Duty on purchaser to ensure the SPA was free from any legal infirmity.

Chang Yun Tai v HSBC bank. FC. 2011

Held: The respondent was not a party to the SPA. The SPA was the respective appellant's contract with the developer. Therefore, the duty was cast on the appellants rather than the respondent to ensure that the SPA was free from any legal infirmity. If they omitted to do so, they could not rely on their default to defeat the respondent's claim to repay their loans (Golden Vale Golf Range & Country Club Sdn Bhd v. Hong Huat Enterprise Sdn Bhd ). The respondent had no duty to advise the appellants as borrowers in the present case because it was merely a financing bank and not an advisory bank. The SPA had already been executed before the end financing facilities were granted. Therefore, the respondent could presume that the SPA which the appellants had entered into had been ascertained by the appellants to be valid. It would be too onerous to require the respondent to investigate or enquire into a transaction or contract to which they were not a party. Banking business would be rendered impracticable and burdensome if this was so. The courts should not impose such a requirement that may impede the flow of commerce (Co-operative Central Bank Ltd (In receivership) v. Feyen Development Sdn Bhd ). Thus, the respondent was not under a duty to enquire that the SPA was free from illegalities as a pre-condition to the end financing being granted.