Kaolim Pte Ltd v United Overseas Land Ltd

• Judge: Lord Roskill
• Judgment Date: 13 December 1982
• Neutral Citation: [1982] SGPC 5
• Citation: [1982] SGPC 5
• Defendant Counsel: Viscount Bledisloe QC and Michael Brindle (Coward Chance)
• Published date: 19 September 2003
• Date: 1982
• Subject Matter: Discharge of mortgage,Property tax,Credit and Security,Mortgage of real property,Sale of mortgaged property with existing prior charge,Pre-completion tax,Revenue Law,ss 6, 34(1), (3) & 35(1) Property Tax Act (Cap 144),Existence of prior charge,Whether purchaser or the mortgagor must bear tax
• Court: Privy Council
• Plaintiff Counsel: Timothy Lloyd and Elizabeth Weaver (Freshfields)

This appeal from a decision of the Court of Appeal in Singapore raises the question whether, on a sale by a mortgagee, a prior charge on the mortgaged property falls to be discharged by the purchaser from the mortgagee or is a burden on the net proceeds of sale payable to the mortgagor. The charge is a statutory one for arrears of property tax relating to a period which straddles the completion of the sale. It is common ground that the post-completion apportionment of the tax falls on the purchaser. The dispute is whether the purchaser or the mortgagor must bear the pre-completion tax.

In 1976 Kaolim Pte Ltd (the mortgagor) bought a property known as Kaolim Building, Kramat Lane, Singapore, and mortgaged it to Far Eastern Bank Ltd (the bank) to secure part of the purchase price. On 10 March 1980 the bank, in exercise of its power of sale offered the property for sale by tender. The amount due to the bank was about $5m. On 20 March the tender of United Overseas Land Ltd (the purchaser) in the sum of $8m was accepted by the bank, together with a 20% deposit which accompanied the tender. On 31 March the Comptroller of Property Tax notified the bank of his claim to arrears of property tax amounting to $521,242.53. This was made up of arrears to 31 December 1979 ($459,291.43), tax for the half year to 30 June 1980 ($55,025) and $6,926.10 penalty, interest and fees. The bank replied to the Comptroller that in its view the tax was the responsibility of the purchaser. This was not accepted by the purchaser, which on 9 April issued an originating summons, making the bank and (by amendment) the mortgagor respondents. The purchaser sought, in effect, a declaration that the property was contracted to be sold free from the charge for arrears of property tax; alternatively, that if under the contract of sale the purchaser was liable as between itself and the bank to discharge the arrears of tax, it could claim the amount so paid from the mortgagor on the principle of being subrogated to the rights of the Comptroller.

When speaking hereafter of arrears of property tax, their Lordships will leave out of account the apportioned tax arising after completion, for which the purchaser accepts responsibility.

Their Lordships now refer to the particulars and conditions of sale. The particulars contained a description of the property and, as one would expect, made no reference to incumbrances. The conditions of tender, so far as relevant for present purposes, provided as follows:

10 The purchase shall be completed and the balance of the purchase price shall be paid on 21 April 1980 ...

(12) The title of the property shall be properly adduced.

(16) The property is sold subject to:

(a) any scheme, layout, matter or thing embodied or shown in the general improvement plan and/or the master plan and all proposed amendments or addition thereto:

(b) any proposed scheme affecting the property; and

(c) all notices, charges, orders of court, charging orders, caveats and court or other claims affecting the property made or served whether before on or after the date of sale. The purchaser shall be deemed to have purchased with full knowledge and notice of all such schemes or proposed schemes, layouts, notices, demands, charges, orders of court, charging orders, caveats and court or other claims which shall be complied with and discharged by and at the expense of the purchaser who shall not be entitled to make or raise any objection or requisition whatsoever in respect thereof.

22 The purchaser shall not require any evidence that estate duty has been paid in respect of any death that occurred before the date of sale and no objection or requisition shall be made on the ground that such estate duty has not been paid nor shall the non-payment of such duty annul the sale and no abatement or compensation shall be allowed in respect thereof.

(29) The property is sold subject to these conditions and also the general Conditions of Sale known as `The (Revised) Singapore Conditions of Sale` and all purchasers shall be deemed to have full knowledge and notice of the contents and effect thereof; whether they shall actually have inspected a copy or not.

The (Revised) Singapore Conditions of Sale, so far as relevant, provided as follows:

6 The outgoings will be discharged by the Vendor down to the day fixed for completion, as from which day all outgoings shall be discharged by and the rents and profits or possession shall belong to the purchaser, (such outgoings, rents and profits, if necessary, being apportioned) but the purchaser shall nevertheless not be let into actual possession or receipt of rents and

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