Ngan Siong Hing v RHB Bank Bhd

Facts This is an appeal case between a partner of a legal firm (the Appellant) and a bank (the Respondent). The Appellant has appealed against the trial judge decision in favour of the Respondent. The Respondent was the financier for the purchaser in a subsale transaction of two apartment units (the Properties). By the way of letter of instruction or retainer dated 18 October 2000 (the LOI), the Respondent has appointed and instructed the Appellant of Abbas & Ngan to prepare the loan security documents in respect of the facilities granted to the borrower. Upon receiving confirmation from the Appellant that their interest was adequately protected, the bank released the loan sum to the Respondent for their onward transmission to the vendor. However, when the borrower defaulted in repayment of the banks facilities, the bank then discovered that the borrower had a fictitious identity; that the vendor was never the beneficial owner of the properties; and that the solicitors who had witnessed the sale and purchase agreement and who was acting for the borrower was a bogus legal firm. The Respondent then commenced a legal proceeding against the Appellant for the losses and damages suffered by it as a result of the Appellants breach of the contractual obligation, which included, inter alia, failing to carry out the necessary searches on the alleged vendor, proprietor, developer and the borrower/purchaser and alternatively in the tort of negligence for the Appellants failure to discharge the duty of care owed by the Appellant to the Respondent. In this case, the appeal was allowed with cost. Comments In my opinion, such situation of this case is avoidable if each solicitors exercise their responsibilities upon the bank based on the followings:Responsibilities of the solicitors acting for the bank in loan transaction. Based on the experts witness for parties in this case, the searches and steps which necessary to be done by the solicitors acting for the bank for the sub-sale transaction, are as follows: Relevant searches on the vendor, developer, proprietor and second purchaser with OA or OR (bankruptcy and winding up searches) and CCM (when the parties concerned is a company) ; Land search on title; Check on validity of the developers license; To obtain custody of the original SPA pertaining to the property made between the proprietor, developer and the first original purchaser and verify all important particulars (whether the particulars provided are same with the search results or not); To obtain custody of all original security documents, if any pertaining to any loan taken by the vendor as the first purchaser to finance the property upon the full and complete redemption; To obtain redemption statement and undertaking letter from vendors financier for a full and complete redemption and reassignment of the property and undertaking letter from the vendors financier to refund the redemption sum it the redemption cannot be completed (if applicable); To obtain duly executed and stamped DRR (if applicable); To obtain original deed of title and discharge of charge document (if applicable);

To obtain original SPA between the vendor and second purchaser (for sub-sale); To obtain certain confirmation and undertaking from the proprietor/developer /vendor pertaining to the vendors ownership and undertaking for delivery of relevant transfer and deed of title upon the issuance of title; To obtain vendors undertaking to refund the loan sum in the event that the assignment/charge cannot be perfected or completed; To obtain undertaking for delivery of any pending document due to any reason; If any document is missing under any party safekeeping, always ask for a statutory declaration to declare on the missing document.

Prohibition against the solicitors acting for the bank in loan transaction. Solely rely on the information given by any party under the loan transaction Witness any document executed by any party without attending to him/her Advise bank to release the loan with insufficient documents Advise bank to release using the outdated searches Certify any document as true copy without referring to the original document