[1998] SGHC 207

In the High Court of the Republic of Singapore

[1998] SGHC 207

OS 9/1998

Between

Masa-Katsu Japanese Restaurant Pte Ltd

… Plaintiff

And

Amara Hotel Properties Pte Ltd

… Defendant

grounds of decision

Landlord and Tenant — Agreements for leases

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.

Masa-Katsu Japanese Restaurant Pte Ltd v Amara Hotel Properties Pte Ltd

[1998] SGHC 207

OS 9/1998
Lim Teong Qwee JC
23 June 1998

1 LIM TEONG QWEE JC

4 (b). Prayer 2 claims an order for repayment by the landlord of sums overpaid by the tenant for rent, service charge and security deposit.

5 (c). Prayer 3(1) claims rectification of a lease dated 5 September 1995 and prayer 3(2) claims a declaration and certain orders arising out of the lease as rectified.

6 (d). Prayers 4 to 7 claim damages, interest, accounts and inquiries and costs as claimed in the original prayers 5 to 8.

8 Rectification

10 On 19 September 1994 the tenant wrote to the landlord a letter (which I shall refer to as the offer letter) making an offer to take a lease of the premises at [num ]01-17 of the building complex known as The Amara at 165 Tanjong Pagar Rd subject to certain terms and conditions set out in the offer letter. The relevant terms and conditions were:

2 Lease Period

Three (3) years with an option to renew for a further period of three (3) at prevailing market rental or at the current rental plus 30% whichever is the lower upon the terms and conditions to be agreed.

3 Rent

The rental including service charge is to be $10 per square foot per month payable in advance on the lst day of each calendar month.

4 Security Deposit

The security deposit in cash to be equivalent to Three (3) months` rent and service charge in the sum of S$60,000 (Singapore Dollars: Sixty Thousand only). This amount is subject to change, pending on an independent survey of the area once the unit has been renovated ...

5 Fitting-Out

A rent-free period of six (6) weeks from the date of possession of the premises will be granted for the fitting out of the premises ...

6 Commencement Date of Lease

The commencement date of lease shall be upon the expiry of the fitting-out period

... 8 Lease Documents

Upon acceptance of our offer we will execute a lease within 14 days from date of receipt of the lease documents ...

9 Permitted Use

For use as Japanese Restaurant serving sushi, sashimi and tempura dishes from grilled counter, steamed speciality dishes and other Japanese food.

10 Forms of Lease (1) The lease shall be drafted on such further terms and conditions as your solicitors deem fit for the purpose of our trade.

We are writing to confirm our acceptance of your offer and advise that our solicitors are preparing the lease agreement and will revert to you in due course.

As stipulated in cl 10(3) of your offer letter, you shall submit the additions/alterations and signage plans of the unit for our approval before doing the same.

The management of Amara Hotel Properties Pte Ltd takes this opportunity to wish you all the best in your business endeavour.

After much consideration, we have agreed to extend the fitting-out period for another two weeks instead of the one week that we originally allowed for. Hence, the lease of unit [num ]01-17 The Amara will commence on 12 January 1995.

Thus, proceed to remit rental payments to us for the months of January and February 1995. For the time being, the rental payment due to us will be based on the approximate area of the premises. We will keep you informed once the actual area has been established and will refund the balance, if any, back to your company ...

As regards to your proposal to amend the lease period to five years with an option to renew for another five years, we regret to inform you that your proposed amendment is unacceptable to us. The lease period for the above unit will thus remain at three years with an option to renew for another three years.

20 Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284 per Parker J at p 289.

22 Arcos Ltd & Anor v Aronson [1930] 36 Lloyd LR 108 per Wright J at p 112. In that case important questions were left to be settled by arbitration. I think the parties had clearly finished reaching an agreement.

The lessees shall be entitled to an option to renew the lease for a further period of three (3) years at the prevailing market rental or at the current rental plus 30% whichever is the lower upon the terms and conditions to be agreed.

The lessors may at the written request of the lessees made not less than three (3) calendar months before the expiration of this lease hereby created and if there shall not at the time of such request and also at the time of expiry of this lease be any existing breach or non-observance of any of the terms conditions and provisions contained herein and on the part of the lessees to be observed or performed at the expense of the lessees grant to the lessees a lease of the demised premises for a further term of three (3) years from the expiration of this lease upon terms and conditions to be agreed by the parties.

27 Declaration

29 By a letter dated 4 October 1997 the tenant wrote to the landlord:

Kindly be informed that we wish to renew the lease of the abovementioned unit for another three (3) years commencing from 5 January 1998 in accordance with our agreement.

Your early attention to the above matter will be much appreciated. Kindly let us know what is the new rate of rental as soon as possible.

We refer to your letter informing us of your intention to discuss renewal terms.

As it is a term in our agreement that you may request for renewal not less than three (3) months before the expiration of this current lease, it is therefore with regret that we shall be unable to accede to your request for renewal.

Your letter of renewal was received by us through fax only on 10 October 1997 and 13 October 1997 through registered post.

Any notice required to be served on the lessors hereunder shall be served personally or by sending the same by prepaid registered post addressed to the lessors at the address of the lessors hereinbefore set forth or at such address as the lessors shall from time to time by notice in writing to the lessees nominate ... and any notice sent by post shall be deemed to be given at the time when it ought to be delivered in the due course of post.

34 required to be served on the landlord under the lease . The option for renewal is to be exercised by making a written request. There is no provision in the lease that requires notice of such a request to be served on the landlord. In my judgment cl 11(e) does not apply to a written request made under cl 12 for a renewal of the lease.

35 Chua Sock Chen v Lau Wai Ming & Anor [1989] SLR 1119 at p 1126.

37 Bushwall Properties Ltd v Vortex Properties Ltd [1976] 2 All ER 283 at p 294 where Buckley LJ said:

I fully accept that the court should be reluctant to hold any contract void for uncertainty if that consequence can be avoided; but, on the other hand, it is not the function of the court to make or to perfect contracts entered into between members of the public.

38 Jewellery Industries (S) Pte Ltd v Sintat Rent-a-Car Pte Ltd [1993] 2 SLR 623 and Klerk-Elias Liza v KT Chan Clinic Pte Ltd [1993] 2 SLR 417 .

39 Bushwall Properties the question was whether an enforceable contract had been concluded by the parties. It may well be that the essential terms of the `contract` so called are so uncertain that there is no binding contract at all as in that case. The question before me is different. The question is not whether an enforceable lease has been concluded. It certainly has and the parties have acted on the faith of it. The question is whether a term of the lease is void for uncertainty. Even if the term is void the landlord is not contending that the lease itself is void for uncertainty. I entirely agree that it is not the function of the court to make or to perfect contracts entered into between members of the public but that is not what this action is about.

40 Jewellery Industries the question was whether an option for renewal clause in a lease was valid and enforceable. The material part of the clause was:

... grant the tenant ... an extension of two (2) years from the expiration of the term hereby created subject only to the right of the landlord to review the rental payable and upon such terms and conditions as may be agreed by the parties hereto with the exception of the present provision for renewal.

There was undoubtedly an uncertainty of concept at the heart of this provision since it was not even possible to ascertain from its wording on what basis the rental for the extended period should be determined.

43 King`s Motors (Oxford) Ltd v Lax [1970] 1 WLR 426 was followed but unfortunately it does not appear that counsel referred to Corson & Ors v Rhuddlan Borough Council (1990) 59 P & CR 185 although the actual decision might not have been different. In that case Ralph Gibson LJ at p 194 inclined to the view that King`s Motors was wrongly decided and Balcombe LJ doubted whether it was correctly decided. The third member of the court Staughton LJ did not refer to it at all.

Had this portion of the clause stood alone, it might not have presented an insuperable difficulty. If the main terms of a tenancy, ie duration, premises and rent, are agreed, the contract can take effect although some minor issues are left unresolved. When this portion that terms were to be agreed was read together with the provision regarding rent, however, a different light was thrown on the picture. If the rent was subject to renegotiation and was at large, then depending on the level of renewed rent, parties might very well have wished to change ancillary provisions of the lease such as the indemnity clauses, provision for payment of property tax and reinstatement obligations.

45 Jewellery Industries assists the landlord. It is clear that in the case before me the terms and conditions as may be agreed stand alone. The rent has been fixed or is ascertainable. The other main terms of the tenancy (for the renewed term), namely, the duration and commencement of the renewed term and the identity of the premises are agreed.

46 Klerk-Elias Liza the landlord wrote to the tenant to confirm the terms of rental of the premises. These terms were accepted by the tenant. There were eight terms providing for rent and other essential matters and one of these terms was:

The lease will be for three years commencing 1 December 1983 with an option for renewal at the end of the period, details of which will be incorporated in the lease.

... if the clause had simply said `The lease will be for three years commencing 1 December 1983 with an option for renewal at the end of the period`, without the words referring to details in the lease, it would have had the same effect as had the words in Lewis v Stephenson [1898] 67 LJQB 296.

The words `details of which will be incorporated in the lease` are an integral part of the clause dealing with the subject of option to renew. I do not think one could properly disregard them and treat the clause as one providing for renewal on the same terms as those of the existing lease.

I think there are only two questions that need to be asked and answered about these provisions in the letter: firstly, were these material terms, and secondly, were they settled?

One is entitled, I think, to look at the course of negotiations and the evidence, not to find out what is meant by these words, or the provisions as a whole, but to answer the question: Had the parties reached agreement?

... the letter did not provide for at least two essential features of an option for renewal. It did not say how long the renewed term would be. It also did not say what were the terms of the renewed tenancy, for instance the amount of the rent.

54 Klerk-Elias Liza was delivered by Karthigesu J (as he then was) who at pp 430, 431 referred to Brown v Gould [1972] Ch 53 and cited an extensive passage from the judgment of Megarry J at pp 56 to 58. I do not think it is necessary for the present purpose to cite the whole of that passage again but it may be helpful to cite part of it at the end. After referring to Greater London Council v Connolly [1970] 2 QB 100 Megarry J said at p 57:

Lord Pearson said, at p 110:

`As my Lord has said, the courts are always loath to hold a clause invalid for uncertainty if a reasonable meaning can be given to it, and it seems to me easy to give a reasonable meaning to this condition.`

Sir Gordon Willmer agreed. No doubt there may be cases in which the draftman`s ineptitude will succeed in defeating the court`s efforts to find a meaning for the provision in question; but only if the court is driven to it will it be held that a provision is void for uncertainty.

Applying these principles to the instant case we are of the view that a court would give effect to both these provisions, ie cll 3 and 6 of the letter of 7 July 1983. Accordingly we have no hesitation in coming to the conclusion that the acceptance by Mrs Klerk of Dr Chan`s letter of 7 July 1983 constituted in law a concluded and enforceable contract.

57 Brown v Gould the question was whether an option clause in a lease was void for uncertainty. There was never any doubt that the lease itself containing that clause was a perfectly valid and enforceable lease. In Greater London Council v Connolly the question was whether a term in a lease as to increase in rent was void for uncertainty. Again there was never any doubt as to the validity of the lease. The question before me also is whether an option for renewal clause is void for uncertainty. That clause is contained in a lease which is undoubtedly valid and enforceable although the original term has expired.

renew the lease for a further period of three (3) years from the expiration of this lease at the prevailing market rental or at the current rental plus 30% whichever is the lower upon the terms and conditions to be agreed by the parties.

59 renew the lease. The lease is to be renewed for three years at the new rent which is ascertainable. Apart from the duration of the term and the rent the other terms of the lease would be the same as in the present lease except for the option for renewal if there are no other terms and conditions to be agreed. The present lease already deals comprehensively with every material term and many others which are much less material.

60 Corson Ralph Gibson LJ said at pp 193, 194:

[The option clause] must be construed in the context of the entire transaction of which the second lease formed part. It is expressed in terms suitable and relevant to contractual right and obligation and not to the mere expression of a willingness at the end of the first term to negotiate, free of any legal obligation, for the grant of a new term. If it was intended to be no more than a statement that the landlords would negotiate, it was grossly misleading to anyone unfamiliar with the argument capable of being mounted upon the decision in the case of Oxford Motors v Lax, and it served no purpose whatever in a contractual document. If there was to be no obligation there was no need for or point in the definition of the time for service of notice for the exercise of the option. There was equally no need for or point in the expression of the condition that there must be no subsisting breach of any of the obligations of the [tenant]. Finally, there was no point in the provision that the rent under the new lease should not exceed the current rent of 1,150. It seems plain to me, therefore, that, in the absence of authority requiring us to take a different course, it is proper to apply to this clause the principle applied by Lord Tomlin to the document in Hillas & Co v Arcos, namely, that the court should, if it can:

`so balance matters that without violation of essential principle the dealings of men may as far as possible be treated as effective.`

The parties obviously intended the option clause to be of legal effect; they went to the trouble of specifying amongst other things, an upper limit for the new rent; by a separate lease which was part of the same bargain the trustees had taken the clubhouse for a period of 99 years; they had undertaken an obligation, which may well have been onerous, to carry out improvements. I do not believe that either party would have contended that, if there were no agreement [on the rent], the option was to be ineffective.

63 Greater London Council v Connolly the tenancy agreement contained a term that the rent was `liable to be increased or decreased on notice being given`. Lord Denning MR said at p 108:

It is said that the condition is too vague: it is too uncertain: and, therefore, invalid by the law of contract. I do not think so. The courts are always loath to hold a condition bad for uncertainty. They will give it a reasonable interpretation whenever possible. It is possible here. I read this condition as if it said that the rent and other sums `are liable to be increased or decreased by the landlord on reasonable notice being given by him.` The court can always say what is reasonable notice.

64 Corson an option clause was not void for uncertainty by implying a term that the rent to be agreed was to be a fair rent. In Greater London Council v Connolly a term providing for increase or decrease of the rent was not void for uncertainty by implying a term that it could be increased or decreased by the landlord on reasonable notice. In the case before me the question I have to consider is whether by implying a term the option clause for a renewed term on the terms and conditions to be agreed may be saved from being void for uncertainty. I think it can.

Lim Teong Qwee JC

Benjamin Goh (Bernard Rada & Partners) for the plaintiff
Gopal Krishnan Nair (G Raman & Partners) for the defendant