Fong Whye Koon v Chan Ah Thong

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 09 April 1996
• Neutral Citation: [1996] SGHC 68
• Docket Number: Originating Summons No 579 of 1995
• Date: 09 April 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: MP Rai (Robert WH Wang & Woo)
• Citation: [1996] SGHC 68
• Defendant Counsel: Tan Hee Liang (Tan See Swan & Co)
• Court: High Court (Singapore)
• Subject Matter: Inadequacy of consideration,Presumption of constructive fraud,Equity,Non-availability of independent advice bargain,Remedies,Unconscionable transactions,Adverse inference against party on ground of failure to reveal material facts known to him,Specific performance,Unconscionable bargain,Unconscionability,Whether passive acceptance of bargain in unconscionable circumstances could amount to constructive fraud,Whether rebutted,Other party's age and infirmity,Whether transaction was an unconscionable bargain,Factors giving rise to presumption,Whether alternative remedy of damages available,Contract

Cur Adv Vult

This is a claim by the purchaser for specific performance of a contract for the sale of a flat. The defendant vendor is an old lady, aged 84 at the time when the contract was entered into in May 1994. She is of a humble origin. She is illiterate. She worked all her working life as a domestic servant and casual labourer. She managed to save enough to buy the flat in 1964. It was her only asset. No longer able to work, she lived solely on the rent obtained from letting two rooms.

The contract for the sale came about this way. The lady was feeling old, she had chronic illnesses - arthritis, heart problems, difficulty in moving about and so on. She entertained the thought of returning to China to live out her years at her ancestral village. There was an invitation from her sister to do so. So she thought of selling the flat. She met someone whom she describes as a friend who was moonlighting as a housing agent. This `friend` told her she would be able to get a good price for it. The `friend` gave the `market price` as $245,000, and wanted a $5,000 commission, which the defendant agreed to pay. Two days later, the `friend` brought the plaintiff to view the property. According to the defendant, the plaintiff agreed on the spot to buy the flat at the asking price of $245,000 without any bargaining. Subsequently, the defendant put her thumb print on an option dated 26 April 1994, presumably before the `friend`.

The plaintiff exercised the option on 10 May 1994, paying the balance of the 10% of the purchase price as the deposit. The contract was thus concluded. Completion was to be within four months from the date of the option. However, some technical problem with the title was in due course discovered by the purchaser`s mortgagees` solicitors. This had to be rectified and the completion date was more than once extended by agreement, the last extension being to 26 April 1995. At about this time, the defendant began to have doubts about returning to China. Her relatives were asking for large sums of money and she had heard about aged returnees being abused and ill-treated. So on 5 May 1995, her solicitors wrote to the plaintiff`s solicitors telling them that she did not intend to go on with the sale as she had not been able to find alternative accommodation. The plaintiff refused to accept this position and insisted on proceeding with the contract. On 19 June 1995, the plaintiff took out this originating summons seeking specific performance and consequential orders.

In her affidavit of 10 August 1995 in answer to the plaintiff`s claim, the defendant said that she had now found out that the price of $245,000 was a gross undervalue. A valuation report obtained on her behalf shows that the market price at the date of contract was about $390,000. The valuation report was prepared by a professional valuer on the basis of comparables of sales of similar flats in the immediate neighbourhood at about the same time as the subject flat. The valuation of $390,000 stands unchallenged, and I accept it as indicative of the true market value of the subject flat at the time of the contract.

Constructive fraud: unconscionable bargain

Counsel for the defendant submits that the circumstances of this case bring it within what is recognized by courts of equity as an unconscionable bargain, and the court should not lend its aid to the purchaser by ordering specific performance. I think he is right. Unconscionable bargain is a species of constructive fraud, a concept with a long history. In the very early case of Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82, Lord Hardwicke said:

Fraud may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other; which are inequitable and unconscientious bargains.

Lord Hardwicke said that fraud could be presumed `from the circumstances or conditions of the parties contracting - weakness on one side, usury on the other, or extortion, or advantage taken of that weakness.` In Earl of Aylesford v Morris [1861-73] All ER Rep 300, Lord Selborne said that `fraud` in this context `means an unconscientious use of the power arising out of these circumstances and conditions.`

Both these cases were cases of transactions involving expectant heirs, who, because of their circumstances, including youth, impecuniosity and ignorance of the ways of the world, were thought to be deserving of the protection of the courts of equity in respect of transactions entered into to their disadvantage. However, the principle has been extended to all cases in which the parties contracting do not meet on equal terms. Fullagar J in the High Court of Australia case of Blomley v Ryan (1954-56) 99 CLR 362 at p 405 summarized the position, I am sure correctly, as follows:

The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-Ã -vis the other.

Kay...