The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd [2015] SGCA 21

The case of The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd was a decision concerning a sale and purchase contract between the parties, where the sale of the land was subject to the relevant authorities’ approval. The Singapore Court of Appeal overturned the High Court’s decision in The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd [2014] 4 SLR 806 on the issue of whether the appellant had breached its implied obligation to use all reasonable endeavours to obtain the requisite approvals of the relevant authorities. In this regard, the Singapore Court of Appeal found that the appellant had not breached such implied obligation. This is because the appellant had used all reasonable endeavours to obtain the requisite approvals before rescinding the option to purchase, and was not obliged to take further steps after the authorities had refused to approve the sale and purchase.

Background

The appellant exercised an option to purchase (the “OTP”) the remainder of the lease to the respondent’s property (the “Property”). The Property was leased from the Housing and Development Board (the “HDB”). The OTP provided that the Property was sold subject to the “existing approved use” and that the OTP could be rescinded if the HDB refused to approve the sale.

The appellant approached the HDB, the Urban Redevelopment Authority and the National Environment Agency (the “NEA”) for their approval for the sale and purchase of the Property. The NEA replied to state that it was unable to grant such approval as the long term land use plan for the Property was residential and the appellant’s intended use (for selling motor vehicles) did not conform. Following from this, the HDB then informed the appellant that it was unable to grant “in-principle approval” as “the NEA’s consent has not been obtained” (the “HDB Response”).

The appellant sought to rescind the transaction and to obtain the return of the deposit of S$1.68 million under the OTP. The respondent refused, arguing that the appellant should appeal the NEA’s decision. The respondent interceded with the NEA without the approval of the appellant. This resulted in a letter from the NEA to the appellant allowing the latter’s appeal and providing approval for the sale and purchase of the Property (the “NEA Letter”). The NEA Letter noted the appellant’s “declaration and confirmation” that it was taking over the Property “without any change of use” and that it had “in-principle no objection” to this. The appellant informed the NEA that it had not appealed and declined to go ahead with the sale and purchase at this juncture.

High Court decision

The High Court found that the HDB had not clearly and unequivocally rejected the appellant’s application. The issue to be determined was, therefore, whether the appellant had taken all reasonable steps to secure the NEA’s approval, which could then be used to obtain the HDB’s approval. The court found that the appellant had failed to take all reasonable steps in this regard.

Decision of the Court of Appeal

The Court of Appeal disagreed with the High Court and found that, reading the HDB Response objectively, the HDB had clearly and unequivocally refused to approve the sale and purchase of the Property when it responded to state that it was unable to grant the in-principle approval due to the refusal of the NEA to grant its approval. Thus, the question was whether the appellant was obliged to use reasonable endeavours to persuade the HDB to change its mind after it had refused to grant its approval.

The court found that, up to the point of the HDB Response, it could not be said that the appellant had not used reasonable endeavours. As regards the question of whether this implied obligation extended to the taking of further steps after the HDB had refused to grant its approval, the court did not think that the implied obligation would invariably extend so far. Such a determination would be fact-centric, and its scope would have to be determined with regard to the express terms of the contract.

Here, the OTP expressly provided that the sale and purchase of the Property was subject to the approval of the HDB and, if the HDB refused to approve the sale, the sale would be rescinded. The effect of these express provisions was that, upon the receipt of the HDB’s refusal, the OTP came to an end and the appellant came under no further obligation to use reasonable endeavours to effect the sale and purchase. The intention behind such provisions was to eliminate the possibility of a dispute when the requisite approval has been refused, and to allow parties to have a clean break. These provisions were express and must prevail.

Concluding comments

This case reinforces the point that the scope and boundaries of implied obligations tend to be uncertain and the determination of the same would necessarily be fact-centric. As such, parties to a sale and purchase contract may wish to ensure that there are express provisions in respect of the extent of their obligation to obtain the relevant authorities’ approval and/or on the effect of a rejection from the authorities.