Tan Cheow Gek and Another v Gimly Holdings Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JC
• Judgment Date: 08 June 1992
• Neutral Citation: [1992] SGHC 157
• Docket Number: Originating Summons No 388 of 1991
• Date: 08 June 1992
• Published date: 19 September 2003
• Year: 1992
• Plaintiff Counsel: HT Sam (HT Sam & Co)
• Citation: [1992] SGHC 157
• Defendant Counsel: Len P Rodrigo and John Tan Thong Young (Len P Rodrigo & Co)
• Court: High Court (Singapore)
• Subject Matter: ss 3(1), (2), 9(1), (2), 25(2), (4) & 36 Residential Prop-erty Act (Cap 274),Whether vendor entitled to release of deposit held by stakeholders,Parties not in pari delicto,Sale of land,ss 104(1) & 111 Land Titles Act (Cap 157),Foreign purchaser,ss 3(1), (2), 9(1), (2), 25(2), (4) & 36 Residential Property Act (Cap 274),Sale and purchase of residential property,Application to remove,Civil Procedure,Words and Phrases,s 25(2) Residential Property Act (Cap 274),Whether purchaser had caveatable interest,'Desires to purchase',Caveats,Plaintiffs' absolute right to deal with property fettered by defendants' refusal to withdraw caveat from land register,Plaintiffs' entitlement to costs,Whether contract null and void,Withdrawal,Illegality of contract for purchase,s 327 National Land Code 1965 [Mal],Purchaser a foreign person,Whether option money may be forfeited,Failure to obtain prior official approval,Removal of caveat,Failure to obtain prior approval of Minister,Contract,Conditions of sale,s 327 National Land Code [Mal],Land,Costs,Illegality and public policy,ss 104 & 111 Land Titles Act (Cap 157)

The plaintiffs in this originating summons are the registered proprietors of the land and premises known as 23 Dedap Road, Singapore 2880 (`the property`). On 12 December 1990, the plaintiffs, in consideration of the payment of $10,000, granted an option to `Lim Jit Wah and/or nominee` to purchase the property at a price of $700,000. The option was valid for 14 days. It could be exercised by the purchaser signing at the portion of the option marked `acceptance copy` and delivering the same together with the sum of $60,000 to the plaintiffs` then solicitors to be held by them as stakeholders pending completion of the purchase.

On 26 December 1990, the defendants (presumably as nominee of the said Lim Jit Wah) accepted the offer constituted by the option and forwarded the acceptance copy of the option duly signed together with a cheque for $60,000 to the plaintiffs` then solicitors. On 11 January 1991, the defendants` solicitors lodged a caveat against the property in the land register. The plaintiffs` solicitors subsequently carried out a search at the Registry of Companies and ascertained that one of the directors and shareholders of the defendant company was not a Singapore citizen. This meant that by virtue of the provisions of the Residential Property Act (Cap 274) (`the Act`), the defendants were classified as a `foreign person` and were not entitled to purchase the property unless they had the approval of the Controller of Residential Property. The plaintiffs` solicitors accordingly wrote to the defendants` solicitors, asking for a copy of the `clearance letter` from the Land Dealings (Approved) Unit before they could approve the draft transfer prepared by the defendants` solicitors. The clearance letter was not forthcoming despite two further requests. In the event, it turned out that the defendants had not obtained approval from the Controller of Residential Property to purchase the property prior to their exercise of the option on 26 December 1990.

The plaintiffs refused to complete the sale as no clearance letter had been obtained on or before 26 December 1990.

On 27 April 1991, the plaintiffs took out this originating summons in which they asked for the following reliefs:

(a) an order that the option contract dated 12 December 1990 offered by the plaintiffs as vendors of the property known as 23 Dedap Road Singapore 2880 (hereinafter called `the said property`) to Lim Jit Wah and/or his nominee and exercised by the defendants on 26 December 1990 as nominee of Lim Jit Wah and purchasers of the said property be declared null and void under s 3 of the Residential Property Act (Cap 274).

(b) An order that the plaintiffs retain the sum of $10,000 paid by the defendants as option money paid under the said option contract.

(c) An order that the plaintiffs` former solicitors Messrs Jing Quee Chin Joo & Teck Hui release to the vendors the stakeholders money of $60,000 held by them as part of the 10% of the purchase price paid by the purchaser pursuant to the exercise of the said option contract.

(d) An order that the caveat No CV/48958B dated 9 January 1991 lodged by the defendants on 11 January 1991 against Lot 4802 Mukim 18 comprised in certificate of title vol 109 Folio 99 and known as 23 Dedap Road Singapore 2880 be withdrawn from the land register immediately upon the order herein being made.

(e) An order that the costs of and incidental to this application be paid by the defendants in any event.

After hearing submissions from both parties, I made a declaration that the contract of sale dated 26 December 1990 for the sale by the plaintiffs as vendors of the property known as 23 Dedap Road Singapore 2880 to Gimly Holdings Pte Ltd as purchaser was null and void. I also made an order for the removal of the caveat filed against the property. I indicated to the parties that I would be giving written reasons for my decision.

Each issue raised in the originating summons will be discussed separately.

(1) Was the contract of sale of the property null and void?

The argument on this issue centred around the interpretation of ss 3(1), (2) and 25 of the Act. Section 3(1)(c) reads as follows:

Except as provided in this Act -

...

(c) ) no foreign person shall purchase or acquire any residential property or any estate or interest therein except by way of a mortgage, charge or reconveyance

and sub-s (2) follows on the principle stated in above by providing:

Any -

...

(c) ) purchase or acquisition of any residential property or of any estate or interest therein by any foreign person, except by way of a mortgage, charge or reconveyance, made in contravention of subsection (1)(c),

shall be null and void.

It was common ground that for the purposes of the Act, the defendants were `foreign persons` and the property was `residential property`.

Section 25(2) which is also relevant states:

Subject to subsection (14), any foreign person who desires to purchase, acquire or retain any estate or interest in any residential property (referred to in this section as the applicant) shall make application (referred to in this section as the application) to the Controller, in respect thereof, in such form as the Controller may require, for the grant of approval to acquire or to retain residential property, as the case may be.

The plaintiffs` argument was that when the option for purchase of the property was exercised by the defendants, it became an unconditional contract for the sale of the property to the defendants. At that time, however, the defendants did not have in hand an approval to purchase the property pursuant to s 25 of the Act. Consequently, on the basis of Lim Xue Shan & Anor v Ong Kim Cheong :1

(1) by entering into the unconditional contract for the sale and purchase of residential property before the defendants had obtained approval therefor, the plaintiffs and defendants had contravened the Act since as soon as a foreign person has formed an intention to purchase residential property, he must apply for ministerial approval;

(2) by virtue of s 25(2) read with s 36(1) of the Act, the agreement between the plaintiff and the defendant was an illegal contract and thus no enforceable rights could arise thereunder.

The defendants recognized that the decision in Lim Xue Shan `s case1 presented them with a formidable obstacle. Accordingly, the defendants argued that that decision was wrong and should not be followed.

The facts of Lim Xue Shan & Anor v Ong Kim Cheong [1990] 3 MLJ 449 were very similar to the facts before me. In that case the plaintiffs, who were foreign persons, entered into a written agreement with the defendant to purchase a piece of residential property from the defendant. The plaintiffs paid the defendant a deposit of 10% of the purchase price. After the agreement was signed, the plaintiffs applied to the Controller of Residential Property for approval to purchase the property. The application was rejected. The plaintiffs then demanded the return of the deposit. The defendant refused and the plaintiffs commenced an action to recover the deposit.

AP Rajah J held that the agreement between the plaintiffs and the defendant was an illegal contract. Accordingly, no enforceable rights could arise thereunder. The plaintiffs` claim was dismissed.

The crux of the decision is at p 451 of the report where AP Rajah J said:

In this case the plaintiffs not only offended the provisions of s 3 of the Act which makes the contract null and void but they have also offended the provisions of s 25(2) of the Act which lays down that any foreign person who desires to purchase or acquire any estate or interest in residential property shall as a first prerequisite make application to the Controller of Housing for the grant of approval to acquire such residential property. To my mind the Act requires that any foreign person desiring to buy residential property must, some time before he enters into a contract for the purchase of the property, get approval of the Minister to purchase such residential property. `Desires to purchase` must refer to a point of time before the signing of the contract. It refers to the state of mind of the foreign person before he signs the contract. It seems to me that a foreign person no sooner has he formed the intention to purchase property subject to the provisions of this Act must before he signs any contract apply for ministerial approval.

Mr Rodrigo pointed out that nowhere in s 25(2) or in any other subsection of that section is there any indication or reference to a point of time when the foreign person must make the application for approval. He submitted that the learned judge was wrong in holding that the words `desires to purchase` refer to a point in time before signing the contract. In his submission, the meaning of s 25(2) was simply that a foreign person who wished to purchase residential property must obtain ministerial approval at some point of time, and that failure to do so would contravene s 3(2)(a) of the Act and attract the penalties provided for under s 36. To state that s 25(2) requires, as a pre-requisite, an application for approval to be made before the agreement for sale is signed is to force an interpretation which the legislature did not intend. Mr Rodrigo submitted that it was by the contract or agreement for sale...