Golden Bay Realty Pte. Ltd v Orchard Twelve Investments Pte. Ltd

• Jurisdiction: Singapore
• Judgment Date: 27 May 1986
• Date: 27 May 1986
• Docket Number: Originating Summons No 654 of 1983
• Court: High Court (Singapore)

Orchard Twelve Investments Pte Ltd

Plaintiff

and

Golden Bay Realty Pte Ltd

Defendant

[1986] SGHC 51

L P Thean J

Originating Summons No 654 of 1983

High Court

Damages–Liquidated damages or penalty–Clause providing for liquidated damages–Whether clause is penalty–Principles applicable to determining whether clause is penalty–Land–Sale of land–Conditions of sale–Vendor's failure to give notice to complete on or before agreed date–Whether purchaser entitled to liquidated damages

The respondent, the vendor, entered into an agreement with the applicant, the purchaser, for the sale of certain office premises. The vendor did not give notice to complete by the date stipulated in cl 14 (2) of the agreement. Clause 14 (2) provides for the payment of liquidated damages in the event of the vendor's failure to give such notice by the stipulated date. The vendor's solicitors later gave the notice to complete, but the sale and purchase was still not completed as the parties disagreed as to the terms of completion and as to whether the purchaser was entitled to deduct liquidated damages from the balance of the purchase price. Subsequently, the purchaser took out an originating summons claiming for the amount of the liquidated damages and for an order that the vendor complete the sale. The sale was eventually completed prior to the hearing and the only issue remaining was whether the purchaser was entitled to deduct the liquidated damages from the balance of the purchase price. The purchaser contended that it was entitled to deduct the liquidated damages. The vendor, however, argued that the cl 14 (2) was penal in nature and that the delay in completion giving rise to the liquidated damages was due to causes beyond its control under cl 15 of the agreement.

Held, granting the application:

(1) The case of Lee Kay Guan v Phoenix Heights Estate (Pte) Ltd [1977-1978] SLR (R) 614 cannot be distinguished from the instant case. As such, on the authority of that case, cl 14 (2) in the instant case was not penal in nature: at [9] to [11].

(2) Clause 14 (2) in the instant case follows the statutory form prescribed by the Sale of Commercial Properties Rules 1979 (“the Rules”) under the Sale of Commercial Properties Act 1979 (Act 14 of 1979) (“the Act”). A contract in a statutory form will not have all the incidents of an ordinary contract and in particular will not be subject to the ordinary rule relating to penalty. Otherwise, different contracts will operate differently depending on individual circumstances which would be inconsistent with the Act and the Rules: at [12].

(3) It must be taken that the Legislature in providing for liquidated damages has considered the various factors in adopting the formula contained in cl 14 (2) as a genuine pre-estimate of damage and the formula therefore cannot be penal in nature: at [13].

(4) The principles for determining whether a payment under a contract is penal in nature are first, that this is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of the making of the contract and not as at the time of the breach; second, it would be a penalty if the sum stipulated is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach; and third, it is not an obstacle to the sum stipulated being a genuine pre-estimated damage where the consequences of the breach are such as to make precise pre-estimation almost an impossibility, as it is just such a situation when it is probable that the pre-estimated damage was the true bargain between the parties. In the instant case, cl 14 (2) was not penal in nature: at [14] to [16].

(5) The burden of showing that the delay in completing the sale was due or attributable to cause or causes beyond the vendor's control and thereby exempting it from liability under cl 15 lies with the vendor. Further, the vendor must be treated as having control of matters dealt with or ought to have been dealt with by its advisors. In so far as cl 15 is concerned, the vendor must be held responsible for any act or omission on the part of any of its advisors. In the instant case, the vendor failed to discharge its burden: at [20] and [25].

Dunlop Pneumatic Tyre Company Limited v New Garage & Motor Company Limited [1915] AC 79 (folld)

Honeywill & Stein Limited v Larkin Brothers (London's Commercial Photographers) Limited [1934] 1 KB 191 (distd)

Lee Kay Guan v Phoenix Heights Estate (Pte) Ltd [1977-1978] SLR (R) 614; [1978-1979] SLR 102, CA (folld)

Lee Kay Guan v Phoenix Heights Estate (Pte) Ltd [1977-1978] SLR (R) 284; [1978-1979] SLR 237, HC (not folld)

Loates v Maple (1903) 88 LT 288 (refd)

Phoenix Heights Estate (Pte) Ltd v Lee Kay Guan [1981-1982] SLR (R) 484; [1982-1983] SLR 20 (folld)

Reardon Smith Line Ltd v Yngevar Hansen-Tangen (trading as H E Hansen-Tangen) [1976] 1 WLR 989 (refd)

Housing Developers (Control and Licensing) Ordinance 1965 (No 4 of 1965)s 21

Housing Developers Rules1965 (GN Sp No S 154/1965)

Land Titles Act (Cap 276,1970 Rev Ed)ss 13, 103, 104,105

Planning Act (Cap 279,1970 Rev Ed)s 9 (3)

Sale of Commercial Properties Act1979 (Act 14 of 1979)ss 5 (2), 9

Sale of Commercial Properties Rules1979 (GN No S 158/1979)Sched B

David Lowe QC, Cheong Yuen Hee and Roy Chua (Y H Cheong) for the applicant

Leolin Price QC and Goh Kian Hwee (Lee & Lee) for the respondent.

L P Thean J

1 By an agreement dated 17 February 1981 (“the agreement”), Golden Bay Realty, the abovenamed respondents (“the vendor”) agreed to sell to Orchard Twelve Investments the abovenamed applicants (“the purchaser”) the whole of the office premises known as Unit No 1205 (subsequently renumbered as 13-05) (“the said unit”) of a multi-storey shopping and residential building known as “Orchard Towers” situate at Orchard Road, Singapore. At the date of the agreement, Orchard Towers had been completed and the said unit was occupied by a tenant under a tenancy agreement dated 22 December 1978 made between the vendor and the tenant. In fact, a certificate of practical completion of the building works was issued by the architect of the vendor as long ago as 8 September 1975, and a temporary occupation licence for the said unit was issued on that day for a period of six months and thereafter presumably was renewed periodically. As at the date of 17 February 1981, the vendor had already sold quite a number of units of Orchard Towers and a substantial part, if not the whole, of the building had been occupied.

2 The purchase price of the said unit was $3,380,000 payable by 12 progress payments at the times respectively set out in cl 4 of the agreement. As the said unit had been completed and was occupied by the tenant on the date of the agreement, 11 of such progress payments amounting to a total sum of $2,535,000 became due and payable. The whole of this amount, after some delay on the part of the purchaser, was paid on 19 May 1981 together with a sum of $54,894.80 representing interest for late payment. It was agreed between the vendor and the purchaser that as of that date, 19 May 1981, the purchaser took possession of the said unit; as from that date the purchaser received the rent from the tenant and became liable for payment of all outgoings payable on the said unit. There still remained a balance of 25% of the purchase price which, under cl 4 (1) (l) of the agreement, was payable on completion of the sale and purchase of the said unit as follows: 20% to the vendor and the remaining 5% to the purchaser's solicitors as stakeholders to be paid to the vendor only on production of the certificate of fitness for occupation issued by the Assistant Director (Building Control) in respect of the said unit. Under cl 14 (1) of the agreement, the sale and purchase of the said unit was to be completed at the office of the vendor's solicitors within 14 days after receipt by the purchaser of a notice to complete and under cl 14 (2), the notice to complete was to be given on or before 31 December 1981.

3 The notice to complete was not given by the vendor by 31 December 1981; nor was it given by 31 December 1982. In fact, after possession of the said unit had been given to the vendor on 19 May 1981 nothing eventful in relation to this transaction occurred until 1983. On 12 January 1983, the certificate of fitness for occupation of Orchard Towers was issued and, in accordance with cl 4 (1) (l) of the agreement, 5% of the purchase price amounting to $169,000 was paid by the purchaser to the vendor. Then on 17 June 1983 the vendor's solicitors gave to the purchaser's solicitors notice to complete under cl 14 (1) requiring completion of the sale and purchase to be effected within 14 days. The sale and purchase, however, was not completed by the date as required for two reasons: (a) the purchaser requested an acknowledgement for production of prior title deeds which the vendor was not in a position to deliver at that time; and (b) there was a dispute between them: the purchaser claimed that a sum of $376,874.63 was deductible from the balance of the purchase price as liquidated damages under cl 14 (2) and the vendor rejected this claim and insisted on payment of the balance of the purchase price in full. On 1 August 1983 the vendor's solicitors gave to the purchaser's solicitors a second notice requiring payment of the full balance of the purchase price, maintaining that the delay in obtaining subsidiary strata certificate of title for the said unit was due to causes beyond the vendor's control and that by reason of cl 15 the vendor was not liable to the purchaser in damages, and requiring completion of the transaction within two weeks. The purchaser disagreed and refused to complete the purchase by the date as required; and no completion took place. On 26 August 1983, the purchaser took out this...