Developments In Singapore Law Land Property Essay

Published Date: 02 Nov 2017

The development of equity was founded mainly to plug the weaknesses of the common law but has evolved today to a body of "discrete rules, principles and remedies" [1] . Such a change was greatly motivated by "a need for certainty and consistency" [2] . VK Rajah in Lau Siew Kim articulated that "[a]s society progresses and as lifestyles, attitudes and norms change, modern development of the law and of equitable principles becomes inexorable, and, indeed, necessary." [3] He highlighted the four tenets that should guide courts in the development of equity: precedent, principle, policy and pragmatism. Therefore, any change in the law with respect to equity must develop in a way that is pragmatic and yet consistent with precedent, principle and policy.

Recent cases have questioned the orthodox position and at least one has explicitly departed from it. By doing so, the certainty in purchasers’ rights in the context of contracts for the sale of land have now been shaken. In order to safeguard certainty and also to allow the development of the law into modern times, there is a need to review this change towards awarding damages as a default remedy (as opposed to specific performance) for the contract of sale of land.

II. The orthodox position

The general principle in damages is that one is always entitled to common law damages as of absolute right in the event of contractual breach while specific performance, an equitable remedy, is discretionary. This is contrary to the orthodox position in contracts of sale of land, i.e. specific performance ought to be available to the purchaser as of right. Hence, it is usual for courts to award specific performance because such contracts are specifically enforceable. This is based on the traditional notion that all parcels/pieces of land/property are inherently unique. Prima facie, once land or property is deemed unique, damages awarded during breach of such contracts are perceived as inadequate. [4] Specific performance would not be granted however, if there is the existence of an equitable defence, i.e., hardship or if the plaintiff comes to court without ‘clean hands’.

III. Developments in Singapore

In the recent cases of EC Investment Holding v Ridout Residence Pte Ltd [5] , both the High Court and Court of Appeal (partly affirming) have departed from the orthodox position by refusing to award specific performance for a contract of sale of land. In doing so, the High Court, especially, had questioned the validity of the orthodox position, which the Court of Appeal refused to affirm.

At first instance, the judge had largely relied on the Canadian and New Zealand cases of Sinnadurai Paramadevan and Blossom Paramadevan v Bernard Semelhago [6] and Landco Albany v Fu Hao Construction Ltd [7] in order to justify that purchasers of land no longer have specific performance as a remedy as of right. He had explicitly doubted that the principles underlying the orthodox position held water in the modern context [8] . Chan J (as he was then) had previously also displayed such an inclination and ruled in Good Property that if an owner holds a piece of land for profit rather and personal enjoyment, damages are more likely to be adequate. [9] 

Loh J also referred to Cathay Theatres Pte Ltd v LKM Investment Holdings Pte Ltd [10] and concluded that Lee Seiu Kin JC (as he was then) had cited Good Property and approved of the above proposition. With great respect, Loh J may have conflated the position of the purchaser and the vendor. Lee JC had expressed approval that damages may be an adequate remedy for vendors rather than purchasers. [11] It was therefore, Loh J himself who mainly extended the argument that damages may be adequate for purchasers, due to the lack of clear precedent in Singapore law.

Even so, there seems to be a second view arising from the Singapore courts. This was noted by Phang J (as he was then) in Ho See Yueng Novel v V Development Pte Ltd [12] who was of the view that because land is unique, the purchaser "may well consider a contractual remedy in damages to be inadequate – hence the possible remedy of … specific performance". [13] The Court of Appeal in RidoutCoA, too, had exhibited reticence on this matter. The Court of Appeal decided not to affirm specifically on Loh’s J use of the Commonwealth authorities but chose rather to affirm it on a broader ground, i.e., that it would not be just and equitable to award specific performance. Furthermore, in outlining what the orthodox position was, they described is as one where "specific performance will always be decreed for… land contracts", i.e. contracts relating to immovable property". [14] 

As a result, it is yet uncertain whether the orthodox position still holds in Singapore. However, given Rajah JA’s dictum in Lau Siew Kim, judges when presented with a legal problem, courts have to look towards statutory law and precedent for a solution, in this case, looking at local precedent first before opting to go to foreign precedents. If local precedents are divided, the judge should have looked towards English precedents [15] which are still binding on us, i.e. pre 1993 and analyse the reasoning/rationale of those decisions. Inasmuch as there is a need to bring the law into modernity by referring to other common law jurisdictions, it should not have been done without due consideration of its potential impact.

IV. Specific performance or damages: that is the question

Loh J was of the view that the law on contracts for the sale of land should follow that of Canada and New Zealand, as mentioned briefly in [3]. However, this may have adverse ramifications on the development of our law. In choosing to award damages, there are three possible problems that seek to undermine certainty.

One practical effect would be to adopt two premises into Singapore law. One, that specific performance will not be awarded if damages are adequate and two, that as long as the land is not unique, damages will be adequate. Furthermore, given Loh J’s doubts over the orthodox position [16] as well as dictum in Semelhago:

"While at one time the common law regarded every piece of real estate to be unique, with the progress of modern real estate development this is no longer the case. Residential, business and industrial properties are all mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available" [17] 

it is most likely that the presumption of uniqueness would be removed, noting also that "the presumption of uniqueness has not (yet) been replaced by a presumption of replaceability, and … Semelhago … open(ed) the door to a critical inquiry as to the nature and function of the property in relation to the prospective purchaser." [18] 

In fact, following the Canadian line of jurisprudence, it became the burden of the plaintiff-purchaser to prove that land was unique and that there was no other substitute before specific performance could be awarded. Even now, the content of the "uniqueness" test in Canada is uncertain and there are numerous interpretations. Sopinka J provided little guidance because his discussion was mere obiter and not integral to the case at hand. In Walton, the test of uniqueness, known also as the "business rationale" test, is one that includes both subjective and objective elements. It cited Professor La Forest to explain that:

"[the] ‘business rationale’ test for which the (subjective) business case for desiring the particular commercial property is examined through a due diligence (objective) appraisal by the court. Thus, the court will examine the nexus between the plaintiff’s business plan and the amenities of the subject property." [19] 

The issue here is that the court is supposed to step into the shoes of a commercial investor and furthermore, it is unsure whether the court has the ability to determine commercial viability. Such business proposals are predicated on a probability as opposed to a certainty that profits will be made. In Raymond v Raymond [20] , the court diverged from the test in Walton and reverted to the test in Morsky v Harris [21] , and assessed uniqueness based on "objective attributes … and subjective factors articulated by the prospective purchaser". [22] This test placed greater emphasis on objective factors compared to Walton. What is important here is that it is undesirable to allow the law to develop even incrementally in a direction that is yet unsettled and uncertain in the jurisdiction that founded it.

It is settled principle that damages are assessed based on expectation as stated at [7]. Similarly, damages are assessed at date of breach. Moreover, whether a court awards specific performance or damages, it is worth noting that they:

"are simply two means of accomplishing the same result. Specific performance protects the [purchaser’s] expectation interest in a contract by delivering the promised performance, [while] damages … protects the same interest, forcing the defendant to pay the monetary equivalent of the promised performance. [23] 

Therefore, it is important to ensure that whichever remedy is awarded, the result should be the same and the purchaser should not unduly benefit or lose as a result of the choice of the remedy.

The argument behind why damages are usually inadequate is because of the concept of consumer surplus which is hidden from the objective assessment. [24] Most of consumer surplus comprises a subjective value, i.e. a value that the purchaser has affixed above and beyond the price paid, i.e a representation of expectation interest. This value is subjective and hence "extremely difficult to assess". [25] This can lead to a situation of either over or under-compensation. The former will take place in a rising market and the surplus is lower, while the latter takes place if the surplus is lower than market value. This is further aggravated in a volatile property market. Pragmatically, awarding specific performance also allows the court to avoid the task of having to assess damages and avoid erroneous assessment. [26] 

There may be an argument to differentiate commercial, residential and even speculative purchasers, however, the tradeoff of uncertainty may be far too high. According to Sharpe, both parties (need) to know what form of remedy is available, not only to avoid the cost of litigation, but also to enable the purchaser to know whether to a substitute…" [27] In such absence, purchasers are unable to determine their course of action in the face of contractual breach.

Another problem with the change in default remedy (since the land presumed not to be unique and that damages would be adequate) is that the purchaser would have no claim on or equitable interest in the land, but only a contractual right against the vendor. As mentioned in Walton, "[o]nce it has been determined that damages are an adequate remedy, there is no "interest in land" capable of protection by caveat." [28] As the purchaser is no longer the equitable owner of the land (equity sees what ought to be done as done) he would not be able to file a caveat and therefore, he would not be able to register his interest pursuant to the Land Titles Act. [29] 

The caveat affords the purchaser protection of his interest and claim in the property. Without it, the vendor will be able to transfer the property to another purchaser and consequently, will deny the purchaser his right to specific performance. Furthermore, in cases of fraud, it is harder to prove that the second purchaser had notice (actual or constructive) of the first purchaser’s interest. Another example would be the insolvency of the vendor, where creditors can lay claim to the property without the protection of the caveat. Even in Walton, the judge had chosen to overlook and not discuss "how the remedy of specific performance [and hence damages] interacts with the Torrens system when competing caveats claim the same interest in land". [30] 

Singapore is a small and densely population nation of scarce land. Given the high price of property in Singapore, most property owners buy their property on long-term loans and shell out significantly large amounts of money for their homes. While Sharpe has noted that "there has not … been a dramatic change in practical result", whether for residential property [31] or commercial cases, [32] it is the fear of interference with the Torrens system and whether caveats are still valid if purchasers no longer have the presumed right to specific performance.

V. Conclusion

It is clear that RidoutCoA does not stand ultimately for the proposition that specific performance is no longer available as of right even though the Court of Appeal had denied specific performance. They had done so for other reasons and even if specific performance was awarded as of right, it would still have been denied because there would be hardship to a third party had the contract been performed. [33] This is important because what Sopinka J laid down in Semelhago was obiter but has regrettably taken off on its own, i.e. re-interpreted and applied in other Canadian cases. Arguably, in his oft-quoted dictum (also cited by Loh J), he states that "(i)t is no longer appropriate … to maintain a distinction in the approach to specific performance as between realty and personalty." Referencing Adderley v Dixon, the "(c)ourts of Equity decree the specific performance of contracts not upon any distinction between realty and personalty", i.e. the courts did not distinguish between realty or personalty to begin with. Rather, as Alistair Hudson aptly puts it, "the focus is on land as the subject matter of a contract, rather than on the need for the acquisition of property rights per se". [34] 

Specific performance should be available as of right to the purchaser of land because of the presumption that land is ultimately unique. However, it may be preferred such a presumption be rebuttable by the vendor, i.e. the right is qualified. In the context of a vendor-breach and is subsequently arguing for damages in lieu, it may be preferred that the burden is placed on him to argue on what basis the orthodox position should be departed from based on the facts. Note that the Canadians had in fact recognised possible problems in Semelhago and had convened a committee to study the effects of such a change in law and consider legislation to reverse it. Their findings are useful as it can help illuminate how a vendor may attempt to rebut the presumption.

The Alberta Law Reform Institute came up with a list of objective factors that contribute to uniqueness:

"no other land has the same boundaries and precisely the same physical characteristics; the parcel is immovable and indestructible; the land has been uniquely identified by the parties in a contracts, … ownership of the land is determined by a public record; ownership of land can be changed by an entry in a public record by a public official at the instance of the court." [35] 

However, it should also be noted that the orthodox position takes into account not only objective factors but subjective notions of uniqueness, which the vendor also has to rebut.

Therefore, because there is significant difficulty in rebutting the presumption, it is only in the most exceptional of cases where it can be proved with great certainty that damages are accurately adequate, that the orthodox position can be departed from pursuant to the court’s power to do so under the Supreme Court of Judicature Act [36] . As such, the phrase "the court needs to look at all the facts and circumstances" [37] is particularly important. This seeks to ensure that the situation is an appropriate one and that there is nothing to the contrary that can deprive the purchaser of his right or deprive the vendor to payment of damages if damages can be accurately proven to be adequate.