JustCo Loses Court Battle With Tenant
SINGAPORE – The High Court has sided with tenant cybersecurity firm Dathena Science against the case it filed against local coworking space provider JustCo, reported The Business Times on Wednesday afternoon (6 October, SGT).
Apart from being the first legal case in Singapore arising from COVID-related measures, it has potential ramifications on the contracts signed for the coworking sector as well as traditional office space, as the court struck down “grossly unfair” provisions in the rental or membership agreement.
In particular, Dathena filed a claim of S$286,892, while JustCo responded with a counterclaim of almost S$2.4 million. The legal spat arose from a membership agreement signed by both parties in January 2020.
Under the deal, Dathena agreed to occupy 4 levels in the OCBC Centre East building in Raffles Place for 2 years from 1 May 2020 to 30 April 2022.
In its judgement, the High Court noted that it was of “paramount importance” to Dathena that the workspace would be able to accommodate its servers and fulfil its IT requirements before the lease commences because of the nature of the cybersecurity firm’s business.
But JustCo failed to do so on the promised start date and the server room was not completed as per the original timeline. While JustCo argued that it wasn’t able to fulfil its obligation due to the circuit-breaker measures, the High Court pointed out that Dathena cannot operate without its servers and internet access.
Eventually JustCo confirmed that the coworking space in OCBC Centre East building will only become available only in early September 2020 and this was already over 4 months late.
Consequently, Dathena had issued a notice of termination, but JustCo insisted that their agreement was still in force. However, Senior Judge Lai Siu Chiu explained that the latter’s assumption that the agreement continued was “not credible”.
Dathena asked for a refund of S$286,892 from JustCo, consisting of an advance monthly membership fee of S$99,992 and a security deposit of S$186,900. However, JustCo declined the request, asserting that the delay was beyond its control and it filed a counterclaim for nearly S$2.4 million for the membership fees for the entire 2-year lease.
Ultimately, the high court sided with Dathena and dismissed the coworking space operator’s counterclaim. Justice Lai explained that JustCo’s reasoning – that it would struggle to find another tenant as the workspace was tailored to Dathena – as a “lame and unacceptable excuse for failing to be more proactive in looking for replacement tenants”.
Furthermore, Justice Lai ruled that some provisions in both parties’ agreement were unenforceable under the Unfair Contract Terms Act (UCTA) as they were “grossly unfair and disadvantageous” to the tenant.
For example, there was no clause that allows the occupant a member to terminate the deal, while JustCo could unilaterally do so. “That cannot be right as a matter of contract law in a commercial context,” Justice Lai elucidated.
Another one is that JustCo can unilaterally replace a member’s allocated workspace with alternative premises, but a member is not permitted to transfer its membership to another party without JustCo’s permission.
In Dathena’s case, while JustCo offered 2 alternative premises, they were not suitable and not similar to OCBC Centre East building based on location, size, and other attributes.
Another clause found to be unenforceable is that Dathena is not allowed to file a claim against JustCo if the use of the coworking space was disrupted, interrupted, or halted. And even if the coworking space operator terminated the contract, t
Another clause, likewise found to be unenforceable, stated that Dathena could not make any claim against JustCo if its use of the co-working premises was interrupted, disrupted or ceased. And even if JustCo scrapped the contract, the cybersecurity firm is still required to pay all of the membership fees for the rest of the lease term.