Liten Logistics Services Pte Ltd v ORG Powell Packaging Pte Ltd and another appeal

JudgeSundaresh Menon CJ
Judgment Date23 July 2013
Neutral Citation[2013] SGCA 42
CourtCourt of Appeal (Singapore)
Hearing Date20 March 2013
Docket NumberCivil Appeals Nos 44 and 45 of 2012
Plaintiff CounselAqbal Singh (Pinnacle Law LLC)
Defendant CounselNg Keng Chye and Tan Ee Nin (Wong Alliance LLP)
Subject MatterLand,Sale of land,Conditions of sale
Published date30 July 2013
Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

This was an unusual appeal (against the decision of the High Court judge (“the Judge”) in ORG Powell Packaging Pte Ltd v Liten Logistics Services Pte Ltd [2012] SGHC 219 (“the GD”)). This was not merely a false start but a race that ought not to have taken place to begin with, at least in so far as one of the appeals before this court was concerned. But the parties nevertheless continued to run it with gusto. They continued running right up to the hearing of the present appeal. Eventually, they had to be called back to the start line.

The parties had run ahead of themselves because they had joined issue on legal questions that ought not to have been raised until a threshold legal issue had first been resolved. In their enthusiasm to put forward their respective cases, they had missed this threshold issue. The case concerned an attempted sale and purchase of an interest in land but the land was compulsorily acquired by the government before the sale could be completed. Perhaps the parties could not be faulted because, as we shall see, the compulsory acquisition of the land concerned lent itself to the suggestion that the contract that they had entered into might, inter alia, have been frustrated. But this missed the threshold question: had a proprietary interest in the properties concerned changed hands between the parties to begin with? If not, then all the legal issues canvassed by the parties in the court below were ultimately irrelevant. Put simply, if no proprietary interest had changed hands to begin with, that would be the end of the matter. Fortunately, this was a pure question of contractual construction in the context of a tenancy and could be resolved by this court at this hearing by construing the relevant provision in accordance with established legal principles. Indeed, the relevant application was, in any event, by way of an Originating Summons so no evidence was required to be called in the court below.

This was, indeed, a simple matter. In the circumstances, the parties needed no extra time and could address us forthwith on this particular threshold issue. After hearing submissions from counsel, it was clear to us that no proprietary interest had changed hands between the parties in the first place. We therefore allowed the appeal of Liten Logistics Pte Ltd (“the Vendor”) in Civil Appeal No 44 of 2012 (“CA 44”).

However, there was a remaining issue which constituted the nub of the appeal of ORG Powell Packaging Pte Ltd (“the Purchaser”) in Civil Appeal No 45 of 2012 (“CA 45”) and which (we should add) was (unlike CA 44) correctly canvassed in the court below. The relevant contract comprised the tenancy and purported sale of two of the Vendor’s properties. Only one had been compulsorily acquired. Could the Purchaser nevertheless insist on the sale of the other property if its arguments in respect of the former property failed (as we had, in fact, held)? After hearing submissions from counsel, it was clear to us that the sale was an integrated one for both properties and we therefore dismissed the appeal in CA 45.

We now give the detailed grounds for our decision.

The factual background

These appeals concern the ownership of the subleases of two industrial properties, viz, No 36 Tuas West Road, Singapore 638384 (“No 36”) and No 6 Tuas Avenue 20, Singapore 638820 (“No 6”), respectively. These will be collectively referred to as “the Properties”.

On 8 August 2008, the Vendor purchased the Properties from a company named Akebono-Okaya (S) Pte Ltd and became the sub-lessee of the JTC Corporation (“JTC”). Under the terms of the sublease agreements with JTC, the Vendor could not deal with its interest in the Properties in any way within three years of the date the agreements were entered into, save that it could sublet the Properties with JTC’s consent. This prohibition was relaxed after that period, with the Vendor being able to dispose of the Properties provided it had JTC’s consent. The agreements provided for the forfeiture of the subleases should the clauses be breached.

In May 2010, the Purchaser commenced negotiations with the Vendor for the purchase of the Properties. This led to the execution of an agreement known as the Preliminary Agreement on 12 June 2010. The Preliminary Agreement stated that the Properties were to be sold on 1 August 2011 with sale prices of $6,250,000 and $4,100,000 for No 36 and No 6, respectively. It was entered into in advance of the intended transaction because of the aforementioned prohibition (referred to above at [7]). In the meantime, the Purchaser would lease No 36 at a monthly rent of $65,000 from 1 August 2010 to 31 July 2011, with the sale price of No 36 being reduced by a proportion of the gross monthly rent (referred to as the “net rent”) paid over the year-long lease. The Preliminary Agreement contemplated the subsequent signing of a formal agreement.

On 22 September 2010, the parties executed a tenancy agreement in respect of No 36 (“the Tenancy Agreement”) at a monthly rent of $65,000 for a term commencing seven days after JTC’s approval of the lease was obtained and concluding on 31 August 2011. On 28 February 2011, JTC granted retrospective approval for the lease between the parties from 1 August 2010 to 31 August 2011.

Clause 2(a) of the Tenancy Agreement provided for a security deposit of $130,000 (“the security deposit”), the equivalent of two months’ rent. Clause 4(l) provided for an option to purchase No 36 together with No 6 (“the Option”) which was annexed to the Tenancy Agreement. The option period was from 15 August 2011 to 29 August 2011 and the security deposit was to be treated as the option money. The Option provided that an agreement for the sale and purchase of the Properties would arise upon its exercise (“the Agreement”). Unlike the Preliminary Agreement, the Option did not specify individual prices for each of the Properties. Instead, clause 2 of the Option stated a global sum of $10,350,000, excluding GST. Like the Preliminary Agreement, clause 3 of the Option provided that the full purchase price would be reduced by the security deposit and the net rent.

On 11 January 2011, before the Option became open for exercise, a notice of compulsory acquisition was served for No 36 (“the Acquisition Notice”). Generally, a contract for the sale of land may be discharged due to frustration if the property concerned is subject to compulsory acquisition by the Government (see, for example, the decision of this court in Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994] 1 SLR(R) 233 (“Lim Kim Som”)). However, clause 22(b) of the Option apparently made provision for such an eventuality in that it gave the Purchaser the right to rescind the Agreement on notice of the Government’s intention to acquire the whole or part of the Properties. As noted at the outset, it was over the question of frustration that the parties joined issue.

On 23 February 2011, the Purchaser’s counsel gave notice that the Purchaser would not be exercising its right to rescind and would be exercising the Option. The Vendor’s counsel replied on 1 April 2011 and took the position that, because the Option was only open for acceptance between 15 August 2011 and 29 August 2011, the Acquisition Notice had “frustrated the agreement for an option to purchase under clause 4(l)(i) of the Tenancy Agreement”. The Purchaser’s counsel replied, in turn, and expressed the view that the Acquisition Notice had frustrated neither the Option nor the Tenancy Agreement and, at the same time, reiterated their clients’ intention to proceed with the purchase of the Properties.

Correspondence between the parties ceased temporarily after this exchange of letters and they continued to satisfy their respective obligations under the Tenancy Agreement. On 3 August 2011, the Vendor wrote to the Purchaser asking that the necessary steps be taken to vacate No 36. On 15 August 2011, the Purchaser’s counsel purported to exercise the Option. The Vendor’s counsel replied the next day, repeating the position that the Option had been frustrated and rejecting the attempted exercise of the Option.

In accordance with its position that the contract had not been frustrated, the Purchaser wrote to the Vendor’s counsel on 19 August 2011 and asked that the Vendor proceed with the application for JTC’s approval of the sale of No 6. However, the Purchaser made no mention of No 36. Clause 10(a)(i) of the Option provided that the sale and purchase of the Properties was subject to the Purchaser obtaining JTC’s approval. Under clause 10(h), either party could rescind the Agreement should such approval not be obtained by 30 November 2011 for reasons beyond the control of the parties.

The Vendor (now without counsel as an intermediary) replied on 26 August 2011, enclosing an application form to be completed by the Purchaser and returned to the Vendor for submission to JTC. The Vendor stated that it was forwarding the application form without prejudice to its position regarding frustration.

Before the Purchaser returned the completed application form, the Vendor attempted to return the balance of the security deposit to the Purchaser, thereby indicating the end of the Tenancy Agreement. As mentioned above at [10], the security deposit was to serve as the option money and part payment for the Properties. Hence, the Vendor was acting on the basis that...

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1 books & journal articles
  • Land Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2013, December 2013
    • 1 Diciembre 2013 proceed. Conveyancing Availability of specific performance 20.91 In Liten Logistics Services Pte Ltd v ORG Powell Packaging Pte Ltd[2013] SGCA 42, the Court of Appeal had to consider, inter alia, whether the remedy of specific performance was available to the purchaser so that the latter......

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