Model case note

Ho Kon Kim v Lim Gek Betsy [2001] 4 SLR 340

Mdm Ho was the owner of a property at 124 Branksome Road and she granted an option to
purchase to Ms Lim with conditions. The sum of sale was 4.2 million with a condition to
construct a detached house on one of the three proposed sub-divided lots, of Betsy’s
choosing.

Mdm Ho chooses a plot, plot 3, which was roughly 1/3 of the entire plot size, and on 14
October 1996, Ms Lim exercised the power of sale. On November 1996,he mortgaged the
property to OCBC for a credit of 6.1 million. Wong, Mdm Ho’s solicitor, lodged a caveat for
Mdm Ho on 11 June 1998, as her attempts to contact OCBC to obtain permission was futile.

However, Ms Lim had already re-mortgaged the property to RHB Bank, whose credit was
directed to Ms Lim’s own company (Earling Builders). RHB had acknowledged and
recognized Betsy’s interest and had agreed to discharge Betsy’s unit free of payment.

Trial Judge’s Holding:

1) No action for breach of trust as there was any fiduciary relationship between Ms Lim
and Mdm Ho. The contract of sale, when constructed, shows that Betsy intended to
dispose the entire property to Ms Lim and thus no trust can be found, as Betsy also
had received good consideration for the land.

2) No constructive trust against RHB or WLAW. The actual knowledge on RHB’s part of
Ms Lim’s contractual obligation to build and convey a bungalow to Betsy, did not
amount to fraud. Thus, RHB’s title was still indefeasible.

3 Main issues on appeal:

1) Whether under the sale of agreement, Betsy held an equitable interest in the property
after she had sold and transferred it to Ms Lim?

2) If yes, did Ms Lim breach the trust in Betsy’s favour by discharging the OCBC
mortgage and re-mortgaging the property with RHB?
3) If yes, does RHB hold the mortgage subject to the equitable interest of Betsy?

Issue ONE:

The consideration sum of 4.2 million did not include the value of Betsy’s chosen plot of land. It
was roughly the price of 2/3 of the land (not inclusive of plot 3). The mortgage contract with
OCBC included a clause, which allowed Betsy to lodge a caveat, and provided for
unconditional discharge of Betsy’s unit without any payment.

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-This would lead to a conclusion that Ms Lim held the beneficial interest of Betsy in trust for
her.

Issue TWO:

-Ms Lim had merely switched the mortgages from OCBC to RHB, to obtain fresh finance.
However, her intentions were purely for her own purpose. She had used the property to
secure credit to be made to her own company (Earling Builder’s).

-It was implicit in the trust, that Ms Lim would use the property to secure credit for the carrying
out of the proposed development. Ms Lim had further hid the switch over of mortgages from
Betsy.

Thus, Ms Lim had committed a breach of trust in relation to Betsy’s equitable interest in the
property.

Issue THREE:

RHB had notice of Betsy’s interest in the property and was aware that one of the plots
was marked for Betsy, which was to be re-transferred back to her.

i. After, all Ms Leong (the solicitor for Ms Lim and OCBC) was acting for RHB too and
she must have conveyed this information to RHB

ii. In the evaluation of the security, RHB’s valued sum of 8 million did not include the
value of the Betsy’s lot.
iii. Clause 6(2) b of the regulation agreement provided for the unconditional discharge of
Betsy’s unit. Thus, showing that RHB acknowledged and recognized Betsy’s
interest in the land.
Remedies:

1) Can RHB’s repudiation of the agreement be equated to fraud as under the LTA?

Assets v Mere The term fraud in the Act means actual fraud, ie. dishonesty of some
Roihi sort, and not constructive or equitable fraud
Bahr v Nicolay ‘…Not mean that all species of equitable fraud stand outside the
statutory concept of fraud’, and in their view the statutory concept of
fraud means ‘actual fraud, personal dishonesty or moral turpitude’.

Their Honors held that fraud could arise both from dishonest
repudiation of a prior interest which the registered proprietor had
acknowledged or had agreed to recognize as the basis for
obtaining the title, as well as for fraudulent conduct which enabled
him to obtain the title by registration.

Conclusion: Repudiation by RHB does not amount to fraud, personal dishonesty or moral
turpitude. No facts point towards a dishonest repudiation of an unregistered interest.

2) Does Betsy have a claim in personam against RHB by imposing a constructive trust?

The fact that RHB recognized and acknowledged Betsy’s equitable interest in the land and via
clause 6(2)(b),it shows that RHB had committed themselves to discharging the mortgage on
the plot of land without Betsy making any payment. This was a bargain RHB made with Ms
Lim which essentially mean that RHB recognized Betsy’s equitable interest in the land.

It would inequitable for RHB to back down from their bargain and repudiate their
equitable interest of Betsy’s property. Thus, it would hold that RHB took the mortgage of
the property subject to the constructive trust in favour of Betsy.

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Bebe’s criticism of Betsy [73]: Court could have decided that RHB was holding Mdm Ho’s
case: land on express trust or that RHB was guilty of equitable fraud
(minority holding in Bahr).Actual fraud could have been found as
the facts shows that RHB had induced Betsy to accept the
mortgage on the promise that they would release Mdm Ho’s plot
of land back to her without payment, thus brining the case within
s 46(2)(b) of the LTA and in line with Loke Yew.

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