Indian Overseas Bank v Cheng Lai Geok

• Jurisdiction: Singapore
• Judgment Date: 30 September 1991
• Date: 30 September 1991
• Docket Number: Suit No 3734 of 1981
• Court: High Court (Singapore)

Indian Overseas Bank

Plaintiff

and

Cheng Lai Geok

Defendant

[1991] SGHC 141

Goh Phai Cheng JC

Suit No 3734 of 1981

High Court

Land–Sale of land–Contract–Mortgagee bank selling land by public auction–Purchaser not completing purchase of land–Whether purchaser entitled to rescind contract for sale and purchase of land upon discovery of caveats lodged against land and pending suits in respect of land–Whether mortgagee under duty to disclose existence of pending suits and caveats notified on Land Register–Section 26 Conveyancing and Law of Property Act (Cap 61, 1985 Rev Ed)–Section 67 (2) Land Titles Act (Cap 157, 1985 Rev Ed)–Land–Sale of land–Remedies under uncompleted contract–Failure of purchaser to complete sale of land by mortgagee bank–Mortgagee bank electing at date of trial to claim common law damages for breach of contract–Whether mortgagee entitled to special damages–Whether mortgagee entitled to elect at trial between accepting repudiation and claiming damages for breach of contract or seeking order for specific performance–Date on which damages should be assessed–Quantification of damages–Whether mortgagee entitled to claim consequential expense and loss–Whether mortgagee entitled to deposit paid by purchaser

The plaintiff was the mortgagee of certain properties (“the subject properties”) under an instrument of mortgage dated 7 November 1978. In exercise of the power of sale as mortgagee, the plaintiff put up the subject properties for sale by public auction on 2 July 1981. The special conditions of sale required the purchaser, immediately after the sale, to pay a deposit of 25% of the purchase price and to sign the agreement. The purchase was to be completed within one calendar month from the signing of the agreement, ie on 2 August 1981.

The defendant was declared the purchaser of the subject properties. He signed the agreement immediately and gave a cheque deposit of $650,000, which was 25% of the purchase price. The defendant countermanded payment of the cheque, saying that there were four caveats lodged against the subject properties and two pending High Court suits in respect of the subject properties.

The facts leading to the lodgment of the four caveats and the two pending High Court suits were as follows. The proprietor of the subject properties (“Abacus”) had, by an option in writing dated 22 August 1979, granted to one Ho an option to purchase the subject properties. By another option in writing, Ho granted to one Ong and one Kassim an option to purchase the subject properties. These two options were exercised by the parties concerned but both Ho and Abacus refused, were unable or neglected to complete the sale in favour of Ong and Kassim by way of a tripartite transfer. Ong and Kassim subsequently lodged four caveats in respect of the subject properties. They also brought two suits: one against Ho and Abacus on 13 June 1980, applying for specific performance and damages in addition to and in lieu of specific performance; and another against the plaintiff on 30 June 1981 seeking an injunction restraining the plaintiff from auctioning off the properties, especially the public auction scheduled on 2 July 1981.

The defendant did not complete the purchase of the subject properties on 2 August 1981. On 7 October 1981 the plaintiff commenced this action against the defendant for specific performance of the agreement for the sale and purchase of the subject properties and damages for breach of contract in lieu of or in addition to specific performance. On the first day of the hearing of this action, the plaintiff abandoned the remedy of specific performance. The plaintiff had resold the subject properties on 11 April 1991 making specific performance impossible.

The issue was whether the defendant was entitled to rescind the contract for the sale and purchase of the subject properties when he discovered the four caveats and the two pending suits. Related to this issue was the question whether the plaintiff was under a duty to disclose on or before 2 July 1981 the existence of the two pending suits and the four caveats which were notified on the Land Register.

Held, allowing the plaintiffs' claim:

(1) The defendant was not entitled to rescind the contract for the sale and purchase of the subject properties on the ground that there were four existing caveats and two pending suits involving the subject properties. None of the four caveats existed prior to the creation of the mortgage of the subject properties in favour of the plaintiff. Pursuant to s 26 of the Conveyancing and Law of Property Act (Cap 61, 1985 Rev Ed) and s 67 (2) of the Land Titles Act (Cap 157, 1985 Rev Ed), the defendant would have acquired a good title in the subject properties from the plaintiff upon the registration of the instrument of transfer executed by the plaintiff had he completed the purchase of the subject properties: at [36], [37], [39] and [40].

(2) The plaintiff was under no duty to disclose the existence of the four caveats and two pending suits. The caveats had been notified on the Land Register for the whole world to see. The general rule in contracts for the sale of land was caveat emptor and a vendor's duty to disclose only applied to latent defects of title. The interests claimed under the four caveats notified on the Land Register could not be regarded as latent defects in the title to the subject properties: at [46].

(3) The plaintiff was not entitled to special damages on the ground that the defendant was the beneficial owner of the properties prior to their resale in April 1991 since the plaintiff resold the properties making specific performance of the contract impossible. The plaintiff was also not entitled to claim these damages in accordance with the terms of the contract of sale since it had elected to claim common law damages for the breach of contract: at [49].

(4) Where a purchaser under a contract for the sale and purchase of land failed to complete, the vendor could either treat the purchaser as having repudiated the contract, accept the repudiation and claim damages for breach of contract, or seek an order from the court for specific performance with damages for any loss arising from delay in performance. As such, the plaintiff was entitled to wait until the date of the trial to elect which of the two alternative remedies to pursue: at [52].

(5) By an order of court dated 15 October 1982, the plaintiff was to set down the action for trial within 30 days from the date of the order. It did not set the action down for trial until 9 April 1987, almost five years after the court order. No reason was given for the plaintiff's delay in setting down the action. The plaintiff had not acted reasonably in pursuing specific performance and therefore the date which was fixed for completion of the purchase of the properties by the defendant should be the date on which damages should be assessed. The plaintiff was therefore not entitled to claim the expenses incurred in respect of the subject properties during the period from 1 August 1981 to 17 May 1991 for insuring and guarding the properties, property tax, repairs, etc. Even if it was entitled to claim these expenses, it might not succeed in recovering all or any of these expenses since it had a duty to mitigate damages and it did not let out the properties during that period: at [55] and [56].

(6) The measure of damages at the date of the breach (ie 2 August 1981) was the difference in the price which the defendant agreed to pay for the subject properties on 2 July 1981 and the market price at the date of completion (ie 2 August 1981). The court assessed the plaintiff's loss at $50,000 based on the valuers' assessment of the diminution in value of the subject properties during this period: at [57]and [66].

(7) Since the plaintiff decided not to resell the subject properties on or about the time fixed for completion, and it failed to act reasonably in the pursuit of the remedy of specific performance, it was not entitled to claim any consequential expense and loss: at [68].

(8) The plaintiff's claim that the deposit of $650,000 paid by the defendant was liable to forfeiture under cl 30 of the Revised (Singapore) Conditions of Sale was rejected. The plaintiff had elected at the date of the trial to claim damages for breach of contract at common law, and was only entitled to common law damages and not damages prescribed by the terms of the contract of sale. Moreover, it would be inequitable and unconscionable to allow the plaintiff to forfeit the sum of $650,000. It was in effect a penalty and not a genuine pre-estimate of the damages which the plaintiff would suffer as a result of the defendant's breach of contract. The sum of $650,000 represented 25% of the purchase price of the subject properties, and the diminution in value of the properties during the period of one month provided for the completion of the purchase could not be anywhere in the region of $650,000: at [69], [72] and [75].

[Observation: If Ong and Kassim had succeeded in obtaining an order of court to restrain the Registrar from registering the instrument of transfer executed by the plaintiff in favour of the defendant until the outcome of the two pending suits after the service upon them by the Registrar of the 21-day notice pursuant to s 108 (1) of the Land Titles Act, and if, at the expiry of the said notice the plaintiff failed to remove the order of court restraining the Registrar from registering the instrument of transfer, then the defendant could have rescinded the contract for the sale and purchase of the subject properties: at [41].

Had the defendant completed the purchase of the subject properties, he could also have rescinded the contract after having given a notice to the plaintiff to make time of the essence of the contract: at [45].]

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