Lim Kim Som v Sheriffa Taibah bte Abdul Rahman

• Judge: Karthigesu JA
• Judgment Date: 01 February 1994
• Neutral Citation: [1994] SGCA 15
• Citation: [1994] SGCA 15
• Defendant Counsel: Kenneth Tan as amicus curiae,Cheong Yuen Hee and Tan Teng Muan (Mallal & Namazie)
• Published date: 19 September 2003
• Plaintiff Counsel: V Ramakrishnan and Ang Chin Peng (V Ramakrishnan & Pnrs)
• Date: 01 February 1994
• Docket Number: Civil Appeal No 40 of 1992
• Court: Court of Appeal (Singapore)
• Subject Matter: Contract,Agreement for sale and purchase of property,Whether a declaration under s 5 of Land Acquisition Act (Cap 272) frustrated agreement,Test in determining whether frustration has occurred,Frustration,Discharge,Whether doctrine of frustration applicable to contract for sale of land

Cur Adv Vult

(delivering the judgment of the court): On 29 April 1983 the respondent (`the vendor`) granted an option in writing to the appellant (`the purchaser`) to purchase a piece of land, Lot 1120 of mukim 2, with buildings thereon comprising six structures and known as 74 King`s Road. We shall refer to the land and premises as `the property`. The purchase price was $2,138,200 of which 5% amounting to $106,910 was paid by way of an option fee. On 12 May 1983 the purchaser exercised the option and another 5% was paid, and a sale and purchase agreement was thereby made, which we shall refer to as `the agreement`. The sale was subject to the Singapore Law Society`s Conditions of Sale 1981 (`the Law Society`s Conditions`) and was also subject to the title of the property being in order and free from encumbrances. Clause 4 of the agreement provided that completion should be within eight weeks from the date of exercise of the option. Accordingly the date fixed for completion was 7 July 1983.

Completion, however, did not take place on the stipulated date. On 13 July 1983 the vendor`s solicitors sent to the purchaser`s solicitors a notice to complete within 21 days under condition 2 of the Law Society`s Conditions. On the same day there was made under s 5 of the Land Acquisition Act (Cap 272, 1970 Ed) (`the Act`) a declaration on behalf of the President of the Republic of Singapore stating that the property was required for a public purpose, viz general redevelopment, and on 19 July a notification of the declaration was published in the government gazette. For the purpose of this judgment we shall refer to the text and sections of the Act in the 1970 edition. On 1 August 1983 the purchaser`s solicitors wrote to the vendor`s solicitors stating, among other things, that in view of the declaration in the gazette the purchaser did not intend to carry on with the purchase and requested the refund of the 10% deposit. In response the vendor, by her solicitors` telex dated 5 August 1983, stated that the 21-day notice had expired and as the purchaser did not intend to complete, the 10% deposit had been forfeited and she joined issue with the purchaser`s other contentions.

On 7 August 1984 the vendor commenced an action against the purchaser claiming the balance of the purchase price plus interest or alternatively damages for breach of contract. The claim was disputed and the purchaser raised, inter alia, two defences which may be summarized as follows:

(a) The performance of the agreement without any fault on his part was frustrated by the compulsory acquisition of the property under the Act which was initiated by the declaration under s 5 of the Act published on 19 July 1982 and the purchaser was thereby discharged from the performance of the agreement.

(b) The vendor was precluded by the declaration from giving to the purchaser a good title to the property. The purchaser counterclaimed the refund of the deposit of 10% of the purchase price.

In the meanwhile, on 23 August 1984 the Collector of Land Revenue awarded a sum of $450,000 as compensation for the acquisition and the amount was paid into court. Possession of the property was taken by the Collector on 28 May 1985 under s 16 of the Act. Following that on 1 June 1985 an entry in the Registry of Deeds was made pursuant to s 18 of the Act. The amount of compensation with interest was subsequently paid out to the vendor pursuant to an order made on 5 July 1985 at the instance of the vendor.

The action was tried before the learned judicial commissioner, Mr Michael Hwang. In a reserved judgment, reported in [1992] 2 SLR 516 , he allowed the claim of the vendor and dismissed the counterclaim of the purchaser. So far as relevant to this appeal, his decision, if we may summarize it, is as follows. Under the Act, compulsory acquisition is a process rather than an act, which begins with the declaration under s 5 and ends with the entry or notification in the Registry of Deeds or Registry of Titles (as the case may be) under s 18. The landowner is not divested of his legal or beneficial interest in the land until after possession has been taken by the Collector under s 16 or 17 and the procedures described in s 18 have been carried out. It is the entry or notification in the appropriate register under s 18 which vests the title in the state. In the instant case, the vendor, as the owner of the property, could complete the sale and convey to the purchaser the title to the property even though a declaration under s 5 had been made and published. The declaration under s 5 did not deprive the vendor of her interest in the subject land so as to preclude her from completing the sale. Nor did the declaration destroy the subject matter of the agreement. On the question of good title to the property, the learned judicial commissioner held that the declaration under s 5 was not an encumbrance on the property and the fact that the property would, shortly after completion, have to be `surrendered` to the state should not affect the validity of the vendor`s title at completion. The effect of the declaration under s 5 might be to diminish the value of the property but that did not impeach the vendor`s title. The vendor, therefore, on completion could give a good and marketable title despite the s 5 declaration. Against his decision this appeal has been brought.

Before us, three main issues have been raised: first, whether the doctrine of frustration is capable of being applied to a contract for the sale of land; secondly, if the answer to the first question is in the affirmative, whether in this case the agreement was frustrated by the compulsory acquisition of the property under the Act, and thirdly, whether by reason of the compulsory acquisition, which had already commenced, the vendor could on completion convey to the purchaser a good title to the property.

(I) Whether frustration can apply to contract for the sale of land

Recent judicial dicta support the view that the doctrine of frustration is capable of being applied to a contract for the sale of land. In Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd , the Court of Appeal in England appeared to have accepted that frustration could apply to such a transaction. That case concerned the sale of a warehouse that had been advertised as suitable for redevelopment. During the negotiations the purchasers had been informed by the vendors that the property had not been designated as a building of `special architectural or historical interest`. The day after the contract was signed, the Department of Environment informed the vendors that the property had been selected for inclusion in the list of buildings of `special architectural or historic interest` pursuant to s 54 of the Town and Country Planning Act 1971. The effect of this was that obtaining planning permission would become more difficult and complicated. One of the arguments raised on behalf of the purchasers was that the contract had been frustrated by the inclusion of the property in the statutory list of buildings of `special architectural or historic interest`. Both the High Court and the Court of Appeal held that the contract had not been so frustrated. Buckley LJ stated thus, at p 173:

... I am prepared to assume for the purpose of this judgment that the law relating to frustration of contracts is capable of being applied in the case of a contract for the sale of land, though that is one of the matters which has been debated before us.

The learned judge then held that there was no factual basis for holding that the contract had been frustrated. He said, at p 173:

... I have reached the conclusion that there are not here the necessary factual bases for holding that this contract has been frustrated. It seems to me that the risk of property being listed as property of architectural or historical interest is a risk which inheres in all ownership of buildings. In many cases it may be an extremely remote risk. In many cases it may be a marginal risk. In some cases it may be a substantial risk. But it is a risk, I think, which attaches to all buildings and it is a risk that every owner and every purchaser of property must recognize that he is subject to. The purchasers in the present case bought knowing that they would have to obtain planning permission in order to develop the property. The effect of listing under the sections of the Act to which I have referred makes the obtaining of planning permission, it may be, more difficult, and it may also make it a longer and more complicated process. But still, in essence, the position is that the would-be developer has to obtain the appropriate planning permissions, one form of permission being the `listed building permission`.

The learned judge held that the purchasers must be taken to have known that there was the risk that the building might at some time be listed. He continued, at pp 173-174:

But, in my judgment, this is a risk of a kind which every purchaser should be regarded as knowing that he is subject to when he enters into his contract of purchase. It is a risk which I think the purchaser must carry, and any loss that may result from the maturing of that risk is a loss which must lie where it falls. Moreover, the purchasers have not yet established that they will be unable to obtain all the necessary planning permissions, including `listed building permission.` So it has not yet, I think, been established that the listing of this building has had the drastic effect which the figures which I have mentioned suggest that it may have had. It may well turn out to be the case that `listed building permission` will be obtainable here and the purchasers will be able to carry out the development which they desire to carry into effect.

To similar effect was the judgment of Lawton LJ. He said at p 175:

Anybody who buys property knows, and certainly those

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