Chip Thye Enterprises Pte Ltd v Development Bank of Singapore Ltd

• Jurisdiction: Singapore
• Judgment Date: 10 September 1994
• Date: 10 September 1994
• Docket Number: Civil Appeal No 169 of 1993
• Court: Court of Appeal (Singapore)

Chip Thye Enterprises Pte Ltd

Plaintiff

and

Development Bank of Singapore Ltd

Defendant

[1994] SGCA 59

Yong Pung How CJ

,

M Karthigesu JA

and

L P Thean JA

Civil Appeal No 169 of 1993

Court of Appeal

Equity–Remedies–Account–Whether mortgagee liable to account to purchaser as person who appeared from land register to be entitled to mortgaged property in respect of proceeds of mortgagee sale including any gain in appreciation in value of mortgaged property–Land–Caveats–Remedies of caveatee–Whether mortgagee committed statutory breach against purchaser as person who appeared from land register to be entitled to mortgaged property in respect of proceeds of mortgagee sale–Section 68 Land Titles Act (Cap 157, 1985 Rev Ed)–Land–Sale of land–Conditions of sale–Whether condition precedent of sale imposed on purchaser–Whether condition of sale exclusive benefit of purchaser such that it alone at liberty to waive it and render sale agreement unconditional–Land–Sale of land–Conditions of sale–Whether condition set out in letter incorporated into sale agreement–Land–Sale of land–Remedies under uncompleted contract–Whether purchaser had elected to treat sale agreement as repudiated by vendor and rescinded sale agreement–Land–Sale of land–Remedies under uncompleted contract–Whether purchaser had equitable lien for its deposit on surplus proceeds of mortgagee sale conducted by mortgagee

Quah owned and mortgaged his property (“the property”) to the respondent bank. On 15 July 1986, Quah agreed to sell the property to Goh Hock Choon Pte Ltd (“GHC”), and on 27 August 1986, GHC lodged a caveat against the property claiming an interest as purchaser. A dispute subsequently arose between Quah and GHC, and GHC commenced a suit against Quah claiming for a rescission of the sale agreement and a refund of the deposit paid under the sale agreement.

While these proceedings were in progress, in early November 1986, Quah started negotiations with the appellant for the sale of the property. On 27 November 1986, Quah wrote to the appellant, confirming that the property had been sold to it for $830,000 and informing it that the transfer of the property would be effected “after the settlement with GHC” (“the 27 November 1986 letter”). The appellant did not reply. Subsequently, on 4 December 1986, Quah and the appellant entered into a written agreement for the sale and purchase of the property (“the sale agreement”).

At the time of the execution of the sale agreement, Quah had obtained written planning permission to develop two pairs of semi-detached bungalows on the property. Clause 6 of the sale agreement stated that the sale was subject to the appellant obtaining an extension or renewal of the existing planning permission. The appellant thus applied to the authorities for an extension, upon which it received a reply that an extension was unnecessary as the planning permission was valid until 24 October 1987. The appellant did not inform Quah of this. Instead, the appellant's solicitors wrote to Quah's solicitors, stating erroneously that it had obtained the extension and that “the agreement had become unconditional” (“the 13 October 1987 letter”). The appellant's solicitors further enclosed the engrossed transfer for execution and requested that Quah's solicitors provide the completion account. However, the sale was not completed.

On 16 March 1987, GHC lodged another caveat against the property claiming interest as holders of an equitable lien arising from the payment of the deposit under the agreement of 15 July 1986. On 8 June 1987, the appellant lodged a caveat claiming interest as the purchasers of the property.

On 23 October 1987, the respondent bank exercised its power of sale as mortgagee and sold the property at an auction for $1,210,000. The caveats lodged by GHC and the appellant against the property were later overreached and cancelled. The appellant thus sued Quah for repayment of the deposit and damages for breach of contract. After paying the costs involved in the mortgage sale and deducting the amount outstanding under the mortgage, the respondent bank held a surplus of $415,778.41 (“the surplus amount”) which it eventually paid to Quah.

The appellant sued the respondent bank for a declaration that it was entitled to the surplus amount under s 68 (1) of the Land Titles Act (Cap 157, 1994 Rev Ed) (“the Act”). The appellant alleged that the respondent bank held the surplus amount in trust for the appellant, who was a purchaser of the property. Alternatively, the appellant claimed an equitable lien on the surplus amount as a result of the deposit it had paid.

The trial judge dismissed the appellant's claim. He held that the sale agreement was a conditional contract and was incapable of being specifically enforced. The appellant thus fell outside the scope of s 68 (1) of the Act, and was precluded from claiming the surplus amount. Further, the trial judge held that the appellant had elected to rescind the sale agreement and thus could not seek specific performance of the sale agreement. Finally, the trial judge held that the appellant had no equitable lien on the surplus amount as there was no contract capable of being specifically enforced at the date of the completion of the mortgagee sale by the respondent bank.

The appellant appealed.

Held, allowing the appeal:

(1) The 27 November 1986 letter was written prior to the execution of the sale agreement and did not form part of the parties' agreement. The term that the transfer would occur “after the settlement with GHC” was not incorporated in the sale agreement and there was no evidence that the parties had agreed that this term would form a supplemental term to or a variation to the sale agreement. Accordingly, this term was not a stipulation to which completion of the sale and purchase was subject: at [13] and [14].

(2) It was plain on the face of the agreement that cl 6 was exclusively for the benefit of the appellant. As the planning permission would expire in 1987, it was obvious that the appellant would want the planning permission to be extended. Hence, to protect itself against a refusal by the competent authority to extend the written planning permission or to grant a fresh planning permission, cl 6 was inserted, and following that cl 8 was also inserted to provide that in the event that the extension was not obtained or fresh permission was refused, the sale agreement would come to an end. It was of no concern to the vendor whether or not the appellant would proceed with the development as approved in the planning permission: at [20].

(3) In determining whether the appellant had waived the condition in cl 6, the subjective views or beliefs of the appellant with reference to the extension of written planning permission, as well as the erroneous representations it made to Quah, were immaterial. Rather, what was material were the words used by the appellant and its conduct. The appellant had unequivocally stated that it treated the agreement as unconditional. The appellant had also enclosed the engrossed transfer for Quah's execution and asked for the completion account. Thus, while cl 6 rendered the sale agreement conditional, the appellant had by the 13 October 1987 letter and by its conduct, waived that condition. Accordingly, as of that date, the sale agreement became unconditional: at [22] and [25].

(4) The real question was whether the appellant had elected to treat the sale agreement as repudiated by the vendor Quah and had rescinded the agreement. This issue must be considered against the background of the events occurring at the material time. At the time the appellant had commenced action against Quah, the appellant had already been notified of the respondent bank's sale of the property. Quah was thus in no position to complete the sale to the appellant by then. In the appellant's statement of claim, it did not allege that Quah had repudiated the sale agreement nor did it allege if there was a repudiation by Quah, it had accepted it. Instead, the appellant claimed only a refund and damages for breach of contract Accordingly, the appellant had not rescinded the sale agreement: at [26] and [27].

(5) Irrespective of whether the sale agreement was specifically enforceable or not, when the mortgagee sale was completed, the appellant had an equitable lien for the deposit on the surplus proceeds of the sale. However in the instant case, the sale agreement was capable of specific performance. The sale to the appellant did not proceed as there had been a default on Quah's part which resulted in a mortgagee sale by the respondent bank. In these circumstances, the appellant as purchaser was entitled to an equitable lien for its deposit on the surplus amount: at [36].

(6) Section 68 (1) of the Act did not make any reference to a person who had a “registered interest” in the mortgaged property. It merely referred to “the person who appeared from the land register to be entitled to the mortgaged property”. A caveator, such as the appellant, who had duly lodged a caveat claiming an interest in the mortgaged property as purchaser and whose caveat had been notified in the land register, came within the scope of s 68 (1). The respondent bank thus ought to have paid the surplus amount to the appellant, and by paying the surplus to Quah it acted in breach of its duty under s 68 (1) and was liable to account to the appellant: at [38], [41] and [45].

(7) In equity, the appellant was the owner who would be entitled to any gain in the appreciation in the value of the property. The appellant was entitled to this amount as well as the deposit. However, as the surplus proceeds in the hands of the respondent was an amount smaller than the aggregate of the two said amounts, the appellant was entitled to receive the whole of this amount: at [46].

Aberfoyle Plantations Ltd v Khaw Bian Cheng [1960] AC 115; [1959] 3 All ER 910 (distd)...