Jurisdiction - Singapore
News
Singapore – Landlord And Tenant: Cupid Jewels Pte Ltd v Orchard Central Pte Ltd [2014] SGCA 2

12 March, 2014

 

The phrase “otherwise dealt with in the course of [the tenant’s] ordinary trade or business” under section 8(d) of the Distress Act referred to managing property as agents of the property owners. Further, determining whether a person was the “reputed owner” of goods under section 12(a) of the Distress Act requires an application of the reasonable man test from the landlord’s perspective: 

 

— Cupid Jewels Pte Ltd v Orchard Central Pte Ltd [2014] SGCA 2 (Singapore, Court of Appeal, 13 January 2014)


Facts


The respondent (“Landlord”) was a landlord of commercial premises (“Premises”), and the appellant (“Tenant”) was the tenant of those Premises. The Tenant ran a jewellery retail shop at the Premises.


When the Tenant fell behind on its rental payments, the Landlord applied for a writ of distress for the sum of S$891,507.99. The writ of distress was granted and the sheriff seized goods found on the Premises. The distrained items included some 579 pieces of jewellery (“Disputed Goods”). The Tenant applied to court for the release of the Disputed Goods. It was joined by a third party, the company (“Supplier”) that had provided the Disputed Goods to it on consignment. The Tenant and the Supplier were “related companies” in the sense that they had the same directors and two common shareholders.


Whether The Goods Could Be Seized Pursuant To A Writ of Distress


The Tenant applied for the release of the Disputed Goods on the basis that section 8 of the Distress Act excludes certain goods from seizure under a writ of distress. Specifically, it relied on section 8(d) which excludes “goods in the possession of the tenant for the purpose of being carried, wrought, worked up, or otherwise dealt with in the course of his ordinary trade or business”. The question was whether the Disputed Goods which had been delivered to the Tenant by the Supplier for the purpose of sale fell under section 8(d) as “goods in the possession of the tenant for the purpose of being … otherwise dealt with in the course of his ordinary trade or business”.


The Court considered the meaning of the phrase “otherwise dealt with”. It noted that section 8(d) had its roots in the common law exception of trade privilege, and held that the phrase should therefore be construed in line with that concept. This provided that goods that were managed by the tenant were excluded from seizure. A tenant was considered to be managing property if he held such property as an agent of the property owners, with a key aspect of an agency relationship being remuneration on a commission basis.


On the facts of the present case, trade privilege under section 8(d) of the Distress Act did not apply to the Disputed Goods. The Tenant was not an agent of the Supplier, and did not sell the Supplier’s property on commission. The Court therefore found that the Tenant had not managed property under the common law formulation of trade privilege, and hence, the Disputed Goods had not been “otherwise dealt with in the course of [the Tenant’s] ordinary trade or business”.


Whether The Tenant Was The Reputed Owner Of The Disputed Goods


The Supplier’s application was made pursuant to section 10 of the Distress Act which allows a third party beneficial owner of goods that have been seized under a writ of distress to apply for them to be released. Any such application, however, is subject to the exceptions in section 12 of the Distress Act. This provides that section 10 does not apply where, among other things, the goods had been in the tenant’s possession “under such circumstances that such tenant [was] the reputed owner thereof”.


The Court had to consider the meaning of the phrase “reputed owner” in section 12(a) of the Distress Act. It held that the determination of whether a party was a “reputed owner” for the purposes of section 12(a) of the Distress Act would require an application of the reasonable man test from a landlord’s perspective. This was consistent with the intention of the doctrine of reputed ownership, that is, to allow a landlord to recover goods on the tenant’s premises where the true owner of the goods permitted or consented to a state of things from which he must have known, if he considered the matter, that an inference of ownership by the tenant would arise.


The burden was on the Supplier to prove that the goods were not reputedly owned by the Tenant. Although the Supplier had adduced evidence that it was common industry practice for jewellery to be put on consignment by a jewellery manufacturer or wholesaler with a jewellery retailer, the Court held that the evidence did not establish that this practice was sufficiently prevalent so as to be immediately apparent to a reasonably informed landlord. The Supplier’s application for the release of the Disputed Goods was therefore dismissed, on the grounds that the Tenant was the “reputed owner” of the Disputed Goods from the perspective of the Landlord.

 

Our Comments / Analysis


The issue as to the distraint of goods on consignment is not new (see e.g., Plaza Singapura (Pte) Ltd v Cosdel (S) Pte Ltd & Anor [1990] SGCA 9). While the burden of proof is on the non-tenant party seeking the release of goods to prove the conditions under sections 10 and 12 of the Distress Act, it is noteworthy that the Court of Appeal agreed with the High Court Judge’s view that the doctrine of reputed ownership does not, as a matter of principle, exclude that of actual knowledge. To avoid such challenges, landlords may wish to require tenants to notify landlords where goods on the tenanted premises belong to third parties.

 

wongpartnershiplogo

 

For further information, please contact:

 

Bock Eng Sim, Partner, WongPartnership

bockeng.sim@wongpartnership.com

 

WongPartnership Dispute Resolution Practice Profile in Singapore

 

Homegrown Dispute Resolution Law Firms in Singapore

 

Comments are closed.