Court of Appeal · Decided 17 December 2014

RBC Properties Pte Ltd v Defu Furniture Pte Ltd

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[2014] SGCA 62Case no. Civil Appeal No 19 of 2014

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Andrew Phang Boon Leong JA (delivering the judgment of the court):
Introduction
[1] In deciding any given case, it is axiomatic that the court concerned must apply the law to the relevant facts. Whilst the law to be applied is objective and universal, the facts that the law is applied to are varied and specific. Unsurprisingly, therefore, the decision or result of a case is heavily dependent (in the final analysis) on the specific facts concerned.
[2] That this is so is demonstrated in no uncertain terms by the main issue that has to be decided in this appeal, which concerns the respondent lessee’s (Defu Furniture Pte Ltd, hereinafter known as “the Respondent”) claim to rescind a lease entered into with the appellant lessor (RBC Properties Pte Ltd, hereinafter known as “the Appellant”) on the grounds of misrepresentation. The lease was in respect of the first storey of an industrial building (“the Premises”) and its sole permitted use under the lease was as a furniture showroom. The misrepresentation complained of was the Appellant’s assurance that all necessary approvals had been obtained for the Premises to be used as a furniture showroom, which, it is argued, was never the case because the Singapore Land Authority (“the SLA”), acting on behalf of the State, had not in fact given its approval for the premises to be so used. Such a misrepresentation would, of itself, entitle the Respondent to rescind the lease. However, the Respondent claims that it is further entitled, under s 2(1) of the Misrepresentation Act (Cap 390, 1994 Rev Ed) (“the Misrepresentation Act”, the provision is hereinafter simply referred to as “s 2(1)”), to damages for losses suffered, because the Appellant did not have (within the meaning of s 2(1)) any reasonable ground to believe that all necessary approvals for the use of the premises as a furniture showroom had been obtained, and was therefore liable as if the misrepresentation had been made fraudulently.
[3] In the court below, the High Court Judge (“the Judge”) held that the Appellant did in fact make a misrepresentation to the Respondent in the terms complained of, and (more importantly) that such a misrepresentation fell within the ambit of s 2(1) as the Appellant did not have any reasonable ground to believe that the facts it had represented to the Respondent were true (see Defu Furniture Pte Ltd v RBC Properties Pte Ltd [2014] SGHC 1 (“the Judgment”)). The Appellant has appealed, inter alia, against this particular finding.
[4] On the correct and holistic appreciation of all the facts that are before us, we do not entertain any serious doubt whatsoever that the Appellant did make a misrepresentation to the Respondent, who relied on that misrepresentation in entering into the lease and thereby suffered loss. Accordingly, we are of the view that the Respondent is entitled to rescind the lease, which is an equitable remedy that generally applies to all forms of misrepresentation, whether the claim is mounted under the Misrepresentation Act or at common law. The crux of the appeal before us (which formed the main thrust of the Appellant’s case) is the closely related (and indeed, crucial) issue: can the Appellant avail itself of the statutory defence in s 2(1), viz, that it had reasonable ground to believe, and did believe up to the time the lease was entered into, that the facts it had represented were true? If so, the misrepresentation would be wholly innocent as the presumption in s 2(1) would be defeated, and whilst the Respondent would still be entitled to the rescission of the lease and an indemnity for obligations it had taken on under the lease, it would not, under that self-same provision, be entitled to damages as if the misrepresentation had been made fraudulently. As we shall see, the determination of this particular issue is clearly fact-centric and therefore requires a nuanced and contextual consideration of all the relevant facts.
[5] Whilst this issue constitutes the crux of the present appeal, it is by no means the only issue before us. Indeed, it is important at this juncture to note that there is another – and no less important – issue which was also raised in the court below, viz, whether or not the Appellant was (in the alternative) liable to the Respondent for breach of contract. The Judge declined to render a decision on this particular issue in light of his decision in favour of the Respondent with regard to s 2(1) (see also below at [43] and [133]), and the primary focus of the parties’ submissions to this court was (not surprisingly) therefore also on s 2(1). However, as we were of the view that this was also an important issue, we invited counsel for the parties to elaborate upon it further during oral submissions before this court – not least because if this court is of the view that the Appellant is not liable under s 2(1), that would not be the end of the matter inasmuch as it could still be potentially liable for breach of contract.
[6] Nevertheless, given the focus by the parties on s 2(1), we will deal with their (rather comprehensive) arguments in this particular regard first before proceeding to consider the issue relating to breach of contract. Before we turn to a discussion of these various issues, it might be apposite first to set out briefly both the factual background as well as the decision of the trial court.
Background facts
[7] The Appellant is the sub-lessee of a five-storey industrial building located at 11, Bedok North Avenue 4, known as the Richland Business Centre (“the Property”). The Property was originally developed in 2006 by a company known as RLG Development Pte Ltd (“RLG”), a sister company to the Appellant. Pursuant to a building agreement dated 16 August 2006 (“the Building Agreement”), RLG leased the plot of land at Bedok North Avenue 4 under a 30-year lease from the President of the Republic of Singapore (in effect, the State). RLG undertook to develop the land in accordance with the relevant conditions of tender and, in particular, to develop it in accordance with its zoning status.
[8] At that time, the relevant zoning provisions were those expressed in the Urban Redevelopment Authority’s (“the URA”) Master Plan Written Statement 2003 (“the Master Plan 2003”). Under the Master Plan 2003, that plot of land was zoned for Business 2 use (“B2 use”), which meant that it could only be used for clean industry, light industry, general industry, warehouse, public utilities and telecommunication uses and other public installations. The Master Plan 2003 also permitted “ancillary uses”, but restricted such uses to “40% of the total floor area”, and further stipulated that “the types of B2 and ancillary uses that may be allowed are subject to the evaluation of the competent authority and other relevant authorities”.
[9] It is not disputed that from the very beginning of the development process, RLG’s intention was to utilise the Premises as a showroom. It drafted plans to this effect and on 5 October 2006, obtained provisional permission from the URA for its development plans (“the Provisional Permission”). This was followed, on 24 April 2007, by written planning permission from the URA to erect a “5 storey single-user light industrial development comprising showroom at 1st storey and warehouse from 2nd to 4th storey and ancillary office at 5th storey” (“the Written Permission”). It is not disputed that the Written Permission amounted to the URA’s approval for the Premises to be used as an ancillary showroom. The URA’s prevailing guidelines also stipulated a minimum size for the showroom and that the showroom was not be used for retail sales such as cash and carry transactions, but only for the display of items (such as furniture) which could then be ordered and delivered separately. On this basis, RLG began construction of the Property, which was completed in 2008.
It is not disputed that the “Competent Authority” under the Planning Act (Cap 232, 1998 Rev Ed) (“the Planning Act”) referenced in this clause was the URA.
[11] In so far as restrictions on use are concerned, the relevant clause is clause 2 of the State Lease which reads as follows:
[12] On 24 April 2008, RLG granted the Appellant a lease of the Property for a term of 10 years and 4 months (“the Head Lease”). The Head Lease subjected the Appellant to the obligations of RLG under the Building Agreement and the State Lease. The Appellant also had to ensure that any sub-tenants complied with all the terms of those agreements. Under clause D7.1 of the Head Lease, the permitted uses of the Property were restricted as follows:
[13] On 16 September 2008, RLG assigned its interest in the Property to a company known as AMB Changi South DC1 Pte Ltd (“AMB”). AMB therefore stepped into RLG’s shoes as the lessee under the State Lease, and as the lessor under the Head Lease. AMB was subsequently re-named Prologis Changi South 1 Pte Ltd (“Prologis”).
[14] In 2010 the Appellant decided to rent out the Premises as a showroom, as was originally envisaged in the plans. A potential lessee who was interested in leasing the Premises for use as a furniture and furnishings showroom was found. Accordingly, Mr Siebren Kamphorst (“Mr Kamphorst”), a commercial executive working for the Appellant, wrote to the URA on 8 April 2010 to ask if the Premises were approved for use as a showroom. The Judge found, and the Respondent does not dispute, that the URA replied in the affirmative. Pursuant to the Head Lease, the Appellant also wrote to AMB to seek its permission to sub-lease the Premises for use as a showroom. AMB responded that it had no objections in principle for the Premises to be leased for such use, provided that any approvals required from the authorities were obtained. In the event, the proposed lease fell through and the Premises were again advertised for lease in late 2010.
[15] In early 2011, the Respondent, which was also a furniture seller, approached the Appellant with a view to leasing the Premises for use as a furniture showroom. The Respondent’s owners, Mr Lim Thiam Soon (“Mr Lim Sr”) and Mr Allen Lim (“Mr Lim Jr”) (collectively, “the Lims”), viewed the premises in January of that year, accompanied by Mr Kamphorst. The Lims claimed that Mr Kamphorst was asked whether there were restrictions on the use of Premises as a showroom and that he confirmed that whilst no retail sales could take place, all necessary approvals had been obtained for the use of the Premises as an ancillary showroom. The Lims also alleged that Mr Kamphorst had pointed to the floor-to-ceiling glass panels around the Premises as evidence that they had been installed for showroom purposes.
[16] The Lims made a second visit to the Premises in early February 2011. Again they asked whether it could be used as a showroom and received Mr Kamphorst’s assurance that it could be so used as long as no retail sales were carried out, in accordance with the URA guidelines on ancillary uses of B2 zoned industrial land. He then gave the Lims a copy of the URA’s Written Permission and also pointed to the schematic plan of the Premises which specified its showroom use.
[17] We pause at this juncture to note, parenthetically, that the Appellant’s case on appeal is that at this point all that Mr Kamphorst said was that he was not sure if there were any other government or regulatory approvals required for the Respondent to use the premises as a furniture showroom. The Respondent’s case is that the Lims were specifically told that the URA had given its approval and that no other approval was necessary.
[18] On 16 February 2011, the Respondent signed and returned a letter of (“the Letter of Offer”), by which it offered to lease the Premises. The permitted use was expressed under clause 1.3 of the Letter of Offer as “Ancillary Showroom for furniture and furniture accessories (Subject to URA and NEA and any other relevant authorities’ approval)”. The handover date was 1 April 2011 and the lease was for 60 months from 1 June 2011, at a monthly rental of $1.75 per square foot (“psf”) for 39,500 square feet of floor area.
[19] The Appellant accepted the Letter of Offer on 18 February 2011 and accordingly, the parties entered into a lease agreement dated 11 March 2011 (“the Lease”). Clause 3.14.2 of the Lease set out the permitted use of the Premises:
[20] Schedule 4 reads as follows:
[21] The Lease also contained an indemnity clause which reads as follows:
[22] The Respondent was given a two-month rent-free period in April and May 2011 for the purpose of fitting out the Premises. Accordingly, the Respondent took possession of the Premises on 1 April 2011 and commenced fitting it out.
[23] The first sign of trouble emerged three weeks later. On 21 April 2011, the SLA wrote to AMB in relation to a proposed racking system to be installed on the 2nd floor of the building by another of the Appellant’s tenants, DHL Supply Chain Singapore Pte Ltd (“DHL”). The URA had granted written planning permission for the racking system on 30 March 2011, which permission had come to the notice of the SLA. The SLA took the view that under clause 2(i) of the State Lease, the racking system would create additional industrial gross floor area of 765.31 square metres, an addition which was inconsistent with the pre-existing approved use of the building under the terms of the State Lease. Accordingly the SLA said it was entitled under clause 2(ii) of the State Lease to charge a differential premium for that enhanced value.
[24] The racking system was completely unrelated to the Respondent’s proposed use of the ground floor as a furniture showroom. However, it appears from the letter of 21 April 2011 that the SLA further took the view that the Written Permission obtained by RLG on 24 April 2007 – almost four years previously – for the Premises to be used as a showroom (see above at [9]) also constituted a change in use within the meaning of clauses 2(i) and (ii) of the State Lease, for which the SLA’s approval and the attendant payment of a differential premium for the enhancement in land value were required. The reason advanced by the SLA at paragraph 4 of its letter of 21 April 2011 was that this involved “change of use of 3,436.6 sqm of GFA from industrial use (Group D) to commercial showroom use (Group A)” [emphasis added]. The enhancement in value – for both DHL’s racking system and the “change of use” as a showroom – was accordingly priced at S$2,820,935, or S$2,964,894.53 including fees and GST, which had to be paid in return for the SLA lifting the restrictions on use under the State Lease.
[25] AMB received the letter on 26 April 2011 but neither the Appellant nor the Respondent was notified immediately; fitting out work continued apace. It was not until 27 May 2011 that Mr Kamphorst of the Appellant was informed. It appears that the SLA’s use of the words “commercial showroom” confused AMB, because after it received the letter AMB contacted SLA and formed the view that the differential premium would only need to be paid if the Premises were used as a “commercial showroom” (as stated in the SLA’s letter), but not if the Premises were used as an “ancillary showroom”. In other words AMB misunderstood the SLA’s position to mean that whilst approval had been obtained for use as an “ancillary showroom”, the SLA’s objection was that the Premises had not been approved for use as a “commercial showroom”. AMB asked Mr Kamphorst to clarify the distinction with the URA, which he did in the following terms on 27 May 2011:
[26] The URA’s response was that the premises were approved for use as a “showroom for display of furniture to prospective customers” and there was no change of use so long as the premises were used as an ancillary showroom with no retail element. It is apparent that at this point, Mr Kamphorst was still under the misapprehension that it was the URA’s planning approval that was at issue, instead of the SLA’s approval as lessor under clause 2(ii) of the State Lease. The requirement for the latter’s approval was never in his mind.
[27] On 27 May 2011, Mr Kamphorst also informed Mr Lim Jr of the Respondent of the SLA’s letter. Their correspondence indicates that both continued to hold the (mistaken) belief that the hold-up was an issue of compliance with the URA’s planning regulations. In the event, the Respondent did not halt its fitting out works until 6 June 2011.
[28] On 21 June 2011, the SLA wrote again to AMB to particularise the premium it was charging for the racking system alone instead of adding the premiums for the two “improvements” (the racking system and the “change of use” as a showroom) together. The SLA’s letter clarified that the previous letter of offer of 21 April 2011 had included a differential premium:
[29] On 5 July 2011, the SLA sent a further letter to M/s Lee & Lee, the solicitors acting for AMB (which by now had changed its name to Prologis). This was the first time that the SLA explained in some detail why it thought it was entitled to charge a differential premium for the change of use as a showroom, and the fourth and fifth paragraphs of the aforementioned letter therefore merit quotation in full:
[30] Despite the SLA’s clarification, Prologis and the Appellant continued to labour under a misapprehension with regard to the SLA’s position. As the URA had granted approval for the use of the Premises as a showroom back in 2007 and that letter had been copied to the Commissioner of Lands and the SLA, Prologis and the Appellant were of the view (as a natural conclusion in those circumstances) that any objection as to the change of use ought to have been raised then.
[31] The matter was only finally clarified when the SLA wrote to Prologis on 26 July 2011 and again in 22 August 2011. The SLA explained that the use of the Premises as a showroom was not a use falling under B2 zoning as stated in clause 2(i) of the State Lease. It was, instead, a variation in use requiring both the URA’s and the SLA’s approval. RLG had obtained only the URA’s permission in 2007, as was required under the Planning Act. However, the SLA’s separate approval was required pursuant to clause 2 of the State Lease as it stood in the position of the lessor under the State Lease. This separate approval, which had never been obtained, was contingent on a differential premium being paid if, in the SLA’s opinion, there was an enhancement in the value of the land. Thus, as the SLA put it in its letter of 22 August 2011, a differential premium “will be charged if the Lessee/Assignee has used the Property in such a way that results in an enhancement of land value … the grant of URA’s approval coupled with the actual use of the 1 storey as a showroom will attract payment of differential premium” [emphasis added].
[32] We pause in our recital of the factual background to note that, even assuming that the SLA’s interpretation of the various provisions was correct, the SLA’s letters did not explain why the SLA had not imposed a differential premium at the time the State Lease was executed in 2008, since that had been entered into after URA had issued both the Provisional Permission and the Written Permission approving the Premises for use as a showroom, or even at any point in time since. The words “change in use” imply that a subsequent change had been made, when in fact the Property had been planned all along to have a showroom as its first storey. The SLA never explained why it had not simply charged a higher premium at the very beginning of the process, when the State Lease was being negotiated. The only relevant evidence is paragraph 5 of the letter of 26 July 2011, which stated as follows:
For completeness, we note that there was no evidence before us as to whether or not this was done by the professional consultants and there is no basis for us to reach a conclusion either way.
[35] The Respondent refused to pay this extra sum. It commenced the present proceedings on 14 October 2011, announced its intention to rescind the Lease and proceeded to reinstate the Premises. The reinstatement works concluded in December 2011 but the keys were not accepted by the Appellant until 12 March 2012.
The parties’ pleaded cases
[36] The Respondent’s primary case in the court below was in misrepresentation. It claimed that the Appellant had represented to it that it could use the premises as a showroom without any further approval, and that this representation was made on four occasions – during each of the two occasions that the Lims viewed the premises; when the Letter of Offer was signed; and when the Lease was signed. The Respondent’s case was that this representation was demonstrably false because the SLA’s further approval for the change in use was in fact required; and further that the representation was negligently made because the SLA’s right to charge a differential premium was founded on a clause in the State Lease that the Appellant could and ought to have checked. Had the Appellant done so, it would have been alive to the possibility of a differential premium being charged; and it would not have represented to the Respondent that no further approvals for the Premises to be used as a showroom were needed. As the Respondent had relied on this misrepresentation in entering into the Lease, it was therefore entitled to rescind the Lease; and further, because the Appellant had no reasonable ground to believe in the truth of the representation (from the time it made the representation up to the time the Lease was entered into), the Respondent was also entitled to claim damages under s 2(1) for the losses suffered. It therefore sought the following relief:
(a) A declaration that it had validly rescinded the Lease;
(b) A consequent refund of certain payments made to the Appellant being:
(i) Security deposit of $345,625;
(ii) Pre-paid rent of $73,963.75; and
(iii) Double payment of rent of $69,125;
(c) Damages for misrepresentation in the following sums:
(i) Stamp duty of $13,272;
(ii) Cost of fitting out works of $888,685.90;
(iii) Utilities charges for April and May 2011 of $2,70.51;
(iv) Interest on a loan taken for the fitting out works of $78,216.88; and
(v) Reinstatement costs of $85,056
[37] The Respondent mounted the following claims in the alternative. The first was for equitable relief for rescission of the Lease for innocent misrepresentation and for an indemnity for all losses suffered. The second was for the Appellant’s alleged repudiatory breach of the Lease by failing to respond to the Respondent’s requests to continue the fitting out after it was interrupted by the SLA’s intervention. The third was in unjust enrichment on the basis of a total failure of consideration. The fourth was that the Lease was voidable for mistake in equity under the principle laid down in the English Court of Appeal decision of Solle v Butcher [1950] 1 KB 671.
[38] The Appellant’s defence at first instance was twofold. First, it denied that it had made the representation on which the Respondent relied and maintained that the Letter of Offer and the Lease placed the burden of seeking all necessary approvals required for using the Premises as a showroom on the Respondent. The Appellant averred that, in any event, the Respondent could not reasonably have relied on the representation. Second, and in the alternative, the Appellant submitted that even if there was a misrepresentation, it had been made innocently; and, in any case, clause 6.9 of the Lease (“Clause 6.9”) was effective in excluding liability for any misrepresentation.
[39] The Appellant also mounted a counterclaim for breach of contract resulting from the Respondent’s alleged repudiation of the Lease.
The decision of the court below
[40] The Judge found that the Appellant had indeed made the misrepresentation to the Respondent that had induced the latter to enter into the Lease. This was for the following three reasons:
(a) The Appellant in fact represented that only the URA’s approval was needed for use of the Premises as a showroom because that was Mr Kamphorst’s actual belief in the relevant period before the Lease was entered into; it was not until 27 May 2011 that he was notified of the SLA’s letter of 21 April 2011.
(b) The Appellant completely failed to understand the distinction between the URA’s approval in the form of written planning permission for the use of the Premises as a showroom on the one hand and the SLA’s separate and independent approval for such use on the other, and that this misunderstanding persisted even after 27 May 2011.
(c) Finally, the Appellant’s conduct upon realising the true state of events was exactly as might be expected had it made the misrepresentation claimed by the Respondent – it repeatedly sought an indemnity from first AMB and later Prologis for any liability owed to the Respondent.
[41] The Judge also rejected the Appellant’s reliance on clauses 1.3 and 6.3 of the Letter of Offer as placing on the Respondent the burden of obtaining all the necessary approvals, for four main reasons:
(a) The SLA did not come within the language of clause 1.3, which contemplated approvals from “relevant authorities”. In this case, the SLA, although a government authority, was acting in its capacity as the representative of the lessor (the State) and its right to withhold approval was founded in contract, viz, clauses 2(i) and (ii) of the State Lease, and not on any regulatory powers.
(b) Clause 6.3 was an “unhappily worded” clause, whose meaning was not apparent on its face. But, in any event, any reliance on this clause was misplaced because it referred to clause 1.3.
(c) The SLA’s approval was never in the minds of the parties at the time they entered into the Lease and it therefore followed that it could not, as a matter of construction, be covered by the terms of thereof.
(d) The Appellant and, in particular, Mr Kamphorst did not behave as if the burden was on the Respondent to secure any approvals – it was the Appellant which was at all material times in contact with Prologis, the URA and the SLA.
[42] The Judge further held that the Appellant did not discharge its burden under s 2(1) to prove that it had “reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true”. This was because the Appellant possessed copies of the Head Lease and the State Lease and had to be aware of their terms, ie, that it was obliged under the Head Lease to comply with and to ensure that its sub-tenants complied with, all terms and conditions of the State Lease. The Judge relied on the English Court of Appeal decision of Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavation) Ltd [1978] 1 QB 574 (“Howard Marine”) for the proposition that the Appellant could not have had reasonable ground to believe that the representations it made were true, where it had special knowledge from reliable documents in its possession that would have demonstrated that the representations were false. Had the Appellant checked clauses 2(i) and (ii) of the State Lease, it would have become aware of the SLA’s right to charge a differential premium. The Judge found that even though the Written Permission had been granted in 2007, before the State Lease was entered into in 2008, this was immaterial as the State Lease incorporated the Building Agreement that had been entered into in 2006 (and thus predated the Written Permission). The use of the land under the State Lease was therefore limited to primary industrial uses under B2 zoning as stipulated in the Building Agreement and did not include ancillary use of the Premises as a showroom. The Judge also observed that the Appellant had the benefit of legal advice in interpreting the State Lease.
[44] As the case had been determined on the foregoing bases, the Judge made no finding on the Respondent’s alternative claims in restitution and breach of contract and also dismissed the Appellant’s counterclaim.
The parties’ cases on appeal
The Appellant’s case
[45] The Appellant’s case before us proceeds on three fronts.
[46] First, it maintains that it had never made the representation complained of. The Appellant argues that the indicia relied on by the Judge (described above at [40]) were equally consistent with the Appellant’s alternative version of the representation made (“the Alternative Representation”) (see also above at [17]), ie, that Mr Kamphorst had only said he was “not sure if there were any other government and/or regulatory approvals needed”. Therefore, the Respondent had failed to discharge its burden of showing that there was a misrepresentation.
[47] The Appellant’s fall-back position is that, even if there was an operative misrepresentation, it was made innocently such that it should not be liable for damages under s 2(1). The Appellant argues that it had reasonable grounds to believe, and did believe up to the time the Lease was entered into, that the facts represented were true. The Appellant accepts that it has the burden of showing this but avers that it has discharged this burden because:
(a) The effect of the Lease, the Head Lease and the State Lease is that the URA was the first port of call for matters pertaining to planning permission.
(b) The URA’s planning permission affected the SLA’s contractual right to approve any change of use, and the URA’s Provisional Permission of 5 October 2006, and its subsequent Written Permission of 24 April 2007, did not state that there was any change of use, nor did the SLA (which was copied in that document) object or raise any issue at that time, or at any time until April 2011. It took AMB (later Prologis) and the Appellant more than two months, even with the aid of legal advice, to understand and accept the SLA’s position on the matter. It follows that the Appellant had reasonable grounds to believe that the SLA’s right to impose a differential premium had not arisen at all.
(c) Ultimately, the Appellant only needs to demonstrate that its representation of the approval status of the Premises were reasonable, not that it was correct.
(d) Finally, the cost of the fitting out works, which formed the bulk of the Respondent’s monetary claims below (see above at [36(c)(ii)]), could not be claimed by way of an indemnity for rescission because the fitting out works were not obligations under the Lease.
[48] The third plank of the Appellant’s case is that it was absolved of liability due to the exclusion clause contained in the Lease, viz, Clause 6.9. The Appellant argues that Clause 6.9 had to be read in its context to mean that the parties agreed to treat all representations as denuded of any force whatsoever, whether for a claim for a breach of warranty or in misrepresentation. It was also argued that the aforesaid clause was reasonable under the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed).
The Respondent’s case
[49] The Respondent argues that all three grounds of appeal are without merit. First, it submits that the Appellant’s claim that Mr Kamphorst had made the Alternative Representation was wholly speculative as it was not corroborated by any documentary or other witness evidence.
[50] Second, the Respondent submits that the Appellant did not have reasonable grounds for believing in the truth of its misrepresentation. The Respondent says the Appellant cannot now claim that it was unaware of SLA’s right to impose a differential premium for a change in use, for the simple reason that the Appellant never demonstrated that it had ever considered the terms of the State Lease at all. Whether or not the SLA was correct in the assertion of its contractual rights under clause 2(ii) of the State Lease, the undisputed fact was that the Appellant had never bothered to make any inquiries of the SLA, or even to read, let alone examine, the terms of the State Lease, even though that document was in its possession (which meant that it had all the knowledge required to assess whether and what further approvals were required). The Respondent contends that the Appellant’s failure to make those necessary enquiries means that it must be taken to have failed to discharge its burden under s 2(1).
[51] Thirdly, the Respondent states that, broadly for the same reasons advanced by the Judge, the Appellant cannot rely on Clause 6.9 to exclude any liability for misrepresentation.
Issues before the court
[52] Three issues arise for our decision. The first is whether there was any misrepresentation made by the Appellant to the Respondent. The next is the consequent issue of whether, if there was in fact such a misrepresentation, the Appellant was liable under s 2(1), or whether there was no liability inasmuch as the Appellant had reasonable ground to believe and did believe up to the time the contract was made that the representation was true. The third issue is whether the Appellant may rely on Clause 6.9 to exclude any liability for misrepresentation.
[53] There are also two further miscellaneous issues that were canvassed in argument before us. The first miscellaneous issue is this: Assuming that the misrepresentation was wholly innocent and did not fall within the ambit of s 2(1), would the Appellant nevertheless be entitled to what it might have recovered under s 2(1) by way of an indemnity? The second miscellaneous issue is whether this appeal might have been resolved on the basis of the finding of a breach of contract instead.
Whether there was a misrepresentation
[54] As we have alluded to briefly (see above at [4]), we do not think that there is any serious doubt that the Appellant, through its agent, Mr Kamphorst, did misrepresent to the Respondent that all necessary approvals for the Premises to be used as a showroom had been obtained. In the hearing before us, Assoc Prof Goh Yihan (“Prof Goh”), instructed as counsel for the Appellant, did not (correctly, in our view) seriously contend that the misrepresentation had not been made, and was content to stand on his written submissions on this point. This was that the Appellant’s Alternative Representation, ie, that Mr Kamphorst had only stated that he was “not sure if there were any other government and/or regulatory approvals needed”, was equally consistent with the facts as found by the Judge. We now amplify our reason for arriving at this conclusion.
[55] In our view, as a matter of commercial reality, the Respondent would hardly have gone ahead with the Lease had Mr Kamphorst caveated the representation in the way the Appellant now claims he did by means of the Alternative Representation. Put simply, the Appellant had advertised the Premises as being suitable for use as a showroom and had sought lessees willing to pay an enhanced rent on that basis. The Respondent had, in consequence, registered its interest in the Premises solely on the basis that they could be used as a showroom. Indeed, Schedule 4 of the Lease states that the Premises “shall not be used for any purpose other than as a Showroom for furniture and furniture accessories under the trade name of [the Respondent]”. In this context, it is wholly improbable that the Respondent would have accepted the terms of the Lease if it had been told that there was any doubt over whether the necessary approvals other than that of URA were needed, which is the main import of the Alternative Representation. Whether the representation was express and in words, or implied through conduct, we are satisfied that the Appellant had represented to the Respondent that all necessary approvals had been obtained for the use of the Premises as a showroom, and that this was a misrepresentation because it is not disputed nor is it in doubt that the representation is demonstrably false.
Whether the misrepresentation fell within the ambit of s 2(1)
[56] There is no dispute that, assuming there was in fact a misrepresentation made, the Respondent had relied on said misrepresentation in entering into the Lease and thereby suffered loss. Thus our finding above, without more, entitles the Respondent to rescind the Lease, together with a consequential entitlement to an indemnity from the Appellant for all sums it was obliged to pay over under the Lease. However, s 2(1) affords a further possible remedy for victims of misrepresentation (such as the Respondent) and reads as follows:
[57] Thus, this subsection further entitles any victim of a misrepresentation to damages as he would have been so entitled “had the misrepresentation been made fraudulently”. To avoid liability under s 2(1), the representor must be able to show that “he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true”. For convenience, we will term this “the test of reasonable belief”.
The test of reasonable belief
The historical background to s 2(1)
[58] We begin our analysis of the test of reasonable belief with the observation that s 2(1) of the Misrepresentation Act is, for all intents and purposes, the equivalent of s 2(1) of the English Misrepresentation Act 1967 (c 7) (UK) (“the UK Misrepresentation Act”). Section 2(1) of the UK Misrepresentation Act was enacted in order to give effect to the recommendations in the UK Law Reform Committee, Tenth Report on Innocent Misrepresentation (Cmnd 1782, 1962) (“the 1962 Report”), paragraphs 17 and 18 of which read as follows:
[59] The stated inspiration for the test of reasonable belief is therefore s 43 of the Companies Act 1948 (c 38) (UK), specifically, s 43(3)(c) thereof, which reads as follows:
[60] The sub-section quoted in the preceding paragraph was, in turn, drawn from s 3(1)(a) of the Directors Liability Act 1890 (c 64) (UK) (“the Directors Liability Act 1890”) (see also John Cartwright, Misrepresentation, Mistake and Non-Disclosure (Sweet & Maxwell, 3rd ed, 2012) (“Cartwright”) at para 07-16). The section reads as follows:
[61] Interestingly, s 3 of the Directors Liability Act 1890 was intended to reverse, in the particular situation to which that section applies, the decision in the House of Lords decision in Derry v Peek (1889) 14 App Cas 337 (“Derry”). Derry is, of course, the leading decision on the tort of fraudulent misrepresentation or deceit in the Commonwealth, and in which Lord Herschell famously observed (at 374) as follows:
[62] As this court observed in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve (sole executrix of the estate of Ng Hock Seng, deceased) and another [2013] 3 SLR 801 (“Wee Chiaw Sek Anna”), fraud or deceit is separate and distinct from negligence or carelessness. In particular, it was observed as follows (at [34]–[35]):
[63] The distinction referred to in the preceding paragraph is an important one. In particular, s 3 of the Directors Liability Act 1890 was clearly referring to conduct other than fraud or deceit. As already noted, the touchstone for establishing fraud or deceit is that of dishonesty. The provision just mentioned was clearly intended to exclude the necessity for establishing this particular element. It is also important to note that, unlike fraud or deceit, the burden of proof in s 3 of the Directors Liability Act 1890 was placed on the representor to establish that he had reasonable ground for his belief. All this is made even clearer in s 2(1) of the Misrepresentation Act itself. In particular, the words “that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently” [emphasis added] in the provision itself are of crucial importance. Put simply, there is no need for proof of dishonesty in order for a claim under s 2(1) to succeed. The burden of proof is also clearly on the representor to prove “that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true”.
[64] In order to understand the somewhat awkward phraseology of s 2(1) itself, the historical backdrop against which that provision was enacted ought to be borne in mind. Section 2(1) was intended to provide a legal avenue for the recovery of damages at common law where none had existed before apart from a claim for fraudulent misrepresentation or deceit. Put another way, under the common law, absent a claim for fraudulent misrepresentation or deceit, no damages were recoverable for all other types of misrepresentation (at best, only an indemnity might be obtained). To be sure, the equitable remedy of rescission was and is always available for all types of misrepresentation, subject to the operation of any applicable bars to rescission (see generally Pearlie Koh, “Misrepresentation and Non-disclosure” in ch 11 of The Law of Contract in Singapore (Academy Publishing, 2012) at paras 11.133–11.156; the chapter is hereinafter referenced as “Koh” and the book as “The Law of Contract in Singapore”). However, it bears reiterating that the common law remedy of damages was not always available, save in the situation where there was fraud or deceit.
[65] In this regard, it is of the first importance to note that the tort of negligent misrepresentation (which was first established in the landmark House of Lords decision of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (“Hedley Byrne”)) had yet to be established at the time the Law Reform Committee issued its report in 1962 (Hedley Byrne was decided in 1963). Whilst it is true that the decision in Hedley Byrne had been handed down by the House of Lords by the time the Misrepresentation Act was enacted in 1967, it is likely that the tort of negligent misrepresentation was still in an embryonic stage, thus prompting the promulgation of the Misrepresentation Act and, in particular, s 2(1) thereof. Be that as it may, it is clear, in our view, that a claim brought under s 2(1) is (consistent with the analysis in the preceding paragraph) and, indeed, must have been, ex hypothesi, a different legal creature from an action in fraud or deceit.
[66] What, then, is its true nature? Section 2(1) of the Misrepresentation Act is, in the first place, undoubtedly statutory in nature. It now co-exists with the tort of negligent misrepresentation at common law as first established in Hedley Byrne and was clearly enacted to perform the same function – to furnish a remedy in damages where none had hitherto (apart from fraud or deceit) existed. However, it is also simultaneously different from the tort of negligent misrepresentation at common law. The burden of proof under the common law, in respect of a claim based on the tort of negligent misrepresentation, is on the plaintiff/representee. However, under s 2(1), as already noted above at [63], the burden is on the defendant/representor to prove “that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true”. In this regard, the following perceptive observations by Prof Cartwright may be usefully noted (see Cartwright at para 6-64):
[67] As already noted above at [64], the equitable remedy of rescission is always available for every type of misrepresentation (subject to any applicable bars to rescission). Section 2(2) of the Misrepresentation Act now furnishes the representee with the additional option of claiming damages in lieu of rescission. Whether or not this particular provision applies notwithstanding the fact that one or more of the bars to rescission operates raises rather thorny legal issues (see generally Koh at paras 11.240–11.242) which (fortunately) do not have to be resolved in this judgment as only s 2(1) is in issue. Let us turn now to elaborate on the test of reasonable belief.
The test proper
An objective standard to aid in ascertaining subjective belief
[68] As previously noted, the representor (here, the Appellant) would be liable to pay damages under s 2(1) “unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true” [emphasis added in italics and bold italics]. This element of reasonableness constitutes the objective element in the application of s 2(1) to the given facts of the case concerned. It is not only consistent with the general approach towards legal analysis in the law of contract (as to which see generally The Law of Contract in Singapore at paras 03.006–03.020); it is also consistent with the tort of negligence (which utilises the objective standard of reasonableness as well (see, for example, per Lord Atkin in the seminal House of Lords decision of Donoghue v Stevenson [1932] AC 562 at 580)).
[69] The court must ascertain his subjective state of mind based on an objective standard – hence, the test of reasonable belief that is an integral part of s 2(1). Such an approach is wholly understandable, as it would otherwise be all too easy for a defendant representor to merely assert that he had truly believed in what he had represented, notwithstanding the fact that he had no reasonable ground to believe that what he had represented to the plaintiff representee was true. But, this is not to state that the representor’s subjective state of mind is immaterial; the fundamental point is that the objective standard is not intended to be a substitute for the representor’s subjective belief. Far from it. If on the objective assessment of the evidence placed before the court, it is found that the representor did not subjectively believe that what he had represented to the representee was true, then the court must hold that he (the representor) has not discharged his burden so as to escape liability under s 2(1). Put simply, this assessment of the representor’s alleged belief in the truth of his representation is always an objective assessment of whether, in the context of the particular facts placed before the court, the representor did in fact subjectively hold that belief. It would otherwise be invidious to expect the court to accept the representor’s claims as to his subjective state of mind at face value.
[70] Once, on the particular facts of the case objectively assessed, the representor is found subjectively to believe that the representation made was true, the analysis proceeds to the objective assessment of whether the representor had reasonable grounds for that belief. The court would have to assess the reasonableness of the representor’s alleged belief in the context of both the representation(s) made as well as all the circumstances of the case, and what is reasonable will inevitably be, in the nature of things, a fact-centric exercise. We think it pertinent to emphasise though that, in the nature of things, no hard and fast line can be drawn and, in certain situations, both the subjective and objective elements may apply in an interactive fashion. In this regard, we preface our analysis with the observation that the fact that the representor is to some degree at fault in making the representation lies at the heart of s 2(1) and is the sole justification for imposing on him the burden of damages as if he was fraudulent. It follows that it would only be fair to fault the representor, if, assessed in the context of the circumstances present and acting on his mind, it was not objectively reasonable for him to make the representation that he did. In effect, the liability for damages flows from the fact that the representor’s subjectively held belief has fallen short of what, in those circumstances, would have been objectively reasonable for him to believe. Removing this subjective element from the test of reasonableness would transform the test of reasonable belief from an assessment of the representor’s culpability, which, we have said, is a necessary assessment for the finding of liability, into a post-hoc rationalisation of the representation. We think that this cannot be correct as a matter of principle. As Prof Cartwright aptly observes (see Cartwright at para 7-25):
[71] We should add that, even though the test is an objective assessment of the reasonableness of the representor’s subjectively held grounds for his belief, we do not think the representor is entitled (for instance) to claim innocence where he was, in effect, wilfully blind to obvious sources of information that would, if they had been referenced, have brought him to a realisation of the true position. It is clear that the inquiry is a broad and fact-centric one that delves into all the circumstances present and available to the representor, although it is not a detailed and forensic examination of particular propositions of beliefs. We think that this conclusion follows inexorably from the rationale that we have said lies at the heart of an action for damages under s 2(1).
[72] Indeed, the courts have also, in our view, always taken the position that the only grounds the court may assess in relation to the reasonableness of a belief in defending a claim under s 2(1) are those grounds that were present to the representor’s mind, even if (initially at least) the authorities had not always articulated this fully. For example, in the English Court of Appeal decision of Broome v Speak [1903] 1 Ch 586, one of the questions was whether the defendant directors of a company were liable for damages under s 3(1) of the Directors Liability Act 1890 for failing to make mention in a prospectus of two material contracts entered into by the company. Buckley J found that, as a matter of fact, the statements in the prospectus were thereby made untrue, and, turning to the test of reasonable belief, observed as follows (at 603):
[73] This reasoning was endorsed by the House of Lords on further appeal. In Shepheard and another v Broome [1904] AC 342 (“Shepheard”), Lord Lindley put the matter thus (at 347):
[74] To both the English Court of Appeal and the House of Lords, therefore, the subjective state of mind of the defendant was instrumental in the objective assessment of reasonableness, and thereupon in the finding of liability.
[75] Turning to a more recent decision, in Howard Marine, the issue there was whether the plaintiff, a barge owner, had reasonable grounds for his belief that the capacity of certain barges hired by the defendant was 1,600 tonnes. The true figure was 1,055 tonnes and the discrepancy was because the plaintiff’s employee had relied on a mistaken entry in Lloyd’s Register when the correct figure was stated in documents from the barges’ manufacturer. The English Court of Appeal embarked on the exercise of determining the actual state of mind of the plaintiff’s employee. Bridge and Shaw LJJ ruled that the plaintiff had no reasonable ground for preferring one reliable source of information, which was Lloyd’s Register, over another, the documents from the manufacturer. Lord Denning MR dissented on this point. The learned Master of the Rolls accepted that the plaintiff’s employee had seen the figure in Lloyd’s Register and had also seen the documents from the manufacturer, but that the latter figures “did not register”; he observed thus (at 593):
[76] It is apparent that the dissent by Lord Denning was based, in effect, on a difference with regard to the proper inferences to be drawn from the evidence. Bridge LJ disagreed with Lord Denning (at 597) that the correct figures had not registered in the employee’s mind, noting that the employee had given evidence that he had in fact seen the correct capacity figures in the documents, but instead had preferred the figure in Lloyd’s Register for two reasons: the documents referred to freshwater capacity and not seawater, and that he was concerned only with cubic capacity. Bridge LJ found that neither reason was objectively reasonable (at 598), first, because the issue of cubic capacity was quite irrelevant, and, second, because there was a minimal difference between freshwater and seawater capacity. Shaw LJ concurred in this particular assessment of the evidence.
[77] Hence, the exercise of determining whether a person had reasonable grounds to believe in the truth of a representation that was false, is an objective enquiry undertaken with regard to all the considerations that were subjectively present in the mind of that person. Where there were conflicting sources of information to which the representor had recourse, the touchstone is whether he possessed objectively reasonable reasons to prefer one source over another. We think this is the correct statement of the law and, in so far as this is the holding in Howard Marine, we approve it. We also note that the difference in views based on the evidence illustrates a point that we have already emphasised (see above at [5]) – that the application of the test of reasonable belief under s 2(1) is a very fact-centric exercise.
[78] At this juncture, we should also note a related point with regard to the timeframe to which the test of reasonable belief applies – and to which our attention now briefly turns.
The relevant timeframe
[79] Section 2(1) of the Misrepresentation Act is clear: the representor (in this case, the Appellant) must not only prove that “he had reasonable ground to believe” that the facts he represented to the representor (here, the Respondent) “were true” – he must also prove that he “did believe up to the time the contract was made” [emphasis added] that the facts so represented “were true”. The timeframe laid down by s 2(1) is both logical as well as commonsensical as this must surely be what one would consider to be the operative period of the misrepresentation(s). Put simply, this operative period commences from the time the misrepresentation concerned is made and ceases when the contract is entered into after or as a result of the misrepresentation. It should also be noted that the objective assessment of whether the representor had reasonable ground to believe in the truth of the representation is a continuing assessment that is applied throughout this period. Thus, for instance, if the representor originally had reasonable grounds to believe in the truth of the representation made, but due to a change in circumstances those grounds were no longer objectively reasonable by the time the contract was made, then the representor would not have passed the test of reasonable belief. This is clear not only on a plain reading of s 2(1) but also constitutes a logical as well as commonsensical application of the letter and spirit of the provision itself.
What kind of damages are recoverable under s 2(1)?
[80] In order to complete our analysis on the test of reasonable belief, we pause to say a few words on the nature of the damages recoverable in a claim under s 2(1). This is an area of law of considerable controversy, which is not, as we shall see, engaged precisely on the specific facts of the present appeal; however we think it appropriate to discuss the point briefly in view of the Judge’s observations on this issue at [146]–[151] of the Judgment.
[81] In essence, the controversy may be stated as follows: Assuming that the measure of damages to be awarded under s 2(1) is the tortious (and not the contractual) measure, ought the actual measure of damages to be awarded be that awarded for fraud or deceit or for negligence? There is in fact a difference between each measure of damages. To elaborate briefly, the measure of damages awarded for the tort of fraudulent misrepresentation or deceit includes all loss that flowed directly from the entry into the contract in question, regardless of whether or not such loss was foreseeable; the damages awarded would include all consequential loss as well (see, in particular, the House of Lords decision of Smith New Court Securities Ltd v Citibank NA [1997] AC 254 (“Smith New Court”), the principles of which were endorsed by this court in Wishing Star Ltd v Jurong Town Corp [2008] 2 SLR(R) 909 (“Wishing Star”)). On the other hand, the measure of damages awarded for the tort of negligent misrepresentation would only include loss that was reasonably foreseeable (see, for example, Wishing Star at [23]).
[82] The rationale for the more generous measure of damages under fraudulent misrepresentation was in fact helpfully elucidated by Lord Steyn in Smith New Court in the following terms (at 279): “[f]irst it serves a deterrent purpose in discouraging fraud”; and “[s]econdly, as between the fraudster and the innocent party, moral considerations militate in favour of requiring the fraudster to bear the risk of misfortunes directly caused by his fraud”. In so far as the last-mentioned point is concerned, Lord Steyn proceeded to observe thus (at 280):
[83] Returning to the measure of damages to be awarded under s 2(1), we observe that the English Court of Appeal, in Royscot Trust Ltd v Rogerson [1991] 2 QB 297 (“Royscot Trust”), held (disagreeing with the then prevalent academic opinion on this particular issue) that the measure of damages to be awarded under s 2(1) ought to be that measure which would have been awarded for fraudulent misrepresentation or deceit. In arriving at this view, the court relied primarily on the language of s 2(1) itself. However, the difficulty with such an analysis is that s 2(1) (as we have already seen) does not concern a situation that pertains to actual fraud as such, but one that, on the contrary, falls short of it (see Richard Hooley, “Damages and the Misrepresentation Act 1967” (1991) 107 LQR 547 (“Hooley”)). Indeed, if Lord Steyn’s observations in Smith New Court (quoted in the preceding paragraph) are accepted, it is, with respect, difficult to see that the moral turpitude entailed under s 2(1) would be on the same level as that entailed in a situation of fraudulent misrepresentation or deceit. Indeed, although the language of s 2(1) refers to “fraud”, the context in which the word “fraud” is used is, in our view, of the first importance. In particular, the references to “fraud” were (as we have seen above at [63]) in fact intended to signal the fact that s 2(1) offered a statutory remedy for damages which was hitherto available only in the context of the (more serious) situation of fraudulent misrepresentation or deceit. Looked at in this light, s 2(1) extended the remedy of damages to situations that fell short of fraudulent misrepresentation or deceit, and this is underscored by the phrases “had the misrepresentation been made fraudulently” and (perhaps more importantly) “notwithstanding that the misrepresentation was not made fraudulently” in s 2(1) [emphasis added]. Indeed, as Prof Cartwright correctly observes, “s.2(1) does not refer to “negligence” but that is, in substance, what it covers” (see Cartwright at para 6-64, note 386 [emphasis added]). Put simply, it is the statutory analogue of the common law action for negligent misrepresentation (the latter of which was, as we have seen (see above at [65]), first established in Hedley Byrne).
[84] If the above analysis is correct, then it ought to follow that the measure of damages awardable under s 2(1) ought, instead, to be that awarded under the common law action for negligent misrepresentation. The decision in Royscot Trust ought not to be followed. That having been said, we note that, in the Singapore High Court decision of Ng Buay Hock and another v Tan Keng Huat and another [1997] 1 SLR(R) 507, Royscot Trust was cited with apparent approval, with the court referring (at [31]) to that case as reflecting what the “prevailing opinion” appeared to be. The Judge (at [150] of the Judgment) also expressed his agreement with Royscot Trust. There is nevertheless a strong case, in our view, for reconsidering Royscot Trust. Indeed, Lord Steyn himself noted in Smith New Court (at 1075), that Royscot Trust has been subject to “trenchant academic criticism” (citing Hooley; see also generally Ian Brown & Adrian Chandler, “Deceit, Damages and the Misrepresentation Act 1967, s. 2(1)” [1992] LMCLQ 40; Chitty on Contracts (Sweet & Maxwell, 31st ed, 2012) at para 6-075; as well as Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 13th ed, 2011) (“Treitel”) at para 9-066). Although both Lord Steyn and Lord Browne-Wilkinson expressed no conclusive view on Royscot Trust in Smith New Court, the tenor of their judgments (particularly that of Lord Steyn) suggests that the days of Royscot Trust might be numbered. Indeed, as we have already noted, there is no reason in both logic and principle why a plaintiff should be as well-placed as he would have been had the misrepresentation concerned taken place in a situation of actual fraud or deceit since, ex hypothesi, the situation is in fact not one that pertains to actual fraud or deceit but on the contrary one that falls short of it. Further, and consistent with Lord Steyn’s observations in Smith New Court, it is extremely difficult to see how the moral turpitude entailed under s 2(1) would on the same level as that entailed in a situation of fraudulent misrepresentation or deceit.
[85] However, as this particular issue was not argued before this court, we will express a conclusive view only when it is next directly in issue before us. In any event, as already noted and shall be elaborated upon below, the result in the present case does not turn on which view is adopted with regard to the proper measure of damages to be awarded under s 2(1). This would be an appropriate juncture to turn to the application of s 2(1) (in particular, the test of reasonable belief) to the facts of the present appeal.
Applying the test of reasonable belief
[86] Returning to the facts of the present case, we are of the view that it is clear on the objective evidence that the Appellant did honestly believe in the truth of the representation it had made to the Respondent. We are satisfied for the reasons given by the Judge that the Appellant, in the shape of its representative Mr Kamphorst, did in fact believe at all the relevant times that only URA’s approval was necessary for the Respondent to use the Premises as a showroom and that therefore no other approval was required (see the Judgment at [96]–[97] and [120]). However, the key question in the context of the present appeal is whether or not, in the circumstances, it was reasonable for the Appellant to hold that belief.
[87] The Appellant’s main contention, which was advanced with considerable force (and commendable clarity) by Prof Goh in the oral hearing before us, is that the Judge was wrong to find that the Appellant had no reasonable grounds to believe that the representation was true. In other words, that the Appellant had failed the test of reasonable belief. The Judge’s reasoning bears quoting in full (at [121] and [124]–[125] of the Judgment):
[88] The Judge’s reasoning may be summarised as follows:
(a) The Appellant had in its possession the Head Lease and the State Lease.
(b) The Appellant had an obligation not to put its own landlord (AMB and later Prologis) in breach of the State Lease.
(c) Had it checked the State Lease, the Appellant would have become aware of clauses 2(ii) and 2(iii) thereof which granted the SLA the right to charge a differential premium in circumstances that, in the end, eventuated.
(d) The Appellant was legally advised and could have sought a legal opinion on the relevant terms in the State Lease.
[89] Prof Goh attacked the reasoning of the Judge in the following manner. The Appellant’s belief in the truth of the representation was reasonable because even if it had examined the relevant contractual documents, it would have reasonably come to the view that the SLA did not have any right to charge a differential premium. It could therefore not be faulted for its ignorance of the SLA’s right to do so. The Appellant relies, in particular, on clause 3.3 of the Building Agreement, and clauses 1(i) and 2(i)(a) of the State Lease, which, it says, have the cumulative effect that URA was always the first port of call in relation to planning permission. For convenience, clauses 2(i) and (ii) of the State Lease are reproduced as follows:
[90] The Appellant’s case is that it is apparent from these clauses that SLA’s right to charge a differential premium was premised on there being a change in use of the property in question, which in turn was premised on the URA’s approval of such change in use. This two-step framework means that if and when the URA comes to the view that some use for which planning permission was obtained is outside the presently approved use, it will state explicitly that there is a variation or change of use, triggering the SLA’s right to examine that change and to charge a differential premium if that change results in an enhancement in the value of the land. The example raised was DHL’s request for a racking system to be installed on the second floor of the Property. This increased the gross floor area of the Property beyond that approved under clause 2(i) of the State Lease; planning permission was granted by the URA and it was explicitly stated in the grant of planning permission that “[t]he applicant is to pay differential premium to the Commissioner of Lands, Singapore Land Authority”.
[91] In contrast, the Written Permission, by which the URA marked its approval of the development plans for the Property, including the planned use of the Premises as a showroom, did not state explicitly that the SLA was entitled to charge a differential premium. The Written Permission was copied to “COL, SLA”, that is, the Commissioner of Lands of the SLA. Furthermore, between April 2007 (when the Written Permission was issued) and April 2011 (when the SLA first raised the issue of the premium), the SLA was conspicuously silent on the issue as to whether a differential premium was payable. That silence fortified the Appellant’s belief that only the URA’s permission was required for the use of the Premises as a showroom, and that permission having undoubtedly been obtained, no further approvals were required.
[92] Prof Goh conceded that, on hindsight, it might have been prudent or even wise for the Appellant to have checked directly with the SLA on whether a differential premium was payable before embarking on the process of finding a lessee for the Premises. However, he argued, the key issue was whether the grounds were reasonable in the circumstances, and in the circumstances, viz, the SLA’s deafening silence on the matter, plus Mr Kamphorst’s own inquiries with the URA, it was reasonable to believe that the SLA’s approval was not an issue at all. This view, he argued, was buttressed by the fact that, even with the benefit of legal advice, it took AMB and later Prologis over two months of communications with the SLA in order to clarify the position (see above at [23]–[31]). It would thus not have been reasonable to expect the Appellant to come to the SLA’s view of the matter, in particular because, with respect to issues arising under the State Lease including the issue as to the differential premium, the SLA was willing to communicate only with AMB and Prologis who were the lessees under the State Lease, and not with the Appellant, who was only the sub-lessee and therefore not privy to the State Lease.
[93] We admit to having some sympathy for the Appellant’s case. We agree that, even if the State Lease had been reviewed by competent legal counsel, it is likely that they would have found it difficult to accept that the SLA’s approval was even an issue. We are much struck by the written communications between the solicitors for AMB and Prologis on the one hand, and the SLA on the other, in which it was clear that the former had completely failed to understand the source of the SLA’s objection to the Lease, whilst the latter had repeatedly failed to communicate its position with any clarity. We point to two specific instances.

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RBC Properties Pte Ltd v Defu Furniture Pte Ltd

Laws this judgment relies on

Grounds of decision

Introduction

Background facts

The parties’ pleaded cases

(v) Reinstatement costs of $85,056

The decision of the court below

The parties’ cases on appeal

The Appellant’s case

The Respondent’s case

Issues before the court

Whether there was a misrepresentation

Whether the misrepresentation fell within the ambit of s 2(1)

The test of reasonable belief

The historical background to s 2(1)

The test proper

An objective standard to aid in ascertaining subjective belief

The relevant timeframe

What kind of damages are recoverable under s 2(1)?

Applying the test of reasonable belief