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

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 22 April 2013
• Neutral Citation: [2013] SGHC 84
• Court: High Court (Singapore)
• Docket Number: Suit No 844 of 2011
• Published date: 03 July 2013
• Year: 2013
• Hearing Date: 27 February 2013,19 March 2013,29 January 2013,28 January 2013,30 January 2013
• Plaintiff Counsel: William J M Ricquier and Alvin Ong (Incisive Law LLC)for the plaintiff
• Defendant Counsel: Tan Yew Fai (Y F Tan & Co)
• Subject Matter: Contract,Contractual Terms,Express Terms,Breach,Remedies,Damages,Loss of Chance
• Citation: [2013] SGHC 84

Andrew Ang J:

This claim and counterclaim originated from a sub-lease agreement (“the Sub-lease”) between the plaintiff, MK Distripark Pte Ltd (“MKD”) and the defendant, Pedder Warehousing & Logistics (S) Pte Ltd (“Pedder”) in respect of 3A Jalan Terusan, MK Distripark, Singapore 619302 (“the Premises”). As the Premises were owned by the Jurong Town Corporation (“JTC”), the continuation of the Sub-lease 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 Sub-lease of 12 months. Any such extension of initial approval was to be on terms “no less favourable” than those contained in the Sub-lease. 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 Sub-lease. Following such refusal, MKD brought action against Pedder for breach of the Sub-lease and this led to MKD treating the Sub-lease as forfeited.

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 CA 20 of 2013) and judgment for the counterclaim.

Factual background

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”).

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 Sub-lease. On 11 January 2011, MKD issued a letter of offer to Pedder for a sub-lease of the Premises for a period of 49 months, 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.

The structure of the Sub-lease was not straightforward. As the Premises were owned by JTC, they were subject to strict subletting policies. It was ultimately for Mapletree, as the head tenant, to apply for permission for MKD to sublet the Premises. There were therefore two layers of consent: Mapletree’s consent and decision to apply to JTC; and 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 term of 49 months. It should be noted at the outset that Mapletree’s consent to the continuation of the Sub-lease was not to be unreasonably withheld (see cl 3.19.2 of the MKD Lease) and that there was no serious suggestion throughout the trial that Mapletree had any intention to withhold consent. Both parties had proceeded on the basis that Mapletree’s consent was more of a formality and it was only during the hearing of further submissions on the counterclaim that counsel for MKD suggested that Mapletree’s consent was an additional wild card to be added to the mix.

In-house legal counsel for MKD, Loh How Yee (“Loh”), sent Pedder a draft Sub-lease on 25 January 2011, and Mapletree simultaneously applied to JTC for consent for the Sub-lease. JTC met with both MKD and Mapletree on 4 March 2011 (“the Tripartite Meeting”). JTC indicated during that meeting that a sublet of 100% of the Premises could be approved for a year, but would be subject to review and approval after the first year. After this meeting, MKD and Mapletree began to explore different options to ensure that the full term of the Sub-lease could be secured.

To this end, Loh furnished a document labelled “Lease of 3A, Jalan Terusan” to Mapletree on 9 March 2011. This document contained a proposed lease to Pedder, where Pedder would be put into a direct landlord-tenant relationship with Mapletree under a new lease agreement. This document further outlined the salient points of the proposed agreement between Mapletree and MKD as follows: 1. [T]o suspend the Original Lease Agreement. 2. MKD to pick up the difference between Original [sic] Lease Agreement and New Lease Agreement. 3. If New Lease Agreement with Pedder is terminated: a) To re-activate Original Lease Agreement; b) Mapletree to assign to MKD the right of Landlord against Pedder under New Lease Agreement. 4. MKD shall continue to have the option to renew for further 7 years under Clause 6.14 of Original Lease Agreement.¹

Mapletree did not respond to this proposal until 14 March 2011, by which time it had already received informal approval from JTC for 100% subletting to Pedder for a year (from 1 April 2011 to 31 March 2012). Mapletree thus suggested that MKD proceed with the Sub-lease for 49 months, subject to review after the expiration of JTC’s consent. JTC’s consent was formally given to Mapletree by way of a letter dated 25 March 2011.

On 29 March 2011, MKD sent another draft Sub-lease to Pedder which included a new clause, cl 2A which read as follows:

2A. TENURE
First JTC Approval	(a) Pursuant to Letter of Approval from JTC dated 25 March 2011 reference no: JTC(L)6117/32, approval has been given to the subletting period of one year from 1 April 2011 to 31 March 2012 for the entire gross floor area (“GFA”) of the Premises.
Subsequent JTC Approval
	(b) According to the present JTC handbook on subletting, there will be a 50% subletting cap on GFA with effect from 1 January 2012. The Lessor will use its best endeavour [sic] to obtain approval from JTC to continue to lease the 100% GFA of the Demised Premises to Lessee, or as much GFA of the Demises [sic] Premises as allowed by JTC.
Other arrangement	(c) In the event Lessor is able to procure the continue [sic] lease of the Demised Premises to Lessee on no less favourable terms and conditions than this Lease Agreement, Lessee shall be obliged to lease the entire Demised Premises or as much of the GFA of the Demised Premises as Lessor shall be able to arrange until the end of the Lease on 30 April 2015, and the Lessee hereby undertake [sic] to do such acts and sign such documents as may be necessary for such purposes. FOR AVOIDANCE OF DOUBT, the aforesaid arrangement by Lessor shall include but not limited to arranging for Lessee to execute a lease agreement directly with Mapletree or such other party necessary to affect the lease of the Demised Premises to Lessee.2

Pedder’s General Manager and the contact person for Pedder at the material time, Thean Siew Yong (“Pauline”), agreed to the inclusion of cl 2A in an e-mail dated 30 March 2011.³ The Sub-lease was signed by Pedder’s director, Ang Hock Chuan (“Ang”), at 2.30pm at MKD’s office premises in Great World City.

After the Sub-lease was signed, MKD continued to explore options to ensure the full term of the Sub-lease. On 1 April 2011, a meeting between MKD, Mapletree and JTC took place, where the idea of novating the MKD Lease to Pedder was mooted. Thereafter, Mapletree began to draft a novation agreement. Mapletree sent a draft of the Supplemental Deed for novation (“the Supplemental Deed”) to MKD on 31 May 2011.

The Supplemental Deed was forwarded to Pauline on 15 June 2011. According to Pauline, this was the first time novation had been mentioned to Pedder.⁴ The Supplemental Deed was a tripartite agreement between Pedder, MKD and Mapletree, and provided generally that Pedder take over the rights and obligations of MKD under the MKD Lease.

A draft of a further deed between MKD and Pedder was prepared (“the First Deed”), in which it was stated at cl 1(a) that MKD “shall be responsible for the balance obligations”⁵ under the MKD Lease. It was later clarified in an e-mail dated 27 August 2011 from Loh to Pedder that those “balance obligations” included “any terms under the [Mapletree–MKD] Lease that is [sic] more onerous than the MKD-Pedder Lease”.⁶ A copy of the MKD Lease was also given to Pedder for their perusal.

Pedder took time to discuss the draft Supplemental Deed and First Deed (collectively, “the Novation Agreements”) and the MKD Lease with its legal consultant and shareholders. On 26 August 2011, counsel for Pedder, Mr Tan Yew Fai (“Tan”), wrote to MKD to inform MKD that Pedder was “unable to execute the Novation Agreements and/or to proceed with the same” as “[t]he Tenant’s obligations under the Main Lease are much more onerous than the same under the Sub-Lease”.⁷

MKD persevered with trying to obtain Pedder’s agreement to the Supplemental Deed and the First Deed. This was ultimately unsuccessful. On 14 September 2011, Pauline wrote:

… Pedder’s position has already been stated in the letters by YF Tan (Pedder’s solicitor) to MKD i.e.: i. Pedder is not signing Novation Agreements; and ii. MKD to obtain approval from JTC and Mapletree for Pedder’s continue [sic] occupation under the SUB-LEASE.⁸

On 7 October 2011, MKD issued a notice to Pedder pursuant to s 18(1) of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed), alleging breach of cl 2A(c) of the Sub-lease, which obliged Pedder to agree to any arrangement for continued subletting of the Premises to Pedder if the terms and conditions were no less favourable than those set out in the Sub-lease. MKD claimed that, by failing to sign the Novation Agreements, Pedder had breached its obligations under cl 2A(c), and MKD was entitled to treat the Sub-lease as forfeited. A final notice to remedy the alleged breach was issued by MKD on 2 November 2011.

On 9 November 2011, MKD returned the rental sum of $173,765.86 paid by Pedder for the month of October, pursuant to...