Andrew Phang Boon Leong JA (delivering the judgment of the
court):
Introduction
Not surprisingly, the issue of interpretation has – in the nature of things – always been a central one in the common law of contract. As Lord Steyn aptly observed in an extrajudicial context (in “Contract Law: Fulfilling the Reasonable Expectations of Honest Men” (1997) 113 LQR 433 at 439), “[d]isputes about the meaning of contracts is one of the largest sources of contractual litigation”.
Indeed, if the relatively recent proliferation of extremely scholarly texts on this particular issue from both England and Australia by an eminent judge as well as eminent professors and practitioners is anything to go by (see, for example, Sir Kim Lewison, The Interpretation of Contracts (Sweet & Maxwell, 5th Ed, 2011) (adapted for Australia in Sir Kim Lewison & David Hughes, The Interpretation of Contracts in Australia (Sweet & Maxwell, 2011)); Gerard McMeel, The Construction of Contracts – Interpretation, Implication, and Rectification (Oxford University Press, 2nd Ed, 2011); Richard Calnan, Principles of Contractual Interpretation (Oxford University Press, 2013); and J W Carter, The Construction of Commercial Contracts (Hart Publishing, 2013)), this issue has become even more important in recent times. In the final analysis, however, much depends – as this court has observed in Fairview Developments Pte Ltd v Ong & Ong Pte Ltd and another appeal [2014] 2 SLR 318 (“Fairview Developments”) at [47] (see below at [30]) – on both the text as well as the context of the contract. This is no mere catchphrase. In our view, it captures the essence of what the court does – and ought to do – in the context of the interpretation of contracts. However, since the context of each case can vary so greatly, much of the difficulty for the court concerned lies in the sphere of application. The present appeal is yet another illustration in this particular regard.
The background facts
The parties
The appellant, Y.E.S F&B Group Pte Ltd (“YES”), was the defendant in the proceedings below. It is a Singapore incorporated company in the business of running food and beverage outlets, in particular, a chain of Chinese restaurants under the name Dian Xiao Er. YES was incorporated in 2002. It was founded by the husband and wife team of Mr Yik Kuen Koon (“Yik”) – who appeared as the sole witness for YES in the trial below – and Ms Eliza Gunawan (“Eliza”). They are the current shareholders and directors of YES.
The respondent, Soup Restaurant Singapore Pte Ltd (“Soup”), was the plaintiff in the proceedings below. It is also a Singapore incorporated company which operates a chain of Chinese restaurants. These restaurants are run under the name Soup Restaurant. Soup is wholly-owned by its parent company, Soup Restaurant Group Limited (“SRGL”). Mr Mok Yip Peng (“Mok”), a director of Soup, appeared as its only witness in the trial below.
Today, YES and Soup are competitors in the food and beverage industry. However, it is important to bear in mind that, when the contract which is the subject of the present appeal was entered into (in October 2009 (see below at [13])), the complexion of their relationship was very different. At that time, YES and Soup were in fact related companies within the same corporate structure. By way of background, their previous relationship as sister companies began sometime in 2006. This was when SRGL and another of its subsidiaries, Soup Restaurant Investments Pte Ltd (“SRI”), acquired a majority stake of 50.98% in YES, thereby bringing YES into the SRGL group of companies, which included Soup. Yik and Eliza held the remaining 49.02% of shares in YES pursuant to this acquisition. However, as will become apparent in due course, fractures in the SRGL corporate group began to emerge in early 2010 and, by June 2012, Yik and Eliza had bought over all of SRGL and SRI’s shareholding in YES; this was done pursuant to a settlement agreement that had been entered into to resolve a minority oppression suit commenced by Yik and Eliza (see below at [18]–[19]). The corporate relationship between YES and Soup was thus brought to a formal end, and this explains their present-day status as competitors.
The competition between the parties today is particularly evident in the shopping mall known as Vivocity where they occupy adjacent units under their respective leases with the landlord. At present, YES operates its Dian Xiao Er restaurant out of Unit #02-137/138 (“Unit 137”) while Soup operates its Soup Restaurant business out of the neighbouring Unit #02-141 (“Unit 141”). However, this has not always been the case. At one point, when the relationship between the parties as sister companies was still good, they had entered into a sub-lease agreement pertaining to a part of Unit 141 with Soup as the sub-lessor and YES as the sub-lessee. Essentially, that agreement allowed for the space in Unit 141 to be shared and it is the interpretation of the terms of this agreement – in particular, for the purpose of discerning the duration for which it remains valid and subsisting – that forms the central focus of this appeal. The context surrounding the execution of this sub-lease agreement is, as alluded to earlier, of utmost importance; hence we turn to set out the relevant factual matrix in that regard.
YES’s lease of Unit 137
YES was first to set up shop in Vivocity. This was sometime in October 2006 when it entered into a lease with the landlord to operate a Dian Xiao Er outlet. This lease was for a period of three years and so expired in October 2009. However, it did contain an option to renew for a further period of three years.
At the end of the aforementioned lease, the option was exercised by YES upon which it entered into a second lease with the landlord for Unit 137. For reasons which will become apparent later, it is of some importance to note two aspects of this second lease – first, that its expiry date was fixed as at 6 October 2012 and, secondly, that, unlike YES’s initial lease in 2006, this subsequent lease did not contain an option to renew.
Presently, YES occupies Unit 137 on the terms set out in a third lease. This was negotiated with the landlord at the expiry of the second lease.
Soup’s lease of Unit 141
It is undisputed that, during the period of YES’s first lease (which began in 2006), its Dian Xiao Er outlet performed well. Therefore, sometime in April 2009, which was prior to the expiry of the said lease, the landlord offered YES the opportunity to expand its pre-existing business at Unit 137 by taking up a new lease of the adjoining Unit 141. YES was keen on the idea of expanding its business and approached Soup to inform the latter about the landlord’s offer. YES and Soup, it should be mentioned, were already sister companies by this time. Discussions ensued between the parties. Importantly, it appears that Soup did not need the entire premises at Unit 141 as it expressed only an interest to be the main tenant of Unit 141; in this connection, Soup seemed happy to accommodate YES’s interest in expanding its pre-existing outlet at Unit 137 as Soup was willing to set aside a part of Unit 141 for YES’s use.
Based on the understanding reached in these discussions, Yik (of YES) brought Mok (of Soup) to meet representatives of the landlord in respect of Unit 141. It was duly made known to the landlord that Soup intended to lease Unit 141 to operate a Soup Restaurant outlet but that a part of this unit would be sub-leased to YES to expand its existing Dian Xiao Er outlet from Unit 137. In this last-mentioned regard, it is important to note that an email from Soup to the landlord dated 1 July 2009 demonstrates that Soup was aware that YES also had specific designs for its additional space in Unit 141, namely, that it was to be used for the expansion of Dian Xiao Er’s kitchen and VIP rooms. Indeed, it was only after Soup had (as evidenced by this email) obtained the landlord’s confirmation that YES could use the additional space for this purpose that it (ie, Soup) accepted the landlord’s letter of offer dated 19 June 2009 for the lease of Unit 141.
The said letter of offer was subsequently reduced into a formal lease agreement dated 11 October 2010 (“the 2010 Lease Agreement”). Its terms provided that Soup’s lease of Unit 141 was for a three year term, commencing on 19 October 2009 and expiring on 18 October 2012. It also provided that the fixed rent (inclusive of GST) payable would be $42,117.28 per month.
Soup sub-leases a part of Unit 141 to YES
On the same day that Soup’s lease of Unit 141 commenced under the 2010 Lease Agreement, viz, 19 October 2009, it also entered into a sub-lease agreement with YES (“the Sub-Lease Agreement”) to let out a strip of Unit 141 amounting to an area of 742.70 square feet (“the Sub-Leased Premises”). This was done pursuant to the parties’ agreement to share Unit 141 which, as stated above, Soup had communicated to the landlord prior to accepting the 19 June 2009 letter of offer.
The Sub-Lease Agreement is a simple two-page document. According to Mok, it was drafted by the company secretary of Soup, and apparently without any legal assistance. As the terms of this agreement are central to the present dispute, we set them out here in their entirety:
1. Soup Restaurant (Causeway Point) Pte Ltd (the “Company”) had entered into an agreement (the “Agreement”) with VivoCity Pte Ltd as trustee of VivoCity Trust (the “Landlord”) on 19 June 2009 in respect of the lease of 1 HarbourFront Walk #02-141 VivoCity S(098585) to operate both “Soup Restaurant” and “Dian Xiao Er” (“DXE”) brands.
2. Y.E.S F & B Group Pte Ltd (“YES”) had sub-leased a part of the above space to operate DXE with the consent from the Landlord.
3. By entering into this agreement, YES agrees: i) To be bounded by the same terms and conditions in the lease agreement
...
