Lim Chin San Contractors Pte Ltd v Shiok Kim Seng (trading as IKO Precision Toolings)

Philip Pillai J:

[1] This present appeal and cross appeal arose out of the Assistant Registrar’s assessment of damages pursuant to my decision in Lim Chin San Contractors Pte Ltd v Shiok Skim Seng [2010] SGHC 243 (“the Judgment”). In the Judgment, I found that the Defendant had made out a claim for proprietary estoppel and directed that the quantum of compensation is to be assessed by a Registrar. Also, in the Judgment, I specifically directed that the parties are to be at liberty to clarify the terms of the orders I made, and to apply for any ancillary orders so as to give effect to my judgment. I note that neither party had done so. They proceeded to argue the quantum of compensation before the Assistant Registrar on their respective assumptions and both now appeal against the assessment below.

[2] All the necessary findings of fact are set out in the Judgment and need not be repeated here for the purposes of this appeal against the assessment below.

[3] Once the court determines that a proprietary estoppel claim has been established, the court is faced with the unusual task of fashioning an appropriate remedy to satisfy the equity. Compared to the principles governing the assessment of damages pursuant to breach of contract, the principles governing the fashioning of an appropriate proprietary estoppel remedy are still not clear cut. This is necessarily so as the appropriate remedy would always turn on the particular facts of each case out of which the proprietary estoppels arose.

[4] The authors of Kevin Gray & Susan Francis Gray, Elements of Land Law (Oxford University Press, 5th Ed, 2009) noted at para 9.2.95 that:

[5] While the court in each case has an extremely wide discretion to fashion a remedy, such discretion cannot be exercised arbitrarily and without reference to established principles. Lord Walker cautioned in Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [46] that:

[6] The court’s duty is to do equity and no more than equity: Cameron v Murdoch [1983] WAR 321 at 360. This means that the court, as a court of conscience, goes no further than what is necessary to prevent unconscionable conduct: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 419. The court seeks, amongst other aims, to preserve some kind of proportionality between the detriment which has been incurred by the estoppel claimant and the remedy eventually awarded: Jennings v Rice [2003] 1 P & CR 100 at 111 (“Jennings”). In more recent cases, this approach has been referred to as the ‘minimalist approach’. Robert Walker LJ (as he then was) in Gillett v Holt [2001] 1 Ch 210 at 237 neatly explains the minimalist approach as follows:

[7] In the present case, I have already found at [33] of the Judgment that an outright order to sell the unit to the Defendant is out of the question, the more appropriate remedy being an award of monetary compensation. I shall now turn to the principles that govern the quantification of such an award.

[8] When awarding monetary compensation as a remedy for a proprietary estoppel claim, the court could adopt either an expectation-based approach or a reliance-based approach in quantifying the compensation, depending on the facts of each case. The difference is that the expectation-based approach looks to the plaintiff’s position had the representations been carried through, whereas the reliance-based approach looks to the plaintiff’s position had the defendant not made the representations. It is clear that while the court may take into account any of the above bases of quantifying the compensation, no single approach is determinative. The court could even arrive at an intermediate figure taking into account the different bases: Clayton v Green (1979) NZRL 139 at 140.

[9] The issue of whether the court should address the claimant’s expectations or the losses or detriment the claimant sustained as a result of his reliance upon the representation was addressed by Sundaresh Menon JC in Hong Leong Singapore Finance Ltd v United Overseas Bank Ltd [2007] 1 SLR(R) 292 (“Hong Leong”). After undertaking a comprehensive survey of the existing authorities, Menon JC concluded (at [247]-[249]):

[10] The approach in Jennings, which adopts the fulfilment of the claimant’s expectation as a starting point, has been repeatedly endorsed in subsequent cases. However, I note that the approach has not received universal support. Professor John Mee concluded critically in his chapter “The Role of Expectation in the Determination of Proprietary Estoppel Remedies” published in Modern Studies in Property Law, Volume 5 (Hart Publishing, 2009) (Martin Dixon ed) 389 at p 415 that:

[11] Therefore, to summarise, the authorities suggest that I am not bound by any specific measure in quantifying the amount of compensation to be awarded. Mr Shiok’s expectations and reliance are certainly relevant factors which I would take into account, but these factors are not determinative. Ultimately, the court would have to look at all the circumstances of the case in order to arrive at a proportionate award that would satisfy the equity raised by the estoppel. The court has discretion to adopt whichever measure (or any intermediate figure) that it considers to be the most appropriate sum given the facts of the case.

[12] With the above principles in mind, I shall now address the quantum of compensation that would in my view sufficiently satisfy the equity raised by the proprietary estoppel claim.

[13] The relevant findings of fact in the Judgment that will guide the exercise of my remedial discretion are as follows:

[14] A closer scrutiny of my findings of fact above would quickly reveal that there were actually two different representations that Mr Lim made to Mr Shiok. The first representation that Mr Lim made was that Mr Shiok could build a mezzanine floor and that Mr Lim would apply for the relevant approvals. The second representation that Mr Lim made was that Mr Shiok could buy the unit from Mr Lim at some point in time. Following my finding of proprietary estoppel, the equities that are raised in respect of these two representations ought to be satisfied by monetary compensation.

[15] Although the two representations are somewhat related, it would be conceptually clearer to treat them as independent of each other when considering the appropriate remedy to satisfy each equity.

[16] The equity that arose in respect to this representation is different from that which arose in respect to the representation that Mr Shiok could purchase the unit, because Mr Shiok’s expectation could not have been fulfilled here. The mezzanine floor would have caused the plot ratio of the building to exceed the legally permissible ratio, making the expectation illegal. If I follow the approach in Jennings and take Mr Shiok’s expectation as a starting point, he would recover nothing. This is clearly not an appropriate measure.

[18] This case is unusual in the sense that the improvements made to the land in the form of an additional mezzanine floor were illegal and had to be removed pursuant to a court order. That left the condition of the land in the same state as that before any improvements were made to it. Therefore, an assessment based on the enhancement to the value of the land would cause Mr Shiok to recover nothing. This is clearly not an appropriate measure either.

[21] The representation that Mr Shiok could purchase the premises could have been legally fulfilled, unlike the expectation that Mr Shiok could build a mezzanine floor. Therefore, following the approach in Jennings, I take Mr Shiok’s expectation, ie, the position that Mr Shiok would have been in had he had the opportunity to purchase the premises, as the prima facie basis of compensation, unless the outcome is disproportionate to the detriment suffered.

[23] It is clear on the facts that Mr Shiok had lost the opportunity to purchase the premises because of Mr Lim’s conduct. I had already found at [29] of the Judgment that:

[24] In the ordinary course of events, Mr Lim could not have sold the promises at the agreed price without offering Mr Shiok the opportunity to purchase the premises first. However, by conducting himself in a manner “that was not beyond reproach”, as I have found at [35] of the Judgment, Mr Lim had caused Mr Shiok to lose the opportunity to purchase the unit.

[25] Counsel for Mr Lim submitted that this opportunity is valueless because, first, the condition precedent under the second tenancy agreement requiring a Certificate of Statutory Completion (“CSC”) to be issued had not been fulfilled; and second, even if the condition precedent was fulfilled, the parties had not agreed upon the price and timing of the sale.

[26] I find Mr Lim’s submissions on this issue to be misconceived. The reason why a party would choose to rely on the doctrine of proprietary estoppel is precisely because he is not entitled to his strict legal rights. Also, even though the parties had not agreed upon a price and the time of sale, the opportunity to purchase does not become valueless. A loss of a chance, no matter how small, is still the loss of something of value and is thus capable of being the subject of compensation. The difficulty in valuing the chance is an entirely different matter altogether. In the context of a personal injury claim, Lord Diplock explained in Mallett v McMonagle [1970] AC 166 at 176 that:

[28] However, in the absence of any submissions to guide the exercise of my discretion in valuing this lost opportunity, I would adopt a minimalist approach in coming up with a figure. This figure must be low enough such that reasonable men would not regard it as excessive or extravagant, but high enough such that if it was to be set any lower, reasonable men would not regard it as sufficient to satisfy the equity raised. Taking into account the fact that the opportunity was not an option but merely a right of first refusal, I am of the view that 10% of $462,054.00 (the agreed purchase price under the first tenancy agreement) would be an appropriate reflection of the value of Mr Shiok’s lost opportunity. This works out to $46,205.40.

[32] Therefore, taking into account all the factors raised in this judgment, I am of the view that the minimum sum that Mr Shiok is entitled to in order to satisfy the equity raised is as follows:

(a) Cost of installing the mezzanine floor amounting to $188,817.98;

(b) Loss of opportunity to purchase premises quantified at $46,205.40; and

(c) Costs for all related legal actions to be agreed or taxed.

[33] I further order simple interest of 5.33% per annum to be payable on items (a) and (b) above starting from 8 October 2008, being the date on which Mr Shiok filed his defence and counterclaim. No interest is payable on item (c).

Philip Pillai J:

[35] After I delivered my grounds of decision, both counsel requested for further arguments before me, and after hearing them I made the following orders:

(a) compensation referred to at [32(c)] above be fixed at $3,000;

(b) cost of this appeal fixed at $8,000 (inclusive of disbursements) to be paid by Mr Lim to Mr Shiok; and

(c) cost of the hearing below to be paid by Mr Lim to Mr Shiok to be taxed if not agreed.