EN BLOC SALES IN SINGAPORE

AuthorTER Kah Leng LLM (Bristol); Barrister (Lincoln’s Inn), Advocate & Solicitor (Singapore); Associate Professor, NUS Business School, National University of Singapore.
Date01 December 2009
Citation(2009) 21 SAcLJ 485
Published date01 December 2009

Critical Developments in the Law

It is well known that the numbers of en bloc or collective sales reached their peak in 2007. The policy supporting collective sales is linked to Singapore’s severe land constraints and the need to realise the full development potential of old estates. The main incentive for sellers is the exceptional premium to be gained from the en bloc sale rather than if a unit were to be sold individually on the open market. Not surprisingly, en bloc sales fell dramatically in 2008 along with the economic downturn. Of the collective sale applications submitted to the Strata Titles Board (“STB”) for approval, an increasing number of its orders have been challenged in the Supreme Court. The cases involve recurrent issues which the STB has had to grapple with and which are best clarified and resolved by the courts. The judgments on statutory interpretation, statutory non-compliance, constitutional issues, role of the STB, the relationship between the sale committee and the subsidiary proprietors and the nature, form and effect of the sale and purchase agreement will provide helpful guidelines of particular relevance when en bloc sales pick up again.

I. Statutory interpretation

1 Of most recent significance is the Court of Appeal’s decision on the applicability of the Land Titles (Strata) Act1 (“LTSA”) to HDBHUDC estates2 (referred to in the judgment and hereinafter as “privatised HUDC estates”) and in relation to computing their age for

the purpose of determining the requisite majority consent for their collective sale. Other significant legal developments are the Supreme Court’s interpretation of “good faith”, “point of law”, “financial loss” and “subsidiary proprietor” in the context of the LTSA. The meaning of these words is pivotal to the outcome of applications to the Strata Titles Board (“STB”) and appeals to the Supreme Court.

A. Section 84A(1) of the LTSA as amended in 19993 and its application to privatised HUDC estates

2 The test case on the applicability of s 84A(1) of the LTSA4 to privatised HUDC estates is Kok Chong Weng v Wiener Robert Lorenz5(“Gillman Heights”). There, the requisite majority consent of 87.54% for collective sale was obtained prior to 4 October 2007. Hence, the 2007 Amendments6 did not apply to the case. The application for sale was approved by the STB. Against this order, the minority owners appealed to the High Court7 and ten of them (the appellants) went up to the Court of Appeal. In both instances, the appeals were dismissed. Before the Court of Appeal, the appellants argued that s 84A(1) did not apply to privatised HUDC estates (the “Applicability Argument”) and alternatively, if it did, that the 90% and not the 80% consent

requirement was needed, having regard to the age of the development (the “Reference Date Argument”).

3 A brief history of Gillman Heights (“GH”) is essential to a proper understanding of the arguments raised. As an HDB development, it was not required to be issued, upon its completion, with a Temporary Occupation Licence (“TOL”) and the Certificate of Fitness (“COF”).8 These were subsequently replaced9 by the statutory equivalent of the Temporary Occupation Permit (“TOP”)10 and the Certificate of Statutory Completion (“CSC”).11 GH was ready for occupation in December 1984, and in 1996, following its privatisation, it was issued with a strata title under the LTSA.12 A CSC was issued in October 2002, and in November 2002, a TOP was issued for the newly completed clubhouse and swimming pool in GH.

4 In 1999, s 84A(1) of the LTSA was amended13 to reduce the unanimous consent requirement to majority consent when it became apparently difficult to obtain unanimous consent in freehold and 999-year leasehold strata developments. The percentage majority consent was pegged to the age of the development calculated by reference to the date of issue of the latest TOP or CSC, as the case may be. As this reference date could not apply to privatised HUDC estates which sought to go en bloc, the LTSA was amended in 200714 to allow the reference date for such estates to be the date of completion of the construction of the last building (not being any common property) comprised in the strata title plan as certified by the relevant authority. In the case of privatised HUDC estates, it is the HDB.15

5 Before the High Court, the appellants contended that the 2007 Amendments16 showed that Parliament had deliberately excluded privatised HUDC estates from the ambit of s 84A(1) of the LTSA (the “Applicability Argument”). Even if Parliament had not intended to exclude privatised HUDC estates, the reference date to determine the age of GH under the section was the latest TOP or the latest CSC. In the case of GH, these were issued only in 2002 which made the estate less than ten years old at the time the majority consent was obtained. This meant that 90% consent was required as opposed to the 87.54% that

was in fact obtained (the “Reference Date Argument”). The High Court rejected both arguments and upheld the STB’s order.

6 Before the Court of Appeal, the appellants contended that s 84A(1) of the LTSA17 should be interpreted literally to ascertain the intention of Parliament not to apply s 84A(1) to privatised HUDC estates. However, they did not dispute the purposive approach to the construction of s 84A(1) as advocated in s 9A of the Interpretation Act.18

7 The appellants argued that there were four pointers or indications that Parliament had not thought of providing for the collective sale of privatised HUDC estates, such as GH, in s 84A(1) of the LTSA.19 They were as follows: (a) when the 1999 Amendments20 were passed, the rejuvenation of only freehold and 999-year leasehold estates was contemplated. Parliament did not have 99-year leaseholds, such as GH, in mind; (b) the Government had no motivation to encourage HUDC dwellers to go en bloc and reap the profits of resale after it had heavily subsidised the privatisation scheme; (c) s 84A(1) deliberately used the TOP and CSC to determine the reference date in order to exclude privatised HUDC estates which were not issued with these; and (d) Parliament must know or be deemed to know that HUDC estates were exempted from the requirement of TOP and CSC and that privatised HUDC estates would similarly not have these certifications.

8 The Court of Appeal dismissed the four arguments above as indicators of legislative intent. Chan Sek Keong CJ, delivering the judgment of the court, held that there were no credible indications of Parliament’s intent in the Parliamentary Debates in 1995, 1998/1999 and 2007 to support the appellants’ claims. In the court’s view, the Applicability Argument rested on only one factor, which was the reference to TOP and CSC in s 84A(1) of the LTSA.21 This, the court said, was reverse logic: that because the TOP and CSC were used as the means to determine the age of a strata development, the section cannot apply to any strata development which does not have a TOP or CSC. This, the court felt, was not necessarily correct. Instead, it would be more appropriate to rely on the legislative objective to determine whether the means is appropriate to achieving that objective. Thus, since the objective of s 84A(1) is to facilitate en bloc sales, the court held that the section must be construed in such a way that would achieve that objective. To confine it to TOP and CSC as the only means of calculating the age of the development and the consent requirement would not

achieve the legislative objective of facilitating en bloc sales. In that sense, the court concluded, s 84A(1) was wanting in many respects.

(1) Comment

9 Chan Sek Keong CJ asked why Parliament would wish to exclude privatised HUDC estates from the collective sale scheme when the object of the scheme was the rejuvenation of old estates. He was prompted to so ask by the appellants’ submission that Parliament intended to exclude such estates. It is apparently a weak submission that is difficult to substantiate, given the overriding policy objective of facilitating collective sales, and the absence of any express exclusion of privatised HUDC estates from the scheme in any of the relevant Land Titles (Strata) (Amendment) Acts.

10 Is there a difference, albeit a subtle one, between a scheme that is excluded by Parliament and one that is not within its contemplation? If so, a possible alternative argument might be that in 1999 it was not within the contemplation of Parliament that privatised HUDC estates would go en bloc and therefore no express provision was made in s 84A(1) of the LTSA. Perhaps the privatisation history of GH may throw some light on this.

11 In his Second Reading speech to the Land Titles (Strata) (Amendment) Bill 1995,22 the Minister for National Development, Mr Lim Hng Kiang, revealed that a pilot project was needed to test the full complexity of the privatisation scheme and to iron out any problem which might arise. For this purpose, GH and Pine Grove were selected for the pilot project. If successful, the Government would extend the conversion scheme to other HUDC estates batch by batch.23 The HDB was tasked to progressively identify which estates were ready for privatisation and it was up to HUDC residents to obtain at least 75% support for the conversion from HDB to strata title developments.24 This would give them the freedom to upgrade their estates if they wished to enhance their assets further. However, the Minister pointed out that the 1995 Amendments25 did not mean the automatic conversion of all estates. They would be taken batch by batch and would require the 75% consent.26

12 The Court of Appeal took the view that, upon privatisation, HUDC residents would be able to enjoy all the legal attributes and

benefits of a private strata title development, including the eligibility for collective sale. Since GH had obtained its strata title in 1996, it became a strata title plan...

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