Tsai Jean v Har Mee Lee

• Jurisdiction: Singapore
• Judgment Date: 18 November 2008
• Date: 18 November 2008
• Docket Number: Originating Summons No 464 of 2008
• Court: High Court (Singapore)

Tsai Jean

Plaintiff

and

Har Mee Lee and others

Defendant

[2008] SGHC 210

Andrew Ang J

Originating Summons No 464 of 2008

High Court

Land–Strata Titles–Collective sales–Application for collective sale order–Appeal against decision of the Strata Titles Board–Question of law–Whether Board made an error of law ex facie–Whether the view of the Board was one that no person acting judicially and properly instructed as to the relevant law could have come to–Section 98 (1) Building Maintenance and Strata Management Act (Cap 30C, 2008 Rev Ed)–Land–Strata Titles–Collective sales–Land Titles (Strata) Act (Cap 158, 1999 Rev Ed)–Application for collective sale order–Board not satisfied that the transaction was not in good faith–Whether Board made an error of law ex facie–Whether the view of the Board was one that no person acting judicially and properly instructed as to the relevant law could have come to–Sections 84A (9) and 84A (9) (a) (i) Land Titles (Strata) Act (Cap 158, 1999 Rev Ed)–Words and phrases–“Good faith”–Section 84A (9) Land Titles (Strata) Act (Cap 158, 1999 Rev Ed)

This was an appeal by the plaintiff (“the appellant”) under s 98 (1) of the Building Maintenance and Strata Management Act (Cap 30C, 2008 Rev Ed) (“BMSMA”) against the decision of the Strata Titles Board (“the Board”). In that decision, the application of the defendants (“the respondents”) for a collective sale order for the subsidiary strata lots and common property in Strata Title Plan No 1041 (“the Development”) to Jewel 1 Pte Ltd (“Jewel”) at a sale price of $44m pursuant to s 84A (7) of the Land Titles (Strata) Act (Cap 158, 1999 Rev Ed) (“LTSA”) was allowed. On 19 October 2006, 17 of the subsidiary proprietors of the Development had signed a collective sale agreement (“the Collective Sale Agreement”) for the purposes of instituting a collective sale of the Development. The signing of the Collective Sale Agreement led to the formation of a sale committee (“the Sale Committee”). The offer from Jewel was the highest offer received by the Sale Committee up to the time it was received, and exceeded all other offers by more than $5m. In rejecting the appellant's objection to the application for a collective sale order, the Board held that: (a) it cannot be said that the Sale Committee's acts were not in good faith since the Jewel offer was the highest at the material time and was higher than the reserve; (b) the approach of the respondents' valuer in valuing the Development was more consistent than the appellant's valuers, and taking into account the adjusted and revised valuations of the respondents' valuer of $47m and $48m, the sale price of $44m was not to be considered unreasonable but to be within the acceptable range; and (c) the Jewel offer provided the best indication of the market value of the Development.

The overarching issue on appeal was whether the Board was wrong to have rejected the appellant's objection to the application by the respondents for the collective sale order, viz, that the application should be dismissed for a lack of good faith having regard to the sale price pursuant to s 84A (9) of the LTSA. The grounds of appeal raised by the appellant could be divided into three main contentions. The first was that the Sale Committee failed to proceed to take steps to secure the highest possible price for the Development. In support, it was argued that the Sale Committee had failed to act on the advice of its marketing agent HSR International Realtor Pte Ltd (“HSR”), which was, about a week after the option to purchase was granted to Jewel, dismissed for, inter alia, failing to carry out the Sale Committee's instructions. HSR had only provided the Sale Committee with a market update prior to the sale to Jewel. Another supporting argument advanced for the first contention was that the Sale Committee decided to sell the Development to Jewel even though there was still more than five months before the expiration of the Collective Sale Agreement. A further supporting argument for the first contention was that the Sale Committee changed its mind about making counter-offers of $50m to the previous bidders for the Development. The second main contention was that the deliberations by the Sale Committee before it accepted the offer from Jewel were inadequate and lacking in maturity. The final main contention was that the respondents' valuation report in support of the sale price contained numerous errors. It was further submitted that the Board, by holding that the sale price of $44m was within the “acceptable range”, had exercised its discretion on the basis of an incorrect legal principle.

Held, dismissing the claim:

(1) Pursuant to s 98 (1) of the BMSMA, the High Court could only entertain an appeal against a decision of the Board if the appeal was on a “point of law”. Having regard to Edwards (Inspector of Taxes) v Bairstow [1956] AC 14, the Board's not being satisfied that the transaction was not in good faith (regard being given to the purchase price of the Development) could not be challenged unless the Board made an error of law either ex facie (“the first issue”) or had made a determination that no person acting judicially and properly instructed as to the relevant law could have come to (“the second issue”): at [16] to [18].

(2) In regard to the first issue, a lack of good faith connoted the presence of dishonesty or bad faith. At its widest, a lack of good faith could possibly include an egregious form of recklessness bordering on intent. While the Board did not spell out its interpretation of the meaning of good faith, it could be assumed, from a holistic reading of the reasons for its decision, that the Board had approached the appellant's objection from the viewpoint that a lack of good faith connoted the presence of dishonesty or bad faith: at [21] and [25].

(3) As regards the second issue, the question was whether the view that the Board reached (ie,that it was not satisfied that the transaction was not in good faith) was one that no person acting judicially and properly instructed as to the relevant law could have come to. In totality, however, it could not be said that the Board, in not being satisfied that there was a lack of good faith in the transaction, had made a determination that no person acting judicially and properly instructed as to the relevant law could come to: at [23] and [33].

(4) In regard to the first main contention, viz, that the Sale Committee had received a market update from HSR which expressed pessimism and uncertainty in regard to the marketability of the Development. In light of the low offers it had received prior to the offer from Jewel, the Sale Committee had reason to believe the pessimism and uncertainty. In addition, delaying the acceptance of the offer from Jewel would not ensure that a better offer would come along but could result in loss of the offer should Jewel decide to withdraw the same. In this respect, it would not be appropriate for the court or Board to assess good faith on the basis of hindsight. As for the alleged obligation to make counter-offers, there was evidence that the making of counter-offers was to be at the discretion of the Sale Committee: at [26] to [28].

(5) In regard to the second main contention,viz, that the minutes of the meeting of the Sale Committee on 10 May 2007, where the sale to Jewel was decided, did not indicate a lack of proper deliberations by the Sale Committee: at [29].

(6) In regard to the third main contention, viz, that the Board did not accept the original valuation of the respondents' valuer and only accepted his adjusted and revised valuations due to the consistent approach taken. Other than bare assertions, there was nothing offered by the appellant to impugn this view of the Board which was, in any case, a finding of fact not open to appeal under s 98 (1) of the BMSMA: at [30].

(7) As regards the submission that the Board, by holding that the sale price of $44m was within the “acceptable range”, had exercised its discretion on the basis of an incorrect legal principle, the appellant was elevating the Board's statement to one of principle where it was not. The Board was merely implying that it was easier to conclude that there was no lack of good faith as the sale price was not far off the valuation: at [31].

[Observation: It would not be correct to state that for the purposes of s 84A (9) of the LTSA, the court should be guided by the principles underlying a mortgagee's duties in exercising his power of sale, viz, to act in good faith and also to take reasonable care to obtain the true market value or the proper price of the mortgaged property: at [22].

The factors which the Board was permitted to take into account in deciding whether it was satisfied that a decision was not in good faith were expressly limited by s 84A (9) (a) (i) of the LTSA to the sale price for the lots and the common property in the strata title plan, the method of distributing the proceeds of sale and the relationship of the purchaser to any of the subsidiary proprietors. As such, it would appear at first blush that nothing else should be taken into account where the issue of good faith in a transaction was being considered. However, to give the subsection such a strict and literal interpretation would be to render it unworkable. It would be impossible to be satisfied, one way or the other, whether a transaction was in good faith if only the sale price (ie, a dollar amount) was to be taken into account. Limiting the Board's scope of consideration in such a manner could not have been the intention of the Legislature as other facts relevant to the sale price, such as the valuation of the property in question and, possibly, the background to the acceptance of the sale price, would be material to the Board's finding. In particular, if the valuation could not be taken into account, there would be no point in Fourth Schedule to...