Boon Lay Choo v Ting Siew May: Enforceability of Backdated Option to Purchase & Illegality

In Boon Lay Choo and Law Khim Huat v Ting Siew May, the Singapore High Court addressed the enforceability of a backdated option to purchase a property. The plaintiffs, Boon Lay Choo and Law Khim Huat, sought specific performance of an option to purchase a property from the defendant, Ting Siew May. The defendant argued that the backdating of the option to purchase to circumvent Monetary Authority of Singapore (MAS) regulations rendered the contract illegal and unenforceable. The High Court declared the option to purchase valid and binding, ordering specific performance by the defendant, finding that the backdating did not make the contract illegal or contrary to public policy.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Declaration that the Option to Purchase is valid and binding on the Defendant; order for specific performance by the Defendant.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case concerning the enforceability of a backdated option to purchase and whether it was illegal due to contravention of MAS Notice 632.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Ting Siew MayDefendantIndividualOrder for Specific PerformanceLost
Boon Lay ChooPlaintiffIndividualJudgment for PlaintiffWon
Law Khim HuatPlaintiffIndividualJudgment for PlaintiffWon

3. Judges

Judge NameTitleDelivered Judgment
Lionel YeeJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
P BalagopalM P Kanisan & Partners
Ng Lip ChihNLC Law Asia LLP

4. Facts

  1. Plaintiffs sought to purchase landed property and approached United Overseas Bank for financing.
  2. Plaintiffs were granted in-principle approval for a loan capped at 80% loan-to-value ratio.
  3. MAS issued an amendment to MAS Notice 632, tightening loan-to-value ratio to 60% in certain cases.
  4. Plaintiffs made a verbal offer to the Defendant to purchase the property for $3.68 million.
  5. The Option to Purchase was signed by the Defendant and backdated to 4 October 2012.
  6. The Defendant refused to proceed with the sale, claiming the backdating was illegal.

5. Formal Citations

  1. Boon Lay Choo and another v Ting Siew May, Originating Summons No 27 of 2013, [2013] SGHC 175

6. Timeline

DateEvent
Plaintiffs granted in-principle approval for a loan by United Overseas Bank.
MAS issued an amendment to MAS Notice 632.
The loan-to-value ratio would be capped at 60% if the tenure of the facility sought exceeded 30 years or if the sum of the tenure and the age of the borrower at the time applying for the loan facility exceeded 65.
Plaintiffs made a verbal offer to the defendant to purchase the property.
Agreement reached between the parties on the purchase price of $3.68 million.
Option to purchase was signed by the Defendant and was dated 4 October 2012.
Bank offered the Plaintiffs a loan facility at an 80% loan-to-value ratio which was promptly accepted by them.
Defendant’s solicitors wrote a letter to the Plaintiffs’ solicitors stating that the backdating of the Option to Purchase to 4 October 2012 in order to enable the Plaintiffs to obtain a bank loan in contravention of the 5 October Notice was an “illegality or irregularity”, and that the Defendant did not want to be a party to it.
Plaintiffs’ solicitors attempted to exercise the Option to Purchase at the offices of the Defendant’s solicitors, which was rejected.
Plaintiffs’ solicitors proposed performing the contract on the basis that it was dated 13 October 2012.
Originating Summons No 27 of 2013 was brought by the Plaintiffs.
Judgment reserved.

7. Legal Issues

  1. Enforceability of Contract
    • Outcome: The court held that the Option to Purchase was enforceable despite the backdating.
    • Category: Substantive
    • Sub-Issues:
      • Illegality due to backdating
      • Contravention of banking regulations
  2. Specific Performance
    • Outcome: The court ordered specific performance of the Option to Purchase.
    • Category: Procedural
    • Sub-Issues:
      • Clean hands doctrine

8. Remedies Sought

  1. Declaration that the Option to Purchase is valid and binding
  2. Order for specific performance
  3. Damages (in the alternative)

9. Cause of Actions

  • Breach of Contract
  • Specific Performance

10. Practice Areas

  • Commercial Litigation
  • Real Estate Transactions

11. Industries

  • Banking
  • Real Estate

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
St John Shipping Corp v Joseph Rank LtdQueen's BenchYes[1957] 1 QB 267England and WalesCited for the principle that the fundamental question is whether the statute means to prohibit the contract.
Hemlata Pathela (trading as Coco Properties) v Suresh Partabrai and anotherHigh CourtYes[2000] 2 SLR(R) 393SingaporeCited for the exercise of gauging “the parliamentary pulse” when construing a statute.
ParkingEye Ltd v Somerfield Stores LtdCourt of AppealYes[2013] 2 WLR 939England and WalesCited for the principle that any intention from the outset to do something in the performance of the contract which would in fact be illegal must vitiate any claim by the party concerned does not do justice to his judgment.
21st Century Logistic Solution v MadysenHigh CourtYes[2004] 2 Lloyd’s Rep 92England and WalesCited for the principle that the fact that the supplier of computer processor units intended to defraud the revenue authorities was not a bar to it recovering the purchase price of the goods.
American Home Assurance Co v Hong Lam Marine Pte LtdCourt of AppealYes[1999] 2 SLR(R) 992SingaporeCited for the proposition that the backdating of a contract for an illegal purpose (of deception) does not automatically render the contract unenforceable.
Suntoso Jacob v Kong Miao MingUnknownYes[1985–1986] SLR(R) 524SingaporeDistinguished in American Home Assurance Co v Hong Lam Marine Pte Ltd.
Alexander v RaysonKing's Bench DivisionYes[1936] 1 KB 169England and WalesDistinguished in American Home Assurance Co v Hong Lam Marine Pte Ltd.
Palaniappa Chettier v Arunasalam ChettierHigh CourtYes[1962] MLJ 143MalaysiaDistinguished in American Home Assurance Co v Hong Lam Marine Pte Ltd.
Bowmakers Ltd v Barnet Instruments LtdCourt of AppealYes[1945] 1 KB 65England and WalesCited for the principle that where a party can seek recovery via an independent cause of action which does not require him to rely on the illegality, recovery will be allowed.
Tinsley v MilliganHouse of LordsYes[1994] 1 AC 340England and WalesCited for reaffirming the reliance principle.
Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd and anotherHigh CourtYes[2011] 1 SLR 657SingaporeObserved that the reliance principle has found general application.
Siow Soon Kim v Lim Eng BengCourt of AppealYes[2004] SGCA 4SingaporeApplied the reliance principle outside the sphere of proprietary rights.
Chee Jok Heng Stephanie v Chang Yue ShoonHigh CourtYes[2010] 3 SLR 1131SingaporePreferred the narrower interpretation that the reliance principle was applicable only in relation to proprietary rights.
Shaw v GroomCourt of AppealYes[1970] 2 QB 504England and WalesSuggests that the courts may render contracts unenforceable in order to give effect to the objectives of a statute without necessarily finding either an express or implied legislative intent as such.
Theresa Chong v Kin Khoon & CoFederal CourtYes[1976] 2 MLJ 253MalaysiaCited in relation to the deception of public authorities.
Aqua Art Pte Ltd v Goodman Development (S) Pte LtdHigh CourtYes[2011] 2 SLR 865SingaporeCited as an example of a case where the locus poenitentiae doctrine was relevant.
Aubin v HoltCourt of ChanceryYes(1855) 2 K & J 66England and WalesCited for the principle that the agreement must be legal or illegal, and it is not within the discretion of the Court to refuse specific performance because an agreement savours of illegality.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Banking Act (Cap 19, 2008 Rev Ed)Singapore
Banking Act (Cap 19, 2008 Rev Ed), s 55Singapore
Banking Act (Cap 19, 2008 Rev Ed), s 71Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Option to Purchase
  • Backdating
  • Loan-to-value ratio
  • MAS Notice 632
  • Specific performance
  • Illegality
  • Banking Act
  • Locus poenitentiae
  • Clean hands doctrine

15.2 Keywords

  • Option to Purchase
  • Backdating
  • Illegality
  • Specific Performance
  • MAS Notice
  • Banking Act
  • Singapore
  • Contract Law
  • Real Estate Law

17. Areas of Law

Area NameRelevance Score
Backdating80
Contract Law75
Loan-to-Value Ratio65
Real Estate60
Banking Law40

16. Subjects

  • Contract Law
  • Real Estate
  • Banking
  • Civil Litigation