Alvin Nicholas Nathan v Raffles Assets (Singapore) Pte Ltd [2016] SGCA 18

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On 15 February 2012, in compliance with the Respondent’s initial demand that he surrender the Original Premises by 29 February 2012, the Appellant moved to new, but interim, premises at 1 Magazine Road, #03-01 to #03-02, Central Mall (“the Interim Premises”). On 30 May 2012, the Appellant moved to his permanent premises at 1 Magazine Road, #07-07 to #07-11, Central Mall (“the Current Premises”), a few floors above the Interim Premises. The lease of the Current Premises only commenced on 16 July 2012 and renovations were still under way, but the Appellant had no alternative because the Interim Premises were not available beyond 31 May 2012. The sizes of and the costs of renting the various premises occupied by the Appellant are set out below :

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In his claim for damages before the Judge, the Appellant sought, inter alia, compensation for the costs of renovating the Original Premises, which was wasted because of the early termination of the Lease Agreement, as well as the costs of relocating to and renovating the Interim Premises and the Current Premises.

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Second, the Appellant submitted that the Judge erred by failing to award damages of $100,963.06 to compensate him for the costs of his relocation from the Interim Premises to the Current Premises (ie, the costs of the second relocation). The Judge reasoned that the Appellant could have avoided relocating twice by staying on in the Original Premises until the Current Premises were ready. However, the Appellant submitted that he could not be expected to remain in the Original Premises beyond 1 March 2012 when the Respondent would be carrying out renovations thereto. It was therefore not unreasonable for the Appellant to move to the Interim Premises first bearing in mind that it was the acts of the Respondent which brought about this state of affairs.

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Third, the Appellant submitted that the Judge erred in awarding only $150,000 for wasted costs. On this item of claim, the Appellant argued that the Judge was wrong to have preferred the Respondent’s expert’s estimates to the Appellant’s expert’s estimates of wasted costs.

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As mentioned at [11] above, the Appellant sought compensation for the increased rent which he had to pay on account of the Excess Area. In our opinion, the Appellant was not entitled to compensation for the Excess Area. We agreed with the Judge that the Appellant’s move to larger premises was, based on the evidence before the court, likely to have been a deliberate move on his part. The Appellant claimed that his business did not require the additional 2,388 square feet of space (ie, the Excess Area), and that he only accepted the Current Premises because he could not find smaller alternative premises that suited his needs. However, when questioned, the Appellant could not point to any evidence that he had been looking for premises that were approximately the size of the Original Premises. Instead, the Respondent brought to the court’s attention the fact that the Appellant’s shortlist of 18 possible properties only included premises which had an area of at least 7,000 square feet. In the circumstances, given that there was no evidence that the Appellant had made any effort to find premises with similar dimensions to those of the Original Premises, we found that the Appellant had failed to mitigate his losses. It was unreasonable to require the Respondent to compensate the Appellant for the costs of renting premises which were approximately 50% bigger than the Original Premises.

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The Judge held that the Appellant could have mitigated his losses by staying on at the Original Premises until the Current Premises were ready. If he did, he would not have incurred (a) two relocation costs and (b) the increased rent for the Interim Premises prior to the move to the Current Premises. The Appellant however appealed against this finding on the ground, inter alia, that it was not unreasonable for him to have left the Original Premises before the renovations started on 1 March 2012.

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In the present case, we found that it was not unreasonable for the Appellant to have moved out of the Original Premises before 1 March 2012 even though the permanent premises he found were not ready. The Appellant cited issues of safety for his handicapped employees, noise, inconvenience, and the lack of parking space to explain why he could not stay on in the Original Premises after renovations thereto commenced. Moreover, it being a standard stipulation in a lease that a tenant is entitled to quiet enjoyment of the premises, in our view, it was reasonable for the Appellant to want to avoid the inconveniences the renovations would have brought about, even if shifting into the Interim Premises would have involved incurring some extra costs.

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For the above reasons, we disagreed with the Judge’s finding that the Appellant’s failure to remain in the Original Premises until the Current Premises were ready was a failure to mitigate on his part. The Appellant therefore ought to have been awarded the extra rent incurred during the short period when he occupied the Interim Premises (see item 1 in [8] above), and the costs of relocating from the Interim Premises to the Current Premises.

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Having said that, we disapproved of the Appellant’s quantification of his relocation costs. The Appellant asserted that he spent $100,963.06 on relocation and making the necessary alterations to the Current Premises. The Respondent pointed out that it was unreasonable and unforeseeable that the Appellant would spend $59,000 on the purchase and installation of individualised air-conditioning units in the Current Premises even though the Current Premises had central air-conditioning. We agreed. That sum should be excluded from the claim. Thus, we would only have awarded the Appellant the sum of $41,963.06 for the costs of relocating from the Interim Premises to the Current Premises.

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On the claim for wasted costs incurred on the Original Premises, we could not accept the claim even though the Judge accepted and made an award based on that. While the Respondent had only raised in passing the principle that the Judge should not have awarded both expectation and reliance losses (explaining, perhaps, the absence of a cross-appeal) , we found that this was an important point.

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Following this principle, damages for breach of contract are ordinarily assessed in terms of the claimant’s expectation loss, which refers to the value of the benefit that the claimant would have obtained but for the breach of contract, or, to put it another way, the gains the claimant expected as a result of the full performance of the contract: Andrew Phang Boon Leong, The Law of Contract in Singapore (Academy Publishing, 2012) (“The Law of Contract”) at para 21.033. On occasion, damages for breach of contract may be quantified in terms of the claimant’s reliance loss – that is, the costs and expenses the claimant incurred in reliance on the defendant’s contracted-for performance, but which were wasted because of the breach of contract: The Law of Contract at para 21.034. The basis for awarding reliance loss is the assumption that were the contract performed, the claimant would have at least fully recovered the costs and expenditure incurred: Van Der Horst Engineering Pte Ltd v Rotol Singapore Ltd [2006] 2 SLR(R) 586 at [54]–[55]. Indeed, in cases where a claimant enters into a bad bargain and would not have recovered all his costs/expenditure even if the contract had been performed, his losses may not be quantified by reference to his reliance expenditure: C & P Haulage v Middleton [1983] 1 WLR 1461 at 1468. Thus, the underlying principle, even in cases where reliance loss is awarded, is to place the innocent party in the position he would have been in had the contract been performed.

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Putting it in the plainest terms, had the Lease Agreement been wholly performed by the Respondent, the Appellant would have been entitled to enjoy the use of the Original Premises at the agreed rental for a total of four years subject to the qualification that in respect of the second two year period (ie, the renewed term), the Appellant would have had to pay up to 20% more in terms of rental in order to enjoy the use of the Original Premises. However, in view of the breach of the Lease Agreement by the Respondent, the Appellant had to suffer the payment of higher rental rates for the use of the Interim Premises and the Current Premises. In addition, the Appellant had to incur relocation costs, ie, the costs of relocating from the Original Premises to the Interim Premises, and then from the Interim Premises to the Current Premises. Of course, besides the higher rental and relocation expenses incurred, the Appellant had also suffered the inconvenience of relocating, for which the Judge had awarded him the sum of $20,000 (see [7(b)] above). These were the losses suffered by the Appellant on account of the Respondent’s breach. On payment of these sums as damages, the Appellant would effectively have been placed in a position, as far as money can buy, as if there was no breach on the part of the Respondent.

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The problem with the award of wasted costs made by the Judge lay in the fact that it would be over-compensating the Appellant. Had the Lease Agreement been performed by the Respondent, the Appellant would still have incurred the “wasted costs”, ie, the costs of renovating the Original Premises, to render them suitable for his purposes. In this regard, we noted that the Judge did not grant the sum claimed by the Appellant for the costs of the second relocation. In our view, there seemed to be a slight misunderstanding on the part of the Judge as to the underlying principle upon which damages were assessed. By awarding the appellant both wasted costs and the costs of the first relocation, the Judge effectively exempted the Appellant from having to pay any costs for renovating the Original Premises. While denying the Appellant damages for the costs of the second relocation did reduce the total damages which the Appellant was entitled to receive from the Respondent, such an approach was not correct conceptually. If, as the Judge found, the Appellant was not entitled to be indemnified as to the costs of the second relocation, there should be no question of the Appellant being compensated in a different way by awarding him the costs incurred in doing up the Original Premises, ie, by an award of wasted costs.

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In this regard, we should add that the Respondent suggested that the Appellant ought to have been awarded wasted costs rather than relocation costs (ie, reliance rather than expectation loss) . We did not think that this suggestion would be in accord with principle. Conceptually, and in the circumstances here, an award of relocation costs would, as opposed to wasted costs, better achieve the law’s aim of placing the Appellant in the position he would have been in had the Lease Agreement been performed.

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For the reasons given, we held that the Judge should not have awarded the Appellant $150,000 for wasted costs. We noted that the Appellant had asked for an even higher amount for wasted costs. In view of our opinion on this item of claim, the question of increasing the quantum of award for wasted costs did not arise.

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In conclusion, we found that the Appellant should have been awarded an extra $14,099.28 for the increased rent he incurred whilst he occupied the Interim Premises (see item 1 in [8] above), and an extra $41,963.06 for the costs of relocating from the Interim Premises to the Current Premises (see [21] above). However, we also found that the Appellant should not have been awarded damages of $150,000 for wasted costs (see [27]-[29] above). In the result, the Appellant was therefore better off without any appellate intervention. Given that there was no cross-appeal by the Respondent, we dismissed the Appellant’s appeal and awarded costs of $30,000 (all in) to the Respondent.