Cupid Jewels Pte Ltd v Orchard Central Pte Ltd and another appeal [2014] SGCA 2

The remedy of distress (which allows the landlord to seize goods found at the leased premises when the rent is in arrears, as security for the payment of rent) is an important remedy for landlords. The Singapore Court of Appeal decision of Cupid Jewels Pte Ltd v Orchard Central Pte Ltd and another appeal provides useful clarification on the procedure for the exercise of this remedy.

This case is significant because the Court of Appeal provided guidance on the information which a landlord has to disclose when applying to court for a Writ of Distress.

The debt

The dispute related to a lease of retail premises at the Orchard Central shopping centre. Cupid Jewels Pte Ltd (“Cupid Jewels”), which was in the business of selling jewellery, leased two units at the shopping centre from the landlord, Orchard Central Pte Ltd (“Orchard Central”). Cupid Jewels took possession of the premises in June 2009 and fell into rental arrears. At the time of the filing of the Writ of Distress in August 2010, Cupid Jewels was in rental arrears to the amount of S$891,507.

Between May 2010 and July 2010, the parties entered into negotiations for a rental review. In July 2010, negotiations broke down and Orchard Central demanded payment of the rental arrears by December 2010.

Writ of Distress issued

In August 2010, Orchard Central 2010 filed an ex parte application in the High Court for a Writ of Distress under section 5 of the Distress Act (the “Act”). The application was granted and, on the same day, the sheriff seized goods found on the premises, including 579 pieces of jewellery (the “distrained jewellery”).

Cupid Jewels subsequently applied to the court for the release of the distrained jewellery.

In dismissing the application, the High Court refused to release the distrained jewellery. Cupid Jewels appealed.

Non-disclosure of negotiations

One of the key issues before the Court of Appeal was Cupid Jewels’ argument that Orchard Central’s failure to disclose the parties’ negotiations on the rental review between May to July 2010 when it applied for the Writ of Distress was a material nondisclosure. Cupid Jewels argued that, as the landlord’s application was made on an ex parte basis, the landlord was subject to a duty of full and frank disclosure.

The Court of Appeal rejected the disclosure argument, stating that the doctrine of full and frank disclosure does not apply to ex parte applications for Writs of Distress in the manner and extent that it ordinarily does in other ex parte applications generally. The court noted that beyond the information specifically required to be disclosed in support of an application for a Writ of Distress as set out in the Rules of Court, a landlord is only under a duty to disclose the fact of any crystallised dispute between the parties as to whether the right to distress has in fact arisen.

The court explained that, because of the unique nature of the remedy of distress, the court’s oversight over Writs of Distress was not intended to be as extensive as in other ex parte applications. The court commented that an extensive general duty of disclosure would unnecessarily add to the complexity and costs of making applications for Writs of Distress.

On the facts of the case, the court found that there was no crystallised dispute between the parties as to whether Orchard Central’s right to distress had in fact arisen. There was no evidence that, in the course of the parties’ negotiations on the rental review, Orchard Central had made any representation that it would not insist on its strict legal position. There was therefore no reason for Orchard Central to provide disclosure of the negotiations.

For the reasons summarised above and other reasons, the Court of Appeal dismissed the appeal by Cupid Jewels.

Practical implications

This decision provides welcome clarification on the extent of the landlord’s duty of disclosure in an application for a Writ of Distress. The Court of Appeal has made clear that a landlord does not need to disclose its negotiations with a defaulting tenant unless there is a crystallised dispute on the tenant’s obligation to pay the rental arrears. This decision is also notable because the situation which arose in this case is not an uncommon situation in commercial leases, where landlords often engage in negotiations with defaulting tenants over rental arrears before pursuing other remedies.