Lagoon View Owners' Association v SV Chandran and Jumaiah Bte Mohd Saad

• Jurisdiction: Singapore
• Judge: Seah Chi Ling
• Judgment Date: 19 May 2016
• Neutral Citation: [2016] SGDC 123
• Court: District Court (Singapore)
• Docket Number: DC 2866 of 2014, HC/DCA 6 of 2016, HC/DCA 11/2016
• Published date: 04 June 2016
• Year: 2016
• Hearing Date: 27 July 2015,23 February 2015,30 December 2015,07 September 2015,09 March 2016,18 December 2015,04 December 2015,21 September 2015
• Plaintiff Counsel: Peter Madhavan/ Chin Jia Yi [Joseph Tan Jude Benny LLP] - plaintiff
• Defendant Counsel: Vijai Parwani [Parwani Law LLC] - 1st and 2nd defendants
• Subject Matter: Unincorporated Associations and Trade Unions,Estate Owners,Meetings,Resolutions concerning Privatisation of Estate,Whether ultra vires Association's Constitution,Whether binding on dissenting proprietor,Effect of non-compliance with terms of Resolutions,Courts and Jurisdiction,Declaratory Relief
• Citation: [2016] SGDC 123

District Judge Seah Chi Ling: Introduction

The present dispute arose out of the Defendants’ refusal to pay a $35,141.18 privatization levy in connection with the privatization of Lagoon View Estate. The Defendants’ defence, in essence, was that the privatization exercise was not properly carried. The privatization of Lagoon View Estate had since been completed in or around August 2011, upon the issuance of the Subsidiary Strata Certificates of Title by the Singapore Land Authority.

Background Facts

The Plaintiff, the Lagoon View Owners’ Association (hereinafter, interchangeably, the “Plaintiff” or the “Association”) is an association of residents of Lagoon View Estate (the “estate”) situated at Marine Parade Road. The Plaintiff is a registered society within the meaning of the Societies Act (Chapter 311) and is governed by its rules as set out in a document entitled the “Rules and Constitution of the Lagoon View Owners’ Association” (hereinafter, interchangeably, the “Rules” or the “Constitution”).

The estate is a 99-year leasehold development built by the Ministry of Finance (“MOF”) in or around 1977. Other than their individual flats, the members of the Association did not own the common areas of the estate.

The Defendants are residents and joint-owners of an apartment in the estate with the address [XXX]. The Defendants are also members of the Association.

In or around 2009, the members of the Estate mooted the idea of privatizing of the estate. The privatization exercise would entail the following two stages: (a) first, the purchase the land and common areas of the estate from MOF, and (b) thereafter, an application to the Singapore Land Authority (“SLA”) under the Land Titles (Strata) Act (Cap 158, 2008 Rev Ed) (“LTA”) for the issuance of Subsidiary Strata Certificates of Title (“SSCT”). The Management Committee of the Plaintiff (the “MC”) proceeded to obtain MOF’s in principle agreement to sell the land and common areas within the estate (the “common property”) to the owners of the flats in the estate.

On 9 May 2010, the Plaintiff convened a Special General Meeting (“SGM”) at which a resolution for the purchase of the common property from MOF was tabled to pave the way for the privatization of the estate. At the 9 May 2010 SGM, the Plaintiff obtained approval from a 74.4% majority of members to, inter alia, purchase the common property from the MOF at a sum of S$16,000,000.00, subject to various conditions. The material portions of the resolutions passed at the 9 May 2010 meeting were as follows (the “9 May 2010 Resolutions”)ⁱ: “A) All Members of the Association accepted the Primary Terms and Conditions of Offer in the draft Sale & Purchase Agreement (SPA) made by the Ministry of Finance through their lawyers M/S Bih Li & Lee. B) All Members (if there are more than one owner of a Flat unit, they will collectively for the purposes of all the Resolutions herein, be regarded as one Member) shall pay a sum of $35,500 being their share of the cost for the purchase of the Land and Common Areas together with all Expenses, Legal, Stamp and Survey Fees and Disbursements (hereinafter referred to as the Privatization Levy). C) The Management Committee (MC) is authorized to appoint British Malaysian Trustees or any Professional Trustees to act as Custodian Trustees of the Association to hold the Legal Title of the Land and Common Areas as Custodian Trustees of the Association for the benefit of all Members of the Association on the Terms and Conditions to be agreed by the MC. The Management Committee is authorized to draw on the Associations [sic] funds or Sinking Fund, whichever is more expedient, to meet all payments to the Trustees for their fees. D) The MC is hereby authorized to borrow and enter into a Loan Agreement on behalf of the Association or through its Trustees with any major bank in Singapore for a loan amount of $3 million or slightly higher (Up to 15%) on such Terms and Conditions that the MC shall deem fit and the loan provided to the Association is for the sole purpose of paying for any shortfall in the collection of the Privatization Levy to meet the payments due under the Sale of Purchase of the Land and Common Areas and any and/or all related expenses for the completion of the Sale & Purchase Agreement.

The MC is authorized to drawdown on the Sinking Fund belonging to the Association a sum of $3 million or slightly higher (up to 15%) for the sole purpose of pledging as Collateral for the Loan abovementioned on such Terms and Conditions as the MC deem fit and to drawdown on the Loan to meet any shortfall in the collection of the Privatization Levy in order to pay all monies due under the Sale & Purchase Agreement and/or all related expenses for the Completion of the Sale and Purchase Agreement but at all times the authority to drawdown on the Loan is subject to the following conditions:- (a) The MC shall commence with the collection of the sum of $5,500, immediately on the passing of all the Resolutions moved in this SGM, from each Member, to meet the payment of the 1st instalment and Stamp fees and as an expression of Members commitment to the Privatization. Unless at least 80% of members have paid in full the said sum of $5,500 by 29th May 2010, the MC shall not be authorized to drawdown on the Loan to proceed with the Privatization exercise and shall abort the entire Privatization exercise and all monies collected shall be returned to members. (b) The MC shall immediately on the signing of the S&P Agreement to purchase the Land and Common Areas commence with the collection of the balance of the Privatization Levy ($35,500 - $5,500 = $30,000). Unless at least 80% of All Members pay the entire Privatization Levy within 120 days from the date of the signing of the S&P Agreement, the MC shall not complete the S&P without further authority from Members at another SGM that the MC shall convene to seek authority from Members to complete the Purchase of the Land and Common Areas. (c) The MC shall complete the S&P if at least 80% of Members have paid the full Privatization Levy and are authorized to drawdown on the Loan to meet the shortfall of 20% or lesser. (d) The MC shall maintain a list of all Members failing to pay their share of the Privatization Levy and shall be authorized to disclose the names of Members to interested Parties and/or Lawyers to assist in recovering from the defaulting Member the full payment of the Privatization levy and all cost incurred by the MC in recovering the entire or any part of the Privatization Levy shall be borne by the defaulting Member (all the named Owners of the Flat unit) jointly and severally……..” (Emphasis added)

At a further SGM held on 19 June 2010 (the “19 June 2010 Resolutions”), the terms of the 9 May 2010 Resolutions were substantially reaffirmed by 90.625% of the members present and voting, the only material changes (for present purposes) beingⁱⁱ: The MC was given the option of either: (i) directly drawing down on the Sinking Fund; or (ii) procuring a bank loan (with the Sinking Fund being used as collateral), to meet any short-fall in the collection of the privatisation levies. This was different from the 9 May 2010 resolution where only option (ii) was adopted by the members: see last 2 paragraphs of the “President’s Address”ⁱⁱⁱ in, and the first 5 paragraphs of, the 19 June 2010 Resolutions^iv. A direct draw down of the Sinking Fund to pay the balance purchase price under the SPA, however, remained subject to the condition that “if the shortfall of collection of Privatisation Levy is more than $3 million within 120 days from the date of the signing of the SPA, the MC shall not complete the S&P without further authority of the members at another SGM”: see clause (ii) of the 19 June 2010 Resolutions^v; and a penalty provision was included under which penalty interest at a specified rate would be chargeable against Members who failed to pay the Privatisation Levy or any part thereof by the due date(s). (the 9 May 2010 Resolutions, as modified by the 19 June 2010 Resolutions, hereinafter, the “Resolutions”).

To summarize, the salient terms of the Resolutions are as follows: the members were required to pay a privatization levy, being their share of the cost for the purchase of the land and common areas, and all other expenses including legal, stamp, survey fees and disbursements. The privatization levy per unit was calculated at S$35,500.00, payable in two instalments of S$5,500.00 and S$30,000.00; the members approved the appointment of the British and Malayan Trustees Limited (hereinafter “BMTL”) to act as custodian trustees of the Plaintiff to hold the legal title of the common property for the benefit of all members of the Plaintiff; and the members authorized the Plaintiff’s MC to drawdown on a bank loan or its Sinking Fund to finance any shortfall in the collection of the privatization levies, subject to the condition that at least 80% of the members must have paid the entire Privatization Levy within 120 days from the date of the signing of the S&P Agreement, failing which the MC shall not complete the S&P without further authority from the members at another SGM.

Following the passing of the Resolutions, the MC proceeded to enter into a Sale & Purchase Agreement dated 30 June 2010 (hereinafter the “SPA”) with the MOF for the purchase of the common property of the estate. Collection of the privatization levies followed.

The SPA between the Association and MOF was completed in or around 30 December 2010^vi. The Association thereafter applied to the SLA for the issuance of the SSCT. The privatization exercise was completed in or around 1 August 2011^vii with the issuance of the SSCTs.

The Plaintiff’s Claim

To date, all members of the Plaintiff have paid their respective privatization levies, save for proprietors of two units of the estate, of which the...