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  • Lau Siew Kim v Yeo Guan Chye Terence and another[2008] 2 SLR(R) 108; [2007] SGCA 54
    apparent that the presumption of advancement will operate only where there is no direct evidence that may reveal the intention of the parties only then will there be any necessity to infer or presume intention 60 Relationships which attract the presumption of advancement have traditionally included transfers from husband to wife and from father to child These categories of relationships have however been established in a markedly different social context from the present It goes without saying that the application of the presumption of advancement just like the presumption of resulting trust should be assessed in accordance with contemporary norms Indeed the two traditional categories of relationships have each already been remoulded and refined in different jurisdictions as social realities and practices have changed over time Nevertheless further extension and extrapolation may be appropriate and indeed required to cater to the myriad matrices that prevail in today s society As Deane J sagely noted in Calverley v Green 37 supra at 268 the categories of relationships to which the presumption of advancement applies are not finally settled or closed He was of the view ibid that It is arguable that the categories of relationships should be adjusted to reflect modern concepts of the equality in status and obligations of a wife vis à vis a husband and of a mother vis à vis a father Any adjustment of those relationships must however be made by reference to logical necessity and analogy and not by reference to idiosyncratic notions of what is fair and appropriate emphasis added This passage has been adopted and endorsed by our local High Court in Damayanti Kantilal Doshi v Shobhana J Doshi 1997 3 SLR R 340 at 26 We agree There can be no doubt that the approach of principled pragmatism should also be adopted in the courts modern application of the presumption of advancement 61 That the presumption of advancement must be applied in tandem with the contemporary societal climate is also exemplified by the outright rejection of the presumption in India It is well settled law that there is no presumption of advancement in Indian laws see vol III of Law of Evidence 45 supra at p 3656 and vol 2 of Sarkar 44 supra at p 1853 This is due to the widespread and persistent practice of making benami transfers see 45 above for a brief explanation of these transactions for no obvious reason or apparent purpose This palpably illustrates that the application of the presumption of advancement must be considered against the backdrop of the particular community there should not be a blind adherence or slavish application of the presumption simply to dovetail with the English approach The rejection of the presumption of advancement in India reflects a recognition that the logical and apt operation of the presumption in England does not translate to an equally appropriate operation in India which has a vastly different culture and popular mindset In the case of Singapore the differences between our local climate and the English system are not as stark and the presumption of advancement still accords with the community s contemporary societal norms and expectations in particular situations Nevertheless there will inevitably be certain inherent divergences in the attitudes and norms of any two countries especially where one is oriental and the other occidental in fact these divergences would also exist even amongst different communities within a society As such it is vital that the application of the presumption of advancement be nuanced in accordance with the particular context Parent child relationships 62 We turn first to consider briefly the parent child relationships which give rise to the presumption of advancement Traditionally there was a strong presumption of advancement between a father and his child In In re Roberts deceased 1946 Ch 1 Evershed J held at 5 It is well established that a father making payments on behalf of a son prima facie and in the absence of contrary evidence is to be taken to be making and intending an advance in favour of the son and for his benefit This application of the presumption of advancement was subsequently extrapolated to include the relationship between a child and a person standing in loco parentis Jessel MR explained the rationale for this extension of the presumption in Bennet v Bennet 1879 10 Ch D 474 Bennet at 477 as follows A s regards a child a person not the father of the child may put himself in the position of one in loco parentis to the child and so incur the obligation to make a provision for the child 63 Given that the presumption of advancement arises in the case of a child vis à vis his or her father or a person standing in loco parentis the courts long standing rejection of the presumption in the case of a child vis à vis his or her mother appears to be a curious anomaly especially when viewed in the present social context The reason for this differentiation between a mother and a father or even a mother and a person standing in loco parentis was set out by Jessel MR in Bennet at 478 I n our law there is no moral legal obligation no obligation according to the rules of equity on a mother to provide for her child there is no such obligation as a Court of Equity recognises as such Such reasoning embodies archaic patriarchal concepts of the family In the modern social context mothers must almost invariably share the responsibility to provide for their children see Pearce Stevens 31 supra at p 255 see also s 68 of the Women s Charter Cap 353 1997 Rev Ed which provides that it shall be the duty of every parent to maintain or contribute to the maintenance of his or her children Indeed the logic behind this reasoning had raised doubts even as early as in the late 19th century In Sayre v Hughes 1868 LR 5 Eq 376 Sir John Stuart VC astutely observed at 381 It has been argued that a mother is not a person bound to make an advancement to her child and that a widowed mother is not a person standing in such a relation to her child as to raise a presumption that in a transaction of this kind a benefit was intended for the child But the case of a stranger who stands in loco parentis seems not so strong as that of a mother In the case of Re De Visme it was said that a mother does not stand in such a relationship to a child as to raise a presumption of benefit for the child The question in that case arose on a petition in lunacy and it seems to have been taken for granted that no presumption of benefit arises in the case of a mother But maternal affection as a motive of bounty is perhaps the strongest of all although the duty is not so strong as in the case of a father inasmuch as it is the duty of a father to advance his child emphasis added 64 Despite the obvious logical flaws in the rejection of the presumption of advancement in the case of a mother and her child the English courts appeared to have continued in this approach for a long period In the relatively recent late 20th century case of Sekhon v Alissa 1989 2 FLR 94 Hoffmann J had applied the presumption of resulting trust instead of advancement when dealing with a case where both a mother and her daughter had contributed to the purchase of the property conveyed into the daughter s sole name The mother was eventually held to have some interest in the property to the extent of the amount of her contribution as there was insufficient evidence to rebut the presumption of resulting trust This traditional distinction between a mother and a father for the purposes of applying the presumption of advancement has been quite correctly trenchantly criticised by academics as being hopelessly out of touch with the egalitarian nature of contemporary society see Gray Gray 36 supra at para 10 30 English courts have attempted to get around the conventional gender bias of the presumption of advancement by requiring very little evidence to prove a mother s donative intent to her child for example Jessel MR had noted in Bennet that there was very little additional motive required to induce a mother to make a gift to her child at 480 More recently however it may be distilled from some cases a tentative inclination on the part of the English courts to depart from the artificial and historical distinction between a paternal and a maternal relationship In In re Cameron decd 1999 Ch 386 Lindsay J opined at 52 that in the light of the difference between Victorian and modern attitudes to the ownership and ability to dispose of property both parents instead of just the father should nowadays be taken to be in loco parentis unless the contrary was proved Although that case was concerned with whether a gift was a portion made in order to establish a child in life or make substantial provision for him Lindsay J s remarks probably reflect the modern trend in English judicial attitudes towards the relationship between a mother and her child and herald a plausible avenue by which the presumption of advancement should be developed so that it has application to a mother child relationship Indeed at least one academic has opined that Lindsay J s views should now also be taken as applicable to the presumption of advancement generally see Philip H Pettit Equity and the Law of Trusts Butterworths 9th Ed 2001 at p 172 65 In Australia the courts appear less reticent in advocating the modern application of the presumption of advancement equally in both father child and mother child relationships In Dullow 40 supra Hope JA found it unnecessary in the circumstances to consider what the correct principle was in relation to any presumption of advancement when a mother placed property in the name of a child However he did remark in obiter at 541 that A s at present advised I think that if the law is to be left constrained by presumptions the same presumption should apply to gifts to children by both mother and father Similarly in Brown v Brown 1993 31 NSWLR 582 at 591 Gleeson CJ was of the view that in modern times the drawing of any rigid distinction between parents may be accepted to be inappropriate Kirby P in the same case at 599 supported the principle that the presumption of advancement if it is still to be applied today must be applied equally to gifts by mothers as by fathers 66 Finally in 1995 it was held by the High Court of Australia that a presumption of advancement should indeed operate between a mother and her child see Nelson 47 supra Although in that case the presumption of advancement was found to be rebutted by the evidence of the mother s intention to hold the beneficial interest herself that should not detract from the fact that the Australian courts have definitively and conclusively departed from the traditional limits on the application of the presumption of advancement In approving the Supreme Court of New South Wales extension of the presumption of advancement Dawson J opined at 576 that there was no longer any justification for maintaining the distinction between a father and a mother in the application of the presumption of advancement McHugh J adopted a similar stance on this issue and explained this at 601 in the following terms While the presumption of advancement continues to apply to transfers of property between father and child consistency of doctrine requires that the presumption should also apply to transfers of property by a mother to her child If the presumption of advancement arises as Sir George Jessel thought from the obligation of a father to provide for his child the mother as well as the father now has a legal obligation to support their child But independently of any legal obligation of a mother it would not accord with the reality of society today for the law to presume that only a father has a moral obligation to support or is in a position to advance the interests of a child of the marriage 67 It is therefore clear that there have been a number of recent developments to the presumption of advancement by an extrapolation of the father child relationship which traditionally attracts the operation of the presumption Indeed it has been emphatically acknowledged that to treat the established categories of relationships giving rise to the presumption of advancement as frozen in time would not be characteristic of the doctrines of equity per Gibbs CJ in Calverley v Green 37 supra at 250 An extension and or modification of the traditional categories to accord with modern views would to our minds allow for the flexibility and dynamism that is especially necessary in the application of historical equitable doctrines while maintaining a sufficient nexus to fundamental doctrine Further just as how the presumption of resulting trust may vary in strength according to the factual circumstances in each case we are of the view that the presumption of advancement may similarly vary 68 One possible factor within the parent child category which could affect the weight of the presumption of advancement may be the number of children the parent or person standing in loco parentis has ceteris paribus the greater the number of children one has the less likely that a transfer of property of substantial value to a single child without similar provision for the other children would be intended as a pure gift to that child Of course the presumption of advancement should still operate in such a case but it is likely that less weighty evidence would be required to rebut the presumption of a gift as compared to a case where the recipient child was the only child of the transferor parent All the circumstances of the case must be considered For example if a transfer were made by a parent to the only child of majority age in a family of several children the presumption of advancement may have only slight relevance At this point it should briefly be mentioned that despite the majority view in Pecore 56 supra that the presumption of advancement in parent child relationships should not apply to independent adult children we do not see any reason to confine the application of the presumption in the same manner Indeed we are more inclined to the view of Abella J in Pecore which regarded the presumption of advancement as emerging no less from affection than from dependency and thus would logically apply to all gratuitous transfers from parents to any of their children regardless of the age of the child or dependency of the child on the parent see 90 103 of Pecore The present case is however unconcerned with the parent child relationship thus there is no necessity for us to make any firm pronouncements in relation to this category of relationships or to dwell on this issue any further Spousal relationships 69 The spousal relationship between Yeo and the appellant lies at the heart of the present appeal as such it is important to turn now to this category of relationships which attracts the operation of the presumption of advancement 70 As mentioned the presumption of advancement typically arises between a husband and his wife The principle was stated by Malins VC in In re Eykyn s Trusts 1877 6 Ch D 115 at 118 as follows The law of this Court is perfectly settled that when a husband transfers money or other property into the name of his wife only then the presumption is that it is intended as a gift or advancement to the wife absolutely at once subject to such marital control as he may exercise And if a husband invests money stocks or otherwise in the names of himself and his wife then also it is an advancement for the benefit of the wife absolutely if she survives her husband The husband wife relationship which attracts the presumption of advancement has been subsequently extended to include a situation where the transferor or contributor husband is engaged to be married to the beneficiary wife and they do not subsequently break their engagement to marry each other 71 In Moate v Moate 1948 2 All ER 486 Moate Jenkins J explained the compelling logic of this extension at 487 as follows I can see no practical distinction between a transfer by an intending husband to an intending wife and a transfer as between a husband and a wife The reason for presuming advancement is stronger where the gift is made in contemplation of the marriage before it is actually solemnised than it is where the transaction is post nuptial It seems to me the presumption would be in the former case that the intending husband is making a gift to the lady in consideration of the marriage a gift by way of wedding present which he intends to take effect in her favour beneficially provided the marriage is duly solemnised I therefore hold that the presumption in this case is that the husband intended this to be a provision by way of gift to his wife provided the marriage was duly solemnised The High Court of Australia has similarly held in Wirth v Wirth 1956 98 CLR 228 Wirth that a transfer of property by a prospective husband to his intended wife made in contemplation of the marriage for which they had contracted raises a presumption of advancement just as a similar transfer made after the celebration of the marriage raises the same presumption In coming to this conclusion Dixon CJ remarked at 238 To say that a transfer of property to an intended wife made in contemplation of the marriage raised a presumption of a resulting trust but a similar transfer made immediately after the celebration of the marriage raised a presumption of advancement involves almost a paradoxical distinction that does not accord with reason and can find a justification only on the ground that the doctrine depends in categories closed for historical reasons That is not characteristic of doctrines of equity 72 It appears therefore that the courts are willing to modify and extend the established categories of relationships to which the presumption of advancement applies to accommodate the contemporary social climate and the particular circumstances in the cases which come before the court a steadfast and rigid adherence to the historical application of the presumption has been rightly rejected In fact the Australian courts have also expressed at least some inclination to extend the application of the presumption of advancement even to de facto relationships in the light of the progressive prevalence and openness of such relationships in recent times 73 The conventional position is that there is no presumption of advancement between cohabiting couples whether sexual or homosexual nor between a man and his mistress see for example Rider v Kidder 1805 10 Ves 360 32 ER 884 Soar v Foster 1858 4 K J 152 70 ER 64 Allen v Snyder 29 supra and Diwell v Farnes 1959 1 WLR 624 In Calverley v Green 37 supra however although the majority rejected the application of the presumption of advancement to a relationship devoid of the legal characteristic which warrants a special rule affecting the beneficial ownership of property by the parties to a marriage per Mason and Brennan JJ at 260 Gibbs CJ adopted quite a different line of argument He observed at 250 251 The question is whether the relationship which exists between two persons living in a de facto relationship makes it more probable than not that a gift was intended when property was purchased by one in the name of the other The answer that will be given to that question will not necessarily be the same as that which would be given if the question were asked concerning a man and his mistress who were not living in such a relationship The relationship in question is one which has proved itself to have an apparent permanence and in which the parties live together and represent themselves to others as man and wife Once one rejects the test applied in Soar v Foster as too narrow and rejects any notion of moral disapproval such as is suggested in Rider v Kidder as inappropriate to the resolution of disputes as to property in the twentieth century it seems natural to conclude that a man who puts property in the name of a woman with whom he is living in a de facto relationship does so because he intends her to have a beneficial interest and that a presumption of advancement is raised emphasis added 74 It is obvious that Gibbs CJ s remarks were driven at least in part by his pragmatism in acknowledging the changing conditions of society and a desire to desist from the historical reasons for confining the presumption of advancement to cases of legal spouses Though his remains the lone voice advocating for such a change academics have acknowledged that it is arguable that changing social attitudes to de facto relationships especially where they are recognised legislatively should be reflected by the courts in the application of the presumption of advancement see G E Dal Pont D R C Chalmers Equity and Trusts in Australia and New Zealand LBC Information Services 2nd Ed 2000 at p 591 However given that legislative recognition and public consensus about the status of de facto relationships have yet to emerge locally any development along the lines envisaged by Gibbs CJ may be in our view presently unwarranted The point to be highlighted here is simply that equitable principles such as the presumption of advancement should constantly be re examined and adjusted in the light of contemporary reality and this approach has quite correctly and undoubtedly been adopted by foreign courts albeit in varying degrees 75 In order to ensure that the presumption of advancement dovetails with modern norms and expectations courts have also increasingly regarded the presumption to be of varying strength in spousal relationships characterised by different dynamics In Pettitt v Pettitt 1970 AC 777 Pettitt Lord Reid with his customary acuity observed that the strength of the presumption of advancement when applied to spousal relationships should generally be considered as having diminished significance He stated at 793 I do not know how this presumption first arose but it would seem that the judges who first gave effect to it must have thought either that husbands so commonly intended to make gifts in the circumstances in which the presumption arises that it was proper to assume this where there was no evidence or that wives economic dependence on their husbands made it necessary as a matter of public policy to give them this advantage I can see no other reasonable basis for the presumption These considerations have largely lost their force under present conditions and unless the law has lost all flexibility so that the courts can no longer adapt it to changing conditions the strength of the presumption must have been much diminished In the same case Lord Upjohn acknowledged at 813 that the presumptions of resulting trust and advancement have been criticised as being out of touch with the realities of today but he nevertheless remained optimistic that when properly understood and properly applied to the circumstances of today the presumptions remain as useful as ever in solving questions of title Nevertheless he appeared to have regarded the ready rebuttal of the presumptions by comparatively slight evidence as the proper application of these presumptions then at 814 76 Locally the Court of Appeal recently considered the presumption of advancement in some detail in Low Gim Siah v Low Geok Khim 2007 1 SLR R 795 Low Gim Siah Chan Sek Keong CJ in delivering the judgment of the court accepted that the presumption of advancement was generally of varying strength in different circumstances he opined at 33 that T he amount of evidence required to rebut the presumption would depend on the strength of the presumption ie how readily the court would be prepared to make the presumption Chan CJ further pronounced on the application of the presumption in certain spousal relationships at 43 44 as follows In our view it is correct to say that the cases where the presumption of advancement was held to have lost its robustness or diminished in importance were cases concerning joint contributions by married couples in acquiring the matrimonial home or properties acquired using joint savings They were not concerned with the traditional and well established categories of father and child and husband and wife relationships where one party is under a moral or equitable obligation to support the other party The presumption of advancement has been applied in England in such relationships for over two centuries and justified on the basis of a moral or equitable obligation on the part of one to care for the other Such moral obligations do not change even if social conditions change Hence we find it difficult to accept an argument that in modern Singapore fathers and husbands have somehow changed their paternal or marital obligations so radically that the presumption is no longer applicable or should not be applied There is no doubt that many married women in Singapore are financially independent of their husbands But there are also many of them who are not or who choose to be housewives in order to look after their husbands their children and their homes In our view in the case of such relationships there is no reason to treat the presumption of advancement as having lost its robustness or diminished in its vigour and there is no reason why it should not be applied to resolve questions of title in the absence of any evidence indicating otherwise emphasis in original 77 We maintain the view expressed in Low Gim Siah The presumption of advancement is still very relevant today in the established both traditional and extended categories of relationships it is the strength of the presumption that should vary with the circumstances in accordance with modern social conditions Thus on this point we must respectfully depart from the learned trial judge s bare assertion that the Singapore courts had moved away from the presumption of advancement and that the presumption was no longer applicable in modern times unless there was evidence to support it see 16 above In fact we find that the strength of the presumption of advancement whether in cases concerning spouses or otherwise should not even be generally diminished as appeared to be suggested in Pettitt Instead it should only be where the present realities are such that the putative intention inherent in the presumption of advancement is not readily inferable from the circumstances of the case that the presumption would be a weak one easily rebuttable by any slight contrary evidence 78 The overall aim of the presumption of advancement is to discern the intention of the transferor As Gibbs CJ remarked in Calverley v Green 37 supra at 250 The presumption should be held to be raised when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred whether or not the purchaser owed the other a legal or moral duty of support emphasis added The nuanced fact sensitive approach advocated in Low Gim Siah is therefore preferred all the circumstances of the case should be taken into account by the court when assessing how strongly the presumption of advancement should be applied in the particular case The financial dependence of the recipient on the transferor or contributor mentioned in Low Gim Siah is but one factor which may affect the strength of the presumption of advancement In our judgment two key elements are crucial in determining the strength of the presumption of advancement in any given case first the nature of the relationship between the parties for example the obligation legal moral or otherwise that one party has towards another or the dependency between the parties and second the state of the relationship for example whether the relationship is a close and caring one or one of formal convenience The court should consider whether in the entirety of the circumstances it is readily presumed that the transferor or contributor intended to make a gift to the recipient and if so whether the evidence is sufficient to rebut the presumption given the appropriate strength of the presumption in that case Relevance of the Women s Charter 79 Finally it is appropriate to consider briefly the relevance of the Women s Charter in relation to the presumption of advancement as applied between spouses 80 Sections 51 and 52 of the Women s Charter taken with s 112 of the same legislation have resulted in a deferred community of property approach in the determination of the property rights of spouses The former two sections have the effect of rendering the fact that a woman is married irrelevant to her proprietary interests her entitlement to proprietary interests depends on the same rules as the entitlement of an unmarried woman or man The latter section on the other hand has empowered the courts with a broad discretion to divide matrimonial assets between spouses during or after matrimonial proceedings to terminate their marriage it is based on the principle of community of property under which both spouses have a joint interest in certain property regardless of which spouse purchased or otherwise acquired it see Leong Wai Kum Principles of Family Law in Singapore Butterworths Asia 1997 at pp 799 800 81 Therefore the community of property approach to the property rights of spouses only operates where there are matrimonial proceedings terminating a marriage When the marriage subsists property law including the law of resulting trusts applies without modification to determine the respective proprietary rights of spouses The application of the ordinary rules of law and equity relating to real and personal property are discussed by Anthony Dickey QC in Family Law LBC Information Services 3rd Ed 1997 He noted at p 587 that there are no special rules concerning the normal interests of spouses in property and continued It is true that a presumption of advancement that is of a gift arises upon the transfer of property to a wife either by or at the direction of her husband where the wife is not a purchaser of the property This presumption supersedes the presumption of a resulting trust which otherwise operates upon a transfer of property to a person who is not a purchaser of it However the presumption of advancement is not confined to spouses but generally speaking extends to all relationships which have traditionally involved an obligation by one party to provide for the other Its rationale like that of a resulting trust is the presumed intention of the parties in particular circumstances It is also true that different legal significance can be attributed to acts between spouses than would otherwise be attributed to similar acts between strangers This however concerns simply a difference in the likely intention of the parties or the reason for their actions The substantive rules of property law remain the same emphasis added We agree The presumption of advancement is not and should not be affected by considerations relating to the division of matrimonial property such as that embodied in s 112 of the Women s Charter It is an inquiry as to the intentions of parties which would be from common experience presumably different when particular relationships for instance the spousal relationship exist between the parties 82 Indeed the community of property principle on which s 112 of the Women s Charter is based which places particular emphasis on fairness to the homemaker spouse and the equality of spouses which in turn find expression in the interests of each party to a marriage in their property holdings comes into play only when there exists matrimonial proceedings resulting in a terminated marriage It is our view that even where a marriage is terminated by the demise of one spouse the separation of property principle which applies to spouses during the subsistence of their marriage should continue to apply and the parties respective property rights should continue to be governed by the usual rules of property law including the law of resulting trusts unmodified by considerations involving the division of matrimonial assets This is subject of course to the regulation of the succession regime where applicable for instance s 7 of the Intestate Succession Act Cap 146 1985 Rev Ed dictates that where a deceased dies intestate his or her surviving spouse will receive at least half of his or her estate and s 3 of the Inheritance Family Provision Act Cap 138 1985 Rev Ed provides that where a testator had failed to make reasonable provision for the maintenance of his or her surviving spouse the court may upon application by or on behalf of the surviving spouse order that reasonable provision be made out of the testator s net estate for the maintenance of the surviving spouse Thus to our minds the need for a just determination of spousal property rights on one spouse s demise given the view that marriage is an equal partnership is sufficiently addressed by the succession regime there is no necessity or indeed any basis to adjust or apply the presumption of advancement in line with s 112 of the Women s Charter Joint tenancies 83 We turn now to consider the presumption of resulting trust and correspondingly the presumption of advancement in relation to properties held on joint tenancies It is trite law that joint tenancies are generally abhorred by equity and unless there is an express declaration or any other intention shown to the contrary or unless the parties have contributed to the purchase money in equal shares legal joint tenants of a property will be presumed to hold that property as beneficial tenants in common of shares proportionate to their contribution to the acquisition of that property see for example Pettitt 75 supra Bernard v Josephs 1982 Ch 391 and Springette v Defoe 1992 2 FLR 388 This proposition is explained in Halsbury s Laws of Singapore vol 9 2 LexisNexis 2003 at para 110 026 as follows In a specialised instance the maxim that equality is equity finds expression in the abhorrence of a joint tenancy or correspondingly the preference for a tenancy in common as a form of common ownership of property The right of survivorship which is an incident of a joint tenancy has the effect of divesting a deceased joint tenant of his unsevered interest and giving the survivor the entirety of the estate producing a disproportionate effect The preference for a tenancy in common means that in equity the court construing the intentions of the parties leans towards holding that they are tenants in common in proportion to their contributions to the purchase price The parties will only be held to be joint tenants when they purchase in equal shares and no contrary intention is shown that they were to be otherwise than joint tenants It is therefore clear that the presumption of resulting trust and consequently the presumption of advancement features prominently as a means by which equity intervenes in a legal joint tenancy In a variety of circumstances legal joint tenants are presumed to hold the property in question on trust for themselves as tenants in common in accordance with their respective contributions to the purchase price of the said property This may be primarily explained by the

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  • GHL Pte Ltd v Unitrack Building Construction Pte Ltd and Another[1999] 4 SLR 604; [1999] SGCA 60
    that case are well known and may be summarised briefly as follows The Director General of the Public Works Department PWD appointed the plaintiffs as contractors to construct and maintain Phase II of the Central Expressway from Bukit Timah to Chin Swee Road A dispute arose between them The plaintiffs claimed damages for breach of contract alleging that the PWD in breach of contract prevented them from completing their part of the contract on time The PWD denied the breach and counterclaimed the costs of remedial works required to be carried out for alleged defects in the plaintiffs works and liquidated damages for the delay The matters in dispute were referred to arbitration While that was pending the PWD notified the plaintiffs that they intended to call on the performance guarantee issued by Standard Chartered Bank which the plaintiffs had provided under the contract Thereupon the plaintiffs immediately initiated proceedings against the PWD represented by the Attorney General seeking inter alia a declaration that the PWD was not entitled until the dispute was finally resolved by arbitration to claim or receive any sum under the performance guarantee The consideration for granting such relief is the same as that for granting an interlocutory injunction The question was therefore whether if the defendant were a private person an interlocutory injunction would be granted restraining the defendant from calling on the bond 15 The application for the declaration was dismissed by the High Court The plaintiffs appealed and this court dismissed their appeal Karthigesu JA delivered the judgment of the court and at p 746 after referring to various authorities he concluded thus In our opinion whether there is fraud or unconscionability is the sole consideration in applications for injunctions restraining payment or calls on bonds to be granted Once this can be established there is no necessity to expend energies in addressing the superfluous question of balance of convenience It does not lie in the mouth of the defendant to claim that damages would still somehow be an adequate remedy Later in rejecting the application of the test of balance of convenience in a case such as the one before the court although it was applied by Roskill LJ in Howe Richardson Scale v Polimex Cekop Anor 1978 1 Lloyd s Rep 161 165 Karthigesu JA further said at p 747 To allay these concerns we need only note that dispensing with consideration of the balance of convenience does not make an injunction any easier to obtain Indeed a higher degree of strictness applies as the applicant will be required to establish a clear case of fraud or unconscionability in interlocutory proceedings It is clear that mere allegations are insufficient Further in the concluding part of his judgment at p 748 where he held that this court could not interfere with the exercise of discretion by the High Court he repeated what he had said earlier as follows We are unable to find any apparent error to justify interfering with the judge s exercise of discretion We are of the opinion that the trial judge had concluded correctly that declaratory relief in terms of prayer 1 should not be granted While s 27 of the GPA Government Proceedings Act permits a declaration to be granted in lieu of any injunction the appellants had not established their entitlement to an injunction restraining the respondent from calling on the guarantee In particular they had not shown and indeed had conceded that they could not show that fraud or unconscionability was present on the facts 16 It is abundantly clear from the judgment that the court expressly held that fraud or unconscionability was a ground on which the court would interfere and restrain the enforcement of a performance bond It is significant that in that judgment the court on no less than three occasions referred consistently to fraud or unconscionability as a ground for the grant of an injunction We should add that the concept of unconscionability was adopted after deliberation and was not inadvertently inserted as a result of a slip nor was it intended to be used synonymously or interchangeably with fraud There is nothing in that judgment which can be said to indicate or suggest that the court did not decide that unconscionability alone is not a separate ground as distinct from fraud We accept that to that extent Bocotra is a departure and if we may respectfully say so a conscious departure from the English position 17 After Bocotra the first case on performance bonds decided purely on the ground of unconscionability was Raymond Construction Pte Ltd v Low Yang Tong Anor Suit No 1715 of 1995 11 July 1996 unreported This was also a construction case The brief facts are as follows Under a construction contract the plaintiffs who were contractors undertook to build a double storey detached house for the first defendant the owner of the land Pursuant to the contract the plaintiffs were required to procure for the first defendant a performance guarantee This they duly did and a performance guarantee in the amount of 40 419 05 was furnished by the second defendants AGF Insurance Singapore Pte Ltd which incidentally are also the second defendants in the present case Subsequently disputes arose between the plaintiffs and the first defendant which eventually came to a head when the house was practically completed The first defendant complained of breaches of contract in that the plaintiffs had failed to rectify certain defects and the plaintiffs complained of the failure or refusal by the first defendant to pay the sums certified as due The first defendant called on the performance guarantee and the plaintiffs immediately initiated proceedings against the first defendant joining AGF as the second defendants The plaintiffs obtained ex parte an interim injunction restraining the second defendants from paying on the guarantee and the first defendant from receiving any payment The first defendant subsequently applied to discharge the injunction The application was dismissed by Lai Kew Chai J thus continuing the injunction In his judgment the learned judge said at 5 Bocotra Construction Pte Ltd v AG No 2 1995 lays down the rule of law that there must be compelling evidence capable of proving fraud or unconscionability before an injunction may be granted restraining payment under instruments which contain unconditional and irrevocable obligations to pay on demand The concept of unconscionability to me involves unfairness as distinct from dishonesty or fraud or conduct of a kind so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party Mere breaches of contract by the party in question in this case the first defendant would not by themselves be unconscionable In my view Royal Design Studio LP Thean J as he then was and Kvaerner Singapore GP Selvam J are illustrations of the circumstances where payments would have been unconscionable Later the learned judge added the following remarks at 6 So as to place the context in which these remarks were made there were really two matters which the court was addressing First on the authorities considered the court was elaborating on what would amount to unconscionability sufficiently grave and serious for equity to intervene That proceeded on the basis that equity would step in to prevent the enforcement of any legal right if such enforcement would have been unjust Any allegation of fraud was put aside Secondly learned counsel for the first defendant contended that mere allegations of breaches of contract by the first defendant did not amount to unconscionability I agreed with him and came to the following conclusion at 35 Having considered all the evidence I was driven to the conclusion that evidence was strongly suggestive that the conduct of the first defendant from first to last was most unfair and it was against the court s conscience to have allowed him to insist on his pound of flesh Plainly he could not be allowed to get at the money and add insult to injury until trial There was strong evidence that he would postpone meeting his financial commitments by tactics of all sorts The way he drew his cheques and the delays in his payments were legendary and habitual if one took into account the fact that he has the unusual hallmark of being the subject of bankruptcy notices and suits for defaults in meeting his commitments Thus in this case the interim injunction was granted purely on the ground of unconscionability 18 We now turn to the recent decision of the High Court in New Civilbuild Pte Ltd v Guobena Sdn Bhd Anor supra That case too involved a construction contract The first defendants Guobena were main contractors for the Tanglin Regency condominium project They sub contracted the external structural and architectural works for themain and ancillary buildings to the plaintiffs Under the sub contract the plaintiffs were obliged to provide a performance bond equal to 10 of the contract price which amounted to approximately 1 6m This they duly did Subsequently disputes arose between them and the first defendants made a demand on the performance bond on the insurance company which issued the bond The plaintiffs denied that they had breached their obligations under the contract and obtained ex parte an interim injunction restraining the first defendants from calling on the bond The first defendants thereupon applied to discharge the injunction and at the inter partes hearing the learned judge discharged the injunction on two grounds first that there was a non disclosure of material facts by the plaintiffs and secondly that there was no evidence of fraud on the part of the second defendants and that unconscionability alone was not a separate ground for an injunctive relief His decision on the first ground was eminently right and no issue arose in that respect 19 The learned judge went on to deal with the second ground In deciding on that ground the learned judge considered the question whether since Bocotra there existed a separate ground of unconscionability apart from that of fraud which could prevent the defendants from enforcing the bond After quoting extensively passages from the judgment in Bocotra he said at 33 35 33 I have set out in detail the judgment of the Court of Appeal in the Bocotra case so as to better appreciate the context in which the term unconscionability ought to be understood At no point did the court discuss the scope of this concept of unconscionability As shown above the court first stated at p 744 that the weight of authority suggested that the sole exception permitting injunctive relief was fraud and held that there was no difference between the principles to be applied in dealing with attempts to restrain banks from paying and callers from calling for or receiving payment It is well established that banks cannot be restrained other than for fraud Therefore the Court of Appeal had held in the Bocotra case that the same position obtains where the application is in respect of the caller 34 The term unconscionability first appeared after a discussion of the question whether the balance of convenience test applied in such applications the court holding that once it is found that fraud or unconscionability is established there is no need to address the question of balance of convenience Thereafter the word unconscionability appeared alongside the word fraud in two other places 35 Given that the Court of Appeal had stated that the weight of authority had suggested that fraud as the sole exception was well entrenched I do not understand the court as having changed the law without a discussion of the basis for it Indeed upon an examination of the cases cited to the court there is no doubt that such is the overwhelming weight of authority The learned judge then considered the leading English cases Howe Richardson Scale Co v Polimex Cekop 1978 1 Lloyd s Rep 161 RD Harbottle Mercantile v National Westminster Bank 1978 QB 146 The Bhoja Trader Intraco v Notis Shipping Corp of Liberia 1981 2 Lloyd s Rep 256 State Trading Corp of India v ED F Man Sugar 1981 Com LR 235 and Potton Homes v Coleman Contractors 1984 28 Build LR 19 and concluded at 43 It is clear from this analysis why the Court of Appeal had said in the Bocotra case that the weight of authority suggested that fraud was the sole exception permitting injunctive relief in these cases I should add that none of the cases cited by the Court of Appeal in that case was decided on the basis of unconscionability as a distinct and separate concept from fraud Indeed I am unable to find the term mentioned in any of those cases I can only conclude that the Court of Appeal had used the term unconscionability interchangeably with fraud 20 With respect for the reasons we have given in 16 above we are unable to agree with the learned judge that this court did not in Bocotra decide that unconscionability is a separate exception permitting injunctive relief True as the learned judge said the court did not discuss the scope of this concept of unconscionability but then nor did the court discuss the scope of fraud and the concept of unconscionability is not a novel one indeed no more novel than fraud It should be noted that in Bocotra this court considered not only the English authorities but the Singapore authorities as well Royal Design Studio v Chang Development 1990 SLR 1116 Kvaerner Singapore Ltd v UDL Shipbuilding Singapore Ltd 1993 3 SLR 350 and Chartered Electronics Pte Ltd v Development Bank of Singapore Ltd 1999 4 SLR 655 although this last case was not expressly referred to in the judgment Royal Design Studio was decided on the ground of unconscionability although the word unconscionability was not expressly used there but the circumstances in which the injunction was continued were clearly those warranting the description of unconscionability Kvaerner Singapore was decided partly on the ground of unconscionability and did not strictly follow the fraud exception principle laid down in the English cases GP Selvam J said at p 353 The defendants invoked the principle in Edward Owen Engineering Ltd v Barclays Bank International Ltd 1978 QB 159 that except in cases of established fraud known to the issuer of the performance guarantee he cannot be restrained from making payment on the ground that the party to the underlying contract disputes liability Later cases show that it is not an immutable principle of universal application And in my view it has no application where the injunction is sought against a party to the underlying contract who seeks to take advantage of the performance guarantee where by his own volition he fails to perform a condition precedent in the sense I have described Furthermore a demand under the performance guarantee can be made only when the seller has failed or refused to fulfil his obligations under the contract The seller s failure or refusal is a condition precedent to the buyer making a demand An assertion to that effect is implied in a demand made by the buyer In circumstances where it can be said that the buyer had no honest belief that the seller has failed or refused to perform his obligation a demand by the defendants buyers in my view is a dishonest act which would justify a restraint order On the facts of the case a demand made by the buyer was utterly lacking in bona fides For all these reasons I continued the injunction until further order 21 In Chartered Electronic Industries supra Chan Sek Keong J as he then was also did not strictly follow the English cases of established fraud in particular in the application of the standard of proof of fraud In that case the plaintiffs entered into a contract with overseas buyers for the supply of certain articles and as security for the performance of the contract the defendant bank at the instance of the plaintiffs issued a performance guarantee After the contract had been substantially performed by the plaintiffs dispute arose between them and the buyers While the dispute was in progress the buyers called on the bond and the plaintiffs obtained ex parte two interim injunctions against the bank restraining them from paying on the bond At the inter partes hearing Chan Sek Keong J continued the injunctions until trial on the ground of a strong prima facie case of fraud on the part of the buyers The learned judge said at 45 In the circumstances there was strong evidence that the demands for payment of US 407 040 under the performance guarantee was not made bona fide There was no way that the buyers could have justified the demand for that amount since they had retained the second shipment valued at US 759 740 16 with interest thereon at 4 per annum payable after 12 months from date of presentation of documents On these materials and having regard to the circumstances of the demands for payment and the form and substance of such demands I formed the view a that the plaintiffs had more than satisfied the test of a strong prima facie case of fraud and b that if the Ackner standard were applicable the only realistic or reasonable inference to be drawn from the materials before me was that the buyers could not have honestly believed that they were entitled to the amount of the damages they had demanded It seems to us that Chan Sek Keong J used the term fraud in a somewhat broad sense when he characterised the claim as not being made bona fide and not strictly in the sense applied in the English cases such as RD Harbottle Howe Richardson and Edward Owen Engineering supra Fraud in the common law sense implies more than a mere absence of bona fides in the claim It implies an

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  • BS Mount Sophia Pte Ltd v Join-Aim Pte Ltd
    following observations by this court in JBE at 10 13 bear repeating 10 The Singapore courts rationale in applying unconscionability as a separate and independent ground for restraining a call on a performance bond especially one given by the contractor obligor in a building contract is that a performance bond serves a different function from a letter of credit The latter performs the role of payment by the obligor for goods shipped to it by the beneficiary typically via sea or air from another country and has been the life blood of commerce in international trade for hundreds of years see Chartered Electronics Industries Pte Ltd v Development Bank of Singapore 1992 2 SLR R 20 Chartered Electronics at 36 Interfering with payment under a letter of credit is tantamount to interfering with the primary obligation of the obligor to make payment under its contract with the beneficiary Hence payment under a letter of credit should not be disrupted or restrained by the court in the absence of fraud In contrast a performance bond is merely security for the secondary obligation of the obligor to pay damages if it breaches its primary contractual obligations to the beneficiary A performance bond is not the lifeblood of commerce whether generally or in the context of the construction industry specifically Thus a less stringent standard as compared to the standard applicable vis à vis letters of credit can justifiably be adopted for determining whether a call on a performance bond should be restrained We should also add that where the wording of a performance bond is ambiguous the court would be entitled to interpret the performance bond as being conditioned upon facts rather than upon documents or upon a mere demand contrary to the dictum of Staughton LJ in IE Contractors Ltd v Lloyds Bank Plc and Rafidain Bank 1990 2 Lloyd s Rep 496 at 500 11 Even where a performance bond is expressed to be payable on first demand without proof or conditions as in Edward Owen Engineering 1978 1 QB 159 at 170 which strictly speaking means the paying bank is contractually obliged to pay the beneficiary once it makes a call on the performance bond there is no reason why fraud which is often difficult to prove should be the sole ground for restraining the beneficiary from receiving payment To adopt such a position is to apply a standard of proof which will virtually assure the beneficiary of immediate payment and does nothing more than to transfer the security from the paying bank to the beneficiary see Chartered Electronics at 37 This may in turn cause undue hardship to the obligor in many cases For instance where a call is made in bad faith especially a call for payment of a sum well in excess of the quantum of the beneficiary s actual or potential loss the beneficiary will gain more than what it has bargained for Furthermore if the amount paid to the beneficiary pursuant to a call is subsequently proved to be in excess of the quantum of its actual loss the obligor runs the risk of being unable to recover any part of the excess amount should the beneficiary become insolvent Yet another relevant consideration is that an excessive or abusive call can cause unwarranted economic harm to the obligor This is particularly relevant in the context of the construction industry where liquidity is frequently of the essence to contractors In this regard while the sum stipulated to be paid under a performance bond is usually pegged at only 5 to 10 of the contract price this typically amounts to one or more progress payments under a building contract In very large building contracts the deprivation of a whole progress payment might well be fatal to the contractor obligor s liquidity These concerns are by no means fanciful as evidenced by the mechanisms evolved by the construction industry to ensure the quick settlement of disputes relating to progress payments 12 In Peter Ellinger Dora Neo The Law and Practice of Documentary Letters of Credit Hart Publishing 2010 at p 326 the authors argue in the context of the construction industry that where the employer beneficiary has sacrificed a stronger position for a weaker one eg where it has accepted a performance bond in substitution for security in the form of a cash deposit which is the position in the present case it would be justifiable to apply the autonomy principle to the performance bond and treat it as though it were a letter of credit We find it difficult to agree with this argument for several reasons First as a matter of principle the utilisation of a cash deposit provided as security for the performance of the contractor obligor s obligations under a building contract should be treated no differently from the making of a call on a performance bond which is third party security in that it is always provided by an entity other than the contractor obligor It is true that it will be more difficult if not impossible in practice to restrain the use of a cash deposit than it will be to restrain the third party paying bank from paying out on a performance bond But this will be the case no matter what test is adopted for restraining a call on a performance bond Moreover the greater ease in practical terms of restraining a call on a performance bond as compared to restraining the utilisation of a cash deposit provided as security for contractual performance is a factor which the employer beneficiary must be taken to have considered and accepted in preferring a performance bond to a cash deposit In other words the employer beneficiary would have a reason for accepting as security for the contractor obligor s contractual performance a performance bond rather than a cash deposit One reason could be that the contractor obligor might have priced its bid for the building contract differently if it had to provide a cash deposit as security for its performance of the contract In our view the mere fact that the employer beneficiary agreed to accept a performance bond in lieu of a cash deposit should not be material in determining whether a call on a performance bond should be restrained 13 In our view the Singapore position on the circumstances in which the court may restrain a call on a performance bond is justified for the functional and commercial reasons mentioned earlier at 10 12 above The juridical basis for adopting unconscionability as a relevant ground separate from and independent of fraud lies in the equitable nature of the injunction Considerations of conscionability are applicable in relation to the use of the injunction in other areas of the law and there is no reason why these considerations should not be applied for the purposes of determining whether a call on a performance bond should be restrained so as to achieve a fair balance between the interests of the beneficiary and those of the obligor emphasis in original 19 The elements of unconscionability are also fairly uncontroversial and have been variously stated to include elements of abuse unfairness and dishonesty see eg the decision of this court in GHL Pte Ltd v Unitrack Building Construction Pte Ltd 1999 3 SLR R 44 GHL and Dauphin Offshore Engineering Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin Khalifa bin Zayed Al Nahyan 2000 1 SLR R 117 Dauphin as well as below at 42 45 We pause to observe parenthetically that although the unconscionability exception is apparently only firmly established in the Singapore context there is a similar scope for the exercise of such an exception albeit from a statutory standpoint in Australia via in particular s 51AA of the Trade Practices Act 1974 No 51 of 1974 Aust see now s 20 1 of the Australian Consumer Law Vol 3 Sch 2 of the Competition and Consumer Act 2010 Cth and see generally Nelson Enonchong The problem of abusive calls on demand guarantees 2007 LMCLQ 83 Enonchong s article at pp 99 100 and also Nelson Enonchong The Independence Principle of Letters of Credit and Demand Guarantees Oxford University Press 2011 Enonchong s book at paras 7 37 7 49 as well as Thanuja Rodrigo Theoretical justifications for restraining unconscionable demands under on demand guarantees 2012 40 ABLR 5 The position in Malaysia appears to be in a state of flux see Poh Chu Chai Law of Pledges Guarantees and Letters of Credit LexisNexis 5th Ed 2003 at pp 933 936 as well as Low Kee Yang Eugene Ooi Elizabeth Wong Unconscionable Calls on Performance Bonds A Bold New Exception in ch 21 of Singapore Academy of Law Conference 2006 Developments in Singapore Law between 2001 and 2005 Teo Keang Sood gen ed Singapore Academy of Law 2006 at pp 845 847 though cf Enonchong s article at p 100 and Enonchong s book at paras 7 56 7 58 It is also noteworthy that the unconscionability exception in Singapore has also been referred to and even substantially discussed in established textbooks by leading foreign writers see eg Geraldine Mary Andrews QC Richard Millett QC Law of Guarantees Sweet Maxwell 6th Ed 2011 at paras 16 027 16 028 and Benjamin s Sale of Goods M Bridge gen ed Sweet Maxwell 8th Ed 2010 at para 24 033 The high threshold for establishing unconscionability 20 Of greater significance in the context of the present appeal is the necessary threshold of unconscionability that has to be established before the court will exercise its discretion to grant an injunction Indeed as we shall see it is precisely this threshold that constitutes the key to resolving the relevant tension that exists which tension we will address in a moment see generally below at 26 46 It is important to note at the outset that the law in this regard is settled Simply put the threshold is a high one and the burden that the applicant has to discharge is to demonstrate a strong prima facie case of unconscionability see for example Dauphin at 57 The question in this appeal is really a question of defining the contours of that burden having regard to the relevant facts 21 When determining if a strong prima facie case has been made out the entire context of the case must be thoroughly considered and it is only if the entire context of the case is particularly malodorous that such an injunction should be granted We must emphasise that the courts discretion to grant such injunctions must be sparingly exercised and it should not be an easy thing for an applicant to establish a strong prima facie case 22 The reason for setting the barrier at such a high level is that the equitable remedy of the interim prohibitive injunction is a very harsh one It restricts the person in whose favour the performance bond was issued the beneficiary from doing that which he was entitled by agreement of the parties to do and which he in all probability had bargained for during the negotiations leading up to the contract concerned In essence he would be prevented from enforcing a substantive right which he had contracted for 23 The availability of unconscionability as a ground for relief for obligors of performance bonds from oppressive calls on the bonds by beneficiaries does not necessarily make it any easier for such obligors to obtain such relief This availability merely signifies the recognition that relief should be warranted in situations where the facts support a finding of unconscionability but not necessarily a finding of fraud Unconscionability is a distinct and separate ground from fraud and as stated earlier at 19 includes conduct such as unfairness and abuse that are broader than the conduct that would constitute fraud In other words the availability of unconscionability acknowledges that conduct exhibited by the beneficiary other than fraud might be sufficiently reprehensible to justify relief on the part of the obligor For example unfairness is an element of unconscionability but it would not make logical sense to say that a beneficiary had thereby acted in such an egregiously unfair manner as to amount to fraud This is because the concept of unfairness admits of other dimensions beyond the fraudulent dimension and is assessed on different parameters from those with which we assess fraud The most we can say is that such conduct does not necessarily constitute fraud 24 Hence the availability of unconscionability as a ground for relief does not necessarily mean that it would be easier for an obligor of a performance bond to obtain injunctive relief from an oppressive call on the bond by a beneficiary As mentioned earlier the high threshold for unconscionability is established law and in this appeal we are merely reinforcing this and explaining why this is so The reasons for requiring a high threshold for unconscionability relate to the need to strike the appropriate balance between the conflicting positions of the obligor and beneficiary of a performance bond which we have termed the perennial tension Tied up in this balance is the underlying need to preserve the raison d être of performance bonds that they are to provide security for the performance of the obligor s obligations which stems from broader policy reasons If calls on this security by the beneficiary are too liberally subject to injunctive relief from the courts this security loses its efficacy and the raison d être of performance bonds would be eroded or even wholly undermined 25 Furthermore the courts should be slow to upset the status quo and disrupt the allocation of risk which the parties had decided upon for themselves in a building contract see eg the decisions of this court in Anwar Siraj and another v Teo Hee Lai Building Construction Pte Ltd 2003 1 SLR R 394 at 16 and Eltraco International Pte Ltd v CGH Development Pte Ltd 2000 3 SLR R 198 Eltraco at 30 The bid price or other terms of the contract would in all probability have been influenced by the mode of provision of security viz a performance bond as opposed to a cash deposit As with all contracts the parties should abide by the bargain that they have struck The perennial tension 26 As alluded to above what we term the perennial tension characterises the at least potential diametrically opposed relationship between the beneficiary and the obligor in the context of performance bonds 27 On the one hand there is ample reason for allowing injunctive relief for the obligor on the grounds of unconscionability Calls made in bad faith on a performance bond would result in the beneficiary receiving something that he was not entitled to and would instead damage the liquidity of the obligor who would have to compensate the issuer of the bond It was in part this concern that a performance bond could be used as an instrument of oppression that prompted the development of unconscionability as distinct from fraud as a ground justifying the grant of injunctions restraining a beneficiary of a performance bond from calling on that bond Indeed in the context of the construction industry in addition to the observations set out by this court in JBE at 11 and which were reproduced above at 18 the following observations of this court in GHL at 24 may also be usefully noted We agree that performance bonds are used frequently in the construction industry that they are provided by and to parties who deal at arm s length that the use of performance bonds has resulted in substantial benefits to the parties and also in savings that the courts should give effect to the intention of the parties and that the law in relation to performance bonds should be placed on a clear and unambiguous footing so that they could be accepted by parties whether in Singapore or abroad But with respect these are not the points involved with which we are concerned We are concerned with abusive calls on the bonds It should not be forgotten that a performance bond can operate as an oppressive instrument and in the event that a beneficiary calls on the bond in circumstances where there is prima facie evidence of fraud or unconscionability the court should step in to intervene at the interlocutory stage until the whole of the circumstances of the case has been investigated It should also not be forgotten that a performance bond is basically a security for the performance of the main contract and as such we see no reason in principle why it should be so sacrosanct and inviolate as not to be subject to the court s intervention except on the ground of fraud We agree that a beneficiary under a performance bond should be protected as to the integrity of the security he has in case of non performance by the party on whose account the performance bond was issued but a temporary restraining order does not prejudice or adversely affect the security it merely postpones the realisation of the security until the party concerned is given an opportunity to prove his case per Chan Sek Keong J in Chartered Electronics Industries Pte Ltd v Development Bank of Singapore 1992 2 SLR R 20 at p 31 of the transcript see 20 supra at 37 Two learned commentators have also perceptively observed in a similar vein thus see Quentin Loh Tang Hang Wu Injunctions restraining calls on performance bonds is fraud the only ground in Singapore 2000 LMCLQ 348 at p 353 In the construction industry the provision of a performance bond can leave the principal at the mercy of an unscrupulous beneficiary In certain cases it is not unforeseeable that an abusive call may effectively cripple the principal financially Arbitration or litigation is expensive business An abusive call may render the principal insolvent or incapable financially to proceed to arbitration or litigation a fortiori if the principal s directors have executed counter indemnities in their personal capacities and these have also been called upon by the guarantor The principal would have to give up legitimate claims due to the fact that it is financially incapable of mounting an arbitration or litigation proceedings to recover what is due to him A tactical call on a performance bond would probably force the principal either to give up his claim entirely or to settle the claim unfavourably emphasis in italics in original emphasis added in bold italics 28 It might be thought that since such an injunction is only meant to subsist until resolution of the substantive issues by a court or arbitral tribunal that the harshness of the remedy can be mitigated by its reversibility should the merits of the case shift in favour of the beneficiary at the substantive hearing In any event it would appear that the beneficiary is not bereft of a substantive remedy and if he has a good claim to relief he would receive it eventually In this respect Chan Sek Keong J held in the important Singapore High Court decision of Chartered Electronics Industries Pte Ltd v Development Bank of Singapore 1992 2 SLR R 20 as follows at 37 A temporary restraining order does not affect the security nor the beneficiary s rights in it It merely postpones the realisation of the security until the plaintiff is given an opportunity to prove his case This is probably true of other interim injunctions to restrain calls on performance bonds but we should not be so quick to say that the same reasoning can be applied in its entirety to the context of performance bonds in the construction industry Liquidity or cash flow is particularly important to participants in the construction industry and as we observed in JBE at 11 reproduced above at 18 the construction industry has developed several mechanisms to effect the quick resolution of disputes related to progress payments 29 Looking at the other side of the coin so to speak whilst we noted in that case that considerations of liquidity were often of crucial significance to the obligor the deprivation of the beneficiary s right to call on the performance bond could equally well be very detrimental to its liquidity as well as detrimental to its prospects pending the resolution of the substantive dispute 30 The perennial tension that exists as set out in the preceding paragraphs has been succinctly captured in the following observation in a leading work see Peter Ellinger Dora Neo The Law and Practice of Documentary Letters of Credit Hart Publishing 2010 Ellinger Neo at pp 325 326 The right message should be communicated that the courts will not condone any form of dishonesty or unconscionable behaviour on the part of beneficiaries On the other hand much has been said in the courts about the importance of the principle of autonomy in international commerce It is vital that contracting parties in international and national transactions should be able to rely on the integrity of a bank s promise to pay upon an independent guarantee regardless of disputes in the underlying contract The argument that the principle of autonomy is not as important in performance bonds as in commercial credits might appear an attractive one but it must be examined with caution A counter argument is that an injunction should not be granted lightly even in relation to an independent guarantee as this would put the beneficiary in precisely the position he sought to avoid by asking for an independent guarantee in the first place that he can be paid first and talk later It should be noted that the beneficiary might sometimes have sacrificed a stronger position when he agreed to take an independent guarantee An example might be in the case of a repayment guarantee or a warranty guarantee in the construction industry where the beneficiary might have been entitled to hold on to the retention money had he not been persuaded to substitute this for an independent guarantee When the primary rationale for procuring an independent guarantee in the beneficiary s favour is considered it would seem that autonomy is equally important in independent guarantees as in commercial credits and that a case can be made for the law to confine exceptions to the autonomy principle to a narrow limit emphasis added 31 It is clear from the perceptive observations just quoted in the preceding paragraph that a balance needs to be struck Hence whilst there are persuasive reasons why in addition to fraud unconscionability may in an appropriate case result in the grant by the court concerned of an injunction restraining a beneficiary of a performance bond from calling on that bond the actual grant of such injunctions should be kept within a very narrow compass In this regard the following observation by the writers just quoted is particularly apposite see Ellinger Neo at p 325 The decisions suggesting unconscionability and lack of faith as an exception to the autonomy principle in cases involving independent guarantees have done so in the context of an application for an injunction to restrain a claim on the guarantee This leaves to the courts the responsibility for assessing the presence of these factors a task which though uncertain the courts are more equipped to perform than the issuer emphasis added Critique of the unconscionability exception 32 Prof Enonchong has pointed to a number of possible pitfalls with the unconscionability exception see generally Enonchong s article at pp 104 105 and Enonchong s book at paras 7 32 7 35 and has therefore concluded that notwithstanding the advantages that it brings see Enonchong s article at pp 103 104 and Enonchong s book at paras 7 30 7 31 the English courts ought not to adopt such an exception The learned writer has three main arguments These arguments are important as if they are persuasive the task of the courts in applying the unconscionability exception would be rendered invidious at best and impossible at worst 33 The first argument is that recognition of the exception may lead to easy availability of injunctions restraining calls on demand guarantees and that there would be a concern that easy availability of injunctions would destroy confidence in performance bonds as the equivalent of cash in hand and undermine their utility as the lifeblood of commerce see Enonchong s article at p 104 and Enonchong s book at para 7 34 This is a very valid concern that has already been referred to and which we addressed above at 23 24 see also below at 37 40 in the context of our view that unconscionability must be applied in a nuanced manner Indeed the learned writer proceeds to observe that i t is perhaps for this reason that the courts in Singapore now appear to be attempting to roll back the ground covered by the unconscionability exception see Enonchong s article at pp 104 105 and Enonchong s book at para 7 34 With respect this fact of a limited application of the unconscionability exception is itself ambiguous The key question is whether or not such limited application has been arrived at in a principled manner having regard to the facts of the case at hand a crucial point to which we shall return below see 39 40 Reference may also be made to a recent article where the learned writer observes as follows see Kelry C F Loi Two Decades of Restraining Unconscionable Calls on Performance Guarantees From Royal Design to JBE Properties 2011 23 SAcLJ 504 Loi at pp 508 509 One could conceivably suppose that the response to Prof Enonchong s objection might have been that a performance guarantee unlike a letter of credit which comprises the mode of payment of price for goods or services is not the lifeblood of commerce as it merely security against damages for defective performance In any case although the recognition of unconscionability as an additional ground of relief apart from fraud means relief would be more readily available that is not to say that injunctive relief would be easily or readily available not unless unconscionable behaviour were rampant amongst beneficiaries of performance guarantees and provable on strong evidence Furthermore confidence in and utility of commercial instruments such as performance guarantees cannot possibly be promoted by habitual judicial enforcement of unconscionable payment demands made under oppressive circumstances emphasis in original 34 The second argument is that recognition of the unconscionability exception may lead to the courts getting involved in disputes arising from the underlying contract when such disputes should be resolved in separate proceedings and in accordance with any arbitration or jurisdiction clause in the underlying contract see Enonchong s article at p 105 and Enonchong s book at para 7 35 This possible pitfall was precisely what the Judge anticipated in the present case and he dealt with it if we may say so in a very appropriate and practical manner see the GD especially at 29 We must also emphasise the prima facie nature of the inquiry as elaborated on below in 40 In addition reference may also be made to the article cited in the preceding paragraph in which the learned author observes as follows see Loi at pp 510 511 However formidable this objection by Prof Enonchong might originally have been it must have lost all traction when Anglo American law took that first step upon the slippery slope many decades ago when recognising fraud as an exception to the autonomy principle Whatever commercial value might be attached to the autonomy principle just as the courts will not countenance the law and the court s own offices being perverted into instruments of fraud the courts will likewise not allow the law or its offices to become instruments of unconscionable conduct In Enonchong s book the learned author argues at para 7 35 that the whole point of a performance bond is to provide the beneficiary with payment pending resolution of disputes and is therefore a mechanism of risk allocation This may be true but as we observed on numerous occasions see above at 27 29 and below at 39 see also JBE at 11 and GHL at 24 the lack of liquidity can have very drastic consequences on parties in the construction industry Therefore if an unconscionable call on a performance bond is made pending the resolution of the substantive dispute between the parties ostensibly to provide the beneficiary with cash in hand in the meantime that call itself might suffice to leave the obligor high and dry and cripple its ability to defend itself in the resolution of that substantive dispute 35 The third argument is that unconscionability is an imprecise and vague ground for relief and that i f recognized it will inject considerable uncertainty in an area of commercial activity where clarity and certainty are highly valued with the result that s uch uncertainty would increase litigation on the enforceability of demand bonds and deprive them of their unique quality as the equivalent of cash see Enonchong s article at p 105 and Enonchong s book at para 7 33 This concern whilst a valid one is in our view far too pessimistic As has already been pointed out above see Ellinger Neo at p 325 and quoted above at 31 the courts are equipped to ascertain whether or not there has been unconscionability though cf Loi at pp 512 514 and 515 516 While it is generally desirable to have crisp definitions of legal doctrines to guide behaviour we do not think that relief for unconscionable conduct should be categorically rejected simply because a neat and tidy definition of the same is not forthcoming 36 As will be discussed below at 41 broadly speaking unconscionability is a label applied to describe unsatisfactory conduct tainted by bad faith A precise definition of the concept would not be useful because the value of unconscionability is that it can capture a wide range of conduct demonstrating a lack of bona fides The beneficiary of a performance bond is in a position of strength in relation to the obligor From the beneficiary s point of view its position is similar to having cash in hand since the bank is compelled to pay the beneficiary upon the beneficiary s call But from the obligor s point of view the importance of liquidity to the construction industry and the spectre of an unexpected call on the performance bond would appear to leave it in an arguably more uncertain position than if it had given cash up front Had the obligor given cash up front it would be out of pocket but it would not be faced with the insecurity of a call on the performance bond by the beneficiary at an unspecified time Therefore it is particularly important that the concept of unconscionability be flexible enough to capture a range of conduct all of which share the common undertones of bad faith The beneficiary notwithstanding that he had bargained for the performance bond is uniquely placed to inflict economic harm on the obligor if acting in bad faith 37 Although unconscionability itself may not carry a precise definition from the beneficiary s point of view what constitutes unconscionable conduct should be reasonably apparent It is probably very difficult to negligently act in bad faith especially where positive action is required for a call on a performance bond If the beneficiary s call on the bond is motivated by improper purposes or such a call cannot be justified with clear evidence or in any other situation where the beneficiary is less than certain about his entitlement to call on the bond and for what amount the beneficiary ought to take a step back and re examine its entitlement and conduct prior to calling on the bond Unfairness is also an element of unconscionability see below at 42 43 and the question as to whether or not notice was afforded to the obligor of his alleged breach before the beneficiary s call on the bond would also be a relevant consideration 38 In any event Prof Enonchong s concern that unconscionability is a vague ground of relief is not an argument for the proposition that unconscionability should not be a ground of relief Everything hinges on the manner of its application As mentioned above at 33 the unconscionability exception must be applied in a principled manner having regard to all the facts of the case at hand This brings us back full circle to the crucial point which we have already referred to and to which we now turn that unconscionability must be applied in a nuanced manner in order that a balance may be struck between preventing the abusive calling on performance bonds on the one hand and the undermining of the very raison d être of performance bonds on the other Resolving the tension the importance of a high threshold for establishing unconscionability 39 In the final analysis it is a fact of commercial life that the tide of liquidity needs to wash both ways and financial droughts can be equally detrimental to both the beneficiary and the obligor Bearing this in mind and also the fact that the parties had by the performance bond themselves allocated the burden of risk we think that the appropriate balance should be struck in the manner referred to above at 20 22 Put simply there ought to be a high threshold which requires a strong prima facie case of unconsionability to be established before an injunction would be granted by the court to restrain a beneficiary of a performance bond from calling on that bond As this court observed in Eltraco at 30 i t is important that the courts guard against unnecessarily interfering with contractual arrangements freely entered into by the parties as t he parties must abide by the deal they have struck In this regard we would emphasise once again that the whole context of the case must support such a finding see also above at 21 It was also observed by this court in Eltraco at 31 that i n determining whether a call on a bond is unconscionable the entire picture must be viewed taking into account all the relevant factors This is undoubtedly true as it is also for most areas of the law but this present appeal throws into sharp relief the reasons why this should be so Simply put the nuanced application of unconscionability will enable the court to avoid using it as a blunt legal instrument that would erode or undermine the very raison d être of performance bonds 40 It is the prima facie nature of the burden that adds thickness to the thin normativity of the Eltraco statement in the realm of injunctions restraining calls on performance bonds It is precisely because the court is not required to decide on the substantive entitlements of the parties to enforce their rights and not required to engage in a protracted consideration of the merits of the case that it is all the more important that the overall tenor and entire context of the conduct of the parties support a strong prima facie case of unconscionability A prima facie strong piece of evidence does not make a strong prima facie case since the court in interlocutory proceedings is not in a position to determine the reliability and probative value of that piece of evidence at the point of granting the injunction Furthermore without the benefit of full argument on the merits the court would be hard pressed to place the seemingly strong piece of evidence in its correct location in the overall picture of the case Therefore although we arrived at the same conclusion as the Judge and were of the opinion that the injunction should remain we only came to this decision after considering and taking into account a far broader

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  • Hytech Builders Pte Ltd v Tan Eng Leong and another[1995] 1 SLR(R) 576; [1995] SGHC 85
    business for the plaintiffs He left word with Mr Andre Yeap that the drafts when ready should be sent to Mr Yan Kum Seng Mr Tan Kim Seng another director of the plaintiffs and Mr Tan for their comments before sending them to the Taiwanese side 20 Mr Yeap prepared the documents for Contract 220 in the names of Kung Sing and Sinbelco and on 13 May sent the drafts to Sinbelco marked for the attention of Mr Yan Mr Yan writing under the letterhead of the plaintiffs acknowledged receipt of the drafts and raised certain queries 21 On 15 May Mr Tien of Kung Sing came with the news that the closing date for tenders for Contract 206A was earlier than had been expected and there was need to finalise the documents urgently Priority was to be given to this contract So the next day he Mr Tan and others went to see Mr Andre Yeap Mr Tan instructed Mr Andre Yeap to draft the documents in the name of Kung Sing the plaintiffs and Hock Lian Seng This was duly done and the documents consisting of a technical collaboration agreement and a deed were executed on 17 May Mr Tan signed for the plaintiffs 22 Unfortunately Dorts rejected the technical cooperation agreement according to Mr Seok for the following reasons a Dorts would allow only one foreign participant b the plaintiffs did not meet the requirements of Dorts Hock Lian Seng alone could satisfy all the requirements of Dorts On 20 May on Mr Ng s instructions Mr Andre Yeap redrafted the technical collaboration agreement with the inclusion on the Singapore side of only Hock Lian Seng s name However the previous position of the three parties ie Kung Sing the plaintiffs and Hock Lian Seng was to be preserved and this was done in the form of a supplemental deed to be signed by the three parties The fresh technical collaboration agreement and supplemental deed were signed on 20 May after some initial difficulty in getting Mr Lim Peng Kiat to attend He was not very happy about Hock Lian Seng being the sole signatory of the technical collaboration agreement and carrying sole responsibility up front 23 I should mention at this point that the deed provided for the payment by Kung Sing to Hock Lian Seng and the plaintiffs of 1 25 of the successful tender price the 1 25 amounting to an estimated S 1 5m The payment was to be made as follows 40 within 14 days of the award of the contract by Dorts 20 within three months thereafter and the remaining 40 in four instalments at three monthly intervals thereafter 24 Mr Andre Yeap had asked Mr Tan how the amount was to be shared as between Hock Lian Seng and the plaintiffs Mr Tan told him that he would leave it to Mr Ng to speak to Mr Lim Peng Kiat the boss of Hock Lian Seng as Mr Ng knew him well and had been instrumental in getting Hock Lian Seng to come in So the point was left open in the deed and supplemental deed Contract 220 Events of 21 May 25 On 20 May Contract 220 was also discussed The closing date for this contract was 23 May and Kung Sing was pressing for the documentation to be concluded Mr Ng was still away On the next day the meeting continued at Allen Gledhill 26 As Mr Tan tells it he was working under great pressure that day First he had been unable to get the Belgian partners to agree to the use of Sinbelco s name Secondly Hock Lian Seng were rather unhappy over the fact that they had been the sole signatory in relation to Contract 206A and they were reluctant to join in Contract 220 and even threatened to pull out of 206A as well Mr Tan tried to get Antara Koh Pte Ltd whose experience with MRT work would qualify them for Contract 220 to come in but the shortage of time made it impossible for Antara Koh to come back with the necessary documents to send to Taiwan In all these troubles Mr Tan tried to enlist the help of his fellow director Mr Tan Kim Seng but the latter turned him down telling him to forget about Contract 220 since he could not get the consent of the Belgian partners Mr Tan says that it was under these circumstances that he decided to use his own company Evergreat as the contracting party 27 According to Mr Andre Yeap at one stage Mr Tan instructed him to use the plaintiffs name in place of Sinbelco in the technical collaboration agreement and to draft a deed with the plaintiffs and Hock Lian Seng as the contracting parties with Kung Sing However again according to Mr Andre Yeap Mr Tan retracted this idea as he thought it would be difficult to get the necessary certification from the MRTC or the Construction Industry Development Board CIDB showing the plaintiffs experience to meet Dorts requirements Mr Andre Yeap kept an attendance note to this effect Mr Tan however denied all of this He said that Evergreat s name was included to replace Sinbelco not to replace the plaintiffs He said that without the approval of the plaintiffs board he could not have included the plaintiffs name I have no doubt in my mind that Mr Tan s recollection on this point is quite faulty 28 The thrust of Mr Tan s evidence as I understand it is that his choice of Evergreat as a party to the technical collaboration agreement with Kung Sing was dictated by the pressure of events rather than being motivated by any male fide on his part 29 Mr Tan did manage to get the necessary documents about Evergreat s experience in the MRTC Contracts 103 and 103A from the offices of the plaintiffs with the help of Mr Yan He also managed to get the CIDB to give him at short notice on the same day a letter certifying Evergreat s experience with these two MRTC contracts The relevant part of the CIDB letter reads Evergreat Construction Co Pte Ltd is one of the leading civil and building contractors registered with the Construction Industry Development Board The company is a joint venture partner of Sinbelco Construction Pte Ltd who had successfully completed the design and construction of the following projects for Mass Rapid Transit Corp Singapore 1 MRT Contract 103 a Bishan Station and tunnels to Braddell b Contract sum 32 882 507 c Completed 30 January 1987 2 MRT Contract 103A a Braddell Station and tunnels to Toa Payoh b Contract sum 58 078 939 00 c Completed 8 June 1987 30 Mr Tien faxed these documents to his office in Taipei In his covering letter he added a caveat that the letter was for Kung Sing s own reference and was not to be shown to Dorts as it could easily be seen that there were two contracts involved meaning that only when the contract value of the two were added up would it meet the Dorts value requirements Kung Sing came back with the confirmation that Evergreat was indeed qualified to participate in Contract 220 31 In the meantime Mr Seok had succeeded in persuading Hock Lian Seng to change its mind and to sign the documents for Contract 220 So the technical collaboration agreement and the deed were each signed in the names of Kung Sing Hock Lian Seng and Evergreat Mr Tan signed for Evergreat The deed provided for the payment by Kung Sing of a flat sum of S 3m Of this S 1 2m was to be paid within 14 days of the award of the contract by Dorts S 600 000 within three months thereafter and S 1 2m in four three monthly instalments 32 According to Mr Andre Yeap whose evidence I accept he advised Mr Tan that Evergreat would be holding the rights and benefits of the contract for the plaintiffs Discussions followed as to how the benefits should be shared with Hock Lian Seng and as between Evergreat and the plaintiffs Mr Tan told Mr Andre Yeap that he would discuss these matters with the other directors of the plaintiffs in due course 33 On 8 June Evergreat was informed by Kung Sing that the tender for Contract 220 was successful and that representatives of Hock Lian Seng and Evergreat had to co sign the contract with Dorts in Taipei Subsequent events 34 Mr Ng had returned to Singapore from his Nigeria trip on 23 May However he did not ask Mr Tan about the progress made in the Dorts contracts during his absence Mr Tan himself had gone to Taipei on 22 May he returned to Singapore on 24 May and left for the United States on 26 May He did not return to Singapore until 11 June 35 Under the deed for both Contracts 206A and 220 Kung Sing was required to furnish to the Singapore parties a performance bond In the case of Contract 206A the bond was to secure the payment of the 1 25 of the contract sum which Kung Sing was required to pay the Singapore parties estimated at S 1 5m In addition the obligor would undertake to provide the Singapore parties with funds up to a maximum aggregate of S 5m as the Singapore parties might require to execute complete rectify modify or reconstruct any of the works and to secure up to that amount any loss or damage which either of the Singapore parties might suffer as a result of any breach of obligations by Kung Sing In the case of Contract 220 the corresponding amounts were 3m and S 10m 36 Kung Sing were having difficulty raising the performance bonds For Contract 220 Kung Sing proposed to deposit a sum of S 2 5m in a Singapore bank as security pending their production of the performance Mr Tan says that he discussed the proposal with Mr Chua Leong Hai of Hock Lian Seng and they agreed to accept it Kung Sing paid the sum of S 2 5m for Contract 220 on 14 June 1991 It was placed with Evergreat s solicitors Judy Loke and Mr Cheong on or about 16 June 37 On 28 June there was a board meeting of the plaintiffs According to the minutes of the meeting prepared by Mr Ng Mr Tan informed the board that Contracts 206A and 220 had been signed on behalf of the plaintiffs on 16 May and 21 May respectively In his evidence in court however Mr Tan said that he did not tell the board that the contracts had been signed on behalf of the plaintiffs He said I need not lie because so many people knew that I had signed 220 on behalf of Evergreat 38 In his affidavit of evidence in chief he said I informed the board that I had signed the deeds and technical collaboration agreements I did not specify the details I was under the impression that the board was aware that the deed and technical collaboration agreement for Contract 220 had been signed by me on behalf of Evergreat and not the plaintiffs because every one of us knew that the plaintiffs were not a qualified party and CFE had also not given their consent for Sinbelco to take part in the Taiwan projects I thought that the other directors had been informed by Mr Ng and Mr Yan Kum Seng I reported that there were no bonds from Kung Sing yet and thus there were no further progress since the signing of the technical collaboration agreement and deed I was referring to Contract 206A Mr Tan Kim Seng had already told me on 21 May to forget about Contract 220 39 It seems clear as Mr Tan himself says he did not tell the board that Evergreat s name had been used for Contract 220 He gave precious little information about the contract It is also clear that he did not tell the board about the very recent receipt of the 2 5m cash from Kung Sing which he clearly knew about 40 Between 23 July and 5 August Mr Ng had several telephone conversations with Mr Lim Peng Kiat of Hock Lian Seng who hinted to him that payments for both contracts had been received On 10 August Mr Ng telephoned Mr Tien of Kung Sing in Taiwan He was told that Hock Lian Seng had been paid a sum of 520 685 and Evergreat had been paid 1m for Contract 220 Mr Ng was quite shocked and told the other directors of the plaintiffs about this They decided to call a board meeting to confront Mr Tan This was duly held on 24 August 41 At this meeting Mr Tan admitted for the first time that he had got Contract 220 to be signed in the name of Evergreat instead of the plaintiffs He also admitted that Evergreat had received 1m under the contract However he refused to give further details The board then decided to refer the matter to solicitors 42 Mr Tan was subsequently removed as a director of the plaintiffs at a board meeting on 19 October The key issue 43 The core issue in this case is whether Mr Tan having procured Contract 220 for his company Evergreat is accountable to the plaintiffs for the benefits of the contract 44 In essence the plaintiffs case is that Mr Tan diverted a business opportunity to his own company without the consent and approval of the plaintiffs and should be held to account Mr Tan s defences 45 Mr Tan s defence is that firstly the information about Contract 220 was that of Sinbelco and not the plaintiffs The defendants contend that when Mr Leong referred the matter to Mr Chin it was meant for him as a friend and not as a director of the plaintiffs They point out that when the parties met on 19 April 1991 it was obvious straightaway that the plaintiffs did not qualify as they did not meet the requirements of Dorts That was the reason why Mr Ng mentioned Sinbelco In addition Mr Seok gave evidence that he had been told by Mr Ng at that first meeting that Mr Ng was the general manager of Sinbelco and Mr Seok was satisfied that Mr Ng had the authority to discuss the proposal with Mr Seok Mr Seok relayed the information to Kung Sing who then prepared powers of attorney authorising Mr Tien to deal with Sinbelco The draft agreement dated 10 May which Mr Ng handed to Mr Andre Yeap described Mr Ng as the acting project manager of Sinbelco and show Mr Ng as the person to sign for Sinbelco The defendants therefore contend that the information about the Dorts contracts was received by Mr Ng for Sinbelco The defendants also submit that it was clear that at the board meeting of 29 April it was decided by the plaintiffs that Sinbelco was to be the contracting party So whatever the initial position might be the effect of this decision is that the plaintiffs had renounced the plaintiffs right to the information if there had ever been such right 46 The plaintiffs evidence was as follows Mr Chin said that when he referred Mr Leong to Mr Ng it was with a view to the plaintiffs being interested in the business and he introduced Mr Leong to Mr Ng as the plaintiffs general manager This is confirmed by Mr Ng Mr Leong s evidence is that he had known Mr Chin from the time he Mr Leong was an engineer in the Housing Development Board and Mr Chin was a contractor He knew that Mr Chin s firm was a member of the plaintiffs and that the plaintiffs were involved as a party in an MRTC project That was the reason why he asked Mr Chin if Mr Chin would be interested 47 Mr Ng s evidence is that when Mr Leong first approached him in early April he was approached as a representative of the plaintiffs This is confirmed by the faxes which Mr Ng sent to Mr Leong dated 4 6 and 8 April under the plaintiffs name setting out the experience of the plaintiffs in MRTC Contracts 103 and 103A At the meeting of 9 April with Mr Seok and Mr Leong he knew that the plaintiffs could not meet the Dorts requirements Mr Seok and Mr Leong had assured him that all that was needed was just a name that had the experience that would satisfy the Taiwanese requirements Mr Ng proposed the use of the Sinbelco s name only as a front to satisfy the Taiwanese side but it was the intention that the real benefits of any contract would go to the plaintiffs although of course Sinbelco s consent to the use of its name would be needed This is the reason why para 5 of the minutes of that meeting contains the words using Sinbelco s past job reference for the pre qualification purpose only 48 It was Mr Ng s evidence that the contracts would be a plum job for the plaintiffs with great rewards but with not much burden on the plaintiffs part 49 Mr Ng confirmed the correctness of the minutes of the board meeting of 29 April The directors of the plaintiffs other than Mr Tan who attended that meeting ie Mr Chua Thuan Koon Mr Chin Foo Yun and Mr Tan Kim Seng all confirm the substantial correctness of those minutes Mr Tan Kim Seng in particular also confirm that it was his understanding of the board meeting of 29 April that the plaintiffs would merely use the name of Sinbelco but that the plaintiffs remained interested in the

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  • Law Society of Singapore v Khushvinder Singh Chopra[1998] 3 SLR(R) 490; [1998] SGHC 313
    complainant or Silva It was the respondent who initiated this move The inference that one can reasonably draw was that the respondent intended to insulate the three vendors from the complainant s solicitors M s Bannir Associates 21 The gist of the supplementary agreement summarised by the Court of Appeal without setting it out in full was this at 45 Arising from the discussions the respondent had with Rajendran the respondent prepared the supplemental agreement which was signed by the three vendors The supplemental agreement in so far as material was as follows It was expressed to be made supplemental to the option and recited that for a consideration of 12 000 the option was granted by all the appellants to the respondent to purchase the property at the price of 1 200 000 It recited also that the option was exercised on 25 October 1993 and the respondent paid to the Vendor ie the three vendors the deposit of 108 000 and that the respondent agreed to pay to Rajendran a sum of 50 000 on 24 April 1994 There were only three principal provisions The first was that in consideration of Rajendran waiving the payment of 50 000 the respondent agreed to pay a further sum of 50 000 towards the purchase price thus increasing the price to 1 250 000 The second provision was that early possession was to be given ie on 24 March 1994 which was before completion and the three vendors agreed to the respondent carrying out renovations in the property The third provision was that the deposit of 108 000 paid to the Vendor by the Purchaser on the 26th day of October 1993 was to be held by the three vendors solicitors as stakeholders pending completion and the deposit was to be released only on certain conditions one of which was the three vendors procuring the withdrawal of the caveat no CV 5037D lodged by or on behalf of Ravi and Pushparanee and other caveats if any lodged against the property by third parties 22 Apart from the supplementary agreement the respondent also persuaded the vendors to sign a statutory declaration affirming the supplementary agreement This was done on 8 December 1993 when the respondent arranged for a meeting with them before taking them to the High Court to affirm the declaration Before the Commissioner for Oaths the declaration was explained to the complainant in Tamil who gave his indication that he understood the contents contained therein The Commissioner of Oaths pointed out in the course of explaining the contents of the declaration to the complainant that the declaration was entirely disadvantageous to him but for some unexplained reasons the complainant nevertheless agreed to affirm it 23 The Court of Appeal in the same decision found that the declaration was wholly bias and one sided for the benefit of the respondent The gist of the declaration was to in the words of L P Thean JA who delivered the judgment of the court secure to himself a cast iron case to uphold the validity and integrity of the supplementary agreement and the option at 65 The relevant parts of the declaration read 1 That we the three vendors had on 14 October 1993 in consideration of the sum of Singapore Dollars Twelve Thousand S 12 000 00 paid to us by the respondent holder of NRIC No 1591657 E of No 1 Sennett Avenue East Coast Hill Singapore hereinafter called the Purchaser granted to the Purchaser an Option hereinafter called the Option for the purchase of the property known as No 91 Jalan Seaview Singapore at the price of Singapore Dollars One Million Two Hundred Thousand S 1 200 000 00 We acknowledge the same to be valid and binding on all parties to the same 2 That the reason I the complainant did not put my signature to the Option at the time the same was granted was because I had authorised Rajendran my son and Silva my daughter in law to represent me and to act on my behalf in all matters concerning the negotiation and granting of the Option to the respondent 3 That the Purchaser did on 26 October 1993 pay to us the balance deposit of Singapore Dollars One Hundred and Eight Thousand S 108 000 00 in exercise of the Option which is being held by the solicitors as stakeholders 4 That the Purchaser did by Acknowledgements both dated 14 October 1993 agree to pay to us the sum of Singapore Dollars Fifty Thousand S 50 000 00 by the 24th day of April 1994 5 That the Purchaser did by a Supplemental Agreement hereinafter the Supplemental Agreement dated 22 November 1993 agree to the variation of several of the terms in the Option 6 That we had carefully read the Option and Supplemental Agreement before execution of the same and confirm that we fully understand the contents therein and did voluntarily enter in these transactions described in the Option and the Supplemental Agreement for our benefit 7 8 That there was never at any time in relation to the Option and or the Supplemental Agreement any impropriety or undue influence whatsoever by the respondent who had himself fully informed us of all the material facts including in particular divulging prior to the execution of the Option all circumstances relating to the then contemplated ex gratia payment by the respondent to Rajendran of a sum of S 50 000 00 and including fully and frankly disclosing his personal interest in the transaction and advising us of his conflict of interest and his advice therefore to seek independent legal advice before executing the Option and the Supplemental Agreement and we satisfied ourselves as to the fairness of the transaction the price and other terms thereon 9 24 It was only after the declaration was affirmed that the respondent brought the vendors to see one Mr Murugaiyan an advocate and solicitor to advise them as to the contents of the declaration It was also only then that Mr Murugaiyan realised that the vendors were already represented by M s Bannir Associates and advised them to seek the advice of the latter instead We asked why the vendors were brought to seek independent legal advice only after the statutory declaration was affirmed and the reply was because it was late in the afternoon and the vendors and the respondent wanted to affirm the declaration before the Commissioner of Oaths office closed for the day Counsel for the respondent submitted that this lack of forethought was because the respondent was anxious to resolve his dispute with the vendors 25 The supplementary agreement was consequently annulled by the Court of Appeal on the basis that it was procured by the undue influence of the respondent The court found that as a result of the vendors not being advised of the consequences and implications of the supplementary agreement or the statutory declaration or being asked to seek independent legal advice prior to the execution of the documents the two said agreements could not be enforced and were invalid The statutory declaration now formed part of the charge against the respondent 26 This brings us to the letter of complaint filed by the complainant against the respondent as a result of what we set out above In the letter the complainant sought the assistance of the Law Society in what he termed the wrong done to him by the respondent The Council of the Law Society referred the complaint to the Inquiry Panel and this subsequently resulted in three charges being brought against the respondent by the Law Society which were considered and determined by the Disciplinary Committee The respective members of the Disciplinary Committee consisted of Mr Joseph Grimberg as the chairperson and Mr Woo Tchi Chu Mr Roy Neighbour and Mrs Yvonne Goh 27 The respective charges were A That you Khushvinder Singh Chopra are guilty of grossly improper conduct in the discharge of your professional duty within the meaning of s 83 2 h of the Legal Profession Act Cap 161 in that you between 14 October 1993 and 25 October 1993 both dates inclusive while attempting to purchase the property known as 91 Jalan Seaview Singapore 1543 for yourself purported to act as solicitor for the vendor the complainant and for yourself in the same transaction and purported to bind the complainant to the attempted sale to yourself even though the said complainant had not at any time instructed you to represent him in any such sale to you and had not in fact entered into any such sale to you nor authorised any person to do so on his behalf B That you Khushvinder Singh Chopra are guilty of grossly improper conduct in the discharge of your professional duty within the meaning of s 83 2 h of the Legal Profession Act Cap 161 in that you between 14 October 1993 and 25 October 1993 both dates inclusive whilst attempting to purchase the property known as 91 Jalan Seaview Singapore 1543 for yourself purported to act as solicitor for the vendors of the said property the complainant Rajendran and Silva and yourself in the same transaction and thus allowed a conflict of interest to arise without ensuring that the vendors had sought independent legal advice C That you Khushvinder Singh Chopra are guilty of grossly improper conduct in the discharge of your professional duty within the meaning of s 83 2 h of the Legal Profession Act Cap 161 in that you after you had ceased to act or purportedly to act for the complainant in the attempted sale of his property 91 Jalan Seaview Singapore 1543 to you and despite knowing that at all material times he had instructed other solicitors to represent him communicated and or met with the said complainant in the absence of his solicitors to procure the execution by the complainant of a Statutory Declaration dated 8 December 1993 which was drafted by you and or by your servants agents without reference to the solicitors of the said complainant and without first advising the complainant of the legal consequences of the said Statutory Declaration and or affording him a reasonable opportunity to seek independent legal advice the intent and effect of which Statutory Declaration was to inter alia i uphold the integrity and validity of the option purportedly entered into between you the complainant Rajendran and Silva on or about 14 October 1993 and the Supplementary Agreement dated 22 November 1993 so as to bind the complainant Rajendran and Silva to the attempted sale to yourself on the terms of the said option and Supplementary Agreement ii absolve you of allegations of fraud and impropriety contained in the complainant s letter of complaint to the Law Society dated 11 November 1993 28 At the hearing before the Disciplinary Committee the respondent conceded that he was liable to some form of disciplinary action for charges A and C but took issue with charge B in consequence of which the Disciplinary Committee considered charge B first before moving to charges A and C in the DC report The Disciplinary Committee s findings in the DC report 29 The Disciplinary Committee came to the conclusion that charge B against the respondent namely that of putting himself in a position of conflict of interest without ensuring that the vendors had sought independent legal advice was made out Accordingly the respondent was found guilty of grossly improper conduct in the discharge of his profession duty within the meaning of s 83 2 h of the Legal Profession Act The gist of the decision was summarised from 47 to 49 of the Disciplinary Committee report Law Society of Singapore v Khushvinder Singh Chopra 1998 SGDSC 4 the Disciplinary Committee emphasising that their decision was consistent with the Court of Appeal s decision in the same respect 47 Applying the principles to which we have referred we have little hesitation in concluding that the respondent should at least have made it clear to Rajendran and Silva at the outset of his meeting with them at 11 45pm on the night of 13 October 1993 that he would not act for them in the proposed sale unless the vendors took independent advice 48 It is manifest from the facts we have recited that the respondent s interests were inimical to those of the complainant Rajendran and Silva He was determined to pay as little as he could for the property they to secure the highest price possible Vigorous bargaining took place over two hours late at night and into the early hours of 14 October 1993 the parties reaching a consensus by approaching the agreed consideration from opposite ends of the price spectrum The respondent obtained in the option terms no less favourable to the vendors than they had secured under the earlier option in the aborted sale Moreover he did so against the background as counsel for the respondent conceded of a strong property marked sic Indeed on the very day the respondent secured the option the vendors were offered S 50 000 more for the property by Ravi and his wife 49 On no account can it be said of the respondent in this case that he could have felt assured of holding the scales evenly between himself and his clients This was not an exceptional case such that the respondent should have done otherwise than either to have ceased to act for his clients or ensured that they took independent advice Instead he persisted in continuing to represent the vendors until after he had purported to exercise the option on 25 October 1993 by which time we find the respondent must have known that the complainant at least was unwilling to sell at the price of S 1 25m In addition so the Court of Appeal found by 25 October 1993 the respondent had taken legal advice on the matter and knew fully well that as a purchaser he was in a vulnerable position and that the purported sale could or would be likely to be successfully impugned 30 In so far as charge A was concerned the Disciplinary Committee felt however that a reprimand per se in line with the respondent s concession was sufficient It was felt that there was insufficient evidence before the committee to warrant the charge being made out The Disciplinary Committee made the following observation at 65 of their report We have come to the conclusion that having regard to the burden of proof required of professional bodies in disciplinary proceedings against their members it would be unsafe for us to find the respondent guilty under either limb of charge A Having said that we have no doubt that he was professionally remiss in failing to make any attempt to obtain the complainant s signature to the option We find that this failure arise from the respondent s unseemly anxiety to close the deal over the property but we draw back from any determination imputing dishonesty to the respondent with regard to the aspect of his conduct covered by Charge A 31 Finally with regards to charge C the Disciplinary Committee decided that cause of sufficient gravity existed for disciplinary action against the respondent s conduct Again reliance was placed on the Court of Appeal s decision which held that the supplementary agreement and statutory declaration were obtained by the undue influence of the respondent without the benefit of independent legal advice for the vendors Further the committee found that the two agreements could only be to validate the option and to protect the respondent against any allegations of fraud or impropriety on his part as alleged by the complainant Council of the Law Society s decision 32 The Council of the Law Society the Council subsequently considered the Disciplinary Committee s report In so far as charges B and C were concerned the Council took no further issue and applied under s 94 1 of the Legal Profession Act for an order calling the respondent to show cause However the Council disagreed with the Disciplinary Committee s recommendation with respect to charge A As a result pursuant to s 94 3 b of the same Act the Council proceeded to make an application under s 98 calling upon the respondent to show cause for that charge 33 Counsel for the Law Society explained this course of action taken by the Council in his affidavit before us Putting it briefly the Council felt that the Disciplinary Committee erred in considering that there was insufficient evidence before them to find the respondent guilty of charge A Having regard to all the circumstances of the case and the two decisions arising out of the High Court and the Court of Appeal the Council felt that there was sufficient evidence before the Disciplinary Committee which warranted them finding that there existed cause of sufficient gravity for disciplinary action under s 83 of the Legal Profession Act At paras 23 to 26 of his affidavit counsel for the Law Society explained 23 The Law Society is of the view that there was sufficient material before the DC to warrant a finding that the respondent could not reasonably have believed that Rajendran was properly authorised However the DC examined this from a purely subjective viewpoint and on this the Law Society submits the DC erred 24 In any case the gravamen of charge A concerns more than merely whether the respondent believed as of the 13 October 1993 that he and Rajendran had the requisite authority As stated above there is an additional and crucial question namely whether he knew by 25 October 1993 when he purported to exercise the option and purported as the three vendors solicitor to pay the balance of the option moneys into the three vendors client account that the complainant did not wish to proceed with the sale to him in circumstances where the complainant had not himself instructed the respondent to represent him had not signed the option and had not conferred ostensible authority on anyone to do either of the aforesaid on his behalf 25 It had been submitted on behalf of the Law Society to the DC that all three charges were concerned with the conflict between the respondent s duty as an advocate and solicitor of the Supreme Court and his personal interest as a prospective purchaser of the property and that charge A is properly meant to reflect an aggravated conflict This crucial point appears to have been overlooked by the DC It had further been submitted that the basic foundation of charge A is the same for charge B namely i the respondent was interested personally in purchasing the property from the complainant ii while attempting to purchase the property he purported to act as the solicitor for the vendor and for himself The resulting conflict was aggravated by a The fact that the complainant had never entered into the transaction he had never signed the option nor authorised nor held anyone out to be authorised to enter into the transaction on his behalf b the complainant had not authorised the respondent to act as his solicitor in the transaction and c by 22 October 1993 at the latest the respondent knew that the complainant did not want to sell the property to him Yet the respondent had sought to bind the complainant to the transaction on 25 October 1993 in the manner described in para 24 above It had been submitted to the DC that there was no sign at this stage of the respondent taking a step back and putting at the forefront his duty to his putative client to assess the strengths of his position vis a vis his client Instead he had insisted on asserting his own interest 26 In the light of the foregoing the Law Society is of the view that the DC in dealing only with the issue of whether the respondent subjectively believed he had authority on 13 October 1993 did not give any or sufficient consideration to the matters stated above A proper consideration of all these matters would it is submitted have led to the DC to conclude that cause of sufficient gravity exists for disciplinary action in respect of charge A so that the respondent should be called upon to show cause Therefore the Law Society is proceeding under s 94 3 b of the Legal Profession Act to make an application that the respondent be called upon to show cause in respect of charge A The show cause proceedings 34 We therefore moved to consider the show cause proceedings in the light of the Disciplinary Committee and the Council s deliberations and findings Before dwelling into the depths of the respondent s actions we found it useful to set out some of the settled general applicable principles pertinent to the case at hand namely a solicitor s duty to his clients when both were involved in the same transaction The gist of the charges against the respondent was that he had intentionally acted against the wishes of his clients by forcing the vendors to sell their property to him and acting for them at the very same time thus placing himself in a serious conflict of interest situation Counsels on both sides referred to numerous cases but we needed only to refer to a handful for a feel of the law In the case of Law Society of New South Wales v Harvey 1976 2 NSWLR 154 Street CJ delivering the judgment of the Court of Appeal held at 171B A conflict of interest which is avoidable and ought to be avoided is that which arises from a deliberate proposal of the solicitor that his client deal with him If for example a client seeks aid or advice from a solicitor concerning lending or borrowing or the acquisition or disposal or dealing with assets the solicitor will disregard his primary duty as a solicitor referred to so trenchantly by Lord Westbury if he uses the occasion to become the party who deals with his client It can make no difference if he is not a party directly but the transaction is with a company in which he has an interest Even the tender of advice to his client to have independent legal advice although of importance does not really overcome the objection to the solicitor having proposed invited or encouraged the client to deal with him or his company in the proposed transaction We need not pause to analyse the differing problems which arise where the client rejects the advice to seek such independent advice and the solicitor continues to act or the client acts for himself or where he has independent legal advice either just for the transaction or has a permanent new solicitor In varying degrees the trust of and reliance upon the solicitor to act fairly and independently arising from the initial preparedness of the solicitor and client to trade may remain as the reason why the client ultimately deals with the solicitor and not somebody else It is difficult to be sure it does not In the absence of very special circumstances a solicitor who promotes himself as the dealer with his client misuses his position The price of being a member of an honourable profession whose duty to his client ought not to be prejudiced in any degree is that a solicitor is denied the freedom to take the benefit of any opportunity to deal with persons whom he has accepted as clients Therefore he ought neither to promote suggest nor encourage a client to deal with him but rather should take all reasonable steps positively to avoid dealing directly or indirectly with his client There are of course exceptional cases where the transaction may be in the special interest of a particular client but such cases will be isolated and need to be dealt with conscientious regard for the procedures referred to emphasis added 35 Law Society of New South Wales v Harvey 34 supra was a case where clients lent money to three companies where the solicitor was a director and shareholder of The court held that the solicitor was guilty of improper conduct as he had mixed his clients affairs with his own had grossly preferred his interests to those of his clients and had failed to advise his clients to seek independent legal advice 36 Law Society of New Sough Wales v Harvey 34 supra was subsequently followed in the case of Law Society of New South Wales v Moulton 1981 2 NSWLR 736 a similar case dealing with the misconduct of a solicitor who conducted business dealings with his clients There the solicitor borrowed money from his clients at a lower rate than he would otherwise have obtained if he had borrowed from a finance company The security given by the solicitor was inadequate to justify the loan and the solicitor failed to give full disclosure of the security given to the clients Hope JA delivering the judgment of the Court of Appeal had the following to say at 739F In cases such as the present one it is essential to remember indeed to emphasize that a solicitor stands in a fiduciary relationship to his clients If he is to have business dealings with them on his own account and in particular if he is to borrow money from them the requirements of the law are rigorous The need for that rigour is obvious Commonly to a great extent always to some extent the solicitor is in a position of special influence in respect of his client Clients must be able to rely upon the professional advice of their solicitor and to place him in the fullest confidence that he will protect them and handle their affairs in their interests When a solicitor wishes to borrow from a client the client must be put in a position to make a free and informed decision about the proposed transaction Since in these circumstances the interests of the client and of the solicitor can and generally must conflict the best and easiest way to achieve this result is to insist that the client have independent and informed advice If this does not happen a heavy burden indeed lies upon the solicitor to show that he has done everything in his power to protect the interests of his client and to ensure that the client is aware of every circumstances that is or might be relevant to his decision If a solicitor wishes to use his client s money to finance some business he is carrying on it is almost impossible to see how the client can be adequately protected and advised without insisting that he gets independent advice Moreover it must be borne in mind that many clients are not able effectively to decide whether an investment is a prudent one no matter what information is given to them and that the greater the trust of the client in the solicitor the greater is the need for independent advice where a conflict if interest may arise Because of Mr Moulton s evidence and the submissions made on his behalf it is also necessary to say that none of the propositions I have stated is new law they were not established for the first time by the decision in Harvey 1976 2 NSWLR 154 Indeed they are expressive of a standard of behaviour which members of the public should be entitled to expect without recourse to legal precedent of those whose probity as well as skill has been certified by the court It is no answer to a charge of professional misconduct in relation to transactions with his clients money that the solicitor did not appreciate that what he was doing constituted misconduct emphasis added 37 A case closer to the factual matrix of the present case was the very old case of Re Beard 1918 NZLR 202 where a solicitor proposed to purchase his clients property Without going into the details of the facts of the case Hosking J who delivered the judgment of the Court of Appeal laid down several principles in relation to solicitors entering into transactions with their clients At 206 it was held Before entering upon the facts in detail it is desirable to refer to the law which we consider relevant to the matter As the relationship of solicitor and client necessarily renders the solicitor more or less conversant with the client s private affairs and as the trust which the client comes to repose in the solicitor gives the solicitor a position of influence over the client the law in the interests of the profession and the public has in many ways sought to ensure that solicitors shall not abuse the confidence reposed in them Thus courts of equity have always examined with great strictness any transaction in the nature of a purchase by a solicitor of a client s property The law does not absolutely forbid a solicitor from acquiring property from his client but it does so relatively and the onus of supporting the transaction if it should be attacked lies upon the solicitor Lord O Hagan in Macpherson v Watt 1 states the position with great force If he the solicitor becomes the buyer of his client s property he does so at his peril He must be prepared to show that he has acted with the completest faithfulness and fairness that his advice has been free from all taint of self interest that he has not misrepresented anything or concealed anything that he has given an adequate price and that his client has had the advantage of the best professional assistance which if he had been engaged in a transaction with a third party he could possibly have afforded There must be uberrima fides between the attorney and the client and no conflict of duty and interest can be allowed to exist The cases in which the onus is cast on a solicitor to see that the client is put at arm s length comprise those in which a personal ascendancy or influence has been acquired over the client or in which the solicitor has gained some knowledge of the client s property in virtue of his having acted for the client or in which the circumstances of the transaction are such as to render it his duty to give advice or information to the client in regard thereto We thus summarize what is laid down by Lord Blackburn in the same case 1 In regard to the last ground he says 2 In Holman v Loynes 3 Lord Justice Turner mentions among the instances in which an attorney cannot be allowed to deal with his client without divesting himself of his character all cases in which the circumstances are such as to make it his duty to give advice to his client When that is the case he cannot make a bargain without putting himself as it has been commonly phrased at arm s length from his client From the very nature of things where the duty exists that he should give his client advice it should be disinterested advice The mere fact that you being in the circumstances which made it your duty to give your client advice have put yourself in such a position that being the purchaser yourself you cannot give disinterested advice your own interests coming in conflict with his that mere fact authorizes him to set aside the contract if he chooses so to do In Macpherson v Watt 4 although the solicitor could not be said to have been the general solicitor of the sellers and although there was no ground for suggesting undue influence yet he was held to have placed himself in that fiduciary relation requiring the utmost good faith because he volunteered advice as to the value of the property and the circumstances were such that those advised were entitled to look upon his advice as a solicitor s advice given in their interests 38 He continued at 208 On the other hand if a solicitor has once been employed say to manage his client s real estates then although the employment may have entirely ceased yet there may still be a duty on the solicitor s part towards his client for example that of possibly advising or possibly communicating information which he has obtained while acting as solicitor and the existence of such a duty may bring the ordinary rule into operation and make the solicitor in hac re if he subsequently purchased the real estates from his client although as a matter of fact the relationship of solicitor and client in strict sense had cased to exist altogether 39 In the light of the above cases the principle was this in general a solicitor ought not to put himself forward as a prospective principal to deal with his client and in the present case to purchase the client s property This however was not an absolute rule Should the solicitor choose to do so he must ensure that his client received the most disinterested advice possible as if the client was transacting with a third party In this respect we thought the best form of disinterested advice was to advise the client to seek other independent advice legal or otherwise In fact the most appropriate action to take would be to discharge himself as solicitor for the client and to advise the client to appoint new solicitors But at the very least the solicitor ought to ensure that the client has had the benefit of truly independent legal advice 40 But the solicitor s duty did not end there Because of the principle that the solicitor owed a fiduciary duty to his client if he entered into any transactions with his client the law would be rigorous on him and any benefit received thereof by him must be fair and informed This applied whether the solicitor was still acting for the client or whether he had discharged himself as was consistent with the case of Re Beard 37 supra Each case depended on its very own nature and facts The solicitor must not take any advantage of his influence on his client to obtain the slightest benefit which he would otherwise not obtain It was no answer to a charge of misconduct that the solicitor thought it was not misconduct or if he failed to appreciate the unsatisfactory or objectionable nature of his conduct 41 Reverting to the present case counsel for the respondent argued that charge B namely a failure on the respondent s part to ask the vendors to seek independent legal advice was not made out In this respect the Disciplinary Committee erred It was contended that there was only a duty to ensure independent legal advice in a number of circumstances most notably where the nature of the transaction and the relationship between the solicitor and client was such that the client expected disinterested legal advice where the transaction in favour of the solicitor was at an undervalue see Demerara Bauxite Co v Hubbard 1923 AC 673 or where the solicitor failed to make full disclosure of any facts which would otherwise affect the judgment of the client see Law Society of New South Wales v Moulton 1981 2 NSWLR 736 and Spector v Ageda 1973 Ch 30 None of the above circumstances were present in the present case 42 We disagreed To begin with we did not think that there were any rigid rules prescribing when a solicitor should advise his client to seek independent legal advice particularly where he was entering into the same transaction with the client To lay down and endorse such rigid rules ran counter to the general principle that a solicitor must always give

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  • ERA Realty Network Pte Ltd v Puspha Rajaram Lakhiani and another[1998] 2 SLR(R) 721; [1998] SGHC 213
    that Asma was her sister in law Asma was also the executive officer of Marshall Realty Pte Ltd a property investment company Shabana s husband Abedeen Abdulkader Tyebally was at all material times a director of the company The option was eventually exercised by Marshall Realty Pte Ltd Shabana s husband and the company will feature again later in this judgment At the trial in the District Court the defendants disputed that Shabana had informed them that she and Asma were related to each other The learned district judge found that Shabana had made that disclosure to the first defendant either directly or through Kersy and this finding has not been impugned 6 The sale and purchase of the property was completed on or about 30 June 1995 and the commission of 1 ie 36 000 became due to the plaintiffs The defendants however refused to pay the plaintiffs the agreed commission on the following two grounds 1 the plaintiffs breached their fiduciary duties to the defendants by introducing a purchaser who was related to their representative Shabana without disclosing this relationship to the defendants The plaintiffs had also failed to disclose that Shabana was the wife of Abedeen Abdulkader Tyebally 2 the plaintiffs failed to disclose that it was commercially viable for the entire development of which the property was a part to be sold en bloc which would have resulted in a significantly higher price than a sale on an individual basis It was also alleged that Asma and or Marshall Realty knew about the potential for an en bloc sale and that if the information about the en bloc sale potential had been disclosed to the defendants they would not have sold the property pending a decision on the en bloc sale or at any rate at only 3 6m 7 The defendants therefore claimed that the plaintiffs were not only not entitled to the commission they were also liable to the defendants for all loss and damage suffered in respect of that sale The defendants accordingly counterclaimed for a a declaration that the plaintiffs were in breach of their duties to them and or in breach of the agreement b a declaration that the plaintiffs were liable to the defendants for all loss and damage suffered by the defendants thereby and c damages to be assessed 8 The learned district judge held that the plaintiffs had forfeited their right to the commission and granted the defendants the two declarations sought but made no order on the claim for damages to be assessed She also found that the defendants were entitled to complete the sale and purchase notwithstanding the discovery of the material non disclosures while reserving their rights against the plaintiffs This last finding was originally challenged by the plaintiffs in their petition of appeal but the point was abandoned before me The appellants also rightly abandoned the argument that Shabana s knowledge could not be attributed to the plaintiffs 9 I summarise here the other findings of the trial court on the facts and the law a Since the plaintiffs had made out a prima facie case against the defendants who were relying solely on the matters pleaded in their defence and counterclaim to justify the non payment of the commission the onus of proof on such matters rested on the defendants b The relationship of principal and agent gave rise to particular and onenous duties on the part of the agent The fiduciary relationship required the agent to act in the interests of his principal and to disclose matters of personal interest which might conflict with the interests of the principal Where any transaction was entered into in violation of this rule the principal may repudiate the transaction or may approve it and recover any profit made by the agent For the above propositions she relied on the cases of a Armstrong v Jackson 1917 2 KB 822 b Dunne v English 1874 LR 18 Eq 524 and c Lunghi v Sinclair 1966 WAR 172 c Applying the law to the facts she found as mentioned earlier that Shabana had disclosed to the first defendant directly or indirectly her relationship to Asma d It was an admitted fact that Shabana did not disclose that she was the wife of Abedeen Abdulkader Tyebally a director of Marshall Realty the eventual purchaser of the property She found that Shabana knew of her husband s and consequently the company s interest in purchasing the property from the outset As Shabana knew that her husband was the controlling mind behind the entire transaction she was under a duty to disclose to the defendants that her husband was the real orchestrator of the transaction that he was the one who made the offers and the decision to purchase the property The plaintiffs breached their fiduciary duties by Shabana s failure to disclose her husband s and Marshall Realty s interest and involvement in the transaction e It was no answer to plead that the transaction was concluded on a willing seller and willing buyer basis Aberdeen Rail Co v Blaikie Brothers 1843 60 All ER Rep 249 f Although the effect of a nominee clause was to wipe out the materiality of the identity of the purchaser Alrich Development Pte Ltd v Rafiq Jumabhoy 1995 2 SLR R 340 the plaintiffs were precluded from raising the issue of non materiality of the purchaser s identity as a defence to the counterclaim as it was not pleaded g The Urban Redevelopment Authority URA gazetted the River Valley Development Guide Plans on 25 March 1994 re zoning Cuscaden Tower into a high density residential zone and increasing its gross plot ratio to 2 8 It thus became viable for the individual owners to sell the whole development en bloc which would have fetched better prices for each unit Shabana admitted she did not advise the defendants of this possibility She claimed she did not know about it until late June 1995 when she saw the defendants solicitors letter Even if Shabana was ignorant of the en bloc sale potential the gazette notification imputed knowledge to the general public and it was no excuse to plead ignorance It followed from the plaintiffs duty to act with reasonable care skill and diligence that they should advise the defendants of matters affecting the value of their property whether or not knowledge of such matters could be imputed to the defendants unless the defendants had specifically informed the plaintiffs that they did not want such information or were already aware of it The trial judge therefore found the plaintiffs were negligent and in breach of their duties as estate agents h The plaintiffs breaches impinged on the fundamental duty of disclosure and the duty to act with reasonable care and skill and in good faith and went to the very root of the principal agent relationship The plaintiffs had therefore forfeited their right to the commission Keppel v Wheeler 1927 1 KB 577 i The two declarations sought should be granted The second declaration would be effective only as and when the defendants should suffer any loss or damage in the future which event might not occur As the defendants were not pursuing the claim for damages to be assessed and as there was no evidence of any damage sustained as at the date of trial no order was made on this prayer 10 I will first set out my findings on the facts I see no reason to disagree with the trial judge s finding that Shabana did disclose to the first defendant directly or otherwise the fact that she and Asma were related to each other I also agree that Shabana was obviously cognisant of her husband s and hence Marshall Realty s interest and intention to purchase the property in question She was actually brought into the picture by her husband for the very purpose of finding out whether the property was still available for sale and what the defendants expected price was 11 As for the en bloc sale potential apart from knowledge imputed by the publication of the Gazette I am satisfied on the evidence that Shabana knew about the increase in plot ratio and consequently the possibility that Cuscaden Tower could be sold more profitably en bloc Her husband s company was a property investment company It bought one unit in Cuscaden Tower in April 1994 and the penthouse unit a day before the defendants option at 2 75m and 5 7m respectively Marshall Realty being a company so deeply involved in property investment and Shabana s husband having decided to park more than 12m in the three units in Cuscaden Tower it would be extremely naive to think that he was not aware of the then hottest phenomenon in town ie en bloc sale potential or that he did not consider that possibility when making the foray into Cuscaden Tower Shabana has been a real estate agent since 1992 She was engaged by her husband to help him secure the property in question It would be highly unusual that no discussion of any sort about the en bloc sale potential took place between husband and wife in those circumstances Equally I find it hard to accept that Kersy described by counsel for the respondents as the defendants financial advisor and someone who deals with the defendants property transactions would be totally ignorant of the en bloc sale potential of Cuscaden Tower The defendants did not appear to be novices either in property matters 12 I note that the defendants did not contend that 3 6m was apart from any en bloc sale potential anything other than a fair market price then 13 I cannot disagree with the learned judicial pronouncements and the academic treatises on the law of agency I doubt however whether all the principles relating thereto are applicable en bloc to the case of an estate agent in Singapore and to the facts of this particular case Section 6 of the Auctioneers Licences Act Cap 16 defines a house agent as follows 6 Every person firm or company who a as an agent for any other person for or in expectation of any fee gain or reward of any kind advertises for sale or letting any furnished house or part of any furnished house b by any public notice or advertisement or by any inscription in or upon any house shop or place used or occupied by him or by any other ways or means holds himself out to the public as an agent for selling or letting furnished houses or c lets or sells or makes or offers or receives any proposal or in any way negotiates for the selling or letting of any furnished house or part of any furnished house shall be deemed to be a person using and exercising the business occupation and calling of a house agent and shall be a house agent within the meaning of this Act A house agent is required by s 7 of the Act to take out a licence Other than this licensing requirement there does not appear to be any other statutory provision regulating house or estate agents 14 In Singapore it is not unusual to find an estate agent acting on behalf of a vendor and a purchaser in respect of the same property in the same way as he could be acting for a landlord and a tenant for the same premises with the result that he can collect commissions at both ends Equally an estate agent could have been appointed by several owners of adjoining properties or of units in the same block or development to procure buyers Such market practices do not seem to have been considered abhorrent or objectionable in principle If the law of agency is applied to estate agents in its full rigour as the learned district judge appeared to have done no estate agent could safely carry on such generally accepted activities For instance a prospective buyer could have instructed his estate agent to help him procure two or more adjoining properties because of his desire to redevelop the properties or perhaps due to his wish to have his children live close to him This confidential information would no doubt be material to the owners of the various properties as such a buyer was likely to be willing to pay more for the second and subsequent properties If the estate agent managed to persuade the owners to appoint him as their agent to sell the properties or if he had already been appointed as such non disclosure of the buyer s intention would be a breach of his fiduciary duties to the sellers On the other hand disclosure would be a breach of his fiduciary duties to the buyer 15 Indeed a scenario akin to the above arose in the case of Horace Brenton Kelly v Margot Cooper 1993 AC 205 the facts and holding of which are summarised compendiously in the headnotes The plaintiff instructed the defendants a firm of estate agents to sell his house and agreed to pay them a percentage of the selling price as commission The owner of an adjacent house also instructed the defendants to sell that house The defendants showed both houses to a prospective purchaser whose offer to purchase the adjacent house was accepted He then offered to buy the plaintiff s house The defendants did not inform the plaintiff of the agreement to buy the adjacent house The plaintiff accepted the purchaser s offer Sales of both houses were completed The plaintiff then instituted proceedings against the defendants claiming damages for their breach of duty in failing to disclose material information to him and placing themselves in a position where their duties and interests conflicted The defendants counterclaimed for their commission on the sale of the plaintiff s house The judge awarded the plaintiff damages and declared that the defendants were not entitled to commission The Court of Appeal of Bermuda allowed the defendants appeal and gave judgment for them on their counterclaim On the plaintiff s appeal to the Judicial Committee Held dismissing the appeal that since it was the business of estate agents to act for numerous principals several of whom might be competing and whose interests would conflict a term was to be implied in the contract with such an agent that he was entitled to act for other principals selling similar properties and to keep confidential information obtained from each principal and that the agent s fiduciary duty was determined by the contract of agency that since the plaintiff knew that the defendants would be acting for other vendors of comparable properties and would receive confidential information from them the agency contract could not have included terms requiring them to disclose that confidential information to him or precluding them from acting for rival vendors or from trying to earn commission on the sale of another vendor s property and that accordingly although the purchaser s interest in acquiring both properties was material information which could have affected negotiations for the sale price of the plaintiff s house the defendants were not in breach of their duty in failing to inform the plaintiff of the agreement to buy the adjacent house which was confidential to the owner thereof and the defendant s financial interest in that sale did not give rise to a breach of fiduciary duty Per curiam Even if a breach of fiduciary duty by the defendants had been proved they would not thereby have lost their right to commission unless they had acted dishonestly and the plaintiff did not allege nor did the judge find any bad faith by the defendants 16 If an estate or housing agent can act for numerous principals be they sellers or buyers several of whom might have competing and conflicting interests then he cannot be said to be a true agent as that term is commonly understood in the law pertaining to principals and agents Where existing market practice is not contrary to public policy then the law should recognise that market practice The estate agent in Singapore is in reality a canvassing or introducing representative seeking to bring seller and buyer to an agreement at a mutually acceptable price Whether or not the estate agent has been given an exclusive agency to market a property does not in my opinion alter the position Neither does the fact that he has participated in the negotiations on the price This position may of course be qualified by specific terms agreed between the estate agent and the seller buyer 17 Coming back to the facts of the present case Shabana s duty was to procure a buyer willing to pay 3 8m That did not mean that she was not entitled to put forward offers which were below the stated price Sellers often set an inflated price in order to allow for a bit of haggling Even if they really wanted a particular price often they would relent and settle for something less if no better offer was forthcoming and or time was not on their side In the words of the first defendant s affidavit of evidence in chief My instructions to Kersy was that we had no objection to the same so long as the plaintiffs were able to locate a suitable buyer with an acceptable offer She was there stating her reply to Kersy who had informed her that he had been approached by the plaintiffs with an offer to act as the defendants agent Shabana could be considered to be acting as agent for both the seller and the buyer here 18 There was no duty on Shabana s part to inform the defendants that Asma was related to her but she did upon being asked To require her to further inform that Asma was in fact a front for Marshall Realty is

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  • Yuen Chow Hin and another v ERA Realty Network Pte Ltd[2009] 2 SLR(R) 786; [2009] SGHC 28
    000 this being the profit made by Natassha as well as all disbursements and expenses incurred by the plaintiffs in uncovering Natassha s relationship with Mike and Mike s relationship with Jeremy and costs on an indemnity basis to emphasise the gravity of the misconduct and breach of duty in this case at 16 Case s referred to ERA Realty Network Pte Ltd v Puspha Rajaram Lakhiani 1998 2 SLR R 721 1999 1 SLR 190 distd Horace Brenton Kelly v Margot Cooper 1993 AC 205 distd 5 February 2009 Judgment reserved Choo Han Teck J 1 The first plaintiff a businessman is the husband of the second plaintiff They owned a flat in a condominium known as Riverside Piazza at Keng Cheow Street They decided to sell the flat and by recommendation from the first plaintiff s mother sister and brother they asked one Ang Teik Soon known to them as Jeremy to help them find a buyer Jeremy was a Senior Marketing Director of the defendant company although the latter asserted in its defence that none of the agents or directors named or involved in this suit were its servant or employee It claimed that they were independent contractors known as associates I shall return to this point shortly 2 Jeremy was regarded as an agent of ERA as the defendant is more famously known The plaintiffs understood ERA to be a company that provided the services of a housing agency and that a person carried an ERA calling card or who advertised himself as a housing agent under the banner of ERA was an ERA agent 3 Jeremy had just prior to his engagement by the plaintiffs found a buyer for a flat owned by the mother of the first plaintiff and was recommended to the plaintiffs as a competent agent Jeremy worked as a subordinate to one Mitul Ratilal Parikh known as Mike Mike had at all material times about 200 agents working under him all of whom used the defendant s ERA name and logo The arrangement in place was that whenever an agent under Mike has successfully helped a client to complete a sale and purchase transaction he would share his commission with Mike and the defendant There was some discrepancy in the evidence as to what the applicable ratio was and it seemed that a flexible formula was used In this respect the evidence of the defendant s former Legal Manager Tan Keng Yong s account differed from that given by Mike The exact ratio however was not important but the fact that the defendant and Mike shared in an agent s commission was relevant in establishing the nature of the relationship between Jeremy and Mike and the defendant It was a relationship in which the defendant could not be heard to say that it had nothing to do with the conduct of Jeremy or Mike 4 The first plaintiff was frequently away on business and he therefore left it to the second plaintiff to manage the sale of their Riverside Piazza flat The second plaintiff was the one who appointed Jeremy as the agent for that purpose in June 2007 Jeremy reported to her sometime in mid June that the OCBC Bank had valued the flat between 650 000 and 700 000 He told her that he would soon place an advertisement for the sale of the flat Jeremy telephoned the second plaintiff about 4 July 2007 and told her that he had a Chinese client who wanted to buy the flat for 650 000 According to the second plaintiff Jeremy described this client as a regular client of his This client turned out to be one Natassha Sadiq Natassha who was and still is Mike s wife The second plaintiff asked Jeremy why she was not offered the valuation price of 700 000 Jeremy told her in reply that it was because she had recently renewed the tenancy for the flat implying that a tenancy encumbered flat had a lower value The second plaintiff then asked Jeremy to make a counter offer of 688 000 Natassha who later testified for the defendant said in her evidence that she had offered to buy the flat at 650 000 after a discussion with her husband and that they decided on this sum because it was the serial number of her identity card which was in fact 6500003 This was not a crucial piece of evidence in itself it was useful only in my assessment of the witness s credibility Jeremy then told the second plaintiff that the seller had accepted her offer The second plaintiff s evidence was that she then granted an option dated 12 July 2007 addressed to Natassha Sadiq or nominee s for her to buy the flat at 688 000 and also signed a commission agreement also dated 12 July 2007 agreeing to pay a commission of 6 880 1 The commission agreement was on the defendant s letterhead and the addressor was identified in the phrase Yours sincerely ERA REALTY NETWORK PTE LTD and signed by Jeremy in his proper name Ang Teik Soon Between 5 July 2007 and 12 July 2007 there were some negotiation concerning the price and the completion period but this was not relevant to the issues before me 5 Jeremy claimed that the option and the commission agreement were signed on 5 July 2007 and not on 12 July 2007 I have no hesitation in preferring the second plaintiff s version In any event in my view it was not a major issue although Jeremy s point was that the second plaintiff knew as at 5 July 2007 that Natassha was likely to sub sell the property because of the words or nominee s appearing in the option form What was significant was that the defendant filed a claim against the plaintiffs for the commission due from the sale of the flat That claim was made in the Small Claims Tribunal in the Subordinate Courts by the defendant not by Jeremy 6 Natassha exercised her right of option on 26 July 2007 thus contracting to buy the plaintiffs flat for 688 000 The plaintiffs did not know at that time that Natassha was Mike s wife and they also did not know that Mike was Jeremy s superior in the defendant organisation Neither did they know that Jeremy had known Mike for a very long time and was employed by Mike personally when he Jeremy was retrenched in 1999 by his previous employer Mike subsequently suggested that Jeremy join the defendant and that was how Jeremy became an associate of the defendant More importantly unknown to the plaintiffs Mike had placed newspaper advertisements for the sale of the flat and conversely Jeremy did not place any advertisement The second plaintiff thought he did because he told her that no one had responded to the advertisement When cross examined Jeremy told the court that he believed that telling his regular clients which was in fact Mike who used his wife as nominee constituted advertisement That clever answer did not explain why he had said to the second plaintiff that no one answered the advertisement Perhaps Jeremy did not think that counsel knew the difference between a tip off and an advertisement I think that it is fair to say that most people know the huge difference between those two words The plaintiffs subsequently discovered that Mike had placed at least two advertisements in the Straits Times one on 7 July and the other on 14 July It also transpired that Natassha granted an option to purchase the flat to one Teo Su Kee on 18 July 2007 for the price of 945 000 Teo Su Kee exercised his right of option on 25 July 2007 the day before Natassha exercised her right of option granted by the second plaintiff Teo Su Kee testified that he bought the flat through Mike in response to a newspaper advertisement 7 The plaintiffs were puzzled when they received a query from the Central Provident Fund Board the Board asking them why they had sold their flat below valuation They asked Jeremy whether that was so Jeremy told them that it was not true and helped them draft a reply to the Board The reply was not entirely truthful but that was not a major issue and adds only to the court s assessment of Jeremy The plaintiffs received no further communication from the Board after that but they sensed that something was not right They then searched the newspapers and found the advertisements placed in the Straits Times by Mike They also discovered through a search made at the Registry of Marriages that Natassha was Mike s wife On these facts the plaintiffs sued the defendant for breach of contract and specifically for the breach of the implied terms that the defendant would use its best endeavours to obtain the best price for the plaintiffs and not act in conflict of interest or obtain any secret profit 8 The defendant denied the claim and its counsel Mr Leonard Loo made the following two arguments on its behalf First he argued that there was no wrongdoing on the part of Mike or Jeremy Secondly even if there were any wrongdoing it did not amount to a breach of contract between the defendant and the plaintiffs because neither Mike nor Jeremy was a servant or agent of the defendant Counsel argued that even though Jeremy and Mike had used the defendant s name they were independent contractors whose actions did not bind the defendant It was not disputed that Mike and Jeremy had signed what was titled an Associate Agreement with the defendant in which the defendant was known as the Broker Under that agreement the associate was appointed as the defendant s agent in terms stipulated as follows APPOINTMENT Subject to the provisions of this Agreement the Broker hereby appoints the Associate as the Broker s real estate agent to sell lease and provide other real estate brokerage services to solicit additional property listings and customers for the Broker and to otherwise promote the business of servicing the public in real estate transactions and the Associate hereby accepts this appointment The Associate agrees to work diligently and to perform his services to the best of his ability The Associate shall at all times conform to and abide by all rules regulations and policies of the Broker for the performance of the Associate s obligations hereunder as the same may be amended from time to time at the Broker s sole discretion The Associate agrees to conduct his business and regulate his habits so as to maintain and to increase and not to diminish the goodwill and reputation of the Broker For the avoidance of doubt nothing in this Agreement shall constitute or create a partnership or employment between the Broker and the Associate This agreement also provided for the commission to be charged to clients or customers for services rendered by the associate Although it declared that it was not a document creating a partnership or an employer employee relationship between the associate and the defendant I am of the view that the defendant had held out the associate as its agent In the circumstances unless the associate s client was expressly told otherwise the client was entitled to regard the associate as a servant or agent of the defendant I am satisfied that such disclosure was not made to either the first plaintiff or the second plaintiff 9 Mr Loo attempted to show that the second plaintiff was an experienced businesswoman with a real estate agency company called Katz Realty Pte Ltd Counsel thus wished to persuade the court that she must have not only known what was going on but also knew that the defendant was not bound by Jeremy s conduct The evidence did not support Mr Loo s argument I accept the evidence of the first and second plaintiffs and find that they were not professionally familiar with the real estate business of Katz Realty Pte Ltd and further that they had unreservedly relied on the services and expertise of Jeremy I accept the second plaintiff s evidence that her business was that of a personnel agency 10 I accept the evidence of the second plaintiff that had she known the full facts that is that Natassha was Mike s wife and Mike was not only an ERA agent but also a Divisional Director and Jeremy s boss she would not have agreed to sell her flat to Natassha and that she would have asked an agent from a different housing agency to act for her She voiced what I think would be the sentiment of any reasonable vendor namely that she would not have trusted an agent who did not disclose that the purchaser he procured was actually the agent s boss I also reject Mr Loo s argument that the plaintiffs sold at the price they wanted therefore they should not be unhappy that the purchaser made a larger profit That argument missed the point Jeremy was not entitled to act as he did namely placing himself in a position where he might have to act in conflict between his principal s interests and his own In any event the second plaintiff had stated that she would not have granted the option had she known the concealed facts 11 Chua Khee Hak better known as Jack Chua was and still is the president of the defendant as well as the president of the defendant s holding company He was not called as a witness for the defendant and was thus subpoenaed to appear by the plaintiffs as a witness for the plaintiffs He testified that understanding the facts as disclosed he did not think that Jeremy or Mike had acted unethically He also testified that by reason of the Associate Agreement Jeremy and Mike were independent agents whose actions do not bind the defendant He stated that the defendant s agents need not disclose the identity of the buyer unless the agent himself has a pecuniary interest or the defendant would have obtained a financial benefit for itself He confirmed that no disciplinary action had been taken against either Mike or Jeremy When Mike and Jeremy gave their evidence they likewise declared that their conduct was not unethical Their evidence were consistent with that of Jack Chua Ms Gan Kam Yuin counsel for the plaintiffs drew Mike s attention to the Code of Ethics of the Institute of Estate Agents the Code of Conduct and showed him that they had provisions that would have required Jeremy to make the appropriate disclosure to the plaintiffs Mike expressed the view that since Jeremy was not a member of the Institute of Estate Agents he Jeremy was not bound by the Code of Conduct Mike admitted that although he Mike was a member of the Institute he was not in breach of the code of ethics because he was not the plaintiff s agent That was the thrust of the defendant s case Mike and Jeremy did no wrong for the reasons given by Mike and in any event they were independent contractors whose conduct did not bind the defendant 12 It transpired in the trial that this was not the only instance in which Jeremy Mike and Natassha had been involved in a sale and purchase of property on behalf of clients without disclosing to them the identity connection and the interests of each of them I think that the facts as I found above indicated that Jeremy was utterly wrong not to have made full disclosure to the plaintiffs I find that Natassha was only a nominee and the person who had wanted to buy the plaintiffs flat was Mike because he was the one who was acutely aware of the true state of what Jeremy described as the crazy market at the time I am of the opinion that he was the one who wanted to make a profit from a quick subsidiary sale as he had done However had he done so himself he would have been in breach of the ethics set out in the Code of Conduct He thus created a little more distance between himself and the plaintiffs by using his wife Natassha as the purchaser and Jeremy as the vendor s agent I think that any reasonable person would hold such conduct to be wrong and I was surprised that Jack Chua the president of the defendant as well as Marcus Chu the defendant s Senior Vice President both thought that there had been no misconduct on the part of Mike Jeremy and the defendant It was only during the cross examination of Marcus Chu that it became clear to me why they thought so Marcus Chu admitted that he and others in the company as well as agents from other companies in the housing agency business had been doing what Mike and Jeremy had done in the transaction of the plaintiffs flat 13 I am of the opinion that the Mike and Jeremy were ethically wrong and in breach of contract by reason of creating a conflict of interest between their client and themselves Jeremy was the contractual link between the plaintiffs and the defendant but Mike was person behind the scheme and his position in the defendant rendered Jeremy s breach even more reprehensible The misconduct of Jeremy Mike and the defendant in question is a matter of such importance that I feel bound to explain as simply and as briefly as I can the reasons as to why I think that the agents conduct was wrong so that no property agent can claim ignorance after this When a property agent is engaged to sell or buy real property he the agent is the agent of the person who engaged him That other person is his

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  • Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal[2009] 3 SLR(R) 109; [2009] SGCA 14
    each case whether the contract was done in good faith in the sense set out in the LTSA It was entitled to approve the sale even though there might have been as in this case another potential purchaser who had offered a higher price if it thinks that HPPL s price was fair and the circumstances justified it Whether it was the right time to sell or that the SC ought to have made a little more effort to persuade the purchaser to offer more are not crucial matters that obliges the Horizon Board to withhold approval 74 The Judge acknowledged that it appears that there may have been intrigue in the course of the en bloc sale from the day the SC was created to the proceedings before the Horizon Board ibid However he was of the view that the Horizon Board was not the appropriate forum for considering the conduct of the original SC He stated that if the original SC had deliberately or negligently ignored the Vineyard offer thereby causing financial loss to the appellants their recourse was through litigation in the courts at 17 of the Judgment For all these reasons the Judge dismissed the appeals in OS 5 2008 OS 10 2008 and OS 11 2008 The present appeals The parties submissions 75 Having set out the background to the case we now turn to the parties submissions in the present appeals The appellants submissions 76 Counsel for the appellants in CA 119 2008 Mr Elias submitted at the outset that the present appeals were on a point of law in accordance with s 98 1 of the BMSMA viz whether the Horizon Board had erred in law by finding that the sale to HPPL was in good faith as no person acting judicially and properly instructed as to the relevant law would have come to such a determination citing Edwards v Bairstow 1956 AC 14 77 Mr Elias next argued that the Horizon Board was not limited to considering the sale price in determining whether a given transaction was in good faith relying on the use of the word transaction in s 84A 9 of the LTSA and the parliamentary debates on the enactment legislation which state that an STB must consider all the circumstances of the case see 127 below He tendered a list of conduct which purportedly amounted to a lack of good faith on the part of the original SC We set out the list as follows 1 Non disclosure in discovery of letters of 28 Dec 2006 and 3 Jan 2007 from Vineyard 2 The existence of the letters of 28 Dec 2006 and 3 Jan 2007 only came about during the cross examination of Henry Lim by Mr Michael Hwang SC on the 4 th last day of the resumed Horizon Board hearing in November 2007 Further there was no mention of Vineyard s higher offer in the joint affidavit of the SC members filed in the Horizon Board proceedings 3 Non circulation of 3 Jan 2007 written offer to any of the subsidiary proprietors notwithstanding rising market prices and objections of some subsidiary proprietors of the erosion of the premium 4 No earnest discussion with Vineyard at any time notwithstanding that a the Vineyard offer was regarded as firm b the SC had from 28 Dec 2006 to 22 Jan 2007 to consider and communicate it 5 No search on Vineyard was done at any time 6 Dismissal of the Vineyard offer which was described by the Horizon Board as robust and cavalier Cavalier means carefree and nonchalant high handed free and easy off hand unceremonious 7 Imposing a 50 mil deposit to be paid by Vineyard over a weekend from 6 Jan 2007 to 8 Jan 2007 The Horizon Board held that this was considerably onerous as contrasted with the deposit of a mere 5 million required of HPL 8 Not following through on M s Shan Su s letters of 28 Dec 2006 and 3 Jan 2007 in not providing the terms and conditions to Vineyard 9 Not seeking legal advice in considering Vineyard s offer 10 Deliberate suppression of Vineyard s higher offer in minutes of SC meeting on 6 Jan 2007 Notably the word gross was used to describe the Vineyard offer notwithstanding the fact that it was not present in M s Shan Su s letter of 3 Jan 2007 and that this was before Henry Lim was asked to follow up on the Vineyard offer The usage of the word gross was calculated to undermine and disregard the Vineyard offer 11 Deliberate suppression of Vineyard s higher offer in Henry Lim s email dated 2 Feb 2007 to the SC listing 25 potential developers buyers he had contacted who apart from HPPL had not even made any offer 12 Suppression by Alvin Er of Vineyard s offer in his letter of 16 Jan 2007 to the SC that there were no other offers and no firm indication of any other offer in the near future even though he was well aware of the higher Vineyard offer 13 Not revealing Vineyard s higher offer at the 2 nd EOGM on 25 March 2007 It was stated at the meeting that there was no indication that the price could not have gone beyond S 500 mil they SC were also keeping their ears to the ground with Alvin s help At no point in time was there I believe any indication given or have they heard or through Alvin as well that the price could have gone beyond 500 mil 14 The legal advice aspect a The Horizon Board and the learned Judge in the Court below relied on Henry Lim s evidence in cross examination that the SC relied on legal advice in not pursuing the Vineyard offer earnestly b Drew Napier s letter dated 16 Jan 2008 shows that this was not the case and that Henry Lim had lied The discrepancies between Henry Lim s evidence and Drew Napier s letter dated 16 Jan 2008 are set out at Page 10 at Paragraph 24 of the Appellants Skeletal Arguments filed on 29 Jan 2009 15 The learned Judge in the Court below accepted that Vineyard had offered a higher price emphasis in original 78 The 28 December 2006 letter referred to was allegedly the first letter from Vineyard expressing interest in purchasing the Property but as no such letter was discovered throughout the entire proceedings before the Horizon Board and the Judge we shall assume that it does not exist 79 As for the Drew Napier letter dated 16 January 2008 this was a letter sent by the original SC s solicitors Drew Napier LLC D N to M s Phang Co who represented some of the objecting subsidiary proprietors in the Horizon Board proceedings in response to allegations made against D N in a draft affidavit for OS 5 2008 the 16 January 2008 D N letter In this letter D N clarified the content of their legal advice to the original SC stating inter alia that contrary to the assertions in the draft affidavit they had firstly never been instructed to do any due diligence on Vineyard or contact Shan Su and secondly they had never advised the original SC that it could be sued if it did not sell the Property to HPL whereas it would be difficult to challenge the sale if the original SC sold to HPL at a price which met the reserve price 80 Mr Darmawan appearing in person for the appellants in CA 120 2008 emphasised Bharat Mandloi s evidence that the original SC had refused to seek affirmation of the sale to HPL from the consenting subsidiary proprietors because that would mean that the sale would be as good as dead see 31 above He submitted that the fact that the original SC had proceeded with the sale to HPL despite its awareness of the consenting subsidiary proprietors unhappiness was a clear manifestation of bad faith He further submitted that there had been a breach of the fundamental purpose of the sale of the Property which was to achieve the best sale price one with the healthy premium which First Tree had represented to the subsidiary proprietors would result from the collective sale Mr Darmawan contended that the original SC had also breached cl 4 1 b of the CSA see 14 above by its failure to follow up on the Vineyard offer and even if there had been a follow up the failure to involve First Tree in such a follow up breached the requirement in cl 4 1 b for negotiations with all intended purchasers to be carried out in conjunction with the Agents 81 Finally Mr Darmawan submitted that because the original SC members had purchased additional units in the Property with bank financing they were under financial pressure to sell the Property and were thus acting in a conflict of interest This was a further instance of bad faith The respondents submissions 82 Counsel for the respondents in the present appeals Mr Chelva Rajah SC Mr Rajah submitted that the original SC had never concealed Vineyard s offer The existence of an offer of 510m was disclosed in the minutes of the 6 January 2007 SC meeting albeit Vineyard was not referred to by name 83 Mr Rajah submitted that the original SC had through Henry Lim followed up on the offer from Vineyard by asking for a deposit as proof of the seriousness of its intent to purchase the Property but Vineyard had never responded to that request or even attempted to negotiate the terms of the deposit He submitted that under these circumstances the original SC had acted in good faith by choosing to accept the firm offer of a more reputable purchaser 84 It was also submitted that the 16 January 2008 D N letter reaffirmed that the original SC had been advised that it was up to it to use its judgment and exercise due honesty care and skill in arriving at its decision on the sale of the Property The only contradiction raised in rebuttal by the 16 January 2008 D N letter was that D N had not been instructed to conduct due diligence on Shan Su contrary to what Henry Lim had claimed before the Horizon Board This did not materially affect the finding of the Horizon Board that the original SC had relied on its solicitor s advice in deciding to take up the HPL offer see 55 above 85 Mr Rajah submitted that First Tree had not made any misrepresentation that the 80 premium would be obtained as its presentation at the 23 April 2006 EGM to the subsidiary proprietors had made it clear that the 80 premium was an estimate based on the latest transacted prices for individual units at that time He also pointed out that the reserve price in cl 5 of the CSA was not arrived at on the basis of the 80 premium 86 He pointed out that the Horizon Board had considered and rejected the reports tendered by the objecting subsidiary proprietors which purported to value the Property at prices which were higher than 500m Thus the appellants had failed to substantiate their contention that the price of 500m was too low The intervener s submissions 87 Counsel for the intervener Mr Ang Cheng Hock SC Mr Ang made substantially the same submissions as those of the respondents In addition he emphasised that the original SC s conduct must be evaluated in the light of the events leading up to January 2007 He pointed out that at that time 500m was a record price for a 99 year leasehold strata title property and that prior to January 2007 a whole host of developers had been approached to no avail The only real and viable prospect was HPL s offer Under these circumstances he submitted that the original SC had acted in good faith by choosing to sell to HPL rather than holding out for a response from Vineyard 88 Mr Ang also contended that the role of an STB in applications for a collective sale was very circumscribed According to him it was never envisaged that contentious legal arguments pertaining to misrepresentation breach of duties and suchlike would be put before an STB Rather an STB should only consider the factors set out in ss 84A 7 and 84A 9 of the LTSA in its determination of whether the transaction was in good faith The nature of an appeal from an STB decision to the High Court 89 Before moving on to the substantive issues in the present appeals we will first consider the nature of an appeal to the High Court from a decision of an STB on a collective sale application Section 98 1 of the BMSMA states that No appeal shall lie to the High Court against an order made by a Board under this Part or the Land Titles Strata Act Cap 158 except on a point of law 90 In Halsbury s Laws of England vol 1 1 Butterworths 4th Ed Reissue 1989 Halsbury s at para 70 since replaced by the 2001 edition but the statement of law remains largely similar see para 77 of the 2001 edition it is stated that Errors of law include misinterpretation of a statute or any other legal document or a rule of common law asking oneself and answering the wrong question taking irrelevant considerations into account or failing to take relevant considerations into account when purporting to apply the law to the facts admitting inadmissible evidence or rejecting admissible and relevant evidence exercising a discretion on the basis of incorrect legal principles giving reasons which disclose faulty legal reasoning or which are inadequate to fulfil an express duty to give reasons and misdirecting oneself as to the burden of proof emphasis added 91 In Singapore it has been accepted in several High Court cases that errors of law as condensed in this passage from Halsbury s constitute ex facie errors of law which would in turn raise points of law subject to appeal under s 98 1 of the BMSMA In Dynamic Investments Pte Ltd v Lee Chee Kian Silas 2008 1 SLR R 729 Dynamic Investments the court stated at 11 b that guidance as to the meaning of point of law could be found in this passage from Halsbury s and from Lord Radcliffe s statement in Edwards v Bairstow 76 supra see 93 below then concluded at 14 that The Board s holding that it was not satisfied that the transaction was not in good faith regard being had to the method of distributing the proceeds of sale was a decision on the facts of the case and could not be challenged unless there was an error of law either ex facie as to which there was none or such as was described in Edwards v Bairstow emphasis added 92 This approach was endorsed in Liu Chee Ming v Loo Lim Shirley 2008 2 SLR R 764 Liu Chee Ming at 16 In the present appeal before me the statement in Halsbury s was again cited by the appellants without contest by the respondents Nevertheless I take this opportunity to say that I agree with Ang J on the wider meaning for a point of law in an appeal from a decision of the Board but it must be remembered that the statement in Halsbury s should not be taken to allow an appellant to raise issues of fact That is why Ang J held in Dynamic Investments at 14 that a decision on the facts of the case could not be challenged unless there was an error of law either ex facie or such as was described in Edwards v Bairstow emphasis added 93 We should briefly explain the reference to Edwards v Bairstow In that case two men had embarked on a joint venture to purchase a complete spinning plant agreeing between themselves not to hold it but to make a quick resale The Commissioners of Income Tax determined that the given transaction was not an adventure in the nature of trade taxable under the Income Tax Act 1918 c 40 UK and therefore not subject to tax The Crown appealed against this determination The Court of Appeal dismissed the appeal on the ground that the determination was not erroneous in point of law and accordingly it was not open to interference by the court The House of Lords took the opposite approach Lord Radcliffe stated at 35 36 I think that the true position of the court in all these cases can be shortly stated If a party to a hearing before commissioners expresses dissatisfaction with their determination as being erroneous in point of law it is for them to state a case and in the body of it to set out the facts that they have found as well as their determination I do not think that inferences drawn from other facts are incapable of being themselves findings of fact although there is value in the distinction between primary facts and inferences drawn from them When the case comes before the court it is its duty to examine the determination having regard to its knowledge of the relevant law If the case contains anything ex facie which is bad law and which bears upon the determination it is obviously erroneous in point of law But without any such misconception appearing ex facie it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal In those circumstances too the court must intervene It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination So there too there has been error in point of law emphasis added 94 Lord Radcliffe noted that the two men had put their money into buying the machinery with no intention of using it as machinery or even holding their purchase at all They had planned to sell the machinery even before they bought it and did in due course sell it for profit On these facts he found that the transaction was inescapably an adventure in the nature of trade and upheld the Crown s appeal 95 The proposition in Edwards v Bairstow that a determination may be challenged on a point of law in addition to an error of law ex facie that bears upon the ultimate determination if the facts were such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal see 93 above has now been consistently approved at the High Court level such as in Ng Swee Lang v Sassoon Samuel Bernard 2008 1 SLR R 522 Ng Swee Lang at 27 Dynamic Investments 91 supra at 16 and Liu Chee Ming at 16 96 On the other hand there have been earlier local cases on appeals against arbitral awards which articulated a different and in some senses narrower view of appeals on a question of law In Northern Elevator Manufacturing Sdn Bhd v United Engineers Singapore Pte Ltd 2004 2 SLR R 494 Northern Elevator the appeal was against the grant of leave to one of the parties to appeal against an arbitral award Section 28 2 of the 1985 Arbitration Act Cap 10 1985 Rev Ed which the parties in Northern Elevator had agreed would govern the arbitration proceedings read A n appeal shall lie to the court on any question of law arising out of an award made on an arbitration agreement 97 The Court of Appeal distinguished between a question of law and an error of law stating that the former conferred jurisdiction on a court to grant leave to appeal against an arbitration award while the latter in itself did not at 17 At 18 it approved G P Selvam J s reasoning in Ahong Construction S Pte Ltd v United Boulevard Pte Ltd 1993 2 SLR R 208 at 7 A question of law means a point of law in controversy which has to be resolved after opposing views and arguments have been considered It is a matter of substance the determination of which will decide the rights between the parties If the point of law is settled and not something novel and it is contended that the arbitrator made an error in the application of the law there lies no appeal against that error for there is no question of law which calls for an opinion of the court emphasis added 98 The Court of Appeal in Northern Elevator concluded at 19 To our mind a question of law must necessarily be a finding of law which the parties dispute that requires the guidance of the court to resolve When an arbitrator does not apply a principle of law correctly that failure is a mere error of law but more explicitly an erroneous application of law which does not entitle an aggrieved party to appeal emphasis added 99 The wording of s 28 2 of the 1985 Arbitration Act is quite similar to s 98 1 of the BMSMA Although the body of s 98 1 of the BMSMA refers to a point of law rather than a question of law nothing turns on this as the heading of s 98 1 is Appeal to High Court on question of law Thus it may be said with some force that the narrower view taken in the arbitration cases cited in 96 and 97 above should also apply in cases of collective sales However the context in which an appeal on legal issues is statutorily permitted is also important The definition of questions or points of law in each context may be wider or narrower depending on the underlying policy considerations 100 It can persuasively be said that the policy considerations undergirding the arbitration scheme where party autonomy is the primary consideration are quite different from those of the collective sale scheme under the LTSA where a qualifying majority of owners is allowed to override the wishes of the minority owners In the case of the former a limited right of review by the courts of arbitral decisions accords with the legitimate expectations of the contracting parties as regards finality In our view therefore the High Court has rightly declined to apply the approach in the arbitration cases in the context of appeals against STB decisions In the High Court decision of Ng Swee Lang 95 supra the court rejected the narrower approach in the arbitration cases citing inter alia the different policy considerations in the context of private arbitrations which were underpinned by the principle of party autonomy as compared with a hearing before an STB under the LTSA It astutely observed at 24 Statutory tribunals such as the Strata Titles Board performed important functions of the Government which would generally affect the wider public interest as compared to private arbitrations There had to be a greater degree of supervision over such tribunals by the courts 101 We agree that ex facie errors of law would entitle a party to appeal under s 98 1 of the BMSMA Such an approach affords the court greater oversight over administrative and other inferior tribunals and thus accords better protection to private rights In this respect we find much force in the following observations from a leading academic treatise Sir William Wade Christopher Forsyth Administrative Law Oxford University Press 9th Ed 2004 at pp 947 948 The courts ought to guard against any artificial narrowing of the right of appeal on a point of law which is clearly intended to be a wide and beneficial remedy The extension in recent years of the right of appeal on questions of law has as already noted done much to assist the integration of the tribunal system with the general machinery of justice Judicial policy ought to reinforce this beneficial trend 102 In our view however it is not necessary in the present case to rely on the proposition in Edwards v Bairstow 76 supra to determine whether the present appeals are on points of law They undoubtedly are For example in order for the Horizon Board to determine the critical issue of whether the collective sale was entered into in good faith under s 84A 9 a i of the LTSA it had to construe the meaning of good faith in that provision The question of what a statutory term means is clearly an issue of law and a misinterpretation of the term would constitute an ex facie error of law open to appeal under s 98 1 of the BMSMA see 89 above The Horizon Board also had to consider whether the original SC had discharged its legal duties to the subsidiary proprietors This required the Horizon Board to formulate its view of the duties of an SC again an issue of law on which an error would be open to appeal Further an STB will also make an error of law when after receiving and assessing the evidence it misconceives the factual issue that must be ultimately decided see Mark Aronson Bruce Dyer Matthew Groves Judicial Review of Administrative Action Lawbook Co 4th Ed 2009 Judicial Review at p 201 At an even more fundamental level an STB must correctly apply the appropriate burden of proof in deciding whether a collective sale was in good faith A misapprehension as to the burden of proof is also an ex facie error of law against which an appeal may lie Judicial Review pointedly states at p 201 Strictly speaking there is no legal burden of proof in proceedings brought before administrative tribunals That is specially so where the tribunal s proceedings are not adversarial but it may also be the case wherever the rules of evidence do not apply However the absence of a strict burden of proof does not necessarily entail an absence of any legal standard of persuasion which a decision maker must reach before making a particular decision A decision maker who applies a more exacting standard will have committed an error of law emphasis added The main legal issues 103 We now set out what we consider are the main legal issues raised in the present appeals They arise from the unique relationship between an SC and the subsidiary proprietors both consenting and objecting not only under the LTSA itself but also under the common law and equity The issues essentially revolve around the following questions a What is the nature of the relationship between an SC and the subsidiary proprietors b What duties does an SC owe to the subsidiary proprietors c What are the duties of an STB in reviewing a collective sale We shall address each of these in turn The relationship between an SC and subsidiary proprietors 104 In our view the SC is the agent of the subsidiary proprietors collectively in relation to the collective sale of their strata units At the point when an SC is appointed to carry out the collective sale inter alia obtaining consent to the collective sale agreement advertising negotiating and finalising the terms of the collective sale with potential purchasers and completing the sale there is no question of it being appointed to represent the consenting subsidiary proprietors only since at that point the process of signing up to the collective sale agreement has not yet begun The SC therefore carries out the collective sale process on behalf of all the subsidiary proprietors collectively and has the power to affect the legal relations of all the subsidiary proprietors with third parties The common law requirement of express or implied assent by the principal see 114 below is not relevant in the context of a statutory scheme the very purpose of which is to allow the sale of the strata development against the wishes of the objecting subsidiary proprietors 105 Section 84 1A of the LTSA constitutes statutory confirmation of an SC s status as agent for all subsidiary proprietors collectively although we are mindful that s 84A 1A as well as the present incarnations of the Second and Third Schedules to the LTSA were introduced only in 2007 as part of the amendments to the LTSA the 2007 amendments This was after the appointment of the original SC in the present appeals and thus these provisions do not apply directly to the original SC Section 84A 1A provides For the purposes of a collective sale under this section and before the signing of the collective sale agreement by any subsidiary proprietor a there shall be constituted a collective sale committee to act jointly on behalf of the subsidiary proprietors of the lots whose members shall be elected by the subsidiary proprietors of the lots at a general meeting of the management corporation convened in accordance with the Second Schedule and b the Third Schedule shall have effect as respects the collective sale committee its composition constitution members and proceedings emphasis added An SC is now constituted by an ordinary resolution passed by the subsidiary proprietors at an EGM convened by the strata development s MC which represents the interests of all the subsidiary proprietors see paras 1 and 3 4 of the Second Schedule and para 1 2 of the Third Schedule to the LTSA 106 The Minister explained the rationale for the 2007 amendments at the second reading of the Land Titles Strata Amendment Bill 2007 Bill 32 of 2007 the 2007 Second Reading see Singapore Parliamentary Debates Official Report 20 September 2007 vol 83 at cols 1994 1995 Prof S Jayakumar Deputy Prime Minister and Minister for Law T he main purpose of this Bill which amends the Land Titles Strata Act is to provide additional safeguards and greater transparency for all owners involved in en bloc sales ie both majority and minority owners The proposed amendments address the concerns of owners over the lack of clarity transparency and safeguards in the current process of en bloc sales They also ensure that the interests of all owners are taken into consideration more adequately While the amendments are intended to achieve those objectives we have also borne in mind that the amended law does not make it unduly onerous to bring about an en bloc sale The rationale for the enactment of s 84A 1A in particular was as follows at col 1997 Currently the law does not contain rules to govern the function and proceedings of an en bloc sale committee In the light of experience and complaints which we have received we believe there is clearly a need to enhance procedural clarity in this regard emphasis added 107 As the SC is the agent of the subsidiary proprietors collectively there is no point at which the SC may act solely in the interests of any group of subsidiary proprietors whether they are consenting or objecting proprietors When an SC is first appointed it is with a view to achieving a collective sale for the benefit of all the subsidiary proprietors At this stage the interests of the subsidiary proprietors are not yet clearly differentiated Thus the SC s initial paramount responsibility is simply to obtain the requisite consent for the collective sale as well as appoint competent professional advisers The SC s members and advisers also have the duty to avoid any possible conflict of interest see 137 145 below However once the requisite consent is obtained and the interests of the objecting subsidiary proprietors become distinguishable from those of the consenting subsidiary proprietors the SC s role becomes that of an impartial agent acting for both camps In other words the SC must hold an even hand between these interests We shall elaborate on this below at 136 The SC as a fiduciary 108 A fiduciary relationship between an SC and the subsidiary proprietors arises from the underlying agency relationship In law fiduciary relationships exist in a plethora of situations Other commonly recognised fiduciaries include employees partners directors and solicitors Typically common law agency relationships are also fiduciary in nature F M B Reynolds Bowstead and Reynolds on Agency Sweet Maxwell 18th Ed 2006 Bowstead Reynolds succinctly states at para 1 001 Agency is the fiduciary relationship which exists between two persons one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation 109 The law relating to the fiduciary obligations of agents is a specialised body of law with jurisprudential roots in equity and connections to the rules of equity applicable to express trustees see Bowstead Reynolds at para 6 001 p 164 These fiduciary obligations operate independently of contract ibid As Lord Mustill incisively noted in In re Goldcorp Exchange Ltd 1995 1 AC 74 at 98 T he essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself We will return to this point at 166 below 110 The raison d être of fiduciary obligations is that an agent who has undertaken to act in the interests of another person the principal should not be permitted to act against his principal s interest Indeed a distinguishing characteristic of recognised fiduciary relationships see 108 above is the peculiar vulnerability of a party to be affected by an abuse of a power or duty that has been entrusted to another Paul D Finn in his celebrated pioneering work Fiduciary Obligations The Law Book Company Limited 1977 perhaps best summarises it at paras 465 466 465 A somewhat cynical view of human nature is the foundation of this jurisdiction assumed over fiduciaries Lord Herschell s observations in Bray v Ford 1896 AC 44 at 51 52 are perhaps the best known expression of this It does not appear to me that this rule is as has been said founded upon principles of morality I regard it rather as based upon the consideration that human nature being what it is there is danger of the person holding a fiduciary position being swayed by interest rather than duty and thus prejudicing those whom he was bound to protect It has therefore been deemed expedient to lay down this positive rule This view has echoed down the centuries The possibility that a trustee might act to favour his own interests at the expense of his beneficiaries was one of the reasons early given for denying him remuneration for his services his position gave him undue advantage to distress a cestui que trust In the often quoted and misquoted decision of Keech v Sandford 1726 Sel Ca t King 61 25 ER 223 where a trustee renewed for his own benefit a lease which he was unable to renew for his beneficiary it was held that he must hold the lease for his beneficiary for if a trustee on the refusal to renew might have a lease for himself few renewals would be made for the benefit of beneficiaries 466 Consequently the courts have held fiduciaries to something stricter than the morals of the market place Not honesty alone but the punctilio of an honour most sensitive is then the standard of behaviour But if the level of conduct of fiduciaries is thus kept at a level higher than that trodden by the crowd when will a person have this standard exacted for him Who is a fiduciary for the purposes of this rule 111 Finn further observes in Fiduciary Obligations that it does not even matter if the relationship

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