Chua Choon Cheng and Others v Allgreen Properties Ltd and Another Appeal

• Judge: Chan Sek Keong CJ
• Judgment Date: 28 May 2009
• Neutral Citation: [2009] SGCA 21
• Citation: [2009] SGCA 21
• Defendant Counsel: Davinder Singh SC, Darius Bragassam and Alecia Quah (Drew & Napier LLC)
• Published date: 01 June 2009
• Plaintiff Counsel: Molly Lim SC, Philip Ling and June Hong (Wong Tan & Molly Lim LLC)
• Date: 28 May 2009
• Docket Number: Civil Appeal Nos 72 and 73 of 2008
• Court: Court of Appeal (Singapore)
• Subject Matter: Purchaser offering additional payments to minority owners to induce consent,Whether there was implied term in law prohibiting making of additional payments to minority owners,New point on implied term in law,Whether purchaser owed implied duty to disclose in law the making of additional payments to minority owners,Implied duty of good faith in law,Minority owners initially objected to collective sale but later withdrew objections,Whether purchaser owed implied duty of good faith in law to owners in collective sale contract,Majority owners might be keen to incentivise minority owners or for purchaser to offer more money to minority owners to complete deal,Whether such fact relevant to position of majority owners,No duty of care or good faith owed by purchaser to vendor in relation to price of property,New point raised on appeal,Civil Procedure,Implied duty of disclosure in law,Sale committee objected as sale price too low,Whether there was implied term in fact prohibiting making of additional payments to minority owners,Sale committee did not subject collective sale to development baseline inquiry to save costs and achieve certainty of sale,Whether new point could be raised on appeal,No prejudice caused to other party,Judgments and orders,Land Titles (Strata) Act (Cap 158, 1999 Rev Ed),Contractual terms,Related proceedings before High Court,Land,Whether appellant could proceed against minority owner on appeal,Minority owners paid additional sum by purchaser to procure consent to collective sale,Collective sale became unanimous,Contract,Implied terms,Whether Strata Titles Board should continue its hearing or decision,Strata Titles,Appeals,Whether Strata Titles Board had jurisdiction over application for collective sale order,Minority owner not party to action,Strata Titles Board hearing application for collective sale order,Whether Strata Titles Board should take sale committee's objections into account in determining whether transaction was in good faith,Contract provided possibility of obtaining unanimous consent within 12 months from date of contract,Minority owner had no opportunity to appear before court to make arguments,Nothing in contract required purchaser to disclose making of additional payments to minority owners

28 May 2009 Judgment reserved.

V K Rajah JA (delivering the judgment of the court):

1 This appeal arises from the collective sale of the condominium development known as Regent Garden Condominium (the “Property”). It raises an interesting legal issue about the propriety of the purchaser’s direct payment of incentive monies to the minority owners to secure the latter’s consent to the collective sale. Is there an implied term or an obligation of good faith that requires a purchaser to obtain the prior consent of the consenting majority owners or, at the very least, to inform the latter before making such incentive payments? We should add that an unusual feature about this collective sale is that it is only the minority owners who now support the collective sale. The majority owners, ironically, are in the rather awkward position of opposing the very sale they initiated and agreed to with the purchaser. This volte face has arisen because the majority owners now strongly feel that they had mistakenly short-changed themselves when they agreed to a sale price “below” the market value of the Property. How did this peculiar situation arise? To provide the background to the dispute, we first set out the material facts before addressing the legal issues.

Facts of the case

2 There are 31 units in the Property. Between 26 August 2006 and 25 February 2007, the owners of 25 units (the “Majority Owners”) agreed, pursuant to a Collective Sale Agreement dated 26 August 2006 (the “CSA”), to a collective sale of the Property.^{[note: 1]} Clause 10.1 of the CSA states that “[t]he Sale Price shall be applied by the Solicitors in accordance with the terms of this Agreement and apportioned as set out in Schedule F”.^{[note: 2]} Schedule F of the CSA sets out the prescribed method of apportionment that seeks to ensure that each subsidiary proprietor receives a share of the sale proceeds in proportion to his unit’s share value and floor area.^{[note: 3]} In accordance with the CSA, a Sale Committee (“SC”) was constituted to represent the Majority Owners. Colliers International (“Colliers”), the SC’s marketing agent,^{[note: 4]} recommended a minimum reserve price of $30m for the Property, taking into account an anticipated development charge estimated at $7.6m. This worked out to be about $336 on a per-square-foot (“psf”), per-plot-ratio (“ppr”) basis.

3 After accepting this recommendation, the SC instructed Colliers to prepare an Invitation to Submit Offer (“ISO”) to invite developers to bid for the Property. The ISO was sent out on 16 January 2007 and the bidding process closed on 13 February 2007. At this point of time, the SC was still four units short of the 80% threshold required by the CSA (see [47] below) and the Land Titles (Strata) Act (Cap 158, 1999 Rev Ed) (“the Act”) to be able to submit an application to the Strata Titles Board (the “STB”) for a collective sale.^{[note: 5]} The ISO indicated an estimated development charge of $7.2m. Allgreen Properties Limited, the respondent, (“Allgreen”) offered the highest bid of $34m, which was $4m higher than the reserve price. On 14 February 2007, Colliers wrote to all the subsidiary proprietors of the Property to notify them of Allgreen’s bid, describing it as amongst the highest achieved on a psf-ppr basis for a property in the vicinity^{[note: 6]}. Based on the $34m offer, Colliers managed to persuade four other subsidiary proprietors to sign the CSA at a reserve price of $34m, on 21 February 2007.^{[note: 7]}

4 We pause here to provide some context about the development charge regime. This will facilitate a better understanding of the background to this dispute. Development charges are charges levied on the enhancement in land value resulting from the State approving a higher value development proposal: see A Quick Guide on Development Charge (Source: (accessed on 14 May 2009). Generally, a development charge is payable where the ‘development ceiling’ exceeds the existing ‘development baseline’.^{[note: 8]} Therefore, the higher the existing development baseline of a project is, the lower the development charge will be. A lower development charge would, in turn, ordinarily translate into a higher realisable sale price for the land.

5 After the bid was received (but before the sale and purchase agreement was entered into), the SC held extensive discussions with both Allgreen and Colliers about the potential impact of the potential development charge. This was partly documented by the handwritten minutes of a meeting held between the SC and Colliers on 2 April 2007, which stated:^{[note: 9]}

1. The Sales Committee enquired about the need for a base-line measurement of the estate for the enbloc sale.

Colliers noted that they had clarified this previously.

2. They Colliers assured the committee that the current practice is for the buyer who are developers to be concerned about the size of the estate for as it affects the development charges. If the buyer does not demand the base line, it has adopted the risk.

The sales committee’s duty is to obtain the best price. The price can be obtained from a EOI [Expression of Interest] or a tender. The profession currently relies on the URA approved gross floor area as a measure of the estate’s size.

[emphasis added]

6 It is also helpful for additional context to reproduce an email sent by Colliers to the SC on 9 April 2007. This summarised, with clarity, the nature and extent of the SC’s and Collier’s discussions on the potential impact of the development charge on the sale price:^{[note: 10]}

Following the meeting on 2 April 2007… we note that the subject of the development baseline for Regent Garden was brought up again by Ms Wong Lai Keen [chairperson of the SC].

If you all can recall, the subject of the development baseline was brought to attention soon after our appointment by the sale committee as the marketing agent sometime in July 2006. For buildings approved prior to 1 September 1989, there is a requirement for an architect to recompute the Gross Floor Area (GFA) of the building according to the new definition of GFA when a Development Baseline enquiry is made. We obtained a verbal quotation of $11,000/- from M/s Cyril K H Seah Architects to recompute the GFA, and this was conveyed to the sale committee then. The sale committee felt that the owners were unlikely to pay for the extra cost, considering that the MC funds could not be used for this purpose. Hence, the development baseline enquiry was not made.

However, for our marketing purposes, we applied at our own cost to URA for the planning records to obtain the approved GFA for Regent Garden based on the submission plans back in 1980. The approved GFA in 1980 was indicated as 5880.44 sq m, which translates to a plot ratio of 0.8355. This was of course subject to the usual disclaimer that it shall not be construed as the development baseline, but it will at least provide the developers with a guide as to the estimated development baseline, in lieu of an official baseline enquiry reply. The estimated baseline plot ratio based on the approved GFA is higher than the plot ratio of only 0.7 in the 1980 Master Plan, and so an estimated base plot ratio of 0.8355 was indicated to developers during our marketing of your site.

Allgreen initially wanted to subject their purchase of Regent Garden to a baseline plot ratio of at least 0.8355, but we negotiated with them and managed to get them to agree to remove the clause from the Sale & Purchase Agreement. What this means is that Allgreen will assume the risk of having to pay more development charge should the baseline plot ratio fall below 0.8355.

During the meeting of 2 April 2007, Ms Wong brought to our attention a recent press article regarding a developer having to pay less development charge for a collective sale site because the development baseline was higher than earlier estimated. She then posed the question whether owners of Regent Garden can seek legal recourse if the development baseline is found to be higher than 0.8355?

If the sale committee still has concerns or issues with the development baseline, please let us know now. We will then perhaps suggest to Allgreen that they subject the sale to a baseline of 0.8355. Should the baseline be higher, Allgreen will pay to owners the savings in the development charge; if it is lower, then Allgreen has the option to either proceed with or walk away from the deal.

We have already come this far in the collective sale, and we hope that the sale committee, lawyers and consultants can all work together as an undivided team to see the collective sale till fruition.

[emphasis added]

7 In Ms Wong’s reply to Colliers, she confirmed that the SC had “[a]fter much deliberation… decided not to subject the [sale and purchase agreement] to any development baseline. We need to have more certainty of sale”. Ms Wong, we should add, was the Chairperson of the SC. This email is important as it underscores a crucial fact. The SC had made a considered decision in preferring the certainty of a sale to the uncertainty of renegotiating the sale. The latter alternative, while allowing the subsidiary proprietors to receive any savings in the development charge (if the actual development charge turned out to be lower than originally estimated), would give Allgreen the option of walking away from the deal if the actual development charge payable was greater than estimated. As far as the SC was concerned, the “certainty” of a bird in hand was certainly preferable to the “uncertainty” of there possibly being two birds in the bush (but see [17] below). We also note that between 14 March 2007 and 15 March 2007, there was a further exchange of letters between Tan & Au LLP (solicitors for the Majority Owners and the SC) (“T&A”) and Yeo-Leong & Peh LLC (solicitors for Allgreen) (“YLP”).^{[note: 11]} This correspondence unequivocally confirmed that both the SC and Allgreen had agreed not to subject the collective sale to any...