Ability to Claim Double Rent - Rohasassets Sdn Bhd v Weatherford (M) Sdn Bhd & Anor (Appeal No. 02(f)-12-02/2019(W))

The recent Federal Court decision on the ability to claim for double rent. Important for both landlord and tenant alike. A 33 page judgment with 100 paragraphs.

TLDR:

1.                  The leave question for determination by the Federal Court was 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?

2.                 Section 28(4)(a) of the Civil Law Act 1956:-

“Every tenant holding over after the determination of his tenancy shall be chargeable, at the option of his landlord, with double the amount of 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.” 

3.                 The Federal Court answered the question in the negative i.e. 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. 

4.                 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.

A.               High Court

5.                 The Appellant’s (“Landlord”) claim for double rental was premised on section 28(4)(a) of the Civil Law Act as well as provisions in its tenancy agreements.  

6.                 The Landlord being the registered owner of a commercial building known as Rohas Perkasa (“Premises”), let out the Premises to the 1st and 2nd Respondents since 2000 and 2003 respectively. Before the expiry of the tenancies, which was almost 10 years later, parties began negotiations for renewal of the tenancies. 

7.                 The negotiations went on even after the expiry of the tenancies and dragged on for more than two years during which the Landlord expressly reserved its right to charge double rent and consistently reminded the Respondents both before and after the expiry of the tenancies to make payment but the Respondents did not do so.

8.                The Respondents knew of the appellant’s right to charge double rent and in fact pleaded for it to be waived, especially in the event of a renewal of the tenancies. This is evidenced by the correspondence between the parties and the meetings between the parties.  

9.                 Negotiations for new tenancies failed. After which, the Landlord terminated the tenancies and gave notices to the Respondents to quit and deliver vacant possession of the Premises by 1.10.2011. 

10.             The Respondents did not challenge the termination nor the notices to quit but took an additional one month to vacate the premises by delivering vacant possession only on 31.10.2011.  

11.              Double rent was claimed for the period commencing from the expiry of the tenancies on 31.3.2009, 30.4.2009 and 31.1.2011 up to the date of delivery of vacant possession on 31.10.2011. 

12.             After a full trial of the action, the learned High Court Judge dismissed the Landlord’s claim for double rent and allowed the Respondents’ counterclaims for a refund of the deposits.

B.       Court of Appeal

13.             The Landlord appealed to the Court of Appeal. On 13.4.2018, the Court of Appeal allowed the appeal in part and inter alia ordered the Respondents to pay double rent but only for the period commencing from 1.10.2011 (expiry of the notices to quit dated 19.8.2011) up to 31.10.2011 (delivery of vacant possession).  

14.             It means that the Landlord is only entitled to 30 days of double rent instead of 30 months if the rent is to be calculated from the date of expiry of the tenancies up to the date of delivery of vacant possession. 

15.              The Court of Appeal had agreed with the High Court that it is a requirement under section 28(4)(a) of the Civil Law Act that there must be wilful or contumacious holding over on the part of the tenant to entitle the landlord to claim double rental. Having so decided on the question of law, it found no reason to interfere with the High Court’s finding of fact that there was no evidence to prove contumacious conduct on the part of the Respondents.

C.       Federal Court 

16.             The Landlord’s contention in support of its appeal was as follows:

(a)      after the expiry of the tenancies, the Respondents were tenants “holding over” within the meaning of section 28(4)(a) of the Civil Law Act and had no right to remain in occupation of the premises;

(b)      a reading of section 28(4)(a) of the Civil Law Act shows that the court does not retain any discretion and cannot refuse to make the award of double rent (or double the value of rent) when the Respondents were holding over; and

(c)  there is no requirement for the Landlord to show wilful conduct or contumacy on the part of the Respondents to render them liable to double rent. 

17.              The Respondents on the other hand argued that the Landlord was not entitled to charge double rent as the words “holding over” in section 28(4)(a) of the Civil Law Act refers only to cases of wrongful holding over and not to cases where the act of remaining in the premises is with the consent of the landlord pending negotiations for fresh tenancies. It was argued that to entitle the Landlord to charge double rent, it must prove wrongful or contumacious conduct on the part of the Respondents. 

18.             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. 

19.             Given the nature of the dispute between the parties, the  task is to determine the true meaning to be given to the words “holding over” in section 28(4)(a) of the Civil Law Act. There were diverse reasonings given by the former Federal Court in three cases, namely (1) Krishna Sreedhara Panicka v Chiam Soh Yong Realty Co Ltd [1983] 1 MLJ 65 (“Panicka”), (2) Wee Tiang Yap v Chan Chan Brothers [1986] 1 MLJ 47 (“Wee Tiang Yap”) and (3) Soong Ah Chow and Anor v Lai Kok Cheng [1986] 1 MLJ 42 (“Soong Ah Chow”). 

20.            In Panicka, the landlord had made additions and alterations to an old two-storey building known as 25 Jalan Ah Fook, Johor Bahru and converted it into two premises No. 25 and 25A. The ground floor became No. 25 and the first floor No. 25A. The appellant became tenant of No. 25A at a monthly rental of $300 and No. 25A at a monthly rental of $680. 

21.             He was served with notices to quit both premises. After the expiry of the notices, he failed to quit. The learned trial judge allowed for double rent to be charged by the landlord, but only to be calculated from 1.8.1979 and not from the date of the notices to quit, that is 1.3.1971 as claimed by the landlord. There was therefore a loss of about seven and a half years of chargeable double rent incurred by the landlord. It is not clear from the report though what the date 1.8.1979 actually refers to. 

22.            Aggrieved by the decision, the landlord appealed to the former Federal Court. It was held by a majority decision (Lee Hun Hoe CJ (Borneo) and Yusoff Mohamed J) that the learned judge was correct in holding that on the facts the landlord should be given double rent only from 1.8.1979 and not from 1.3.1971, the expiry date of the notices to quit. 

23.            What the learned trial judge was saying was that the charging of double rent by the landlord would have been justified if the tenant’s conduct in holding over had been unreasonable, which he found not to be the case in the case before him, hence his decision to allow double rent to be chargeable only from 1.8.1979 and not from the date of expiry of the notice to quit, which was 1.3.1971. 

24.            The consequence that flows from Panicka is that the charging of double rent could be avoided if the conduct of the tenant in holding over had been reasonable.

25.             The Federal Court was unable to find any legal definition for the word ‘contumacious’ used in Crook v Whitbread (referred to in Panicka). The Concise Oxford English Dictionary (11th Edition, Revised) defines it to mean “stubbornly or wilfully disobedient to authority” whilst the Merriam-Webster Dictionary defines it to mean “stubbornly disobedient: rebellious”. In the context of the leave question before the Federal Court, it will not be off the mark, to equate the word with stubbornness on the part of the tenant. 

26.            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. 

27.             Going by the meaning given to the words “holding over”, it does not seem to matter if the word “wilful” is there in section 28(4)(a) or otherwise, for holding over simply means an act of continuing to be in occupation of the premises after the expiry of the tenancy. What matters is the reason for the holding over. 

28.            The words “until possession is given up by him” in section 28(4)(a) of the Civil Law Act is not without significance when read together with the right of the landlord to charge double rent. It contemplates a situation where the tenant refuses to deliver up vacant possession without any just cause or valid reason after the expiry of the tenancy. 

29.            In relation to Wee Tiang Yap, 3 years after Panicka. In that case, the appellant’s father Wee Phor Tin claimed vacant possession of premises in Kota Bahru from the respondent, alleging that they were trespassers. The respondents were previously the tenants of the premises but Wee Phor Tin had issued a notice to quit to the respondents, the notice expiring on 1.3.1976. 

30.            It subsequently appeared that Wee Phor Tin was no longer the registered owner of the premises at the date of the filing of the writ as he had transferred it to his son, the appellant. It was also agreed that the respondents had been paying rent to Wee Phor Tin right up to August 1979. Before judgment, Wee Phor Tin died and the appellant continued the action as representative of his estate. 

31.             The learned trial judge held that on the death of a temporary occupation landowner his estate had no right of any kind to the land. He also held that section 116 of the Evidence Ordinance cannot prevent a tenant from contending that neither the deceased nor the widow had any title to the land. The learned judge therefore dismissed the claim and ordered that the sum of $16,800 be paid to the respondent under the counterclaim. 

32.            On appeal to the former Federal Court, it was held, inter alia, that since the respondents had wilfully remained on the premises after the expiry of the period of notice to quit on 1.3.1976, the appellant was entitled to obtain damages for trespass in the form of double rent chargeable from the expiry of the notice to quit.  

33.            As for Soong Ah Chow, by a lease executed on 3.10.1961 between the landlord and the tenants, a tenancy was created for a term of 18 years from 1.8.1961 at a yearly rental of $1,800 payable at a rate of $150 per month. 

34.            The said lease expired by effluxion of time on 31.7.1979. As from 1.8.1979 all tenders of rental by the tenants were consistently refused by the landlord and the tenants were asked to vacate the premises. On 3.11.1981 the landlord obtained a Certificate of Decontrol under section 23(1)(a) of the Control of Rent Act 1966 and served copies of the certificate to the tenants. On 26.11.1981 the landlord also served a notice to quit on the tenants. 

35.             In an action brought by the landlord against the tenants, the learned trial judge directed the tenants to render vacant possession of the premises and to pay double rent from 1.8.1979, that is, the date that the trial judge held them to be trespassers. The tenants appealed to the former Federal Court. It was held as follows:

(a)      Because of the refusal of the landlord to accept any rental from 1.8.. 1979 no tenancy was created between the parties as from that date. There was therefore no tenancy existing between the tenants and the landlord after 31.7.1979 in respect of the premises; and

(b)      Since the trial judge had found the tenants to be trespassers from 1.8.1979 the order to impose double rental from that date was correctly made. 

36.            Whilst Panicka by majority decided, following Crook v Whitbread that wilful and contumacious conduct on the part of the tenant is required to justify the charging of double rent by the landlord under section 28(4)(a) of the Civil Law Act, both Wee Tiang Yap and Soong Ah Chow did not consider proof of contumacious conduct to be necessary to entitle the landlord to charge double rent. 

37.             In the present case, there were negotiations for renewal of the tenancies before and after the expiry of the tenancies and the Landlord did not ask the Respondents to vacate the premises while negotiations were in progress. All the Landlord did was to reserve its right to charge double rent and to remind the respondents to pay double rent. 

38.            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 the expiry of the tenancy but that is entirely a matter for the landlord to decide. 

39.            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. 

40.            Therefore, the question in the present appeal is not whether the Respondents were holding over contumaciously or otherwise after the expiry of the tenancies. The question is whether they were holding over with or without the Landlord’s consent, express or implied by conduct. Section 28(4)(a) of the Civil Law Act cannot be construed to mean that double rent is chargeable irrespective of whether consent to hold over has been given by the Landlord or otherwise. 

41.             On the facts of the present case, it is clear that the Respondents’ holding over was with the tacit approval of the Landlord. This was also the concurrent findings of fact by both courts below and the Federal Court saw no reason to interfere with such findings of fact. 

42.            One feature of the case that stands out is that the Landlord did not make its intention clear to the Respondents that it did not wish to renew the tenancies and wanted the Respondents to give up possession after the expiry of the tenancies.

43.            In fact, by agreeing to negotiate for renewal of the tenancies, the Landlord had evinced an intention to renew the tenancies subject to finalisation of the terms. Nor did the Landlord make it clear to the Respondents that it would not allow the Respondents to hold over without paying double rent while negotiations for renewal of the tenancies were ongoing. 

44.            Crucially, throughout the period of negotiation for renewal of the tenancies, the Landlord accepted tenders of rent from the Respondents without any complaint and did not issue any notice to quit, not until after the failure of the negotiations, and this too was done some two years after the expiry of the tenancies. Therefore, the Landlord by conduct had waived its right to charge double rent.