1  The facts

2 The appellants were the landlords and the respondents, the tenants, of units 01-16/17 of Wisma Atria (the premises) under a three-year lease dated 24 January 1986 (the lease). Sometime between 15 and 17 July 1986, the tenants took possession of the premises; renovation and interior decoration of the premises amounting to $49,682 were subsequently effected by the tenants. On 15 August 1986, water leaked from a fire hose-reel adjacent to the premises and, as a result, flooded the premises, causing damage to the tenants` property. The tenants had taken out insurance which included the risk of `bursting or overflowing of water tanks/pipes`. The tenants gave notice of the flooding damage to the insurers and made a claim on them. The claim was met by their insurers, who subsequently instituted an action in the district court against the landlords in the name of the tenants in exercise of their right of subrogation. The thrust of their claim was that the flooding was caused by the landlords` negligence.

3 The claim was resisted by the landlords. First, they denied that the flooding was caused by their negligence or that of their servants or agents. Secondly, they maintained that even if the flooding had been so caused, the contractual effect of cl 10(a) (`the insurance clause`) of the lease was that the tenants assumed the risk of such damage and consequently had no claim against them. As the tenants had no right of action against the landlords, their insurers, likewise, were unable to pursue such an action.

4  Decisions below

5 In the district court, the trial judge found that the landlords` negligence had caused the damage. He further held that the tenants had not assumed the risk of damage by flooding by virtue of the insurance clause. The insurance clause was construed by the trial judge in the light of cl 11(a) of the lease, which released the landlords from all claims and demands by the tenants unless they resulted from the landlords` negligence. Further, the trial judge also relied on cl 21(h) of the lease, which excluded any term from being implied into the lease, and held that, by reason thereof, it could not be implied into the insurance clause that the tenants assumed the risk of damage by the landlords` negligence. He allowed the claim of the tenants and gave judgment to them in the sum of $41,916 with interest and costs.

6 On appeal to the High Court, Punch Coomaraswamy J agreed with the trial judge`s finding that the landlords had been negligent and also held that, on its true construction, the insurance clause did not protect the landlords against any damage caused by their negligence. He found that since the insurance clause was merely a `covenant at large`, the tenants could not be sued even if they had failed to effect any insurance. Thus, the learned judge held that the insurance effected by the tenants was not for the benefit of the landlords. Accordingly, he held that the landlords were not absolved from their liability in negligence. He dismissed the appeal with costs. [See [1993] 3 SLR 781 .]

7  The appeal

8 Against the decision of the learned judge, this appeal has been brought. Before us, the landlords appealed on two main grounds. Firstly, they averred that the learned judge had erred in finding that the landlords were negligent, and secondly, that the learned judge had erred in holding that the insurance clause did not absolve the landlords from their liability in negligence. The first is a question of fact, and the second a question of law.

9  Negligence

10 Before us, it was submitted on behalf of the landlords that they had not been negligent and had not breached any duty of care owed to the tenants. They contended that the standard of care imposed on them by the courts below was akin to an absolute duty, when what the law required of them was only the standard of reasonable care and skill of a landlord.

11 To deal with this issue, it is necessary to rehearse in some detail the evidence relating to the flooding that took place. On 15 August 1986, at about 10.15am, the tenants` managing director, Leong Loon Wah (Leong), received information that their premises had been flooded. He proceeded to the premises to check the extent of damage and also called for his insurers` surveyor. The insurance surveyor, Phee Thian Chye (Phee), a mechanical engineer with ARIECS Pte Ltd, arrived at the premises at 11am the same morning and investigated the damage. He discovered that the premises were flooded with water up to two inches above the ground, and calculated that there must have been at least 5200 cubic litres of water in the premises. He also discovered that there was a fire hose-reel adjacent to the premises, and that there was a slit of about 4cm on the hose at a point, about 7-8cm from the metal drum end of the hose. Phee`s evidence was that there were two linings in the fire hose, an outer lining and an inner lining, and that the slit on the outer lining of the hose was smooth and that on the inner lining was rough. He opined that there must have been initially a smooth slit on the outer lining of the hose and water pressure within the hose must have pushed through the inner lining to meet the slit on the outer lining, thus allowing water to escape and cause the flooding.

12 The landlords called an expert witness at trial, Ng Kok Yan, a senior scientific officer with the Singapore Institute of Standards and Industrial Research, who agreed that probably the slit was initiated from outside and it was the water pressure that had caused the inner slit. There was no evidence as to what caused the outer slit.

13 Evidence was also adduced by the landlords that, on 27 May 1986 and 2 June 1986, officers from the Fire Safety Bureau inspected the fire fighting equipment, including the hose-reels, for the purpose of issuing a clearance temporary occupation permit. Major Choy Marn Khoon (Choy), head of inspection and enforcement branch of the Fire Safety Bureau, gave evidence. He said that the checking of hose-reels was carried out at random. He could not say if the hose-reel in question was checked. However, stop cocks and stop valves were checked to see if they were in a closed position; if they were in an open position, they would not pass the test. Choy, in the course of his testimony, brought to the court`s attention cl 8.5.4.1. of the `Code of Practice Regulating the Use and Maintenance of Hose-reel`, which provides as follows:

14 He further testified that if a stop valve was left in an open position, there would have been water in the hose and this would lead to deterioration of the hose tube.

15 At the material time, the maintenance of the building was under the charge of 2M Property Consultants Pte Ltd, whose maintenance manager was Raymond Choo (Choo). Choo arrived at the scene at about 8am on the day of the incident, and he prepared a report of his investigation to the landlords. In it, he described the events leading to the discovery of the flooding. According to his report, two security guards were on patrol at about 4am on 15 August when they heard water sounds as they were walking down from the second to the first storey. They discovered that water was flowing from the hose-reel adjacent to the tenants` premises, and that the stop valve in the open position. This was immediately closed by the guards. The guards then informed the security officer who then contacted Johnny Chua (Chua), the duty mechanic at the Fire Command Centre. Both men then proceeded to investigate the cause of the flooding.

16 The Fire Command Centre in the building housed the fire alarm panels and the building automation system, which was designed to monitor the starting and stopping of equipment, including water pumps. Whenever a water pump was activated (ie when water is flowing out of a hose-reel), this information would be printed on the computer. The computer, however, would not identify the exact hose-reel from which water was flowing, and a physical check was necessary, and the person on duty in the Fire Command Centre would then either have to search for the defective hose personally or alert the security guards to do so. According to Choo, the activation of the pumps had been recorded on the printout from the computer in the Fire Command Centre. But he could not say the time that was on the printout.

17 Chua`s version of the facts was that he had heard the buzzer alarm indicating the activation of the pumps, and he had alerted the security guards to do a physical check. According to Chua, he was informed of the exact location within 10 minutes by the security guards. The trial judge rejected Chua`s evidence as he found it unbelievable that more than 5200 cubic litres of water could flow out of a 4cm slit in merely ten minutes. The trial judge found that it was the security guards who had informed Chua of the leak on the first storey. The trial judge also found that even though Chua was on duty at the Fire Command Centre, he had failed to note the activation of the pumps, and had not taken immediate steps to locate and stop the leak. In effect, the trial judge found that Chua, as the landlords` servant, was negligent in not reacting to the leakage within a reasonable time. It was his duty to deal with such activation of the pumps, but he had failed to take action to remedy the situation, even after an alarm was received indicating the flow of water from one of the hose-reels.

18 It was common ground that the water that caused the flooding and damage to the premises emanated from the slit in the hose, and that, for such large quantity to have flowed out of the slit hose, the stop valve must have been in an open position. The learned trial judge found that the hose-reel and the stop valve were in the control of the landlords and their servants. The stop valve was supposed to be in a closed position whenever the hose was not in use. The trial judge held that the landlords had failed to put in place a system for checking and ensuring that the stop valves were closed when the hose-reels were not in use and this failure had contributed to the occurrence of the flooding, and accordingly they were negligent. He said:

19 Before us, counsel for the landlords attacked this finding of the trial judge. He submitted that there was no evidence as to what had caused the 4cm slit in the hose, and that the landlords had exercised sufficient care and skill in the purchase and installation of the fire hose-reel. He also argued that the slit in the hose could not have been noticed or discovered by the landlords even upon reasonable examination. Thus he contended that imposing a duty on the landlords to ensure that there was no slit in every single hose would be akin to imposing an absolute duty on them. Counsel cited the case of Haseldine v CA Daw & Son Ltd & Ors for the proposition that they had exercised sufficient care by employing and relying on the competence of their several architectural and engineering consultants in the purchase and installation of the fire hose-reels.

20 In this case, the landlords` negligence was not with regard to the purchasing and installation of the fire hose-reels, but the absence of an established system for detecting and ensuring that all the stop valves of the fire hose-reels were in the closed position when the hose-reels were not in use, which had been the cause of the flooding. It is true that the landlords would not have been able to discover slits in the hoses unless they unwound each and every hose-reel and examined them closely. But the leaving of the stop valve in the open position was the real cause of the flooding. If the stop valve had not been left in that position, there would not have been any water pressure present to push through the inner lining to meet the slit on the outer lining. Even if there had been a slit on both lining, the volume of water that would have flowed out of the hose would have been limited if the valve was closed. It certainly cannot be said that requiring the landlords to devise a proper and adequate system of ensuring that the stop valves were closed would be akin to imposing an absolute duty on them. In any case, the landlords knew, or ought reasonably to have known, that one of the criteria required by the Fire Safety Bureau for passing of safety inspection was that the stop valves must be in the closed position.

21 Apart from that finding of negligence, the trial judge also found that the landlords` employee, Chua, was negligent in not reacting to the leakage within a reasonable time. If he had reacted promptly, the extent of the damage on the tenants` property would have been considerably minimized. Indeed, he could or might even have prevented the damage from being caused to the tenants` property.

22 Accordingly, we agree with Punch Coomaraswamy J and affirm the trial judge`s findings of negligence.

23  Insurance clause

24 The second defence raised by the landlords is more complex. It turns on the construction of cl 10(a) and other provisions of the lease. It is convenient at this juncture to set out the provisions of that clause which are as follows:

25 The thrust of this defence is that, under the insurance clause, the tenants have a legal obligation to insure both the premises and the tenants` own property therein. The intention was that the insurance effected by the tenants would enure to the benefit of both the parties; otherwise, the insurance clause would have no substance or subject matter as it would then be an obligation entered into by the tenants only for their own benefit. Pursuant to that clause, the risk of damage to the premises, including damage caused by the negligence of the landlords has been covered by the insurance, and, accordingly, the tenants have no claim against the landlords for negligence; and it follows, therefore, that the tenants` insurers have no claim against them by way of subrogation. In support of this defence, numerous authorities were relied upon.

26 The first is Ross Southward Tire Ltd v Pyrotech Products Ltd . In that case, the tenant of a building was obliged under the lease to pay all `insurance rates`, and, pursuant to the lease, the tenant paid to the landlord the amount required for the premium. The latter took out an insurance policy covering, inter alia, fire damage to the building. The building was subsequently destroyed by a fire occasioned by the negligence of the tenant`s employees and it was rebuilt with the insurance moneys. The insurer claimed against the tenant the amount paid under the policy by way of subrogation of the landlord`s rights. It was held by the Supreme Court of Canada, by a majority, that the risk of loss by fire, including the risk of loss by reason of the negligence of the tenant or its employees, passed to the landlord under the provisions of the lease which obligated the tenant to pay `insurance rates`. Laskin CJC said, at p 251:

27 Clearly, the decision was predicated on the tenant`s covenant to pay the insurance premium and the payment thereof by the tenant. The policy as taken out by the landlord covered the risk of the loss occasioned. The learned Chief Justice, after having referred to some cases cited by the landlord, said, at p 252:

28 The Supreme Court of Canada in the subsequent case of T Eaton Co Ltd v Smith went even further. In that case, the tenant leased two contiguous properties from different landlords. The buildings on which the two properties stood were destroyed by a fire caused by the negligence of an employee of the tenant. Both the leases contained, inter alia, covenants by the landlords to insure the property against fire damage and covenants by the tenant to repair, to repair on notice, and to leave the premises in good repair. But there was no covenant by the tenants to pay any premium for the insurance. On the other hand, each of the leases also contained a clause giving to the tenant an option to purchase the premises, which provided, inter alia, that, until completion of the purchase, the risk of the premises remained with the landlords. That clause, so far as relevant, was in the following terms:

29 After the insurers had paid the amounts of the fire damage to the landlords, they sought to recover both the amounts from the tenant in exercise of their right of subrogation. It was held, again by a majority, that they were precluded by the terms of the two leases from claiming against the tenant having regard to the fact that the landlords had in each case covenanted in the lease to insure the premises against fire. The majority judgment was again delivered by Laskin CJC. His basic propositions were stated as follows, at pp 428-429:

30 Had the landlord insured without giving a covenant to that effect in the lease, the tenant`s risk of liability for fire resulting from negligence would be unquestionable; and if the landlord collected from his insurer, the latter would have an equally unquestionable right of recovery from the tenant in a subrogated action. The contention of the respondents [the landlords] is that the insuring covenant in the present case does not alter the result because, as I understand the submission of the respondents, the covenant to insure has subject-matter without relating it to coverage against the risk of fires caused by the tenant`s negligence. The appellant [the tenant], ... urges that where the covenant to insure is not at large but is, as in this case, a covenant with the lessee that the landlord will keep the buildings on the premises insured against loss by fire, it must be given effect against liability for fires arising from the tenant`s negligence because otherwise, as a covenant expressly running to the benefit of the tenant, it would have no subject-matter.

31 The learned Chief Justice then referred to Pyrotech Products and said that he accepted the argument advanced on behalf of the tenant, and continued, at p 429:

32 The learned Chief Justice (at pp 430-431) found that the option clause, which protected the tenant as purchaser from bearing the risk of loss by fire (which would otherwise have passed to the tenant on the exercise of the option), fortified his view that the tenant was to have the benefit of the insurance.

33 The third case is Marlborough Properties Ltd v Marlborough Fibreglass Ltd , which is a decision of the Court of Appeal in New Zealand. There, the plaintiffs leased to the defendant a factory for the manufacture of fibreglass products. The lease by cl 3 provided:

34 Pursuant to that clause, the requisite insurance against fire and other risks was taken out by the defendants in the name of the plaintiffs alone. Subsequently, the factory was severely damaged by fire and the plaintiffs reinstated the factory by the use of the insurance moneys and brought an action against the defendants claiming that the fire was occasioned by the negligence of the defendants. It was held by the Court of Appeal, also by a majority, that the insurance effected by the defendants (at their cost) was intended to cover the plaintiffs against the risk of loss by fire, whether accidental or occasioned by negligence, and it could not have been intended that the plaintiffs should be entitled to recover under the policy which was paid for by the defendants and should also be entitled to pursue a separate claim for damages against the defendants. It was implicit that the parties agreed that, to the extent of the cover provided in the insurance, the risk of loss by fire, whether or not due to the defendants` negligence, passed to the plaintiffs. Richardson J said, at pp 469-470:

35 We now come to the decision of the English Court of Appeal in Mark Rowlands Ltd v Berni Inns Ltd . There, the defendant was the lessee of a part of a building in Leeds for a term of 30 years, and, by cl 3(3) thereof, the defendant covenanted as follows:

36 and the landlord by cl 4(2) covenanted as follows:

37 The lease also contained, inter alia, provisions to the effect that if the demised premises were destroyed by fire, the tenant would be relieved from its obligations to repair under the lease. The landlord insured the entire building solely in its name against fire and other risks. The entire building was destroyed by a fire occasioned by the negligence of the tenant. The insurer paid the landlord the cost of rebuilding and reinstating the building and thereafter exercised its rights of subrogation and initiated proceedings against the tenant claiming damages for negligence. It was held by the High Court that the insurance was taken for the joint benefit of the landlord and tenant and the insurer could not, by way of subrogation, claim against the tenant. On appeal, the decision was affirmed by the Court of Appeal. The court followed the two Canadian cases discussed above and also some American cases. Kerr LJ, who delivered the main judgment of the court, held that it was clear from the terms of the lease that the parties intended that the insurance effected by the landlord should enure for the benefit of both of them and that, in the event of fire, regardless of whether it was due to accident or the tenant`s negligence, the landlord was to recoup its loss from the insurance moneys, and, in that event, it had no further claim against the tenant. Since the landlord could not maintain an action against the tenant, the insurer did not have any right of subrogation against the tenant as well. Kerr LJ said, at p 484:

38 It is clear to us that in each of these cases, the court held that, on the true construction of the insurance clause and other relevant provisions of the lease, the insurance was taken out for the joint benefit of the tenant and the landlord and that it was the intention of both parties that the landlord, in the event of a destruction of the building by fire, whether or not caused by the negligence of the tenant, was to recoup its loss from the insurance moneys. In Ross Southward Tire , Marlborough Properties and Mark Rowlands , the relevant terms giving rise to such intention were clearly the covenant by the landlords to insure the premises in question and the covenant by the tenants to pay the insurance premiums, although the policies taken out were in the sole names of the landlords, and, in each of those cases, the tenant did pay the premiums required. The covenant by the tenant and payment of the insurance premiums were plainly crucial in the determination of that issue in those cases. In T Eaton Co , there was a covenant by the landlord to insure, and although there was no covenant by the tenant to pay the insurance premium, there was an option clause in each of the leases which expressly provided that the risk of the building would remain with the landlords.

39  Construction of the insurance clause

40 The insurance clause at hand is materially different from the relevant insurance clauses in the four cases. It obligated the tenants to insure (i) the demised premises and (ii) all the tenants` property therein, against all risks commonly insured against in respect of premises of a similar nature. This clause by itself is not sufficient to relieve the landlords from their liability to the tenants for negligence. None of the authorities which we have considered have laid down that the mere covenant or undertaking to insure, by itself, in a lease or tenancy agreement is a sufficient indication of such an intention to relieve the other party, whether such party be the landlord or the tenant, from the liability for negligence. In Marlborough Properties , Richardson J said, at pp 468-469:

41 In Leisure Centre Ltd v Babytown Ltd , the lessor covenanted to insure the demised premises and to apply the proceeds of insurance in reinstatement. The demised premises were damaged and the lessor claimed that the damage was caused by the negligence of the lessee. It was held by the Court of Appeal that the lessor`s covenant to insure and reinstate did not affect the lessee`s liability for negligence. The parties made no express agreement on the question and there was no sufficient basis for implying a term exempting the lessee from liability. Cooke J in the concluding part of his judgment said, at p 323:

42 Reverting to the case at hand, we are unable to find any trace of an indication in the lease that the parties intended that the insurance taken out under cl 10(a) was to enure to the benefit of both the landlords and the tenants, and that, as between them, the risk of loss or damage to the premises and the tenants` property therein was to be covered solely by the insurance taken out, and that, as a result, the tenants would have no claim against the landlord even if the loss or damage was caused by the latter`s negligence. On the contrary, we find in cl 11(a) a clear indication that the landlords would be and remain responsible to the tenants for damage caused by their negligence. Clause 11(a) provides:

43 If the insurance clause is to be construed to put the risk on the tenants, the words `in the absence of any negligence on the part of the landlords` in cl 11(a) would be rendered meaningless. The presence of cl 11(a) clearly shows that when the parties entered into the agreement, they intended that the tenants would only bear the risk of damage as far as the landlords or their servants were not negligent.

44 Before us, counsel for the landlords contended that Punch Coomaraswamy J had failed to consider three authorities which supported his contention that even if the negligent party had not paid for or contributed to the insurance premiums, the insurers would still be unable to recover from the negligent party. The three authorities cited were: James Archdale & Co Ltd v Comservices Ltd ; Norwich City Council v Harvey & Ors ; and Scottish Special Housing Association v Wimpey Constructions UK Ltd . The facts in those cases were too far removed from the case at hand to be of any assistance. There is a crucial distinction between the relevant clauses in those cases and the insurance clause at hand. The clauses in the three cases consisted of two different parts: the first part specified that the risk of the damage was to be borne by one party, and the second part imposed on the same party an obligation to maintain adequate insurance against that risk. For example, cl 20[C] in Norwich v Harvey stated:

45 The first part of the clause clearly has transferred the risk of damage by fire to the building owners and the second part has imposed on them a positive obligation to effect adequate insurance. Therefore, the construction of those clauses in the three cases cannot really assist the landlords` case before us. The learned appellate judge rightly disregarded these cases.

46 Our conclusion is that the landlords were negligent and that the insurance clause does not have the effect of absolving them from liability. Accordingly, the tenants have a right to recover damages from the landlords for the damage to their property, with the result that the tenants` insurers, by virtue of the right of subrogation, have a claim against the landlords. In the result, we dismiss the appeal with costs. There will be the usual consequential order for payment to the tenants or their solicitors, to account for their costs, the deposit paid into court as security for costs.

47  Appeal dismissed.