QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
(SITTING AS A JUDGE OF THE HIGH COURT)
| YOO DESIGN SERVICES LIMITED
|- and -
|ILIV REALITY PTE LIMITED
Edmund Cullen QC (instructed by Dentons UK and Middle East LLP) for the Defendants
Hearing dates: 10th and 11th February 2020.
Crown Copyright ©
Christopher Hancock QC (sitting as a Judge of the High Court) :
Introduction and factual background.
i) Whether the Defendant is under an implied obligation (as alleged in paragraph 9.1 of the Amended Particulars of Claim) to proceed with marketing the Apartments for sale with due diligence and expedition at all times and to ensure that its sole marketing agent continued to use its best endeavours to complete the sale of the Apartments under Sale and Purchase Agreements;
ii) Whether the Defendant is under an implied obligation (as alleged in paragraph 9.2 of the Amended Particulars of Claim) to complete the sale of the Apartments within a reasonable time of the third quarter of 2008 and/or of completion of the development of the Apartments;
iii) Whether the Defendant is under an implied obligation (as alleged in paragraph 9.3 of the Amended Particulars of Claim) to refrain from renting out the Apartments pending sale or from taking any other steps which would delay or undermine the sale of the Apartments; and
iv) Whether the facts alleged in paragraphs 11 to 15 of the Amended Particulars of Claim (if proved) are capable of amounting to a breach of the express terms of the Agreement.
i) First, it granted a licence to the Defendant to apply its "Concept" (and associated designs, trade marks, etc.) to the development: see clause 2. The "Concept" is described in Appendix A to the DSA.
ii) Second, the Claimant agreed to provide design and other services as described at Appendices D and E to the DSA: see clause 3.
"Clause 9.1: "In consideration for the sub licence of the Concept granted by Yoo and for the Services provided by Yoo, the Company shall pay to Yoo a Retainer fee ("the Retainer Fee") of One million six hundred thousand United States Dollars (US$1,600,000) based on an estimated gross development sales value of One hundred and fifty-eight million, seven hundred thousand Singapore Dollars (S$158,700,000)."
Clause 9.2: "The Company shall pay the Retainer Fee [to the Claimant] in advance of Four Hundred and eighty thousand United States dollars (US$480,000) in 24 equal instalments of twenty thousand United States dollars (US$20,000) per calendar month payable by electronic transfer within fourteen (14) days of the execution of this Agreement and on each calendar month thereafter. (For the avoidance of doubt all fees are non-refundable under any circumstance and may not be offset against any claims, invoices and payments etc of any kind)."
Clause 9.3: "The Company shall in addition, pay up to 50% of the Retainer Fee, less payments already made under Clause 9.2 above to Yoo upon the signing of the Sale and Purchase Agreements of 50% of the Apartments in the Property."
Clause 9.4: "The balance of the Retainer Fee shall be paid to Yoo upon Legal Completion of the Apartments."
Clause 9.5: "In addition, Yoo shall receive an incentive fee (the "Incentive Fee") equal to 3% of the aggregate gross sales proceeds (as defined below) in excess of an average per square feet price of the saleable parts of the Project of Three thousand, six hundred Singapore dollars (S$3,600) per square foot . . . For the avoidance of doubt, Yoo shall be entitled to the Incentive Fee only if all the 28 Apartments in the Property are sold up to Legal Completion. The "Gross Sale Price" of a Yoo Apartment shall be gross sale price of the Apartment as sold to a bona fide arms length third party. It shall also exclude all furniture and fitting costs (if any) and shall be allocated on a good faith basis) levied in the sale of the Apartments".
Clause 9.6: "The Incentive Fee shall be paid to Yoo within two (2) months of the signing of the last Sale and Purchase Agreement of all 28 Apartments".
Clause 9.7: "In addition to the Retainer Fee and Incentive Fee stated above, the Company shall pay to Yoo a Commission of 1% of the Gross Sale Price for any Apartment, where Yoo introduces a purchaser, via its database databank, website, or other means . . . Such Commission shall be payable two (2) months after the signing of the Sale and Purchase Agreement for each Apartment".
Clause 5.1 provides that: "The Company warrants to Yoo as follows: the execution and delivery of this agreement by it and the performance by it of its obligations will not result in the breach of the terms and conditions of or constitute a default under any agreement or undertaking to which the Company is a party or by which the Company may be bound, and does not breach any judgment, order, rule, regulation, injunction or decree of any court, or Government Agency applicable to it or by which it may be bound."
Clause 5.2 provides that: "The Company shall grant access to Yoo or its duly appointed representative at any time before the sale of any Units in order that Yoo or its authorised representatives may inspect the same and to ensure that the Units comply with the above warranty and the other requirements of this Agreement."
Clause 5.3 provides that: "The Company undertakes that for so long as the Property or any of the Units remain owned by or on its behalf, it will ensure that the Property and the Units owned by it or on its behalf are retained in good repair and condition and they are consistent with the Requirements".
Clause 8.1 provides that the Defendant shall "proceed to develop the Project with all due diligence and expedition at all times and shall ensure that its Project Architects, and all other agents consultants contractors and advisers use their best endeavours to complete the Project within the anticipated development timetable".
Clause 8.2 provides that: "The Company undertakes to provide to Yoo a quarterly written sales and site progress report on or before the last day of each quarter in which the following will be reviewed in such detail as Yoo shall reasonably require
8.2.3 progress in the sales of the Units
8.2.4 progress of marketing and advertising the Units"
i) Because the proposed Development was to be undertaken in Singapore, it is common ground between the parties that it was subject to an onerous statutory and regulatory regime contained within Singapore's Residential Property Act (Chapter 274, 2009 Revised Edition) ("the RPA") and the Housing Developer Rules made pursuant to section 22 of the Housing Developers (Control and Licensing) Act (Chapter 130, 2008 Edition ("the HDR") (together, "the Singaporean Regime").
ii) In this case, as the Defendant (being a Singaporean entity owned by a foreign company) was a foreign housing developer for the purposes of the RPA, it was required to obtain an approval from the Controller of Residential Property in Singapore, commonly referred to as a qualifying certificate ("QC"). QCs are subject to restrictions imposed pursuant to section 31 of the RPA which will include:
a) an obligation on the developer to provide security for its obligations under the QC and RPA in the form of a Banker's Guarantee of at least 10% of the purchase price of the land on which the development was to be built ("the Security Deposit");
b) an obligation on the developer to complete the construction of the development and obtain a Temporary Occupation Permit ("TOP") or Certificate of Statutory Completion ("CSC") within a limited period of time from the date of the QC, ordinarily 6 years; and
c) an obligation to sell the properties comprised within the development within 2 years from the date of issue of the TOP or CSC, failing which it would risk forfeiture of its Security Deposit.
iii) Although it is possible for developers such as the Defendant to apply to extend the two year period in which they have to sell the properties comprised within the development following the grant of a TOP or CSC, the fees for so doing are substantial, being levied at 8% of the value of the land for the first year, 16% of the value of the land for the second year and 24% of the value of the land for third and subsequent years.
iv) Moreover, the effect of section 31(4) of the RPA is that the Defendant was prohibited as a foreign company from retaining any of the Apartments within the Development (whether to rent the same or otherwise) without applying to the Controller of Residential Property in Singapore for permission pursuant to section 25 of the RPA.
"10.The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds  1 WLR 1381 , 1383H1385D and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen)  1 WLR 989 , 997, Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties' contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 , 912913 Lord Hoffmann reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham of Cornhill in an extrajudicial writing, "A New Thing Under the Sun? The Interpretation of Contracts and the ICS decision" (2008) 12 Edin LR 374, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree.
11.Lord Clarke of Stone-cum-Ebony JSC elegantly summarised the approach to construction in the Rainy Sky case  1 WLR 2900 , para 21f. In the Arnold case  AC 1619 all of the judgments confirmed the approach in the Rainy Sky case: Lord Neuberger of Abbotsbury PSC, paras 1314; Lord Hodge JSC, para 76 and Lord Carnwath JSC, para 108. Interpretation is, as Lord Clarke JSC stated in the Rainy Sky case (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (the Rainy Sky case, para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2)  2 All ER (Comm) 299 , paras 13, 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: the Arnold case, paras 20, 77. Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms.
12.This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: the Arnold case, para 77 citing In re Sigma Finance Corpn  1 All ER 571, para 12, per Lord Mance JSC. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.
13.Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance JSC spoke in Sigma Finance Corpn  1 All ER 571 , para 12, assists the lawyer or judge to ascertain the objective meaning of disputed provisions."
i) Where, as here, one is dealing with the implication of a term into a particular contract, in the light of the express terms, commercial common sense, and the facts known to both parties at the time the contract was made, a term will only be implied if it satisfies the test of business necessity.
ii) For the term to be implied (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.
iii) It may be difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully-drafted contract but have omitted to make provision for the matter in issue because it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate decision or indeed the parties might suspect that they are unlikely to agree on what is to happen in a certain eventuality and may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur.
iv) It is wrong to approach the question with the benefit of hindsight in the light of the particular issue that has in fact arisen. It is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.
v) A term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them.
vi) A term can only be implied if, without the term, the contract would lack commercial or practical coherence.
vii) The courts' usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power.
"Agents' Remuneration Due Upon the Happening of an Event
(1)Where an agent is entitled to his remuneration upon the happening of a future event, his entitlement does not arise until that event has occurred.
(2)The event upon which the agent's entitlement to remuneration arises is to be ascertained from the terms of the agency contract.
(3)Where the event upon which the agent's entitlement to remuneration arises does not occur, the agent will not be entitled to receive remuneration on a quantum meruit unless provision for this is expressly made in the agency contract, or unless a term to such effect can be implied into the agency contract in order to give it business efficacy or otherwise to give effect to the intentions of the parties."
i) First, it is necessary to determine on what event the relevant party's entitlement to be paid is dependent. This is a matter of construction of the contract.
ii) Secondly, where that event does not occur, it is necessary to ask whether there should be implied into the contract an entitlement to be paid some sum by way of quantum meruit.
Preliminary issue 4.
"Whether the facts alleged in paragraphs 11 to 15 of the Amended Particulars of Claim (if proved) are capable of amounting to a breach of the express terms of the Agreement."
The parties' submissions.
i) imposing an obligation on the Defendant to proceed with the marketing of the Apartments for sale with due diligence and expedition ("the Marketing Obligation"), which obligation founds the breaches alleged at paras 11.1 to 11.4 of the Amended Particulars of Claim;
ii) imposing an obligation on the Defendant to complete the sale of the Apartments within a reasonable time of the third quarter of 2008 and/or the completion of the development of the Apartments ("the Sale Obligation"), which obligation founds the breach alleged at paras 11.5 of the Amended Particulars of Claim; and
iii) preventing the Defendant from renting out the Apartments ("the Rental Prohibition").
i) The Defendant was required by clause 8.1 to "proceed to develop the Project with all due diligence and expedition at all times and shall ensure that its Project Architects, and all other agents consultants contractors and advisers use their best endeavours to complete the Project within the anticipated development timetable".
ii) "Project" in this context must be construed as including the marketing of the Apartments for sale with due diligence and expedition given that:
a) The definition of "Project" in Recital D is not confined to the construction phases of the Development. It simply refers to the "residential development to be named, located at 74 Grange Road".
b) The Services that the Claimant was to provide under the Agreement, which necessarily must have formed part of the Project, included extensive obligations in Appendix E to assist the Defendant with the marketing and advertising of the Apartments. It makes no sense for those marketing and advertising services to be outwith the scope of the Project. If the Claimant's services in this regard fall within the scope of the Project then, necessarily the Defendant's marketing and advertising activities must also form part of the Project in circumstances where the Claimant's obligation was to assist the Defendant's efforts.
c) Inherent in an obligation to "develop" a project is the concept of an endpoint to that project towards which that party is to strive. In this case, the endpoint for the project can only sensibly be understood as the sale of the Apartments in circumstances where:
i) The ultimate purpose of the Agreement was to facilitate the sale by the Defendant of the Apartments (the Claimant's obligations and remuneration being directed to achieving such objective and it being the Defendant's raison d'κtre as a property developer). The Defendant rightly accepts this premise in its Defence, taking issue only with whether it was under an obligation to sell within a certain time and not the principle that it was intended that the Apartments be sold.
ii) The payment of the final 50% of the Claimant's Retainer Fee pursuant to clause 9.4 of the Agreement was only payable on "Legal Completion of the Apartments", which definition required the sale of the Apartments.
iii) The Singaporean Regime would not permit the Defendant to retain ownership of the Apartments after their construction, Indeed, it would be fined in the event it did not sell the Apartments expeditiously. The completion of the Defendant's task as a property developer so far as those rules were concerned required not just the expeditious construction of the Apartments but also their sale within specified time periods. The Singaporean Regime is part of the factual background to which the Court can properly have regard in circumstances where:
(a) it is not in dispute that the Singaporean Regime was known to the Defendant;
(b) it was Mr Pang's evidence that the Claimant was aware of the salient features of the Singaporean Regime; and
(c) even if the Court were not satisfied on the evidence presently available that the Claimant was in fact aware of the Singaporean Regime at the time it entered into the Agreement, knowledge of that regime is on any view knowledge which was "reasonably available" to the parties: see Challinor v Juliet Bellis  EWHC 347 (Ch) at paras 276 to 279 per Hildyard J.
d) Clause 8.2 of the Agreement which requires the Defendant to provide quarterly reports to the Claimant is plainly intended to enable the Claimant to verify that the Defendant is complying with its obligations under clause 8.1 to develop the Project with all due diligence and expedition, following on as it does immediately from clause 8.1 in the same clause 8 of the Agreement. Pursuant to clauses 8.2.3 and 8.2.4 respectively, the Defendant was required to provide quarterly reports as to its progress in sales of the Apartments and its progress in marketing and advertising the Apartments. There is no reason why the Defendant would be under an obligation to provide such regular reports to the Claimant and, moreover, reports on those matters in such detail as the Claimant required: see clause 8.2 if its express obligation in clause 8.1 to "develop the Project with all due diligence and expedition" did not encompass the marketing of the Apartments for sale.
e) In circumstances where the only way the ultimate purpose of the Agreement i.e. the sale of the Apartments could be achieved was through the marketing and advertising of the Apartments for sale, and the Claimant was only to receive the vast majority of its remuneration under the Agreement upon sale of the Apartments, it would be nonsensical for the Defendant to be under an obligation to complete the building of the Apartments with all due diligence and expedition and to inform the Claimant of its progress in that regard but not to have to take such steps with regard to the final stage of the development, i.e. their marketing and sale.
i) The Defendant has only made two attempts to sell the Apartments in the near 12 years since the Agreement was entered into and the "Marketing Launch Date" from which its efforts were supposed to commence, as alleged at para. 11.1;
ii) it has not offered the Apartments to the wider public, as alleged at para. 11.2;
iii) it has chosen to rent the Apartments rather than market the same, as alleged at para. 11.3 and 12; and
iv) it has rejected the Claimant's offers of assistance with marketing the Apartments for sale, as alleged at para. 11.4.
i) The Defendant's obligation pursuant to clause 9.1 was to pay the Claimant the Retainer Fee of US$1.6m in consideration for the provision by the Claimant of the Licence and the Services. That fee was not a performance related incentive fee that was catered for elsewhere in the Agreement at clause 9.5 but rather the Claimant's fixed 'base fee' and the Claimant's entitlement to be paid the same was unqualified. It is inherent in the ordinary meaning and concept of a 'Retainer Fee' that it should be paid in order for services to be secured.
ii) The purpose of this Agreement was for the Defendant's Development to be branded as a 'designed by Yoo' development and for it to benefit from the Claimant's interior designs such that the Apartments would sell swiftly and at a premium to that which they would otherwise achieve without the Claimant's involvement. The exploitation of that premium is necessarily premised on the Apartments being sold while the Claimant's design remained current, innovative and in accordance with customer expectation and tastes for properties of this kind.
iii) There is no difficulty that this obligation to complete the sale of the Apartments which clause 8.1 encompassed should be construed as requiring their sale within a reasonable time. That is because, as set out above, it is well established that where a contract does not expressly or by necessary implication fix any time for the performance of an obligation, it will be implied that it shall be performed within a reasonable period of time: see HHJ Davis-White QC (sitting as a Judge of the High Court) in Sparks v Biden  EWHC 1994 (Ch) at para. 59, a decision in the analogous context of an overage agreement.
i) An obligation on the Defendant to complete the sale of the Apartments with all due diligence and expedition gives practical coherence and effect to the Agreement, ensuring that the joint venture to which the parties are working is completed timeously and the payment of the Claimant's Retainer Fee which the Defendant has an unqualified obligation to pay: see, in this regard, Sparks, supra, at para. 52.
ii) If the Defendant is right and the Agreement imposes no obligation to sell within any period then it must logically be the Defendant's case that if it so chose it would not have to sell the Apartments at all, i.e. that it could simply rent the same. That would have a number of highly implausible consequences which it cannot sensibly be said the parties would have intended. In particular:
a) The Claimant would have no entitlement to be paid the balance of its fixed Retainer Fee notwithstanding the fact that it had provided the Licence and the Services.
b) The Claimant would have no ability to earn the incentive fee or commission even if it had identified purchasers for all of the Apartments.
c) The Claimant would be required to continue to provide the Services to the Defendant indefinitely but without prospect of payment. Indeed, the Claimant could be required decades hence to provide marketing services in relation to the sale of the Apartments if and when the Defendant eventually did decide to sell.
d) The Defendant would be obliged to report quarterly to the Claimant on its progress in selling the Apartments and in marketing and advertising the Units for sale even though it had no such intention.
e) Even if the Apartments were rented out on long-term leases, the Defendant would be obliged to ensure that all of the Apartments were in a condition suitable for sale pursuant to clause 5.3 of the Agreement.
f) If the Defendant were to sell the Apartments at some very much later date, say decades later (by no means implausible given the time which has already passed), there was and is no mechanism by which the Claimant's Retainer Fee might be increased, for example, to take account of inflation. All that the Claimant would be entitled to is the Retainer Fee.
g) If the Apartments were only sold at a very much later date at the time of the Defendant's choosing, they would be sold as a branded 'designed by Yoo' development notwithstanding the fact that they had been designed decades earlier. The Agreement contains no provision for the Apartments to be redesigned.
i) The fact that the market conditions as at the time construction was completed were not as advantageous as the Defendant might have hoped was an ordinary commercial risk inherent in the Agreement and in property development generally.
ii) This fact is not one which deprives the Agreement of practical coherence. It is a mere consequence and an unremarkable one at that. It is not something which drives or demands a particular construction of the Agreement.
iii) The parties knew that the Defendant would be obliged to sell the Apartments within a short time frame because of the Singaporean Regime irrespective of market conditions. The Defendant thus had no practical commercial choice as to when it sold the Apartments in any event.
i) it is common ground that the Defendant has not sold any of the Apartments in the nearly twelve years since the Agreement was signed; and
ii) it is no part of the Defendant's case that it is unable to sell the Apartments, rather it is the Defendant's case that it has chosen not to do so because market conditions are such that the Development would allegedly not be profitable for it were it to sell at prevailing market prices.
i) Clause 5.2 of the Agreement expressly requires (a) the Defendant to grant the Claimant or its duly appointed representatives at any time before the sale of any Apartment access to that Apartment so as to inspect the same; and (b) the Defendant to immediately remedy any Apartment which does not comply with the requirements prescribed by the Agreement. Rental by the Defendant of the Apartments precludes the Claimant from exercising that unfettered right and prevents the Defendant from complying with its obligation to make good any Apartment which does not comply, a tenant not being obliged to grant such unfettered access or, indeed, access at all without permission. In this regard, it is to be noted that the Defendant has not pleaded that the law of Singapore with respect to the rights of tenants to restrict access differs in any material respects from English law on this point.
ii) If it is the case that clause 8.1 properly construed contains the Marketing Obligation and the Sale Obligation then it follows that for the Defendant to have rented out the Apartments would be for it to have acted in breach of that clause in circumstances where an Apartment which is rented out cannot be sold.
The Defendant's submissions.
Discussion and conclusions
i) The preliminary issue that I am asked to determine is that which has been ordered by the Court. In effect, Mr Riley's submission is that I should redraft the issue, so as to ask whether the obligations he puts forward are, on a true construction of the agreement, part of the bargain.
ii) This would also, in my judgment, involve the need to replead the case. In essence, what Mr Riley seeks to do is to start with the breach alleged, and then ask whether the contract can be construed as including (as a matter of construction) the terms he relies on, which are not then the actual express terms pleaded. In essence, this approach puts the cart before the horse, in my judgment.
iii) The logic of Mr Riley's argument, it seems to me, is really that the terms put forward as implied terms form part of the express terms of the contract, properly construed.
i) Appendix B sets out "The Project". It specifies that as "The general design of the building with approximately Units in accordance with the terms of this Agreement and more specifically (but subject to change) as follows:
a) Project Address: 74 Grange Road Singapore
b) Approx number of units: 28
c) Construction start date: 4th quarter 2008
d) Estimated completion: 4th quarter 2010
e) Marketing launch date: 3rd quarter 2008
f) Estimated project GDV: S158,700,000.00
ii) Appendix D set out the adaptation and design services as follows:
a) Phase I: The Concept Schematic Design Phase
b) Phase II: The Design Development Phase
c) Phase III: The Construction Documents Phase
d) Phase IV: The Construction Phase
iii) Appendix E set out the Marketing Services to be provided under clause 3 by Yoo. That clause provides as follows:
"Yoo will provide Marketing and PR Services via assistance and coordination as follows:
- Work with the Company to create a meaningful marketing plan and to maintain development of the plan as the Project progresses.
- Wholly associate the Yoo brand with the Project with a view to maximising the Project Profile for the ultimate benefit of the Company.
- Collaborate with the Company and its sole marketing agent in the State in the undertaking of a national and international direct marketing and awareness campaign in the promotion of the overall project.
- Organise a schedule of dedicated conference calls for quality control and problem solving purposes of various and all marketing issues as the Project progresses. The frequency of the diarised calls will vary along the Project term, but will be agreed with the Company.
- Supply content material for marketing collateral in the form of Yoo's databank of copyrighted images, quotes and other copy.
- Supply of historic press copy in digital format for optional display in marketing centres and other appropriate areas.
- Collaborate with the Company and its sole marketing agent in the State on all promotional and marketing elements considered necessary for the overall success of the Project Interiors in its entirety. These elements will include but are not limited to the following:
- Site Presentation
- Brochures and other printed promotional matter
- Hoarding and signage
- Public relations
- Web site
- Community outreach
- Sales center presentation
- Virtual imagery
- Review and comment on all project sales and marketing material at every stage that the material is submitted to them.
- The development will be promoted as a "Yoo-Starck Concept" and/or "Yoo inspired by Starck" designed project in association with the Company's brand.
- Liaise with both the Project PR company approved by the Company and the Company to create a sustainable PR program with the locally appointed PR company.
- Distribute relevant brochures and promotional material to all Yoo projects within Yoo's portfolio for increased international exposure.
- Providing a CD/DVD specifically for the Property with Philippe Starck making reference to and being involved in the Property subject to the rights set out in this Agreement in relation to such CD/DVD"
iv) Appendix F then set out details of the Incentive Fees.
i) The contract makes a clear distinction between the obligation to complete the Project within the anticipated timescale, which in context must mean the timescale in Appendix B, and the obligation to market and sell the units within the project, which are differentiated from the Project itself.
ii) Whilst it is true that clause 8.2 imposes an obligation on the Defendant to report back as to the rate of sales, it does not impose any obligation on the company to sell at any particular rate. That is in my view unsurprising.
iii) In both the recitals and in clause 8.2, there is a clear distinction drawn between the Project and the units which form part of the Project. The Defendant's obligations relate to the Project; the rights of the Claimant relate to sale of the units.
iv) In my judgment, the decision of the House of Lords in the case of Luxor v Cooper  AC 108 is applicable here. The right to commission is dependent on sale. If no such sale is made, then there cannot be a right to commission pursuant to the express terms of the contract; instead, the question must be whether such a right is to be implied.
v) Although this may be putting the same point in a different way, to say that there must be an obligation to sell because otherwise the commission that is dependent on a sale cannot be earnt is to put the cart before the horse. The party that is making the largest investment is the developer; the party whose interest is therefore the most significant is the developer; so to subjugate the interests of the developer to those of the provider of design and marketing services would be contrary to all business commonsense.
vi) Finally, I should deal with the argument which Mr Riley put forward, to the effect that any construction which meant that the Defendant would not have to market the units meant that the Claimant would be left owing obligations to assist with marketing for an indefinite period. I accept this; but the argument does not seem to me to prove anything. As and when the Defendant and its agent choose to market, then the Claimant may be called upon; but not before then.
i) The parties had entered into an option agreement, under which the buyer had an option to purchase certain land owned by the seller. The seller, as both parties knew, wished to use monies generated by the project to which I shall make reference, to provide retirement monies.
ii) That agreement required the buyer, within 3 years, to use all reasonable endeavours to procure planning permission for the development of eight buildings on the land the project I have referred to. Once that planning permission had been obtained, the option could be exercised.
iii) Thereafter, if the planning permission was obtained and the option exercised, the buyer had, "as soon as practicable" to construct the buildings.
iv) The purchase price, after amendment, was £500,000. In addition, the seller was to receive 33% of the sale price of each property, net of the purchase price already received, but with a minimum overage of £1.2m (taking into account the £500,000 already received).
v) The buyer did not however sell the houses. He leased out seven of them, and used the last himself, maintaining that the time of sale was entirely a matter for his discretion.
Preliminary issue 1.
"Whether the Defendant is under an implied obligation (as alleged in paragraph 9.1 of the Amended Particulars of Claim) to proceed with marketing the Apartments for sale with due diligence and expedition at all times and to ensure that its sole marketing agent continued to use its best endeavours to complete the sale of the Apartments under Sale and Purchase Agreements"
i) It is so obvious that it goes without saying. The ultimate purpose of the DSA was to enable the Defendant to sell the Apartments in the Development, from which sale both the Claimant and the Defendant would realise a return. Given that the parties on any view expressly intended that the Defendant should progress the construction of the Apartments with all due diligence and expedition, it follows that they must also have intended that the next stage of the Development the marketing and advertising of the Apartments should also proceed diligently and expeditiously in circumstances where:
a) irrespective of market conditions, the only plausible way the Apartments might eventually be sold as it is not disputed the parties ultimately envisaged and intended and the parties able to realise their return on the project is if they were marketed and advertised for sale;
b) there are no good reasons why the parties should have been in agreement that the construction phase of the Apartments should proceed with all due diligence and expedition but that, when it came to the marketing of the same, the Defendant should have been permitted not to exercise diligence or to act expeditiously: to suggest otherwise would be to conclude that the parties were indifferent to the process whereby they might ultimately realise their return on the Development;
c) the DSA itself contemplated that the marketing phase of the Development should in fact commence even before construction, the latter only being scheduled to commence in the fourth quarter of 2008 whereas the marketing launch was scheduled for the preceding quarter of that year;
d) the DSA required the Defendant to provide the Claimant with quarterly reports from its execution as to the progress of its sales, marketing and advertising efforts, which obligation especially when coupled with the contractual timetable for the marketing launch presupposes an ongoing marketing and advertising effort; and
e) the DSA at clause 26 prohibited the Claimant from marketing or promoting any residential or development or project in Singapore from the date of the DSA until the earlier of the sale of 23 of the Apartments or 31 March 2009 and, thereafter, from marketing or promoting a competing development in the same area of Singapore until the earlier of the sale of 23 Apartments or 30 June 2009: that prohibition plainly envisaged a substantial marketing campaign being conducted for the Project from the date of the DSA onwards from which it was important the Claimant should not detract by involvement in a competing project.
ii) For essentially the same reasons, the proposed term is necessary to give business efficacy to the DSA, that is to say to give the DSA practical and commercial coherence. Without such an obligation:
a) The Defendant would not be obliged to bring about the ultimate objective to which the DSA is directed, i.e. the sale of the Apartments;
b) The Claimant would be left with an open-ended commitment to provide the Services to the Defendant, its obligation continuing while the Apartments remained unsold;
c) The Claimant would be required to provide marketing and advertising assistance to efforts that the Defendant was under no obligation to undertake; and
d) it would be highly unlikely that the Claimant would be paid its Retainer Fee within a reasonable period, the payment of the vast majority of which required the sale of the Apartments, which sale would not occur without the Defendant marketing the same for sale.
iii) The proposed term is reasonable and equitable. It does no more than impose exactly the same obligation as the Defendant on any view expressly assumed with respect to the much more onerous and expensive construction phase of the Development.
iv) The proposed term is clearly expressed.
v) The proposed term does not contradict any express term of the contract, nor does the Defendant suggest otherwise.
The Defendants' submissions.
Preliminary issue 2.
"Whether the Defendant is under an implied obligation (as alleged in paragraph 9.2 of the Amended Particulars of Claim) to complete the sale of the Apartments within a reasonable time of the third quarter of 2008 and/or of completion of the development of the Apartments"
The Claimant's submissions.
i) For essentially the same reasons as set out above in relation to the first implied term the proposed term reflects and gives effect to what can safely be presumed to be the parties' intentions when regard is had to the purpose of the DSA, its express terms and the context in which it was made. In that regard, it is significant to note that:
a) The DSA envisaged and was directed entirely towards the sale of the Apartments. It neither contemplated nor provided for the Apartments to be rented.
b) The DSA was entered into against the backdrop of the Singaporean Regime which, as set out above, required the sale of the Apartments within a period of no more than two years following completion of construction.
c) Mr Pang's evidence at trial was that it was intended and understood that the Apartments be sold quickly indeed, it is his evidence that it was the Defendant's very desire to achieve this aim that prompted their instruction of the Claimant on the Development. The Defendant has not adduced any evidence to gainsay that case or understanding.
d) The Claimant's Retainer Fee is not expressed as a function of the value of Apartment sales the Defendant might make but rather as a pre-determined, fixed figure payable irrespective of the sale price for the Apartments the Defendant might achieve. The parties thus clearly intended that it is a sum that the Claimant should be paid; but the vast majority of that fee could only be paid upon sale of the Apartments.
ii) The proposed term is necessary to give business efficacy to the DSA, again for the reasons already given in relation to the first implied term. Those reasons apply with even greater force in the case of the obligation to sell the Apartments within a reasonable time, however, in circumstances where, without such an obligation:
a) there is no means by which the Claimant can compel payment of its Retainer Fee;
b) the Claimant would be obliged to continue to provide the Services to the Defendant even if there was no prospect that it would be paid its Retainer Fee in the foreseeable future because the Defendant was not actively seeking to sell the Apartments;
c) the Defendant could receive the benefit of the Licence and the Services and rent the Apartments for profit without ever being obliged to pay the Claimant its agreed Retainer Fee; and
d) The Claimant would be deprived of its opportunity to earn additional sums in the form of the incentive fee and/or commission under the Agreement, both of which were predicated upon sales of all of the Apartments even if it had introduced purchasers for several Apartments who had purchased at a price significantly in excess of the target price per square foot.
iii) The proposed term is reasonable and equitable. It is not unreasonable still less inequitable that the Defendant should be required to sell the Apartments within a reasonable period of time in circumstances where the Defendant was already subject to such a requirement in the form of the Singaporean Regime and where the risk that market conditions might not be propitious when the time came to sell was inherent in the DSA and the Development in any event.
iv) The proposed term is clearly expressed.
v) The proposed term does not contradict any express term of the contract, nor does the Defendant suggest otherwise.
The Defendant's submissions.
i) The relevance of the Singaporean law (as expressed in paragraph 2A of the Amended Reply) is said to be that that law required (i) the completion of the construction and the obtaining of a Temporary Occupation Permit ("TOP") or Certificate of Statutory Completion ("CSC") within a "limited period of time" (in fact 6 years) from the date of the Qualifying Certificate (ii) the sale of the Apartments within 2 years of the issue of the TOP or CSC (in default of which fees would be payable for extensions) and (iii) permission from the authorities to rent out the Apartments.
ii) All of these, it is said, provided a "likely long-stop" date for the completion and sale of the Apartments.
iii) It is hard to see any basis on which any of these lends any support to the implication of the alleged terms. They are entirely separate.
iv) In fact, the content of the Singaporean law (assuming it was known to the Claimant) tends to militate against the implication of the alleged terms. If, for all practical purposes, it was considered that the local legislation provided a "likely long-stop" for the sale of the Apartments (and thus the payment of the balance of the Retainer Fee), then there was all the more reason why the matter was not required to be dealt with in the DSA.
My conclusions on issues 1 and 2.
i) Clause 14.5 provides that "neither party gives any warranties or undertakings to the Company except as expressly set out in this Agreement, and all other warranties whether express or implied at law or otherwise are hereby excluded to the fullest extent permitted by law."
ii) Clause 23 provides that "This Agreement embodies the entire understanding between the parties and all prior agreements and statements, oral or written are merged into this agreement."
i) I start from the fact that, as I have already concluded, the contract included no express time frame in this regard, although it did require the Defendant to complete the Project (ie the actual building) within a set time frame. It is perhaps unsurprising that the Defendant was prepared to accept responsibility for finishing the building (an obligation it had control over) but not selling (since that depended on third parties as well as the Defendant).
ii) I bear in mind also that it would have been perfectly possible for the parties to have included a long stop date in their contract, at which point the Claimant would have been entitled to their fee irrespective of sales of units. They did not however choose to structure their contract in this way.
iii) Next, there is the fact that the parties made very disparate contributions to the project, as the Defendant has emphasised. The suggestion that the Defendant should be obliged to sell against its wishes in a depressed climate in order to enable the Claimant to earn the balance of its fee, a fee which was, in the grand scheme of things, a relatively small proportion of the overall cost of the project, seems to me to be an unlikely one and certainly not necessary to give business efficacy to the contract.
iv) I also accept the point made by the Defendant that, if such a term were to be implied, one would expect that both parties would share in the downside following a sale at a lesser value. However, the size of the Claimant's entitlement would be in no way diminished in such a case; whilst a greater sale return does enure to the Claimant's advantage. For this reason, too, I take the view that it is unnecessary to imply a term that the units will be sold earlier rather than later to enable the Claimant to earn its fee.
v) Turning from business efficacy to the question of whether this term is so obvious that it goes without saying, I think it highly unlikely that the officious bystander would have been testily suppressed by both parties had the point been raised during contract negotiations. In fact, it seems very likely to me that there would have been heated dissension between the parties.
i) First, the seller was looking to the proceeds of the development to provide retirement income, as both parties knew. The seller therefore had a clear interest in those proceeds being realised as soon as possible. In the current case, whilst the Claimant would no doubt wish to obtain its share of the proceeds sooner rather than later, then there is not the same imperative as was the case in the Sparks case.
ii) Secondly, the sale of the properties in that case represented the last stage in a series of steps. At each earlier stage, an express time limit was stated. Thus, there was a time limit for obtaining planning permission; a consequent time limit on the exercise of the option; an express obligation to build as soon as practicable; and then to pay a share of the proceeds of sale of the properties, which could only be done if the properties were sold. Whilst there are obviously similarities between that case and the current one, the express contractual structure in Sparks v Biden was a very much more time limited one. As the Court observed, at paragraph 52, the entire point of the express obligations as to time in relation to obtaining planning permission and building the houses was to ensure that the ability to sell the houses and enable the seller to realise his right to overage would enure as rapidly as possible. That in turn suggested strongly that the houses should be sold as rapidly as possible.
iii) Thirdly, the disparity in the contributions and interests of the two parties that I have identified as a major reason for rejecting the implication in this case was not present in Sparks v Biden. The seller provided the entirety of the relevant land, and was to receive one third of the sale proceeds of each property. The exercise smacked of a joint venture, in which one party would not expect to have an unfettered discretion which is what the buyer in that case was claiming.
Preliminary issue 3:
"Whether the Defendant is under an implied obligation (as alleged in paragraph 9.3 of the Amended Particulars of Claim) to refrain from renting out the Apartments pending sale or from taking any other steps which would delay or undermine the sale of the Apartments"
The Claimant's submissions.
i) The proposed term reflects and gives effect to what can safely be presumed to be the parties' intentions when regard is had to the purpose of the Agreement, its express terms and the context in which it was made in circumstances where:
a) The DSA did not envisage or contemplate that the Apartments might be rented out, making no provision for such. Instead, its provisions were directed entirely towards and by reference to the sale of the Apartments.
b) The rental of the Apartments is inconsistent with the sale of the same for the occupation of a luxury apartment by a tenant would, at the very least, likely hinder the sale of the same at the best possible price.
c) The rental of the Apartments would preclude the exercise by the Claimant of its unfettered right to inspect the same at any time pursuant to clause 5.2 of the DSA.
d) The rental of the Apartments to tenants would, at the very least, hinder if not preclude the compliance by the Defendant with its duty pursuant to clause 5.2 of the DSA to immediately remedy any deficiencies with the Apartments identified by the Claimant on an inspection and its duty pursuant to clause 5.3 of the DSA to ensure that the Apartments are until sale retained in good repair and in accordance with the contractual requirements.
e) The parties cannot have intended that the Defendant should be permitted to rent the Apartments and thereby avoid any obligation to pay the Claimant its full Retainer Fee for so long as it chose.
ii) For essentially the same reasons as given above, the proposed term is further and, in any event, necessary to give business efficacy to the Agreement. In particular, without such a term, the Defendant would be permitted to escape indefinitely its obligation to pay the Retainer Fee.
iii) The proposed term is reasonable and equitable given the consequences of the Defendant's being permitted to rent and in circumstances where, by reason of the Singaporean Regime, the Defendant would not have been permitted to retain the Apartments on a long-term basis to rent the same anyway. That it has been able to do so is only by virtue of the sale of the shares in the Defendant (as opposed to the Property) such that the Defendant is no longer treated as a foreign company and has avoided the strictures imposed on foreign developers under the Singaporean Regime.
iv) The proposed term is clearly expressed.
v) The proposed term does not contradict any express term of the contract, nor does the Defendant suggest otherwise.
The Defendant's submissions.
i) I accept the Defendant's submission that the rental of the units is at the least consistent with the terms of clause 5.2, since it refers to the "use, marketing or sale" of the apartments, and the most obvious form of "use" other than marketing or sale in this connection seems to me to be rental.
ii) I do not accept the submission that the rental of a unit would of necessity make it impossible for the Defendant to comply with its obligation to allow the Claimant access to ensure compliance with clause 5.2. This would depend on the terms of the rental agreement, as the Defendant pointed out.
iii) Even if the rental of the unit might make it impossible for the Defendant to comply with clause 5.2, this is an entirely different question from whether rental was wholly prohibited because such rental might undermine the marketing or sale of the units. In truth, this is a submission which only has force if it be accepted that there was an obligation to market or sell within a particular period, a contention which I have rejected.