Challenger Technologies Pte Ltd v Sheares Edwin Charles Hingwee and Others (Wuan Real Estate, Third Party)

• Jurisdiction: Singapore
• Judgment Date: 07 May 1998
• Date: 07 May 1998
• Docket Number: Suit No 25 of 1996
• Court: High Court (Singapore)

Challenger Technologies Pte Ltd

Plaintiff

and

Sheares Edwin Charles Hingwee and others (Wuan Real Estate, third party)

Defendant

[1998] SGHC 152

Lim Teong Qwee JC

Suit No 25 of 1996

High Court

Agency–Estate agents–Duties of agent–Estate agent preparing option to purchase–Whether any duty to advise on incidence of GST–Revenue Law–Goods and Services Tax (GST)–Supply–Sale and purchase of property–Sections 7, 8 (1), 8 (2), 8 (2A), 8 (3), 11, 22, Second and Fourth Schedule Goods and Services Tax Act (Cap 117A, 1997 Rev Ed)–Tort–Negligence–Duty of care–Estate agent preparing option to purchase–Option silent on GST–Seller instructing solicitors after option to “handle the conveyance”–Whether solicitor under duty to advise on incidence of GST

The plaintiff seller granted an option in writing to purchase its property. The option was exercised by the buyer. After the completion of the sale, the seller sued the buyer (the first defendant) for the amount of GST “leviable on the sale of the property” under the Goods and Services Tax Act (Cap 117A, 1997 Rev Ed) (“the Act”). The seller also claimed against the estate agent (the second defendant) the amount of the GST as damages for negligence. The estate agent in turn sought an indemnity or contribution against its co-broker (the third party). The seller's solicitors (the third to seventh defendants) were also sued for the same amount as damages for negligence.

Held, dismissing the plaintiff's claims:

(1) Under the Act, the seller was liable to pay GST on the sale of the property. However, it was open to the parties to agree as between themselves as to which party was to bear GST. It was not a term of the agreement for the sale of the property that the buyer was to bear the GST on the sale. Accordingly, the seller's claim against the buyer was dismissed: at [4] and [16].

(2) The seller's claim against the estate agent for negligence was pleaded on the basis that a duty of care arose out of a contractual relationship between them. On the evidence, the estate agent was not the agent of the seller but the buyer's representative. Thus, the seller's claim against the estate agent failed. It followed that the estate agent's claim against the co-broker was dismissed: at [23], [24] and [54].

(3) The seller's solicitors were instructed to “handle the conveyance” after the option had been given. They were not instructed to review or give their comments on the terms and conditions in the option, which was silent on GST. In the circumstances, the seller's solicitors owed no duty to advise the seller as to the implication of GST, whether at the option, contract or completion stages of the sale. The claim against them was therefore dismissed: at [36], [44], [50] and [53].

[Observation: Where estate agents were not required to undergo any relevant training, it was impossible to impose on them a duty to advise on or explain a matter of such complexity as the incidence of GST on the sale of the property: at [26].]

Kuo Ching Yun v H&L Investments Holding Pte Ltd [1995] 3 SLR (R) 276; [1996] 1 SLR 47 (refd)

Tropical Properties & Trading Pte Ltd v Suganung Tasani [1995] 3 SLR (R) 947; [1996] 1 SLR 677 (refd)

Goods and Services Tax Act (Cap 117A, 1997 Rev Ed) ss 7, 8 (1), 8 (2), 8 (2A), 8 (3), 11, 22, Second Schedule and Fourth Schedule (consd)

Chung Ting Fai and Tan Cheng Kiong (Chung Tan & Partners) for the plaintiff

Peter Low and Christine Sekhon (Peter Low Tang & Belinda Ang) for the first defendant

Goh Phai Cheng, Christopher Woo and Ang Su-Lin (Harry Elias &Partners) for the second defendant

Joseph Ang and Tan Kean Siew (Lee & Lee) for the third to seventh defendants

Kwok-Chern Yew Tee and Roger Yek (Lawrence Chua & Partners) for the third party.

Lim Teong Qwee JC

1 On 27 July 1994 the plaintiff granted an option in writing to purchase the property at 62 Burn Rd for $11.5m. The option was exercised by the first defendant and the sale was completed on 28 November 1994 when the balance of the purchase price was paid to the plaintiff and the transfer of the property was delivered to the first defendant. In this action commenced by writ issued more than a year later on 5 January 1996 the plaintiff claims against the first defendant the amount of the Goods and Services Tax (“GST”) “leviable on the sale of the property”. The plaintiff also claims against the second defendant the amount of the GST as damages for negligence as the estate agent of the plaintiff. The third, fourth, fifth and sixth defendants together with Yap Chee Leong (deceased) were partners in the firm of Seah Yap Leong & Partners and the claim against them is also for the amount of the GST as damages for negligence as the plaintiff's solicitors. In the third party proceedings the second defendant claims an indemnity or alternatively contribution against the third party. At the conclusion of the trial on 13 January 1998 I dismissed the plaintiff's claims against all the defendants. I also dismissed the second defendant's claim against the third party. These are the grounds of my judgment.

GST

2 Section 7 of the Goods and Services Tax Act (“the Act”) provides for GST to be charged on the supply of goods and services in Singapore. By virtue of s 11 and the Second Schedule the “grant, assignment or surrender of any interest in or right over land or of any licence to occupy land” is a supply of goods. Section 8 (1) provides:

Tax shall be charged on any supply of goods … made in Singapore where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.

Section 8 (2) provides:

A person is a taxable person for the purposes of this Act while he is or is required to be registered under this Act.

Section 8 (2A) provides:

A taxable supply is a supply of goods or services made in Singapore other than an exempt supply.

3 It was not in dispute that the plaintiff was registered under the Act and had been so registered since 1 April 1994 and was accordingly a taxable person and the grant or assignment of an interest in the property was a taxable supply as it was not an exempt supply under s 22 and the Fourth Schedule. Whether GST was chargeable depended on whether the taxable supply was made in the course or furtherance of any business carried on by the plaintiff.

4 Section 8 (3) provides:

Tax on any supply of goods or services is a liability of the person making the supply …

It is the supplier who is liable to pay or to account for GST but it is of course open to the supplier and the buyer as the person to whom the taxable supply is made to make an agreement as between themselves as to which party is to pay GST. If there is an agreement that the buyer is to pay GST then subject to the terms of the agreement it seems to me that it has to be shown that the supplier is liable for GST. It has to be shown that GST is chargeable on the supply.

Claim against the first defendant

5 In the statement of claim it is alleged that the agreement for the sale of the property was partly in writing as evidenced by the option to purchase dated 27 July 1994 granted by the plaintiff and the acceptance dated 18 August 1994 signed by the first defendant. It is then alleged that “it was an oral term of the agreement” that the first defendant would bear the GST “leviable on the sale of the property” and that by his conduct in exercising the option the first defendant “accepted” the terms contained in the option and the oral term. The plaintiff's case is that the oral term was “stipulated” by its Mr Loo to the second defendant's Mr Seow at the point of time the option was granted and contemporaneously with it. There is also an allegation that it was an implied term of the agreement for sale that the “price quoted” was “exclusive of GST” and that such term was implied by the custom of the trade of selling commercial property. No evidence was adduced as to any such custom and this part of the case was abandoned.

Oral term

6 Mr Loo, a director of the plaintiff, said in his affidavit:

At the point of granting the option on behalf of the plaintiffs, I expressly told Mr Allan Xiao in the presence of Ms Wuan that it was part of the agreement that the purchaser would bear the GST. Mr Allan Xiao told me that he would take care of that as the first defendant was similarly informed.

It was not in dispute that the option was signed by Mr Loo and delivered to Mr Seow (or Xiao but I shall for convenience refer to him by the other name) on 27 July 1994 at the office of the plaintiff and that other than Mr Loo and Mr Seow the only person who was present then was Ms Wuan the proprietor of the third party.

7 Under cross-examination Mr Loo said:

1. Q: You noticed in option no GST clause?

2. A: Yes.

3. Q: You asked Allan Xiao to insert GST clause in option?

4. A: No.

5. Q: When you told him purchaser to bear GST?

6. A: When we completed option. I mean I. By 'completed' I mean signed. I mean after I signed option.

7. Q: What exactly you told him?

8. A: Can't recall exactly what kind of words. Something to the effect that buyer shall pay GST.

9. Q: Allan Xiao's reply?

10. A: Don't have exact words he said. Something to the effect he accepted.

Down to the point of time he completed signing the option Mr Loo had not mentioned anything about GST. This was not disputed. If GST was chargeable it would have amounted to $345,000. It was not an insignificant sum. It was Mr Seow who prepared the option by writing in the particulars on a printed option form supplied by the second defendant. He did that as he, Mr Loo and Ms Wuan discussed and agreed the terms. Mr Loo read through the option after Mr Seow had prepared it and there was nothing about GST in it. He did not ask Mr Seow to write it in.

8 Mr Seow said in his affidavit that he recalled “haggling” over the commission. The printed form provided for 2%. Mr Loo rejected that as...