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Tenancy agreements regulate the relationship between a landlord and tenant.
A key feature of tenancy disputes would be double-rental (mesne profits). I have previously written about this in a discussion of the FC’s decision of Rohasassets v Weatherford.
The CA considers double-rental
Through this judgment, the CA discussed double-rental and the elements one would need to consider.
The facts
Attic owned a unit (LG-01 in Citta Mall).
In 2011, Presto executed a 3-year tenancy agreement for the unit. Presto then set-up and operated a supermarket.
The unit had its share of flaws. There was a persistent issue with flooding and leaking (together with noxious odours).
Presto raised several complaints with Attic.
Notwithstanding its complaints, Presto renewed the tenancy for 3 years (from June 2014-June 2017).
Attic sought (and obtained) a guarantee for the payment of rent from Presto’s directors, during this renewal).
Presto terminates the tenancy and leaves
Presto terminated the tenancy early. It left the premises on 24 June 2015, with 2 years left on its tenancy.
At the time of termination, Presto failed to restore the premises to its original state. However, Presto had returned the keys to Attic by July 2015.
Presto promised to restore the premises but failed to do so. Attic, at its own cost, hired a contractor and did the restoration work itself.
Attic took the position that vacant possession was only returned by Presto in November 2015 (when the restoration works were completed).
Attic sued Presto for outstanding rental, double rental and reinstatement costs (~RM850k).
Presto counterclaimed for a colossal figure of ~RM20m. Presto further alleged that the guarantee given by its directors had been procured under “duress”.
Having heard witnesses, the HC allowed Attic’s claim but dismissed Presto’s counterclaim. Dissatisfied, Presto appealed.
Findings
The CA largely upheld the findings of the HC. The CA noted that:
a. Presto’s allegations of “duress” in executing the guarantee were unfounded;
b. Presto was liable for all rental outstanding;
c. Attic did not commit any fundamental breach of the tenancy agreement.
The CA also noted that Presto had, at the time of leaving the premises, suggested a replacement tenant (Urban Fresh). This put paid to Presto’s allegations that the premises were wholly unusable.
Double-rental
The CA did, however, allow Presto’s appeal on double-rental. At paragraph 43 onwards, the CA outlined Rohasassts and set-out the crucial issue for determination:
[46] In this regard, we are wholly alive to the fact that after 14 July 2015, i.e. after the keys had been handed over Presto had asked for extensions of time to restore the Premises to its “bare state” and ultimately, they failed to do so and so Attic had to do the reinstatement at their own cost, for which they made a claim. The critical question is - since Presto failed to comply with the TA and restore the Premises to its bare state, were they therefore “holding over” as a matter of law? Before us, it was therefore argued for Presto that the Learned Judge erred in awarding double rental to Attic under s.28(4) of the Civil Law Act 1956 for ‘holding over’ from 14 July 2015 to 23 November 2015
The CA held that Presto, by delivering the keys to Attic on 14.07.2015, could not be deemed to have been “holding over”. Presto had handed-over possession to Attic and as such, the CA determined that:
[53] Having handed over the keys on 14 July 2015, Presto was as a matter of fact, not in “occupation” of the Premises and thus they could not be “holding over” as per s. 28 (4) of the Civil Law Act 1956. This is underscored and augmented by the fact that Attic had already claimed for rentals and service charges for the same period per paragraph 14 of the Statement of Claim, which was allowed. The claim for double rental per paragraphs 22-23 of the Statement of Claim is clearly overlapping with and is subsumed in the claim for rentals in paragraph 14 of the Statement of Claim. To put it tersely, Presto’s failure to reinstate the Premises after having handed over vacant possession to Attic, although they promised to do so and asked for extension of time to do so, cannot be equated with their being in occupation of the Premises.
Put briefly, the CA held that Attic could not claim for rental and at the same time, claim for double rental.
The CA concluded by dismissing the appeal but-for this point on double rentals. Presto's appeal was allowed in-part. The parties were ordered to bear their own costs.
Key (pun-intended) takeaways
The handing-over of keys is a crucial element that must be carefully considered and scrutinised in determining whether a claim for double-rental is able to succeed.
If keys are not surrendered, a tenant would be deemed to be holding-over the property. Conversely, the Courts would be loathe to assist a landlord that alleges a situation of holding-over whilst being in possession of the property.
The crucial distinction appears to be possession and access to the premises; if it is returned, the tenant cannot be said to be holding-over.
GAVIN JAYAPAL
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