Hao Mart sues PropNex Realty, agent for alleged misrepresentation over Taste Orchard lease, cites S$3.5 million in losses

SINGAPORE: Supermarket operator Hao Mart has sued PropNex Realty and its agent over what it described as misrepresentations in dealings over the lease agreement for Taste Orchard.

The Taste Orchard master tenant is seeking to claim nearly S$3.5 million (US$2.7 million) in losses against the real estate agency and its agent, Mr Michael Tan Ban Aik, in addition to damages, interests and costs, in a statement of claim seen by CNA. 

Tan had negotiated the lease for Taste Orchard with Hao Mart on behalf of landlord OG.

OG had previously operated its department store out of the former Orchard Point building at 160 Orchard Road. The department store closed in October 2022.

The building’s five retail floors were then leased to Hao Corp, which runs Hao Mart’s chain of supermarkets. 

It then reopened as Taste Orchard, with Hao Mart as master tenant. Taste Orchard announced its soft opening in November 2023.

Hao Corp signed a seven-and-a-half-year lease, but had its tenancy terminated after less than two years.

In September this year, sub-tenants under Hao Mart were told to vacate the premises by Dec 31, with many expressing shock and frustration at the news.

LAWSUIT

Hao Mart is represented by Vita Law's Sean Francois La'Brooy, and assisted by Watershed Law's Mr Christian Teo and Ms Esther Yong.  

Its statement of claim, dated Aug 29 this year, stated that Tan's misrepresentation caused Hao Mart to incur losses amounting to S$3,496,266, consisting of five months' rental after the project was delayed.

Apart from that, the company alleged that it incurred about S$5.6 million to comply with regulatory approvals, although this amount was not included among the current claims it is seeking. Hao Mart will be relying on the Misrepresentation Act.

It alleged that Mr Tan had a fiduciary relationship with Hao Mart through its director, Dr Tan Kim Yong, who is also CEO of Hao Corp, but failed to act in the company's best interests. 

Mr Tan had "voluntarily placed himself in a position where he undertook fiduciary duties" to Hao Mart, it argued, referring to six past property transactions in support. Mr Tan was supposedly involved with Hao Mart in these transactions, which occurred between 2019 and 2022. 

Hao Mart also referred to a WhatsApp message Mr Tan had sent to Dr Tan on Nov 14, 2021.

In the message, which came before the letter of intent, Mr Tan told Dr Tan he would "always fight" for him. 

He allegedly continued in the message: "You know my style and the good standing relationship between us, what I can squeeze I sure will."

"If for the purpose of the letter of intent, (Mr Tan and PropNex Realty) were acting as agents for OG, (Hao Mart) avers that (the defendants) knew or ought to have known that they were placing themselves in a conflict of interest position yet still undertook the fiduciary duties to the claimant," Hao Mart argued. 

The company further added that Mr Tan indicated he would act in the best interests of Hao Mart for the letter of intent, and there would be no need to seek legal or other professional advice.

As a result, Dr Tan supposedly believed that Hao Mart did not have to inspect the premises or seek legal advice, or engage consultants within the tight time constraints, before signing the letter of intent and lease agreement.

According to Hao Mart, Mr Tan also undertook to sell one of Dr Tan's properties to raise working capital for the project. However, Mr Tan failed to do so, causing Dr Tan to enter into a facility agreement with OG.

The alleged misrepresentations also encompass several clauses within the letter of intent, such as one which stated that maintenance to be undertaken "for the podium by the tenant including utilities, maintenance of elevators/escalators and air-cons and internal toilets” would not be an issue for Hao Mart. Hao Mart said that these turned out to incur costs.

Mr Tan also failed to ensure a timely handover of the premises, resulting in costs incurred to due to the delay, Hao Mart said. 

Mr Tan had "actually made the representations fraudulently and either knowing that they were false and untrue or recklessly not caring whether they were true or false", Hao Mart added.  

PROPNEX AND AGENT DENY CLAIMS

The defendants, represented by Mr Marc Goh and Ms Sharon Lin from Withers KhattarWong, have maintained that they are not liable and denied allegations of misrepresentation. 

They said Mr Tan was acting on behalf of the landlord OG, not Hao Mart, and had no obligation to represent Hao Mart’s best interests.

On the past property transactions, the defence stated that Mr Tan was acting for the respective landlords and not Hao Mart or Dr Tan. They pointed out that these transactions were unrelated to Taste Orchard anyway.

In relation to the WhatsApp message, the defendants reiterated that Mr Tan was acting for OG at all times, and that he had sought to obtain a "mutually beneficial outcome" for both OG and Hao Mart.

"However, (Mr Tan) did not represent to (Hao Mart) and/or Dr Tan that he would undertake any fiduciary duties vis-à-vis (Hao Mart)," the defendants added.

While acknowledging that Mr Tan drafted and signed the letter of intent, the defence asserted that Hao Mart was advised by its own representatives in relation to the letter of intent and tenancy agreement.

Mr Tan had not been under any obligation to sell Dr Tan's properties or ensure the timely handover of premises, the lawyers added. 

They denied that Mr Tan had made the representations relating to the clauses within the letter of intent, or that delays were due to their actions. 

The case is ongoing.