Mcdonald's Rest Restaurants Pte Ltd v Wisma Development Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 26 December 2001
• Neutral Citation: [2001] SGHC 375
• Court: High Court (Singapore)
• Published date: 18 March 2013
• Year: 2001
• Plaintiff Counsel: Margaret George (Koh Ong & Partners)
• Defendant Counsel: Mirza Namazie and Chua Boon Beng (Mallal & Namazie)
• Citation: [2001] SGHC 375

Judgment

GROUNDS OF DECISION

1. The defendants, Wisma Development Pte Ltd, who leased their property at Wisma Atria, Orchard Road, to the plaintiffs, McDonald’s Restaurants Pte Ltd, and who agreed that the rent for an extension of the lease for another four years would be fixed on the basis of the average of the rental valuation by two appointed valuers less ten per cent, sought, inter alia, a declaration to set aside the rental valuation by one of the valuers. I dismissed Wisma’s application and now give the reasons for my decision

Background

2. The facts, shorn of details for present purposes, are as follows. Wisma Development Pte Ltd ("Wisma") entered into a number of agreements to lease their property at Wisma Atria ("the premises") to McDonald’s Restaurants Pte Ltd ("MD") over a period of 16 years with effect from August 1989. Before the third four-year term of the lease expired on 27 August 2001, MD exercised their option to lease the premises for a fourth four-year term. Initially, Wisma took the view that the lease had not been validly extended for a fourth four-year term but they subsequently accepted the validity of this extension of the lease. However, Wisma and MD could not agree on the monthly rent for the fourth four-year term of the lease.

3. The parties foresaw that there could be a deadlock on the determination of the prevailing market rent for the extension of the lease and the tenancy agreement provided a mechanism for breaking the impasse. Clause 17 of the relevant tenancy agreement provided as follows:

If the parties are unable to agree, the prevailing market rent shall be determined by two (2) international valuers, one to be appointed by each party …. If the valuers cannot agree on a joint valuation the average of the valuations submitted by the valuers shall be the prevailing market rent and shall be final conclusive and binding on the parties and shall not be called into question in any Court or be the subject matter of any review or appeal.
(emphasis added)

4. It was further agreed that if the parties could not agree on the rent payable for the premises during the fourth four-year extension of the lease, the rent payable shall be the prevailing market rent as determined in accordance with clause 17 less ten per cent.

5. Wisma appointed DTZ Debenham Tie Leung (SEA) Ltd ("DTZ") to determine the prevailing market rent of the premises while MD appointed Knight Frank Pte Ltd ("Knight Frank’) to do the same. Problems arose with respect to the basis on which the monthly rent of the premises was to be valued. MD thought that the prevailing market rent should be computed on the basis that the lease provided that the premises shall not be used otherwise than as a McDonald’s fast food restaurant. On the other hand, Wisma insisted that the prevailing market rent should be computed without taking into account any restriction on the use of the premises.

6. On 9 March 2001, DTZ valued the prevailing market rent of the premises at $55 per square foot per month without taking into account the restricted use of the premises. In contrast, on 27 March 2001, Knight Frank, after taking into account the fact that the terms of the lease prohibited MD from using the premises in any manner other than as a McDonald’s fast food restaurant, valued the prevailing market rent of the premises at $34 per square foot per month.

7. On 28 August 2001, Judicial Commissioner Tay Yong Kwang ordered that the term "prevailing market rent" in clause 17 of the fourth tenancy agreement be determined without having regard to the fact that the premises shall not be...