27/01/2022
A Judgment Of Supreme Importance.
The most fulfilling part of a lawyer’s work is when he is able to help resolve difficult issues which are of paramount importance to society.
As all of you will know, many businesses in Singapore have been badly hit by Covid. Many businesses have been forced to close because of the lack of business. But even after the business folds, there are residual issues such as the liabilities under the tenancy agreements for not seeing out the lease.
Recently, I represented a client who had signed a 2 year lease for a premise which was to be used as a pub/ bar/ cabaret/ night club/ discotheque / karaoke lounge only. The lease was executed on 26 December 2019. My client intended to use the premises as a pub and indeed had been operating a pub at the same premises for many years.
As we all know, Covid hit in late January 2020 and on 26 March 2020, the Covid measures led to a closure of bars, cinemas and entertainments. In fact, the premises remain closed until today.
The landlord sued my client for failing to pay outstanding rental which is now in excess of $400 000. They took out what is known as a summary judgment application. A summary judgment application is taken out when the party suing believes that the Defendant has no defence to the claim. If the Court agrees, it will order judgment to be entered instead of prolonging the dispute by allowing it to go to trial.
I defended my client on the basis that the lease agreement had been discharged by frustration and that my client was not liable. The doctrine of frustration discharges parties from their contract by operation of law when, without the default of either party, a supervening event that occurred after the formation of the contract rendered a contractual obligation radically or fundamentally different from what had been agreed to in the contract. The supervening event must have significantly changed the nature of the outstanding contractual rights from what the parties could reasonably have contemplated at the time of its ex*****on, that it would be unjust to hold them to the strict contractual obligations. However, as this is an exceptional doctrine, mere hardship or mere increase in cost to perform the contract will not result in a frustrating event.
Justice Choo Han Teck( below )who heard the application, agreed with my client’s contention that the lease agreement had been frustrated. Justice Choo said in his judgment:-
“On the face of the Tenancy Agreement, it may be said that there was a shared purpose of using the Premises to run a music lounge. At the time of the contract, parties may not have contemplated that the Premises might be prevented by a tiny coronavirus from being used as a music lounge. The fact that the Plaintiff had to write in to the URA subsequently in April 2021 to ask for a temporary permission to use the Premises as restaurant reinforces my view that the Plaintiff had similarly intended the Premises to be used as a music lounge. With the imposition of Covid-19 measures and closure of night-time entertainment venues, it was obvious that this purpose cannot be achieved”.
Justice Choo dismissed the Plaintiff’s application for summary judgment and ordered the dispute to proceed to trial.
I believe this is the 1st reported judgment where a Defendant has successfully invoked the defence of frustration in relation to the pandemic. I am proud of my contribution to Singapore law in this regard.
I believe this decision of Justice Choo Han to be of 1st Rate importance and which will have major ramifications for business and commerce in Singapore.
