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Goodluck Garden gets court's nod for sale despite missteps by committee, advisers

Goodluck Garden gets court's nod for sale despite missteps by committee, advisers

Source: Business Times
Date Published: 27 Nov 2018
Author: Yunita Ong

Judge finds 'no bad faith' after considering sale price, which was 12.6% higher than independent valuation.

The High Court granted a sale order to Goodluck Garden on Monday, making it the latest property to have its collective sale resolved by the courts, though the court also found several missteps in the sale process.

Justice Woo Bih Li also found that the conduct of the collective sale committee (CSC), marketing agent Knight Frank and the lawyers for the CSC Rajah & Tann was "wanting in various respects".

Still, after considering all the facts, Justice Woo said that he found "no bad faith after taking into account the sale price", which was some 12.6 per cent higher than the independent valuation by Colliers International.

He also said that the valuation of the property by Colliers International, at S$542 million, was not flawed; whereas a belated S$637 million valuation by Asian Assets Allianz - which objectors relied on - was. The latter valuation had assumed a higher gross plot ratio than the one used in the Master Plan and by Colliers.

Justice Woo also observed that the July cooling measures "makes the sale price seem even more favourable for all (owners), although this has no direct bearing on the question of good faith which is to be determined at the time the sale process was undertaken".

The Toh Tuck Road condominium had been sold to Qingjian Group in early March for S$610 million, above the reserve price of S$550 million.

However, some owners applied to Strata Titles Boards (STB) with their objection, leading STB to issue a stop order in late June. High Court hearings were held over several days in September.

The objectors were represented by TSMP Law Corporation's Adrian Tan.

One major area of dispute was that of the development charge (DC). Knight Frank had provided various DC estimates from S$48.4 million to S$63.19 million to the owners, and had advised owners that DC rates could increase from March 1.

Knight Frank and the CSC launched the collective sale without yet getting an official response from the Urban Redevelopment Authority (URA) about the actual amount of DC; but a little more than a week before the tender closing date on March 7, they were officially informed that there would be no DC.

Lawyers of the CSC had argued that it was market practice to concurrently launch and wait for official verification of DC charges.

Justice Woo said that the results of the DC verification was "material" to potential bidders, and for the purposes of determining the reserve price.

The CSC and Knight Frank should have been more careful about the possibility that the DC might be materially different from Knight Frank's latest estimate, he said.

While acknowledging that Knight Frank acted quickly to disseminate the information to potential bidders, Justice Woo said that the CSC should have extended the tender by at least a week to give more time to spread this information.

The CSC should also have informed and consulted owners and let them have their say as to what to do next, Justice Woo said.

He added: "Whether or not the reserve price would have been raised and whether or not potential bidders would have taken into account the reserve price, the point is that the subsidiary proprietors had been given, although inadvertently, an inaccurate impression about the DC; and this should have been corrected immediately."

He said of the CSC: "They had been too focused on the potential bidders that they lost sight of the subsidiary proprietors."

Justice Woo also said that the apportionment of sale proceeds and of the terms and conditions of the collective sale agreement (CSA) should have been approved at a general meeting of the management corporation, and through "overt means" such as voting.

Rajah & Tann had advised the CSC that it was enough for those owners who were in agreement to sign the CSA after the meeting, which Justice Woo said was wrong advice as it was in conflict with the Land Strata Titles Act.

He also disagreed with the dissenters' arguments that the fact that two members of the CSC had relatives owning property in Goodluck Garden amounted to an actual or potential conflict of interest. There was no suggestion that the apportionment of sale proceeds was unfair as a result.

But this information should have been disclosed when the CSC had been queried about it, to avoid unnecessary suspicion, he said.

Justice Woo added: "Although the CSC and their professional advisers may view this court's decision as a victory for the majority owners, I hope that they reflect long and hard on their missteps."

The hearing on Monday - attended by 50 people - took place on the last day before buyer Qingjian could walk away from the sale, according to the sale and purchase agreement.

Qingjian, whose purchase of Shunfu Ville (now JadeScape) had also been taken to court, declined comment to The Business Times.

It is not yet known if the objectors will appeal.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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