[1998] SGHC 150

In the High Court of the Republic of Singapore

[1998] SGHC 150

Suit 109/1990 and 441/1992

Between

Lee Tat Realty Pte Ltd

… Plaintiff

And

Limco Products Manufacturing Pte Ltd and Others and Another Action

… Defendant

grounds of decision

Landlord and Tenant — Recovery of possession; Landlord and Tenant — Covenants

This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports.

Lee Tat Realty Pte Ltd v Limco Products Manufacturing Pte Ltd and Others and Another Action

[1998] SGHC 150

Suit 109/1990 and 441/1992
Chao Hick Tin J
02 May 1998

1 CHAO HICK TIN J

5 The complaints

7 The bases upon which Lee Tat sought to forfeit the lease and recover possession of the premises were set out in a letter of 22 December 1989 from Lee Tat`s solicitors to the solicitors of Limco (`the notice`). As the validity of this notice is challenged by Limco, I shall set it out in full:

Pursuant to s 18(1) of the Conveyancing and Law of Property Act (Cap 61), we hereby give your clients notice on behalf of our clients that our clients intend to enforce the forfeiture of the lease by reason of the following breaches:

(1) In breach of cll 3(4), 3(5) and 3(6), your clients have failed to maintain the demised premises in good order and condition. (2) In breach of cl 3(9), your clients have used the building or part thereof otherwise than as office and factory for light industries, in particular, using the second and fourth floors as warehouse. (3) In breach of cl 3(11), your clients have used the demised premises for retail or warehouse sale, in particular, using the ground floor as a demonstration cum sales room for computers. (4) In breach of cll 3(9), 3(10) and 3(13), your clients have used part of the premises as sleeping quarters for persons other than the watchman or security guards. (5) In breach of cl 3(15), your clients have installed electrical fittings, glass doors in place of existing wooden doors and have made alterations and additions without our clients` written consent. (6) In breach of cl 3(33), your clients have signed, or sub-let or part with the possession or part of the demised premises to SMI Pte Ltd and MCM Singapore Pte Ltd. (7) In breach of cl 3(34), your clients have fixed or otherwise exhibited upon the demised premises signs or advertisements on the exterior of the demised premises without the consent of the landlord.

In accordance with s 18(1) of the Act referred to above, we hereby give your clients notice that in so far as the breaches mentioned above are capable of remedy, the breaches must be remedied within seven (7) days of the date hereof and in any case, reasonable compensation in money must be made to our clients. Unless all these breaches are rectified within seven (7) days from the date hereof, our clients shall proceed with such application as they may think fit and in the meantime, our clients reserve all their rights.

1 Your para (1) Our clients deny the allegation. If there are specific areas of failure to maintain the premises, please specify. 2 Your para (2) The building is used as a factory by our clients to manufacture its products, ie personal computers. After manufacturing, it is only natural that our clients have to store the boxes containing personal computers in the factory, hence one would find a store in every factory. It would be unreasonable to suggest that by storing its own goods, a building has become a warehouse. 3 Your para (3) The ground floor is the reception cum waiting area and showroom for our clients` products. It is only natural for a light industry factory to display its products to visitors or prospective buyers. We cannot see how this amounts to a breach of cl 3(11) of the tenancy agreement and we also cannot see how the use of the ground floor as showroom could hurt your clients in any way. 4 Your para (4) Our clients have not permitted any part of the premises to be used as sleeping quarters for persons other than the watchman or security guard. 5 Your para (5) Our clients deny having made any alterations to your clients` fixtures and fittings. In any event, even if there are minor alterations, your clients are protected by cll 3(46) and 3(47). We cannot see how the reasonable use of the premises can affect your clients` interest. 6 Your para (6) Our clients deny having parted possession of any part of the premises as the companies mentioned are associate companies who are licencees. 7 Your para (7) Our clients deny having breached cl 3(34). Even if they are in breach, it is a technical one. Our clients hereby request your clients` permission to exhibit their registered name and logo on the exterior of the demised premises.

11 Validity of notice

13 I shall first examine the issue of the validity of the notice. Under s 18(1) of the Conveyancing and Law of Property Act it is provided that a right of re-entry or forfeiture for breach of covenants in a lease shall not be enforceable by action or otherwise unless a notice `specifying the particular breaches complained of ...` has been given and the tenant must be given a reasonable period of time to remedy the breach, if capable of remedy or to make reasonable compensation in money.

14 Woodfall`s Law of Landlord and Tenant , Vol 1 at p 865, has this to say:

The notice ought to be such as will enable the tenant to understand with reasonable certainty what it is that he is required to do, and so distinct as to direct the attention of the tenant to the particular things of which the landlord complains in order that the tenant may have an opportunity of remedying them before an action for forfeiture is brought against him.

15 Halsbury`s Laws of England (4th Ed) at para 434.

16 Woodfall was taken from the judgment of North J in Fletcher v Nokes [1897] 1 Ch 271 where the notice given merely stated that the tenant had `broken the covenants for repairing the inside and outside of` the house. North J was there construing the English pari materia provision of our s 18 and he said:

I do not mean that the landlord need to go through every room in a house and point out every defect. But the notice ought to be so distinct as to direct the attention of the tenant to the particular thing of which the landlord complains ... The plaintiff has not condescended upon any details, and in my opinion, the notice is not sufficient ...`

17 Fletcher v Nokes was followed and taken one step further in Gregory v Serle [1898] 1 Ch 652 where the notice informed the lessee that he `has not kept the said premises well and sufficiently repaired and the party and other walls thereof.` Kekewich J held this notice to be bad. However, the same notice also set out two other breaches, namely, failure to paint outside every third year and failure to paint and whiten inside every seventh year, and although these two breaches were clearly specific, Kekewich J held that the notice as a whole was still bad. He explained:

It may be true that the distinct breaches are sufficiently specified, but according to the judgments to which I have referred, and particularly that of North J, the tenant has not had an opportunity of considering what he has to do in order to avoid the forfeiture. I do not think it is enough for the landlord to say to the tenant `At all events you must do this.` That is not sufficient information. The tenant is entitled to look at the matter in this way: `Suppose I do spend money in painting and whitening, still I have to make good the other breach, which may be much more onerous, and involve me in much greater expense, and so, after I have painted and whitened, I may have my lease forfeited because I have not complied in some unspecified way with another covenant`. Those considerations seem to me to show that the notice cannot be saved as a whole because a part of it is good.

18 Pannell v City of London Brewery Co [1900] 1 Ch 496 which ought to be distinguished from Gregory v Serle . In Pannell the court held that a notice was not invalidated in toto just because some of the alleged breaches of a covenant to paint had not taken place. Pannell was not a case concerned with the question of sufficiency of particulars of an alleged breach. It concerned the question whether there was in fact such a breach, a matter of defence.

19 Pannell was further distinguished and clarified in Guillemard v Silverthorne [1908] 99 LT 584 where the notice alleged a breach which was not contained in the lease and another breach which was valid. Ridley J explained that in Pannell :

the notice relied inter alia on breaches of a covenant to paint, which had not in fact been committed; and there again it was held by Buckley J that the notice was not thereby necessarily rendered altogether ineffective. The notice ... was good in some respect; and it was decided that the part which was valid might be separated from the part which was invalid and that the latter might be regarded as surplusage. But here the notice does not agree with the terms of the lease, and I think that the tenant has a right to insist that the Act is not complied with unless it does.

20 Gregory v Serle if any alleged breach fails to satisfy the requirement as to particulars, the whole notice would be bad. So the question is, did Lee Tat give sufficient particulars of the seven alleged breaches set out in its solicitors` letter of 22 December 1989? It seems to me abundantly clear that the first alleged breach, namely:

in breach of cll 3(4), 3(5) and 3(6), your clients have failed to maintain the demised premises in good order and condition,

21 Fletcher v Nokes and Gregory v Serle , which were found to be inadequate and therefore bad.

26 State of building at time of lease

28 However, in case I am wrong in the above determination, I shall proceed to examine the substantive merits of the alleged breaches.

41 Alleged breach I

43 As mentioned before, there were no particulars of this alleged breach. There was no way Limco could ascertain in what respects it was in breach. The writ was commenced on 17 January 1990. Some particulars were given in the affidavit of Mrs Tan Geok Tee of 2 May 1990 relating to cloggged drains. In para 8(b) of the affidavit of evidence-in-chief (AEC) of PW1 this breach was elaborated as follows:

(i) the grass had not been cut; (ii) the trees had not been pruned; (iii) the fences not maintained allowing creepers to grow and completely cover certain portions of the fences; (iv) waste had not been removed, and creepers have grown over the waste; (v) creepers had also grown along and over the air-conditioning units; and (vi) the drains are clogged, contained stagnant water, and were potential breeding grounds for mosquitoes.

46 Alleged breach II

48 There is no evidence from Lee Tat that Limco stored goods of third parties in the building. In Limco`s solicitors` letter of 29 December 1989, they explained that Limco had used the building to manufacture personal computers. That was the evidence of DW1 and DW6. It was only natural that boxes containing component parts and finished products, including assessories, would be temporarily stored there. The building was not converted into a warehouse just on account of such storage. I find that such storage was incidental to the use of the building as a light industry factory.

51 Alleged breach III

53 Clause 3(11) prohibited the use of the building for retail or warehouse sale. There was a show-room on the ground floor. Lee Tat alleged that Limco had used it for `demonstration cum sales` room. Again, there is no evidence of such retail or warehouse sale. Having a show-room did not mean that retail sales were carried out. Wholesale business would be different and would not be prohibited. I accept Limco`s contention that it is natural for a factory to have a showroom to display its products to visitors or prospective customers. Moreover, there is evidence to show that Limco had shop outlets at Adelphi and Sim Lim Square. It also had ten other licensed dealers besides its own marketing staff. There were also overseas dealers. To prove that Limco had used the premises for retail sales, Lee Tat must as a minimum procure a trap sale and even then if it were an isolated sale it might not be enough. This it has failed to do. There is also no evidence whatsoever that Limco had carried out any warehouse sale.

54 Alleged breach IV

56 The complaint was that Limco used part of the premises as sleeping quarters for persons other than watchmen or security guards, contrary to cll 3(9), 3(10) and 3(13). The allegation was that labourers were staying there. Limco admitted having engaged four security guards or watchmen. Lee Tat`s allegation rest wholly on the fact that at a particular location of the building there were six beds. PW1 alleged that on 8 December 1989 when he questioned a representative of Limco as to who was sleeping there, the reply was `labourers`. Yet when Limco`s solicitors replied to state that only security guards or watchmen slept there, this point was not pursued further. No mention was made of any admission by Limco`s representative. PW1`s answer on the point that `by having beds and cupboards, there was a breach,` is in my view wholly inadequate. If security guards were allowed to sleep on the premises, the fact that there were cupboards and beds there should not be unexpected.

58 Alleged breach V

60 The complaint was that Limco had installed electrical fittings, glass doors in place of existing wooden doors and made alterations and additions without Lee Tat`s written consent (in breach of cl 3(15)). The defence raised is that all these works were discussed and consent was given, as was implicit in cl 3(20):

To pay the cost of all internal partitions constructed within the building and of installing such partitions including all doors, air-conditioners, glass and other items including in, or incidental to the same, all additional lights and power outlets, switches, and telephone equipment.

63 Alleged breach VI

65 This complaint related to assigning, subletting or parting with possession of the building or part thereof to SMI Pte Ltd and MCM Singapore Pte Ltd in breach of cl 3(33). SMI had its registered office there; it also had a letter box there at the perimeter fence. In the case of MCM it had a signboard on the second floor of the building and a letter-box too at the perimeter fence.

67 Lam Kee Ying Sdn Bhd v Lam Shes Tong [1974] 2 MLJ 83 at p 85: `A covenant which forbids a parting with possession is not broken by a lessee who in law retains the possession even though he allows another to use and occupy the premises.` While cl 3(33) also prohibits licensing, the allegation in the notice did not concern that. Neither was licensing mentioned in the pleadings. So the case which Limco had to meet was not one based on licensing.

69 Alleged breach VII

71 This complaint related to exhibiting on the exterior of the building two signboards without the consent of Lee Tat, in breach of cl 3(34). In its solicitors` reply Limco denied the breach but averred, in the alternative, that even if there were a breach, it was a technical one and requested for ex post facto permission to which request there was no reply. In January 1991 Limco took down the two signboards.

73 Relief against forfeiture

75 From the above it will be seen that as regards alleged breach V, there was at most a technical breach, and if this were the only breach I would have no second thoughts at all in granting relief as in substance there is nothing in that complaint. It was clearly understood between Lee Tat and Limco that renovation works would have to be carried out in order to render the building suitable for Limco`s needs; the only default of Limco was in not informing Lee Tat and seeking their formal consent.

76 Hyman v Rose [1912] AC 623 at p 631. But it must be exercised judicially: Egerton v Esplanade Hotels, London Ltd [1947] 2 All ER 88 at p 92. The court must in exercising the discretion have regard to all the circumstances of the case, including the conduct of the parties as laid down in s 18(3), and must have regard to the question whether the landlord would thereby be substantially prejudiced or damaged.

79 Refund of deposit

81 I now turn to Suit No 441/92. Sometime in August 1991 Limco requested Lee Tat to extend the lease for another three years. This was refused. On 12 November 1991 Lee Tat`s solicitors wrote to Limco`s solicitors stating that Lee Tat would require Limco to restore the building to its original state. On 17 December 1991 Limco`s solicitors requested for the floor plans and the electrical wiring plans. The plans were handed to Limco on 27 December 1991. In the meantime, even before 17 December 1991, Limco had started on restoration works.

1 Lifts: see enclosed letter dated 8 January 1992 from Otis Elevator Company (S) Pte Ltd; 2 Water-pumps: servicing has been regularly carried out and the pumps will be returned in their original condition; 3 Water-tanks: The water tanks were handed over to our clients in seriously defective condition, and our clients are in fact handing them back to your clients in much better than original condition (see enclosed letter from our clients dated 11 April 1989 copied to your clients); 4 Fire alarm: see enclosed letter dated 7 January 1992 from Ademco (Far East) Pte Ltd; 5 Sprinkler systems: There was no sprinkler system at the date when our clients entered into possession; 6 Stand-by generator: Regular checks on the stand-by generator were carried out by our clients, even though this was not their responsibility; 7 Sanitary facilities: At the date when our clients entered into possession more than 70% of these facilities were defective. They will be returned in much better than original condition. 8 Electrical and lighting facilities: Again, these will be handed over in much better than original condition; 9 Structural soundness: there is no question whatsoever of our clients having affected the structural soundness of the building. Please note that the cracking of the floors due to sinking of the building was drawn to your clients` attention prior to their entering into possession by their letter dated 11 April 1989 copied to your clients (enclosed).

shall be forfeited if for any reason whatsoever the lessee commits a breach of any of the terms conditions or covenants herein contained, but otherwise the deposit shall be refunded ... at the expiration ... of the term hereby created ...

87 Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79, I have no doubt in my mind that this is a penalty clause inserted in terrorem of the lessee to ensure compliance. The deposit of $105,000 was not a genuine pre-estimate of the damages which Lee Tat would suffer on account of any breach. Indeed, cl 5(a)(i) does not even state that the deposit forfeited would be the liquidated damages payable. Accordingly, Lee Tat must prove its actual loss.

89 Hill and Redman`s Law of Landlord and Tenant (15th Ed) the learned authors stated (at para 140):

If reasonable wear and tear are excepted, the tenant is not bound to make good dilapidations caused by the friction of the air, and by exposure and ordinary use ... If the passage of time and operations of the elements has a more than deteriorating effect than usual owing to the original unsoundness of the premises, the tenant will not be liable for the resulting dilapidation ... Covenants to keep in tenantable or good or habitable repair must be reasonably construed. The landlord is not to claim for slight defects.

96 Judgment

98 In the result, I hold that Lee Tat has not proven the damage caused by Limco, or the actual loss on account of rectification works carried out by Lee Tat which are attributable to Limco`s breaches of the tenancy agreement. Accordingly, I order that Lee Tat shall refund the entire deposit of $105,000 to Limco. The counterclaim of Lee Tat is dismissed.

100 Addendum

101

102 On the question of pre-judgment interest, I have to bear in mind the fact that Limco took no further steps for a considerable period of time after pleadings were closed so much so that Lee Tat applied to have the action struck out for want of prosecution. Accordingly, I would only allow interest at 6% on the judgment sum of $105,000 from 31 July 1996, the date on which Limco filed the summons for directions.

Chao Hick Tin J

CS Lee (CS Lee) for the plaintiff in S 109/90 and defendant in S 441/92
Lisa Chong (Lisa Chong & Partners) for the defendant in S 109/90 and plaintiff in S 441/92.