Kwon Do Hyeong v Covenson Pte Ltd [2025] SGHC 212

HC/OA 1031/2024 (“OA 1031”) stems from Mr Kwon Do Hyeong’s (“Mr Kwon”) attempt to purchase 8 Ardmore Park #19-01 (“Property”), an attempt which ended unsuccessfully sometime in 2023. Mr Kwon claimed that two further payments he had made in respect of the Property ought not to have been forfeited by Covenson Pte Ltd (“Covenson”), which was the vendor of the Property. Mr Kwon’s case was that these further payments were advance payments for the purchase of the Property, which Covenson was not entitled to forfeit, whereas Covenson’s case was that these further payments were part of the consideration for the grant of the option, which it was entitled to forfeit.

This matter was heard before me on 26 August 2025. I found that the further payments were part of consideration for the option and thus dismissed Mr Kwon’s claim for the return of these further payments. I allowed Covenson’s counterclaim for additional rent. As an appeal was filed against my decision on 22 September 2025, I now elaborate on my reasons.

Facts

Background to the dispute

Mr Kwon first expressed interest in the property in or around December 2021. On 11 December 2021, Mr Kwon (through his estate agent) proposed to purchase the Property at $38.8m with 5% as the booking fee for the grant of an option for a period of four weeks and a further 5% as the fee for the exercise of the option within that option period. Mr Kwon proposed a period of eight weeks after the exercise of the option for completion with the balance 90% being paid upon completion. On 12 December 2021, Covenson indicated its agreement, but required 12 weeks instead of 8 weeks after exercise of the option to prepare the Property for handover.

On 15 December 2021, the Singapore government announced an increase in the Additional Buyers’ Stamp Duty (“ABSD”) for foreigners from 20% to 30% of a property’s purchase price.

On 16 December 2021, in light of this new measure, Mr Kwon (again through his estate agent) requested for either a longer option exercise period of 18 months as he was in the process of applying for permanent residency, or a lower offer price to account for the increase in ABSD. This request was relayed to Covenson’s representative, Ms Tan Sok Hui (also known as Samantha) (“Ms Tan”). That same day, Ms Tan reached out to her superiors via WhatsApp for confirmation.

Following further negotiations, Covenson eventually acceded to Mr Kwon’s request for a longer option period of 18 months in exchange for further payments being made during that longer option period and before the option could be exercised. Covenson granted the option to purchase agreement (“Option”) on 23 December 2021. I use the capitalised word “Option” to refer to the Option granted in this matter, and use the uncapitalised word “option” when referring to options in general. The key terms of the Option were as follows:

In accordance with these terms, the option fee of $388,000.00 (“Option Fee”) was remitted on 22 December 2021 and the two further payments of $1,552,000.00 (“Further Payment 1”) and $16,820,000.00 (“Further Payment 2”) were made by their required dates, prior to the exercise of the Option.

Under cl 3 of the Option, upon receipt of Further Payment 2, Covenson “agree[d] to let” and Mr Kwon “agree[d] to take out the tenancy” of the Property. While it was not common for penthouse units with a size and price similar to that of the Property to be rented out, Covenson stated that exceptions could be made for buyers like Mr Kwon “who expressed significant commitment to purchasing the unit [and] sought to rent the unit in the short term pending their purchase of the same”.

Accordingly, a tenancy agreement was signed between Covenson and Mr Kwon on 17 February 2022 (“Tenancy Agreement”). The Tenancy Agreement was for a fixed term from 28 February 2022 to 22 June 2023, and on top of the monthly rent of $40,000, a lump sum rental of $640,000 had to be made prior to the commencement of the tenancy.

On 28 February 2022, the Property, with fixtures installed, was handed over to Mr Kwon. From 1 March to 1 June 2022, Mr Kwon renovated the property. From around June to August 2022, Mr Kwon lived in the Property with his family.

On 17 May 2023, Mr Kwon (through his wife who was acting on his behalf pursuant to a Power of Attorney) exercised the Option by returning the countersigned Option and cashier’s order for the $1,000 Deposit to Covenson. On 19 May 2023, Covenson’s counsel wrote to Mr Kwon’s counsel (at the time) with a letter appending the completion account showing the balance moneys due as $19,456,553.30 (comprising balance purchase price, property tax, management fund and sinking fund). As of 19 May 2023, Covenson had received $19,401,000 from Mr Kwon. This comprised the Option Fee, Further Payment 1, Further Payment 2, the Deposit and the lump sum rental of $640,000.

On 31 May 2023, which was the scheduled completion date two weeks from the date the Option was exercised, Mr Kwon’s counsel (at the time) sent an email to Covenson’s counsel stating that Mr Kwon “ha[d] come to a settled decision not to proceed with the purchase and [would] not be completing the transaction”. Thereupon, Covenson issued a notice to complete within 21 days pursuant to Condition 15 of the Law Society of Singapore’s Conditions of Sale 2012. Mr Kwon did not comply with this notice and accordingly on 22 June 2023, the contract for sale and purchase of the Property terminated and the tenancy came to an end.

It was undisputed that the Property was not reinstated. The Property was only vacated on 21 July 2023 and handed over back to Covenson on 25 July 2023. The monthly rent of $40,000 for the period from 23 June to 22 July 2023 was paid on 24 July 2023.

Procedural history

On 4 October 2024, Mr Kwon filed the Originating Application in OA 1031 seeking a declaration that Covenson’s forfeiture of the sum of $19,401,000 received from Mr Kwon was “invalid, unlawful and/or otherwise null and void”, as well as a return of the same sum with interest. Subsequently Mr Kwon narrowed down his claim to the return of Further Payment 1 and Further Payment 2 (collectively, “Further Payments”). My analysis was thus limited to the Further Payments.

In the 1st affidavit filed by Ms Tan, Covenson raised three counterclaims:

(a) rectification costs amounting to $91,121.43, which comprised $32,585.20 already incurred for rectification works, $25,715.10 for replacement of the refrigerator, dishwasher and kitchen hood, $28,835 for the replacement of ceiling lighting and their corresponding transformers, and $3,986.13 for repair and refurbishment works to the swimming pool timber deck. During the hearing, Covenson clarified that if Mr Kwon’s claim were to be dismissed, it would narrow its counterclaim for rectification costs to $40,230.19, which comprised $32,585.20 for reinstatement works incurred prior to the resale and $7,644.99 for a new hood;

(b) additional rent amounting to $40,000 since Mr Kwon was liable to pay double the amount of his rent as he had held over the Property for a month after the expiration of the tenancy; and

(c) damages arising from Mr Kwon’s failure to complete the sale and purchase of the Property, if the court were to grant the declaration sought by Mr Kwon that “Covenson [was] not entitled to retain the Collected Sums”. This would include the difference between Mr Kwon’s contracted purchase price and the eventual substitute resale price, as well as additional costs incurred by Covenson: see [15] above. These additional costs included the agent commission incurred for the resale, and the management fund incurred between the original and eventual completion date.

The parties’ cases

The question of whether Mr Kwon is entitled to a return of the Further Payments turned on whether the Further Payments were paid as part of the consideration for the grant of the option or instead as advance payments for the purchase.

Mr Kwon adopted the latter position and contended that the Further Payments were advance part payments such that the forfeiture of them by Covenson was invalid. Mr Kwon offered the following reasons to support his contention:

(a) The express wording of the Option supported Mr Kwon’s contention that the Further Payments were advance part payments and were not part of the option fee.

(b) The fact that parties had been treating Mr Kwon as an owner from the outset supported Mr Kwon’s contention that the Further Payments were advance part payments and were not part of the option fee.

(c) Covenson did not have a contractual right to forfeit the Further Payments. Instead, the Further Payments were to be returned to Mr Kwon in view of how the sale and purchase of the Property had not been completed and Mr Kwon had not received title to the Property, thus resulting in a total failure of basis for the transfer of the Further Payments.

Covenson contended that the Further Payments were paid as consideration for the grant and continuation of the Option over the longer option period. For this, Covenson relied on the express wording of the Option and the commercial context behind how the Option had been agreed on between the parties. Covenson relied on the analysis adopted in the decision of the Appellate Division in TG Master Pte Ltd v Tung Kee Development (Singapore) Pte Ltd [2024] 1 SLR 690 (“TG Master”), contending that the Further Payments were part of the true, non-refundable option fees.

Claim

The first question is whether the Further Payments formed part of the consideration for the option and so were earned by the grant and holding open of the option during the option period or were instead a deposit or part-payment toward the purchase of the Property.

Only if the Further Payments were found not to be consideration for the option, would the court have to apply the framework set out in Li Jialin v Wingcrown Investment Pte Ltd [2024] 2 SLR 372 (“Wingcrown”) (at [73]) for claims seeking the return of an alleged deposit. Under the first step, the court would have to consider whether the Further Payments were a deposit or part-payment toward purchase: Wingcrown at [73(a)]. If the Further Payments were found to be part-payment, their recoverability would then be determined under general law. If the Further Payments were found to be a deposit, the court would then proceed to consider whether Covenson was entitled to forfeit the Further Payments or would be precluded from doing so on the basis that the Further Payments were not a “true deposit”. The distinction is between reasonable true deposits serving as an earnest for performance by the purchaser and part payments disguised as deposits, far exceeding what would be reasonably necessary to serve the function of earnest money: see TG Master at [89]–[90]; Wingcrown at [73].

The Nature of the Further Payments

The terms of the Option determine the nature of the Further Payments. Perhaps because the parties were seeking to reflect bespoke terms into an otherwise general form contract, operative terms were included within the recital section. In my view, this drafting choice, while untypical, did not hold any significance for the task of interpretation. The relevant recitals within the Option are as follows:

Mr Kwon relied on the point that the “Option Fee” in Recital A was defined as $388,000 (see [6] above) to contend that parties had “agreed that the consideration supporting Covenson’s grant of the [Option] was the Option Fee of $388,000 that had been received by Covenson” [emphasis in original omitted] and that the Option was in effect upon the payment of the $388,000. Mr Kwon then interpreted Recital B as a condition subsequent providing that non-payment of the Further Payments would result in the “avoidance of an option which had already been constituted” [emphasis in original omitted].

Mr Kwon also contended that because Recital E provided that upon exercise of the Option, the Further Payments (together with the Option Fee and the Deposit) would “secure the due performance … and the completion of the sale and purchase of the Property” [emphasis in original omitted], the Further Payments were indeed security for performance and hence subject to the penalty rule.

However, I disagreed with Mr Kwon’s interpretation of the Option. The question to ask is what had to be paid in order to keep the option open for the option period. The option period here was much longer than the usual period because of circumstances specific to Mr Kwon (his being subject to higher ABSD rates as a foreigner) and it was Mr Kwon who had requested that longer period.

Mr Kwon (through his wife) accepted that the Option had “unique features” and “was neither a, nor intended to be, the typical option to purchase in a property purchase market”. In particular, Mr Kwon (again through his wife) accepted that the 18-month option exercise period was “a relatively extended one”. This was in contrast to the four-week option exercise period initially proposed on 11 December 2021. Mr Kwon needed more time because he hoped to change his immigration status in the intervening time so as to avoid incurring the increased ABSD.

The longer option period meant that Covenson had to keep the Property off the market for longer. The grantor of the option takes the risk that property prices will fall before the date arrives for exercise of the option. In such circumstances, the grantee may choose not to exercise the option, leaving the grantor with the unsold property that is worth less than it was when the option was granted. It is natural that the longer the option period (and hence the longer the period during which the grantor takes this risk of falling prices), the higher the option fee that is needed to compensate for the period of risk.

Indeed, in this case, evidence was adduced that Covenson’s concern was not simply of a general risk of falling prices but instead specifically concerned regulatory uncertainty around ABSD and additional cooling measures. Such measures, if introduced, would impact prices for luxury properties such as the Property.

Further, the timing of the Further Payments is significant. They were to be made prior to the expiry of the option period and exercise of the Option. Payments made prior to the formation of the sale and purchase agreement (which would occur only upon exercise of the Option) are, in principle, hard to allocate to a contract not yet in existence. It is straightforward to allocate them instead to the contract that is in existence, namely the option contract. This is in line with observations made by the Appellate Division of the High Court that sums paid prior to the exercise of an option would typically be part of the option fee paid for the grant of the option (and not part payment towards the purchase): TG Master at [84], [97].

Therefore, I found that the Further Payments were part of the consideration for the Option. Accordingly, they were fully earned by Covenson’s keeping the Property off the market during the option period.

Mr Kwon had a further argument based on the terms of the Option. This was that the right to forfeit the Further Payments was predicated upon failure to exercise the Option (per Recital D) while upon exercise of the Option, they became security for due performance and completion (per Recital E). His counsel contended that the fact the Option was exercised also distinguished this matter from TG Master, where the option was not exercised. I rejected this contention. Even if an option is exercised so as to bring into existence a sale and purchase agreement, the consideration paid for grant of the option does not become refundable if the purchase is not completed, unless otherwise agreed by the parties. The option fee is earned by grant of the option and by keeping the subject of the option exclusively available to the grantee for the option period: TG Master at [84]. Thus, whether any part of the Option Fee credited to the purchase price becomes refundable in the event of non-completion is a matter of construction to determine what the parties agreed. This approach is consistent with that of the Court of Appeal of New South Wales in J & Z Holding (Aust) Pty Ltd v Vitti Pty Ltd [2024] NSWCA 2, which was not cited by either party. Tellingly in this case, both Recitals D and E refer to the Option Fee in the same breath as the Further Payments and do not distinguish them. In my judgment, Recital E merely made clear that the payments made for the Option had to be credited toward payment of the purchase price of the Property. There was no agreement that upon exercise of the Option, the Further Payments would become refundable, in the event of non-completion. Moreover, it cannot be said that there was a “total failure of basis” or “total failure of consideration”. Mr Kwon received what he bargained for: the Option and his right to exercise it. It was Mr Kwon who decided not to proceed with the purchase.

As such there was no need to consider whether, if they were deposits or part-payments, Covenson was entitled to forfeit them. I thus dismissed Mr Kwon’s application in full.

Counterclaim

Counterclaim for reinstatement costs

Counterclaim for additional rent

Covenson counterclaimed double rent amounting to $40,000 during the holding over period pursuant to s 28(4) of the Civil Law Act 1909 (2020 Rev Ed) (“CLA”). This subsection provides as follows:

Mr Kwon did not contest the applicability of s 28(4) of the CLA. Instead, his main argument was that Covenson had, by way of a letter dated 17 July 2023 from its counsel to Mr Kwon’s counsel (at the time) (“17 July 2023 Letter”), either waived its right to claim for double rent or become estopped from making this counterclaim for double rent since Covenson had by its word or conduct induced Mr Kwon to continue holding over the Property under the impression he would not be liable for double rent. In particular, Mr Kwon relied on the following representation by Covenson’s counsel in the 17 July 2023 Letter:

Covenson’s offer in effect not to charge double rent during the 1-month holding over period between 22 June and 21 July 2023 was subject to “the Property [being] vacated, returned to its ‘original state and condition’ and delivered up to [Covenson] in accordance with Clause 4(I) of the Tenancy Agreement”. This condition was not met as Mr Kwon had not reinstated the Property.

Therefore, I found that Covenson had not waived its right to charge, nor was it estopped from charging, double rent pursuant to s 28(4) of the CLA. I thus allowed Covenson’s counterclaim for additional rent of $40,000.

Conclusion