Lim Hun Joo and others v Kok Yin Chong and others

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 02 January 2019
• Neutral Citation: [2019] SGHC 3
• Citation: [2019] SGHC 3
• Year: 2019
• Published date: 07 May 2019
• Hearing Date: 13 September 2018,26 November 2018,12 September 2018,14 September 2018
• Docket Number: Originating Summons No 841 of 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)
• Subject Matter: Land,Strata titles,Collective sales
• Court: High Court (Singapore)

Woo Bih Li J: Introduction

The plaintiffs commenced Originating Summons No 841 of 2018 (“OS 841/2018”) 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, who had agreed in writing to sell the Property, 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. They mainly contended that the present application was ultra vires, that there was a flagrant breach of certain statutory requirements, and that the transaction in respect of the collective sale to the purchaser was not in good faith. On this last point, the defendants raised many factors to argue that this court should not approve the collective sale application pursuant to s 84A(9)(a)(i).

I heard OS 841/2018 from 12 September 2018 to 14 September 2018. At the end of the hearing on 14 September 2018, I reserved judgment. I was informed that the plaintiffs had to obtain an order in respect of the collective sale by 26 November 2018, failing which the purchaser who entered into a sale and purchase agreement to buy the Property (ie, the sale and purchase agreement, amended as at 8 March 2018 (“the SPA”)) might treat it as rescinded.¹ I delivered my oral judgment (Lim Hun Joo and others v Kok Yin Chong and others [2018] SGHC 256) on 26 November 2018, addressing the main issues of law and fact, and indicated that more detailed grounds of decision would follow. In short, I granted the primary orders sought by the plaintiffs with costs and disbursements to be determined at a later date.

These are the grounds of my decision. References to statutory provisions are to provisions of the LTSA unless otherwise stated.

Background

I set out the background facts as far as they were undisputed.

The Property is a freehold development comprising 210 units.² In or around May 2017, the management council of the Property’s management corporation invited Knight Frank Pte Ltd (“Knight Frank”) to share with the subsidiary proprietors an overview of the collective sale process.³ Knight Frank will be referred to as a “marketing agent” in these grounds.⁴ On 27 May 2017, Knight Frank gave a presentation to the subsidiary proprietors where it estimated the sale price for the Property to be at least $455.8m, and estimated the development charge (“DC”) payable for the redevelopment of the Property to be $48.4m.⁵ The DC is a tax payable by developers to the relevant authorities when planning permission is granted to carry out a development project which increases the value of the land.⁶

On 1 July 2017, an extraordinary general meeting (“EGM”) of the management corporation was convened. At this EGM, the CSC was constituted to act jointly on behalf of the subsidiary proprietors for the purposes of a collective sale.⁷ The subsidiary proprietors resolved that the CSC comprise six members, and that the three plaintiffs and three other individuals form the CSC.⁸ The first plaintiff became the chairman of the CSC.⁹

The CSC thereafter contacted a few marketing agents, including Knight Frank, with the intention of appointing one of them for the proposed collective sale. Sometime in early July 2017, the CSC members unanimously agreed to appoint Knight Frank as the marketing agent.¹⁰ The CSC members also unanimously agreed to appoint Rajah & Tann Singapore LLP (“R&T”) as the legal firm for the collective sale.¹¹

On 9 September 2017, an EGM of the management corporation was convened and was attended, in person or by proxy, by subsidiary proprietors who collectively own 135 units of the Property.¹² At the EGM, Knight Frank shared a proposed reserve price of $500m for the collective sale and an estimated DC of around $58.5m, subject to verification.¹³ Knight Frank explained the apportionment method of sale proceeds.¹⁴ R&T then went through the terms and conditions of the collective sale agreement (“the CSA”).¹⁵ The CSA stated that the reserve price was $500m, although this reserve price could be changed in accordance with the provisions in the CSA.¹⁶ However, at the EGM, the subsidiary proprietors did not vote on or otherwise approve the apportionment of sale proceeds and the terms and conditions of the CSA.¹⁷ Instead, after the EGM was concluded, subsidiary proprietors who collectively own 76 units signed the CSA that day.¹⁸

Thereafter, the CSC circulated a situational update dated 18 October 2017, which was provided with inputs from Knight Frank, where the CSC stated that the DC was one of the factors that had been taken into consideration to establish the reserve price.¹⁹

On 22 November 2017, the CSC, in consultation with Knight Frank, resolved to increase the reserve price from $500m to $550m,²⁰ and did so pursuant to Schedule 3 cl 3 of the CSA.²¹

On the same day, Knight Frank appointed an architectural company, Ong & Ong Pte Ltd (“Ong & Ong”), to carry out for the Property, the Gross Floor Area (“GFA”) verification and the Development Baseline search with the Urban Redevelopment Authority (“URA”).²² These searches would provide information to determine the actual amount of DC payable for the Property (“the DC verification”).²³ Consequently, Ong & Ong spent some weeks to do the necessary preparatory work for submitting the search applications to URA.²⁴

Thereafter, Knight Frank sent letters dated 24 November 2017 to the subsidiary proprietors to inform them that the CSC had resolved to increase the reserve price to $550m.²⁵

As at 7 December 2017, subsidiary proprietors of the lots with less than 80% of the share values and less than 80% of the total area of all the lots had signed the CSA. Knight Frank then sent a letter dated 8 December 2017 to urge the subsidiary proprietors to support the collective sale.²⁶ The letter stated that “[DC] rates are highly expected to increase on 1 March 2018 and it will have a direct impact on [the potential bidders’] bid price[s]”. The letter added that “[i]t is ideal to lock in a buyer before further [DC] rates increment, as this directly affects the land rate – developers may factor in potential [DC] increase during tender and discount the price to owners”.

Thereafter, by 15 January 2018, subsidiary proprietors of the lots with not less than 80% of the share values and not less than 80% of the total area of all the lots had signed the CSA.²⁷ The subsidiary proprietors thus reached the 80% consent threshold required for making any collective sale application pursuant to s 84A(1)(b). (Subsidiary proprietors who signed the CSA (at this point or thereafter) will be referred to as “majority owners” or “assenting subsidiary proprietors”, and subsidiary proprietors who did not sign the CSA will be referred to as “minority owners” or “dissenting subsidiary proprietors”.)

On 18 January 2018, Ong & Ong submitted the search applications for the DC verification to URA.²⁸

On 25 January 2018, the CSC convened what they called an “owners’ meeting”.²⁹ Knight Frank informed the subsidiary proprietors that the 80% consent threshold had been reached and that the Property would be launched for sale by way of public tender on 26 January 2018. Knight Frank mentioned that the estimated DC was $63.19m, and that it had appointed an architect to carry out the DC verification.³⁰

On 26 January 2018, the Property was launched for sale by way of public tender. The public tender was scheduled to close on 7 March 2018. When the Property was launched for sale, Knight Frank’s marketing efforts included sending emails to some 652 potential bidders on its database to notify them of the launch.³¹ In the emails, it was mentioned that the reserve price was $550m, that there was an additional estimated DC of approximately $63.2m, and that Knight Frank was awaiting a reply from URA on the Development Baseline which Knight Frank expected to receive within the next two weeks (this was a reference to the DC verification).³² Knight Frank also published an article on its webpage and from 26 January 2018 to 22 February 2018, placed four advertisements in the Business Times and one advertisement in the Straits Times to market the Property.³³ In these various marketing materials, it was stated that the Master Plan 2014 (which was a reference to the URA Master Plan 2014) had zoned the site of the Property “Residential” with a Gross Plot Ratio (“GPR”) of 1.4. The GPR relates to the intensity of the land use permitted on a site.³⁴

From 26 January 2018 to 25 February 2018, three potential bidders requested a site inspection of the Property.³⁵

On 26 February 2018, there was a very important development. The CSC received a copy of URA’s letter to Ong & Ong dated the same day (“URA’s letter”), which set out the recomputed GFA and the development charge baseline of the Property, and the CSC forwarded it to Knight Frank.³⁶ According to Knight Frank, URA’s letter meant that no DC would be payable for the Property.³⁷

The following took place on 26 February 2018. Knight Frank immediately began updating potential bidders in various ways that no DC was payable. Knight Frank sent emails to some 652 potential bidders,³⁸ and made direct calls to potential bidders who had earlier expressed interest in the Property.³⁹ Knight Frank also informed Colliers International Consultancy & Valuation (Singapore) Pte Ltd (“Colliers”), which had been appointed to give an independent valuation of the Property as at 7 March 2018, of the development charge baseline.⁴⁰ There were...