Court raps developer Lippo Marina Collection in appeal by UOB

A COURT of 3 judges had harsh words for Lippo Marina Collections (LMC) on Friday (Apr 29) as its long-running legal tussle with UOB over claims of inflated loans continued with an appeal of the High Court’s judgement which had ruled in the property developer’s favour.

After winning the case in June last year, LMC – a subsidiary of Indonesia’s Lippo Group – had refused to take up an offer by UOB to settle the case through mediation, giving the reason that the option is “not time and cost efficient”. 

The judges’ very first remarks at the appeal hearing took aim at this response, with Justice Belinda Ang saying that the response seemed “rather flippant”, while Justice Quentin Loh said he would have thought it is in Lippo’s interest to take up the mediation offer.

Aspects of the case “(seem) to me a huge circumvention of (2009 property) cooling measures”, Justice Loh said, stating that he “might spend a paragraph or two” in the grounds of decision addressing just that. “Pretty severe” consequences might follow, he warned.

“Misleading cooling measures is not something that a developer wants to do. Many countries in the world don’t like housing bubbles. It could lead to terrible consequences for the country and its economy,” he said.

“I would have thought that if I am sitting in control of housing development, I might start an investigation, and I might disqualify any director who sits in the development company,” he added, further noting that this could also implicate LMC’s parent company. Justice Loh had made the latter comments in relation to the Housing Developers' rules. He later acknowledged that LMC was not subject to these rules after LMC's lawyers clarified that the transactions in question were private treaty sales, but reaffirmed that the course of debate had raised certain concerns over the conduct of a reputable developer.

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Close to the end of the half-day hearing, the third judge, Justice Woo Bih Li, said whether or not UOB had done enough to overturn the High Court judgement, Lippo should be concerned about its conduct. “To me, so far, it may be more than sharp practice,” he said.

The lawsuit, first filed in November 2014, is over UOB’s claims that LMC had inflated mortgages on 38 units at Marina Collection, a luxury condo at the wealthy enclave of Sentosa Cove, to get higher housing loans.

To pull this off, the bank, which disbursed S$181 million for the properties between 2011 and September 2013, alleged that LMC had conspired with 2 property agents in December 2011 to offer “excessive” furniture rebates provided to buyers. 

For example, a unit with an actual purchase price of S$4.8 million was granted a furniture rebate of S$1.4 million, resulting in a stated purchase price of S$6.2 million. 

Unaware of the rebates, the bank financed S$4.9 million for the unit – a sum higher than the property’s actual price, far exceeding the 80 per cent loan-to-value limit permitted under the 2009 cooling measures. 

In pursuing the appeal, UOB’s lawyers from Tan Kok Quan Partnership stated in their written submissions that all 38 loans had in fact exceeded the actual prices – they ranged from 103 per cent to 118 per cent of the actual prices.

To support their claim that the furniture rebates were “not genuine”, the lawyers said that the rebates had steadily increased over time. The first unit was sold with a S$1.35 million rebate, while the last 3 units offered highest rebates to the tune of S$2.39 million.

They also pointed out that buyers have asked for a higher rather than lower stated purchase price to obtain a larger loan. As evidence, they cited an email detailing a buyer’s request for S$2,950 per square foot. It contains LMC general manager Woo Pui Lim’s reply to the request: “It is too high to justify and will draw unnecessary attention.”

By April 2015, all 38 purchasers had defaulted on the loans and remain in arrears to date.

Justice Loh voiced poor opinion of the furniture rebates on Friday, calling them “an absolute misnomer” and pointing out that “not a stick of furniture was borne”. 

Representing LMC at the hearing was Senior Counsel Siraj Omar of Drew & Napier, who argued that there was no duty for the developer to disclose the presence of the rebates to the bank, and so there was “no agreement to conceal” that fact.

Justice Woo took issue with this. “No duty to disclose assumes that the furniture rebate is a genuine device. It seems to me that this argument cannot fly because you won’t disclose your own fraudulent device,” he said.

Justice Loh chimed in. “That price you put as the price of the unit goes, in effect, out to the world, agree? It goes on so many websites. The URA site, property agents’ website… You didn’t mean to mislead, that’s one thing. I think that’s wrong.

“Look at the amount of that rebate… What kind of rebate is this? This is a discount on the price. That is not the real price. A discount on the real price is a different thing… You can’t say I don’t need to tell anybody this. It goes out to the world what the property price is.”

He followed up with another rebuke. “I am at awe, you know, actually, that a responsible property developer says I don’t need to tell anyone about this because after all it is a furniture rebate. This is not a furniture rebate. This is concealing the price of the sale."

Justice Loh, meanwhile, said in parting remarks that he hopes parties can reconsider mediation. "We will reserve judgement. But when the judgement is ready and (things) have not (reached settlement), then too bad. We will come out."

This article has been amended to clarify a quote from Justice Quentin Loh.