REGENT COURT - High Court ruling on Financial loss

Regent Court ruling explained
The objectors said their share of the sale proceeds would amount to $932,000; they had bought their flat for $993,000.

But ....... the buyer, Regent Development, had undertaken to settle the gross difference of $93,935.75 once the sale went through.

The STB did not consider this payment and took account of only the objectors’ purchase price and the en bloc sale price.

Straits Times - 11 Mar 2009

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My legal purist friend will not be happy with this ruling. The LTSA specifiaclly states that the Board can reject a sale when an owner suffers financial loss (as defined by their own very narrow criteria). This has been reiteraterd again and again in parliamentary speeches right from the beginning and has always merited special mention and attention - even to the point of having it's own SCHEDULE dedicated to it! It is the cornerstone of minority rights and protection!

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The High Court has now decided in its wisdom that the loss can be ameliorated by a third party payment.

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Perhaps the LTSA rules should be amended yet again to reflect this new reading: Fourth sechedule to include item no 5 in it's list of allowable deductables to ascertain financial loss.

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Mohamed Amin bin Mohamed Taib and Others v Lim Choon Thye and Others[2009] SGHC 48

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Ok, I have read the High Court decision and again the 'purposive interpretation' rather than the literal meaning of the Statutory requirement is yet again propounded. The words "Sales proceeds" also take on a new meaning.

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The defendents argued: 17 "that the plaintiffs’ argument that the Board may “supplant or vary” the statutory formula in computing financial loss by taking into consideration the undertaking given by the Purchaser was untenable. They noted that Parliament had specifically provided for an increase to be made from the proceeds of sale to an objector who suffered financial loss. By s 84A(7)(a), the Board was empowered to increase the objector’s share of the sale proceeds with the consent of the collective sale committee. By s 84A(7)(b), Parliament had set a limit to such an increase viz 0.25% of the proceeds of sale for each lot or $2,000 for each lot whichever is the higher. Parliament was at pains to make sure that each owner received a proportionate share of the proceeds of sale and it was not willing to allow any one or more owners to hold the owners to ransom. The plaintiffs were attempting to circumvent this provision by obtaining the undertaking and supplemental agreement. In effect they were trying to compel the ninth and tenth defendants to accept the Undertaking to which these defendants were not parties to and give up their statutory right not to be compelled to sell. This should not be allowed and the appeal should be dismissed."

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The Judgment:

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19 In recent years, the literal rule has been regarded as completely out-dated."

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55 At the end of the day, each objection must be examined on its own facts and the particular requirement breached set against the overall purpose of the legislation. One should then consider whether a strict construction and the invalidation of the Board’s order is what Parliament would have intended, taking into account any prejudice to the rights of parties and the public interest (if any).

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27 I accepted the above submission. I considered that the legislature would not have intended the adverse consequences to future en-bloc sales that would arise from a strict construction of “proceeds of sale”. I also agreed that the interpretation propounded by the plaintiff was not a strained interpretation of the Act. There was no reason why “proceeds of sale” should be limited to simply looking at the “purchase price” set out in the sale and purchase agreement."

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28 Adopting such an interpretation means that the Board would be entitled to consider not only the sale and purchase agreement but also the Undertaking and the supplemental agreement in deciding whether or not the ninth and tenth defendants had suffered “financial loss” under the Act. . In my view, the Board was, accordingly, wrong in law to decide that it could not look at these additional documents simply because they were extrinsic to the sale and purchase agreement.

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29 There was an argument that the Board could not consider the undertaking because this document was not enforceable by the ninth and tenth defendants. That argument was misplaced. Under s 84A(11) of the Act, the Board has the power to make any order and to give any direction “as may be necessary or expedient” to give effect to an order made under s 84A(7) for the collective sale of the development. This section empowers the Board to facilitate the en-bloc sale in any way necessary and therefore the Board would have had the power, had it wished to exercise it, to allow the sale to go through subject to the purchaser (which had already indicated its willingness to compensate the ninth and tenth defendants) entering into a binding agreement with the ninth and tenth defendants to make good the financial loss sustained by them. It could also order the purchaser to pay the compensation moneys to someone to hold as stakeholders pending the completion of the sale and purchase so that there would be no worry about default on the part of the purchaser."