HSBC INSTITUTIONAL TRUST SERVICES (SINGAPORE) LIMITED (as Trustee of AIMS AMP Capital Industrial REIT) v DNKH LOGISTICS PTE. LTD.

Facts

HSBC Institutional Trust Services (Singapore) Ltd, as trustee of an industrial REIT, leased a warehouse in Tuas to DNKH Logistics Pte Ltd for four years from 16 July 2012. On 9 August 2015 a fire broke out in an area where a customer of the tenant stored large quantities of dried black peppercorns, believed to have combusted spontaneously. The landlord's losses, including repairs, a rent reduction and professional fees, came to $3,441,541.24 and were paid by its insurer.

The insurer, exercising its right of subrogation, sued the tenant on an indemnity clause in the lease, cl 3.18.1. That clause required the tenant to indemnify the landlord against losses caused by any occurrences at the premises or by the use or occupation of the premises by the tenant and those connected with it. The parties agreed that neither of them had been negligent. The High Court held that the clause covered only third-party claims and only losses caused by the tenant's fault, and the landlord appealed in Civil Appeal No 94 of 2022.

Issues

1. Whether, on a proper construction of the lease, the landlord could claim an indemnity from the tenant under cl 3.18.1 for fire damage caused without fault on either side, after being fully paid by its own insurer.
2. Whether the tenant's obligation to reinstate the premises at the end of the lease made it liable for the fire damage.

Holding

The Appellate Division dismissed the appeal with costs in an ex tempore judgment, finding that the landlord could not use the indemnity clause to recover the fire losses. The tenant was awarded costs of $30,000 inclusive of disbursements.

Reasoning

The court said the trial judge had wrongly started by comparing the clause with similar clauses in earlier cases. The correct approach begins with the words of the clause and then the relevant context, which here was the lease itself. Read alone, cl 3.18.1 is very wide. But the lease divided insurance duties clearly. The landlord had to insure the property against fire under cl 4.3.2, while the tenant had to take out all-risks cover for the premises in joint names, which the court read as covering only the tenant's fixtures and similar items. It would make no sense for the landlord to insure the same property against the same risk under two policies. So the lease placed the risk of fire damage that was nobody's fault on the landlord's own insurance, and an indemnity claim did not arise.

This reading matched the lease as a whole. A landlord does not need an indemnity for the tenant's breaches, because it can simply sue for damages, which suggests the clause is aimed at claims by third parties. The broad clause exempting the landlord from liability to the tenant complements an indemnity against third-party claims, as in Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd [1997] 2 SLR(R) 897. The neighbouring sub-clauses, and the second half of cl 3.18.1 itself, assume fault by the tenant. Because the clause was clear on this reading, the contra proferentem rule did not need to be applied.

The new argument on reinstatement also failed. That duty arose only when the lease ended, and by then the premises had been fully restored, so there was nothing left to reinstate.

From the judgment