Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng

[1] This is an appeal against the decision of the High Court judge (“the Judge”) dismissing the appellant’s application for a caveat lodged against the respondent’s property at 17 Nallur Road to remain on the land register (see Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng [2008] 1 SLR 262).

[2] The appellant is a family company in every sense. Incorporated on 9 March 1976, its articles of association state that membership in the company should be restricted to its founder, Ong Chay Tong (who had since passed away in 1993), the founder’s wives and his male lineal descendants and their wives. It was common ground that the object of incorporating the appellant as a limited company was for it to hold a three-storey residential development which consisted of eight apartment units at 17 Nallur Road (“Ong Mansions”).

[3] Shares in the appellant were issued on or about 7 December 1976 to the founder and members of his family (which included the founder’s second wife, Mdm Chang Yueh Nu, and her only son, the respondent). On 4 January 1979, the appellant’s board passed a resolution (“the First Resolution”) authorising the appellant to sell one unit in Ong Mansions to each of the founder’s six sons (“the first generation Ongs”) at a discounted price of $100,000 per unit (“purchase price”). The resolution also specified that the sale of the units would be subjected to the following terms and conditions:

[4] The respondent was not a director of the appellant at the time the First Resolution was passed. On 26 March 1982, units in Ong Mansions were sold to the founder’s six sons, including the respondent. Each of the sale and purchase agreements contained a special condition (“SC3”) which made direct reference to the First Resolution:

[5] On 7 May 1998, after the demise of the founder, the appellant’s board of directors (“the Board”) held a meeting. The respondent did not attend this particular meeting although by that time he had been a director of the appellant for some five years. At the meeting, the members of the Board agreed that it might not have been the intention of the founder to restrict the holder of each unit to only the sons of the founder without consideration for future generations of male lineal descendants bearing the surname “Ong”. Accordingly, the Board resolved to delete conditions (a) and (b) of the First Resolution and to substitute them with the terms set out in the board resolution passed on that same day (“the Second Resolution”). The minutes of the meeting read as follows:

[6] At the appellant’s annual general meeting held on 15 June 1998, Ong Mui Eng, a director of the appellant, handed the said minutes to the respondent. The respondent signed the minutes. The appellant’s position was that Ong Mui Eng did not explain the minutes to the respondent but had merely handed them over to the respondent for his signature in his capacity as a director of the appellant. The respondent, on the other hand, deposed in an affidavit that “[i]nsofar as I am concern[ed], if anything, Clause 3 of the Agreement had been varied to the extent set out in the Minutes of Meeting dated 7 May 1998”.[note: 1]

[7] On 28 March 2006, a certified public accountant valued the appellant’s worth at $30 a share on the following basis:[note: 2]

[8] Based on the net realisable value of around $15,000,000 and the fact that 500,000 shares were issued, the accountant valued each share in the appellant at $30. We would note that the valuation did not factor in the appellant’s pre-emption rights over the respondent’s property at 17 Nallur Road #04-02, which at the material time had a market valuation of about $830,000. Nor did it take into account the value of the other five units in the Ong Mansions which were similarly sold by the appellant to the respondent’s five half-siblings.

[9] On 12 June 2006, the respondent agreed to sell his shares in the appellant at $24 per share to his half-siblings. A few days later, he resigned as a director of the appellant. On 14 August 2006, the appellant’s board passed a further resolution (“the Third Resolution”) to rescind the Second Resolution as well as to lodge caveats against the individual units in the Ong Mansions in which the appellant possesses pre-emption rights. The relevant portion of the Third Resolution reads as follows:

[10] On the very same day, the appellant lodged a caveat against the respondent’s property at 17 Nallur Road #04-02. Its basis for lodging the caveat was the undertaking of the respondent set out in SC3 under the sale and purchase agreement dated 26 March 1982 not to sell, transfer or otherwise dispose of or part with possession of the property except only to the appellant at the price of $100,000. The respondent challenged the lodgment of the caveat and the appellant subsequently took out an application for an order that the caveat be allowed to remain on the land register.

[11] At the hearing in the High Court, the Judge held that, as a result of the Second Resolution, the appellant had abandoned its pre-emption rights under SC3 and he accordingly dismissed the appellant’s application for an order that the caveat be allowed to remain on the land register.

[12] As a preliminary matter, the respondent applied to adduce fresh evidence in relation to the respondent’s purported reliance on the Second Resolution. It is settled law that in order to justify the reception of fresh evidence at the appellate stage, three conditions must be cumulatively fulfilled (see Ladd v Marshall [1954] 1 WLR 1489 at 1491):

[13] The fresh evidence sought to be adduced before us relates primarily to the respondent’s account that he had taken certain courses of actions in reliance on the Second Resolution. Quite clearly, such evidence was in the possession of the respondent or, at the very least, could have been easily obtained with reasonable diligence and ought to have been placed before the Judge at the proceedings below. In the circumstances, we had little alternative but to dismiss the application.

[14] It would be useful for us to first consider the question of the scope and effect of SC3. Mr Hwang, who appeared for the respondent, put forward the argument that the words “sell transfer or otherwise dispose [of]” in SC3 should not be construed in a manner which would prevent a testamentary transfer or a distribution in accordance with the Intestate Succession Act (Cap 146, 1985 Rev Ed). On the other hand, counsel for the appellant, Mr Menon, contended that, upon the event of the respondent’s demise, the vesting of the latter’s assets in the Public Trustee or an executor would amount to a transfer or disposition in breach of SC3.

[15] It is an established principle of interpretation that where the words used in a document are ambiguous or capable of having more than one meaning, their meaning cannot be determined by looking at them in isolation. This court has on many occasions applied the contextual approach to determine their meaning as intended by the parties in such cases, for example, in Sandar Aung v Parkway Hospitals Singapore Pte Ltd [2007] 2 SLR 891 and Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029. In the present case, the dispute between the parties is on the meaning of the word “dispose”, which is an ordinary word capable of wide meaning (see Carter v Carter [1896] 1 Ch 62 at 67):

[16] In our opinion, the words “dispose of” in SC3 are capable of referring to both inter vivos and testamentary dispositions since they are used together with the words “transfer” and “sell” in SC3, both of which refer to inter vivos disposals. It is therefore reasonable to infer that the words “dispose of” were intended to apply to testamentary dispositions, and less reasonable to infer that the drafters of SC3 and the appellant who adopted it had intended all three expressions to have the same meaning.

[17] SC3 itself also provides the context in which the intended meaning of those words can be ascertained. SC3 was incorporated into each of the agreements for sale and purchase in compliance with the First Resolution which provided, inter alia, that: (a) the buyers of the flats could not resell the flats to any other persons except to the appellant at the purchase price; and (b) the buyers could only use the flats for their own occupation and not for letting out to any person. When read with conditions (a) and (b) of the First Resolution, SC3 would suggest that the buyers’ interests in the flats would cease upon their deaths, and this interpretation would be consistent with their obligation not to sell the flats to anyone during their lifetimes.

[18] Indeed, to hold that the words “dispose of” in SC3 were intended to refer to testamentary dispositions is also consistent with the terms of the Second Resolution which was passed by the appellant to give effect to the intention of the Ong patriarch and also that of the buyers, that the flats could be owned by not only the first generation Ongs (as set out in the First Resolution) but also by all future generations of Ong male lineal descendants. The Second Resolution accordingly deleted conditions (a) and (b) of the First Resolution and substituted therefor the following conditions:

(a) that each first generation Ong be allowed to dispose of, transfer or lease his flat to only his own lineal descendants bearing the surname of “Ong” (“the future generation Ongs”); and

(b) that each of the first and future generation Ongs should procure an undertaking from the transferee(s) of his flat to abide by condition (a), for the reason that each flat was transferred by the appellant to each of the first generation Ongs for goodwill purposes of providing a roof and home for each of the first generation Ongs and not for monetary gain or commercial purposes.

The Second Resolution went on to provide that if any owner or transferee of the flats should breach or be unable to fulfil condition (a) above for whatever reason, the appellant would have the irrevocable right to repossess the relevant flat at the original book cost entry of $100,000.

[19] The only other issue that needs to be considered in this connection is whether the Second Resolution (its effect on SC3 is discussed at [21]–[31] below) would allow the flats to be transmitted by intestate succession to a person other than a male Ong descendant. In our view, that would not be permissible as such an interpretation would be contrary to the intention as expressed in the Second Resolution as it would breach condition (a), thereby triggering the right of pre-emption in the appellant.

[20] In our view, therefore, even if the scope of the words “dispose of” in the original SC3 were unclear, their meaning was made clear by the Second Resolution which was passed by the appellant to give effect to the intention of the Ong patriarch. The intention was that the flats were meant to provide a roof for all generations of lineal male Ongs and not for them to be sold or leased out to others. Under the Second Resolution the appellant would be entitled to ask that the flat be resold to the appellant at the original price where a lineal male Ong failed to give the undertaking specified in condition (a), or where the intestate successor in title was not a lineal male Ong descendant.

[21] The parties to a contract may by mutual agreement effect a variation of the said agreement by modifying or altering its terms. In the context of the present matter, the first question to be considered is whether a board resolution of a company (like the Second Resolution) is capable of varying an existing contract to which the company is a party.

[22] Such a question is, however, not novel to the Singapore courts. In Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd [1996] 2 SLR 109 (“Edward Goh”), the following board resolution was passed:

[23] The judge in Edward Goh held that the above resolution did not in itself constitute a new contract between the parties. Her reasoning (at 127, [57]) was:

[24] That aside, the judge in Edward Goh also alluded, at 127, [58] of her decision, to the existence of a “category of resolutions which have an immediate legal effect”. There is little doubt that such a category of resolutions indeed exists. One example can be found in Christopher Richard Oakley v Osiris Trustees Limited [2008] UKPC 2, where the directors of a trust company passed a resolution resolving, inter alia, that “the proper law of the Trusts is the Law of the Isle of Man”. The Privy Council considered (at [31]) that the resolution in itself had an immediate legal effect:

[25] The following observations made by the Privy Council at [38] and [39] are likewise useful:

[26] In the present case, it is true that the Second Resolution did not make any direct reference to SC3. But it did expressly refer to the First Resolution. It is important to bear in mind that we are here dealing with a family company par excellence. Thus one should not take too formalistic or legalistic an approach in relation to its affairs, especially in its relationship with members of the family. It is also equally important to note that the Second Resolution sought to do no more than to clarify what was the intention of the founder of the appellant company. It would not be unreasonable to infer that the Board intended for the Second Resolution to have immediate effect in relation to the six units in Ong Mansions. This intention is consistent with the conduct of the Board in seeking to obtain the agreement of the respondent (who was absent at the Board meeting) to the minutes where the Second Resolution was set out.

[27] An alternative way of viewing the position would be to say that by tendering the minutes of the board meeting for the signature of the respondent, there was an offer to vary SC3 which the respondent accepted by signing the minutes. It is trite law that an offer can be made by a party’s conduct. Since the respondent was not present at the meeting, he would not be in a position to signify his agreement that the minutes were an accurate reflection of what had transpired at that meeting. The respondent’s act of signing the minutes on 15 June 1998 had no legal significance in his capacity as a director of the appellant as, under Art 112 of the appellant’s articles of association, the minutes of any board meeting need only be signed by the chairman of the meeting and not by all the directors of the company. The approved minutes needed only be sent to the respondent for his information. The conduct of the Board in seeking the respondent’s signature to the minutes and his act of signing them must mean something. Here, we would reiterate the same point made in [26] above, which is that the appellant was a family company and the requisite degree of formality therefore need not be as high as that required in relation to other types of companies and commercial transactions.

[28] Accordingly, we are of the view that the appellant’s conduct of proffering the minutes evidencing the Second Resolution to the respondent for his signature constitutes a valid offer to vary SC3 (“the new SC3”), and that the respondent signified his acceptance of the offer by initialling on the said minutes. To construe otherwise would be to say that these two acts were entirely superfluous and meaningless.

[29] We turn now to the question of consideration. In Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR 853, Andrew Phang Boon Leong J observed at [30] that:

[30] In our view, the consideration provided by the respondent is self-evident in the Second Resolution. In exchange for the freedom to lease or transfer the flat inter vivos to his own lineal descendants, the respondent promised to procure that the transferee of his flat would execute an undertaking to the effect that the latter would not dispose of, transfer or lease the flat save only to his own lineal descendants bearing the surname of “Ong”. In the event that the respondent failed to do so, the Second Resolution provided that the appellant would have the irrevocable right to repossess the flat at $100,000. This promise by the respondent to procure an undertaking would no doubt constitute good consideration. Chitty on Contracts (Sweet & Maxwell, 29th Ed, 2004) at para 3-008A states:

[31] In the premises, we are of the opinion that the tendering of the Second Resolution to the respondent for his agreement and signature constituted an offer to vary SC3, and that the respondent had accepted the offer and had provided good consideration for the variation. Accordingly, we hold that, as far as the appellant and the respondent are concerned, there was an agreement by conduct between them that SC3 was to be varied and substituted by a new clause in the terms as set out in the Second Resolution. We note that the Judge held that there was abandonment of SC3. We accept that “abandonment” is the effect of “waiver” and as Lord Hailsham of St Marylebone LC stated in Banning v Wright [1972] 1 WLR 972 at 979:

Of course, in the present instance, the case was not simply one of waiver or abandonment but, as pointed out above, a variation or substitution.

[32] In passing, we ought also to mention that the respondent has, in the respondent’s case, made the submission that, in the circumstances, estoppel would also apply as the respondent had acted on the basis of the Second Resolution. It would be noted, as stated in [13] above, that we had refused the respondent’s application to adduce fresh evidence to establish reliance by the respondent on the Second Resolution. In the light of our ruling that SC3 had been varied, we do not propose to go into this question of whether a case of estoppel has been made out.

[33] We now turn to the issue of whether SC3 or the new SC3 constitutes a condition subsequent. Here, the respondent argued that the new SC3 was a condition subsequent attached to the respondent’s interest in the property and, it being such a condition, the entire clause was void for being a restraint on alienation and/or for want of certainty.

[34] A case where a similar point was raised and where the circumstances were somewhat similar to the present case is that of Tan Soo Leng David v Wee Satku & Kumar Pte Ltd [1998] 2 SLR 83 (“Tan Soo Leng”). In that case, the first defendant purchased a property from the second defendant. One of the clauses in the sale and purchase agreement (“cl (f)”) provided that:

[35] Subsequently, the first defendant granted the plaintiff an option to purchase the property. The sale was conditional on the second defendant’s consent. The second defendant refused to consent to the sale and the plaintiff purported to exercise the option. The plaintiff also lodged a caveat against the property and commenced an action for, inter alia, specific performance.

[36] One of the issues before the court in Tan Soo Leng was the legality of cl (f), which the plaintiff asserted was not valid as it amounted to a restraint on alienation. The judge cited, amongst others, Caldy Manor Estate Ltd v Farrell [1974] 1 WLR 1303 (“Caldy Manor”) as authority for her view, at [55]:

[37] The judge then upheld cl (f) and stated (at [59]) that:

[38] Apart from Tan Soo Leng, Caldy Manor was also applied in Neo Hock Pheng v Teo Siew Peng [1999] 2 SLR 45 (“Neo Hock Pheng”), where this court cited (at [24]) the following passage by Russell LJ (at 1307 of Caldy Manor):

[39] The court in Neo Hock Pheng also stated (at [18]) that:

[40] It bears noting that, in Chitty on Contracts ([30] supra) at para 12-030, a condition subsequent was described, in general, as follows:

[41] In Tan Sook Yee, Principles of Singapore Land Law (Butterworths Asia, 2nd Ed, 2001), Prof Tan Sook Yee also gave an illustration of a condition subsequent (at pp 61–62) as follows:

[42] In the present case, the new SC3 provides that the respondent is allowed to dispose of, transfer or lease his flat to only his own lineal descendants bearing the surname of “Ong”. In the event the said condition is breached, the appellant has an irrevocable right to purchase the flat at $100,000. The distinction between the present facts and Tan Soo Leng ([34] supra) is that in the former, a breach of the relevant clause would entitle the original vendor to repurchase the property at a pre-determined price, while in the latter, there is no such provision. This distinction aside, we are nevertheless of the view that the absence of a right of re-entry and forfeiture or language to the effect of bringing the original contract to an end compels us to conclude that the new SC3 is not a condition subsequent and does not constitute a restraint on alienation.

[43] In Tiffany Investments Ltd v Bircham & Co Nominees (No 2) Ltd [2004] 2 P & CR 10 (“Tiffany Investments”), the English Court of Appeal, applying Pritchard v Briggs [1980] Ch 338 (see [47]–[51] below), held that the sale of a lease in contravention of a party’s first right of refusal would entitle that party to an equitable interest commensurate with that of a purchaser under a binding contract immediately prior to the sale. Thus, assuming if the English authorities are to be followed, all the appellant would have is an equitable interest in the property in the event that the respondent acts in a manner that is contrary to the new SC3. However, just like in Tan Soo Leng, if the respondent had ignored the new SC3 and had assigned the legal interest of the property for valuable consideration to a bona fide third party without notice, that assignment would have been valid and the original estate granted to the respondent would not have been destroyed by the breach.

[44] The classic hallmark of a condition subsequent is that a breach of it would accord the grantee the right to bring the original contract to an end or to re-enter or forfeit the property. The new SC3, however, does not provide for such a course of action in that eventuality and we are of the view that the new SC3 amounts only to a contractual restraint, a breach of which would not result in the original grant being brought to an end. In the circumstances, we reject the respondent’s submissions that SC3, or the new SC3, was a condition subsequent and that it was void for being a restraint on alienation.

[45] Notwithstanding the above finding, as in Tan Soo Leng where the judge noted at [59] that the second defendant could have attempted to injunct the completion of the sale, the appellant in the present case is likewise not prevented from seeking a similar measure. The right may be contractual in nature but a court may in certain circumstances grant an injunction to ensure that a party’s right (particularly in land) would be given effect to. Indeed, in Caldy Manor ([36] supra), Russell LJ had observed that, even in instances of a contractual restraint, the covenantee could prevent a threatened alienation in breach of the covenant by obtaining an injunction, although relief might or might not be granted (see [38] above).

[46] We now turn to consider the question of whether what is provided in SC3, or the new SC3, constitutes a caveatable interest. In Ho Seek Yueng Novel v J & V Development Pte Ltd [2006] 2 SLR 742 (“Novel Ho”), a decision of the High Court, Andrew Phang Boon Leong J was of the view that it was eminently fair, logical and commonsensical to allow a caveat to be lodged at any time by the holder of a valid and enforceable right of first refusal or right of pre-emption. Here, the authorities would appear to treat a right of first refusal as synonymous with a right of pre-emption, with the only essential factual difference between the two being that, in the case of a right of pre-emption, the price has been fixed.

[47] In coming to his view in Novel Ho, Phang J examined extensively the Australian and English cases as well as the academic writings on the subject. He scrutinised, in particular, what seemed to be the most important case on the issue, Pritchard v Briggs, where the majority of the English Court of Appeal proffered the view (albeit obiter) that a right of pre-emption became an equitable interest in land, like that of an option proper, only upon the happening of a triggering event. Phang J also considered the position taken by the Canadian courts which seemed to favour the Pritchard v Briggs approach.

[48] The reasons for the conclusion reached by Phang J were summarised by him under the following five heads. First, allowing a caveat to be lodged in such circumstances was consistent with the function of a caveat. Second, the cases that appeared to state that a right of first refusal was merely a contractual right and not an interest in land did not purport to do so conclusively. Third, the proposition of the majority in Pritchard v Briggs, that a right of refusal could be transformed into an interest in land only when the grantor of that right decided to sell the property concerned, generated much uncertainty and had been correctly criticised. Fourth, an option was now widely acknowledged to create an interest in land and there appeared to be no reason why a right of first refusal could not also create an interest in land. The distinction between an option and a right of refusal was not particularly convincing. Fifth, legislation in the United Kingdom had acknowledged, in so far as registered land was concerned, that a right of first refusal constituted an interest in land.

[49] However, we should hasten to add that the views enunciated by Phang J referred to above did not form part of the ratio decidendi of his decision in Novel Ho because he had earlier concluded that the defendant’s interest in the sale proceeds itself constituted a sufficient interest capable of sustaining a caveat. To this, we might add that Phang J was also very conscious of the fact that, to date, no case, other than judicial pronouncement of an obiter nature, had taken a step further than that propounded by the majority in Pritchard v Briggs (ie, recognising that a right of first refusal accords the grantee an equitable interest at the time of its grant).

[50] As we have mentioned above, the leading authority on the issue is the English Court of Appeal case of Pritchard v Briggs. Until this case, the authorities seemed to hold that a right of first refusal could not constitute an interest in land sufficient to lodge a caveat (see Eudunda Farmers Co-operative Society Limited v Mattiske [1920] SALR 309; Mackay v Wilson (1947) 47 SR (NSW) 315; Re Bosca Land Pty Ltd’s Caveat [1976] Qd R 119 (“Bosca”); and Re Rutherford [1977] 1 NZLR 504).

[51] Putting it simply, the issue in Pritchard v Briggs was which of two registered interests, namely, the right of first refusal (which caveat was lodged first) and an option to purchase, had priority. Interestingly, at first instance, Walton J was of the view (at 361–362) that “there would appear to be no essential difference, from the point of view of creating an interest in land, between an option on the one hand and a right of pre-emption on the other”. Accordingly, he held that a pre-emption right in relation to a real property was sufficient to constitute an interest in land to warrant the lodgment of a caveat. However, the Court of Appeal thought that such a right was purely a contractual right which did not give rise to an interest in land. It thus held that the second caveat lodged to protect the option prevailed. However, the majority of the Court of Appeal (Templeman and Stephenson LJJ), went one step further and proffered the view that a right of pre-emption could be converted into an interest in land if the right was triggered by the owner’s decision to sell the property. But the caveat so lodged in respect of the right of pre-emption would only take its priority as from the date when the right of pre-emption became exercisable and the right was converted into an option. The third member of the coram, Goff LJ, did not share that view. To him, a right of pre-emption did not create an interest in land (at 399 of Pritchard v Briggs).

[52] The majority view of Templeman and Stephenson LJJ was the subject of much commentary by academics and this was alluded to by Phang J in Novel Ho. For our purpose, it will not be necessary to traverse all of that again. We propose to refer only to two highly regarded pieces of work. The first is Henry William Rawson Wade, “Rights of Pre-Emption: Interests in Land?” (1980) 96 LQR 488. Prof Wade critically remarked at 488 and 489:

[53] Next, the authors of a leading textbook, Kevin Gray & Susan Francis Gray, Elements of Land Law (Oxford University Press, 4th Ed, 2005) seemed less strident in their comment on the majority view in Pritchard v Briggs when they stated at para 9.85 that:

[54] The adverse comments on Pritchard v Briggs notwithstanding, the courts in England, Australia and Canada have subsequently followed the approach propounded by the majority in Pritchard v Brigg, eg, in Kling v Keston Properties Ltd (1983) 49 P & CR 212; Bircham & Co, Nominees (2) Ltd v Worrell Holdings Ltd (2001) 82 P & CR 34; Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149; Kopec v Pyret (1983) 146 DLR (3d) 242.

[55] Nevertheless this does not mean that the academic criticisms were totally disregarded by the courts. In Dear v Reeves [2002] Ch 1, Mummery LJ remarked at [43] that “the reasoning in the judgments in Pritchard v Briggs may require reconsideration”.

[56] However, we will at this juncture refer to a line of thinking in Australia which seems to advance the view that so long as an interest is protectable by an injunction, that interest would be sufficient to enable the owner of that interest to lodge a caveat. In Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 (“Jessica Holdings”), Brownie J analysed the two divergent lines of Australian authorities as to whether a conditional contract vested a purchaser with a caveatable interest. The earlier line of authorities was of the steadfast view that a caveat could only be sustained by a legal or equitable interest. For instance, in Bosca ([50] supra), Dunn J held that a contract conditional upon first obtaining a proper subdivision of the land did not vest the purchaser with any equitable interest and “this being so I propose to order that the caveat be removed” (at 122).

[57] While Bosca has been adopted and applied by the Australian courts in subsequent decisions, it was not without criticism. In Re C M Group Pty Ltd’s Caveat [1986] 1 Qd R 381 (“Re C M Group”) at 388–389, Dowsett J voiced his unease with Bosca:

[58] Dowsett J then quoted from Ovenden v Palyaris Construction Pty Ltd (1974) 11 SASR 65 (“Ovenden”) and continued (at 390):

[59] Although Dowsett J in Re C M Group ultimately applied Bosca, Brownie J declined to do so in Jessica Holdings as he was of the view that, if relief by way of an injunction was available to a caveator, then that might be a sufficient basis to maintain a caveat. Brownie J premised his reasoning on the observations made by Deane and Dawson JJ in Stern v McArthur (1988) 165 CLR 489 at 522, where the learned judges said:

[60] Brownie J then continued, at 151–152 of Jessica Holdings:

[61] As we see it, Jessica Holdings and Dowsett J’s dicta in Re C M Group clearly suggest that a caveat need not necessarily be supported by the existence of a full-fledged equitable interest as, so long as the interest falls within the protective aegis of an injunction, then, depending on the circumstances, that interest might well be protected by a caveat.

[62] We now turn to examine the provisions in the Land Titles Act (Cap 157, 2004 Rev Ed) (“LTA”) which govern the lodging of caveats. Section 115 of the LTA reads:

Section 4 of the LTA defines an “interest” in land to mean “any interest in land recognised as such by law, and includes an estate in land”.

[63] It is settled principle that a statutory provision should be given a purposive interpretation. In Chief Assessor v First DCS Pte Ltd [2008] 2 SLR 724, this court stated at [10]:

[64] The term “interest” in relation to land came up for consideration in Chi Liung Holdings Sdn Bhd v AG [1994] 2 SLR 354 (“Chi Liung”), where this court held that a contract for the sale of properties conditional upon a foreign purchaser obtaining qualifying certificates from the Controller of Housing did not contravene the Residential Property Act (Cap 274, 1985 Rev Ed) as no estate or interest in the purchaser’s favour arose until the contract had become unconditional.

[65] A similar view of what would constitute an interest or equitable interest in land was expressed by Street J in Mackay v Wilson ([50] supra) at 325 as follows:

[66] If the interpretation given to the term “interest” by this court in Chi Liung were to be applied generally, as opposed to it being confined to the Residential Property Act, it would follow that a pre-emption right would not constitute an interest in land for the purposes of lodging a caveat. The critical question, however, is whether the court should hold that a pre-emption right constitutes a caveatable interest in land.

[67] Different legislations have different objectives. As pertinently noted by Prof Tan in Principles of Singapore Land Law ([41] supra) at p 263:

In other words, “interest” may have different meanings in different contexts. The following observations made by Dowsett J in Re C M Group ([57] supra) at 385 are also apposite:

[68] What then is the ambit of “interest” in s 115 of the LTA? As we have alluded to at [63] above, the answer should not be obtained outside the function and object of the said section. It is well settled that the function and object of a caveat is not to create any interest in the land on which the caveat is lodged. Nor is it to give notice to the world of a claim by the caveator. “Caveat”, a word from Latin meaning “let him beware”, is effectively a notice or warning. In Alrich Development Pte Ltd v Rafiq Jumabhoy [1993] 2 SLR 446 at 452, [37], this court described a caveat to be:

[69] Similarly, in Leros Proprietary Limited v Terara Proprietary Limited (1992) 174 CLR 407 at 419, the High Court of Australia unanimously determined that:

[70] In this regard we also note Prof Tan’s persuasive argument for a broader interpretation of the term “interest” under s 115 of the LTA to at least include a purchaser’s rights under a conditional contract. This is notwithstanding the fact that such conditional rights are not recognised as equitable interests. In Principles of Singapore Land Law ([41] supra), Prof Tan states at p 262:

[71] The practical problems that could arise if a narrow view is taken as to the meaning of the term “interest in land” for the purposes of lodging a caveat were highlighted by Phang J in Novel Ho ([46] supra), where he said at [62]:

[72] It is perhaps also of interest to note that in the early case of Manchester Ship Canal Company v Manchester Racecourse Company [1900] 2 Ch 352 at 366, Farwell J in fact held that the right of first refusal created an interest in land. On appeal, while the Court of Appeal expressly disapproved of the opinion of Farwell J, it did also say that the holder of the right of first refusal could ask for the issue of an injunction to prevent that right from being disregarded (see [1901] 2 Ch 37 at 51). It would also be recalled that it had been stated in Elements of Land Law ([53] supra) that “there remains a strong argument that potential disponees of land deserve, in fairness, to be forewarned of all sale arrangements affecting the estate which they propose to buy” (see [53] above).

[73] It is quite clear that, unless the holder of a right of pre-emption is recognised as having a sufficient interest to lodge a caveat, more often than not, by the time he comes to know of the breach by the owner it would be too late for him to exert or protect his rights over the property. In terms of priority in equity, the English Court of Appeal in Tiffany Investments ([43] supra) unanimously decided (at [54]) that in the event of there being a contravention of the right of pre-emption, the holder of the right was to be regarded as having an equitable interest commensurate with that of a purchaser under a binding contract, which equitable interest would have priority over the rights of the person to whom the owner had, in breach of the covenant, sold the property to. But this is still little comfort to a holder of a right of pre-emption. Unless the holder of such a right is entitled to lodge a caveat, he would not be able to protect his right if he cannot show that the subsequent purchaser (of the legal interest) was not bona fide and had bought with notice of the holder’s right of pre-emption. Further, he may well lose priority if a third party with an equitable interest later in time lodges a caveat ahead of him, as ss 49(1) and 49(2) of the LTA provide that:

[74] It is therefore wholly illogical that a holder of a right of pre-emption may lodge a caveat only after a triggering event as, by then, a caveat would probably have already been lodged by the third-party purchaser whose actions triggered the said event. The net result is that unless the holder of a right of pre-emption is entitled to lodge a caveat by virtue of that right itself, there is little that he can do to effectively protect his interest in the property.

[75] It is settled law that a simple option constitutes an equitable interest sufficient to lodge a caveat. What then differentiates a right of pre-emption from that of a simple option such that the holder of a right of pre-emption should not be similarly treated? In Pritchard v Briggs ([43] supra) at 418, Templeman LJ said:

[76] This question was also examined extensively by Phang J in Novel Ho ([46] supra) at [88] to [96]. Although in both situations, the interest of the holder of the right of first refusal and that of the option holder are contingent, in the former case, there are double contingencies (the triggering event and the decision of the holder of the right to buy the property) while in the latter case, there is only a single contingency (exercising the option). It has been suggested that the critical difference lies in the fact that in the former case the triggering event depends on the volition of the owner of the property and not the holder of the right of pre-emption. But why should that difference be so significant? The fact remains that both are contingent interests, so should the precise reasons for the contingency be relevant in relation to the issue of whether a caveatable interest is created? Perhaps, there is really a need to start from first principles. Why is it that the law should treat land so differently from other matters or objects? Basically it has all to do with the fact that land is unique and may not be replicated. Logically, therefore, if a right of pre-emption relates to land, it should receive the same treatment as an option simpliciter.

[77] Further, to suggest – that if the law were to treat a right of pre-emption as being a caveatable interest it would lead to the register being cluttered up with all kinds of interests lodged thereon – would be a gross exaggeration, as we cannot imagine how, realistically and in good conscience, more than one unqualified right of pre-emption can be granted over a property by its owner. And even in instances where multiple qualified rights of pre-emption were to be granted, the second person accorded such a right would have his right subject to that of the holder of the first right, and it is only fair that the first person accorded such a right be given the first opportunity to exercise the same upon the occurrence of a triggering event. Clearly, recognising the caveatability of such a right would prevent unnecessary controversies from arising involving the new purchaser and would also prevent the owner from reneging on his commitment.

[78] A flaw in the reasoning of Templeman LJ in Pritchard v Briggs would appear to lie in his Lordship having regarded the holder of a right of pre-emption as being “in much the same position as a beneficiary under a will of a testator who is still alive, save that the holder of the right of pre-emption must hope for some future positive action by the grantor which will elevate his hope into an interest” (at 418). We find it difficult to see how it could be right to equate the holder of a pre-emption right with that of a beneficiary under a will of a testator who is still alive and kicking. A living testator is free at any time to remove a person as a beneficiary in his will but the owner of a property has no such liberty in relation to the holder of the pre-emption right. Of course, we recognise that whether a right of pre-emption may be converted to a real option depends on the determination of the owner but the holder of that right is certainly not in quite the same position as a person named as a beneficiary in the will of a living testator.

[79] Having regard to all of the above, we are in agreement with Phang J’s dicta in Novel Ho in so far as that a right of pre-emption should be recognised, without more, as an interest in land for the purpose of lodging a caveat under s 115 of the LTA. In particular, we agree with Phang J that such an approach would be consistent with the purpose and function of a caveat, and that it would be fair, logical and commonsensical to allow a person with a pre-emption right over a defined piece of unique property to lodge a caveat over that property. This would avoid a situation where a pre-emption right is defeated by the stealth assignment of the legal interest or by way of s 49 of the LTA without the holder of the right having first the opportunity to invoke the court process to give effect to his right. While such a conclusion might at first blush be interpreted by some as giving undue “proprietary” reach to a “personal” right, we should nevertheless be mindful of the fact that a contractual restraint on land has long been recognised as one that is susceptible to injunctive relief (see [45] above). As also noted by Prof Tan, it would be duplicative to require a conditional purchaser to first obtain an injunction before he can lodge a caveat (see [70] above). By analogy, the same would apply to a holder of a pre-emption right. Moreover, a right of pre-emption is akin to a restrictive covenant as it gives the holder a negative right over the subject land, an important feature of a restrictive covenant. Indeed, the learned authors of Megarry & Wade, The Law of Real Property (Sweet & Maxwell Limited, 6th Ed, 2000) at para 12-063, have expressed the view that a right of pre-emption is capable of binding successors in title as a restrictive covenant if the rules for the creation of such covenants are obeyed. However, we would hasten to add that this was doubted by Lightman J in University of East London Higher Education Corpn v Barking and Dagenham London Borough Council [2005] Ch 354, who said at [28] of his judgment that “a restrictive covenant is concerned with restricting the use of land, and not with restraints on alienation”.

[80] Nevertheless, a right of pre-emption is undoubtedly a right concerning land and there is no logical reason why it should not be treated as an interest in land for the purposes of s 115 of the LTA. In our view, a contingent interest such as the present is no less an interest because it remains a clog on the rights of the owner to deal with the property. All in all, we do not see any real downside to taking this progressive approach, an approach which was espoused more than a hundred years ago by Farwell J (see [72] above) and later followed by Walton J in Pritchard v Briggs (see [51] above).

[81] In the result, we are of the view that the new SC3 (and the original SC3 too) which accords the appellant the right to repurchase the disputed property in the event of any dealings contrary to the clause, is capable of sustaining a caveat. However, the caveat lodged in the present case was based on the original SC3 and was in the following terms:

[82] Quite clearly the defect is not a minor one of form but goes to the very foundation upon which the caveat was lodged. The terms of the original SC3 and the new SC3 are different. In Alrich Development Pte Ltd v Rafiq Jumabhoy ([68] supra), this court held (at 453, [45]) that a caveat lodged should not be struck out “for some minor defect of form”. It also stated (at 453, [44]) that “[s]o long as the terms of the caveat [give] a fair indication of what estate or interest the caveator claims and the ground of his claim” that should suffice. On this test, the caveat lodged must be removed. This is because the basis for the lodgment of the caveat was entirely wrong and moreover the scopes of the two undertakings are quite different. Nevertheless, there is nothing to preclude the appellant from lodging a fresh caveat on the correct basis.

[83] That said, we do not see any necessity in the present appeal to consider the more general question of whether a right of pre-emption constitutes a full-fledged equitable interest at the time of its grant. This is therefore not the occasion to consider all of the reasoning in Novel Ho ([46] supra), in particular the obiter dicta inclining towards recognising a right of pre-emption as an equitable interest. While it may very well be the case, nevertheless, we think we should pay heed to the observation of the Federal Court of Australia in Octra Nominees Pty Ltd v Chipper [2007] FCAFC 92 at [56], where it said:

[note: 1]See Core Bundle vol II at p 123.

[note: 2]See Record of Appeal vol III at p 339.