LI JIALIN & Anor v WINGCROWN INVESTMENT PTE LTD
16 cases cited
(9 SG, 7 foreign)
Cited by 1 case
Catchwords
Practice Areas
Counsel (11)
Allen & Gledhill LLP Firm Covenant Chambers LLC Firm Yong Pung How School of Law, Singapore Management University Firm Benaiah Lim Oon Kuan Counsel Appellant Lee Ee Yang Counsel Appellant Shjoneman Tan Sze Ern Counsel Respondent Tay Yong Seng Counsel Respondent Teo Hui Yan Sarah Counsel Appellant Toh Jia Jing Vivian Counsel Respondent Wong En Hui Charis Counsel Appellant Yeo Tiong Min Counsel Independent Counsel
Case Significance
In Li Jialin and another v Wingcrown Investment Pte Ltd [2024] SGCA 48, decided on 6 November 2024, the Court of Appeal heard Civil Appeal No 5 of 2024, with Sundaresh Menon CJ, Tay Yong Kwang JCA and Steven Chong JCA sitting and Steven Chong JCA delivering the grounds of decision. The case concerned a property developer, the respondent Wingcrown Investment Pte Ltd, that had initially purported to forfeit a deposit constituting about 63% of the purchase price upon the non-completion of a contract for the sale and purchase of an apartment by the appellants, Li Jialin and Li Suinan. In response to a letter of demand for the return of the deposit, the respondent changed its position and decided to forfeit a reduced sum amounting to 20% of the purchase price while withholding a further sum for damages, with the balance refunded to the appellants about five years after the initial forfeiture. The court framed the essential question as whether the deposit could or could not be forfeited, rather than whether the respondent was entitled to forfeit part of it, in the context of Condition 15.9(c)(i) of the relevant Law Society conditions. The catchwords record issues of deposits and of liquidated damages and penalties. Professor Yeo Tiong Min served as independent counsel.
Summary
SUPREME COURT OF SINGAPORE
6 November 2024
Case summary
Li Jialin and another v Wingcrown Investment Pte Ltd [2024] SGCA 48
Civil Appeal No 5 of 2024
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Decision of the Court of Appeal (delivered by Justice Steven Chong):
Outcome: The Court of Appeal allowed an appeal against the decision of the General Division of the High Court in respect of the forfeiture of a deposit following the termination of an agreement for the sale and purchase of an apartment and ordered the respondent to repay deposit with interest, subject to an entitlement to retain an option fee.
Pertinent and significant points of the judgment
• The following framework applies where a claimant sues for the return of a sum alleged to be a deposit: at [73]
o First, the court determines whether there is a contractual right to forfeit the sum alleged to be a deposit upon the payer’s breach. This will involve consideration of the parties’ intentions and the terms of the contract, and may be express or implied. Where there is an express forfeiture clause to this effect, this will be sufficiently clear. Where there is no such clause, the right of forfeiture may nonetheless be implied from the use of words such as “deposit”. A reference to a sum described as a deposit being compensatory as liquidated damages could displace the inference that it is intended to be a deposit which is forfeitable upon breach. If there is no contractual right to forfeit, then there is no need to make any further inquiry as to the reasonableness of the sum. Its recoverability will be determined under the general law notwithstanding the payer’s breach.
o Second, where there is a contractual right to forfeit, the court determines whether the sum is a true deposit. The test is whether the sum is reasonable as an earnest. The sum will be reasonable if it is customary or conventional. If it is higher than customary, it may nevertheless be reasonable if the vendor can show special circumstances to justify the deposit.
o Third, if the sum is reasonable as an earnest, it is a true deposit and can be forfeited. However, if the sum is not reasonable as an earnest, it is not a true deposit and cannot be forfeited. The right to forfeit, whether express or implied, is thus unenforceable and the claimant’s right to recovery of the deposit will be left to be decided under the general law.
Background to the appeal
1 This appeal arose out of two failed attempts to purchase an apartment unit in a housing project developed by the respondent. The first attempt was made in 2015, when the appellant exercised an option issued by the respondent and the parties entered into a sale and purchase agreement (the “First Sale and Purchase Agreement”). The First Sale and Purchase Agreement was terminated by the respondent when the appellants defaulted on their instalments. The parties entered into further negotiations following this termination, and agreed to a second option to purchase (the “Second Option to Purchase”) which the appellants exercised by the payment of an option fee of $357,000 (the “Option Fee”). The terms of sale under the second transaction provided for a deposit of $1,195,354.42, amounting to almost 63% of the purchase price, and incorporated the Law Society of Singapore’s Conditions of Sale 2012 (the “Conditions of Sale 2012”).
2 After the appellants’ failure to complete, the respondent gave notice on 20 November 2018 terminating the sale and asserted its entitlement to forfeit the deposit under Condition 15.9(c)(i) of the Conditions of Sale 2012. The respondent rejected two requests by the appellants for the deposit to be returned. In response to a subsequent letter of demand from the appellants, the respondent changed its position and decided to forfeit a reduced sum of $380,000 amounting to 20% of the purchase price and to withhold a further sum for damages.
3 The appellants commenced HC/OA 423/2023 in the General Division of the High Court, seeking declarations that the deposit was not a true deposit and amounted to an unenforceable penalty. In determining whether the deposit could be forfeited, the High Court judge (the “Judge”) accepted that the test in Hon Chin Kong v Yip Fook Mun and another [2018] 3 SLR 534 was applicable, but held that the test should be applied only to the sum of $380,000 which was actually forfeited. The Judge found that this sum was reasonable as an earnest and therefore a true deposit. The Judge also held that the respondent was entitled to an equitable set-off of its fees and expenses to be determined at an assessment of damages before an Assistant Registrar. The respondent was permitted to retain a sum of $326,243.07 pending this assessment. Interest was payable on the balance sum of $488,957.04 for the period of 2 March 2019 to 18 April 2023 and for any sum payable to the appellants after the set-off for the period of 2 March 2019 to the date of payment. The Judge reserved decision on the applicable rate of interest to the Assistant Registrar having conduct of the assessment of damages.
4 The appellants appealed against the Judge’s decision.
The Court of Appeal’s decision
5 Deposits are sui generis in that they serve an earnest function. There is little reason in principle or pragmatism for the law of deposits to be subsumed within the law of penalties. The two should be kept distinct: at [52].
The proper interpretation of Condition 15.9(c)(i)
6 Condition 15.9(c)(i) was not a discretionary forfeiture clause as contended by the respondent. The plain language of the clause did not support such an interpretation, and it would not serve the earnest function of a deposit to read the clause in this way. Thus, the reasonableness of the deposit had to be determined not at the point that the respondent’s “discretion” to forfeit was exercised, but at the time of contracting: at [57] to [61].
The deposit was unreasonable
7 The deposit of $1,195,354.42 was not reasonable as an earnest. It was therefore not a true deposit and could not be forfeited. The appellants were entitled to recover the sum in unjust enrichment: at [74] to [75].
8 The respondent’s belated attempt to justify its partial forfeiture of the deposit through equitable relief against forfeiture was a non-starter as it was not for the respondent to ask the court to grant such relief to allow it to partially enforce what was otherwise an unenforceable right of forfeiture: at [78].
What sum(s), if any, was the respondent entitled to withhold if there was no right of forfeiture
9 The respondent was entitled to retain the Option Fee of $357,000 as that sum had been earned through the respondent’s performance of the option contract, which was separate from the sale and purchase contract: at [83] to [84].
Interest on the refunded amounts
10 Given that the respondent had taken the position that it was forfeiting the entire deposit of $1,195,354.42 by its notice dated 20 November 2018, it was more appropriate for interest to run from that date to the date of payment of the withheld sums: at [87].
11 The applicable rate of interest was an issue which the Judge should have decided as it was ancillary to the Judge’s primary decision. There was no reason for any departure from the default rate of 5.33% per annum in this case: at [88] to [89].
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 Li Jialin v Wingcrown Investment Pte Ltd [2024] SGCA 48 about?
It concerned a property developer, Wingcrown Investment Pte Ltd, that purported to forfeit a deposit of about 63% of an apartment's purchase price on non-completion, later reducing the forfeited sum to 20%. The Court of Appeal addressed whether the deposit could be forfeited at all.
How did the deposit forfeiture change in Li Jialin v Wingcrown [2024] SGCA 48?
Wingcrown Investment Pte Ltd initially purported to forfeit a deposit of about 63% of the purchase price, then after a letter of demand reduced this to 20% while withholding a further sum for damages, refunding the balance to the appellants roughly five years after the initial forfeiture.
Cases Cited (16)
SLR (9)
[1995] 2 SLR(R) 643 [1998] 3 SLR(R) 1028 [2000] 3 SLR(R) 594 [2015] 5 SLR 1422 [2016] 3 SLR 1308 [2018] 3 SLR 534 [2021] 1 SLR 631 [2022] 3 SLR 252 [2024] 1 SLR 690
UK (5)
[1915] AC 79 [1924] AC 980 [1993] 2 WLR 702 [1993] AC 573 [2016] AC 1172
MY (1)
[1972] 1 MLJ 89
HK (1)
[2002] HKCFA 15
Referenced in
Legal concepts & references
Judgment
Read the full judgment on the official Singapore Courts portal.
Read on eLitigationSource: eLitigation ([2024] SGCA 48)