MK Distripark Pte Ltd v Pedder Warehousing & Logistics (S) Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 22 April 2013
• Date: 22 April 2013
• Docket Number: Suit No844 of 2011
• Court: High Court (Singapore)

MK Distripark Pte Ltd

Plaintiff

and

Pedder Warehousing & Logistics (S) Pte Ltd

Defendant

[2013] SGHC 84

Andrew Ang J

Suit No844 of 2011

High Court

Contract—Breach—Sublease clause obliged lessee to accept continued sublease if terms were ‘no less favourable’ than original sublease—Lessee refused to sign novation agreement—Whether this was breach of sublease

Contract—Contractual terms—Express terms—Continuation of sublease subject to approval of Jurong Town Council on terms ‘no less favourable’ than original sublease—Landlord proposed novation agreement and agreed to ‘pick up’ balance obligations under head tenancy—Whether novation agreement was on terms ‘no less favourable’ than original sublease

Contract—Remedies—Damages—Loss of chance—Lessor did not apply for requisite approval—Lessee lost chance to continue sublease—Whether damages were recoverable for loss of chance to continue sublease—How such loss was calculated

This claim arose from a sublease of premises (‘the Sublease’) used for warehousing (‘the Premises’). The Premises were the subject of a Jurong Town Corporation (‘JTC’) lease held by Mapletree Logistics Trust (‘Mapletree’) via its agent. The Premises were let to the plaintiff, MK Distripark Pte Ltd (‘MKD’) (‘the MKD Lease’). MKD sublet the Premises to the defendant, Pedder Warehousing & Logistics (S) Pte Ltd (‘Pedder’). The 49-month Sublease was to be renewed annually upon obtaining JTC approval. Under cl 2A (c) of the Sublease, Pedder was obliged to continue the Sublease if the new terms were ‘no less favourable’ than the original terms of the Sublease.

After the Sublease was signed on 30 March 2011, MKD negotiated with Mapletree and JTC to novate the MKD Lease in favour of Pedder. This would dispense with the need to get JTC approval year after year. A supplemental deed (‘Supplemental Deed’) between Mapletree, MKD and Pedder for the novation was forwarded to MKD. As the MKD Lease was more onerous than the Sublease, MKD prepared a further deed (‘the First Deed’) whereby it undertook to be ‘responsible for the balance obligations’. Under cl4.5 of the Supplemental Deed, MKD and Pedder would jointly and severally indemnify Mapletree against all liabilities, costs, expenses, claims, obligations, damages and losses arising out of or in connection with the MKD Lease. MKD did not apply to JTC for approval to renew the Sublease.

Pedder refused to sign the Supplemental Deed and First Deed on the ground that the terms and conditions under the MKD Lease were more onerous than those under the Sublease. MKD alleged that this was a breach of cl 2A (c) of the Sublease, which obliged Pedder to accept the novation. MKD sued Pedder for repudiation of the Sublease. Pedder counterclaimed that MKD's failure to apply to JTC for approval to renew the Sublease was a breach of MKD's contractual obligations and resulted in the loss of a chance to continue the Sublease. Pedder vacated the premises on 3 April 2012, after the first year of the Sublease expired.

Held, dismissing the claim and allowing the counterclaim:

(1) Pursuant to cl4.5 of the Supplemental Deed, Pedder would be fully liable to Mapletree for ‘all liabilities, costs, expenses, claims, obligations, damages and losses’ incurred by MKD prior to the date of the Supplemental Deed. This increased Pedder's risk exposure and was more onerous. Pedder could only claim a contribution from MKD under a separate agreement. Without the separate agreement between MKD and Pedder, Pedder could still seek a contribution from MKD under ordinary common law principles. A separate agreement could not change the effect of cl4.5 of the Supplemental Deed: at [29].

(2) The test for whether MKD used ‘best endeavours’ to obtain JTC approval for continuation of the Sublease pursuant to cl 2A (b) of the Sublease was an objective one. Clause 2A (b) specifically stated that JTC approval was to be sought for continuation of the Sublease. The meaning of ‘best endeavours’ included at least an application to JTC for its approval for a continued Sublease: at [35], [36] and [38].

(3) The fact that a loss of chance could not be easily quantified did not make the existence of the loss uncertain. Loss of a chance as a compensable head of damage applies where the object or purpose of the agreement or clause breached was the chance being claimed. The object of cl 2A (b) was to give Pedder a chance to continue the Sublease. Accordingly, damages sounded for a loss of a chance to continue the Sublease: at [42], [48], [50] and [51].

(4) The test for determining if the loss of chance doctrine applied was two-fold: (a) whether the breach caused the loss of a chance; and (b) whether the chance lost was a real and substantial one. So long as the chance to gain JTC approval for the Sublease was a real and substantial chance, it did not matter that Pedder's chance of obtaining JTC approval was not proven on a balance of probabilities. A real and substantial chance was a chance which was more than speculative; it could even be rated at or below a 50% chance. There was a real chance that JTC approval would be given as this possibility was provided for in JTC's subletting policy: at [54], [55], [56], [58] and [59].

(5) Damages for the loss of a chance to continue the Sublease were calculated as a percentage of the standard measure for general loss of the Sublease, viz, the rental value of the Premises less the contractual rent which would have fallen to be paid in the future multiplied over the unexpired term. The percentage probability was compounded annually. The lack of evidence of the percentage probability of obtaining JTC approval for the continued Sublease was not a bar to calculating the quantum of damages. The chances of approval were more than fair for a continued Sublease of 50% of the gross floor area of the Premises. This was rated at 60%. The rental value was the monthly rent paid by the new tenant plus property tax and JTC land rent which the new tenant was liable for. Under the Sublease, property tax and JTC land rent was borne by the landlord. Damages for the loss were $626,657.71: at [61], [62], [65], [68], [69] and [72].

ABC Supermarket Pte Ltd v Kosma Holdings Pte Ltd [2005] SGHC 44 (refd)

Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 (refd)

Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd [2005] 1 SLR (R) 661; [2005] 1 SLR 661 (folld)

Chaplin v Hicks [1911) 2 KB 786 (folld)

Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR (R) 594; [2004) 2 SLR 594 (refd)

Justlogin Pte Ltd v Oversea-Chinese Banking Corp Ltd [2007] 1 SLR (R) 425; [2007) 1 SLR 425 (refd)

Mc Rae v Commonwealth Disposals Commission (1951) 84 CLR 377 (refd)

Raffles Town Club Pte Ltd v Tan Chin Seng [2005] 4 SLR (R) 351; [2005) 4 SLR 351 (refd)

Straits Engineering Contracting Pte Ltd v Merteks Pte Ltd [1995] 3 SLR (R) 864; [1996) 1 SLR 227 (folld)

Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) s18 (1)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 20 r8

William J M Ricquier and Alvin Ong (Incisive Law LLC) for the plaintiff

Tan Yew Fai (Y F Tan & Co) for the defendant.

Judgment reserved.

Andrew Ang J

1 This claim and counterclaim originated from a sublease agreement (‘the Sublease’) between the plaintiff, MK Distripark Pte Ltd (‘MKD’) and the defendant, Pedder Warehousing & Logistics (S) Pte Ltd (‘Pedder’) in respect of 3AJalan Terusan, MK Distripark, Singapore 619302 (‘the Premises’). As the Premises were owned by the Jurong Town Corporation (‘JTC’), the continuation of the Sublease to the full term of 49 months was subject to MKD's procurement of JTC's approval for an extension of the initial approval for the Sublease of 12 months. Any such extension of initial approval was to be on terms ‘no less favourable’ than those contained in the Sublease. Pedder refused a novation arrangement MKD proposed whereby Pedder would take over from MKD the lease which the latter had of the Premises on the ground that the terms procured for this arrangement were less favourable to Pedder than those under the Sublease. Following such refusal, MKD brought action against Pedder for breach of the Sublease and this led to MKD treating the Sublease as forfeited.

2 I decided as a preliminary point that there was no merit to the main claim and proceeded to hear the counterclaim. I now give the grounds for my decision in the main claim (which is the subject of an appeal by MKD in Civil Appeal No20 of 2013) and judgment for the counterclaim.

Factual background

3 The Premises were, at all material times, the subject of a JTC lease held by HSBC Institutional Trust Services (Singapore) Limited as trustee of Mapletree Logistics Trust (‘Mapletree’). Mapletree entered into a lease with MKD on 2 May 2008 to let the Premises for a term of seven years (‘the MKD Lease’).

4 After about two and a half years, MKD found that it was no longer profitable for it to continue the MKD Lease, and it sought to sublet the Premises for the remainder of the seven year term. Accordingly, MKD began negotiating with Pedder for the Sublease. On 11 January 2011, MKD issued a letter of offer to Pedder for a sublease of the Premises for a period of 49months, from 1 April 2011 to 30 April 2015, subject to the necessary approvals from JTC and all other relevant government authorities. Pedder countersigned the letter of offer on 12 January 2011.

5 The structure of the Sublease was not straightforward. As the Premises were owned by JTC, they were subject to strict subletting policies. Itwas ultimately for Mapletree, as the head tenant, to apply for permission for MKD to sublet the Premises. There were therefore two layers of consent:

(a) Mapletree's consent and decision to apply to JTC; and

(b) JTC's approval allowing the Premises to be sublet to Pedder.

As a result, there was no guarantee that 100% of the Premises could be let for the full...