Chi Liung Holdings Sdn Bhd v Attorney General

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu JC
• Judgment Date: 03 May 1993
• Neutral Citation: [1993] SGHC 95
• Docket Number: Originating Summons No 363 of 1992
• Date: 03 May 1993
• Published date: 19 September 2003
• Year: 1993
• Plaintiff Counsel: Cheong Yuen Hee and Lai Swee Fung (Toh Tan & Partners)
• Citation: [1993] SGHC 95
• Defendant Counsel: Soh Tze Bian (State Counsel) and Tan Ting Ting (State Counsel)
• Court: High Court (Singapore)
• Subject Matter: Credit and Security,Options for sale of land granted by purchaser without prior approval of Controller,Guarantees given to secure undertakings by foreign purchaser not to sell or dispose of land without prior approval of Controller of Housing,Whether undertakings breached,Options subsequently exercised,s 31 Residential Property Act (Cap 274),Guarantees and indemnities,Whether sums forfeited constituted penalty,Undertakings secured by guarantees under which company liable to forfeit sums of money for breach of undertakings,Foreign company undertaking not to sell or dispose of land without prior approval of Controller of Housing,Conditions of sale,Whether Controller entitled to forfeit sums under guarantees,Liability to forfeit sums of money for breach of undertakings,Options for sale of land granted without prior approval of Controller,Sale of land,Land

The plaintiffs` application in the above action was for the following reliefs:

(i) a declaration that the Controller of Housing (`the Controller`) had acted unlawfully in forfeiting two sums of $2,887,500 and $4,982,474.70 purportedly pursuant to para 3(E) of two letters of guarantee Nos 5928088601 and 5928088602 respectively furnished by Citibank NA (collectively `the guarantees` and singly as `the guarantee`);

(ii) a declaration that the said two sums of $2,887,500 and $4,982,474.70 forfeited by the Controller constituted penalties in law and that the undertakings referred to in para 3(E) of each of the guarantees were unenforceable by the defendant against the plaintiffs;

(iii) an order that the Controller forthwith pay to the plaintiffs the total sum of $7,869,974.70 together with interest thereon at the rate of 8%pa to be calculated from 19 December 1989 to the date of payment;

(iv) alternatively, a declaration that the plaintiffs had discharged the undertakings referred to in para 3(B) of each of the guarantees and that the Controller had acted ultra vires in forfeiting the two sums of $412,500 and $711,782.10 purportedly pursuant to para 3(B) of each of the guarantees;

(v) an order that the Controller forthwith pay to the plaintiffs the total sum of $1,124,282.10 together with interest thereon at the rate of 8%pa to be calculated from 19 December 1989 to the date of payment;

(vi) such further or other relief as the court deems fit and costs.

The facts giving rise to these proceedings as adduced from the affidavits filed in particular by the plaintiffs` counsel Thomas Toh Swee Hoon (`Toh`) on 23 April 1992 are as follows:

(1) the plaintiffs, a Malaysian company, are also incorporated as a foreign company in Singapore. In 1984 the plaintiffs intended to acquire two plots of land at Balmoral Road and Gallop Road (`the properties`) at the consideration of $8.25m and $14,235,642 respectively. As a foreign company the plaintiffs were required under s 31 of the Residential Property Act (Cap 274) (`the Act`) to, and did apply for qualifying certificates (`the certificates`) to enable them to purchase the properties;

(2) before approving the plaintiffs` application the Controller required

Dato Tong Lee Hwa (`Tong`), described as the governing director of the plaintiffs, to furnish two written undertakings (`the undertakings`) dated

30 May and 22 October 1984 respectively under which (para 2(d)) the plaintiffs undertook not to sell or dispose of the properties without the prior written approval of the Controller. Subsequently, the certificates (two) were issued to the plaintiffs with the condition that `there shall be no change of shareholding of the company without the prior written approval of the Controller`. The undertakings were secured by the guarantees under which

para 3(E) the plaintiffs were liable to forfeit a sum of up to 40% of the purchase price of each of the properties in the event of their sale and disposal without the Controller`s prior written approval;

(3) on 31 December 1988 Tong passed away suddenly. The plaintiffs faced immense pressure from bankers who were financing the development of the properties; they either had to sell the properties or risk a forced mortgagees` sale;

(4) on 10 April 1989 (exh TSH-4) the plaintiffs` solicitors wrote to the Controller to seek his consent to the intended sale of the properties to Teng Fuh Holdings Pte Ltd (`Teng Fuh`). On 12 April 1989 the plaintiffs granted two options (collectively `the options` and singly `the option`) to Teng Fuh or its nominee to purchase the properties. As Teng Fuh was also a foreign company within the meaning of s 2(1) of the Act, cl 8(i) of the options stated:

the sale and purchase is conditional upon the purchaser obtaining a qualifying certificate from the relevant government authorities for the purchase and retention of the property within a period of 15 weeks from the date of exercise of this option.

The options were exercised on 2 May 1989 by Vimbosa Pte Ltd (`Vimbosa/the purchaser`) as Teng Fuh`s nominee; Vimbosa was also a foreign company;

(5) following two reminders from the plaintiffs` solicitors, the Controller replied on 31 May 1989 asking for particulars of the purchaser and the proposed selling prices which particulars were furnished. On 10 July 1989 the Controller wrote to say the plaintiffs` request had been rejected;

(6) on 17 July 1989 the plaintiffs` solicitors appealed to the Controller to revoke his decision followed by a second appeal on 10 August 1989. The Controller wrote on 25 August 1989 for certain information which was supplied by the plaintiffs` solicitors. Finally after several reminders the Controller replied on 2 December 1989 to say:

(i) the plaintiffs` explanation for the sale of the properties was not accepted;

(ii) since the plaintiffs had contravened para 2(d) of each of the undertakings, the plaintiffs would have to forfeit to the government $3.3m and $5,694,256.80 under para 3(E) of the guarantees for Balmoral Road and Gallop Road respectively.

On the same day the Controller requested Citibank to forward the total sum of $8,994,256.80 to the Public Works Department (`PWD`);

(7) on 8 December 1989 the plaintiffs` solicitors wrote to the Controller to say that the sums to be forfeited were erroneously calculated as which result the Controller replied on 12 December 1989 to say that the amount to be forfeited would be reduced to $7,869,974.70 (`the sum`) comprising $2,887,500 and $4,982,474.70. On the same day the Controller wrote to Citibank requesting that the sum be forwarded to the PWD. On 19 December 1989 Citibank forwarded to PWD a cheque for the sum which amount Citibank recovered from the plaintiffs` moneys deposited with Citibank;

(8) on 31 January 1990 Vimbosa, now known as OST Development Pte Ltd (`OST`), obtained in-principle approval from the Controller who issued it the certificate subsequently. On 23 March 1990 the sale of the properties to OST was finally completed;

(9) Drew & Napier on behalf of the plaintiffs` solicitors made representations to the Controller for refund of the sum which request was rejected on 20 June 1990;

(10) Drew & Napier then made representations to the Minister of Law who in turn referred the matter to the Ministry of National Development. After several reminders from Drew & Napier the latter ministry replied in February 1991 to say the plaintiffs` appeal had been disallowed.

The plaintiffs contended that the Controller was not entitled to forfeit the sum for the following reasons:

(a) the grant of the options on 12 April 1989 by the plaintiffs to Teng Fuh did not constitute a sale or disposal of the properties; the options were clearly offers only and as such the plaintiffs did not breach para 2(d) of the undertakings;

(b) as cl 8 of the options made the same conditional upon Teng Fuh or its nominee obtaining a certificate to purchase the properties the exercise of the options by Vimbosa only brought into existence a conditional contract and until the condition was satisfied there was no binding contract for sale and purchase of the properties. Therefore the plaintiffs did not breach para 2(d) of the undertakings when Vimbosa exercised the options on 2 May 1989;

(c) the provisions in para 3(E) of the guarantees were in the nature of penalties and therefore unenforceable in law;

(d) prior to forfeiture the Controller did not give the requisite 14 days` notice in writing under s 31(6) of the Act stating his intention to forfeit and the reasons therefor;

(e) after the plaintiffs` solicitors` second appeal letter of 10 August 1989, their counsel spoke personally to the Controller (Joseph Yee) who indicated that he preferred to leave the decision whether to forfeit to the Minister of National Development (`the Minister`). As the Controller had involved the Minister whose proper function under s 31(7) of the Act was to consider an appeal from a party aggrieved by the Controller`s decision, the forfeiture was therefore irregular and ultra vires the Act;

(f) alternatively, even if the plaintiffs were in breach of the undertakings (which is denied) the conduct of the Controller was such as to amount to a waiver of the requirement for prior approval;

(g) in the further alternative, if the Controller was entitled to do so, the amount forfeited should have been $6,745,692.60 instead of the sum. The Controller erroneously forfeited the difference of $1,124,282.10 (between the two figures) representing 5% of the purchase price of the properties on the basis that the plaintiffs had not discharged the obligation in para 3(B) of the guarantees (which corresponded to para 2(b)(ii) of the undertakings), namely, the submission of building plans by certain dates which in fact was complied with by the plaintiffs on time (on 13 July and 15 December 1988 respectively). Even after the plaintiffs had granted the options to Teng Fuh the processing of the plaintiffs` building plans by the Building Control Division (`BCD`) continued and it was only after Vimbosa had exercised the options that the plaintiffs decided that it would be pointless to continue to secure approval of the building plans and the BCD was informed accordingly followed by notice of withdrawal of the building plans on 11 May 1989. The Controller had therefore misdirected himself in holding that the undertaking in para 3(B) of the guarantees remained undischarged on the ground that the building plans were withdrawn. The same having been submitted, their subsequent withdrawal is irrelevant which withdrawal in any event took place after the options had been exercised by Vimbosa. As such it was inequitable that the plaintiffs should thereby suffer an additional penalty.

The Controller in his (first affidavit) filed on 12 May 1992 to resist the plaintiffs` application said:

(i) it is the function of his office to...