Roberto Building Material v Oversea-Chinese Banking Corp: Mortgagee's Duty of Good Faith & Receiver's Duty of Care

In Roberto Building Material Pte Ltd & Others v Oversea-Chinese Banking Corporation Limited & Another, the Singapore High Court dismissed an action brought by Roberto Building Material Pte Ltd, a corporate borrower and mortgagor, along with its shareholders who acted as guarantors, against Oversea-Chinese Banking Corporation Limited (OCBC) and Mr. Don Ho, the receiver and manager appointed by OCBC. The plaintiffs alleged that OCBC breached its equitable duty to act in good faith and that Mr. Ho breached his equitable duty of care when exercising the power of sale. The court found no breach of duty by either defendant and dismissed the action.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Action dismissed against both defendants.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case regarding a mortgagee's duty of good faith in appointing a receiver and manager, and the receiver's duty of care.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Roberto Building Material Pte LtdPlaintiffCorporationClaim DismissedLostN Sreenivasan, Joseph Liow, Cassandra Yak
Tan Heng YongPlaintiffIndividualClaim DismissedLostN Sreenivasan, Joseph Liow, Cassandra Yak
Oversea-Chinese Banking Corporation LimitedDefendantCorporationJudgment for DefendantWonV K Rajah SC, Lee Eng Beng, Chio Yuen-Lyn, Lynette Koh
Don Ho Mun-TukeDefendantIndividualJudgment for DefendantWonMicheal Hwang SC, Edwin Tong, Prakash Pillai, Loong Tse Chuan

3. Judges

Judge NameTitleDelivered Judgment
Lai Kew ChaiJudgeYes

4. Counsels

Counsel NameOrganization
N SreenivasanStraits Law Practice LLC
Joseph LiowStraits Law Practice LLC
Cassandra YakStraits Law Practice LLC
V K Rajah SCRajah & Tann
Lee Eng BengRajah & Tann
Chio Yuen-LynRajah & Tann
Lynette KohRajah & Tann
Micheal Hwang SCAllen & Gledhill
Edwin TongAllen & Gledhill
Prakash PillaiAllen & Gledhill
Loong Tse ChuanAllen & Gledhill

4. Facts

  1. Roberto Building Material Pte Ltd's primary business was supplying building materials.
  2. Four Seas Bank Ltd granted banking facilities of $31 million to the company in November 1995.
  3. The banking facilities were personally guaranteed by the Mr Tan Heng Yong, 3rd and 4th defendants.
  4. Four Seas Bank Ltd merged with OCBC on 12 May 1998.
  5. In May 1998, the sums owed by the company stood at $33,100,000.00.
  6. OCBC required the liabilities to be reduced by $3 million by way of a monthly reduction of $600,000.00.
  7. The company failed to comply with the Price Waterhouse recommendations.
  8. The company failed to procure alternative refinancing by 31 December 1999.
  9. OCBC received a letter from IRAS that there was outstanding property tax.
  10. OCBC received a letter from Jurong Town Corporation that there was arrears of rent.
  11. The company failed to pay the promised sums by 31 March 2000.
  12. OCBC decided to enforce its rights as mortgagee and appoint a receiver and manager on 22 April 2000.

5. Formal Citations

  1. Roberto Building Material Pte Ltd & Others v Oversea-Chinese Banking Corporation Limited & Another, OS 1889/2000, [2002] SGHC 291

6. Timeline

DateEvent
Four Seas Bank Ltd granted banking facilities of $31 million to the company.
Mr Tan Heng Yong, 3rd and 4th defendants provided a joint and several letter of guarantee.
Four Seas Bank Ltd merged with OCBC.
Sums owed by the company stood at $33,100,000.00.
Company reduced outstanding sums to about $31 million.
OCBC required liabilities to be reduced by $3 million via monthly reductions of $600,000.00.
Company requested monthly reductions start on this date, OCBC agreed.
Company appointed Price Waterhouse as its financial consultant.
OCBC met with representatives of Price Waterhouse.
OCBC informed the company that it required the company to execute a debenture.
Price Waterhouse's Financial Evaluation Report was issued.
OCBC internally decided on a strategy to restructure banking facilities.
Company executed a debenture in favor of OCBC.
OCBC and company discussed improving cash flows through stock reduction.
OCBC's credit strategy memorandum was dated.
Price Waterhouse advised OCBC that the company's stocks had increased.
OCBC was informed that the company would be purchasing another $3 million in stocks.
OCBC suspended the credit line of the company.
Mr. Tan Heng Yong and OCBC officers met to discuss restructuring.
OCBC granted the company till 30 September 1999 to provide evidence of refinancing.
Company failed to procure alternative refinancing.
Mr. Tan Heng Yong met with representatives from Price Waterhouse and OCBC to request an extension of time.
Company failed to provide any evidence of refinancing.
OCBC received a letter from IRAS regarding outstanding property tax.
OCBC received a letter from Jurong Town Corporation regarding arrears of rent.
Company informed OCBC that it was expecting $150,000 on or about 15 March 2000.
Company failed to pay the promised sums.
OCBC made demands against the plaintiffs for the outstanding sum of $32,921,485.06.
Ernst & Young informed OCBC that DTZ Debenham Yie Leung had been appointed to sell the mortgaged property.
Ernst & Young informed OCBC that DTZ found two prospective purchasers.
OCBC appointed Mr Don Ho Mun-Tuke as Receiver and Manager.
Mr. Francis Lee met with Mr. Don Ho and suggested withdrawing the appointment of the receiver and manager.
Internal e-mail from Mr. Gregory Pau to Ms. Goh Hooi Kim regarding scenario planning.
Plaintiffs offered $1 million to OCBC to terminate the receivership for 45 days.
Decision Date

7. Legal Issues

  1. Duty of Mortgagee to Mortgagor
    • Outcome: The court held that OCBC had acted in good faith and given the company reasonable time to repay the sums owed.
    • Category: Substantive
    • Sub-Issues:
      • Duty to act in good faith
      • Reasonable time to effect payment
    • Related Cases:
      • [1993] AC 295
      • [1991] BCLC 36
      • [1986] 1 WLR 201
      • [1999] 3 WLR 922
  2. Duty of Receiver and Manager
    • Outcome: The court found that Mr. Don Ho had acted competently and did not fall short of the standards and duty of care required.
    • Category: Substantive
    • Sub-Issues:
      • Equitable duty of care
      • Qualification of receiver and manager
      • Competence of receiver and manager
    • Related Cases:
      • [2000] Ch 86

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Equitable Duty of Good Faith
  • Breach of Equitable Duty of Care

10. Practice Areas

  • Commercial Litigation
  • Banking Litigation
  • Insolvency Litigation

11. Industries

  • Banking
  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Medforth v BlakeChancery DivisionYes[2000] Ch 86England and WalesCited for the principle that a receiver is entitled to have regard to the interests of the debenture holder and can sacrifice the interests of the mortgagee in pursuit of that end, provided he acts in good faith.
Downsview Nominees Ltd v First City Corporation LtdPrivy CouncilYes[1993] AC 295United KingdomCited for the basic principles of mortgage enforcement and the protection of borrowers, including the duty of good faith in exercising powers conferred on a mortgagee.
Shamji v Johnson Matthey Bankers LtdNot AvailableNo[1991] BCLC 36England and WalesCited to distinguish between the duty of care when appointing a receiver versus exercising the power to sell property under mortgage, emphasizing the inherent conflict of interest in the former.
Re Porters Oils LtdNot AvailableYes[1986] 1 WLR 201England and WalesCited for the principle that a debenture holder is under no duty to refrain from exercising his rights merely because it may cause loss to the company or its unsecured creditors.
Medforth v BlakeNot AvailableYes[1999] 3 WLR 922England and WalesCited for the concept of good faith, emphasizing that it requires some dishonesty or improper motive, some element of bad faith, to be established.
Mister Broadloom Corporation (1968) Ltd v Bank of MontrealNot AvailableNo(1979) 25 OR (2d) 198CanadaCited for the factors to consider when determining what constitutes a reasonable time for a demand by a debenture holder, but ultimately distinguished.
Ronald Elwyn Lister Ltd v Dunlop Canada LtdSupreme Court of CanadaNo(1982) 135 DLR (3d) 1CanadaCited as approving Mister Broadloom Corporation (1968) Ltd v Bank of Montreal regarding reasonable time for demand, but ultimately distinguished.
Moase Produce Ltd v Royal Bank of CanadaNot AvailableNo(1986) 50 Nfld & PEIR 168CanadaCited by the plaintiffs, but the court found the facts to be entirely exceptional and not applicable to the present case.
Cripps (Pharmacenticals) Ltd v WickendenNot AvailableYes[1973] 1 WLR 944England and WalesCited for the principle that a debenture-holder in respect of an ‘on demand’ facility need not give the company a reasonable time to pay before appointing a receiver.
Bank of Baroda v PanessarNot AvailableYes[1987] 1 Ch 335England and WalesCited for the principle that a debenture-holder in respect of an ‘on demand’ facility need not give the company a reasonable time to pay before appointing a receiver.
Kennedy v De TraffordNot AvailableYes[1897] AV 180Not AvailableCited for an explanation of a lack of good faith.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Mortgagee
  • Mortgagor
  • Receiver and Manager
  • Debenture
  • Good Faith
  • Equitable Duty of Care
  • Reasonable Time
  • Fixed and Floating Charge
  • Refinancing
  • Receivership

15.2 Keywords

  • mortgagee duty
  • receiver duty of care
  • good faith
  • banking
  • insolvency
  • Singapore
  • OCBC
  • Roberto Building Material

16. Subjects

  • Banking
  • Insolvency
  • Mortgages
  • Civil Procedure

17. Areas of Law

  • Banking Law
  • Insolvency Law
  • Mortgage Law
  • Equity