MP-Bilt Pte Ltd v Oey Widarto

• Jurisdiction: Singapore
• Judge: G P Selvam J
• Judgment Date: 26 March 1999
• Neutral Citation: [1999] SGHC 70
• Date: 26 March 1999
• Subject Matter: Whether alleged implied term can contradict term in contract,Developer affirming contract,Whether time of the essence,Remedies,Whether principles governing specific performanc applicable to claim in debt,Whether developer has to act reasonably by mitigating loss,Specific performance,Whether buyer can choose to defer progress payment and pay interest only,Contractual terms,Whether claim for progress payment a claim for debt,Implied terms,Buyer alleging existence of implied term which allows deferment of progress payment if interest paid,Contract
• Docket Number: Suit No 1844 of 1998 (Registrar's Appeal No 623 of 1998)
• Published date: 19 September 2003
• Defendant Counsel: Ernest Lau and Thio Shen Yi (Thio Su Mien & Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: Engelin Teh SC, Jill Tan and Thomas Sim (Engelin Teh & Young)

Judgment:

1.GP SELVAM J

The action

This case concerns an agreement for the sale and purchase of a flat in a condominium development called Ardmore Park which is presently under construction. It proposes to comprise 330 flats in three blocks. It is a billion dollar project. Only the affluent can afford to purchase the flats. The plaintiffs, the developers, brought this action to recover an unpaid progress payment from the defendant, the purchaser of one flat. They applied for summary judgment. The defendant is resisting the claim. The application was rejected and the defendant was given unconditional leave to defend. The reason for the resistance is novel and I have to defer stating it until after I have stated the background facts.

2. The facts

The agreement was made on 16 August 1996. It is in a form familiar to conveyancing lawyers. The area of the flat is stated to be 268 sq m, that is about 2,888 sq ft It is at the sixth level. The purchase price is $4,860,398 which works out to about $1,683 per sq ft.

3.The agreement states that the purchase price shall be paid by instalments. The instalments vary. The first is 20% of the price and is payable on signing the agreement. The next is 10% of the price and is payable by the purchaser upon the vendor`s notice in writing that the foundation work has been completed. The third is also 10% and is payable within 14 days after receipt by the purchaser of the vendor`s written notice that the reinforced concrete framework has been completed. The agreement provides for seven further instalments.

4.A failure to pay an instalment attracts interest on it at an agreed rate. If the purchaser defaults the vendor is given the right to give an unless notice to `repudiate this agreement` meaning that the agreement may be annulled by the vendor. The choice is the vendors`. If that happens the law says that neither side has any further rights or obligations except as to damages which are limited by the agreement. If the notice to annul is given, the interest stops running from the end of the notice period.

5.If the agreement is so annulled the vendor has an express right to resell the flat and recover from the purchaser, the accrued interest and `to forfeit and retain for his own benefit a sum equal to 20% of the purchase price from the instalments (excluding payments for interest) previously paid by the purchaser`. If, property price has plummeted in excess of 20% of the purchase price, as it appears to have, the developers must carry the excess.

6.If the developers annul the agreement and cannot find another buyer at the same price immediately they have to source the funds elsewhere to proceed with the construction of the flat.

7.On the other hand if the developers do not annul the agreement and purchaser fails or refuses to pay the instalments, they might be in deeper trouble. They may have to cease construction. In which case the purchaser will be entitled to annul the agreement and seek reimbursement of the payments he has made. Thus, the developers are caught on the horns of a dilemma.

8. Application for summary judgment

They have chosen a third alternative: they have sued the purchaser for payment of the first instalment based on the completion of foundation work. Then they sought summary judgment under O 14 for the sum of S$486,039.80 and interest on it.

9.The defendant appeared by counsel to show cause against the application. He relied on an alleged implied term to the effect that he can defer payment of the progress payment as long as he continued to pay interest. He said that he offered to pay interest without the principal sum but it was not accepted. Instead the plaintiffs affirmed the contract. Next he said that the plaintiffs were under a reasonable duty to mitigate all the losses they have incurred. These points were set out in a defence filed on 3 November 1998.

10.The application was heard on 11 December 1998. Counsel for the defendant raised five arguments which were recorded as follows: 1. The claim is really one of specific performance and that is not pleaded in the statement of claim.

2. The principles of sale and purchase should apply.

3. We have not breached the agreement because of an implied term.

4. Even if there was a breach, it is an anticipatory breach as it is an executory contract.

5. As a matter of public policy, it should be ventilated at trial.

11.In developing his arguments counsel for the defendant cited White and Carter (Councils) Ltd v McGregor [1962] AC 413 and a number of additional authorities. The points raised by these authorities were novel. In the end, the court below was persuaded to give unconditional leave to defend on the ground that `this is in fact a claim for specific performance and it has not been pleaded as such in the statement of claim`.

12.The plaintiffs appealed to the judge-in-chambers. I heard the appeal. A dictum of Lord Reid in White And Carter was the mainstay of the defendant`s objection.

13. Order 14 on points of law

Before I proceed to consider the merits of the application, I propose to make a brief reflection on O 14 proceedings. In Hua Khian Ceramics Tiles Supplies Pte Ltd v Torie Construction Pte Ltd [1992] 1 SLR 884 a rule of practice was stated to the effect that the courts should make a robust approach when considering applications for summary judgment particularly in commercial and construction cases where cash flow is the life blood to make commerce work. The rigour of that rule is being applied to good end. It has earned good reputation for Singapore.

14.Since then a new provision was inducted into the Rules of Court 1996. Order 14A, now O 14 r 12, was introduced to enable the court to effect summary disposal of cases by determining any question of law or construction of any document arising in any cause or matter at any stage of the proceedings. This is an implement of a recent and present movement towards a speedy solution to civil disputes where oral evidence is unnecessary. The new procedure should be put to use in cases where all relevant and necessary evidence is documentary. Even in a case where an application is made under O 14 r 1, if the matter can be disposed of by the application of well settled principles of law, the court should not flinch from its obligation under O 14. The court should take judicial notice of the law and at once grapple with the issue. This rule of practice is founded on the following principle of practice found in The Supreme Court Practice 1999 para 14/4/12 headed `Questions of Law`.

Where the court is satisfied that there are no issues of fact between the parties, it would be pointless to give leave to defend on the basis that there is a triable issue of law, and this is so even if the issue of law is complex and highly arguable.

The principle was applied in European Asian Bank AG v Punjab and Sind Bank (No 2) [1983] 2 All ER 508[1983] 1 WLR 642 (CA), Israel Discount Bank of New York v Hadjipateras [1983] 3 All ER 129[1984] 1 WLR 137 and more recently in Stocznia Gdanska v Latvian Shipping Co [1998] 1 All ER 883[1998] 1 WLR 574, where the House of Lords decided a point raised in an O 14 application. This practice has been approved and applied by the Singapore Court of Appeal in Tokyo Investment Pte Ltd & Anor v Tan Chor Thing [1993] 3 SLR 170 .

15. Implied terms must be reasonable, necessary and consistent with express terms

Now I shall consider the objections raised by the defendant. First this implied term. The defendant says that :

it was an implied term of the agreement and/or there was a common understanding or intention between the plaintiffs and the defendant that the defendant could defer payment of the instalment set out, inter alia, in cl 3(1)(b) of the agreement provided:

(a) the defendant pays to the plaintiffs all interest payable under cl 5(1) and 5(2) of the agreement; and/or

(b) the plaintiffs did not accept the defendant`s failure to pay the said instalment within 14 days of the defendant`s receipt of the plaintiffs` notice in writing as a repudiatory breach of the agreement.

16.An implied term is a fictional device conceived by the courts as a term the parties had in their mind in order to make the contract workable. It is a fundamental assumption or basic sense on which the written contract before the court is deemed to have been made. By definition, it is complementary to the written contract. An implied term, therefore, cannot go counter to and destroy a sense or term that is already in the contract. Parties cannot have two contracts, one written and the other implied, contradicting each other. In Liverpool City Council v Irwin [1977] AC 239 at 253 (HL) Lord Wilberforce said that the courts would be `willing to add a term on the ground that without it the contract will not work`. In Gyllenhammar International Ltd v Sour Brodogradevna Industrija [1989] 2 Lloyd`s Rep 403 at 415 Hirst J said with succinctness: `On well established principles a term would only be implied if it was reasonable, necessary, and consistent with the remainder of the contract.`

17.The defendant`s implied term fails all three touchstones. First, it is not reasonable for the defendant to neglect and refuse to pay a debt which has fallen due. The defendant admits that he is liable to pay interest. But the liability to pay interest cannot arise unless and until the principal is due and payable. Accordingly, it is wholly unreasonable on his part to sign a contract requiring the plaintiffs to expend money and effort and make a myriad of contracts with others and consequent subcontracts against his promise to pay upon their performance and in the same breath say that an implied term exempts him from making payment. The plaintiffs did not give him an `interest only loan`. Next the alleged implied term is not necessary to make the contract work. On the contrary, the contract will become unworkable should the defendant`s term be implied into...