Ken Glass Design Associate Pte Ltd v Wind-Power Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin JC
• Judgment Date: 14 October 2002
• Neutral Citation: [2002] SGHC 237
• Docket Number: Suit No 1557 of 2001
• Date: 14 October 2002
• Year: 2002
• Published date: 19 September 2003
• Plaintiff Counsel: Anand Thiagarajan and Anthony Netto (Anand T & Co)
• Citation: [2002] SGHC 237
• Defendant Counsel: Alan Shankar and Lim Poh Choo (Alan Shankar & Lim)
• Court: High Court (Singapore)
• Subject Matter: Disputes as to extension of contract,Remedy to be awarded where deception is involved,Refusal to complete at completion date,Contract,Recovery of moneys paid to stakeholders,Fundamental breach,Contractual terms,Illegality and public policy

Judgment

GROUNDS OF DECISION

1 The Plaintiffs were at all material times the owners of the industrial premises known as Lot A18060 at 5 Woodlands Sector 1, Woodlands East Industrial Estate ("the Property"). They utilise the Property for their glass design and manufacturing business. The Defendants are building and general contractors and are also involved in processing and distributing glass and glass fixtures.

2 On 18 April 2001, in consideration of the sum of $17,000 (being 1% of the price), the Plaintiffs granted the Defendants an option ("the Option") to purchase the Property at the price of $1.7 million. On 2 May 2001 the Defendants accepted the offer contained in the Option by making a further payment of $153,000 (being 9% of the price) to Keppel TatLee Bank Ltd, the mortgagees of the Property, as stakeholders pending completion of the sale and purchase agreement ("the Agreement") that arose from the acceptance. The balance $1,530,000 was to be paid on completion. The Option provided, inter alia, for the following terms:

(i) the Agreement was subject to The Singapore Law Society’s Conditions of Sale 1999 ("the Law Society Conditions") so far as they are applicable to a sale by private treaty and not varied by the terms in the Option;

(ii) the Agreement was subject to the written approval of the Jurong Town Corporation ("JTC") for the sale of the Property to the Defendants; and

(iii) completion was to within 12 weeks from the date of acceptance of the Option or within 4 weeks from the date of receipt of approval from JTC, whichever is later.

3 On 25 June 2001, in anticipation of completion on 25 July, the parties entered into a tenancy agreement wherein the Defendants agreed to let the Property to the Plaintiffs for the purposes of their glass designing and manufacturing business for a period of two years from 1 August 2001 at the rent of $15,000 per month. Upon entering into the tenancy agreement the Plaintiffs gave the Defendants two cheques, the first for $30,000 being two months’ rent as deposit and the second for $15,000 being advance payment of rent for August 2001.

4 By letter dated 15 June 2001, JTC gave their in-principle approval for the sale and purchase of the Property subject to certain terms and conditions. Therefore pursuant to the Agreement, the completion of the sale and purchase of the Property would be 25 July 2001, being 12 weeks from 2 May 2001, the date of exercise of the Option.

5 One of the conditions imposed by JTC was that the Plaintiffs were to furnish the Certificate of Statutory Completion ("CSC") for a mezzanine floor extension prior to the completion. Construction of the mezzanine floor in the Property was undertaken in 1999 but no CSC had been obtained then. The Plaintiffs instructed their architects to set about obtaining it. However by mid-July it did not appear that the CSC could be obtained by the completion date of 25 July. The Plaintiffs therefore sought and obtained the approval of JTC for the completion to proceed with an undertaking given by the purchasers – the Defendants – to furnish the CSC after completion. With this, the Plaintiffs’ solicitors wrote a letter on 20 July to the Defendants’ solicitors to ask if the Defendants would be prepared to give such an undertaking upon the Plaintiffs giving the Defendants a corresponding undertaking. On 23 July the Defendants’ solicitors replied to say that the Defendants were not prepared to furnish any undertaking to JTC. The letter ended with the following:

Your clients are required to obtain the Certificate of Statutory Completion for the mezzanine floor extension prior to completion as this is one of the conditions for JTC’s consent.

In view of the above, please note that our clients will only complete with your clients when your clients have procured the Certificate of Statutory Completion. Please keep us informed at least three (3) days before completion.

6 In the event completion did not take place on the 25 July 2001. By letter dated 7 August 2001, the Defendants’ solicitors asked the Plaintiffs’ solicitors when the Plaintiffs expected to obtain the CSC. The letter also contained a 21-day notice to complete the sale and purchase of the Property under condition 29.10 of the Law Society Conditions. The Plaintiffs’ solicitors replied on 15 August to say that the Defendants had agreed to extend the date for completion to end October. That letter states as follows:

We refer to your telefax dated of 7 August 2001.

We are instructed that the Certificate of Statutory Completion for the mezzanine floor extension is expected by end-October. Our clients have also applied to the Jurong Town Corporation for extension of time for completion. We are further informed that our clients have communicated with your clients in this regard and your clients has agreed to complete the sale and purchase in end-October 2001.

Kindly confirm your clients’ agreement to the above.

7 There was no reply from the Defendants or their solicitors until 11 September 2001. But that was only a holding letter which states as follows:

We refer to your letter dated 15 August 2001.

Please note that we are taking our clients’ instructions and will revert to you in due course.

All our clients’ rights are reserved.

It is notable that the 21-day period given in the Defendants’ notice to complete had expired on 28 August and there had been no letter after that date until this one. Between 3 September and 22 October there were transactions conducted between the parties which is the subject of considerable dispute and I shall pass over them for the time being.

8 On 22 October 2001 the Plaintiffs finally obtained the CSC. So on 23 October the Plaintiffs’ solicitors wrote to the Defendants’ solicitors to advise that they were ready to complete on 31 October. However the Defendants’ solicitors replied on 25 October to say that the Defendants had never agreed to extend completion to end October and reserved their rights in respect of the failure to complete within the 21-day period given in the 7 August notice to complete. There followed an exchange of letters between the solicitors setting out the parties’ respective positions in respect of the facts. This culminated in two letters, the first from the Plaintiffs’ solicitors dated 26 October giving the Defendants 21 days' notice to complete under Condition 29 of the Law Society Conditions. In their reply dated 29 October the Defendants’ solicitors made a demand pursuant to Condition 29.10 of the Law Society Conditions for the return of the $170,000 paid by the Defendants.

Findings of fact

9 The main dispute of fact is whether the Defendants had agreed to grant an extension of time until end October 2001 for the completion. The persons who represented the parties throughout are the Plaintiffs’ director Edmund Lim Cheng Kiat ("Lim") and the Defendants’ director, Low Hang Teow ("Low"). There is also a third party and a most important actor in this little drama. He is John Tan ("Tan") who appears to be a freelance agent and wheeler-dealer extraordinaire. He was the person who brought together the parties on the sale and purchase and had also procured for both sides other unrelated financing opportunities. Unfortunately neither side saw fit to call him as a witness in this matter although he would have been able to throw much light on the case as he was the intermediary between the parties in several crucial transactions. He is the only one who can support or contradict the evidence of the protagonists in those matters.

10 It is the common position of the parties that the entire transaction was a sale and leaseback agreement. At the time the Plaintiffs were experiencing a severe cashflow problem and facing foreclosure by the mortgagee-bank as they had been unable to satisfactorily service their bank facilities. It was in these circumstances that Tan came into the picture and he was able to procure some bank financing for the Plaintiffs for a fee. But this was insufficient to tide the Plaintiffs over their difficult period and Tan suggested to Lim to sell the Property. Tan said that he had buyers who were interested to make such investments. Lim said that he would be prepared to do it provided the Defendants could lease the Property back as he wished to continue with the business and it was expensive to relocate to another location. In the negotiations leading up to the sale, the parties agreed that after the purchase the Property would be leased back to the Plaintiffs at a monthly rent of $15,000, a sum which the Defendants felt would give a satisfactory return on their investment.

11 However there was just one problem: JTC did not permit their factory premises to be rented out. Lim explained that JTC required the lessor to conduct operations on the leased premises. However this problem did not seem to be insurmountable as far as the parties were concerned. Lim said this in cross-examination:

JTC does not allow a person to buy a JTC factory to merely rent out. To overcome this, we came up with this joint arrangement, whereby Defendant would purchase the property, machine remained there, we would transfer our technical know how to Defendant.

Lim explained that the Plaintiffs would in their application to JTC put up a bogus proposal which stated that the Plaintiffs and Defendants were entering into a joint venture and for that purpose required the transfer of the lease to the Defendants. Lim said that:

… the joint arrangement was to fulfill JTC's requirements. I had earlier mentioned that JTC did not allow a purchaser to lease the property. That's why there is no $15,000 rental in [the application] document.

Lim admitted quite frankly that they were trying to "hoodwink" JTC in order to get their approval for the sale. It was in this context that the scheme fell flat arising from the delay in the CSC.

12 According to Lim, after the...