Case Update |
ORDER BY A STRATA TITLES BOARD
The following Order is published with the kind permission of the Strata Titles Board.
Toh Fong Pheng & Ors v Quek Bek Kim
STRATA TITLES BOARD — STB 37 OF 1999
TAN LIAN KER, OWI BENG KI, LIM LAN YUAN, KONG MUN KWONG AND WILLY
SHEE
24 FEBRUARY 2000
1. This is an application made by Messrs Toh Fong Pheng @ Jennifer Chan, Fatimah Khalil Nee Burhan and Yeo Joon Hock, the three authorised representatives of the subsidiary proprietors who hold at least 80% of the share values of the abovementioned Development known as Devonshire Court (Strata Title Plan No 135) comprised in Land Lot No 578C TS 21 for an order for collective sale under section 84A of the Land Titles (Strata) Act (Cap 158).
The Facts
2 Devonshire Court is situated at 134 and 142 Killiney Road, Singapore. It was erected in 1973 and comprising 62 units of apartments (60 standard plus 2 penthouses). All units have one share value except the two penthouses with two share values each making a total of 64 share values. The total share value of majority owners who have signed the sale and purchase agreement is 63 which is equivalent to 98.4%. The share value of the minority owner who has not signed the sale and purchase agreement is one which is equivalent to 1.6%.
3 The respondent, Quek Bek Kim, the minority owner, purchased unit 134 Killiney Road #04-140 for the sum of $730,000 on 29 January 1999. His share of net collective sale proceeds is $1,884,971.98. He would therefore make a profit of $1,154,971.98.
Objection
4 The respondent’s grounds of objection are that he had to incur expenditure for the following items:
Mediation
5 Before the hearing, the Board had mediated the case but without success.
Issue
6 The single issue in this case is whether the Board could exercise its discretion under section 84(A)(11) of the Land Titles (Strata) Act to order the majority owners of Devonshire Court to pay the respondent a compensation sum of $207,894.95 being 2 /3 tax on profit gain from his share of the proceeds of sale.
Submissions of Counsel and the Relevant Law
7 Counsel for the applicants submitted that the respondent did not suffer any financial loss in this sale; nor were the proceeds of sale insufficient to redeem his mortgage or charge in respect of his property. She confirmed that the respondent purchased the property for $730,000 and his share of net collective sale proceeds amounted to $1,884,971.98. After deducting $730,000 and 2 /3 tax of $207,894.95 on capital gain, there is a balance of $947,077.03. Assuming the following items are allowed deduction:
| a. | Interest paid on property | $ 50,000.00 |
| b. | Legal costs | $ 10,000.00 |
| c. | Stamp fee | $ 16,000.00 |
| d. | Renovation cost | $ 40,000.00 |
| $116,000.00
|
There is still a net profit of $831,077.03. She therefore submitted that it was inequitable, unreasonable and unjustifiable to ask the majority owners to compensate him for his tax. If the proposed compensation were allowed, it would be tantamount to exploitation for the respondent’s own gain and should not be permitted by this Board.
8 While counsel for the respondent conceded that there was no financial loss suffered by the respondent, nonetheless she argued that it was unfair and inequitable for the respondent to bear the financial consequences of the majority owners’ decision. According to her, this was not a case of tyranny of the minority owner over the majority owners. The compensation asked for is not an unbearable or excessive amount. Each owner is required to contribute only $4,836.52.
9 She maintained that the respondent would not be able to purchase a property of the same size at the same locality without incurring extra costs. She further submitted that when the respondent first purchased the property, he intended to make it his matrimonial home. The collective sale had thus affected his marriage. His rights would also be unduly prejudiced by the sale. Nonetheless, he is prepared to accept a compensation sum of $207,894.95 from the majority owners.
10 To fortify her argument, she contended that in the event that the Board orders the sale to go through, it still has an unfettered discretion under section 84(A)(II) of the Act to order the majority owners to compensate the respondent the sum claimed so as to achieve fairness and justice.
11 The Board had carefully considered the submissions put forward by counsel for both parties. In the Board’s view, the submission of the respondent’s counsel was untenable and without merits.
12 Section 84(A)(II) of the Act reads:
The Board may make all such other orders and give such directions as may be necessary or expedient to give effect to any order made under Subsection (6) or (7).
13 Subsection (6) refers to no objection filed by any subsidiary proprietor to the collective sale. It therefore does not apply in this case.
14 Subsection (7) reads:
Where one or more objections have been filed under subsection (4), the Board shall, subject to subsection (8), after mediation, if any, approve the application made under subsection (1) and order that the lots and common property in the Strata Title plan be sold unless, having regard to the objections, the Board is satisfied that:
(a) any objector, being a subsidiary proprietor, will incur a financial loss; or
(b) the proceeds of sale for any lot to be received by any objector, being a subsidiary proprietor, mortgagee or chargee, are insufficient to redeem any mortgage or charge in respect of the lot.
15 Subsection (8) states:
... for purposes of subsection (7)(a), a subsidiary proprietor —
(a) shall be taken to have incurred a financial loss if the proceeds for his lot, after any deduction allowed by the Board, are less than the price he paid for his lot;
(b) shall not be taken to have incurred a financial loss by reason only that his net gain from the sale of his lot will be less than the other subsidiary proprietors.
16 At the second reading of the Bill, Associate Professor Ho Peng Kee said:
In the event that mediation fails, the sale will nevertheless proceed as long as the transaction is bona fide and at arm’s length, unless there are exceptional circumstances to warrant the Board assuming a more pro-active role; for example, the sale proceeds are lower than the purchase price he had paid for the unit or are insufficient to redeem the outstanding mortgage or charge on the unit. This is based on the underlying assumption that none of the owners in an en-bloc sale shall lose out financially.
17 The above statement was reiterated by Minister of Law, Professor S Jayakumar at the third reading of the Bill. The Minister said:
In deciding on a case, the Board will not impose its own terms and conditions on the parties. If the Board feels that the price is too low or method of distribution of the sale proceeds is not equitable, it will order that the sale not proceed.
18 A study of subsections (7), (8) and (11) of the Act and the statements made by the two ministers in Parliament clearly show that it was not the intention of Parliament to empower the Board in deciding the case to impose its own terms and conditions on the parties. If the method of distribution of the sale proceeds is not equitable, it will order the sale not to proceed.
19 The Board is of the opinion that subsection (11) does not give the Board an unfettered discretion to order the majority owners to pay compensation to the minority owner on the ground that his net gain is less than the majority owners.
20 In the Board’s opinion, the legislative intent of the 1999 amendments to the Land Titles (Strata) Act was to change the law to make it easier for collective sales to proceed. Parliament unanimously acknowledged the scarcity of land in Singapore during the debates and the need to ensure optimal use of land for the population through redevelopment. While Parliament was also concerned with the need to balance the rights and interests of majority and minority owners, it saw fit to do this by conferring powers on the Board to disapprove a collective sale where the objector establishes a financial loss. However, if no financial loss within the meaning of the Act is established and the requirements of section 84A(9) are met, section 84A(7) leaves the Board no discretion but to approve the sale.
21 In the present case, as the respondent acknowledged that he has sustained no financial loss within the meaning of the Act, and the Board is satisfied (from the documents adduced) that the requirements of section 84A(9) are met, the Board is required by section 84A(7) to approve the application and order that the strata development in question be sold. Under the provisions of the Act, it is mandatory for the Board to order the sale. It is therefore difficult to see how an order to the majority owners to compensate the sole minority objector’s financial disadvantage is necessary or expedient to give effect to the Board’s order of sale.
22 In the Board’s opinion, the types of orders contemplated by subsection (11) are orders to pre-empt delays in completing and implementing the collective sale so ordered. The Board will, where appropriate circumstances warrant, grant ancillary orders and directions to facilitate the completion and give effect to the collective sale so ordered.
Conclusion
23 For the above reasons, the Board is of the opinion that the remedy sought is not available to the respondent.
24 Accordingly, pursuant to section 84A(7) of the Act, on the basis of the facts available, the Board is satisfied that the transaction is in good faith and at arm’s length and that the sale and purchase agreement would not require any subsidiary proprietor who has not agreed in writing to the sale to be a party to any arrangement for the development of the lots and the common property of Devonshire Court in the (Strata Title Plan No 135), the Board hereby approves the application and orders the lot and the common property of Devonshire Court in the (Strata Title Plan No 135) to be sold collectively to Chelmer Pte Ltd.
25 As this is the first case of its kind, the Board does not deem fit to order costs. Each party is therefore to bear its own costs.
Registrar
Strata Titles Board