Yoo Design Services Ltd v ILIV Reality Pte Ltd

A contractual obligation to develop a project with due diligence and expedition does not ordinarily include an obligation to market or sell units forming part of the development where the contract distinguishes construction from sales. An obligation to report on sales or marketing does not itself impose an obligation to sell at a particular rate or within a particular period.

Terms are implied only where the strict business-efficacy and obviousness requirements are satisfied. A court should not imply terms merely because they appear fair or would improve one party’s prospects of payment. Where the contract leaves the timing of sales to the developer, corresponding obligations to market the units or refrain from renting them will generally be unnecessary and counterintuitive.

The claimant provided branded design, licensing and marketing services for a Singapore residential development under a Design and Services Agreement. The defendant had not sold any of the 28 apartments and had made attempts to market them at reduced values.

The claimant sought determinations of four preliminary issues. It contended that the agreement contained express or implied obligations to market and sell the apartments within a reasonable time and to refrain from renting them pending sale. It also alleged that renting, limited marketing and failure to sell could breach express contractual provisions. The central questions concerned the construction of the project-development obligations and whether the proposed terms could be implied.

1. Preliminary issue 4. The pleaded facts were not capable of amounting to breaches of the express terms relied upon. Clause 8.1 concerned completion of the physical development within the anticipated timetable. The agreement distinguished the Project from the Units and separately referred to marketing and sales. Reporting obligations under clause 8.2 did not impose any obligation to sell at a particular rate or within a particular period. The court applied Luxor v Cooper [1941] AC 108: entitlement to commission depended on the specified event, and where that event did not occur any further entitlement required implication of a term.
2. Renting the apartments did not necessarily prevent compliance with clause 5.2, which depended on the terms of the tenancy. In any event, no request for access had been made, which was fatal to the pleaded actual breach.
3. Preliminary issues 1 and 2. No term required the defendant to market the apartments with due diligence and expedition or to sell them within a reasonable time. Applying the principles stated in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, the agreement worked coherently without either term. The defendant retained control over the timing of a major property investment; the parties could have included a long-stop payment date but did not; and the proposed terms would have imposed the downside of an unfavourable market on the defendant without reducing the claimant’s fixed fee.
4. The court distinguished Sparks v Biden [2017] EWHC 1994 (Ch). That agreement had a more tightly structured timetable, a seller dependent on sale proceeds for retirement income, and features resembling a joint venture. Those circumstances were absent here.
5. Preliminary issue 3. No term prohibited renting or other conduct said to delay or undermine sale. Rental was consistent with the reference in clause 5.2 to the use, marketing or sale of the apartments. All four preliminary issues were answered “No”.

First-instance trial of preliminary issues ordered by Cockerill J on 7 June 2019. The judgment records no subsequent appellate decision.