Ma Ong Kee and another v Kaiyo Reptile Products Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 16 August 2011
• Neutral Citation: [2011] SGHC 188
• Court: High Court (Singapore)
• Docket Number: Suit No 642 of 2010
• Published date: 18 August 2011
• Year: 2011
• Hearing Date: 04 July 2011,15 July 2011,05 July 2011
• Plaintiff Counsel: Subramaniam s/o Ayasamy Pillai and Taryn Yap (Colin Ng & Partners LLP )
• Defendant Counsel: Beh Eng Siew and Bernard Sahagar (Lee Bon Leong & Co)
• Subject Matter: Land,Sale of Land,Conditions of Sale
• Citation: [2011] SGHC 188

Woo Bih Li J: Introduction

The plaintiffs Ma Ong Kee and Tan Soo Ling (collectively referred to as “The Purchasers”) had entered into an agreement to purchase a non-residential property known as 15, Realty Centre #01-02, Enggor Street, Singapore 079716 (“the Property”) from the defendant Kaiyo Reptile Products Private Limited (“the Vendor”). The sole dispute which arose between them was whether the Purchasers were liable to pay goods and services tax (“GST”) on the purchase price which the Vendor was itself liable to pay to the relevant authority. Unfortunately, this issue was not resolved and the Vendor terminated the agreement in the circumstances elaborated below and forfeited the deposit paid by the Purchasers. The Purchasers then filed a Writ of Summons to claim specific performance of the agreement and liquidated damages or general damages in lieu of specific performance. The Vendor in turn counterclaimed declarations that it was entitled to rescind the agreement, that the Purchasers were to cancel any entry in the relevant land register relating to the agreement and that the Vendor was entitled to forfeit all moneys paid by the Purchasers. The Vendor also counterclaimed a declaration that it was entitled to damages under condition 29.9 of the Singapore Law Society’s Conditions of Sale 1999 (“the 1999 Conditions of Sale”) but did not pursue this claim before me. Instead, the Vendor claimed damages for being precluded from utilising a deposit as I shall elaborate below.

Background

By an option to purchase dated 31 March 2010, the Vendor granted the Purchasers an option to purchase the Property at a price of $3,800,000. The option fee was $38,000, ie, one per cent of the price.

On 14 April 2010, the Purchasers’ solicitors Colin Ng & Partners LLP (“CNP”) wrote to the Vendor’s solicitors Lee Bon Leong & Co (“LBLC”), with various documents enclosed to exercise the option. One of the documents was a cheque for $152,000 in favour of LBLC, being the balance of 5% of the price, which was the amount payable on the exercise of the option. I will refer to the entire 5% amounting to $190,000 as “the Deposit”.

On 15 April 2010, LBLC wrote to CNP to state, for the avoidance of doubt, that the Property was sold subject to an existing tenancy and that the Vendor was registered for GST. LBLC requested $13,300 being the 7% GST payable on the Deposit.

Notwithstanding the request for $13,300, there was no dispute that the option had been validly exercised. Accordingly when it was exercised, there was a binding sale and purchase agreement between the Vendor and the Purchasers.

Although the terms of the option did not clarify whether the Property was sold with vacant possession or subject to a tenancy, the Purchasers did not raise any issue about the tenancy and apparently accepted that the sale was subject to the tenancy mentioned by LBLC in its letter dated 15 April 2010.

On 11 May 2010, about four weeks after LBLC’s letter of 15 April 2010, CNP wrote to LBLC to say that the Purchasers were surprised at the belated request for payment of GST and that the Purchasers were not obliged to pay it “as this is contrary to the contractual bargain between the parties. In any event, this is consistent with the position at law where if there is no provision in the Option for the purchaser to pay the vendor’s GST liability or the GST attracted by the sale, then the price quoted by the vendor for the sale of the property shall be deemed to include any GST chargeable on the sale”.

LBLC replied on 12 May 2010 to disagree with CNP’s letter on the issue as to whether the Purchasers were liable to pay the Vendor’s GST, pending formal instructions from the Vendor. LBLC drew CNP’s attention to condition 7.3 of The 1999 Conditions of Sale which they said imposed the liability for GST on the Purchasers.

On 14 May 2010, LBLC wrote to confirm their client’s stand as stated in LBLC’s letter of 12 May 2010. I will refer to the issue as to whether the Purchasers were liable to pay the GST as “the GST issue”.

The parties could not agree on the GST issue. Apparently, the Purchasers offered to complete the sale but to pay the 7% GST amounting to $266,000 to CNP or to a neutral third party to be held as stakeholders pending determination of the GST issue. However, these suggestions were not acceptable to the Vendor. Accordingly, the sale and purchase was not completed on 28 July 2010 which was the scheduled date of completion as calculated under the terms of the option.

On 30 July 2010, LBLC sent CNP a 21-day notice to complete the sale and purchase. In turn, CNP sent LBLC a 21-day notice to complete also dated 30 July 2010. Both the 21-day notices expired on 20 August 2010.

While each set of solicitors maintained that their respective clients were ready, able and willing to complete the transaction, there was no completion because of the GST issue.

In the circumstances, if the notice to complete from LBLC was valid, the Vendor was entitled to forfeit and keep the deposit paid by the Purchasers and resell the Property (see condition 29.8 of the 1999 Conditions of Sale). Although there is no express provision that a sale and purchase agreement would be terminated for failure by a purchaser to comply with a valid notice to complete, both sides assumed that that must be the effect of condition 29.8.

The Purchasers filed the writ of summons on 24 August 2010, a few days after the expiry of the notices to complete. The reliefs they sought and the reliefs sought by the Vendor in its counterclaim are summarised in [1] above.

The action was fixed for hearing for three days from 4 July 2011. Counsel for the parties eventually agreed that the material facts were not in dispute. The issue was the correct interpretation of condition 7.3.1 of the 1999 Conditions of Sale, ie, whether it imposed liability for GST on the Purchasers. Counsel summarised the facts in an Agreed Statement of Facts which is attached hereto as a schedule. I have elaborated above on the summary.

Condition 7.3

Condition 7.3 of the 1999 Conditions of Sale states: 7.3.1 The Purchaser (whether of freehold or leasehold property) shall pay all Goods and Services Tax, if any, which may be payable in respect of the sale price of the property under the Goods and Services Tax Act (Cap. 117A) on completion or earlier as required by the Comptroller. 7.3.2 These provisions are not to merge in the Conveyance of the property.

The court’s decision

The predecessor to the 1999 Conditions of Sale is the Singapore Law Society’s Conditions of Sale 1994 (“the 1994 Conditions of Sale”). It was common ground that condition 7.3.1 of the 1999 Conditions of Sale is a new provision dealing with GST and that there was no such provision in the 1994...