Grace Development Pte Ltd and Another v Kassim Syed Ali and Other Actions

• Jurisdiction: Singapore
• Judge: S Rajendran J
• Judgment Date: 07 November 1997
• Neutral Citation: [1997] SGHC 291
• Docket Number: Suits Nos 1423 of 1991, 1426 of
• Date: 07 November 1997
• Year: 1997
• Published date: 19 September 2003
• Plaintiff Counsel: Davinder Singh SC and Rosalind Lazar (Drew & Napier)
• Citation: [1997] SGHC 291
• Defendant Counsel: K Shanmugam and Edwin Tong (Allen & Gledhill),VK Rajah and R Chandra Mohan (Rajah & Tann)
• Court: High Court (Singapore)
• Subject Matter: Application of Condition 11 of the Revised Conditions of Sale,Sale of land,Developers of commercial and industrial property,Whether developers owed a fiduciary duty to develop the property in accordance with contract,Architect's certificate,Whether developer in breach of contract in delivering units in a hotel cum shopping complex instead of a office cum shopping complex,Whether certificate provided by architect fulfilled requirements stipulated in the contract,Development,Fiduciary duties and contractual obligations,Contract,Validity of notice to complete,Land

Judgment:

S RAJENDRAN J

Cur Adv Vult

The defendants in these three suits and various other purchasers (collectively referred to as `the purchasers`) had contracted with Adelphi Development Pte Ltd (ADPL) in 1982/93 for the purchase of shop units in a building to be called the `Adelphi`, that ADPL intended to build at the former Adelphi Hotel site that they owned at the Coleman Street/North Bridge Road junction.

2.The contract for the construction of the Adelphi was awarded by ADPL to OCK Construction Pte Ltd (OCK). It was to be built in two phases. Construction work on Phase I of the project, comprising the podium block consisting of the shop units and basement car park, started in 1980. Phase II would comprise the tower block which would house a hotel.

3.ADPL, however, encountered financial difficulties which affected the progress of the construction. By 1988 construction work came to a halt. By that time the amount owing to OCK by ADPL was about $18.5m. In order to try to ameliorate the losses, the shareholders of OCK entered into negotiations with ADPL and the United Overseas Bank, the financiers of ADPL, that ultimately resulted in the shareholders of OCK agreeing to purchase the Adelphi site and project for $77.5m. A company called Grace Development Pte Ltd (the first plaintiffs) was incorporated for this purpose. On 24 August 1988, ADPL gave the first plaintiffs an option to purchase the site. After obtaining in-principle approval from Arab Bank Ltd to finance the purchase, the first plaintiffs, on 15 September 1988, exercised the option. While negotiating the purchase of Adelphi, the first plaintiffs were, simultaneously, negotiating with DBSL Building Pte Ltd (`DBSL`, the second plaintiffs) for the sale of the tower block and the unsold shop units in the Podium Block to DBSL.

4.The negotiations for the purchase of Adelphi and the negotiations for the sale of the tower block to DBSL were conducted by Ong Han Cheong (Ong), a shareholder of OCK and a director of the first plaintiffs. He was also the managing director of OCK and had been the Project Manager of the Adelphi project from the time work on the project commenced. Ong was therefore familiar with the history of the project. With the passage of time, however, Ong`s recall of detail was, understandably, hazy and much of his evidence was based on the documentation shown to him. Ong testified that as there was, in 1988, a glut of hotel rooms in Singapore, DBSL had doubts whether another hotel so close to Raffles City would succeed. DBSL was therefore prepared to pay a higher price if the tower block was converted from hotel use to office use.

5.ADPL had, on 10 December 1987, in fact obtained in-principle approval for the conversion of the tower block from hotel to office subject to the consent of those persons who had already contracted to buy units in the project. The approval, however, lapsed on 1 July 1988. DBSL was prepared to give the first plaintiffs time to obtain approval for the conversion.

6.The sale and purchase agreement between the first plaintiffs and DBSL was entered into on 19 October 1988. By this agreement the first plaintiffs sold Adelphi (less shop units already sold) to DBSL for $78m. The purchase price for the shop units was agreed at $350 psf. By cl 30 of the agreement DBSL reserved the right to require the first plaintiffs to take steps to convert the hotel component to office premises and further shop units. It was also provided that, upon DBSL exercising this right, the first plaintiffs were to use its best endeavours to obtain the consent of all the purchasers of the sold units to the conversion as well as obtain the approval of the building authority for the amended plans. If the approval of the building authority for the conversion was obtained, the purchase price was to be adjusted upwards to $520 psf for the shop units and office units to be purchased by DBSL. DBSL exercised its right under cl 30 on the same day as the sale and purchase agreement was signed.

7.By a deed of assignment dated 19 October 1988 (the Adelphi assignment) ADPL assigned all its interests in the sale and purchase agreements entered into with the defendants and other purchasers of shop units to the first plaintiffs absolutely. Soon thereafter the other creditors of ADPL moved in and a compulsory winding-up order was made against ADPL on 28 April 1989. In October/November 1988 notice of the Adelphi assignment was given by ADPL and the first plaintiffs to the defendants and all other purchasers of shop units in the Adelphi. The first plaintiffs also informed the purchasers that OCK was being re-appointed as the main contractor to complete the project.

8.Under the terms of the sale and purchase agreement between ADPL and the purchasers, the purchase price was payable progressively until completion in accordance with a schedule set out in cl 4(1) and (2) thereof. Progress payments would fall due and payable within 14 days after receipt by the purchasers of the vendor`s notice in writing that a particular stage of the construction has been completed or that a particular event had occurred. Every such notice would also be supported by a certificate of the vendor`s architects confirming the matters stated in the vendor`s notice. Up to the time the first plaintiffs entered into the picture, all notices issued on behalf of ADPL by its solicitors, M/s Jing Quee Chin Joo & Teck Hui (JQCJ), to the defendants under cl 4 of the sale and purchase agreement had been met.

9.On 14 December 1988, M/s Harry Elias & Pnrs (HE & P), the then solicitors for the first plaintiffs, requested payment of the sum due and payable under cl 4(1)(i) of the sale and purchase agreement. The defendants were asked to make the cheque payable to `Arab Bank Ltd for account of Grace`. The defendants complied as directed.

10. The conversion from hotel/shopping to office/shopping

As early as 1980, ADPL had ideas of converting the use of the tower block from hotel to office. This is apparent from a letter written by JQCJ to the Controller of Housing requesting approval to include in the sale and purchase agreement amended clauses (32 and 33) to the effect that the purchasers are deemed to have knowledge of the vendor`s intention to apply to convert the hotel component of the project into office space. The Controller of Housing, by letter dated 24 October 1980, gave approval for the said amendments.

11.Although approval was obtained, cll 32 and 33 were in fact not included in its amended form in 50 out of the 148 sale and purchase agreements that were entered into by ADPL. The defendants were amongst those whose sale and purchase agreement did not include the amended cll 32 and 33. There was no admissible evidence given in court to explain the reason for the omission. All that can be said from the material available in the ADPL files was that the omission was as a result of some miscommunication between ADPL and JQCJ.

12.On 19 January 1983 (some two weeks after the sale and purchase agreements were signed) JQCJ wrote to M/s Rajah & Tann (R & T), who were acting for the defendants, explaining that cll 32 and 33 had been `inadvertently omitted` from some of the sale and purchase agreements entered into and sought confirmation that the two clauses `shall be deemed to have been included` in the sale and purchase agreements of the defendants. R & T replied saying that their clients could not agree.

13.By letter dated 2 August 1988, JQCJ informed R & T that at a meeting between ADPL and R & T`s clients, R & T`s clients had indicated their willingness to consent to the hotel component being converted to office space. JQCJ requested R & T for written confirmation of such consent. R & T in their response dated 6 August denied that their clients had consented to the change but stated that their clients would consent on condition that ADPL agreed to compensate them by an abatement in the purchase price. The abatement that R & T sought was the aggregate amount of the remaining progress payments payable under the respective sale and purchase agreements which, at that stage, was 35% of the purchase price.

14.On 18 May 1989 the first plaintiffs entered into a loan agreement with DBSL for DBSL to finance the project in place of Arab Bank Ltd and in connection therewith entered into a deed of assignment that same day with DBSL by which the first plaintiffs assigned to DBSL, inter alia, all its rights under the Adelphi assignment and under the sale and purchase agreements entered into with the purchasers of shop units. All the purchasers of the shop units (including the defendants) were, on 20 May 1989, notified by the first plaintiffs of the re-assignment by Arab Bank Ltd and the assignment to DBSL and told that unless otherwise notified by DBSL they were, with immediate effect, to pay all amounts falling due under the sale and purchase agreements to DBS project account no 27-042163 for the account of the first plaintiffs (the project account). None of the defendants took issue with this notice.

15.On 5 December 1988, the first plaintiffs wrote to the purchasers stating:

In view of the current economic outlook of the hotel industry, we are contemplating and considering a proposed conversion of the building project, ie The Adelphi, to an office cum shopping complex instead of its present approved plans as a hotel cum shopping complex. We understand that the previous registered proprietors, Adelphi Development Pte Ltd, had been in communication with you as purchasers of the abovecaptioned unit in the Adelphi in respect of your agreement to such proposed conversion of the Adelphi.

We would like to reassure that any proposed conversion of the Adelphi to office usage would not in any manner affect or change the physical plans, layout or specifications of the unit purchased by you as such conversion is intended only for the hotel premises of the building project.

We would also like to

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