Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 31 July 2001
• Neutral Citation: [2001] SGHC 207
• Court: High Court (Singapore)
• Year: 2001
• Published date: 19 September 2003
• Plaintiff Counsel: Benjamin Sim (Kelvin Chia Partnership)
• Defendant Counsel: Harpreet Singh and Gerald Kuppusamy (Drew & Napier)
• Citation: [2001] SGHC 207

JUDGMENT:

1. The plaintiffs (the MC) are the management corporation of the well-known commercial and residential development in Chinatown, People's Park Complex. In December 2000, the MC commenced what they thought was a straightforward action against the defendant company (De Beers) to recover arrears of maintenance contributions and other payments due from the latter in respect of the 18 residential units they own in the complex.

2. No doubt to their great surprise since no hint of such a claim had been made before, the MC found themselves faced with a counterclaim for reimbursement of $370,000 being the aggregate of two payments previously made to the MC by De Beers. The gravamen of the counterclaim was that the MC had been unjustly enriched by the payments. It was asserted that the MC had unlawfully demanded the same as a condition for approving certain conversion works that De Beers wished to undertake in respect of their units in the complex. There was also a claim for a declaration in respect of a proposed covenant relating to the maintenance of the roof above the units.

3. The MC’s claim was for $341,596.05 being the aggregate of amounts accruing due from De Beers, as subsidiary proprietors, for their 18 lots during the period between 1 June 1996 and 1 November 2000. The MC also claimed interest at ten per cent per annum up to the date of judgment and legal costs on the indemnity basis. The MC applied for summary judgment and this application was heard on 19 February 2001. In the result, the MC obtained judgment for the principal amount of their claim but execution on the judgment was stayed until the trial of De Beers’ counterclaim. The MC was awarded interest on various amounts at ten per cent per annum up to the date of judgment. Post judgment interest was reserved to be determined by the judge hearing the trial of the counterclaim.

4. This judgment deals with the counterclaim and the question of interest.

The facts

5. People's Park Complex was constructed in the late 1960s and completed in about 1970. It is a mixed development containing over 650 units in both a podium block and a tower block. Over 200 of the units are residential units situated in the tower block. On the 31^st and 32^nd storeys of the tower block, there were, originally, four penthouse units that had a total area of 27,000 square feet. These penthouses were originally occupied as one unit by the moving spirit of the development company, Mr Ho Kok Chong.

6. Unfortunately, financial difficulties experienced by the then owner resulted in the penthouses being left vacant for several years before they were put up for auction in September 1988 by the mortgagees. De Beers purchased the four units at the mortgagee sale. The penthouses were in a state of considerable disrepair and in that condition were close to impossible to let. De Beers formed the view that in order to get the best return from their investment, they should convert and subdivide the four penthouses into 18 maisonette units that could then be rented out profitably.

7. In late 1988, Mr Ow Chor Seng, a director of De Beers, spoke with the company’s architects and instructed them to commence work on the conversion process. It was De Beers’ intention not only to reconstruct the four penthouses into 18 maisonettes but also to subdivide the existing four strata title lots into 18 strata title lots, one for each maisonette. Mr Ow was informed by the architects that De Beers would require approval from the MC for the intended subdivision. Accordingly, Mr Ow subsequently spoke with one Mr Lim On Guan @ Lim Woon Kiat, who was the managing director of SCMS Property Management Pte Ltd, the managing agent of the MC. Mr Lim was informed of the plans in respect of the four units. This conversation was followed by a letter dated 18 January 1989 in which De Beers formally requested the MC’s approval for the conversion work and forwarded the relevant plans for endorsement by the MC prior to submission to the Building Control Division.

8. On 25 January 1989, there was a meeting of a sub-committee of the MC. One of the matters discussed was the proposed conversion of the four penthouses. The minutes of the meeting in relation to this item read as follows:

‘PENTHOUSE UNITS #31-991 TO #31-994

The subsidiary proprietor through their Architects. DP Architects applied for endorsement to convert and sub-divide the 4 units to 18 smaller units with subsequent creation of common properties (sic).

Meeting was briefed that a special resolution is required.

After some deliberation, Meeting agreed in principle to the conversion subject to the cost sharing of an additional lift. MA [managing agent] to negotiate.’

Mr Lim was asked to convey this decision to De Beers.

9. According to Mr Lim, the reason for the cost sharing proposal was simple. There were three lifts which served the residential units. By 1989, these had reached the limits of their capacity. There had been many complaints about the waiting time, breakdowns and congestion. One of the duties of the MC was to ensure that the subsidiary proprietors were able to enjoy the common facilities and would not be inconvenienced. Once the four penthouses were converted into 18 maisonettes, there would be many more people living on the 31^st storey and the three lifts would not be able to cope with the increased demand.

10. Mr Lim duly informed Mr Ow that the MC had no objection in principle to the conversion plan but that De Beers must share the cost of installing an additional lift. Thereafter, however, when Mr Lim met with a representative of Schindler Lifts (S) Pte Ltd (Schindler) to discuss the improvement of the lift services at the complex, Schindler recommended that instead of installing an additional lift, the MC modernise the existing three lifts. The estimated cost of such modernisation work was $390,000.

11. On 10 April 1989, at a meeting of the council of the MC, the alternatives were weighed and the council decided to proceed with modernisation of the existing lifts. Mr Ow was then invited into the meeting. Mr Lim told him that since installing a new lift was not technically feasible, the existing lifts would be modernised and that if the MC was to approve De Beers’ conversion plans, the company must contribute $220,000 to the modernisation work. According to the minutes of the meeting, Mr Ow requested the meeting to reconsider the contribution figure taking into consideration the total share value of the penthouses and then offered to pay 50% of the final cost. The chairman of the meeting then suggested a lump sum contribution of $200,000. According to the minutes, Mr Ow agreed to this figure.

12. Three days later, the MC wrote to De Beers stating that it had no objection to the proposal conversion ‘subject to the following terms and conditions’. One of these was ‘a one-time contribution of $200,000 to the Management Corporation towards part of the cost for modernisation of the three lifts serving the residential apartment (sic) such payment to be made to us within two weeks from the date of our notification of payment’. In due course, De Beers accepted all the terms and conditions imposed in this letter. Mr Ow’s explanation for so doing was that he honestly believed that the De Beers had no choice but to agree to the financial contribution in order to obtain the MC’s consent to the proposed conversion. The $200,000 was eventually paid to the MC in January 1992.

13. In September 1992, an extraordinary general meeting of the MC was called to approve certain special works. These were (i) replacement of the existing passenger lifts serving the residential block (this was the modernisation work planned earlier), (ii) refurbishment of the escalators at the podium block, (iii) replacement of the existing goods lift and (iv) installation of a travellator at the podium block. The resolution stated that the cost of the works was estimated at $1,139,860 and that this would be paid from the sinking fund account and/or from the management fund account and/or by other financial arrangement by way of loan which the management council might think fit. The minutes of the meeting show that the subsidiary proprietors who attended it were not told that De Beers had contributed $200,000 towards the cost of modernising the lift system. No reference was made either to the additional traffic that the lifts would have to bear as a result of the conversion works carried out by De Beers. The resolution was duly passed.

14. In the meantime, in early 1990, De Beers had submitted their formal renovation plans to the MC for endorsement prior to submission to the building authority. On 3 April 1990, the MC replied that they were prepared to approve the renovation plans only on receipt of De Beers’ undertaking to comply with the various terms and conditions set out in their letter. One of these was that the roof of each maisonette was to be maintained by the individual owner of the maisonette at the latter’s own cost. This condition was accepted by De Beers on 20 April 1990.

15. The next development took place in February 1993 when De Beers submitted 14 sets of strata subdivision plans from their surveyor for the MC’s endorsement. These plans were to effect the subdivision of the original four strata title lots issued for the penthouses into 18 strata title lots, one for each maisonette apartment. As part of the conversion process, a common corridor had also been created giving access to the 18 new units. Upon strata subdivision of the original four lots, the space making up this corridor would no longer be included in any strata lot and would therefore become part of the common property. It was for this reason that De Beers asked for the MC’s endorsement of their strata subdivision plans.

16. On 19 February 1993, a council meeting was held. One of the attendees was Mr Wong Kwong Chen, another employee of SCMS Property Management Pte Ltd. Mr Wong...