1 Cur Adv Vult

2 The second respondents, Abacus Realty Pte Ltd (`Abacus`), were, at the material time, the owners of the property known as Nos 27, 29, 31 and 33 Birch Road, Singapore (`the property`). By an instrument of mortgage dated 7 November 1978, Abacus mortgaged the property to the appellants, Indian Overseas Bank (`the bank`), to secure the payment by the first respondents, Motorcycle Industries (1973) Pte Ltd (`Motorcycle Industries`), and certain individuals named therein of the sum of $4,629,770.84 with interest and costs under a judgment which the bank had obtained against Motorcycle Industries and the individuals. The property at that time was in the occupation of Abacus and/or Motorcycle Industries and was used as a motor showroom, sales office and store.

3 Subsequently, Motorcycle Industries and Abacus defaulted in their obligations under the mortgage and the bank in exercise of their power of sale put up the property for sale by public auction on or about 2 July 1981. With the agreement of Abacus, the property was offered for sale with vacant possession and on 3 July 1981, vacant possession of the property was given to the bank, and the bank thereby became mortgagees in possession.

4 At the auction, the bank entered into a contract to sell the property to one Cheng Lai Geok (`Cheng`) at the price $2.6m and pursuant to the terms of the contract Cheng issued a cheque for $650,000, being the deposit representing 25% of the purchase price. However, the cheque was dishonoured and Cheng repudiated the contract stating that `he decided not to proceed with the purchase`. The bank issued a writ against Cheng on 7 October 1981 claiming specific performance and damages in lieu of or in addition to specific performance. Summons for directions was taken out in that suit in September 1982. Although an order was made on 15 October 1982 - slightly over a year from the commencement of the action - the action was not set down for trial until after a lapse of some four and a half years.

5 Throughout this period and subsequently, the bank continued to remain in possession of the property and did not let out the property. Abacus had been asking the bank for accounts and making enquiry whether the property had been rented out or put to profitable use. No satisfactory reply from the bank was forthcoming. The bank continued to allow the property to remain vacant and, apart from the action instituted against Cheng, did not take any step to terminate the contract made with Cheng and resell the property until April 1991.

6 On 13 September 1989, the respondents took out an originating summons against the bank seeking accounts to be taken and other consequential reliefs. The originating summons was subsequently amended to include a claim for the sale of the property by public auction pursuant to s 30 of the Conveyancing and Law of Property Act (Cap 61).

7 On 10 April 1991, the bank accepted the repudiation by Cheng of the contract made with him and entered into a fresh contract to sell the property to two new purchasers, namely, Lim Chor Pian and Lim Choo Kuan (`the Lims`), for the sum of $2.33m and this sale was completed on 19 June 1991. The suit against Cheng eventually came on for hearing in June/July 1991 and judgment was given in favour of the bank. [See [1992] 2 SLR 38 .]

8 The originating summons against the bank came on for hearing subsequently before GP Selvam JC. At that time, as the property had been sold, the claim for the sale of the property was not pursued. The learned judicial commissioner at the conclusion of the hearing allowed the originating summons and made an order for necessary accounts to be taken and an order for payment by the bank to Abacus of such sums of rental income in respect of the property to be assessed by the registrar and that the rental should be credited to the computation of the amount of interest payable to the bank. [See [1992] 2 SLR 453 .] Against the decision of the learned judicial commissioner, this appeal has been brought.

9 Before us, several issues have been raised by Mr Peter for the bank in his detailed arguments but, in our opinion, they may be resolved into the following main issues:

10 We propose to consider, first, the second issue which is really crucial in this appeal.

11 The duty of a mortgagee in possession was stated by Turner LJ in Lord Kensington v Bouverie [1855] 7 De GM & G 134[] 44 ER 53 at p 157:

12 The question is whether the bank had been diligent in realizing the amount which was due.

13 The bank took possession of the property on 3 July 1981 and on or about that date sold the property to Cheng with vacant possession. Cheng on 8 July 1981 or thereabout repudiated the contract and the bank appeared to have waited for about three months before they took out a writ against Cheng claiming specific performance and damages in lieu of or in addition to specific performance. Though a period of three months is not unusually or inordinately long, it is difficult to understand why the bank could not have acted promptly and swiftly upon the dishonour of the cheque for $650,000 and repudiation of the contract by Cheng and have taken out the writ immediately within a matter of days against such defaulting purchaser. After the writ had been issued there followed a lapse of about one year before a summons for directions was taken out in respect of that action, and following that there was a further lapse of four and a half years before the action was set down for trial. Such procrastination was inexplicable and prima facie the bank had not prosecuted the action with due diligence. That, however, was not really what Abacus complained about. They complained that during all this time the bank while retaining possession of the property had done nothing to put the property to any beneficial use. Since Cheng had repudiated the contract, there was no reason why the bank could not have accepted the repudiation, sold the property and sought to recover from Cheng any loss they would or might have suffered. The bank could have acted thus soon after Cheng had repudiated the contract or they could even have done so later, in 1982 or 1983. There was no evidence that during this period the property market was not favourable for the sale of such property. It must have been possible and practicable for the bank to have sold the property during this period. Alternatively, if they decided to keep the contract alive so as to enable them to obtain an order of specific performance in the action against Cheng, they should have known that litigation would be protracted and could have taken steps to let out the property. Again, it must have been possible and practicable to let out the property for a short term of three to five years. They appeared to have made no effort in terms of either putting up the property for resale or letting it out. They did nothing until 10 April 1991 when they terminated the contract with Cheng and entered into a fresh contract with the Lims. Between the date of sale to Cheng and the date of resale, there was a lapse of nearly ten years, and throughout the whole of this period the bank while retaining possession of the property had not put the property to any beneficial use. In our opinion, it is indefensible that the bank had not exercised any due diligence either in selling the property or letting it out. We cannot but agree entirely with the following finding made by the learned judicial commissioner.

14 Having regard to what we have decided, the first issue which we have earlier set out can hardly arise. However, Mr Peter submitted at great length that the general or normal rule is that a mortgagor cannot bring an action against the mortgagee relating to the mortgage without expressly or by implication offering to redeem and that to this rule there are four exceptions and that the present case did not fall within any of the exceptions. We have no hesitation in rejecting this submission. The general rule and the exceptions to it have been stated in Fisher and Lightwood`s Law of Mortgages (10th Ed) at pp 592-593 as follows:

15 This rule does not apply where the object of the proceedings is to obtain the construction of the mortgage deed, or where the equity of redemption has become subject to trusts which provide for the payment of the mortgage debt and the mortgagee is made a party to an action relating to the trusts, and it does not apply where the mortgagor`s claim is for sale and not redemption, or to restrain the mortgagee from an improper sale of the mortgaged property.

16 We accept that this is an established rule, but it is not of universal application and has been held inapplicable in various situations, and the exceptions enumerated in the above passage are by no means exhaustive. In Jefferys v Dickson, [1866] 1 Ch App 183 the mortgagor conveyed all his mortgaged property to the trustees upon trusts to pay certain annuities and the interest on the mortgages, and to accumulate the surplus rents and apply them in payment of principal, and subject to those trusts to hold the property for the mortgagors. The plaintiff, who was a subsequent encumbrancer, initiated proceedings against all the parties, seeking accounts to be taken under the deed creating the trusts. It was held that the general rule had no application to that case; that was the case that created one of the exceptions to the rule. Lord Cranworth LC, explaining the rationale for the rule said, at pp 188-189:

17 Kekewich J in Re Nobbs [1896] 2 Ch 830 at p 833 explained the rationale for the rule thus:

18 The learned judge there also did not apply the general rule as the matter before him was one involving construction of the mortgage deed. That case created another exception to the general rule.

19 It has been held that such a rule has no application where the mortgagor complains that the mortgagee is acting improperly: see Murad v National Provincial Bank Ltd. [1966] 198 The Estates Gazett 117 In that case, the bank which was a mortgagee applied to strike out the claim of the plaintiff, the mortgagor, as frivolous and vexatious on the ground that the mortgagor was suing the mortgagee without offering to redeem the mortgage. The application was refused by Pennycuick J. The relevant part of his judgment was reported as follows, at p 119:

20 On the face of it, it would be very strange if the principle did apply to such a case. A single example would illustrate this. Suppose there was a property worth o10,000 in mortgage to secure o8,000, and suppose that the mortgagee threatened to sell that property to his own wife at a price of o1,000. Was it really the law that in such a case the mortgagor could not apply to the court to restrain the sale without offering to redeem the mortgage and, indeed, bringing into court the whole sum of o8,000? He (his Lordship) was not concerned to decide this point, but if that was the law, it seemed to him to be something of a travesty of justice. No judicial authority had been cited in which it had been held one way or the other whether the principle on which Mr Browne relied applied in the circumstance now under consideration, namely, where the mortgagor was seeking to restrain what he contended was an improper exercise of the mortgagee`s power of sale.

21 A fortiori, this rule can have no application where, as in this case, the mortgagee has been shown to have committed a breach of duty. In the circumstances of this case, it is unarguable that Abacus were entitled to bring this action against the bank seeking, inter alia, an order for accounts to be taken.

22 We now turn to the third issue. Motorcycle Industries were not a mortgagor. The mortgage was a third party mortgage, ie a mortgage by Abacus, the owners of the property, to secure the liability of Motorcycle Industries and certain individuals named therein, the principal debtors. All of them were joined as parties to the instrument of mortgage and under the terms thereof, the obligations of Abacus and Motorcycle Industries (and the individuals) are joint and several. If the bank had not been in breach of duty they would have realized at least a substantial part of the moneys secured by the mortgage and such early realization would have resulted in a reduction of their liability to the bank. Surely even as a judgment debtor, Motorcycle Industries are entitled, in the circumstances, to an account as to the extent of their liability to the bank.

23 In any case, the order as to the necessary accounts to be taken was made in favour of the appropriate parties. The order in so far as material is as follows:

24 We see no merit in the complaint by the bank of this order. In our judgment, the order is correct.

25 Lastly, the appellant raised an argument that Abacus`s claim for an account has been time-barred. We are unable to accept this argument. The remedy sought is the taking of accounts to ascertain the final amount. In the absence of a settled account there is a continuous cause of action until the bank as mortgagees ceased to be in possession. At the risk of repetition, we quote the following passage from 32 Halsbury`s Laws of England (4th Ed) at p 455 (which was quoted by the learned judicial commissioner):

26 In the result, this appeal is dismissed with costs. There will be the usual consequential order for payment to the respondents to account of their costs of the amount deposited in court as security.

27 Outcome: