FRUSTRATION OF COMMONLY HELD PURPOSES AND COVID-19
In Lachman’s Emporium Pte Ltd v Kang Tien Kuan (trading as Lookers Music Café, a sole proprietorship) [2022] SGHC 19, the General Division of the High Court dismissed a summary judgment application on the basis that the defendant has established a bona fide defence of the frustration of the parties’ shared purpose of using the premises in question as a music lounge.
The facts. In summary, the plaintiff landlord had entered into a tenancy agreement (the “Tenancy Agreement”) with the defendant to lease the premises at 510 Geylang Road, #01-01, Singapore 389466 (the “Premises”) for a fixed term of two years from 1 January 2020 to 31 December 2021. The Tenancy Agreement was terminated in April 2021.
The plaintiff commenced a suit against the defendant claiming that the defendant had refused to pay rent for March 2020 and August 2020 to April 2021.
The summary judgment application. The plaintiff then brought a summary judgment application against the defendant on the basis that there has been a prima facie breach of the Tenancy Agreement by the defendant and that the defendant has no defence.
The defence. The defendant claims that it can rely on the doctrine of frustration by reason of the COVID-19 outbreak. In particular, the defendant claims that “… The tenancy agreement required the defendant to use the Premises as a “pub/bar/cabaret/ night club/discotheque/karaoke lounge” only. …” and due to the COVID-19 measures, “… it was impossible for the defendant to have continued with the use of the Premises for the intended purpose under the regulations. …”
What was not relied upon. As the Court highlighted, in this case, neither party was relying on the COVID-19 (Temporary Measures) Act 2020, nor did the parties refer the Court to the Frustrated Contracts Act 1959 (2020 Rev Ed) or the force majeure clause in the Tenancy Agreement.
No supervening impossibility. And this is not a case of “supervening impossibility”, as the Premises were in fact fit for rental and the primary obligation, “… which is for the plaintiff to lease the Premises and for the defendant to rent the Premises, is not rendered impossible by virtue of the COVID-19 measures. …”
Commonly held purposes. However, the Court accepted that the defendant managed to raise a bona fide defence of frustration of the commonly held purposes of the parties. We set out the relevant paragraph below:
“13 In the present case, although the primary obligation to lease has not been rendered impossible by COVID-19 nor the COVID-19 measures, there is a bona fide defence of the frustration of the shared purpose of using the Premises for a music lounge. 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 (see Clause 2(x)). 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 a 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 the closure of night-time entertainment venues, it was obvious that this purpose cannot be achieved. It may, however, transpire at trial that this purpose was not shared – or it might not; but for the purpose of this summary judgment application, I find that the defendant has raised a bona fide defence.”
(our emphasis added)
Conclusion. As the Court made clear at the start of the judgment, “[t]his case is about the effects of COVID-19 measures on small businesses, and the doctrine of frustration in the time of COVID-19. …”This decision shows that even if you cannot rely on the reliefs under the COVID-19 (Temporary Measures) Act 2020 or a force majeure clause under the contract, there are other doctrines in common law, such as the doctrine of frustration, that can apply to provide a defence.
And when it comes to frustration, if you can establish that there has been a frustration of the commonly held purposes by the parties, which may be easier than establishing a “supervening impossibility” depending on the facts, you will be able to rely on the doctrine.
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