Li Jialin v Wingcrown Investment: Deposits, Liquidated Damages & Penalties
In Li Jialin and Li Suinan v Wingcrown Investment Pte Ltd, the Singapore Court of Appeal heard an appeal regarding the forfeiture of a deposit in a property sale. The appellants, Li Jialin and Li Suinan, sought the return of a deposit paid to the respondent, Wingcrown Investment Pte Ltd, for an apartment purchase. The court, with Steven Chong JCA delivering the judgment, allowed the appeal, holding that the deposit was unreasonable and thus not subject to forfeiture. The court clarified the principles governing deposits and their distinction from penalties.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal Allowed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore Court of Appeal case concerning the forfeiture of a deposit in a property sale, addressing the reasonableness of the deposit and its relation to penalties.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Li Jialin | Appellant, Claimant | Individual | Appeal Allowed in Part | Partial | |
| Li Suinan | Appellant, Claimant | Individual | Appeal Allowed in Part | Partial | |
| Wingcrown Investment Pte Ltd | Respondent, Defendant | Corporation | Appeal Dismissed in Part | Partial |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Tay Yong Kwang | Justice of the Court of Appeal | No |
| Steven Chong | Justice of the Court of Appeal | Yes |
4. Counsels
4. Facts
- Appellants entered into a sale and purchase agreement with the respondent for an apartment unit.
- Appellants defaulted on their instalments, leading the respondent to terminate the First Sale and Purchase Agreement.
- Parties agreed to a second option to purchase, with a deposit of $1,195,354.42, almost 63% of the purchase price.
- Appellants failed to complete the sale despite multiple extensions.
- Respondent served a Notice to Complete and later terminated the sale, asserting its right to forfeit the deposit.
- Respondent initially purported to forfeit the entire deposit but later changed its stance to forfeit a reduced sum.
- The respondent had already refunded the sum of $488,957.04 on 10 April 2023, and a further sum of $231,064.76 following the decision of the Assistant Registrar at the assessment of damages hearing on 7 August 2024 that the respondent was entitled to $95,178.31 for its fees and expenses.
5. Formal Citations
- Li Jialin and another v Wingcrown Investment Pte Ltd, Civil Appeal No 5 of 2024, [2024] SGCA 48
6. Timeline
| Date | Event |
|---|---|
| Respondent issued the First Option to Purchase to the appellants. | |
| Appellants began to default on their instalments. | |
| Second Option to Purchase was exercised by the appellants. | |
| Respondent served the appellants with a Notice to Complete. | |
| Respondent gave notice that the sale had been terminated and asserted its entitlement to forfeit the deposit. | |
| Appellants’ solicitors requested a refund of the full deposit. | |
| Respondent rejected the request for a refund of the deposit. | |
| Appellants’ solicitors made a further appeal to the respondent but received the same response. | |
| Respondent resold the Property to another purchaser. | |
| Appellants’ solicitors issued a letter of demand to the respondent claiming repayment of the entire deposit. | |
| Respondent replied and changed its initial stance and purported to exercise its right to forfeit $380,000. | |
| Balance sum was paid to the appellants. | |
| Oral hearing of the appeal. | |
| Judgment delivered. |
7. Legal Issues
- Forfeiture of Deposit
- Outcome: The court held that the deposit was unreasonable and thus not subject to forfeiture.
- Category: Substantive
- Sub-Issues:
- Reasonableness of deposit
- True Deposit Test
- Liquidated Damages
- Outcome: The court clarified the distinction between deposits and liquidated damages, stating that the penalty rule does not apply to deposits.
- Category: Substantive
- Sub-Issues:
- Penalty rule
- Interpretation of Contractual Clauses
- Outcome: The court rejected the argument that the clause conferred a discretion on the respondent to decide whether and when to forfeit the deposit.
- Category: Substantive
- Sub-Issues:
- Discretionary forfeiture clause
8. Remedies Sought
- Refund of Deposit
- Interest
9. Cause of Actions
- Unjust Enrichment
10. Practice Areas
- Commercial Litigation
- Real Estate Law
11. Industries
- Real Estate
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lim Lay Bee and another v Allgreen Properties Ltd | High Court | Yes | [1998] 3 SLR(R) 1028 | Singapore | Cited to establish that the clause confers upon the developer a right of termination. |
| Hon Chin Kong v Yip Fook Mun and another | High Court | Yes | [2018] 3 SLR 534 | Singapore | Cited as the applicable framework to determine whether the deposit could be forfeited. |
| V Nithia (co-administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another | Court of Appeal | Yes | [2015] 5 SLR 1422 | Singapore | Cited for the principle that parties are bound by their pleadings and that the court is precluded from deciding on a matter that the parties themselves have not put into issue. |
| Howe v Smith | Court of Appeal | Yes | (1884) 27 Ch D 89 | England and Wales | Cited to show the earnest function of the deposit. |
| Mayson v Clouet | Privy Council | Yes | [1924] AC 980 | Singapore | Cited to show that the earnest function of the deposit became firmly part of Singapore law. |
| Linggi Plantations Ltd v Jagatheesan | Privy Council | Yes | [1972] 1 MLJ 89 | Malaysia | Cited to show that a deposit must be reasonable. |
| Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd | Privy Council | Yes | [1993] 2 WLR 702 | Jamaica | Cited to show that an unreasonable deposit was a penalty. |
| Triangle Auto Pte Ltd v Zheng Zi Construction Pte Ltd | High Court | Yes | [2000] 3 SLR(R) 594 | Singapore | Cited to show that a reasonable deposit is regarded as earnest money given to guarantee the due performance of the contract and is not regarded as a penalty in English law or common English usage. |
| Denka Advantech Pte Ltd and another v Seraya Energy Pte Ltd and another and other appeals | Court of Appeal | Yes | [2021] 1 SLR 631 | Singapore | Cited to show that the historical earnest function of a deposit should continue to be recognised in a limited fashion because of the useful private and economic functions which deposits serve. |
| Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd | House of Lords | Yes | [1915] AC 79 | United Kingdom | Cited to show the classic test of whether the sum paid was a genuine pre-estimate of loss. |
| Polyset Ltd v Pandahat Ltd | Court of Final Appeal | Yes | [2002] HKCFA 15 | Hong Kong | Cited to show that the deposits were unreasonable and had to be refunded, without reliance on the penalty rule. |
| Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis (Consumers’ Association intervening) | UK Supreme Court | Yes | [2016] AC 1172 | United Kingdom | Cited to show the test of legitimate interests, ie, whether a secondary obligation imposes a detriment on the contract breaker that is out of proportion to the legitimate interest of the innocent party sought to be protected by a liquidated damages clause. |
| TG Master Pte Ltd v Tung Kee Development (Singapore) Pte Ltd and another | High Court | Yes | [2024] 1 SLR 690 | Singapore | Cited to show that it was unclear whether the jurisdiction to grant relief against forfeiture existed in the context of deposits. |
| Pacific Rim Investments Pte Ltd v Lam Seng Tiong and another | High Court | Yes | [1995] 2 SLR(R) 643 | Singapore | Cited to show that the jurisdiction to grant relief against forfeiture operated on the fundamental principle upon which equity acts – that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct. |
| Grains and Industrial Products Trading Pte Ltd v Bank of India and another | Court of Appeal | Yes | [2016] 3 SLR 1308 | Singapore | Cited to show that an award of pre-judgment interest is meant to be compensation for the successful claimant’s time value of money. |
| Baker, Michael A (executor of the estate of Chantal Burnison, deceased) v BCS Business Consulting Services Pte Ltd and others | Court of Appeal | Yes | [2022] 3 SLR 252 | Singapore | Cited to show that any argument for a departure from the default interest rate would necessarily have to relate to what the claimant would have done with the moneys. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Housing Developers Rules | Singapore |
| Contracts (Malay States) Ordinance 1950 | Malaysia |
| Rules of Court 2021 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Deposit
- Forfeiture
- Earnest
- Penalty Rule
- True Deposit Test
- Option Fee
- Notice to Complete
- Conditions of Sale
- Reasonableness
- Unjust Enrichment
15.2 Keywords
- deposit
- forfeiture
- penalty
- contract
- property
- Singapore
- Wingcrown Investment
- Li Jialin
- Li Suinan
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Deposits Law | 90 |
| Contracts | 80 |
| Breach of Contract | 75 |
| Penalties | 70 |
| Liquidated Damages | 70 |
| Property Law | 65 |
| Unjust Enrichment | 60 |
| Civil Litigation | 50 |
16. Subjects
- Contract Law
- Property Law
- Civil Procedure