Thomson Hill Pte Ltd v Chang Erh and Another and Another Appeal

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 06 July 1992
• Neutral Citation: [1992] SGCA 46
• Docket Number: Civil Appeals Nos 67 and 120 of 1990
• Date: 06 July 1992
• Year: 1992
• Published date: 19 September 2003
• Plaintiff Counsel: Chua Lee Ming (Lee & Lee),Shriniwas Rai (Hin Rai & Tan)
• Citation: [1992] SGCA 46
• Defendant Counsel: Chan Eng Thai (David Ong & Lim),Gan Hiang Chye (Allen & Gledhill)
• Court: Court of Appeal (Singapore)
• Subject Matter: Sum misappropriated by solicitor,cll 3(1)(i) & 19(1) Housing Developers Rules 1976,Land,Conveyance,Agreement for purchase and sale of property,Housing Developers (Control and Licensing) Act (Cap 130),Whether loss to be borne by purchasers or vendors,5% of purchase price held by purchasers' solicitor as stakeholder,Bankruptcy of solicitor

Cur Adv Vult

Both these appeals raise an identical legal point, which is, who should bear the loss in the event that the stakeholder under a contract of sale and purchase of immovable property misappropriates the funds and subsequently becomes a bankrupt. Thus we heard them together.

The contract of sale and purchase in both instances followed the standard terms prescribed under the Housing Developers Rules 1976, which Rules were in turn made by the Minister pursuant to powers conferred upon him under the Housing Developers (Control and Licensing) Act (Cap 130). In both cases the appellants are the vendors, who are housing developers.

The relevant clause under the contract is cl 3(1)(i) which reads as follows:

The purchase price shall be paid by the purchaser to the vendor by the instalment and at the times following, that is to say:

...

(i) on completion of the sale and purchase of the housing unit as provided in cl 14 hereof, the balance of thirty (30) per cent of the purchase price, twenty (20) per cent of which shall be paid forthwith to the vendor and the remaining ten (10) per cent shall be paid to the purchaser`s solicitors as stakeholders, five (5) per cent of which shall be paid to the vendor within seven (7) days of the receipt by the purchaser or his solicitors of the certificate of fitness for occupation issued by the assistant director in respect of the housing unit or a photographic copy thereof duly certified as a true copy of the vendor`s solicitors and the remaining five (5) per cent or any balance thereof (after any deduction has been made in accordance with cl 19 hereof) to be paid to the vendor on the expiry of six (6) months after the date of delivery of vacant possession to purchaser or the date of the issue of the certificate of fitness for occupation, whichever is the earlier.

We think that for completeness we will set out the terms of cl 19(1) as well:

Any defect, shrinkage or other faults in the housing unit and in the building project and all the common property thereto which shall become apparent within a period of six (6) calendar months after the date of delivery of vacant possession to the purchaser or after the date of issue of the said certificate of fitness for occupation (whichever shall be the earlier) and which shall be due to defective workmanship or materials or to the housing unit and the building project and all common property thereto not having been constructed in accordance with the said specifications and plans (amended or unamended, as the case may be) shall be made good by the vendor at its own cost and expense within one calendar month of its having received written notice thereof from the purchaser and if the said defects, shrinkage or other faults are not made by the vendor as aforesaid the purchaser and the management corporation of the building project shall be entitled to recover from the vendor the costs of making good the same and the purchaser may deduct such costs from any sum which has been held by the purchaser`s solicitors as stakeholder for the vendor:

Provided that the purchaser shall at any time after the expiry of the said period of one month notify the vendor of the cost of carrying out any works to make good the said defects, shrinkage and other faults before the commencement of the works and shall give the vendor an opportunity to carry out the works himself within fourteen days from the date the purchaser has notified the vendor of his intention to carry out the said works.

But we should add that nothing in the present appeals turns on cl 19. The sums which were misappropriated by the solicitor-stakeholder were the first mentioned 5% in cl 3(1)(i).

The same law firm acted for the purchasers in both cases. It was Messrs Philip Wong & Co, of which one Philip Wong Kai Chuen was the sole proprietor. Philip Wong is now a bankrupt and is serving a jail term following his conviction on two charges of criminal breaches of trust of clients` money.

As far as we can see, the only real factual difference between the two cases is that in one (Civil Appeal No 67 of 1990), the certificate of fitness was only issued by the competent authority after the solicitor-stakeholder was adjudicated a bankrupt, and in the other (Civil Appeal No 120 of 1990), the certificate was issued well before the solicitor-stakeholder was so adjudicated a bankrupt. However, we do not think that this difference is material to the question which is before us. The crucial fact is that when the time came for the solicitor-stakeholder to make the payment of the first-mentioned 5% to the vendors, he was unable to do so.

One of the earlier cases most frequently cited to have dealt with this question is Rowe v May. [1854] 52 ER 241 There a mortgagor contracted to sell a property and one of the conditions was that the purchaser should pay a deposit to the auctioneer. The mortgagee subsequently agreed and adopted the contract. The auctioneer later became insolvent. It was held that the vendor, and thus the mortgagee, must bear the loss. The reasons given by John Romilly MR in the report are brief and they are as follows:

When a purchaser pays a deposit on his purchase money to the auctioneer, and it is lost, on whom does the loss fall? If the matter goes off because the vendor cannot make a good title, it is the vendor`s duty to repay the deposit and the loss occassioned by the non-completion; and in case an action were brought against him for breach of the contract, the amount of deposit not repaid would be part of his loss, and the purchaser would be entitled to add it to the damages; so if the contract be completed and the deposit cannot be recovered from the auctioneer, who for this purpose is the agent of the vendor, it will be the vendor`s loss and not that of the purchaser.

It would appear that the court`s decision in Rowe v May [1854] 52 ER 241 was based on the fact that the auctioneer was the agent of the vendor; and not on the basis that the auctioneer was a stakeholder. We would, however, observe that there is an established presumption, in the absence of an express agreement, that an auctioneer holds a deposit as a stakeholder: see ...