Chen Con-Ling Tony v Quay Properties Pte Ltd

• Jurisdiction: Singapore
• Judge: V K Rajah JC
• Judgment Date: 19 February 2004
• Neutral Citation: [2004] SGHC 31
• Docket Number: District Court Appeal No 43 of 2003
• Date: 19 February 2004
• Published date: 01 March 2004
• Year: 2004
• Plaintiff Counsel: Andrew J Hanam (PK Wong and Advani)
• Citation: [2004] SGHC 31
• Defendant Counsel: Shriniwas Rai (Hin Rai and Tan)
• Court: High Court (Singapore)
• Subject Matter: Land,Fiduciary duties,Whether purchaser able to show consequential economic loss as result of not being consulted,Termination of leases,Vendor and purchaser relationship,Devolution of rights before completion,Landlord and Tenant,Property sold subject to tenancy,Whether landlord-vendor of property had duty to consult purchaser when tenant purported to terminate prior to completion of sale,Scope of duty to consult,Whether landlord in breach of fiduciary duty qua trustee to consult purchaser on termination of tenancy,Sale of land

19 February 2004

V K Rajah JC:

1 This appeal raises a slender but significant point pertaining to the rights and obligations arising from the vendor and purchaser relationship, pending the completion of a sale and purchase agreement for land. The narrow issue as identified by the learned district judge was whether a vendor owes a legal duty to consult the purchaser upon receiving a notice to quit from the tenant. The tenant, in this case, had relied on what is commonly known in property parlance as a “diplomatic clause”. This is a clause that allows a tenant to terminate a tenancy if the occupier no longer resides within the jurisdiction. The learned district judge characterised this issue as a “novel and interesting point of law”. At the conclusion of the appeal, I disagreed with his characterisation of the issue as being novel, as well as his holding on the issue. I however dismissed the appeal on the factual matrix and varied his order for costs. There has been no appeal from my decision. Both counsel have urged me nonetheless to furnish the written grounds of my decision. Considering that both a senior practitioner and the learned district judge had made a fairly fundamental error, I have now articulated the reasons for my decision in the hope that they may afford some assistance to the conveyancing community.

The undisputed facts

2 The subject property is 64 Havelock Road #02-12 River Place, Singapore (“the property”). On 15 May 2001, the respondent entered into a tenancy agreement (“the tenancy”) with Borouge Pte Ltd (“the tenant”). The tenancy was for a period of two years, commencing 15 May 2001. The monthly rental was $8,000.00. The tenancy was amended on 15 May 2001 by way of a letter inserting a “diplomatic clause”. This particular diplomatic clause permitted the tenant to terminate the tenancy by giving the respondent two months’ “notice to quit” upon satisfying certain conditions. The relevant portion of the letter stated:

It is hereby agreed that the Tenant may terminate this Agreement by giving the Landlord not less than two (2) months’ prior notice in writing after twelve (12) months from date of commencement of the tenancy hereby created in the event that employee of the Tenant occupying the said premises at the commencement of the tenancy hereby created is:-

1) Deported from Singapore; or

2) Refused permission by the Singapore Government to reside in Singapore; or

3) Transferred or relocated from Singapore to another country; or

4) No longer employed by the Tenant.

Always provided that the Tenant shall have furnished the Landlord with sufficient documentary or other evidence to the Landlord’s satisfaction of any or all of the matters referred to in subclauses (1), (2), (3) and (4) herein.

[emphasis added]

3 The respondent subsequently sold the property to the appellant pursuant to an option to purchase dated 1 April 2002 (“the option”). The option was exercised on 22 April 2002. Under the terms of the option, completion of the sale was to take place on or before 1 July 2002. The sale was subject to the tenancy. A copy of the tenancy was attached to the option. Notice of the tenancy and its terms was not an issue in these proceedings.

4 The appellant asserts that he “bought the property in large part due to the tenancy” and its potential rental income. The property was not intended to be his residence. This is also not in dispute.

5 On 3 May 2002, in accordance with the terms of the diplomatic clause, the tenant purported to give notice of termination to the respondent. The letter stated:

In accordance with the Diplomatic Clause, we are enclosing the supporting document to provide you evidence that the occupant of the above apartment will be operating from our branch office in Abu Dhabi instead of the Singapore office. Please note that he still remains our employee and we will not cancel his employment pass as he will still be coming to the Head Office in Singapore for reporting purposes and attending meetings. During his short visits, he will be staying in a hotel as it does not justify renting an apartment. [emphasis added]

Enclosed with this letter was the new employment contract the tenant had sent to its employee/occupier (“employee”). Under the terms of the new employment contract the employee was to operate from the tenant’s branch office in Abu Dhabi. The employee would report to the tenant’s commercial manager in Singapore but he was now responsible for the Saudi Arabian market. He was no longer to be based in or a resident of Singapore.

6 On 21 May 2002, the respondent’s solicitors sent a letter to the appellant’s previous solicitors informing them that the tenant had served the requisite two months’ notice to terminate the tenancy pursuant to the diplomatic clause and that the property would, pursuant to the notice, cease to be tenanted after 15 July 2002. The letter enclosed the tenant’s letter to the respondent dated 3 May 2002. There was no attempt to seek the appellant’s position on the issue, let alone consult him. The respondent appeared to take the position that the appellant’s views on this matter were irrelevant.

7 On 22 May 2002, the respondent wrote to the tenant intimating that its request for an early termination of the tenancy was accepted. This letter was not copied to the appellant. In other words, the appellant was not directly informed by the respondent that it had unilaterally agreed to terminate the tenancy.

8 In response to the respondent’s solicitors’ letter of 21 May 2002, the appellant’s solicitors wrote to the respondent’s solicitors on 24 May 2003 voicing the appellant’s strong objections to the tenant’s request for an early termination of the tenancy. The letter bluntly stipulated that from “the perusal of the documentary evidence submitted by the tenant to you, none of the scenarios (1) to (4) stated herein applies to the tenant” and that the appellant “reserves all his rights to sue the tenant if the tenant insists on determining the tenancy prematurely”.

9 The respondent’s solicitors responded on 31 May 2002 asserting:

The tenant has the right to invoke the diplomatic clause after 12 months from the date of commencement of the tenancy in the event that the employee of the tenant is transferred or relocated from Singapore to another country. ...

In accordance with the diplomatic clause, the tenant has furnished satisfactory evidence to our clients, the landlord, in their employment letter of 28.3.02 addressed to their employee to their Branch Office in Abu Dhabi, Saudi Arabia.

As scenario (3) applies to the tenant, the tenant is thereby entitled to exercise their right to terminate the tenancy pursuant to the diplomatic clause.

10 The appellant’s solicitors staunchly maintained their stance in their response letter dated 4 June 2002. They asserted emphatically that the diplomatic clause could only be invoked by the tenant:

PROVIDED that the tenant furnishes satisfactory documentary evidence or other evidence to the Landlord’s satisfaction that the employee is to be transferred or relocated from Singapore to another country. The satisfactory documentary evidence in support of this must be that the employment pass of the employee in question … be cancelled in Singapore.

...

My client insists that the full security deposit be transferred to him on completion. This issue as to whether the tenant is entitled to invoke the diplomatic clause shall be dealt with by my client direct with the tenant and is therefore of no concern to your clients.

[emphasis added]

11 The respondent’s solicitors in a brief response dated 6 June 2002 reiterated in turn their client’s position. They made no reference whatever to their client’s written acceptance of the notice to quit dated 22 May 2004. The appellant became frustrated. He felt, quite rightly, that the respondent was not being helpful. On 18 June 2002, he instructed his solicitors to communicate directly with the tenant. Only as a result of this communication was the appellant apprised of the respondent’s written acceptance of the tenant’s termination notice. The tenant further informed the appellant’s solicitors on 19 June 2002 that it had already vacated the premises and handed possession of the property directly to the respondent. The appellant states that he was taken aback and dismayed to learn of this development. It was too late to turn the clock back. He then sensibly decided to complete the purchase of the subject property. Acting on the appellant’s instructions, his solicitors proceeded to duly complete the transaction, without prejudice to the appellant’s right to claim for damages accruing from the termination of the tenancy.

12 It is not in dispute that the respondent took no steps at all, pending completion, to seek the appellant’s views on how it should have dealt with the tenant’s termination notice. Nor is it disputed that no steps were taken by the respondent to look for a new tenant, pending completion. Immediately upon completion, the appellant engaged a property agent to look for a new tenant. The property market was weak. A new tenant was only found on 15 October 2002. A tenancy agreement for a two-year period commencing 15 November 2002 was subsequently entered into. The new rental was substantially lower. The appellant was understandably aggrieved. He felt that the respondent had acted irresponsibly. He felt he had suffered a substantial financial loss. Had he been consulted by the respondent, he would have rejected the termination notice and indemnified the respondent against any claims by the tenant. He wanted the termination notice litigated. In essence, he complained that he had been denied an opportunity to possibly succeed in a claim against the tenant for the “wrongful” termination of the tenancy. This signified for him the loss of a valuable right. The respondent had disregarded his “legitimate expectation”. On 3 December 2002 he initiated proceedings for damages in...