Rex Hotel Limited v Jubilee Insurance Company Limited (Civil Appeal No. 49 of 1971) [1972] EACA 18; (12 April 1972)

IN THE COURT OF APPEAL FOR EAST AFRICA

AT MOMBASA

 

CORAM: (DUFFUS, P., LAW, AND MUSTAFA, JJ.A.)

 

CIVIL APPEAL NO 49 OF 1971

 

BETWEEN

 

REX HOTEL LIMITED…………………………………….……….……..APPELLANT

AND

JUBILEE INSURANCE COMPANY LIMITED …………………..……RESPONDENT

 

[Appeal from the judgment and decree of the High Court of Kenya at Mombasa (Mosdell, J.) dated 20^th  August, 1971 in Civil Case No. 380 of 1970]

 

12^thApril, 1972

 

The Following judgments were read:-

 

MUSTAFA, J A

The respondent, Jubilee Insurance Company Limited (herein­ after called the Company) by a lease dated 31^st January, 1955 leased to the appellant, Rex Hotel Limited (hereinafter called Rex Hotel) a hotel building and premises from 1st October, 1955 for a term of 10 years at a monthly rental of Shs. 8,000/-.

The lease contained this proviso_­

"If the lessee shall be desirous of determining this lease at the end of first five years of the aforesaid term and of such desire shall give to the lessor three calendar months previous notice in writing then in such case at the end of such five years the term hereby granted shall cease but subject to the rights and remedies of the lessor for or in respect of any rent in arrears or any breach of any of the lessee's covenants."

On 12^th September, 1963 a deed of variation was executed between the Company and the Rex Hotel whereby it was mutually agreed that the term of 10 years created by the first lease "shall be and is hereby extended for a further period to include up to 31^st August, 1970".

This deed of variation provided for the following matters­:-

(a) An extension of the term

(b) A reduction of the monthly rent from Shs. 8,000/- per month to Shs.6,200/-

(c) The payment by Rex Hotel of any increase in the amount of the existing Municipal rates (1963)

(d) that the covenants and the conditions contained in the original lease which were then applicable to the premises shall continue to be applicable.

Before the expiry of the lease the Company gave the Rex Hotel a notice in writing to the effect that the Company would require vacant possession of the premises when the lease would expire on 31^stAugust, 1970.

The Rex Hotel refused to give the Company any such assurance and claimed protection under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap.301) (h0rcinafter called the Act).

On or about 24^th March 1970 the Company filed a suit against the Rex Hotel in the High Court claiming (a) a declaration that the demised premises were not subject to the provisions of the Act, (b) a declaration that the company was entitled to vacant possession of the premises on 31^st August 1970. At the trial the Company added verbal prayers for an order for possession of the premises and for an order for mesne profits from 31^st August, 1970 until the date of possession, as when the case came to be heard the lease had already expired.

The trial judge decreed the two declarations as prayed for as well as the orders for possession and for mesne profits. From that judgment the Rex Hotel has appealed to this Court, and the Company has cross-appealed. The trial judge found that to discover the intention of the parties both the lease and the deed of variation must be read together.

He came to the conclusion that the deed of variation of 1963 was intended to create an extension of the original lease and was not intended to be a new lease. He concluded that the deed of variation extended the term of the old lease subject to a reduced rent and to the Rex Hotel paying any increased municipal rates and subject to such terms and conditions of the original lease as were still applicable as on the date of the deed of variation, that is, 12^th September, 1963.

It is true he said "the lease was not surrendered expressly or by implication". I think what the trial judge meant was that the original lease was at no time surrendered but was merely extended for a further period by the deed of variation.

Mr. Nazareth for the Rex Hotel submitted that the deed of variation had created a new lease from the date of expiry of the original lease which was 1^st October, 1965. In that event the new lease would be for a term of 4 years 11 months, from 1^st October, 1965 to 31^st August 1970.

He said that the trial judge had found as a fact that the lease was not surrendered expressly or by implication and this finding was not appealed. He submitted, in view of this finding, that the new term could only commence from 1^st October, 1965, after the term of the original lease had expired. He pointed out that the learned judge also said "In my opinion the lease and deed of variation must be read together and their joint effect is that, as from 12^th  September, 1963, the defendants obtained an extended term up to 31^st August, 1970 at a reduced rent, subject to such terms and conditions”

He submitted that if the trial judge had found that the new lease was to take effect from the date of the deed of variation, that is 12^th September, 1963 then he was contradicting himself because he had also found that the original lease had not been surrendered, and the new lease therefore could only take effect after the original lease had expired.

If there was a new lease and the new lease commenced from the 1^st October, 1965 then the new lease was only for a term of 4 years 11 months, and the Rex Hotel would be protected as the lease would be a "controlled tenancy" as defined in the Act.

Section 2 of the Act, as amended, reads:-­

“controlled tenancy” means a tenancy of a shop, hotel or catering establishment ­

(a) which has not been reduced into writing? or

(b) which has boon reduced into writing and which­

(i) is for a period not exceeding five years or

(ii) Contains provision for termination, otherwise than for breach of covenant, within five years from the commencement thereof…"

 

Mr. Nazareth submitted that if the new lease was for a period of less than 5 years, then section 2(b)(i) applies. However if the lease was a continuous one for 15 years then the original lease contained a provision for termination otherwise than for breach of covenant within 5 years from the commencement thereof.

In that event he submitted that section 2(b)(ii) would apply because in that case the original lease of 1965 has to be looked at and that lease contained the clause for an option to terminate within the first 5 years. Mr. Nazareth however conceded that the deed of variation effectively deleted the option to terminate.

Mr. Nazareth also submitted that the trial judge was wrong in making an order for possession and for mesne profits. At the time when the plaint was filed the Company could not have asked for an order of possession or for mesne profits as that would clearly have been premature. Again the suit was for declarations which are essentially discretionary remedies whereas a prayer for possession is a remedy which can be claimed as of right provided the facts are proved.

Mr. Slade submitted that he had asked for the orders for possession and for mesne profits as ancillary and consequential reliefs. The trial judge in his judgment had dealt with this matter as if Mr. Slade had asked for an amendment to the plaint. The trial judge said:-­

"I therefore grant Mr. Slade's application and order that the plaint be and is hereby amended accordingly."

Mr. Slade never asked for any amendment] what he had asked for was in the nature of consequential reliefs following on the declarations. Mr. Slade invoked the provisions of Order 2 rule 7 and Order 7 rule 6 of the Civil Procedure Rules.

I am satisfied that the trial judge was in error in making the orders for possession and for mesne profits when these remedies could not have been claimed by the Company when the suit was filed as no cause of action would have existed at that time.

Nor can I understand how an order for possession could possibly be a consequential or ancillary relief arising from a declaration that the premises were not subject to the provisions of the Act, and that the Company would be entitled to vacant possession at the expiry of the lease.

I am of the view that the lease and the deed of variation have to be read together and the combined meaning and effect of these two declarations is that there was to be a continuation of the original lease but subject to the variations and amendments in terms of the deed of variation, that is to say, at a reduced rent, an obligation by the Hex Hotel to pay any increased Municipal rates, and the deletion of the option of termination within the first 5 years, such variations to take effect as from 12^th September, 1963.

The deed of variation did not in my view create a new lease either from 12^th September, 1963 or from the expiry of the original lease, that is from 1^st October, 1965. The effect of this deed of variation was merely to extend the term of the old lease from 10 to 15 years subject to certain variations as contained in the deed itself.

The parties had stated what they intended, and meant what they said. That being so, the suit premises would not be under a controlled tenancy within the meaning of the Act as amended, as the lease was for a period exceeding 5 years and did not contain any provision for termination otherwise than for breach of covenant within 5 years from the commencement of the lease, the option for termination having expressly been deleted by the deed of variation in 1963.

I will now briefly deal with the cross appeal. In construing section 2(b)(ii) of the Act the trial judge in acceding to the submission of Mr. Slade held that the words "by the landlord" should be interporeted after the word "termination" as he was of the view that these words were implied since the purport of the Act was to protect the tenant.

With respect I disagree. There is no ambiguity in the meaning or the words in section (2)(b)(ii) of the Act and I can see no reason at all why a literal interpretation should not be adopted.

The word used there is termination", not “re-entry”, and termination can apply with equal force to a tenant or a landlord. Mr. Slade in his cross-appeal sou6ht to support the orders for possession and for mesne profits as orders for consequential relief.

He also submitted, as an alternative, that if a new lease was created by the deed of variation, then it commenced as from 12^th September, 1963 and would be a new lease for about 7 years. He also submitted that the dead of variation had expressly deleted the option to terminate and in any event the said option had expired prior to the enactment of the Act or its amendment.

In view of my finding that the lease was a continuous and unbroken lease for a term of about 15 years, and that the words "by the landlord" could not be interpolated "after the word "termination" in section 2(b )(ii) of the Act, the cross-appeal substantially fails.

I am of the view therefore that the trial judge was right in granting the declarations namely  

(1) that the demised premises were not subject to the provisions of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap. 301) as amended and

(2) That the Company was entitled to vacant possession of the demised premises on 31^st August, 1970.

I am of the view that the trial judge was in error in granting the company the "further reliefs", namely, the orders for possession and for mesne profits.

I would therefore amend the judgment and decree of the High Court by deleting therefrom      

(a) The order for possession of the demised premises

 (b) The order for mesne profits as from 31st day of August, 1970 till the date of               possession.

The appellant, Rex Hotel has partly succeeded in its appeal. I would award half the costs of the appeal and the costs of the cross­ appeal to the appellant, Rex Hotel.

As regards the costs in the High Court, I see no reason to disturb the order made..

 

DUFFUS, P.

I have had the advantage of reading the judgment of Mustafa, J.A. in draft tenancy, as set out in the definition of a "controlled tenancy" in section 2 of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, Cap. 301 (as amended by the 1970 Act) must refer to the tenancy existing at the relevant date. The rele­vant date here is the date on which the suit was instituted, i.e. the 24^th March 1970.

I quote the relevant portions of section 2 "controlled tenancy" means a tenancy of a shop, hotel or catering establishment

(a) Which has not been reduced into writing; or

(b) Which has been reduced into writing and which:-

 ­(i) is for a period five years; or

(ii) Contains provision for termination, otherwise than for breach of covenant, within five years from the commence­ment thereof' "

Therefore the tenancy in this case is the tenancy existing at the time when the action was filed and also when the judgment was given. This tenancy had been reduced into writing and the terms and conditions were those set out in the deed of variation dated the 12^th September, 1963, and in the original lease dated 31^st January, 1955.

Mr. Nazareth has submitted that the deed of variation in fact created a new lease for a term of under five years, running from the 1^st October, 1965, until the 31^st August, 1970. With respect, this cannot be correct.

I agree that the deed of variation created a new agreement and a new tenancy in accordance with the terms and conditions set out in that variation. The parties intended to and, in fact, entered into a new tenancy on these conditions. They agreed that the tenancy as from the 12^th September, 1963, was for a definite term extending from that date up to the 31^st August, 1970, a period of nearly seven years.

They also agreed on a new and reduced rental and other conditions. By clause 3 of the deed of variation the parties specifically agreed

“It is hereby further mutually agreed between the parties hereto and declared that all the Lessor's and Lessee’s covenants and conditions as contained in the said Lease and the proviso for re-entry therein contained and which are now applicable to the premises comprised therein shall con­tinue to be applicable to the demised premises as if the rent thereby reserved has been only Shs. 6200/- (six thousand two hundred) per month and the term ex­tended to the 31^st day of August, 1970.”

"It is in my view quite clear that the proviso to paragraph 4 (3) of the 1955 lease, giving an option to the lessee to determine the lease at the end of five years, i.e. on the 30^th  September, 1960, would no longer apply to the new agreement made on the 12th September, 1963, as the option no longer existed.

I therefore agree with Mustafa, J.A. that the tenancy, the subject of this action, would not be a “controlled tenancy" within the meaning of the Landlord and Tenant (Shops, Hotels and

Catering Establishments) Act.

I also agree with Mustafa, J.A. for the reasons which he has set out in his judgment, that the learned trial judge should not have made the orders for possession and for mesne profits.

The lease was still in force at the time the action was brought and the tenant was still lawfully in possession and there could have been no question at that time of having an order for possession made. The plaintiff/respondent did not seek to amend the plaint at any time and the judge was, with respect, in error when in the circum­ stances of this case, he amended the plaint during the course of his judgment.

The main purpose of the cross-appeal was to support the order for possession and mesne profits as being such consequential relief as could be included in the prayer "such further or other relief".

I agree with Mustafa, J.A. that the learned judge was wrong to have granted this relief either by way of amendment to the plaint or by way of including this as consequential relief sought in the prayer to the plaint.

The question of the interpretation of paragraph 2(b)(ii) of the definition of "controlled tenancy" arose and the learned judge held that the words “contains provision for termination" must be read as if the words "by the landlord” were applied after the word "termination”. With respect, this question does not arise in this hearing.

As I have said, the tenancy in existence at the relevant time was clearly for a period exceeding five years and the provision for the termination of the tenancy within five years from the commence­ment no longer existed. It is therefore unnecessary to consider whether the provision for termination only applied to the landlord and not to both parties.

There remains the question of costs. I agree with Mustafa, J.A. that the appellant, having only succeeded in a part of his appeal should, in the particular circumstances of this case, have only half the costs of the appeal. I agree that the order for costs in the court below should remain.

On the question of the cross-appeal I agree that the plaintiff has net succeeded in the main purpose of his cross-appeal which was to support the order for possession, and although I have agreed in part with grounds 2 and 3 of his cross-appeal, I agree that the appellant should have the costs of the cross-appeal.

As Law, J.A. also agrees the appeal is allowed in accordance with the order set out in the judgment of Mustafa, J.A.

 

 LAW, JA

I have had the advantage of reading in draft the judgment prepared by Mustafa J.A. I agree with it in every respect, and can­not usefully add anything. I concur with the order proposed.

 

.,