TG MASTER PTE. LTD. v TUNG KEE DEVELOPMENT (SINGAPORE) PTE. LTD & Anor
14 cases cited
Cited by 1 case
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Counsel (8)
Eldan Law LLP Firm Withers KhattarWong LLP Firm Amanda Koh Jia Yi Counsel Appellant Lee Peng Khoon Edwin Counsel Appellant Lin Hui Yin Sharon Counsel Respondent Mirza Akmal Bin Mohamad Shahri Counsel Appellant Oh Zhen Hao Thaddeus (Hu Zhenhao) Counsel Respondent Phng Boon Yew Gideon Counsel Respondent
Case Significance
TG Master Pte Ltd v Tung Kee Development (Singapore) Pte Ltd and another [2024] SGHC(A) 13 was decided by the Appellate Division of the High Court of Singapore in Civil Appeal No 53 of 2023, with Woo Bih Li JAD delivering the grounds of decision of the court on 2 May 2024, sitting with Debbie Ong Siew Ling JAD and Audrey Lim J, following the hearing on 27 November 2023. The appellant was TG Master Pte Ltd, and the respondents were Tung Kee Development (Singapore) Pte Ltd and Mr Yung Man Tung. TG Master granted Mr Yung eight options to purchase eight properties situated at 1, 3, 5, 7, 9, 11, 13, and 15 Miltonia Close, collectively referred to as the OTPs. The OTPs were each dated 3 January 2018 and had some unusual features: the option period for each was unusually long, remaining valid for exercise for 24 months; the true option fee was in fact payable in two tranches; and each OTP came bundled with further features. The appeal traversed issues including civil procedure on pleadings and new points on appeal, the sale of land and options to purchase, contractual remedies including deposits and liquidated damages and penalties, and interest on payments into and out of court. The appellant was represented by Eldan Law LLP, including Lee Peng Khoon Edwin, and the respondents by Withers KhattarWong LLP.
Summary
SUPREME COURT OF SINGAPORE
2 May 2024
Case summary
TG Master Pte Ltd v Tung Kee Development (Singapore) Pte Ltd and anor [2024] SGHC(A) 13
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Decision of the Appellate Division of the High Court (delivered by Judge of the Appellate Division Woo Bih Li):
Outcome: The Appellate Division of the High Court allowed the appeal by the grantor of options to purchase eight properties (a) to retain sums paid by the grantee as the fees for the grant of those options and (b) to retain renovation costs of two of the eight properties that had been reimbursed to the grantor by the grantee; and also allowed the grantor’s claim for extension fees pertaining to the grant of extensions of time to exercise the options, which were ultimately unexercised.
Pertinent and significant points of the judgment
The framework set out in Hon Chin Kong v Yip Fook Mun and another [2018] 3 SLR 534 (“Hon Chin Kong”) was not applicable to unexercised options to purchase and did not allow for the return of option fees paid for the grant of the options. The Hon Chin Kong framework was only concerned with sums which could properly be classified as either a deposit or a part payment towards the acquisition of the subject matter of a sale: at [93] to [94].
Background
1 Mr Yung Man Tung (“Mr Yung”) was the sole shareholder of Tung Kee Development (Singapore) Pte Ltd (“Tung Kee”), a company incorporated in Singapore.
2 On 3 January 2018, TG Master Pte Ltd (“TG Master”) granted Mr Yung eight options (“the OTPs”) to purchase eight properties (“the Properties”). The OTPs, which had an option period of 24 months, required Mr Yung to pay an “Option Fee” of $59,375 and a “Further Sum” of $500,000 for each OTP, which totalled 20 per cent of the “Sale Price” for each of the Properties. TG Master would then grant a tenancy of the Properties “in consideration of the Further Sum”. Mr Yung was also to reimburse TG Master $550,000 as the costs of renovating two of the Properties (“Renovation Costs”). If the OTPs were not exercised in the prescribed manner, TG Master would have the right to terminate the OTPs and the Option Fees, Renovation Costs and Further Sums would be “forfeited” to TG Master absolutely.
3 Subsequently, TG Master granted Tung Kee a tenancy agreement in respect of each of the Properties (the “Tenancy Agreements”). The agreements were in substantially the same terms save for their commencement dates and leased the respective Properties to Tung Kee for a term of 30 months.
4 It was undisputed that the Option Fees, Further Sums (less a $80,000 goodwill discount) and Renovation Costs were paid to TG Master. It was also undisputed that Mr Yung did not exercise the OTPs by the initial expiry date of 2 January 2020.
5 On 22 January 2020, TG Master agreed to lend $1,240,000 to Tung Kee in two equal tranches, with Mr Yung acting as guarantor (the “Loan Agreement”). The first tranche of $620,000 was disbursed on 22 January 2020 whilst the second tranche was contingent on the exercise of some of the OTPs and was never disbursed. The Loan Agreement provided for the full amount of the loan with interest and certain extension fees to be paid by 30 June 2020.
6 According to TG Master, Mr Yung had requested for six extensions of time to exercise the OTPs, and TG Master had agreed and granted such extensions of time beyond the original option periods. Yet, the OTPs were never exercised. It was further undisputed that Mr Yung had paid to TG Master $122,720 as extension fees to extend the expiry date of the OTPs. However, it was disputed whether the Respondents or Mr Yung were obliged to pay other extension fees and whether Mr Yung was entitled to claim the return of the $122,720. While the first set of extension fees was contained in the Loan Agreement (“1st Set of Extension Fees”), the subsequent fees were premised on oral agreements with Mr Yung.
7 The trial judge (“Judge”) allowed TG Master’s claim for the repayment of the $620,000 loan but denied its claim for the unpaid extension fees. The Judge also allowed Mr Yung’s counterclaim for the return of $4,550,000, being substantially all the sums that he had previously paid to TG Master, save for the $475,000 total “Option Fees” paid in respect of the Properties. The Judge did not allow the counterclaim for $122,720 which had already been partially paid by Mr Yung as extension fees. The net result was that TG Master had to repay the Respondents a substantial sum of money (and interest). By agreement, TG Master paid $3,885,223.17 into court on 6 June 2023, pending the determination of the appeal. This sum comprised the moneys payable by TG Master less the moneys payable to TG Master and interest, as calculated by the parties.
8 On appeal, TG Master sought to retain the $4,550,000 and claim $448,000 in unpaid extension fees. Specifically, these unpaid extension fees pertained to four extensions of time which were purportedly given by TG Master – the 1st Set of Extension Fees and the corresponding second to fourth extension fees (the “2nd, 3rd and 4th Extension Fees” respectively).
Decision
TG Master was entitled to retain the Further Sums
9 The “Further Sum” in each OTP was in substance a part of the fee for the option to buy granted in the OTPs, being the right to exercise the OTP whereupon a sale and purchase agreement would be constituted. Each tenancy agreement was granted pursuant to the OTP and the payment of both the “Option Fee” and the “Further Sum”. Although the Tenancy Agreements would only be granted if the Further Sums were paid, that did not mean that the Further Sums were consideration only for the grant of the Tenancy Agreements. Instead, the “Option Fee” and the “Further Sum” were together parts of a larger option fee of $559,375 (per property) (“the True Option Fee”), which amounted to 20 per cent of the Sale Price: at [72] and [74].
10 An option to purchase was a contract between a vendor of a property and a prospective purchaser. In exchange for the payment of an option fee, the vendor granted the prospective purchaser an exclusive right to buy the property. The prospective purchaser was not obliged to exercise the right to buy and was free to allow it to lapse: at [82] to [83].
11 The option fee was a non-returnable booking fee paid by a prospective purchaser for the grant of the option. It was fundamentally different from part payments paid by a purchaser towards the purchase price of a property under a sale and purchase agreement: at [84].
12 The framework in Hon Chin Kong did not apply. The Hon Chin Kong framework was concerned only with whether a sum that could properly be classified as a deposit or as a part payment towards the acquisition of the subject matter of a sale could be forfeited. This binary characterisation of a sum as being either a true deposit or a part payment presupposed an obligation to complete a purchase. Here, however, the unexercised OTPs were not sale and purchase agreements and Mr Yung was not under any obligation to exercise or to complete any purchase when the OTPs were granted. The True Option Fee was the fee payable for the grant of the OTPs and did not secure, and was not paid pursuant to, any obligation to complete a purchase and therefore could not be classified as either a deposit or a part payment: at [93] to [97].
13 The penalty doctrine did not apply to the retention of the True Option Fee, as the right to retain arose from a primary obligation rather than a secondary obligation triggered by a breach of contract: at [99].
TG Master was entitled to retain the Renovation Costs
14 The Renovation Costs were not paid pursuant to any obligation on Mr Yung’s part to complete the purchase of the Properties. The Hon Chin Kong framework therefore did not apply to the Renovation Costs. Instead, the correct characterisation of the obligation to reimburse the Renovation Costs was the payment of a sum of money pursuant to a primary obligation. This meant that the penalty doctrine did not apply and so TG Master was entitled to retain the Renovation Costs: at [108] to [113].
TG Master was entitled to claim for the extension fees
15 TG Master’s claim for the 2nd to 3rd Extension Fees should not be dismissed on the sole basis of insufficient particularisation as no prejudice was occasioned to Mr Yung : at [127].
16 TG Master had made out its claim for the 1st Set of Extension Fees as the obligation of Mr Yung and Tung Kee to pay these fees was an independent obligation which arose at the point the parties entered into the Loan Agreement. This was borne out by the plain wording of the Loan Agreement and the surrounding clauses: at [137] to [141].
17 TG Master had made out its claim for the 2nd and 3rd Extension Fees as the evidence showed that the parties intended for Mr Yung’s obligation to pay these fees to be independent: at [146] and [150].
18 There was no need to deal with the 4th Extension Fee as it was undisputed that this had been paid from the $122,720 that Mr Yung had already paid: at [48].
19 The balance of the $60,000 (from $122,720) was to be applied against the 1st Set of Extension Fees: at [156].
Issues on interest
20 The court ordered interest to be paid to TG Master from various dates depending on the basis for payment of the principal sum: at [161] to [162].
21 The court ordered Mr Yung to pay interest to TG Master at the rate of 2.6 per cent per annum on the sum paid into court: at [169].
This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.
What was TG Master Pte Ltd v Tung Kee Development (Singapore) Pte Ltd [2024] SGHC(A) 13 about?
[2024] SGHC(A) 13 was an Appellate Division appeal concerning eight options to purchase properties at Miltonia Close granted by TG Master to Mr Yung Man Tung, addressing pleadings, deposits, liquidated damages and penalties. Woo Bih Li JAD delivered the grounds of decision on 2 May 2024.
What were the unusual features of the options to purchase in TG Master v Tung Kee Development?
The eight options to purchase, each dated 3 January 2018 for properties at 1, 3, 5, 7, 9, 11, 13 and 15 Miltonia Close, had unusually long option periods valid for 24 months, option fees payable in two tranches, and additional bundled features, as noted in [2024] SGHC(A) 13.
Cases Cited (14)
SG (6)
[2020] SGCA 69 [2022] SGHC 165 [2022] SGHC 192 [2022] SGHC 316 [2023] SGHC 256 [2023] SGHC 64
SLR (8)
[1995] 2 SLR(R) 643 [2014] 4 SLR 166 [2018] 1 SLR 170 [2018] 1 SLR 76 [2018] 3 SLR 534 [2021] 1 SLR 304 [2021] 1 SLR 631 [2023] 2 SLR 235
Referenced in
Legal concepts & references
Judgment
Read the full judgment on the official Singapore Courts portal.
Read on eLitigationSource: eLitigation ([2024] SGHC(A) 13)