LE APPLE BOUTIQUE HOTEL (KLCC) SDN. BHD. v PGCG ASSETS HOLDINGS SDN. BHD.

Case Significance

Addresses a tenant's claim to recover from the landlord the cost of improvements made to leased premises, holding that a fit-out undertaken for the tenant's own commercial purpose does not, on the tenancy's expiry, give rise to a right to compensation on the footing of unjust enrichment.

This High Court decision concerns a claim in unjust enrichment for the cost of improvements a tenant made to leased premises. The plaintiff had taken a tenancy of an office building owned by the defendant and, at its own expense, converted the building into a fully fitted hotel. The tenancy was for one year, renewable for a number of further terms at the tenant's written request, but the plaintiff expressed an intention not to renew beyond a certain date. After the tenancy expired, the defendant continued to operate a hotel business at the premises, and the plaintiff claimed to be compensated for the substantial cost it had incurred in the conversion, contending that the defendant would otherwise be unjustly enriched. After a full trial, the Court identified the main issue as whether, at the expiry of the tenancy, the property had to be restored to its original state, and examined the claim in the light of the principle against unjust enrichment, including the statutory illustration in the Contracts Act 1950 that a person who enjoys the benefit of a non-gratuitous act must compensate for it. The Court held that the plaintiff had not made out its claim: the conversion had been undertaken for the plaintiff's own commercial purpose under the tenancy, and the circumstances did not give rise to a right to be compensated by the landlord for the fit-out on the tenancy's expiry. It dismissed the plaintiff's claim with costs. The judgment is significant for its treatment of a tenant's claim to recover the cost of improvements from the landlord on the footing of unjust enrichment. The decision is a useful reminder that a tenant who fits out premises for its own commercial venture takes the commercial risk of that investment, and cannot, without more, turn to the landlord for reimbursement on the footing of unjust enrichment merely because the landlord later benefits.