N K Rajarh v Tan Eng Chuan: Collective Sale Approval Denied Due to Lack of Good Faith

In N K Rajarh & Ors v Tan Eng Chuan & Ors, the High Court of Singapore dismissed an application to approve the collective sale of Harbour View Gardens. The defendants opposed the sale, arguing a lack of good faith due to an incentive payment made to a subsidiary proprietor to reach the required 80% threshold. Belinda Ang Saw Ean J held that the Collective Sale Committee (CSC) breached its fiduciary duty by allowing its marketing agent, Colliers International, to offer a cash inducement, demonstrating a lack of transparency and loyalty to the dissenting minority owners.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Originating Summons dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Collective sale approval denied due to the Collective Sale Committee's lack of good faith in incentivizing a subsidiary proprietor to reach the 80% threshold.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
N K Rajarh & OrsPlaintiffOtherApplication DismissedLost
Tan Eng Chuan & OrsDefendantOtherSuccessful in opposing the applicationWon

3. Judges

Judge NameTitleDelivered Judgment
Belinda Ang Saw EanJYes

4. Counsels

Counsel NameOrganization
Kevin De SouzaDe Souza Lim & Goh LLP
David De SouzaDe Souza Lim & Goh LLP
Lim Seng SiewOTP Law Corporation
Lai Swee FungUniLegal LLC

4. Facts

  1. The Collective Sale Committee (CSC) was appointed on 10 September 2011.
  2. The development was put up for collective sale by public tender with a reserve price of $34m, but no offers were received.
  3. An offer of $33m was received on 19 July 2012.
  4. The Hans were promised an incentive payment of $200,000 to sign the Collective Sale Agreement (CSA) and Supplemental Agreement.
  5. Colliers International entered into an agreement with the Hans to pay them $200,000 to sign the CSA and Supplemental Agreement.
  6. The Contribution Agreement was not fully signed until 25 July 2012.
  7. The Colliers Agreement was not disclosed to the defendants until ordered by the court.

5. Formal Citations

  1. N K Rajarh & Ors v Tan Eng Chuan & Ors, OS No 1199 of 2012, [2013] SGHC 76

6. Timeline

DateEvent
Collective Sale Committee appointed
Public tender for collective sale began
Public tender for collective sale closed
Offer received to purchase the Development at $33m
Colliers Agreement signed
Miao Miao signed the Contribution Agreement and Supplemental Agreement
Plaintiffs applied to the Strata Title Board to approve the collective sale
Strata Title Board issued a Notice to Stop Order
Strata Title Board issued a s 84A stop order
Plaintiffs filed OS 1199/2012
Court ordered Mr. Rajarh to disclose the Contribution Agreement
Clarification hearing held
Decision Date

7. Legal Issues

  1. Breach of Fiduciary Duty
    • Outcome: The court found that the CSC breached its fiduciary duty to the minority owners by participating in a scheme to incentivize a subsidiary proprietor, demonstrating a lack of good faith.
    • Category: Substantive
    • Sub-Issues:
      • Conflict of interest
      • Lack of transparency
      • Breach of duty of loyalty
      • Failure to disclose material information
  2. Good Faith in Collective Sales
    • Outcome: The court held that the CSC did not act in good faith due to the incentive payment made to achieve the 80% threshold, the lack of transparency, and the failure to treat all subsidiary proprietors even-handedly.
    • Category: Substantive
    • Sub-Issues:
      • Incentive payments to achieve 80% threshold
      • Transparency in sale process
      • Even-handedness in dealing with subsidiary proprietors

8. Remedies Sought

  1. Approval of Collective Sale

9. Cause of Actions

  • Breach of Fiduciary Duty

10. Practice Areas

  • Real Estate Law
  • Commercial Litigation

11. Industries

  • Real Estate

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Tsai Jean v Har Mee LeeN/AYes[2009] 2 SLR(R)SingaporeCited for the principle that a strict and literal interpretation of s 84A(9)(a)(i) of the LTSA would render it unworkable.
Ng Eng Ghee v Mamata Kapildev DaveCourt of AppealYes[2009] 3 SLR(R) 109SingaporeCited for the principle that the duty of good faith requires the CSC to discharge its statutory, contractual and equitable functions and duties faithfully and conscientiously, and to hold an even hand between the consenting and the objecting owners in the sale process.
Chua Choon Cheng v Allgreen Properties LtdCourt of AppealYes[2009] 3 SLR(R) 724SingaporeCited to summarise the five areas of good faith required of the CSC, including loyalty, even-handedness, avoiding conflicts of interest, full disclosure, and conscientiousness; distinguished on the facts regarding incentive payments.
Royal Brunei Airlines Sdn Bhd v TanN/AYes[1995] 2 AC 378N/ACited for the principle that the test of good faith is objective and depends on whether the conduct is regarded as commercially unacceptable by reasonable and honest people.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Land Titles Strata Act (Cap 158 Rev Ed 2009)Singapore
s 84A(6B) of the Land Titles Strata Act (Cap 158 Rev Ed 2009)Singapore
s 84A(1A)Singapore
s 84A(9)(a)(i)Singapore
Third Schedule to LTSA para 11(3)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Collective Sale
  • Good Faith
  • Fiduciary Duty
  • Incentive Payment
  • Strata Title
  • Subsidiary Proprietor
  • Collective Sale Committee
  • Colliers Agreement
  • Contribution Agreement
  • 80% Threshold

15.2 Keywords

  • collective sale
  • good faith
  • fiduciary duty
  • incentive payment
  • strata title
  • real estate
  • singapore

17. Areas of Law

Area NameRelevance Score
Collective Sales95
Fiduciary Duties70
Property Law60
Contract Law40
Estoppel30

16. Subjects

  • Real Estate
  • Collective Sales
  • Fiduciary Duties