Case Summary 3: Interference with quiet enjoyment required some substantial physical interference with the enjoyment of the premises (Ridge Ltd v Golden Castle Ltd)

Case Summary 3: Interference with quiet enjoyment required some substantial physical interference with the enjoyment of the premises (Ridge Ltd v Golden Castle Ltd)

Case Name: Ridge Ltd v Golden Castle Ltd [2005] 3 HKC 592 (CFI)

Subject: Whether tenant has the right to set-off claim for unpaid rent against landlord's breach of covenant for quiet enjoyment

Facts

The plaintiff (landlord) claimed against the defendant (tenant) for failure to pay rent and other outgoings in respect of commercial premises leased out to the defendant.

The tenant counterclaimed that it was entitled to legal or equitable set-off of its loss of business as a result of the landlord’s renovations that blocked customers’ access to the premises which amounted to a breach of covenant to quiet enjoyment.

Issues

There were two main issues:

1. Whether there was a legal right of set-off of a claim for breach of the landlord’s covenant to give quiet enjoyment against a breach of the tenant’s covenant to pay rent.
2. Whether the landlord’s renovations amounted to a breach of covenant to quiet enjoyment.

Rulings and Discussion

The covenant to pay rent was independent of the other covenants or obligations under a lease, including the covenant for quiet enjoyment.

A tenant’s obligation to pay rent was not dependent upon the compliance by the landlord of its obligations under the lease, therefore, equitable set-off did not apply.

In this case, there was no defect in the premises themselves. There was no actual blockage of access. At most there was inconvenience to customers who could not use the escalators and stairway within the store, but who could find another way in.

Accordingly, it could not be said that the defendant could not do business, or that its business was so substantially interfered with by the landlord that it should not have to pay rent.

Therefore, the plaintiff succeeded in obtaining a judgement against the defendant for vacant possession and payment of outstanding rent.

Takeaway

For equitable set-off to apply,

1. the counterclaim must be at least closely connected with the same transaction as the claim; and
2. the relationship between the claims must be such that it would be manifestly unjust to allow one to be enforced without regard to the other.

In general, interference with quiet enjoyment required some substantial physical interference with the enjoyment of the premises.