[1996] SGHC 119

In the High Court of the Republic of Singapore

[1996] SGHC 119

OS 969/1995

Between

Bestland Development Pte Ltd (in liquidation)

… Plaintiff

And

Manit Udomkunnatum
Another

… Defendant

grounds of decision

Credit and Security — Lien — Equitable lien; Land — Caveats; Land — Sale of land — Conditions of sale

This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports.

Bestland Development Pte Ltd (in liquidation) v Manit Udomkunnatum and Another

[1996] SGHC 119

OS 969/1995
Lim Teong Qwee JC
12 June 1996

1 LIM TEONG QWEE JC

2 Cur Adv Vult

3 This is a claim for an order directing the Registrar of Titles to remove or expunge a caveat lodged by the defendants affecting the shop unit at 317 Outram Rd #01-50 Concorde Hotel Shopping Centre. The shop unit is comprised in subsidiary strata certificate of title in volume 234 folio 180 of the subsidiary land-register.

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 -

(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;

(b) the instalments previously paid by the purchaser to the vendor excluding any interest paid shall be dealt with and disposed of as follows: (i) firstly, all interest calculated in accordance with para (1) hereof owing and unpaid shall be paid to the vVendor; (ii) secondly, a sum equivalent to twenty five (25) per cent of the balance thereof shall be paid and forfeited to the vendor; and (iii) lastly, the residue thereof shall be refunded to the purchaser;

(c) neither party hereto shall have any further claims against the other for costs, damages, compensation or otherwise hereunder; and(d) each party hereto shall pay its own costs in the matter.

We refer you to cl 6(3) of the agreement dated 3 March 1983.

On behalf of our clients, we hereby give your clients, Mr Keh Kee Guan and Mr Manit Udomkunnatum, notice that upon the expiry of 30 days from service of this notice on your clients, our clients will treat the said agreement as having been repudiated by your clients; so that, unless before the expiry of that period of 30 days all the unpaid instalments of purchase price and interest payable under the agreement are fully paid, the agreement will be annulled ...

Our clients are agreeable to a final extension of the completion date for another three weeks from 6 October 1989 on terms that interest for late completion will continue to accrue and the extension granted herein shall not be construed as a waiver of our clients` right to rescind the agreements or any other rights accruing thereof ( sic).

interest as lienholder over the abovementioned premises (the `premises`) comprising of a leasehold estate for the unexpired portion of a term of 99 years commencing from16 June 1980, for the refund of purchase moneys aggregating the sum of $298,483.66 or thereabouts and interest thereon by virtue of:

(i) the caveator and the registered proprietor having entered into an agreement for sale and purchase dated 3 March 1983 (the `agreement`) for the sale and purchase of the premises; (ii) the termination/annulment of the agreement; and (iii) the liability of the registered proprietor to refund to the caveator the said sum of $298,483.66 or thereabouts as a result of the termination/annulment of the agreement.

Any person claiming an interest in land, or any person otherwise authorised by any Act to do so, may lodge with the Registrar a caveat in the prescribed form.

13 The Singapore Torrens System (1961) says at p 195:

The number of interests which will justify the lodging of a caveat is limited by the number of permissible `interests in land`.

There is nothing in the Ordinance to suggest that this is one of the occasions on which the legislature intended to create a new interest in land to be known as a caveatable interest.

15 Keppell v Bailey (1834) 2 My & K 517; 39 ER 1042 was cited and I think it bears repeating. Lord Brougham LC said at pp 535, 536:

... it must not therefore be supposed that incidents of a novel kind can be devised and attached to property at the fancy or caprice of any owner. It is clearly inconvenient both to the science of the law and to the public weal that such a latitude should be given. There can be no harm in allowing the fullest latitude to men in binding themselves and their representatives, that is, their assets real and personal, to answer in damages for breach of their obligations. This tends to no mischief, and is a reasonable liberty to bestow; but great detriment would arise and much confusion of rights if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, which should follow them into all hands, however remote.`

17 Chip Thye Enterprises Pte Ltd v Development Bank of Singapore Ltd [1994] 3 SLR 613 was a case which also arose out of an agreement for sale and purchase of land. The purchasers paid part of the price as a deposit and lodged a caveat claiming interest as purchasers. Before the agreement for sale was entered into the vendor had mortgaged the land. He defaulted on the mortgage and after the agreement for sale had been entered into the mortgagee sold the land in exercise of its power of sale. After payment of the costs and expenses of the sale and all moneys due under the mortgage there was a residue which under s 68(1) of the repealed Act then in force should be paid to the `person who appears from the land-register to be entitled to the mortgaged property or to be authorised to give receipts for the proceeds of the sale thereof`. The mortgagee having paid the residue to the vendor notwithstanding the purchasers` caveat the purchasers commenced proceedings for a declaration that they were entitled to the residue under s 68(1) and alternatively claimed an equitable lien on the residue for the deposit they had paid to the vendor. On the question of the equitable lien LP Thean JA (delivering the judgment of the Court of Appeal) said at p 625:

A purchaser who has paid money as deposit or to account of the purchase price has a lien on the property in the hands of the vendor.

[The sale agreement] went off, not because of any default on the part of the appellants as purchasers, but because of the default on the part of [the vendor] in suffering the respondents as mortgagees to sell the property which precluded [the vendor] from redeeming it and the [purchasers] from completing the purchase. In these circumstances, clearly the appellants as the purchasers were entitled to a lien for the deposit they had paid for the property. In our judgment, irrespective of whether the sale agreement was specifically enforceable or not, when the mortgagee sale was completed, the [purchasers] had an equitable lien for their deposit on the surplus proceeds of sale.

19 Ex p Lord [1985] 2 Qd R 198 at p 202. Mr Kumar`s submission is that when the agreement for sale and purchase has gone off because of the purchaser`s default he cannot assert a lien. The argument is that the purchaser must come with clean hands. In Chip Thye Enterprises Pte Ltd v Development Bank of Singapore Ltd the agreement went off not because of the purchasers` default but because of the vendor`s default and the question whether the purchasers whose default caused the agreement to go off had a lien for any part of the deposit or any other money paid to account of the purchase price which they were entitled to recover from the vendor did not arise and was not considered.

20 Rose v Watson (1864) 10 HLC 672 the purchaser made several payments to account of the purchase price and interest on the unpaid balance in accordance with the terms of the contract but declined to complete the purchase and in due course rescinded the contract on the ground that certain representations by which he had been induced to enter into the contract were unfulfilled. He claimed repayment of the money paid and a lien on the estate in respect of the money claimed and interest on it. Lord Westbury LC said at pp 678, 679:

When the owner of an estate contracts with a purchaser for the immediate sale of it, the ownership of the estate is, in equity, transferred by that contract. Where the contract undoubtedly is an executory contract, in this sense, namely, that the ownership of the estate is transferred, subject to the payment of the purchase-money, every portion of the purchase-money paid in pursuance of that contract is a part performance and execution of the contract, and, to the extent of the purchase-money so paid, does, in equity, finally transfer to the purchaser the ownership of a corresponding portion of the estate.

... In conformity, therefore, with every principle, the purchaser paying the money acquired an interest in the estate by force of the contract and of that part performance of the contract, namely, the payment of that portion of the purchase-money.

My Lords, I concur in what has fallen from my noble and learned friend, in every particular. 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 alien, 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.

It seems to me that that is founded upon such solid and substantial justice, that if it is true that there is no decision affirming that principle, I rejoice that now, in your Lordships` House, we are able to lay down a rule that may conclusively guide such questions for the future.

Then, my Lords, if that contract fails, and the failure is not to be attributed to any misconduct or default on the part of the purchaser, the obvious question arises, is the purchaser to be deprived of the interest in the estate which he has acquired by that bona fide payment?

In all reason and justice, therefore, and in all principle, it is impossible to find anything to countenance this attempt on the part of the assignees of the vendor (for the present appellants stand in the shoes of the vendor) to deprive the purchaser of the lien which he has upon the estate.

25 Whitbread & Co Ltd v Watt [1901] 1 Ch 911 the contract for sale and purchase of a plot of land in a building estate provided that if within two years 300 houses had not been erected on the building estate then the purchaser had the right on giving seven days` notice to rescind and cancel the agreement and in that event the deposit was to be returned by the vendor to the purchaser. The purchaser paid the deposit on signing the contract. The 300 houses were not erected within two years and the purchaser gave notice to rescind the contract and claimed the repayment of the deposit which was refused. Farwell J after considering Rose v Watson said at p 915:

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 the case is entirely different. 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(emphasis added).

26 A priori if the contract goes off albeit owing to the purchaser`s default yet if he is entitled to repayment of any part of the purchase money paid by him under thecontract his lien is not lost.On appeal in [1902] 1 Ch 835 Vaughan Williams LJ said at p 838:

It is contended that if the purchaser chooses to give up the contract, not being driven thereto by any default of the vendor, he not only gives up the contract, but also relinquishes the lien or the inchoate lien, which is a creature of the contract. I agree that Rose v Watson does not absolutely negative that view, although I think that the illustration given by Lord Cranworth of the mortgage goes a very long way to do so.

I think the lien for the deposit exists so long as, and in every case in which, the right to recover the deposit has not been lost by reason of the misconduct of the purchaser.

29 Ridout v Fowler [1904] 1 Ch 658 where Farwell J said at p 663:

[A purchaser] has a right to a lien for the repayment of his deposit which, according to Rose v Watson - a case I recently followed in Whitbread & 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.

30 Whitbread & Co Ltd v Watt . In this case the purchaser paid a deposit and was let into possession. He defaulted and the vendor rescinded the contract and forfeited the deposit as he was entitled to do. The purchaser while remaining in possession brought an action against the vendor for the return of the deposit and the action was compromised on terms that the agreement was rescinded and the deposit was not returned but the vendor agreed to pay the purchaser some money for the purchaser to give up possession. The passage of the judgment cited addressed the facts of the case for not only was the purchaser in default but he was in such default that he was not entitled to the return of the deposit. I do not think Farwell J intended to say that if the purchase went off because of the purchaser`s default he thereby lost his lien even if some part of the purchase money he had paid whether called a deposit or otherwise was recoverable from the vendor as such.

31 Frankcombe v Foster Investments Pty Ltd [1978] 2 NSWLR 41 the purchaser paid a deposit and later in consideration of the vendor giving him an extension of time to complete the purchase he paid a further sum on account of the purchase price. The vendor rescinded the contract owing to the purchaser`s default. Holland J said at p 57:

Notwithstanding decisions in Dinn v Grant (1852) 5 De G & Sm 451 and McGifford v O`Brien [1932] VLR 71, and obiter dicta in Rose v Watson and Whitbread & Co Ltd v Watt 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 beenpaid by the purchaser to the vendor on account of the purchase price, the purchaser has a lien upon the land for that money, until it has been recovered or paid.

32 purchaser which he was not after the contract had been rescinded.

33 Dinn v Grant which Holland J referred to the purchaser claimed a lien for sums he had advanced under the contract for sale and purchase of a hotel. Sir James Parker VC said at pp 454, 455:

... the [purchaser] writes in a manner indicating that he considered he was not under any obligation by reason of the agreement. From that time all notion of any agreement being in force appears to have ceased; and from that time the [purchaser] treated [the vendor] as being personally liable for sums expended, for which, if they had been expended on the footing of the agreement, there would have been no personal liability in [the vendor].

35 Cornwall v Henson [1899] 2 Ch 710 the contract provided for payment of the purchase price by instalments and the purchaser went into possession. He defaulted in payment of the last instalment and eventually abandoned the land and could not be found. The land was in a derelict state and rates were unpaid and it was not worth the amount of the instalments paid by the purchaser. The vendor took possession and let it to a tenant. Cozens-Hardy J said at p 715:

... I think that the [purchaser] by his conduct has shewn that in October 1896, he thought it not worth his while to have anything further to do with the land, and in fact abandoned the land and repudiated the contract. I think, further, that, the [purchaser] having made such default as precluded him from demanding the transfer of the property, the [vendor] was justified in treating this as an abandonment, and in acting thenceforward as the true owner, both at law and in equity, of the property. It was in this character that he granted a lease to Burns with an option to purchase.

37 Dinn v Grant was referred to. Later at the same page Cozens-Hardy J said:

It is, I think, plain that the [purchaser] cannot obtain damages for breach of the contract which he has himself repudiated, nor do I think he can recover back the money which he has paid, as money had and received to his use.

39 Cox v Parker (1987) 5 BPR 11, 208 the purchasers paid a deposit and a further sum of $20,000 to account of the purchase price pursuant to the contract. They defaulted and the vendor terminated the contract. The purchasers lodged a caveat claiming a purchaser`s equitable lien over the land to secure repayment of the $20,000. Kearney J referred to Frankcombe v Foster Investments Pty Ltd and said at p 11, 214:

My conclusion, in accordance with the view of Holland J, is that in the present instance the defendants were entitled to a purchaser`s equitable lien in respect of the sum of $20,000 and, accordingly, had the requisite caveatable interest to justify the lodgment of their caveat.

41 Hewett & Ors v Court & Anor (1983) 149 CLR 639 where Deane J said at p 663:

While [an equitable lien] arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties.

42 Bestland Development Pte Ltd v Lai-Tan Holdings Pte Ltd (Suit No 394 of 1987, 22 May 1990) (unreported) where Chan Sek Keong J (as he then was) said at p 16:

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 the land in such manner as the vendor shall see fit ` as if this agreement had not been entered into`.

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 (emphasis added).

44 Bestland Development Pte Ltd v Lai-Tan Holdings Pte Ltd Chan Sek Keong J thought those words meant that the vendor need no longer be concerned with any claim by the purchaser against the land. Alternatively the effect of those words was to cause the lien to be lost altogether. If there is no sale and purchase agreement there is no lien. I have seen a copy of the caveat that was lodged in that case. The caveator was a lender to the purchaser and claimed interest in its caveat as a chargee of the purchaser`s interest as purchaser . As in Frankcombe v Foster Investments Pty Ltd the defendant had no more interest as purchaser when the sale and purchase agreement had gone off.

There have been complaints from the public about the inequitable manner in which some developers conduct the sales of their shop units.

`Rules to be enacted under this Bill will require agreements for sale and option forms to contain such terms and conditions as may be prescribed. Any terms or conditions of sale which are inconsistent with the prescribed terms shall be null and void.

...

The Bill will put an end to prevailing abuses by developers.

(1) the vendor has the right to deal with the shop unit as if the agreement had not been entered into - para (a); (2) the vendor is entitled to interest on all unpaid instalments and to retain this out of all instalments paid; the vendor is entitled to forfeit 25% of the balance; finally the residue is to be refunded to the purchaser - para (b); (3) neither party shall have any further claims against the other - para (c); and (4) each party will pay its own costs - para (d).

51 The Mersey Steel & Iron Co v Naylor, Benzon & Co (1884) 9 HLC 434 Lord Blackburn said at pp 443, 444:

The rule of law, as I always understood it, is that where there is a contract in which there are two parties, each side having to do something (it is so laid down in the notes to Pordage v Cole 1 Wms Saund 548 (1871 Ed)), if you see that the failure to perform one part of it goes to the root of the contract, goes to the foundation of the whole, it is a good defence to say, `I am not going on to perform my part of it when that which is the root of the whole and the substantial consideration for my performance is defeated by your misconduct.`

Lim Teong Qwee JC

Harish Kumar (Chor Pee & Co) for the plaintiff
Michael Hwang and Andrew Ho (Allen & Gledhill) for the defendants