Case Details
- Citation: [2021] SGCA 54
- Case Number: Civil Appeal No 167 of 2020
- Date of Decision: 12 May 2021
- Court: Court of Appeal of the Republic of Singapore
- Coram: Tay Yong Kwang JCA; Belinda Ang Saw Ean JAD; Woo Bih Li JAD
- Parties: M Asset Pte Ltd (Appellant); Inngroup Pte Ltd (Respondent)
- Procedural History: Appeal against the High Court decision in Inngroup Pte Ltd v M Asset Pte Ltd [2020] SGHC 197
- Legal Area: Civil Procedure — Costs
- Judgment Length: 6 pages, 3,081 words
- Counsel: K Muralitherapany and Marcus Sim Jia Qing (Joseph Tan Jude Benny LLP) for the appellant; Looi Ming Ming (Eldan Law LLP) for the respondent
- Key Context: Dispute arising from a settlement agreement following litigation between adjoining shophouse owners
Summary
M Asset Pte Ltd v Inngroup Pte Ltd [2021] SGCA 54 concerned an appeal from a High Court decision that found the appellant in breach of a settlement agreement and awarded damages to the respondent. The underlying dispute arose between owners of adjoining shophouses at 41 and 42 Hong Kong Street. After mediation of earlier litigation, the parties signed a settlement agreement in the early hours of 27 June 2018. The respondent later commenced proceedings alleging that the appellant breached the settlement agreement by refusing to sign a tenancy agreement on terms consistent with the settlement.
On liability, the Court of Appeal affirmed the trial judge’s conclusions. The appellate court accepted that the appellant was in breach of the settlement agreement, including clause 6, and that the trial judge’s findings on the parties’ respective conduct were correct. On damages, the Court of Appeal also upheld the trial judge’s pragmatic approach to computing loss of profits, including a discount to reflect the impact of the COVID-19 pandemic and uncertainty in the hotel market.
The principal appellate intervention concerned costs. The Court of Appeal expressed “perturbed” concern about the trial judge’s method of pegging costs at 80% of the appellant’s indemnity-based estimate without sufficiently engaging with the full circumstances, including the respondent’s own costs estimates and the proper exercise of discretion. The Court of Appeal therefore adjusted the costs outcome, clarifying that costs awards must be reasoned and proportionate, and that the court should not mechanically adopt an indemnity-based figure as a proxy for what is fair in the circumstances.
What Were the Facts of This Case?
The parties, M Asset Pte Ltd (“Appellant”) and Inngroup Pte Ltd (“Respondent”), were owners of adjoining shophouses. The respondent owned 41 Hong Kong Street and the appellant owned 42 Hong Kong Street. In September 2016, the respondent commenced an action against the appellant relating to the use of their properties. That litigation was mediated with a view to settlement, and the mediation produced a settlement agreement signed at about 2.30am on 27 June 2018.
The settlement agreement contained a package of obligations. In broad terms, the appellant agreed to contribute $250,000 in two tranches towards renovation costs, to provide access to all floors of its property, and to cooperate in applying for regulatory approval for a change of use, with the respondent bearing the costs of submissions and applications. Critically, clause 6 required the appellant to lease the second to fifth storeys to the respondent at $8,000 per month for three years, with staggered handover dates: the fourth and fifth storeys by 1 August 2018, the second storey by end June 2019, and the third storey by end January 2020. Clause 7 then contemplated a further two-year lease at $12,000 per month after expiry of the initial lease, and the parties were to enter into a tenancy agreement reflecting these key terms, including a first option to renew at the conclusion of a “five plus five” tenancy structure.
Although the settlement agreement was signed, the contemplated tenancy agreement was not executed. In 2019, the respondent commenced the present action. The respondent alleged that the appellant breached the settlement agreement by refusing to sign a tenancy agreement consistent with the settlement’s terms. One of the alleged unreasonable acts was that the appellant repeatedly proposed draft tenancy agreements containing terms inconsistent with the settlement agreement’s thrust. The appellant denied breach and counterclaimed that the respondent itself breached the settlement agreement by refusing to consider the appellant’s numerous proposals for the tenancy agreement and by refusing to mediate the dispute.
At trial, the High Court identified two main issues. First, whether the appellant breached the settlement agreement by providing numerous and changing draft tenancy agreements containing terms inconsistent with the settlement. Second, whether there was any agreement or understanding that the appellant’s property would be used solely as a hotel. The trial judge found in favour of the respondent on both issues, holding that the respondent succeeded in its claim and dismissing the appellant’s counterclaim. The Court of Appeal, on appeal, accepted that the trial judge’s liability findings were correct, including that the appellant breached clause 6.
What Were the Key Legal Issues?
The appeal raised two broad categories of issues: (1) whether the trial judge was correct on liability and damages arising from breach of the settlement agreement; and (2) whether the trial judge’s approach to costs was legally and factually sound.
On liability and damages, the Court of Appeal had to consider whether the appellant’s conduct in relation to the tenancy agreement drafts and the eventual leasing arrangements constituted breach of the settlement agreement. The appellate court also had to assess whether the trial judge’s method of calculating damages—particularly the assumptions about hotel usage, occupancy rates, and the effect of the COVID-19 pandemic—was justified on the evidence and consistent with the principles governing damages for breach of contract.
On costs, the key legal issue was the proper exercise of the court’s discretion. The trial judge had pegged the respondent’s costs at 80% of the appellant’s estimated costs, which were worked out on an indemnity basis and excluded disbursements. The Court of Appeal scrutinised whether this approach sufficiently considered the circumstances of the case, including the respondent’s own costs estimates (which differed once disbursements were accounted for) and the guidance from appellate authority on costs awards.
How Did the Court Analyse the Issues?
On liability, the Court of Appeal agreed with the trial judge. It noted that the trial judge’s conclusions on which party was in breach were supported by the evidence. The appellate court also accepted the respondent’s submission that the appellant had breached clause 6 of the settlement agreement. In practical terms, this meant that the appellant’s failure to deliver the lease arrangements contemplated by the settlement—particularly in relation to the timing and terms of handover and leasing—was not merely a technical non-compliance but a breach that justified the respondent’s claims.
On damages, the Court of Appeal addressed the fact that the respondent abandoned its claim for specific performance. The respondent’s abandonment was linked to the COVID-19 pandemic and to the appellant’s decision to sign a new tenancy agreement with another company, Ink and Pixel Pte Ltd, on 21 March 2019 for 24 months with effect from 1 June 2019, concerning the second storey. This second storey was supposed to be handed over to the respondent by end June 2019 under the settlement agreement. The respondent also considered it would be difficult to deal with the appellant for ten years under the “five plus five” tenancy contemplated.
Having elected damages, the respondent advanced multiple heads of claim. The trial judge dismissed a claim of $170,000 for August 2018 to December 2019 on the basis that the evidence did not support the asserted ability to use each floor during that period. The trial judge also dismissed a loss of opportunity claim for a collective sale as too speculative. The Court of Appeal did not disturb these conclusions, and instead focused on the trial judge’s alternative damages assessment.
The trial judge approached damages by assuming hotel usage would have commenced in February 2020 and ended in July 2028, after the last staggered handover on 31 January 2020. This produced an operating period of 102 months (about eight and a half years). The trial judge then relied on expert evidence to estimate profits and losses under two scenarios: a boutique hotel model (with 80% occupancy) and a capsule hotel model (with 75% occupancy). The estimated losses over the ten-year contemplated tenancy were approximately $4.67 million for the boutique scenario and $6.89 million for the capsule scenario. Rather than selecting one scenario exclusively, the trial judge took a pragmatic approach: she averaged the two figures to arrive at about $5.78 million, and then discounted this average by 50% to reflect the pandemic’s effect and uncertainty, resulting in approximately $2.89 million.
The Court of Appeal accepted this approach as fair and pragmatic. It acknowledged that there was no guarantee that the respondent’s application for a hotel licence would succeed, but the expert evidence suggested it was likely to succeed given existing uses on the respondent’s adjoining property. The appellate court also endorsed the trial judge’s reasoning that it could not be assumed the tourism and hotel industry would remain depressed for another eight years, and that recovery would likely improve room rates beyond the discounted levels. Accordingly, the Court of Appeal affirmed the trial judge’s damages assessment.
Costs, however, required closer scrutiny. The Court of Appeal highlighted that the trial judge pegged the respondent’s costs at 80% of the appellant’s estimated costs, which were calculated on an indemnity basis and excluded disbursements. The Court of Appeal found this approach problematic because it appeared to have been applied “apparently without considering all the other circumstances of the case.” The appellate court observed that, apart from the costs award, disbursements were awarded to the respondent slightly above $58,000, including the fees and charges of two experts called by the respondent.
The Court of Appeal then compared the estimates. The respondent’s own costs estimate was about $131,000, but it included disbursements. Once disbursements were deducted (at roughly $58,000), the respondent’s standard-basis costs estimate without disbursements was around $73,000. The respondent’s costs schedule for trial estimated costs at about $71,000 and disbursements as slightly more than $60,000. The respondent had argued before the trial judge that the appellant’s costs estimate was exorbitant and unjustified, and that if the respondent succeeded, the court could award costs closer to what the appellant claimed in its costs schedule, citing Lipkin International Ltd v Swiber Holdings Ltd and another [2016] 4 SLR 1079 at [18] (“Lipkin”).
The trial judge did not explicitly state that she was awarding costs on an indemnity basis. Instead, she said she agreed with and followed the approach in Lipkin. She pegged costs for the respondent’s claim and the appellant’s counterclaim to the appellant’s indemnity-based estimate (at $217,750), deducted 20%, and awarded $174,200. The Court of Appeal’s concern was that this method did not adequately reflect the respondent’s own costs position and did not show sufficient engagement with the proportionality and fairness considerations that underpin costs discretion.
Although the provided extract truncates the remainder of the appellate reasoning, the Court of Appeal’s expressed “perturbed” stance indicates that the appellate court viewed the trial judge’s costs calibration as insufficiently reasoned and potentially disproportionate. In costs jurisprudence, the court’s discretion is broad but must be exercised judicially, taking into account the parties’ conduct, the complexity and importance of the issues, the reasonableness of the costs incurred, and the overall justice of the outcome. The appellate court’s intervention signals that adopting an indemnity-based estimate as a starting point, without a careful and transparent analysis of what is fair on the facts, may lead to an unjust costs award.
What Was the Outcome?
The Court of Appeal affirmed the High Court’s decision on liability and damages. It agreed that the appellant was in breach of the settlement agreement and that the trial judge’s damages computation—based on expert evidence, occupancy assumptions, and a pandemic discount—was appropriate. The respondent’s abandonment of specific performance and its election to claim damages were also treated as consistent with the trial judge’s approach.
On costs, the Court of Appeal adjusted the outcome. While the extract does not provide the final quantified costs order due to truncation, the appellate court’s criticism of the trial judge’s costs methodology indicates that the costs award was not left untouched. The practical effect is that the respondent did not receive the full costs outcome as determined by the trial judge, and the Court of Appeal’s decision reinforces that costs awards must be calibrated with proper regard to the evidence of reasonable costs and the circumstances of the case.
Why Does This Case Matter?
M Asset Pte Ltd v Inngroup Pte Ltd is significant for two reasons. First, it illustrates how courts treat settlement agreements and subsequent tenancy arrangements in property-related disputes. Where a settlement agreement sets out detailed obligations—including timing, access, and leasing terms—courts will scrutinise later conduct and draft documents to determine whether the settlement’s “thrust” has been respected. The case confirms that repeated proposals inconsistent with the settlement can amount to breach, and that liability findings grounded in trial evidence will generally be upheld on appeal.
Second, and more importantly for practitioners, the decision provides guidance on costs discretion. The Court of Appeal’s discomfort with the trial judge’s mechanical pegging of costs to an indemnity-based estimate underscores that costs awards must be reasoned and proportionate. The court’s reference to Lipkin International Ltd v Swiber Holdings Ltd and another [2016] 4 SLR 1079 at [18] indicates that while indemnity-based estimates may be relevant, they are not a substitute for a careful assessment of what costs are fair and reasonable in the circumstances. Lawyers should therefore ensure that costs submissions are supported by coherent comparisons (including disbursements), and that the court is invited to consider the reasonableness of each party’s costs position rather than relying on a single benchmark.
For litigators, the case also highlights the importance of costs evidence and transparency. The respondent’s own costs estimates—once disbursements were properly accounted for—were central to the appellate court’s critique. This suggests that parties should prepare costs schedules that clearly distinguish between costs and disbursements, and should be ready to explain why a particular costs estimate is or is not justified.
Legislation Referenced
- None specified in the provided judgment extract.
Cases Cited
- Inngroup Pte Ltd v M Asset Pte Ltd [2020] SGHC 197
- Lipkin International Ltd v Swiber Holdings Ltd and another [2016] 4 SLR 1079
- M Asset Pte Ltd v Inngroup Pte Ltd [2021] SGCA 54
Source Documents
This article analyses [2021] SGCA 54 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.