Cathay Theatres Pte Ltd v LKM Investments Holdings Pte Ltd

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 14 January 1998
• Neutral Citation: [1998] SGCA 4
• Citation: [1998] SGCA 4
• Defendant Counsel: Indranee Rajah and Elaine Chao (Drew & Napier)
• Published date: 19 September 2003
• Plaintiff Counsel: CR Rajah and WJM Ricquier (Tan Rajah & Cheah)
• Date: 15 January 1998
• Docket Number: Civil Appeal No 207 of 1996
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether new registered owner precluded from challenging interest claimed by caveator in latter case,Registration of caveat on property subject of sale agreement,Caveats,Effect,Whether purchaser of property in taking transfer subject to interest claimed by caveator effectively acknowledging and admitting interest claimed in caveat,Whether caveat consistent with title contracted for in sale agreement,ss 46 & 115(2)(a)Land Titles Act (Cap 157, 1994 Ed),Land,Whether purchasers entitled to insist on removal of caveat prior to completion of sale

Judgment:

LP THEAN JA

(delivering the grounds of judgment of the court): Introduction

1.This was an appeal against the decision of the High Court dismissing the appellant`s application for a declaration that the respondents were not entitled to require the appellants to procure the withdrawal of a caveat lodged against the property situate at 3501, Jalan Bukit Merah known as Regal Theatre (the property) before completing the sale of the property. We allowed the appeal and now give our reasons.

2. The facts

The relevant facts that gave rise to the appeal are these. The appellants are the lessees of the property under a lease for a term of 99 years granted by the Housing and Development Board (HDB) on 24 August 1981. The lease is registered under the Land Titles Act (Cap 157, 1994 Ed).

3.On 11 February 1987, the appellants entered into an agreement with McDonald`s Restaurants Pte Ltd (McDonald) to lease a part of the property (the premises) to McDonald for a term of seven years less one day. The appellants sought approval from HDB to sublet the premises for the term as agreed. HDB informed them that any sublease to McDonald could be for a period of three years only, and that further renewal would be subject to review. The appellants then sought in-principle approval from HDB to sublet the premises to McDonald for a term of 21 years comprising seven separate consecutive leases, each for a term of three years. HDB granted in-principle approval, subject to future revision of the applicable terms and conditions. Following that, the appellants executed a deed of variation on 10 October 1987, pursuant to which seven consecutive leases, each for a term of three years, were executed and were also dated 10 October 1987, these leases spanning in total 21 years from 1987 to 2008.

4.Subsequently, however, HDB changed its policy and informed the appellants that any subletting would only be permitted up to a maximum period of two years at any one time. Just before the expiry of the term of the first lease, the appellant`s solicitors on 17 May 1990, wrote to HDB in the following terms:

We refer you to the above matter and enclose for your ready reference copies of your letters dated 10 March 1987 and 8 April 1987 approving the above subletting for a total term of 21 years comprising seven sublettings of three years each.

The first term of three years of the seven sublettings commencing from 20 May 1987 expires on 20 May 1990.

Our clients understand that under the Board`s present management policy only a maximum period of a two year term for each subletting will be permitted by the Board and we are instructed to enquire if in this instance the previous approval of the Board given in respect of the above sublettings still stands.

On 21 May 1990, HDB replied as follows:

We would like to confirm that our present management policy only allows subletting for a maximum period of two years in each instance.

We wish to explain further that our previous approval given to your clients was for the first subletting term of 3 years commencing 20 May 1987. Subsequent renewals of the tenancy upon expiry of existing terms are subject to our review as specified clearly in para 2(a) of our approval letter dated 10 March 1987; your clients have also accepted these conditions vide your letter dated 21 March 1987.

Please therefore advise your clients to apply to this office for the second subletting term (maximum of two years) as soon as possible.

5.In compliance with HDB`s requirement, the appellants proposed to vary the second and subsequent terms of the leases agreed with McDonald to two years each and sought HDB`s approval. Accordingly, on 28 May 1990 the appellants` solicitors wrote to HDB as follows:

We thank you for your letter of the 21st instant and enclose a copy of lease dated 10 October 1987 signed by the parties and stamped in respect of the second subletting for a term of three years commencing from 21 May 1990.

The lessee has agreed to enter into a deed of variation to vary the terms of the above lease from three to two years and pending the preparation of the deed, we are instructed by the lessor to seek the Board`s approval for the second subletting for a term of two years commencing from 21 May 1990 on the terms and conditions contained in the enclosed copy of the lease save for the term to be varied from three to two years.

HDB granted approval for the sublease of the premises to McDonald for a term of two years commencing 21 May 1990.

6.The appellants and McDonald then executed another deed of variation dated 6 December 1990, under which the term of two years of each of the remaining six consecutive leases was varied to two years, and three additional consecutive leases each for a term of two years dated 23 April 1991 were executed. There were therefore in existence nine consecutive leases, each for a term of two years; the first lease for a term of three years had already expired. As of the date of 23 April 1991, the leases were as follows:

10 October 1987	First lease	21 May 1987 - 20 May 1990 (expired)
10 October 1987	Second lease	21 May 1990 - 20 May 1992
10 October 1987	Third lease	21 May 1992 - 20 May 1994
10 October 1987	Fourth lease	21 May 1994 - 20 May 1996
10 October 1987	Fifth lease	21 May 1996 - 20 May 1998
10 October 1987	Sixth lease	21 May 1998 - 20 May 2000
10 October 1987	Seventh lease	21 May 2000 - 20 May 2002
13 April 1991	Eight lease	21 May 2002 - 20 May 2004
23 April 1991	Ninth lease	21 May 2004 - 20 May 2006
23 April 1991	Tenth lease	21 May 2006 - 20 May 2008

7.On 16 August 1995, McDonald lodged a caveat (the caveat) on the Land Register of the property pursuant to s 115(2)(a) of the Land Titles Act, claiming an estate or interest as a lessee of the premises. McDonald based their claim on the following ground:

[A]n agreement for lease dated 11 February 1987, the deeds of variation dated 10 October 1987 and 6 December 1990 and the several leases executed pursuant thereto between the registered proprietor as lessor and the caveator as lessee.

The caveat expressly prohibits the registration of any instrument affecting the property unless the instrument is expressed to be subject to the interest claimed by McDonald.

8.By an agreement made on 17 May 1996 (the sale agreement), the terms of which were contained in an offer in writing dated 17 April 1996, which was accepted on 17 May 1996, the appellants agreed to sell and the respondents agreed to purchase the property for a sum of $16,500,000. The sale was subject to the consent of HDB and was due for completion within three months of the acceptance of the offer or two weeks of the receipt of the consent, whichever was the later.

9.Clause 4(1) of the sale agreement provided as follows:

The property is sold subject to four leases dated 10 October 1987 (as varied by a deed dated 6 December 1990) and three leases dated 23 April 1991 all made between [the appellant] of the one part and McDonald`s Restaurants Pte Ltd of the other part (hereinafter collectively referred to as `the leases` which expression shall where the context so requires mean any one of or more of them) unless the leases shall have been terminated for any reason whatsoever before completion.

And Clause 4(2) thereof, so far as material, provided:

No requisitions or objections whatsoever shall be raised by the [respondents] in respect of or in connection with the contents effect or regularity of the leases nor shall the [respondents] require the production of any other document referred to in or connected with the leases.

The four leases all dated 10 October 1987, the deed dated 6 December 1990 and the three leases all dated 23 April 1991 referred to in cl 4(1) were produced for inspection by the respondents.

10.As at the date of the sale agreement, the second and the third leases had expired and the fourth lease was nearing its end and the fifth lease was about to commence. The appellants had obtained from HDB approval for each of those leases. They had not, however, obtained approval for the subsequent leases.

11.HDB gave its consent to the sale, but the respondents declined to complete the transaction unless the caveat lodged by McDonald was removed. More specifically, the respondents insisted that the transfer of the property to them should state `Nil` in the box for `Prior Encumbrances` and not `subject to Caveat No CV/051297E` which is the caveat lodged by McDonald, and they refused to accept a transfer that was expressed to be subject to the caveat.

12.The date fixed for completion was 16 August 1996. However, the issue of removing the caveat could not be resolved between the parties. On 17 August 1996, the appellants served on the respondents a notice to complete pursuant to condition 29 of the Singapore Law Society`s Conditions of Sale 1994. On the same day, the respondents served a similar notice on the appellants in which they stated, among other things, that they were ready, willing and able to complete the transaction, provided the caveat was removed.

13.The appellants took out an originating summons seeking a declaration that the respondents were not entitled to insist on the withdrawal of the caveat and to rely on the existence of and the non-withdrawal of the caveat as a reason or ground for not completing the sale. The appellants also claimed a declaration that the notice to complete served by the respondents on 17 August 1996 was null and void and of no effect as a notice to complete under condition 29 of the Singapore Law Society`s Conditions of Sale.

14.The appellants contended that the respondents had expressly contracted to take the property subject to the leases specified in cl 4(1) of the sale agreement and that McDonald as the lessee had an interest in the property capable of being protected by a caveat. The caveat lodged by McDonald prohibited registration of a transfer, unless the transfer was expressly subject to the interest claimed in the caveat. The transfer to the...