Case Summaries

Ngui Gek Lian Philomene and others v Chan Kiat and others

3 September 2013

Media Summary

Ngui Gek Lian Philomene and others v Chan Kiat and others
(HSR International Realtors Pte Ltd, interveners)
Originating Summons No 71 of 2013

Decision of the High Court (delivered by Andrew Ang J)

  1. Three authorised representatives of the Thomson View Condominium
    (“the Plaintiffs”) collective sale committee (“the CSC”) brought an application
    for the sale of Thomson View Condominium (“the Development”) under
    s 84A(1) of the Land Titles (Strata) Act to Wee Hur-Lucrum Pte Ltd (“the
    Purchaser”). The objecting subsidiary proprietors (“the Defendants”) opposed
    the sale on the basis that it was not made in good faith. One of the
    Defendants’ main allegations centred on the marketing agent’s offers to make payments of varying amounts to four subsidiary proprietors (“the Incentive Payments”) in return for their undertaking to sign the collective sale
    agreement (“the CSA”) so that the 80% consent threshold would be reached.
  2. The Judge found that there were lapses on the part of the CSC in the
    sale and marketing process of the Development but was ultimately of the view
    that these lapses did not amount to bad faith. In particular, the Judge held that the CSC should have consulted the consenting subsidiary proprietors
    regarding the lease upgrading premium clause proposed by the Purchaser
    because this clause effectively made the sale and purchase agreement an
    option rather than a binding contract. However, since the CSC honestly relied
    on their lawyer’s advice that there was no need to consult the subsidiary
    proprietors on the proposed amendments, the CSC’s failure to do so was held
    not to be in bad faith.
  3. Nonetheless, the Judge held that the sale could not be approved
    because the offer of the Incentive Payments amounted to bad faith in the
    transaction. Following the case of Ng Eng Ghee v Mamata Kapilev Dave [2009] 3 SLR(R) 109, the marketing agent in a collective sale transaction
    owed a duty to avoid any possible conflict of interest. On the facts, the Judge
    found that the marketing agent placed itself in a position of conflict by offering the Incentive Payments to a select group of subsidiary proprietors, thereby preferring the interests of the select group over the interests of the opposing subsidiary proprietors. It was also found that the marketing agent had breached its duty of transparency by failing to disclose the Incentive
  4. In addition, the Judge held that the Incentive Payments had the effect
    of altering the method of distributing the sale proceeds under the sale and
    purchase agreement without the approval of the consenting subsidiary
    proprietors. At first sight, the Incentive Payments did not seem to affect the
    method of distributing the sale proceeds because they did not form part of the sale proceeds and were to be borne by the marketing agent. However, the
    Judge held that this view was fallacious. On closer analysis, since the
    marketing agent would only receive its commission if the requisite 80%
    consent threshold was achieved, the Incentive Payments would not come
    from commission that the marketing agent had already earned but from its
    future commission payable by all the subsidiary proprietors. Effectively, the
    marketing agent was reducing its commission by promising the Incentive
    Payments. This reduction of commission would ordinarily result in a
    corresponding increase in the net sale proceeds which would benefit all
    subsidiary proprietors but in this case, such a reduction would only benefit the
    four subsidiary proprietors who were promised Incentive Payments. The
    Judge therefore concluded that the Incentive Payments amounted to bad faith
    involving the method of distributing the sale proceeds within the meaning of
    s 84A(9)(a)(i)(B) of the LTSA.
  5. More fundamentally, the four subsidiary proprietors had agreed to a
    different method of distributing the sale proceeds from the method spelt out in the sale and purchase agreement. The consent of the four subsidiary
    proprietors to the CSA should therefore be disregarded for the purposes of
    calculating the 80% consent threshold required under s 84A(1)(b) of the LTSA. After disregarding the consent of the four subsidiary proprietors, the
    Plaintiffs did not even have the requisite 80% approval under the statute to
    apply for a collective sale order.
  6. For the above reasons, the Judge dismissed the Plaintiffs’ application.
    This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court.