Inflated condo loans: UOB loses lawsuit against developer Lippo Marina Collection

The case involved the 124-unit Marina Collection condominium, which was launched for sale in 2007. ST PHOTO: CHONG JUN LIANG

SINGAPORE – UOB has lost the legal battle against Indonesian developer Lippo Marina Collection (LMC) in its bid to recover the losses and damages it suffered from disbursing about $182 million in inflated home loans.

High Court judge Aedit Abdullah on Monday (June 28) dismissed all claims against LMC, a subsidiary of Indonesia’s Lippo Group, although the bank succeeded in its allegations of misrepresentations against the second and third defendants – property agents Goh Buck Lim, also known as Rick, and Aurellia Ho.

In his brief remarks, Justice Aedit noted that the claim of deceit was made out against the two property agents, who did not put up a defence.

But their liabilities do not make a substantial difference to the outcome, he said.

He added that the evidence from UOB failed to prove that the three defendants were involved in a conspiracy to cause harm to the bank by unlawful means.

In the legal tussle filed in 2014 which was wrapped up last month, UOB alleged that the three defendants had been involved in a conspiracy that saw LMC giving substantial “furniture rebates” of between 22 per cent and 34 per cent.

These rebates were used to offset cash payments required from purported purchasers of 38 units in the Marina Collection – a Sentosa Cove condominium developed and sold by LMC.

The furniture rebates, which were not disclosed to UOB, inflated the price of individual properties in “option to purchase” forms by the amounts of the furniture rebate.

This, UOB claimed, led the bank to finance the units in excess of the purchase prices and extend loans beyond limits permitted by the Monetary Authority of Singapore.

For instance, a unit with a stated purchase price of $5.3 million was actually transacted with a furniture rebate of about $1.6 million. The actual purchase price would be $3.7 million.

UOB, represented by lawyer Eddee Ng of Tan Kok Quan Partnership, also said the defendants had deliberately concealed the identities of 32 of the buyers.

The bank said they were acting as fronts for Indonesian investors and did not have the means to finance the loans.

Arguing for LMC, Senior Counsel Siraj Omar of Drew & Napier said there was “nothing improper” in giving furniture rebates, which he added is a common marketing tool used by many developers.

The obligation to disclose the rebates, he said, was on the party seeking financing – the purchasers of the property.

In his closing submissions, Mr Siraj said UOB “was the victim of its poor internal system of checks” that allowed it to be manipulated by Mr Goh and Ms Ho, and Ms Ann Ong, who was a UOB staff member handling the loan applications.

“Unfortunately, the risk of default came true in this case at a time when a dampened property market meant that UOB could not recover the amounts owing on the loans by simply enforcing the mortgage and selling the properties,” added Mr Siraj.

The 124-unit Marina Collection was launched for sale in late 2007, but only 42 units were sold by March 10, 2011, after a series of cooling measures were introduced.

UOB disbursed more than $181 million in mortgages to purported purchasers of 38 units between December 2011 and September 2013.

By April 2015, all 38 buyers had defaulted on their loans.

Justice Aedit said the evidence did not prove that LMC or its officers had suggested or kept the existence of the furniture rebates from the bank.

Even if there was such an agreement to conceal the furniture rebates, it does not mean there was an agreement to commit unlawful acts against the bank.

“There has to be something more, tying the alleged agreement to a plan employing the use of unlawful means,” the judge said.

“Suppressing or hiding information about the furniture rebates does not involve such a link since there was no duty to disclose.

“I am also doubtful that the conspiracy claim would be made out on the basis that the bank’s loan was made on something other than what was the ‘true price’.

“There is no true price for real property; these are not marked to market as are securities, nor is there any market that can indicate the true market price.”

He added that the price expressed on the loans were within what would have been “accepted as reasonable valuations”.

“The behaviour of the first defendant (LMC) could just as easily be explained as a willingness to go along with the purchase arrangements, without caring how the plaintiff (UOB) was affected.

“While that may be sharp practice perhaps, it would not on current law lead to tortious liability.”

UOB will not enforce any judgment obtained against Mr Goh and Ms Ho as it had made a deal with the property agents for Mr Goh’s “truthful testimony” in court.

The bank will be appealing against the High Court’s decision.

“Source: [Inflated condo loans: UOB loses lawsuit against developer Lippo Marina Collection] © Singapore Press Holdings Limited. Permission required for reproduction”

Leave a Reply

Your email address will not be published. Required fields are marked *