High Court judge upholds decision to award UOB S$17.7 million in Lippo Marina Collection lawsuit
The bank had claimed up to S$92 million in damages, but Justice Aidan Xu says it ‘failed to mitigate losses fully’
[SINGAPORE] A High Court judge has upheld his decision to award UOB S$17.7 million in damages, for losses the bank incurred as a result of disbursing inflated housing loans to buyers who bought units at Marina Collection.
On Wednesday (Nov 26), Justice Aidan Xu said the bank “failed to mitigate its losses fully” and that interest awarded was based on appropriate deductions.
The case began in 2014, when UOB filed a lawsuit alleging that Marina Collection’s developer, Lippo Marina Collection – a subsidiary of Indonesia’s Lippo Group – conspired with two property agents to offer “excessive” furniture rebates provided to buyers, inflating the sale prices of units at the luxury condominium in Sentosa Cove.
Marina Collection was launched in December 2007, but sold only 42 out of 124 units by March 2011. Lippo then entered into an agreement with the two property agents, Goh Buck Lim and Aurellia Ho, to offer furniture rebates to buyers referred by the agents.
For instance, a unit with a stated purchase price of S$6.1 million was sold with a furniture rebate of S$1.4 million. This put the actual purchase price at S$4.8 million.
As a result, UOB was misled into granting housing loans based on inflated prices.
The bank disbursed about S$182 million in home loans to purchasers of 38 units between December 2011 and July 2013, all of whom defaulted on their loans.
In 2022, the Appellate Division of the High Court found that Lippo Marina Collection had conspired with two property agents to mislead the bank.
Justice Xu’s decision to award UOB S$17.7 million was based on around S$53 million in claims comprising excess loans disbursed, the cost of funds, credit spread and costs of investigation.
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About S$37.2 million was deducted to account for repayments made and rental income UOB collected from renting out units it repossessed. The bank also received S$2.3 million in statutory interest.
Bank’s claim
UOB argued that damages should be calculated on the basis that it would not have approved or disbursed any housing loans if not for conspiracy between Lippo Marina Collection and the two property agents. The bank said its losses amounted to S$92 million.
In the alternative, if losses were to be quantified on the basis that UOB would still have granted the housing loans, the bank said it would have suffered losses around S$76.9 million.
However, Lippo Marina Collection objected to these calculations, saying that UOB had failed to take reasonable steps to mitigate its losses.
Justice Xu said: “I found that UOB had failed to mitigate from 2017, which was when it should have taken steps to sell off the units to reduce its losses.”
UOB defended its decision not to sell the units in 2014 when the case began, as property prices were falling and seller’s stamp duty was substantial. Instead, the units were rented out, to reduce the outstanding amounts.
Property prices were generally falling, with a minor increase in December 2018, before falling again in 2019.
While Justice Xu acknowledged that the bank did not have to sell these units in softening conditions, he said: “When the market turned in 2017, UOB should have started selling”.
The judge noted that UOB was “awaiting the outcome of the litigation” before selling the units.
The bank’s justification was that if units were sold cheaply, it would need to recover the shortfall between the outstanding loan amount and sale proceeds from the purchasers who might not be able to pay. However, if UOB’s claim were successful, it could receive compensation from Lippo Marina Collection and avoid these concerns.
However, Justice Xu said that it was “not reasonable” for UOB to wait for an outcome to the lawsuit. “The reasonable position to take would have been to minimise loss. Wait and see is not what the law requires,” he said.
As for interest claims, Justice Xu said interest should be awarded only for losses incurred, that is, on sums assessed after deduction of amounts which are determined by the court to be excluded from sums awarded to the claimant.
“Awarding loss of use (of funds) in respect of monies before proper deductions are made would be awarding an unjustified windfall,” he said.
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