Group Exklusiv Pte Ltd v Diethelm Singapore Pte Ltd

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 21 October 2003
• Neutral Citation: [2003] SGHC 247
• Date: 21 October 2003
• Subject Matter: Land,Whether authorities finally and conclusively rejected application for approval,Agreement subject to purchaser obtaining approval from authorities,Clause requiring purchaser to use best endeavours to apply for approval,Scope of purchaser's obligation to use best endeavours,Sale of land
• Docket Number: Originating Summons No 1517 of
• Published date: 28 October 2003
• Defendant Counsel: Chan Hian Young and Ginny Chew (Allen & Gledhill)
• Court: High Court (Singapore)
• Plaintiff Counsel: R. Chandra Mohan and Edric Pan (Rajah & Tann)

1 The defendants were the lessees of a piece of property known as 303 Alexandra Road. The property was leased from the Housing and Development Board (‘HDB’). By a sale and purchase agreement dated 19 June 2002 the defendants contracted to sell the remainder of their lease to the plaintiffs for $20,000,000. The plaintiffs paid a deposit of $1,000,000 to the defendants’ solicitors (then Drew & Napier). The sale and purchase agreement was subject to some special conditions and the Law Society’s Conditions of Sale 1999. The completion date was agreed to be 31 March 2003. Clause 7 of the special conditions provided that:

‘The property is sold subject to the approval of all relevant government authorities for:

a) the sale of the property to the purchaser;

b) the change of use of the property to motor vehicle showroom and workshop

The purchaser shall apply for such approval in accordance with cl 15.’

Clause 15 provided that the sale was subject to the ‘approval of HDB, Urban Redevelopment Authority and other relevant authorities for the change of use of the property. It also provided that the parties shall apply for consent and change of use of the property within five weeks of the execution of the sale agreement.

2 The plaintiffs submitted an application to the National Environment Agency for their approval for the change of use of the property. The form was a standard issue of the NEA known as Form IA and it was completed by the plaintiffs’ architect, Heng Twa Kiat and submitted to the NEA by the plaintiffs’ then solicitors Chong Chia & Lim on 31 July 2002. Copies of the forms were given to the defendants’ solicitors at the same time.

3 Sometime at end August 2002, the NEA called a meeting with the plaintiffs. Heng and the plaintiffs’ divisional manager, Lim Chung Chay attended the meeting with K. Suresh and Wong Hin Mun of the NEA. The meeting lasted about 30 minutes. Heng and Lim were called as witnesses for the plaintiffs at the trial but Suresh was not summoned by either party. Heng and Lim testified that Suresh informed them that spray-painting would not be allowed, and they tried in vain to persuade Suresh to reconsider. Lim testified under cross-examination that Suresh was ‘determined’ that spray-painting would not be approved. Lim further testified that he showed Suresh some brochures of new technology for spray-painting to illustrate the point that pollution from the equipment would be minimised, but Suresh was unconvinced. Mr Chan, counsel for the defendants strongly challenged Lim’s evidence but I am of the view that Lim was a forthright witness whose testimony I accept. Realising and finally accepting that Suresh was unmoved, Lim asked if Suresh would give his decision in writing so that Lim can refer it to his employer.

4 The NEA subsequently wrote a letter dated 19 September 2002, stating the position it took in the meeting with Heng and Lim on 6 September 2002. Two relevant paragraphs of that letter are now reproduced:

‘ …

2 The premises at No. 303 Alexandra Road is located near to HDB housing flats at Jalan Rumah Tinggi. The current activities conducted at No 303 Alexandra Road include metal fabrication and spray painting activities. Despite installation of pollutive control equipment, there would still be residual pollution from such activities. Residents in the nearby HDB flats had complained against noise, smell and paint nuisance from these activities.

3 The proposed use of the above site as a vehicle showroom and parts storage is acceptable. However, pollutive uses such as vehicle repair and spray painting should not be conducted at the above premises as it would aggravate the existing nuisance problems. We have met the company, M/s Group Exklusiv on 6 Sept 02 to explain the above to them.

…’

5 By letter of 23 September 2002, Chong, Chia & Lim LLC, the former solicitors of the plaintiffs gave notice of rescission of the sale and purchase agreement. The defendants did not accept the rescission and therefore did not refund the deposit of $1m paid by the plaintiffs. The plaintiffs thus commenced this action for the recovery of their deposit. The defendants counterclaimed for breach of contract and prayed for a forfeiture order against the $1m, as well as for an award of damages. The defendants’ first allegation was that the plaintiffs were in breach because they did not make a proper application to the NEA. It will be recalled that the application to the NEA was made through the HDB by a submission of the NEA’s standard Form IA. In the sections marked “Air Pollution Control” and “Noise Pollution Control” the plaintiffs stated “N.A.” to indicate that there was nothing relevant to set out. The defendants asserted that the plaintiffs ought to have set out details explaining why there would be no air or noise pollution.

6 The defendants further alleged that the plaintiffs were in breach because they did not make any effort to appeal against the NEA’s rejection, or to persuade the latter to review its decision. The defendants argued that the plaintiffs were entitled to rescind the contract pursuant to cl 15(e) only if ‘the relevant authority clearly indicated finally and conclusively that approval would not be granted under any circumstances and not even with the imposition of terms and conditions’. I think that this is too strict an interpretation although I accept that the plaintiffs would only be entitled to rescind after it had received a clear and conclusive rejection of their application. For convenience, cl 15(e) is set out:

‘ …

(e) If the consent of HDB, LTA and other relevant authorities in respect of the sale and purchase and the change of use and the erection of the private access road is not obtained or refused by the date falling one (1) month before the date fixed for completion, the sale and purchase may, at either party’s option, be rescinded, whereupon all monies (including but not limited to the deposit and goods and services tax, if any) paid by the Purchaser herein shall be refunded to the Purchaser without any interest or compensation.

…’

7 From the pleadings, the critical issues that I have to determine are first, whether a proper application was made to the relevant authorities for a change of use; secondly, whether there was a clear and conclusive rejection of that application; and thirdly, were the plaintiffs obliged to appeal or take steps to persuade the authorities to review its decision. The plaintiffs' application to the NEA was made on 31 July 2002. A number of different statutory approvals were required from the relevant authorities at that time and most of the applications for them were channelled through the HDB. The application to the NEA was one of them. It was also the only relevant approval for the purposes of this trial. The application was submitted by the plaintiffs' then solicitors on the requisite Form IA, signed by the plaintiffs on 22 July 2002. The proposed change of use was described in the form as -

'MOTOR VEHICLE SHOWROOM AND WORKSHOP WITH VEHICLE SERVICING, MAINTENANCE AND REPAIR, SPRAY-PAINTING AND PARTS STORE'.

It is appropriate to deal with a late attempt by Mr Chan to launch a new and different attack against the plaintiffs' case. This took place shortly before the defendants' last witness had left the stand. It occurred to counsel at that time that the relevant 'subject to approval' clause in the contract merely stated the change of use of the property to motor vehicle showroom and workshop. Mr Chan therefore argued that since the letter of 19 September 2002 from NEA actually allowed the change of use for a 'vehicle showroom and parts storage' there was, in effect, an approval by NEA. He argued that the words 'vehicle servicing and spray-painting' which the NEA objected to were inserted by the plaintiffs in a way that was unfaithful to the wording in the contract. This argument had two glaring flaws. First, the letter of 19 September also expressly rejected 'vehicle repair' which is an obvious activity of a vehicle workshop. Likewise, spray-painting is an integral part of vehicle repair, or in other words, another necessary and common activity of a vehicle workshop. Secondly, the defendants had been given copies of the application form when it was being submitted to NEA. They had no objection because they and their solicitors knew then, as they did at the start of this trial, that a vehicle workshop naturally encompasses all that was described in the Form IA that the plaintiffs had submitted for approval. The defendants cannot now complain that the wording was less than precise. Given the circumstances, and the ordinary and reasonable use of a motor vehicle workshop, I find that the wording was sufficiently precise and no one concerned had any doubt as to whether ‘workshop’ would entail spray-painting work.

8 I now refer to the question as to whether the plaintiffs...