Case Summary 1: The tenant's obligation to pay rent is independent of the covenants or obligations of the landlord under the tenancy agreement (Charmway Development Ltd v Long China Engineering Ltd)

Case Summary 1: The tenant's obligation to pay rent is independent of the covenants or obligations of the landlord under the tenancy agreement (Charmway Development Ltd v Long China Engineering Ltd)

Charmway Development Ltd v Long China Engineering Ltd
Case No.: HCA 54/2001
Date of Judgment: 16th July 2001
https://www.hklii.hk/en/cases/hkcfi/2001/68?hl=HCA%2054%2F2001

Facts

The plaintiff tenant had entered into a tenancy agreement with the defendant landlord for a commercial premises in Causeway Bay for a term of 3 years to operate a café and bar.  It is not in dispute that the tenant had not paid rent since 6 months after the commencement of the tenancy.

The tenant sued the landlord for breach of the tenancy agreement on the ground that:- (1) the landlord had denied its entitlement to put up advertising signs on the external wall of the building; and (2) the landlord was in breach of the covenant for quiet enjoyment in that the metal gate at the street entrance of the building was closed after mid-night when the tenant’s business was opened until 4 a.m.

The landlord denied the tenant’s allegations and counterclaimed for arrears of rent and moneys due under the distraint proceedings issued by the landlord.  The landlord successfully obtained summary judgment against the tenant on the counterclaim.

The tenant appealed.

Issue

On appeal, the question for determination was whether taking the tenant’s case to the highest, there were triable issues in its defence to the landlord’s counterclaim.

Ruling and Reasons for Judgment

By reference to the subject tenancy agreement, the tenant’s obligation to pay rent was not conditional upon compliance by the landlord of all or part of its obligations.  The tenancy agreement only provided for suspension of rent in the event that the building was destroyed or rendered inaccessible by events or calamity beyond the control of the landlord.  The tenancy agreement contemplated that the obligation to pay rent to operate independently from other contractual obligations.

The position was the same under the common law.  The covenant to pay rent by the tenant was independent of the other covenants or obligations under the lease, including the covenant of quiet enjoyment.

The Court held that there was no room for the defence asserted by the tenant to the counterclaim that it was not obliged to pay rent because of the alleged breaches of the tenancy agreement by the landlord.  The tenant’s appeal was accordingly dismissed.

Takeaway

This case is a reminder of the well-established legal principle that the tenant’s obligation to pay rent is independent of the covenants or obligations of the landlord under the tenancy agreement (e.g. the covenant for quiet enjoyment or the obligation to carry out repairs (if any)).  In other words, the tenant is generally not entitled to deduct or withhold any part of the rent on the ground that the landlord has not fulfilled all or part of its obligations under the tenancy agreement, unless the express terms of the tenancy agreement clearly states that the tenant can do so.

No doubt, if the landlord is in breach of his obligations, the tenant may have a separate claim against the landlord for the losses and expenses incurred as a consequence of the breach.

If the tenant persistently fails to pay rent in full, the landlord can likely forfeit the tenancy, and depending on the actual circumstances, the landlord may even have a claim against the tenant for losses arising from the forfeiture of the tenancy (e.g. where the tenancy was originally for a fixed term but the tenancy was forfeited because the tenant insisted not to pay rent to the landlord).