Mount Elizabeth Health Centre Pte Ltd v Mount Elizabeth Hospital Ltd

• Jurisdiction: Singapore
• Judgment Date: 13 October 1992
• Date: 13 October 1992
• Docket Number: Suit No 1874 of 1988
• Court: High Court (Singapore)

Mount Elizabeth Health Centre Pte Ltd

Plaintiff

and

Mount Elizabeth Hospital Ltd

Defendant

[1992] SGHC 265

G P Selvam JC

Suit No 1874 of 1988

High Court

Civil Procedure–Pleadings–Amendment–Special damages–Annual value of premises not pleaded–Whether too late to apply to amend pleadings to include claim for double value after all evidence given–Landlord and Tenant–Agreements for leases–Option to renew lease–Observance of covenants condition precedent to tenant's entitlement to new term–Whether there was breach of covenants by tenant–Whether breaches sufficient to disenfranchise tenant's right to new term–Landlord and Tenant–Agreements for leases–Option to renew lease–Time at which notice of exercise of option should be given–Whether notice of exercise of option by tenant premature and therefore ineffective and invalid–Landlord and Tenant–Agreements for leases–Waiver of condition precedent to exercise of option to renew–Acquiescence–Whether landlord's failure to inform tenant that notice of exercise of option premature constituted waiver–Whether landlord estopped from taking objection to tenant's exercise of option on basis of premature notice–Landlord and Tenant–Covenants–Prohibition against assignment and subletting without “consent of the landlord in writing”–Power to give consent–Whether carte blanche consent intended by clause–Whether fresh consent required for new occupier

The defendant constructed and owned a hospital complex called Mount Elizabeth Hospital (“the building”). From the outset, unit 01-01 (“the premises”) on the ground floor of the building was intended for operating a health centre. The plaintiff's principal objects were the operation of massage parlours and Turkish baths and the provision of health services. It entered into a lease with the defendant in 1979 for a term of three years in respect of the premises (“the first lease”). A second lease was entered into in 1982 between the same parties, and contained an option for renewal. That option was exercised on 3 November 1985 for a further term of three years (“the third lease”). The third lease also had an option clause for renewal for a further term of three years from 3 November 1988.

In the beginning, the plaintiff and the defendant were separate legal entities but were both effectively under common ultimate ownership and control. However, on or about the same day the third lease was executed in June 1985, the effective ownership and management of the building passed to a separate entity and the previous relationship of the plaintiff and defendant was changed. The new management was therefore burdened with the three-year lease with the defendant which came into force some four and a half months after the change of ownership and management in June 1985, and was also cumbered with a massage parlour which was somewhat incongruous with the image of the hospital as a high class medical centre. Various legal skirmishes ensued between the plaintiff and the defendant.

On 8 March 1988, the plaintiff's solicitors wrote to the defendant giving notice of the exercise by the plaintiff of the option to renew the lease for a further three years pursuant to cl 5 (iii) (i) of the lease agreement. Clause 5 (iii) (i) provided that the written request of the tenant should be made three calendar months before the expiration of the term of lease and that there should not be any existing breach or non-observance of any of the terms, conditions, stipulation and agreements on the part of the tenant at the time of the request. There was no response from the defendants until 26 August 1988 when the defendants' solicitors wrote stating that the notice of renewal was ineffective and contrary to the terms of the lease agreement as the notice was premature and as there were existing breaches and non-observance of certain terms in the lease agreement. As the expiry date of the third lease was fast approaching, the plaintiff was in fear of eviction when the lease expired on 2 November 1988, and it decided to make a pre-emptive strike by filing the present action on 20 September 1988. An ex parte interlocutory injunction was obtained from A P Rajah J on 31 October 1988, which, inter alia,restrained the defendant from evicting the plaintiff from the premises other than through due process of law. The defence delivered by the defendant asserted that the notice of exercise of option served by the plaintiff was contrary to the terms and conditions required in cl 5 (iii) of the lease in that it was served prematurely. Consequently, it was ineffective and invalid and not binding on the defendant. The defence further alleged that at the time the notice was given, there were breaches and non-observance of certain terms (in respect of subletting or parting with possession; affixing and exhibiting signboards; making alterations to the premises; and prostitution) of the third lease by the plaintiff and therefore the purported exercise of the option was not valid and effective.

The defendant counterclaimed for possession of the health centre and double rent and/or mesne profits from 2 November 1988 to delivery of possession of the health centre and/or damages. Special damages as such were not pleaded.

Held, dismissing the claim and allowing the counterclaim:

(1) The time at which the notice to exercise an option to renew should be given was apparent from an objective construction of the provision. It should be reasonably close to the last date on which the option could be exercised, in order to give some measure of certainty of the time at which existing breaches of covenants by the tenant could be ascertained and so as not to leave it to the tenant to choose a time favourable to him. What was reasonably close to the last date was a question of fact. In the present case, the notice was given almost eight months and not three months before the expiry. The notice was not reasonably close to 2 August 1988, the last day for giving the notice. Thus, unless waived by the defendant, it was premature and ineffective: at [18] and [23].

(2) There should be no breach or non-observance of any term in the lease if it was a condition precedent to the tenant's entitlement to a new term. It was a condition precedent because it was essential for a binding agreement to come into existence. Triviality of the breach was immaterial. The relevant time to ascertain whether the tenant was in breach of a term was when the notice of renewal was given. If the breach was remedied or spent at that time, it would not affect the tenant's right: at [22].

(3) There was no dispute about subletting or parting with possession. It was impliedly admitted by the plaintiff that it had sublet or parted with possession. The real question was whether there was “consent of the landlord in writing” as required by the lease agreement. The power to give consent could arise only after the instrument creating the power came into being. A consent given before the third lease was signed would be outside its ambit. The plaintiff's contention was that on 5 June 1985 the defendant had given its written consent. However, as the third lease could have been signed only on or after 15 June 1985, the purported consent was given without the requisite power and accordingly was ineffective. Further, a carte blanche consent was not intended by the clause; the landlord had the power to refuse consent if the proposed occupier of the health centre was unacceptable to him for some valid reason. As the occupant of the premises had changed, a fresh consent should have been applied for in respect of the new occupier and no such consent was applied for or given. There was therefore a breach of term which prohibited assignment and subletting except with the “consent of the landlord in writing”: at [25], [26] and [28].

(4) With respect to the prohibition against the affixation of signs at the external façade of the health centre or permitting them without the written approval of the defendant, the de minimis argument and the further argument that the signs were necessary for the business were in error. As the parties specifically included in the lease a prohibition against signs and name plates without approval, there could be no escape from it on the ground that the breach was minimal. In any event, as a matter of fact, it was not minimal. Since the observance of the terms was a condition precedent, that it was trivial and necessary were completely irrelevant matters. There was therefore a breach of the term prohibiting signs: at [31].

(5) In order to establish waiver or quasi-estoppel by acquiescence, an element of encouragement on the part of the defendant was required, and there must be some positive act or duty on the part of the defendant which encouraged the plaintiff to conduct itself in a manner inconsistent with its true rights and obligations. Mere inaction was insufficient. Quiescence was not acquiescence. The defendant was under no duty to inform the plaintiff that the notice was premature or that it would not take the point. The defendant was not the plaintiff's legal advisers. Further, at the time the notice of option was served, the parties were locked in legal combat over breaches of the covenants of the lease. The defendant had commenced proceedings and asserted that the plaintiff had no right to remain in possession of the premises. This was a sufficient message to the plaintiff that the defendant would not grant it a further lease. It was inconceivable that the plaintiff, notwithstanding the defendant's assertion that the plaintiff was in wrongful occupation of the premises, believed that a new lease would be given and it need do nothing. Finally, on the question of detriment, the allegation that the plaintiff did not look for alternative premises was insincere and unbelievable because it was not itself operating a massage parlour. Its agreement with the operator came to an end at the same...