Chong Ah Kwee and Another v Viva Realty Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 19 March 1990
• Date: 19 March 1990
• Docket Number: Suits Nos 1660-1662, 1667-1668, 1688-1690, 2027-2028 and 3208 of 1985
• Court: High Court (Singapore)

Chong Ah Kwee and another

Plaintiff

and

Viva Realty Pte Ltd

Defendant

[1990] SGHC 20

Chan Sek Keong J

Suits Nos 1660-1662, 1667-1668, 1688-1690, 2027-2028 and 3208 of 1985

High Court

Land–Conveyance–Purchasers buying flat from developer–Final surveyed area of flat less than estimated contractual area–Purchasers claiming abatement in price after completion of sale and purchase–Whether purchasers entitled to compensation for shortfall in area–Whether developer in breach of warranty on land area–Whether purchasers waived right to compensation–Whether shortfall in area was serious or vital and affecting property value under condition 11 of Singapore Law Society's Conditions of Sale 1981–Whether compensation to be by way of proportionate abatement on purchase price

The defendant was the developer of a block of flats. By an agreement for sale dated 10 November 1982, it agreed to sell one of the flats to the original purchasers at the price of $425,000. The agreement for sale described the flat as “all that flat … estimated to contain a floor area of 195.2 sq m (2,100sq ft)”. On 15 September 1983, the original purchasers gave an option in writing to the plaintiffs to purchase the flat (as described in the agreement for sale) at the price of $460,000. The option was exercised on the same day.

At the time of completion in August 1984, the plaintiffs discovered for the first time that the final surveyed area of the flat was only 163m² (about 1753.88sq ft) or 16.47% short of the contractual area. The plaintiffs' solicitors then wrote to the defendant's solicitors claiming 16.47% of the purchase price of $425,000 and requesting the same be deducted from the balance due on completion, but this was rejected by the defendant's solicitors who replied that the purchase price was calculated on a unit basis and not on an area basis.

The plaintiffs sought compensation on the purchase price under condition 11 of the Singapore Law Society's Conditions of Sale 1981 for the shortfall in the area, as amounting to a misdescription of a serious nature and/or that it affected the value of the flat considerably.

Held, allowing the plaintiffs' claim:

(1) From the evidence, the defendant either did not make a genuine estimate or it deliberately did a fraudulent calculation of the area of the flat: at [18].

(2) It was perfectly reasonable to construe the word “estimated”, assuming it was a warranty, to mean that the defendant had estimated the area but that if a mistake was made, the plaintiffs would not be entitled to annul the contract or to compensation unless the estimation had resulted in a misdescription which was of a serious/vital nature or affected the value of the flat. If there was a doubt as to the ambit of the defendant's warranty, it should be construed in favour of the purchaser: at [19].

(3) The plaintiffs had not waived their claim to abetment. The plaintiffs had been given no real choice, there was no principle that an application for relief had to be made before completion, and there was no merger of the contract and conveyance: at [21], [22]and [25].

(4) The defendant had knowledge of the correct area of the flat at the time of the subpurchase, but it did not disclose this fact and thereby induced the plaintiffs to complete the subpurchase on the basis of an incorrect area: at [28].

(5) Condition 11, on its ordinary construction, meant that neither party should be entitled to compensation for any misdescription if it was neither of a serious/vital nature nor considerably affecting the value of the property. Accordingly, if it was one or the other, then either party was entitled to compensation. In the context of Singapore, a shortfall of 16.47% of the built-up area of a flat is both of a serious nature and considerably affecting the value of the property: at [29] and [30].

(6) Where a purchaser was entitled to compensation, the general principle was that the purchaser was entitled to be put as nearly as possible into the position he would have enjoyed had he obtained the land contracted to be sold without the error or misdescription. A rateable abatement of the price would probably leave parties in the same relative situation in which they would have stood if the true quantity had been originally known. In the case of a flat, some parts of it may well be of less value than other parts, but in the absence of any evidence to the contrary, a rateable abatement should be applied: at [49] and [50].

Aswani v Collector of Land Revenue [1981-1982] SLR (R) 519; [1982-1983] SLR 81 (refd)

Bos v Helsham (1866) LR 2 Exch 72 (refd)

Clayton v Leech (1889) 41 Ch D 103 (distd)

Contract, In re A; Elphick and Gaw Khek Khiam [1930] SSLR 199 (refd)

Cordingley v Cheeseborough (1862) 4 De G F & J 379; 45 ER 1230 (folld)

Hill v Buckley (1811) 17 Ves 394; 34 ER 153 (folld)

Joliffe v Baker (1883) 11 QBD 255 (distd)

McKenzie v Hesketh (1877) 7 Ch D 675 (folld)

Owmist Pty Ltd v Twynam Pastoral Co Pty Ltd [1983] 3 NSWLR 196 (refd)

Palmer v Johnson (1884) 13 QBD 351 (refd)

Rudd v Lascelles [1900] 1 Ch 815 (folld)

Rutherford v Acton-Adams [1915] AC 866 (folld)

Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 (refd)

Yeo Brothers Co (Pte) Ltd v Atlas Properties (Pte) Ltd [1987] SLR (R) 490; [1987] SLR 443 (distd)

Housing Developers Rules1976 (GN No S 182/1976)r 17, First Schedule

Housing Developers (Amendment) Rules 1981 (GN No S 239/1981)

Cheong Yuen Hee, Terence Teo and Tommy Ho (Y H Cheong) for the plaintiffs

C Newman QC, Cheng Tim Pin and Lo Wai Ping (Yap & Yap) for the defendant.

Judgment reserved.

Chan Sek Keong J

1 This action was commenced in February 1985 as an action for rescission of a sale and purchase agreement of a flat (“the flat”) known as #05-02, Prince Apartments, Jalan Datoh, Singapore on the ground of fraudulent misrepresentation in relation to the area of the flat and for other consequential reliefs. The defence and counterclaim was filed in March 1985 and amended in August 1985. The reply and defence to counterclaim was filed in September 1985 and the further amended defence and counterclaim was filed in May 1986. In July 1986, the amended reply and defence to counterclaim was filed. In October 1989, the statement of claim was amended to include an alternative allegation of negligent misrepresentation and a claim for an abatement of the purchase price on the ground of a shortfall in the area of the flat purchased by the plaintiffs. In consequence, the defendants filed their re-amended defence and counterclaim some days later. On the date of hearing, the plaintiffs, with the consent of the defendants, served a re-amended reply and defence to counterclaim.

2 At the trial, the parties agreed to have only one issue tried, and that is whether the plaintiffs are entitled to compensation on the purchase price of the flat for the shortfall in its area. It has also been agreed by counsel for the relevant parties in the other ten consolidated actions that the outcome of this action will also determine the results of those actions where similar claims have been made against the defendants in connection with other flats in Prince Apartments.

3 The defendants were the developers of the block of flats called Prince Apartments. By an agreement for sale dated 10 November 1982, they agreed to sell the flat to Teo Thian Hock and Lee Lak Nia (“the original purchasers”) at the price of $425,000. The agreement for sale was in the form prescribed under the Housing Developers Rules 1976 and described the flat in the First Schedule thereof as “ [a]ll that flat … estimated to contain a floor area of 195.2 sq m (2,100 sq ft)”. On 15 September 1983, the original purchasers gave an option in writing to the plaintiffs to purchase the flat (as described in the agreement for sale) at the price of $460,000. The option was exercised on the same day.

4 In accordance with r 17 of the Housing Developers Rules 1976 as amended in 1981 (see GN No S 239/1981), the defendants agreed to enter into a fresh agreement for sale with the plaintiffs provided certain conditions were fulfilled, ie inter alia, that the plaintiffs furnish a stamped deed of assignment, a letter of authority and the surrender of the original agreement of sale for cancellation. All the conditions were duly complied with, as a result of which the defendants, as vendors, and the plaintiffs, as purchasers, entered into a fresh agreement for sale dated 21 January 1984 (“the sale agreement”). By the deed of assignment dated 9 January 1984 and made between the original purchasers and the plaintiffs, the former assigned to the latter all their “rights title and interest benefits advantages permits licences and remedies of the assignors in the agreement of sale”.

5 At the time of completion in August 1984, the plaintiffs discovered for the first time that the final surveyed area of the flat was only 163m² (about 1753.88sq ft) or 16.47% short of the contractual area. On 6 August 1984, the plaintiffs' solicitors wrote to the defendants' solicitors claiming the sum of $70,023.80 (being 16.47% of the purchase price of $425,000) and requesting the same be deducted from the balance due on completion. The defendants' solicitors replied on 10 August 1984 rejecting the request on the ground that the purchase price was calculated on a unit basis and not on an area basis. The plaintiffs attempted to complete on 14 August 1984 without prejudice to their claim for abatement, but the defendants refused to complete. The defendants' solicitors ended their letter dated 14 August 1984 with the following sentence: “Your clients may wish to complete the purchase or rescind the contract.” In their letter of the same date, the plaintiffs' solicitors placed on record that the solicitor for the defendants was of the view that the plaintiffs either complete or “commence action to nullify the agreement for sale and purchase”. On...