Tel : +65 64383922

family header

Disputes Between Co-Owners of A Property And A First Right of Refusal To Buy Over The Other’s Share

By Susan Tay, director of OTP Law Corporation

The Uncertainty of Litigation Series

You, as a client, would have constantly heard from us, as lawyers, how unpredictable the outcome of litigation can be.

The Uncertainty of Litigation Series highlight, with articles about previous court decisions, and about the experiences of lawyers and clients, how common this unpredictability is when cases are fought in court.

With all this uncertainty, we advocate resolving your dispute through methods where the parties are the ones making the decisions. You can do this either by negotiation, mediation or conciliation. If you place your fate in the hand of someone else, his decision will never be entirely in your control. So why not, place your fate in your own hands?

Part 1 – Disputes Between Co-Owners of A Property And A First Right of Refusal To Buy Over The Other’s Share

The Uncertainty of Litigation Series starts with disputes involving properties co-owned by two or more persons.

In such disputes, it is very common for one party to want the first right to buy over the other party’s share in the property before the property is sold in the open market. This is what is called “a first right of refusal”. This is especially common in divorce proceedings where the matrimonial property is co-owned by spouses who contemplate a life separate from each other after the divorce.

This article is a short study of 3 Singapore cases (in 2016, 2019, and the latest in 2022). These cases centred or touched on the court’s power to grant a 1 st right of refusal to a co-owner to buy over the other’s share in a property.

An interesting point to note in the latest 2022 case is when the judge commented that his preferred route is not to have to decide on the case but for the parties to come to an amicable agreement concerning their dispute. This reflects the key message of The Uncertainty of Litigation Series.

We start off with the case which said that a court has NO such power.

Tan Chor Heng v Ng Cheng Hok is a 2019 High Court decision. In that case, the plaintiff, Mdm Tan, and the defendant, Mr Ng, bought a 5-room HDB flat under the Joint Singles Scheme in the proportion of 95:5 in favour of Mdm Tan. They bought the flat in 1997.

They were complete strangers. Through a mutual friend, they got to know each other shortly before the purchase of the flat. Soon after the purchase, they then lost contact. Mr Ng moved to Japan and spent 18 years in prison there. He only returned to Singapore in December 2018.

On financial contributions, Mr Ng made 1 payment of about S$7,900 from his CPF account toward the purchase price. A few days later, he received $5,000 in cash from Mdm Tan. Mdm Tan also paid for everything else, including all mortgage repayments for the HDB mortgage loan.

After Mr Ng’s return, Mdm Tan and Mr Ng quarrelled over the flat. Mdm Tan then applied to court for the flat to be sold in the open market and for the sale proceeds to be divided between her and Mr Ng in the ratio of 95:5. She also wanted sole conduct of the sale and to be allowed to buy over Mr Ng’s share directly at valuation price in lieu of putting the flat up for sale.

Mr Ng did not object to the sale of the flat but objected to Mdm Tan having sole conduct of the sale and to her being given the right to buy over his share at valuation price. Mr Ng also claimed to be entitled to 43.4% of the sale proceeds.

Eventually the court ordered that the flat be sold with Mdm Tan having sole conduct and the sale proceeds splitting 95:5. However the court decided that it has no power to grant an order giving her the right to buy over Mr Ng’s share.

The court gave the following reasons:
a) the lawyers could not give any precedent cases to say the court has such a power; and
b) the words in the written law, paragraph 2 of the 1st Schedule of the Supreme Court Judicature Act (“SCJA”), which gave the court power to order a sale did not give the court power to allow one co-owner to compulsorily purchase the other co-owner’s share.

The decision in Tan Chor Heng’s case was not followed in the most recent November 2022 case of Sun Yan Yuan v Ng Yit Beng. Mdm Sun and Mr Ng are co-owners of a HDB flat. Mdm Sun had inherited her 30% share from her late husband. Mr Ng is her late husband’s brother.

After the husband’s passing, acrimony between Mdm Sun and Mr Ng escalated so badly that Mdm Sun had to take out a personal protection order against Mr Ng. According to Mdm Sun, there were many times when Mr Ng promised to sell the flat but these promises were not kept. She then had to seek the court’s help to sell the flat following the broken promises.

Mr Ng said that selling the flat would disrupt his and his family lives. It also prejudiced his interest as a 70% owner and would deny him the right to buy over the flat. He therefore suggested that instead of immediately selling the flat, he be  given the 1st right of refusal to buy the flat within 6 months.

Mdm Sun relied on the earlier case of Tan Chor Heng, to say that Mr Ng cannot be given the 1st right of refusal to buy over the flat.

In his decision, the High Court Judge noted that a 1st right of refusal to buy over a co-owner’s interest in a property must be a common order sought between co-owners. The Judge decided that the court had the power to give a co-owner of a property the 1st right of refusal to buy over the share of the other owner. He gave 3 reasons for not following the decision in Tan Chor Heng. The first reason was based on previous decisions (what lawyers call “precedent”). The second based on basic principles of law and the last based on policy reasons.

One the first reason, the Judge cited an even older court decision in 2016 called Sumoi Paramesvaeri v Fleury, Jeffrey Gerard where an order granting the first right of refusal was given for one co-owner to buy out the other co-owner’s share in a property.

The brief facts of Sumoi’s case are as follows. Mdm Sumoi, a widow, moved in with her daughter and son-in-law after her husband passed away. From the sale of a flat, the three of them bought a private property (1st property) which was then sold to buy a second property (2nd property). Mdm Sumoi used her CPF money to contribute to the purchase of the 1st property. When the 1st property was sold, the three of them used its sale proceeds to buy the 2nd property. Mdm Sumoi was registered as having a 10% legal interest in the 2nd property.

The relationship between them then deteriorated and Mdm Sumoi eventually sued her daughter and son-in-law. She wanted the court to declare her interest in the 2nd property to be more than the stated 10% and for the 2nd property to be sold. The daughter and son-in-law said that her interest was in fact zero. One of the reasons given was because Mdm Sumoi had repeatedly said she was going to give her share to this daughter when she dies.

Eventually, the court decided that Mdm Sumoi’s interest in the 2nd property was indeed only 10% and ordered a sale of the property with a right of first refusal to be given to the daughter and her husband to purchase the property. The reason given why they were entitled to such a right was that “they are in occupation of the greater portion of the property”.

Sumoi’s case is thus a previous case (or precedent) which decided that a court does have the power to order a 1st right of refusal for a co-owner to buy over the share of the co-owner.

Commenting further on the ‘precedent’ reason, the Judge in Sun’s case further said, “In any event, I do not view the lack of a precedent (even if true) as a determinative factor, since a court’s statutory power is ultimately derived from the power-conferring legislation, as opposed to prior case law.

On the ‘principles of law’ reason, the Judge relied on s 18(2) of the SCJA read with paragraph 2 of its First Schedule. He concluded that the words in the Act “… and to give all necessary and consequential directions …” are wide enough to allow the court to order a first right to buy over the flat.

Lastly, as a matter of policy, the court said that an order for the sale to be made to a particular party does not prejudice the seller if the court has considered all the circumstances of the case. In fact, it might be appropriate in certain cases.

To conclude, the 3 case studies in this article perfectly  exemplifies the unpredictability of litigation and how you should not take for granted that the court will grant one co-owner a 1st right of refusal to buy over the other party’s share in a property.

Co-owners must therefore understand the perils of co-owning a property with family or friends and especially with people you hardly know. You may not be able to buy over the other person’s share or the other person may not agree to sell the property when you want to.

Even if you have the best of relations with the person you want to co-own the property with, the next generation may not share the same relationship and disputes can arise.

From the 3 cases, we see too that both parties did not get what they hope for even after the court made the final orders. In Tan Chor Heng, both parties, being unhappy with the Judge’s decision, appealed. In Sumoi, the mother did not get more than 10% interest in the property.

We hope that you found this article helpful. If you are contemplating or going through a dispute or are looking for alternative solutions to your dispute, or just require assistance in any way, please reach out to us at enquiries@otp.sg or +65 64383922.

Susan

Susan Tay is the founder and director of OTP Law Corporation. She has been in practice as a lawyer since 1989. Her expertise is dispute resolution with a special focus on family law. Wearing many hats, Susan is also a parenting coordinator, a collaborative family lawyer, a certified mediator and especially, a trained mediation advocate. Susan believes in the peace mode and hopes to build an eco-system of dispute resolution outside courts as much as possible.