 1989
• Subject Matter: Land,s 29 Conveyancing and Law of Property Act (Cap 61),Tenant holding over,Lease of part of building,Landlord and Tenant,Credit and Security,ss 39, 64, 104 & 108(1) Land Titles Act (Cap 276),Unregistered lease vs registered subsequent mortgage,Whether periodic tenancy binding on mortgages created,Mortgage to rank in priority,Whether equitable lien arises for return of deposit for due performance of lease,Tenant holding over after expiry of lease
• Docket Number: Originating Summons No 1130 of 1986
• Published date: 19 September 2003
• Defendant Counsel: Michael Barnes QC and S Rajendran (Khattar Wong & Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: Nigel Hague QC and KS Chung (Chung & Co)

Cur Adv Vult

The facts in these proceedings are not in dispute, and, so far as relevant, are these. By a lease dated 27 April 1976 (the lease) the first defendants, who were then the owners of a building known as the UMBC Building (the building) demised to the plaintiffs parts of the building consisting of the basement, the ground, first, second, third, fourth, sixth and seventh floors and the penthouse (hereinafter together called the demised premises) for a term of ten years commencing from 1 January 1976 at a quarterly rent and service charge totalling $302,081 and payable quarterly in advance. The title to the, building is one issued under the Land Titles Act (Cap 157) and is comprised in two certificates of title registered in Vols 103 and 118 Folios 10 and 21 respectively. Strangely enough, though nothing turns on this, the lease was not in a form prescribed under the Act. The lease, after execution, was never registered with the Registry of Titles; presumably, it was not registrable as (apart from not being in a prescribed form) it was a lease for parts of the building for a term exceeding seven years and no sub-division approval for the demised premises had been obtained under the Planning Act. Under cl 3(2) of the lease, the plaintiffs were obliged to pay to the first defendants a sum of $6,041,622 on or before the execution of the lease by way of deposit or security for the due performance and observance by the plaintiffs of all the terms and conditions of the lease, and they duly paid the sum to the first defendants. Under the same clause the sum was refundable by the first defendants to the plaintiffs after the expiry of the term of the lease.

On 27 July 1982, the first defendants executed a mortgage of the building to the second defendants as agents for themselves and the third defendants to secure the repayment by a company, International Consolidated Investments Ltd, of all moneys, interests and other liabilities from time to time due to the second and third defendants under a loan agreement as therein provided. At the time when the second defendants took the mortgage they had knowledge that the plaintiffs were tenants in possession of the demised premises for a term expiring on 31 December 1985. This was admitted by Mr Soh Kim Soon, a director of the second defendants, in his affidavit deposed to on 11 February 1988. This knowledge, according to him, was derived from a valuation report of the building, in which it was stated that the building was let out to various tenants as set out in a schedule which contained `details of each tenant, the area occupied, the commencement and expiry dates of the various leases and the monthly rent`. However, he said that the second and third defendants had no knowledge of the lease and the provisions of cl 3(2) thereof. That denial of knowledge I cannot accept. First, the valuation report obviously was prepared with a view to assisting the second defendants in evaluating the building for the purpose of the mortgage and since the brief particulars of the tenancies appeared in the schedule to the valuation report, the second defendants as a prudent financier would have called for a copy of the lease and examined the provisions thereof. Secondly, in an important transaction, such as the mortgage of the building which obviously was to secure a large sum of money, the second defendants` legal adviser, as a prudent solicitor, would have made the necessary searches and inquiries of the building; would have found out that a lease or tenancy agreement had been made between the first defendants and the plaintiffs; would have called for a copy of the lease for perusal, and would have examined the provisions of the lease and reported to the second defendants the material provisions thereof. It may well be that no one at that time had the prescience that a provision such as cl 3(2) could or would give rise to a litigation or dispute such as that which has now arisen. Be that as it may, the mortgage was executed and completed and was registered with the Registry of Titles. Subsequently, a variation of the terms of the mortgage was executed on 6 February 1985, and the instrument of variation was also registered.

In 1985 or thereabouts, financial problems of the first defendants developed and the second defendants had to resort to the mortgage; they exercised their rights as a mortgagee and appointed one Mr Peter MK Chi of Peat, Marwick, Mitchell & Co as receiver of income of the building (including the demised premises), and notice of the appointment was served on the plaintiffs on or about 3 July 1985 requesting or directing payment of rent to be made to the receiver. Following that, the plaintiffs on 5 July 1985 lodged a caveat under s 104 of the Land Titles Act seeking to protect their interest under the lease. In compliance with the notice of the receiver, the plaintiffs duly paid the rent and service charge to the receiver. On 28 November 1985, the plaintiffs lodged another caveat seeking to protect what they called an equitable lien on the property, ie the building.

In the caveat the plaintiffs claimed:

an equitable lien over the land above described securing repayment of the sum of $6,041,622 paid by the caveator to the registered proprietor under cl 3(2) of a lease dated 27 April 1976 made between the registered proprietor of the one part and the caveator of the other part by way of deposit or security for the due performance and observance by the caveator of the covenants and conditions of the said lease (together with any interest due therein and the costs of obtaining such repayment).

On 30 September 1985, the plaintiffs sought from the receiver an extension of the term of the lease to 30 June 1986 which, however, was refused. The lease expired on 31 December 1985 and thereafter the plaintiffs remained in possession of the demised premises. The receiver demanded the rent and service charge of the demised premises and the plaintiffs paid the same as demanded. The plaintiffs continued to remain in possession of the demised premises until 30 April 1986 when they vacated the demised premises and delivered possession thereof to the receiver.

On 29 April 1986, the plaintiffs lodged yet another caveat under s 104 of the Land Titles Act, seeking to protect their `equitable lien`. In substance, what the plaintiffs claimed in this caveat is the same as that claimed in the earlier caveat, but the claim on this occasion was expressed to be founded on the implied term...