I. Introduction

1. Most agreements for sale and purchase of property provide that the purchaser will first place a deposit with the vendor, and pay the balance of the purchase price at a later date. If the purchaser subsequently fails to complete the sale and purchase (by failing to pay the balance of the purchase price), the purchaser will have committed a breach of contract. In such a situation, what is the vendor’s relief?
2. In Wingcrown Investment Pte Ltd v Mannepalli Gayatri Ram [2023] SGHC 1 (Wingcrown), the General Division of the High Court considered this very issue. The decision hence provides valuable guidance in this area of the law.
3. The Dentons Rodyk & Davidson LLP team comprising Senior Partner Ng Hui Min and Senior Associate Mok Zi Cong acted for the vendor in Wingcrown.

II. Background

4. In July 2018, the purchaser (the Purchaser) and the vendor (the Vendor) entered into a sale and purchase agreement (the SPA) in respect of the property (the Property). The purchase price for the Property was slightly above S$3 million. In early July 2018, the Purchaser paid an option fee amounting to 10% of the purchase price.
5. Unlike the usual agreement for sale and purchase of property where the purchaser is only permitted to move into the property upon completion of the sale and purchase of the property, the SPA in this case expressly allowed the Purchaser to take early possession of the Property prior to the completion of the sale and purchase of the Property under the SPA. The Purchaser therefore took possession of the Property in late July 2018.
6. The Purchaser failed to pay the balance of the purchase price and therefore failed to complete the sale and purchase of the Property under the SPA. Consequently, the SPA was terminated. In February 2022, the Purchaser delivered up possession of the Property to the Vendor. The Vendor then carried out reinstatement works on the Property before proceeding to market and sell the Property on the open market.

III. Key Takeaways

7. We set out three key takeaways from the Court’s judgment which have implications for purchasers and vendors alike.

A. If a purchaser has obtained early possession of the property, the purchaser may be liable for damages for the delayed sale and purchase of the property

8. In Wingcrown, the completion of the sale and purchase of the Property was originally scheduled for 4 June 2020, almost two years after the Purchaser took possession of the Property in July 2018. The Purchaser failed to complete the sale and purchase of the Property yet continued to stay in the property until 27 February 2022. The Vendor hence sought damages in respect of the delayed sale and purchase of the Property.
9. As a measure of damages, the Vendor sought:
1. monthly rent from 5 June 2020 (just after the date on which the sale and purchase was scheduled for completion) to 16 August 2021 (just before termination of the SPA); and
2. double rent from 17 August 2021 (the date on which the SPA was terminated) to 27 February 2022 (the date on which the Purchaser returned possession of the property to the Vendor).

10. The Purchaser argued that he ought not be liable for the above damages as he was never a tenant, and consequently could not be made to pay rent or any double rent.
11. The Court rejected this submission. The Court pointed out that, after the original scheduled completion date, the Purchaser no longer had a right to remain in the Property, and was therefore “de facto a trespasser” on the Property. It is well-established that the measure of damages for trespass is the value to the trespasser for the use of the property during the period of trespass, which is in turn typically measured using the market rent of the property (Federal Lands Commissioner v Benfort Enterprise and Another [1998] SGHC 361).
12. The Court also held that notwithstanding the COVID-19 (Temporary Measures) Act 2020, which provided temporary relief for certain prescribed contracts, the Vendor’s rights would continue to accrue during the period of temporary relief. The Court further observed that there was no basis for the Purchaser to be entitled to rental relief pursuant to the COVID-19 (Temporary Measures) (Rental and Related Measures) Regulations 2020. The Court’s ruling is therefore a welcome addition to the jurisprudence surrounding the pandemic-related legislative relief.
13. Turning to the vendor’s claim for double rent, the Court agreed with the Vendor’s submissions that, while the Purchaser was never a tenant of the Vendor, the Purchaser was nevertheless in a position akin to a tenant holding over after the determination of the tenancy. Under section 28(4) of the Civil Law Act 1909, a tenant who holds over (i.e. stays in the property) after the determination of his tenancy (i.e. the end of the lease period) is liable at the option of the landlord with double the amount of rent until possession is given up by him.
14. The Court reasoned that, after the termination of the SPA, the Purchaser had full knowledge that he could no longer claim any right to remain in possession of the Property, and was therefore in a position akin to a tenant who had held over. The Court therefore allowed the Vendor’s claim for double rent from 17 August 2021 to 27 February 2022.
15. The Court’s decision in this respect is notable for permitting a claim for double rent beyond its traditional confines (which require there to be a relationship of landlord and tenant). It will be interesting to observe whether further inroads will be made in this area.
16. In the authors’ view, the Court’s award of damages for the delayed sale and purchase of the Property should provide some measure of comfort for vendors who permit purchasers to take early possession of the property pending the completion of the sale and purchase.

B. The deposit paid by the purchaser may be forfeited without any credit given to the purchaser

17. As the Purchaser had paid the option fee equivalent to 10% of the purchase price when he entered into the SPA (which was to be held as a deposit by the Vendor), the Purchaser submitted that the Vendor was required to be give credit for the deposit paid in assessing the quantum of damages payable by the Purchaser.
18. The Court rejected the Purchaser’s submission. The Court observed that a clause in the SPA provided that, upon the termination of the SPA, the Vendor would have the right to, “without prejudice to any other rights or remedies available to the [vendor] at law and in equity, forfeit the Deposit”. The Court concluded that the Vendor was entitled to rely on this clause to forfeit the deposit while retaining the full extent of its other rights or remedies. Consequently, the Vendor was not required to give any credit to the Purchaser for the deposit paid.
19. The Court’s decision in this regard is a timely reminder that the terms of the contract are of paramount importance. The authors are aware of other cases where courts have awarded damages after giving credit for any deposits held by the vendor. Both vendors and purchasers alike should pay careful attention to the terms of the sale and purchase agreement to avoid being caught by surprise should the deal turn south.
20. In some circumstances, the amount of deposits paid by the purchaser may exceed any losses that have been suffered by the vendor. In such circumstances, the question that arises is whether the purchaser has any right to claim the balance from the vendor. Similarly, in such circumstances, the first port of call must be the terms of the contract between the parties. In particular, the court will consider whether the contract entitles the vendor to forfeit the deposit paid, regardless of the actual loss suffered by the vendor (Hon Chin Kong v Yip Fook Mun and another [2018] 3 SLR 534).

C. The vendor may not be required to give credit to the purchaser for the profit earned on the re-sale of the property

21. After the Purchaser returned possession of the Property to the Vendor, the Vendor re-sold the property on the open market, at a price higher than the purchase price in the SPA (with the Purchaser). In other words, the Vendor made a profit upon the re-sale of the Property.
22. The Court considered the profit made by the Vendor when assessing the Vendor’s claim for further damages for the delayed completion of the sale and purchase of the Property. On top of the Vendor’s claims set out above, the Vendor had claimed for damages (in the form of market rent) to account for the period between 28 February 2022 (after the purchaser returned possession of the property to the vendor) to 30 August 2022 (the date of completion of the re-sale of the Property to the replacement purchaser). The Vendor sought an award of Wrotham Park damages in this respect (based on the English case of Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798). Such damages protect a party’s interest in the performance of a contract, even in circumstances where it is not clear that the innocent party has suffered any loss as a result of the other party’s breach of contract.
23. The Court declined to award Wrotham Park damages to the Vendor, reasoning that the Vendor’s profit from re-sale far outstripped the Wrotham Park damages claimed. Therefore, the Vendor had successfully mitigated its loss, and no discernible loss was suffered. The Court reasoned that the Vendor could have been entitled to damages based on ordinary principles, and there was thus no need to award Wrotham Park damages (which is a limited and exceptional remedy) to the Vendor.
24. As the Court did not separately give any credit to the Purchaser for the profit earned by the vendor upon the re-sale of the property, it is implicit in the Court’s judgment that the Vendor was not required to account to the Purchaser for such profit in the assessment of damages. It has been observed that the benefit accruing to the innocent party need only be considered in the assessment of damages if there is a sufficient link between the benefit and the breach (Fulton Shipping Inc of Panama v Globalia Business Travel SAU (formerly Travelplan SAU) of Spain; The New Flamenco [2017] 1 WLR 2581). In coming to its conclusion that the Vendor need not account to the Purchaser for the profit from the re-sale of the Property, the Court may have considered the fact that, after the Vendor took over the Property, it engaged several contractors to carry out reinstatement works before proceeding to market and sell the Property. Thus, any increased purchase price may be said to have been due to the Vendor’s own efforts rather than the breach of the SPA by the Purchaser. In a future case, it is likely that whether any credit needs to be given for the profit earned on re-sale will depend heavily on the specific facts of that case.

IV. Conclusion

25. The decision in Wingcrown carries valuable lessons for vendors and purchasers of Singapore properties alike.
26. For purchasers:
1. Before committing to the sale and purchase of a property, ensure that your finances are in order, and that you are able to complete the sale and purchase of the property on the scheduled completion date. Do not expect that the worst-case scenario is that you would have to forfeit any deposits already paid, as you may be liable to pay the vendor additional sums should you fail to complete the sale and purchase of the property.
2. Obtaining early possession of the property can be a double-edged sword. In this case, the Purchaser had stayed in the Property for nearly 4 years by the time he delivered the property back to the Vendor. As would be expected, he had made modifications to the property to suit his lifestyle. However, when he failed to complete the sale and purchase, these modifications had to be removed in order to comply with his obligation to reinstate the property to its original condition. Because he failed to do so, he had to compensate the Vendor for the amount paid incurred by the Vendor to carry out the reinstatement works. The Purchaser hence had to bear both the costs of the modifications themselves and the costs of removing them.

27. For vendors:
1. Consider obtaining legal advice before signing the sale and purchase agreement. In this case, the Vendor was able to rely on several clauses in the SPA (which were specifically drafted to protect the Vendor’s interest in view of the early possession scenario) to protect its position. Do not be confined to template agreements.
2. In the event of any dispute, ensure that you have sufficient records of your expenses to support a future claim. In Wingcrown, for instance, the Court allowed the Vendor’s claim for reinstatement, legal and other costs in full as the Vendor’s claims were fully supported by the relevant quotations / invoices.