Gateway Services Station Ltd v Engen Petroleum (Z) Ltd (Appeal 12 of 2003) [2003] ZMSC 160 (29 October 2003)

IN THE SUPREME COURT FOR ZAMBIA HOLDEN AT LUSAKA APPEAL NO. 12/2003 (Civil Jurisdiction) BETWEEN: GATEWAY SERVICES STATION LIMITED (T/A GATEWAY SERVICE STATION) APPELLANT AND ENGEN PETROLEUM (Z) LIMITED RESPONDENT Coram: LEWANIKA, DCJ, CHIBESAKUNDA and CHITENGI, JJS on 9th April 2003 and 29th October 2003 For the Appellants: For the Respondent: Mr. N. Nchito of NMB Mr. M. A. Wright of Wright Chambers JUDGMENT Chibesakunda, JS, delivered the Judgment of the Court Cases referred to: 1. 2. 3. 4. 5. 6. 7. Shell and BP (Z) Limited Vs Condaris and Others [1975] ZR.174 Preston Vs Luck [1884] 27 CD 497 Graneda Group Limited Vs Ford Motor Limited Manal Investments Limited Vs Lamise Investment Limited, SCZ No. 1 of 2001 Fellowes Vs Fisher [1975] 3 WLR page 184 Thomson Vs Park [1994] KB. p. 405 Hastings Obrien Go nd we Vs BP Zambia Limited, SCZ No.1 of 1997 Legislations referred to: 8. 9. 10. Landlord and Tenant Business Premises Act Cap 193 Order 29/1 /3, White Book 1999 Ed Halsbury's Laws of England 3rd Ed Vol. 21 para 766 This is an appeal against a judgment of the High Court rejecting an application for an interlocutory injunction pending trial. According to the affidavit evidence before the High Court, on or about 27th October 2000, the Appellants, who were the plaintiff, in the court below, entered into an agreement with the Respondents relating to a business premise known as Getway Service Station, otherwise known as Plot No. 18504 Kafue Road, Lusaka. The duration of that agreement was five years. The Appellant, as part of this agreement, agreed to lease, in addition to the Service station other equipment belonging to the Respondent, such as pumps, etc. This equipment was for use in the service station. The Appellant also agreed for the Respondent to supply them with the automotive products, such as fuel. On or about 28th October 2002 the Respondent wrote to the Appellant giving them notice of terminating this agreement. The Respondent in this notice of termination gave the Appellant seven days’ notice on the grounds that the Appellant had breached the agreement by failing to pay monthly rentals. The Appellant's affidavit evidence says that they were up to date in rental payments. The Appellant even produced the schedule of payments and the receipts issued by the Respondent for the month of October, which was produced and marked as exhibit ‘MM3’ and 'MM4', respectively. The Appellant's contention was that even if the Appellant had breached the said lease agreement, as a business premises, the Respondent was under a statutory obligation to give them six months’ notice in the prescribed form, specifying the reasons for such termination as provided under the Landlord and Tenant (Business Premises) Act (8). The Appellant also contented that the Respondent did not facilitate the Appellant's taking the actual possession of the premises from the time they entered into this lease agreement from 27th October 2000 until May 2001 as the Respondent had embarked on unnecessary renovation of the premises and that during that time only one fuel pump was in operation and the Respondent in that same period was using the said premises as a depot for storage of automotive fuel. According to the Appellant's affidavit the Respondent also during that same period failed to supply the Appellant with the equipment needed for the operations of the service station as agreed. The Respondent had failed to produce computers to the Appellant’s premises, that is, to measure quantity of the fuel sold. These were fuel tanks losses, leakages and profit losses. The Appellant brought these shortcomings to the attention of the Respondent but nothing was done about that complaint. The Respondent's case before the High Court on this application for injunction was that the Appellant was in breach of the agreement. So in accordance with clause 17 of the Agreement, the Respondent had a sole discretion of terminating automatically the agreement. They also in the affidavit maintained that the Appellant was in arrears in its rental payments and according to them the relationship between the Appellant and the Respondent was not that of a tenant and landlord. The relationship was that of a licensee and licensor. They referred to a number of authorities and argued that the Appellant could have been adequately atoned with damages as they claimed that there was no Landlord and Tenant relationship. The learned trial Judge rejected this application for an injunction on grounds that there was a lease agreement stipulating the conditions in which the Appellant had to operate in order to carry out the business in the petrol station. The learned trial Judge went on to say that on such conditions the Appellant was obliged to get the fuel and lubricant from the Respondent as provided in Clause 2 of Clause 10.2. He also held that in that case the application to revoke by force majeur as that condition was not correct, it had to be waived after due notice by either party. He agreed with the Respondent that to maintain the exparte injunction granted on November 2002, would do injustice to the Respondent whereas the discharge of the injunction would not cause irreparable damages to the Appellants as the Respondent was in a position to compensate the Appellant adequately should the final position be in favour of the Appellant. The Appellant advanced four grounds and filed in elaborate arguments to support the four grounds. In ground 1, Mr. Wright argued that the learned trial Judge erred and misdirected himself at law when he ruled that the Landlord and Tenant (business premises) Act was not applicable to the agreement entered into between the Appellant and the Respondent and further held that the agreement stipulated the conditions under which the Appellant had to operate in order to carry out the business of the petrol service Station. He argued that the Appellant's position was that this was a lease agreement entered into between the parties and therefore was subject to Landlord and Tenant (business premises) Act (8). He submitted that the Landlord and Tenant (business premises) Act (8) provided inter alia, "for security of tenure for tenants occupying property for business, to enable such tenants to obtain new tenancies in certain cases; and to provide for matters connected therewith and incidental thereto." He therefore concluded that it was wrong for the learned trial Judge to rule that the agreement was not a lease agreement because at pages 26 - 42 of the record, there was evidence of a lease agreement, and pages 43 - 70 established the schedule to the lease agreement. He argued that it is a fallacy to hold that because the lease agreement has certain schedule which stipulated conditions as to how and what business to be conducted at a certain premises, therefore it was not a lease agreement. He stated that what ought to have been done was to look at the agreement and see if it held all the ingredients of the lease agreement, and these are:- 1) 2) 3) 4) It must be in writing; The parties to the agreement must be identified; It must be of a fixed term; and There must be a consideration moving from the offeree to the offeror. According to him this agreement before the court has all these ingredients and as such it was a lease agreement under the ambit of the Landlord and Tenant (business premises] Act (8). He argued that the premises in question were solely occupied for business purposes. In addition, the Appellant paid rentals and also paid withholding taxes and VAT. This agreement therefore had all the ingredients of a lease agreement and as such the Respondent had a statutory obligation of giving six months’ notice to the Appellant. The seven days notice issued therefore had no legal effect. It was null and void. He referred to the case of Hastings Obrian Gondwe v BP Zambia Limited (7) and asked this court to employ the same approach pro tanto. On Ground 2, the Appellant's argument was that the learned trial Judge misdirected himself when he concluded that by discharging the exparte injunction granted on 9th November 2002, the Appellant would not suffer irreparable damages as the Respondent was in a position to compensate the Appellant adequately. His argument is that this was approach is not supported by law. Citing the case of Shell and BP Limited v Condaris (1), he submitted that the evidence before the court established that there was a lease agreement and the applicable law was the Landlord and Tenant (business premises) Act (8). With that proved the Appellant therefore established a clear right to relief. He cited Order 29 Rule 1(3) of the rules of the Supreme Court (9), and Halsbury’s Laws of England (10) and further submitted that the lower court made a startling proposition when it held that the Respondent was in a position to adequately compensate the Appellant as that is not the right approach in dealing with the application for an injunction. He referred to that proposition as a Richman’s Charter. In furtherance of this argument he argued that according to Order 29 rule . 1/3 of the Rules of the Supreme court which states that:- “Damages is not sufficient if the damages would be difficult to assess.” It is further stated that, “Damages for disruption of business and damages to business reputation are difficult to assess." The evidence before the court established that in the case before us it was not easy to establish the amount of damages suffered by the Appellant, as there was evidence of disruption of business and evidence of damage to the business reputation of the Appellant. He referred to the evidence in the affidavit that the Appellant invested numerous amounts of money and goodwill in the premises. Therefore, he argued that the damages resulting from rejecting to grant an injunction would not be ease to quantify and as such irreparable. Also refering to Halisbury' Laws of England (10), which states, “Where any doubt exists as to the Plaintiff’s right or if his right is not disputed but its violation is denied, the Court in determining whether an interlocutory injunction should be granted must take into consideration the balance of convenience to the parties and the nature of the injury which the Defendant on the one hand, would suffer if the injunction was granted and he should ultimately turn out to be right and that which the Plaintiff on the other hand; might sustain if the injunction was refused. The burden of proof that the inconvenience which the Plaintiff will suffer by the refusal is greater than that which the Defendant would suffer if it is granted lies on the Plaintiff.” he argued that the court erred in not taking into account the balance of convenience. He submitted that the amount which the Respondent was claiming as having been unpaid was K229 415 784 39. He argued that there was, however, an agreement for the Appellant to pay this outstanding bill in two instalments and that the Appellant was not in any default on the part of payment of this amount. So he argued that when one compares the Respondent's position to that of the Appellant and taking into account the amount of damage caused to his reputation and goodwill, the court below should have held that the balance of convenience weighed in favour of the Appellant, as it would have been wiser to delay a new activity rather than to risk damaging an established one, vide Manal Investments Limited v, Lamise Investment Limited (4). Ground 3, The Appellant’s argument was that the court below misdirected itself at law when it ruled that the Appellant had not come with clean hand because the Appellant was not in arrears of rent. Counsel pointed out to us that this is an area of contention as the Appellant maintained that they had paid all their rentals and were up to date. Even the counter claim issued by the Respondent made no claim to rental arrears. He submitted that the amounts submitted by the Respondent at page 99 of the record purportedly showed that on the 11th of November 2002 the Appellant was not in rental arrears. Even according to their own affidavit at page 97 of the record was that at the time for immobilizing the station the Appellant was not in arrears. But inspite of this fact the Respondent argued that that the Appellant admitted that certain sum was due to the Respondent - the bill was for petroleum products not rentals at the time. The Appellant had complied with the payment in accordance with the schedule totaling K30 million. In fact the Respondents issued receipts in acknowledgment of payment of the said two instalments. But inspite of these payments the Respondents immobilized the Appellant's business. They even took full possession of the Appellant’s business and are operating the same as their own. He, therefore, asked who between the two is seeking equity with unclean hands. On ground 4, the Appellant’s argument was that the issue of status quo was argued before the court below. Citing an authority the court below failed to make any finding and/or ruling upon the same. He therefore argued that this omission by the court below ought not to be allowed to stand following the decision of this court in the case of Manal Investments Limited vs Lamlse Investment Limited (4). He argued further that although the Respondents have argued that there is no status quo to maintain as they are now in possession of the premises, the Appellant’s position is that the actual status quo must mean, the position prevailing prior to the Respondent’s immobilizing the station and seizing the Appellant’s station. He referred to the case of Fellowes v. Fisher (5) and also to Thomson v. Park (6) and therefore prayed for this court to grant the injunction. Mr. Nchito in response supported the High Court's decision in rejecting the application for injunction. He argued that the issues raised encompassed a field wider in inquire. In ground one, he submitted that the issues raised require being determined on their merits at the trial of the main action. For the present consideration he submitted that the lower court and even this court ought to confine itself to issues and legal principles relating to granting or refusal to grant injunctions. He argued that the function of the court below was not to proceed to undertake a detailed inquiry into the merits or demerits of the matter, as that would preempt the issues in this main trial. According to him, the question that, the court below was meant to have considered, in dealing with the application for an injunction, was whether the injunction should be granted having regard to the well settled legal principles relating to the granting or refusal to grant injunctions. He argued that the court in considering whether or not to grant or refuse to grant an injunction should address its mind as to whether or not there is a likelihood of irreparable damage being caused to the applicant or whether or not damages cannot be atoned by way of an award of monetary compensation. He endorsed the lower court's view that in the case before us the action of the Respondent did not and could not have caused irreparable damages On ground 2, It was Mr. Nchito's argument that the lower court was on firm ground when it ruled that by discharging the exparte injunction the Appellant would not suffer irreparable damages as the Respondent was in a position to compensate the Appellant adequately. He argued that the authorities cited by the Appellant in fact supported the proposition that the remedy of an injunction should only be available when an applicant is likely to suffer irreparable damage. According to him the Appellant in this case had not demonstrated what irreparable damage it would suffer in the event that the grant of an injunction was refused. Referring to the case of Shell and BP (Z) Limited vs Conidaris and Others (1), he argued that the well settled principles are that a court will not generally grant an interlocutory injunction unless the right to relief is clear and unless the injunction is necessary to protect the Appellant from irreparable injury. On ground 3, Mr. Nchito argued that the lower court was on firm ground when it held that the Appellant had come to the court with unclean hands. He submitted that the gist of the matter before the lower court clearly indicted that the Appellant failed lamentably to discharge financial obligations, whether those obligations are eventually characterized as being under a lease made pursuant to the Landlord and Tenant (business premises) Act (8) or, as argued by the Respondent, these obligations arose from a breach of a license granted by the Respondent. Whatever construction will be placed on the character of the business relationship between the Appellant and the Respondent, the Appellant had nonetheless breached its obligation to pay the agreed sums of money to the Respondent. This breach entitled the Respondent to terminate the relationship. The grant of an injunction under these circumstances would have had the effect of compelling the Respondent to grant the Appellant credit terms of an open-ended nature, an aspect the parties never entertained. He argued that it is not the business of the court to compel parties to grant each other credit terms contrary to their agreement. Therefore, the court was right to have held that the Appellant did not come to court with clean hands. On ground 4, he argued that there was nothing illegal in the manner the Respondent obtained the status quo that existed at the time the injunction application was heard. According to him the Appellant and the Respondent went into an agreement, which existed, and provided for consequences that were to follow in the event that any of the provisions of the agreement was breached. He referred to clause 17.3.1 of the agreement appearing on page 37 of the record of appeal which he quoted. It was pursuant to this clause that the Respondents gave notice to terminate the agreement. He cited the cases of Thomson vs Park (6) and Manat Investments Limited Vs Lamise Investment (4) and distinguished it from the case before us. We have looked at the arguments before us. It is trite injunction law that the granting or rejecting to grant an injunction is entirely in the discretion of the court. It is also well settled law that a court would not generally grant an interlocutory injunction unless the right to relief is clear or unless the injunction is necessary to protect the Plaintiff from irreparable injury, mere inconvenience is not enough, or where there are triable issues. This court has defined irreparable injur/ to mean injury which is substantial and cannot be adequately remedied or atoned for in damages. Also according to Order 29 Rule 1 (3) (9) of the Rules of the Supreme Court, damages are insufficient if damages would be difficulty to assess. Looking at the affidavit evidence, we agree with Mr. Wright that it would be difficulty to assess damages for disrupting business and damages to business reputation, see page 6. Also as Mr. Wright pointed out there were a number of very pertinent issues which had to be determined at the trial. Questions such as, what type of relationship existed between the Appellant and the Respondent - whether or not Landlord and Tenant (business premises) Act (8) applied and whether as claimed by the Appellant there were breaches on clause 17.1.3 of the agreement? All these were fundamental questions, which ought to have been given a chance to be heard at the hearing. Against that background it is our considered view that the learned trial Judge erred in not granting the injunction. We therefore grant the injunction. We order costs to be abide by the event. D M Leanika DEPUTY CHIEF JUSTICE L P Chibesakunda SUPREME COURT JUDGE P Chitengi SUPREME COURT JUDGE