Ow Chor Seng v Tjinta Pte Ltd ((in Liquidation))

• Jurisdiction: Singapore
• Judgment Date: 11 October 1994
• Date: 11 October 1994
• Docket Number: Originating Summons No 557 of 1991
• Court: High Court (Singapore)

Ow Chor Seng

Plaintiff

and

Tjinta Pte Ltd (in liquidation)

Defendant

[1994] SGHC 259

Amarjeet Singh JC

Originating Summons No 557 of 1991

High Court

Land–Caveats–Application to remove caveat–Caveat founded on allegations that property transferred in breach of directors' fiduciary duties–Whether there was serious question in law to be tried–Whether balance of convenience lay in favour of maintaining caveat–Whether caveat was properly lodged

The defendant (“Tjinta”) was the registered owner of a particular property (“the said property”). Tjinta obtained a valuation report stating that the said property was valued at $588,000, on the basis that it was subject to rent control. Tjinta then entered into an agreement to sell the said property to the plaintiff for $550,000 without vacant possession. Neither the plaintiff nor the managing director of Tjinta knew that the said property was not, in fact, subject to rent control. Subsequently, Tjinta was wound up and a liquidator appointed. The liquidator then lodged a caveat against the said property, claiming that the transfer of the said property to the plaintiff had been effected by its directors in breach of their fiduciary duties, and that the plaintiff had actual or constructive notice that the said property was trust property and that the transfer by its directors was in breach of their fiduciary duties. Separately, it commenced an action against the plaintiff, which was pending at the time of the plaintiff's application.

The plaintiff sought to remove the caveat lodged by Tjinta against the said property and to order an inquiry as to the damages, costs and expenses sustained or incurred by him as a result of the caveat being lodged and payment of compensation thereof.

Held, dismissing the plaintiff's application:

(1) The parties' respective claims of constructive trusteeship based on mistake were serious and were not frivolous or vexatious. This was an issue of law for the trial judge to decide: at [27] and [28].

(2) The question of the plaintiff's knowledge as a constructive trustee and the evidence adduced by Tjinta in this respect raised a substantial question of law: at [42] and [43].

(3) The submissions made by counsel for Tjinta regarding whether there was a good and valid ratification of the breach of fiduciary duty by its shareholders or approval by its major creditor also raised a serious issue: at [47].

(4) As there was a real dispute between the parties, and as it was probable that the plaintiff could sell the said property if the caveat were removed and dispose of the funds, the balance of convenience was in favour of preserving the status quo pending disposal of the suit: at [52].

(5) There was no evidence that the plaintiff had suffered any damage as a result of the caveat being lodged against the said property. In any event, if he were to suffer any damage, an adequate remedy was available under s 112 (1) of the Land Titles Act (Cap 157, 1985 Rev Ed): at [53] and [54].

(6) The caveat in the name of Tjinta was properly lodged, as the winding up had no immediate effect upon its corporate personalities and powers and did not transfer the property in the company to the liquidators: at [58].

Alrich Development Pte Ltd v Rafiq Jumabhoy [1993] 1 SLR (R) 598; [1993] 2 SLR 446 (folld)

American Cyanamid Co v Ethicon Ltd [1975] AC 396; [1975] 1 All ER 504 (refd)

Baden Delvaux and Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1983] Com LR 88 (refd)

Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 (refd)

Clearbrook Property Holdings Ltd v Verrier [1974] 1 WLR 243 (refd)

Eng Mee Yong v V Letchumanan [1979] 2 MLJ 212; [1980] AC 331 (refd)

Good Property Land Development Pte Ltd v Société Générale [1989] 1 SLR (R) 97; [1989] SLR 229 (refd)

Holder v Holder [1968] Ch 353; [1968] 1 All ER 665 (refd)

Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 ACLC 215 (refd)

Macon Engineers Sdn Bhd v Goh Hooi Yin [1976] 2 MLJ 53 (refd)

Mohd Kumpulan Sua Batong Sdn Bhd v Datoran Segar Sdn Bhd [1992] 1 CLJ 20 (refd)

Montagu's Settlement Trusts, In re; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264 (refd)

Regal (Hastings), Ltd v Gulliver [1942] 1 All ER 378 (refd)

Société Générale v Good Property Land Development Pte Ltd [1989] 1 SLR (R) 27; [1989] SLR 182 (refd)

Su Meu Ging v Philip Yong Khiam Poon [1988] 3 MLJ 86 (refd)

Tan Cheow Gek v Gimly Holdings Pte Ltd [1992] 2 SLR (R) 240; [1992] 2 SLR 817 (refd)

Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146 (refd)

Control of Rent (Exemption) Notification 1980 (S290/1980)s 2 (b)

Land Titles Act (Cap 157, 1985 Rev Ed)ss 54, 111,112 (1)

Hee Theng Fong and Christina Teay (Hee Theng Fong & Co) for the plaintiff

Davinder Singh and Bonnie Lo (Drew & Napier) for the defendant.

Amarjeet Singh JC

Introduction:

1 The plaintiff sought by the present originating summons:

(a) to remove a caveat number CV/69496/A registered on 8 October 1988 and extended on 28 September 1993 by the defendants against the whole of lot 1227 of town sub-division 24 together with the building erected thereon and known as 14 Chatsworth Road, Singapore (“the said property”) comprised in vol 258 folio 122, of which he was the registered proprietor;

(b) an order for an inquiry as to the damages costs and expenses sustained or incurred by the plaintiff as a result of the said caveat having been lodged and allowed to remain on the said property and payment of such sums or sum that may be found due as compensation to the plaintiff.

2 The defendants described their caveatable interest in the said property as beneficiary under a constructive trust of an estate in fee simple by virtue of:

(a) the transfer of the said property to the registered proprietor (plaintiff) effected by the directors of the caveator in breach of their fiduciary duties to the caveator; and

(b) the registered proprietor (plaintiff) receiving the said property with actual or constructive notice that the said property was trust property and that the transfer by the directors of the caveator was in breach of their fiduciary duties.

3 Having lodged the caveat, the defendants commenced an action against the plaintiffs on 27 October 1989 in Suit No 2003 of 1989 (where Tjinta Pte Ltd (in liquidation) are the plaintiffs and Ow Chor Seng is the defendant) for amongst other things a declaration that the plaintiffs' entire interest in the said property in question was held by them in trust for the defendants. The plaintiff applied for security of costs against the defendants in the said suit but their application was dismissed by the assistant registrar on 3 August 1990. The defendants thereafter applied for summary judgmentand their application was dismissed on 14 August 1992 and the plaintiffs were granted unconditional leave to defend the action which is now pending.

Undisputed facts

4 The undisputed facts as far as they can be gathered were as follows:

5 Tjinta Pte Ltd (“Tjinta”) was incorporated in Singapore in 1963 and was a family company run by patriarch Thio Tjing Thing (“the deceased”) until his death in 1980. Soon after his death, his son Thio Sin Bin, who was a director and shareholder of the company, took over the management of Tjinta as well as Toho Rubber Processing Co Pte Ltd (“Toho Rubber”) of which Tjinta was the majority shareholder. Thio Sin Bin had also been a director of Toho Rubber.

6 Tjinta was the registered owner of the property known as Lot 45-57 of TSXXIV measuring 4610m². The property was subdivided into three Lots 1227, 1228 and 1229. Two houses stood on the same property. 14, Chatsworth Road, stood on Lot 1227 with an area of 3,030.9m².14A stood on Lot 1228. Lot 1229 is a stretch of land measuring 181m² adjacent to Lot 1227. The deceased and his family had been resident at 14 Chatsworth Road since 1961 and after the death of the deceased, the family continued to reside there. 14A, Chatsworth Road, was occupied by Tjinta's gardener and his family.

7 In 1982, Tjinta mortgaged the said property to the Indian Overseas Bank (“IOB”) to secure its liabilities to IOB, the liabilities arising from credit extended by IOB to Tjinta and in respect of a guarantee dated 17 July 1982 whereby Tjinta agreed to guarantee the liabilities of Toho Rubber to IOB in respect of facilities granted to Toho Rubber by IOB.

8 In or about April 1986, Tjinta was owing to IOB over $3m and approximately $50,000 to another creditor.

9 In the same month, 14A Chatsworth Road was sold with vacant possession by Tjinta to one Chung Kok Soo for $1,050,000.

10 Again, in April 1986, Tjinta obtained a valuation of the said property 14 Chatsworth Road through a valuer appointed by IOB. The valuation was done by Michael Sim of M/s Michael Sim & Associates, Valuers, who stated in their report dated 7 April 1986 that amongst other things, they “understand that this property is let out to Mr Thio Kong Bin at $500 per month”. M/s Michael Sim & Associates then valued the property at $588,000 “subject to a controlled tenancy”.

11 An extraordinary general meeting of the company chaired by Thio Sin Bin was held on 19 May 1986 and at the meeting all its shareholders approved the sale of the property by resolution at a price of not less than $500,000.

12 On 30 May 1986, Thio Sin Bin, the managing director of Tjinta, and Thio Ai Koen [Koean], a director of Tjinta, procured Tjinta to enter into a written sale and purchase agreement of even date (“the agreement”) with the plaintiff. Under the agreement, Tjinta agreed to sell and the plaintiff agreed to purchase the said property for $550,000 without vacant possession. Under the agreement it was stated that the purchase was to be completed within six weeks, ie by 15 July 1986. The Thio family retained possession of the property at a rental of $500 pm. It appears that...