Sheng Siong Supermarket Pte Ltd v Carilla Pte Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 14 September 2011
• Neutral Citation: [2011] SGHC 204
• Court: High Court (Singapore)
• Hearing Date: 24 March 2011,25 March 2011,21 March 2011,23 March 2011,22 March 2011,06 April 2011
• Docket Number: Suit No 272 of 2010
• Plaintiff Counsel: Willie Yeo and Lim Chee San (Yeo Marini & Partners)
• Defendant Counsel: Marina Chin (Tan Kok Quan Partnership)
• Subject Matter: Contract
• Published date: 26 September 2011

Andrew Ang J: Introduction and facts

This case concerns the interpretation of a leasehold agreement and whether it is conditional upon the premises being capable of being used for a certain purpose.

The defendant, Carilla Pte Ltd (“Carilla”), purchased a three-storey leasehold property with a land area of about 1417.4 sq metres located at 535 Kallang Bahru, Singapore 339351 (“the Premises”), from Eng Wah Theatres Organization Pte Ltd in September 2008. The reversionary owner of the property is the Housing & Development Board (“the HDB”).

The plaintiff, Sheng Siong Supermarket Pte Ltd (“Sheng Siong”), operates a well known chain of supermarkets, air-conditioned wet markets and food courts. The property was introduced to Sheng Siong by Gabriel Goh Seh Hui (“Gabriel Goh”) of CJ Goh Partnership LLP, who had himself been introduced the property by Jeffrey Lau Chun Wei (“Jeffrey Lau”) of Huttons Real Estate Group, an agent for Carilla.

How the dispute came about

The parties met on 13 October 2008 at Sheng Siong’s office to discuss renting the Premises. They discussed, amongst other things, the following: The viability of setting up a supermarket and food court on the Premises; A potential rental rate of $2.50 per sq ft for three or more years to commence on the issue of the temporary occupation permit; and Necessary addition and alteration works (“A&A works”). It was agreed that Carilla was to take care of all the necessary A&A works and engage its own architects to draw up plans for submission to the HDB and the Urban Redevelopment Authority. Sheng Siong was to be responsible for the interior design and renovation works and daily maintenance of the building.

In November 2008, various e-mails were exchanged between David Teo Kai Lip (“David Teo”), Sheng Siong’s property manager, and Gabriel Goh regarding the rental of the Premises. In particular, an e-mail dated 10 November 2008 from Gabriel Goh to David Teo informed that Carilla was to build “two internal travellators, a sub-station [sic], central air-cons, and a cargo lift to suit the supermarket operations”.

In January 2009, a Main Term Sheet (“MTS”) was drafted by Carilla and translated into Chinese at Sheng Siong’s request. On 12 January 2009, David Teo e-mailed Gabriel Goh stating that Sheng Siong had vetted the draft MTS and had some queries. In particular, with regard to cl 10(b) of the MTS, David Teo wrote:

Please inform/advise the landlord that our co. business is operating supermarket, Air-conditioning wet market and Food Court. The Landlord will need to get approval from the relevant authorities for us to operate the said businesses. In the event, if either one of these business is being rejected or disapproved by authorities, we were [sic] not consider to rent the said premises.

He asked Gabriel Goh to check with “the Landlord” (ie, Carilla) regarding these queries and advise accordingly. Gabriel Goh forwarded this e-mail to Lawrence Leow and Jeffrey Lau of Carilla.

A final version of the MTS was signed by representatives from both Carilla and Sheng Siong on 14 January 2009. Clause 10, titled “Tenant’s responsibilities” reads as follows:

40% of GFA is for retail and 60% GFA is for entertainment, offices, child care, etc. Tenant usage comprises supermarket, wet market, thematic F&B, offices and others.

The final paragraph also states:

All the abovementioned terms shall be incorporated into the standard tenancy agreement (see attachment B) to form the Formal Tenancy Agreement. Both parties shall execute the Formal Tenancy Agreement within 30 days from the date of signing of this Main Term Sheet.

The first draft of the tenancy agreement was produced by Carilla on 8 January 2009 and a second draft was produced on 13 February 2009. A final version was prepared on 6 March 2009 (“the executed Tenancy Agreement”). All versions of the tenancy agreement omit various terms contained in the MTS. Most importantly, cl 10 of the MTS (reproduced at [7] above) which refers to “supermarket, wet market, thematic F&B” usage was omitted. Nevertheless, Annex 1 of the tenancy agreement included a plan of the Premises which, both parties agreed, depicted a supermarket. The Second Schedule similarly contained a list which included a cargo lift, a passenger lift, travellators and escalators consistent with use as a supermarket. Various terms not contained in the MTS were included in the executed Tenancy Agreement. In particular, cl 4 of the executed Tenancy Agreement states:

The Tenant hereby covenants with the Landlord as follows:-

(1) ... (2) Use (a) To use or occupy the Demised Premises only for the purpose(s) specified in item 7 of the First Schedule hereto or for such other purposes as approved by the Landlord from time to time, Provided that all necessary approvals/licences from the relevant authorities shall have been obtained for such use of the Demised Premises.

[emphasis in original]

Also of note, cl 18(1) states:

This Agreement sets out the entire understanding between the parties, is in substitution for all previous agreements between the parties hereto and contains the whole agreement between the parties relating to the subject matter of this Agreement.

At a meeting between the parties on 6 March 2009, Sheng Siong signed and returned the executed Tenancy Agreement to Carilla, along with two cheques: one for $453,210 (ie, a requested 4-month security deposit and money for legal fees) and another for $22,954 to the “Commissioner of Stamp Duties”. Carilla acknowledged receipt of the payments.

A side dispute arose here regarding the signed copy of the executed Tenancy Agreement. Sheng Siong insists that they requested for Jeffrey Lau to return a signed copy to them but that this was not done. However, Michael Leow Chin Huat (“Michael Leow”) disputes this and asserts that a signed copy was enclosed in a letter dated 30 June 2009.

On 11 April 2009, Carilla submitted three sets of plans to the HDB proposing that the first and second storeys be used as a supermarket and the third storey be used as a food court.

On 27 April 2009, the HDB responded to Carilla, rejecting the proposed plans submitted. The day after, on 28 April 2009, Carilla informed Sheng Siong of the HDB’s rejection and suggested that “Supermarket” be renamed “Retail” and the “Multi-Purpose Hall” be renamed “Function Hall”.

On 29 April 2009, David Teo replied to Ching Ngee Yong (“Ching”), from Crescendas (ie, Carilla’s architect), that Sheng Siong could not change the name from “Supermarket” to “Retail”.

On 5 May 2009, Carilla sent the executed Tenancy Agreement for stamping. At some point after this, Carilla asked Sheng Siong to appeal and offered to compose an appeal letter to the HDB on Sheng Siong’s behalf. This was anomalous given that it was for the applicant, Carilla, as the leasehold owner, to appeal to the HDB. Jeffrey Lau handed David Teo the appeal letter dated 20 May 2009 when the two, along with Gabriel Teo, agreed to meet at a hawker centre near Sheng Siong’s office. David Teo returned to his office, rubber-stamped Sheng Siong’s logo on the letter and returned with a list outlining points of appeal that Sheng Siong wished to be conveyed to the HDB which he passed to Jeffrey Lau.

On 1 June 2009, Leow Chin Hai, from Carilla, forwarded to the HDB the list that David Teo passed to Jeffrey Lau. Leow Chin Hai then sent a letter to Sheng Siong informing them that they had forwarded the letter to the HDB, adding that if approval was not granted Sheng Siong would need to amend its proposal to suit the HDB’s requirements. A day later, on 2 June 2009, David Teo responded (in an e-mail to Gabriel Goh) that Sheng Siong was unable to accept an amendment of proposal to suit the HDB’s requirements.

On 9 June 2009, the HDB replied with another rejection that “supermarket use” was not acceptable, with a suggestion to “reconsider other uses” like that of a “hotel or hostel”.

On 15 June 2009, with the 9 June 2009 reply from the HDB enclosed, Carilla informed Sheng Siong that they were to “adjust [its] operation at the Premises so as to be in line with the usage as allowed by HDB”.

On 28 June 2009, Lim Hock Chee (“Lim”), Sheng Siong’s managing director and Michael Leow spoke over the telephone. Lim alleged that Michael Leow assured him that he would look into the matter of the HDB approval. Pursuant to this conversation, Lim sent a letter to Michael Leow to follow up, detailing their conversation. Two days later, on 30 June 2009, Michael Leow sent Sheng Siong a reply informing that: Sheng Siong was to liaise with the HDB directly regarding its concern; refusal to comply with the HDB’s requirement and the executed Tenancy Agreement would result in Sheng Siong owing Carilla additional “holding cost”; and if Sheng Siong failed to respond, Sheng Siong would lose “all monies [paid to Carilla] relating to the lease of the Premises”.

A few months later, on 27 August 2009, Lim sent a letter to Michael Leow agreeing to a change of name to “Retail”, albeit provided that they would be able to use the Premises for a supermarket and food court. He also asked Carilla to appeal to the HDB on Sheng Siong’s behalf.

There is no evidence of any communications between the parties in the week or so between this (ie, 27 August 2009) and when Sheng Siong began legal proceedings on 4 September 2009. Its claim in these proceedings is for: the return of the security deposit of $450,000 and the legal fee of $3,210 paid to Carilla for the lease or, alternatively, for damages to be assessed; reimbursement of the stamp duty of $22,954 paid to the Inland Revenue Authority of Singapore; interest on the sum of $453,210 from 27 April 2009 (ie, the date that the HDB rejected the application for change of use) at such rate and for such period the court thinks fit; costs on an indemnity basis;...