Boon Lay Choo v Ting Siew May

Judgment Date16 September 2013
Date16 September 2013
Docket NumberOriginating Summons No 27 of 2013
CourtHigh Court (Singapore)
Boon Lay Choo and another
Plaintiff
and
Ting Siew May
Defendant

Lionel Yee JC

Originating Summons No 27 of 2013

High Court

Contract—Illegality and public policy—Common law—Statutory illegality—Option to purchase land backdated to avoid Monetary Authority of Singapore notice restricting loan which could be granted to purchasers by bank—Whether unenforceable—Whether specific performance would be ordered

An option to purchase a property (‘the Option to Purchase’) was granted by the defendant-seller (‘the seller’) in favour of the plaintiff-purchasers (‘the purchasers’) on 13 October 2012. The Option to Purchase was backdated to 4 October 2012. This was because MAS Notice 632, a notice prescribed by the Monetary Authority of Singapore (‘the MAS’) pursuant to s 55 of the Banking Act (Cap 19, 2008 Rev Ed), was amended on 5 October 2012 to lower the permissible loan-to-value ratio imposed on banks in relation to loans which could be granted to persons in the purchasers' position from 80% to 60%. The purchasers had sought the backdating of the Option to Purchase because they believed that this would have allowed them to obtain financing from the Bank on the more favourable terms permissible prior to the amendment of MAS Notice 632 on 5 October 2012.

The Option to Purchase provided that it was to expire ‘at 4:00 pm on the 25 thday of October 2012’. On 24 October 2012, the solicitors for the seller wrote to the solicitors for the purchasers stating that the backdating was an ‘illegality or irregularity’ which the seller did not wish to be a party to and that they had instructions to reject any exercise of the Option to Purchase. On 25 October 2012, the purchasers' solicitors attempted to exercise the Option to Purchase at the offices of the seller's solicitors but this was rejected. Correspondence ensued. The purchasers proposed, inter alia, performing the contract on the basis that it was dated 13 October 2012, the actual date of the Option to Purchase, and stated that they would obtain financing from the Bank on that basis and in accordance with the amended MAS Notice.

The purchasers brought an application to court for a declaration that the Option to Purchase was valid and binding on the seller and for an order for specific performance by the seller.

Held, granting the application:

(1) The question for the court was whether, on a proper construction of the statute in question, it was the legislature's intention that, on account of a contravention, the contract in question should be prohibited. The Banking Act dealt with the regulation of banks and prohibitions imposed by notices issued under s 55 were imposed on banks and not the general public at large. Further, the penalties for any contravention were imposed only on banks. There was no evidence that the legislature intended by implication that the Option to Purchase, which was an agreement entered into by two private parties, and which was separate from but merely related to the loan agreement to which the Bank was a party, was to be prohibited: at [13] to [15] .

(2) The Option to Purchase was a contract which concerned a sale and purchase of land and its grant and exercise was, in and of itself, perfectly legal. The illegal manner in which the financing of it was intended to be procured was a matter only incidental to the Option to Purchase and so could not be said to have transformed it into a contract prohibited by statute: at [16] .

(3) There was no fixed rule that where a party entered into a contract with the intent of breaking the law the contract was unenforceable at his suit. The application of such a rule was an aspect of common law illegality, and the other considerations which applied in the realm of those cases would apply equally: at [18] and [20] .

(4) There might be circumstances where the court would refuse enforcement of a contract to deter the conduct proscribed by the statute, but this would be only a relevant factor and was not in and of itself conclusive. In the present case there was no evidence as to whether the existing sanctions were inadequate, and whether the civil court ought to intervene in this regard to render options to purchase which were backdated unenforceable: at [23] .

(5) The fact that the backdating was an act of deception did not ipso facto cause it to be unenforceable. The deception was on the Bank, which was a private entity. There was nothing to suggest that the heads of public policy covering the deception of public authorities ought to be expanded to the deception of privately owned banks or other entities: at [25] .

(6) The centrality of the illegality or the degree of remoteness of the illegality were considerations relevant to whether a contract was to be rendered unenforceable at common law. A contract was not rendered unenforceable where the plaintiff did not have to rely on the illegality. There was a degree of overlap between these two principles. Regardless of which principle was applied, the illegality was not an obstacle to enforcement in the present case. The illegal manner in which the financing was intended to be procured by the purchasers was merely incidental to the Option to Purchase and so too remote to render it unenforceable. There was also no need for the purchasers to rely on the backdating to found their claim against the seller: at [26] to [28] , [31] and [32] .

(7) Where a contract was not void and not unenforceable at law for illegality, there was no reason why it should not be specifically enforceable in equity for the same alleged illegality: at [38] .

21st Century Logistic Solutions Ltd v Madysen Ltd [2004] 2 Lloyd's Rep 92 (folld)

Alexander v Rayson [1936] 1 KB 169 (refd)

American Home Assurance Co v Hong Lam Marine Pte Ltd [1999] 2 SLR (R) 992; [1999] 3 SLR 682 (folld)

Aqua Art Pte Ltd v Goodman Development (S) Pte Ltd [2011] 2 SLR 865 (refd)

Aubin v Holt (1855) 2 K & J 66; 2 K & J 66 (folld)

Bowmakers Ltd v Barnet Instruments Ltd [1945] 1 KB 65 (folld)

Chee Jok Heng Stephanie v Chang Yue Shoon [2010] 3 SLR 1131 (not folld)

Hemlata Pathela v Suresh Partabrai [2000] 2 SLR (R) 393; [2000] 4 SLR 516 (refd)

Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2011] 1 SLR 657 (folld)

Palaniappa Chettiar v Arunasalam Chettiar [1962] MLJ 143 (refd)

Parking Eye Ltd v Somerfield Stores Ltd [2013] 2 WLR 939 (folld)

Shaw v Groom [1970] 2 QB 504 (refd)

Siow Soon Kim v Lim Eng Beng [2004] SGCA 4 (refd)

St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267 (refd)

Suntoso Jacob v Kong Miao Ming [1985-1986] SLR (R) 524; [1986] SLR 59 (refd)

Theresa Chong v Kin Khoon & Co [1976] 2 MLJ 253 (refd)

Tinsley v Milligan [1994] 1 AC 340 (folld)

Banking Act (Cap 19, 2008 Rev Ed) ss 55, 71

Ng Lip Chih (NLC Law Asia LLP) for the plaintiffs

PBalagopal (M P Kanisan & Partners) for the defendant.

Judgment reserved.

Lionel Yee JC

1 From around the middle of 2012, the plaintiffs Boon Lay Choo and Law Khim Huat (‘the Plaintiffs’) were looking to purchase landed property. They approached their banker at United Overseas Bank (‘the Bank’), one Leslie Ong (‘Ong’), about the financing of such a purchase, and on 12 July 2012, they were granted in-principle approval for a loan by the Bank. The maximum quantum of this loan would be capped at the prevailing loan-to-value ratio of 80% imposed by MAS Notice 632 for purchasers in the Plaintiffs' position. MAS Notice 632 is a notice prescribed by the Monetary Authority of Singapore (‘the MAS’) pursuant to s 55 of the Banking Act (Cap 19, 2008 Rev Ed) to banks for the purposes of regulating residential property loans. The term ‘value’ is defined as the market value or the net purchase price of the residential property sought to be purchased, whichever is lower.

2 On 5 October 2012, the MAS issued an amendment to MAS Notice 632 (the amended MAS Notice 632 is hereafter referred to as ‘the 5 October Notice’). The press release accompanying the 5 October Notice explained that this was ‘part of the Government's broader aim of avoiding a price bubble and fostering long term stability in the property market’. The 5 October Notice, addressed to banks, provided, inter alia, that from 6 October 2012, for purchasers in the Plaintiffs' position, the loan-to-value ratio would be capped at 60% if the tenure of the facility sought exceeded 30 years or if the sum of the tenure and the age of the borrower at the time applying for the loan facility exceeded 65. This represented a tightening of the permissible loan-to-value ratio from 80% previously.

3 On 10 October 2012, the Plaintiffs made a verbal offer to the defendant Ting Siew May (‘the Defendant’) to purchase a property owned by her known as 30 Jalan Angin Laut Singapore 489226 (‘the Property’). On 12 October 2012, almost a week after the new restrictions imposed by the 5 October Notice were imposed, an agreement was reached between the parties on the purchase price of $3.68 m. According to the Plaintiffs, they were advised by Ong to ask their property agent to check with the Defendant if she was willing to date the option to purchase (‘Option to Purchase’) as 4 October 2012 instead of the actual date when the Defendant was to sign it. They thought that if the Option to Purchase was dated prior to 5 October 2012, they would be able to obtain financing for the purchase on the more favourable terms allowed prior to the issue of the 5 October Notice. This was because the tenure of the loan they sought to obtain was 24 years, which when added together with the Plaintiffs' ages exceeded 65 years, and banks were accordingly allowed to grant the Plaintiffs a loan at a loan-to-value ratio of up to 60% instead of 80%. The Plaintiffs also deposed that Ong had told them that ‘a lot of buyers’ were backdating their purchases to dates prior to 5 October 2012 for that reason and that it was simply ‘common practice’ to do so. On 13 October 2012...

To continue reading

Request your trial
2 cases
  • Ting Siew May v Boon Lay Choo
    • Singapore
    • Court of Appeal (Singapore)
    • 26 May 2014
    ...[2007] All ER (D) 243 (May) (refd) Birkett v Acorn Business Machines Ltd [1999] 2 All ER (Comm) 429 (refd) Boon Lay Choo v Ting Siew May [2013] 4 SLR 820 (refd) Edler v Auerbach [1950] 1 KB 359 (refd) Enderby Town Football Club Ltd v Football Association Ltd [1971] Ch 591 (refd) Holman v Jo......
  • Ting Siew May v Boon Lay Choo and another
    • Singapore
    • Court of Appeal (Singapore)
    • 26 May 2014
    ...the court): Introduction This is an appeal against the decision of the judge (“the Judge”) in Boon Lay Choo and another v Ting Siew May [2013] 4 SLR 820 (“the Judgment”). This appeal concerns the enforceability of an option to purchase a property granted by the Appellant to the Respondents,......
2 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2013, December 2013
    • 1 December 2013
    ...question of its illegality. 12.79 The effects of illegality were also considered in the interesting case of Boon Lay Choo v Ting Siew May[2013] 4 SLR 820 (‘Boon Lay Choo’), which arose in connection with an attempt to circumvent certain loan restrictions imposed by the Government to cool re......
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2014, December 2014
    • 1 December 2014
    ...entered into irresponsibly. Illegality 12.82 In last year's edition of this Ann Rev, the authors discussed Boon Lay Choo v Ting Siew May[2013] 4 SLR 820, which concerned a dispute arising from an attempt to circumvent certain property cooling measures. On 13 October 2012, the plaintiff-resp......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT