Tian Teck Construction Pte Ltd v Exklusiv Auto Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 30 April 1992
• Neutral Citation: [1992] SGCA 36
• Docket Number: Civil Appeal No 25 of 1988
• Date: 30 April 1992
• Published date: 19 September 2003
• Year: 1992
• Plaintiff Counsel: Cheong Yuen Hee and Tan Kay Khai (Chua Hay & Wee)
• Citation: [1992] SGCA 36
• Defendant Counsel: Goh Aik Chew (Goh Aik Chew & Co)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether time of the essence,Sale subject to satisfactory replies to legal requisitions,Sale and purchase of property,Contract,Land,Conveyance,Performance,Discharge,Sale and purchase of property subject to satisfactory replies to legal requisitions,Notice of any unsatisfactory reply to be given within 7 days of receipt of reply,Stipulation that notice of any unsatisfactory reply to be given within 7 days of receipt of reply

(delivering the grounds of judgment of the court): By an agreement in writing dated 11 July 1984 (the agreement), Tian Teck Construction Pte Ltd (the appellants) agreed to sell and Exklusiv Auto Pte Ltd (the respondents) agreed to purchase the property known as No 11 Leng Kee Road, Singapore (the property) at the price of $2.4m, of which a 10% deposit of $240,000 was paid by the respondents to the appellants.

Clause 8B of the agreement provided as follows:

Provided the usual legal requisitions are sent within seven (7) days from the date of this agreement the sale shall be subject to satisfactory replies to the said legal requisitions of the purchasers solicitors to the various government departments and to the MRT authority. In the event that the said replies are not satisfactory the purchaser shall be entitled to, by notice in writing served on the vendor within seven (7) days of receipt of such replies, rescind this agreement whereupon the vendor shall refund to the purchaser the deposit paid herein without interest and each party shall have no claim against the other whatsoever.

In this clause, none of the replies from the relevant authorities shall be deemed to be not satisfactory unless it reveals -

(i) any intention on the part of any public authorities to acquire the whole of the property or any part thereof, in the latter case, the area of the part affected shall exceed 5% of the total area of the property; or

(ii) the existence or contemplation of any public schemes which will inevitably affect the property adversely and in consequence thereof would be compulsorily acquired; or

(iii) a defect in the building in that it was built without approval(s) of the competent authority(ies); or

(iv) the existence of any outstanding notice or notices with which the vendor is unable or could not reasonably be required to comply with all notices outstanding as at the date of this agreement will be complied with by the vendor.

Even before the agreement was executed, the respondents solicitors had sent the usual legal requisitions to the various government departments. On 10 July 1984 they received an initial reply from the Building Control Division which included the following information:

Question 6 : Master plan zoning:

Answer : Residential/major traffic route

Because of the cryptic answer to question 6, the respondents solicitors applied to the relevant authority on 11 July 1984 for a road interpretation plan. It was alleged later by the appellants that this interpretation plan was available for collection by the respondents at the of fice of the relevant authority on 24 July 1984. The respondents contended, however, that they could not have known and did not know that the interpretation plan was to be collected, and that the interpretation plan was in fact received by them only on 2 August 1984. In any event, on receipt of this interpretation plan, the respondents sought advice on it. Meanwhile, on 15 August 1984, the respondents solicitors forwarded by letter their draft of the instrument of transfer to the appellants solicitors for approval.

On 16 August 1984, the respondents solicitors wrote to the appellants solicitors that, according to the interpretation plan, the property was affected by a category 4 road proposal along Leng Kee Road and a category 5 road proposal along Hoy Fatt Road which abutted the property on one side. The area affected was coloured pink on the interpretation plan and the legend referring to the affected area read: land required for road widening. On 17 August 1984, the respondents solicitors, having confirmed with their architects that approximately 18.2% of the area was affected by the road widening, as indicated in the interpretation plan, informed the appellants that since the area affected exceeded the 5% provided for in the agreement, the respondents were not prepared to purchase the property unless a fresh agreement at a different price was renegotiated. Copies of the legal requisitions and the interpretation plan were sent by the respondents solicitors to the appellants solicitors for their inspection. By another telex, the respondents solicitors asked for the refund of the deposit since the sale and purchase was aborted. Notice of rescission was thus served on 17 August 1984.

For the next month there was a flurry of letters exchanged between the respective solicitors. The respondents contended that the replies to the requisitions were not satisfactory, and that therefore, by virtue of the condition in cl 8B, the respondents were entitled to rescind the agreement and cl aim a refund of the deposit. The appellants contended that for cl 8B to apply, the respondents had to show proof of an intention on the part of the public authorities to acquire the affected area and the replies did not amount to proof of such an intention.

As the dispute could not be resolved, the appellants on 13 September 1984 accepted the respondents repudiation, and forfeited the deposit; and on 22 September 1984 the respondents filed Originating Summons No 813 of 1984 for the following declarations:

(1) a declaration that the plaintiffs have lawfully rescinded the aforesaid sale and purchase agreement and that the same was effectively rescinded and was null and void and of no further effect;

(2) that the defendants may be ordered to repay to the plaintiffs the deposit of $240,000 together with interest thereon at 18% pa from 20 August 1984 until payment and costs.

The originating summons was heard on 13 and 14 April 1987, and again on 22 February 1988, and was decided on 29 February 1988. The learned judge made an order-in-terms of the prayers of the originating summons, except that interest was ordered at 8% pa. The appellants appealed. The parts of the grounds of decision of the learned judge which are relevant to this appeal are reproduced below:

(2) Did the plaintiffs rescind within time?

Counsel for the defendants contended that the plaintiffs had failed to rescind within the seven days after receipt of the requisitions, as required by cl 8B. The evidence disclosed that the plaintiffs solicitors received the RIP [road interpretation plan] on 2 August 1984 (although it was, unknown to them, ready for collection on 28 July 1984). The solicitors then sought instructions from their clients and clarifications from their clients architects whose calculations were only received on 17 August 1984, whereupon they gave notice of rescission to the defendants solicitors. The evidence also showed that the defendants were not concerned with the time limit imposed by cl 8B as this point was raised after they had changed solicitors.

In my view, the question whether or not the rescission was made in time depended on whether the time for rescission was of the essence of the agreement. By virtue of s 4(7) of the Civil Law Act [Cap 43, 1988 Ed], time is not of the essence in an agreement for sale of land unless the parties have expressly stipulated as such or that the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered of the essence: 9 Halsburys Laws [of England] (4th Ed) para 481 (stating the rule in equity), per Lord Simon. I was unable to find anything in cl 8B or the circumstances in which the agreement was made or in the nature of the subject matter which was of sufficient cogency to override the presumption that time was not of the essence.

In United Scientific Holdings Ltd v Burnley BC [1978] AC 904, the House of Lords held that the timetable specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review was not of the essence of the contract. I thought the reasoning of their Lordships was applicable to the present action. In that case, the failure of the landlords to set the procedure in motion within the timetable did not prejudice the lessees in any way. Here too, the defendants were not prejudiced as the date for completion was 90 days from 11 July 1984.

Furthermore, the local circumstances for such contracts of sale being invariably made subject to satisfactory requisitions must be properly appreciated. In England, it is the practice not to exchange contracts until all preliminary searches have been done and found satisfactory. That is why gazumping is possible and frequently practised in England. In Singapore before the first property boom in the early sixties, the practice was the same. When the property boom came, purchasers were not minded to wait for requisitions to come in and found satisfactory before they were prepared to bind themselves to an agreement. They wanted to sign a binding agreement before requisitions were sent and they wanted protection by means of the satisfactory requisitions clause. The legal profession was able to resolve the problem of gazumping without the aid of legislation. The historical development of cl 8B would not suggest that any time therein would be of the essence.

I was also of the view that the essence of cl 8B was the nature of the requisition, ie whether it was satisfactory or unsatisfactory. The plaintiffs had to apply an objective and not a subjective assessment as to the nature of the reply to the...