The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 17 September 2014
• Neutral Citation: [2014] SGHC 183
• Year: 2014
• Date: 17 September 2014
• Published date: 19 September 2014
• Hearing Date: 15 April 2014,16 April 2014,22 August 2014
• Plaintiff Counsel: Michael Palmer and Chew Kiat Jinn (Quahe Woo & Palmer LLC)
• Citation: [2014] SGHC 183
• Defendant Counsel: Albert Balasubramaniam (instructed counsel) and Chew Ching Ching (Ching Ching, Pek Gan & Partners)
• Court: High Court (Singapore)
• Docket Number: Suit No 56 of 2013

Edmund Leow JC:Introduction

The defendant (“the Vendor”) was the lessee of a property at 11 Leng Kee Road (“the Property”). The Property was leased from the Housing and Development Board (“HDB”).

The plaintiff (“the Purchaser”) was in the business of the retail sale of motor vehicles (except motorcycles and scooters).

These proceedings relate to the option to purchase (“OTP”) granted by the Vendor to the Purchaser for the Property. The purchase price was $16.8m. On 21 January 2013, the Purchaser brought a claim against the Vendor for the refund of the deposit paid (“the Deposit”) on the ground that the OTP has been validly rescinded by the HDB’s refusal to grant its approval for the sale. In response, the Vendor counterclaimed for various declarations, an order that the Purchaser proceed to apply to HDB for approval of sale of the Property, as well as damages. The Vendor also sought the forfeiture of the Deposit, as well as the withdrawal of the Purchaser’s caveat against the Property.

On 8 August 2014, I dismissed the Purchaser’s claim. I ordered the forfeiture of the Deposit and the withdrawal of the Purchaser’s caveat against the Property. The Purchaser has appealed against my decision. I set out my reasons below.

Facts

Mr Cheong Sim Lam (“Cheong”) was the Purchaser’s sole director and shareholder.¹ According to him, he had been interested in setting up and operating a car business in the Leng Kee Road area since late 2011. On 8 March 2012, Cheong (using a different corporate entity) completed the purchase of a commercial property unit at Alexandra Road.² He also entered into a sale and purchase agreement on 4 May 2012³ to purchase a property at 3 Leng Kee Road (“3 Leng Kee Road”) in his personal capacity. He claimed that the transaction for 3 Leng Kee Road later fell through, purportedly because HDB did not approve the transfer.⁴

On 6 July 2012, the Vendor granted the Purchaser the OTP in exchange for the option fee of $504,000 (being 3% of the purchase price of $16.8m). The OTP was exercised on or about 27 July 2012 on the payment of the sum of $1.176m (being 7% of the purchase price). The total sum of $1.68m, being 10% of the purchase price of the Property, comprised the Deposit under cl 3(a) of the OTP.

Under cl 10 of the OTP, the Property was to be sold “subject to the existing approved use”. Further, under cl 12(a) of the OTP, the sale and purchase was subject to the written approval of HDB or such other competent authority to the sale of the Property by the Vendor being obtained.⁵

On 27 July 2012, KhattarWong LLP (“KW”), as the solicitors acting for the Purchaser, wrote to HDB for its consent to the sale and purchase of the Property.⁶

On 15 August 2012, Cheong applied to the Urban Redevelopment Authority (“URA”) via URA’s E-Services to enquire on the approved use of the Property.⁷

On the same day, Cheong also applied to the National Environment Agency (“NEA”) for NEA’s approval of the Purchaser’s proposed use of the Property as a “general workshop, store, showroom, staff canteen, office, motor workshop and for auxiliary purposes” (“the Seven Uses”) via NEA’s Industrial Allocation System (“IA System”) portal on its website.⁸

Mr Gary Leong (“Mr Leong”) was the senior industrial properties manager in HDB for properties along Leng Kee Road and Alexandra Road.⁹ He dealt with the applications for both the Property as well as 3 Leng Kee Road.¹⁰ On 16 August 2012, Mr Leong issued an inquiry for, inter alia, the reason the Purchaser was buying the Property and the proposed use of the Property, including the Purchaser’s business plan. KW replied on 17 August 2012 stating that the Purchaser would be using the Property for the Seven Uses; however, it did not appear to contain a business plan.¹¹

On 21 August 2012, NEA sent the Purchaser a letter asking for clarifications on a number of matters. This included, inter alia, the estimated number of vehicles to be serviced, the operating hours, a brief description on the activities to be carried out at the motor and general workshop, the amount of wastewater that will be generated, the trade effluent, and so on.¹² Cheong asked his brother-in-law, Mr Jason Tan (“Jason”), to address NEA’s queries.¹³

On 27 August 2012, the URA replied to the Purchaser’s inquiry, stating that the Property was approved for “workshop, office and showroom use”.¹⁴

On 29 August 2012, KW fixed a meeting between the Purchaser and HDB for 12 September 2012. This was in response to a phone call from Mr Leong requesting for a meeting to understand the Purchaser’s business plans for 3 Leng Kee Road and the Property.¹⁵

On 3 September 2012, the Vendor’s conveyancing solicitors responded to NEA’s queries of 21 August 2012 stating that the Property would be used for the Seven Uses and that the details of the business would be furnished once available.¹⁶

On 4 September 2012, NEA’s Mr Chen Fu Yi sent an email to KW and Cheong requesting for them to “furnish [NEA] with the necessary information required in [NEA’s] letter” so that he could process their application and upload their reply through the IA System.¹⁷

During this time, Jason and another person, one Charles, worked on the answers to NEA’s queries. Charles sent an email with the answers they came up with to one of Cheong’s employees on 7 September 2012.¹⁸

On 11 September 2012, KW supplied NEA with the Purchaser’s further responses to NEA’s queries.¹⁹

Later on the same day,²⁰ Cheong received the notice from NEA addressed to the Purchaser informing him that NEA was unable to “support” the Plaintiff’s application for NEA’s approval of the Purchaser’s proposed use of the Property (“NEA’s 11 Sep 2012 Letter”). It stated:²¹

…

2We wish to inform you that under the URA Master Plan 2008, the long term land use plan for the subject site at 11 Leng Kee Road is for residential use, notwithstanding that it is currently being used by industry at this juncture.3As your proposed uses (i.e. general motor workshop, store, showroom, staff canteen, office and auxiliary purpose) do not conform to the long term land use plan for the subject site, we regret that we are unable to support your application.

4. Please source for alternative industrial premises, which is zoned for B2 industry use (ie. general special) in the URA Master Plan. …

…

On 12 September 2012, the planned meeting with HDB took place. According to Jason, the persons who were present were two HDB officers (namely, Mr Leong and his superior), two solicitors from KW, as well as the architects that the Purchaser had engaged.²²

As to what was discussed at the meeting, Mr Leong (a subpoenaed witness) said that he wanted to know the reasons why the Purchaser had wanted to buy the Property and 3 Leng Kee Road together and to find out their business plan.²³ Mr Leong’s evidence was that the discussion was focused on 3 Leng Kee Road and not the Property as the Purchaser wanted to close the 3 Leng Kee Road deal very quickly.²⁴ He therefore asked the Purchaser to provide a written proposal²⁵ for 3 Leng Kee Road.²⁶

Mr Leong also said that the subject of NEA non-approval or non-consent for the Property did not come up during the discussion.²⁷ Mr Leong also did not recall Jason saying anything about not being able to run a workshop on the Property and do car servicing because of NEA’s refusal to grant its approval.²⁸ Nor did he recall himself or his superior assuring Cheong and Jason that HDB would speak to NEA about letting the Purchaser run a workshop on the Property.²⁹

On 21 September 2012, KW wrote to Mr Leong, saying that Mr Leong had given instructions that in order to obtain HDB’s approval, HDB required clearance from all relevant government authorities, including NEA and URA. The email stated that ‘[i]n light of NEA’s rejection, please confirm the status of the application for HDB approval by the vendor and our clients”. NEA’s 11 Sep 2012 Letter was attached to this email.³⁰

On the same day, Mr Leong wrote an email to the Vendor’s solicitors, Ching Ching, Pek Gan & Partners (“CCPG”) stating that KW has informed HDB that NEA’s consent has not be obtained for the Seven Uses and as such, HDB was “unable to process the request for transfer of lease” at the Property.³¹

On 21 September 2012, Cheong provided HDB with the details of his business plans for 3 Leng Kee Road (but apparently not the Property). He did so again on 26 September 2012. Cheong claimed that HDB was not contented with his two responses and was not going to approve.³² However, Mr Leong said he did not recall saying that HDB was not going to give approval.³³

On 24 September 2012, Mr Leong wrote an email to KW stating the following:

We wish to inform you that NEA’s approval for the proposed use is required before HDB can give in-principle approval for the transfer of lease. As NEA’s consent has not been obtained in this case, we are unable to grant in-principle approval. …³⁴

On 25 September 2012, KW wrote to CCPG stating the sale and purchase of the Property had been rescinded as a result of HDB’s refusal to approve and requested a refund of the Deposit.³⁵

On 1 October 2012, CCPG responded to KW rejecting the Purchaser’s purported notice of rescission. The letter noted that the existing tenant of the Property did not use the place as a workshop, which was consistent with clean industry use, and asked the Purchaser to revise their application. They also asked the Purchaser to appeal to NEA by highlighting that currently all properties in the same stretch of Leng Kee Road was used for motorcar-related industrial purposes and it would be inequitable to refuse consent on its use “especially when it is to be used as a clean industry basis [sic]”.³⁶

On 5 October 2012, KW responded by noting that the Property was sold subject to the existing approved use (ie, the Seven Uses) and not just existing use. It stated that the...