Can a customer's unhappiness with the personal services prov ided by a bank or its employee raise a triable issue in the bank's cla ims against the customer for default on interest pay ments? This was one of the issues considered by the Singapore High Court in Australian and New Zealand Banking Group Ltd v Joseph Shihara Rukshan De Saram [2015) 1SLR 635, w hich is reported ly going on appeal to the Court of Ap peal.
Under two residential property term loan agreements dated 9 June 2010 ("Facility 1") and 12 October 2010 ("Facility 2") (collectively, "the Facility Agreements "), the pla intiff bank ("the Bank") granted loans to the defendant borrower ("the Customer"). Each Facility Agreement was secured by, inter alia, a mortgage of a different property, prov ided for different drawdown amounts and incorporated the Bank's standa rd terms and conditions. In particular, the Facility Agreements provided that:
- the Custome r could choose whether to drawdown the funds through the form of a single currency (Australian Dollar) or cross-cu rrency (Australian Dollar and Hong Kong Dollar) loan;
- the maximum sum must be drawn dow n in one tranche w ithin six months from the date of the relevant facility;
- the interest period applicable to the relevant loan fa cility would be either one month or three months subject to any variation by the Bank;
- the interest rate for each interest period was fixed at 1.25% per annum over the Bank's Cost of Funds1
- the Bank was entit led to rely on its own assessment of the value of the Customer's pledged security to determine the loan/security ratio;and
- the Bank was entit led to terminate each Facility Agreement and demand for immediate repayment of all monies owed by the Customer upon a "default" as defined in the relevant Facility Agreement
Subsequently, t h e Customer defau lted on interest pa ym ents due under th e Facility Agreemen ts and t h e Ba nk term inated th e Facility Agreements on 10 September 2012. About th ree mon th s later, th e Bank sued to recover moneys due and owing from t h e Customer. The Custome r countercl a im ed against t h e Bank for about S$14m based on com plaints as to t h e "cumu lative failures" of the Ba nk a nd its employee ("th e Counterclaim").
On 14 M arch 2014, t h e Assistant Registra r ("the AR") gran ted th e Ba nk's application for summary jud gm ent aga inst t h e Customer a nd ordered t h e Customer to pay the jud gment sums of HK$4,043,424.75, A$480,862.92 and US$1,350.00, togeth er wi t h contract ua l interest, defa u lt fees and legal costs on a full indemnity basis.
Summary of Decision
The High Court dismissed t he Custom er's appea l aga inst t he AR's decision and decl i ned to stay execution of the summa ry judgment i n t he Ban k's f avour pen ding tria l of the Countercl aim.
Th e H igh Court rejected all of the nin e t ria ble issues raised by t h e Customer i n defendin g th e Bank's application for summ ary judgment , as th ey were eith er wit h out merit or were not in th e natur e of a defence to th e Ba nk's claims.
For convenience , we will discuss th e Custom er's allegations aga inst th e Ban k in t hree bro ad categories: (a) Delays and Und ervaluation; ( b) Unilateral/Im prop er Conduct; a nd (c) Person a l Services.
Delays and Undervaluation
The Customer a lleged t h at t h e Ban k h ad delayed loan processi ng both before a n d after the conclus ion of Facility 1. Th e High Court, how ever, held that even if t here were delays in th e loan processing before Faci lity 1was concluded , the Customer had accepted the terms of Facility 1and was not excused from refusing to repay the loan borrowed under Facil ity 1.
As for the alleged f urthe r delays after Faci lity 1was concluded, w h ich apparen t ly caused the Customer to incu r a cash flow deficit that needed h is person al attention to resolve, the High Court h eld tha t it was not a defence to the Ban k's claims.
Th e H igh Court also rej ected t h e alleged und erval u ation of t h e property secu red under Fa cil ity 1 as "a bare a n d unfound ed assertion", given t h at t h e Customer had accepted the valuation by signin g Facility 1.
Th e Customer alleged that t h e Ban k h ad un ilatera lly:
- reduced t he stamp duty for th e prop erty secured unde r Facility 2, whi ch resulted in a lower loa n amoun t th at could not m eet his "t ransactiona l a rrangem ents";
- inflated t he Cost of Funds for bot h loa ns, thereby overcharging him on t h e int erest payments; and
- increased the interest rate pa yable, for both loans, f rom 1% per an num over th e Cost of Funds to 1.25% per annum over th e Cost of Funds.
Th e H igh Court held non e of t h e t hree allegations raised t r ia bl e issues because :
- t h e Ba nk was contractua lly entit led to ded uct stam p duty f rom th e loan am ount and t h e Cu stomer had add u ced no eviden ce of h is a lleged "transaction al arrangem en ts";
- t h e Ba nk h ad compu ted the Cost of Funds in accord an ce wit h th e Facility Agreem ents a nd t h e Custom er did n ot object wh en m aki ng previou s interest p aym ents or raise any issue of ma n ifest error, impropr iety or f rau d vis-a-v is t h e two con clusive certificates issu ed by t h e Ba nk;and
- t h e Ba n k had informed t h e Customer, befo re t h e Facility Ag reem ents were signed, that the applicable interest rate was 1.25%, wh ich the Customer had acknow ledged and was deem ed to have accepted particu larly i n view of h is p revious pa yment of interest w ithout obj ections.
The Custome r a l so alleged tha t the Ban k ha d failed to admin ister the cross cu r rency l oan p roperl y for Facil ity 1, by refusi ng h is request to convert the amount dra w n dow n by the Customer i n Hong Kong d olla rs to Aust ralian dolla rs. Th e H igh Cou rt, however, h eld t h at the Ban k was entit led to reject t h e Customer's request based on t h e ter ms of Fa cility 1.
The Cu stom er made a numb er of allegations arising from h is dissatisfaction with th e pe rson al services provided by t h e Ba nk and its relation ship m a n ager ("th e RM "). Th e High Cou rt found t h at t h e Cu stom er's compl ain ts agai nst t h e Ba nk's person a l serv ices, inclu din g its cred it card an d Intern et ba nking serv ices, were tota lly unrelated to th e Fac ility Agreem ents an d did n ot con stitute a defen ce to t h e Ba n k's claim s. Th e rem ain i ng a llegations a rose f rom th e "unha ppy ba nk ing relationshi p" betw een t h e Cu stomer and the R M.
First l y, on 5 June 2012, th e RM h ad sen t a text message to the Customer that purported to term inate the Facility Agreem ents, as th e Customer had failed to pay i nterest due on 12 Apri l 2012. The Custome r alleged t hat such pu rported term i nation w as wrongf ul as it wa s p remature, as the RM had i n f ormed h im on 5 June 2012 that the Bank would only term i nate t he Faci lity Agreemen ts upon 60 days from the due date.
Th e Hig h Cou rt, however, h el d that the Custome r's cla i m was i n fact a com p la int against th e con duct of th e RM , and not a legal claim for w rongful term ination. Th is was because t h e Ba nk was cont ractua lly entitled to term inate t h e Facility Agreem ents on 5 J u n e 2012 a n d h ad pr eserved its righ t to do so by issu in g an "Event of Defa ul t" n otice to th e Custom er on 28 M ay 2012 . M oreov er, th e R M 's refer ence to th e 60-day period was "n ot inten ded to be an un equivocal suspen sion of th e Ba nk's st r ict legal righ ts". In any case, t h e Ban k clarified with the Custom er on 7 Jun e 2012 t h at t h e Facility Ag reemen ts h ad not been term in ated, which th e Cu stom er h ad acknowl edged .
In addition, th e H igh Court found that t h ere was no basis for th e Custom er's alleged "bu siness d isru ptio ns" caused by t h e Ban k's purpo rted term i n ation on 5 Jun e 2012, as the Cu stom er had failed to particu l arise his losses in the pl eadings.
Secondly, the Customer made fou r compla ints regarding the qual ity of the RM's services . Two of the complaints, which concerned the RM's slow turna round in executing instructions and inadequate provision of investment advice,did not relate to the Facility Agreements and hence could not be defences to the Bank's claims.
The other two complaints were found to be baseless: (a) w hether the RM had provided incorrect account information to the Customer on making payment towards the facility was irrelevant as the Customer had admitted that he was already late in making payment at the material time; and (b) the RM's sending of payment reminders to the w rong mailing address was the Customer's fault as he did not inform the Bank of his correct mailing address as required under the contract .
The High Court's decision rested on its view that the triable issues identified by the Custome r were "equivoca l, lacking in precision, ill-founded and fanciful" and that the Customer "resorted to bare assertions of the Bank's negligence and various breac hes of the Facility Agreements without specifying the clauses that were breac hed".