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  • Beckkett Pte Ltd v Deutsche Bank AG and Another and Another Appeal[2009] 3 SLR 452; [2009] SGCA 18
    SME Shares as being US 96 9m which to begin with was the value of SME Shares put forward by Beckkett prior to the 10 discount for minority interest see 60 above and had deducted the amount of the Unpaid Loan from this figure to conclude that the SME Shares had a negative value The figure of US 96 9m was in fact the net value of the SME Shares after taking into account the amount of the Unpaid Loan The Judge had thus double counted the Unpaid Loan in his valuation of the SME Shares When properly calculated based on the market value of US 240m for the 40 shareholding in Adaro and IBT at 97 of the Judgment the computation should have yielded a finding that SME had a positive equity value of at least US 118m 64 Although the Judge made a detailed analysis of the value of the SME Shares he was fully aware that it was an exercise in futility without evidence as to the value of the Adaro Shares and the IBT Shares since the value of those shares were imputable to the value of the SME Shares Without a finding on the market value of SME s indirect 40 shareholding in Adaro and IBT held through Asminco when these shares were sold by the Bank it was clearly impossible for him to determine the value of the SME Shares SME s 2001 financial statements would disclose the total debts of SME as at 2001 but it could shed no light as to SME s value as a going concern or its net asset value without imputing a market value to its 40 shareholdings in Adaro and IBT held through Asminco Their investment value was stated at US 102m but there was no evidence as to whether this represented the book value or the market value Beckkett contends the figure represented the historic book value as mentioned at 63 b above However it seems unlikely that it represented their market value as it bore no resemblance whatever to the price at which the Bank sold them in May 2001 at US 45 2m Furthermore for the same reason the Judge s conclusion that the SME Shares were not sold at an undervalue based on the assumption at 111 of the Judgment that the fair market value of those shares was US 96 9m was clearly a mistake As pointed out by counsel for Beckkett the US 96 9m was the value of the Adaro Shares and the IBT Shares on the assumption that the Bridging Loan had been discounted or fully paid The correct finding should have been that there was no evidence to show what the value of the SME Shares was and therefore there was no evidence that the sale of the SME Shares at US 800 000 was at an undervalue We might add that by parity of reasoning even if the SME Shares had been sold for US 1 00 there would still be no evidence that that was at an undervalue in these circumstances 65 As a result of the Judge s finding that the SME Shares were not sold at an undervalue and or that there was no evidence that they had been sold at an undervalue the Judge dismissed Beckkett s claim for damages on the ground that no loss at all had been proved This finding relates to two separate issues of fact a the sale at an undervalue and b the resultant loss We agree with the logic that if there was no sale at an undervalue there could be no liability for loss but we respectfully disagree that there was no evidence of undervalue with respect to the sale of the Pledged Shares at US 46m In our view there was ample prima facie evidence that the Pledged Shares especially the Adaro Shares had been sold at an undervalue The value of the SME shares would be determined substantially by the value of the Adaro Shares although not so much the IBT Shares whose value was dependent on Adaro being a viable coal producing company We will now examine this aspect of the case A PRIMA FACIE EVIDENCE OF UNDERVALUE 66 What then is the evidence of undervaluation The first piece of evidence was the Bank s own internal valuations of the Adaro Shares and the IBT Shares as at 1999 and 2000 The internal valuation of Deutsche Capital Singapore for the Bank had priced Adaro and IBT at US 689 3m as at August 1999 while the combined discounted cash flow valuation dated 28 December 2000 found that Adaro and IBT had an equity value of US 666 8m As at those dates the Adaro Shares and the IBT Shares together had a market value many times higher than the price of US 45 2m at which they were sold to DSM even if allowances were to be made to the different bases on which the valuations were made Beckkett had produced these valuations not to prove the value of the Pledged Shares at the date they were sold to DSM but to show that they had been sold at a gross undervalue 67 The second piece of evidence is the disparity between the sale price and the price at which the Swabara Group bought the Adaro Shares and the IBT Shares in 1997 As mentioned earlier Adaro s coal mine in Kalimantan which produced a low ash low energy coal known as Envirocoal was the crown jewel of the Swabara Group In 1997 the Swabara Group purchased 25 of Adaro s equity and 20 of IBT s equity using the US 100m loan which it had obtained from the Bank Four years later in 2001 the Bank sold 40 of Adaro s equity and 40 of IBT s equity and also the SME Shares and the Asminco Shares at a total price of US 46m of which US 800 000 was for the SME Shares This price was roughly about 25 30 of the combined price at which the Swabara Group financed its earlier purchase of 25 of Adaro s equity and 20 of IBT s equity No explanation was given by the Bank as to why or how the value of the Adaro Shares and IBT Shares had fallen so drastically during this period Indeed the Bank s internal valuations although they referred to the value of Adaro and IBT as operating companies showed that the Adaro Shares and the IBT Shares had increased in value in 2000 This meant that the value of the shares had fallen by more than 50 in less than one year B PROOF OF LOSS 68 In the present case we are satisfied that the Pledged Shares had been sold at an undervalue However the law also requires that Beckkett must prove that it has suffered a loss as a result of the Bank breaching its duty to obtain the best price for the Pledged Shares To do this Beckkett must adduce evidence of the best price the Pledged Shares could have fetched if the Bank had discharged its duty in the exercise of its power of sale With respect to this issue the Judge decided that Beckkett had failed to adduce sufficient evidence of its loss and accordingly dismissed its claim The Judge made this ruling on the basis that Beckkett was under an obligation to adduce evidence of its actual loss at the trial of the action and not at an inquiry for damages after liability had first been determined In connection with this issue it may be pertinent to note that in Apple Fields Ltd v Damesh Holdings Ltd 2004 1 NZLR 721 Apple Fields the Privy Council said at 22 Section 103A of the Property Law Act 1952 NZ codifies the duty which under the general law a mortgagee exercising a power of sale would be taken to owe to the mortgagor It does not produce a duty breach of which is actionable without proof of damage If a mortgagor wants an inquiry as to damages for breach of the s 103A duty the mortgagor must in Their Lordships opinion satisfy the Court that it has suffered at least some damage emphasis added 3 The Bifurcation Order 69 The Judge in a reserved judgment held that Beckkett had an obligation to adduce evidence of its loss at the trial itself under the terms of what is known as the Bifurcation Order see 21 e above The issue had been raised during the trial when counsel for Beckkett was cross examining one of DSM s witnesses Counsel for DSM objected to the line of questioning by counsel for Beckkett There was an exchange of comments and views among all three counsel as well as the Judge on the purpose of the Bifurcation Order At the conclusion of this exchange the Judge did not rule expressly on this issue That this was the case is evidenced in Beckkett s written submissions filed after the trial had concluded on this aspect of the case At paras 561 569 570 and 581 of its written submissions Beckkett argued as follows 561 It is clear from Beckkett s pleaded case that Beckkett has from the outset sought damages to be assessed at a separate hearing after this Court has made its findings on the liabilities of the Bank and DSM Neither the Bank nor DSM has ever raised any issue with the nature of the relief sought by Beckkett which is for damages to be assessed 569 In any event insofar as the Bank asserts that as a matter of law Beckkett has to quantify the precise loss suffered at this trial such assertion is without basis 570 It is clear from the authorities that where the plaintiff claims for damages to be assessed the plaintiff need not prove the precise loss suffered at the trial So long as the plaintiff can show he has an arguable case that he suffered loss the quantum of his loss is to be assessed at the assessment hearing 581 As a matter of law the Bank s submission that there will be no separate hearing to assess damages if damages are to be assessed based on the value as at November 2001 is plainly wrong On the evidence Beckkett has demonstrated more than an arguable case that it has suffered loss as a result of the breaches of duties by the Bank and the conspiracy perpetrated by the Bank and DSM Beckkett is clearly entitled to an enquiry as to damages to determine the quantum of its loss regardless of whether damages are to be assessed based on current value or the value as at November 2001 There is accordingly no basis for the Bank to assert that Beckkett has to prove its precise loss at this trial emphasis added 70 The Judge dealt with these submissions at 147 149 as follows 147 Beckkett however argued At this stage it is not necessary to prove the exact loss in the value of SME shares It would be sufficient to prove that any sale of the pledged shares in Adaro and IBT at an undervalue will inevitably cause a loss in the value of the shares in the companies upstream This Beckkett has amply proved emphasis in original 148 There were two difficulties with this argument First the loss in value of the SME shares caused by the sale of the Adaro and IBT shares was not really in issue The true issue was whether the SME shares were sold at an undervalue for US 800 000 and the Bank s internal valuations of Adaro and IBT shares did not show whether the SME shares were worth more than US 800 000 149 Second the reference to at this stage and the implication that the presentation of the proof can or is to be done at a later stage were misconceived This trial of this action was not divided such that liability is to be determined at the first stage to be followed by the assessment of damages in the second stage There was the Bifurcation Order made on 18 November 2006 but that was a limited and specific bifurcation The order was necessary because of Beckkett s claim for damages in respect of the pledged SME shares for damages based on the difference between the current market value of the SME shares and the price at which it sic was sold in or about November 2001 The order was that for the 2005 value the shares were to be determined at a later stage because the parties were not ready to deal with that at the trial It is not entirely clear why the 2005 value was considered important as the action was filed in 2004 and the B ifurcation O rder was sought and made in 2006 As the proof of undervalue at the time of sale in November 2001 is an entirely separate matter from the 2005 valuation the former was not deferred Beckkett was therefore obliged to prove that at the hearing or face the consequences As it has not proved its loss it is only entitled to nominal damages emphasis added The Judge held that the Bifurcation Order meant that the issues of liability and damages based on the value of the Pledged Shares at 2001 were to be determined at the trial but that the damages based on their 2005 value were to be deferred to a later stage because the parties were not ready to deal with them at that stage A WHAT WAS THE PURPOSE OF THE BIFURCATION ORDER 71 The issue as to whether Beckkett was obliged to prove its actual loss at trial by reason of the Bifurcation Order is critical to the success of Beckkett s appeal in the present case If the Judge s decision that Beckkett had such an obligation and was fully aware of it is correct that would be the end of this appeal It is therefore necessary for us to examine carefully the background to the making of the Bifurcation Order so as to determine its purpose 72 The application for the Bifurcation Order was made by DSM after Beckkett had filed its amended statement of claim in which it claimed against the Bank and DSM for the following reliefs a an order to set aside the sale of the Pledged Shares and b in the alternative for damages to be assessed either at their 2001 value or 2005 value whichever was appropriate under the law Beckkett sought damages to be assessed at 2001 against the Bank because its case was that the Bank had sold the Pledged Shares in 2001 in breach of its mortgagee s duties Beckkett sought damages against DSM calculated as at 2005 because DSM who was joined as the second defendant in 2005 had sold the Adaro Shares and the IBT Shares to an international consortium in 2005 Accordingly DSM would not have been in a position to return the Pledged Shares and therefore might have to pay damages on the basis of their 2005 value Beckkett also claimed damages at their 2005 value against the Bank on the basis that if it were entitled to set aside the sale it should be awarded damages as at 2005 since the Pledged Shares and in particular the Adaro Shares and IBT Shares could not be restored to them This would explain why Beckkett was claiming damages based on their 2005 value which had puzzled the Judge The reason why the claim for damages based on the value of the Pledged Shares as at 2005 was deferred under the Bifurcation Order was not because the parties were not ready to deal with that claim but because it was neither convenient nor efficient to do so until the court had determined the issue of whether the sale could or should be set aside having regard to the fact that DSM had already disposed of the Adaro Shares and the IBT Shares 73 It was against this background that DSM made an application on 11 November 2005 in Summons in Chambers No 5762 of 2005 for the following order In respect of Beckkett s claim for damages calculated based on the current market value of shares in SME Asminco Adaro and IBT all questions and or issues whether of fact or law or partly of fact and partly of law and whether raised by the pleadings or otherwise relating to any such liability of the Bank and or DSM to Beckkett for damages calculated based on the current market value of the said shares be tried after the outcome of the trial or determination of the Court on all other questions and or issues in this cause or matter emphasis added In this application the phrase current market value referred to the market value as at 2005 either because DSM was joined as the second defendant on 28 February 2005 or because the application was made in 2005 When this application came before the assistant registrar the AR on 18 November 2005 see 21 e above Beckkett opposed the application on the ground that since valuations of the Pledged Shares as at 2001 would be produced there should be no reason why the same valuers could not value them as at 2005 DSM disagreed and argued that until the court had decided the issue whether Beckkett was entitled to set aside the sale vis à vis DSM it was neither necessary nor efficient to hear any evidence on the 2005 value of the Adaro Shares and the IBT Shares at the trial DSM wanted its liability to be determined first and for damages computed as at the 2005 value to be assessed at a subsequent hearing The Bank supported the application 74 After hearing arguments the AR made the following order Court Issue of the basis for damages to proceed ie whether 2001 or 2005 valuation However the actual valuation at 2005 for purposes of damages is to be assessed at a later stage This is without prejudice to Plaintiff s applications in relation to discovery or otherwise relating to 2005 valuation if it is able to establish that it is relevant to liability emphasis added 75 It seems clear to us that DSM s application and the Bifurcation Order were solely concerned with the 2005 value of the Pledged Shares and nothing more We have mentioned earlier that the issue of the scope of the Bifurcation Order was considered by the Judge but he made no decision on it This issue surfaced between Beckkett and DSM when one Soeryadjaya a witness for DSM was cross examined by Mr Chong counsel for Beckkett This took place after Beckkett had closed its case against the Bank and the Bank had elected not to give evidence Mr Chong wanted to elicit from Soeryadjaya evidence on the dealings between Adaro and a company called Coaltrade which he considered to be relevant in showing the true value of the Adaro Shares as at 2001 Allegations were made by Beckkett that Adaro s profits had been siphoned to Coaltrade such that Adaro appeared to be less profitable than it really was Counsel for DSM Mr Tan objected to this line of questioning on the grounds that it was irrelevant as DSM did not even know about the existence of Coaltrade until after the sale of the Pledged Shares in 2001 and that Beckkett simply had no basis to make such allegations The exchanges between Mr Chong Mr Tan counsel for the Bank Mr Ang and the Judge then proceeded as follows MR TAN Sir perhaps at this stage I should raise my point The issue of Coaltrade has come before your Honour several times Your Honour will recall that there were lengthy arguments on the relevance of Coaltrade and further discovery on Coaltrade and your Honour ruled that for purposes of liability Coaltrade was not relevant I would ask again that this area not be gone into consistently with how your Honour has ruled twice before Mr Tan The suggestion that Beckkett is making is at the same time that DSM acquired their interest in Adaro and IBT they also acquired the interest in Coaltrade That s not been established and that s a critical part of this kind of an argument DSM bought only Adaro IBT and the other companies from the B ank Coaltrade was not there DSM didn t even know about Coaltrade at that time That was the deal and that was the complaint that Beckkett has made before this court I think what they are saying which is what we argued in chambers your Honour is supposing they are able to establish liability on the part of the B ank and or DSM Then when they go for an assessment of damages they say that the real value of Adaro and IBT may perhaps include Coaltrade to the extent that that is an adjunct of Adaro and IBT That s a separate issue which we will fight then but the issue here is how can you say now that when DSM bought IBT and Adaro they as part of the whole scheme also bought Coaltrade knowing that the value was different and therefore this is part of the conspiracy MR CHONG I don t understand the basis of my learned friend s submission Is he saying it s not relevant It s relevant it s in my pleadings your Honour Mr Tan I am saying it s not relevant to liability sir and the pleadings are such It was brought before your Honour exactly the same pleadings and the pleadings relate only to damages That was how your Honour ruled MR CHONG Your Honour I went back to check and I argued that with my learned friend about the bifurcation I think your Honour should know that the order made by the AR on bifurcation was not bifurcation as I also recall that liability and damages are bifurcated His bifurcation was very narrow and I ll show it to you now your Honour Page 3 Your Honour one of the issues which emerged during this hearing and in fact from the pleadings Beckkett s principal claim is to set aside the sale and purchase agreement and for the equity of redemption to be restored to the original pledgors That is the principal claim But for whatever reason if that could not be performed then there will be an issue of damages and that issue would have a further issue as to whether damages are to be assessed by reference to 2001 or 2005 That is exactly what Mr Kwek said In fact your Honour when I go through the cross examination I will only be showing Coaltrade documents from 2001 to 2004 I don t need to go into 2005 The bifurcation is an extremely limited bifurcation COURT I am sorry I don t understand extremely limited bifurcation COURT Can we look at the application because basically everything said is in the context of the application and I think we will have the best assistance by looking at that MR CHONG This was a long application the main remedy of which was to vacate the trial Insofar as liability or damages the prayer that was sought was In respect of the plaintiff s claim for damages calculated on the current market value of shares in SME Asminco Adaro and IBT all questions and or issues whether of fact or law and whether raised by the pleadings or otherwise relating to any such liability of the first and or second defendants can be tried after the outcome of the trial or the determination of the court on all other questions issues in this cause So the application was also specific only to the issue of calculating the damages by reference to current market value COURT This is all getting very complicated Let s just move one step back Are you saying that now with regard to the restoration of the shares That is if you succeed in the issue before me this court MR CHONG Yes COURT This is very interesting I ll tell you why When it comes to that you will have a lot of other matters that the court will have to take into account in a situation like that third party interests change of circumstances investments made and all of that improvements A court will not do that without taking all those other matters into account MR CHONG Yes your Honour I agree COURT If this were before me I have to say that very little of this has been surfacing in this case You have closed your case and you have not dealt with that and that is important My impression was that with the bifurcation that actually comes as part of the remedy and you may then go either before me or somebody else and at that stage you can then bring those facts before the court If none of those facts are before the court then it would seem rather unlikely that the court would without any facts say All right if you succeed yes the shares go back to you even though they are in third party hands COURT If that s how you will deal with it because quite honestly I had always thought that by the bifurcation I will only deal with liability Anything post liability the form of remedy comes later your take is different Your take is that I deal with everything MR CHONG Other than the quantification COURT Is that how the defendants look at it MR ANG Your Honour we take the view that it actually covers everything except the quantification COURT So whether or not there should be recovery of the shares is something to be done in these proceedings MR ANG Yes COURT Mr Tan MR TAN Your Honour only determines liability all the rest is bifurcated COURT You two take the same position but not him MR TAN Yes COURT We can t even decide on the order I have always been thinking in the way that Mr Tan has Just give me a minute to think over this because it has just come up Off hand I would have thought that you would have preferred to take his position because there are a lot of questions which arise when a court decides whether to order restoration If you say that there is a bifurcation you have another round to treat that but if you say that you are prepared to deal with that now you can deal with it now Now we come back to this other point about whether this Coaltrade issue if it doesn t go into damages the simple point is it s not before me and by any of the constructions you give damages is not before me emphasis added 76 Mr Chong s questions to Soeryadjaya on Coaltrade were directed at eliciting evidence to show that the Adaro Shares had been sold to DSM at an undervalue with DSM s knowledge Mr Chong wanted to prove undervalue not actual loss in order to show that DSM had conspired with the Bank to purchase the Adaro Shares at an undervalue and that the sale should be set aside In this context Mr Chong referred to the restoration of the equity of redemption and argued that b ut for whatever reason if that could not be performed then there will be an issue of damages and that issue would have a further issue as to whether damages are to be assessed by reference to 2001 or 2005 see 75 above Clearly Mr Chong s statement was a reference to liability being determined at the trial and damages only later if liability should be determined against DSM 77 Mr Chong s understanding of the Bifurcation Order was that the quantification of damages as at 2005 valuations would follow only after the court had decided whether to set aside the sale of the Pledged Shares assuming there was a legal basis to set it aside Mr Ang s understanding was also the same He said Your Honour we take the view that it actually covers everything except the quantification Similarly Mr Tan also had the same understanding He said Your Honour only determines liability all the rest is bifurcated Finally even the Judge appears to have been of the same understanding since he said So whether or not there should be recovery of the shares is something to be done in these proceedings to which Mr Tan replied Yes see 75 above 78 The Bifurcation Order was therefore very narrow as explained by Mr Chong The Bifurcation Order was limited on the issue of liability to the remedy of setting aside the sale of the Pledged Shares and on the issue of damages to the extent of damages which would be necessary to compensate Beckkett for its loss should DSM not be able to restore the Pledged Shares to Beckkett ie damages at 2005 valuations The Bifurcation Order was not concerned with liability arising from the breach of the duty to obtain the best price or with damages arising from this breach ie damages at 2001 valuations That this was clearly Mr Chong s position is shown by Beckkett s written submissions that it did not have to prove actual loss at the trial but only undervalue since such damages were to be assessed as pleaded by Beckkett B DID THE BIFURCATION ORDER REQUIRE DAMAGES TO BE PROVED AT TRIAL 79 In our view the Judge was wrong to have interpreted the Bifurcation Order as obliging Beckkett to adduce evidence of actual loss at the trial This ruling is not supported by the evidence and the reasons for DSM s application for the order DSM took out the application for its own convenience and not for the Bank s convenience Beckkett had never pleaded nor agreed that if it was entitled to damages against the Bank or DSM as at 2001 valuations it had to adduce all its evidence at the trial All three counsel did not have such an understanding as Beckkett s pleaded case from inception until its final pleading was for damages to be assessed In its re amended statement of claim dated 28 December 2005 which was filed after the making of the Bifurcation Order Beckkett proceeded on this basis AND BECKKETT CLAIMS damages to be assessed against the Bank and DSM for breach of the Bank s duties to Beckkett and for the conspiracy of the Bank and DSM emphasis added 80 In our view the Bifurcation Order said nothing about damages as at 2001 valuations having to be assessed at the trial There is nothing in DSM s application or the arguments of the parties before the AR that suggested such a requirement On the contrary Beckkett s final pleadings suggested otherwise Further Beckkett had proceeded with its case on that understanding as confirmed by its counsel s remarks during the exchanges with the Judge and counsel for the Bank and DSM and also by its written submissions on this point 81 Apart from the evidence there are other reasons why in our view the Judge s dismissal of Beckkett s claim for damages against the Bank should not stand The first reason is that the Bifurcation Order was only a procedural order which was not binding on the Judge If there was any doubt as to its scope and if it was necessary to modify or set aside the Bifurcation Order in the interest of justice the Judge had the power to do so and to give such directions as he thought fit The second reason is that and this is more important he should have ruled on the dispute when it arose so that if his ruling were inimical to Beckkett s claim for damages as it was Beckkett would have been apprised thereof and given an opportunity to decide whether to apply to re open its case to adduce evidence of actual loss on the basis of the Judge s interpretation of the Bifurcation Order Although both Beckkett and the Bank had closed their cases it would have been within the power of the Judge to grant the application as it is difficult to see how the Bank could have been prejudiced by such a ruling since it had given no evidence at all Of course after Beckkett has adduced evidence of its actual loss the Bank would then have another chance to elect whether or not to open its case The third reason is that the omission by the Judge in not ruling on this disputed point and then deciding it against Beckkett in a reserved judgment might be seen to have denied Beckkett a fair trial in relation to its claim for damages Beckkett s claim to set aside the sale of the Pledged Shares 82 It may be recalled that Beckkett s claim to set aside the sale of the Pledged Shares to DSM is based on allegations that DSM was not a bona fide purchaser for value without notice as a DSM had notice of the Bank s lack of good faith and or impropriety in exercising its power of sale and b DSM had conspired with the Bank to injure Beckkett through unlawful means by buying the Pledged Shares at an undervalue The Bank has denied such allegations and also contended that in any event Beckkett had no standing to set aside the Pledged Shares other than the SME Shares as it neither owned nor pledged those shares and that in any event it would be inequitable having regard to all the circumstances of the case to set aside the sale We will consider the issue of standing first followed by the question of whether DSM was a bona fide purchaser Can Beckkett set aside the sale of the Pledged Shares 83 The Judge agreed with the submission of the Bank that Beckkett had no locus standi to set aside the sale of the Pledged Shares except for the SME Shares at 144 of the Judgment Before us Beckkett has contended that it was competent to set aside the sale of the Pledged Shares as the Bank had sold them as one lot to DSM under a single agreement there was only one transaction and the values of the different shares could not be segregated Beckkett argued that the whole transaction had to be unravelled for it to be even able to recover the SME Shares it had pledged Further given that it would be impossible for SME and Asminco to sue for their shares which they had respectively pledged since they were now controlled by DSM s nominees see also 56 above Beckkett was effectively the only party that could sue to recover the Pledged Shares It was further argued that since Beckkett had at least the standing to sue for the recovery of the SME Shares as owner and pledgor of those shares then following the corporate chain downstream Beckkett should have an interest in the Adaro Shares and the IBT Shares through the two subsidiary companies SME and Asminco Beckkett s interest in SME gave it an interest in Asminco and in turn Adaro and IBT because the value of the shares in SME which itself had an interest in Asminco was ultimately dependent on the value of the shares in Adaro and IBT It was argued that the law recognised this as a fact but regulated the ability of a shareholder to bring a claim for reflective loss only because it would otherwise give rise to a problem of multiple plaintiffs or claims see Townsing 55 supra

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  • EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd and another
    pp 392 393 For example the Singapore courts have taken judicial notice of the likelihood that foreign law may differ in content from Singapore law in cases of forum non conveniens Halsbury s Singapore at para 75 297 JIO Minerals FZC and others v Mineral Enterprises Ltd 2011 1 SLR 391 at 96 citing Rickshaw at 43 58 Notwithstanding these difficulties it remains established by the various case authorities that in general if foreign law is not pleaded Singapore courts will simply apply Singapore law Halsbury s Singapore at para 75 296 This is subject to exceptions for example where a mandatory pleading of foreign law is required as a matter of law Goh Chok Tong v Tang Liang Hong 1997 1 SLR R 811 GCT at 84 see also Parno v SC Marine Pte Ltd 1999 3 SLR R 377 at 44 In GCT the defendant applied to strike out a claim for defamation on the ground that the plaintiff had not pleaded actionability of this claim under the law of Malaysia the place where the slander was uttered and the tort of authorising the publication was committed The High Court in GCT held that in relation to the double actionability rule a plaintiff is not required to plead actionability under a foreign law and in the absence of such pleading a tort claim involving foreign elements may be treated as if it were a domestic Singapore case GCT at 85 89 The Law Reform Committee of the Singapore Academy of Law in a report of 31 March 2003 titled Reform of the Choice of Law Rule Relating to Torts also noted that while the pleading of the applicable law for tortious claims is desirable it is not mandatory in Singapore at paras 29 30 In commenting on GCT Yeo Tiong Min in Private International Law Recent Developments in Singapore 1997 1 Singapore Journal of International Comparative Law 560 observed at p 586 that The specific question that Lai J addressed in GCT was whether the double actionability rule had to be stated in every pleading alleging a foreign tort The learned judge held that it was not necessary as foreign law is presumed to be the same as the lex fori unless shown to be different and the defendant has the option of pleading foreign law to exonerate himself Thus if neither party pleads foreign law the case will be dealt with as if it is a purely domestic case In so holding this case flatly contradicts the controversial Malaysian Federal Court decision in Chan Kwon Fong v Chan Wah not cited in the Singapore decision that had dismissed a plaintiff s claim for failing to adduce foreign law to prove actionability by the lex loci delicti Although there are English authorities going both ways the Singapore position is probably more consistent with general principles emphasis added in bold italics 59 In Dicey Morris and Collins at para 35 121 the learned authors also note that A question arises as to whether it is for the claimant to allege in a tort claim that the defendant s conduct is actionable under the lex loci delicti i e that such an allegation is part of the claimant s positive case or whether it is sufficient for the claimant to allege what amounts to defamation and other torts to which the Rome II Regulation does not apply in English law it then being left to the defendant to allege and prove that his conduct was not actionable under the lex loci delicti If the first view is correct it does not follow that the claimant has to allege and prove foreign law for he can rely on the principle that in the absence of an averment as to the content of foreign law the court will apply English law On the other hand if the second view is correct the content of the foreign law is irrelevant unless and until the defendant alleges that his conduct is not actionable under the lex loci delicti and in support of that allegation seeks to rely on the foreign law The cases reveal support for each of these views and the question has not been authoritatively determined by an English court emphasis added in bold italics 60 In Richard Fentiman International Commercial Litigation Oxford University Press 2010 at para 6 01 the learned author also states that under English law the pleading of foreign law is generally voluntary and parties are likely to plead foreign law only where English law offers no equivalent claim or defence or where foreign law is significantly more advantageous than English law or where the pleading of foreign law is mandatory see also James McComish in Pleading and Proving Foreign Law in Australia 2007 Melb U L Rev 400 61 In this case the parties did not plead or raise any issue of foreign law in relation to the claim of unlawful means conspiracy for example to argue that the claim was not actionable under Taiwan law or that there was a defence under Taiwan law that the respondent could avail itself of the Judgment at 80 In a tortious claim involving foreign elements the claimant is not obliged to plead the applicability of foreign law and in our judgment there is no reason or basis for imposing any such burden on the plaintiff see also Richard Fentiman Foreign Law in English Courts Pleading Proof and Choice of Law Oxford University Press 1998 Foreign Law in English Courts at pp 101 103 who notes that the view that a claimant must plead actionability under the lex loci delicti having decided to sue in England and have English law apply is hard to justify either on authority or principle In our judgment the primary rationale for the double actionability rule in general lies in the consideration that an alleged tortfeasor who commits an act or omission in one jurisdiction should not be liable to suit in another without being afforded the opportunity to contend that for one reason or another whether it be the lack of such a head of liability or the availability of a defence in the place where the alleged tort was committed he would not have been liable there and so should not be liable in the forum see also Halsbury s Singapore at para 75 372 This explains why the rule exists primarily for the benefit of the defendant whose burden it should be to raise the issue and prove the difference Where as here he does not raise any difference in the law of the place of the tort there is accordingly no conflict of laws issue raised by the parties and the court simply applies the forum s law see also GCT at 87 89 62 In the circumstances that availed in this case the Judge ought simply to have applied Singapore law The Judge should have assessed the claim purely as a domestic matter governed by Singapore law which is how the case was pleaded It follows that in our judgment the Judge erred in dismissing the Suit on the basis of the appellants failure to plead actionability under Taiwan law 63 The Judge distinguished GCT on the basis that it involved the choice of law rule for a claim for defamation and not unlawful means conspiracy However it does not seem to us that this distinction featured materially in the reasoning of the court in GCT Nor do we think that there is any basis in principle for confining the rule to actions in defamation It also follows from this that there was no need on the facts of this case to consider the applicability of the presumption of similarity or identity of laws ie the presumption that foreign law is the same as the lex fori in absence of proof which is concerned with the ascertainment of the content of foreign law In Law Foreign Laws and Facts at p 406 the learned author in discussing the presumption of similarity or identity of laws observed that the presumption of identity between English and foreign law has always been troublesome Even if it operates where proof of foreign law has failed or has not been attempted it is uncertain whether it has a role where foreign law has not been pleaded at all emphasis added in bold italics 64 We note that in OMG Holdings Pte Ltd v Pos Ad Sdn Bhd 2012 4 SLR 201 OMG Holdings at 39 and 42 the court appeared to require the parties to plead foreign law in relation to a claim in passing off and noted that the presumption that the foreign law is the same as the lex fori would not apply if an injunction is sought to restrain acts of passing off committed in the foreign jurisdiction The court in OMG Holdings relied on a series of cases where the courts refused injunctions to restrain alleged acts of passing off in other jurisdictions on the basis that evidence on foreign law had not been adduced and the claim was not shown to be actionable in the foreign jurisdiction We do not think that OMG Holdings or the cases relied upon by the court such as Alfred Dunhill Ltd v Sunoptic SA 1979 FSR 337 Alfred Dunhill are of assistance to the appellants see also Foreign Law in English Courts at p 103 Alfred Dunhill may have to be seen in light of the nature of the application sought which was an interlocutory injunction to restrain acts of passing off in another jurisdiction In such circumstances it would not be surprising if the court were to require proof that the act to be restrained is in fact illegal in the place where it would otherwise be done 65 Consequently it is not necessary for us to make any order on the Summons and we order that the parties bear their own costs in respect of the Summons However although we agree that Judge erred insofar as she dismissed the claim in this ground this does not dispose of the appeal and we now turn to consider whether the elements of the tort of unlawful means conspiracy were made out on the facts as a matter of Singapore law Issue 3 Whether the elements of the tort of unlawful means conspiracy are satisfied on the facts of this case 66 The nub of the appeal on the substantive question of the tort of unlawful means conspiracy turned on the mental element that would support a finding of liability on the part of the respondents Mr Yeo accepted that Ms Lim had no actual knowledge of Mr Qin at the time the Documents were shown nor of the representations made by Mr Chiao and Mr Hsiao on 24 June 2008 nor even of the fact that EIMC had found a potential investor who would provide it with funds After all the fraud on the appellants was not to raise funds in order to pay for the Hulls which had always been the extent of the respondents interest On the contrary Mr Qin was told that the Hulls had already been purchased and paid for and then sold and that EIMC had purchased other vessels which were currently under construction with the sale proceeds see above at 26 Mr Qin decided to invest in the company because he thought that it was a good business proposition 67 However Mr Yeo s case was that the appellants were part of the class of persons who stood to be injured by the wrongful acts of the respondents because it would have been within the contemplation of Ms Lim as a business person that EIMC might approach not just banks but investors to inject money into EIMC whether by way of loan or equity Mr Yeo also submitted that the mental element for unlawful means conspiracy would be satisfied if the respondents knew or ought to have known that the Documents which had been created with their participation could be used for other fraudulent purposes by Mr Lu Mr Hsiao or the principals of EIMC to deceive private investors other than banks into investing in EIMC on the basis of the false impression of EIMC s financial strength but were recklessly indifferent as to whether this would transpire During the hearing of this appeal we expressed the concern that if we accepted Mr Yeo s conception of the mental element for unlawful means conspiracy the tort of conspiracy would begin to look very much like a species of negligence 68 In addressing this issue it might be useful for us to first examine the history of the tort of unlawful means conspiracy and the developments that have taken place thus far with particular attention paid to developments that have taken place in England History of the tort of conspiracy by unlawful means 69 Hazel Carty in her article The economic torts in the 21 st century 2008 124 LQR 641 Carty LQR sets out a succinct summary of the history and evolution of the law on unlawful means conspiracy in England and indeed the group of torts commonly labelled as economic torts before the decision of OBG Ltd and another v Allan and others 2008 1 AC 1 OBG at p 164 In theory the House of Lords decision in Allen v Flood set out the framework for the modern development of the economic torts However the century following that seminal decision saw the economic torts get into a muddle By the start of the 21st century a patchwork list of economic torts with confusing intersections between them had emerged So inducing breach of contract had spawned torts of direct and indirect interference with contract A tort of intimidation had also been identified together with what was described as the genus tort of unlawful interference with trade now termed the tort of causing loss by unlawful means In addition a hybrid tort unlawful interference with contractual relations lurked in case law thought to lie somewhere between the tort of inducing breach and the tort of causing loss by unlawful means The case law also evidenced two further economic torts They were both based on conspiracy but whereas the first focused on unjustified harm the other centred on unlawful means and their relationship to the other economic torts and to each other was uncertain Moreover the ingredients of these torts lacked clarity Though inducing breach of contract required knowledge of the contract breached and the tort of causing loss by unlawful means and the unlawful means conspiracy tort centred on the use of unlawful means these key ingredients had failed to attract a uniform judicial definition And the requirement of intentional harm the key ingredient of all the economic torts was similarly unclear 70 It is noteworthy that most leading textbooks on the subject have categorised conspiracy claims in tort as part of a cluster of economic torts see for example Gary Chan Kok Yew The Law of Torts in Singapore Academy Publishing 2011 The Law of Torts in Singapore Clerk Lindsell on Torts Sweet Maxwell 20th Ed 2010 Clerk Lindsell at para 24 01 Francis Trindade Peter Cane Mark Lunney The Law of Torts in Australia Oxford University Press 4th Ed 2007 The Law of Torts in Australia Peter T Burns and Joost Bloom Economic Interests in Canadian Tort Law LexisNexis 2009 alongside the tort of procuring a breach of contract unlawful interference and intimidation This perspective seems to have spawned the search for a unifying theory of economic torts which was eventually rejected in the United Kingdom in OBG but this in turn has since been somewhat obscured by the more recent pronouncement of the House of Lords in Revenue and Customs Commissioners v Total Network SL 2008 1 AC 1174 Total Network see Hazel Carty An Analysis of the Economic Torts Oxford University Press 2nd Ed 2010 Carty at pp 166 168 71 At least a few propositions seem clear The first is that there appears to be two types of settings in which such torts might arise The first has been termed the 3 party setting which envisages the involvement of a third party or intermediary either as the primary wrongdoer eg the intermediary who actually breaches the contract in the tort of inducement of breach of contract as was laid down in Lumley v Gye 1843 EWHC QB J73 or as the victim of the wrongful act of the defendant eg in the tort of unlawful interference with business also known as the tort of causing loss by unlawful means such as where a defendant intends to injure the claimant by wrongful interference with a third party s actions see generally Carty at pp 17 18 and pp 155 156 OBG at 46 47 However liability can also arise in a 2 party setting where the defendant intentionally causes loss to the claimant without acting through an intermediary This can be seen in torts such as intimidation and conspiracy Conspiracy of course could also arise in a 3 party setting see Lord Mance in Total Network at 117 citing Lonrho plc v Fayed and others 1992 1 AC 448 Lonrho v Fayed HL 72 The second proposition is that many though not all of these torts require that there be some unlawful means or the presence of an element of unlawfulness The Law of Torts in Singapore at para 15 004 see also The Law of Tort Ken Oliphant gen ed LexisNexis 2nd Ed 2007 Oliphant at para 29 6 This is unsurprising given that the common law has recognised the need to protect and encourage lawful competition in a free market system Lord Nicholls of Birkenhead observed in OBG at 142 that Intentional harm of another s business is not of itself tortious Competition between businesses regularly involves each business taking steps to promote itself at the expense of the other One retail business may reduce its prices to customers with a view to diverting trade to itself and away from a competitor shop Far from prohibiting such conduct the common law seeks to encourage and protect it The common law recognises the economic advantages of competition In fact it has been suggested that neither malicious hindrance with another person s business nor general unfairness renders conduct that is otherwise lawful unlawful Oliphant at para 29 2 73 One notable exception to this was the tort of conspiracy to injure or what is now known as lawful means conspiracy where liability can arise merely by reason of damage flowing from a combination regarded as illegitimate because it had at its essence the predominant purpose of injuring the claimant without proof of further illegality Clerk Lindsell at para 24 07 In Crofter Hand Woven Harris Tweed Company Limited and others v Veitch and Another 1942 AC 435 at 462 Lord Wright said The rule may seem anomalous so far as it holds that conduct by two may be actionable if it causes damage whereas the same conduct done by one causing the same damage would give no redress In effect the plaintiff s right is that he should not be damnified by a conspiracy to injure him and it is in the fact of the conspiracy that the unlawfulness resides It is a different matter if the conspiracy is to do acts in themselves wrongful such as to deceive or defraud to commit violence or to conduct a strike or lock out by means of conduct prohibited by the Conspiracy and Protection of Property Act 1875 or which contravenes the Trade Disputes and Trade Unions Act 1927 74 The tort of lawful means conspiracy has been castigated as an anomaly which has been allowed to survive only because of its vintage The attempt to justify its existence rested largely on the much criticised rationale that a combination may make oppressive or dangerous that which if it proceeded only from a single person would be otherwise and the very fact of the combination may shew that the object is simply to do harm and not to exercise one s own just rights The Mogul Steamship Company Limited v McGregor Gow Co and Others 1889 23 QBD 598 at 616 As long ago as thirty years Lord Diplock in Lonrho Ltd and another v Shell Petroleum Co Ltd and another No 2 1982 1 AC 173 Lonrho v Shell noted the deficiencies in this rationale at 189 in these terms But to suggest today that acts done by one street corner grocer in concert with a second are more oppressive and dangerous to a competitor than the same acts done by a string of supermarkets under a single ownership or that a multinational conglomerate such as Lonrho or oil company such as Shell or B P does not exercise greater economic power than any combination of small businesses is to shut one s eyes to what has been happening in the business and industrial world since the turn of the century and in particular since the end of World War II The civil tort of conspiracy to injure the plaintiff s commercial interests where that is the predominant purpose of the agreement between the defendants and of the acts done in execution of it which caused damage to the plaintiff must I think be accepted by this House as too well established to be discarded however anomalous it may seem today 75 Notably two decades later Lai Kew Chai J in Panatron Pte Ltd v Lee Cheow Lee and Others 2000 SGHC 209 picked this theme up and suggested that the time had come to reconsider the law s historical recognition of the tort of conspiracy by lawful means at 85 it is quite odd to have a situation where what a person does alone is not unlawful but it becomes actionable if he acts in concert with another It is especially so in view of the fact that in this modern age conglomerates are certainly more powerful and potent than the combination of a small group of people Should our jurisprudence entertain this anomalous cause of action There are other pragmatic reasons for its discontinuance It will obviate wasteful litigation which tend to be highly contentious prolonged and lend themselves to an investigation of a host of circumstantial evidence That is because combines usually are hatched in secrecy and a plaintiff has to resort to indirect evidence and in the process of drawing conclusions from a set of circumstances there could arise fevered imaginations coloured by the inevitable emotions Further our law of tort already recognises other economic torts of intimidation unlawful interference and indirect procurement of breach of or interference with contract which are sufficient to provide the necessary remedies 76 Another exception to the general applicability of the second proposition to this cluster of torts is the tort of interference with a contractual relationship short of inducing a breach of it see Lord Hoffmann s discussion of Quinn v Leathem 1901 1 AC 495 Quinn GWK Ltd v Dunlop Rubber Co Ltd 1926 42 TLR 376 and DC Thomson Co Ld v Deakin 1952 1 Ch 646 DC Thomson in OBG at 15 29 The foundation for a unified theory which treated the tort of inducing a breach of contract the Lumley v Gye tort as a species of the tort of actionable interference with contractual rights which extended to forms of interference other than persuasion procurement or inducement was laid down by Jenkins LJ in DC Thomson OBG per Lord Hoffmann at 26 27 Subsequently in Torquay Hotel Co Ltd v Cousins and Others 1969 2 Ch 106 at 138 Lord Denning said t he time has come when the Lumley v Gye tort should be further extended to cover deliberate and direct interference with the execution of a contract without that causing any breach including cases where the defendant prevents or hinders the intermediary from performing the contract This extension of the Lumley v Gye tort was endorsed by Lord Diplock in Merkur Island Shipping Corporation v Laughton The Hoegh Anapa and others 1983 2 AC 570 at 608 Today the notion that these two torts are subsumed one within the other has been curtailed if not jettisoned following the House of Lords decision in OBG The House of Lords in OBG held that the Lumley v Gye tort and the tort of causing loss by unlawful means should be kept as distinct torts because the rationale underlying each of these two torts is different OBG per Lord Hoffmann at 32 33 and 38 see also OBG per Lord Nicholls at 188 189 per Lord Walker of Gestingthorpe at 264 per Baroness Hale of Richmond at 303 and per Lord Brown of Eaton under Heywood at 319 320 As explained in Carty at p 24 the Lumley v Gye tort depended on the third party s liability for contract breach resulting from the defendant s persuasion and is a species of secondary liability while the tort of causing loss by unlawful means was ambivalent as to the nature of the interest which is damaged and is a species of primary liability see also OBG per Lord Hoffmann at 32 33 The House of Lords accordingly rejected the notion of a unified theory that underlay the Lumley v Gye tort and the tort of causing loss by unlawful means 77 A third proposition that may be gleaned from the authorities is that these torts require some element of intention or intentional harm for liability to be imposed Carty at p 170 The Law of Torts in Australia at pp 269 270 and that other lesser mental states would not suffice In fact it was thought in many cases that it was the element of intentional infliction of harm that might form the basis of a unified theory although this premise too has been criticised see Carty at p 19 Lord Lindley in Quinn characterised the Lumley v Gye tort as a species of the tort of causing loss by lawful means on the basis of a wider principle which imposed liability for all wrongful acts done intentionally to damage a particular individual and actually damaging him Quinn at 535 see also Carty LQR at p 645 This placed emphasis on the subjective intent of causing harm coupled with the objective fact of resulting harm to justify making unlawful that which would otherwise be lawful 78 Beyond this not much else was clear Was the scope of the required intention the same for all torts Was there even a unifying theory Was it possible to follow in the footsteps of Lord Atkin whose historic judgment in M Alister or Donoghue Pauper v Stevenson 1932 1 AC 562 paved the way for the development of a unified theory of liability for unintended physical harm caused by a failure to take reasonable care to avoid foreseeable risks of injury in the field of intentional acts done with the aim of causing economic harm usually carried out in a commercial context Were each of these torts all still valid and relevant see for example the forgoing discussions on unlawful interference with contractual relations falling short of breach and on lawful means conspiracy There have also been questions as to whether there remains a basis or a need for a separate tort of unlawful means conspiracy in a 2 party setting where the same question of liability could be analysed and resolved by reference to the framework applicable to the primary tort accompanied by the doctrine of joint tortfeasorship see Carty LQR at p 669 Position in England today in relation to economic torts OBG 79 Some of these questions might be thought to have been settled in England at least by the House of Lords decision in OBG OBG was hailed as endorsing a back to basics approach with a return to the true import of economic torts and an accompanying abstentionist judicial philosophy exemplified in Thomas Francis Allen v William Cridge Flood and Walter Taylor 1898 1 AC 1 more commonly known as Allen v Flood Carty at pp 24 25 In OBG the House of Lords concluded that there is no unified theory for the cluster of torts grouped under the label of economic torts see for example Lord Walker in OBG at 264 OBG did not deal squarely with the question of unlawful means conspiracy But it dealt with a number of other torts including the Lumley v Gye tort and the tort of causing loss by unlawful means Indeed the court s views on the lack of a unified theory underlying economic torts are illuminating Lord Hoffmann in particular at 32 associated himself with the views of Peter Cane who said in Mens Rea in Tort Law 2000 20 Oxford JLS 533 at 552 that The search for general principles of liability based on types of conduct is at best a waste of time and at worst a potential source of serious confusion and the broader the principle the more is this so Tort law is a complex interaction between protected interests sanctioned conduct and sanctions and although there are what might be called principles of tort liability by and large they are not very general More importantly they cannot be stated solely in terms of the sorts of conduct which will attract tort liability Each principle must refer as well to some interest protected by tort law and some sanction provided by tort law 80 The House of Lords in OBG also agreed that the element of intention is a requirement across the spectrum of the various economic torts even though the precise scope and content of that element of intention that had to be made out for liability to be imposed for each tort might be different depending on the rationale and interest underlying each individual tort OBG per Lord Hoffmann at 62 per Lord Nicholls at 164 167 The notion of a unifying theory having been jettisoned it becomes essential for the court to be sensitive to the different justifications and conceptual underpinnings for each tort and to guard against importing notions and ideas from the analytical framework applicable to one tort into that for another as if there were a unifying theory A philosophical division in the House of Lords as to the underlying rationale for the tort of causing loss by unlawful means in a 3 party setting which might have implications on the development of other economic torts translated into divergent views on what would constitute the requisite unlawful means The genesis for the philosophical division is encapsulated in Lord Nicholls speech in OBG at 153 155 These different views are founded on different perceptions of the rationale underlying the unlawful interference tort On the wider interpretation of unlawful means the rationale is that by this tort the law seeks to curb clearly excessive conduct The law seeks to provide a remedy for intentional economic harm caused by unacceptable means The law regards all unlawful means as unacceptable in this context On the narrower interpretation this tort has a much more limited role On this interpretation the function of the tort of unlawful interference is a modest one Its function is to provide a claimant with a remedy where intentional harm is inflicted indirectly as distinct from directly If a defendant intentionally harms a claimant directly by committing an actionable wrong against him the usual remedies are available to the claimant The unlawful interference tort affords a claimant a like remedy if the defendant intentionally damages him by committing an actionable wrong against a third party The defendant s civil liability is expanded thus far but no further in respect of damage intentionally caused by his conduct In my view the former is the true rationale of this tort The second interpretation represents a radical departure from the purpose for which this tort has been developed If adopted this interpretation would bring about an unjustified and unfortunate curtailment of the scope of this tort emphasis added 81 Lord Hoffmann whose views on this issue represented those of the majority thought that the tort was meant to enforce basic standards of civilised behaviour in economic competition between traders or between employers and labour in OBG at 56 However he felt that this was subject to the significant limitation that the unlawful means be limited to civil wrongs for which the intermediary could maintain an action per Lord Hoffmann at 49 per Baroness Hale at 302 and per Lord Brown at 320 The key question was whether the use of any means that entailed the happenstance of some law or regulation being breached would suffice to constitute unlawful means even if the breach in question did not translate into or give rise to a civil right of action on the part of the third party and even if did not affect the third party s freedom to deal as he pleased with the plaintiff Lord Hoffmann thought not in OBG at 51 Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant emphasis added 82 Lord Hoffmann emphasised that the court should be similarly cautious in extending a tort which was designed only to enforce basic standards of civilised behaviour in economic competition o therwise there would be a danger that it will provide a cause of action based on acts which are wrongful only in the irrelevant sense that a third party has a right to complain if he chooses to do so OBG at 56 Lord Hoffmann was doubtful as to whether the requirement of a causal connection between the wrongful conduct of the defendant and the loss suffered by the plaintiff would be a sufficient limiting factor for the imposition of liability OBG at 58 In arriving at the view that the unlawful means must in general be actionable by the third party Lord Hoffmann referred to Lonrho v Shell as an illustration of a failed attempt to found a cause of action on the fact that the conduct alleged to have caused loss was contrary to law but not actionable by the third party OBG at 55 It is true that on the facts of Lonrho v Shell the wrongful conduct in question there an alleged breach of a sanctions order that attracted penal consequences was not actionable as a civil wrong However it should be noted as was observed in Total Network see for example per Lord Hope at 38 that this did not appear to be the basis of Lord Diplock s reasoning in Lonrho v Shell since his real preoccupation was with the failure to show the requisite intention to injure 83 Unlike Lord Hoffman s more measured approach Lord Nicholls in OBG considered that unlawful means encompassed all acts which a person is not permitted to do and covers common law torts statutory torts crimes breaches of contract breaches of trust and equitable obligations breaches of confidence and so on OBG at 151 While acknowledging that the element of unlawful means served as a limitation on the boundaries of liability OBG at 147 he preferred a broader concept of unlawful means of illegality with the brake of instrumentality OBG at 159 and see below at 93 Lord Nicholls at 152 also thought it very odd if in such a case the law were to afford the claimant a remedy where the defendant committed or threatened to commit a tort or breach of contract against the third party but not

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  • Ch.22 Banking and Finance
    for contravening statutory obligations of banking secrecy 22 3 9 Contravention of section 47 is an offence Upon conviction an individual may be punished with a fine not exceeding S 125 000 or imprisonment for a term not exceeding three years or both In the case of a corporation a fine not exceeding S 250 000 may be imposed E Statutory secrecy regime does not prevent assumption of higher standard of confidentiality 22 3 10 The statutory banking secrecy regime does not prevent a bank from contracting with its customers to assume a higher standard of confidentiality This is provided for in section 47 8 F Common law exceptions to duties of confidentiality no longer applicable in Singapore 22 3 11 It was previously thought that the statutory banking secrecy regime did not override the common law of duties of confidentiality on a bank which arose out of the banker customer relationship 22 3 12 However following the decision of the Singapore Court of Appeal in Susilawati v American Express Bank Ltd 2009 2 SLR R 737 2009 SGCA 8 it is now clear that the current statutory secrecy regime leaves no room for the four general common law exceptions expounded in Tournier v National Provincial and Union Bank of England 1924 1 KB 461 to co exist 22 3 13 In the seminal case of Tournier v National Provincial and Union Bank of England 1924 1 KB 461 the English Court of Appeal held that a banker had an implied duty to keep the affairs of a customer confidential subject to four general exceptions under which disclosure could be made by the bank These were classified into four categories a where disclosure is under compulsion by law b where there is a duty to the public to disclose c where the interests of the bank require disclosure d where the disclosure is made by the express or implied consent of the customer 22 3 14 The Singapore Court of Appeal held that in light of the plain wording of section 47 the four exceptions in Tournier had been embraced within the framework of section 47 of the Banking Act Cap 19 2008 Rev Ed which is now the exclusive regime governing banking secrecy in Singapore 22 3 15 In arriving at its decision the Singapore Court of Appeal held that in terms of details and scope section 47 of and the Third Schedule to the Banking Act Cap 19 2008 Rev Ed provided a more comprehensive regime than that articulated in Tournier In the words of the Court of Appeal There is simply no room in Singapore for the less sophisticated and more general common law rules articulated in Tournier to have any further relevance save for the perspective of historical evolution and context it provides G Banks in Singapore and the Personal Data Protection Act 2012 Organisations in Singapore are obliged to observe and comply with the requirements of the Personal Data Protection Act 2012 the PDPA which establishes the Singapore regime for the protection of personal data While the PDPA does not establish specific statutory obligations specifically applicable to banks as they are organisations operating within Singapore banks are obliged to observe and comply with the requirements of the PDPA An individual s personal data refers to data whether true or not about an individual who can be identified from that data or other accessible information Broadly banks have to observe the following obligations under the PDPA Banks may only collect use and disclose personal data of an individual with the individual s consent and for a reasonable purpose which the organisation has made known to the individual Personal data must not be transferred outside Singapore except in accordance with requirements of the PDPA In short banks are to provide a standard of protection to the transferred personal data comparable to the protection granted under the PDPA Except in certain circumstances which is discussed below banks must accede to an individual s right of access and correction in respect of his personal data that is in the bank s possession The individual has a right of action for relief against a bank for losses or damages suffered directly as a result of the contravention by the bank of its personal data protection obligations If an individual has registered his Singapore telephone number with the Do Not Call Registry DNC and has thereby opted out from receiving certain types of marketing messages banks have to ensure that such messages are not sent to the registered telephone number In general banks have to carry out the following compliance obligations Designate one or more individuals to be a data protection officer responsible for ensuring that the bank complies with the PDPA and making available to the public contact information of at least one such individual Develop and implement policies and practices to enable the bank to meet its obligations under the PDPA Communicate information on its PDPA related policies and practices to its staff Establish a process to receive and respond to complaints arising with respect to the PDPA and Make available information about the bank s PDPA related policies and practices and complaint process upon request Exceptions and the effect of other written law on the PDPA There are various exceptions and exclusions to the obligations described above within the PDPA In addition the PDPA provides that the provisions of other written law prevail over portions of the PDPA to the extent of any inconsistency For banks it is useful to note that MAS Notice to Banks on Prevention of Money Laundering and Countering the Financing of Terrorism MAS 626 was prepared to take advantage of this MAS 626 is discussed further below MAS 626 In the course of performing customer due diligence in compliance with MAS 626 banks may be required to collect use and disclose personal data of individuals without first obtaining consent This would be in breach of the PDPA provisions To alleviate this situation the MAS amended MAS 626 on 1 July 2014 to expressly allow a bank whether directly or through a third party e g data intermediaries to collect use and disclose personal data of an individual the relevant individual who is a customer appointed to act on behalf of a customer a connected party of a customer namely the director or natural person having executive authority in a customer which is a company the partner or manager of a customer which is a partnership limited partnership or limited liability partnership or any natural person having executive authority in a customer which is a body corporate or unincorporate a beneficial owner of a customer without the relevant individual s consent for the purposes of complying with the requirements under MAS 626 Further MAS 626 provides that in general the bank is not required to provide the relevant individual with the right to access or correct an error or omission of his personal data in the possession or under the control of the bank except with regard to the following personal data of the relevant individual which was provided by him to the bank his factual identification data namely his name identity card number birth certificate number passport number existing residential address contact telephone number date of birth and nationality H Power of IRAS to obtain information 22 3 16 The Inland Revenue Authority of Singapore the IRAS is given broad powers to obtain information for domestic tax administration purposes under section 65B of the Income Tax Act Cap 134 2014 Rev Ed Notwithstanding that the information sought by the IRAS may consist of customer information which may not be disclosed under section 47 of the Banking Act Cap 19 2008 Rev Ed including any regulations made under section 47 10 of the Banking Act Cap 19 2008 Rev Ed a person is not excused from producing the information by reason only that he is under a statutory obligation to observe secrecy section 65D 1 and 2 Income Tax Act Cap 134 2014 Rev Ed Section 65D Income Tax Act Cap 134 2014 Rev Ed overrides any duty of secrecy imposed by the Banking Act Cap 134 2014 Rev Ed in relation to the information sought and provides for immunities for a breach of a duty under the Banking Act Cap 19 2008 Rev Ed when complying with a notice for such information Sections 65B and 65D also apply in relation to information formally requested by a foreign tax authority concerning the tax position of any person pursuant to any Avoidance of Double Taxation Agreement which Singapore has entered into with the country of the foreign tax authority to implement the international standard for the exchange of information for tax purposes developed by the Organisation for Economic Co operation and Development Return to the top SECTION 4 LENDING AND SECURITY A Lending regulated by various statutes depending on the provider of the funds 1 Banks and finance companies 22 4 1 In Singapore the business of lending is regulated by various statutes depending on the person or type of institution that is providing the funds 22 4 2 Banks and finance companies are licensed or regulated under the Banking Act Cap 19 2008 Rev Ed and the Finance Companies Act Cap 108 2011 Rev Ed respectively 2 Licensing and regulation under the Moneylenders Act 22 4 3 Every person who carries on the business of moneylending in Singapore other than banks or finance companies licensed under the relevant Acts to carry on their respective businesses in Singapore must be licensed under or excluded or exempted from the provisions of the Moneylenders Act Cap 188 2010 Rev Ed Moneylending by a person who is not so licensed or who is not an excluded or exempted moneylender is an offence In addition section 14 2 of the Moneylenders Act Cap 188 2010 Rev Ed renders the borrower s obligation to repay such a person unenforceable 22 4 4 The Moneylenders Act Cap 188 2010 Rev Ed came into force on 1 March 2009 repealing and replacing its predecessor which was enacted 50 years ago The new Act underscores a more flexible and progressive approach to the regulation of moneylending in Singapore to keep pace with the modern credit economy With the introduction of the concept of excluded moneylender any person who lends money solely to corporations or limited liability partnerships or to business trusts and real estate investment trusts or their respective trustees or trustee managers will generally not be subject to the new Act However a person lending to individuals other than those which qualify as accredited investors within the meaning of Section 4A of the Securities and Futures Act Cap 289 2006 Rev Ed will not be an excluded moneylender for the purposes of the new Act B Security taken for a loan 22 4 5 Security for a loan is taken by a bank in Singapore to avoid the effects in the winding up or bankruptcy of its borrowing customer of the pari passu distribution of the assets of that borrowing customer Such securities may be classified as proprietary security or possessory security 1 Proprietary security confers upon the secured creditor a right of ownership to property 22 4 6 Proprietary security confers on the secured creditor a right of ownership to the property that is subject to the security Possession of the property remains with the person providing the security The most common proprietary securities are the mortgage and the charge 2 Possessory security depends on creditor obtaining and retaining possession of property 22 4 7 In contrast the legal effectiveness of a possessory security is dependent upon the creditor obtaining and retaining possession of the property that is the subject of the security The most common possessory securities are the pledge and the lien 3 Personal security undertaking by a third party to pay in event of default by borrower 22 4 8 In addition to proprietary and possessory security a bank may enhance its position by obtaining personal security in the form of an agreement by a third party to undertake a personal obligation to pay the bank if the borrowing customer defaults There are two types of such personal security namely guarantees and indemnities While the taking of such personal security does not usually result in the bank acquiring rights over the assets of the relevant third party such guarantees and indemnities are nonetheless useful in providing further recourse for the bank in the event of its borrowing customer s default 4 Characterisation of security based on substance of agreement rather than label applied by parties or form of documents 22 4 9 In determining whether a security interest is created by a particular transaction and the nature of that security interest the courts look to the substance of the parties agreement rather than the label applied by the parties or the form of the documents The true nature of the transaction should be ascertained from the documents against the surrounding circumstances in which they came into being 5 Security over scripless shares Distinct regime provided by the Companies Act 22 4 10 Apart from the security rights granted in favour of the bank under charges mortgages pledges and liens the Companies Act Cap 50 2006 Rev Ed provides for a distinct regime for the taking of security over scripless shares or book entry securities listed on the Singapore Exchange Securities Trading Limited 6 Bank s common law right to combine accounts and contractual rights of set off 22 4 11 In addition to the proprietary possessory and personal security which are available to a bank in Singapore to secure the obligations of its borrowing customer the bank may also avail itself of its common law right to combine accounts and contractual rights of set off against the borrowing customer s accounts with the bank Unless the bank and its customer have agreed otherwise a bank is entitled to combine accounts maintained with the bank by a customer in his own right against a debt payable by the customer to the bank and to treat the balance if any as the amount actually standing to the customer s credit This right to combine all the accounts of a customer is regarded as a right of set off which in practice is usually fortified by contract to circumvent the limitations of this right under the common law For example contractual provisions are usually introduced to entitle a bank to set off a sum presently due to or from the customer with a sum payable by or as the case may be to the customer at a future date to combine different kinds of accounts maintained by the customer in different currencies Return to the top SECTION 5 CHARGES A Characteristics of a charge 1 Confers the right to a creditor to resort to property for payment of a debt or claim 22 5 1 A security interest by way of charge arises when the owner of a property gives the right to his creditor to resort to the property for payment of a debt or claim In the event of the chargor s insolvency the chargee may enforce the security in priority to the claims of unsecured creditors 2 Differences between charge and mortgage no transfer of ownership in a charge 22 5 2 In practice the terms mortgage and charge are often used interchangeably Statutory usage has also tended to assimilate mortgages and charges as well For example a mortgage under the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed is defined to include a charge However there are differences between the two types of security 22 5 3 A charge is created by the contractual acts of the parties Unlike a mortgage a charge does not involve a transfer of ownership to the chargee Also unlike possessory securities such as the pledge and lien the effectiveness of a charge is not dependent upon the chargee obtaining and retaining possession of the charged property In the event of default the chargee has the right to realise the charged property through judicial process whether by way of order for sale or the appointment of a receiver B Creation of charge 1 Charge takes effect by way of agreement without passing of title or possession in property 22 5 4 A charge takes effect by way of an agreement between debtor and creditor without title or possession in the property passing to the chargee 2 Generally no formalities required to create charge except that in certain circumstances agreement must be in writing and signed 22 5 5 There is generally no formal requirement as to the agreement creating the charge However there are two important instances whereby writing is required First section 6 d of the Civil Law Act Cap 43 1999 Rev Ed provides that no action shall be brought against any person upon any contract for the disposition of interest in immovable property unless the agreement is in writing and signed Accordingly a charge created in respect of an interest in land will not be enforceable unless the contract between the parties is in writing and signed The second exception relates to promises to answer for the debt of another Pursuant to section 6 b of the Civil Law Act Cap 43 1999 Rev Ed no action shall be brought against a defendant upon a promise to answer for the debt of another person unless the promise is in writing and signed Consequently a charge created over the chargor s assets to secure the debt of the bank s borrowing customer for instance a charge given by a holding company to secure a loan given by the chargee to a subsidiary of the holding company must be in writing and signed C Types of charges 1 Registration of all floating charges and certain fixed charges under section 131 of the Companies Act 22 5 6 A charge may be fixed or floating All floating charges must be registered under section 131 of the Companies Act Cap 50 2006 Rev Ed but only fixed charges over one or more of the specific types of assets listed in section 131 3 need to be registered 2 Fixed charge fastens on identifiable and ascertainable assets 22 5 7 A fixed charge is one that fastens on assets that are identifiable and ascertainable such as land shares ships and aircraft The fixed charge encumbers the charged asset immediately from the time it is created The chargor is unable to deal with a charged asset without the consent of the chargee 3 Floating charge creates immediate security interest without specifically attaching to individual assets 22 5 8 In contrast a floating charge creates an immediate security interest but does not specifically attach to the individual assets until crystallisation The assets secured by a floating charge are always generally identified in the charging document by referring to all of or as the case may be all of an identifiable class or type of the undertaking and assets of the chargee both present and future 4 Fixed v floating charges distinguished by liberty of chargor to deal with assets and ascertained from terms and circumstances of the agreement 22 5 9 The labelling of a charge as fixed or floating is not determinative of the nature of the charge The critical feature distinguishing a floating charge from a fixed charge is whether the chargor is at liberty to deal with the assets 22 5 10 The true nature of a charge must be ascertained by considering the terms of the security agreement and the factual and commercial matrix in which the agreement is created and performed As such a charge over uncollected book debts which leaves the chargor free to collect them and use the proceeds in the ordinary course of business is a floating charge even if expressed as a fixed charge over the uncollected book debts and a floating charge over the proceeds 5 Fixed v floating charges fixed charge holders and statutorily preferred creditors have priority if charging company is wound up 22 5 11 The main disadvantage of having a floating rather than a fixed charge is the treatment of floating charge holders in the winding up of the charging company Fixed charge holders and persons to whom statutory preferential debts are owed have priority over floating charge holders for the payment of their debts D Registration requirements for charges created by companies incorporated or registered in Singapore 1 Application of section 131 1 of the Companies Act for registration of charges 22 5 12 Section 131 1 of the Companies Act Cap 50 2006 Rev Ed provides that a charge that is created by a company incorporated in Singapore or the branch of a foreign corporation registered in Singapore under Division 2 of Part XI of the Companies Act and to which section 131 applies must be lodged with the Registrar of Companies for registration within 30 days after the creation of the charge in the case where the document creating the charge is executed in Singapore and within 37 days after the creation of the charge in the case where the document creating the charge is executed outside Singapore section 139 22 5 13 Charges that are subject to registration under section 131 are a charge to secure any issue of debentures a charge on uncalled share capital of a company a charge on shares of a subsidiary of a company which are owned by the company a charge or an assignment created or evidenced by an instrument which if executed by an individual would require registration as a bill of sale a charge on land wherever situate or any interest therein a charge on book debts of the company a floating charge on the undertaking or property of a company a charge on calls made but not paid a charge on a ship or aircraft or any share in a ship or aircraft and a charge on goodwill on a patent or licence under a patent on a trade mark or on a copyright or a licence under a copyright Charges capable of registration under the International Interests in Aircraft Equipment Act Cap 144B 2012 Rev Ed do not fall within the ambit of section 131 of the Companies Act Cap 50 2006 Ed 2 Charges that are not registered within time limit are void against liquidators and other creditors of company 22 5 14 A charge that is not registered under section 131 of the Companies Act Cap 50 2006 Rev Ed within the time limit is void against the liquidator and other creditors of the company In the event of insolvency of the chargor company the chargee of an unregistered charge will lose its security and can only claim as an unsecured creditor of the company 3 Failure to register does not affect underlying debt 22 5 15 Notwithstanding the failure to register a charge as required under section 131 of the Companies Act Cap 50 2006 Rev Ed the underlying debt due from the chargor company to the chargee is not affected by the avoidance of the charge against the liquidator and creditors of the company However pursuant to section 131 2 the money secured by the charge will become immediately repayable if the charge becomes void for non registration 4 Registration constitutes notice of the existence of the charge 22 5 16 Registration constitutes notice of the existence but not necessarily the particulars of the charge to all persons dealing with the charged property who might reasonably be expected to search the register of all matters for which registration is prescribed 5 Additional registration requirements apart from those under the Companies Act may apply based on nature of charged asset 22 5 17 Apart from registration under the Companies Act Cap 50 2006 Rev Ed there may be additional registration requirements depending on the nature of the charged asset For example a charge over real property governed by the Land Titles Act Cap 157 2004 Rev Ed must be in the prescribed form and registered thereunder Similarly security given over a ship for a loan must be in the prescribed form and registered with the Registry of Ships When an individual creates a charge over his property the charge is subject to the registration requirements of the Bills of Sale Act Cap 24 2011 Rev Ed if the charge constitutes a bill of sale Under the Bills of Sale Act Cap 24 2011 Rev Ed in order to be effective as security the bill of sale must secure at least S 100 should not be made or given wholly or partly in consideration of a pre existing debt has to be executed in the prescribed form and must be registered within three days of its execution E Enforcement of charges different rights available before and upon default in payment 22 5 18 Some of the rights of enforcement available to a chargee of charged property may be exercised even before a payment default Upon any dealing inconsistent with the charge the chargee has not merely a personal remedy for breach of contract but has other remedies such as an injunction notwithstanding that there has been no failure to pay A chargee can also obtain the appointment of a receiver prior to default on grounds of jeopardy of security However the power of sale arises as a remedy only upon default in payment of the secured debt In the event of default in payment by the chargor the chargee is entitled to look to the property and its proceeds for the discharge of the liability Return to the top SECTION 6 MORTGAGES A Characteristics of a mortgage 1 Transfer of ownership of asset but subject to mortgagor s equity of redemption 22 6 1 In most cases where a bank obtains security in the form of a mortgage the mortgagor transfers ownership of the asset that is the subject of the security to the mortgagee The transfer of ownership is subject to the mortgagor s right to redeem which entitles the mortgagor to call for the re transfer of ownership to the mortgagor when the secured debt is satisfied this is known as the mortgagor s equity of redemption 2 Differences between mortgage and charge transfer of either legal or equitable title in a mortgage 22 6 2 As mentioned above despite the technical differences between a mortgage and a charge the terms are often used interchangeably From the perspective of the secured creditor a mortgage and charge will yield the same practical result although the nature of the security is different A mortgage may be viewed as an enhanced charge as it gives not only rights of appropriation over an asset as a charge does but also entails a transfer of ownership of either legal or equitable title to the mortgagee B Creation of mortgage formalities required to create mortgage agreement except that in certain circumstances agreement must be in writing and signed 22 6 3 As in the case of a charge there is generally no formal requirement on the agreement creating a mortgage However formal requirements must be observed depending on the nature of the property which is the subject of the mortgage The provisions of sections 6 d and 6 b of the Civil Law Act Cap 43 1999 Rev Ed which have been discussed above would similarly apply to mortgages in the circumstances described C Types of mortgages either legal or equitable 1 Equitable mortgage 22 6 4 A mortgage can be either legal or equitable The mortgage will be equitable where the formalities necessary to create a legal mortgage have not been fully complied with the mortgagor s interest in the asset being mortgaged is itself an equitable interest or the parties have entered into an agreement to create a legal mortgage in the future over the asset in question 2 Equitable mortgagee loses priority to subsequent legal mortgagee if latter was a purchaser for value in good faith without notice 22 6 5 Generally the main difference between a legal and an equitable mortgage is that an equitable mortgage loses priority to a subsequent legal mortgage if the subsequent mortgagee was a purchaser for value in good faith without actual or constructive notice of the prior equitable mortgage 3 Different rules of priority where a mortgage is taken over land 22 6 6 Different rules of priority apply where a mortgage is taken over land In Singapore the rules of priority applicable to legal and equitable mortgages over land that is not regulated under the Land Titles Act Cap 157 2004 Rev Ed are governed by the Registration of Deeds Act Cap 269 1989 Rev Ed Section 14 of the Registration of Deeds Act Cap 269 1989 Rev Ed provides that all instruments entitled to be registered under the Registration of Deeds Act Cap 269 1989 Rev Ed will have priority according to the date of their registration and not according to the date of the instruments or of their execution Pursuant to section 6 a charge by reason of a deposit of title deeds will have no effect or priority as against a subsequent assurance for value unless and until a memorandum of charge signed by the person against whom the charge is claimed has been registered in accordance with the Registration of Deeds Act Cap 269 1989 Rev Ed Where the mortgaged land is governed by the Land Titles Act Cap 157 2004 Rev Ed priority is determined according to the date of registration of the instrument of legal mortgage In the case of an equitable mortgage a caveat may be lodged to protect the mortgagee s interest D Registration requirements under section 131 of the Companies Act 1 Mortgages subject to same provisions relating to registration of charges under the Companies Act 22 6 7 The Companies Act Cap 50 2006 Rev Ed defines a charge to include a mortgage and the provisions of section 131 of the Companies Act Cap 50 2006 Rev Ed in relation to the registration of charges applies to mortgages 2 Additional requirements and or formalities depending on nature of mortgaged asset 22 6 8 Apart from registration under the Companies Act Cap 50 2006 Rev Ed there may be additional registration requirements depending on the nature of the mortgaged asset For instance a mortgage over real property governed by the Land Titles Act Cap 157 2004 Rev Ed must be in the prescribed form and registered under that Act It is the act of such registration that creates the mortgage Further it is provided that a registered mortgage shall not operate as a transfer of the land mortgaged but shall take effect as security only 22 6 9 Pursuant to section 53 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed a mortgage of land will be void at law unless it is by deed in the English language If however the subject matter of the mortgage is not land then there is no requirement for the mortgage to be executed by deed Nevertheless in practice it is advantageous for the mortgage to be executed by deed as in order to enforce a deed it is not necessary to show that consideration passed between the contracting parties At common law a promise is not binding as a contract unless it is either made in a deed or supported by consideration 22 6 10 There are also practical issues to be taken into consideration when creating a mortgage For example in the case of a mortgage of shares a mortgage is created through a transfer of title in the subject shares to the mortgagee following which the shares are registered in the name of the mortgagee Pursuant to section 195 4 of the Companies Act Cap 50 2006 Rev Ed the mortgagor s interest cannot be reflected in the share register Hence in practice the mortgage is effected by delivery of the share certificate and its related transfer form duly executed by the mortgagor together with a document setting out the circumstances of the transfer and providing for re transfer to the mortgagor upon repayment of the loan E Enforcement of security upon default in payment 1 Rights of secured lender to enforce security are cumulative 22 6 11 Where the borrower defaults in repaying the sums due under the mortgage a bank can have recourse to a number of rights and remedies in order to enforce its security The rights of the secured lender are cumulative which means that the bank may exercise all or any of the remedies until it is fully repaid Thus even after it sells the property and there is a shortfall unless the sale is pursuant to the right of foreclosure the bank can sue the borrowing customer for the balance on his personal promise to repay the moneys 2 Exercising the power to sell mortgaged property 22 6 12 The bank may choose to exercise its power to sell the property The power to sell is usually provided for in every well drafted mortgage document It is also implied by statute pursuant to section 24 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed into every mortgage that is made by deed If the objective is to protect the security and to collect profits yielded by the property which may be applied towards discharging the mortgage debt a receiver may be appointed either pursuant to the provisions of the security document section 29 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed or a court order Where the subject of the mortgage is land the express terms of a mortgage instrument will usually give the bank the right to enter into possession upon default and after written notice is given to the borrowing customer In selling the property the bank has a duty to take reasonable steps to obtain a proper price such as holding a public auction where appropriate Return to the top SECTION 7 PLEDGES A Characteristics of a pledge transfer of possession of asset without transfer of ownership 22 7 1 A pledge operates upon the transfer of possession of the asset by the pledgor to the pledgee There is no transfer of ownership B Delivery of pledged item critical to creation of pledge and may be actual or constructive 22 7 2 Critical to the creation of a pledge is the delivery of the subject matter of the pledge Delivery may be actual or constructive For example a pledge may be created over personal chattels stocks or goods by actual delivery of the items or bill of lading relating to the goods C Pledged assets retained by pledgee until secured debt is satisfied 22 7 3 The pledgee retains possession of the pledged assets until the secured debt is satisfied If the pledgor does not repay the debt the pledgee is entitled to sell the pledged asset and use the proceeds to satisfy the debt D Implied term of pledge that asset may be sold to satisfy debt upon default in repayment 22 7 4 It is an implied term of the contract of pledge that the pledgee may sell the asset pledged to satisfy the debt on default of payment at the time fixed for repayment Where there is no time fixed for repayment the pledgee may demand payment and in default of payment sell on notice to the pledgor of his intention to do so The pledgor has a right to redeem the pledge up to the time of the sale Return to the top SECTION 8 LIENS A Characteristics of a lien confers a right to retain lawful possession of property owned by another until a claim is met 22 8 1

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  • Ch.22 Banking and Finance
    purposes of the Deposit Insurance and Policy Owners Protection Schemes Act Cap 77B 2012 Rev Ed D Penalties for contravening statutory obligations of banking secrecy 22 3 9 Contravention of section 47 is an offence Upon conviction an individual may be punished with a fine not exceeding S 125 000 or imprisonment for a term not exceeding three years or both In the case of a corporation a fine not exceeding S 250 000 may be imposed E Statutory secrecy regime does not prevent assumption of higher standard of confidentiality 22 3 10 The statutory banking secrecy regime does not prevent a bank from contracting with its customers to assume a higher standard of confidentiality This is provided for in section 47 8 F Common law exceptions to duties of confidentiality no longer applicable in Singapore 22 3 11 It was previously thought that the statutory banking secrecy regime did not override the common law of duties of confidentiality on a bank which arose out of the banker customer relationship 22 3 12 However following the decision of the Singapore Court of Appeal in Susilawati v American Express Bank Ltd 2009 2 SLR R 737 2009 SGCA 8 it is now clear that the current statutory secrecy regime leaves no room for the four general common law exceptions expounded in Tournier v National Provincial and Union Bank of England 1924 1 KB 461 to co exist 22 3 13 In the seminal case of Tournier v National Provincial and Union Bank of England 1924 1 KB 461 the English Court of Appeal held that a banker had an implied duty to keep the affairs of a customer confidential subject to four general exceptions under which disclosure could be made by the bank These were classified into four categories a where disclosure is under compulsion by law b where there is a duty to the public to disclose c where the interests of the bank require disclosure d where the disclosure is made by the express or implied consent of the customer 22 3 14 The Singapore Court of Appeal held that in light of the plain wording of section 47 the four exceptions in Tournier had been embraced within the framework of section 47 of the Banking Act Cap 19 2008 Rev Ed which is now the exclusive regime governing banking secrecy in Singapore 22 3 15 In arriving at its decision the Singapore Court of Appeal held that in terms of details and scope section 47 of and the Third Schedule to the Banking Act Cap 19 2008 Rev Ed provided a more comprehensive regime than that articulated in Tournier In the words of the Court of Appeal There is simply no room in Singapore for the less sophisticated and more general common law rules articulated in Tournier to have any further relevance save for the perspective of historical evolution and context it provides G Banks in Singapore and the Personal Data Protection Act 2012 Organisations in Singapore are obliged to observe and comply with the requirements of the Personal Data Protection Act 2012 the PDPA which establishes the Singapore regime for the protection of personal data While the PDPA does not establish specific statutory obligations specifically applicable to banks as they are organisations operating within Singapore banks are obliged to observe and comply with the requirements of the PDPA An individual s personal data refers to data whether true or not about an individual who can be identified from that data or other accessible information Broadly banks have to observe the following obligations under the PDPA Banks may only collect use and disclose personal data of an individual with the individual s consent and for a reasonable purpose which the organisation has made known to the individual Personal data must not be transferred outside Singapore except in accordance with requirements of the PDPA In short banks are to provide a standard of protection to the transferred personal data comparable to the protection granted under the PDPA Except in certain circumstances which is discussed below banks must accede to an individual s right of access and correction in respect of his personal data that is in the bank s possession The individual has a right of action for relief against a bank for losses or damages suffered directly as a result of the contravention by the bank of its personal data protection obligations If an individual has registered his Singapore telephone number with the Do Not Call Registry DNC and has thereby opted out from receiving certain types of marketing messages banks have to ensure that such messages are not sent to the registered telephone number In general banks have to carry out the following compliance obligations Designate one or more individuals to be a data protection officer responsible for ensuring that the bank complies with the PDPA and making available to the public contact information of at least one such individual Develop and implement policies and practices to enable the bank to meet its obligations under the PDPA Communicate information on its PDPA related policies and practices to its staff Establish a process to receive and respond to complaints arising with respect to the PDPA and Make available information about the bank s PDPA related policies and practices and complaint process upon request Exceptions and the effect of other written law on the PDPA There are various exceptions and exclusions to the obligations described above within the PDPA In addition the PDPA provides that the provisions of other written law prevail over portions of the PDPA to the extent of any inconsistency For banks it is useful to note that MAS Notice to Banks on Prevention of Money Laundering and Countering the Financing of Terrorism MAS 626 was prepared to take advantage of this MAS 626 is discussed further below MAS 626 In the course of performing customer due diligence in compliance with MAS 626 banks may be required to collect use and disclose personal data of individuals without first obtaining consent This would be in breach of the PDPA provisions To alleviate this situation the MAS amended MAS 626 on 1 July 2014 to expressly allow a bank whether directly or through a third party e g data intermediaries to collect use and disclose personal data of an individual the relevant individual who is a customer appointed to act on behalf of a customer a connected party of a customer namely the director or natural person having executive authority in a customer which is a company the partner or manager of a customer which is a partnership limited partnership or limited liability partnership or any natural person having executive authority in a customer which is a body corporate or unincorporate a beneficial owner of a customer without the relevant individual s consent for the purposes of complying with the requirements under MAS 626 Further MAS 626 provides that in general the bank is not required to provide the relevant individual with the right to access or correct an error or omission of his personal data in the possession or under the control of the bank except with regard to the following personal data of the relevant individual which was provided by him to the bank his factual identification data namely his name identity card number birth certificate number passport number existing residential address contact telephone number date of birth and nationality H Power of IRAS to obtain information 22 3 16 The Inland Revenue Authority of Singapore the IRAS is given broad powers to obtain information for domestic tax administration purposes under section 65B of the Income Tax Act Cap 134 2014 Rev Ed Notwithstanding that the information sought by the IRAS may consist of customer information which may not be disclosed under section 47 of the Banking Act Cap 19 2008 Rev Ed including any regulations made under section 47 10 of the Banking Act Cap 19 2008 Rev Ed a person is not excused from producing the information by reason only that he is under a statutory obligation to observe secrecy section 65D 1 and 2 Income Tax Act Cap 134 2014 Rev Ed Section 65D Income Tax Act Cap 134 2014 Rev Ed overrides any duty of secrecy imposed by the Banking Act Cap 134 2014 Rev Ed in relation to the information sought and provides for immunities for a breach of a duty under the Banking Act Cap 19 2008 Rev Ed when complying with a notice for such information Sections 65B and 65D also apply in relation to information formally requested by a foreign tax authority concerning the tax position of any person pursuant to any Avoidance of Double Taxation Agreement which Singapore has entered into with the country of the foreign tax authority to implement the international standard for the exchange of information for tax purposes developed by the Organisation for Economic Co operation and Development Return to the top SECTION 4 LENDING AND SECURITY A Lending regulated by various statutes depending on the provider of the funds 1 Banks and finance companies 22 4 1 In Singapore the business of lending is regulated by various statutes depending on the person or type of institution that is providing the funds 22 4 2 Banks and finance companies are licensed or regulated under the Banking Act Cap 19 2008 Rev Ed and the Finance Companies Act Cap 108 2011 Rev Ed respectively 2 Licensing and regulation under the Moneylenders Act 22 4 3 Every person who carries on the business of moneylending in Singapore other than banks or finance companies licensed under the relevant Acts to carry on their respective businesses in Singapore must be licensed under or excluded or exempted from the provisions of the Moneylenders Act Cap 188 2010 Rev Ed Moneylending by a person who is not so licensed or who is not an excluded or exempted moneylender is an offence In addition section 14 2 of the Moneylenders Act Cap 188 2010 Rev Ed renders the borrower s obligation to repay such a person unenforceable 22 4 4 The Moneylenders Act Cap 188 2010 Rev Ed came into force on 1 March 2009 repealing and replacing its predecessor which was enacted 50 years ago The new Act underscores a more flexible and progressive approach to the regulation of moneylending in Singapore to keep pace with the modern credit economy With the introduction of the concept of excluded moneylender any person who lends money solely to corporations or limited liability partnerships or to business trusts and real estate investment trusts or their respective trustees or trustee managers will generally not be subject to the new Act However a person lending to individuals other than those which qualify as accredited investors within the meaning of Section 4A of the Securities and Futures Act Cap 289 2006 Rev Ed will not be an excluded moneylender for the purposes of the new Act B Security taken for a loan 22 4 5 Security for a loan is taken by a bank in Singapore to avoid the effects in the winding up or bankruptcy of its borrowing customer of the pari passu distribution of the assets of that borrowing customer Such securities may be classified as proprietary security or possessory security 1 Proprietary security confers upon the secured creditor a right of ownership to property 22 4 6 Proprietary security confers on the secured creditor a right of ownership to the property that is subject to the security Possession of the property remains with the person providing the security The most common proprietary securities are the mortgage and the charge 2 Possessory security depends on creditor obtaining and retaining possession of property 22 4 7 In contrast the legal effectiveness of a possessory security is dependent upon the creditor obtaining and retaining possession of the property that is the subject of the security The most common possessory securities are the pledge and the lien 3 Personal security undertaking by a third party to pay in event of default by borrower 22 4 8 In addition to proprietary and possessory security a bank may enhance its position by obtaining personal security in the form of an agreement by a third party to undertake a personal obligation to pay the bank if the borrowing customer defaults There are two types of such personal security namely guarantees and indemnities While the taking of such personal security does not usually result in the bank acquiring rights over the assets of the relevant third party such guarantees and indemnities are nonetheless useful in providing further recourse for the bank in the event of its borrowing customer s default 4 Characterisation of security based on substance of agreement rather than label applied by parties or form of documents 22 4 9 In determining whether a security interest is created by a particular transaction and the nature of that security interest the courts look to the substance of the parties agreement rather than the label applied by the parties or the form of the documents The true nature of the transaction should be ascertained from the documents against the surrounding circumstances in which they came into being 5 Security over scripless shares Distinct regime provided by the Companies Act 22 4 10 Apart from the security rights granted in favour of the bank under charges mortgages pledges and liens the Companies Act Cap 50 2006 Rev Ed provides for a distinct regime for the taking of security over scripless shares or book entry securities listed on the Singapore Exchange Securities Trading Limited 6 Bank s common law right to combine accounts and contractual rights of set off 22 4 11 In addition to the proprietary possessory and personal security which are available to a bank in Singapore to secure the obligations of its borrowing customer the bank may also avail itself of its common law right to combine accounts and contractual rights of set off against the borrowing customer s accounts with the bank Unless the bank and its customer have agreed otherwise a bank is entitled to combine accounts maintained with the bank by a customer in his own right against a debt payable by the customer to the bank and to treat the balance if any as the amount actually standing to the customer s credit This right to combine all the accounts of a customer is regarded as a right of set off which in practice is usually fortified by contract to circumvent the limitations of this right under the common law For example contractual provisions are usually introduced to entitle a bank to set off a sum presently due to or from the customer with a sum payable by or as the case may be to the customer at a future date to combine different kinds of accounts maintained by the customer in different currencies Return to the top SECTION 5 CHARGES A Characteristics of a charge 1 Confers the right to a creditor to resort to property for payment of a debt or claim 22 5 1 A security interest by way of charge arises when the owner of a property gives the right to his creditor to resort to the property for payment of a debt or claim In the event of the chargor s insolvency the chargee may enforce the security in priority to the claims of unsecured creditors 2 Differences between charge and mortgage no transfer of ownership in a charge 22 5 2 In practice the terms mortgage and charge are often used interchangeably Statutory usage has also tended to assimilate mortgages and charges as well For example a mortgage under the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed is defined to include a charge However there are differences between the two types of security 22 5 3 A charge is created by the contractual acts of the parties Unlike a mortgage a charge does not involve a transfer of ownership to the chargee Also unlike possessory securities such as the pledge and lien the effectiveness of a charge is not dependent upon the chargee obtaining and retaining possession of the charged property In the event of default the chargee has the right to realise the charged property through judicial process whether by way of order for sale or the appointment of a receiver B Creation of charge 1 Charge takes effect by way of agreement without passing of title or possession in property 22 5 4 A charge takes effect by way of an agreement between debtor and creditor without title or possession in the property passing to the chargee 2 Generally no formalities required to create charge except that in certain circumstances agreement must be in writing and signed 22 5 5 There is generally no formal requirement as to the agreement creating the charge However there are two important instances whereby writing is required First section 6 d of the Civil Law Act Cap 43 1999 Rev Ed provides that no action shall be brought against any person upon any contract for the disposition of interest in immovable property unless the agreement is in writing and signed Accordingly a charge created in respect of an interest in land will not be enforceable unless the contract between the parties is in writing and signed The second exception relates to promises to answer for the debt of another Pursuant to section 6 b of the Civil Law Act Cap 43 1999 Rev Ed no action shall be brought against a defendant upon a promise to answer for the debt of another person unless the promise is in writing and signed Consequently a charge created over the chargor s assets to secure the debt of the bank s borrowing customer for instance a charge given by a holding company to secure a loan given by the chargee to a subsidiary of the holding company must be in writing and signed C Types of charges 1 Registration of all floating charges and certain fixed charges under section 131 of the Companies Act 22 5 6 A charge may be fixed or floating All floating charges must be registered under section 131 of the Companies Act Cap 50 2006 Rev Ed but only fixed charges over one or more of the specific types of assets listed in section 131 3 need to be registered 2 Fixed charge fastens on identifiable and ascertainable assets 22 5 7 A fixed charge is one that fastens on assets that are identifiable and ascertainable such as land shares ships and aircraft The fixed charge encumbers the charged asset immediately from the time it is created The chargor is unable to deal with a charged asset without the consent of the chargee 3 Floating charge creates immediate security interest without specifically attaching to individual assets 22 5 8 In contrast a floating charge creates an immediate security interest but does not specifically attach to the individual assets until crystallisation The assets secured by a floating charge are always generally identified in the charging document by referring to all of or as the case may be all of an identifiable class or type of the undertaking and assets of the chargee both present and future 4 Fixed v floating charges distinguished by liberty of chargor to deal with assets and ascertained from terms and circumstances of the agreement 22 5 9 The labelling of a charge as fixed or floating is not determinative of the nature of the charge The critical feature distinguishing a floating charge from a fixed charge is whether the chargor is at liberty to deal with the assets 22 5 10 The true nature of a charge must be ascertained by considering the terms of the security agreement and the factual and commercial matrix in which the agreement is created and performed As such a charge over uncollected book debts which leaves the chargor free to collect them and use the proceeds in the ordinary course of business is a floating charge even if expressed as a fixed charge over the uncollected book debts and a floating charge over the proceeds 5 Fixed v floating charges fixed charge holders and statutorily preferred creditors have priority if charging company is wound up 22 5 11 The main disadvantage of having a floating rather than a fixed charge is the treatment of floating charge holders in the winding up of the charging company Fixed charge holders and persons to whom statutory preferential debts are owed have priority over floating charge holders for the payment of their debts D Registration requirements for charges created by companies incorporated or registered in Singapore 1 Application of section 131 1 of the Companies Act for registration of charges 22 5 12 Section 131 1 of the Companies Act Cap 50 2006 Rev Ed provides that a charge that is created by a company incorporated in Singapore or the branch of a foreign corporation registered in Singapore under Division 2 of Part XI of the Companies Act and to which section 131 applies must be lodged with the Registrar of Companies for registration within 30 days after the creation of the charge in the case where the document creating the charge is executed in Singapore and within 37 days after the creation of the charge in the case where the document creating the charge is executed outside Singapore section 139 22 5 13 Charges that are subject to registration under section 131 are a charge to secure any issue of debentures a charge on uncalled share capital of a company a charge on shares of a subsidiary of a company which are owned by the company a charge or an assignment created or evidenced by an instrument which if executed by an individual would require registration as a bill of sale a charge on land wherever situate or any interest therein a charge on book debts of the company a floating charge on the undertaking or property of a company a charge on calls made but not paid a charge on a ship or aircraft or any share in a ship or aircraft and a charge on goodwill on a patent or licence under a patent on a trade mark or on a copyright or a licence under a copyright Charges capable of registration under the International Interests in Aircraft Equipment Act Cap 144B 2012 Rev Ed do not fall within the ambit of section 131 of the Companies Act Cap 50 2006 Ed 2 Charges that are not registered within time limit are void against liquidators and other creditors of company 22 5 14 A charge that is not registered under section 131 of the Companies Act Cap 50 2006 Rev Ed within the time limit is void against the liquidator and other creditors of the company In the event of insolvency of the chargor company the chargee of an unregistered charge will lose its security and can only claim as an unsecured creditor of the company 3 Failure to register does not affect underlying debt 22 5 15 Notwithstanding the failure to register a charge as required under section 131 of the Companies Act Cap 50 2006 Rev Ed the underlying debt due from the chargor company to the chargee is not affected by the avoidance of the charge against the liquidator and creditors of the company However pursuant to section 131 2 the money secured by the charge will become immediately repayable if the charge becomes void for non registration 4 Registration constitutes notice of the existence of the charge 22 5 16 Registration constitutes notice of the existence but not necessarily the particulars of the charge to all persons dealing with the charged property who might reasonably be expected to search the register of all matters for which registration is prescribed 5 Additional registration requirements apart from those under the Companies Act may apply based on nature of charged asset 22 5 17 Apart from registration under the Companies Act Cap 50 2006 Rev Ed there may be additional registration requirements depending on the nature of the charged asset For example a charge over real property governed by the Land Titles Act Cap 157 2004 Rev Ed must be in the prescribed form and registered thereunder Similarly security given over a ship for a loan must be in the prescribed form and registered with the Registry of Ships When an individual creates a charge over his property the charge is subject to the registration requirements of the Bills of Sale Act Cap 24 2011 Rev Ed if the charge constitutes a bill of sale Under the Bills of Sale Act Cap 24 2011 Rev Ed in order to be effective as security the bill of sale must secure at least S 100 should not be made or given wholly or partly in consideration of a pre existing debt has to be executed in the prescribed form and must be registered within three days of its execution E Enforcement of charges different rights available before and upon default in payment 22 5 18 Some of the rights of enforcement available to a chargee of charged property may be exercised even before a payment default Upon any dealing inconsistent with the charge the chargee has not merely a personal remedy for breach of contract but has other remedies such as an injunction notwithstanding that there has been no failure to pay A chargee can also obtain the appointment of a receiver prior to default on grounds of jeopardy of security However the power of sale arises as a remedy only upon default in payment of the secured debt In the event of default in payment by the chargor the chargee is entitled to look to the property and its proceeds for the discharge of the liability Return to the top SECTION 6 MORTGAGES A Characteristics of a mortgage 1 Transfer of ownership of asset but subject to mortgagor s equity of redemption 22 6 1 In most cases where a bank obtains security in the form of a mortgage the mortgagor transfers ownership of the asset that is the subject of the security to the mortgagee The transfer of ownership is subject to the mortgagor s right to redeem which entitles the mortgagor to call for the re transfer of ownership to the mortgagor when the secured debt is satisfied this is known as the mortgagor s equity of redemption 2 Differences between mortgage and charge transfer of either legal or equitable title in a mortgage 22 6 2 As mentioned above despite the technical differences between a mortgage and a charge the terms are often used interchangeably From the perspective of the secured creditor a mortgage and charge will yield the same practical result although the nature of the security is different A mortgage may be viewed as an enhanced charge as it gives not only rights of appropriation over an asset as a charge does but also entails a transfer of ownership of either legal or equitable title to the mortgagee B Creation of mortgage formalities required to create mortgage agreement except that in certain circumstances agreement must be in writing and signed 22 6 3 As in the case of a charge there is generally no formal requirement on the agreement creating a mortgage However formal requirements must be observed depending on the nature of the property which is the subject of the mortgage The provisions of sections 6 d and 6 b of the Civil Law Act Cap 43 1999 Rev Ed which have been discussed above would similarly apply to mortgages in the circumstances described C Types of mortgages either legal or equitable 1 Equitable mortgage 22 6 4 A mortgage can be either legal or equitable The mortgage will be equitable where the formalities necessary to create a legal mortgage have not been fully complied with the mortgagor s interest in the asset being mortgaged is itself an equitable interest or the parties have entered into an agreement to create a legal mortgage in the future over the asset in question 2 Equitable mortgagee loses priority to subsequent legal mortgagee if latter was a purchaser for value in good faith without notice 22 6 5 Generally the main difference between a legal and an equitable mortgage is that an equitable mortgage loses priority to a subsequent legal mortgage if the subsequent mortgagee was a purchaser for value in good faith without actual or constructive notice of the prior equitable mortgage 3 Different rules of priority where a mortgage is taken over land 22 6 6 Different rules of priority apply where a mortgage is taken over land In Singapore the rules of priority applicable to legal and equitable mortgages over land that is not regulated under the Land Titles Act Cap 157 2004 Rev Ed are governed by the Registration of Deeds Act Cap 269 1989 Rev Ed Section 14 of the Registration of Deeds Act Cap 269 1989 Rev Ed provides that all instruments entitled to be registered under the Registration of Deeds Act Cap 269 1989 Rev Ed will have priority according to the date of their registration and not according to the date of the instruments or of their execution Pursuant to section 6 a charge by reason of a deposit of title deeds will have no effect or priority as against a subsequent assurance for value unless and until a memorandum of charge signed by the person against whom the charge is claimed has been registered in accordance with the Registration of Deeds Act Cap 269 1989 Rev Ed Where the mortgaged land is governed by the Land Titles Act Cap 157 2004 Rev Ed priority is determined according to the date of registration of the instrument of legal mortgage In the case of an equitable mortgage a caveat may be lodged to protect the mortgagee s interest D Registration requirements under section 131 of the Companies Act 1 Mortgages subject to same provisions relating to registration of charges under the Companies Act 22 6 7 The Companies Act Cap 50 2006 Rev Ed defines a charge to include a mortgage and the provisions of section 131 of the Companies Act Cap 50 2006 Rev Ed in relation to the registration of charges applies to mortgages 2 Additional requirements and or formalities depending on nature of mortgaged asset 22 6 8 Apart from registration under the Companies Act Cap 50 2006 Rev Ed there may be additional registration requirements depending on the nature of the mortgaged asset For instance a mortgage over real property governed by the Land Titles Act Cap 157 2004 Rev Ed must be in the prescribed form and registered under that Act It is the act of such registration that creates the mortgage Further it is provided that a registered mortgage shall not operate as a transfer of the land mortgaged but shall take effect as security only 22 6 9 Pursuant to section 53 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed a mortgage of land will be void at law unless it is by deed in the English language If however the subject matter of the mortgage is not land then there is no requirement for the mortgage to be executed by deed Nevertheless in practice it is advantageous for the mortgage to be executed by deed as in order to enforce a deed it is not necessary to show that consideration passed between the contracting parties At common law a promise is not binding as a contract unless it is either made in a deed or supported by consideration 22 6 10 There are also practical issues to be taken into consideration when creating a mortgage For example in the case of a mortgage of shares a mortgage is created through a transfer of title in the subject shares to the mortgagee following which the shares are registered in the name of the mortgagee Pursuant to section 195 4 of the Companies Act Cap 50 2006 Rev Ed the mortgagor s interest cannot be reflected in the share register Hence in practice the mortgage is effected by delivery of the share certificate and its related transfer form duly executed by the mortgagor together with a document setting out the circumstances of the transfer and providing for re transfer to the mortgagor upon repayment of the loan E Enforcement of security upon default in payment 1 Rights of secured lender to enforce security are cumulative 22 6 11 Where the borrower defaults in repaying the sums due under the mortgage a bank can have recourse to a number of rights and remedies in order to enforce its security The rights of the secured lender are cumulative which means that the bank may exercise all or any of the remedies until it is fully repaid Thus even after it sells the property and there is a shortfall unless the sale is pursuant to the right of foreclosure the bank can sue the borrowing customer for the balance on his personal promise to repay the moneys 2 Exercising the power to sell mortgaged property 22 6 12 The bank may choose to exercise its power to sell the property The power to sell is usually provided for in every well drafted mortgage document It is also implied by statute pursuant to section 24 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed into every mortgage that is made by deed If the objective is to protect the security and to collect profits yielded by the property which may be applied towards discharging the mortgage debt a receiver may be appointed either pursuant to the provisions of the security document section 29 of the Conveyancing and Law of Property Act Cap 61 1994 Rev Ed or a court order Where the subject of the mortgage is land the express terms of a mortgage instrument will usually give the bank the right to enter into possession upon default and after written notice is given to the borrowing customer In selling the property the bank has a duty to take reasonable steps to obtain a proper price such as holding a public auction where appropriate Return to the top SECTION 7 PLEDGES A Characteristics of a pledge transfer of possession of asset without transfer of ownership 22 7 1 A pledge operates upon the transfer of possession of the asset by the pledgor to the pledgee There is no transfer of ownership B Delivery of pledged item critical to creation of pledge and may be actual or constructive 22 7 2 Critical to the creation of a pledge is the delivery of the subject matter of the pledge Delivery may be actual or constructive For example a pledge may be created over personal chattels stocks or goods by actual delivery of the items or bill of lading relating to the goods C Pledged assets retained by pledgee until secured debt is satisfied 22 7 3 The pledgee retains possession of the pledged assets until the secured debt is satisfied If the pledgor does not repay the debt the pledgee is entitled to sell the pledged asset and use the proceeds to satisfy the debt D Implied term of pledge that asset may be sold to satisfy debt upon default in repayment 22 7 4 It is an implied term of the contract of pledge that the pledgee may sell the asset pledged to satisfy the debt on default of payment at the time fixed for repayment Where there is no time fixed for repayment the pledgee may demand payment and in default of payment sell on notice to the pledgor of his intention to do so The pledgor has a right to redeem the pledge up to the time of the sale Return to the top SECTION 8 LIENS A Characteristics of a lien confers a

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  • Bank of America National Trust and Savings Association v Herman Iskandar and another[1998] 1 SLR(R) 848; [1998] SGCA 22
    changes of solicitors acting for Lugito s estate LAJ Smith Co acted from November 1984 to November 1986 A C Fergusson acted from April 1987 to September 1990 Haridass Ho Partners acted from September 1990 to July 1993 and Drew Napier from July 1993 to December 1997 A C Fergusson and Haridass Ho Partners had written to the appellants for information with respect to the large account Until a specific query was made by Haridass Ho Partners in 1991 the appellants did not say that Herman was a joint account holder of the large account or that he could give instructions to the appellants for renewal of the fixed deposit in his own capacity 17 On 5 January 1988 A C Fergusson wrote to the appellants stating that he acted for Herman as executor of Lugito s will and asked for a confirmation of the balances in Lugito s accounts The appellants refused initially to provide information because of the then banking secrecy provisions in the Banking Act until the production of the certified true copy of the letters of administration or grant of probate or written permission from the personal representatives of the estate Herman signed a letter authorising the release of information but he used a new signature which differed from that which appeared on the account opening forms for the large account On 29 February 1988 the appellants replied to Herman s letter saying that they refused to provide the information on the ground that the signature on the letter differed from the file records 18 All along Herman believed that the moneys in the large and small accounts were continuing to earn interest Meanwhile the estate duty on the Lugito estate remained unpaid and interest on the unpaid estate duty was running at 12 per annum He knew that this exceeded the interest that the large account would be earning and wanted the money to be released to pay estate duty By this time he was a customer of the appellants private banking department His private bankers with the appellants were Brian Williamson and Yap Yip Leong Yap Lip Leong had earlier informed Herman in a meeting in Jakarta either just before Herman received the appellants letter of 29 February 1988 or soon thereafter that his signature in his letter of 15 January 1988 was different from those in the appellants file records 19 Herman had used the same signature which he used to establish a deposit account with the appellants in Hong Kong in the early 1970s He had transferred some of these funds from his Hong Kong accounts to the Singapore branch and he thought this was how the Singapore branch had his old signature Yap Lip Leong asked him to sign whatever other signatures he had used with the appellants on a photocopy of his letter of 15 January 1988 However Yap Lip Leong did not tell him that he was a joint account holder of the large account 20 On 15 March 1988 he wrote a letter directly to Yap Lip Leong of the appellants requesting the appellants to release the estate money in the large account to the Comptroller of Estate Duty in payment of estate duty The learned judicial commissioner drew the inference that Herman was unaware that he could withdraw the money in the large account as the surviving holder of the large account or that the money in the large account was not earning any interest Nevertheless the appellants made no attempt to correct Herman s mistaken impression 21 In reply to Herman s letter of 15 March 1988 the appellants solicitors Shook Lin Bok wanted to know a the capacity in which Herman made the request b the accounts in relation to which the request was made c the amounts for which the request was made and d copies of all documents relating to the above Mr Fergusson who was then acting for Herman replied by letter dated 20 April 1988 providing the required information He also inquired the status of the two fixed deposit accounts Shook Lin Bok replied by letter dated 14 June 1988 stating the balances currently standing to the credit of the two accounts This was the first time the appellants gave an indication that the large account was a joint account However the appellants did not say who the signatories to the joint account were 22 At this juncture it is most unfortunate that the solicitors acting for Herman did not notice that the amounts in credit in the two fixed deposits stood at exactly the same amount as at 1979 ie the appellants had not credited any interest to the two accounts since 1979 It was only in 1991 when Haridass Ho Partners took over the matter and on specific queries from the firm as to why the moneys in the two accounts were not earning any interest that the appellants replied stating that they had no instructions to place the amounts on interest bearing deposit since 1979 On 28 August 1991 Haridass Ho Partners instructed the appellants to place the moneys in the large account on a seven day interest bearing deposit and the moneys in the small account on a one month interest bearing deposit The appellants effected these instructions with immediate effect 23 It was only on 3 September 1991 that the appellants solicitors Shook Lin Bok revealed that the large account was a joint account in the name of three parties ie Lugito Herman and Lily By a letter dated 4 May 1992 Haridass Ho Partners demanded full repayment of all moneys in the large and small accounts inclusive of all the interest accrued thereon within seven days of the date of the letter The appellants failed to make such payment On 1 October 1992 the respondents commenced their present action against the appellants demanding the repayment of the moneys standing in the large and small accounts as well as the interest that would be payable if the two accounts had been renewed annually 24 On 3 February 1993 the appellants paid the respondents the sum of 1 585 727 73 in respect of the large account representing 1 534 539 87 and interest accrued from 28 August 1991 to 2 February 1993 On 17 February 1993 the appellants paid 5 902 12 in respect of the small account representing 4 855 56 and interest from 28 August 1991 to 15 February 1993 The appellants adamantly refused to pay any interest from 24 January 1979 to 27 August 1991 25 In the court below the respondents argued that the appellants were bound to comply with the lawful and reasonable instructions in the letter by Lui dated 23 June 1979 to renew the fixed deposit for a year and to keep them informed Further they argued there was an implied term in fixed deposit contracts that the bank would contact a fixed deposit account holder to inform him of the maturity of the fixed deposit and seek his instructions The appellants were in breach of this duty since they ought to have sought instructions from Lui whom the appellants knew were the solicitors acting for the Lugito estate 26 The appellants raised several defences which were all rejected by the learned judicial commissioner The appellants argued that under rule 2 found on the face of the TCD the production of the TCD was a condition precedent to the renewal and the TCD was never produced at all material times The appellants argued that they were under no obligation to obey Lui s instructions and further there was no room to imply a contractual term that the bank was under an obligation to seek the instructions of its customers the fixed deposit account holders on the maturity of the fixed deposit Even if there was such a contractual term the appellants had fulfilled their duty by sending reminders to the Cairnhill address the address provided by Lugito at the time of the opening of the account The appellants argued that in any event the respondents causes of action were hopelessly time barred since any breaches of duty on the part of the appellants took place in 1979 or at the latest in 1980 27 The learned judicial commissioner accepted all the arguments raised by the respondents He held that the appellants were contractually bound to comply with Lui s instructions to renew the fixed deposit for a year It was not a condition precedent for the TCD to be produced before renewal of the fixed deposit The production of the TCD was only necessary where the customer had sought repayment of his principal sum and the interest The appellants were contractually obliged to take reasonable steps to seek instructions from the respondents on the maturity of the fixed deposit the attempts made by the appellants were short of what a reasonable banker would do The respondents claims were not time barred as the breaches by the appellants were of a continuing nature 28 In the result the appellants were ordered to pay compound interest to the respondents on a 1 534 539 87 from 25 January 1979 to 3 September 1991 at the appellants TCD rate for six month deposits for the whole of the period with no rests during such period b 4 855 56 from 1 July 1980 to 27 August 1991 at the appellants TCD rate for monthly deposits c the difference in interest between the interest paid to the respondents from 28 August 1991 to 2 February 1993 on 1 534 539 87 and the interest that should be paid for that period on the principal amount with compound interest as calculated in a and d the difference in interest between the interest paid from 28 August 1991 to 15 February 1993 on 4 855 56 and the interest that should be paid on the principal amount with compound interest in b Consequential orders on the interests payable on the judgment sum and costs were made The appeal Duty to comply with customer s instructions 29 Before us counsel for the appellants attacked the holding of the learned judicial commissioner on various grounds Counsel argued that the appellants were under no obligation to renew the deposit in the large account for a period of a year notwithstanding the receipt of Lui s instructions of 23 June 1979 Lui was acting on behalf of the executors to Lugito s estate and had instructed that the amount standing to the credit of the large account be renewed on maturity which was on 24 January 1979 Counsel advanced two arguments under this issue first the terms in the fixed deposit did not confer any contractual option to renew the appellants were only under an obligation to repay the deposit moneys and the interest for a year on its maturity to the customer What Lui did when they requested for a renewal of the deposit was only an offer made to the appellants which was not accepted by the appellants Second it was a precondition that the TCD be produced before renewal could take place and even though this precondition was communicated to Lui no expired TCD was ever produced Counsel attacked the findings of the learned judicial commissioner that the appellants did not actually communicate to Lui s office that renewal would not take place until and unless the old TCD was produced 30 The essence of the contract between a banker and customer in a contract of fixed deposit is that the customer deposits an amount for a specified period of time at an agreed rate of interest The balance standing to the credit of a customer s fixed deposit account is a debt due to him from the bank and this sum together with interest is payable either on demand or at a predetermined date If the deposit is renewed at maturity the bank would roll over the deposit and the interest payable into a new deposit and fix the interest rate at the then prevailing rate An analysis of some of the incidents of the banker customer contract was stated by Atkin J in N Joachimson a firm name v Swiss Bank Corporation 1921 3 KB 110 at 127 as follows The bank undertakes to receive money and to collect bills for its customer s account The proceeds so received are not to be held in trust for the customer but the bank borrows the proceeds and undertakes to repay them The promise to repay is to repay at the branch of the bank where the account is kept and during banking hours 31 In DFC New Zealand v Goddard 1992 2 NZLR 445 at 447 Cooke P said It is elementary that an unsecured deposit whether for a term or at call with a bank or similar financial institution creates normally only a debtor and creditor relationship and not a trust and that this applies to an authorised deposit of trust funds 32 Hence in the absence of any special relationship between the bank and the customer such that the bank is held out to be a fiduciary the amount is not held by the bank as a trustee In Hart Inspector of Taxes v Sangster 1957 Ch 329 it was held that separate deposits into the account do not constitute separate contracts but instead remain as one continuous contract This contract is made at the time the account is opened and both withdrawals and payments into the account are effected in performance of this contract 33 The terms of the TCD were silent as to the renewal of the deposits There was no dispute that Lui had by the letter dated 23 June 1979 clearly instructed the appellants to renew the fixed deposit standing in the large account for a period of one year When such an instruction is given it is really unarguable that what the account holder is saying is that the deposit is to be renewed on the banker s usual terms and interest rates for the amount given presumably at the then prevailing interest rate There was no ambiguity in respect of the instructions The instructions were not uncertain since there was an objective market standard to be applied at all times That was indeed how the appellants understood the instructions in the same mandate of 23 June 1979 to consolidate the two current accounts one in Singapore currency and the other in US currency and to place them on a one year deposit 34 Counsel relied on Paul Felthouse v Bindley 1862 11 CB NS 869 for the proposition that an offeror was not entitled to treat an offer as having been accepted by the offeree if the offeree did not respond to the offer However the proposition that silence did not amount to acceptance did not apply where it was one continuing contract between the customer and the bank The only question was what sort of terms were agreed by the parties It must be that the bank was contractually bound to accept further deposits into the account on the instructions of the customer if they were above a prescribed minimum as long as the banker customer contract existed between the parties If the appellants refused to accept the instructions either to place any further money in the fixed deposit account or to renew the deposit with the accrued interest when maturity date was reached the appellants should at the very least give reasonable notice to the customer before terminating the account In this case the appellants never terminated the banker customer relationship In fact the appellants acted on the same mandate in transferring the money in the two current accounts into a new fixed deposit account and sending the TCD to Lui The appellants themselves said that they contacted Lui for the return of the expired TCD in respect of account No 202831 before they would renew the deposit in the large account All these showed that the appellants never terminated the contract between the parties 35 The second argument advanced by counsel was on the construction of rule 2 found on the face of the TCD Rule 2 provided that the receipt must be duly stamped upon repayment The terms of the TCD were that the bank received from the customer a stated sum of money to be placed on fixed deposit for a certain period repayable with interest at the stipulated rate upon presentation of this receipt subject to the following rules Rule 2 was one of the rules It is clear that these terms were concerned with repayment to the customer and not renewal of the deposit Counsel s argument that rule 2 also applied to the renewal of the deposit is not persuasive at all 36 Counsel for the appellants relied on Voo Foot Yiu v Oversea Chinese Banking Corp Ltd 1936 MLJ 169 and Re Wee Cheow Keng deceased 1953 MLJ 206 in arguing that there was every reason why the appellants required the return of the expired TCD In Voo Foot Yiu it was held that where money in a deposit account was stated to be repayable only on the production of the deposit receipt the bank repaid the money at its own risk when it made payment of the deposit to someone who did not have the deposit receipt However Voo Foot Yiu is distinguishable from the facts in the present case which concerned the renewal of the deposit and not repayment When a fixed deposit reached maturity and the whole amount payable thereunder is instructed to be renewed on a fresh deposit all the principal and accrued interest remains in the same fixed deposit account albeit on a fresh deposit There is no repayment of the sums in the deposit account to the customer 37 In Re Wee Cheow Keng deceased a father deposited 100 000 with the bank in the joint names of himself and his infant son The bank issued a receipt which provided that the amount shall be received by the named persons or bearer in Singapore Murray Aynsley CJ at 207 said by way of dicta that This document the receipt was not negotiable and it could not be assigned at law by mere delivery Parties cannot by contract make a chose in action negotiable nor can they create a chose in action which is assignable other than in accordance with the statute Delivery would at most operate as an equitable assignment and an assignee could only sue the bank in his own name after the procedure required by statute for the legal assignment of a chose in action had been completed 38 We fail to see why the appellants perceived that the return of the expired TCD was important The decision in Re Wee Cheow Keng deceased made it clear that a deposit receipt was not negotiable The appellants TCD was not a negotiable instrument Transferring an unexpired TCD in itself could not transfer any rights in ownership to the transferee This is a fortiori the case with an expired TCD 39 The learned judicial commissioner held that even if the presentation of the TCD was a condition precedent to the renewal of the deposit the appellants were obliged to act with reasonable care and skill to duly notify the respondents clearly unequivocally and promptly that they were refusing to renew the deposit until the expired TCD was presented and the failure to do so was a breach of contract In our view the appellants were under an implied duty of care to the account holders to give such a notice and such a breach gave rise to an estoppel The appellants by their conduct were estopped from insisting on the presentation of the expired TCD a provision which was inserted only for the benefit of the appellants The practice of the appellants from 1973 the date on which the account was opened to 1978 the date of Lugito s death was to automatically renew fixed deposits on the maturity date without insisting on the presentation of the TCD The appellants did not write a single letter from 1979 to 1991 to state that the large account could not be renewed because the expired TCD was not returned In all the inquiries made by Herman s solicitors to the appellants no mention was made that the expired TCD was not returned In 1991 when the appellants were asked why interest was not paid since 1979 their answer was not the non return of the TCD but the lack of specific instructions to place the moneys in an interest bearing account 40 Counsel for the appellants attacked the learned judicial commissioner s finding that there was no actual communication by the appellants to the respondents of the necessity of returning the expired TCD The learned judicial commissioner did accept that Tan Bee Choo also known as Cindy Koh a clerk with the appellants in the fixed deposit department at the time the 23 June 1979 letter was received made a telephone call to the office of Lui on 27 June 1979 She testified that she called and spoke to a Ms Tan a clerk in the firm This was supported by a contemporaneous note made by Tan Bee Choo The learned judicial commissioner made a finding that while such a telephone conversation did take place it was probable that all she told Ms Tan was to ask for the large account s TCD He was not prepared to find that Tan Bee Choo did communicate explicitly to Ms Tan that the deposit of the large account moneys would not be renewed until the expired TCD was produced This was a finding of fact made by the learned judicial commissioner who had seen and heard Tan Bee Choo s evidence and who had assessed the probative value of the contemporaneous note which only stated that she had spoken to Ms Tan who would get the original TCD from the client In our view he was perfectly entitled to come to such a finding 41 In addition the learned judicial commissioner held that in any event such a conversation would not be sufficient to discharge the appellants burden in establishing that they had given the respondents proper notice of their refusal to renew unless the expired TCD was returned This conversation was between a clerk with the appellants and a secretary with Lui A reasonable banker would have informed Mr Lui Boon Poh personally or given the firm written notice hereof Counsel for the appellants argued that there was no requirement that all communications between a bank and its customer must be in writing citing the example of telephone banking We think that this missed the point completely Whether it was appropriate to use the telephone as a means to convey information would depend on the importance of the information The appellants position that they would not renew the fixed deposits without the return of the original TCD should have been clearly communicated to Mr Lui Boon Poh personally or to the firm It was unreasonable for Tan Bee Choo to leave the instructions to return the expired TCD with a secretary of the solicitor without confirming it in writing Proper notice of their stance taken was important and would have required the appellants to confirm their position in writing Duties of the bank on the maturity of the fixed deposit 42 We now turn to the second issue which is the scope of the bank s duty of care to the customer when it has not obtained the customer s instructions to deal with the money in the fixed deposit on its maturity This issue concerns both the large and small accounts This issue is far more contentious Counsel for the appellants argued that in relation to the large account even if they ought to comply with the instructions given in the 23 June 1979 letter they were under no obligation to pay interest for any longer than that one year period The respondents relied on the implied terms in the banking contract There were no express terms in the contract as evidenced on the face of the TCD the opening account cards loan time deposit form and the time deposit confirmation regarding notification to the customer on maturity of the deposit or the renewal of the fixed deposit 43 Counsel for the respondents relied on the letter of 23 June 1979 which contained an instruction to the appellants to keep us Lui informed The learned judicial commissioner held that these words keep us informed would be understood by a bank taking reasonable care and skill in interpreting ascertaining and acting in accordance with the instructions of its customer to mean that the respondents required them to communicate with Lui on all matters in relation to the large account which they would in the normal course of their operations communicate with the account holders of the large account The failure of the appellants to ask Lui upon the maturity of the deposit of the large account moneys whether the deposit should be renewed was a breach of duty We disagree with the learned judicial commissioner that the words to keep us informed import contractual effect This request was far too vague to constitute a binding mandate It was more of words of mere courtesy and was insufficient to import a binding obligation to require the appellants to inform them periodically the state of the fixed deposit account 44 Counsel for the respondents sought to imply a term that the bank is under a duty of care to contact the account holders for instructions on the maturity of the fixed deposit The appellants should not only have renewed the deposit for a year following the instructions of 23 June 1979 but should also have reminded Lui that the large deposit had matured 45 In Energy Shipping Co Ltd v UDL Shipping Singapore Pte Ltd 1995 2 SLR R 609 the Court of Appeal accepted that whether a term must be implied must be a necessary term irrespective of whether one accepts the business efficacy test propounded by Bowen LJ in The Moorcock 1889 14 PD 64 or the officious bystander test enunciated by MacKinnon LJ in Shirlaw v Southern Foundries 1926 Ltd 1939 2 All ER 113 Counsel for the respondents relied on the implied duty of care arising in the contractual relationship of banker and customer found in Redmond v Allied Irish Banks 1987 FLR 307 which applied the dicta in Selangor United Rubber Estates Ltd v Cradock No 3 1968 1 WLR 1555 and Karak Rubber Co Ltd v Burden No 2 1972 1 WLR 602 These authorities supported the general proposition that a banker owed a customer a duty to take reasonable care and skill in acting in accordance with the instructions of the customer In Selangor United Rubber Estates Ltd Ungoed Thomas J held in the context of a bank s duty to the customer in respect of the conduct of its customer s business at 1608 as follows To my mind a bank has a duty under its contract with its customer to exercise reasonable care and skill in carrying out its part with regard to operations within its contract with its customer The standard of that reasonable care and skill is an objective standard applicable to bankers Whether or not it has been attained in any particular case has to be decided in the light of all the relevant facts which can vary almost infinitely 46 Counsel for the appellants argued that the dicta in Selangor United Rubber Estates Ltd was too wide and was criticised in Lipkin Gorman v Karpnale Ltd 1992 4 All ER 409 In Lipkin Gorman Cass was a partner in a solicitors firm and was a compulsive gambler He drew cheques on the firm s client account with the bank and made the cheques payable to cash as well as to the building society from whose account Cass withdrew the proceeds Those cheques were honoured by the bank even though the branch manager knew of Cass gambling activities and was aware that the method used for the drawing of the cheques was unusual May LJ criticised the application of the reasonable banker test used in Selangor to the claim against the banks for negligence and at 421 he said In my opinion whether it was by concession or not it was wrong to equate the duty to inquire where there has been fraud and the bank is proved to have known of it with that where all that is being alleged is that the bank has been negligent Nor was it necessary to rely upon any such equivalence in order to decide the issues in the Selangor case It was because of this error I think that both Ungoed Thomas J in Selangor 1968 2 All ER 1073 at p 1118 1968 1 WLR 1555 at p 1608 and Brightman J in Karak 1972 1 All ER 1210 at p 1231 1972 1 WLR 602 at p 629 stated the common law of duty of care on a paying banker in the normal case of a current account in credit too highly The relationship between the parties is contractual The principal obligation is upon the bank to honour its customers cheques in accordance with its mandate on instructions There is nothing in such a contract express or implied which could require a banker to consider the commercial wisdom or otherwise of the particular transaction Nor is there normally any express term in the contract requiring the banker to exercise any degree of care in deciding whether to honour a customer s cheque which his instructions require him to pay In my opinion any implied term requiring the banker to exercise care must be limited 47 Lipkin Gorman was concerned with how the reasonable banker test should be applied in the context of whether a bank had been negligent in honouring a cheque drawn within the authority of its customer s agent without enquiries The formulation of the reasonable banker test in ordinary transactions remained the same but the criticism only went to when the court should hold that the bank would be put on inquiry and its failure to investigate amount to negligence 48 In our view the bank is under an implied duty of care to take reasonable steps to inform the account holders on the maturity of their fixed deposits Counsel for the appellants argued that it would be unrealistic to expect the appellants to continually send reminders and that an absolute duty for the bank to seek out the customer was too onerous a duty and would be tantamount to requiring the bank to act as a part time detective This argument is exaggerated Reasonable steps in many cases would ordinarily mean in the absence of special circumstances writing once to the customer at the address provided when it has not received any instructions for renewal Obviously the bank could not be under an absolute duty to seek out its customer 49 We fail to see how imposing such an obligation to send reminders was contrary to fundamental principles in the banker and customer contract Counsel relied on Holden The Law and Practice of Banking 5th ed vol 1 and Clare Co v Dresdner Bank 1915 2 KB 576 for the proposition that unless and until called upon by the customer to pay either by paying over the balance or by honouring a cheque or other payment instruction the banker was neither expected nor obliged to act 50 The authorities relied on by the appellants were not inconsistent with the duty of care imposed by a bank in reminding the customers of the maturity of the deposit Holden stated that the ordinary rule that a debtor must seek out his creditor did not apply between the bank and customer in the context of repayment of the deposit Holden at p 55 The customer had no right of action against his banker in respect of money deposited until after a demand had been made and so time did not begin to run against the customer under the Limitation Act Cap 163 1996 Ed until such demand In Clare Co v Dresdner Bank 1915 2 KB 576 the court held that the customers were not entitled to demand payment on their account from the bank s London branch when their account was at the Berlin branch The banker s duty was only to repay the money upon demand being made by the customer at the branch of the bank where the account was kept 51 Whether we ought to impose a duty of care on the bank to send reminders to fixed deposit account holders had nothing do with when limitation was to set in or at which branch the customer could demand repayment of the sums deposited The rule that the banker was not obliged to seek its customer dealt with the banker s obligation to repay the deposit and had nothing to do with general duties of care imposed on the banker 52 Reverting to the present case the facts are very unusual and unfortunate for the respondents The attempts which the appellants made in contacting the account holders were the reminders which they sent to the Cairnhill property Tan Bee Choo and Lilian Hui a customer service officer adduced evidence of a comprehensive method of using a computer generated device to send reminders to the account holders The system according to them was that it would ensure that a reminder was sent seven days before the fixed deposit was due to mature and if the appellants had still not received any instructions on what to do with the deposit upon maturity another reminder would be sent seven days after the maturity of the deposit Further reminders would then be sent After five reminders a registered letter would be sent as a last resort This system was already in place in the appellants However all the reminders were sent to the Cairnhill property occupied by the first family which was at loggerheads with the respondents The upshot was that the respondents were not informed of those reminders The appellants did send a registered letter on 22 January 1981 which was returned unclaimed This would be obvious to anyone including the appellants that no instructions would come from that address or that the customer had moved from the address or could no longer receive correspondence through that address 53 The appellants did not give a satisfactory explanation as to why there was no follow up action or any attempt to contact Lui or Mr Lui Boon Poh whom they knew from the 23 June 1979 letter were the solicitors acting for the executors of Lugito s estate The appellants had indeed taken Lui s instructions in respect of consolidation of the two current accounts and could not possibly dispute that they were entitled to ignore Lui as a source of instructions Moreover Tan Bee Choo testified that she accepted that Lui were the proper source of instructions and had called the solicitor s office to request for the return of the expired TCD The letter of 23 June 1979 from Lui was recorded on a caution card in the appellants records with respect to the large account In 1985 the appellants claimed that they lacked any form of instructions and forced the account into dormancy 54 On Lugito s death on 21 November 1978 the right of survivorship operated and legal title to the joint account vested in Herman and Lily On Lily s death on 17 September 1983 Herman would hold the sole legal title to the funds For some inexplicable reason between 1979 and 1991 the appellants did not inform Herman or his solicitors that either Herman or Lily when she

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  • Susilawati v American Express Bank Ltd[2009] 2 SLR(R) 737; [2009] SGCA 8
    a new trial may be ordered was elucidated by Denning LJ in Ladd v Marshall at 1491 F irst it must be shown that the evidence could not have been obtained with reasonable diligence for use in the trial secondly the evidence must be such that if given it would probably have an important influence on the result of the case although it need not be decisive thirdly the evidence must be such as is presumably to be believed or in other words it must be apparently credible although it need not be incontrovertible The Ladd v Marshall test has been cited and followed by this court on a number of occasions Cheong Kim Hock v Lin Securities Pte 1992 1 SLR R 497 Cheong Kim Hock at 21 Cheng Wong Mei Ling Theresa v Oei Hong Leong 2006 2 SLR R 637 Theresa Cheng Wong at 39 Sim Cheng Soon v BT Engineering Pte Ltd 2006 3 SLR R 551 Sim Cheng Soon at 7 The three conditions must be cumulatively satisfied Su Sh Hsyu v Wee Yue Chew 2007 3 SLR R 673 Su Sh Hsyu at 15 25 The respondent conceded that the third condition of the Ladd v Marshall test ie that the evidence must be apparently credible though it need not be incontrovertible was satisfied here We agreed that since the nature of the evidence took the form of a document and there was no dispute as to its authenticity the requirement was indeed fulfilled in this case 26 We were also in no doubt that the second condition was satisfied here The Referral Agreement suggested a potential conflict of interests and the appellant s case rested heavily on that point In our view since the requirement only demanded that the evidence have an important influence on the result of the case but need not be determinative this was a low threshold to mount and on the face of the facts here we accepted that the Referral Agreement would most likely have a significant influence on the result of the case 27 In the circumstances it was the first condition that posed a dilemma The question we had to resolve was whether the new evidence could have been obtained for use in the trial with reasonable diligence 28 Counsel for the appellant and the respondent cited different authorities for the interpretation of the term reasonable diligence Counsel for the appellant relied on the case of Dickson v Telstra Corporation Ltd 2005 ACTCA 36 where the Supreme Court of the Australian Capital Territory held 7 As to the question of diligence it is to be noted that what is required is not perfection but reasonable diligence and reasonable means to take account of all the circumstances of the litigation in question and of the accident in question and of the events that presumably preceded it 13 I also note that section 48A of the Australian Capital Territory Self Government Act 1998 Cth places an overriding duty on this court to ensure that justice is done and that when the Court is looking at a concept such as reasonableness diligence the question of reasonableness demands some flexibility in balancing the need for the finality of litigation with the public interest in ensuring that justice is done 19 T he rule for receipt of fresh evidence is far from absolutely rigid A discretionary judgment must be made not only as to the question of the cogency of the evidence but also the question of whether there was reasonable diligence or not That is diligence being reasonable in all the circumstances The rule is also subject to the overriding consideration that the interests of justice are always of paramount importance emphasis added 29 Counsel for the respondent meanwhile cited Sim Cheng Soon 24 supra where this court referred at 10 to the Malaysian High Court decision of Re Lim Hong Kee David 1995 4 MLJ 564 which had explained diligence in the following manner at 572 Diligence means industry It is a steady earnest and meticulous pursuit towards the attainment of one s goal In the context of obtaining the fresh evidence that is intended to be adduced the party seeking to make such an introduction ought to satisfy the court that he has made all reasonable cogent and positive efforts in the pursuit of obtaining the best evidence to prove his case It is his duty to show to the court that neither indolence nor a lackadaisical attitude predominated in the preparation of his case nor that insufficient preparation at the pre trial stage led to the party being unable to adduce the evidence he now seeks to introduce as fresh evidence If all reasonable efforts had been exhausted and fresh evidence that is sought to be introduced could not have been thus obtained the court ought then to allow for the admission of such fresh evidence subject of course to any existing statutory provisions Positive tangible or clear explanation ought to be given as to why such evidence could not have been obtained with reasonable diligence for use at the trial The requisite standard as noted by Andrew Phang JA at 10 of Sim Cheng Soon is one of reasonable diligence not Herculean or extraordinary effort 30 There can be no question here that the appellant s solicitors had every opportunity to adduce the evidence before the end of the trial and the appellant could not argue otherwise Their only excuse was that they had received the Referral Agreement at a very late stage in the proceedings Counsel for the respondent submitted that with reasonable diligence the appellant s solicitors would have inquired and discovered the existence of the Referral Agreement prior to the trial or would at least have realised its significance before the end of the proceedings We agreed with counsel for the respondent 31 During the trial the appellant s solicitor had indeed cross examined Mr Lim on whether any written acknowledgement to the referral arrangement had been obtained by the respondent This was the precise exchange that took place Q Yes And the email says Reads I note that the referring agent to the Bank And that s a reference to Tommy A Yes Q Reads will also be operating the account To avoid any further misunderstandings or potential problems with the actual client I would require a written acknowledgement from the client to the effect that she is aware of Tommy Lim s position as both a compensated referral agent and operator of the account You see that A Yes Q And if you look at page 23 the email right at the top A Yes Q you will see Reads PB Credit concurs on the CR with the condition that the written acknowledgment as discussed is recvd on the next client visit Correct A Yes Q Was such a written acknowledgement obtained A Your Honour I can t recall but I would probably say no it was not obtained But we have told Mdm Susilawati that Tommy is a referral agent Q Mr Lim can you answer the question A Okay sorry Q So you would say that no written confirmation was received correct A I said I can t recall but I think it would be fair to say that no written acknowledgement was received Q Right Did you obtain such a written confirmation from Mdm Susilawati A I don t think so emphasis added 32 On re examination Mr Lim was again asked about the written acknowledgement Q Now my question is are you aware or not whether at that time from the time the account was opened or shortly thereafter whether Mdm Susilawati was or was not aware of Tommy being a referral agent A Mdm Susilawati knows Tommy is the referral agent yes Court How Q How did she know that A No I have to tell her For the referral agent agreement when when a referral agent is signed up when a referral agent brings in a new pros brings in a new prospect we have to make it known to the prospect that this is the referral agent As far as the bank is concerned we just have to let them know that s it The internal arrangement between the bank and the referral agent need not be discussed with the client or the prospect So for for the clients that er Mr Tommy refer to us I do tell them that he is the referral agent and he is paid a certain amount of money by the bank Q Now did you tell your evidence is that maybe let me ask you this so that we are clear Did you tell Mdm Susilawati or did you not that Tommy was the referral agent in this case A I think I would have Court Did you A Yes I think I would have But Your Honour I would say I think I would have I can t confirm you know it s yes or no Q To the best of your recollection A I think I would have emphasis added 33 Mr Lim s testimony on the stand was clear and unequivocal He admitted that no written acknowledgement had been obtained by the respondent from the appellant but maintained that he had in all likelihood informed the appellant of the referral arrangement between Tommy and the respondent It is not insignificant that the appellant s solicitor did not query let alone dispute Mr Lim s claim that he had informed the appellant of the referral arrangement Instead the cross examination concentrated solely on whether any written acknowledgement had been obtained This subtleness was not lost on us It was plain to us that as the appellant s counsel had actually referred to an internal e mail of the respondent adverting to this very issue the appellant was familiar with the existence of the referral arrangement well before the trial This e mail was discovered to the appellant s solicitors on 18 September 2006 some ten months before the trial The email dated 6 January 1998 from John Hughes a senior risk assessor to Mr Lim stated I note that the referring agent to the Bank will also be operating the account To avoid any future misunderstandings or potential problems with the actual client I would require a written acknowledgement from the client to the effect that she is aware of Tommy s position as both a compensated referral agent and operator of the account If he is not being compensated for the referral of this business then I have no problem in concurring in the CR as presented The fact that this email was discovered at a relatively early stage also made it plain to us that there was no premeditated attempt by the respondent to suppress information about the existence of the referral arrangement Indeed the respondent had also discovered two other documents namely the Personal Client Profile and Write up of the family of Mr Gustimego Mdm Susilawati Ms Farida Gustimego and Ms Zina Gustimego which clearly adverted to Tommy s role as referror We should also express our profound disquiet with the appellant s failure to file any personal affidavit in support of the applications attesting to her knowledge or lack thereof of the referral arrangement This would have undoubtedly helped shine some further light on this issue Thus in the absence of evidence to the contrary we were minded to conclude that Mr Lim had indeed informed the appellant of the relationship between Tommy and the respondent For good measure we should also mention that the trial judge did not find the appellant to be a credible witness see the GD at 11 31 43 45 46 55 56 and 58 Mr Lim on the other hand was deemed to be a credible witness see the GD at 50 52 In the final analysis the fact that no written acknowledgement had been obtained was to our minds quite irrelevant to the appellant s real state of knowledge as to the existence of such an arrangement 34 This actual knowledge was of real significance because the appellant s solicitors had sought to paint the discovery of the Referral Agreement at trial as an event that had taken them by surprise It appears to us however that the fact that the acknowledgement of the referral arrangement by the appellant was not embodied in the form of a document did not materially alter or redefine the pertinent circumstances Armed with prior knowledge of the referral arrangement between Tommy and the respondent the appellant s solicitors by exercising reasonable diligence could have quite easily discovered the existence of the Referral Agreement prior to trial alternatively interrogatories could have been administered In any event the appellant s awareness of the referral arrangement should have been more than sufficient to alert her solicitors to any possible cause of action grounded on that basis and having chosen not to pursue that lead it did not then lie in their mouths to argue that it was the discovery of the Referral Agreement that apprised them of the new cause of action which they belatedly wanted to advance at the appeal stage The cross examination of Mr Lim see 31 above quite clearly also conveys the unmistakeable impression that the appellant s original counsel had indeed received prior instructions on this issue and had decided to focus his forensic efforts to undermine the respondent s case solely on the absence of written acknowledgment rather than on the actual absence of knowledge of the referral arrangement on the part of the appellant 35 We hasten to add that our conclusion on this point should not be construed as our condoning of the failure by the respondent to give discovery of the Referral Agreement prior to the trial In this context we were helpfully referred by appellant s counsel to the Australian case of Commonwealth Bank of Australia v Quade 1991 178 CLR 134 Commonwealth Bank of Australia In that case the applicants had sustained financial losses by reason of unfavourable exchange rate fluctuations in relation to a Swiss franc loan which had been made to them by the Commonwealth Bank of Australia Commonwealth Bank The applicants then sued the Commonwealth Bank in the Federal Court of Australia for damages but the proceedings were dismissed After judgment the Commonwealth Bank made available to the applicants some documents which had been wrongly omitted from an affidavit of documents that had been filed and served in purported compliance with an order for discovery The High Court of Australia considered the appropriate approach to be adopted by an appellate court in determining whether a new trial should be ordered when documents which should have been discovered were not disclosed by the successful party Its incisive treatment of the innate procedural tensions in play when there is a prior breach of a discovery obligation at 142 143 merit repetition in their entirety here The position is however different in a case such as the present where the unavailability of the evidence at the trial resulted from a significant failure by the successful party to comply with an order for the discovery of relevant documents in his possession or under his control The application to that category of case of the general rule that a new trial should only be ordered on the ground of fresh evidence if it is almost certain or reasonably clear that the opposite result would have been produced if the evidence had been available at the first trial would particularly where the failure was deliberate or remains unexplained serve neither the demands of justice in the individual case nor the public interest in the administration of justice generally In so far as the demands of justice in the individual case are concerned it would cast upon the innocent party an unfairly onerous burden of demonstrating to virtual certainty what would have happened in the hypothetical situation which would have existed but for the other party s misconduct In so far as the public interest in the administration of justice generally is concerned it would be likely to ensure to the successful party the spoils of his own default and thereby encourage rather than to penalize failure to comply with pre trial orders and procedural requirements It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict The most that can be said is that the answer to that question in such a case must depend upon the appellate court s assessment of what will best serve the interests of justice either particularly in relation to the parties or generally in relation to the administration of justice In determining whether the matter should be tried afresh it will be necessary for the appellate court to take account of a variety of possibly competing factors including in addition to general considerations relating to the administration of justice the degree of culpability of the successful party any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non disclosed material had been made available While it is not necessary that the appellate court be persuaded in such a case that it is almost certain or reasonably clear that an opposite result would have been produced the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so emphasis added 36 In our opinion the court in Commonwealth Bank of Australia summed up the balancing exercise rather aptly We agree that the factors suggested by the court in addition to general considerations relating to the administration of justice the degree of culpability of the successful party any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non disclosed material had been made available are useful guiding principles as to whether a retrial might be necessary in any future cases relating to the failure to give proper discovery The courts also have to remain constantly vigilant so that parties are not encouraged to think that the spoils of victory can be invariably retained regardless of the extent of their failure to observe pre trial obligations of discovery Litigation in Singapore is now a cards face up on the table process and parties must appreciate that a lack of honesty in the pre trial proceedings can in egregious cases have exceptionally adverse consequences Legal advisors have an abiding and grave responsibility as officers of the court to ensure that their clients are fully apprised of their serious and often extensive discovery obligations to provide all relevant material that may either be supportive or destructive of their case theories Clients ought to be informed in writing at the earliest appropriate opportunity of this unwavering obligation under our adversarial system 37 We should however emphasise that the present case did not involve a failure to comply with a specific order for discovery nor were there any allegations that the respondent had deliberately suppressed the Referral Agreement or behaved in any way mala fide and rightly so We do not for one moment think that this omission was anything other than an inadvertent oversight there was no question of any deception or impropriety having taken place in relation to the discovery process whether prior to the trial or during the trial itself In the light of these factors coupled with our finding that the appellant appears to have been well aware of the referral arrangement between Tommy and the respondent see 33 and 34 above we were not at all persuaded that the delay in discovery had resulted in any injustice whatsoever to the appellant 38 Further we also agreed with counsel for the respondent that with reasonable diligence the appellant s solicitors could have inquired and discovered the existence of the Referral Agreement prior to the trial or at the very least ought to have realised its significance before the end of the trial Therefore as the first requirement of the Ladd v Marshall test had not been satisfied we were unable to allow either the appellant s application for leave to adduce further evidence or the application for the court to order a new trial 39 In the final analysis this was certainly not one of those exceptional cases where by reason of the discovery of fresh evidence and or the appearance of a patent miscarriage of justice leave to adduce further evidence or a new trial was warranted In the normal course of events this determination would have been sufficient to dispose of the matter However for the sake of completeness we should add further that we were satisfied in any event that the appellant s new point was plainly unsustainable in the face of all the adduced evidence on record and it is to this issue that we next turn Duty of full and frank disclosure by a fiduciary 40 One of the key questions raised in the appellant s submissions was whether Tommy owed the appellant any fiduciary duties as an agent The appellant submitted that it is settled law that an agent owes his principal fiduciary duties and that these duties arise whether or not the agency is gratuitous However we should point out that an agency relationship does not always give rise to a fiduciary duty Moreover the extent of any existing fiduciary duty may vary from situation to situation In this context Lord Upjohn s observation in Phipps v Boardman 1967 2 AC 46 is often relied upon at 127 The facts and circumstances must be carefully examined to see whether in fact a purported agent and even a confidential agent is in a fiduciary relationship to his principal It does not necessarily follow that he is in such a position emphasis added Hence while it is accepted that a fiduciary relationship is often presumed to exist in many types of agency relationships this presumption can be rebutted by the relevant facts 41 In view of our decision not to allow the appellant leave to raise and argue the new point we did not make a finding on whether Tommy in fact owed the appellant any fiduciary duties and if so the extent of these duties We need only mention that we consider the analysis made in Frame v Smith 1987 2 SCR 99 by Wilson J dissenting in identifying the common features of a fiduciary relationship at 60 helpful in such an exercise Relationships in which fiduciary obligations have been imposed seem to possess three general characteristics 1 The fiduciary has scope for the exercise of some discretion or power 2 The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary s legal or practical interests 3 The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power Wilson J s summary was accepted in Hodgkinson v Simms 1994 3 SCR 377 at 408 and a similar formulation was adopted by the High Court of Australia in Hospital Products Ltd v United States Surgical Corporation 1984 156 CLR 41 Hospital Products where Mason J said at 96 97 The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations viz trustee and beneficiary agent and principle solicitor and client employee and employer director and company and partners The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position emphasis added Mason J s analysis in Hospital Products was accepted and followed by G P Selvam J in Kumagai Zenecon Construction Pte Ltd v Low Hua Kin 1999 3 SLR R 1049 at 15 and this court also found it of assistance in Friis v Casetech Trading Pte Ltd 2000 2 SLR R 511 at 29 42 It is trite law that if a person occupying a fiduciary position wishes to enter into a transaction which would otherwise amount to a breach of duty he must if he is to avoid liability make full disclosure to the person to whom the duty is owed of all relevant facts known to the fiduciary see R P Meagher J D Heydon and M J Leeming Meagher Gummow and Lehane s Equity Doctrines and Remedies Butterworths LexisNexis 4th Ed 2002 at para 5 115 43 The appellant alleged that Tommy had breached this duty of full and frank disclosure by failing to disclose the existence of the referral arrangement between the respondent and himself and further that the respondent had compounded this breach by failing to ensure that the appellant gave her informed consent to the conflict of interests which the referral arrangement allegedly created In this regard the appellant s submissions leaned heavily on the fact that her written acknowledgement of the referral arrangement had not been obtained 44 As we explained earlier at 33 and 34 we were not impressed by this rather strained reasoning First Mr Lim s evidence that he had informed the appellant of the referral arrangement was not even cursorily contested by the appellant There was hence no doubt in our minds that the appellant had been informed of the material facts Our view was further fortified by the failure of the appellant to file an affidavit attesting to her knowledge or lack thereof of the referral arrangement Given our conclusion that the appellant was aware of the existence of the referral arrangement the absence of a written acknowledgement was really quite irrelevant We were not pointed to any authority which stated that informed consent could only be obtained vide a written acknowledgement and on our part we do not think such a prerequisite is necessary While it is of course always preferable to have concrete documentary evidence that informed consent has indeed been obtained it seems axiomatic to us that the factum of consent can also be proved through oral evidence and or inferences from established facts In the final analysis the appellant s very narrow focus and unflagging emphasis on the lack of a written acknowledgement was merely a red herring floating in a sea of legal flotsam 45 We would also add that the appellant s awareness of the referral arrangement inter alia meant that this was plainly not a case where the alleged fiduciary had obtained a bribe or a secret commission to favour the payor s interest It was clear to us that the respondent did not provide referral fees to Tommy for the purpose of inducing him to favour the respondent s interests in preference to that of the appellant s There are two further points worthy of mention First that the appellant made an apparent paper profit of about US 1 8m during the operation of the Account Secondly there was no suggestion let alone evidence that Tommy and or the respondent had manipulated the appellant s Account in any manner whatsoever with the intention of deriving some benefit through the referral arrangement or otherwise In the final analysis we were also not convinced that the referral arrangement in this matter engendered a conflict of interests and that Tommy had breached his fiduciary duties if any New point on appeal 46 Order 57 r 13 4 of the ROC permits the admission of a new point not taken at trial The powers of the Court of Appeal under paragraphs 1 2 and 3 may be exercised notwithstanding that b any ground of allowing the appeal or for affirming or varying the decision of that Court is not specified in any of the Cases filed pursuant to Rule 9A or 10 and the Court of Appeal may make any order on such terms as the Court thinks just to ensure the determination on the merits of the real question in controversy between the parties emphasis added 47 Arguably the most frequently cited and authoritative rendition of the principle governing the introduction of a new point of law on appeal is that expressed by Lord Herschell in the House of Lords decision of The Owners of the Ship Tasmania and the Owners of the Freight v Smith and others The Owners of the Ship City of Corinth The Tasmania 1890 15 LR App Cas 223 at 225 My Lords I think that a point such as this not taken at the trial and presented for the first time in the Court of Appeal ought to be most jealously scrutinised The conduct of a cause at the trial is governed by and the questions asked of the witnesses are directed to the points then suggested And it is obvious that no care is exercised in the elucidation of facts not material to them It appears to me that under these circumstances a Court of Appeal ought only to decide in favour of an appellant on a ground there put forward for the first time if it is satisfied beyond doubt first that it has before it all the facts bearing upon the new contention as completely as would have been the case if the controversy had arisen at the trial and next that no satisfactory explanation could have been offered by those whose conduct is impugned if an opportunity for explanation had been afforded them when in the witness box emphasis added Over the years this principle has been cited and applied in Singapore on a number of occasions Attorney General for the Straits Settlement v Pang Ah Yew 1934 MLJ 184 Cheong Kim Hock 24 supra MCST Plan No 473 v De Beers Jewellery Pte Ltd 2002 1 SLR R 418 Riduan bin Yusof v Khng Thian Huat 2005 4 SLR R 234 Panwah Steel Pte Ltd v Koh Brothers Building Civil Engineering Contractor Pte Ltd 2006 4 SLR R 571 Panwah Steel 48 In our view however Lord Birkenhead LC s carefully measured caveat in North Staffordshire Railway Company v Edge 1920 AC 254 at 263 264 also merits very close attention and adherence T here are very few cases of which it can be confidently stated that a failure to raise a relevant contention at the appropriate stage will not prejudice the other litigant It is for instance argued in this case that a proper order for costs would compensate the respondent for the expenses of the litigation unnecessarily incurred on the hypothesis that being informed at first instance of the true contention he might have been advised to abandon his claim I do not think it necessary to point out that this suggestion may possibly in another case require qualification or consideration having regard to the notorious incompleteness of the indemnity furnished by our present system of costs because in the present case counsel for the respondent satisfied me that there was reasonable ground for supposing that he might have been able to strengthen his case upon this branch of it by calling parol evidence But I desire to draw attention to a consideration which in my view is both more general and more important The appellate system in this country is conducted in relation to certain well known principles and by familiar methods The issues of fact and law are orally presented by counsel In the course of the argument it is the invariable practice of appellate tribunals to require that the judgments of the judges in the Courts below shall be read The efficiency and the authority of a Court of Appeal and especially of a final Court of Appeal are increased and strengthened by the opinions of learned judges who have considered these matters below To acquiesce in such an attempt as the appellants have made in this case is in effect to undertake decisions which may be of the highest importance without having received any assistance at all from the judges in the Courts below Decisions of this House have laid it down that in very exceptional cases and in spite of the considerations above referred to new matters may be considered by your Lordships see the judgment of Lord Halsbury in Sutherland v Thomson and the judgment of Lord Watson in Connecticut Fire Insurance Co v Kavanagh I have carefully examined the cases upon the subject which have been decided in this House and my examination of them has led me more and more to the conclusion that such attempts must be vigilantly examined and seldom indulged emphasis added Part of the preceding passage has been cited with approval by this court in Feoso Singapore Pte Ltd v Faith Maritime Co Ltd 2003 3 SLR R 556 at 32 49 The appellant vigorously submitted that it would be in the interests of justice for the new point to be heard However this argument can only be taken so far As McHugh JA aptly noted in Holcombe v Coulton 1988 17 NSWLR 71 at 77 78 Certainly I cannot accept the notion that the interests of justice require that cases should be heard and re heard until every conceivable factual pattern or every conceivable legal principle of relevance that finally occurs to the parties have been litigated The cost and strain of litigation and the limits of curial resources have to be weighed against the demand of the appellant for justice according to the set of rules which represent the law which should have governed the case Under the adversary system of justice the function of the trial court is to determine disputes in respect of issues formulated by the parties and the function of an appellate court is to correct any error of the trial court in making its determination Moreover the policy of the law is that when a matter becomes the subject of litigation and adjudication both parties are forever precluded from litigating any issue which might have been brought forward as part of the matter in dispute Port of Melbourne Authority v Anshun Pty Ltd 1981 147 CLR 589 To allow a party to raise in an appellate court a matter which was not litigated in the trial court not only undermines the respective functions of the trial and appellate courts and the policy of law but perhaps more importantly it deprives the appellate court of the benefit of the views of the trial court emphasis added 50 It is axiomatic that the interests of justice must be afforded a wider scope than to just merely encompass one party s ie the appellant s expectation of justice In Geelong Building Society v Encel 1996 1 VR 594 Tadgell J of the Supreme Court of Victoria made the following highly pertinent observation at 605 An abstract notion that an appellant should receive justice though undoubtedly one of them will not be accorded undue weight at the expense of other considerations which are entitled to be accorded their own due weight including a respondent s expectation also to receive justice We

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  • Intraco Ltd v Multi-Pak Singapore Pte Ltd[1994] 3 SLR(R) 1064; [1994] SGCA 142
    memorandum to the executive committee of the board of directors of the appellants to the effect that the respondents had agreed to take over the debts owed by City Carton in exchange for shares in the respondents On 6 June 1984 the respondents were informed by the appellants that the latter s board of directors had approved the subscription of the shares in the respondents On the same day a cheque for the sum of 2 371 079 62 payable to the appellants was signed by Peter Ng and David Ng as directors of the respondents which was intended as payment for the assignment of the debts The respondents board resolution approving the allotment of shares to the appellants was passed on 11 June As part of the agreement to subscribe for shares in the respondents the appellants also agreed to advance to the respondents a loan of 371 079 62 Accordingly two cheques were issued by the appellants to the respondents one for 2m for the shares and the other for 371 079 62 for the loan On 21 June 1984 the three cheques were deposited by the two parties to their respective accounts with the same bank at about the same time in the following sequence the two cheques in favour of the respondents were deposited first to the account of the respondents and immediately thereafter the cheque in favour of the appellants was deposited to the account of the appellants On 25 July 1984 Leslie Tan and one Mrs Catherine Kwan the appellant s financial controller and secretary were appointed directors of the respondents 9 Subsequently the respondents were in financial difficulties Barely seven months later on 24 January 1985 the respondents went into receivership and later into liquidation The receivers formed the view that the purchase of the debts owed by City Carton and Box Pak was improper and accordingly proceedings were instituted against the appellants Peter Ng David Ng and Pattinson Temple As we have said the three named individuals were not served with the writ and were not parties to the proceedings Decision below 10 The court below accepted the evidence that City Carton and Box Pak were technically insolvent at the time when the debts were assigned and found that there was little chance of their unsecured creditors being paid The trial judge held that in light of the financial position of the two companies there was no commercial justification for the respondents taking an assignment of the unsecured debts when they were in essence worthless Consequently he found that the directors had misapplied the funds of the respondents and held that they were in breach of their statutory duty under s 157 1 of the Companies Act Cap 50 in that they had failed to act honestly and to use reasonable diligence in the discharge of their duties at all times The learned judge further found that the appellants had actual or at least constructive knowledge of the breach and declared that the appellants held the sum of money received as constructive trustees for the respondents At the same time he also found that the tort of conspiracy had been made out in that the appellants had acted in concert with the directors to commit a breach of their duty under s 157 1 an offence under s 157 3 of the Companies Act Appeal 11 Central to the appeal was the issue whether the purchase by the respondent of the debts owed by City Carton and Box Pak to the appellants was linked to a the subscription by the appellants of the 20 000 shares of 100 each in the capital of the respondents and b the advance of the loan of 371 079 62 by the appellants to the respondents These transactions must be considered in the context of the factual matrix in which the parties were at the material time The facts and events leading to the transactions and the implementation thereof have been set out earlier and it is only necessary to repeat the following The agreement for the assignment of the debts was made between the respondents and the appellants on 24 May 1984 Following that approximately four days later the respondents informed the appellants that 20 000 shares of 100 each had been allotted at par to the appellants and that they were to be payable in cash On 5 June Leslie Tan submitted a memorandum to the chairman and members of the executive committee which was an executive committee of the board of directors of the appellants and exercised the powers of the board The content of this memorandum was informative and it is helpful to set it out in full which was as follows City Carton a manufacturer of paper carton established in 1973 has been together with its subsidiary Box Pak customers of Intraco for the past ten years An ill timed ambitious expansion plan together with the prolonged recession of 1982 and 1983 have brought the company almost to the verge of bankruptcy The total owings of the company as of now is 23m Intraco has over 1983 and 1984 written off about 1 5m and the amount outstanding in our books is about 900 000 A group of outside shareholders have now launched a rescue operation for the company The rescue operation envisages Multi Pak a 30m company started to manufacture paper from pulp and waste paper taking over City Carton as its subsidiary and injecting new cash into it Multi Pak which will commence operation in July promises to be a viable operation as there is considerable demand for paper in Singapore and in the Asean countries Intraco will be appointed as the sole distributor of their products As part of the rescue operation the shareholders of Multi Pak have offered Intraco to take over the entire 2 4m owings by City Carton in exchange for shares in Multi Pak We have agreed to this in principle because if we stay with City Carton and the rescue operation does not materialize there is every danger that we would end up recovering perhaps less than 5 of the original debts As the offer stands we would end up as a shareholder of Multi Pak and recover some of the money by the commission from selling paper The conversion does not involve any cash injection on our part but it seems just the only way for us to recover our credit 12 Unfortunately Leslie Tan who was deeply involved in the negotiations with Peter Ng and David Ng in respect of these transactions had passed away by the time the action came on for trial The memorandum was prepared by him in the ordinary course of business and explained to a certain extent what the appellants sought to achieve with the sale of the debts and the subscription of the shares the appellants being a substantial unsecured creditor of City Carton and Box Pak had obviously decided that a conversion of those debts into equity in the respondents was the best possible method to recover the amounts owed to them The proposal contained therein was approved by the executive committee and on the following day 6 June 1984 the respondents were accordingly informed that the board of directors of the appellants had approved the subscription of the 20 000 shares of 100 each in the capital of the respondents On the same day a cheque for 2 371 079 62 payable to the appellants was signed by Peter Ng and David Ng on behalf of the respondents It was unclear whether the cheque was delivered or handed to the appellants on that day As a matter of inference it seemed to us highly unlikely that the cheque was issued and delivered to the appellants then The respondents would not have taken over the debts and paid for them without some other consideration emanating from the appellants bearing in mind that the debts were known to all parties concerned to be of little value The other consideration as the evidence unfolded consisted of the subscription by the appellants of 20 000 shares of 100 each in the capital of the respondents and the loan of 371 079 62 to the respondents It is true that no mention of this was made in the agreement for the assignment of the debts made on 24 May 1984 But on the facts the inference that the subscription of the shares and the advance of the loan were part of the arrangement for the assignment of the debts was irresistible 13 On 11 June 1984 the board of directors of the respondents resolved that 20 000 shares of 100 each be allotted at par to the appellants payable in cash within one month the shares were duly allotted on 20 June 1984 and payment therefor was made on the following day 21 June The payment for the shares the advance of the loan and the payment for the purchase of the debts by the respective parties were of some significance On that day the appellants issued two cheques in favour of the respondents a one for 2m in payment for the shares and b the other for 371 079 62 for the loan to the respondents the total of these two amounts came to 2 371 079 62 These two cheques were paid and credited to the bank account of the respondents and immediately following that the respondents cheque for 2 371 079 62 payable to the appellants representing the consideration for the purchase of the debts was paid and credited to the appellants bank account 14 Clearly the purchase of the debts by the respondents from the appellants was linked to the a subscription by the appellants of the 20 000 shares in the respondents and b the loan of 371 079 62 by the appellants to the respondents It could not have been a mere coincidence that the cheques for the respective sums were deposited to the respective bank accounts of the parties on the same day and that the total of the amount paid for the shares and the amount of loan equalled the purchase price for the debts Although the agreement for the assignment of the debts was made nearly one month earlier it was not carried out and implemented until the payment for the shares and release of the loan were made The transactions were orchestrated to be completed on the same day and at about the same time In our view the inescapable conclusion is that the appellants subscribed for the shares in the respondents and advanced the loan to them in return for the respondents purchasing the debts from the appellants That in essence was the true nature of the transactions 15 It is relevant to mention also that following the completion of these transactions Leslie Tan and Catherine Kwan both employees of the appellants joined the board of directors of the respondents Again as a matter of inference this must have been agreed to by the respondents and the appellants as part of the arrangement made between them 16 We now turn to the next issue and that is whether in entering into these transactions the directors of the respondents committed a breach of duty On this issue two questions arise first as the purchase of the debts by the respondents was in exchange for the appellants subscribing for shares and advancing the loan whether there was a breach of s 76 of the Companies Act Cap 50 and second apart from s 76 whether in entering into these transactions the directors of the respondents acted in breach of their fiduciary duties to the respondents 17 It is convenient at this stage to set out s 76 so far as relevant which reads as follows 1 Except as is otherwise expressly provided by this Act no company shall give whether directly or indirectly and whether by means of a loan guarantee or the provision of security or otherwise any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company or where the company is a subsidiary in its holding company or in any way purchase deal in or lend money on its own shares 18 The respondents relied on the case of Belmont Finance Corp v Williams Furniture Ltd No 2 1980 1 All ER 393 and contended that the transactions contravened s 76 There the third defendant Grosscurth wanted to acquire the entire share capital of Belmont Finance Corp Ltd Belmont which was wholly owned by the second defendant City Industrial Finance Ltd City which in turn was wholly owned by the first defendant Williams Furniture Ltd Williams Grosscurth was the controlling shareholder of Maximum Finance Ltd Maximum Grosscurth and his associates agreed with Williams and City to sell all their shares in Maximum to Belmont for 500 000 and to buy the entire share capital of Belmont from City for 489 000 At the same time Williams and City agreed to lend Belmont 200 000 for 12 months secured on the share capital of Maximum Grosscurth guaranteed to Belmont that the aggregate pre tax profits of Maximum and its subsidiaries for a certain period of time would be not less than 500 000 and City agreed to subscribe for 230 000 1 preference shares in Belmont out of the 489 000 it received for the sale of Belmont The end result was that Grosscurth and his associates became the owners of all the shares of Belmont and through it Maximum Belmont subsequently went into liquidation It was then found on valuation that Maximum was worth only about 60 069 and not 500 000 An action was later commenced against inter alios Grosscurth Williams and City At the trial it was established that at the material time of the transaction the respective parties genuinely believed that Maximum s shares were worth 500 000 and that buying Maximum was a good commercial transaction and on that ground the High Court dismissed the claim On appeal the Court of Appeal held that the purchase of Maximum was not a bona fide commercial transaction in its own right but was merely part of a scheme to enable Grosscurth and his associates to acquire Belmont using Belmont s own funds and that it was not a transaction in the ordinary course of Belmont s business to acquire Maximum and did not enable Belmont to acquire anything which it genuinely needed for its own purpose Accordingly it was held that there was a breach of s 54 of the Companies Act 1948 which was in pari materia with s 76 of our Companies Act Buckley LJ in his judgment said at 403 In truth the purchase of the share capital of Maximum was not a commercial transaction in its own right It was not a transaction whereby Belmont acquired anything which Belmont genuinely needed or wanted for its own purposes it was one which facilitated Mr Grosscurth s acquiring Belmont for his own purposes without effectively parting with Maximum That the purpose of the sale of Maximum to Belmont was to enable Mr Grosscurth to pay 489 000 for Belmont was at all relevant times known to and recognized by Mr James and the members of his team as well as by Mr Copeland There is no good reason disclosed by the evidence to suppose either that Mr Grosscurth and his associates could have sold Maximum to anyone else for 500 000 or that Belmont could have disposed of Maximum for 500 000 to anyone else at any time The purchase of the share capital of Maximum may have been intra vires of Belmont a matter which we have not been invited to consider but it was certainly not a transaction in the ordinary course of Belmont s business or for the purposes of that business as it subsisted at the date of the agreement It was an exceptional and artificial transaction and not in any sense an ordinary commercial transaction entered into for its own sake in the commercial interests of Belmont It was part of a comparatively complex scheme for enabling Mr Grosscurth and his associates to acquire Belmont at no cash cost to themselves the purchase price being found not from their own funds or by the realization of any asset of theirs for Maximum continued to be part of their group of companies but out of Belmont s own resources In these circumstances in my judgment the agreement would have contravened s 54 of the 1948 Act even if 500 000 was a fair price for Maximum 19 In this case counsel for the respondents contended that as the debts purchased by the respondents were worthless the assignment was not in the commercial interests of the respondents and that the only purpose for which the debts were purchased was in order to enable the appellants to become a shareholder of the respondents without having to pay cash for the shares thereby breaching s 76 20 Counsel for the appellant on the other hand contended that it was not a breach of s 76 when a company entered into a transaction with a party in its own commercial interests and not solely to provide financial assistance to the other party to buy shares in it although it resulted in the other being put in funds to acquire the shares We were referred to the following passage from the judgment of Buckley LJ in Belmont No 2 18 supra at 402 If A Ltd buys from B a chattel or a commodity like a ship or merchandise which A Ltd genuinely wants to acquire for its own purposes and does so having no other purpose in view the fact that B thereafter employs the proceeds of the sale in buying shares

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  • Indian Bank v Ramachandran and others[1991] 1 SLR(R) 511; [1991] SGHC 43
    Joethy informed this court that the third and fifth defendants are bankrupt and he no longer represented them The respective counsel for the first defendant and second defendant also informed the court that their clients consented to judgment to be entered against them in favour of the plaintiffs for the sum of 130 000 with interest on the said amount at the rate of 2 per annum above the plaintiffs prime lending rate from 28 October 1983 to the date of payment and all costs charges and expenses which the plaintiffs might incur in obtaining or seeking to obtain payment of all or any part of the above sum to be taxed on a solicitor and client basis Accordingly judgment was entered against the first and second defendants for the said sum of 130 000 with interest and costs as per para 10 b ii and 10 c of the amended statement of claim 4 Counsel for the plaintiffs had during the course of the hearing asked this court to adjourn the plaintiffs claim against the third and fifth defendants I decided that it would not be appropriate to do so as the plaintiffs claims against the third and fifth defendants are that they are jointly and severally liable with the other defendants in this action for the overdraft facilities granted to the company under the first and second guarantees The outcome of the plaintiffs claim against the third and fifth defendants must follow the outcome of their claim against the other defendants in this action 5 Mr Jeganathan PW1 a bank officer of the plaintiffs gave evidence for the plaintiffs and the fourth sixth and seventh defendants gave evidence before this court 6 In January 1982 or thereabouts the company applied for banking facilities from the plaintiffs The company wanted a temporary overdraft facility of 130 000 for a period of 60 to 90 days It intended to apply for a facility of 600 000 subsequently within 90 days The plaintiffs were willing to extend overdraft facilities to the company provided that all the seven directors gave their personal guarantees for the facilities extended to the company The plaintiffs prepared a guarantee on or about 18 January 1982 with the names of all the seven defendants stated therein as co sureties and handed the same to the second defendant for execution by all the seven defendants The said guarantee hereinafter referred to as the first guarantee was signed by all the defendants except the seventh defendant who was away in England pursuing a course of studies The said guarantee was returned to the plaintiffs on 19 January 1982 by the third defendant the general manager of the company The third defendant informed the plaintiffs of the fact that the seventh defendant had not signed the said guarantee as he was away in England 7 On 22 January 1982 the company wrote to the plaintiffs saying that they required the use of the temporary overdraft facilities on an urgent basis The plaintiffs manager Mr Reddy told the second defendant the managing director of the company that he wanted the guarantee of the seventh defendant and the second defendant agreed to get a separate guarantee of the seventh defendant PW1 said in his evidence in chief that the plaintiffs allowed the company to use the facilities on 1 February 1982 when the second defendant Dr Dhanapal promised to obtain a separate guarantee from the seventh defendant when his manager Mr Reddy insisted that he wanted the signature of the seventh defendant before releasing facilities to the company According to PW1 his manager instructed him to prepare a separate guarantee for the seventh defendant to sign The plaintiffs had only one standard form for all guarantees furnished by their clients PW1 took a standard form of the plaintiffs and typed the seventh defendant s name and other particulars on it and the same was forwarded to the company to obtain the seventh defendant s signature on the guarantee and it was returned to the plaintiffs sometime in March 1982 duly signed by the seventh defendant on 14 March 1982 This guarantee was dated 14 March 1982 hereinafter referred to as the second guarantee The first and second guarantees are identical except for the fact that the first guarantee has all the names of the seven defendants shown therein as co sureties and the second guarantee has only the name of the seventh defendant shown therein as surety 8 During his cross examination by counsel for the seventh defendant PW1 was asked to explain what he meant when he said the second defendant told him that he the second defendant would get the guarantee of the seventh defendant PW1 s reply was We could not have released the guarantee for the seventh defendant to sign as we want to hold on to the document PW1 further said that as far as the plaintiffs were concerned the second guarantee was an addendum to the first guarantee 9 The company was allowed to use the overdraft facilities from 1 February 1982 Thereafter the company utilised the overdraft facilities and by 11 March 1983 the company s account was overdrawn by the amount of 130 619 10 Despite requests and demands the company did not settle the amount due under the overdraft account to the plaintiffs The company was wound up pursuant to an order of court on 11 November 1983 10 By a letter dated 29 September 1984 addressed to each of the defendants the plaintiffs through their solicitors demanded payment from the defendants of the amount due to the plaintiffs from the company As no payment was made the plaintiffs commenced proceedings against the seven defendants 11 Paragraph 3 of the plaintiffs statement of claim reads In consideration of the plaintiffs making advances or otherwise giving credit to the company the defendants pursuant to the following written personal continuing guarantees duly signed by the defendants jointly and severally guaranteed the payment on demand of all moneys due to the plaintiffs from the company on inter alia overdraft and default guarantee facilities granted to the extent of 130 000 and all interest thereon Date Amount Guarantors 19 January 1982 130 000 The abovenamed first second third fourth fifth and sixth defendants 14 March 1982 130 000 The abovenamed seventh defendant 12 It is important to note that the basis of the plaintiffs claim is that all the seven defendants are jointly and severally liable under the first and second guarantees for the payment of overdraft facilities extended by the plaintiffs to the company to the extent of 130 000 notwithstanding the fact that a the first guarantee which had all the seven defendants named therein as co sureties was only signed by the first six defendants and b the second guarantee was only signed by the seventh defendant who is the only named surety on that guarantee 13 The third fifth and sixth defendants who filed a separate defence jointly averred that they were not liable under the first guarantee as claimed or at all for the following reasons a the third fifth and sixth defendants signed the first guarantee on the faith reliance and understanding that all seven defendants including the seventh defendant would sign the same The seventh defendant did not sign the first guarantee and the plaintiffs did not fulfil this condition precedent and accepted the said guarantee so altered b if seven sureties were expected to join in making the first guarantee as would be evident from its form and six of them signed it but without their approval or express waiver the seventh did not join in guaranteeing the obligation the six who signed are not bound c that the first guarantee is materially different and varied from one intended to bind the third fifth and sixth defendants d the first guarantee is on the face of it defective and not binding on the third fifth and sixth defendants e the plaintiffs have not followed established and prudent banking practice by requiring the seventh defendant to sign the first guarantee f the third fifth and sixth defendants did not agree to be liable despite the fact that the seventh defendant did not sign the first guarantee and g the first guarantee is replete with inconsistencies and inaccuracies and the third fifth and sixth defendants would so far as is necessary rely on the contra proferentem rule 14 The fourth defendant who filed a separate defence averred that a the first guarantee was to be executed by the seventh defendant as a co surety as it could be seen from the face of it and as the seventh defendant did not sign it the fourth defendant is not liable thereunder to the plaintiffs in any way and for any sum whatsoever and there is no contract and the guarantee is nullified b the fourth defendant never agreed with the plaintiffs that the signature of the seventh defendant was to be dispensed with c the first guarantee for the sum of 130 000 is an incomplete document in that the seventh defendant did not sign it and is not a party to it d it was the duty of the plaintiffs to obtain the signature of the seventh defendant and as they have failed to do so the said guarantee is void and unenforceable against the fourth defendant e the fourth defendant was not contractually bound in law by the first guarantee because of the failure of one of the co sureties namely the seventh defendant to sign it which is a condition precedent to the fourth defendant s becoming liable and f the fourth defendant never consented to be a surety without the seventh defendant joining in to indemnify the plaintiffs 15 The seventh defendant who also filed a separate defence alleged inter alia that a it was agreed between the plaintiffs and all the defendants that in consideration of the plaintiffs making advances or otherwise giving credit to the company the seven defendants shall enter into a guarantee jointly and severally guaranteeing the plaintiffs payment on demand of credit given to the company to the extent of 130 000 b contrary to the said agreement the plaintiffs accepted a guarantee signed by the first second third fourth fifth and sixth defendants dated 19 January 1982 and advanced credit facilities to the company and c unaware that the plaintiffs had accepted a guarantee signed by the first second third fourth fifth and sixth defendants dated 19 January 1982 and advanced credit facilities to the company the seventh defendant signed the guarantee dated 14 March 1982 in the belief that the first second third fourth fifth and sixth defendants would also be parties to the said guarantee and then be equally liable on the same 16 It was the seventh defendant s contention that the second guarantee is not the guarantee that the seventh defendant had agreed to enter into and he is therefore not liable under the same The seventh defendant had averred that there is no consideration for the second guarantee signed by him However this contention was abandoned by him during the course of the hearing 17 There is a reply to the defence of the seventh defendant and there is no reply to the defence of the fourth defendant or to the sixth defendant That reply answered as it could be seen what was raised by the seventh defendant in his defence 18 The main issue before this court was whether the seven defendants are jointly and severally liable to the plaintiffs for overdraft facilities extended to the company under the first guarantee which had been signed only by six of the seven persons named in that guarantee as co sureties and the second guarantee which was executed only by the seventh defendant who is the only named surety on the second guarantee Both guarantees are in the plaintiffs standard form They are identical except that under the second guarantee the seventh defendant is the only nominated surety for the overdraft facilities granted by the plaintiffs to the company and all the seven defendants are nominated as co sureties in the first guarantee 19 The evidence of the fourth defendant DW1 is briefly as follows a He signed the first guarantee in the belief that all the other six directors would do so b Unknown to him the seventh defendant did not sign the first guarantee c The plaintiffs did not give a copy of the first guarantee to him and the first time he saw that guarantee was when these proceedings were instituted against him d He would not have agreed to become a guarantor if all the other six directors did not become guarantors for the overdraft facilities e He never agreed with anyone to dispense with the signing of the first guarantee by the seventh defendant f He had no knowledge of the plaintiffs taking the second guarantee from the seventh defendant and even if he had knowledge of it that knowledge would not affect his case 20 The evidence of the sixth defendant DW2 is briefly as follows a He signed the first guarantee because every other director of the company had to sign the document b He would not have signed the first guarantee if any one of the seven directors had not signed c He would not have allowed a waiver of any one director from signing the first guarantee d The plaintiffs did not tell him that the seventh defendant had not signed the guarantee e The plaintiffs did not give him a copy of the first guarantee f The first time he saw a copy of the first guarantee was after these proceedings had commenced and it was then that he realised only six directors had signed the document 21 The evidence of the seventh defendant DW3 is briefly as follows a While in United Kingdom he was told by his brother Dr Dhanapal that the company was trying to get credit facilities from a bank b He received the second guarantee sometime in March 1982 when he was still in the United Kingdom He signed it on the same day he received it It was 14 March 1982 c Prior to receiving this document he had heard from his brother Dr Dhanapal that it was for purpose of obtaining overdraft facilities from the plaintiffs for the company Dr Dhanapal told him all directors would be signing the document d If any of the directors had not signed he would not have signed Should the company not be able to pay all the directors would be liable They were supposed to be jointly liable e He expected the company to get all directors to sign this document 22 Counsel for the plaintiffs challenged the evidence of the fourth sixth and seventh defendants that they were not given a copy of the first guarantee and were unaware that the seventh defendant had not signed the first guarantee until these proceedings have commenced He also suggested to these three defendants that they were aware that the seventh defendant was away and that he could not have signed the first guarantee and that the reason why the second guarantee was prepared for and executed by the seventh defendant was that the company needed the overdraft facilities urgently and that it was agreed that a separate guarantee would be obtained from the seventh defendant as he was away These suggestions were denied by these defendants 23 Counsel for the plaintiffs also suggested to the fourth sixth and seventh defendants that they had consented to the seventh defendant signing the second guarantee This suggestion was also denied by these three defendants 24 Having considered both the oral and documentary evidence adduced at hearing I found that when the company needed the use of the overdraft facilities urgently the second defendant agreed with the plaintiffs officer Mr Reddy to get the separate guarantee of the seventh defendant who had not signed the first guarantee I also found that the fourth and sixth defendants had not given their consent to the plaintiffs that the seventh defendant need not sign the first guarantee and that the second guarantee signed by the seventh defendant is to be regarded as an addendum to the first guarantee I also found that the fourth sixth and seventh defendants were not given a copy of the first guarantee either by the company or the plaintiffs and that they were only aware that the seventh defendant signed the second guarantee and did not sign the first guarantee after the plaintiffs had commenced proceedings for the recovery of the sum guaranteed by the seven defendants In arriving at the aforesaid conclusions I took into account of the fact that the fourth defendant had at times not given his evidence in a frank and straightforward manner I had also noted that there was no evidence from the plaintiffs witness PW1 that the fourth and sixth defendants had agreed with the plaintiffs or any of the plaintiffs officers that the seventh defendant need not sign the first guarantee and that he should sign a separate guarantee instead The evidence from PW1 was that the second defendant had agreed to get the separate guarantee of the seventh defendant and that it was the third defendant who informed PW1 that the first guarantee was not signed by the seventh defendant The seventh defendant who was away at the material time could not have given his consent for the new arrangements for the execution of two guarantees instead of one guarantee where all seven defendants would have signed as guarantors 25 Plaintiffs counsel submitted that all the other six defendants knew that the seventh defendant was not in Singapore and that it was improbable or impossible for all seven signatures to be obtained on the same instrument and consequently the essential issue was where the parties had an agreement for

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