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102 SINGAPORE LAW REPORTS (REISSUE) [1990] 2 SLR(R)

Lim Xue Shan and another

v
Ong Kim Cheong

[1990] SGHC 63

High Court — Suit No 1624 of 1982

A P Rajah J
18 September 1990

Contract — Illegality and public policy — Statutory illegality — Purchase of

residential property by foreign person — No approval by Minister — Implied term —
Frustration — Whether purchaser entitled to recover deposit

Land — Sale of land — Conditions of sale — Purchase of residential property by

foreign person — No approval by Minister — Whether purchaser entitled to recover
deposit — Sections 3(1)(c), 3(2)(c), 25 and 36 Residential Property Act (Cap 274,
1985 Rev Ed)

Words and Phrases — “Desires to purchase” — Section 25(2) Residential Property

Act (Cap 274, 1985 Rev Ed)

Facts
The defendant entered into an agreement to sell a property to the plaintiffs who
paid an initial deposit of $131,000. The property was classified as residential
property within the meaning of the Residential Property Act (Cap 274, 1985 Rev
Ed) (“the Act”). The plaintiffs were “foreign persons” within the meaning of the
Act and were required to obtain the approval of the Minister for transfer of the
said property. Such approval was sought by the plaintiffs subsequent to the
signing of the said agreement but was refused. The plaintiffs commenced the
present proceedings to recover the deposit paid.

Held, dismissing the plaintiffs’ claim:

(1) The parties had entered into an unconditional written contract for the sale
and purchase of residential property before the purchasers had applied for
ministerial permission to acquire such property in contravention of s 25(2) of
the Act. The agreement was an illegal contract under which no enforceable
rights could arise: at [22] and [23].
(2) “Desires to purchase” referred to a point of time before the signing of the
contract, and the state of mind of the foreign person before he signed the
contract. The Act required any foreign person desiring to buy residential
property to get approval of the Minister to purchase such residential property
before he entered into a contract for purchase of the property: at [25].
(3) Foreign persons who wished to purchase residential property could not
claim an implied term of the purchase being subject to the Minister’s approval,
especially when the failure to obtain such consent was of their own making and a
punishable criminal offence under the Act: at [26].
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[1990] 2 SLR(R) Lim Xue Shan v Ong Kim Cheong 103

(4) The question of frustration did not arise as the contract was null and void
under the Act. Purchasers who had defaulted in obtaining the Minister’s
approval would not be entitled to recover any sums of money paid under the
contract whether it was a deposit paid by them as security for the performance of
their obligations or as part payment of the purchase price: at [27].

Legislation referred to
Frustrated Contracts Act (Cap 115, 1985 Rev Ed) s 2(2)
Residential Property Act (Cap 274, 1985 Rev Ed) ss 3(1)(c), 3(2)(c), 25, 25(2), 36
(consd);
s3

Roderick Martin and M Rasanayagam (Ramdas & Wong) for the plaintiffs;
Cheong Yuen Hee (YH Cheong) for the defendant.

18 September 1990 Judgment reserved.

A P Rajah J:
1 By an agreement in writing dated 19 January 1981 (hereinafter called
“the said agreement”) made between the defendant as vendor and the
plaintiffs as purchasers, the plaintiffs agreed to purchase and the defendant
agreed to sell the property known as 55 Oei Tiong Ham Park, Singapore
(hereinafter called “the said property”) for the sum of $1,310,000 subject to
existing tenancy.
2 It is not disputed that under the said contract, a sum of $131,000 has
been paid by way of deposit to the defendant as vendor.
3 It is also not disputed that the said property is residential property
within the meaning of the Residential Property Act (Cap 274, 1985 Rev Ed)
(“the Act”) and that both the plaintiffs (“the purchasers” herein), though
permanent residents of Singapore, were foreign persons within the
meaning of the Act and that any transfer of the said property to them,
whether for consideration or by way of gift or otherwise, is prohibited by
and would be null and void under s 3 of the Act and that, unless the
purchasers had obtained the approval of the Minister under s 25 of the Act,
the purchasers would be committing an offence under s 36 of the Act.
4 On 28 April 1981, the Controller of Residential Property in response
to the plaintiffs’ application dated 2 February 1981 for approval to purchase
the said property and in compliance with s 25(11) of the Act conveyed to
the plaintiffs’ solicitors by notice in writing bearing the same date that the
Minister had considered the plaintiffs’ application and had disapproved it.
5 The plaintiffs have in fact demanded of the defendant the return of
the said deposit, but the defendant has refused and refuses to return the said
$131,000.
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104 SINGAPORE LAW REPORTS (REISSUE) [1990] 2 SLR(R)

6 It is in these circumstances that the plaintiffs have commenced

proceedings against the defendant and claim the return of the said sum of
$131,000.

7 The plaintiffs contend that the said agreement has been frustrated by
the failure to obtain the Minister’s approval and that the plaintiffs are
accordingly entitled to recover the said deposit as money had and received
for a consideration that has wholly failed.

8 In their amended statement of claim the plaintiffs plead that “at the
time and in consideration of the plaintiffs entering into the said agreement
the defendant orally agreed by himself and by his said solicitor with the
plaintiffs and warranted to them as an agreement collateral to the said
agreement and with the intent that the plaintiffs should rely thereon that
the sale and purchase should be subject to the grant of approval by the
Minister to the plaintiffs to purchase or acquire the said property”. They
also plead that “relying on the said oral agreement and the warranty the
plaintiffs duly entered into the said agreement on 19 January 1981 as
aforesaid”. “Further and in the alternative”, the plaintiffs say, “it was an
implied term of the said agreement that if the Minister’s approval was not
obtained the said deposit of $131,000 would be repaid to the plaintiffs and
the said agreement would be null and void.”

9 The plaintiffs also contend that prior to 19 January 1981 the

defendant and his solicitor Choo Kwun Kiat knew that both the plaintiffs
were foreign persons within the meaning of the Act. The defendant denies
this and maintains that it was not until after the Minister had refused his
approval for the purchase of the said property did he come to know that the
plaintiffs were Indonesian nationals.

10 On this single issue evidence was led on both sides. I accept the
evidence of the defendant and of his then solicitor Mr Choo Kwun Kiat,
who acted for him in the sale and purchase, on this issue and find that the
defendant came to know of the plaintiffs being Indonesian nationals only
after the Minister had disapproved of the said purchase on 28 April 1981. It
follows from this that there could not have been any oral agreement that the
sale and purchase of the said property should be subject to the grant of
approval by the Minister to the plaintiffs to purchase and acquire the said
property.

11 The defendant in his defence denies that he is liable to repay to the

plaintiffs the said sum of $131,000 or any other sum for the reason that by
virtue of s 3(1)(c) of the Act no foreign person shall purchase or acquire any
residential property or estate or interest therein except by way of a
mortgage, charge or reconveyance and that under s 3(2)(c) any such
purchase or acquisition shall be null and void. The defendant further denies
that there was any term implied or otherwise in the said agreement that the
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[1990] 2 SLR(R) Lim Xue Shan v Ong Kim Cheong 105

said deposit would be repaid to the plaintiffs if the Minister’s approval was
not obtained.
12 Mr Martin for the plaintiffs submitted that the issues before the court
were basically four in number:
(a) Whether the plaintiffs acquired any interest (legal or equitable)
in the property on signing the said agreement.
(b) Whether arising out of this the plaintiffs are, on the basis of
money had and received, entitled to succeed in their claim against the
defendant for the return of the said sum of $131,000.
(c) Whether the law would imply a term being written into the said
agreement that the sale was to be subject to the Minister’s approval
and that whether, if the Minister’s approval was not obtained, the said
agreement “would go off” and the said deposit of $131,000 would then
have to be refunded to the plaintiffs.
(d) Whether the said agreement had been frustrated by the failure
to obtain the Minister’s approval for the sale and purchase and the
plaintiffs are accordingly entitled to recover the said sum from the
defendant by virtue of s 2(2) of the Frustrated Contracts Act
(Cap 115).

Issue (1) — legal or equitable interest

13 It would be useful to set out the various provisions of the Act which
have a bearing on this issue. Section 3 of the Act reads:
(1) Except as provided in this Act —
(a) no person shall, whether for consideration or by way of
gift inter vivos or otherwise, transfer any residential property or
any estate or interest therein to any foreign person;
(b) …
(c) no foreign person shall purchase or acquire any residential
property or any estate or interest therein except by way of a
mortgage, charge or reconveyance.
(2) Any —
(a) transfer of any residential property or of any estate or
interest therein by any person to a foreign person made in
contravention of subsection (1)(a);
(b) …
(c) any purchase or acquisition of any residential property or
of any estate or interest therein by any foreign person, except by
way of a mortgage, charge or reconveyance, made in
contravention of subsection (1)(c),
shall be null and void.
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106 SINGAPORE LAW REPORTS (REISSUE) [1990] 2 SLR(R)

14 A foreign person is defined in s 2 of the Act as:

(a) any person who is not a citizen;
(b) any permanent resident;

15 Section 25 of the Act relates to applications by foreign persons for

approval to purchase or acquire any estate or interest in any residential
property. Section 25(2) reads:
Subject to subsection (14), any foreign person who desires to purchase,
acquire or retain any estate or interest in any residential property
(referred to in this section as the applicant) shall make application
(referred to in this section as the application) to the Controller, in
respect thereof, in such form as the Controller may require, for the
grant of approval to acquire or to retain residential property, as the
case may be.

16 Section 25(4) provides:

The Controller shall forward every such application to the Committee;
and after consideration thereof, the Committee shall make
recommendation thereon to the Minister who may, in his discretion,
grant, with or without conditions (or refuse to grant), approval —
(a) for the purchase or acquisition of the estate or interest in the
residential property in respect of which the application was made or
for the retention of such estate or interest; or
(b) for the purchase or acquisition of the estate or interest in
residential property of such class or nature as the applicant may desire
to purchase or acquire.

17 Section 25(11) provides:

The decision of the Minister to approve or to refuse to approve any
application shall be conveyed to the applicant by the Controller by
notice in writing.

18 Section 25(13) provides:

The decision of the Minister to approve or to refuse to approve any
application or, if any representations are made pursuant to
subsection (12), his decision to accept or reject the representations,
shall be final and shall not be called in question in any court.

19 Section 36 provides:
(1) Any person who contravenes or fails to comply with any of the
provisions of this Act for which no penalty is expressly provided shall
be guilty of an offence and shall be liable on conviction to a fine not
exceeding $5,000 or to imprisonment for a term not exceeding 3 years
or to both.

20 In the instant case the undisputed facts are:

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[1990] 2 SLR(R) Lim Xue Shan v Ong Kim Cheong 107

(a) that the purchasers, although permanent residents of Singapore,

are not citizens of Singapore as defined in s 2 of the Act;
(b) that the contract was not made conditional on the Minister’s
approval being obtained;
(c) that when the parties signed the said agreement the purchasers
had not as yet applied under s 25 of the Act for the Minister’s
approval to purchase the said property from the vendor; that in fact
the application under s 25 of the Act for the purchase of the property
was made by the purchasers on 2 February 1981, some 14 days after
the signing of the said agreement; and
(d) that the Minister disapproved the purchase of the said property
on 28 April 1981.
21 It is not disputed:
(a) that s 3(1)(c) of the Act forbids the purchase of residential
property or any estate or interest therein by a foreign person;
(b) that s 3(2)(c) declares any such purchase in contravention of
s 3(1)(c) to be null and void; and
(c) that s 25(2) enacts that any foreign person who desires to
purchase or acquire any estate or interest in any residential property
shall apply to the Controller for the grant of approval to acquire such
residential property. [emphasis added]
22 In the instant case the purchasers and the vendor entered into an
unconditional written contract dated 19 January 1981 for the sale and
purchase of residential property some 14 days before the purchasers had
applied under s 25(2) of the Act for ministerial permission to acquire such
property. To begin with, this unconditional contract contravenes both the
provisions of s 3 and s 25(2) of the Act. The purchasers by failing to comply
with the provisions of s 25(2) have made themselves liable to criminal
prosecution under s 36(1) of the Act and on conviction to a fine not
exceeding $5,000 or to imprisonment for a term not exceeding three years
or to both.
23 The said agreement by virtue of s 25(2) read with s 36(1) of the Act is
an illegal contract. In these circumstances no enforceable rights can arise
under the contract.
24 The question now before the court is whether the plaintiffs are
entitled to recover the sum of $131,000 paid by the purchasers to the vendor
by way of deposit for the purchase of the said property. In resolving this
question I can do no better than to rely on para 1268 of Chitty On Contracts
(26th Ed) under the heading “Recovery of Money Paid or Property
Transferred under Illegal Contracts”:
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108 SINGAPORE LAW REPORTS (REISSUE) [1990] 2 SLR(R)

Non-recovery of consideration. While cases in which the plaintiff seeks

the enforcement of an illegal contract are governed by the maxim ex
turpi causa non oritur actio, those in which he seeks some release from
its operation fall within the principle in pari delicto potior est conditio
defendentis. The result of the application of this principle is that where
both parties, contracting on an equal footing, are aware of the illegal
nature of the contract, whether it be on its face illegal or whether the
common intention be to carry out the contract in an illegal manner,
neither party can recover anything paid or transferred thereunder. So,
in a contract to secure a title for the plaintiff in return for payment, the
plaintiff, when he failed to receive his title, could not recover back what
he had paid, the contract being turpis and the parties in pari delicto. A
fortiori where the defendant has performed his part of the agreement
the plaintiff cannot set up the illegal nature of the transaction in order
to recover a deposit or part payment. Thus in Taylor v Chester [(1869)
LR 4 QB 309] the plaintiff failed to recover the half of a £50 banknote
deposited with the defendant to secure payment by the plaintiff of the
price of wines and suppers supplied by the defendant in her brothel for
the purposes of a debauch and of loans of money by the defendant to
the plaintiff for expenditure in riot, debauchery and immoral conduct.
The court held that the plaintiff failed, since he could not make out his
case ‘otherwise than through the medium and by the aid of the illegal
transaction to which he was himself a party’.

Issue 2 — money had and received

25 Mr Martin contends that the said agreement of sale and purchase by

the parties in our case was not illegal in that it did not contravene s 3(1)(c)
as neither legal nor equitable interest had passed to the plaintiffs under that
agreement. In this case the plaintiffs not only offended the provisions of s 3
of the Act which makes the contract null and void but they have also
offended the provisions of s 25(2) of the Act which lays down that any
foreign person who desires to purchase or acquire any estate or interest in
residential property shall as a first prerequisite make application to the
Controller of Housing for the grant of approval to acquire such residential
property. To my mind the Act requires that any foreign person desiring to
buy residential property must, some time before he enters into a contract
for the purchase of the property, get approval of the Minister to purchase
such residential property. “Desires to purchase” must refer to a point of
time before the signing of the contract. It refers to the state of mind of the
foreign person before he signs the contract. It seems to me that a foreign
person no sooner has he formed the intention to purchase property subject
to the provisions of this Act must before he signs any contract apply for
ministerial approval. In the instant case the purchasers have further
contravened the Act by not obtaining approval before the signing of the
contract. The maxim ex turpi causa non oritur actio therefore applies which
means of course that no rights can arise under the contract and that even if
both the plaintiffs and defendant were wrongdoers under the Act, the
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[1990] 2 SLR(R) Lim Xue Shan v Ong Kim Cheong 109

maxim in pari delecto fotior est conditio defendentis would operate in favour
of the defendant. The [money] had and received argument is therefore
rejected.

Issue 3 — implied term

26 In the instant case the obligation to obtain the Minister’s consent
under s 25 of the Act has been categorically cast by the Act on foreign
persons who wish to purchase residential property and they, not having
obtained such consent cannot now claim an implied term of the purchase
being subject to the Minister’s approval, more so when the failure to obtain
such consent was of their own making; and even more so when such failure
is a punishable criminal offence under s 3 of the Act read with s 36(1) of the
Act.

Issue 4 — frustration
27 In the instant case the plaintiffs claim that the contract has been
frustrated by failure to obtain the Minister’s approval for the purchase of
the said property. Under the Act the contract we are concerned with is null
and void. The question of frustration therefore does not arise. Under the
Act it is for the purchasers who are foreign persons to obtain the Minister’s
approval; the purchasers being the party in default will not be entitled to
recover any sums of money paid under the contract whether it be any
deposit paid by them as security for the performance of their obligations or
as part payment of the purchase price.
28 For these reasons I dismiss the plaintiffs’ claim with costs.

Headnoted by Daryl Chew Ee-Kai.