Pender Development Pte Ltd and Another v Chesney Real Estate Group LLP and Another and Another Suit

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 26 May 2009
• Neutral Citation: [2009] SGHC 126
• Docket Number: Suits Nos 479 and 501 of 2008
• Date: 26 May 2009
• Year: 2009
• Published date: 27 May 2009
• Plaintiff Counsel: Vinodh S Coomaraswamy SC, David Chan and Kenneth Choo (Shook Lin & Bok LLP)
• Citation: [2009] SGHC 126
• Defendant Counsel: Alvin Yeo SC, Chua Sui Tong, Smitha Rajan Menon (WongPartnership LLP),Abdul Rashid Gani, Chia Ho Choon and Joycelyn Lin (KhattarWong)
• Court: High Court (Singapore)
• Subject Matter: Rectification,Misrepresentation,Whether insurance bond ought to be rectified on basis of common mistake,Whether sham transaction,Mistake,Contract,Whether documents represented true relationship between parties,Whether representation was material or mere puff,Whether there was intention to create legally binding arrangement with no covert arrangement intended

26 May 2009 Judgment reserved.

Andrew Ang J:

Introduction

1 These two proceedings before me arose from the same factual matrix involving the same or related parties. In Suit No 479 of 2008 (“Suit 479”), Chesney Real Estate Group LLP (“Chesney LLP”) sought to recover $8.284m which it claimed to have loaned Bravo Building Construction Pte Ltd (“Bravo”). According to Chesney LLP, this loan was secured by an insurance bond issued by India International Insurance Pte Ltd (“India Insurance”). It thus sought, in Suit No 501 of 2008 (“Suit 501”), payment of the loan moneys from India Insurance pursuant to this bond. Bravo resisted Chesney LLP’s claim on the ground that the loan was not really a loan but a deposit under a broader agreement between Chesney LLP and Pender Development Pte Ltd (“Pender”). According to Bravo, Chesney LLP was not entitled to a refund of this deposit. Pender, on the other hand, sought to claim damages from Chesney LLP on the basis of an alleged breach of that broader agreement as well as damages for a misrepresentation allegedly made by Chesney LLP’s managing partner, Vincent Chesney (“Vincent”).

The facts

2 Bravo and Pender are associated companies in the construction business. One Pang Sor Tin (“Jenny Pang”) was consultant to both companies and it is undisputed that she had authority to act for them. In September 2007, through a professional acquaintance, Vincent learned that Pender was purchasing en bloc the development at 110 Wishart Road (“Pender Court”). Through the same acquaintance, he came to be introduced to Jenny Pang on 20 September 2007. Jenny Pang informed him that Pender had entered into a sale and purchase agreement with the majority owners of the units at Pender Court for the sale of the development at a price of $80m with the completion date fixed for 25 February 2008.

3 Vincent indicated to Jenny Pang that should Pender be willing to construct a mixed development of townhouses and apartments in the form of cluster housing which foreigners could purchase, he was confident of Chesney LLP’s ability to find sufficient buyers for units in the redeveloped property. Jenny Pang indicated that Pender would be keen to do so and instructed Pender’s architects, aKTa-rchitects to look into changing the design plans accordingly. Through the course of numerous meetings, Pender appointed Chesney LLP as Pender’s exclusive marketing agent to sell units in the redeveloped Pender Court. As a result, two written agreements were entered into between Chesney LLP and Pender:

(a) An Exclusive Marketing Agreement & Consultancy Services Agreement dated 4 October 2007 (“First Marketing Agreement”); and

(b) An Exclusive Marketing Agreement dated 22 October 2007 but signed on 23 October 2007 (“Second Marketing Agreement”).

4 The express terms of the First Marketing Agreement provided for Chesney LLP to be appointed by Pender either as exclusive marketing agent or consultant for the redeveloped Pender Court which would comprise 48 units. It also provided for Chesney LLP to pay Pender, by 22 October 2007, an exclusive marketing fee of $168,000 per unit taken up by Chesney LLP. Chesney LLP, as marketing agent, was also to be paid a commission of 3% of the selling price of all units sold by Chesney LLP. The First Marketing Agreement also gave Pender the option to reject the exclusive marketing fee submitted by Chesney LLP if the latter failed to take up a minimum of 40 units. This First Marketing Agreement was unusual in that it was the marketing agent who had to pay the developer a marketing fee and not the other way round as one would have expected. This marketing fee was tied to the number of units taken up by Chesney LLP which suggested that the latter had a choice in the number of units it wished to take up. Oddly, however, it was also provided that in the event Pender accepted Chesney LLP’s marketing fee (regardless of how many units were taken up), Chesney LLP would have to use its best efforts to secure buyers for all 48 units at a total selling price of $175m. No such marketing fee was paid by 22 October 2007. Instead, the Second Marketing Agreement dated 22 October 2007 was executed by the parties on 23 October 2007.

5 The Second Marketing Agreement differed from the first in several ways. It provided for Chesney LLP to be appointed as exclusive marketing agent without an option for appointment as a consultant. The Second Marketing Agreement also did not refer to any exclusive marketing fee to be paid by Chesney LLP. Further, the Second Marketing Agreement stipulated that there would be 52 units in the development (which would comprise 48 townhouses and 4 duplexes) as opposed to the 48 units specified in the First Marketing Agreement. It also expressly stated that the development would be eligible for purchase by foreigners. Both agreements provided that the exclusive marketing period would only commence when Pender had obtained a sales licence from the Controller of Housing.

6 On 23 October 2007, the same day the Second Marketing Agreement was signed, Chesney LLP entered into a loan agreement with Bravo (“the Loan Agreement”) pursuant to which Chesney LLP issued a cheque dated the same day for the sum of $8.284m in favour of the latter. Clause 2 of the Loan Agreement stipulated two “conditions precedant [sic]” to the issuance of the loan: first, Bravo had to execute a corporate guarantee and indemnity in favour of Chesney LLP for the loan; and second, Bravo had to procure an insurance bond with Chesney LLP as beneficiary to secure Bravo’s repayment of the loan. Bravo executed a corporate guarantee and indemnity dated 30 October 2007 and procured an Insurance Bond No A035806 dated 6 December 2007 issued by India Insurance for Chesney LLP’s benefit (“the Insurance Bond”).

7 On or about early April 2008, pursuant to cl 5.1 of the Loan Agreement which provided for repayment of the loan within 30 days of written demand, Chesney LLP called for the loan to be repaid. It issued a notice of demand of repayment dated 3 April 2008 to Bravo. Bravo did not respond to this letter.

Bravo and Pender’s case

8 Bravo and Pender’s case was that the documents did not contain the entire agreement between the parties. According to Jenny Pang, Pender and Chesney LLP reached an oral agreement on 15 October 2007 with the following terms:

(a) Chesney LLP was to market and secure buyers for all 52 units in the redeveloped Pender Court;

(b) Chesney LLP was to sell all 52 units in the redeveloped Pender Court at an aggregate price of not less than a guaranteed sum of $175m (“the Guaranteed Sum”);

(c) Chesney LLP would pay Pender an $8m deposit (“the Deposit”) against its obligations on the following terms:

(i) The Deposit was part-payment of the Guaranteed Sum;

(ii) Pender was entitled to retain the Deposit in the event that Chesney LLP breached its partly oral and party written agreement with Pender (“the Agreement”);

(iii) Pender was obliged to return the Deposit, without interest, in the event the sale and purchase of Pender Court was not completed for reasons that did not arise from Chesney LLP’s breach of the Agreement or if Pender failed to complete or failed to procure the completion of the redevelopment otherwise than as a result of Chesney LLP’s breach of the Agreement;

(d) Pender was to work with Chesney LLP in finalising the redevelopment plans for Pender Court with the latter having the final say on the plans for the redevelopment;

(e) Pender would appoint Bravo as main contractor for the redevelopment; and

(f) In consideration of Chesney LLP helping Pender to market and sell the units in the redeveloped Pender Court, Chesney LLP would earn a commission equivalent to 3% of the higher of the two values – the Guaranteed Sum or the total of the sale prices.

9 Further, Jenny Pang alleged that she had met Vincent again on 18 October 2007 and that it was agreed that the Agreement between Chesney LLP and Pender would be varied so that Bravo instead of Pender would receive the Deposit. In that same meeting, Bravo and Chesney LLP agreed that the receipt of the moneys by Bravo would be recorded in terms of a written agreement whereby Chesney LLP would ostensibly lend the amount of the Deposit to Bravo but that the Loan Agreement would nevertheless be subject to the terms applicable to the Deposit as agreed between Pender and Chesney LLP.

10 Bravo therefore sought to resist Chesney LLP’s claim for repayment of the loan on the ground that Chesney LLP breached the Agreement. Chesney LLP’s alleged anticipatory breach stemmed from (1) a meeting in late March 2008 where Vincent allegedly informed Jenny Pang that Chesney LLP was unable to proceed with the Agreement; and (2) the issuance of a notice of repayment dated 3 April 2008 pursuant to the Loan Agreement shortly after this meeting. Pender also sought to recover damages for this breach of contract.

11 Additionally, Pender alleged that Vincent had orally represented to Jenny Pang in late September 2007 that the new development at Pender Court would “definitely attain” foreigner eligibility status with his assistance. This did not materialise and Pender sought damages for this misrepresentation from Vincent.

Chesney LLP and Vincent’s case

12 Chesney LLP’s case was relatively simple. It argued that the loan was simply a loan and that it was thus entitled to seek repayment. The Loan Agreement was wholly separate from Chesney LLP’s involvement in the marketing of the redeveloped Pender Court. According to Vincent, Jenny Pang informed him at their meetings in September and October 2007 that Bravo required an injection of cash in order to fund some of its projects. She told him that the money was needed by Bravo for these other projects and not for the redevelopment of Pender Court. She had assured him that the moneys were not going to be used to enable Pender to purchase Pender Court from its existing owners. Vincent felt that assisting Bravo with a loan...