by MH Law | June 9, 2024 | Case Spotlight
Overview
The High Court decision in Tetap Tiara Sdn Bhd v Hatching Education Group Sdn Bhd [2023] underscores critical principles in contract law, particularly concerning illegality and restitution under void agreements.
Background Facts
Tenancy Agreement and Breach of Law
The appellant rented two premises to the respondent for use as a special needs education centre.
The premises had unapproved renovations deviating from the original building plan, violating the Street, Drainage, and Building Act 1974, rendering the Tenancy Agreement void due to illegality.
The respondent terminated the agreement and sought a refund of 15 months’ rental.
Judicial Findings on Clauses
Clauses in the agreement (e.g., "as is where is" and tenant’s obligation to secure permits) could not validate breaches of statutory provisions.
Counterclaims and Occupancy
The appellant counterclaimed for unpaid rent and damages, arguing that the respondent had continued benefiting from the premises despite knowing the breaches.
High Court Findings
Illegality and Termination Rights
The Court upheld the respondent’s right to terminate the Tenancy Agreement due to the appellant’s breaches of statutory provisions.
Refund of Rentals
The Court rejected the respondent’s claim for a refund, applying the principle of estoppel. The respondent was precluded from recovery as they continued to occupy and benefit from the premises despite the alleged illegality.
Obligation to Restore Advantages
Section 66 of the Contracts Act 1950, which mandates restoring benefits under void agreements, was deemed inapplicable in this case. The Court cited illustrative scenarios where benefits retained must be compensated for their use.
Counterclaims by the Appellant
The appellant's counterclaim was dismissed, with the Court directing the return of the deposit to the respondent.
Key Takeaways
Illegality and Contractual Terms:
Parties cannot circumvent statutory violations through clauses or mutual agreements. For instance, “as is where is” clauses or disclaimers about suitability will not shield landlords from the consequences of statutory non-compliance.
Prompt Action Required by Tenants:
Tenants must act swiftly upon discovering breaches; failure to do so may result in estoppel, precluding recovery of paid amounts.
Restitution Under Void Agreements:
While agreements may be void, benefits already enjoyed by a party must often be compensated, preventing an inequitable outcome.
Guidance for Similar Disputes:
The decision aligns with precedents like Redha Resources and Liputan Simfoni, balancing the enforceability of void agreements against equitable considerations.
This case reinforces the criticality of adhering to statutory compliance in contracts and highlights the interplay between legal breaches, benefits derived, and equitable remedies in disputes.
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