Kaolim Private Ltd v United Overseas Land Ltd

• Jurisdiction: Singapore
• Judgment Date: 13 December 1982
• Date: 13 December 1982
• Docket Number: Privy Council Appeal No 34 of
• Court: Federal Court (Singapore)

Kaolim Pte Ltd

Plaintiff

and

United Overseas Land Ltd

Defendant

[1982] SGPC 5

Lord Diplock

,

Lord Keith of Kinkel

,

Lord Roskill

,

Lord Brightman

and

Sir John Megaw

Privy Council Appeal No 34 of 1981

Privy Council

Credit and Security–Mortgage of real property–Discharge of mortgage–Mortgagor exercising right of sale–Pre-existing statutory charge for property tax in arrears–Whether purchaser or mortgagor to bear tax–Revenue Law–Property tax–Recovery–Sale of property by mortgagee–Property tax in arrears–Whether mortgagee or purchaser to bear tax–Sections 6, 34 and 35 Property Tax Act (Cap 144, 1970 Rev Ed)

Kaolim Pte Ltd (“the mortgagor”) bought a property and mortgaged it to Far Eastern Bank Ltd (“the bank”) to secure part of the purchase price. The bank, in the exercise of its power of sale, subsequently sold the property by way of tender to United Overseas Land Ltd (“the purchaser”). However, it transpired that a sum of money representing arrears of property tax (“the tax”) was yet to be paid to the Comptroller of Property Tax, which therefore constituted a statutory charge over the property. The bank took the view that the tax was the responsibility of the purchaser. The purchaser sought a declaration from the court that the property was contracted to be sold free from the charge for arrears of property tax, or, alternatively, that if the contract of sale deemed the purchaser liable as between itself and the bank to discharge the arrears of tax, it could claim the amount paid from the mortgagor on the principle of being subrogated to the rights of the Comptroller. Both the High Court and the Court of Appeal held in favour of the purchaser. The mortgagor appealed to the Privy Council.

On appeal, the mortgagor sought to rely on condition 16 in the conditions of tender (“special condition 16”) which stated, amongst other things, that the property was sold subject to “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 in turn relied on condition 6 of the (Revised) Singapore Conditions of Sale (“general condition 6”) which stated that the vendor was obliged to discharge “outgoings” apportioned down to the date fixed for completion. To this, the mortgagor contended that an apparent conflict between special condition 16 and general condition 6 had to be resolved in favour of the former as general condition 34 called for special conditions to prevail over general conditions.

Held, dismissing the appeal:

(1) As there was in existence a prior charge to secure the arrears of property tax, the bank was in substance selling as second mortgagee. The right of a second mortgagee is to sell the mortgaged property, which subject to encumbrances is the mortgagor's property, at the best price reasonably obtainable. The second mortgagee so selling has a choice. He can sell the mortgaged property free from the first charge. Alternatively, the second mortgagee can sell the property subject to the first mortgage. The question to be decided is whether, upon a true construction of the contract for sale, the purchaser bought the mortgagor's land as an encumbered or an unencumbered property: at [11].

(2) The contract must be read as a whole. Taking the special conditions and the general conditions together, there was no difficulty in excluding from special condition 16 a charge the subject matter of which is specifically dealt with elsewhere in the contract. An outgoing is specifically dealt with by general condition 6, which places the incidence on the vendor so far as the outgoing relates to the period before the date fixed for completion. Such an outgoing, if secured by a charge, is thus taken out of special condition 16: at [14].

Property Tax Act (Cap 144, 1970 Rev Ed) ss 6, 34, 35 (consd)

Timothy Lloyd and Elizabeth Weaver (Freshfields) for the appellant

Viscount Bledisloe QC and Michael Brindle (Coward Chance) for the respondent.

Lord Brightman

(delivering the judgment of the Board):

1 This appeal from a decision of the Court of Appeal in Singapore...