Lim Li Meng Dominic v Ching Pui Sim Sally

JurisdictionSingapore
Judgment Date02 October 2015
Date02 October 2015
Docket NumberCivil Appeal No 52 of 2015 and Summons No 266 of 2015
CourtCourt of Appeal (Singapore)
Lim Li Meng Dominic and others
Plaintiff
and
Ching Pui Sim Sally and another and another matter
Defendant

SLR

Sundaresh Menon CJ

,

Andrew Phang Boon Leong JA

and

Steven Chong J

Civil Appeal No 52 of 2015 and Summons No 266 of 2015

Court of Appeal

Land—Strata titles—Collective sales—Collective sale agreement containing clauses intended to have penal effects on non-signatory subsidiary proprietors—Whether collective sale agreement relevant to assessing good faith—Whether clauses forming part of method of distribution of sale proceeds—Whether duty of even-handedness breached—Section 84 A (9) (a) (i) Land Titles (Strata) Act (Cap 158, 2009 Rev Ed)

Land—Strata titles—Collective sales—Court approving collective sale after striking out penalty clauses in collective sale agreement—Whether court might amend collective sale agreement to cure bad faith—Section 84 A (5 A) (c) Land Titles (Strata) Act (Cap 158, 2009 Rev Ed)

Land—Strata titles—Collective sales—Subsidiary proprietors appointing three persons to act jointly as authorised representatives in connection with approval proceedings—Authorised representatives filing inconsistent applications to court—Whether authorised representatives having power to act severally—Whether application for approval made without authority—Section 84 A (2) Land Titles (Strata) Act (Cap 158, 2009 Rev Ed)

The respondents were Sally Ching (‘Ching’) and Warren Khoo (‘Khoo’). Together with Choo Liang Haw (‘Choo’), they comprised the Executive Committee (‘the Exco’) of the seven-member Collective Sale Committee (‘the CSC’), which had been appointed for the collective sale of a condominium development known as ‘Gilstead Court’. Under the Collective Sale Agreement (‘the CSA’), the members of the Exco were also the authorised representatives required to be appointed for any approval proceedings before the Strata Titles Board (‘STB’) or the High Court under s 84 A (2) of the Land Titles (Strata) Act (Cap 158, 2009 Rev Ed) (‘the LTSA’).

The CSA was signed by all the subsidiary proprietors (‘SPs’) in Gilstead Court, except the SPs of five units (‘the non-signatory SPs’). The appellants were three of the non-signatory SPs. The CSA contained a number of clauses which, inter alia,permitted the deduction of various sums (such as the costs and expenses of any approval proceedings before the STB and/or the High Court) from the share of the sale proceeds that would otherwise be payable to the non-signatory SPs but for the fact that they had not signed the CSA. These clauses were referred to collectively as the Objectionable Clauses. The primary draftsman of the CSA, Khoo, had inserted these clauses as sanctions against what he viewed as the selfish behaviour of those who did not sign the CSA.

The designated purchaser in the collective sale was Dillenia Land Pte Ltd (‘DLPL’). Not long after DLPL's bid of $150,168,000 was accepted, the non-signatory SPs communicated an offer to the Exco saying that they would sign the CSA if the CSC gave written confirmation that some of the Objectionable Clauses would not be enforced, but this offer was rebuffed.

On 4 July 2013, an application to the STB was made for the collective sale of Gilstead Court to DLPL. This application also included a claim against the non-signatory SPs for $29,000, pursuant to certain Objectionable Clauses. The non-signatory SPs then filed objections with the STB. During this period, DLPL made three offers to contribute towards the costs of the application to the STB to Khoo if, inter alia, the objections were withdrawn. This led to a split in the CSC - the minority (including Khoo and Ching) wanted to reject the offer while the majority (led by Choo) favoured acceptance. It was in the midst of this rift that the STB issued a stop order pursuant to s 84 A (6 A) (b) of the LTSA on 1 October 2013.

On 7 October 2013, Choo and the members of the CSC favouring acceptance of DLPL's offer filed Originating Summons No 941 of 2013 before the High Court to obtain, inter alia, declarations that the Objectionable Clauses of the CSA did not apply to the non-signatory SPs if they signed the CSA. On 16 October 2013, Khoo commenced Originating Summons No 982 of 2013 (‘OS 982’) in the names of the Exco, but without the knowledge or consent of Ching or Choo. Ching eventually ratified the use of her name but Khoo had to remove Choo as a plaintiff and add him as a defendant. OS 982 contained an application for the High Court's approval of the collective sale as well as various other prayers, including one for the non-signatory SPs make payment of the sums allegedly owing under some of the Objectionable Clauses.

The High Court judge who heard the proceedings below took the view that the Objectionable Clauses caused an unjustifiably unequal distribution of the sale proceeds but it was not to the extent of impugning the bona fides of the transaction. Instead, he approved the sale subject to conditions pursuant to s 84 A (5 A) (c) of the LTSA to strike out the offending portions of the Objectionable Clauses. The appellants appealed against the judge's decision to approve the application for collective sale on the basis that the transaction was not in good faith as was required under s 84 A (9) (a) of the LTSA and that the respondents' application to the High Court was made without authority.

Held, allowing the appeal:

(1) In considering or assessing whether there was good faith in the transaction, it would often be necessary for the court to have regard to the collective sale agreement to assess the conduct of the transaction, and this would be all the more so if the method of distribution of the sale proceeds described in the sale and purchase agreement was expressly subject to the operation of the collective sale agreement: at [47] and [49] to [52] .

(2) When a court took into account the method of distributing the sale proceeds for the purpose of assessing the good faith of the transaction, it was concerned with the substance of the transaction and not merely its form. What was crucial was the actual consideration that each SP would receive and how that sum would be calculated. The phrase ‘the method of distributing the proceeds of sale’ in s 84 A (9) (a) (i) (B) of the LTSA referred to the entire system by which the final shares of the sale proceeds were determined as a whole and this would cover not only the amount of sale proceeds to be received by an objecting SP but also the method of distributing such proceeds as well. Accordingly, the court had to necessarily have regard to all the terms in the contract that could have a real impact on the distribution of the sale proceeds in order to assess the good faith of the transaction: at [57] and [58] .

(3) The statutory duty of good faith included the duty to be even-handed, but the subjective views of the parties as to the fairness or unfairness of the method of distribution of the sale proceeds were not determinative: at [62] to [64] .

(4) The CSA contained a number of clauses which were objectionable. These clauses might have been drafted with the goal of securing the full agreement of the SPs in the collective sale in order to avoid delays, but they unfairly prejudiced those who might have been disinclined to agree to the collective sale by penalising them for holding that view: at [66] .

(5) An SP had the absolute right not to sign a collective sale agreement, for whatever reason he or she might have. Section 84 A of the LTSA took away the right of an SP to refuse to sell if the requisite majority SPs wished to sell, but it did not require a non-consenting SP to sign a collective sale agreement: at [77] .

(6) On the facts, the impugned clauses, which went to the method of distribution of the sale proceeds, were not only objectively unfair and intended to prejudice the interests of the non-signatory SPs who exercised their entitlement not to lend their signatures to a document they did not concur in, but would also, in fact, cause them to suffer significant detriment. To discharge the statutory duty of good faith, it was not sufficient that the majority SPs or the sale committee had the real, but objectively unjustifiable, belief that they were permitted to act in a discriminatory manner: at [84] .

(7) The inclusion of the impugned clauses and the respondents' determined effort to enforce and give effect to them were contrary to the requirement that the transaction be carried forward in good faith, taking into account, in particular, the method of distribution of the sale proceeds: at [85] .

(8) Once the court or the STB was satisfied that there was a lack of good faith in the transaction, having regard only to the factors stipulated in s 84 A (9) (a) of the LTSA, it had to refuse the collective sale application. Bad faith could not be purged by the imposition of conditions pursuant to s 84 A (5 A) (c), or by the common law rules embodied in the ‘blue pencil’ doctrine and/or notional severance: at [89] , [92] and [100] .

(9) Section 84 A (5 A) (c) of the LTSA was never intended to confer on the High Court such a broad power as was contained in the ‘blue pencil test’. It was intended to confer only a supplementary power to aid the High Court in assessing the relevant collective sale application pursuant to s 84 A (1): at [103] .

[Observation: Notwithstanding the fact that the appeal was allowed on the ground that the transaction was not in good faith, given the fact that the issue relating to the respondents' authority to bring OS 982 was canvassed and considered in the court below as well as in the parties' respective written submissions on appeal, it would be appropriate to furnish some guidance with respect to this issue for the future. In this regard, the persons from the sale committee who were appointed to act jointly as the authorised representatives in connection with any application for a collective sale pursuant to s 84 A (2) of the LTSA...

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5 cases
  • Lim Hun Joo and others v Kok Yin Chong and others
    • Singapore
    • High Court (Singapore)
    • November 26, 2018
    ...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 va......
  • Kok Yin Chong and others v Lim Hun Joo and others
    • Singapore
    • Court of Appeal (Singapore)
    • April 30, 2019
    ...would not be allowed to proceed. We also held in Lim Li Meng Dominic and others v Ching Pui Sim Sally and another and another matter [2015] 5 SLR 989 (“Gilstead Court”) that: 52 … Whilst s 84A(1) implicitly requires the sale and purchase agreement that is entered into between the majority o......
  • Lim Hun Joo and others v Kok Yin Chong and others
    • Singapore
    • High Court (Singapore)
    • January 2, 2019
    ...On appeal, the decision of the Court of Appeal in Lim Li Meng Dominic and others v Ching Pui Sim Sally and another and another matter [2015] 5 SLR 989 (“Gilstead Court (CA)”) did not discuss s 84A(4A). On the other hand, as mentioned, the High Court in Thomson View Condominium (HC) held tha......
  • Yeo Sok Hoon and others v Tan Thiam Chye and another
    • Singapore
    • High Court (Singapore)
    • October 6, 2020
    ...as the circumstances of the case would permit (Lim Li Meng Dominic and others v Ching Pui Sim Sally and another and another matter [2015] 5 SLR 989 at [61]). In attacking the conduct of C&W, the defendant pressed the argument that Ms Sim had made a false representation to the CSC that the p......
  • Request a trial to view additional results
2 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • December 1, 2015
    ...the court clearly assumed that the blue pencil doctrine was of general application. 12.123 In Lim Li Ming Dominic v Ching Png Sim Sally[2015] 5 SLR 989 (‘Lim Li Ming Dominic’), the Court of Appeal disagreed with the lower court as to the precise effects of the impugned clauses. In its view,......
  • Land Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • December 1, 2015
    ...Several important principles in this area of the law were laid down by the Court of Appeal in Lim Li Meng Dominic v Ching Pui Sim Sally[2015] 5 SLR 989 (‘Lim Li Meng Dominic’). This case considered objectionable clauses contained in a collective sale agreement which affected the method of d......

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