SINGAPORE - The owner of a restaurant and bar at Kallang Wave Mall that closed down after failing to pay rent for eight months has been ordered to pay $2.7 million to the landlord.
The Court of Appeal on Wednesday (July 4) upheld an earlier decision that landlord SMRT Alpha was entitled to recover from Strait Colonies more than $562,000 in outstanding rent and late payment interest, and $2.16 million in damages for breach of contract.
Strait Colonies operated the Straits Express Restaurant & Bar at the mall between December 2014 and September 2015. It also ran a club named China One in Clarke Quay.
In March 2014, Strait Colonies agreed to run a business at the mall, which is part of the Singapore Sports Hub. The five-year lease agreement stated that the premises could be used as a "pub cum F&B" outlet providing live music.
In May, SMRT Alpha applied to the Urban Redevelopment Authority (URA) to change the use of the premises from "restaurant" to "restaurant cum pub". But the URA allowed the premises to be used only as a "restaurant with ancillary bar" for three years.
After learning of this, Strait Colonies asked for the rent to be reduced as it could no longer operate under its original business model, but was unsuccessful.
The lease agreement was signed in August 2014, after which Strait Colonies took possession of the premises and carried out fitting works, while it convinced the URA to approve "ancillary live entertainment".
The restaurant and bar became fully operational in December that year.
On Feb 12, 2015, SMRT Alpha raised the rent on the basis that the actual floor area was slightly larger than previously stated. Strait Colonies objected but to no avail.
The tenant then began to fall behind in its payment of rent.
SMRT Alpha issued a legal demand for payment and gave the tenant till Sept 30 to submit a settlement plan. On that day, Strait Colonies vacated the premises.
A new tenant was found more than a year later to take over at a lower rent.
SMRT Alpha sued Strait Colonies for unpaid rent, late payment interest and damages for breach of contract.
Strait Colonies argued that it was entitled to rescind the contract because the landlord had misrepresented the use of the premises as one that could be used to run a pub with live entertainment.
The High Court accepted that the landlord had made these misrepresentations.
However, the court found that after discovering the misrepresentations, the tenant affirmed the contract by taking possession of the premises, carrying out fitting works, opening for business and paying rent initially.
Thus, the tenant was not entitled to rescind the contract.
Strait Colonies filed an appeal, but lost.
The three-judge apex court said that Strait Colonies had signed the contract without any qualifications after it learnt of URA's decision. It also made no protest when taking possession of the premises, opening for business and paying rent.
The court ruled that it was not necessary for a person to whom misrepresentations have been made to know that he has a legal right to rescind a contract.
In this case, the court found that Strait Colonies was aware of its legal right to rescind the contract, pointing to text messages from its director in August 2014 that the company may have to "walk away"and "close the chapter".