Panorama Development Pte Ltd v Fitzroya Investments Pte Ltd & Another

• Jurisdiction: Singapore
• Judge: Woo Bih Li JC
• Judgment Date: 18 November 2000
• Neutral Citation: [2000] SGHC 238
• Citation: [2000] SGHC 238
• Defendant Counsel: Christopher Chuah and Lawrence Tan (Drew & Napier)
• Published date: 19 September 2003
• Plaintiff Counsel: Oommen Mathew (Tan Peng Chin & Partners)
• Date: 18 November 2000
• Docket Number: Originating Summons No 1365 of
• Court: High Court (Singapore)
• Subject Matter: Sale and purchase agreement,Express wording in s 88(1) of Bankruptcy Act (Cap 20, 1996 Rev Ed) unlike s 41(1) of pre-1995 Bankruptcy Act (Cap 20, 1985 Rev Ed),Bankruptcy,Protection of purchasers over unsecured creditors,Insolvency Law,Land,Project completed,Statutory right of set-off,Statutory set-off,Contractual terms,Contract,Whether purchasers entitled to set off liquidated damages against instalments due,Housing developers,Development,Delivery of vacant possession delayed,Housing Developers Rules 1985 rr 12(2), 12(3), 15(1) and 15(2),Vendor wound up and liquidator appointed

(1) The judgment in Good Property Land Development Pte Ltd (in liquidation) v Societe-Generale [1996] 2 SLR 239 has decided that under s 41(1) of the pre-1995 Bankruptcy Act, contingent claims are not capable of being the subject of set-off (as seems to be the case), then, the applicable s 88(1) under the existing Bankruptcy Act had changed the position and it allows the Defendants’ claims for liquidated damages to be set-off against the contingent claims of the Vendor which have now matured into claims against the Defendants ( 88).

(2) In this instance, the right of set-off for late delivery of possession is contractually provided for in cl 11(4) of the Sale & Purchase Agreement (S&P). The liquidator had carried on with the S&Ps. It was said that he used the resources of the company to achieve the stages under cll 3(1)(g) and (h). The fact is that he has carried on with the S&Ps. Having done so, he could not, in the court's view, claim the benefits under the S&Ps and yet disclaim the burdens under them. He cannot choose which terms of the S&Ps would continue to apply to him and which would not ( 94).

(3) Another special feature of the case is that cl 11(4) of the S&P is part of a set of standard terms prescribed by subsidiary legislation ie the Housing Developers Rules 1985. It is quite clear that cl 11(4) of the S&P is to protect the interest of purchasers like the Defendants, see Rules 15(1) and (2). If monies have already been paid under cl 3 of the S&P, they would have to be paid into the Project Account first. The liquidator would then use the moneys for any of the authorised purposes and thereafter have to use it to pay to the purchaser liquidated damages that may arise before making any payment to unsecured creditors, in so far as their claims do not come under s 9(6)(a). In the present case, the Defendants do not have to pay first because of cl 11(4) of the S&P. However, if they happened to pay first, their claim for liquidated damages would still rank ahead of unsecured creditors. Even if the liquidator does not require the monies called for to complete the project or to comply with other obligations under the S&P, this does not mean that the interest of the unsecured creditors negates the right of purchasers to the set-off claimed. As regards the argument for the liquidator that to refuse the set-off would not put purchasers in a worse position because they would be treated like other unsecured creditors, this would not be a valid argument. Purchasers are not supposed to be treated like other unsecured creditors. To do so would put them in a worse position than that envisaged under the Housing Developers legislation and the bankruptcy legislation ( 109, 113, 120-123, 126).

Case(s) referred to

Good Property Land Development Pte Ltd (in liquidation) v Societe-Generale

[1996] 2 SLR 239 (refd)
Re DW McIntosh Ltd v Royal Bank of Canada [1940] 3 DLR 782 (refd)
Arab Banking Corp v United Overseas Bank Ltd [1991] 2 MLJ 84 (refd)
The Official Assignee of the Property of Lim Chiak Kim v United Overseas Bank Ltd [1988] 3 MLJ 189 (refd)
Stein v Blake [1995] 2 WLR 710 (refd)
In Re Daintrey [1900] 1 QB 546 (distd)
In Re Taylor [1910] 1 KB 562 (distd)
Hiley v Peoples Prudential Assurance Co Ltd (In Liq.) [1938] 60 CLR 468 (distd)
Day & Dent Construction Proprietary Limited (In Liquidation) [1981-1982] 150 CLR 85 (distd)
Gye v McIntyre [1991] 171 CLR 609 (distg)
Re Asphaltic Wood Pavement Company, Lee & Chapman’s Case [1885] Ch D 216 (refd)
Re Cyril Wright [1949] 1 Ch 729 (refd)
Re Farrow’s Bank, Ld [1921] 2 Ch 164 (refd)
Golden Bay Realty Pte Ltd v Orchard Twelve Investments Pte Ltd [1989] SLR 42 (refd)
Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167 (refd)
British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 2 All ER 390 (refd)

Legislation referred to

Land Titles Act (Cap 157, 1994 Ed.), s 68(1)
Housing Developers (Control & Licensing) Act (Cap 130, 1985 Ed.), ss 9(5), 9(6)(a)
Housing Developers Rules 1985, Rules 12(2), (3) and 15(1) and (2)
Bankruptcy Act (Cap 20, 2000 Ed.), s 88(1)

Judgment

GROUNDS OF DECISION

BACKGROUND

1. Panorama Development Pte Ltd (‘the Vendor’) is the developer of a housing project known as Chateau Le Fame at Ewe Boon Road (‘the Project’).

2. Each of the Defendants is a purchaser of a unit in the Project. There are other purchasers of units in the Project in the same position as the Defendants. Accordingly the outcome of this action would affect the position of those other purchasers vis--vis the Vendor which is in liquidation.

3. Each of the Defendants entered into a sale and purchase agreement (‘the S&P’) with the Vendor. The terms of each S&P are alike. In fact, the S&P is prescribed by Rule 12(2) and Form E of the Schedule to the Housing Developers Rules 1985 (as amended from time to time) which were made pursuant to the Housing Developers (Control and Licensing) Act (Cap 130) (‘the Housing Developers Act’).

4. The dates of the S&Ps are 12 April 1995 (for the First Defendant) and 21 June 1996 (for the Second Defendant).

5. Clauses 3(1)(a) to (i) of the S&P provides for the purchase price to be paid in instalments on the occurrence of each event specified in sub-paragraphs (a) to (i).

6. Clause 11(1) of the S&P imposes an obligation on the Vendor to deliver vacant possession of the unit purchased by 31 December 1997 and cl 11(2) stipulates how this is done. They state:

‘11(1) The Vendor shall complete the building unit so as to be fit for occupation and remove all surplus material, plant and rubbish from the building unit and the housing project and deliver vacant possession of the building unit to the Purchaser on or before the 31st day of December 1997.

(2) On delivery of vacant possession of the building unit to the Purchaser, the Vendor shall deliver to the Purchaser or his solicitors a copy of the Temporary Occupation Permit or Certificate of Statutory Completion for occupation of the building unit issued by the Building Authority together with the certificate of the Vendor’s architect that the building unit and the housing project and all roads and drainage and sewerage works of the housing project have been constructed in accordance with the plans specifications approved by the Building Authority and that water and electricity supplies have been duly connected to the building unit.’

7. Clause 11(3) of the S&P provides for liquidated damages to be payable by the Vendor if the Vendor fails to meet the deadline in cl 11(1). Clause 11(4) allows such liquidated damages to be deducted from any instalment due and payable to the Vendor. They state:

‘(3) If the Vendor fails or is unable to deliver vacant possession of the building unit to the Purchaser on the date specified in paragraph (1) of this clause for any reason whatsoever, the Vendor shall pay to the Purchaser liquidated damages calculated from day to day at the rate of ten (10) per cent per annum on the total sum of all the instalments paid by the Purchaser towards the purchase price for the period commencing immediately after the date specified in paragraph (1) of this Clause and ending on the date vacant possession of the building unit is delivered to the Purchaser.

(4) Any liquidated damages payable to the Purchaser under this Clause may be deducted from any instalment due and payable to the Vendor.’

8. It is common ground that the Vendor failed to meet the deadline of 31 December 1997.

9. It is also common ground that, subsequently, a winding up petition against the Vendor was filed on 20 July 1999 whereupon an order to, inter alia, wind up the Vendor and appoint a liquidator was made on 3 September 1999.

10. Prior to the date of the winding up order and prior to the date of the filing of the winding up petition, the Defendants had made payments up to and including cl 3(1)(f) of the S&P.

11. Also as at the date of the winding up order as well as the date of the filing of the winding up petition, liquidated damages were due and payable by the Vendor to the Defendants and continued to accrue. However as at that date no instalment was due and payable by the Defendants to the Vendor.

12. On 17 September 1999, the liquidator obtained an order to allow him to engage the main contractor to complete the Project.

13. Pursuant thereto, cl 3(1)(g) and cl 3(1)(h) of the S&P were achieved.

14. The liquidator or his solicitors then sought payment by giving notice under cl 3(1)(g) on 22 October 1999 and under cl 3(1)(h) on 4 March 2000.

15. Clause 3(1)(h) is more significant as that is the stage when notice is given to each Defendant to take possession of the unit purchased i.e. compliance with cl 11(1) of the S&P read with cl 11(2). Clause 3(1)(h) states:

‘(h) Within fourteen (14) days after receipt by the Purchaser of the Vendor’s notice to take possession and a photographic copy of the Temporary Occupation Permit issued by the Building Authority certified as a true copy of the Vendor’s solicitors together with the Certificate of the Vendor’s architect that the building unit and all roads, and drainage and sewerage works serving the housing project have been completed and that water and electricity supplies have been duly connected to the building unit, a sum equal to twenty-five (25) per cent of the purchase price; ’

16. The Defendants did not pay the full instalments required of them. They took the position that they were entitled to deduct the liquidated damages from the instalments claimed and paid the balance.

17. The liquidator has taken out this action essentially to seek a determination as to whether the Defendants are entitled to set-off the liquidated damages against the payment of any instalment to be paid by them subsequent to the date of the filing of the winding up petition and the date of the winding up order.

18. After hearing arguments, I decided that the Defendants are entitled to set-off the liquidated damages both before and...