Lim Hun Joo and others v Kok Yin Chong and others

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 26 November 2018
• Neutral Citation: [2018] SGHC 256
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 841 of 2018
• Published date: 04 December 2018
• Year: 2018
• Hearing Date: 13 September 2018,12 September 2018,14 September 2018
• Plaintiff Counsel: Wong Soon Peng Adrian, Ang Leong Hao, Gan Hiang Chye and Norman Ho (Rajah & Tann Singapore LLP)
• Defendant Counsel: Tan Gim Hai Adrian, Ong Pei Ching and Goh Qian'en, Benjamin (TSMP Law Corporation)
• Citation: [2018] SGHC 256

Woo Bih Li J (delivering the oral judgment of the court):

The plaintiffs commenced Originating Summons No 841 of 2018 to apply for an order for the collective sale of a development known as Goodluck Garden (“the Property”), pursuant to s 84A(1) of the Land Titles (Strata) Act (Cap 158, 2009 Rev Ed) (“LTSA”). Pursuant to s 84A(2), the plaintiffs are the three persons from the collective sale committee (“the CSC”) who were appointed by the Property’s subsidiary proprietors to act jointly as their authorised representatives in connection with this collective sale application. The CSC was constituted pursuant to s 84A(1A) to act jointly on behalf of the subsidiary proprietors for the purposes of the collective sale.

The defendants are 13 subsidiary proprietors who filed objections to the collective sale to the High Court.

The court was informed that the plaintiffs have to obtain an order in respect of the collective sale by 26 November 2018, failing which the purchaser who has entered into a sale and purchase agreement to buy the Property may treat it as rescinded. This oral judgment is rendered first. A more elaborate and detailed grounds of decision will follow.

Therefore, although many issues of law and fact were raised, this oral judgment will address the main ones only and will summarise the arguments and the court’s reasons. References to statutory provisions are to provisions of the LTSA unless otherwise stated.

Issues

In summary, the defendants raised the following main issues.

First, that the first plaintiff (“Lim”) and the third plaintiff (“Chan”) each failed to declare an actual or a potential conflict of interest before their elections into the CSC. This was because Lim has a relative and Chan has two relatives, all of whom come within the meaning of “associate”, who each owns another unit in the Property, and this failure to disclose was in breach of para 2(1)(g) of the Third Schedule. Accordingly, under para 2(2) of the Third Schedule, each of their appointments as members of the CSC is void.

The defendants argued that the present application before the court by all three plaintiffs is ultra vires as all three were to act jointly in bringing the application but they could not have done so because the appointments of Lim and Chan as members of the CSC are void. Alternatively, the invalid appointments are factors which assist the defendants to show that the collective sale transaction is not in good faith.

Second, that there was a flagrant breach of paras 7(1)(b) and 7(1)(c) of the Third Schedule because the approvals of the apportionment of sale proceeds and of the terms and conditions of the collective sale agreement (“CSA”) were not given at a general meeting of the management corporation.

Third, that the transaction in respect of the collective sale to the purchaser is not in good faith. Many factors were raised by the defendants in this regard but the main ones were: that Lim and Chan had actual or potential conflicts of interest which were not disclosed; that the approvals of the apportionment of sale proceeds and of the terms and conditions of the CSA were not given at a general meeting of the management corporation; that the CSC failed to inform and consult the subsidiary proprietors about a material change in the actual development charge (“DC”) for the Property from the last estimate given by Knight Frank Pte Ltd (“Knight Frank”) and failed to extend the closing date of the public tender; and that a valuation report by Colliers International Consultancy & Valuation (Singapore) Pte Ltd (“Colliers”) dated 7 March 2018 was fundamentally flawed and the CSC could not rely on it to justify the collective sale to the purchaser.

Issue of ultra vires

As regards the first main issue, I am of the view that the mere fact that an “associate” of Lim and two “associates” of Chan each owns another unit in the Property does not mean that Lim and Chan respectively had an actual or a potential conflict of interest. Hence, there was no breach of para 2(1)(g) of the Third Schedule. I will elaborate on this later.

Even if, for the sake of argument, there was a breach by Lim and a breach by Chan thus rendering each of their appointments void, this does not mean that the application before this court is ultra vires.

The defendants’ reliance on the Court of Appeal case involving the collective sale of Gilstead Court, ie, Lim Li Meng Dominic and others v Ching Pui Sim Sally and another and another matter [2015] 5 SLR 989 is misplaced. The originating summons in that case was ultra vires because the authorised representatives, whose appointments were all valid, did not act jointly in bringing the collective sale application. However, the application before this court would not have been a similar case of the authorised representatives failing to act jointly in bringing the collective sale application; Lim and Chan would have ceased to be plaintiffs in this application and the second plaintiff would become the sole authorised representative.

Accordingly, I conclude that the plaintiffs’ application before this court is not ultra vires.

Issue of the approvals of the apportionment of sale proceeds and of the terms and conditions of the CSA

As regards the second main issue, the plaintiffs submitted that it was sufficient if more than 50% of the subsidiary proprietors who attended the relevant general meeting signed the CSA.

I do not agree with the plaintiffs on this submission. The terms of the relevant provisions are clear. I agree with the defendants that the approvals of the apportionment of sale proceeds and of the terms and conditions of the CSA are to be done at the general meeting. It was not disputed that the signing of the CSA was done after the general meeting was concluded.

Indeed, para 7(2) of the Third Schedule makes this point even clearer. It states that, “The meeting for any of the purposes in sub-paragraph (1)(a), (b) and (c) shall be convened before any subsidiary proprietor signs the collective sale agreement.”

It was also not disputed that there was no voting on these aspects of the CSA at the general meeting. In my view, the approval must be established by some overt act like voting. It is not sufficient for the plaintiffs to say that it was clear that a majority of those attending the meeting had approved those aspects. It was not a unanimous decision. How would this clarity of approval be established if not by voting?

Accordingly, there was a breach of paras 7(1)(b) and 7(1)(c) of the Third Schedule.

Would that breach then invalidate the plaintiffs’ application?

Section 84A(7C) states that a Strata Titles Board shall not invalidate an application to the Board for an order for a collective sale by reason only of non-compliance with any requirement in the First, Second or Third Schedule if the Board is satisfied that such non-compliance does not prejudice the interest of any person, and the Board may make such order as may be necessary to rectify the non-compliance and such order for costs.

This provision does not mention the High Court. Read together with s 84A(3), s 84A(7C) seems to apply only to the stage where an application is made to the Board. The purpose seems to be so that the Board need not invalidate any application before it simply because of a non-compliance. The omission to mention the High Court appears deliberate but the omission still means that the court has to grapple with the question as to whether a non-compliance would necessarily invalidate an application to the High Court for approval.

It seems to me that a non-compliance will not, in and of itself, invalidate an application to the High Court even if the non-compliance is not of a merely technical provision. This will accord with the framework in s 84A(7C) regarding an application to the Board.

However, a non-compliance would result in the dismissal of an application to the High Court if the circumstances pertaining to the non-compliance amounts to an absence of good faith under s 84A(9)(a)(i).

I will therefore consider the CSC’s non-compliance with paras 7(1)(b) and 7(1)(c) of the Third Schedule in the context of the absence of good faith argument.

Issue of good faith of the transaction

I come now to the third main issue, ie, the question of good faith.

“Good faith” in s 84A(9)(a)(i)

The meaning of “good faith” under s 84A(9)(a)(i) has been considered on various occasions by the Court of Appeal, and recently in Ramachandran Jayakumar and another v Woo Hon Wai and others and another matter [2017] 2 SLR 413 (“Shunfu Ville (CA)”). In its decision in Shunfu Ville (CA), the Court of Appeal generally affirmed, once again, its judgment in Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal [2009] 3 SLR(R) 109 (“Horizon Towers (CA)”). These two cases should be the starting point for the test of good faith and not the High Court case of Tsai Jean v Har Mee Lee and others [2009] 2 SLR(R) 1 involving the collective sale of Cairnhill Heights which the plaintiffs relied on.

In taking into account the sale price for the test of good faith, the Court of Appeal in Horizon Towers (CA) held that the word “transaction” in s 84A(9)(a)(i) (at [130]):

… embraces the entire sale process, including the marketing, the negotiations and the finalisation of that sale price (all of which steps ought to be evaluated in the context of prevailing market conditions), culminating in the eventual sale of the property.

Ultimately, the test of good faith is concerned with whether the sale price was the best price reasonably obtainable in the prevailing circumstances, or as the Court of Appeal in Shunfu Ville (CA) framed it, whether the sale price was appropriate in the circumstances (Shunfu Ville (CA) at [59], [61(c)]). The Court of Appeal chose to frame the test as such because ...