Indian Overseas Bank v Cheng Lai Geok

• Jurisdiction: Singapore
• Judgment Date: 12 January 1993
• Date: 12 January 1993
• Docket Number: Civil Appeal No 155 of 1991
• Court: Court of Appeal (Singapore)

Indian Overseas Bank

Plaintiff

and

Cheng Lai Geok

Defendant

[1993] SGCA 4

Yong Pung How CJ

,

Chao Hick Tin J

and

Warren L H Khoo J

Civil Appeal No 155 of 1991

Court of Appeal

Damages–Liquidated damages or penalty–Law Society required 25% deposit for bids at auction sales–Whether extravagant and unconscionable in relation to greatest possible loss–Bids at auction vary widely–No evidence to show range of fluctuation–Whether deposit requirement penalty clause–Damages–Measure of damages–Contract–Contract for sale of land–Breach of sale and purchase agreement–Refusal of purchaser to proceed with agreement one day after signing agreement–Measure of damages difference between contract price and market price at date of completion–Whether correct to take contract price as market price on date of making contract–Damages–Measure of damages–Contract–Breach of sale and purchase agreement–Expenses incurred by injured party–Vendor sold property through auction–Purchaser repudiated one day after signing agreement–Whether additional advertising and auctioneer costs can be claimed for effecting additional auction or tender–Whether conveyancing fees in respect of repudiated transaction can be claimed–Land–Sale of land–Contract–Payment of deposit by purchaser with cheque–Purchaser countermanded cheque–Repudiatory breach–Whether vendor entitled to deposit after accepting repudiation

The appellant was a bank that had, exercising its mortgagee's powers of sale, auctioned off four properties by public auction. On 2 July 1981, the respondent had successfully bid for the four properties for $2.6m, and on the same day signed a written agreement to this effect. The respondent handed a cheque for $650,000 to the auctioneer, acting as the appellant's agent. The completion date was set for 2 August 1981. On 3 July 1981, the respondent countermanded payment of the cheque and informed the appellant that he decided not to proceed with the purchase.

On 8 October 1981 the appellant commenced an action seeking specific performance or damages in lieu of specific performance. In April 1991, however, the appellant sold the properties to third parties by tender for $2.33m. In an amended statement of claim the appellant sought the following reliefs: (a) damages for breach of contract; (b) a declaration that it was entitled to the deposit of $650,000; (c) payment of the deposit of $650,000 and interest at such rate and for such period as the court thought fit; (d) interest on the purchase money at 8% per annum from 2 August 1981 to date of judgment; and (e) interest on damages at such rates and for such period as the court thought fit. The appellants claimed the following as damages: (a) the difference between the contract price and the market price on the day of the breach; (b) further, or in the alternative, the deposit of $650,000; (c) miscellaneous expenses which the appellants incurred in respect of the properties from 1 August 1981 to 17 May 1991, amounting to $301,128.25; and (d) expenses incurred by the appellant in reselling the properties amounting to $35,005.50.

The judicial commissioner held that the correct measure of damages would be the difference between the price of $2.6m which the respondent had agreed to pay for the subject properties on 2 July 1981 and the market price at the date of completion, 2 August 1981, which was $2.25m. However, he compared the contract price with market value, equiparated the two, and held that as the market value of the properties had only depreciated by $50,000 between the date of contract and the date for completion, the appellant was entitled to damages of only $50,000. He refused its claim to the deposit of $650,000, the miscellaneous expenses, the expenses incurred in reselling the properties and interest. He also held that the deposit of 25% was a penalty and not a genuine pre-estimate of the loss suffered by the appellant.

The appellant appealed. At the appeal, it abandoned its claim for the miscellaneous expenses. It argued that the judicial commissioner had applied the correct principle to determine quantum of damages but had misapplied it to the facts.

Held, allowing the appeal in part:

(1) Contract price should not be equated with market value, which was irrelevant. There was no reason why the vendor should not be entitled to the benefit of a good sale: at [12] and [15].

(2) The general principle for the assessment of damages was compensatory, that the innocent party was to be placed, as far as money could do, in the same position as if the contract had been performed. If the vendor had accepted the rescission and immediately put the properties for resale by tender or auction, advertisement cost and commission to agents would have been incurred. These would be additional expenses which would arise out of the breach of contract by the purchaser. It was doubtful that the conveyancing fees in respect of the sale to the purchaser would have been incurred and paid since the refusal by the purchaser to go through with the sale was almost immediate. Therefore the conveyancing fees would not have been additional costs: at [18].

(3) The moment a bidder successfully bid at an auction and signed a written agreement, a firm contract had come into being. The seller's acceptance of a repudiatory breach by the bidder did not bring about rescission ab initio. By not paying the deposit, the bidder was in breach of a fundamental term of the contract entitling the seller to treat the contract as discharged as from that point and to sue for damages, including the unpaid deposit: at [27] and [31].

(4) The question whether a sum stipulated was a penalty or liquidated damages was a question to be judged of as at the time of the making of the contract, not at the time of the breach. A test to assist in the determination of the question was whether the sum stipulated for was extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. In the instant case, there was simply no evidence to show what could have been the greatest loss that could be caused to the appellant if the respondent failed to proceed with the purchase. The requirement of a 25% deposit was a standard term prescribed by the Law Society of Singapore for bids at auction sales. There was no evidence to show that the deposit was extravagant and unconscionable in comparison to the greatest loss that could conceivably be proved to have followed from the breach: at [32].

(5) Interest would not be awarded to the plaintiff as there had been unexplained undue delay in bringing the action to trial and in amending its statement of claim to include the claim for the deposit: at [35].

Damon Cia Naviera SA v Hapag-Lloyd International SA [1983] 3 All ER 510, HC (refd)

Damon Cia Naviera SA v Hapag-Lloyd International SA [1985] 1 WLR 435; [1985] 1 All ER 475, CA (refd)

Dewar v Mintoft [1912] 2 KB 373 (folld)

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 (folld)

Johnson v Agnew [1980] AC 367 (folld)

Lowe v Hope [1970] Ch 94; [1969] 3 All ER 605 (not folld)

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 (folld)

Millichamp v Jones [1982] 1 WLR 1422 (refd)

York Glass Co, Ltd v Jubb [1925] All ER Rep 285 (refd)

Statute of Frauds 1677 (c 3) (UK) s 4

B V Peter and Chia Kim Huat (Ramdas & Wong) for the appellant

Noor Lila Abdul Hamid (Seah Chwee Lim & Associates) for the respondent.

Judgment reserved.

Chao Hick Tin J

(delivering the judgment of the court):

1 This appeal raises a number of issues relating to the question of damages in the event that a purchaser should default in proceeding with the purchase of a property concluded at an auction.

2 On 2 July 1981, the respondent successfully bid at an auction for the purchase of the properties known as 27, 29, 31 and 33 Birch Road, Singapore (“the said properties”) for a sum of $2.6m. The appellants were at all relevant times the mortgagees of the said properties and they had, in exercise of the powers under the mortgage, placed the said properties for sale by public auction. The sale was subject to certain special conditions and the general conditions known as “The (Revised) Singapore Conditions of Sale” (hereinafter referred to as “the special conditions” and “the general conditions” respectively). It was expressly provided that in the event of any conflict between the two sets of conditions, the special conditions were to prevail.

3 The agreement was duly signed by the respondent on the very day of his successful bid. He also handed over to the auctioneers, as agents for the appellants, a cheque for $650,000, being the required deposit.

4 Clause 1 of the special conditions required the respondent, immediately after the...