ERA Realty Network Pte Ltd v Puspha Rajaram Lakhiani and Another

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JC
• Judgment Date: 27 June 1998
• Neutral Citation: [1998] SGHC 213
• Docket Number: District Court Appeal No 60 of 1996
• Date: 27 June 1998
• Published date: 19 September 2003
• Year: 1998
• Plaintiff Counsel: Michael Khoo SC and Josephine Low (Michael Khoo & Partners)
• Citation: [1998] SGHC 213
• Defendant Counsel: Philip Ling (Wong Tan and Molly Lim)
• Court: High Court (Singapore)
• Subject Matter: Estate agent representing both seller and purchaser,Estate agents,Scope of duties,Whether any duty to disclose identity of real purchaser,Whether any duty to advise on en bloc sale potential of property,Agency

Judgment:

TAY YONG KWANG JC

This is an appeal by the plaintiffs against the decision of the learned District Judge Laura Lau who dismissed the plaintiffs` claim for a commission with costs and awarded judgment to the defendants on their counterclaim for certain declarations.

2.The plaintiffs are property consultants and real estate agents. The defendants were the owners of an apartment known as 6 Cuscaden Walk [num ]02-00 Cuscaden Tower Singapore 1024, which had an area of some 350 sq m.

3.On or about 18 March 1995, the defendants, through their authorised representative, Kersy Bhesania, orally agreed with the plaintiffs` representative, Shabana Abedeen Tyebally, to appoint the plaintiffs as one of their agents in the proposed sale of the abovesaid property. In this non-exclusive agency, it was agreed that the defendants would pay the plaintiffs a commission of 1% of the selling price of the property if a purchaser was procured at a price acceptable to the defendants. This oral agreement was evidenced by a subsequent letter dated 24 March 1995 signed by the first defendant. It was not disputed that the first defendant was acting with the authority of the second defendant as well.

4.On 24 March 1995, Shabana found a purchaser, Asma Abdulkader Tyebally, who agreed to purchase the property for $3.6m. That same day, the defendants granted an option to Asma `and/or nominee` to purchase the property subject to tenancy. Again, this document was signed by the first defendant on her own behalf as well as on behalf of the second defendant.

5.Prior to the first defendant signing the option, Shabana informed her that Asma was her sister-in-law. Asma was also the executive officer of Marshall Realty Pte Ltd, a property investment company. Shabana`s husband, Abedeen Abdulkader Tyebally, was at all material times a director of the company. The option was eventually exercised by Marshall Realty Pte Ltd. Shabana`s husband and the company will feature again later in this judgment. At the trial in the district court, the defendants disputed that Shabana had informed them that she and Asma were related to each other. The learned District Judge found that Shabana had made that disclosure to the first defendant either directly or through Kersy and this finding has not been impugned.

6.The sale and purchase of the property was completed on or about 30 June 1995 and the commission of 1% (ie $36,000) became due to the plaintiffs. The defendants, however, refused to pay the plaintiffs the agreed commission on the following two grounds:

(1) the plaintiffs breached their fiduciary duties to the defendants by introducing a purchaser who was related to their representative, Shabana, without disclosing this relationship to the defendants. The plaintiffs had also failed to disclose that Shabana was the wife of Abedeen Abdulkader Tyebally;

(2) the plaintiffs failed to disclose that it was commercially viable for the entire development, of which the property was a part, to be sold en bloc which would have resulted in a significantly higher price than a sale on an individual basis.

It was also alleged that Asma and/or Marshall Realty knew about the potential for an en bloc sale and that if the information about the en bloc sale potential had been disclosed to the defendants, they would not have sold the property pending a decision on the en bloc sale or, at any rate, at only $3.6m.

7.The defendants therefore claimed that the plaintiffs were not only not entitled to the commission, they were also liable to the defendants for all loss and damage suffered in respect of that sale. The defendants accordingly counterclaimed for: (1). a declaration that the plaintiffs were in breach of their duties to them and/or in breach of the agreement;

(2). a declaration that the plaintiffs were liable to the defendants for all loss and damage suffered by the defendants thereby; and

(3). damages to be assessed.

8.The learned District Judge held that the plaintiffs had forfeited their right to the commission and granted the defendants the two declarations sought but made no order on the claim for damages to be assessed. She also found that the defendants were entitled to complete the sale and purchase notwithstanding the discovery of the material non-disclosures, while reserving their rights against the plaintiffs. This last finding was originally challenged by the plaintiffs in their petition of appeal but the point was abandoned before me. The appellants also rightly abandoned the argument that Shabana`s knowledge could not be attributed to the plaintiffs.

9.I summarize here the other findings of the trial court on the facts and the law: (1). since the plaintiffs had made out a prima facie case against the defendants who were relying solely on the matters pleaded in their defence and counterclaim to justify the non-payment of the commission, the onus of proof on such matters rested on the defendants;

(2). the relationship of principal and agent gave rise to particular and onenous duties on the part of the agent. The fiduciary relationship required the agent to act in the interests of his principal and to disclose matters of personal interest which might conflict with the interests of the principal. Where any transaction was entered into in violation of this rule, the principal may repudiate the transaction or may approve it and recover any profit made by the agent. For the above propositions, she relied on the cases of: (a) Armstrong v Jackson [1917] 2 KB 822; (b) Dunne v English [1874] LR 18 Eq 524; (c) Lunghi v Sinclair [1966] WAR 172;

(3). applying the law to the facts, she found, as mentioned earlier, that Shabana had disclosed to the first defendant directly or indirectly her relationship to Asma;

(4). it was an admitted fact that Shabana did not disclose that she was the wife of Abedeen Abdulkader Tyebally, a director of Marshall Realty, the eventual purchaser of the property. She found that Shabana knew of her husband`s and consequently the company`s interest in purchasing the property from the outset. As Shabana knew that her husband was the controlling mind behind the entire transaction, she was `under a duty to disclose to the defendants that her husband was the real ochestrator of the transaction, that he was the one who made the offers and the decision to purchase the property`. The plaintiffs breached their fiduciary duties by Shabana`s failure to disclose her husband`s and Marshall Realty`s interest and involvement in the transaction;

(5). it was no answer to plead that the transaction was concluded on a `willing seller and willing buyer` basis ( Aberdeen Rail Co v Blaikie Brothers [1848-60] All ER Rep 249);

(6). although the effect of a nominee clause was to wipe out the materiality of the identity of the purchaser ( Alrich Development Pte Ltd v Rafiq Jumabhoy [1995] 2 SLR 401 ), the plaintiffs were precluded from raising the issue of non-materiality of the purchaser`s identity as a defence to the counterclaim as it was not pleaded;

(7). the Urban Redevelopment Authority (URA) gazetted the River Valley Development Guide Plans on 25 March 1994, rezoning Cuscaden Tower into a high density residential zone and increasing its gross plot ratio to 2.8. It thus became viable for the individual owners to sell the whole development en bloc which would have fetched better prices for each unit. Shabana admitted she did not advise the defendants of this possibility. She claimed she did not know about it until late June 1995 when she saw the defendants` solicitors` letter.Even if Shabana was ignorant of the en bloc sale potential, the gazette notification imputed knowledge to the general public and it was no excuse to plead ignorance. It followed from the plaintiffs` duty to act with reasonable care, skill and diligence that they should advise the defendants of matters affecting the value of their property whether or not knowledge of such matters could be imputed to the defendants, unless the defendants had specifically informed the plaintiffs that they did not want such...