Saha Ram Krishna and others v Tan Tai Joum (acting in his capacity as the personal representative of the estate of Tan Hee Liang, deceased) [2024] SGHC 9

Sushant Shukla

Case Details

Citation: [2024] SGHC 9
Court: General Division of the High Court of the Republic of Singapore
Decision Date: 23 January 2024
Coram: Vinodh Coomaraswamy J
Case Number: Suit No 774 of 2020; HC/ORC 4720/2021
Hearing Date(s): 12–13, 17–18 January, 17, 25 April 2023
Claimants / Plaintiffs: Saha Ram Krishna (1st Plaintiff); Jay Mondal (2nd Plaintiff); J M Business World Pte Ltd (3rd Plaintiff)
Respondent / Defendant: Tan Tai Joum (acting in his capacity as the personal representative of the estate of Tan Hee Liang, deceased)
Counsel for Plaintiffs: Yap Bock Heng Christopher and William Ong Meng Hwa (Alpha Law LLC)
Counsel for Defendant: Ng Lip Chih and Chung Jun Hui Joel (Foo & Quek LLC)
Practice Areas: Contract — Breach; Contract — Contractual terms; Contract — Discharge

The judgment in [2024] SGHC 9 addresses a complex commercial landlord-tenant dispute involving the legality of building structures and the doctrine of affirmation in the face of a repudiatory breach. The dispute arose from the lease of a three-storey shophouse at 29 Lembu Road, where the plaintiffs intended to operate a restaurant on the ground floor and house staff on the upper floors. The parties entered into two separate tenancy agreements for different portions of the property. The central conflict was triggered when the plaintiffs discovered that the third storey of the property had been constructed without the requisite planning permissions, leading to a claim that the landlord had breached an implied term regarding the lawful construction of the premises.

The High Court was required to determine whether the two tenancy agreements constituted a single, integrated transaction or two independent contracts. This distinction was vital because the plaintiffs sought to justify their termination of both agreements based on a breach primarily affecting the upper storeys. Vinodh Coomaraswamy J held that the agreements were separate and independent, emphasizing the autonomy of the written instruments. While the court found that the defendant had indeed committed a repudiatory breach of an implied term in the second tenancy agreement—specifically that the third storey was lawfully constructed—it ultimately ruled that the plaintiffs had affirmed the contract. By continuing to occupy the premises and engage in correspondence for nearly a year after discovering the illegality, the plaintiffs lost their right to rescind the agreement.

The doctrinal contribution of this case lies in its rigorous application of the three-step process for implying terms in fact, as established in Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193. The court clarified that while a warranty of lawful construction can be implied for business efficacy, the remedy for its breach is subject to the strict rules of affirmation. The judgment also reinforces the high threshold for treating separate contractual documents as a single transaction, even when they are functionally linked in a commercial sense. The court’s analysis of the "entire agreement" clause (Clause 31) served as a significant barrier to the plaintiffs' attempt to merge the two agreements into a single legal entity.

Ultimately, the court ordered a set-off of damages. Although the plaintiffs were entitled to damages for the breach of the implied term, their subsequent failure to pay rent and their premature vacation of the property constituted repudiatory breaches of both agreements. The defendant succeeded on his counterclaim for arrears of rent and losses arising from the premature termination. The final disposition resulted in a net recovery for the defendant of $265,161.91, plus fixed costs of $150,000. This case serves as a stark warning to practitioners and commercial tenants about the risks of "affirming" a contract through continued performance after a breach is discovered, and the importance of precise drafting when multiple agreements are intended to be interdependent.

Timeline of Events

15 February 2006: The Building and Construction Authority (BCA) issued a certificate of statutory completion for the Property, describing the first storey as an “eating establishment (coffee shop)” under the Building Control Act.
18 October 2012: The Urban Redevelopment Authority (URA) granted permission under the Planning Act for the change of use of the first storey to a restaurant.
2017: J M Business World Pte Ltd (the third plaintiff) was incorporated in Singapore to facilitate the restaurant business.
26 November 2018: The plaintiffs and the defendant executed two separate tenancy agreements for the Property at 29 Lembu Road.
3 December 2018: The tenancies formally commenced for a three-year term.
13 February 2019: The plaintiffs first raised issues regarding the approved use of the Property and the lawfulness of the third storey construction.
February 2019 – October 2019: The plaintiffs engaged in extensive correspondence with the defendant, the URA, and the BCA regarding the structural legality of the third floor while continuing to occupy the premises.
8 October 2019: The plaintiffs ceased paying rent for both the first storey and the upper storeys.
3 January 2020: The plaintiffs yielded up the Property to the defendant, vacating the premises before the expiry of the three-year term.
29 October 2020: The plaintiffs commenced Suit No 774 of 2020 against the defendant for breach of contract and misrepresentation.
12–13, 17–18 January, 17, 25 April 2023: The court conducted substantive hearings to determine the claims and counterclaims.
23 January 2024: Vinodh Coomaraswamy J delivered the judgment in [2024] SGHC 9.

What Were the Facts of This Case?

The dispute centered on a three-storey shophouse located at 29 Lembu Road, Singapore 208456 ("the Property"). The owner of the Property was Tan Hee Liang, who passed away during the proceedings; his estate was represented by the defendant, Tan Tai Joum. The plaintiffs—Saha Ram Krishna, Jay Mondal, and their company J M Business World Pte Ltd—intended to utilize the Property for a dual purpose: operating a restaurant on the ground floor and providing housing for their employees on the second and third storeys. This commercial arrangement was formalized through two distinct tenancy agreements executed on 3 December 2018.

The "First Tenancy Agreement" covered the first storey of the Property. It provided for a monthly rent of $11,000 and required a security deposit of $44,000. The "Second Tenancy Agreement" covered the second and third storeys, with a monthly rent of $6,000 and a security deposit of $24,000. Both agreements were set for a three-year term. The agreements contained standard commercial terms, including Clause 2.1 (the habendum), Clause 20.1 (indemnity for breach), and Clause 31, which was an "entire agreement" clause. Crucially, the agreements did not contain any cross-default provisions that would link the performance of one agreement to the other, despite the plaintiffs' subjective view that the two leases were part of a single business venture.

The regulatory history of the Property was a major point of contention. In 2006, the BCA had issued a certificate of statutory completion describing the first storey as an "eating establishment." In 2012, the URA granted permission for the first storey to be used as a restaurant. However, after taking possession in late 2018, the plaintiffs discovered that the third storey appeared to be an unauthorized addition. Correspondence with the URA and BCA in early 2019 revealed that the Property was officially recognized only as a two-storey shophouse. The third storey had been constructed without planning permission under the Planning Act and without a certificate of statutory completion under the Building Control Act.

Upon discovering this illegality in February 2019, the plaintiffs did not immediately vacate. Instead, they entered into a protracted period of negotiation and investigation. They corresponded with the defendant to seek regularization of the third storey and continued to operate their restaurant and house their staff. During this time, they continued to pay rent. It was only in October 2019, eight months after the initial discovery, that the plaintiffs stopped paying rent for both agreements. On 3 January 2020, they returned the keys and vacated the Property, claiming that the defendant’s failure to provide a lawfully constructed third storey constituted a fundamental breach that discharged them from further performance.

The plaintiffs' claim sought the return of their total security deposits ($68,000), reimbursement for renovation costs, and damages for loss of profits. They argued that the defendant had misrepresented the status of the Property and breached an implied term that the entire structure was lawful. The defendant counterclaimed for arrears of rent from October 2019 to January 2020, as well as damages for the loss of rent for the remainder of the three-year term, arguing that the plaintiffs had wrongfully repudiated the contracts by vacating early. The defendant also sought costs for restoring the Property to its original condition, alleging that the plaintiffs had made unauthorized alterations.

What Were the Key Legal Issues?

The court identified several critical legal issues that required resolution to determine the liability of the parties:

Independence of Contracts: Whether the two tenancy agreements should be treated as a single, unified contract or as two separate and independent agreements. This was the threshold issue, as it determined whether a breach of the Second Tenancy Agreement could justify the termination of the First Tenancy Agreement.
Implied Terms of Lawful Construction: Whether there was an implied term in the Second Tenancy Agreement that the third storey was lawfully constructed in compliance with the Planning Act and the Building Control Act. The court had to apply the Sembcorp three-step test to determine if such a term was necessary for business efficacy.
Repudiatory Breach and Affirmation: If an implied term was breached, did it constitute a repudiatory breach? More importantly, did the plaintiffs affirm the contract by continuing to occupy the premises and pay rent for several months after discovering the breach?
Wrongful Repudiation by Tenants: Whether the plaintiffs' cessation of rent payments in October 2019 and their vacation of the Property in January 2020 constituted a repudiatory breach of both agreements, given the court's findings on affirmation and the independence of the contracts.
Assessment of Damages and Set-off: How to quantify the damages for the landlord's breach of the implied term versus the tenants' breach of the rent and term obligations, and how the statutory interest under the Civil Law Act 1909 should be applied to the resulting net sum.

How Did the Court Analyse the Issues?

The court’s analysis was a masterclass in the strict application of contractual principles and the doctrine of affirmation. The first major hurdle was the characterization of the two tenancy agreements. The plaintiffs argued that the agreements were part of a single transaction because the restaurant business required both the ground floor for operations and the upper floors for staff housing. However, Vinodh Coomaraswamy J rejected this, holding that the agreements were "separate and independent agreements" (at [8]). The court emphasized that the parties had deliberately chosen to execute two distinct documents with different subject matters and rental rates. The presence of Clause 31—the "entire agreement" clause—was decisive. The court noted that if the parties had intended the agreements to be interdependent, they could have included cross-default or "tie-in" provisions. In the absence of such language, the court refused to look beyond the four corners of the written instruments to find a unified contract.

Regarding the implied term, the court applied the three-step process from Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193. The first step was to identify a "gap" in the contract. The court found that the Second Tenancy Agreement did not expressly warrant that the third storey was lawfully constructed. The second step involved the "business efficacy" test. The court reasoned that a tenant entering into a lease for a three-storey building would naturally assume that all three storeys were lawfully constructed and could be used without the risk of regulatory enforcement. As the court noted:

"In SembCorp at [101], the Court of Appeal set out the three-step process for implying a term in fact into a contract under Singapore law."

The third step, the "obviousness" test, was also satisfied; if an officious bystander had asked whether the landlord warranted the lawful construction of the premises, the parties would have surely answered, "of course." Thus, the court implied a term that the third storey was lawfully constructed. The evidence from the URA and BCA clearly showed that the third storey lacked planning permission and a certificate of statutory completion. This constituted a breach of the implied term. Furthermore, the court held this was a repudiatory breach under the RDC Concrete framework because it deprived the plaintiffs of a substantial part of the benefit they were intended to receive—namely, a lawful three-storey premises.

However, the plaintiffs' claim faltered on the doctrine of affirmation. The court found that the plaintiffs became aware of the third storey's illegality as early as February 2019. Despite this knowledge, they continued to occupy the Property, operate their business, and pay rent until October 2019. They also engaged in correspondence with the landlord to "regularize" the situation, which the court interpreted as an election to keep the contract alive. Under Singapore law, once a party with knowledge of a repudiatory breach acts in a manner consistent with the continued existence of the contract, they are deemed to have affirmed it. The right to terminate is lost, and the innocent party is limited to a claim for damages. The court held that the plaintiffs had unequivocally affirmed the Second Tenancy Agreement.

This affirmation had dire consequences for the plaintiffs' subsequent actions. Because the contract had been affirmed, the plaintiffs remained bound by their obligations. When they stopped paying rent in October 2019 and vacated in January 2020, they committed their own repudiatory breaches of both the First and Second Tenancy Agreements. Since the First Tenancy Agreement was independent and had not been breached by the defendant at all, the plaintiffs had no justification for failing to pay rent or for vacating that portion of the Property. For the Second Tenancy Agreement, the plaintiffs' affirmation meant they were still liable for rent despite the landlord's earlier breach. The defendant was thus entitled to accept the plaintiffs' repudiation and claim damages for the loss of the remaining lease term.

In the final stage of analysis, the court addressed the quantification of damages. For the plaintiffs, the court awarded damages for the breach of the implied term, which included a portion of the renovation costs that were "wasted" due to the illegality, and the return of the security deposits ($68,000). For the defendant, the court awarded the arrears of rent and the loss of rent for the period after the plaintiffs vacated until the defendant was able to re-let the Property. The court meticulously applied the duty to mitigate, finding that the defendant had taken reasonable steps to find a new tenant by late 2020. The court then performed a set-off of these competing sums to arrive at the final judgment amount.

What Was the Outcome?

The court ordered a set-off of the damages awarded to each party, resulting in a significant net recovery for the defendant. The operative paragraph of the judgment states:

"The plaintiffs are entitled to recover damages in the sum of $146,333 from the defendant on the plaintiff’s claim. The defendant is entitled to recover damages in the sum of $411,494.91 from the plaintiffs on the defendant’s counterclaim." (at [141])

The breakdown of the awards and the final disposition were as follows:

Plaintiffs' Entitlement ($146,333): This sum included the return of the security deposits for both agreements ($44,000 and $24,000, totaling $68,000). It also included damages for the breach of the implied term in the Second Tenancy Agreement, covering specific renovation expenses and regulatory fees incurred by the plaintiffs.
Defendant's Entitlement ($411,494.91): This comprised the arrears of rent for both the first storey and the upper storeys from October 2019 to January 2020. It also included damages for the loss of rent for the remainder of the three-year term, calculated up to the point the defendant mitigated his losses by securing a new tenant, minus the security deposits which were credited back to the plaintiffs in their award.
Net Judgment: After setting off the two sums, the defendant was entitled to recover the net sum of $265,161.91 from the plaintiffs (at [143]).
Interest: The court awarded interest on the net sum of $265,161.91 at the statutory rate of 5.33% per annum, as prescribed under the Civil Law Act 1909, running from the date of the writ.
Costs: The defendant was deemed the successful party in the overall action. The court ordered the plaintiffs to pay the defendant's costs for both the claim and the counterclaim. These costs were fixed at $150,000, inclusive of disbursements (at [147]). The court noted that the defendant had prevailed on the core issues of contractual independence and affirmation, which were the primary drivers of the litigation's complexity.

Why Does This Case Matter?

This judgment is a significant authority for commercial practitioners in Singapore, particularly those dealing with real estate and multi-agreement transactions. Its primary importance lies in the strictness with which the court approached the "entire agreement" clause and the independence of contracts. Even where two leases concern the same building and the same business enterprise, the court will not easily read them as a single transaction if the parties have documented them separately. This underscores the necessity for tenants to insist on cross-default or "interdependency" clauses if the viability of one lease depends on the legality or performance of another. Without such clauses, a tenant may find themselves legally bound to continue paying rent for a ground-floor shop even if the upper-floor housing becomes unusable due to the landlord's breach.

Furthermore, the case provides a critical warning regarding the doctrine of affirmation. In commercial disputes, there is often a temptation for the "innocent" party to "wait and see" or to attempt to negotiate a resolution while continuing to perform the contract. [2024] SGHC 9 demonstrates that this "middle path" is fraught with legal risk. By continuing to occupy the premises and pay rent for eight months after discovering the structural illegality, the plaintiffs inadvertently waived their right to terminate the agreement. Practitioners must advise clients that once a repudiatory breach is discovered, they must make a clear and timely election: either terminate the contract immediately or affirm it and sue for damages later. Attempting to do both—affirming through conduct and then later terminating for the same breach—will result in the tenant being the one in repudiatory breach.

The court's application of the Sembcorp test for implied terms also reinforces the principle that commercial leases carry an inherent expectation of legality. While the landlord did not expressly warrant that the third storey was built according to code, the court found it "obvious" that such a warranty must exist for the contract to have business efficacy. This provides some protection for tenants against "hidden" structural illegalities. However, as this case shows, that protection is a shield for damages, not necessarily a sword to cut the contractual tie if the tenant has already affirmed the lease.

Finally, the judgment clarifies the assessment of damages in the context of set-offs. The court’s meticulous calculation of arrears, loss of future rent, and wasted renovation costs provides a useful template for practitioners quantifying claims in premature lease terminations. The application of the statutory interest rate under the Civil Law Act 1909 to the net sum after set-off is also a practical reminder of how final judgments are structured in the Singapore High Court.

Practice Pointers

Due Diligence: Before entering into a lease for a shophouse or modified property, tenants should conduct independent searches with the URA and BCA to verify that the physical structure matches the approved plans and that a certificate of statutory completion covers all storeys.
Interdependency Clauses: If a business requires multiple premises or multiple floors under separate agreements, ensure the contracts include an express "interdependency" or "cross-termination" clause. This allows a breach in one agreement to serve as a ground for terminating the others.
Entire Agreement Clauses: Be aware that Clause 31 (Entire Agreement) will likely prevent a court from considering oral promises or the "commercial reality" of a single transaction if the written documents are separate.
Election and Affirmation: Upon discovering a repudiatory breach, the innocent party must be advised that any act consistent with the continuation of the contract (e.g., paying rent, exercising an option, or remaining in possession) may constitute affirmation and extinguish the right to terminate.
Reservation of Rights: If a tenant chooses to stay while negotiating a breach, they should issue a formal "reservation of rights" notice, although this may not always prevent a finding of affirmation if the conduct is unequivocally inconsistent with termination.
Mitigation: Landlords must take active, documented steps to re-let the premises immediately after a tenant vacates to preserve their claim for loss of future rent.
Unauthorized Alterations: Tenants should obtain written consent for all renovations; otherwise, they face counterclaims for restoration costs, as seen in the defendant's attempt to claim for the removal of partitions.

Subsequent Treatment

As a recent 2024 decision, [2024] SGHC 9 stands as a contemporary application of the Sembcorp and RDC Concrete frameworks. It reinforces the Court of Appeal's established positions on implied terms and repudiatory breach. There are no recorded cases as of the date of this judgment that have overruled or significantly distinguished this decision; rather, it serves as a cautionary precedent for the "affirmation by conduct" rule in commercial tenancies.