Chye Lian Huat Sawmill Co v Hean Nerng Industrial Pte Ltd [2003] 2 SLR 23

High Court — Suit No 1360 of 2001
Lai Kew Chai J
24–30 October; 13 November; 11 December 2002

Contract — Discharge — Breach — Clause in contract included a four months notice period for termination of Licensing Agreement — Whether Licensing Agreement repudiated by plaintiffs

Contract — Illegality and public policy — Sanctity of contract — Whether Licensing Agreement unenforceable

Rabi Ahmand s/o M Abdul Ravoof (PK Wong & Advani) for the plaintiffs
Daniel Koh and Martin Lee (CTLC Law Corporation) for the defendants

Plaintiffs were lessees of premises owned by JTC. The plaintiffs sublet part of the premises, including open spaces, to the defendants under a Licensing Agreement without the approval of JTC. The plaintiffs further entered into a Management Agreement with the defendants to manage matters in relation to the maintenance of the premises and running of the plaintiff’s business. Under the Licensing Agreement the defendants were allowed to sublet their portion of the premises to third parties. The Licensing Agreement contained a termination clause that required both parties to give four months notice in the event that either party wished to terminate the Licensing Agreement.

Some time later, JTC became aware of the subletting and wrote to the plaintiffs stating clearly that they were to remove all the sub-tenants. The defendants were aware of this and finally delivered vacant possession some eight months after the demand.

The plaintiff then claimed the balance of the fees for use of the premises and for expenses incurred in clearing the premises of debris. The defendants claimed a set-off under the Management Agreement and counterclaimed for liquidated damages arising from the plaintiffs’ repudiatory breach of the Licensing Agreement.

At the onset, a preliminary issue needed to be addressed, that being, whether the claims by both the plaintiffs and defendants under the Licensing Agreement ought to be dismissed in light of the Licensing Agreement being unenforceable on grounds of illegality and public policy.

Held, allowing the plaintiffs’ claim and dismissing the defendants’ claims for set-off and counterclaim with costs:

Subletting of industrial property under JTC lease, using the then applicable guidelines, was not illegal unlike subletting of residential premises. A tenant could sublet his leased industrial property if he sought JTC’s approval and paid subletting and administrative fees to JTC and other government authorities. As such, subletting of industrial property was not illegal.

Public policy now remained the sole ground for unenforceability of the Licensing Agreement. The defendants submitted that it would be against public policy to allow the claim as no subletting was allowed without prior approval from JTC.

JTC had remedies available to them in situations where the premises were sublet without their prior approval. Among the remedies available was the right of forfeiture. However, JTC chose to give all concerned, including the unauthorised sub-tenants, enough time to relocate.

The sanctity of a contract freely entered into should not be invalidated without good reason and where public policy was involved, courts should be circumspect. Taking into consideration that JTC chose not to forfeit the premises immediately and that there were no explicit rulings that contracts of sub-tenancy were contrary to public policy, the Licensing Agreement should not be invalidated based on public policy.

The plaintiffs’ claim included in one part, sums paid by the plaintiffs to clear debris from the premises and on another part, sums owed to the plaintiff by the defendant by way of monthly licence fees.

As part of the Management Agreement, it was the defendants’ responsibility to ensure the premises were well maintained and this included clearing debris left behind by the defendants’ sub-tenants. It was uncontested that the defendants’ sub-tenants caused the debris and that it was the responsibility of the defendants and not the plaintiffs to clear the debris. Therefore, the plaintiffs’ claims for reimbursement arising from removing the debris will be allowed.

In order to ascertain the sums owed by the defendants to the plaintiffs by way of monthly licensing fees, a Scott’s Schedule was created using information from documents, including warehousing agreements. It was ascertained that, indeed, sums claimed by the plaintiffs were the actual sums owed by the defendants to the plaintiff for use and occupation of the premises. Therefore, the plaintiffs’ claim for monthly licence fees will be allowed.

The defendants’ claim for deduction of expenses from the amount they had to pay the plaintiffs was rejected as the expenses were incurred for the benefit of the defendants.

Finally, the defendants’ counterclaim for damages by reason of wrongful repudiation of the Licensing Agreement would have to fail as the defendants had been given ample notice. The defendants being aware of JTC’s notice to vacate, left only some eight months after the demand. In accordance with the Licensing Agreement, only four months notice was required for termination of the contract. Even if there had been a repudiatory breach on the part of the plaintiffs, it had been waived by the defendants’ conduct of accepting the situation and leaving only after eight months without any demur or protest whatsoever.

Bansal Hermant Govindprasad & Anor v Central Bank of India [2003] 2 SLR 33

Court of Appeal — Civil Appeal No 6 of 2002
Yong Pung How CJ; Chao Hick Tin JA; Judith Prakash J
26 November 2002; 18 January 2003

Civil Procedure — Pleadings — Submission of no case to answer — Circumstances where submission of no case to answer will succeed — Appropriate tests to be applied to submission of no case to answer

N Sreenivasan and Chia See Kim Sharon (Straits Law Practice LLC) for the appellants Tan Tuan Meng and Wong Khai Leng (Mallal & Namazie) for the respondents

The appellants were the sole directors and shareholders of Natsyn Fibres Pte Ltd (‘Natsyn’). Natsyn took out letters of credit benefiting Bhagwati Cottons Ltd (‘Bhagwati’) for goods bought. Bhagwati was also a family company of the appellants. Once the goods were shipped, Bhagwati presented the letters of credit to Central Bank of India (‘CBI’) whereupon CBI paid Bhagwati and returned the documents with CBI’s stamp on it to Bhagwati. CBI, at this point, had not received payment from any of the parties.

These letters of credit then reached Natsyn, who, without paying for it, used the documents to obtain delivery of the goods. Natsyn then sold the goods to a third party. Subsequently, Natsyn was unable to repay CBI in full and close to US$1.5m was left outstanding. CBI brought an action based on conversion, conspiracy and dishonest assistance to a breach of trust against the appellants. At the trial, the appellants made a submission of no case to answer and did not adduce evidence in their defence. The trial judge found the appellants were liable for conversion and dishonest assistance in breach of trust. The appellants appealed that the test used to determine whether there was a case to answer was incorrect.

Held, dismissing the appeal:

A no case to answer submission could be made where, by accepting the plaintiff’s evidence at its face value, no case could be established in law. Alternatively, the submission could be made on the basis that the evidence led for the plaintiff was so unsatisfactory, or unreliable, that the court should find that the burden of proof had not been discharged.

By not adducing evidence, the appellants’ submission of no case to answer was that, even accepting the plaintiff’s evidence at face value, no case had been made out against them. The appellants’ submission was not based on the evidence led by CBI being unsatisfactory or unreliable. The trial judge had used the first type of test based on the face value of the plaintiff’s evidence. Therefore, the trial judge did not err in applying the test or principle.