Lim Chin San Contractors Pte Ltd v Shiok Kim Seng (trading as IKO Precision Toolings)

• Jurisdiction: Singapore
• Judge: Philip Pillai J
• Judgment Date: 19 August 2010
• Neutral Citation: [2010] SGHC 243
• Plaintiff Counsel: Thio Shen Yi SC (instructed counsel) (TSMP Law Corporation) and Kelvin Chia Swee Chye (Balkenende Chew & Chia)
• Docket Number: Suit No 1019 of 2009
• Date: 19 August 2010
• Hearing Date: 27 April 2010,21 January 2010,29 March 2010,26 April 2010,20 January 2010
• Subject Matter: Equity
• Year: 2010
• Citation: [2010] SGHC 243
• Defendant Counsel: The defendant in person.
• Court: High Court (Singapore)
• Published date: 24 August 2010

Philip Pillai J: Introduction

The plaintiff is the developer of Alpha Industrial Building (“the building”) and the owner of, inter alia, unit #05-11 in the building (“the unit”). The defendant was the tenant of the unit under two successive tenancy agreements. The formal terms of both leases have run out. In this action, the plaintiff is claiming for the repossession of the unit, arrears in rent and double rent for holding over. The defendant is resisting the claim on the basis that he is entitled to purchase the unit pursuant to a contractual right or proprietary estoppel. There is also the issue of who should bear the responsibility for the construction of a mezzanine floor in the unit which is irregular under planning regulations.

Facts

The plaintiff was represented by instructed counsel, Mr Thio Shen Yi SC. Its sole witness was Mr Lim Chin Leong, the plaintiff’s managing director. The defendant, Mr Shiok, appeared in person. He gave evidence himself and also called Mr Yeo Hock Chuan who is a property agent who acted for him in his initial dealings with the plaintiff. The evidence is as follows.

The first tenancy agreement

Mr Lim and Mr Shiok first met sometime in late November or early December 2004. On 9 December 2004 they entered into a tenancy agreement for the unit (“the first tenancy agreement”). The term was for two years, from 1 January 2005 to 31 December 2006. Rent was fixed at $3,200 a month. Clause 3(d) of the first tenancy agreement read:¹

During the term of the Tenancy, THE LANDLORD agrees not to sell THE SAID PREMISES to any purchasers other than THE TENANT at the predetermined sale price of Singapore Dollars Four Hundred Sixty Two Thousand And Fifty Four Only (S$462,054.00) or at S$159.00 per sqft, exclusive of GST and stamp duty which are payable by THE TENANT. All rental payable shall be calculated till the date of sale completion.

Mr Lim characterised clause 3(d) as follows in his Affidavit of Evidence-in-Chief (“AEIC”) at [10]:

The aforesaid Clause 3(d) of the 1st Tenancy Agreement is, as I am advised, a right of pre-emption. While the right was subsisting, the Plaintiffs were not allowed to sell the Premises to anybody except the Defendant.

It is pertinent to note that Mr Lim, rather artfully, stopped shy of saying that he understood clause 3(d) to be a right of pre-emption. Mr Lim’s evidence on the stand, when he was cross-examined by Mr Shiok, was significantly different. On the second day of the trial, there was this exchange:² Q: During [our first meeting in December 2004], we conclude the rental of the unit 05-11 and the option to purchase the unit at $159 per square feet. Do you agree? A: Yes, I agree. A similar exchange was as follows:³ Q: I will put it to you, if you have not given me the option to purchase at 159, I would not have invest in this unit, neither would I take up the rental. A: I disagree with you. It’s stated very clearly in the tenancy agreement that you have to buy within the tenancy agreement and I’m willing to sell you at $159 per square feet. But it was very unfortunate that you do – that you did not take this opportunity to buy at all. Q: Look, Mr Lim, I put it you to you at a later stage on this issue, because all this is going to happen in December 2006 and I want you to know, do you – and I put it to you that $159 per square feet was to me an option to purchase and – Def: Your Honour, I – I’ll rephrase it again, correct. Q: Do you agree that the discussion ended with $3,200 for 2 + 2 rental lease with an option to purchase at $159 per square feet? A: Yes, I agree but it was for the first 2-year. Likewise, on the fourth day of the trial:⁴ Q: In December 2004, I came to Alpha Building with my agent Jeffrey Yeo and we met you there. Do you agree? A: Yes. Q: Mm. Do you agree that during this meeting, we discussed the tenancy agreement and the option to purchase? A: Yes. And later on the same day:⁵ Q: [Refers to clause 3(d) of tenancy agreement] A: Yes. Q: Yah, do you agree that, er, I have the first right to buy this unit within the 2 years’ tenancy agreement? A: Yes. All these were not changed in re-examination, where Mr Thio sought to establish that there was no option granted between the parties:⁶ Q: Now, earlier this morning, you were asked this question, that you agreed – during the meeting on December 04, you discussed the tenancy agreement and option to purchase and you said yes Now, a lot of terms have been used loosely, so what I want you to do, is go to the plaintiff’s bundle of documents, grey bundle. The tenancy agreement is at page 9. When you say “option to purchase”, what are you referring to in this tenancy agreement? A: Actually the word option to purchase is – is the tenancy is given at that point in time within 2 years to purchase and within the 2 year, 3 months before the expiry, he has to make his option to purchase. Q: No, no, sorry. Which part of the tenancy agreement are you referring – does this “option to purchase” refer to? Because just now what you said is the option – A: I think it is 3 – 3(d), page 12. Q: 3(g). A: 3(d). Denmark. Q: Okay. [Moves on.]

Mr Shiok and Mr Yeo were also cross-examined on the meaning of clause 3(d). Unsurprisingly, they confirmed that it was a right of pre-emption. However, they were not examined on the actual understanding reached between themselves. This is an issue which was obviously relevant because of Mr Shiok’s insistence that he had an option and Mr Lim’s repeated agreement on the stand with Mr Shiok’s point that an option was in fact the true arrangement between them.

Renovations and the construction of the mezzanine floor

After signing the first tenancy agreement, Mr Shiok proceeded to renovate the unit. The renovation took five to six months. The contractor was Heng Loong Construction (“Heng Loong”), of which Mr Lim was a partner. The invoices issued by Heng Loong to Mr Shiok totalled $106,176.63.⁷ The work done included the construction of a mezzanine floor which effectively doubled the floor area of the unit. After the renovations were completed, Mr Shiok began operating his business from the unit. He ran a precision engineering business and his plant included heavy machinery.

The mezzanine floor turned out to be irregular and has since been removed pursuant to an order of Judith Prakash J. The issue is who should be responsible for the irregularity. The irregularity, which was pointed out to the plaintiff by the Urban Redevelopment Authority (“URA”) on 18 December 2006 and by the Building and Construction Authority (“BCA”) on 25 January 2007, seemed to arise from the fact that the mezzanine floor area caused the gross floor area of the building to exceed the permitted limit. The precise nature of the irregularity was not clearly explained by either party. But both parties agreed on the fact of the irregularity and it is sufficient for present purposes to proceed on that basis.

In his AEIC at [9], Mr Shiok deposed that Mr Lim represented to him during their first meeting that the floor area of the unit could be expanded by constructing a mezzanine floor. At [10], Mr Shiok went on to say that Mr Lim represented to him that “they” would do all the relevant work and take care of obtaining the relevant approvals, etc, from the relevant government bodies.

In his AEIC, Mr Yeo Hock Chuan, who was Mr Shiok’s property agent at the time of the first tenancy agreement, deposed that Mr Lim had represented to Mr Shiok that the floor area of the unit could be expanded by the construction of a mezzanine floor, and that Mr Lim could carry out the construction and attend to all approval requirements. He also said that Mr Lim showed Mr Shiok a room where Mr Lim already built a mezzanine floor and told Mr Shiok he could do the same. According to Mr Yeo, all this happened in his presence. During cross-examination, Mr Yeo conceded that he did not hear Mr Lim represent to Mr Shiok that approval of the mezzanine was guaranteed.⁸

In his AEIC at [7]–[8], Mr Lim deposed that the plaintiff was prepared to allow Mr Shiok to construct the mezzanine floor, but did not warrant that the structure was or would be approved. At [28], Mr Lim elaborated that neither the plaintiff nor Heng Loong nor himself had ever represented, warranted, promised or agreed that the said works could be used by Mr Shiok as a mezzanine floor – any risk of illegality was assumed solely by Mr Shiok.

However, Mr Lim took varying positions in cross-examination. At first, he said that, as of November 2004 and for six months thereafter, nobody knew what a mezzanine floor was - it was only in April 2007 that the BCA raised the issue with the developer and the proprietors.⁹ Shortly after, however, Mr Lim said that, during the same period, all the proprietors of the building, including Mr Shiok, knew that a mezzanine floor was not allowed.¹⁰ A while later, when confronted with a police report by another proprietor that he was misled as to the legality of building a mezzanine floor, Mr Lim said that he could write off the report, as well as other similar reports by other proprietors, because he had told them that a mezzanine floor was illegal.¹¹ Finally, when confronted with an invoice dated 1 June 2005 which expressly referred to “Partition Work at Mezzanine”, Mr Lim said that the building of mezzanine floors was rampant at that time; he did the work at Mr Shiok’s request; and the issue was not what he knew or did not know.¹² Mr Shiok’s various and varying positions contradict each other. If no one knew what a mezzanine floor was, they would not have known or been told that it was not allowed. If it was not allowed and they knew that, then why was Mr Lim building a mezzanine floor for Mr Shiok...