Oversea-Chinese Banking Corp Ltd v Lim Sor Choo [2020] SGHC 116

This is an appeal from the decision of the Assistant Registrar dated 23 December 2019 (“the Decision”) pursuant to O 14 r 12 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“Rules of Court”). In the Decision, the Asst Registrar held that the defendant was liable for US$131,512,173.91 under a judgment entered in the plaintiff’s favour against the defendant’s husband (“the Judgment Debt”) pursuant to the terms of a joint mortgage (“the Mortgage”). The Judgment Debt arose out of a guarantee given by the defendant’s husband to support a loan granted to two companies. I dismissed the appeal. The defendant has appealed against my decision. I now set out my grounds.

Facts

On 21 July 2011, the plaintiff (“the Bank”) issued an offer letter to the defendant and her husband (“the Borrowers”) offering them a loan facility of S$2.7m (“the Loan Facility”) for the purpose of purchasing a property (“the Property”). On 23 July 2011, the Borrowers accepted the offer letter (“the Offer Letter”). The Offer Letter stated that the offer was “on the terms and conditions set out … in our ‘Terms and Conditions Governing Mortgage Loans’”.

Under cl 2 of the Offer Letter, the Borrowers were required to secure the Loan Facility with a mortgage over the Property. To this end, the Borrowers executed the Mortgage on 26 September 2011 and registered it three days later. The Mortgage was expressly subject to the terms set out in the Bank’s “Memorandum of Mortgage” as then in force (“the Memorandum”) and Annex 1 of the Mortgage (“Annex 1”). The Offer Letter, the Memorandum and Annex 1 are hereinafter collectively referred to as “the Facility Documents”. In particular, cl 1.1 of Annex 1 states:

Clauses 1.2, 1.3 and 2 provide as follows:

Subsequently, by way of a letter of offer in writing dated 14 July 2017, the plaintiff’s branch in Hong Kong offered banking facilities to Coastal Oil (HK) Limited and Coastal Oil Singapore Pte Ltd (“the Companies”). The Companies duly accepted the letter of offer and utilised the banking facilities (“the Coastal Facilities”). By a guarantee in writing dated 19 February 2016, the defendant’s husband had earlier furnished a guarantee in favour of the Hong Kong branch to pay the sums owed by the Companies (“the Guarantee”). On 13 December 2018, Coastal Oil Singapore Pte Ltd was placed under provisional liquidation. In a letter dated 19 December 2018, the Bank demanded that the defendant’s husband make full payment of the sums due and owing by virtue of the Guarantee. At a creditors’ meeting held on 28 December 2018, Coastal Oil Singapore Pte Ltd appointed liquidators.

The defendant argued that she was not jointly and severally liable for the Judgment Debt based on a proper construction of the Facility Documents. Given that the issue of liability rested on the construction of the contractual terms, both parties agreed (upon the plaintiff’s application) that the court should determine the issue pursuant to O 14 r 12 of the Rules of Court without a full trial. On 23 December 2019, the Asst Registrar delivered the Decision.

Decision below

In the Decision, the Asst Registrar made the following findings:

(a) first, on the proper construction of the Facility Documents, the defendant is jointly and severally liable for all sums owing and which remain unpaid to the Bank by a co-borrower;

(b) second, on the proper construction of the Facility Documents, the covenant to pay under cl 1.1 of Annex 1 includes liabilities arising out of a judgment debt that a co-borrower owes to the Bank; and

(c) third, on the proper construction of the Facility Documents, the defendant is liable to pay the Bank’s costs on an indemnity basis.

The Asst Registrar noted that the defendant’s submissions were often contradictory. It was not clear whether the defendant took the view that the covenant covered moneys that the Bank loaned to:

(a) both the Borrowers under the housing loan;

(b) both the Borrowers jointly;

(c) either of the Borrowers; or

(d) either of the Borrowers, inclusive of sums owed to the Bank by way of guarantee.

The Asst Registrar held that the case turned solely on the construction of the Facility Documents and cl 1.1 of Annex 1 in particular. In this regard, she made two observations:

(a) first, under cl 1.1, the defendant and her husband are liable for debts owed by each or both of them to the plaintiff, independent of the housing loan and to no limit; and

(b) second, under cl 1.1, such debts include the Judgment Debt in question.

She concluded that the language of cl 1.1 was clear. The Borrowers had to pay “all such sums of money … [that are] owing and remain unpaid to the Mortgagor either as principal or surety and either solely or jointly … whether on the said Accounts or otherwise in any manner whatsoever or for all other liabilities”. This included the Judgment Debt.

The parties’ arguments

In the present appeal, the defendant argues that no reasonable person with the knowledge available to the parties at the time of contracting would understand cl 1.1 of Annex 1 to mean that the defendant agreed to be liable for a judgment debt worth US$131,512,173.91 arising under a guarantee independently provided by her husband in respect of companies that she had no interest in. Clause 1.1 of Annex 1 should be interpreted purposively and contextually, having regard to the entirety of Annex 1 and the Facility Documents. In particular, the defendant makes the following arguments:

(a) The defendant accepts that cl 1.1 of Annex 1 covers the Borrowers’ liability whether as “principal” or “surety”, but argues that the term “surety” must be read with the mortgagee’s covenant to extend facilities to the mortgagor “solely or jointly or jointly with any other person or persons in partnership or otherwise”. Given that the Bank extended the Coastal Facilities solely to the Companies (who are third parties to the Facility Documents), the situation falls outside the “surety” situation contemplated under cl 1.1 of Annex 1. If the parties had intended for the defendant to be liable for such moneys guaranteed by her husband under a different agreement, the Bank would have expressly identified that scenario. Clauses 1.2 and 1.3 of Annex 1 (concerning the payment of interest) are similarly confined to situations where the Bank extends the Coastal Facilities to a mortgagor solely or jointly but not where facilities are extended to a third party.

(b) Clause 1.1 of Annex 1 should not be construed literally and in a vacuum and instead regard must be had to the context of the Facility Documents. Specifically, cl 6 of Annex 1 provides that in the event of any inconsistency between the terms and conditions in the Mortgage and those in the Offer Letter, the terms and conditions in the Offer Letter prevail. Further, the purpose of cl 1.1 of Annex 1 is a narrow one. Clauses 1.2 and 1.3 of Annex 1 do not apply to any other facility except to the Loan Facility extended to the Mortgagors. Likewise, cl 2 of Annex 1, which operates to secure the Loan Facility with the Mortgage, does not address a liability akin to the Judgment Debt. The “in consideration” clause prior to cl 1 similarly emphasises that the relevant subject matter in question is the Loan Facility and nothing more. Moreover, cl 1(a) of the Offer Letter sets out the purpose of the Loan Facility, which is to “finance [the] purchase of the Property for Investment by the Mortgagor(s)”. Clause 2 of the Offer Letter also refers to the mortgage-security that the Borrowers had to execute. Finally, cl 1.1 of the Memorandum provides for repayment of the Mortgage, which again focuses on the Mortgage. The Facility Documents had to guide the interpretation of cl 1.1 of Annex 1 because the court construes linked contracts consistently with one another: Durham v BAI (Run Off) Ltd (in scheme of arrangement) [2012] ICR 574 at [69].

(c) During oral arguments, counsel for the defendant argued that the broad expression “otherwise in any manner whatsoever” in cl 1.1 of Annex 1 is qualified and explained by the subsequent phrase “whether certain or contingent primary or collateral including … the balance which at the date of such demand shall be owing or remain unpaid to the Mortgagee by the Mortgagor” in cl 1.1 of Annex 1. These examples do not include a judgment debt or a guarantee independently given by a co-mortgagor. The defendant relies on the remark by Lord Neuberger of Abbotsbury PSC in Arnold v Britton [2015] 2 WLR 1593 (“Arnold”) at [17] that “… the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision”. If the Bank had intended to provide for the situation before the court, the drafter would have directed the language to such a scenario.

(d) In addition, the defendant relies on decided cases in the UK to argue that the court should construe an “all moneys” clause narrowly. For example, the English Court of Appeal in Lloyds TSB v Shorney [2002] 1 FLR 81 (“Lloyds”) refused to allow an expansive interpretation of an “all moneys” clause and prevented the bank from bringing within the mortgage terms liabilities that arose under guarantees given by the mortgagor subsequent to the executed mortgage. The defendant also cites the judgment of Lord Millett in AIB Group (UK) Ltd v Martin and another [2002] 1 WLR 94 (“AIB”) at [8] and [15], who expressed the possibility of interpreting an “all moneys” clause in a manner that avoided imposing “secondary liability as surety in addition to a primary liability as principal debtor”.

(e) Finally, the defendant relies on several Australian decisions to argue that “all moneys” clauses should be construed to exclude liabilities of a character fundamentally different from those contemplated by the agreement. In the Australian decision of Estoril Investments Pty Ltd v Westpac Banking Corporation (1993) 6 BPR 13146 (“Estoril”) at 13151–13152, Young J articulated several guidelines illustrating how courts often approach dragnet clauses, one of which states that “[o]nly debts of the same type or character as the original debt are secured by the mortgage”. The guideline was affirmed and applied in Perpetual Trustee Company Ltd v Mariam Mohamad Moussa [2013] NSWSC 131 at [59] (holding that an “all moneys” clause does not extend to include liability in restitution) and In the Matter of John Peter Piccolo, Dean Royston McVeigh v National Australia Bank Limited [2000] FCA 187 at [85] (accepting that an “all moneys” clause would not extend to secure tortious liability). This approach is contended to be consistent with the Court of Appeal’s approach in Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte Ltd) [2015] 5 SLR 1187 (“Y.E.S.”) at [31], which provides that where the plain and unambiguous meaning of the text leads to an absurd result, the court will have to undertake careful analysis of the text and context to ascertain whether the text is indeed plain and unambiguous. Here, the stark facts put the case into such a category where the plain and unambiguous meaning of the text led to an absurd result, in three ways. First, the new liability arose as a result of a guarantee provided in support of debts owed by third party companies with which the defendant had no connection. Second, the obligation amounting to US$131,512,173.91 was different in nature and scale to the S$2.7m property loan. Third, the rights under the Guarantee merged into the Judgment Debt (the liability which the Bank now relies on) and that is, on any view, a liability fundamentally different from the property loan.

In response, the plaintiff argues that the language of the Facility Documents is clear and that the court must give effect to what a document, which the parties have contractually agreed to be bound by, expressly and specifically states:

(a) Clause 1.1 of Annex 1 requires the Mortgagors to pay “on demand … all such sums of money which are now or shall from time to time or at any time hereafter be owing … to the Mortgagee … either as principal or as surety and either solely or jointly or jointly with any other person or persons in partnership or otherwise whether on the said Accounts or otherwise in any manner whatsoever or for all other liabilities …” [emphasis added]. Furthermore, cl 7 of Annex 1 provides that “[w]here two or more persons are included in the expression ‘the Mortgagor’ all covenants stipulations and provisions contained herein shall be deemed to be made by and to apply to and be binding upon all such persons jointly and severally”. The Memorandum provides that the Borrowers would “hereby jointly and severally covenant with the Bank … [t]o pay to the Bank all monies which are now or shall from time to time or at any time be owing or remain unpaid to the Bank”. Moreover, cl 9.26 of the Memorandum provides that “where two or more persons are included in the expression ‘the Mortgagor’ or ‘the Borrower’ all covenants stipulations and provisions herein contained shall be deemed to be made by and to apply to and be binding upon all such persons jointly and severally”.

(b) The defendant’s purposive and contextual approach cannot override the plain wording of the contract. No canon of construction allows the court to ignore the intention of the parties, effectively rewriting the terms of the contract: Y.E.S. at [32]; Yap Son On v Ding Pei Zhen [2017] 1 SLR 219 (“Yap Son On”) at [30]; Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd [2016] 1 SLR 1069 (“Lucky Realty”) at [3]. More specifically, this approach was affirmed by the Singapore Court of Appeal in the context of an “all moneys” clause: see Re Tararone Investments Pte Ltd [2001] 3 SLR(R) 61 (“Re Tararone”) at [19].

(c) Courts in foreign jurisdictions have similarly affirmed a broad construction of “all moneys” clauses. In particular, the House of Lords in AIB did not hesitate to construe an “all moneys” clause such that one borrower’s liability extended to debts incurred solely by the other party when both had undertaken to be jointly and severally liable for each other’s debts.

Issue before the court

The only issue is whether, on a proper interpretation of the Facility Documents, the language of cl 1.1 is broad enough to include the Judgment Debt.

My decision

Having read the parties’ submissions and heard the oral arguments, I found that the defendant was jointly and severally liable for the Judgment Debt pursuant to cl 1.1 of Annex 1. I elaborate on my reasons below.

At the outset, the defendant’s reliance on a purposive and contextual approach to interpreting the Facility Documents is misplaced. The following principles set out by the Court of Appeal in Yap Son On are relevant:

(a) the text of the parties’ agreement is of first importance in ascertaining the parties’ objective intentions (at [30]); and

(b) in ascertaining the meaning that the words of a contract would convey to a reasonable person with the relevant background knowledge, the words used by the parties occupy primacy of place (at [38]).

That the language of an agreement assumes central importance is an incontrovertibly well-established principle: see Y.E.S. ([13(e)] supra) at [32]; Lucky Realty ([14(b)] supra) at [3]. The defendant accepted in her own submissions to the court that “[i]t is not for the Court to rewrite the parties’ bargain” and “[i]f the language is unambiguous, the Court must apply it”: Al Sanea v Saad Investments Co Ltd (in liquidation) [2012] EWCA Civ 313 at [31]. More specifically, “all-obligations” or “dragnet” clauses such as cl 1.1 are not exempt from the general principles of contractual interpretation, for it has been observed in Burgess on Law of Loans and Borrowing (Struan Scott ed) (Sweet & Maxwell, Looseleaf Ed, March 2016 release) (“Burgess”) at para 5.17 that “[i]n interpreting such clauses the usual starting point is that general contract principles apply”. Accordingly, I cannot accept the defendant’s approach that begins and ends with a purposive and contextual interpretation of the agreement.

Rather, I arrive at my conclusion on the basis of the unambiguously clear language of the Facility Documents. On a plain reading of cl 1.1 of Annex 1, I find that the words “all such sums of money which are now … owing or remain unpaid to the Mortgagee by the Mortgagor either as principal or as surety and either solely or jointly … whether on the said Accounts or otherwise in any manner whatsoever or for all other liabilities” encompass a range of liabilities that includes the Judgment Debt. The fact that the defendant’s husband entered into the Guarantee independently does not bring the situation beyond cl 1.1 because cl 7 of Annex 1 makes clear that “[w]here two or more persons are included in the expression ‘the Mortgagor’ all covenants stipulations and provisions contained herein shall be deemed to be made by and to apply to and be binding upon all such persons jointly and severally”. There is no principle of interpretation warranting a departure from the broadly-worded and wide-ranging language of Annex 1.

The defendant’s assertion that the broad language in cl 1.1 of Annex 1 is qualified by the subsequent phrase “whether certain or contingent primary or collateral including … the balance which at the date of such demand shall be owing or remain unpaid to the Mortgagee by the Mortgagor” holds no water. This attempt to narrow the scope of cl 1.1 neglects the words “all other liabilities … including (but without prejudice to the generality of the foregoing)”. The defendant also ignores the second half of cl 1.1, which states that the Borrowers’ obligation to pay extends to “the balance … on the said Accounts or otherwise in any manner whatsoever whether … in respect of … guarantees … signed by the [Borrowers] … solely … or in respect of any other banking facilities whatsoever” [emphasis added]. Since the Judgment Debt stemmed from the Guarantee, it also falls squarely within the language of this part of cl 1.1.

Contrary to the defendant’s submission, the “in consideration” clause in Annex 1 does not only refer to the Loan Facility. The “in consideration” clause states:

Plainly, the “in consideration” clause covers a broad spectrum of banking facilities.

In addition, the defendant misconstrues Lord Neuberger’s observation in Arnold ([13(c)] supra) at [17] in asserting that the language of the document “must have been specifically focussing on the issue covered by the provision”. The entirety of the passage is reproduced here:

Considering the passage in full, Lord Neuberger was not prescribing a novel canon of interpretation but was instead underscoring the centrality of the text and textual interpretation to the construction of contractual terms. This is diametrically opposed to the defendant’s case. Indeed, the Singapore Court of Appeal in Yap Son On ([14(b)] supra) at [38] affirmed Lord Neuberger’s exposition in Arnold and emphasised, in similar terms, that “the words used by the parties occupy primacy of place”.

In any event, the defendant’s proposition that the language of a document “must have been specifically focussing on the issue covered by the provision” is unsustainable. The defendant cannot reason backwards to argue that the parties did not contemplate an occurrence and therefore conclude that the contract did not cover that situation. It is for the court to examine the language of the document to see whether the words have the versatility to accommodate the circumstances. As observed in Burgess at para 5.16:

Even assuming for the sake of argument that the defendant’s contextual and purposive approach applies in the present case, the attempt to limit cl 1.1 with reference to cll 1.2 and 1.3 of Annex 1 (as set out at [4] above) does not succeed. It is precisely because the words in cll 1.2 and 1.3 are restrictive that one might argue that cl 1.1 was, in contrast, intended to be broader than the other two clauses. Clauses 1.2 and 1.3 merely refer to interest on any balance owing to the Bank out of any other facilities, but cl 1.1 is the only clause referring to “all such sums of money” and was thus intended to cover a wide range of liabilities.

The High Court’s ruling was reversed on appeal. In allowing the bank’s claim to enforce these subsequent drawdowns, the Court of Appeal rejected Tararone’s argument that the expression “all monies and liabilities” was limited to the overdraft facility. The Court of Appeal held at [15]–[19]:

In my view, the reasoning in Re Tararone applies with equal force in the present case. The clause here contains similarly broad language such as “all such sums of money which are now or shall from time to time or at any time hereafter be owing or remain unpaid”, “either as principal or as surety” and “or otherwise in any manner whatsoever or for all other liabilities”.

Additionally, the leading UK decision in respect of “all moneys” clauses, AIB ([13(d)] supra), supports the approach in Re Tararone. In AIB, Mr Martin was a property developer doing business in his own capacity and in partnership with Mr Gold. Mr Martin and the partnership borrowed money from the bank, which was secured by mortgages provided by both men individually. Clause 1 of the mortgage agreement provided that “[i]f the expression ‘the mortgagor’ includes more than one person it shall be construed as referring to all and/or any one of those persons and the obligations of such persons hereunder shall be joint and several”. Clause 2(1) stated as follows:

When the partnership failed, the bank called in all the loans. The question posed before the House of Lords was whether a co-mortgagor (Mr Gold) could be jointly and severally liable for the debt owed to the bank by the other co-mortgagor (Mr Martin) alone, pursuant to the “all moneys” clause at [28] above. Jacob J answered the question affirmatively. The Court of Appeal agreed with the judge. The House of Lords upheld the Court of Appeal’s decision unanimously. As Lord Scott of Foscote noted, it was clear that both mortgagors had covenanted to pay “all other indebtedness and/or liabilities whatsoever of the mortgagor to the bank” (AIB at [41]), even if this left “Mr Gold under obligations that he had not foreseen and had not intended at the time he signed the mortgage” (AIB at [44]). In my view, the present case finds a strong analogue in AIB, for cl 1.1 of Annex 1 is equally broad as the “all moneys” clause in that decision.

The defendant in the present case attempted to reiterate Mr Gold’s argument that the “all moneys” clause should be construed on a distributive basis such that liabilities for the separate debts of the individuals are attributed to the individuals who had originally incurred the debt. I find no basis to accept this argument. While both the Court of Appeal and House of Lords grappled with this submission, neither court accepted the argument. Lord Rodger of Earlsferry held that the joint and several “all moneys” clause precluded the notion that liability entailed mere payment of a pro rata share of debts: AIB at [48]. Notwithstanding the sympathy that the law lords had for Mr Gold’s plight, the House of Lords felt constrained to construe the words as they stood in the absence of any rectification.

As alluded to by the defendant (see [13(d)] above), Lord Millett opined that it was possible to construe cl 2(1) in a distributive manner to avoid duplicative and secondary liability as a surety in addition to primary liability as a debtor: AIB at [8] and [15]. When read together with the interpretation clause, cl 2(1) provided that (AIB at [49]):

Two interpretations of this clause were considered in AIB ([13(d)] supra). On one view, the provision imposed an obligation on both Mr Martin and Mr Gold, jointly and severally, to repay all sums granted to them in partnership and also to repay all sums loaned to them individually. On the other hand, Lord Millett thought it was possible to interpret the clause such that liability for the individual debts would be attributed only to the person who incurred the debts. The law lord arrived at this view by virtue of the maxim reddendo singular singulis, which permitted the separation of plurals into their respective singular components. Lord Millett explained in AIB at [15]–[18]:

Be that as it may, I am not persuaded to apply the foregoing analysis here for two reasons. First, Lord Rodger cast doubt on the utility of the maxim at [50], since it could not operate contrary to the intention of the parties to divide or withdraw separate debts from joint and several liability. Second, in any event, Lord Millett made the foregoing observation by way of obiter dicta and ultimately did not dissent in AIB. Observing that the other law lords were “unanimously of the opinion” that the distributive construction was not legitimate, Lord Millett was “not prepared to dissent from that view”: see AIB at [22].

That AIB concerned a partnership does not make it a different type of case because the liabilities in a partnership are the respective liabilities of the individual partners. The authors of Burgess note at para 2.54:

The UK decision of Lloyds ([13(d)] supra) is distinguishable. Unlike the present case, the facility documents in Lloyds at [3] contained a fixed monetary cap on the mortgage and guarantee (“provided that the total amount recoverable by the Bank from the Mortgagor under this Mortgage shall not exceed the sum of One Hundred and Fifty Thousand Pounds (£150,000)”). Nevertheless, the bank permitted the husband to incur liabilities exceeding the capped sum without the wife’s consent or knowledge. After her husband’s default, the wife paid the bank the fixed monetary cap stipulated under the guarantee and mortgage, conceding that she was liable for this sum. On these facts, the court accepted that this was the extent of her liability and that the wife had discharged her obligation.

The defendant relies on Estoril ([13(e)] supra) to argue that “[o]nly debts of the same type or character as the original debt are secured by the mortgage”: see Estoril at 13151. Estoril was cited in Re Tararone ([14(b)] supra) at [30]–[31]:

There are two reasons why Estoril does not provide a lifeline to the defendant’s case.

First, as alluded to in Re Tararone at [30]–[31], the guideline requiring “debts of the same character” is only engaged on the condition that “one would get absurdities if one read the wide words literally”: Estoril at 13154. The court considers whether the debts are “of the same type or character” after it is established that the language of the mortgage term would result in absurdities. Here, no absurd result arises from the plain language of cl 1.1 of Annex 1. Where there is no such absurdity, the literal words apply even if the language is broad. Since the defendant is unable to establish that one would arrive at absurdities if one read the wide words in cl 1.1 of Annex 1 literally, I find no basis to consider whether the debt is of the “same type or character”.

Second, as Young J repeatedly observed in Estoril at 13151–13152, the operation of the guideline ultimately depends on the construction of each mortgage:

On the facts, the court found in favour of the bank. In doing so, Young J held at 13154 – 13155:

This is, in substance, no different from the approach that the Singapore courts apply. As I reason at [19] above, a plain construction of the Facility Documents indicates that the defendant is liable for the Judgment Debt.

Finally, I note that AIB ([13(d)] supra) has been cited with approval in the Hong Kong decision of Standard Chartered Bank (Hong Kong) Ltd v Pak Kwan Ho [2018] HKEC 580. That case is very similar to the present one. There, the court held that a wife who was a co-mortgagor could not escape liabilities incurred by her husband under an “all moneys” mortgage (at [26]):

Likewise, I see no compelling legal reason to depart from the approach in AIB.

Ultimately, it is not uncommon for banks to draft clauses in the widest possible terms to mitigate the uncertainty of future circumstances. It goes without saying that at the time of signing the contract, the Borrowers could not have known that the defendant’s husband would subsequently incur a liability upwards of US$131m. But neither did the Bank and, in the final analysis, the Borrowers did sign the Facility Documents. Unfortunately for the defendant, the established rules of contractual interpretation, which accord paramount importance to the language used, leave no room for the courts to rewrite the express terms of contracts presented before them. Even hard cases and sophisticated arguments cannot avoid what a contract plainly provides.

Conclusion