[1998] SGCA 38

In the Court of Appeal of the Republic of Singapore

[1998] SGCA 38

CA 237/1997

Between

Kassim Syed Ali

… Appellant

And

Grace Development Pte Ltd
Another

… Respondent

grounds of decision

Contract — Contractual terms; Contract — Remedies — Damages; Contract — Remedies — Specific performance

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.

Kassim Syed Ali and Others v Grace Development Pte Ltd and Another

[1998] SGCA 38

CA 237/1997
Karthigesu JA; L P Thean JA; Yong Pung How CJ
03 June 1998

1 LP THEAN JA

2 Cur Adv Vult

3 (delivering the judgment of the court): The three appellants were the defendants respectively in the three separate actions, Suits Nos 1423, 1426 and 1443 of 1991, instituted in the High Court by the first respondents for specific performance of the agreements relating to their purchase of the premises. These three actions were subsequently consolidated (the consolidated actions). The first respondents also instituted, at the same time, 19 other actions against 19 other parties (the 19 purchasers) making similar claims in respect of their purchases of the premises respectively. All the defendants counterclaimed against the first respondents damages for breach of contract. They were represented by the same firm of solicitors. As the claims and counterclaims in all the actions were based substantially on the same facts, it was agreed that the 19 actions would abide by the results of the consolidated actions. The consolidated actions were tried before S Rajendran J, and in a reserved judgment (reported in [1998] 1 SLR 730) the learned judge allowed the claims of the first respondents for specific performance and dismissed the counterclaims of the appellants. Against this decision the appellants have now appealed.

4 The facts

5 The relevant facts that gave rise to the proceedings below are not in dispute and have been fully set out in the judgment of the learned judge, which we respectfully adopt. For our purpose, we need only to refer to the following material facts. The appellants each entered into agreements with the company called Adelphi Development Pte Ltd (ADPL) in 1982/1983 for the purchase of shop units in a building now called `The Adelphi`, which is situate at the junction of Coleman Street and North Bridge Road. The Adelphi, as originally designed, was to consist of a podium block and a tower block, and the podium block was to comprise units of shop premises and basement carparks, while the tower block was to house a hotel with 309 rooms. Work on the podium block commenced first as phase 1 of the project. The contract for the construction of The Adelphi was awarded to OCK Construction Pte Ltd (OCK).

19 Decision below

20 The learned judge held that it was clear that from the outset The Adelphi was to be constructed as a hotel and shopping complex, and that the first respondents in delivering to the appellants shop units in an office and shopping complex instead of a hotel and shopping complex were `seeking to put the [appellants] off with something which the [appellants] never bargained for`. As such, he found that the first respondents were in breach of their contractual obligations under the sale and purchase agreements. However, the learned judge found that the appellants had not proved any loss suffered by them, and the first respondents, therefore, did not have to pay any damages to the appellants for the breach of the sale and purchase agreements.

21 Siti & Anor v Lee Kay Li [1996] 3 SLR 319 and Pagebar Properties Ltd v Derby Investment Holdings [1973] 1 All ER 65 that a party giving notice to complete must be ready and able to comply with all of his contractual obligations on the date fixed for completion. If the party was not so ready, the notice would be ineffective. However, the learned judge did not decide specifically on the validity of the notice of completion issued by the first respondents.

24 The appeal

25 Before us lengthy arguments were raised by the parties, but at the end of the day, they may be resolved into three principal issues. First, in delivering to the appellants shop units in an office and shopping complex instead of shop units in a hotel and shopping complex, were the first respondents in breach of the sale and purchase agreements? Second, if the first respondents were in breach, what loss or damage had the appellants suffered and how should damages be assessed? Lastly, again if the first respondents were in breach, were they entitled to call on each of the appellants to complete the transaction and pay the balance of the purchase price under the respective sale and purchase agreements?

26 Breach of contract

27 The first issue is a simple one, and we have no difficulty in arriving at the conclusion that the first respondents were in breach of the sale and purchase agreements. It was contemplated in the sale and purchase agreements that The Adelphi was to be built as a hotel and shopping complex. Each sale and purchase agreement had attached to it a site plan, which set out the various levels of the complex and in which the hotel component of the complex was demarcated as well as a schedule which made it clear that the property expressed to be sold to the purchaser was a unit in a hotel and shopping complex. The appellants, therefore, had agreed to purchase shop units in such a complex, and were entitled to have what they had contracted for. In delivering to the appellants units in an office and shopping complex instead of units in a hotel and shopping complex, the first respondents were clearly in breach of contract.

28 Ayles v Cox [1852] 16 Beav 23 is illustrative of the point. There, the purchaser agreed to purchase a property having a copyhold tenure. It turned out that the tenure of the property was partly freehold and partly copyhold. It was held that the purchaser was entitled to rescind the sale. The court held that the vendor could not compel the purchaser to complete the purchase, even though the purchaser was offered property which was better than what he had contracted to purchase, because the property offered was substantially different from that which the purchaser had contracted to purchase.

29 Lee v Rayson [1917] Ch 613, the purchaser agreed to purchase from the vendor thirteen freehold houses, which were let on six leases for a term of ninety-nine years at rents amounting in aggregate to 72 per annum. The contract described that the houses were let as follows: one pair of houses was let at one entire rent of 11 10s; each of the next four pairs was let at a rent of 11, and the last three houses were let at a rent of 16 10s. The abstract of title deduced, however, showed that the twelve houses were each let at a rent of 5 10s, and one at a rent of 6. In an action by the purchaser for rescission of contract and the repayment of the purchase price, Eve J held that the purchaser was getting something substantially different from what he had bargained for. The learned judge said, at p 619:

I take that to mean that what the court has to do in such a case as I have here to deal with is to decide whether the purchaser is getting substantially that which he bargained for, or whether the vendor is seeking to put him off with something which he never bargained for, and in arriving at a conclusion on this question the court is bound to consider every incident by which the property offered to be assured can be differentiated from that contracted for. If the sum of these incidents really alters the subject-matter, then the purchaser can repudiate the contract; if, on the other hand, the subject-matter remains unaffected, or so little affected as to be substantially that which was agreed to be sold, then the purchaser must be held to his contract.

30 Tarval Pty Ltd v Stevens & Or s [1991] NSW Title Cases [para ] 80-004. There, five purchasers agreed to purchase from the developer their respective units in a proposed residential building comprising mainly residential units. Subsequently, the developer applied to the authority for a change of use and was permitted to use the first ten floors as offices and to carry out the conversion of these floors units into offices, with the result that the development became partly commercial and partly residential. The purchasers terminated the contracts claiming that the developer had breached the contracts. At first instance, Kearney J of the Supreme Court of New South Wales held that the developer was obliged on completion to transfer to the plaintiffs their units in a wholly residential building, and the units then proposed to be transferred did not correspond substantially in all material respects with the units described in the contracts: see [1990] NSW Lexis 10517. The learned judge said, at [para ] 29:

This description of the building is necessarily attached to, so as to become part of, the description of the unit the subject of the contracts. These were not contracts for the sale of freestanding existing houses but for units contained within a building not yet in existence. I consider that the character of the building as designated in the strata plan is in such case a crucial element in the description of the units being sold. Accordingly, the defendant was obliged by the express terms of the contracts to have available to be transferred to the plaintiffs in fulfilment of their contracts home units in a wholly residential flat building. By procuring the rezoning of the lower ten floors of the building the defendant rendered it impossible at the time of it giving notice to complete and thereafter for it to transfer home units corresponding substantially in all respects with the units described in the contracts.

It is clear that what the parties had in mind and what the Agreement contemplated was the sale of shopping units in a complex that was to be a hotel-cum-shopping complex. That being so, to adopt the words of Eve J in 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.

34 Damages

35 We next turn to the issue of damages. It was contended on behalf of the first respondents that the appellants are not entitled to any damages by reason of condition 11 of the Singapore Revised Conditions of Sale, which were incorporated into the sale and purchase agreements. Condition 11 provides as follows:

The property is believed and shall be taken to be correctly described as to quantity and otherwise and is sold subject to all chief, quit, and other rents and out-goings and to all incidents of tenure, rights of way, and other rights and easements (if any) affecting the same and if any error, misstatement, or omission (not of a serious or vital nature nor considerably affecting the value of the property) shall be discovered in the particulars special conditions or contract the same shall not annul the sale nor shall any compensation be allowed by or to either party in respect thereof.

The first plaintiffs would have difficulties in overcoming the first hurdle in condition 11, namely, that the breach was as a result of any error, misstatement or omission. The simple fact is that the breach in this case did not occur as a result of any error, misstatement or omission but as a result of the deliberate act of the first plaintiffs, whatever the mitigating circumstances may be, in converting the tower block to office use and delivering a unit in an office-cum-shopping complex. Condition 11, in my view, provides no protection for such a deliberate act. Even if I am wrong in this, it would be difficult to categorise the delivery of a unit in an office-cum-shopping complex in place of a unit in a hotel-cum-shopping complex as anything other than an error, misstatement or omission of a serious or vital nature and so the first plaintiffs cannot satisfy the second hurdle. Condition 11 would therefore not exempt the first plaintiffs from having to pay compensation.

38 Ayles v Cox (supra) the contract contained the following condition of sale:

That, if any mistake or error be made or discovered in the description of the premises, or any other error whatever shall appear in the foregoing particulars, such mistake or error shall not annul the sale, but a compensation or equivalent shall be given or taken, as the case may require; such compensation or equivalent to be settled by the Master, in case the parties differ.

The fifth condition of sale, which provides for compensation, is inapplicable, when the thing sold turns out to be of a different nature from that contracted to be sold. The contract is different, and I am of opinion, in this case, that the thing proposed to be forced on the purchaser is different from that sold. The fifth condition would apply, if the property had turned out to be larger or smaller than represented in the conditions of sale, but not when the property sold is totally different from that which the vendor has.

40 Tarval adduced evidence which showed that the change of use to a part of the building had a `detrimental effect on the value of the residential units`. Here, the appellants had not given evidence; nor had they adduced any evidence as to the extent of the loss. In the absence of such evidence, it is hard to come to any conclusion other than that the appellants have not suffered any loss. Damages are compensatory, and one cannot seek compensation in vacuo. Compensation must be measured against the loss suffered. In our judgment, the appellants have not proved that what they got was less valuable than what they had contracted for.

41 Liquidated damages

42 The appellants contended that they are entitled to liquidated damages under cl 14(2) of the sale and purchase agreements. That clause provides as follows:

The said notice to complete shall be given by the vendor on or before 31 December 1990. If the vendor shall fail to give the said notice to complete on the date fixed for completion the vendor shall pay to the purchaser liquidated damages calculated from day to day commencing from the date when such notice to complete should have been given at the rate of 9% per annum on a sum equal to 85% of the purchase price such interest may be deducted from any instalment due and payable to the vendor.

44 Abatement of purchase price

45 Counsel for the appellants submitted that it is a clear proposition of law that where a party as a result of a breach by him of the terms of the sale and purchase agreement is unable to serve a valid notice to complete, the court is nevertheless empowered to order completion subject to the party not in breach giving his consent to the completion and subject to the court ordering a suitable abatement of the purchase price. In this case, so counsel submitted, the court in granting an order for specific performance should order a suitable abatement of the purchase price. In support, counsel relied on the following passage of the judgment of the Privy Council in Duncan Rutherford v William Acton-Adams [1915] AC 866, pp 869-870:

In exercising its jurisdiction over specific performance Court of Equity looks at the substance and not merely at the letter of the contract. If a vendor sues and is in a position to convey substantially what the purchaser has contracted to get, the court will decree specific performance with compensation for any small and immaterial deficiency, provided that the vendor has not, by misrepresentation or otherwise, disentitled himself to his remedy. Another possible case arises where a vendor claims specific performance and where the court refuses it unless the purchaser is willing to consent to a decree on terms that the vendor will make compensation to the purchaser, who agrees to such a decree on condition that he is compensated. If it is the purchaser who is suing the court holds him to have an even larger right. Subject to consideration of hardship he may elect to take all he can get, and to have a proportionate abatement from the purchase-money. But this right applies only to a deficiency in the subject-matter described in the contract.

47 Rutherford . Nor is it a case of any shortfall in the areas of the premises delivered to the appellants, as in Chin Tien Sung v Yat Yuen Hong Co Pte Ltd [1993] 2 SLR 744 .

50 Right to complete

51 As we have held, the first respondents were in breach of contract in that they had delivered to the appellants premises different from what had been agreed, and the question really is whether in these circumstances they were entitled to call upon the appellants to complete. The appellants relied mainly on Pagebar Properties Ltd v Derby Investment Holdings Ltd [1973] 1 All ER 65 and Siti & Anor v Lee Kay Li [1996] 3 SLR 310 in support of the proposition that the vendor is not entitled to serve a notice to complete, if he was himself in breach of an obligation which ought to have been performed by that date, and therefore he cannot be said to be ready, willing and able to perform the contract.

52 Pagebar Properties , the plaintiff purchased a flat from the defendants and the contract incorporated the National Conditions of Sale (18th Ed) in England. Under condition 22(1), either party `being ready and willing to fulfil his own outstanding obligations under the contract` may at any time after the contractual date of completion give to the other party notice of completion. The purchaser did not complete the purchase on the contractual date of completion. The vendor acting under condition 22 gave notice to the purchaser making time of the essence and requiring completion within 14 days. On the last day stated in the notice, the clerk of the purchaser`s solicitor attended on completion and discovered, for the first time, that there was an unexpired three year lease which was not disclosed by the vendor in the abstract of leases or tenancy agreements. He decided to take instructions and did not complete the purchase. Subsequently, the purchaser`s solicitor wrote to the vendor`s solicitor stating that the purchaser would complete, notwithstanding the unexpired lease. The vendor, however, refused, on the ground that the time allowed by the notice had expired and proposed to forfeit the deposit. The purchaser sued for specific performance of the contract and applied for summary judgment. Goulding J held that the vendor was obliged under the contract to disclose the unexpired lease in the abstracts of the leases or tenancy agreements to the purchaser under the relevant condition of the agreement, and as the vendor was in breach of that obligation, which ought to be performed by the date he served the notice to complete, he was not entitled to serve the notice to complete.

(1) At any time on or after the completion date, either party, being ready and willing to fulfil his own outstanding obligations under the contract, may give to the other party or his solicitor notice in writing requiring completion of the contract in conformity with this condition. (2) Upon service of such notice as aforesaid it shall become and be a term of the contract, in respect of which time shall be of the essence thereof, that the party to whom the notice is given shall complete the contract within twenty-eight days after service of the notice . (3) In case the purchaser refuses or fails to complete in conformity with this condition, then the purchaser`s deposit may be forfeited

First of all, he [counsel] says, the defendant was not entitled to serve a notice making time of the essence on 28 July, because the defendant itself was in breach of an obligation that ought to have been performed by that date; namely, the obligation to disclose all existing tenancies. In my judgment that contention is sound. In terms condition 22 merely speaks of a party giving notice being ready and willing to fulfil all his outstanding obligations under the contract. However, in the context of these conditions and the ordinary framework of a contract of sale and purchase of land, it is in my judgment clearly intended that the procedure allowed by general condition 22 is only available to a party who is not in default; and just as the vendor who had not delivered a complete abstract of title could not serve a notice under condition 22, so in my judgment a vendor who has not yet disclosed existing tenancies cannot serve a valid notice.

55 Siti & Anor v Lee Kay Li , the vendor and the purchaser were engaged in a series of disputes, each complaining that the other had not observed and performed the sale and purchase agreement. Each served on the other a notice to complete under condition 29 of the Law Society`s Conditions of Sale 1994. This court held that both parties` notices were invalid. Among other things, the court held that the vendor`s notice was invalid, as at the date of the notice he had not discharged his obligation in respect of payment of the maintenance charge payable on the property. Here again, it should be noted that the notice was given under condition 29(2) of the Singapore Law Society`s Conditions of Sale which provides:

If the sale shall not be completed on the date fixed for completion either party may on that date or any time thereafter (unless the contract shall first have been rescinded or become void) give to the other party notice in writing to complete the transaction in accordance with this condition but such notice shall only be effective if the party giving the same at the time the notice is sent is either ready, able and willing to complete or is not so ready, able and willing by reason of the default or omission of the other party to the contract. [Emphasis is added.]

56 Thus, under this condition, the notice was only valid and effective, if the party serving it was `able ready and willing` to complete on the date the notice was sent. It was on this basis that it was held that the vendor was not able, ready and willing to complete and the notice was ineffective.

57 Pagebar and Siti . Pagebar involved the issuance of a notice by the vendor under condition 22. Such notice to complete made time of the essence and entitled the vendor to treat the contract as repudiated if the purchaser failed to complete on the expiry of the notice. Similarly, in Siti the notice was issued under condition 29 of the Singapore Law Society`s Conditions of Sale 1994 and is a notice of repudiatory breach which made time of the essence and entitled the party giving the notice to treat the contract as repudiated by the other if on the expiry of the notice the other fails to complete. Here, the first respondents were not relying on any notice given under any such or similar condition. The notice which called upon the appellants to complete was one given under cl 14 of the sale and purchase agreements which, so far as relevant, is in the following terms:

(1) The sale and purchase of the said unit shall be completed at the office of the vendor`s solicitors, Messrs Jing Quee & Chin Joo fourteen (14) days after the receipt by the purchaser or his solicitors of the notice to complete from the vendor or the vendor`s solicitors such notice to be accompanied by On completion, the vendor shall execute in favour of the purchaser a transfer or lease, as the case may be, of the said unit sold, such transfer or lease to be prepared by and at the expense of the purchaser. (2) The said notice to complete shall be given by the vendor on or before the 31 December 1990

2 As you are aware, your clients` wilful breach of contract and adversarial stance has left our clients with no alternative but to commence litigation. Statements of claim in the names of two of our clients have already been served on you. Our clients are not proceeding with completion pending the determination of the suits. 3 If your clients agree, we suggest that transfer of title can take place without prejudice to either parties` contentions and on the basis that our clients withhold payment of the alleged outstanding instalments.

Karthigesu JA
L P Thean JA
Yong Pung How CJ

VK Rajah SC and R Chandra Mohan (Rajah & Tann) for the appellants
Davinder Singh SC and Rosalind Lazar (Drew & Napier) for the first respondent
K Shanmugam SC and Edwin Tong (Allen & Gledhill) for the second respondent