"Date: 2009/12/31
Subject: MCST 215 (Botanic Gardens View) - Revised Draft Collective Sale Agreement
Dear Sirs,
I refer to your letter dated 18 Oct 2009 and the revised draft Collective Sale Agreement ("CSA") enclosed therewith. In your letter, you asked for written feedback on the revised draft CSA.
I am writing to place on record the following points:
1. Feedback had already been given on the previous draft of the CSA at the Extraordinary General Meeting ("EGM") held on 23 Aug 2008, which lasted for several hours. The feedback given included vigorous opposition to, among other things, the formula for allocation of sale proceeds amongst the subsidiary proprietors, the clause empowering the Collective Sale Committee ("CSC") to enter into a sale below the Reserve Price, the clauses entitling the CSC to amend the CSA and the sale & purchase agreement without obtaining the prior approval of the subsidiary proprietors, and the existence of various clauses indemnifying the CSC and exempting the CSC members from all liability whatsoever. Also, I had requested for the inclusion of provisions to indemnify the subsidiary proprietors and the MCST against damage and liability caused by the actions of the CSC, as well as the provision of a performance bond to ensure performance by the purchaser.
2. Further, it should be noted that at the EGM, the correctness of the figures presented by Credo in support of the proposed formula for allocation of sales proceeds was questioned by subsidiary proprietors. Credo insisted that the figures were correct. However, Credo subsequently issued a letter stating that there were "typographical" mistakes in the figures presented at the EGM, without specifying what those mistakes were and without clearly informing subsidiary proprietors of the effect of the mistakes, which may make a material difference in the perception of subsidiary proprietors (especially those who had attended the EGM and saw the presentation by Credo) as to the decisions which they should make.
3. The feedback given at the EGM has not been taken into account in the revised draft CSA in any substantive or meaningful manner.
4. In particular, from the revised draft of the CSA, the CSC is intent on using the same formula for allocation of sale proceeds as set out in the previous draft of the CSA, notwithstanding that it has not provided satisfactory explanations as to why there was a change from the formula used in the previous en bloc sale attempt (which involved the same chairman and secretary as the current CSC). The formula for allocation of sale proceeds set out in the revised draft CSA is substantially and materially disadvantageous to the subsidiary proprietors of Block 1, and those of them who attended the EGM were totally against adopting this formula. It is grossly unfair to them as they each have one share in the MCST and have, all along, been paying the same maintenance and sinking fund amounts as the subsidiary proprietors in the other blocks.
5. Further, from the revised draft CSA, it also appears that the CSC is preparing in advance for a sale below the Reserve Price. The provisions in relation to such a sale below the Reserve Price do not adequately provide for the protection of subsidiary proprietors who may have signed the CSA on the basis of a sale at or above the Reserve Price. The revised draft CSA does not satisfactorily meet the many concerns raised by subsidiary proprietors at the EGM on this clause, on which the consensus was that it should be removed entirely, in the interests of the subsidiary proprietors as a whole. If such a clause is included in the CSA and potential purchasers are aware of its existence, no doubt they will utilise this to their advantage to reduce the purchase price.
6. Also, I would reiterate my position that the subsidiary proprietors and the MCST must be adequately protected under the CSA from liability and damage caused by actions of the CSC, as well as from non-performance by an intended purchaser. These protections must therefore be incorporated in the CSA, and the clauses indemnifying the CSC and exempting the CSC from liability for their actions must be removed. This is in the interest of all subsidiary proprietors and the MCST, and is absolutely necessary in view of the problems previously faced by subsidiary proprietors in other en bloc sales in Singapore. It is no excuse to say that this has never been done before, as the CSC is duty-bound to protect the interests of all the subsidiary proprietors, rather than adopt a CSA which is more favourable to purchasers in the hope of an easy sale, which may lead to problems for subsidiary proprietors subsequently.
7. It remains to be seen if any written feedback on the revised draft CSA will be taken into consideration by the CSC, after it has ignored the feedback already given at the EGM on the previous draft CSA. However, the CSC members should bear in mind the duties and obligations (including fiduciary duties and obligations) they each owe to all subsidiary proprietors, in the light of the Court of Appeal decision in the Horizon Towers case.
8. The CSA should be therefore be amended to take in the feedback mentioned above, and in due course be considered and decided upon by the subsidiary proprietors in a properly-convened general meeting. 9. Finally, I would also place on record that although the notice of the EGM specifically stated that the items on the agenda for the EGM were to "consider and decide on" the "apportionment of the sales proceeds" and "the terms and conditions of the draft Collective Sale Agreement (inclusive but not limited to the Reserve Price...)", the agenda was changed at the last minute at the commencement of the EGM, when the chairman of the CSA announced that the meeting would only be limited to a presentation and discussion of the draft CSA, and that the EGM would not in fact "decide on" the apportionment of the sales proceeds or the terms and conditions of the draft CSA.
Yours faithfully,
L.H. Tan"
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