Standard Chartered Bank v Elang Mas Enterprise Pte Ltd and Others

[1] This was an appeal by the defendants against the decision of the Senior Assistant Registrar Mr Toh Han Li given on 30 December 2002 when he ordered amongst others the following:-

[3] The plaintiffs are one of the leading bankers in this part of this world. The first and second defendants are and were, at all material times, customers of the plaintiffs. The first defendants are the registered proprietors of the said properties which were purchased for S$2,383,603 and S$2,409,869 respectively. The third and fourth defendants are the directors and shareholders of the first and second defendants as well as of an Indonesian tyre manufacturing company known as PT Elangperdana Tyre Industry. According to the defendants, the first defendants were acquired for the purposes of property investment in Singapore and the second defendants were the procurement arm of the said PT Elangperdana Tyre Industry, for banking facilities in Singapore. Part of the purchase price of the said properties was funded through a facility (‘the first facility’) granted by the plaintiffs.

[4] In this regard, the documents in relation to the said first facility - a term loan - comprised: (a) a letter of offer dated 30 March 2000 from the plaintiffs addressed to the first defendants; and (b) a subsequent letter of offer dated 6 July 2000 from the plaintiffs also addressed to the first defendants varying the terms contained in the first letter of offer. The purport of the second letter was to restructure the earlier offer and to grant additional facilities to the first defendants.

[5] As the present dispute seemed to revolve around the litigants’ respective rights and obligations, it would be necessary, at the outset, to make reference to some of the salient terms of the said letters of offers concerning the term loan facilities. Insofar as is material the first letter of offer dated 30 March 2000 contained the following preamble and terms:

[6] The said offer and the terms stated in it were unconditionally accepted by the first defendants.

[7] The second letter of offer dated 6 July 2000 was, as I mentioned earlier, for the purposes of restructuring the facility granted under the first letter of offer. Under the second offer, the earlier term loan in the sum of US$2,774,000 was restructured as Term Loan 1 for the sum of S$2,383,603 for the first property and Term Loan 2 for the sum of S$2,409,869 for the second property.

[8] By a letter of offer dated 23 September 1999, the plaintiffs also granted the second defendants overdraft facility of USD50,000 and a Trade facility of USD200,000. By a letter of offer dated 3 April 2000, the plaintiffs increased the Trade facility to USD1,400,000. By a letter dated 6 June 2000, the plaintiffs incorporated additional terms to the letter of offer dated 3 April 2000. By a letter of offer dated 10 April 2001, the plaintiffs further increased the Trade facility to USD2,000,000 with the overdraft facility of USD50,000 covered within this limit (the second facility). The second facility was subject to the terms and conditions stated in the letters of offer, which said terms and conditions were duly accepted by the second defendants. Insofar as is material, the following segments in the said letters of offers in relation to the second facility require highlighting:

[9] The standard conditions referred to in the facility letters and accepted by the defendants contained amongst other things the following:

[10] The Facilities were secured, amongst other things, by mortgages over the said properties. By a mortgage dated 12 June 2002 and registered as I/90199Q (the “first mortgage”), the first defendants mortgaged the said properties to the plaintiffs as security as provided under the terms of the first mortgage.

[11] By a second mortgage dated 12 June 2002 and registered as I/90200Q (the "second mortgage"), the first defendants (as mortgagors) and the second defendants (as borrowers) mortgaged the said properties to the plaintiffs as security as provided under the terms of the second mortgage.

[12] Under clauses 3 of the first mortgage and the second mortgage (collectively referred to as the “mortgages”), the first and the second defendants agreed to perform, observe and be bound by the covenants and conditions set forth in the Memorandum of Mortgage filed in the Singapore Land Registry and numbered as MM I/80616E.

[13] Under the terms of the mortgages, the first and the second defendants covenanted with the plaintiffs, amongst other things, as follows:

[16] The letters of guarantee (collectively referred to as the ‘guarantees’) expressly provide, inter alia, namely that:-

[17] The plaintiffs averred that the first defendant defaulted in their payment obligations. In this regard, it would appear that many an attempt by the plaintiffs’ officers to contact the defendants was in vain. As a result, the plaintiffs by their letter dated 11 July 2002 demanded from the first defendants, within seven days from the date of the letter, payment of the outstanding sums due and payable by them under the first facility together with contractual interest thereon, banker’s charges, and all other applicable dues. Insofar as is material, the relevant parts of the said letter addressed to the first defendants, to the attention of Ms Indah Nathania Tanito read as follows:

[18] There was no response whatsoever from the defendants. All the protests started arriving only after the plaintiffs had applied for and obtained an order for the delivery of possession of the said property pursuant to the earlier order of court dated 30 December 2002.

[19] The allegations by the defendants in the appeal before me was that the plaintiffs had suddenly stopped all credit facilities to the second defendants without any prior notice whatsoever in May 2002. The response to the said allegation as contained in paras 8 to 16 of the affidavit of Jane Jan, a business manager of their business financial services unit reads as follows:

[20] An internal document of the plaintiffs with the heading ‘Early Alert Report’ dated 16 July 2002 but apparently signed on 23 July 2002 sets out the sequence of events in relation to the plaintiffs’ concerns and findings contained the following:

[21] As it happened, nothing seemed to have moved the defendants to any action. The result was that the plaintiffs proceeded to send the requisite notice through their solicitors, pursuant to section 75 of the Land Titles Act (Cap.157) of the plaintiffs’ intention to exercise their statutory power of entry into possession of the said properties, upon expiration of one month from the date of the said notice. What followed next was the plaintiffs’ application to court herein.

[22] It was not in dispute that the application which was filed on 25 October 2002 came up for hearing for the fourth time on 30 December 2002. Even as of that date, there was no affidavit from any of the defendants despite a direction by the court for the defendants to file their affidavits by 2 December 2002. In the result, the Senior Assistant Registrar made an order in terms of the application.

[23] On appeal, counsel for the defendants contended, amongst other things, that (a) the plaintiffs had wrongfully terminated the housing loan and the credit facilities; (b) in respect of the housing loan, which was for 300 months, the defendants were not in default of any payments and as such the plaintiffs had no right to terminate the said facilities; (c) even as regards the credit facilities granted to the defendants, they were not in default of any payments nor were they in breach of any conditions; and (d) the guarantees given by the third and fourth defendants were tainted by undue influence on the part of the plaintiffs.

[24] Counsel for the defendants also mounted an attack on the Early Alert Report of the plaintiffs. He suggested that the said report was made up. He questioned how a report which was dated 16 July 2002 could bespeak of events after that date. He contended that the plaintiffs’ averments as contained the first affidavit of Jane Jan that the plaintiffs had made more than reasonable attempts to inform the third and fourth defendants of the suspension of the credit facilities were baseless.

[25] Counsel for the defendant also questioned the correctness of the net worth value of the second defendants as arrived at by the plaintiffs to be S$28,000. In brief, his submission was that the plaintiffs’ conduct in recalling the loans were in breach of both the express and implied terms of their engagement and that there was an error in the figures submitted by the plaintiffs in regard to the amount of the principal sum disbursed. It was also contended on behalf of the defendants that the plaintiffs’ action for delivery of possession of the mortgaged properties was not in compliance with the requirements of Order 83 of the Rules of Court in that the plaintiffs had failed to establish the circumstances under which the right of possession arises.

[26] The main contention by the defendants in this originating summons was that the plaintiffs were unreasonable and precipitate in terminating the credit facilities given to the defendants and that there was no justification whatsoever for the recall of the said facilities. An immediate question was: if it was in fact the situation and the defendants were indeed aggrieved by the alleged sudden and unreasonable conduct on the part of the plaintiffs, why did the defendants have to wait until the appeal was in train to come up with their current allegations? Why didn’t they raise their grievances and protests before the plaintiffs had applied to the court for delivery of possession of the subject properties? In this, the defendants had not, in my view, come up with any acceptable explanation.

[27] The chronology of events set out in the written submission of the plaintiffs’ counsel evinced to the court that apart from some procedural objections to the forms of pleadings and mode of the commencement of this action, no protests seemed to have been placed on record in relation to the termination of the loan facilities, until 28 January 2003. In this regard, it would be relevant to note that the facilities were recalled in early July 2002; the originating summons was filed on 25 October 2002; and the notice of appointment to hear the said summons was given on 12 November 2002. Worse still, even after the Senior Assistant Registrar gave directions to the defendants’ solicitors to file the defendants’ affidavits, if any, by 2 December 2002, there was nothing forthcoming from the defendants. Even on 30 December 2002, when the Senior Assistant Registrar made the order herein, there was no affidavit by the defendants concerning the alleged unreasonable conduct on the part of the plaintiffs.

[28] In my opinion, the inaction by the defendants evidently supported the plaintiffs’ contention that the present allegations by the defendants that they were the wronged party were artful and contrived belatedly to give a semblance of respectability to the defendants’ present contentions, as had been attempted by the third and fourth defendants in their affidavits.

[29] Leaving aside the issue relating to the absence of promptitude on the part of the defendants, the terms of facilities granted to the first and second defendants seemed to stipulate that the facilities were at all times subject to review from time to time and that they could be revised, reduced or cancelled by the plaintiffs at their sole discretion without notice. Proceeding further, it was also stated in the facility letters that the said facilities were to be made available at the sole discretion of the plaintiffs and had to be repaid on demand by the plaintiffs. Above all, there was also a specific and unambiguous provision that the grant of the said banking facilities was uncommitted. Given the phraseology of the facility letters, there was very little basis for the defendants to say that the plaintiffs were not entitled to terminate the facilities when they perceived that their securities were threatened.

[30] Reliance was placed by the defendants’ counsel to the Malaysian case of Bank Bumiputra Malaysia Bhd Kuala Trengganu v Mae Perkayayuan Sdn Bhd & Anor [1993] 2 CLJ 495. In that case, the court in Malaysia had decided that the plaintiff bank was not entitled to recall the term loan until the end of the term of the said facility. But in relation to the case before me, the advent of the terms that the facilities were ‘uncommitted’ and could be revised, reduced or cancelled by the plaintiffs at their ‘sole discretion without notice’, clearly supported the plaintiffs’ contention that the principles stated in the Bank Bumiputra case did not fit the situation at hand. In my opinion, the unambiguous terms of the facility letters, solemnly agreed and subscribed to by the parties, could not be watered down unilaterally by one party. At any rate, the factual scenario narrated by the plaintiffs’ business manager, Jane Jan, clearly justified their action. In my evaluation, the plaintiffs did not terminate the facilities, willy-nilly, but only after their numerous attempts to communicate with the defendants had failed. The difficulties the defendants were complaining of now were brought about not by any fault on the part of the plaintiffs but by the defendants making themselves unavailable for reasons only known to them.

[31] As regards the Early Alert Report, there was a trenchant criticism by the defendants that this document was an afterthought. The criticism was that the said Report contained references to future events; it was made after 11 July 2002 after the letters of demand were issued; and that it seemed to state that the plaintiffs had only intended to terminate the facilities rather than they had already done so. Having viewed the Report, what was clear was that although the said Report was dated 16 July 2002, it was only signed off on 23 July 2002. As such, the Report not surprisingly recorded events which occurred both before and after the letters of demand. In the circumstances, the criticisms by the defendants were found by me to be of little value.

[32] The defendants also contended that the statement of outstandings by the plaintiffs was erroneous and that the plaintiffs had failed to prove that the stipulated sums were due and payable. In my view, the arguments advanced on behalf of the defendants were once again found to be unmeritorious. It is a settled principle of law that a certificate issued by a bank under the conclusive evidence clause was, in the absence of fraud or manifest error on the face of the certificate, determinative of the amount due to the bank: (see Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643: Bangkok Bank Ltd Cheng Lip Kwong [1989] SLR 1154; and Oversea-Chinese Banking Corporation Ltd v The Timekeeper Singapore Pte Ltd & Ors [1997] 2 SLR 526 at 542-I and 543-A).

[33] The court was informed by the plaintiffs’ counsel that there was a small discrepancy in the figures stated in the affidavit of one of their officers, Chia Geok Ee Evelyn, filed on 25 October 2002. The amount stated as disbursed or advanced in respect of Term Loan 1 was US$ 1,394,600.00 and in respect of Term Loan 2 was US$ 1,379,400. But the amounts should be US$ 1,340,891.64 and US$1,329,913.07 for Term Loans 1 and 2 respectively. However, the said errors did not in any way change the quantum of the amounts owed by the defendants since the final amount outstanding as claimed by the plaintiffs as at 25 October 2002 remained accurate i.e., US$ 1,241,542.79 and US$1,234,686.76 in respect of Term Loans 1 and 2 respectively. Given the facts, it was clear that there appeared to be no prejudice occasioned to the defendants.

[34] As to the allegation of undue influence raised by the defendants, I must say at the outset that apart from its very late arrival, the scenario painted by the defendants also did not seem to lend much weight to their credibility. It is a well-entrenched principle of law that a mere allegation is not sufficient to found a defence of undue influence. It was held in Malaysian French Bank Bhd v Abdullah bin Mohd Yusof & Ors [1991] 2 MLJ 475 that in order to succeed in the defence of undue influence, the defendants had to establish that the plaintiff was in a position to dominate the defendants’ will and thus obtained an unfair advantage by using that position. It was also held by the House of Lords in National Westminster Bank Plc v Morgan [1985] 1 AC 686:

[35] The documents placed before the court were clearly indicative of the feature that the third and fourth defendants had direct as well as indirect benefits from the facilities granted to the first and second defendants. Apart from it, the averments of the third defendant in her affidavit filed on 17 March 2003 and the meek echo of it in the fourth defendants’ affidavit of even date, did not go anywhere near establishing the principles stated in Malaysian French Bank as well as National Westminster Bank Plc cases.

[36] The other contention by the defendants that there was non-compliance with Order 83 of the Rules of Court was also plainly unsustainable. The plaintiffs had, in my opinion, provided the defendants with all the requisite particulars and in any event, the conclusive evidence clause in the facility documents precluded the defendants from arguing that they were not liable to the plaintiffs for the amounts stated and that the statements of outstandings were wrong.

[37] There was also a contention by the defendants that the net worth valuation done by the plaintiffs of the defendants was inaccurate and wrong. Having regard to the fact that the plaintiffs had arrived at their valuation from the financial statements provided by the defendants, here again I found the arguments of the defendants to be devoid of merit.

[38] I was mindful that in the case before me, there were allegations and rebuttals by the parties by way of affidavits. The court’s approach to conflicting evidence was laid down by Lord Diplock in the Privy Council case in Eng Mee Yong & Ors v Letchumanan [1979] 2 MLJ 212 at 217 as follows:

[39] Although the defendants had mounted a concerted effort to raise a variety of arguments with a view to clouding the real issue on appeal, having gone through all the arguments and having regard to the express terms of the facility letters as well as the defendants’ recalcitrancy including the extraordinary delay on the part of the defendants to come up with their purported defences which culminated in the order of court made on 30 December 2002 by the Senior Assistant Registrar, the conclusion that the defences now presented were all ill-merited, was inevitable. In my view, the action taken by the plaintiffs to protect their security was not unreasonable nor could it be regarded as unconscionable.

Order accordingly.