April 3, 2009
It's final: Horizon Towers sale is off
Surprise ruling vindicates stand of minority owners
By Joyce Teo
THE Court of Appeal halted the contentious Horizon Towers collective sale once and for all yesterday with a hard-hitting ruling that singled out the estate's sales committee for scathing criticism.
The dramatic judgment caught many by surprise and vindicated the four sets of minority owners who opposed the sale from day one - about 3-1/2 years ago, when the idea was first mooted - and spent nearly $1.5 million in legal costs.
One of those owners, Mr Hendra Gunawan, told The Straits Times yesterday: 'I am very happy that at last we can protect our homes.'
'We can't do anything about it if 80 per cent agree to sell but they have to do it properly so that everyone's home will be sold at a proper price.'
Industry experts are also hailing the decision as a landmark judgment that will set clear parameters for en bloc deals.
Yesterday's ruling was clear in its condemnation of the way the en bloc process was conducted and was particularly critical of the estate's sales committee.
Among a litany of criticism, it pointed to the committee's failure to follow up on a higher offer for the estate, its undue haste in agreeing to a sale price in a rising market and its sloppy procedures in appointing a marketing agent and keeping owners up to speed on the transaction.
But perhaps the most serious censure was directed at its failure to take heed of a possible conflict of interest that arose when two owners bought additional units in the estate just before they were appointed to the sales committee.
'The sale committee's duty is to achieve the best price under the circumstances, and not just a fair price,' said Mr Karamjit Singh, managing director of Credo Real Estate, which has handled many collective sales but not that of Horizon Towers.
The Strata Titles Board, which backed the sale, was also criticised for the way it took too much at face value - whether opinions on price or legal points - when it should have been more questioning. It was also rapped for not being more vigilant on the possible conflict of interest issue regarding sales committee members.
One immediate effect of the ruling is that one of Singapore's most drawn-out en bloc deals is finally over.
The sale of the Leonie Hill estate was first mooted in October 2005. The owners agreed to a reserve price of $500 million the following year, just before the dramatic run-up in the property market.
A deal was signed in January 2007 when the majority owners accepted a price of just below $850 per sq ft of gross floor area from Hotel Properties and its two partners.
The 199 owners of the 99-year leasehold estate would each have pocketed about $2.3 million while the 11 penthouse owners would each have received around $4 million to more than $6 million.
A series of court challenges followed. Even some majority owners turned against the deal when they saw how the soaring market had made their sale price look like a giveaway.
The property market has since slumped and the en bloc market has dried up.
'On paper today, the owners would have lost out, but probably by just 10 per cent,' said a property expert who declined to be named.
Only a handful of the minority owners who objected to the sale fought on until the end, spending millions along the way.
Mr Ng Eng Ghee, Mr Gunawan and his wife Sulistiowati Kusumo and Madam Ong Sioe Hong were represented by Harry Elias while Mr Rudy Darmawan represented himself, his wife and aunt at the hearing.
Madam Ong said her group incurred expenses of more than $1.5 million. Another group of objectors - who fought against the sale earlier - has spent around $1 million. Property industry experts said yesterday's landmark ruling has struck a decisive blow for transparency.
'This is the first time the court of appeal has held in favour of the minority owners,' said Mr Phillip Fong, a partner of Harry Elias Partnership, which represented four minority owners.
'There's now substantial clarity on the extent of the duties of the sale committee.'
Credo's Mr Singh said: 'The judgment is undoubtedly significant. It clarifies what constitutes, for example, good faith and conflicts of interest.'
THE OBJECTORS
FOUR sets of minority owners lasted the full distance to see yesterday's final victory in overturning the Horizon Towers sale.
Those left standing after the marathon battle were Madam Ong Sioe Hong, Mr Hendra Gunawan and his wife, Mr Ng Eng Ghee, and Mr Rudy Darmawan, his wife and aunt.
Mr Darmawan, an Indonesian living here, represented himself, his wife and his aunt at the Court of Appeal. He is believed to be an executive at a multinational corporation.
Mr Gunawan, another Indonesian living here, runs his family's manufacturing business in Indonesia. The 53-year-old and his wife Sulistiowati Kusumo, and two sons have lived in Horizon Towers for eight years.
Madam Ong is the managing director of the department store operator Metro and the sister of Mr Jopie Ong, boss of Metro Holdings. Their father is Metro founder Ong Tjoe Kim.
Madam Ong, her husband and their two sons have lived in Horizon Towers for more than 20 years.
Retiree Mr Ng, was a property developer and is listed as the director of companies such as Hi-Rise Builders and Bideford Realty.
The long-running and costly legal battle saw many minority owners fall by the wayside.
Two out of nine sets of minority owners - a couple representing themselves and a foreign firm - had dropped out of the fight by the time the case went to the High Court in March last year.
By the time the case got to the Court of Appeal stage, more owners had dropped out.
The Appeal Court judgment
The Court of Appeal yesterday reversed the sale of Horizon Towers, ending a 2 1/2-year battle over the estate's collective sale. Chief Justice Chan Sek Keong and Judges of Appeal Andrew Phang and V. K. Rajah found that the condo's sales committee had breached its duties to unit owners and that the Strata Titles Board (STB) and High Court judge Choo Han Teck had erred in allowing the sale. The original sales committee comprised chairman Arjun Samtani, secretary Wee Hian Siew, and members Tan Kah Gee, Henry Lim, Bharat Mandloi, Claude Reghenzani, Dr Chan Siew Chee, Shahrukh Marfatia and George Eapen. These are the main points of the judgment.
WHERE THE SALES COMMITTEE ERRED
§ By not acting with due diligence and transparency in appointing the marketing agent, First Tree Properties, which has two shareholders, neither of whom is a licensed valuer. The appointment was done in haste and 'reflected a lack of conscientiousness';
§ By failing to follow up on a higher offer for Horizon Towers made by Vineyard Holdings, a Hong Kong company;
§ By not using the Vineyard offer as leverage in negotiations with Hotel Properties Ltd (HPL), the eventual buyer of the estate;
§ By not getting advice from an independent property expert prior to the sale;
§ By proceeding with the sale to HPL in 'undue haste' in a soaring property market;
§ By ignoring conflicts of interest. Two of the sales committee members - Mr Samtani and Mr Tan - had bought additional units in Horizon Towers with the help of 'substantial' bank loans right before they were appointed to the committee. They did not disclose these purchases. First Tree was also eager to seal a deal before its mandate as marketing agent expired;
§ By not consulting, or even updating, the majority owners on the sale, despite knowing that the property boom had pushed up the market value of the individual units and significantly eroded their estimated premiums from the collective sale.
WHERE THE STB ERRED
§ By refusing to subpoena Mr Arjun Samtani to testify;
§ By allowing the sales committee to assert 'legal privilege', that is, to not divulge the advice it had received from its lawyers;
§ By not considering whether there was a possible conflict of interest in the sales committee members' purchase of additional units;
§ By not asking whether the price was the best one 'reasonably obtainable';
§ By concluding that the original sales committee had 'acted in good faith' in selling the property to HPL just because the committee had received and relied on legal advice.
WHERE JUSTICE CHOO HAN TECK OF THE HIGH COURT ERRED
§ By taking a 'restricted view' of the duties of a Strata Titles Board in approving a collective sale;
§ By deciding that the only issue to rule on was that of price, and that the STB had determined the price was fair.
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