Abdul Jalil bin Ahmad bin Talib and Others v A Formation Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 28 May 2007
• Neutral Citation: [2007] SGCA 29
• Docket Number: Civil Appeal No 117 of 2006
• Date: 28 May 2007
• Published date: 30 May 2007
• Year: 2007
• Plaintiff Counsel: Andre Yeap SC and Kelvin Poon (Rajah & Tann) and Aloysius Leng Siew Wei (Abraham Low LLC)
• Citation: [2007] SGCA 29
• Defendant Counsel: Anthony Netto (Teo Keng Siang & Partners)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether such forbearance amounting to consideration for compromise agreement,Tenant discharging obligations under compromise agreement,Forbearance,Tenant giving up any right to make claim against previous trustees for damages for breach of terms in lease agreement by accepting compromise offered,Contract,Equity,Consideration,Whether inequitable for present trustees to refuse to honour compromise agreement on ground that such agreement not lawfully entered into,Estoppel

28 May 2007 Judgment reserved.

Chan Sek Keong CJ (delivering the judgment of the court):

1 This appeal is concerned with the power of a sole trustee under cl 19 of the will of Shaik Roubayak bin Khalid bin Talib (“the testator”) to waive arrears of rent payable by a tenant of three properties, viz, Nos 29 and 30 Purvis Street, and No 21 Amoy Street (collectively called “the trust properties”).

2 The appellants are the present trustees of the trust (“the trust”) established under the will of the testator. They have appealed against the decision of Judith Prakash J (“the Judge”) in dismissing their claim for arrears of rent (and interest thereon) which the previous sole trustee had waived prior to their appointment as trustees.

Background

3 On 9 December 1996, the then trustees, Awad bin Omar Harharah (“Awad”) and Shaik Mohamad bin Omar Harharah (“Shaik”) (who became the “sole trustee” after the death of Awad), entered into lease agreements for 25 years (Purvis Street properties) and 20 years (Amoy Street property) with the respondent, A Formation Construction Pte Ltd, subject to the approval of the court (as cl 12 of the will restricted the power of the trustees to grant leases not exceeding five years). The rent for the Purvis Street properties was $10,000 per month and the rent for the Amoy Street property was $3,000 per month. The relevant provisions of the leases were as follows:

(a) Clause 1(1) provided that the lease of the trust properties was to commence either on 9 December 1998 (which was two years from the date of the agreement) or from the time the respondent commenced business at the trust properties, whichever was earlier.

(b) Clause 1(3) provided, inter alia, that the trustees would use their best endeavours to negotiate and obtain vacant possession of the trust properties.

(c) Clause 1(4) stipulated that if the trustees fail to obtain vacant possession through negotiation, they would apply (at the cost and expense of the respondent) to the Tenants’ Compensation Board (“TCB”) for an order giving them vacant possession.

(d) Clause 1(5) stated that the trustees would sign such applications and plans as were necessary to secure the requisite approvals for the restorations works and would render such reasonable assistance as may be necessary to assist the respondent in getting permission to undertake the works.

4 In 1996, the tenants of the trust properties were statutory tenants whose tenancies were protected by the Control of Rent Act (Cap 58, 1985 Rev Ed). One of the statutorily prescribed ways to recover vacant possession of rent-controlled properties then was to obtain planning permission to re-develop them and then apply to the TCB for an order for vacant possession subject to the landlord paying compensation as determined by the TCB. Hence, the lease agreements with respect to the trust properties provided first for the trustees to try to obtain vacant possession through negotiations, failing which they would apply to the TCB for the requisite order. It would appear that the trustees considered that a period of two years (in cl 1(1)) would be sufficient for them to obtain vacant possession of the premises by negotiating with the tenants or, alternatively, by obtaining an order from the TCB.

5 However, by 9 December 1998, when the rent became payable by the respondent, the then trustees were not able to get vacant possession of the trust properties for the respondent to begin redevelopment. In January 1999, Awad died and a new trustee was appointed on 13 April 1999. However, the new trustee retired in November 2000 leaving Shaik once more as the sole trustee until March 2002. In August 1999, the solicitors for the trustees (“M&N”) sent a notice to the respondent’s solicitors (“CH&A”) demanding payment of arrears of rent due and payable from 9 December 1998 to August 1999. CH&A replied in June 2000 that the respondent wished to seek the trustee’s indulgence to waive the rent payable until the temporary occupation permit (“TOP”) for the trust properties were issued. M&N replied that the trustees would only consider the respondent’s request for waiver of the outstanding rent or part of it when the restoration works relating to the trust properties commenced, and provided that the respondent paid M&N’s outstanding legal fees.

6 Vacant possession of the trust properties was given to the respondent in October 2000 (for the Amoy Street property) and February 2001 (for the Purvis Street properties). In May 2001, the respondent’s new solicitors (“TKS”) wrote to M&N proposing that the commencement date of the rent payments be changed on the ground that the trust had contributed to the delay in obtaining the requisite permits for them to begin redevelopment works on the trust properties.

7 There was then a lull in the exchange of correspondence until 17 January 2002, when M&N, acting on behalf of the sole trustee, sent a letter to TKS demanding payment by the respondent of all arrears of rent due from 9 December 1998 to 31 December 1999. TKS replied on 22 January 2002 that the commencement date of the rent should be the date when vacant possession of the trust properties was given as the trust had contributed to the delay in obtaining the requisite planning approvals to redevelop the trust properties. On 28 January 2002, M&N rejected the request and denied that the trust had caused the alleged delay. However, three days later, on 31 January 2002, M&N sent a “without prejudice” letter to TKS making an offer to waive part of the arrears of rent for the period up to 31 December 1999, provided that all rents payable from 1 January 2000 onwards were paid within seven days from the date of the letter. In their “without prejudice” letter dated 6 February 2002, TKS agreed to the offer in relation to the Amoy Street property as the TOP had been obtained. In relation to the Purvis Street properties, TKS requested that the rent should start from December 2002 or the obtaining of the TOP, whichever came later. M&N rejected the request and on 8 February 2002, sent notices to quit to the respondent with respect to all the trust properties. In the same letter, after the computation of sums outstanding, M&N made another offer to TKS (which was open for acceptance up till 15 February). On 15 February 2002, two of the respondent’s directors went to M&N’s office and confirmed acceptance of this second offer on the terms it was made.

8 On 5 March 2002, the sole trustee appointed another trustee to the trust. They ceased to be trustees in March 2004 upon being replaced by the appellants who were appointed as trustees by a court order. Upon discovery of the waiver of rent by the sole trustee, the appellants commenced the present action in October 2004 to recover the rent that had been waived by the sole trustee in February 2002, together with interest at the rate of 12% per annum, amounting to $303,464.41.

The Judge’s decision

9 The issues which the Judge was asked to consider were as follows:

(a) whether the sole trustee had the power under cl 19 of the will to enter into the compromise agreement to waive the arrears of rent;

(b) if the sole trustee did not have such power, whether nevertheless, M&N had ostensible authority to effect the compromise so as to bind the trust; and

(c) whether there was any consideration to support the waiver and/or, in any event, whether the appellants were estopped from denying the efficacy of the waiver.

10 The Judge dismissed the appellants’ claim for recovery of the waived rent on the following grounds:

(a) The waiver of rent was within the power of the sole trustee under cl 19 of the will to carry on the “necessary” business of the trust.

(b) Even if the sole trustee did not have the power under cl 19, M&N had ostensible authority to do so on behalf of the trust. The respondent did not have actual knowledge that the sole trustee did not have such power, and constructive knowledge was insufficient to prevent the operation of the principle of ostensible authority.

(c) There was sufficient consideration for the waiver as in accepting the compromise offered by the sole trustee, the respondent gave up any right it had to make a claim for damages for breach on the part of the trustees. In this regard, the fact that this claim may have been weak and may not have succeeded was not material. Alternatively, the appellants were estopped from denying the validity of the waiver as the respondent had (i) paid up all the moneys required by the sole trustee in accordance with the waiver arrangement; and (ii) incurred expenses in completing work on one of the trust properties.

Issues in the appeal

11 The appellants, being dissatisfied with the judgment, appealed. The issues raised on appeal were substantially the same as those raised before the Judge.

12 Before addressing these issues, it is convenient at this stage that we reproduce the relevant clauses in the will on the powers of the trustees. They are cll 12 and 19 and they provide as follows:

Clause 12: My trustees shall manage or superintend the management of my settled property with power to erect, pull down, rebuild, add to and repair houses and other buildings and to drain and make roads and fences and otherwise to improve all or part of my settled property and to insure houses and buildings or rents against loss or damage by fire or other risks and to make allowances to or arrangements with tenants and to accept surrenders of leases and tenancies and to grant leases or agreements for leases on such terms as my Trustees shall think fit for any period not exceeding five years from the date thereof and generally to deal with my settled property as if they were absolute owners thereof without being responsible for any loss but so that nothing in this clause contained shall be deemed to empower my Trustees except as hereinafter provided to sell or mortgage or create any charge on my settled property and so that my Trustee shall...