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Apex court rules developer can’t retain ‘unreasonable’ $1.2m deposit for $1.9m condo unit

Apex court rules developer can’t retain ‘unreasonable’ $1.2m deposit for $1.9m condo unit

Source: Straits Times
Article Date: 07 Nov 2024
Author: Selina Lum

The court said that it was satisfied that the sum of $1.2 million, which amounted to 63 per cent of the purchase price, was not reasonable as a deposit.

When a father-and-daughter pair from China decided not to go through with the purchase of a $1.9 million condominium unit after paying almost $1.2 million for it, the property developer initially had the entire sum forfeited and refused to return the deposit to them.

Nearly five years after the aborted transaction, it was only under the threat of legal action that the developer of The Crest in Prince Charles Crescent, off Alexandra Road, reduced the forfeited sum to $380,000.

Wingcrown Investment, a unit of listed developer Wing Tai Holdings, kept another $326,397.38 to offset the expenses incurred as a result of the aborted deal and returned the balance of $488,957.04 to the pair.

Still, Ms Li Jialin and her father Li Suinan took the developer to court in a bid to get a full refund, arguing that the sum of $1.2 million was not a true deposit. 

In 2023, a High Court judge ruled that the developer was entitled to a forfeited sum of $380,000, which was 20 per cent of the purchase price.

The pair, who are represented by Mr Lee Ee Yang from Covenant Chambers, then appealed.

On Nov 6, the Court of Appeal ruled that the developer did not have the contractual right to the forfeited sum of nearly $1.2 million, as it was not a “true deposit”.

In written grounds of decision, Singapore’s highest court said that it was satisfied that the sum of $1.2 million, which amounted to 63 per cent of the purchase price, was not reasonable as a deposit.

“We therefore had no difficulty in concluding that this sum was not a true deposit and could not be forfeited,” said the court, which comprised Chief Justice Sundaresh Menon, Justice Tay Yong Kwang and Justice Steven Chong.

The judges disagreed with the lower court that the developer could forfeit a part of the deposit. 

The apex court said the reasonableness of a deposit must be assessed at the time the contract was made.

An unreasonable deposit “does not become reasonable retrospectively by the relevant party purporting to forfeit a reduced sum”, the judges said.

But the Court of Appeal ruled that the developer was entitled to retain $357,000, which had been paid as an option fee under a separate contract.

The decision meant Ms Li and Mr Li would get back $743,176.11 in total, after accounting for other payments.

The developer was also ordered to pay legal costs of $60,000 to the pair. 

In its judgment, the court set out a revised legal test to determine whether a sum of money is a true deposit that can be forfeited.

This framework will apply in future cases where a claimant sues for the return of a sum alleged to be a deposit.

The events leading up to the current dispute began in December 2015, when Ms Li and Mr Li bought a unit at The Crest for $1.785 million.

In March 2018, the deal was annulled by Wingcrown after the pair failed to make the requisite progress payments. By then, more than $1.2 million had been paid.

The developer retained a sum of $379,195.58 from the instalments paid and said it would return the balance to the purchasers.

But father and daughter remained interested in buying the property, and Wingcrown granted the pair a second option to purchase the property for $1.9 million.

Out of the money forfeited from the first attempt, a sum of $357,000 was credited as the fee for the second option. This option was exercised in April 2018.

Despite several time extensions, the pair failed to complete the transaction.

Ms Li blamed their then property agent Liu Siyu for failing to make the requisite payments on their behalf.

The former agent at ERA Realty Network was sentenced to three years’ jail in March 2023 for misappropriating nearly $600,000 of the money entrusted to her.

Wingcrown notified the purchasers in November 2018 that the sale had been terminated and asserted that it was entitled to the stipulated $1.2 million deposit as forfeit.

The duo asked for a full refund in March 2019 and again in June 2019, but the developer rejected their requests.

After the pair sent a letter of demand to Wingcrown, the developer returned $488,957.04 in April 2023.

Separately, Ms Li and Mr Li have filed a lawsuit against ERA, Liu and Ms Neo Yoke Lai, to claim about $1.29 million in damages.

Ms Neo was Liu’s superior at the real estate agency and a family friend.

According to court papers seen by The Straits Times, the pair are accusing Liu of making false representations.

They have also alleged that Liu, Ms Neo and ERA are liable for negligence

ERA has filed its defence, contending that it should not be held liable for any negligent or fraudulent acts on the part of Liu or Ms Neo.

Ms Neo has applied to strike out the lawsuit.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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