Superluck Properties Pte Ltd v Modern Beauty Salon (S) Pte Ltd and Others [2017] SGDC 230

Introduction

Does a tenant have to deliver up the keys to the premises if he intends to terminate the tenancy agreement in the face of a breach by the landlord? Where there is a repudiatory breach of an executory contract and the innocent party wishes to treat himself as discharged, he must accept the repudiation. If the innocent party does not accept the repudiation, he would not be able to terminate the contract and exercise the full range of his right and remedies that have arisen by reason of the other party’s breach. In this case, the issue was whether non-delivery of the keys by the tenant in the face of a repudiatory breach of the tenancy agreement by the landlord constitute non-acceptance of the repudiation?

 Facts

The Plaintiff was the owner and landlord of a property known as Robinson Towers located along Robinson Road (“the Building”). The Building is no longer in existence as it was demolished not long after the dispute in this case arose. The Defendant was the tenant of one of the units (“the Premises”) under a tenancy agreement dated 16 December 2011 (“the Tenancy Agreement”) and the Tenancy Agreement was due to expire on 31 December 2013. The Defendant was in the business of providing beauty and wellness services and the Premises was used as an upmarket beauty salon and wellness spa.

Pursuant to the terms of the Tenancy Agreement, the Plaintiff gave the Defendant six (6) months’ notice to deliver up the Premises as it intended to demolish the Building. As such the Premises was due to be handed over to the Plaintiff in its bare condition by 31 May 2013.

On 25 March 2013, the Premises was flooded with sewage water (“the Incident”). The Incident resulted in the Premises being inundated with foul-smelling and unhygienic sewage water, making it impossible for the Defendant to occupy and use the Premises for its business.

The Defendant notified the Plaintiff of the Incident and treated the Tenancy Agreement as being terminated. However, the Defendant only returned the keys to the Premises to the Plaintiff on 28 May 2013, just before the end of the lease on 31 May 2013. The Defendant also did not reinstate the Premises to its bare condition as per the terms of the Tenancy Agreement. The Building was subsequently demolished in June 2013.

Issues:

1. Whether the Incident constituted a repudiatory breach by the Plaintiff of the Tenancy Agreement.
2. If so, whether the Defendant had accepted the repudiatory breach.
3. Whether the Defendant was liable to pay the reinstatement costs of the Premises claimed by the Plaintiff.

Issue 1 – Whether the Incident constituted a repudiatory breach by the Plaintiff of the Tenancy Agreement.

The Defendant’s position:-

The Defendant contended that the Incident was serious enough to be deemed as a repudiatory breach of the Tenancy Agreement. The Incident resulted in the Defendant not being able to quietly enjoy the Premises and use it for its contracted purpose. The Defendant’s case was that the evidence clearly showed that the entire Premises was flooded with significant levels of sewage water that had a strong stench. The extent of the flooding of sewage water rendered it impossible for the Defendant to occupy the Premises for its contracted purpose until significant repairs were carried out.

The Defendant took the position that they had accepted the Plaintiff’s repudiatory breach and the Tenancy Agreement was terminated on the day of the Incident. As such, the Defendant was not liable for rent and service charge due on the Premises from the date of the Incident onwards.

The Plaintiff’s position:-

The Plaintiff took the position that the cause of the Incident was due to the Defendant’s failure to maintain the pipe resulting in the pipe being choked hence leading to the Incident. Further, the Plaintiff was of the view that the Incident was a minor seepage incident confined to limited areas in the Premises.

The Plaintiff’s case was even if the Incident was attributable to the Plaintiff, the Incident was not sufficient to allow the Defendant to repudiate the Tenancy Agreement.

The Court’s View :-

The Court looked into the evidence furnished by both sides and was of the view that the Defendant had no way to maintain the pipes and the choking could not have been attributed to the Defendant’s default. The pipes were to be maintained by the Plaintiff as the landlord and it was well within the Plaintiff’s scope of maintenance. Further, based on the evidence produced, the Court was of the view that the Incident was by no means a minor seepage affair as claimed by the Plaintiff. It was in fact of such a nature that it rendered the Premises unfit for occupation and use as a beauty salon. As such, the Plaintiff was in repudiatory breach of the Tenancy Agreement.

Issues 2 and 3 – Whether the Defendant had accepted the repudiatory breach and whether the Defendant was liable to pay the reinstatement costs of the Premises claimed by the Plaintiff.

 The Defendant had immediately after the Incident and on the same day (i.e. 25 March 2013) written to the Plaintiff to inform them that they were unable to carry on business as usual due to the Incident and that the Incident had rendered the Premises unfit for the Defendant’s use and occupation. The Defendant also informed the Plaintiff that they had vacated the Premises. The Defendant did not return the keys to the Plaintiff until 28 May 2013 which was just before the end of the lease on 31 May 2013.

The Plaintiff therefore took the position that the Defendant had notwithstanding the repudiatory breach, affirmed the Tenancy Agreement and thus waived their rights which flowed from the Plaintiff’s repudiatory breach. The Plaintiff argued that the Defendant was obliged to pay rent from 1 March 2013 up to 31 May 2013 (the expiry of the Tenancy Agreement) as well as to reinstate the Premises to its bare condition as per the terms of the Tenancy Agreement.

The question that the Court had to determine was whether a tenant has to deliver up the keys to the premises if the tenant intends to accept a repudiatory breach by the landlord of the tenancy.

Based on the facts, it was clear that the Defendant had immediately after the Incident informed the Plaintiff that they would not be continuing with the tenancy and that was a clear and unequivocal communication of the Defendant’s acceptance of the Plaintiff’s repudiatory breach. As such on the facts, the non-delivery of keys to the Premises until 28 May 2013 did not operate as an affirmation of the Tenancy Agreement and waiver of the repudiatory breach.

As to whether the Defendant was required to reinstate the Premises to its bare condition – following the finding that the Tenancy Agreement was repudiated with effect from 25 March 2013, all further obligations of the Defendant under the Tenancy Agreement were extinguished as of 25 March 2013. In any event, it would appear that the Plaintiff suffered no loss by reason of the Defendant’s failure to reinstate the Premises given that the Building was demolished in June 2013.

Conclusion

The Court therefore held that the Incident was a repudiatory breach of the Tenancy Agreement by the Plaintiff; and the Defendant had clearly and unequivocally accepted the repudiation on 25 March 2013 and the Tenancy Agreement came to an end. The fact that keys were not returned to the Plaintiff until 31 May 2013 in light of the facts presented did not constitute an affirmation of the contract or waiver of the repudiatory breach. Consequently, the Defendant was not liable for the payment of any rent and service charge from 25 March 2013. The Plaintiff’s claim for reinstatement costs was also dismissed.