Tenancy and its manifold entanglements are a staple of litigation. One would be hard-pressed to find a civil litigator who hasn’t handled a tenancy dispute or two in his career.
One issue that would at times be raised would be double-rent. Picture this scenario.
Fictional factual matrix
Marcus owns a 400sqm studio. An acquaintance of his, Aurelius, intends to run his meditation centre from this building.
Aurelius approaches Marcus and suggests that he tenant the studio. Marcus, having had his previous tenant abscond, jumps at the idea. They negotiate terms and draw-up a simple tenancy agreement.
The tenancy agreement specifies, inter alia, that rental for the premises shall be set at RM10,000.00 per month. The rental term would be for 2 years, with an option to renew.
Aurelius moves in
Aurelius then moves in and begins operations. Business is slow and the meditation business is in the doldrums, what with cosmic nations and the Republic of Kailaasa hogging the limelight.
Aurelius begins to miss payments. January’s rent is paid on-time; February is delayed by 2 weeks and come March, he begins to avoid Marcus’s telephone calls.
In April, Marcus becomes frustrated. He has his solicitor issue out a notice of demand, asking that Aurelius return the premises and pay for all outstanding rental.
Aurelius refuses to budge
Aurelius refuses to move out. He claims to have expended over RM200,000.00 in renovation costs; it’s not his fault that Kailaasa appears to be a much better option than his centre.
Aurelius has his own solicitor write back to deny all of Marcus’s claims and to further ask for compensation for the renovation costs. Aurelius further claims that the premises are defective and needed major repair work, all of which he (Aurelius) did out-of-pocket.
Marcus instructs his solicitor to file suit. A claim is lodged and Marcus seeks double-rent for the period for which Aurelius is holding-over the studio. Aurelius claims that he isn’t holding-over the studio for no reason; he only wants what he’s owed and isn’t acting with any malice.
The legal framework
As a general rule, tenancies are creatures of contract. There are statutory tenancies but these deal with very specific issues.
The tenancy agreement is a very important document and it shall be the Court’s over-arching guide in determining the parties’ respective rights.
Double rent
Statute specifically provides a remedy for the landlord with regard to a tenant who holds-over. Section 28(4)(a) of the Civil Law Act 1956 states as follows:
(4) (a) Every tenant holding over after the determination of his tenancy shall be chargeable, at the option of his landlord, with double the amount of his rent until possession is given up by him or with double the value during the period of detention of the land or premises so detained, whether notice to that effect has been given or not.
At times, tenants have been creative in arguing that double-rent can only be charged if they hold-over property maliciously or contumaciously (Persatuan Teknologi Malaysia v Medfiche Sdn Bhd [1992] MLJU 22). This has been a source of confusion and a potential defence.
The Federal Court clarifies in Rohasassets v Weatherford
Very recently (26.11.2019), the Federal Court in Rohasassets v Weatherford [Civil Appeal No.: 02(f)-12-02/2019(W)] clarified the law pertaining to double-rent.
The Federal Court was posed this question:
[1] The leave question for our determination was as follows: “In relation to a claim for double rent under section 28(4)(a) of the Civil Law Act 1956, whether there is a requirement on the landlord to show wilful and contumacious conduct on the part of the tenant holding over to render the tenant liable to pay the said double rent.”
[2] The question may be paraphrased: If the tenant holds over after the expiry of the tenancy, is there a need for the landlord to prove wilful and contumacious conduct on the part of the tenant to entitle the landlord to charge double rent under section 28(4)(a) of the Civil Law Act 1956?
The FC consisders S. 28(4)(a)
The FC first noted that the discretion to charge double-rent vests in the landlord:
[26] First of all, the discretion to charge double rent is vested in the landlord and not the Court. The Court’s role in a dispute under section 28(4)(a) of the Civil Law Act is merely to determine whether the option to charge double rent had been properly and lawfully exercised by the landlord. If the discretion had been properly and lawfully exercised by the landlord, the Court has no discretion but to allow the claim for double rent. If, on the other hand, the discretion had not been properly and lawfully exercised, the landlord is not entitled to charge double rent and the Court will rule accordingly.
The FC also clarified, importantly, that double-rent is chargeable by operation of law:
[27] In cases like the present, where the tenancy agreements provide for payment of double rent, such rent is chargeable not only by the terms of the agreements but more importantly it is chargeable by operation of law and in this regard section 28(4)(a) provides that it continues to be chargeable “until possession is given up” by the tenant.
Does willful/contumacious conduct need to be shown?
The FC then went on to consider whether there needed to be evidence of willful/contumacious conduct on the part of the tenant.
The FC went on to consider a few divergent authorities in both Malaysia and the UK. Specifically, they compared the terminology of S. 28(4)(a) with that of s. 1 of the Landlord and Tenant Act 1730. The FC decided that there was a material difference between the two:
[53] What is envisaged by section 1 of the 1730 Act is that in order to entitle the landlord to charge double the yearly value of the land (as opposed to rental), he must prove the yearly value of the land and have it assessed and damages duly ascertained for payment by the former tenant.
[54] There is no such burden on the landlord under section 28(4)(a) of the Civil Law Act where double rent is chargeable at his option. All that he needs to prove to entitle him to charge double rent is to show that the tenant was “holding over” after the expiry of the tenancy.
[55] The requirement of “wilfully holds over” as found in section 1 of the 1730 Act can also be found in section 138 of the Property Law Act 1974 of Queensland, Australia (“the Australian Act”) and section 58 of the Commercial Tenancies Act, 1990 of Ontario, Canada (“the Canadian Act”).
…
[57] Thus, unlike the Australian and Canadian positions, our legislature had chosen not to follow the English position by omitting the word “wilfully” in section 28(4)(a) of the Civil Law Act. So, instead of requiring the act of holding over to be “wilful” as in section 1 of the 1730 Act, in section 138 of the Australian Act and in section 58 of the the Canadian Act, section 28(4)(a) of the Civil Law Act requires mere proof of “holding over” to entitle the landlord to exercise his option to charge double rent.
[58] There is no requirement under section 28(4)(a) of the Civil Law Act for the holding over to be “wilful” or, in the words of Crook v Whitbread, “wilfully and contumaciously” which as we said can also be equated with stubbornness. [59] On the face of it, it appears that the legislature had opted for a stricter and clearer approach in dealing with former tenants who hold over after the expiry of the tenancies.
The FC went on to outline that the strictures of S. 28(4)(a) are weighted in favour of the landlord:
[86] We do not think there is an alternative to the argument that after the expiry of a tenancy, there is no tenancy in existence between the parties as the tenancy has come to an end and it is then not a matter of right for the tenant to hold over without the landlord’s consent and without paying double rent if the tenant has decided to charge double rent pursuant to section 28(4)(a) of the Civil Law Act.
[87] On expiry of the tenancy, section 28(4)(a) kicks in to give the landlord the right, at his option, to charge double rent and the double rent continues to be chargeable until possession is given up by the tenant who holds over without the landlord’s consent. The landlord may decide not to charge double rent at all or even allow the tenant to hold over for free after 29 the expiry of the tenancy but that is entirely a matter for the landlord to decide.
[88] The legislative scheme of section 28(4)(a) of the Civil Law Act is clearly to give the landlord the right of option to charge double rent if the tenant fails or refuses to deliver vacant possession of the demised premises after the expiry of the tenancy. The right is given by statute and can only be taken away by statute.
However, the FC cautioned that the Landlord is not entitled as of right to double-rent. There must be failure and/or refusal by the tenant to deliver vacant possession:
[89] But that said, it does not mean that holding over simpliciter is all that the landlord needs to prove in a claim for double rent under section 28(4)(a) of the Civil Law Act. To entitle the landlord to charge double rent, there must be failure or refusal by the tenant to give up possession after being told to do so by the landlord. This has to be so because the landlord’s claim is actually not rent but a penal sum which the former tenant has to pay for the inconvenience and loss the tenant causes the landlord in refusing to give up possession: Panicka (supra).
The Federal Court then outlined the current position of law lucidly as follows:
[90] At the risk of repetition, it needs to be emphasized that the Court’s duty in a claim under section 28(4)(a) of the Civil Law Act is merely to determine whether the option to charge double rent had been exercised properly and lawfully by the landlord. The Court is not concerned with contumacious conduct on the part of the tenant who holds over. Even if the tenant is not guilty of contumacious conduct, the tenant is still liable to pay double rent if the landlord has decided to charge double rent and does not consent to the tenant’s holding over and has asked the former tenant to vacate the premises.
…
[99] For all the reasons aforesaid, our answer to the leave question is in the negative, that is, in relation to a claim for double rent under section 28(4)(a) of the Civil Law Act 1956, there is no requirement on the landlord to show contumacious conduct on the part of the tenant holding over to render the tenant liable to pay the said double rent.
Analysis: Excellent clarity and reasoning
The Federal Court has dealt with the law and divergent positions admirably. By outlining the current position of law, landlords and tenants know exactly where they stand vis-à-vis their rights.
For landlords, it is of the imperative that correspondence is kept scrupulously. A letter to inform the tenant that double-rent shall be charged will be a very important requirement.
For the tenant, the moment one has knowledge that the tenancy has expired, to move out would be of the imperative. Tenants must be vigilant to ensure that they execute all necessary extension agreements with the landlord well before their term ends.
In the situation outlined above, Aurelius would be obligated to pay double-rent of RM20,000.00 for each month that he holds-over the studio. He certainly would be hard-pressed to avail himself of the maxim “Everything we hear is an opinion, not a fact.
Everything we see is a perspective, not the truth” when the bailiff cometh a-calling.
GAVIN JAYAPAL
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