Chye Lian Huat Sawmill Co v Hean Nerng Industrial Pte Ltd

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 11 December 2002
• Neutral Citation: [2002] SGHC 300
• Docket Number: Suit No 1360 of 2001
• Date: 11 December 2002
• Published date: 19 September 2003
• Year: 2002
• Plaintiff Counsel: Rabi Ahmand s/o M Abdul Ravoof (PK Wong & Advani)
• Citation: [2002] SGHC 300
• Defendant Counsel: Daniel Koh and Martin Lee (CTLC Law Corporation)
• Court: High Court (Singapore)
• Subject Matter: Contract,Breach,Sanctity of contract,Whether Licensing Agreement unenforceable,Clause providing for termination of Licensing Agreement upon giving four months' notice,Discharge,Illegality and public policy,Whether plaintiffs in repudiation of Licensing Agreement

HELD, JUDGMENT FOR THE PLAINTIFFS :

(1) It was not possible to identify any illegality. The sanctity of a contract freely entered into should not be invalidated without good legal reason. Where the doctrine of public policy is invoked, there is a need for the court to be circumspect. In this case, even though the subletting was done without the approval of JTC and there was subletting of open space, nevertheless, JTC was not without its remedies. However, instead of exercising its rights, JTC had chosen to give all concerned time to unscramble. The court would decline from venturing into the proper province of public policy in relation to subletting of industrial properties in respect of which JTC is, professionally and administratively, the best statutory agency to make the calls of judgment (See [10]-[16]).

(2) The preponderance of documentary evidence supported the plaintiffs’ claim for the licensing fees. The plaintiffs’ claims for reimbursement of the costs for the removal of the debris were also allowed as the hardcore debris were incontestably left behind by the sub-tenants of the defendants and there was evidence to show that it was the defendants and/or their sub-tenants and not the plaintiffs who were responsible for the clearance of the debris. On the other hand, the evidence demonstrated that the expenses claimed by the defendants under the Management Agreement were actually incurred by and for the benefit of the defendants themselves and hence, their claims for such expenses were rejected (See [18]-[20]).

(3) The Licensing Agreement had provided for its termination on the expiry of 4 months’ notice. In this case, the defendants were given ample notice and they had, in fact, more than the 4 months to vacate. They did not suffer any damages and accepted the notice to vacate because they were fully aware that that was the requirement of JTC. The plaintiffs were, therefore, not in repudiation of the Licensing Agreement (See [21]-[24]).

CASE(S) REFERRED TO

British Guiana Credit Corporation v Da Silva [1965] 1 WLR 248 (refd)

Gunton v Richmond-Upon-Thames London Borough Council

[1981] 1 WLR 448 (appd)

In re London and Colonial Company ex parte Clark

[L.R] 7 Eq 550 (distd)

Monkland v Jack Barley Ltd

[1951] 1 All ER 714 (refd)

Tan Seng Huat v Golden Seal Pte Ltd

[Suit No 1632 of 1996 unreported] (refd)

Judgment

GROUNDS OF DECISION

Introduction

1 The sawmills in the Sungei Kadut area, each of which occupied more than 4 acres of valuable industrial land, became a sunset industry. After they stopped sawmilling and carpentry operations, they sublet their premises. In this case, the problems were compounded by partnership disputes. The plaintiffs therefore licensed a substantial part of their property to the defendants so that the latter could in turn sub-licence to third parties. They also engaged the defendants to manage their business, which was principally sub-lettings to their own sub-tenants. As will be seen, the arrangements have spawn this piece of litigation.

2 In this action, the plaintiff partnership, for which a Receiver and Manager was appointed by Order of Court made on 25 September 1998, claim from the defendants the sum of $912,154.25 or such other sum that may be found to be due for the balance of the monthly fee payable to the plaintiffs by the defendants for the use of the woodworking factory area and the open space area for the period between 13 February 1997 to 11 February 1999. According to the plaintiffs the gross licensing fee was $1,753,428.60 and they gave credit to the defendants for the payment of $841,274.35 already made. They further claim the sum of $198,631.08 due from the defendants to the plaintiffs for the expenses incurred by the Receiver for the dismantling of the unauthorised structures and for the removal of the debris from the plaintiffs’ premises. They also claim interest on all moneys found to be due to the plaintiffs at the rate of 6% per annum from the date of the writ of summons to the date of judgment and costs.

3 According to the defence, the gross licensing fee for the period of 2 years should be $1,184, 437.20 and not the sum of $1,753,428.60 as the plaintiffs have alleged. The defendants further claim that under another agreement they had with the plaintiffs, namely the Management Agreement, they were entrusted with the management of the property and they claim the expenses of $589,497.18 which are particularised in exhibit P2 and elaborated in exhibits D2 and D3. All three exhibits were documents in the nature of Scott’s Schedule which I had directed to be prepared for ease of reference. They were schedules of items, the amounts, the grounds why the plaintiffs have rejected them and the reasons which the defendants rely on in support of their claims for reimbursements. Thirdly, and finally, the defendants counterclaim liquidated damages in the sum of $944,524.20 which they allegedly suffered by reason of the plaintiffs’ wrongful termination and repudiation of the licensing agreement. Alternatively, the defendants seek the entry of an interlocutory judgement for wrongful repudiation and for damages to be assessed by the Registrar. I now turn to the background.

The background

4 The plaintiffs were at all material times the lessees of the industrial premises at No. 44, Sungei Kadut Street, Singapore ("the premises") of which the lessor was the Jurong Town Corporation ("JTC"). They were a partnership firm dealing in, until the events hereinafter recited, sawmilling and carpentry works. The partnership encountered partnership disputes and they were dissolved by an Order of Court on 25 September 1998 and Mr Don Ho Mun-Tuke ("Mr Don Ho") was appointed the Receiver and Manager.

5 Sometime in early 1997, the defendants, which were associated with one of the partners by ties of kinship, were invited by the plaintiffs to help manage the premises. This was necessary because the partners were at loggerheads and matters of the firm suffered. Matters deteriorated, arrears of rent from their subtenants mounted and the premises were left in a state of disrepair. The plaintiffs granted a licence to the defendants to use a substantial portion of the premises for differentiated monthly licence fees and they also appointed the defendants to run the business of the plaintiffs, which was then solely the business of subletting, and to maintain the premises, keeping them in a state of tenantable repair.

6 The Licensing Agreement ("the Licensing Agreement") was entered into under an agreement dated 13 February 1997. Under it, the defendants agreed to use up to 30,000 square feet of the woodworking factory area ("the woodworking area") and up to 100,000 square feet of the open space area ("the open space area") for a period of sixty (60) months with effect from 13 February, 1997, expiring on 12 February 2002. Both areas were delineated in a plan. The monthly licence fee for the woodworking area was $1.20 per square foot and for the open space area was 60 cts per square foot. The Licensing Agreement conferred on the defendants the right to sub-license their portion of the premises to third parties. A schedule of the defendants’ various sub-licensees is attached to the affidavit evidence in chief of Mr Lim Lung Tieng.

7 It was also agreed that the defendants were to pay to the plaintiffs all utilities charges by meter reading promptly on demand upon presentation of the invoices for the same by the plaintiffs to the defendants. That was because the plaintiffs continued to pay for the utilities to the Public Utilities Board.

8 There was a termination clause. Under it, the defendants or the plaintiffs were entitled to give the other party four (4) months’ notice in the event that either party wished to terminate the Licence Agreement and in the event the plaintiffs were to terminate the Licence Agreement upon giving the requisite four (4) months’ notice, the defendants were allowed to use and occupy the woodworking and open space areas without the need to pay the plaintiffs the monthly service and supervision fee during the notice period.

9 By the Management Agreement between the parties hereto and dated 30 March, 1997 the defendants agreed to assist the plaintiffs in carrying out various matters in relation to the maintenance of the premises and the running of the plaintiffs’ business. The relevant portion of the Management Agreement stated:

"We confirm our agreement that you are to help us:-

1) do necessary repairs and maintenance works etc to the land, structure and drains etc in our premises including the part on electricity supply,

2) pay worker’s salary & Central Provident Fund contribution including wages of odd job labourer hired to assist in the above mentioned repairs and maintenance,

…..

6) dispose any unused machinery at reasonable amount or being properly disposed of and,

7) Any expenses that may (sic) incurred in the running of our business

for which you are to deduct the expenses from the outstanding payable to us and the above will include favour done to us since 13-2-1997" (emphasis added to focus attention.)

The Preliminary Issue

10 At the beginning of the trial, I acceded to the joint application of both counsel that I address a preliminary question. I was told and I was of the same view, having read the trial papers in advance, that the determination of the preliminary question would save a considerable amount of time. The preliminary question was whether the plaintiffs’ claim for the sum of $912,154.25 allegedly due under the Licensing...