Bank of East Asia v Tan Chin Mong: Guarantee, Mortgagee's Power of Sale

In The Bank of East Asia Ltd v Tan Chin Mong Holdings (S) Pte Ltd, the High Court of Singapore heard a claim by The Bank of East Asia Ltd against Tan Chin Mong Holdings (S) Pte Ltd and several individual defendants who acted as guarantors for the company's debt. The bank sought to recover a shortfall after exercising its power of sale over a mortgaged property. The court, presided over by G P Selvam J, addressed issues related to the mortgagee's duty in exercising the power of sale and the liability of joint and several guarantors following a settlement with one of the guarantors. The court allowed the plaintiffs' claim, granting judgment against the second and sixth defendants for the outstanding amount, less the sum received in settlement from another guarantor.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiffs' claim allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The Bank of East Asia's claim against guarantors for a company's debt. The court addressed mortgagee's power of sale and guarantor liability after settlement with one guarantor.

1.7 Decision Date

26 November 2000

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
The Bank of East Asia Ltd	Plaintiff	Corporation	Claim Allowed	Won	Joseph Hoo Chun Hee, Lawrence Khoo
Tan Chin Mong Holdings (S) Pte Ltd	Defendant	Corporation	Judgment against Defendant	Lost	Tan Chuan Thye, Bianca Cheo
Tan Chin Mong	Defendant	Individual	Judgment against Defendant	Lost	Tan Chuan Thye, Bianca Cheo
Jeffrey Tan Keok Hng	Defendant	Individual	Judgment against Defendant	Lost	Tan Chuan Thye, Bianca Cheo
Andrew Jerry Tan Keok Kiang	Defendant	Individual	Settlement Reached	Settled

3. Judges

Judge Name	Title	Delivered Judgment
G P Selvam	Judge	Yes

4. Counsels

Counsel Name	Organization
Joseph Hoo Chun Hee	Joseph Hoo Morris & Kumar
Lawrence Khoo	Joseph Hoo Morris & Kumar
Tan Chuan Thye	Allen & Gledhill
Bianca Cheo	Allen & Gledhill

4. Facts

The Bank of East Asia Ltd extended credit facilities to Tan Chin Mong Holdings (S) Pte Ltd.
The facilities were secured by a joint and several guarantee signed by six individual defendants and a legal mortgage of a property.
The company's financial position deteriorated, leading the bank to cancel the facilities.
The bank exercised its power of sale over the mortgaged property after the company failed to refinance.
The property was sold at auction for $3.8 million.
Acma Ltd called on bank guarantees issued by the plaintiffs, which the plaintiffs honored.
The plaintiffs commenced an action against the company and the guarantors to recover the outstanding balance.
The plaintiffs reached a settlement with one of the guarantors, Jerry Tan, for $400,000.
The second and sixth defendants applied to set aside the default judgment against them, which was granted.

5. Formal Citations

The Bank of East Asia Ltd v Tan Chin Mong Holdings (S) Pte Ltd and Others, Suit 1263/1999, [2000] SGHC 250

6. Timeline

Date	Event
1993-01-01	Company became a customer of the plaintiffs.
1996-12-09	Individual defendants signed the guarantee.
1998-02-01	Aggregate amount of guarantees was $1.5m.
1998-04-27	Plaintiffs cancelled the credit facilities.
1998-05-05	Company stated they were unable to effect refinancing.
1998-05-07	Overdraft account showed a debit of $4,457,794.64.
1998-05-22	Amount owing to the plaintiffs on the overdraft.
1998-05-31	Company withdrew $34,899.93, increasing the debit to $4,492,694.57.
1998-06-03	Property advertised in the press for auction sale.
1998-06-18	Auction sale held, but there was no sale.
1998-07-17	Lawyers issued a demand letter to the company for payment of $4,542,821.24.
1998-09-02	Plaintiffs replied that they were not agreeable to the restructuring.
1998-11-04	Plaintiffs were given the keys to the property.
1998-12-01	Property advertised in the newspapers.
1998-12-16	Property put up for auction.
1999-03-18	Property put up for auction.
1999-05-13	Property advertised in the newspapers.
1999-05-15	Property put up for auction; agreement for sale.
1999-06-17	Acma Ltd called on the bank guarantees.
1999-06-30	Plaintiffs honoured the bank guarantees.
1999-07-22	Sale of property completed.
1999-07-29	Balance due to the plaintiffs was $2,423,230.33.
1999-10-26	Plaintiffs entered default judgment.
2000-05-17	Default judgment against the second and sixth defendants was set aside.
2000-08-03	Deed of settlement between the plaintiffs and Jerry Tan.
2000-11-27	Decision Date

7. Legal Issues

Setting Aside Default Judgment
- Outcome: The default judgment against the second and sixth defendants was set aside, and they were given leave to defend the claims against them.
- Category: Procedural
Mortgagee's Duty of Care in Exercising Power of Sale
- Outcome: The court found that the plaintiffs did not breach their duty of care in exercising their power of sale.
- Category: Substantive
- Related Cases:
  - [1971] Ch 949
  - [1971] 2 All ER 633
  - [1990] 1 AC 536
  - [1989] 3 All ER 839
  - [1993] AC 295
  - [1993] 3 All ER 626
Liability of Joint and Several Guarantors
- Outcome: The court held that the settlement with one guarantor did not release the other guarantors from their several liability, but their liability was reduced by the amount paid by the settling guarantor.
- Category: Substantive
- Related Cases:
  - [1901] 2 KB 642
  - [1884] 13 QBD 50

8. Remedies Sought

Monetary Damages

9. Cause of Actions

Breach of Guarantee
Debt Recovery

10. Practice Areas

Commercial Litigation
Banking Law
Debt Recovery

11. Industries

Banking
Finance

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Nash v Eads	Unknown	Yes	[1880] 25 Sol Jo 95	England and Wales	Cited for the duty of a mortgagee to conduct the sale properly and sell at a fair value.
Watts v Shuttleworth	Unknown	Yes	[1860] 157 ER 1171	England and Wales	Cited for the principle that a surety will be discharged if the person guaranteed does any act injurious to the surety, or inconsistent with his rights, or if he omits to do any act which his duty enjoins him to do, and the omission proves injurious to the surety.
Pearl v Deacon	Unknown	Yes	24 Beav 186	England and Wales	Cited for the principle that the rights of a surety depend rather on principles of equity than upon the actual contract.
Craythorne v Swinburne	Unknown	Yes	14 Vesey 164	England and Wales	Cited for the principle that the rights of a surety depend rather on principles of equity than upon the actual contract.
McHugh v Union Bank of Canada	Privy Council	Yes	[1913] AC 299	Canada	Cited for the mortgagee's duty to behave as a reasonable man would in the realisation of his own property, so that the mortgagor may receive credit for the fair value of the property sold.
Cuckmere Brick Co v Mutual Finance	Court of Appeal	Yes	[1971] Ch 949	England and Wales	Cited as the beacon for all concerned regarding mortgagee's power of sale, stating that the mortgagee must act in good faith and take reasonable care to obtain the true market value of the mortgaged property.
Cuckmere Brick Co v Mutual Finance	Court of Appeal	Yes	[1971] 2 All ER 633	England and Wales	Cited as the beacon for all concerned regarding mortgagee's power of sale, stating that the mortgagee must act in good faith and take reasonable care to obtain the true market value of the mortgaged property.
Barclays Bank v Thienel	Unknown	Yes	[1978] 122 Sol Jo 472	England and Wales	Cited to show the previous understanding that the mortgagee did not owe duties to a surety who did not provide any material security to the mortgagee.
Standard Chartered Bank v Walker	Unknown	Yes	[1982] 3 All ER 938	England and Wales	Cited for the principle that the mortgagee owed the duty not only to the mortgagor but to the surety as well.
Standard Chartered Bank v Walker	Unknown	Yes	[1982] 1 WLR 1410	England and Wales	Cited for the principle that the mortgagee owed the duty not only to the mortgagor but to the surety as well.
American Express International Banking Corp v Hurley	Unknown	Yes	[1985] 3 All ER 564	England and Wales	Cited for the principle that the mortgagee owed the duty not only to the mortgagor but to the surety as well.
Donoghue v Stevenson	House of Lords	Yes	[1932] AC 562	United Kingdom	Cited in relation to the common law concept of a general duty of care.
Home Office v Dorset Yacht Co Ltd	House of Lords	Yes	[1970] AC 1004	United Kingdom	Cited in relation to the common law concept of a general duty of care.
Anns v Merton London Borough Council	House of Lords	Yes	[1978] AC 728	United Kingdom	Cited in relation to the common law concept of a general duty of care.
Tan Soon Gin George v China and South Sea Bank	Hong Kong Court of Appeal	Yes	[1988] 2 HKLR 202	Hong Kong	Cited for the application of the common law negligence theory.
First City Corp v Downsview Nominees	Unknown	Yes	[1990] 3 NZLR 265	New Zealand	Cited for the acceptance of Lord Denning's theory and acted on it.
China and South Sea Bank v Tan Soon Gin George	Privy Council	Yes	[1990] 1 AC 536	Hong Kong	Cited for the rejection of the suggestion that the modern law of negligence and its cognate duty of care applied to a mortgagee's power of sale.
China and South Sea Bank v Tan Soon Gin George	Privy Council	Yes	[1989] 3 All ER 839	Hong Kong	Cited for the rejection of the suggestion that the modern law of negligence and its cognate duty of care applied to a mortgagee's power of sale.
Downsview Nominees v First City Corp	Privy Council	Yes	[1993] AC 295	New Zealand	Cited for reiterating the position that the general duty of care said to be owed by a mortgagee to subsequent encumbrancers and the mortgagor in negligence is inconsistent with the right of the mortgagee and the duties which the courts applying equitable principles have imposed on the mortgagee.
Downsview Nominees v First City Corp	Privy Council	Yes	[1993] 3 All ER 626	New Zealand	Cited for reiterating the position that the general duty of care said to be owed by a mortgagee to subsequent encumbrancers and the mortgagor in negligence is inconsistent with the right of the mortgagee and the duties which the courts applying equitable principles have imposed on the mortgagee.
Parker-Tweedale v Dunbar Bank	Unknown	Yes	[1991] Ch 12	England and Wales	Cited for stating that it is both unnecessary and confusing for the duties owed by a mortgagee to the mortgagor and the surety, if there is one, to be expressed in terms of the tort of negligence.
Parker-Tweedale v Dunbar Bank	Unknown	Yes	[1990] 2 All ER 577	England and Wales	Cited for stating that it is both unnecessary and confusing for the duties owed by a mortgagee to the mortgagor and the surety, if there is one, to be expressed in terms of the tort of negligence.
AIB Finance v Debtors	Unknown	Yes	[1998] 2 All ER 929	England and Wales	Cited for reiterating the position in Cuckmere Brick Co Ltd v Mutual Finance Ltd and Parker-Tweedale v Dunbar Bank plc (No 1) that a mortgagee owes the mortgagor a duty to take reasonable care to obtain a proper price for the mortgaged property at that time and that the duty is not tortious in nature but one recognised by equity as arising out of the particular relationship between mortgagee and mortgagor.
Quennell v Maltby	Court of Appeal	Yes	[1979] 1 All ER 568	England and Wales	Cited for the principle that possession of the mortgaged property must not be sought with a hidden agenda, in disregard of the harm that it might cause to someone with a vested interest in it.
Quennell v Maltby	Court of Appeal	Yes	[1979] 1 WLR 318	England and Wales	Cited for the principle that possession of the mortgaged property must not be sought with a hidden agenda, in disregard of the harm that it might cause to someone with a vested interest in it.
Palk v Mortgage Services Funding	Court of Appeal	Yes	[1993] Ch 330	England and Wales	Cited for the principle that in appropriate circumstances, the court may order sale against the wishes of the mortgagee.
Palk v Mortgage Services Funding	Court of Appeal	Yes	[1993] 2 All ER 481	England and Wales	Cited for the principle that in appropriate circumstances, the court may order sale against the wishes of the mortgagee.
How Seen Ghee v Development Bank of Singapore	Court of Appeal	Yes	[1994] 1 SLR 526	Singapore	Cited for the principle that the mortgagor should be given a reasonable opportunity to market the property.
Hong Leong Finance v Tan Gin Huay	Unknown	Yes	[1999] 2 SLR 153	Singapore	Cited for the principle that the court has no power to decline to make an order for possession when the mortgagor is in clear default and order instalments of the accrued debt.
Re EWA, A Debtor	Court of Appeal	Yes	[1901] 2 KB 642	England and Wales	Cited for the principle that if a single judgment was obtained on a joint and several guarantee, and a compromise settlement by accord and satisfaction was reached with one of the guarantors, all guarantors would ipso facto be discharged.
European Asian Bank v Chia Ngee Thuang	Unknown	Yes	[1995] 3 SLR 171	Singapore	Cited for the general rule that in the absence of any contractual stipulations to the contrary, the release of one joint surety has the effect of releasing all the other joint sureties.
Re Davison, ex p Chandler	Unknown	Yes	[1884] 13 QBD 50	England and Wales	Cited for the principle of law that where a joint judgment is obtained in respect of a joint and several liability, the several liability is not extinguished.
King v Hoare	Unknown	Yes	13 M & W 494	England and Wales	Cited as the leading case, and there it was held that a judgment without satisfaction recovered against one of two joint debtors was a bar to an action against the other, but it was pointed out both at the bar and in the judgment that the law is otherwise when the obligation is joint and several.
Drake v Mitchell	Unknown	Yes	3 East 251	England and Wales	Cited for the principle that one of three joint covenantors had given a bill of exchange for the debt secured by the covenant, on which bill judgment was recovered, and it was held that this judgment was no bar to an action of covenant against the three.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Conveyancing and Law of Property Act (Cap 61, 1994 Ed) s 30	Singapore
Civil Law Act (Cap 43, 1999 Ed) s 17	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Guarantee
Mortgage
Power of Sale
Joint and Several Liability
Settlement
Default Judgment
Mortgagee's Duty of Care
Guarantor
Credit Facilities
Auction Sale

15.2 Keywords

Guarantee
Mortgage
Power of Sale
Joint and Several Liability
Settlement
Default Judgment

16. Subjects

Civil Procedure
Contract Law
Banking
Mortgages
Guarantees

17. Areas of Law

Civil Procedure
Contract Law
Guarantee
Mortgage Law