Jurisdiction - Australia
Singapore – Customer’s Dissatisfaction With Bank’s Personal Services No Defence To Bank’s Judgment Claim.

5 March, 2015


Can a customer’s unhappiness with the personal services provided by a bank or its employee raise a triable issue in the bank’s claims against the customer for default on interest payments? 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] 1 SLR 635, which is reportedly going on appeal to the Court of Appeal.

Under two residential property term loan agreements dated 9 June 2010 (“ Facility 1 ”) and 12 October 2010 (“ Facility ”) (collectively, “ the Facility Agreements ”), the plaintiff 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, provided for different drawdown amounts and incorporated the Bank’s standard terms and conditions. In particular, the Facility Agreements provided that:
  • the Customer could choose whether to drawdown the funds through the form of a single currency (Australian Dollar) or cross-currency (Australian Dollar and Hong Kong Dollar) loan;
  • the maximum sum must be drawn down in one tranche within six months from the date of the relevant facility;
  • the interest period applicable to the relevant loan facility 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 entitled 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 entitled 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, the Customer defaulted on interest payments due under the Facility Agreements and the Bank terminated the Facility Agreements on 10 September 2012. About three months later, the Bank sued to recover moneys due and owing from the Customer. The Customer counterclaimed against the Bank for about SGD 14m based on complaints as to the “cumulative failures” of the Bank and its employee (“the Counterclaim”).
On 14 March 2014, the Assistant Registrar (“the AR”) granted the Bank’s application for summary judgment against the Customer and ordered the Customer to pay the judgment sums of HKD 4,043,424.75, AUD 480,862.92 and USD 1,350.00, together with contractual interest, default fees and legal costs on a full indemnity basis.
Summary Of Decision
The High Court dismissed the Customer’s appeal against the AR’s decision and declined to stay execution of the summary judgment in the Bank’s favour pending trial of the Counterclaim.
The High Court rejected all of the nine triable issues raised by the Customer in defending the Bank’s application for summary judgment, as they were either without merit or were not in the nature of a defence to the Bank’s claims.
For convenience, we will discuss the Customer’s allegations against the Bank in three broad categories: (a) Delays and Undervaluation; (b) Unilateral/Improper Conduct; and (c) Personal Services.
Delays And Undervaluation
The Customer alleged that the Bank had delayed loan processing both before and after the conclusion of Facility 1. The High Court, however, held that even if there were delays in the loan processing before Facility 1 was concluded, the Customer had accepted the terms of Facility 1 and was not excused from refusing to repay the loan borrowed under Facility 1.
As for the alleged further delays after Facility 1 was concluded, which apparently caused the Customer to incur a cash flow deficit that needed his personal attention to resolve, the High Court held that it was not a defence to the Bank’s claims.
The High Court also rejected the alleged undervaluation of the property secured under Facility 1 as “a bare and unfounded assertion”, given that the Customer had accepted the valuation by signing Facility 1.
Unilateral/Improper Conduct
The Customer alleged that the Bank had unilaterally:
  • reduced the stamp duty for the property secured under Facility 2, which resulted in a lower loan amount that could not meet his “transactional arrangements”;
  • inflated the Cost of Funds for both loans, thereby overcharging him on the interest payments; and
  • increased the interest rate payable, for both loans, from 1% per annum over the Cost of Funds to 1.25% per annum over the Cost of Funds.
The High Court held none of the three allegations raised triable issues because:
  • the Bank was contractually entitled to deduct stamp duty from the loan amount and the Customer had adduced no evidence of his alleged “transactional arrangements”;
  • the Bank had computed the Cost of Funds in accordance with the Facility Agreements and the Customer did not object when making previous interest payments or raise any issue of manifest error, impropriety or fraud vis-à-vis the two conclusive certificates issued by the Bank; and
  • the Bank had informed the Customer, before the Facility Agreements were signed, that the applicable interest rate was 1.25%, which the Customer had acknowledged and was deemed to have accepted particularly in view of his previous payment of interest without objections.
The Customer also alleged that the Bank had failed to administer the cross currency loan properly for Facility 1, by refusing his request to convert the amount drawn down by the Customer in Hong Kong dollars to Australian dollars. The High Court, however, held that the Bank was entitled to reject the Customer’s request based on the terms of Facility 1.
Personal Services
The Customer made a number of allegations arising from his dissatisfaction with the personal services provided by the Bank and its relationship manager (“the RM”). The High Court found that the Customer’s complaints against the Bank’s personal services, including its credit card and Internet banking services, were totally unrelated to the Facility Agreements and did not constitute a defence to the Bank’s claims. The remaining allegations arose from the “unhappy banking relationship” between the Customer and the RM.
Firstly, on 5 June 2012, the RM had sent a text message to the Customer that purported to terminate the Facility Agreements, as the Customer had failed to pay interest due on 12 April 2012. The Customer alleged that such purported termination was wrongful as it was premature, as the RM had informed him on 5 June 2012 that the Bank would only terminate the Facility Agreements upon 60 days from the due date.
The High Court, however, held that the Customer’s claim was in fact a complaint against the conduct of the RM, and not a legal claim for wrongful termination. This was because the Bank was contractually entitled to terminate the Facility Agreements on 5 June 2012 and had preserved its right to do so by issuing an “Event of Default” notice to the Customer on 28 May 2012. Moreover, the RM’s reference to the 60-day period was “not intended to be an unequivocal suspension of the Bank’s strict legal rights”. In any case, the Bank clarified with the Customer on 7 June 2012 that the Facility Agreements had not been terminated, which the Customer had acknowledged.
In addition, the High Court found that there was no basis for the Customer’s alleged “business disruptions” caused by the Bank’s purported termination on 5 June 2012, as the Customer had failed to particularise his losses in the pleadings.
Secondly, the Customer made four complaints regarding the quality of the RM’s services. Two of the complaints, which concerned the RM’s slow turnaround 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) whether 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 wrong 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 Customer were “equivocal, lacking in precision, ill-founded and fanciful” and that the Customer “resorted to bare assertions of the Bank’s negligence and various breaches of the Facility Agreements without specifying the clauses that were breached”.
End Notes:
1 Defined in the Facility Agreements as “the cost the Bank would incur in raising deposits for an amount comparable to the loan or any part thereof and in the currency of the loan and for a term equivalent to the relevant interest period in the Singapore interbank market”

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