N K Rajarh and others v Tan Eng Chuan and others

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 08 November 2013
• Neutral Citation: [2013] SGCA 62
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 42 of 2013
• Published date: 16 December 2013
• Year: 2013
• Hearing Date: 15 August 2013
• Plaintiff Counsel: Hri Kumar Nair SC, Benedict Teo and Constance Zhao (Drew & Napier LLC) (instructed) and David De Souza and Kevin De Souza (De Souza Lim & Goh LLP)
• Defendant Counsel: Lim Seng Siew, Ong Ying Ping and Susan Tay (OTP Law Corporation),Lai Swee Fung (UniLegal LLC)
• Subject Matter: Land,Strata titles,collective sales,Equity,Fiduciary relationships
• Citation: [2013] SGCA 62

V K Rajah JA (delivering the grounds of decision of the court):

This appeal arises from an application for the collective sale of the units in Harbour View Gardens comprised in Land Lot No 1789M of Mukim 3 (“the Development”), which was dismissed by a High Court judge (“the Judge”) on 8 April 2013. The Judge’s grounds of decision is reported as N K Rajarh and others v Tan Eng Chuan and others [2013] 3 SLR 103 (“the GD”). This appeal raised some interesting legal questions in relation to a sale committee’s duties arising from the making of an offer of an incentive payment to a minority proprietor to secure the requisite consent level under the Land Titles (Strata) Act (Cap 158, 2009 Rev Ed) (“LTSA”). In this case, the incentive payment was effectively offered to only one of three minority proprietors. It is also noteworthy that this minority proprietor was a member of the sale committee for the proposed collective sale. Another peculiar feature in this appeal was the marketing agent’s intimate involvement in the arrangements to facilitate the incentive payment. This raised further questions as to whether the marketing agent’s conduct (and the sale committee’s knowledge and involvement in it) tainted the procedural fairness of the transaction and made it unsafe for the collective sale to proceed.

After hearing the parties’ submissions, we dismissed the appeal. These are the grounds of our decision.

The background facts Parties to the dispute

The Development is a 27-year-old small residential development of 14 residential units of different sizes and share values.¹ The appellants were members of the collective sale committee who were authorised to make the application for the collective sale of the Development.² (In these grounds, we will refer to the collective sale committee that was constituted as “the CSC”, and collective sale committees in general as “SCs”).

The first respondent (“Mr Tan”) and the second respondent (“Madam Kee”) (collectively, “the Tans”) are husband and wife and they jointly own two units, viz, units 223 and 223A. The third respondent (“Ms Chow”) owns unit 217A. Unit 217A was purchased by Ms Chow’s former husband, Richard Toh (“Mr Toh”), in his sole name before their marriage and used as their matrimonial home. In 2009, Ms Chow and Mr Toh underwent divorce proceedings. On 10 January 2011, the High Court, in dividing the matrimonial assets, ordered that unit 217A be transferred to Ms Chow by 10 January 2012.³ We will refer to the Tans and Ms Chow collectively as “the respondents”.

Events leading to the application for the collective sale

On 10 September 2011, an extraordinary general meeting (“EGM”) of the proprietors was convened,⁴ and a resolution for the CSC to be constituted was passed. The following proprietors were appointed to the CSC:⁵

S/N	Subsidiary proprietor’s name	Unit No
(a)	Arthur Lim Kean Chuan (the second appellant)	213A
(b)	He Jianpeng	221A
(c)	Tan Haw Kiong Jimmy	219
(d)	Pang Kok Wah	221
(e)	Chua Ang Fatt (the third appellant) who was nominated by his wife, Tan Puay Hong, the subsidiary proprietor of unit 215A	215A
(f)	N K Rajarh (the first appellant)	213
(g)	Han Min Juan (“Mr Han”)	217

On 14 September 2011 at a meeting of the CSC, Colliers International (Singapore) Pte Ltd (“Colliers”) was appointed as the marketing agent and De Souza Lim & Goh LLP as the solicitors (“the solicitors”) for the collective sale.⁶ The CSC also discussed the reserve price and the method of apportionment for the sale. All the members of the CSC, except Mr Han, agreed with the method of apportionment proposed at this meeting.⁷

An EGM of the subsidiary proprietors was convened on 8 October 2011 for them to consider a reserve price of $34m for the Development. Mr Tan attended this meeting. The subsidiary proprietors in attendance, including Mr Han, did not object to the proposed reserve price, the method of distribution of the sale proceeds and the terms of the Collective Sale Agreement (“the CSA”).⁸ The CSA provided that if a collective sale was ordered, the “Collective Sale Price” and “the Disbursements” were to be apportioned amongst all the subsidiary proprietors, 60% by strata area and 40% by share value, and each subsidiary proprietor was entitled to receive the gross sum payable in accordance with the method of apportionment less “the apportioned Disbursements” for that unit (cl 41 read with Scheds 1 and 6 of the CSA).⁹

Consent from subsidiary proprietors representing not less than 80% of the share values and total area of all lots in the Development (“the 80% threshold”) was required for an application for a collective sale to be made (s 84A(1)(b) of the LTSA). By the end of October 2011, ten subsidiary proprietors representing 77.41% of the strata area and 80.33% of the share value of the Development had signed the CSA (“the Consenting Proprietors”).¹⁰ Mr Toh was one of the Consenting Proprietors – his signature on the CSA was accepted at that time because he was the registered subsidiary proprietor of unit 217A. However, when Ms Chow became the registered subsidiary proprietor of unit 217A in March 2012, she opposed the collective sale and Mr Toh’s acceptance was not taken into account for the purposes of the 80% threshold.¹¹ With this development, the Consenting Proprietors together held 72.14% of the strata area and 73.77% of the share value of the Development.¹² The subsidiary proprietors who objected to the collective sale (“the Dissenting Proprietors”) were: Mr Han and Jee Meng Tu (“the Hans”); Ms Chow; and the Tans. It was undisputed that the 80% threshold would be met if the Hans consented, or if the Tans consented with respect to unit 223.¹³ Ms Chow’s consent was not critical for the purposes of meeting the 80% threshold because her unit represented only 5.27% of the total strata area of the Development.¹⁴

A meeting of the proprietors was convened on 13 April 2012. Madam Kee and Ms Chow attended this meeting.¹⁵ The appellants claimed that the proprietors were informed at that meeting that the CSC had decided to put the Development up for sale by public tender between 18 April 2012 and 16 May 2012, even though the 80% threshold was not met.¹⁶ This fact was not explicitly captured in the minutes of the meeting. The minutes merely stated that Colliers had explained that the mode of sale would be by public tender, the advantages of this process and the timeline going forward. Ms Chow said that she did not object to the public tender because, in any event, the 80% threshold had not been obtained and she was “not optimistic that a buyer would be found”.¹⁷ As for the Tans, Mr Tan, in an affidavit filed on 21 January 2013, claimed that Madam Kee did not understand the proceedings because they were conducted in English.¹⁸ At the close of the tender, no offers were received for the Development.

The solicitors subsequently received an offer on 19 July 2012 from Roxy-Pacific Holdings Limited (“Roxy-Pacific”) to purchase the Development for $33m.¹⁹ The party named as purchaser under the sale and purchase agreement (“SPA”) was RH West Coast Pte Ltd (“RH West Coast”), a subsidiary of Roxy-Pacific. The offer price was above the market valuation of $32.1m by DTZ Debenham Tie Leung (SEA) Pte Ltd in their report dated 16 May 2012.²⁰ Under para 11(3) of the Third Schedule to the LTSA, the CSC had ten weeks from the close of tender to enter into a sale by private treaty. Thus, the SPA had to be executed by 25 July 2012.²¹ The solicitors confirmed that except for the reserve price, the offer was in accordance with the terms of the CSA. The offer from RH West Coast would be deemed to be accepted if subsidiary proprietors representing not less than 80% of the share values and total area of all lots in the Development signed the SPA (see cll 27–29 of the CSA)²² and a supplemental agreement (“the SA”) to the CSA to reduce the reserve price to $33m.²³

As a consequence of this arrangement, there was a rush to complete the transaction by 25 July 2012. On 23 July 2012, a meeting of the subsidiary proprietors was convened to consider the offer from RH West Coast. Madam Kee and her son and Ms Chow were at the meeting, but the Hans were not present. According to the minutes of the meeting, none of the subsidiary proprietors present at the meeting of 23 July 2012 dissented to the terms and conditions of the SPA and the SA. During the meeting, some of the subsidiary proprietors also discussed whether to contribute a portion of the sale proceeds due to them to make an incentive payment to one or more of the Dissenting Proprietors so that they would sign the CSA and the SA and the 80% threshold would be crossed. According to the minutes of the meeting (see below at [51]), Colliers emphasised that this contribution was voluntary and would be a private matter between the subsidiary proprietors that had agreed to contribute and the recipients.²⁴ The sale proceeds for the Development would not be set aside for this purpose. The subsidiary proprietors who were prepared to contribute (“the Contributing Proprietors”) decided that the contributions should be based on the same formula as the method of apportionment for the sale proceeds. On the evening of 23 July 2012, eight of the ten Consenting Proprietors agreed to contribute monies to make an incentive payment to the minority subsidiary proprietor who accepted the offer (“the Additional Payment”).²⁵ This offer was not extended to Ms Chow, see [12]. A ninth subsidiary proprietor who consented to the collective sale, Mr Miao Miao (“Mr Miao”) had agreed to contribute as well but he was away in Shanghai on 23 July 2012 and could not sign the agreement to contribute to the Additional Payment (“the Contribution Agreement”) on that day. He only signed the Contribution Agreement subsequently. Of...