Tan and Au Partnership v Management Corporation Strata Title Plan No 2625

Woo Bih Li J:

[1] On 27 September 1996, Bedok Reservoir HUDC estate (“the Estate”) was gazetted for privatisation. “HUDC” refers to the Housing and Urban Development Corporation. The meaning of privatisation and the steps involved were explained in an affidavit by Carolyn Tan Beng Hui, a partner of Tan & Au Partnership (“TAP”), a firm of solicitors who is the plaintiff in the action before me. TAP was formed as a result of a merger between Tan-Au Associates (“TAA”) and Thomas Au & Lim (“TAL”) on or about 10 February 2001. Ms Tan’s affidavit was executed on 3 December 2003. She said:

[2] Upon privatisation, TAP sent a bill dated 1 February 2002 for $197,911.31 being its fee and disbursements in the privatisation exercise. The bill was addressed to the defendant who is the Management Corporation Strata Title Plan No 2625 (“the MCST”). TAP claimed $47,634.64 being the balance payable under their bill but the MCST refused to pay the same for a number of reasons. One of the reasons was that the MCST was not the correct party who was liable to pay TAP. As a consequence, TAP filed a writ of summons in the Subordinate Courts. The writ was filed on 13 May 2002 as Magistrate’s Court Suit No 12394 of 2002. The parties eventually agreed that the following be tried as a preliminary question or issue:

[6] Although the preliminary issue concerned ss 126(9) and 126A(3) of the Act, I first set out below other provisions as well for a better appreciation of these two provisions. Sections 126(9) and 126A(1)(a), (2), (3) and (4) of the Act state:

[7] The MCST made various arguments. First, it argued that the reference to reimbursement of persons who “incurred any expenditure” in s 126(9) was directed at persons who were claiming reimbursement after having incurred expenditure in paying someone who had provided services. Section 126(9) did not make the MCST liable to pay the service provider itself. Furthermore, “expenditure” did not imply an element of profit. Following from this argument, the MCST’s position was that TAP should obtain payment from the persons whom TAP contracted with and such persons would then seek reimbursement from the MCST. However, if a lessee were to engage TAP to do the work stated in s 126(9) on an individual basis, the lessee could not claim against the MCST unless the work was done for the entire estate.

[8] The MCST argued that when a party contracting with solicitors for a privatisation exercise sought to claim reimbursement from the MCST, the MCST would surely be entitled to raise an issue as to whether such an expenditure was properly incurred.

[9] The MCST further argued that if it were obliged to pay TAP directly, this would leave it open to claims under contracts which it was not privy to and had no control over, and this would deprive it of the protection afforded to it to question whether the expenditure was properly incurred.

[10] The MCST did not dispute that invoices had been sent to subsidiary proprietors for payment of various items connected with the privatisation exercise. The items included legal fees and the quantum of the legal fees payable by the subsidiary proprietors of each unit as was charged by TAP, and included TAP’s disbursements. However, the MCST stressed that while some payments had been received pursuant to these invoices, it was not the council of the MCST which had sent the invoices but the then managing agents, PREMAS International Limited (“PREMAS”), and this was done before the council for the MCST was elected. The council for the MCST was first elected only on 4 May 2002 after the HDB had convened the first Annual General Meeting of subsidiary proprietors pursuant to the Act. From the time the Estate was privatised on 1 February 2002 until 4 May 2002, PREMAS was the managing agent appointed by HDB.

[11] The MCST also did not dispute that part payments of TAP’s bill had been made but the MCST also stressed that such payments had been made by PREMAS and not the council.

[13] As for s 126A(3) of the Act, the MCST argued that this provision obliged it only to make payment to the HDB.

[14] The MCST further argued that as s 126A of the Act was to apply to land vested in HDB, any reimbursement of expenditure would be governed by s 126A and not s 126. The cleanest solution was for TAP to make its claim against HDB, and for HDB to pay out of its own pocket first, and then claim the amount from the MCST. The MCST’s counsel went on to suggest that if it was successful in its appeal, it would be seeking repayment from TAP of whatever had already been paid to it in respect of its bill. The MCST would then pay the moneys to HDB when HDB makes a demand on the MCST for payment of the bill. Counsel was not certain whether the MCST was prepared to short-circuit the process in that if HDB gave a letter of demand to the MCST for payment, the MCST would assume that payment had been made through the HDB to TAP and thereby, would not require repayment from TAP.

[15] On the other hand, TAP argued that it could not charge what it liked. It had to submit a draft bill for HDB’s approval first. After approval had been given, TAP then engrossed and sent the bill. It believed that after its draft bill was approved, PREMAS then prepared and sent invoices to subsidiary proprietors to claim for payment of various items, including legal fees, as I have mentioned above. The subsidiary proprietors would pay the MCST and the MCST could either pay HDB, with HDB then forwarding the payment to TAP, or HDB would ask TAP to address the bill directly to the MCST. The latter was done in the present case. TAP argued that HDB had never departed from this practice and other management corporations had paid TAP directly. I would add that TAP had acted in privatisation exercises in respect of some other HUDC estates as well.

[16] As for the meaning of the word “reimburse”, TAP submitted that it was not confined to a situation where the claimant was already out of pocket first. It relied on The Shorter Oxford English Dictionary on Historical Principles (Clarendon Press, 3rd Ed) which defined “reimburse” at vol 2, p 1784 as:

In turn, “recompense” was defined in the same dictionary at vol 2, p 1765 as:

The word “expenditure” was defined at vol 1, p 705 as:

The word “expend” was defined at vol 1, p 705 as:

The word “expense” was defined at vol 1, p 705 as:

[17] TAP argued that where two interpretations were possible, one of which would frustrate the intention of the legislature and the other would smoothly implement the scheme under the legislation, the latter should be preferred.

[18] TAP also mentioned that, in fact, invoices had been sent to subsidiary proprietors for payment of various items, including legal fees, associated with the privatisation exercise and TAP had received part payments on its bill, although this was done by PREMAS as the managing agent.

[19] Pursuant to my direction to TAP to inquire of the HDB as to whether the HDB would wish to be heard at the next hearing date before me, the HDB did file an affidavit by Ong-Gan Bee Ghee, the Head, Special Projects Unit of HDB. Her affidavit stated:

[20] Although this affidavit did not specifically state that the Estate was a Phase III or IV HUDC estate, it was not disputed that the Estate was a Phase III or IV HUDC estate.

[23] It was not in dispute that the lessees are ultimately liable to pay the legal fees of private solicitors. However, the explanatory statement did not elaborate on why private solicitors would have to claim their fees from the management corporation but land surveyors need not when, from information packages provided by HDB, the lessees are also ultimately liable to pay land survey fees.

[24] Notwithstanding the lack of clarity as to the reason why the mechanics of payment of legal fees and survey fees are different, the issue before me remained, ie, whether the MCST was liable to pay TAP’s bill under s 126(9) and/or s 126A(3) of the Act in the absence of any contract or agreement between TAP and the MCST.

[25] I will deal with s 126A(3) first. I was of the view that this provision did not assist TAP on the present facts. If HDB had paid TAP and then sought reimbursement from the MCST, s 126A(3) would apply. Even if HDB had not yet paid TAP but were under a legal obligation to pay them, it was likely that HDB would still be able to claim payment from the MCST under s 126A(3). However, in either scenario, HDB would have to make a written demand on the MCST for payment before s 126A(3) kicked in.

[26] The question, therefore, was whether the MCST was liable to pay TAP directly under s 126(9).

[27] Although TAP and HDB took the position that TAP could claim payment direct from the MCST, a page from one of the information packages supplied by HDB suggested otherwise and, as I have mentioned, the MCST relied on this page. This page stated:

This page suggested that HDB would claim the legal and other costs of a privatisation exercise from the management corporation and appeared to support the MCST’s contention that it was for HDB to claim the legal costs from the MCST and not TAP.

[29] After careful consideration, I was of the view that the other arguments of the MCST were without merit.

[30] As regards the MCST’s argument that it could question whether the expenditure was properly incurred before paying the party who had contracted with TAP, I was of the view that if the MCST had a right to question that party, then likewise, it would also have the right to question TAP. After all, it would also not have a contract with the party who had contracted with TAP. Furthermore, no one was suggesting that the MCST would have to close its eyes and pay TAP blindly. The issue before me was whether the MCST was liable to pay in the absence of a direct contractual relationship, assuming that there was no other reason to deny payment.

[31] Also, as it was the Protem Committee which engaged TAP, the MCST’s argument meant that the Protem Committee would have to pay TAP first. Yet where would the Protem Committee get the money from? Were the individual members of the Protem Committee supposed to pay from their own pockets first?

[32] Likewise, I did not agree that the cleanest solution was for TAP to claim payment from HDB and then for HDB to claim reimbursement from the MCST. That was one mechanism but not the only one, and not necessarily the cleanest one. It would entail HDB being out of pocket first. It made sense to me that private solicitors should be able to claim directly from the management corporation.

[33] As for the terms of s 126(9) of the Act, I was of the view that it was not well-drafted. The reference to reimbursement of persons who incurred any expenditure would commonly be taken to mean the payment to someone who has already incurred an expenditure but not payment to the service provider itself. Nevertheless, I accepted TAP’s argument that this was not its only meaning and it could mean the payment to the service provider. Furthermore, TAP would have incurred disbursements which would, in any event, be covered by the MCST’s interpretation of the reimbursement of persons who have incurred expenditure. If the MCST’s interpretation were correct, this would mean that the MCST is liable to pay TAP’s disbursements but not its fees which had to be claimed through the Protem Committee or HDB. In my view, such an absurd result could not have been intended by Parliament.

[34] It also seemed to me that the purpose of the scheme under s 126(9) was to facilitate payment, whether it be payment to the person who incurred the stipulated expenses and/or engaged the service provider, or payment to the service provider itself. Accordingly, in my view, this purposive interpretation was the correct one.

[35] I did not agree with the MCST’s argument that because the land on which the Estate stood was HDB land, s 126A applied to the exclusion of s 126. In my view, s 126A was meant to apply the provisions of s 126 to HDB land upon the undertaking of a privatisation exercise and not to exclude s 126.