Mohamed Ali s/o Abdul Razak v Tan Ah Bee

Philip Pillai JC:

[1] The Plaintiff is the grantee of an Option to Purchase signed by the Defendant, dated 4 June 2009 (“Option”) a property situated at and known as 1 C Riviera Drive, Singapore 467196 (the “Property”). The Plaintiff’s claim against the Defendant in this action is for specific performance of the Option, together with ancillary orders required to effect the same.

[2] The Defendant entrusted all decisions relating to this transaction to her brother, Mr Tan Chin Gee (“Eric Tan”), a property valuer who owned a property valuation and commercial real estate company - Global Realty Pte Ltd. In the entire transaction she fully authorised him to take all decisions as he saw fit and signed all documents approved by him. In short, Eric Tan had the full conduct of this transaction on her behalf.

[3] Between 1 January 2009 and 12 May 2009, Eric Tan placed regular sales advertisements for the Property, inserting his mobile telephone contact number and description as “owner” for prices varying initially at S$1.5m and reduced to S$1.45m from 8 February 2009 onwards. On 26 May, 2 June and 5 June 2009, sales notices were placed by Phyllis Ng of Harvest Realty Consultants Pte Ltd (“Harvest Realty”) for viewing/offer of premises described as “Parbury Vicinity for S$1.3m” and listing her mobile telephone contact number.

[4] The Plaintiff responded to Phyllis Ng’s advertisement and arranged to view the Property on 3 June 2009. Upon viewing the Property, the Plaintiff offered S$1.27m. He was told that the owner’s asking price was S$1.3m but that Phyllis Ng would revert. She called him the next morning at about 9 am confirming the owner’s price of S$1.3m and informed him that the owner had given her a signed Option on the Property in exchange for the 1% payment, should he agree to the unchanged offer price of S$1.3m. At around 3 pm on 4 June 2009, the Plaintiff sent a telephone text message (“sms”) to Phyllis Ng of his acceptance of the offer price of S$1.3m and requested a meeting to deliver the cheque. She called back and they arranged to meet at the Property. Whilst they had arranged to meet around 6 pm, he met her at around 6.45 pm that evening and handed her a DBS Cheque No. 000412 dated 4 June 2009 for the sum of S$13,000, issued in favour of Tan Ah Bee. He received the signed Option dated 4 June 2009 in exchange.

[5] It is the Plaintiff’s evidence that at no time in his conversations and meetings with Phyllis Ng was there any mention of a time deadline imposed by Eric Tan on Phyllis Ng for the option money to be given by 4 pm on 4 June 2009. It is his evidence that he first learnt of this time deadline when he received a telephone call from Phyllis Ng on 6 June 2009 informing him that Eric Tan was refusing to accept the option cheque because it had not been delivered to Eric Tan by 4 pm on 4 June 2009. It is his evidence that he was also then informed by Phyllis Ng that the same cheque had been hand delivered by her to the Defendant on 5 June 2009 at the Defendant’s residential address. It is also his evidence that the cheque was returned to Harvest Realty and delivered by registered post on 8 June 2009 to the Defendant’s residential address and was later confirmed by the Defendant’s solicitors to have been returned to Harvest Realty.

[6] There are 2 documents signed by the Defendant in this transaction: (i) the Option to Purchase and (ii) the Commission Agreement, the relevant material terms of which are extracted hereafter:

[7] The legal issues are simply stated as follows:

(a) Whether the exchanged Option remains exercisable, where the Option grantor returns the Option cheque after the grant but prior to the exercise of the Option?

(b) Whether the Option grantee is bound by the condition “only if option money is given by 4 pm, 4 June 2009” (hereinafter referred to as the “Time Condition”) contained in the Commission Agreement but not contained in the Option? and

(c) Whether the Acceptance and tender of the balance payable in exercise of the Option, constitutes a valid exercise of the Option in light of the prior return of the Option cheque?

[8] The Defendant in her affidavit evidence in chief (“AEIC”) confirms that she fully authorised her elder brother Eric Tan to represent her in the sale and that she had signed the Option and the Commission Agreement. By the express terms of the Option and the Commission Agreement, both of which are in the standard form issued by Harvest Realty, it is clear that the Defendant had appointed the latter as agent with respect to the granting of the Option. Eric Tan had upon cross examination explained that he did not appoint any exclusive agent for the sale of the Property. He had inserted the advertisements as owner for the purpose of ensuring that any agent would be best motivated if he would not have to share his commission with another agent. Eric Tan asserts that Harvest Realty’s Phyllis Ng is not the Defendant’s agent by reason of his prior advertisements to sell the Property as owner. Whatever Eric Tan’s assumptions may have been, in the circumstances, it is beyond question, that when the Defendant signed and handed the Option and Commission Agreement to Phyllis Ng on 3 June 2009, Harvest Realty acting through Phyllis Ng was duly authorised as agent of the Defendant to exchange the Option against receipt of the Option cheque.

[9] The Time Condition is not inscribed in the Option but is to be found in the Commission Agreement which is a standard form commission agreement of Harvest Realty. The Commission Agreement is between Harvest Realty and the Defendant and was signed by the Defendant. The Time Condition requires the “option money to be given by 4 pm, 4 June 2009”. It does not by its express terms prescribe to whom the option money is to be given.

[10] It is not disputed that the Time Condition was conveyed by Eric Tan to Phyllis Ng verbally, that it was inscribed in the Commission Agreement on 3 June 2009 and confirmed by Phyllis Ng by text message to Eric Tan. It is not disputed either that the Option cheque was delivered by the Plaintiff to Phyllis Ng by hand at the Property around 6.45 pm on 4 June 2009. In the event that the Plaintiff were to be held bound by the Time Condition, the option money would not have been “given by 4 pm, 4 June 2009”.

[11] The Plaintiff denies knowing of the existence of the Time Condition in the Commission Agreement at any material time. Eric Tan under cross examination gave evidence that he assumed that Phyllis Ng had notified the Plaintiff. Both parties had the opportunity to call Phyllis Ng as a witness but the first Defendant’s counsel and then the Plaintiff’s counsel each declined to do so although she was present in court.

[12] Eric Tan in his AEIC confirmed that the Time Condition was inserted by him in the Commission Agreement and that he had also inserted the word “Ali” in the Option to Purchase in order to ensure that the Option was only for the Plaintiff and no one else. It is also his evidence that Phyllis Ng had expressed her understanding that if she did not comply with the Time Condition she was prepared to forego or reduce her commission. When asked under cross examination to explain why he had insisted on the 4 pm Time Condition even though any cheque given at or after the prescribed time on 4 June 2009 could only be banked the following day, Eric Tan explained that he did not want Phyllis Ng to have in hand an open-ended Option and be able to shop around. He had agreed to insert the Time Condition in the Commission Agreement and not in the Option because he agreed with her suggestion at the time that were it to be placed in the Option, a potential purchaser would be likely to consult his lawyers and this would delay matters and he might lose the sale.

[13] In Eric Tan’s AEIC he recounts a sequence of text messages between Phyllis Ng and him on 4 June 2009 and his actions, inter alia:

[14] The Plaintiff instructed Hilborne & Co to act on his behalf and on 16 June 2009 they sent the Defendant’s named Option solicitors Abraham Low LLC, the duly completed Acceptance Copy dated 16 June 2009 together with their cheque for S$52,000 representing the balance of the payable upon the exercise of the Option.

[15] This letter and payment were returned on the same day by Abraham Low LLC, with a covering letter stating that:

[16] On 17 June 2009, the Plaintiff’s solicitors sent the letter dated 16 June 2009 marked “Exercise of Option” by hand to the Defendant.

[17] The Defendant’s current solicitors, Patrick Chin & Co, sent the Plaintiff a letter dated 19 June 2009 referring to the letters and cheque delivered to the Defendant and returning the same and stating, inter alia:

[18] The Plaintiff’s solicitors replied by letter on 22 June 2009 stating inter alia:

[19] Although the Option provides that the exercise of the Option is to be effected by payment of the balance to Abraham Low LLC, and that this was duly made by the Plaintiff’s solicitors on 16 June 2009, Eric Tan in para 35 of his AEIC confirms that Abraham Low LLC were instructed not to accept the Option acceptance and the tendered balance of the purchase price.

[20] By reason of the signed Option and the Commission Agreement, the Defendant has expressly appointed Harvest Realty as their agents with Phyllis Ng having the conduct of the agency. The process of delivery by a property agent of a signed Option in exchange for a cheque of the option money is the standard process in Singapore. Upon the delivery of the option money by cheque to Phyllis Ng and her delivery in exchange to the Plaintiff of the signed Option, there came into existence a binding contract between the Plaintiff and the Defendant upon the terms set out in the Option.

[21] There is no dispute as to the inscription of the Time Condition in the Commission Agreement and the absence of such a Time Condition in the Option entered into by the Plaintiff with the Defendant. The Commission Agreement is an agreement between the Defendant and Harvest Realty to which the Plaintiff is not a party.

[22] It has not been established in evidence that the Plaintiff’s attention had been brought to the existence of the Time Condition in the Commission Agreement. Even had it been brought to his attention, by its very terms, it has no obvious bearing on the grant of the Option to Purchase to the Plaintiff, upon his delivering to the agent, his 1% Option cheque and receiving from Phyllis Ng in exchange, the signed Option. It is not argued that there was any incorporation by reference of the terms of the Commission Agreement or the Time Condition into the Option. The Commission Agreement which is a contract between the Defendant and Harvest Realty provides for the payment of the commission of S$19,000 by the Defendant to them, “only if the option money is given by 4 pm, 4 June 2009.”

Issue (1): Whether the exchanged Option remains exercisable, where the Option grantor returns the Option cheque after the grant but prior to the exercise of the Option?

[23] The Plaintiff’s Option cheque was delivered to Phyllis Ng on 4 June 2009 in exchange for the delivery to him of the signed Option. It is a quite settled current practice in relation to options to purchase land in Singapore that the tender of a cheque in exchange for the grant of an option is good tender for the payment of the option money, whilst the exercise of an option is customarily effected by payment to the nominated solicitors. See Wong Fook Heng v Amixco Asia Pte Ltd [1992] 2 SLR 342 per Lai Kew Chai J “A bill of exchange, once given, is to be treated as cash and is to be honoured unless there is some good reason to the contrary.” Equally, a tender of a cheque which is subsequently dishonoured, would no longer contractually bind the grantor to the Option. The objection by Eric Tan does not relate to the validity of the tender of a cheque as a cheque, but rather to the Timing Condition. See Min Hong Auto Supply Pte Ltd v Loh Chun Seng [1993] 3 SLR 498.

[24] Phyllis Ng had brought the cheque to Eric Tan later that night. Eric Tan had refused to accept it then and the following day and also returned the cheque when it was later deposited at the Defendant’s home. The question which arises is whether the tender of a cheque to the Defendant’s agent in these circumstances creates a binding contract and thus entitles the Option grantee to thereafter exercise the Option by payment of the balance deposit payable in accordance with the terms of the Option.

[25] No question arises that the Option cheque was ever dishonoured. Accordingly upon the tender of the Plaintiff’s cheque to Phyllis Ng, the Option became thereupon operative and is binding against the Defendant upon its terms. Its subsequent return by Eric Tan and Tan Ah Bee or otherwise has no bearing on the validity and effectiveness of the Option. Otherwise a grantor of an option, would thereafter be able to frustrate the exercise of an option, by the simple expedient of not encashing the Option cheque, tearing it up or returning it.

[26] This question has been considered in Min Hong Auto Supply Pte Ltd v Loh Chun Seng [1993] 3 SLR 498. The court there held that the return of the option cheque did not affect the binding legal effect of the option.

[27] Accordingly I would find that the Option was effective and binding according to its terms upon the Plaintiff’s tender of the Option cheque to Phyllis Ng, regardless of its subsequent return prior to the exercise of the Option.

Issue (2): Whether the Option grantee is bound by the condition “only if option money is given by 4 pm, 4 June 2009” (hereinafter referred to as the “Time Condition”) contained in the Commission Agreement but not contained in the Option?

[28] Where the agent has been given the signed Option which does not contain the Time Condition, and is authorised to exchange the Option against receipt of the option cheque, she would have had actual authority to do so. It was argued that she was by the Commission Agreement not authorised to do so and accordingly could not have bound the Defendant to any Option grantee without the satisfaction of the Time Condition.

[29] In the first place, the limitation of authority was not to the effect of precluding the exchange of the Option against receipt of the Option cheque, but was ex facie the Commission Agreement, with respect only to the agent’s entitlement to commission if payment was not made by 4 pm. Further that a principal is nevertheless bound to the third party who has no knowledge of any limitation of authority, such limitation being known only by the principal and the agent, is well settled. See Re Coffey Bartel [1995] QSC 67.

[30] In any case, the principal cannot escape liability for acts done by the agent which fall within the apparent scope of his authority. This position is neatly summarised in Halsbury’s Laws of Singapore vol. 15 (LexisNexis 2004, Reissue) at para 180.273.

[31] The circumstances here further provide ample evidence of apparent authority to the Plaintiff. No corroborative evidence has been adduced to establish that the Plaintiff was aware of the Time Condition at the time he tendered the Option cheque in exchange for the Option.

[32] Finally even if the Time Condition in the Commission Agreement had been brought to his attention at the time of the exchange of Option against delivery of the Option cheque, it would have by its terms not have affected his rights or obligations arising from the Option itself.

[33] In these circumstances, I would hold that the Plaintiff is not bound by the Time Condition contained in the Commission Agreement.

Issue (3): Whether the Acceptance and tender of the balance payable in exercise of the Option, constitutes a valid exercise of the Option in light of the prior return of the Option cheque?

[34] Clause 9 of the Option provides:

[35] By its express terms, the Vendor appoints its named solicitors as its agent for the collection of the “balance of the purchase price”. This is defined in the preamble to mean “5% of the purchase price less the option money”. The structure of the Option process as set out in the Option, is that the Option money is received directly by the Option grantee or his agent and the balance of the purchase price upon exercise of the Option is by the express terms of the Option to be received by his nominated solicitors. The reference to “other monies due under the Option” would in this context refer to all monies thereafter payable by the purchaser upon exercise of the Option.

[36] A unilateral repudiation by the Option grantor which is not accepted by the Option grantee, results in the option surviving and being exercisable in accordance with its terms. See Aldrich Development Pte Ltd v Rafiq Jumabhoy [1995] SLR 401. In short, “the exercise of an option to purchase creates the relationship of vendor and purchaser from the date of the expiry of the notice exercising the option.” See Halsbury’s Laws of Singapore vol 14(2) (LexisNexis Reissue, 2004) at para 170.1192.

[37] It is not disputed that Eric Tan had not accepted the 1% option cheque brought to him by Phyllis Ng on 4 June 2009, nor the next day or to the Defendant. By the letter dated 8 June 2009 Eric Tan returned the Option cheque to Harvest Realty. As the return of the option cheque does not terminate the Option with respect to the Option grantee who has validly received the Option in exchange for the tender of the Option cheque, the subsequent exercise of the Option by the Option grantee in full compliance with the terms expressed in the Option for the exercise of the Option will be binding upon the Option grantor.

[38] It was conceded by both counsel, that the exercise of the Option by due completion of the Acceptance form and the tender of the solicitor’s cheque for S$52,000 comprising the balance payable was in full compliance with the express terms of the Option. Defence counsel was accordingly obliged to invite the court to imply a term into the Option. He thus submitted that a term should be implied that the Option cheque remains in the possession of the Option grantor and/or had been encashed before any exercise of the Option could be valid. Upon further questioning, he was obliged to concede that an implied term of encashing of the cheque would defeat the core function of the Option. With respect to possession, he was similarly obliged to concede that this would similarly defeat the core function of the Option and contented himself with the position that, in this case, the Defendant had not returned the cheque prior to the exercise of the Option for the purpose of preventing its exercise, but had returned it at the very outset. Defence counsel’s difficulty in crafting a term to be implied let alone that such a term ought to be implied because it is necessary to give effect to the presumed intention of both parties are considerable obstacles which have not been overcome. Accordingly I would decline to imply such a term into the Option.

[39] The Plaintiff’s counsel submitted that the 1% Option money performs two functions. First it is consideration for the option and this has been satisfied. Its second function is that if and when option is exercised, it is to be treated as part payment of the purchase price. If the option is not exercised, the Option money is to be forfeited. He submitted that at time of exercise, what has become of the 1% option fee would be irrelevant.

[40] Accordingly, it is my judgment that the exercise of the Option by the Plaintiff through his solicitors on 16 June 2009 to the Defendant’s named solicitors in the Option, Abraham Low LLC, by delivery of a duly completed Acceptance Copy dated 16 June 2009 together with their cheque for S$52,000 representing the balance of the purchase price payable was a valid and binding exercise of the Option according to its terms.

[41] Even if such tender of the balance purchase price in the context of the prior return of the Option cheque were not to constitute a valid and binding exercise of the Option according to its terms, that would not be the end of the matter. In Tai Joon Lan v Yun Ai Chin [1993] 3 SLR 129 [1993] SGCA 54, the Court of Appeal considered the situation in which the option grantor had failed to insert the name of the solicitors to whom the balance payment was to be made upon the exercise of the option and had accordingly returned the balance payment cheque as well as the retendered option cheque delivered by the grantee’s solicitors upon the exercise of the option. The Court of Appeal held that courts will not allow vendors to take advantage of their own breach of contract but would undo the advantage gained by treating the purported exercise of the option as valid and compel the performance of the contract for the sale and purchase of the property. The foundational principle underlying this approach of the courts is the rule that no man shall take advantage of his own wrong which extends to undoing the advantage gained, where that can be done. See Hooper v Lane (1857) 6 HL Cas 443, ad pp. 460, 461, per Bramwell B.

[42] This court will similarly, in such circumstances, not allow the Defendant to frustrate the Plaintiff’s valid exercise of the Option according to its terms and would treat the purported exercise of the option as valid and compel the performance of the contract for the sale and purchase of the property arising thereby, subject to the Plaintiff’s further payment of the 1%. The Defendant, would otherwise be able, by the simple expedient of returning or not encashing the option cheque, thereby frustrate the Plaintiff’s exercise of the Option according to its terms.

[43] With respect to the remedy of specific performance in such circumstances, I would have adopted the language of Lai Siew Chiu JC in Lim Bok Kek v Ken Thiam Siew [1994] SGHC 45 at page 113 as equally applying:

[44] I would order specific performance of the Option in particular as follows:

(1) That the Plaintiff pay S$13,000 to the Defendant and

(i) executes all necessary documents and to take all necessary action to effectively transfer the Property to the Plaintiff, failing which the Registrar of the Supreme Court, be empowered to do so.

(ii) pays the Plaintiff interest for late completion in accordance with The Singapore Law Society’s Conditions of Sale 1999.

(iii) pays the Plaintiff, in damages the sum of S$2,500 per month being the rental from 11 September 2009 (the original date of completion) to actual date of completion pursuant to this Order.

(iv) pays the Plaintiff’s costs and disbursements, with such costs and disbursements to be agreed or taxed.