COURT OF APPEAL, SINGAPORE
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www.ipsofactoJ.com/archive/index.htm [1981] Part 2 Case 12 [CASg] |
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COURT OF APPEAL, SINGAPORE |
First National Bank of Chicago
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Tan
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Coram C.J. WEE CJ T KULASEKARAM J A.P. RAJAH J |
20 MAY 1981 |
Judgment
A.P. Rajah J
This appeal arises from a judgment of D’Cotta J dated 3 July 1980, dismissing a claim by the appellants (plaintiffs) against the respondent (fourth defendant) for the sum of $2,520,198.91 together with interest thereon on a guarantee dated 18 April 1974 by the fourth defendant in favour of the plaintiffs.
The plaintiffs’ claim against the first defendant, the borrower, was for the sum of $2,520,198.91 with interest thereon at 8% per annum, due and owing by the first defendant in respect of overdraft facilities extended by the plaintiff bank to the first defendant. The claim against the second, third and fourth defendants arose out of three separate guarantees executed by each of them guaranteeing the due payment by the first defendants to the plaintiffs of moneys owing in respect of the said overdraft facilities.
In March 1973 the second defendant agreed to purchase from Tomlinson Pte Ltd for about $2.7m, 40,523 sq ft of land and bungalow erected thereon and in a dilapidated condition known as No 10 Tomlinson Road (No 10), which was then zoned residential on the master plan. He was able on his own to pay the 10% deposit on the purchase price but payment to the vendor of the balance of the purchase price was effected by the first defendant through overdraft facilities provided for it by the plaintiffs up to the limit of $2.5m for principal moneys with liberty to the bank to increase such limit up to such further or additional amount as may be fixed by the bank at its absolute discretion for a period of one year from the date of the first drawdown and thereafter the renewal of such overdraft facilities was to be reviewed anew.
The conveyance of No 10 was then taken in the name of the first defendant, of which the second and third defendants were directors, and immediately thereafter a legal mortgage, in which the second and third defendants joined in as sureties, was executed, bearing the date 2 May 1973, by the first defendants, as owners of No 10 in favour of the plaintiffs in respect of the said overdraft facilities. Before the mortgage deed was signed the second and third defendants had each of them executed separately on 18 April 1973 unlimited guarantees in favour of the plaintiffs securing the overdraft account.
Before the said over draft facilities was approved by the plaintiffs Messrs Victor & Mendis, a firm of land valuers, valued No 10 for the bank at $4.8m. It should be noted, however, that No 10 was not valued by the valuers as residential property, which was its then zoning on the Master Plan, but as commercial property, on assumptions the valuers were not justified in making, and which, perhaps, accounts for the great disparity between the actual purchase price and the amount at which No 10 was valued. It is also relevant to note that the fourth defendant acted as broker in the purchase of No 10 for which she was paid her commission.
It was not disputed that whenever the first defendants were unable to meet interest payments on the mortgage the first defendants would borrow from the fourth defendant and that she had thus in all lent the company a sum of about $280,000. It was also not in dispute that the fourth defendant
had had a Chinese education up till the age of 14 years,
could, in her own words, ‘understand simple every day English, not the profound type’,
was a land broker of some 17 to 18 years standing,
was running an adequately staffed office for this purpose,
had a translator and interpreter in her office for translating and interpreting to her, from Hokkien into English and vice versa and documents relating to her business,
had legal advisers whom she could readily call upon,
is a fairly competent business woman in a highly competitive field of business,
was a director of two companies which she had formed herself and
had previously executed guarantees in English.
The first drawdown on the overdraft account was on 18 April 1973. In early April 1974, that is some ten days before the expiry date of the one year overdraft facilities, the plaintiffs advised the first and second defendants that they were prepared to review such facilities for a further period provided that additional security or an additional guarantor acceptable to them was provided and that the fourth defendant would be acceptable to them as guarantor as she was well known to them.
The second defendant then approached the fourth defendant and obtained her signature on 18 April 1974 to an unlimited guarantee in favour of the plaintiffs in terms similar to the ones he and the third defendant had given to the plaintiffs on 24 April 1973. Her signature was then witnessed by one Lim Sin, her son-in-law, and a partner in the legal firm of Messrs Lim Sin & Thiam Beng who were her legal advisers.
This unlimited guarantee was then delivered to the plaintiffs by the second defendant and the overdraft facilities were then extended by the plaintiffs for a further period of one year. It is common ground that after the date of the guarantee signed by her no further advance was made by the plaintiffs to the first defendants.
On 22 April 1974 the plaintiffs wrote to the first and second defendants with a copy to the fourth defendant as follows:
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Re: How Lee Realty We acknowledge receipt of the unlimited guarantee form signed by Madam Tan Lai Wah and duly witnessed by Mr. Lim Sin, advocate and solicitor. Kindly forward to us a copy of the Board of Directors’ Resolution appointing Madam Tan a director of the Company. |
Not hearing from the first defendant on the fourth defendant’s appointment as director, the plaintiffs wrote again to the first defendant on 13 May 1974 as follows (inter alia):
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As we have not received the Board of Directors’ Resolutions appointing Madam Tan as a director, could you please forward this to us as soon as possible. |
She was appointed a director of the first defendants on 7 June 1976. On 16 December 1976 No 10 was put up for auction by the plaintiffs, at which although the opening request by the auctioneer was a bid of $880,000, no bids were offered. The bank subsequently sold No 10 by private treaty to the Urban Renewal Authority in July 1977 for $1,024,955.32.
It was in these circumstances that the plaintiffs commenced proceedings against the first, second, third and fourth defendants for the balance of $2,520,198.91 with interest at 8% per annum. Summary judgment was obtained against both the first and third defendants; as against the second defendant judgment in default of appearance was entered against him on 26 October 1977; the fourth defendant, on an Ord 14 Summons, at which she was represented by counsel, was given unconditional leave to defend on her plea that consideration for the execution of the guarantee was past consideration. It will be noted that at this stage of the proceedings the fourth defendant had not raised the plea of non est factum her primary defence.
The fourth defendant in her further amended defence dated 24 October 1979 the date of the commencement of the trial of the action, raised four defences against the plaintiffs’ claim, the non est factum plea being raised for the first time:
That at the time she signed the guarantee it was represented to her by the second defendant that what she was signing was a guarantee of her interest in No 10 which she jointly owned with the second defendant and she honestly believed such representation.
That the plaintiffs did not give any consideration in law or at all for her signing the guarantee.
That she did not by the terms of the guarantee undertake to pay the plaintiffs monies lent to or paid for the first defendant prior to and before she signed the guarantee on 18 April 1974.
That her liability under the guarantee, if any, had been discharged by the plaintiffs acting unreasonably in the sale of No 10 in a manner detrimental to her and thereby prejudicing her.
The learned trial judge in his judgment having said:
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The defence raised two main issues as follows:
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and went on to make the following findings on the non est factum plea:
That the guarantee was not read and explained to the fourth defendant before she executed it and that the bank and its agents had failed to discharge their burden;
That it was so represented to the fourth defendant by the second defendant that the document she was signing was one intended to guarantee payment of interest to the plaintiffs on No 10 and in return for which she was to be given a 50% share in No 10 whereas in fact the document sued on sought to make her liable without limit for all monies advanced by the plaintiffs to the first defendant right from the very beginning;
That there was a radical difference from what the fourth defendant believed she was signing and the document upon which she was being sued;
That taking all the conditions prevailing at the time when the fourth defendant signed the document, she had, in so signing, acted reasonably and prudently in the circumstances.
On these findings and on his reading of Saunders v Anglia Building Society [1970] 3 All ER 961 (the Saunders case) the learned trial judge dismissed the action with costs on the basis that in his judgment the fourth defendant had successfully established the plea of non est factum. Further, he went to say that in view of his so finding, the necessity of considering the other defences raised by the fourth defendant did not arise.
Against this judgment the plaintiffs appeal on the ground that in all the circumstances of the instant case the learned trial judge erred in fact and in law in finding that the plea of non est factum had been successfully established by the fourth defendant; and the fourth defendant, for her part, contends that the decision of the learned trial judge ought to be affirmed on the grounds hereinafter set out, additional to that relied upon by the trial court:
That there was no consideration moving from the plaintiffs to the fourth defendant for the said guarantee;
That upon the strict construction of the said guarantee the fourth defendant only undertook to pay to the plaintiffs the monies lent to or paid to the use of the first defendant after she signed the said guarantee and that no monies were lent or paid to the use of the first defendant after the date the said guarantee was signed by the fourth defendant;
That the fourth defendant has been discharged of her liability under the said guarantee by reason that the plaintiffs have been guilty of laches.
THE PLEA OF NON EST FACTUM
The plea of non est factum can only rarely be established by a person of full capacity and although it is not confined to the blind and illiterate any extension of the scope of the plea would be kept within narrow limits. In particular, it is unlikely that the plea would be available to a person who signed a document without informing himself of its meaning. The burden of establishing a plea of non est factum falls on the party seeking to disown the document and that party must show that in signing the document he acted with reasonable care. Carelessness (or negligence devoid of any special, technical meaning) on the part of the person signing the document would preclude him from later pleading non est factum on the principle that no man may take advantage of his own wrong; it is not, however, an instance of negligence operating by way of estoppel. (Saunders Case 961).
The evidence of the fourth defendant relevant to her plea of non est factum reads as follows:
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The signature on exh P2 (the guarantee document) is mine. |
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PW3 (second defendant) told me that Mathew Lim from the Bank (plaintiffs) suggested that I become his (second defendant’s) guarantor. This was ten days before P2 was signed. He told me that Mathew Lim had said I was a property owner and would be able to provide him the money to pay for the interest of Tomlinson Road. |
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PW3 said I should be guarantor for this piece of land. PW3 told me I had 50% share in this land and I myself was so interested in it. |
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I did not say anything; subsequently he came with P2 (guarantee document) for me to sign. |
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He never told me about renewing overdraft facilities offered to How Lee Realty Ltd (first defendant). |
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PW3 came to my office to see me … PW3 (second defendant) told me that Mathew Lim wanted me to sign P2 in respect of my 50% interest in this piece of land. He did not say what the document was. He said to guarantee the land at Tomlinson Road. |
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Yes, I was happy to sign. I was very interested in this piece of land. PW3 (second defendant) had to give me something in respect of my 50% interest in the land. I was happy to sign P2. I regarded P2 (the guarantee document) as proof that I was holding 50% interest in the land. |
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PW3 did not explain the document to me. He stood there; he was hardly there for ten minutes. He was in a hurry and asked me to sign the document quickly. He left immediately after I had signed the document. He showed me where to sign. Nothing else was said between PW3 and I; I considered P2 as proof that I held 50% interest in Tomlinson Road. |
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There are so many types of guarantees; we must know what it is about; if we accept it we can act as guarantor. As far as I am concerned I thought that P2 was a guarantee that I had 50% interest in Tomlinson Road … I did not know I was guaranteeing an unlimited amount; if I had known that I would not have signed. |
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PW3 took P2 from me after signing; I never asked him to get my signature witnessed by Lim Sin. |
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Later that afternoon Lim Sin telephoned me, he said, ‘Mummy you happy to sign this guarantee in respect of the land at Tomlinson Road’. I said Yes, I was happy … Nothing else was said. |
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Lim Sin put the receiver down … He (Lim Sin) never asked me whether I understood everything inside the guarantee … plaintiffs never wrote to me for being a guarantor for an account with them. No one from the bank spoke to me. |
The second defendant’s evidence relevant to this plea may be divided into two parts,
one dealing with what happened some few days before the guarantee was signed by the fourth defendant and
the other with what took place on the day of the signing of the guarantee, namely, 18 April 1974.
His evidence relating to the first part reads as follows:
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Madam Tan Lai Wah recommended me to purchase this property. She was a broker. Property owned by Tomlinson Pte Ltd. Accounts were to be reviewed after one year. |
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For the first year company paid interest regularly; if I was short of money I would borrow from Madam Tan. I did borrow from her. |
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Before expiry date plaintiffs told me they were prepared to review facilities provided. I pay 2% commitment fees as well as provide additional security, or guarantor acceptable to the bank. |
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I don’t know why plaintiffs wanted additional security or guarantor but they intimated that they would feel more comfortable. |
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I informed plaintiffs I would look for additional security. Plaintiffs suggested Madam Tan as guarantor since I had other business with her. |
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I had discussions with Madam Tan if she would stand guarantor for an extension of another year of facilities given to me. |
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She said that land was good price at $130 per sq ft and she agreed to be guarantor. |
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Plaintiffs agreed to accept Madam Tan as guarantor. |
From this evidence it seems clear that the fourth defendant some few days before the signing of the guarantee had agreed to stand guarantor in favour of the bank for an extension of another year of facilities given to the first defendants.
It was never in dispute that the document the fourth defendant had signed had factually not been read, explained or translated to her. There is however no evidence that this competent land broker had asked either the second defendant or Lim Sin or for that matter her translator-clerk for such reading, explanation or translation before signing.
It would appear from the judgment of the learned trial judge that he had agreed with a submission by counsel for the fourth defendant that there was only one material fact in dispute and that this revolved around what was said by Lim Sin to the fourth defendant when he telephoned her on the afternoon of 18 April 1974 before he attested her signature to the guarantee.
With respect we do not agree with this approach. The non est factum issue, in our view, did not revolve so much around the credibility or otherwise of Lim Sin, the fourth defendant's solicitor as around the question whether the fourth defendant knew the nature and content of the document she was signing, that is to say, whether she knew that she was signing an unlimited guarantee in favour of the plaintiffs to secure overdraft facilities being extended by the plaintiffs to the first defendant for a further one year.
Lim Sin’s evidence and that of the second and fourth defendants’ were not the only available and relevant evidence before the court. Where oral self-interested testimony is conflicting on a particular matter and there is contemporaneous or near contemporaneous documentary evidence relevant to the matter before the court, such evidence should, in our view, be also given due consideration by the court, particularly if such documents came into existence long before the matter in question became one of dispute between the parties, before it makes a finding on the matter in issue. There can, in our view, be no more disinterested, reliable, or weighty evidence than this. There were three such documents before the court.
The first was a letter dated 22 April 1974 (AB4) written by the plaintiffs to the second defendant with copy to the fourth defendant and it reads as follows:
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Re: How Lee Realty We acknowledge receipt of the unlimited guarantee form signed by Madam Tan Lai Wah and duly witnessed by Mr. Lim Sin, advocate & solicitor. Kindly forward to us a copy of the Board of Directors’ resolution appointing Madam Tan a director of the company. |
The second was also a letter dated 8 August 1974 also written by the plaintiffs to the fourth defendant’s solicitors in reply to a request to them by the said solicitors and it reads as follows:
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Re: Madam Tan Lai Wah’s Guarantee in favour of M/s How Lee Realty Pte Ltd. As requested, we enclose herewith a photocopy of Madam Tan’s guarantee. In particular, please note cl (3). |
The third was yet another letter dated 10 August 1974 written this time by the fourth defendant’s solicitors to the plaintiffs and it reads as follows:
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Madam Tan Lai Wah’s guarantee in favour of M/s How Lee Realty Pte Ltd. We thank you for the xerox copy of Madam Tan Lai Wah’s guarantee which was requested by her and acknowledge receipt thereof. |
A reading of the first letter, paying special attention to its subject heading makes it, in our view, patently clear that the fourth defendant certainly knew on or about 22 April 1974 if not before, that she had signed an unlimited guarantee, on 18 April 1974 that is to say four days earlier, in favour of the first defendants and not as she says, a document guaranteeing to her a 50% interest in No 10. The second and third letters clearly indicate that certainly on or about 8 August 1974, if not before, — that is to say within three months of her signing the guarantee — she was aware of the contents of the guarantee she had signed on 18 April 1974.
On the basis of her evidence it is difficult to understand why she should have signed a document guaranteeing her a 50% interest in No 10; in such circumstances one would have thought that it should have been the second defendant, and not she, who should have been the signatory. Again, it is difficult to understand why this document of proof of her 50% interest in No 10, having been signed, should have been allowed to be taken away by the second defendant and handed over to the plaintiffs and not kept by her as such proof. It is even more difficult to understand why after sighting the first letter she did nothing about the second defendant having tricked her into signing an unlimited guarantee in favour of the plaintiffs.
We are satisfied that, if the attention of the learned trial judge had been specifically directed to these three documents, he would not have held as he did, that, in his judgment, the fourth defendant had successfully established the plea of non est factum.
It is also our view that having regard to her long experience as a land broker and other spheres of business as previously set out — factors which the learned trial judge appeared to have not considered — her mere assertion that she thought the document she signed was one guaranteeing her a half share in No 10 was unbelievable.
THE PLEA OF NO CONSIDERATION
The fourth defendant (respondent) contends that in the circumstances of the instant case there was no consideration moving from the plaintiffs (appellants) to the fourth defendant for the said guarantee.
Overdraft facilities up to $2.5m to the first defendants were granted by the plaintiffs for a period of one year from the date of the first drawdown, namely 18 April 1973. These overdraft facilities were secured by a legal mortgage on No 10 in favour of the plaintiffs and further secured by two unlimited guarantees, one by the second defendant and the other by the third defendant. Sometime before the period of one year came to an end the plaintiffs were willing to renew the said overdraft facilities for a further period of a year provided additional security or an additional guarantee was brought in as further security. It was to meet this stipulation for renewal of the overdraft facilities that the fourth defendant (respondent) was brought in. In our view, this was good and sufficient consideration moving from the plaintiff bank to the fourth defendant. Although it is not necessary to record in a guarantee the consideration for which it is given (s 3, Mercantile Law Amendment Act 1856) a bank guarantee usually includes a clause describing why the guarantor has undertaken the liability. This guarantee is no exception and it contains the clause ‘In consideration of the First National Bank of Chicago … at our request making or continuing advances (emphasis ours) or otherwise giving credit or affording banking facilities (emphasis ours) for so long as the bank may think fit.’ In our view, the expression ‘continuing advances’ and ‘affording banking facilities’ are quite sufficient in themselves to meet the circumstances under which the guarantee in the instant case was given. We accordingly reject the fourth defendant’s plea of no consideration.
THE PLEA OF NO LIABILITY FOR PAST LOANS
The fourth defendant (respondent) says that by the terms of the guarantee she did not undertake to pay the plaintiffs monies lent to or paid for the first defendant, the obligor, prior to and before she signed the guarantee. The operative clause of the guarantee reads, ‘I … hereby guarantee on demand in writing being made to me to pay and satisfy to the bank all sums of money which are now or shall at any time be owing to the bank anywhere on any account whatsoever …’ As a matter of construction of the operative clause, the fourth defendant (respondent) thereby guaranteed to the bank not only all sums of money that were owing to the bank on 18 April 1974 being the date of the said guarantee, but also all those that were owing to it from time to time until written demand when the debt crystallised and became due and payable. Here again we see no merit in this plea and reject it.
THE PLEA OF LACHES
The fourth defendant (respondent) contends that she has been discharged under the said guarantee by reason that the plaintiffs (appellants) have been guilty of laches. She cites four instances of such guilt, namely that:
In or about July or August 1975 the plaintiffs their agent or servant prevented a sale at a price of $4.5m of the property which was mortgaged to the plaintiffs to secure the amount due to the plaintiffs on the first defendant’s account. The price was well in excess of the amount due to the plaintiffs on the said account.
In or about March 1976 the plaintiffs unreasonably refused to give their consent to a sale of the said property at a price of $2.5m which price was later increased to $3m insisting upon a price of $4m before they would consent. At the material time, the amount due to the plaintiffs on the account of the first defendant was only $3,028,653.35.
In December 1976 the plaintiffs unreasonably refused an offer to purchase the said property for $1,256,213 made at an auction sale at which the property had been put up for sale by the plaintiffs under their power of sale.
In July 1977 the plaintiffs sold the said property for only $1,024,955.32says that in all these four instances the plaintiffs acted without her consent and/or knowledge and that she had not been kept informed by the plaintiffs.
Acting in accordance with the terms and conditions of the mortgage the plaintiffs sold No 10 by private treaty to the Urban Renewal Authority for the sum of $1,024,955.32. It is to be noted that cl 5(v) of the mortgage provides that ‘the bank shall not be answerable for any involuntary loss happening in or about the exercise or execution of any power conferred upon the bank by these presents or by the Conveyancing and Law of Property Act (Cap 268).’
Instance I.
There is no satisfactory evidence on this as to a firm offer to buy. There is some evidence of talks as to possible purchase and no more. In any event all these talks relate to the purchase of No 10 only in the event of the Competent Authority granting a conversion of use from residential to commercial.
Instance II.
Here again the offer to purchase at $2.5m later increased to $3m, was conditional on No 10 being converted to commercial use and approval of layout plans being obtained by the owners of No 10, namely the first defendants.
Instance III.
There is no evidence to support these allegations. In fact the evidence on record negatives these allegations. The evidence of the Assistant Manager of the plaintiff bank is that, far from there being a bid for $1,256,213, at the auction, there was no bid at all and her evidence is supported by exh P12 which records that on the date of the live auction, namely 16 December 1976 ‘the opening request was for a bid of $880,000. No bids were offered’.
Instance IV.
Here the plaintiffs did in fact sell No 10 by private treaty for the sum of $1,024,955.32 as alleged. The gravemen of the charge is that it was sold at an undervalue. It is in evidence that before this sale the plaintiffs had not obtained a valuation. The question here is whether the plaintiffs should reasonably have sold No 10 at this price or at some other higher figure.
The evidence adduced at the trial and which is relevant to this aspect of the matter is as follows:
exh P10 states that the appraised value of No 10 in August 1975 was $1,418,305 on existing ‘use’ basis.
solicitors’ letter dated 23 July 1976 written on behalf of the first defendant company and all the three guarantors who were also its directors to the solicitors of the plaintiffs which states, inter alia, that the price of $1.5m for No 10 is above the current market value (exh P25).
no bids were offered for No 10 at a live auction on 16 December 1976 although the opening request by the auctioneer was for a bid of $880,000.
the evidence of the Assistant Manager of the plaintiff bank at page 35F of the record regarding the sale of No 10 to the Urban Renewal Authority in July 1977 which runs as follows:
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Eventually property sold on a residential basis for $1m; property market fell at that time. |
The evidence that ‘property market fell at that time’ was not challenged by the fourth defendant.
As it is the fourth defendant who is alleging that No 10 was sold at an undervalue the burden of proof is on her. She, however, did not see fit to produce expert independent evidence to say that when No 10 was sold to the Urban Renewal Authority it was at an undervalue. In these circumstances and on the evidence before the court we are in no position to say whether the plaintiffs had in fact sold No 10 at an undervalue. We are of the view that the fourth defendant had not discharged her burden of proof.
As regards her contention that the plaintiffs acted in the said sale without her knowledge and/or consent and that she had not been kept informed of such sale by the plaintiffs we are of the view that neither in law (G Merel & Co Ltd v Barclays Bank (1963) 107 Sol Jo 542) nor under the guarantee are there any such obligations owed by the plaintiff bank to the guarantor.
In the case of a mortgage ‘It is now clearly established that a mortgagee, when exercising his power of sale, owes a duty to the mortgagor to take reasonable care to obtain a proper price. The burden of proof is on the mortgagor to prove breach of this duty by the mortgagee’ (Fisher & Lightwood’s Law of Mortgage (9th Ed) p 368). See also Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] 1 Ch 949.
Beyond this duty the mortgagee has no duty to inform or obtain the consent of the mortgagor or keep him informed of the sale of the mortgaged property. In the instant case the rights and duties of the plaintiff bank and of the fourth defendant are governed by the guarantee. There is no provision in the guarantee which requires the plaintiffs to inform or obtain the consent of the fourth defendant or keep her informed of the sale of the mortgaged property.
However, we are of the view that there is an implied term in the contract of guarantee whereby the bank, in whose favour the guarantee is given has a similar duty to the guarantor, as indeed it has to the mortgagor, whose property is being sold under its power of sale, to take reasonable care to obtain a proper market price. As we have said before there is no evidence that No 10 was sold at an undervalue.
For these reasons the appeal must be allowed with costs here and below.
Cases
Cuckmere Brick Co v Mutual Finance [1971] 1 Ch 949; G Merel & Co v Barclays Bank (1963) 107 Sol Jo 542; Saunders v Anglia Building Society [1970] 3 All ER 961
Authors and other references
Fisher & Lightwood’s Law of Mortgage (9th Ed)
Representations
F Mallal (Rodyk & Davidson) for the appellants.
JB Jeyaretnam (JB Jeyaretnam) for the respondent.
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