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

• Jurisdiction: Singapore
• Judge: V K Rajah JA
• Judgment Date: 18 January 2013
• Neutral Citation: [2013] SGCA 6
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 76 of 2012 and Civil Appeal No 78 of 2012
• Published date: 29 January 2013
• Year: 2013
• Hearing Date: 17 October 2012
• Plaintiff Counsel: Chia Swee Chye Kelvin (Samuel Seow Law Corporation)
• Defendant Counsel: Eugene Tan Kon Yeng and Eng Cia Ai (Drew & Napier LLC)
• Subject Matter: Damages,appeals,assessment,Equity,satisfaction
• Citation: [2013] SGCA 6

Sundaresh Menon CJ (delivering the Judgment of the Court): Introduction

The present cross appeals arise out of an assessment of damages, which had first been heard before the Assistant Registrar (“the AR”). Both parties appealed against the AR’s decision to the High Court Judge (“the Judge”). The Judge’s decision on the assessment of damages appeal was delivered on 31 May 2012 and this included an addendum that he provided after hearing further arguments. That decision is reported as Lim Chin San Contractors Pte Ltd v Shiok Kim Seng (trading as IKO Precision Toolings) [2012] 3 SLR 595 (“the AD Decision”). In the AD Decision, the Judge referred to an earlier judgement that he himself had delivered after hearing the trial of the matter which dealt with the issue of liability. It was pursuant to the earlier judgement that damages came to be assessed. The earlier judgment is reported as Lim Chin San Contractors Pte Ltd v Shiok Kim Seng (trading as IKO Precision Toolings) [2011] 1 SLR 433 (“the Original Decision”).

Facts Parties to the dispute

Lim Chin San Contractors Pte Ltd (“Lim Contractors”) is the developer of Alpha Industrial Building (“the Building”) and the owner of the premises known as unit #05-11 (“the Premises”) in the Building. The managing director of Lim Contractors is one Lim Chin Leong (“Mr Lim”).

Shiok Kim Seng (“Mr Shiok”) was the tenant of the Premises from January 2005. Although the lease expired at the end of 2008, Mr Shiok remained in possession of the Premises until September 2010. Before renting the Premises, Mr Shiok had run a business as a middleman trading in precision tooling. When he decided to go into the business of manufacturing precision tooling he required new premises, which for his purposes, had to have a floor area of at least 517 m2. This was the context in which he leased the Premises. He has now vacated the Premises and his business has ceased. He is also facing several bankruptcy petitions.

Background to the dispute

Lim Contractors and Mr Shiok entered into the following written tenancy agreements (collectively referred to as the “Tenancy Agreements”): An agreement dated 9 December 2004 (“the First Tenancy Agreement”), under which Lim Contractors agreed to lease the Premises to Mr Shiok for two years (from 1 January 2005 to 31 December 2006) at a monthly rent of $3,200 (not inclusive of GST). An agreement signed sometime in March 2007 (“the Second Tenancy Agreement”), under which Lim Contractors agreed to rent the Premises to Mr Shiok for two years (the term was to begin retrospectively on 1 January 2007 and was to expire on 31 December 2008) at the same monthly rent of $3,200 (not inclusive of GST).

In the Original Decision, the Judge found that Mr Lim had made two representations to Mr Shiok which had induced the latter to take a lease of the Premises from Lim Contractors. These representations were: that a mezzanine floor could be built to substantially increase the floor area of the Premises (see the Original Decision at [13]) (“the First Representation”); and that the Premises could be purchased by Mr Shiok (see the Original Decision at [26] and [29] to [30]) (“the Second Representation”). The First Representation and the Second Representation are collectively referred to as “the Representations”.

Pursuant to the Representations, Mr Shiok constructed a mezzanine floor in the Premises. The contractor that he engaged for this work was Heng Loong Construction, of which Mr Lim was a partner. The renovation work (which included the cost of constructing the mezzanine floor) took five or six months and cost $106,176.03 (see the Original Decision at [6]). The addition of the mezzanine floor almost doubled the usable space at the Premises from approximately 270 m2 to 539 m2. This suited Mr Shiok’s purposes, since, as noted above, he required a floor area of at least 517 m2to enable him to conduct the business of manufacturing precision tools (see above at [3]). Following the construction of the mezzanine floor, Mr Shiok operated his business from the Premises.

The mezzanine floor was subsequently found to be irregular by the Building and Construction Authority (“BCA”) as it caused the gross floor area to exceed the permitted limit and was contrary to planning regulations. Despite being required to do so, Mr Shiok was unwilling to remove or otherwise regularise the mezzanine floor. On 4 November 2009, Lim Contractors obtained a Court order permitting it to enter the Premises and take the necessary steps to remove the mezzanine floor. The mezzanine floor was eventually removed on 29 and 30 January 2010.

As to the Second Representation, the Judge found that there had been some attempt by Mr Shiok to raise the subject of a purchase in 2006 at which time, on Mr Lim’s initiative, it was deferred until 2007 following the anticipated issuance of the Certificate of Statutory Completion (“CSC”) of the Premises (see the Original Decision at [29]). But Mr Shiok never took steps to enforce the asserted right to purchase the Premises and by the time of the Original Decision, the Judge found that Mr Shiok was in no position to exercise any such right (see the Original Decision at [33]).

Moreover, it is significant to note that by the time the Second Tenancy Agreement was entered into in March 2007, the reference to the possible sale of the Premises that had been in the First Tenancy Agreement had changed.

In the First Tenancy Agreement, clause 3(d) provided as follows: 3. THE LANDLORD hereby agrees with THE TENANT as follows:-

...

(d) 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 Thousnd 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.

[emphasis original]

In the Second Tenancy Agreement, clause 4(i) provided:

During the term of the Tenancy, THE LANDLORD agrees not to sell THE SAID PREMISES to any purchasers other than THE TENANT at the sale price which will be determined after the CSC.

[emphasis added]

It may be noted that under each of the Tenancy Agreements, Lim Contractors’ agreement, such as it was, was only for the duration of the respective term of the Tenancy created thereunder. Further, under the Second Tenancy Agreement, there was no longer an agreement even as to price. The Judge did not find that the Second Tenancy Agreement was vitiated in any way though he accepted Mr Shiok’s evidence that “he felt constrained to some extent by the investment he already put into the unit” to agree to the Second Tenancy Agreement (see the Original Decision at [31]).

We return to the significance of these facts a little later but it is sufficient for the moment for us to note that the Judge found that Mr Lim’s representations to Mr Shiok gave rise to a proprietary estoppel (see the Original Decision at [30]). To satisfy the proprietary estoppel, the Judge concluded that an award of damages would be appropriate. In effect, the Judge made an order for equitable compensation, the quantum of which was to be assessed by the Registrar. The Judge further offered the following guidance as to what he had in mind: 33 ... an award of damages to put Mr Shiok into the position he would be in had he not entered into the two tenancy agreements. This would reverse any detriment he has suffered, as well as take into account any benefit he had enjoyed as a result of entering into the tenancy agreements. ...

...

36 ... (b) Mr Shiok is entitled to damages to be assessed to restore him to the position he would be in had he not entered into the two tenancy agreements. The registrar is to assess the totality of rental, renovations and mezzanine floor payments made by him against the totality of benefits received by him in connection with the first tenancy until the date of vacation of the premises. Subject to this overriding aim, the assessing registrar should consider, inter alia, the amount of money Mr Shiok spent on renovating and improving the unit, including the building and removal of the mezzanine floor and the profits from his business conducted therein. I appreciate that a precise measure would not be possible – any evidential difficulties should be resolved in an equitable manner and in the spirit of my judgment.

[emphasis added]

The Judge had thus concluded in the Original Decision that the equity that he found had arisen in favour of Mr Shiok was to be satisfied by an award of compensation designed to restore the parties to the position they would have been in if the Tenancy Agreements had never been entered into, rather than by an order compelling the sale of the Premises to Mr Shiok. The guidance that the Judge gave in this regard contemplated an account being taken of all the losses Mr Shiok made while he was at the Premises and an assessment of what profits he may have made had he conducted his business elsewhere. Although the Judge had invited the parties to come back to him should they have required any clarification, in the event they did not take this up.

Neither party appealed against the Original Decision. It follows that it is no longer open to Lim Contractors to challenge the Judge’s finding that an equity had arisen in favour of Mr Shiok by reason of the Representations. Nor is it open to either party to challenge his decision that this was to be satisfied if at all by an award of equitable compensation with the aim of restoring Mr Shiok to the position he would have been in had he not entered into the Tenancy Agreements. The Judge also ordered Mr Shiok to vacate the Premises within six weeks of the date of the Original Decision, failing which he was to pay Lim Contractors...