ACS Computer Pte Ltd v Rubina Watch Co [1998] 1 SLR 72

1006 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R)

ACS Computer Pte Ltd v

Rubina Watch Co (Pte) Ltd and another

[1997] SGHC 129

High Court — Suits Nos 924 and 925 of 1996 (Registrar’s Appeals Nos 238 and 39 of 1996)Warren L H Khoo J10 September 1996; 25 March; 17 May 1997

Land — Sale of land — Conditions of sale — The Singapore Law Society’s Conditionsof Sale 1999 — Whether purchaser’s liability for GST under condition 17extinguished under doctrine of merger

Land — Sale of land — Doctrine of merger — Scope of doctrine of merger in relationto registered land — Whether purchaser’s liability for GST extinguished underdoctrine of merger — Section 66 Land Titles Act (Cap 157, 1994 Rev Ed)

Statutory Interpretation — Construction of statute — Conflict between statute andcommon law — Resolving conflict with assistance of written materials — Construingprovision in context of neighbouring provisions and the Act as a whole — Section 9AInterpretation Act (Cap 1, 1997 Rev Ed)

Facts

The plaintiff sold units in a Henderson Industrial Estate to the defendants undertwo separate options. The options were subject to the Singapore Law Society’sConditions of Sale 1994. Clause 17 of the terms and conditions of the optionprovided that the purchasers were liable to pay any goods and services tax(“GST”) and stamp duty incurred in the sale and purchase of the property. Therewas no mention of payment of GST by either party before the completion of thesale. It was only mentioned after completion when the plaintiff'’s solicitors raisedit with the defendants’ solicitors and asked that it be paid. The defendantsrefused and this resulted in the plaintiff commencing the present action.

The defendants relied on s 66 of the Land Titles Act (Cap 157, 1994 Rev Ed)(“the Act”), which stated that all obligations created under a contract for the saleof registered land shall merge with the transfer of the land upon registration ofthe transfer of the land unless express provision in writing was made to thecontrary. The defendants argued that as there was no express provision inwriting to the contrary, their obligations under the terms and conditions of theoption had merged with the transfer. Therefore, they were no longer under anyliability to account for the GST. The defendants also submitted, in thealternative, that their liability was inchoate as the plaintiff had not, as yet, paidthe GST in question to the authorities. The plaintiff, on the other hand, arguedthat under the common law, the conveyance of land extinguishes obligationsunder the contract only in so far as the deed of conveyance is intended to coverthe same ground as the contract. Those obligations which are not so intended tobe covered by the deed do not merge in the conveyance. Section 66, according tothe plaintiff’s counsel, intended merely to codify this common law rule with all

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its limitations and does not override the common law. The assistant registrarheld in favour of the plaintiff. The defendants appealed.

Held, dismissing the appeal:

(1) The draftsman for the Act (or Land Titles Ordinance as it was then called)had the intention of importing the common law doctrine of merger as a wholeinto the Act. Moreover, it is also possible to reconcile the wide wording of s 66with the common law doctrine of merger by construing the section in thecontext of neighbouring provisions and the Act as a whole. Therefore, the samerules of merger should apply to dealings in land subject to the Act and dealingsin unregistered land. This approach would mean that the defendants’ liability forGST had not been extinguished: at [22], [25], [30] and [34].

(2) The defendants should not be allowed to resist payment on the groundthat the plaintiff had not paid the authorities, as there was a present andimmediate obligation to pay the plaintiff at the time of completion. That theplaintiff would not ordinarily have to pay the authorities immediately wasentirely irrelevant: at [36].

Case(s) referred toChristopherson v Lotinga (1864) 33 LJCP 121 (refd)Clarke v Ramuz [1891] 2 QB 456 (refd)Colquhoun v Brooks (1889) 14 App Cas 493 (refd)Knight Sugar Company, Ltd v The Alberta Railway & Irrigation Company [1938]

1 All ER 266 (refd)Lawrence v Cassel [1930] 2 KB 83 (refd)Palmer v Johnson (1884) 13 QBD 351 (refd)R v Scott (1856) 25 LJMC 128 (refd)

Legislation referred toGoods and Services Tax Act (Cap 117A, 1997 Rev Ed)Interpretation Act (Cap 1, 1997 Rev Ed) s 9A (consd)Land Titles Act (Cap 157, 1994 Rev Ed) s 66 (consd);

ss 63(1), 63(2), 64, 65, 67Land Titles Ordinance 1956 (No 21 of 1956) s 51Land Titles Act 1906, c 24 (A) (Can) ss 50, 51

Muthu Kumaran (WT Woon & Co) for the plaintiff/respondent; Devinder Rai and Christopher Woo (Harry Elias & Partners) for the defendants/ appellants.

17 May 1997 Judgment reserved.

Warren L H Khoo J:

1 By two options of different dates but in similar terms the plaintiffsoffered to sell units in the Henderson Industrial Estate to the defendants ineach of these suits. The defendants in the two suits are closely related, and



they are also related to the end purchasers FJ Benjamin Holdings Pte Ltd.The options were exercised, and eventually by two separate instruments oftransfer, the properties were transferred to FJ Benjamin Holdings Pte Ltd. Itis common ground that the units are lands governed by the Land Titles Act(Cap 157, 1994 Ed).

2 The option in each case provided that the sale was subject to theSingapore Law Society’s Conditions of Sale 1994 in so far as they wereapplicable to a sale by private treaty and did not conflict with the terms andconditions of the option. Clause 17 of the terms and conditions of theoption provided that the purchaser was liable and must pay the goods andservices tax and stamp duty for and in connection with the sale andpurchase of the property. I shall use the by now popularly familiar acronymGST to refer to the tax.

3 The sale in each case was completed by an instrument of transfer.There was no mention of the GST by either party before the completion ofthe sale. There was no mention of it in the instrument of transfer. There wasno mention of it until some time in May 1996, when the plaintiffs’ solicitorsraised it with the defendants’ solicitors and asked that it be paid. Thedefendants refused to pay, contending that upon the completion of the saleby the execution and registration of the transfer the obligation of thedefendants in that regard had merged with the transfer, and that they wereno longer under any liability.

4 It is common ground that the sale in question attracted GST inaccordance with the provisions of the Goods and Services Tax Act(Cap 117A, 1997 Rev Ed) (“the GST Act”) and in the circumstances of thecase. Although by the name of the tax one might imagine that the GST Actapplied to only the supply of goods and services, there are deemingprovisions in the GST Act which apply it to the sale of real property incertain circumstances. GST was payable for the sale of the land in thesecases.

5 The major question in these two suits is the question of merger. Thedefendants rely on s 66 of the Land Titles Act, which provides as follows:

All obligations created by a contract for the sale of registered land shall,upon registration of the transfer giving effect to the contract, bedeemed to have merged in that transfer unless express provision inwriting is made to the contrary.

6 There was in this case no provision in writing that the GST obligationwas not to merge in the transfer. On an application by the defendants, theassistant registrar Mr Phang Hsiao Chung held, however, that the doctrineof merger did not disentitle the plaintiffs from claiming the GST under cl 17of the option. The defendants appealed.



7 On the face of it, s 66 is wide ranging. Defendants’ counsel submitsthat it should be given full effect. He says there is nothing in the option thatprovides to the contrary nor is there any other writing to the effect.Therefore, he submits that, by the operation of this section, the plaintiffs arenow precluded from asserting their claim for the GST provided for in thecontract of sale.

8 Plaintiffs’ counsel, on the other hand, submits that under thecommon law, the conveyance of land extinguishes obligations under thecontract only in so far as the deed of conveyance is intended to cover thesame ground as the contract. Those obligations which are not so intendedto be covered by the deed do not merge in the conveyance. He submits thats 66 is intended merely to codify this common law rule, with all itslimitations; it does not override the common law.

My view

9 In the face of the absolute terms in which s 66 is cast, I had at firstconsiderable difficulties accepting plaintiffs’ counsel’s submission,although, intuitively, I felt that there was much substance in it. However,having reflected on the matter, I can say with some conviction that he ismore likely to be right than is counsel for the defendants, for the followingreasons.

10 First, the position at common law is as stated by plaintiffs’ counsel.The general rule was well stated by Lord Russell in Knight Sugar Company,Ltd v The Alberta Railway & Irrigation Company [1938] 1 All ER 266 at 269as follows:

It is well settled that, where parties enter into an executory agreementwhich is to be carried out by a deed afterwards to be executed, the realcompleted contract is to be found in the deed. The contract is mergedin the deed. … The most common instance, perhaps, of this merger is acontract for the sale of land followed by conveyance on completion. Allthe provisions of the contract which the parties intend should beperformed by the conveyance are merged in the conveyance, and allthe rights of the purchaser in relation thereto are thereby satisfied.

11 As indicated in this passage, merger is not an absolute doctrine, butdepends entirely upon the intention of the parties. As Bowen LJ said inClarke v Ramuz [1891] 2 QB 456 at 461:

It is true that the execution of the conveyance puts an end to allcontractual obligations which are intended to be satisfied by theexecution. But that doctrine does not apply to cases where thecontractual obligation is of such a kind that it cannot be supposed tohave been the intention of all the parties that it should be extinguishedby the conveyance.



12 Earlier, in the case of Palmer v Johnson (1884) 13 QBD 351 at 357, itwas said:

When one is dealing with a deed by which the property has beenconveyed, one must see if it covers the whole ground of the preliminarycontract. One must construe the preliminary contract by itself, and seewhether it was intended to go on to any and what extent after theformal deed had been executed.

The Knight Sugar case

13 So the common law doctrine and its qualifications are well settled,and they were well settled before the introduction of our land titleslegislation in 1956. The question whether the doctrine was also applicableto a sale of land under a Torrens system of land titles registration had arisenin the Knight Sugar case referred to earlier ([10] supra). In that case, theirLordships of the Privy Council, on an appeal from Alberta, held that it did.The relevant sections of the Alberta Land Titles Act provided as follows:

50 After a certificate of title has been granted for any land, noinstrument shall be effectual to pass any estate or interest in such land(except a leasehold interest for three years or for a less period) orrender such land liable as security for the payment of money, unlesssuch instrument is executed in accordance with the provisions of thisAct and is duly registered thereunder; but upon the registration of anysuch instrument in the manner hereinbefore prescribed the estate orinterest specified therein shall pass, or, as the case may be, the landshall become liable as security in manner and subject to the covenants,conditions and contingencies set forth and specified in suchinstrument or by this Act declared to be implied in instruments of alike nature.

51 So soon as registered, every instrument shall become operativeaccording to the tenor and intent thereof, and shall thereupon create,transfer, surrender, charge or discharge, as the case may be, the land orthe estate or interest therein mentioned in the instrument.

14 In the Knight Sugar case ([10] supra), lands held under Crown grantswere contracted to be sold subject to the conditions and reservations in theoriginal Crown grants. The Crown grants contained a reservation to theCrown of “all coal mines, coal pit seams, and veins of coal, and the right towork the same”. However, the transfers executed for the purpose of thetransfer of title on the sale excepted from the transfer “all coal and otherminerals in and under the said land and the right to use so much of the landor the surface thereof as the company may consider necessary for thepurpose of working and removing the coal and minerals”. The certificatesof title subsequently issued to the purchasers contained the words“excepting thereout all coal and other minerals”.

15 The divergence between the contract of sale on the one hand and thetransfer and certificate of title on the other was, essentially, that whereas the



sale contract reserved only coal and not other minerals, the transfer and thecertificate of title reserved “coal and other minerals”. Some years later,petroleum and natural gas apparently having been found, the appellantsclaimed, on the basis of the reservation in the contract of sale, that theywere entitled to all minerals other than coal. It was argued that that doctrineof merger did not apply to the case of a sale of land to which the Land TitlesAct applied, and that a transfer of land under the Act was nothing morethan an order to the Registrar to cancel the existing certificate of title and toissue a new certificate. This argument was rejected. Lord Russell, afterreferring to ss 50 and 51 of the Act, said that the transfer was a documentprepared in a form approved by transferor and transferee in order that,when registered, it would become operative according to its terms, andwould thereupon transfer the land mentioned in it. He held that for thepurpose of the application of the doctrine of merger, the transfer differed inno relevant respects from an ordinary conveyance of unregistered land.

16 After saying that all the provisions of the contract which the partiesintended should be performed by the conveyance were merged in theconveyance, his lordship found that the parties in the case clearly hadintended that the provisions of the sale agreement should be performed bythe transfer and the subsequent certificate of title. In other words, theprovisions in regard to what was reserved, merged, and were to be found, inthe transfer and certificate of title.

17 So the Knight Sugar case ([10] supra) affirmed that the common lawdoctrine applied to the sale of land registered under a Torrens system,although on the facts it was found that the reservation in regard only to coalhad merged with the reservation in respect of “coal and other minerals”.

The Baalman commentary

18 Our Land Titles Ordinance (as it was then called) was drafted largelyor solely by a consultant Mr John Baalman, an expert in the Torrens systemof land titles registration in New South Wales. Mr Baalman afterwardswrote an extensive commentary on the Act and its provisions in the form ofa book published by the then Government Printer. At this point, it isappropriate for me to consider to what extent reference may be made tosuch a commentary. Last year, Parliament passed amendments to theInterpretation Act which by s 9A allow references to any relevant writtenmaterial for the purpose of (a) confirming the ordinary meaning of theprovision or (b) ascertaining the meaning of a statutory provision when(i) the provision is ambiguous or obscure; or (ii) the ordinary meaningconveyed by the words of the provision leads to a result which is manifestlyabsurd or unreasonable.

19 Section 9A sets out a list of what is “written material” to whichreference may be made, such as any explanatory statement relating to a Billcontaining the provision and the relevant Minister’s speech introducing the



Bill. However, the list is not exhaustive, and the general provision of theamendment allows reference to any material capable of assisting in theascertainment of the meaning of the provision in the circumstances statedin s 9A.

20 The subject matter of Mr Baalman’s commentary is a highly technicalone, and Parliament relied on Mr Baalman’s work as the Bill on which itacted. Mr Baalman’s commentary in the circumstances may be regarded ashaving a similar status to the materials listed in s 9A; it also no doubt meritsthe general description of material capable of assisting in the ascertainmentof the meaning of a provision of the Act for the purposes set out in thesection.

21 Section 66 in one fell swoop appears to negate the doctrine of mergeras developed by and entrenched in the common law. Instead ofapproaching the question whether a contractual provision has merged inthe transfer in the manner of the common law, as enunciated, for examplein the cases cited, including the Knight Sugar case ([10] supra) itself, theterms in which s 66 is cast prescribe that all obligations in the sale contractmerge in the transfer unless express provision in writing is made to thecontrary. This is such a surprising result on the basis of everything we knowabout the doctrine of merger (with all its limitations and qualifications) thata reference to any written material such as Mr Baalman’s commentary isjustified to answer the question: did Parliament (or its predecessor) reallyintend to go so far? Did it really intend to change the common law? Or, inthe words of s 9A of the Interpretation Act, what does s 66 really meanwhen, read literally, it appears to lead to a manifestly absurd orunreasonable result?

22 Mr Baalman’s commentary on s 66 (then s 51) opens by saying thatthe question of merger of interests registered under the Torrens system hadbeen the subject of conflicting judicial decisions, the conflict being in regardto the extent to which the doctrine of merger at common law applied toestates and interests under a Torrens statute. He then quotes the passagesfrom the Privy Council judgment in the Knight Sugar case ([10] supra)which I have already referred to, and then says that s 51 “merely echoes thatdecision”. It is clear that the avowed intention of the draftsman was not tochange the contents of the merger doctrine, but to import the doctrine as awhole to the transfer of lands under the Act. That, of course, includes all itslimits and qualifications.

23 This statement in Mr Baalman’s commentary encourages one, ifencouragement be needed, to adopt what are otherwise well establishedprinciples of construction where the provisions of a statute appear toconflict with the principles of the common law. In R v Scott (1856) 25 LJMC128, at 133, Coleridge J said that if there is a seeming conflict between thecommon law and the provisions of a statute, it is not right to begin byassuming at once that there is a real conflict and sacrificing the common



law; the court ought rather to proceed in the first place by carefullyexamining whether the two may not be reconciled, and full effect given toboth.

24 Words in a statute must always be construed in the context in whichthey are used. The context includes other sections and other parts of theAct. In Colquhoun v Brooks (1889) 14 App Cas 493, at 506, Lord Herschellsaid:

It is beyond dispute, too, that we are entitled, and indeed bound, whenconstruing the terms of any provision found in a statute, to considerany other parts of the Act which throw light on the intention of thelegislature, and which may serve to show that the particular provisionought not to be construed as it would be alone and apart from the restof the Act.

25 It seems to me entirely possible to reconcile the apparently widewording of s 66 with the common law doctrine of merger by construing thesection in the context of the Act as a whole as well as the context of theneighbouring provisions in the part of the Act where s 66 is found. The Actessentially deals with the registration of estates and interests in landbrought within its purview and the registrations of dealings with estates andinterests in such land. Part VII, in which s 66 is found, is headed“Transfers”. Section 63(1) provides as follows:

The proprietor of an estate in land, or of a lease, mortgage or charge,may transfer the same by an instrument of transfer in the approvedform, and upon the registration of such instrument the estate orinterest of the transferor as therein set forth, together with alleasements, rights and powers belonging or appertaining thereto, shallpass to and be vested in the transferee thereof as proprietor.

26 Section 63(2) deals with the rights, powers and remedies of the personto whom a mortgage or charge is transferred, and s 64 deals with theobligations of the person to whom land subject to a mortgage or charge istransferred. Section 65 deals with the transfer of land for an estate for life orfor an estate in remainder. This is followed by s 66, the subject section.Section 67 then provides that where upon the registration of a transfer orother instrument, the interests of (a) lessor and lessee; (b) mortgagor andmortgagee; or (c) chargor and chargee, vest in the same proprietor, anyintention to merge such interests shall be evidenced by a surrender of lease,or by a discharge of mortgage or of charge, as the case may be.

27 It is clear that all these sections in Pt VII, like almost all the other partsof the Act, deal primarily with estates and interests in registered land andtransactions affecting them. When one considers obligations of a contractfor the sale of land registered under the Act, I think it is important to makea distinction between the obligation to transfer title, ie to transfer the estateor interest in the land, and obligations not related to the estate and interestin the land, for example, obligations to construct a building in a



workmanlike manner, as in Lawrence v Cassel [1930] 2 KB 83. Transfers ofregistered land, as required by s 63(1), is effected by an instrument in theprescribed form. As to be expected, the prescribed form purports to transferonly the estate and interest of the proprietor to the transferee; it does notdeal with any other obligations of the sale contract not related to thetransfer of the estate or interest in the land.

28 It seems to me that in the context of the part of the Act in which s 66 isfound, particularly s 63(1), s 66 can be reconciled with the common lawrule and full effect can be given to both if one were to confine the operationof s 66 to those provisions of the contract of sale which deal with estates andinterests in the land contracted to be sold, and, to borrow the words ins 63(1), all easements rights and powers belonging or appertaining to theland. Provisions of the contract relating to such matters, in the absence ofany express provisions in the contract to the contrary, would merge in thetransfer, since according to s 63(1), the registration of the transfer will passand vest the land and such easements, rights and powers to and in thetransferee. However, provisions not dealing with, or related to, estates andinterests in the land or with such easements, rights and powers, would notmerge in the transfer. Section 66 thus makes perfect sense if read as anadjunct of s 63(1).

29 It is to be noted that the Knight Sugar case ([10] supra) concernedprecisely the question of merger of provisions in the sale agreement relatingto an interest in land, ie the proprietorship of the coal or other minerals inthe substratum, which by express definition or otherwise was undoubtedlypart of the land. Since the transfers there also referred to the interests in theland which were reserved, it is not surprising that the contractualreservation was held to have merged in the transfer and the certificate oftitle. This result was reachable by applying the normal common law ruleabout merging, and did not require any change in the contents of the rule.

30 Construing s 66 in the way I have proposed would lead to the resultthat the rules of merger apply similarly to dealings in land subject to the Actand dealings in unregistered land. There is no reason at all why differentrules should apply depending on whether land has or has not been broughtunder the Act.

31 Reading s 66 in the way proposed in the context of the case at hand,also makes good sense. The contract provided for the payment of thepurchase price and the payment of the GST on the part of the purchaser.The instrument of transfer by its own terms transferred only the “estate andinterest” of the plaintiffs to the defendants in consideration of the paymentof the purchase price only. The purchase price has been paid, but the GSThas not. It is still outstanding. The obligations to transfer the title and theobligation to pay the main purchase price have no doubt merged in thetransfer. But obviously the obligation to pay the GST has not merged, andwas not intended to merge, in the transfer. Reading s 66 in the way



proposed is fully in accord with the intention of the parties, and produces aresult which is at once just and fair. Reading it literally would produce aresult which is patently unreasonable and absurd. If the restricted readingof s 66 attracts the criticism that it might amount to adding words from s 63(such as “in so far as they relate to the estate or interest in the land”), so beit. Although the general rule of construction is to adhere to the ordinarymeaning of words used in a statute, if that meaning leads to a manifestrepugnancy or absurdity, the language of the statute may be modified orvaried so as to avoid it. Christopherson v Lotinga (1864) 33 LJCP 121 at 123,per Willes J.

32 Counsel for the defendants refers to certain conditions in the LawSociety’s Conditions of Sale to show that if it is intended to save anyprovision of the contract from merger, an express stipulation is inserted. Anexample is condition 17, which provides that liability for property taxaccruing prior to date of completion does not merge in the conveyance.

33 My view is that these provisions are merely there to make the positionregarding specific matters clear and to remove doubts, as far as the questionof merger is concerned. Their presence does not have any decisive influenceon a proper construction of s 66.

34 I therefore find and hold that notwithstanding the registration of thetransfer in both cases, the liability for GST has not been extinguished.

No debt due point

35 Counsel for the defendants raises an alternate ground for resisting theclaim. He says, simply, that under the Act the liability for GST is that of thevendor. Yes, he says cl 17 provides that the purchaser shall pay the GST, butuntil the vendor has paid it to the authorities, the liability is only inchoate.At the date of the writ, the plaintiffs had not paid the GST. There wastherefore no cause of action in debt. The plaintiffs in fact have not paid todate.

36 My view on the matter is that in the absence of anything to thecontrary, the defendants vis-à-vis the plaintiffs were liable to pay the GST,and the time for payment was the date of completion of the sale. In theabsence of anything to the contrary, the obligations on the part of thepurchaser to pay the GST and other payments under the contract wereobligations to be performed concurrently with the performance of thevendors’ obligations under the contract, such as to deliver a duly executedtransfer, and that is at the time when the sale was completed. The rate ofGST was known, so the amount was known. The defendants could not haveresisted payment on the ground that the plaintiffs had not paid, because vis-à-vis the plaintiffs, there was a present and immediate obligation to pay atthe time of completion. That the plaintiffs would not in the ordinary coursehave to pay the authorities immediately is entirely irrelevant. Just as a



consumer buying goods in circumstances where GST is payable cannotrefuse to pay the GST because the seller has not paid, so the purchaser herecannot say there is no liability to pay until the vendor has paid.

Conclusion

37 In the result, the learned assistant registrar’s decision that the doctrineof merger does not disentitle the plaintiffs from claiming GST under cl 17of the option, is correct, and the appeal in both suits is dismissed, withcosts.

Headnoted by Nathaniel Khng.


Documents

ACS Computer Pte Ltd v Rubina Watch Co [1998] 1 SLR 72