SINGAPORE – UOB has won an appeal against an Indonesian developer over losses and damages it suffered from disbursing about $182 million in inflated home loans, but its claim on the firm’s deceit was rejected.

The Appellate Division of the High Court found that Lippo Marina Collection (LMC), a unit of Indonesia’s Lippo Group, had used unlawful means in a conspiracy with real estate agents to sell properties to be financed by UOB. 

The conspiracy resulted in UOB losing a large amount of money after it financed more than 100 per cent of the purchase prices of high-end apartments.

The amount of damages LMC will have to pay UOB will be determined at a later stage.

The long legal battle began in 2014 and concluded in May this year. In a judgment released in June, High Court judge Aedit Abdullah had dismissed all of UOB’s claims against LMC, 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.

UOB had accused LMC of conspiring with Goh and Ho to obtain financing from the banks so that LMC could dispose of its 38 units at the Marina Collection in the face of difficult market conditions.

The 124-unit Marina Collection in Sentosa Cove 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 about $182 million in mortgages between December 2011 and September 2013 to purported purchasers of 38 units in the condominium developed and sold by LMC.

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

The courts had heard that LMC gave substantial “furniture rebates” of 22 per cent to 34 per cent that were used to offset cash payments required for the condo purchases.

The furniture rebates, which were not disclosed to UOB, inflated the prices of individual properties in Option to Purchase forms by the value of the rebates.

Besides concealing the furniture rebates, the defendants also concealed the true identities of the purchasers.

It was later revealed that 32 of the 38 purchasers were nominees or fronts for four investors based in Indonesia. Only six were the intended beneficial owners of the units.

The appellate court noted in its judgment released on Friday that the sheer magnitude of the furniture rebates suggested that they were not genuine rebates.

For example, a furniture rebate of $2.39 million was granted for each of the last three units sold, which amounted to around 52.6 per cent of the $4.54 million actual purchase price.

The purchase price stated in the Option to Purchase forms was $6.931 million. UOB granted $5 million in housing loans for each of the three units.

Banks can lend only up to 80 per cent of the purchase price (or current market valuation, whichever is lower) of a residential property.

The amounts that UOB disbursed in these loans were well within that cap based on the stated purchase price, but they exceeded the actual purchase price by almost half a million dollars.

That excess was paid to the buyer, so each of them gained a significant cash benefit from the purchase.

The appellate court said the stated purchase price was merely a device to obtain higher valuations and, in turn, higher loans than what would otherwise have been disbursed if the real price was reflected on the Option to Purchase forms.

It disagreed with the High Court judge that the furniture rebate plan could still work even if LMC had not agreed to conceal the furniture rebates from UOB.

“If the furniture rebates had been disclosed in the first place, the entire scheme would have unravelled,” said the appellate court.

It also noted that it was LMC that had deliberately stated the false price in the Option to Purchase forms.

“It was not just a question of apathy, lack of concern or care or sharp practice; it was much more than that. Lippo had armed the purchasers with the instrument to deceive UOB ,” said judges of the Appellate Division Belinda Ang, Woo Bih Li and Quentin Loh.

“Lippo does not appear to fully appreciate the gravity of its conduct. Not only did it deceive UOB, other appraisers and purchasers would also rely on the stated purchase price in the Option to Purchase to value other units in Marina Collection which are purchased or in comparable projects.

“The stated purchase price presented a distorted picture of a segment of the property market.”

UOB was represented by lawyer Eddee Ng of Tan Kok Quan Partnership. It said in a statement to The Straits Times: “We are pleased with the court’s decision.”

LMC, which was represented by Senior Counsel Siraj Omar of Drew & Napier, said in a statement that the firm is pleased with the appellate court’s decision to disallow UOB’s claim of deceit, but it is disappointed with the other aspect of the ruling.

“The parties had attempted to resolve the dispute through mediation but were unsuccessful. We respect the court’s decision and will take it on board when engaging in future endeavours,” LMC said.