1 1) By 3 agreements in writing dated 28.10.82, the plaintiffs agreed to sell and the defendants agreed to purchase 3 shop units, #02-37 to #02-39 in Glass Hotel at the total price of $1,312,216.00.

2 2) The defendants paid all the instalments falling due under clause 4(a) to 0) of the sale agreements but failed to pay those payable under paragraphs (k) and (1). The total amount due and payable on these instalments was $386,108.50. The defendants also failed to pay the maintenance charges amounting to $22,097.62 and survey and plan fees of $371.68 due and payable in respect of the said units.

3 3) In 24.7.87, the plaintiffs obtained judgment in this action for, inter alia, specific performance of the 3 agreements. The defendants failed to complete the purchase of the 3 units notwithstanding the judgment.

4 4) The following material events have since then occurred:

5 (a) On 11.3.88, a company winding-up order was made against the plaintiffs in Companies Winding Up No 63 of 1988.

6 (b) On 11.4.89, DBS Finance Ltd ("DBSF"), an unsecured creditor of the defendants, obtained a charging order nisi (which was made absolute on 2.6.89) ("the Charging Order") against the 3 units for the balance of a judgment debt of about $540,000: DBSF lodged caveats against the said units on 16.6.89.

7 (c) On 6.11.89, receivers and managers were appointed in respect of the undertaking and assets of the defendants pursuant to two debentures issued by the defendants.

8 (d) On 4.12.89, the mortgagees of two of the units, #02-38 and #02-39, completed the purchase of the two units in their capacity as assignees of the defendants' right title and interest therein.

9 (e) On 3.1.90 the plaintiffs exercised their rights under clause 6(3) of the agreement for sale ("the Sale Agreement") in respect of unit #02-37 ("the unit") and treated the agreement as having been repudiated by the defendants. Notice of the annulment was given to DBSF on 4.1.90.

10 5) It is not disputed that the plaintiffs were entitled to exercise their rights under clause 6(3) of the Sale Agreement. On 10.2.90, the plaintiffs took out a motion for the following orders: (1) that the Sale Agreement be rescinded, (2) that they be at liberty to sell the unit and (3) that the caveats lodged by the defendants and DBSF against the unit be withdrawn or removed. The defendants, through counsel, have consented to all the relief sought against them and accordingly, I made an order against the defendants in terms of the notice of motion.

11 6) However, DBSF, although not formally made a party to these proceedings, were served with the motion and appeared by counsel to object to prayer (3). I then heard submissions by counsel for the plaintiffs and for DBSF and I now give judgment on the issue whether, in the events that have happened, the plaintiffs are entitled to an order for the removal of the caveat lodged by DBSF against the unit. The question can be answered by determining whether DBSF had on 3.1.90, when the plaintiffs annulled the sale, a caveatable interest in the unit and this, in turn, depends on whether the defendants have such an interest in the unit.

12 7) It is common ground that during the subsistence of the Sale Agreement, the defendants had a purchaser's lien on unit #02-37 for the purchase instalments paid under the Sale Agreement, and that such lien was a caveatable interest and capable of being charged under the Charging Order. However, counsel for the plaintiffs has contended that such lien or interest was extinguished upon the annulment of the Sale Agreement and any claim by the defendants for the return of any part of the instalments under the terms of the Sate Agreement became an unsecured claim. Correspondingly, the Charging Order ceased to charge any caveatable interest in the unit, and, the plaintiffs having been wound up, the claim of DBSF became an unsecured claim.

13 8) Counsel for the plaintiffs relies on the following passage (and in particular the underlined words) at page 460 of SHELL'S Principles of Equity:

14 "A purchaser has a lien which is somewhat analogous to the vendor's lien. This is a lien upon the property in the hands of the vendor for any deposit or instalment of his purchase-money which the purchaser has paid to the vendor (and not merely to a stakeholder) without obtaining a conveyance. The purchaser has this lien not only when the contract goes off for want of title, but also where he rescinds the contract under a condition enabling him to do so, or the vendor repudiates the contract; but if the contract goes off through the purchaser's default, the lien is gone."

15 9) The decisions of DINN v GRANT (1852) 5 De G & SM 451 and RIDOUT v FOWLER [1904] 1 Ch 658 are referred to in the footnote in support of the above passage. In DINN v GRANT, the purchaser had paid part of the purchase moneys to the vendor and then failed to complete the purchase for lack of funds. He requested the vendor to sell the land. The vendor became bankrupt. The purchaser claimed a lien on the land for the sums he had advanced under the contract. The Vice-Chancellor held that he had no lien as he had abandoned the contract.

16 10) In RIDOUT v FOWLER, a judgment creditor obtained an order by way of equitable execution against the interest of the judgment debtor in land which he had contracted to purchase and for which he had paid a deposit and let into possession by the vendor. The purchaser being unable to complete, the litigation between him and the vendor was compromised by the sale being rescinded and the vendor paying the purchaser £110, not in part repayment of the deposit, but to give up possession of the land. The judgment creditor claimed against the vendor a lien on the land for the deposit as well as the said sum. Farwell J. dismissed both claims. On the first claim, his Lordship held, following the law as stated by James LJ in RAYNER v PRESTON (1888) 18 Ch D 1, at p 13, that the rescission of the agreement operated to deprive the purchaser of any interest in the land from inception, and accordingly there was nothing on which the order by way of equitable execution could have operated. In other words, such equitable interest he had at inception was extinguished by his failure to perform the agreement.

17 11) On the second claim, his Lordship said (at p 663):

18 "It was suggested, but I do not think that the question really arises, that the £110 was in fact part of the purchaser's deposit for which he had a lien on the property. For that purpose it is necessary to consider a purchaser's rights in respect of the deposit which he has paid. He has a right to a lien for the repayment of his deposit which, according to ROSE v WATSON - a case I recently followed in WHTTBREAD & CO v WATT, affirmed by the Court of Appeal - attaches from the moment of payment conditional on this, that the purchase does not go off through his own fault. He has no absolute right to a charge for his lien or to any repayment of the deposit at all. It is only on his not being in default. If he is in default, his right does not exist. In the present case the purchaser was in default, and the order of compromise, which is after all the conclusive matter, shews on the face of it what the agreement was, and that no deposit was in fact returned; but the vendor, being in the unfortunate position of having on his hands a man who was unable or unwilling to pay a debt of 551., and seeing no chance of getting the balance of his purchase money, gave him £110 to give up possession of the property."

19 12) In WHITBREAD & CO LTD v WATT [1901] 1 Ch 911, the purchaser who had paid a deposit to the vendor rescinded the purchase upon the vendor's default in complying with the terms of the sale. The purchaser claimed a lien for the deposit. Farwell J gave judgment for the purchaser. His Lordship, after referring to WYTHES v LEE 3 Drew. 396 and ROSE v WATSON (1864) 10 HCL 672, which he said was on all fours with the case before him, said:

20 "The lien is created by the contract under which the money is paid as part of the purchase-money, and on the faith that the contract will be carried out, and not by the default of the vendor. The default gives rise to the necessity for enforcing the lien, but the lien arises from the contract. I see no reason why a condition that, if 300 houses are not built, the purchaser may rescind should be held to differ in any way from the ordinary condition in a contract that, if the purchaser makes or insists upon any requisition or objection to the title which the vendor is unable or unwilling to comply with, the vendor may rescind. There is no default there, but I venture to think it would not be arguable, and I do not think counsel for the defendant contended, that the purchaser in such a case would have no right to a lien in the same way as if the purchase went off by reason of want of title on the part of the vendor. It is not default. It is rather misfortune. I hold, therefore, that on authority and on principle the purchaser has a lien, both when the contract goes off for want of title and when the contract is rescinded under a condition enabling the purchaser to rescind. If the purchaser himself makes default in such a way as to deprive himself of any debt at all, he cannot have a lien for that which does not exist."

21 13) Counsel for DBSF has contended that DBSF continued to retain a caveatable interest in the unit even after the annulment of the Sale Agreement. She relies on ROSE v WATSON where both the Lord Chancellor and Lord Cranworth, in separate judgments, stated that a purchaser who paid money towards the purchase price acquired a corresponding estate in equity in the land as every payment was part performance of the contract by the purchaser. In that case, the purchaser having paid some instalments in accordance with the terms of the contract of sale, refused to complete the purchase because certain representations which induced him to enter into the contract had not been fulfilled. The vendor failed in his suit for specific performance. In the meantime, the mortgagee to whom the vendor had mortgaged the property obtained an order for foreclosure. The purchaser brought an action against the mortgagee for repayment of the instalments on the ground that he had a lien on the estate. The House of Lords held that he had and that the mortgagee was bound by it. Counsel relies on the following passage in the judgment of Lord Cranworth (at p. 1192):

22 "There can be no doubt, I apprehend, that when a purchaser has paid his purchase money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When, instead of paying the whole of his purchase money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent to which he has paid his purchase money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien exactly in the same way as if upon the payment of part of the purchase money the vendor had executed a mortgage to him of the estate to that extent."

23 14) It would appear that counsel is relying on this passage as authority for the proposition that the vendor is a trustee for the purchaser of a portion of the estate corresponding to the amount of the payments made. If so, I disagree with it. ROSE v WATSON was concerned with the purchaser's lien. The trust language used by both the Lord Chancellor and Lord Cranworth was unnecessary and in any event would not assist DBSF as it is now established law mat a vendor is only a trustee for the purchaser where the purchaser is entitled to specific performance: see LYSAGHT v EDWARDS [1876] 2 Ch D 499. ROSE v WATSON is authoritative only on the issue of the purchaser's lien and was followed by Farwell J in WHTTBREAD v WATT. ROSE v WATSON is not an authority in favour of but against DBSF in the events that have occurred in the present case.

24 15) Counsel also referred to MAYSON v CLOUET [1924] AC 980, a decision of the Privy Council from Singapore. In that case, the contract of sale provided for payment of a 10% deposit and the balance of the purchase price at various dates. The contract also provided that should the purchaser fail to comply with the conditions of the contract, his deposit should be treated as forfeited and the vendor was at liberty to re-sell the property and claimed any deficiency in the price as liquidated damages. The purchaser paid the deposit and two instalments, but failed to pay the balance of the purchase price at the stipulated time. The vendor rescinded the contract. The purchaser claimed the return of the instalments paid. The Privy Council held that the rights of the parties depended on the contract and that the purchaser was entitled to the return of the instalments as the contract provided only for the forfeiture of the deposit but not the instalments. The question of the purchaser's lien was not raised in MAYSON v CLOUET and accordingly, it does not assist DBSF.

25 16) It should be observed that in the ordinary case where the purchaser has failed in claiming a lien for money paid to account of the purchase price, the money was in the form of an initial deposit which was subject to forfeiture upon the default of the purchaser. There appears to be no direct authority on the question whether if some part of the purchase price is recoverable from the vendor the purchaser has a lien where the sale goes off through the default of the purchaser. The judgment of the Vice-Chancellor in DINN v GRANT did not deal with this distinction expressly and it would appear that his Lordship treated the claims of the purchaser in that case as a personal claim. In the present case, it is not disputed that the balance of the instalment payments towards the purchase price are repayable to the defendants subject to two deductions only, i.e., for arrears of interest payable under the unpaid instalments and a sum equivalent to 25% of the balance. In FRANKCOMBE v FOSTER INVESTMENTS PTY LTD [1978] 2 NSWLR 41, this very point was argued in written submissions to the learned judge. In that case, the vendor had sought to remove a caveat filed by the purchaser against the land on the very day the purchaser rescinded the agreement for sale and for damages for filing the caveat without reasonable cause. The purchaser had filed the caveat to protect a 10% deposit and a further sum of A$40,000 he paid to the vendor towards the purchase price. Holland J. found that the purchaser had wrongfully rescinded the agreement, that on the terms of the sale the 10% deposit was forfeited but that the A$40,000 was recoverable. The question then arose as to whether the purchaser could claim a lien on the land for the $40,000 in order to justify the lodgment of his caveat. Holland J held that if the point were material he would have held that the purchaser had a sufficiently arguable case for a caveatable interest in the land by way of purchaser's lien to have provided reasonable cause for lodging and maintaining a caveat to protect that interest. However, his Honour held, on the facts, that the point was immaterial as the purchaser had filed the caveat not for the purpose of protecting his interest but for another purpose, viz., to prevent the vendor from dealing with the land until he had repaid all moneys which had been paid by him under the contract. He accordingly ordered the removal of the caveat.

26 17) In regard to the purchaser's lien, his Honour reasoned as follows, at p57:

27 "Notwithstanding decisions in DINN v GRANT 64 E.R. 1194 and MCGIFFORD v O'BRIEN [1932] V.L.R. 71, and obiter dicta in ROSE v WATSON and WHTTBREAD & CO LTD v WATT [1901] 1 Ch.911 and other cases which may support the opposite view, it is, in my opinion, reasonably arguable that if, after rescission by a vendor for default by the purchaser, the purchaser remains entitled in law to recover from the vendor any money that had been paid by the purchaser to the vendor on account of the purchase price, die purchaser has a lien upon the land for that money, until it has been recovered or paid. In COMBE v SWAYTHLING [1947] Ch. 625; LEE-PARKER v IZZET [1971] 1 W.L.R. 1688; Williams on Title, 4th ed., p.724; Voumard's The Sale of Land, 2nd ed., p.518 et seq.; 3rd ed., p. 100 and Stonham's Vendor and Purchaser, p.670, par. 1335.

28 Whilst, as I read these authorities, it would be difficult to contend that, after rescission, a defaulting purchaser had a lien for a deposit or other money forfeitable by the terms of the contract, there is no case which, in point of decision, clearly holds that he would have no lien for non-forfeitable instalments on account of the purchase price which the vendor was liable to repay to him. It is not easy to see why the principles upon which a purchaser's lien for recoverable moneys paid under a contract of which equity would order specific performance should not extend to such a case. If the purchaser's default does not destroy the right to recover the money, why should it destroy the lien which he undoubtedly would have had prior to the rescission and would, on the cases, continue to have after rescission if not in default?"

29 18) It should be noted that Holland J did not actually provide the answer to the question he posed. His Honour's reasoning is not inconsistent with the statement of Farwell J in WHTTBREAD v WATT (at p 915) where his Lordship said: "If the purchaser makes default in such a way as to deprive himself of any debt at all, he cannot have a lien for that which does not exist".(my emphasis). But, Farewell J.'s statement is tautological as if the purchaser has no claim, he must perforce have no lien.

30 19) There is, I suggest, a reasonable answer to Holland J.'s question. It is that the purchaser's lien is not predicated solely upon the existence of one condition, i.e. recoverability of any part of his purchase moneys: another condition must also exist, i.e. the purchaser's right to specific performance (which right he may have forgone as a result of the fault or default of the vendor). It is understandable that equity should give the purchaser a lien on the land to secure his claim for the return of the purchase price where he is unable to or is denied specific performance by reason of the fault or default of the vendor. It is not so obvious that the purchaser should be given such security when he himself is at fault in not acquiring the full ownership of the land. It is not unfair to relegate him to the position of an unsecured claimant in such a situation.

31 20) So, I think that the point referred to by Holland J. remains no more than an arguable point. It is not necessary for me to come to a concluded view on it as I think that in the present case the defendants lost their lien upon the annulment of the Sale Agreement. A purchaser's lien, like a vendor's lien, arises by operation of law subject to any agreement, express or implied, to the contrary. In my view, the correct approach (see MAYSON v CLOUET) is first to ascertain the rights and liabilities of the parties as set out in the Sale Agreement. The relevant provision is clause 6 which provides as follows:

32 “6.(l) If any of the instalments referred to in Clause 4 hereof remains unpaid by the Purchaser at the expiration of the period of fourteen (14) days referred to in that Clause, interest on any such unpaid instalment or instalments shall commence to run on the day after the expiration of such period and shall be payable by the Purchaser until –

33 (a) such time as the unpaid instalment is paid; or

34 (b) the expiration of the notice to repudiate this Agreement given by the Vendor .pursuant to paragraph (3) hereof,

35 whichever is the earlier.

36 (2) The interest payable under paragraph (1) hereof shall be calculated from day to day at the rate of two (2) per cent above the average of the prevailing prime rates of the four major local banks (i.e. DBS, OCBC, OUB and UOB) rounded downwards to the nearest one eighth (1/8) per cent.

37 (3) If any of such unpaid instalments and interest remains unpaid for any period in excess of forty (40) days after its due date, the Vendor shall be entitled at his option on giving to the Purchaser or his solicitors not less than thirty (30) days' notice in writing to treat this Agreement as having been repudiated by the Purchaser and (unless in the meanwhile such unpaid instalment and interest shall have been paid) this Agreement shall at the expiration of the said Notice (and in this respect time shall be of the essence) be annulled and in such an event -

38 (a) the Vendor shall be entitled to deal with or otherwise dispose of the said unit in such manner as the Vendor shall see fit as if this Agreement had not been entered into; (my emphasis)

39 (b) the instalments previously paid by the Purchaser to the Vendor excluding any interest paid shall be dealt with and disposed of as follows:-

40 (i) firstly, all interest calculated in accordance with paragraph (1) hereof owing and unpaid shall be paid to the Vendor;

41 (ii) secondly, a sum equivalent to twenty five (25) per cent of the balance thereof shall be paid and forfeited to the Vendor; and

42 (iii) lastly, the residue thereof shall be refunded to the Purchaser;

43 (c) neither party hereto shall have any further claims against the other for costs, damages, compensation or otherwisehereunder; (myemphasis) and

44 (d) each party hereto shall pay its own costs in the matter."

45 21) Under clause 6 of the Sale Agreement, the plaintiffs are only entitled to make the two deductions therein specified but no others, from the instalment payments and the defendants are entitled to the refund of the residue after such deductions. Clause 3(c) leaves this in no doubt. Clause 6(3)(a) is expressed in terms as to give the plaintiffs a free hand in dealing with or disposing of the unit upon an annulment. In my view, 'the existence of a purchaser's lien would not be compatible with and, if given effect to, would nullify the vendor's right to deal with or dispose of die land in such manner as the vendor shall see fit "as if this Agreement had not been entered into". The underlined words make it abundantly clear that the legal position of the plaintiffs following an annulment is not that the Sale Agreement has thereupon ceased to exist but that it has never existed in relation to the right of the vendor to deal with or dispose of the property he thinks fit. This must mean that the vendor need no longer be concerned with any claim by the defaulting purchaser against the property concerned. Even if I am wrong in this construction, the effect of the underlined words is that, in any case and whatever their intention, there is no purchaser's lien: absent a contract, there can be no lien. The Sale Agreement, of course, does not cease to exist for all purposes: it continues to exist for the limited purpose of imposing an obligation on the vendor to refund the residue and of conferring a corresponding right on the defaulting purchaser to claim the refund of the residue of the purchase moneys. The defendants' claim is one for money had and received by the plaintiffs (as in MAYSON v CLOUET), and is an unsecured claim.

46 22) Accordingly, I hold that DBSF ceased to have any caveatable interest in the unit upon the annulment of the Sale Agreement. The plaintiffs are entitled to an order for the removal of the caveat lodged by DBSF and I so order.