Top Ten Entertainment Pte Ltd v Lucky Red Investments Ltd

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• Judge: Chao Hick Tin JA
• Judgment Date: 15 September 2004
• Neutral Citation: [2004] SGCA 43
• Citation: [2004] SGCA 43
• Defendant Counsel: Peter Pang (Peter Pang and Co)
• Plaintiff Counsel: Michael Hwang SC and Ginny Chew (Allen and Gledhill)
• Published date: 22 September 2004
• Docket Number: Civil Appeal No 137 of 2003
• Date: 15 September 2004
• Subject Matter: Hiring charges not reflective of value of inventory,Whether hiring charges designed to defraud revenue authority,Whether tenant entitled to recover hiring charges on basis that it was not in pari delicto with landlord,Evidence,Whether judge gave sufficient weight to contemporaneous documentary evidence,Whether tenant entitled to recover hiring charges as money paid under mistake of law,Apportionment of rental for rent of premises and hiring charges,Admissibility of evidence,Documentary evidence,Rent and service charges,Hearsay,Whether lease agreements amounting to illegal contracts,Landlord and Tenant,Whether judge relying on hearsay evidence,Apportionment

15 September 2004

Chao Hick Tin JA (delivering the judgment of the court):

1 The dispute which gave rise to this action concerned a number of tenancy agreements which the appellant, Top Ten Entertainment Pte Ltd (the tenant) and the respondent, Lucky Red Investment Ltd (the landlord) had entered into. The High Court (see [2004] 2 SLR 199) refused the appellant’s claim for a refund of certain hiring charges which it had paid to the respondent. On the other hand, the court allowed the respondent’s counterclaim against the appellant for certain arrears of rent. Being dissatisfied with both these decisions, the appellant appealed to us. After hearing the parties on 29 July 2004, we dismissed the appeal as regards the hiring charges but allowed the appeal as regards the arrears of rent. The result of this partial success was that the appellant would not be required to pay the respondent the alleged arrears of rent. We now give our reasons.

The facts

2 The respondent, a Hong Kong company, was at all material times the owner of the premises known as #04-35/36 and #05-18A Orchard Towers located at 400 Orchard Road, Singapore 238875 (“the premises”). The appellant, a Singapore company, was the tenant of the premises from December 1984 and was using the premises to operate a discotheque. The man behind the appellant was one Mr Peter Bader (“Bader”), its managing director.

3 From December 1984, the appellant had occupied the premises pursuant to seven tenancy agreements, the particulars of which were as follows:

	Date of Agreement	Rental for premises ($)	Hiring charges ($)	Overall rental ($)	Note
1	1/12/84 –1/12/87	28,000	4,000	32,000	Landlord: Premier Theatre
2	1/12/87 –1/12/90	33,800	4,600	38,400	Landlord: Lucky Red
3	1/12/90 –30/11/93	46,000	9,400	55,400
4	1/12/93 –30/11/94	58,000	12,000	70,000
5	1/12/94 –30/11/97	58,000	12,000	70,000	No written lease but agreement to proceed on terms of previous lease.
6	1/12/97 –20/11/00	55,000	15,000	70,000	Lease by way of letter from Lucky Red to Top Ten
7	1/12/00 – 30/11/03	51,000	11,000	62,000	Landlord: Leivest

4 As can be seen from the table above, from the very first tenancy agreement, the rent payable was divided into two components. One component was attributed to be for the rent of the premises and the second for the hiring of furniture and fittings. There was an inventory of furniture and fittings which was set out in a schedule to each tenancy agreement. The inventory included, inter alia, an air-conditioning plant, stage and electrical fittings.

5 We should add that when the appellant first became the tenant of the premises, the respondent was not yet the owner thereof. The respondent ceased to be the owner of the premises on 12 March 2002. But nothing in the action, or in the appeal before us, turned on this.

6 By the time the third tenancy agreement was entered into in 1990, many of the items listed in the inventory in the first tenancy agreement had either been discarded or could not be used. Notwithstanding that, the inventory attached to that and subsequent tenancy agreements remained the same and continued to list such items.

7 The issues in this appeal concerned mainly the sixth tenancy agreement covering the period 1 December 1997 to 30 November 2000. The total monthly rent payable was $70,000, with $15,000 being specified as hiring charges.

8 In 1998, this region was embroiled in a financial crisis which adversely affected business generally. Thus, Mr Loi Kai Meng (“Loi”), who effectively owned the respondent company, agreed initially, pursuant to a request by Bader, to reduce the overall rent per month from $70,000 to $65,000 until the end of 1998. However, because of the worsening business environment, Loi wrote on 24 February 1999 to give a further reduction to the appellant. He stated:

Owing to the economic crisis, we have agreed to accede to your request and reduce the rental temporary [sic] to S$58,000 per month from 1^st January 1999 to 30^th June 1999.

From 1^st July 1999, the rental would revert back to the original amount of $70,000 per month as per the Tenancy Agreement dated 1 August 1996.

In this respect, [we] would appreciate [it] if you could let us have the shortfall of $4,000 for January 99’s rental to be included in the February 99’s rental cheque.

9 It would appear that subsequently, there were conversations between Bader and Loi. According to Bader, Loi agreed to set the overall monthly rent at $56,000 instead of $58,000 and also to apply the reduced rent until the end of the then current term, ie, end November 2000. Loi disputed this assertion. He said that while he did later in 1999 orally agree to extend the reduction in rent up to December 1999, he did not agree to apply the reduction up to November 2000.

10 Be that as it may, the appellant continued to pay only the sum of $56,000 for the months from January to June 2000. Moreover, notwithstanding the fact that the appellant was always late in its payment of rent, the respondent never raised with the appellant the fact that the payments made by the appellant for the first months of 2000 were short. On 6 September 2000, even when the respondent wrote expressing its dissatisfaction with the appellant being persistently late in making payment, and at that point the July and August 2000 rent had yet to be paid, the respondent merely warned the appellant of its intention to repossess the premises. No mention was made of any shortfall.

11 On 8 September 2000, the appellant replied to the respondent as follows:

Please note that we have always paid rent on a monthly basis. We have omitted the payment in April and June 1999, this must have been due to an oversight.

I would like to recall our conversation regarding the rental reduction you have allowed us to take place from June 1999 onwards until the expiry of the existing contract.

Since then until the expiry of the present lease agreement, you have allowed us to pay S$56,000 instead of S$70,000 per month.

As for repossession of the premises you seem to forget that we have a Rental Agreement starting the same day the present agreement ends. You did sign the agreement and it has been engrossed with stamp duty paid. [This was a reference to the seventh tenancy agreement which had been executed in August 1998.]

…

Therefore, we will continue to occupy the premises as agreed. And continue to pay the rent.

12 On 19 September 2000 Loi replied to the appellant as follows:

We refer to the rental of the above premises and note the September rental is still outstanding.

We have agreed to rental reduction from $70,000 to $58,000 from January 1999 to June 1999, however to assist you further during the economic crisis, we extended the period of reduction to December 1999. However, we note you have been paying us rental of $56,000/month for period January 1999 to December 1999.

The rental reduction will no longer apply and has to revert back to $70,000/month with effect from January 2000. However, again, we note you have paid only $56,000/month. In this respect, we need to meet to resolve the issue and review the Tenancy.

Meanwhile, please bear in mind rental for the premises is due and payable by the 8^th of each month and appreciate you pay us September 2000 rental of $70,000 promptly.

13 Bader gave a rejoinder on 22 September 2000:

It is with regret and disappointment to note that our relationship is turning sour. What a shame. After more than 15 years since December 1984 as your loyal tenant and friend.

…

You told me more than once that the [r]ental reduction will be in place until the end of this [t]enancy agreement. I am surprised to find that you now all of the sudden change your mind and want the full [r]ental again. This amounts to you reneging on your agreement which is not right.

We shall continue to pay as agreed the amount of $56,000 until the end of November and from then on the [r]ental agreed in the [seventh] Tenancy Agreement.

14 On the respondent’s reckoning then, the appellant owed arrears of rent amounting to some $186,000. On 12 September 2001, the respondent’s solicitors demanded payment of the same. Part of the outstanding rent was paid. On 12 March 2002, Leivest International Pte Ltd (“Leivest”) became the new owner of the premises. Disputes arose between the new owner and the appellant. An action was instituted by Leivest, followed by a counterclaim by the appellant. Leave was then obtained to make the respondent a party to those proceedings. Happily, the disputes between the appellant and Leivest were settled, leaving outstanding two issues which concerned only the appellant and the respondent. First was the appellant’s claim for a refund of the hiring charges (subject only to the limitation period) on the ground that the hiring charges were paid pursuant to an illegal transaction. Second was the respondent’s claim for the shortfall of the rental paid in respect of the period January to November 2000.

15 As indicated at the outset, the appellant’s claim for a refund of the hiring charges was rejected. However, the respondent’s claim for the shortfall in rent was allowed by the court below. The appellant thus appealed to us in respect of both these orders which were not in its favour.

Hiring charges

16 The appellant alleged that the apportionment of the overall rent payable under each of the tenancy agreements into two components, the rent for the premises and the hiring charges for furniture and fittings, was designed to distort revenue as it would mean that the respondent would pay less for property tax. The respondent had submitted its return to the revenue authority in the same manner. The appellant emphasised the fact that the amount allocated for hiring charges had no relation at all to the nature, value or quantity of the furniture and fittings provided by the respondent. There was no stock-taking at the time...