1 S RAJENDRAN J

2 Cur Adv Vult

3 The defendants in these three suits and various other purchasers (collectively referred to as `the purchasers`) had contracted with Adelphi Development Pte Ltd (ADPL) in 1982/93 for the purchase of shop units in a building to be called the `Adelphi`, that ADPL intended to build at the former Adelphi Hotel site that they owned at the Coleman Street/North Bridge Road junction.

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12  The conversion from hotel/shopping to office/shopping

13 As early as 1980, ADPL had ideas of converting the use of the tower block from hotel to office. This is apparent from a letter written by JQCJ to the Controller of Housing requesting approval to include in the sale and purchase agreement amended clauses (32 and 33) to the effect that the purchasers are deemed to have knowledge of the vendor`s intention to apply to convert the hotel component of the project into office space. The Controller of Housing, by letter dated 24 October 1980, gave approval for the said amendments.

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21  the units only; as share values had not been determined, the question of the share value (of each unit holder) being affected would not arise; the proposed 309 room hotel in that location would not be economical to operate and that the best use of the site would be as office premises.

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24  (b). purchasers of 29 units were negotiating for a discount in the purchase price in exchange for their consent;

25  (c). purchasers of 15 units had not responded;

26  (d). purchasers of three units were objecting to the conversion; and

27  (e). purchaser of one unit was seeking rescission of his sale and purchase agreement.

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29  TOP for Phase I

30 On 15 December 1989, Temporary Occupation Permit (TOP) was issued by the building authority for the podium block and basement floors. This area was described in the TOP as: basement storey B5 to B2, B1 (excluding hotel area) and first to fourth storey (excluding hotel area). The shop units were all within this area.

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35  Certificate of Statutory Completion for Phases I and II

36 On 4 February 1991, the Building Control Division notified the architects that the first plaintiffs` application for Certificate of Statutory Completion (CSC) was approved and the CSC dated 2 February 1991 was enclosed. The architects in turn informed OCK that CSC for the project (Phases I and II) had been obtained and forwarded the CSC to OCK. On 5 February 1991 HE & P forwarded a certified true copy of the CSC to R & T and requested payment of the instalment of 5% of the purchase price falling due under cl 4(2)(a) to the DBSL project account.

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39  (b). R & T`s clients had made their respective payments to the said project account when the TOP was issued;

40  (c). R & T`s clients should make the necessary payments under cl 4(2)(a) as there were still further progress payments under cl 4(2)(b) for their clients to look to in application for a set off for liquidated damages for late completion; and

41  (d). the first plaintiffs were not in breach of the covenants as to user in the respective sale and purchase agreements as the first plaintiffs had constructed and delivered the shop units which R&T`s clients had contracted to purchase.

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46  Notice to complete

47 On 15 April 1991 HE & P, on behalf of the first plaintiffs, issued notices to complete to the various purchasers. Attached to each notice to complete were the following documents: (a). the duplicate subsidiary Certificate of Title for the particular unit;

48  (b). the completion account for the said unit; and

49  (c). a copy of the architects` certificate stating that CSC for the project (Phases I and II) had finally been obtained.

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51  Litigation

52 On 23 April 1991 R & T forwarded to HE & P, by way of service, two writs of summons (Nos 797 and 798 of 1991) on behalf of two of the purchasers. In their letter R & T intimated that writs from their other clients would be filed soon. The plaintiffs in the two writs that were filed alleged, inter alia, that the Adelphi project constituted a `building scheme` which limited its main use to a hotel and which use was designed to `enure for the common benefit of all purchasers of shop units, including the plaintiffs`.

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65  (b). all sums due under cl 17 as contribution towards government survey fees; and

66  (c). all sums due under cl 13 as maintenance and service charges from the time the defendants took possession;

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72  (b). the first plaintiffs were in breach of its obligations under the sale and purchase agreements and in breach of its fiduciary duties when it delivered a unit in an office-cum-shopping unit and not a hotel-cum-shopping unit.

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74  The architects` certificate

75 Clause 14(1) of the sale and purchase agreement requires that the notice to complete `be accompanied by the certificate of the vendor`s architects that the Temporary Occupation Licence or Certificate of Fitness for Occupation (COF) has been obtained for the said unit`. It was not in dispute that the reference to COF in cl 14(1) was a reference to the CSC. The CSC that was issued in this case was addressed to the first plaintiffs and read as follows:

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79  (b). it was clearly written by the architect for the purpose of obtaining payment of his fees and not ostensibly for the purpose of requiring the defendants as purchasers to make payment of the balance of the purchase price;

80  (c). it was written without reference to the terms and conditions of the sale and purchase agreement between the first plaintiffs and the defendants, in particular without making any reference to cl 14(1);

81  (d). it was written without reference to the units purchased in the Adelphi Complex;

82  (e). it made reference to Phases I and II of the Adelphi Complex, a reference not found in the sale and purchase agreements.

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88 Orchard Twelve Investments Pte Ltd v Golden Bay Realty Pte Ltd [1986] SLR 272 , relied on by the defendants, where, the court was prepared to disregard some of the words in the statutory form of contract in order to give the contract commercial efficacy. This appears at p 280 of the judgment of LP Thean J:

89 Mt Elizabeth Hospital Ltd v Allan Ng Clinic for Women [1994] 3 SLR 639 as one where the court took a practical approach in the construction of a contract for the sale of a commercial property. He pointed out that, in that case, although the Sale of Commercial Properties Rules 1985 provided that except with the written approval of the Controller of Housing, there can be no amendment, deletion or alteration to the option or the sale and purchase agreement prescribed, the Court of Appeal nevertheless upheld the validity of an option that was not in the prescribed form. The court did so on the basis that although the option was not in the prescribed form it did not contain any terms that were inconsistent with the prescribed form.

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91 Golden Bay Realty Pte Ltd v Orchard Twelve Investments Pte Ltd [1991] 3 MLJ 65 [1991] SLR 18 in support of his submission that because cl 14(2) is contained in a contract which is in a statutory form, the court should not be too ready to tamper with it.

92  Orchard Twelve was a case under the same statutory form of contract as the present one, the issue there was whether the provision for liquidated damages under cl 14(2) was penal in nature and therefore void and unenforceable as it was an unconscionable provision. That case turned on the question whether it was open to a court to strike out as unconscionable a term in a form of contract prescribed by the minister under statutory authority. There was no such question in this case. The plaintiffs here were not seeking to strike out the requirement for an architects` certificate in cl 14(1). In fact, the question of modifying cl 14(1) does not even arise in this case. The issue here is no more than whether the architects` certificate in question complies with the requirements of cl 14(1).

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97  Breach of contract

98 Mr Rajah submitted that it was a fundamental rule that the purchaser of a property is entitled to have what he contracted to buy and cannot be compelled to take something else. He submitted that by delivering a unit in an office-cum-shopping complex, the first plaintiffs had fundamentally altered the subject matter of the sale and purchase agreement and the defendants, as purchasers, were not getting substantially what they bargained for. The defendants could not therefore be forced to complete without an abatement in the purchase price. In support of this proposition, Mr Rajah relied on the case of Tarval Pty Ltd v Stevens & Ors [1991] NSW Title Cases 80-004.

99  Tarval case, had contracted to buy a unit in a building yet to be constructed. In the sale and purchase agreement the vendor had bound itself to the purchaser to transfer a unit in a `22 and 23 storey residential flat building`. After the agreement had been entered into the vendor, without the consent of the purchaser, procured the rezoning of the lower ten storeys into commercial office space and only the top eight storeys remained as residential. The vendor submitted that there were no words in the contracts for sale which created an obligation to transfer a unit `in a wholly residential flat building`. It was submitted that the contractual obligation was to deliver the property described in annexure A and that the contractual obligation had been satisfied in that the unit the vendor sought to deliver conformed with the physical dimension and configuration of the particular home unit described in annexure A. That submission was rejected. Handley JA held:

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101 Ayles v Cox [1852] 16 Beav 23, certain properties described as being `copyhold of the same manner` was sold at an auction. It turned out that the properties were partly freehold and partly copyhold. Condition 5 of the sale conditions provided as follows:

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103 Lee v Rayson [1917] 1 Ch 613, condition 4 in the agreement for the sale of a property provided: `if there be any misstatement or error in the description of the premises, no compensation shall be allowed, nor shall the same annul the sale`. The agreement gave details of the rentals receivable from various houses on the property separately let on 99-year terms. These details were incorrect although the total sum payable was correct. The purchaser refused to complete and brought an action for rescission of the contract and repayment of the deposit. The vendor counterclaimed for specific performance. Eve J held that as the property which the vendor offered to convey was substantially different from that which the purchaser had contracted to buy, condition 4 would not apply and the purchaser was entitled to rescission and a return of his deposit. In so doing, Eve J said at p 619:

104 Siti & Anor v Lee Kay Li [1996] 3 SLR 310 , the vendor had not fulfilled his obligation to pay maintenance charges up to the date of completion and had asked that the maintenance charges payable by him be set off in the completion account. The solicitors for the purchaser refused this request. The Court of Appeal, while critical of the purchaser`s solicitors for being so uncompromising, nevertheless held that as the vendor had not, by the completion date, paid the maintenance charges, the vendor was in default of his obligation under the sale and purchase agreement and was accordingly not entitled to issue the notice to complete. The defendants also relied on Pagebar Properties Ltd v Derby Investment Holdings Ltd [1973] 1 All ER 65. Pagebar was cited with approval by the Court of Appeal in Siti as appears in the following passage of the judgment of LP Thean JA (p 323):

105  Siti and Pagebar that the party giving the notice to complete must be ready and able to comply with all his contractual obligations on the date of completion. If the party is not so ready the notice would be ineffective.

106  Tarval and the cases cited above, submitted that these facts led to the conclusion that the sale and purchase agreement was an agreement for the sale of a shopping unit in a hotel cum shopping complex and in failing to deliver such a unit the first plaintiffs were in breach of the agreement.

107  Tarval on the facts. He also highlighted the fact that the defendants in this case had elected not to give evidence and so the factual matrix in which the agreement was entered into was not before the court whereas in Tarval evidence relating to the pre-contractual negotiations, the sales brochures and differences in value between the property contracted to be sold and the property as built were all before the court. He also pointed out that whilst in Tarval the building was intended to be wholly residential, in the present case there was, in respect of the hotel component, considerable ambiguities, for example, when was the hotel to be constructed, what was to be its quality, how long was it to be operation as a hotel and so on. Mr Singh submitted that in view of these uncertainties the description of the project as a `hotel cum shopping complex` was not intended to be and was not part of the contractual description of the shop units contracted to be sold to the defendants. He submitted that the agreement was in essence an agreement to sell shop units in a commercial complex; the shop units had been built in accordance with the specifications enumerated in the agreement; and by delivering such a shop unit in an office-cum-shopping complex his clients had fulfilled their contractual obligations - a submission essentially similar to that made by the vendor in the Tarval case.

108  Lee v Rayson , it seems to me that the vendor was seeking to put the defendants off with something which the defendant never bargained for. It was, in my view, no answer to say that the hotel component was not defined clearly enough and therefore not intended to be a contractual term. To the contrary, the descriptions of the hotel component given in the agreement and in the plan of the complex attached to the agreement, in my view, gave a sufficiently clear indication of the nature and size of the hotel. I am of the view that the first plaintiffs, by not delivering a unit in a hotel cum shopping complex as envisaged, were in breach of their contractual obligations. The fact that whoever purchased and managed the hotel component (in the absence of binding covenants as to use in the sale and purchase agreement) may, subsequently decide to convert the hotel to some other use does not, in my view, preclude the hotel component from being part of the contract but is a consideration that may well affect the damages payable for the breach.

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113  Breach of fiduciary duty

114 Mr Rajah submitted that the vendor of property was, pending completion, a trustee for the purchaser. The vendor was therefore bound to manage and preserve the property with the same care as a trustee is bound to manage property subject to trust. He submitted that the first plaintiffs, by acting in their own self interest in converting the hotel component to office, were in breach of their fiduciary obligations to the defendants and were liable to account to the defendants for the profits arising from such breach.

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118  Compensation for breach of contract

119 The defendants had for some time known of the first plaintiffs` wishes to convert the project to an office cum shopping complex and had been demanding a rebate of the balance of the purchase price in exchange for their consent. The MND waived the need to obtain such consent in September 1989 and the first plaintiffs were able to proceed with converting the tower block to office space. Although the first plaintiffs did not formally notify the defendants that they had obtained the waiver or that they were proceeding with the conversion, it would appear from R & T`s letter of 14 March 1990 that the defendants knew that the hotel component was being converted to office use. As the defendants elected not to testify, it is not possible to say exactly when the defendants got to know that conversion work had begun. The possibility remains that the defendants knew of this even before they took possession of their respective units.

120  Siti & Anor v Lee Kay Li ). The defendants chose not to rescind the contract and have enjoyed continuous possession of the units from early 1990 to date. They have however, since taking possession, refused to make any further progress payments to the first plaintiffs.

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124  Tarval case for instance, expert evidence was called to show that the market price of the residential units, if the whole complex had been residential as originally intended, would be greater than the market price of the same units where the complex is partly commercial. No such evidence was before the court in this case. In the absence of evidence of damage, the court can only come to the conclusion that the defendants have not suffered any loss as a consequence of the conversion. It seems to me that the defendants were quite happy to take possession of the units in question and the reason for their demanding a rebate and refusing to complete was that they saw an opportunity to enrich themselves at the expense of the first plaintiffs. I think it is relevant to note here that had the first plaintiffs not come to `rescue` the project, not only OCK but also the defendants would have incurred considerable losses.

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126  Additional liquidated damages

127 In his final submission, Mr Rajah submitted that if the court held that the notice to complete was invalid by reason of the breach of contract and/or fiduciary duty, then liquidated damages would be payable until the date of actual completion and the defendants would be able to set off the outstanding progress payments against those damages.

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131  (b). order that the defendants pay (less the liquidated damages payable by the first plaintiffs and the credit given by reason of the shortfall in excess of 5%), the following sums:

132  (i). the 5% progress payment pursuant to cl 4(2)(a) of the sale and purchase agreement plus interest at 12% per annum;

133  (ii). the final progress payment pursuant to cll 4(2)(b) and 14(1) plus interest at 12% per annum;

134  (iii). the sum of $1,500 (with statutory interest thereon) pursuant to cl 17 and all or any arrears in maintenance and service charges (with interest at such rates as determined by the management corporation);

135  (c). grant a declaration that the first plaintiffs are entitled to a lien upon the defendants` shop units until the defendants pay the sums stated above as well as its costs of this action;

136  (d). order that in the event of default by the defendants in making the payments due to the first plaintiffs, the first plaintiffs be at liberty to enforce the lien and order that in the event the defendants fail to sign any document necessary for such enforcement, the Registrar of the High Court be empowered to execute the same;

137  (e). order that the counterclaims be dismissed; and

138  (f). order that the defendants pay the plaintiffs costs in the claims and counterclaims.