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Singapore – Tort: SH Cogent Logistics Pte Ltd & Anor v Singapore Agro Agricultural Pte Ltd & Ors [2014] SGHC 203.

26 November, 2014

 

Legal News & Analysis – Asia Pacific – Singapore –  Construction & Real Estate

 

Where an outgoing master tenant / management of a commercial site embarked on a “scorched earth policy” by removing various fixtures / fittings from the site and taking steps to evict the Premises’s subtenants / licencees so as to damage the incoming master tenant’s / management’s business of sub-letting and licensing, and threatened to continue with such actions unless it was paid the sum of SGD 3m, held that the outgoing master tenant / management had acted together with the predominant purpose of causing injury to the incoming master tenant / management and was therefore liable for the damage caused to the incoming master tenant’s / management’s business:
— SH Cogent Logistics Pte Ltd & Anor v Singapore Agro Agricultural Pte Ltd & Ors [2014] SGHC 203 (Singapore, High Court, 15 October 2014)

 
Facts

 
The plaintiffs were:

 

  • SH Cogent Logistics Pte Ltd (“SH Cogent”), who became the new master tenant of the former Bukit Timah Turf Club Site, Plot 6 at 200 Turf Club Road Singapore 287994 (“Premises”) from 1 March 2012; and
  • Cogent Land Capital Pte Ltd, a wholly-owned subsidiary of SH Cogent who was responsible for overseeing the management and maintenance of the Premises.

 
The defendants were:

 

  • Singapore Agro Agricultural Pte Ltd (“SAA”), the previous master tenant of the Premises from 2001 until 29 February 2012;
  • Turf City Management Pte Ltd, a related company of SAA which was responsible for the management and maintenance of the Premises;
  • Tan Chee Beng (“Tan”), a majority shareholder and director of SAA; and
  • Koh Khong Meng (“Koh”), a shareholder and director of Turf City Management Pte Ltd.

 
The sequence of key events is as follows:

 

  • SAA became the master tenant of the Premises in 2001. Its tenancy of the Premises was originally due to expire on 31 August 2011.
  • On 12 March 2011, SAA wrote to Singapore Land Authority (“SLA”) requesting for an extension of its lease of the Premises to end February 2012. On 3 June 2011, the SLA agreed to an extension.
  • In June and July 2011, the SLA released a tender for the new lease of the Premises for three years (with an option to renew for a further three years). Both SAA and SH Cogent were among the bidders.
  • In August 2011, SAA extended the leases and licences of the existing sub-tenants and licencees to 31 January 2012, with an option given to them to extend the leases and licences to 29 February 2012 if SAA was the successful tenderer.
  • On 10 October 2011, SLA awarded the new tenancy of the Premises to SH Cogent.
  • From 1 November 2011 until the plaintiffs took over the Premises on 1 March 2012, the defendants engaged in the following actions to ensure that the plaintiffs would only take over an empty shell at the handover:
    • SAA periodically wrote to the tenants insisting that they vacate their units by 31 January 2012 or risk forfeiting their security deposits;
    • SAA commenced works on the Premises, removing and dismantling various fixtures and structures such as a metal deck flooring, partitions, air-conditioning diffusers, and lighting; and
    • Lighting in the common areas was also switched off, and the waste disposal services at the Premises were stopped.
  • When representatives from the plaintiffs and the defendants met to discuss the worsening situation on 1 December 2011, the defendants’ representatives, Tan among them, even made thinly-veiled threats that they would continue their removal and dismantling works and steps to evict the sub-tenants and licencees unless they were paid SGD 3m.
  • These actions were taken in the face of the SLA’s objections, and despite its requests for SAA to take the necessary steps to facilitate the continued stay of interested sub-tenants and occupants (who wished to stay on at the Premises with the plaintiffs) beyond 31 January 2012.
  • The actions even continued after an injunction was taken out against the defendants to restrain them.

 
The plaintiffs subsequently brought a claim against the defendants for the damage suffered as a result of the defendants’ lawful / unlawful conspiracy to injure the plaintiffs. The defendants’ counterclaimed to enforce the plaintiff’s undertaking in damages for the injunction.

 
Decision

 
On lawful act conspiracy, the Singapore High Court made the express finding that the defendants had indeed acted together with the predominant intention of causing injury to the plaintiffs’ business of sub-letting/licencing.
The Court noted that there were two branches to the tort of conspiracy at law: the first, where the acts committed pursuant to the conspiracy were lawful; the second, where the acts committed pursuant to the conspiracy were unlawful. It further noted that the elements of the tort of conspiracy were as follows:

 

  • an agreement between two or more persons to do certain acts; if the conspiracy involves:
    • unlawful means, the conspirators must have intended to cause damage to the claimant;
    • lawful means, then the conspirators must additionally have had the predominant purpose of causing damage to the claimant;
  • the acts must have actually been performed in furtherance of the agreement; and
  • damage must have been suffered by the claimant.

 
The defendants did not seriously dispute the allegations that they had acted in concert pursuant to an agreement with each other. The key dispute between the parties was whether the defendants had acted with the predominant purpose of causing damage to the plaintiffs and/or acted unlawfully in doing so. The defendants asserted that they had acted as they
did because they had had to comply with legal or regulatory obligations owed to the SLA and/or the Urban Redevelopment Authority (“URA”) to carry out dismantling works at the Premises. However, the Court flatly rejected the defendants’ assertions as a mere fig leaf for their true intentions.

 
Reviewing the evidence, the Court concluded that the plaintiffs had established that the defendants had acted with the predominant purpose of injuring them:

 

  • The tape-recorded meeting of 1 December 2011 between Tan, Koh, and the plaintiffs’ representatives made clear what the defendants’ true purpose was: to embark on a scorched earth policy so as to prevent the plaintiffs from getting a running start in their business of sub-letting and licensing unless they paid the sum of S$3 million to the defendants.
  • The defendants had undertaken rectification and removal works and incurred costs doing so even though they were not so required by the SLA. Indeed, in so acting, they had gone against the express instructions of the SLA, who had previously informed SAA to ensure a smooth handover with minimal disruption to the existing sub-tenancies and licencees. In the Court’s view, there was no reason for the defendants to act in such a manner unless they were, in fact, seeking to injure the plaintiffs.
  • The Court also rejected the defendants’ claims that they had been advised by their architectural advisors that they were under an obligation to the URA to carry out the reinstatement work, despite SLA’s wishes. In fact, the Court was of the view that the letters of advice from the architectural advisers tendered in evidence by the defendants were fabricated.

 
Finally, the Court found that the plaintiffs had suffered the following types of damage arising from the defendants’ conspiracy to injure them:

 

  • Damage from the removal of various items from the Premises; Damage from loss of income from rent and licence fees from licencees who left as a result of the defendants’ acts; and
  • Damage from expenses incurred by the plaintiffs to uncover the defendants’ conspiracy.

 
The Court ordered that these damages be assessed. As the plaintiffs had successfully proved that the defendants had acted with the predominant intention to injure the plaintiffs, the Court did not need to decide on whether the defendants had acted unlawfully.

 
Conclusion

 
In coming to its conclusion, the Court described the defendants’ conduct as “reprehensible” and its actions as a “scorched-earth policy”. In this turf war, both the incoming master tenant and the SLA had to suffer as a result of the defendants’ actions. In this respect, the Court had this advice for landlords to protect against similar behaviour from unreasonable master tenants in the future:

 
“In the future, landlords who operate through a master tenant should consider including adequate legal rights for themselves to protect the interests of sub-tenants, licencees and other beneficiaries from the acts of an unreasonable master tenant. … As an example, landlords should consider including for themselves the right to compel the master tenant to grant fresh sub-tenancies or licences up till the end of the existing tenancy, and to enter into such agreements on behalf of the master tenant if it refuses to do so. Accompanying this should also be the right of the landlord to insist that the master tenant stop reinstatement work and to seek injunctive relief to stop such work.”

 
As regards the defendants’ attempt to enforce the plaintiffs’ undertaking in damages for the injunction granted on 20 January 2012 and discharged on 24 February 2014, this was dismissed by the Court. Among other things, the Court noted that the mere fact that a temporary injunction had been discharged was not grounds in itself for the undertaking in damages to be enforced. On the facts, bearing in mind that the plaintiffs had succeeded at trial and that the injunction had not, in the Court’s view, been wrongly obtained, this was not a proper case for the Court to exercise its discretion to enforce the undertaking in damages.

 

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For further information, please contact:

 

Swee Yen Ko, Partner, WongPartnership
sweeyen.koh@wongpartnership.com 


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