Roberto Building Material v Oversea-Chinese Banking Corp: Lender's Duty in Receivership

Roberto Building Material Pte Ltd and its guarantors appealed to the Court of Appeal of Singapore against Oversea-Chinese Banking Corporation (OCBC) and its appointed Receiver & Manager, Mr. Don Ho, for negligence. The appellants claimed OCBC breached its duty of care in appointing the receiver and refusing to revoke the appointment, and that Mr. Ho acted negligently in selling the mortgaged property and stocks. The Court of Appeal dismissed the appeal, finding no merit in the allegations and holding that OCBC and Mr. Ho did not breach their duties.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding lender's duty when appointing a receiver. The court dismissed the appeal, finding no breach of duty by the bank or receiver.

1.7 Decision Date

15 July 2003

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Roberto Building Material Pte Ltd	Appellant	Corporation	Appeal Dismissed	Lost	Kenneth Tan, Foo Jien Huei
Oversea-Chinese Banking Corporation	Respondent	Corporation	Appeal Dismissed	Won	V K Rajah, Lee Eng Beng, Chio Yuen Lyn
Don Ho	Respondent	Individual	Appeal Dismissed	Won	Michael Hwang, Edwin Tong
Tan	Appellant	Individual	Appeal Dismissed	Lost	Kenneth Tan, Foo Jien Huei

3. Judges

Judge Name	Title	Delivered Judgment
Chao Hick Tin	Justice of Appeal	Yes
Judith Prakash	Judge	No
Tan Lee Meng	Judge	No

4. Counsels

Counsel Name	Organization
Kenneth Tan	Kenneth Tan Partnership
Foo Jien Huei	Kenneth Tan Partnership
V K Rajah	Rajah & Tann
Lee Eng Beng	Rajah & Tann
Chio Yuen Lyn	Rajah & Tann
Michael Hwang	Allen & Gledhill
Edwin Tong	Allen & Gledhill

4. Facts

Roberto was granted credit facilities of up to $31 million by OCBC.
The facilities were secured by a mortgage on Roberto's property and guarantees from its directors.
Roberto exceeded the agreed credit limit, reaching $33.1 million in May 1998.
OCBC requested Roberto to reduce the outstanding amount.
Price Waterhouse was appointed as Roberto’s financial consultants.
OCBC suspended the credit line on 1 July 1999.
OCBC demanded repayment of $32,921,485.06 on 3 April 2000.

5. Formal Citations

Roberto Building Material Pte Ltd and Others v Oversea-Chinese Banking Corp and Another (No 2), CA 100/2002, [2003] SGCA 30

6. Timeline

Date	Event
1996-03-13	Second to fourth appellants gave a joint and several letter of guarantee to the bank.
1998-05-01	Total facilities overdrawn reached $33.1 million, exceeding the agreed limit.
1999-03-01	Price Waterhouse initial report noted excessive stock levels and poor cash flow management.
1999-05-05	Fixed and floating charge executed.
1999-06-29	Roberto made new stock purchases.
1999-07-01	OCBC suspended the credit line.
1999-08-01	Roberto issued its audited financial statement for the year ended 31 March 1998.
2000-01-21	Roberto was warned action would be taken to sell the mortgaged property.
2000-03-31	Total outstanding sum stood at $32,921,485.06.
2000-04-03	OCBC demanded repayment of the total outstanding sum.
2000-04-17	Ernst and Young informed OCBC of potential buyers for the mortgaged property.
2000-04-22	OCBC appointed Mr. Ho as the Receiver.
2000-04-22	Roberto's solicitors faxed Chelsfield's offer to OCBC's solicitors.
2000-04-26	Mr. Tan met with OCBC’s representatives, asking for time and the revocation of the appointment of the Receiver.
2000-06-07	Chelsfield reduced its offer to $31 million.
2000-06-16	Meeting held between Chelsfield and Mr. Ho.
2000-07-18	Bandury Development Company Ltd paid an initial deposit of $495,000.
2000-07-01	Bandury changed its mind and wanted the sale to be a mortgagee sale.
2000-09-05	Bandury decided not to proceed with the purchase.
2000-12-04	Jones Lang La Salle erroneously stated that Roberto was in liquidation rather than in receivership.
2000-12-01	First auction was carried out.
2001-11-13	Mr Ho started to advertise for short-term tenants.
2002-03-01	Fourth auction was carried out.
2003-05-19	Appeal heard.
2003-07-16	Appeal dismissed.

7. Legal Issues

Duty of Care of Lender Appointing Receiver
- Outcome: The court held that the lender must act in good faith but has no general duty of reasonable care to consider the interests of the debtor.
- Category: Substantive
- Sub-Issues:
  - Good faith requirement
  - Reasonable time to repay debt
Validity of Receiver Appointment
- Outcome: The court held that the appointment of the receiver was valid, even if applying a wider sense of 'reasonable time', sufficient time had been accorded.
- Category: Substantive
- Sub-Issues:
  - Reasonable time for repayment
  - Mechanics of payment
Duty of Care of Receiver
- Outcome: The court held that the receiver's primary duty is to the debenture holders, and the receiver exercised reasonable care in attempting to sell the property.
- Category: Substantive
- Sub-Issues:
  - Obtaining proper price for property
  - Diligent pursuit of offers

8. Remedies Sought

Damages for Negligence
Injunction to Restrain Receiver

9. Cause of Actions

Negligence
Breach of Duty of Care

10. Practice Areas

Commercial Litigation
Banking Litigation
Insolvency Law

11. Industries

Construction
Building Materials

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Shamji v Johnson Matthey Bankers Ltd	Court of Appeal	Yes	[1991] BCLC 36	England	Cited for the principle that a lender is entitled to act in his own interest when appointing a receiver, and such appointment can only be challenged on grounds of bad faith.
Medforth v Blake	Chancery Division	Yes	[2000] CH 86	England	Cited for the principle that breach of a duty of good faith requires some dishonesty or improper motive, some element of bad faith, to be established.
Cripps (Pharmaceuticals) v Wickenden	High Court	No	[1973] 1 WLR 944	England	Cited to contrast the English law approach, where a debtor is only entitled to time necessary to implement the mechanics of payment, with the Canadian approach.
Ronald Elwyn Lister Ltd v Dunlop Canada Ltd	Supreme Court	No	(1982) 135 DLR (3d) 1	Canada	Cited to contrast the Canadian approach, where a debtor should be given a reasonable time to meet the demand, with the English law approach.
Mister Broadloom Corporation (1968) Ltd v Bank of Montreal	Ontario High Court of Justice	No	(1979) 25 OR (2d) 198	Canada	Cited for the factors enumerated by Linden J in assessing what length of time is reasonable in a particular fact situation.
Bank of Baroda v Panessar	High Court	No	[1987] 2 WLR 208	England	Cited as a case where the court declined to follow Ronald Elwyn Lister and preferred the 'mechanics of payment' test.
Sheppard & Cooper Ltd v TSB Bank plc	Court of Appeal	No	[1996] BCC 653	England	Cited as a case where the English Court of Appeal declined to express a view on the issue of 'reasonable time'.
Waldron v Royal Bank of Canada	Court of Appeal of British Columbia	No	[1991] 4 WWR 289	Canada	Cited for the observation that the duty to give reasonable time to the debtor was founded on public policy and unconscionability.
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd	High Court	Yes	(1984) 51 ALR 609	Australia	Cited for the principle that a debtor required to pay a debt payable on demand must be allowed a reasonable time to meet the demand.
Toms v Wilson	Queen's Bench	Yes	(1862) 4 B&S 442	England	Cited for the principle that the reasonable time was to enable the debtor to get the money from some convenient place.
Bond v Hong Kong Bank of Australia Ltd	New South Wales Court of Appeal	Yes	(1991) 25 NSWLR 286	Australia	Cited for the principle that under a contract of guarantee to pay 'on demand', the guarantor was only entitled to such time as was reasonably necessary for implementing whatever reasonable mechanics of payment needed to be employed to discharge the debt and no more.
ANZ Banking Group (New Zealand) Ltd v Gibson	High Court	Yes	(1981) 2 NZLR 513	New Zealand	Cited as a case that reverted to the restrictive test.
Lloyds Bank plc v Jeffrey Lampert & Anor	Court of Appeal	No	[1999] 3 Lloyd’s Rep 138	England	Cited for commenting on the Canadian cases and stating that Canadian law requires lenders to give 'at least a few days' to meet the demand.
In re B Johnson & Co (Builders) Ltd	Court of Appeal	Yes	[1955] CH 634	England	Cited for the principle that the primary duty of the Receiver is to the debenture holders and not to the company.
Downsview Nominees Ltd v First City Corporation	Privy Council	Yes	[1993] AC 295	New Zealand	Cited for the principle that a receiver exercising his power of sale also owes the same specific duties as the mortgagee.
Cuckmere Brick Co Ltd v Mutual Finance Ltd	Court of Appeal	Yes	[1971] CH 949	England	Cited for the proposition that, if the mortgagee decides to sell, he must take reasonable care to obtain a proper price.
Lee Nyet Khiong v Lee Nyet Yun Janet	Court of Appeal	Yes	[1997] 2 SLR 713	Singapore	Cited for the principle that the relevant question is not whether the price for which the property was sold was reasonable but whether the mortgagee had taken reasonable efforts to obtain the best price available.
Palk v Mortgage Services Funding plc	Court of Appeal	No	[1993] CH 330	England	Cited for the argument that failure to put the property to profitable use amounted to wilful neglect and a breach of duty of good faith.
Whonnock Industries v National Bank	British Columbia Court of Appeal	No	(1987) 42 DLR (4th) 1	Canada	Cited for the principle that where the amount owing is very large Canadian law now requires that lenders should give 'at least a few days' in which to meet the demand.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Debenture
Receiver
Mortgage
Guarantor
Receivership
Good Faith
Reasonable Time
Mechanics of Payment
Duty of Care
Mortgaged Property
Stocks
Letter of Credit

15.2 Keywords

Receivership
Duty of Care
Banking
Mortgage
Singapore
OCBC
Roberto Building Material
Negligence

16. Subjects

Banking
Finance
Credit and Security
Insolvency

17. Areas of Law

Credit and Security
Remedies
Receivership
Company Law
Banking Law