Case Summaries

Ramachandran Jayakumar & Anor v Woo Hon Wai & 5 Ors

 

SUPREME COURT SINGAPORE

 

9 May 2017

Media Summary

Ramachandran Jayakumar and another v Woo Hon Wai and others

and another matter

Civil Appeal No 11 of 2017 and Summons No 39 of 2017

Decision of the Court of Appeal (delivered by Sundaresh Menon CJ)

 

Background to the appeal

1          This was an appeal against the High Court’s decision to approve the application for the collective sale of a development known as Shunfu Ville (“the Property”). The appellants were the subsidiary proprietors of the Property who opposed the collective sale. The first, second and third respondents were members of the collective sale committee (“CSC”) in conduct of the transaction. The central question was whether the collective sale of the Property should be allowed to proceed. The two issues which determined this question were: (a) whether the transaction was in good faith taking into account the sale price of the Property; and (b) whether the CSC acted ultra vires in making the collective sale application.  

Facts

2          The Property is a 32-year-old development. Since 2014, it has experienced a deficit in its operating budget due to various maintenance issues. These remain a live concern today as the buildings continue to deteriorate with age.

3          In 2013, the CSC was formed to explore the possibility of a collective sale of the Property. On 12 July 2014, a collective sale agreement (“the CSA”) was presented to the subsidiary proprietors of the Property and the first signature to the CSA was obtained on the same day. Based on the requirements prescribed under the Land Titles (Strata) Act (Cap 158, 2009 Rev Ed) (“LTSA”), the CSC had a maximum period of approximately 24 months to complete the entire collective sale process, during which a number of milestones had to be met. First, the CSC had to obtain the consent of subsidiary proprietors who together held 80% of the share values as well as of the total area of all the lots within 12 months from the date the first signature to the CSA was acquired, and execute the CSA among them by that time. In this case, the statutory threshold of consents had to be met by 11 July 2015. Second, the collective sale must be launched by way of public tender, although a sale may be concluded by private treaty within ten weeks from the close of the public tender. Third, the CSC had to bring the collective sale application to the Board for approval within 12 months from the date the CSA had been executed by the requisite majority of subsidiary proprietors.

4          The statutory threshold of consents required from the subsidiary proprietors was crossed on 11 July 2015 itself. The reserve price at which the subsidiary proprietors consented to the Property being sold was $688m. With this, the CSC proceeded to launch a public tender. Although no formal bids were received, a number of developers submitted expressions of interest. One of these was the Qingjian group of companies (“Qingjian”) which, subsequent to negotiations with the CSC, agreed to offer $638m for the Property. None of the other developers were prepared to match that price.   

5          In any event, the CSC had already begun efforts to secure a fresh mandate from the subsidiary proprietors at a revised reserve price of $638m, and supplementary agreements were prepared in accordance with the terms of the CSA in order to effect this. While efforts to obtain the requisite consents were ongoing, the CSC proceeded to launch a second public tender but this too was at the initial reserve price of $688m. This again failed to attract any formal bids.

6          Within the ten weeks from the close of the second public tender and after the subsidiary proprietors’ consents required to effect the sale at $638m were finally obtained, the CSC entered into a private contract with Qingjian to sell the Property at that price. This was followed by the CSC’s application to the Strata Titles Board (“the Board”) for a collective sale order on 8 July 2016, with only a few days to spare before the statutorily imposed deadline. In other words, it appeared that the CSC had met the timelines prescribed under the LTSA at each stage, but only just.

7          Following the CSC’s application to the Board, a number of dissenting subsidiary proprietors proceeded to lodge objections to the collective sale. The CSC eventually succeeded in having the collective sale application approved by the High Court, and the subsidiary proprietors appealed against the decision made.

Judgment

8          The Court of Appeal dismissed the appeal. The appellants’ allegation that the transaction was not in good faith was not established on the facts, and the claim that the CSC had acted ultra vires in making the collective sale application was not made out.

Reasons for the judgment

9          In determining whether the transaction was in good faith, the Court emphasised that the entire circumstances of the transaction, taking into account the factors enunciated in the case of Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal [2009] 3 SLR(R) 109, must be appraised in the round. Absent any reason for thinking that members of a collective sale committee were actuated by any improper motives or any conflict of interest, and absent clear evidence that the transaction was tainted by unfairness towards some subsidiary proprietors, in particular the dissenting subsidiary proprietors, or by some deficit in the transaction, the transaction would less likely be refused approval. In addition, the question of whether the “best price” had been obtained was more appropriately framed in terms of whether the price obtained was appropriate in the circumstances. In this connection, whether the price was appropriate always entailed a fact-sensitive inquiry. Finally, a party seeking to make the argument that the price obtained was not an appropriate one for the purpose of letting the sale proceed should particularise the steps that should have been but were not taken and explain how the taking of those steps would have realised a better price. 

10        Given the particular circumstances of this case, although the facts indicated that the CSC was in somewhat of a rush, there was nothing to suggest an absence of good faith or impropriety in the transaction. The appellants had also not led any evidence to show that the price at which the CSC sought to conclude the sale with Qingjian was inappropriate in the prevailing market conditions or, for that matter, in the reasonably foreseeable future. There did not appear to be any other tangible interest in the Property from any other developers and there was no evidence to suggest that the price of $638m reflected an undervalue. Failing to commit to Qingjian not only did not assure that a better offer would come along, but could also have resulted in the loss of Qingjian’s offer.

11        As for whether the respondents had acted ultra vires in making the collective sale application, the appellants argued that the wording of s 84A(1) read with paras 1 and 2 of the First Schedule to the LTSA suggested that the group of subsidiary proprietors who made the application for collective sale must come from the very same group of subsidiary proprietors who had signed the CSA by 11 July 2015. The Court acknowledged that this was, at least in general, how the collective sale process would logically proceed. An interpretation to the contrary would also give rise to a difficulty where one or more subsidiary proprietors, whose consent was essential to meet the required 80% thresholds under the LTSA agreed to enter into a collective sale at a certain price only to find that a year later, a differently constituted group of subsidiary proprietors then applied for approval of a collective sale at a different price and for that matter on terms which were different in other respects as well. 

12        All this would have led to the disapproval of the collective sale in this case but for the fact that the CSA itself contained a contractual provision that permitted each of these developments to take place. Where this very eventuality was contractually provided for, there was no basis for holding that such an arrangement would violate, offend or be otherwise contrary to the scheme envisaged by the provisions of the LTSA. In all other respects, the pre-conditions for an application to the Board had been met and the Court was therefore satisfied that the respondents had not acted ultra vires in making the collective sale application under the LTSA.

 

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.

YOU MAY ALSO BE INTERESTED IN