Kok Lee Kuen and anotherPlaintiff v Choon Fook Realty Pte Ltd and Others and another application

• Jurisdiction: Singapore
• Judgment Date: 30 March 1996
• Date: 30 March 1996
• Docket Number: Originating Summons Nos 129 and 242 of 1995 (Consolidated),Originating Summons No 817 of 1994
• Court: High Court (Singapore)

Lee Hin Realty Pte Ltd

Plaintiff

and

Lee Tah Wee David

Defendant

[1996] SGHC 28

Lim Teong Qwee JC

Originating Summons No 817 of 1994

High Court

Contract–Remedies–Damages–Loss of profit–Whether loss too remote–Election by defendant–Forfeiture of deposit–Condition 29 Singapore Law Society Conditions of Sale

Lee Tah Wee David, the defendant, agreed to buy a property from Realworth Development Pte Ltd (“RW”) for $11m and to resell it to Lee Hin Realty Pte Ltd, the plaintiff, for $11.6m. The plaintiff paid the defendant a deposit of $1.16m (including $116,000 for the option), who, in turn, paid RW a deposit of $1.1m (including $110,000 for the option). The plaintiff failed to complete and RW forfeited the deposit paid by the defendant who stood to gain $60,000 if he forfeited the plaintiff's deposit. The agreement between the defendant and the plaintiff was subject to The Singapore Law Society's Conditions of Sale 1981 (“COS”), condition 29 (4) (b) of which provided that the vendor was entitled to forfeit and retain for his own benefit the deposit paid by the purchaser without prejudice to any other rights or remedies available to him at law or in equity if the purchaser failed to comply with the terms of an effective notice served by the vendor under the condition.

The plaintiff sought a declaration that the defendant had wrongfully repudiated the agreement and also sought an order for the return of the deposit paid and other reliefs. The defendant counterclaimed a declaration that the deposit had been forfeited to him, damages and other reliefs.

Held, dismissing the plaintiff's claim and allowing the defendant's counterclaim:

(1) When a purchaser failed to comply with the terms of an effective notice served by the vendor under condition 29 of the COS, a vendor could choose between various rights and remedies. If he elected to exercise his rights under condition 29 (4) (b), he would not be entitled to recover any loss of profit or any other loss or expense by way of damages other than that provided for in condition 29 (4): at [5].

(2) Here, the evidence did not show that the defendant had forfeited the deposit. The defendant's solicitors had only claimed the defendant's right to forfeit but such right was not exercised. As the defendant had not elected to forfeit the deposit, he was entitled to recover damages: at [8].

(3) The damages recoverable should be such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it. The parties here must have contemplated the simultaneous completion of the two agreements and that the defendant's completion money would be provided by the plaintiff. Therefore, the proper measure of damages was the loss of profit, which would be $540,000 less the amount of legal fees payable by the defendant for the purchase of the property and subsequent transfer to the plaintiff: at [17] and [18].

East Ham Corporation v Bernard Sunley & Sons Ltd [1966] AC 406 (refd)

Goffin v Houlder (1921) 90 LJ Ch 488 (refd)

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (folld)

Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd [1992] 2 SLR (R) 834; [1993] 1 SLR 73 (refd)

Koufos v C Czarnikow Ltd [1969] 1 AC 350 (refd)

Seven Seas Properties Ltd v El-Essa (No 2) [1993] 1 WLR 1083; [1993] 3 All ER 577 (refd)

Talley v Wolsey-Neech (1979) 38 P & CR 45 (refd)

Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297 (refd)

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 (folld)

Wadsworth v Lydall [1981] 1 WLR 598; [1981] 2 All ER 401 (refd)

V Ramakrishnan (V Ramakrishnan & Co) for the plaintiff

V K Rajah, Gopal Perumal and C Trinel (Gopal & Tan) for the defendant.

Lim Teong Qwee JC

1 On 13 January 1995 I dismissed the plaintiff's claim for a declaration that the defendant had wrongfully repudiated an agreement for sale of the land at Lot 235-2 Mukim 17 by the defendant to the plaintiff and for the return of the deposit paid and for other reliefs. I held that it was the plaintiff which had wrongfully repudiated the contract in not complying with the terms of the notice to complete within the time limited time being of the essence of the contract. The defendant counterclaimed a declaration that the deposit had been forfeited to him, damages and other reliefs. After hearing further arguments on 20 July 1995 I gave judgment for the defendant for damages in the amount of $540,000 less the costs which would have been payable by him to his solicitors in and about his purchase of the property from the original vendor and his sale to the plaintiff.

2 The agreement for sale is subject to The Singapore Law Society's Conditions of Sale 1981 and condition 29 (4) provides:

If the purchaser does not comply with the terms of an effective notice served by the vendor under this condition, then –

…

1. (b) Without prejudice to any other rights or remedies available to him at law or in equity, the vendor may –

   1. (i) forfeit and retain for his own benefit the deposit paid by the Purchaser, and

… .

3 The defendant claimed his loss of profit by way of damages. He agreed to buy the property from Realworth Development Pte Ltd for $11m and agreed to sell it to the plaintiff for $11.6m. He received from the plaintiff a deposit of $1,160,000 (including $116,000 paid for the option) out of which he paid to Realworth Development a deposit of $1,100,000 (including $110,000 paid for the option) which Realworth Development forfeited so that the defendant stood to gain $60,000 if he in turn forfeited the deposit paid by the plaintiff. If the agreement for sale to the plaintiff had been completed he would have made a profit of $600,000. After allowing for the gain of $60,000 he claimed the loss of profit of $540,000.

4 Mr Ramakrishnan said that the defendant had elected to forfeit the deposit and was accordingly not entitled to claim any other sum by way of damages notwithstanding condition 29 (4) (b) of the conditions of sale. He referred to Talley v Wolsey-Neech (1979) 38 P & CR 45. The vendors forfeited the deposit and claimed damages for breach of contract by the purchaser in failing to complete his purchase. The agreement was subject to condition 19 (4) which isin pari materia with condition 29 (4) of the conditions of sale. The deposit which the vendors had forfeited exceeded the loss on resale of the property and incidental expenses provided under condition 19 (4) and damages under these heads were not allowed but the court allowed by way of damages interest on the deposit until it was forfeited and on the balance of the purchase price also down to that date. The purchaser appealed. In allowing the appeal Browne LJ said at 53:

… the plaintiffs, having chosen to exercise their rights and remedies under condition 19 (4) (c), are only entitled to recover the 'liquidated damages' defined by that condition, and, accordingly, this appeal must succeed.

5 I respectfully agree. A vendor can choose between various rights and remedies when the purchaser has made default in failing to comply with the terms of an effective notice served by the vendor under condition 29 of the conditions of sale but if he elects to exercise his rights under condition 29 (4) (b) then he is not entitled to recover any loss of profit or any other loss or expense by way of damages other than that provided for in condition 29 (4). The opening words in condition 29 (4) (b) do not give to the vendor any right to damages for the same breach of contract, ie the failure to comply with the terms of an effective notice in addition to those defined in condition 29 (4). If the defendant had forfeited the deposit in exercise of his right under condition 29 (4) (b) then he would not be entitled to claim loss of profit as well.

6 Mr Ramakrishnan did not direct my attention to any evidence of the defendant having forfeited the deposit. The affidavits say nothing about his having done so. However, there is a letter from his solicitors to the plaintiff's solicitors dated 2 July 1994 which says:

Under cl 29 (4) … [he] is entitled to and he shall forfeit and retain for his own benefit the 10% deposit paid by your clients. This is, of course, without prejudice to any other rights or remedies available to him at law or equity. [emphasis added]

7 On the same day the defendant's solicitors received a letter from Realworth Development's solicitors which says:

[O]ur clients have pursuant to the conditions of sale forfeited and retained for their own benefit the 10% deposit paid by your clients.

8 That was what in all probability prompted the defendant's solicitors to write their letter of 2 July 1994 which was the second of two letters from them that day. I think if they had meant that their client was forfeiting the deposit they would have said so and not used the expression “shall forfeit” and qualifying it with the statement that it was without prejudice to any other rights or remedies available to him. The plaintiff's solicitors responded with a simple denial that the defendant was entitled to forfeit the deposit. There was no claim for it to be returned. Nothing more was said about the deposit. I think the defendant's solicitors meant by their letter first to claim a right to forfeit and secondly to intimate an intention to exercise that right and the plaintiff's solicitors understood them to be saying precisely that and were content merely to deny that the defendant had such right. I find that the defendant had not elected to forfeit the deposit and in my judgment he is entitled to recover damages other than forfeiture of the deposit.

9 Mr Rajah submitted that the plaintiff knew of the profit the defendant would make if the contract were completed. Indeed there can be no dispute about that. The defendant obtained an option to purchase the property for $11m and the same...