2 May, 2017
INTRODUCTION
In the recent Singapore High Court (“HC”) decision of iHub Solutions Pte Ltd v Freight Links Express Logisticentre Pte Ltd [2017] SGHC 6, the tenant looked for and acquired new premises in view of the uncertainty of the negotiations with the landlord to renew the tenancy of the original premises. Due to disputes arising from the negotiations, the tenant claimed damages against the landlord for breach of certain implied terms relating to the renewal. A key issue in this case was whether the tenant was entitled to damages associated with its acquisition of and operations at the new premises, when unusually, the tenant continued to use the original premises even after acquiring the new premises.
This article examines the grounds for the HC’s rejection of the tenant’s claim in damages.
FACTS
The Defendant, Freight Links Express Logisticentre Pte Ltd, let the Plaintiff, iHub Solutions Pte Ltd, use some warehouse space on the second and third floors of the Property at 51 Penjuru Road, Singapore (“ Original Premises
”) under a Service Agreement (“SA”). The Defendant also provided automated storage and retrieval services (“ASRS”) to the Plaintiff. The initial duration of the SA was until 30 October 2008 and the SA was subsequently extended for 2 years and then for a further 3 years until 31 October 2013. The Plaintiff had the option to renew the SA for another 3 years with an increase in service charge capped at $0.902 psf.
The Plaintiff gave notice to renew for a further 3 years from 1 November 2013 to 31 October 2016, more than 6 months prior to the expiry of the term. The Defendant however did not confirm this renewal within a reasonable time. The Defendant instead attempted to hinder the Plaintiff in its operations by restricting car park spaces for the Plaintiff, requiring the Plaintiff to stop parking its lorry in the Original Premises with immediate effect and by parking a container on purpose which obstructed the Plaintiff’s access to the Original Premises, amongst others (“acts of hindrances”).
This was aimed at strong arming the Plaintiff to pay a higher service charge than was previously agreed upon.
These tactics made the Plaintiff uncertain as to whether the Defendant would indeed grant the extension and as a result, the Plaintiff began a search for new premises. Subsequently, the Plaintiff acquired new premises (“New Premises”) in early September 2013.
Shortly after, the Defendant responded offering a renewal of the Original Premises but also informed the Plaintiff that they would not be renewing the ASRS unlike in all previous terms. The Plaintiff was unable to accept this term, leading to a series of letters between the solicitors of both parties.
Simultaneously, the Plaintiff started moving some of its goods to the New Premises by mid-September and signed a formal agreement for the New Premises on or about 16 October 2013. In December 2013, the Defendant offered the Plaintiff a Sub-Tenancy Agreement instead of the usual service agreement. After negotiation on the Sub-Tenancy Agreement, the Sub-Tenancy Agreement was signed by the parties and dated 9 December 2014.
ISSUES
The two primary issues were: (1) whether there were implied terms of expeditious renewal and quiet enjoyment; and (2) whether the Defendant was in breach of these terms, and if so, the damages payable.
DECISION
(1) Implied terms
The HC found that there was an implied term for the Defendant to confirm the renewal as long as the Plaintiff gave at least 3 months’ notice, and there was no subsisting breach by the Plaintiff of the SA.
The HC also found that the SA was in substance a tenancy agreement and as such, there was an implied term of quiet enjoyment for the Plaintiff.
(2) Breach and damages payable
The Defendant argued that it had not breached the implied term of expeditious renewal as the issue of expeditious renewal should only be taken from 30 July 2013 (3 months before expiry of the SA) and not from the date the Plaintiff gave the notice to renew (23 April 2013) due to the term in the SA requiring the Plaintiff to provide not less than three (3) months’ notice to renew. The HC, however, held that while the notice was to be given not less than 3 months before, it could have been given earlier. In addition, the HC highlighted that the Defendant had shown no genuine attempt at taking steps towards confirming the renewal in the meantime. The Defendant had not taken reasonably expeditious steps to confirm the renewal and as such had breached the implied term to act reasonably expeditiously in confirming the renewal.
The HC also found that the acts of hindrances constituted a breach by the Defendant of the Plaintiff’s implied term of quiet enjoyment. As the concept of quiet enjoyment must be viewed holistically, the HC rejected the Defendant’s argument that the acts of hindrances, which affected the Plaintiff’s use of the common property, should be confined to the direct use of the Original Premises.
Notwithstanding the Defendant’s breaches, the HC held that the Plaintiff was not entitled to claim damages for various costs associated with the New Premises as these premises were actually additional, and not alternative, premises. In this regard, the HC noted that the Plaintiff had taken legally incompatible courses of action by choosing not to terminate the SA, while obtaining the use of the Original Premises. The Plaintiff could not both affirm the SA and make a claim for damages for the Original Premises as if it had terminated the SA.
Moreover, if the Plaintiff were permitted to remain at the Original Premises, the Defendant would be penalised twice because the Defendant would have to pay the Plaintiff the sum in damages on top of losing the difference between the market rate and the maximum agreed rate. The Plaintiff would therefore have enjoyed a windfall as a result at
the Defendant’s expense.
The HC rejected the Plaintiff’s contention that the Defendant would have forced the Plaintiff to return to the Original Premises if the Plaintiff terminated the SA and moved out of the Original Premises. The HC found that the Plaintiff could have asserted its legal rights against the Defendant by, for example, putting the Defendant on notice that if the acts of hindrances did not stop it would seek an injunction against the Defendant to prevent them from committing such acts. Also, if the Defendant’s failure to confirm the renewal was destabilising the business of the Plaintiff, the Plaintiff could have put the Defendant on notice that it would be seeking a court order for that purpose.
An important finding by the HC was that although the Plaintiff was unhappy about the Defendant’s conduct, the Plaintiff failed to notify the Defendant in writing or otherwise at the material time about its intention to seek the New Premises if the Defendant did not immediately cease the acts of hindrances and confirm the renewal. The HC rejected the Plaintiff’s contention that such a course of action could have encouraged the Defendant to “continue or even increase the frequency and intensity of the hindrances” as the Plaintiff should have put the Defendant on notice and require the Defendant to stop such acts.
1 Although the HC recognised that the Plaintiff was entitled to keep its plans to acquire the New Premises to itself, the Plaintiff was not entitled to claim damages that resulted from implementing such plans.
CONCLUSION
This case provides several lessons for both landlords and tenants. Firstly, the right of a tenant to quiet enjoyment is not restricted to only the premises let out but also extends to the common property.
Secondly, although this case involved a service agreement rather than a lease, the implied term of expeditious renewal is one for both landlord and tenant to take note of. Such a term places greater pressure on both parties, but perhaps more on the landlord, to ensure that they do not drag their feet when it comes to matters of renewal. Both parties must ensure that they communicate their intention to the other party. Even though expeditious renewal does not require the landlord to renew the tenancy instantly, the landlord should communicate to the tenant in a timely manner
whether it intends to accept the renewal or not.
The third and main learning point from this case is that the Courts would expect an aggrieved party to assert its legal rights against the defaulting party promptly, and not to justify its inaction, or incompatible courses of action, on what the defaulting party may do.
In this case, the Plaintiff only notified the Defendant, about three months after acquiring the New Premises, about reserving its rights to claim for damages arising from, for instance, the costs of acquiring alternative premises. Even so, the HC observed that the notification was vague as it did not inform the Defendant of the Plaintiff’s intention to acquire the New Premises and the duration for which the New Premises were acquired.
Hence, the aggrieved party bears the onus of notifying the defaulting party of its intentions to acquire new premises, if they are relevant to a claim in damages that the aggrieved party intends to reserve its rights for.
[2017] SGHC 6 at [72
For more information, please contact:
Sandra Han, Partner, RHT Taylor Wessing
sandra.han@rhtlawtaylorwessing.com
