Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 24 October 2008
• Neutral Citation: [2008] SGCA 42
• Citation: [2008] SGCA 42
• Defendant Counsel: Michael Hwang SC, Katie Chung, Charis Tan (Michael Hwang) and Albert Teo (PKWA Law Practice LLC)
• Published date: 28 October 2008
• Plaintiff Counsel: Sundaresh Menon SC, Lee Eng Beng SC and Ryan Loh (Rajah & Tann LLP)
• Date: 24 October 2008
• Docket Number: Civil Appeal No 141 of 2007
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether right of pre-emption constituted caveatable interest in land,Purchaser not to dispose of property except only to vendor,Land,Dealings between shareholder and family company,Interest in land,Caveats,Section 115 Land Titles Act (Cap 157, 2004 Rev Ed),Whether void as restraint on right to alienate,Variation,Whether board resolution of family company could amount to offer to vary existing agreement,Right of pre-emption,Whether such restriction amounted to condition subsequent,Caveat lodged against land on basis of right of pre-emption,Contract

24 October 2008 Judgment reserved.

Chao Hick Tin JA (delivering the judgment of the court):

1 This is an appeal against the decision of the High Court judge (“the Judge”) dismissing the appellant’s application for a caveat lodged against the respondent’s property at 17 Nallur Road to remain on the land register (see Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng [2008] 1 SLR 262).

Background

2 The appellant is a family company in every sense. Incorporated on 9 March 1976, its articles of association state that membership in the company should be restricted to its founder, Ong Chay Tong (who had since passed away in 1993), the founder’s wives and his male lineal descendants and their wives. It was common ground that the object of incorporating the appellant as a limited company was for it to hold a three-storey residential development which consisted of eight apartment units at 17 Nallur Road (“Ong Mansions”).

3 Shares in the appellant were issued on or about 7 December 1976 to the founder and members of his family (which included the founder’s second wife, Mdm Chang Yueh Nu, and her only son, the respondent). On 4 January 1979, the appellant’s board passed a resolution (“the First Resolution”) authorising the appellant to sell one unit in Ong Mansions to each of the founder’s six sons (“the first generation Ongs”) at a discounted price of $100,000 per unit (“purchase price”). The resolution also specified that the sale of the units would be subjected to the following terms and conditions:

(a) The buyers of the flats are not allowed to resell the flats to any other persons except to the [appellant] at the same purchase price.

(b) The buyers of the flats will only use the flats for their own occupancy and [are] not permitted to lease [or] sub-let any part of the flats to any other persons.

(c) The sales are payable in cash on completion of the conveyance of the flats.

4 The respondent was not a director of the appellant at the time the First Resolution was passed. On 26 March 1982, units in Ong Mansions were sold to the founder’s six sons, including the respondent. Each of the sale and purchase agreements contained a special condition (“SC3”) which made direct reference to the First Resolution:

In compliance with the [appellant’s] directors’ resolution dated 4th day of January 1979 the Purchaser undertakes and covenants that he shall not sell transfer or otherwise dispose off [sic] or part with possession of the said Flat or any part thereof except to the [appellant] at DOLLARS ONE HUNDRED THOUSAND ($100,000-00).

5 On 7 May 1998, after the demise of the founder, the appellant’s board of directors (“the Board”) held a meeting. The respondent did not attend this particular meeting although by that time he had been a director of the appellant for some five years. At the meeting, the members of the Board agreed that it might not have been the intention of the founder to restrict the holder of each unit to only the sons of the founder without consideration for future generations of male lineal descendants bearing the surname “Ong”. Accordingly, the Board resolved to delete conditions (a) and (b) of the First Resolution and to substitute them with the terms set out in the board resolution passed on that same day (“the Second Resolution”). The minutes of the meeting read as follows:

17A, 17B, 17C, 17D, 17E and 17F Nallur Road

Mr Ong Choo Eng said that he would like to discuss the Directors’ Resolution passed on 4 January 1979 wherein it stated, inter alia, that [the first generation Ongs], each a buyer of the flat at 17A, 17B, 17C, 17D, 17E and 17F Nallur Road (now known as 17 Nallur Road #03‑01, #03‑02, #04‑01, #04‑02, #05‑01 and #05‑02), Singapore, respectively, is not allowed to resell his flat to any other person except to the [appellant] at the same purchase price of S$100,000/-.

The meeting agreed unanimously that it may not be the intention of the late Ong Chay Tong at that time to restrict the holder of each flat to only the generation of his sons without consideration for future generations of male lineal descendants bearing the surname of “Ong”. Neither was it each buyer’s intention. They also agreed unanimously that each of them would like his flat to be sold or transferred or leased to only his own lineal descendant(s) bearing the surname of “Ong”. Accordingly, it was unanimously resolved:

“That the terms and conditions (a) and (b) as set out in the Directors’ Resolution dated 4 January 1979 in respect of the 6 units of flats at 17 Nallur Road, Singapore, be deleted and substituted with the following terms and conditions:

(a) Each of [the first generation Ongs] (the “Ongs”) being the first buyer or individual owner of an apartment unit or flat at 17 Nallur Road, Singapore, is allowed to dispose of, transfer or lease his flat to only his own lineal descendants bearing the surname of “Ong” (the “Descendant Ongs”), and each of the Ongs and each of his Descendant Ongs shall procure that the transferee(s) of his flat shall execute the same undertaking; and

(b) Having regard to the following:

(i) that it is the intention of the late Ong Chay Tong to confine or restrict membership of the [appellant] to only male lineal descendants of Ong Chay Tong bearing the surname of “Ong” (including legally adopted sons) as reflected under Clause 6 of the Memorandum of Association of the [appellant]; and

(ii) that the [appellant] was established by the late Ong Chay Tong in 1976 for the purpose of holding the whole of the land and premises at 17 Nallur Road, Singapore (the “Property”) and that each flat at the Property was transferred by the [appellant] to each of the Ongs for goodwill purposes of providing a roof and home for each of the Ongs and not for monetary gain or commercial purposes,

in the event that if any owner or transferee of the flats breaches or is unable to fulfill condition (a) above for whatever reason, the [appellant] shall have the irrevocable right to repossess the relevant flat at the original book cost entry of S$100,000/-.”

6 At the appellant’s annual general meeting held on 15 June 1998, Ong Mui Eng, a director of the appellant, handed the said minutes to the respondent. The respondent signed the minutes. The appellant’s position was that Ong Mui Eng did not explain the minutes to the respondent but had merely handed them over to the respondent for his signature in his capacity as a director of the appellant. The respondent, on the other hand, deposed in an affidavit that “[i]nsofar as I am concern[ed], if anything, Clause 3 of the Agreement had been varied to the extent set out in the Minutes of Meeting dated 7^th May 1998”.[note: 1]

7 On 28 March 2006, a certified public accountant valued the appellant’s worth at $30 a share on the following basis:[note: 2]

Net cash at bank	490,000
Quoted shares at market value	12,640,588
Property at 17 Nallur Road #01-00	2,400,000; ------------
Total assets	15,530,588
Less: 2.5% contingency	(388,265); ------------
Net Value	S$15,142,32

8 Based on the net realisable value of around $15,000,000 and the fact that 500,000 shares were issued, the accountant valued each share in the appellant at $30. We would note that the valuation did not factor in the appellant’s pre-emption rights over the respondent’s property at 17 Nallur Road #04-02, which at the material time had a market valuation of about $830,000. Nor did it take into account the value of the other five units in the Ong Mansions which were similarly sold by the appellant to the respondent’s five half-siblings.

9 On 12 June 2006, the respondent agreed to sell his shares in the appellant at $24 per share to his half-siblings. A few days later, he resigned as a director of the appellant. On 14 August 2006, the appellant’s board passed a further resolution (“the Third Resolution”) to rescind the Second Resolution as well as to lodge caveats against the individual units in the Ong Mansions in which the appellant possesses pre-emption rights. The relevant portion of the Third Resolution reads as follows:

The Board of Directors of the [appellant], having considered all salient issues including the interests of the [appellant], wishes (i) to rescind the resolutions passed at the Directors’ Meeting held on 7 May 1998 relating to the amendments of terms and conditions (a) and (b) of the First Directors’ Resolutions and (ii) to lodge caveat against each of the six units of flats in the Property (collectively, the “Caveats”) based on the undertaking in each Sale and Purchase Agreement dated 28 March 1982 entered into between the [appellant] and the relevant Registered Proprietor, a specimen copy is annexed hereto and marked ‘D’, whereby the relevant Registered Proprietor undertakes not to sell, transfer or otherwise dispose or part with possession of the within land described therein, except only to the [appellant] at the price of S$100,000.00.

10 On the very same day, the appellant lodged a caveat against the respondent’s property at 17 Nallur Road #04-02. Its basis for lodging the caveat was the undertaking of the respondent set out in SC3 under the sale and purchase agreement dated 26 March 1982 not to sell, transfer or otherwise dispose of or part with possession of the property except only to the appellant at the price of $100,000. The respondent challenged the lodgment of the caveat and the appellant subsequently took out an application for an order that the caveat be allowed to remain on the land register.

11 At the hearing in the High Court, the Judge held that, as a result of the Second Resolution, the appellant had abandoned its pre-emption rights under SC3 and he accordingly dismissed the appellant’s application for an order that the caveat be allowed to remain on the land register.

Adduction of further evidence

12 As a preliminary matter, the respondent applied to adduce fresh evidence in relation to the respondent’s purported reliance on the Second Resolution....