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

In Ting Siew May v Boon Lay Choo, the Singapore Court of Appeal addressed the enforceability of an option to purchase a property backdated to circumvent Monetary Authority of Singapore regulations. Ting Siew May (Appellant) appealed against the High Court's decision to enforce the option in favor of Boon Lay Choo and another (Respondents). The Court of Appeal, delivered by Andrew Phang Boon Leong JA, allowed the appeal, holding that the backdated option was unenforceable due to illegality at common law, specifically because it was entered into with the object of committing an illegal act.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed with costs and consequential orders.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal case regarding the enforceability of a backdated option to purchase, addressing statutory and common law illegality.

1.7 Decision Date

25 May 2014

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Another	Respondent	Other	Appeal dismissed	Lost	Ng Lip Chih of NLC Law Asia LLC Tang Hang Wu of NLC Law Asia LLC
Ting Siew May	Appellant	Individual	Appeal allowed	Won	Ong Pei Chin of WongPartnership LLP Alvin Yeo of WongPartnership LLP Hong Jia of WongPartnership LLP M P Kanisan of M P Kanisan & Partners P Balagopal of M P Kanisan & Partners
Boon Lay Choo	Respondent	Individual	Appeal dismissed	Lost	Ng Lip Chih of NLC Law Asia LLC Tang Hang Wu of NLC Law Asia LLC

3. Judges

Judge Name	Title	Delivered Judgment
Sundaresh Menon	Chief Justice	No
Andrew Phang Boon Leong	Justice of the Court of Appeal	Yes
Judith Prakash	Judge	No

4. Counsels

Counsel Name	Organization
Ng Lip Chih	NLC Law Asia LLC
Tang Hang Wu	NLC Law Asia LLC
Ong Pei Chin	WongPartnership LLP
Alvin Yeo	WongPartnership LLP
Hong Jia	WongPartnership LLP
M P Kanisan	M P Kanisan & Partners
P Balagopal	M P Kanisan & Partners

4. Facts

Appellant granted Respondents an option to purchase a property, backdated to 4 October 2012.
Respondents requested backdating to obtain a higher bank loan, circumventing MAS Notice No 632.
MAS Notice No 632 regulated residential property loans, setting loan-to-value (LTV) ratios.
Respondents knew about the 5 October Notice, which lowered the LTV ratio from 80% to 60%.
Appellant withdrew the offer, stating she did not want to be party to any illegality.
Respondents sought a declaration that the option was valid and an order for specific performance.
The High Court held that the option was valid and binding, granting specific performance.

5. Formal Citations

Ting Siew May v Boon Lay Choo and another, Civil Appeal No 121 of 2013, [2014] SGCA 28
Boon Lay Choo and another v Ting Siew May, , [2013] 4 SLR 820

6. Timeline

Date	Event
2012-07-12	Bank granted the Respondents in-principle approval for a loan capped at the loan-to-value ratio of 80%.
2012-10-04	Option to purchase backdated to this date.
2012-10-05	MAS issued an amendment to MAS Notice No 632.
2012-10-10	Respondents made an oral offer to the Appellant to purchase the Property.
2012-10-12	Parties agreed on the purchase price of S$3.68m.
2012-10-13	Appellant signed the Option which was backdated to 4 October 2012.
2012-10-15	Respondents were offered a loan from the Bank at the LTV ratio of 80%.
2012-10-19	Respondents accepted the offer for loan from bank at LTV ratio of 80%.
2012-10-19	Appellant learnt about the 5 October Notice.
2012-10-24	Appellant’s solicitors wrote to the Respondents’ solicitors, stating that the Appellant “[did] not want to be a party to any illegality or irregularity” and was withdrawing her offer.
2012-10-24	Respondents’ solicitors responded, stating that the Appellant had no right to withdraw the offer as stated in the Option.
2012-10-25	Respondents’ solicitors unsuccessfully attempted to exercise the Option at the offices of the Appellant’s solicitors.
2012-12-06	Respondents’ solicitors proposed that the parties proceed with the exercise of the Option on the basis that it was dated 13 October 2012 and that the Respondents would also obtain financing for the purchase of the Property on that basis.
2013-01-11	Respondents applied for a declaration that the Option is valid and binding on the Appellant and an order for specific performance by the Appellant of the Option or, in the alternative, damages.
2013-01-01	Decision from which this appeal arose is reported at [2013] 4 SLR 820.
2014-05-26	Judgment reserved.
2014-05-26	Decision Date

7. Legal Issues

Enforceability of Contract
- Outcome: The Court held that the option to purchase was unenforceable due to illegality at common law.
- Category: Substantive
- Sub-Issues:
  - Illegality of contract
  - Breach of contract
Illegality at Common Law
- Outcome: The Court held that the option was void and unenforceable at common law because it was entered into with the object of committing an illegal act.
- Category: Substantive
- Sub-Issues:
  - Contract to commit a tort of fraud or deceit
  - Contract entered into with the object of committing an illegal act
Statutory Illegality
- Outcome: The Court held that there was no express or implied statutory prohibition of the option in the present case.
- Category: Substantive
- Sub-Issues:
  - Express prohibition under statute
  - Implied prohibition under statute
Reliance Principle
- Outcome: The Court rejected the argument that the Respondents did not have to rely on the backdating of the Option to found their claim against the Appellant.
- Category: Substantive
- Sub-Issues:
  - Need to rely on the illegal act or purpose
  - Enforcing an illegal contract

8. Remedies Sought

Declaration that the Option is valid and binding
Order for specific performance
Damages in the alternative

9. Cause of Actions

Breach of Contract
Specific Performance

10. Practice Areas

Commercial Litigation
Real Estate Transactions
Banking Regulations

11. Industries

Banking
Real Estate

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Boon Lay Choo and another v Ting Siew May	High Court	Yes	[2013] 4 SLR 820	Singapore	The decision from which this appeal arose.
Holman v Johnson	Court of King's Bench	Yes	(1775) 1 Cowp 341	England	Cited for the principle that a court will not lend its aid to a man who founds his cause of action upon an immoral or an illegal act.
Richardson v Mellish	Court of Common Pleas	Yes	(1824) 2 Bing 229; 130 ER 294	England	Cited for the observation that public policy is a very unruly horse.
Enderby Town Football Club Ltd v Football Association Ltd	Court of Appeal	Yes	[1971] Ch 591	England	Cited for the observation that with a good man in the saddle, the unruly horse can be kept in control.
Tinline v White Cross Insurance Association, Limited	High Court	Yes	[1921] 3 KB 327	England	Cited for the observation that if the law is not logical, public policy is even less logical.
Quinn v Leathem	House of Lords	Yes	[1901] AC 495	England	Cited to note Lord Halsbury’s view that “the law is not always logical”.
Edler v Auerbach	High Court	Yes	[1950] 1 KB 359	England	Cited for the principles with regard to the proof of illegality.
North-Western Salt Co v Electrolytic Alkali Co Ltd	House of Lords	Yes	[1914] AC 461	England	Cited as the origin of the principles with regard to the proof of illegality.
Snell v Unity Finance Co Ltd	Court of Appeal	Yes	[1964] 2 QB 203	England	Cited for approval of Devlin J’s statement of principle in Edler.
Seven Seas Supply Co v Rajoo	Federal Court	Yes	[1966] 1 MLJ 71	Singapore	Cited for acceptance of Devlin J’s statement of principle in Edler as correct.
Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and another	High Court	Yes	[2008] 1 SLR(R) 375	Singapore	Cited for acceptance of Devlin J’s statement of principle in Edler as correct.
ANC Holdings Pte Ltd v Bina Puri Holdings Bhd	High Court	Yes	[2013] 3 SLR 666	Singapore	Cited for acceptance of Devlin J’s statement of principle in Edler as correct.
Ngiam Kong Seng and another v Lim Chiew Hock	Court of Appeal	Yes	[2008] 3 SLR(R) 674	Singapore	Cited for the words of Burrough J in Richardson v Mellish and Lord Denning MR in Enderby Town Football Club Ltd v Football Association Ltd.
Scott v Brown, Doering, McNab & Co.	Court of Appeal	Yes	[1892] 2 QB 724	England	Cited for the principle that a contract to commit a fraud includes a contract to commit a fraud on a third party.
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another	Court of Appeal	Yes	[2013] 3 SLR 801	Singapore	Cited for the applicable legal principles and standard of proof for fraud.
Derry v Peek	House of Lords	Yes	(1889) 14 App Cas 337	England	Cited for the statement of principle in so far as the elements of fraudulent misrepresentation are concerned.
Vita Health Laboratories Pte Ltd v Pang Seng Meng	High Court	Yes	[2004] 4 SLR(R) 162	Singapore	Cited for the principle that the allegation of fraud is a serious one and that generally speaking, the graver the allegation, the higher the standard of proof incumbent on the claimant.
Tang Yoke Kheng v Lek Benedict	Court of Appeal	Yes	[2005] 3 SLR(R) 263	Singapore	Cited for the principle that the standard of proof in a civil case, including cases where fraud is alleged, is that based on a balance of probabilities; but the more serious the allegation, the more the party, on whose shoulders the burden of proof falls, may have to do if he hopes to establish his case.
St John Shipping Corp v Joseph Rank Ltd	High Court	Yes	[1957] 1 QB 267	England	Cited for the principle that a contract which is entered into with the object of committing an illegal act is unenforceable.
Vita Food Products Inc v Unus Shipping Co Limited (In Liquidation)	Privy Council	Yes	[1939] AC 277	England	Cited for the principle that each case has to be considered on its merits.
ParkingEye Ltd v Somerfield Stores Ltd	Court of Appeal	Yes	[2013] 2 WLR 939	England	Cited for the principle that the general approach of the courts should be to look at the various policy considerations underlying the defence of illegality to assess whether refusal of the remedy sought would be a proportionate response to the illegality.
21stCentury Logistical Solution v Madysen	High Court	Yes	[2004] 2 Lloyd’s Rep 92	England	Cited for the principle that the fraudulent intention of the plaintiff at the time of the contract did not render the contract illegal because it was too remote from the contract.
Alexander v Rayson	Court of Appeal	Yes	[1936] 1 KB 169	England	Cited for the principle that the court might refuse to enforce a contract where it appeared that the subject matter of that contract was intended to be used for an unlawful purpose, and held that this principle applied equally where the contract itself was intended to be used for an unlawful purpose.
Anglo Petroleum Ltd and another v TFB (Mortgages) Ltd	Court of Appeal	Yes	[2007] All ER (D) 243 (May)	England	Cited for the principle that a contract might be illegal and unenforceable if it was entered into for the purpose of doing an act prohibited by statute.
Les Laboratoires Servier v Apotex Inc	Court of Appeal	Yes	[2012] EWCA Civ 593; [2013] RPC 21	England	Cited for the principle that what is required in each case is an intense analysis of the particular facts and of the proper application of the various policy considerations underlying the illegality principle so as to produce a just and proportionate response to the illegality.
Saunders v Edwards	Court of Appeal	Yes	[1987] 1 WLR 1116	England	Cited for the principle that where issues of illegality are raised, the courts have to steer a middle course between two unacceptable positions.
Napier v National Business Agency, Ltd	Court of Appeal	Yes	[1951] 2 All ER 264	England	Cited as an analogous case where the contract concerned was held to be unenforceable.
Zimmermann v Letkeman	Supreme Court	Yes	[1978] 1 SCR 1097	Canada	Cited as an analogous case where the contract concerned was held to be unenforceable.
Waugh v Morris	Court of Queen's Bench	Yes	(1873) LR 8 QB 202	England	Cited to distinguish the case where any abandonment of an original unlawful intention can be taken into account only if there was an ignorance of the unlawfulness of the intention in the first place.
J M Allan (Merchandising) Ltd v Cloke and another	Court of Appeal	Yes	[1963] 2 QB 340	England	Cited to contrast with the decision in Waugh v Morris.
Birkett v Acorn Business Machines Ltd	Court of Appeal	Yes	[1999] 2 All ER (Comm) 429	England	Cited for the principle that once an illegal object of the contract has been established, that object taints the contract itself and it is no answer to say that the illegal object has not been carried out.
American Home Assurance Co v Hong Lam Marine Pte Ltd	Court of Appeal	Yes	[1999] 2 SLR(R) 92	Singapore	Addressed Prof Tang’s attempt to rely upon the “reliance principle” to buttress the Respondents’ case.
AJU v AJT	Court of Appeal	Yes	[2011] 4 SLR 739	Singapore	Cited for the principle that the fact of an alleged illegality cannot be assumed when it has yet to be proved.
Turquand, Youngs & Co v Yat Yuen Hong Co Ltd	High Court	Yes	[1965-1967] SLR(R) 517	Singapore	Cited for the principle that the dominant purpose in construing a statute is to ascertain the intention of the Legislature as so expressed.
Siow Soon Kim and Others v Lim Eng Beng alias Lim Jia Le	Court of Appeal	Yes	[2004] SGCA 4	Singapore	Cited for the proposition that a plaintiff who has entered into a contract with an illegal purpose may nevertheless enforce the contract if he does not need to reveal or rely on the illegal purpose to found his claim.
Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd and another	High Court	Yes	[2011] 1 SLR 657	Singapore	Cited for the proposition that a plaintiff who has entered into a contract with an illegal purpose may nevertheless enforce the contract if he does not need to reveal or rely on the illegal purpose to found his claim.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Banking Act (Cap 19, 2008 Rev Ed), s 55	Singapore
Banking Act, s 71	Singapore
Penal Code (Cap 224, 2008 Rev Ed), s 415 read with s 511	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Option to Purchase
Backdating
Monetary Authority of Singapore
MAS Notice No 632
Loan-to-Value Ratio
Statutory Illegality
Common Law Illegality
Public Policy
Specific Performance
Reliance Principle
Proportionality

15.2 Keywords

Contract
Illegality
Option to purchase
Backdating
MAS Notice
Banking Act
Public Policy
Singapore
Real Estate
Loan
Mortgage

17. Areas of Law

Area Name	Relevance Score
Illegality and public policy	95
Contract Law	90
Banking Law	50
Real Estate	40
Misrepresentation	30

16. Subjects

Contract Law
Banking Law
Real Estate
Illegality
Public Policy