God is Able Graphic Designers & Suppliers Limited v Damanico Properties Limited (Civil Suit 306 of 2021) [2024] UGCommC 225 (19 June 2024) | Tenancy Agreements | Esheria

God is Able Graphic Designers & Suppliers Limited v Damanico Properties Limited (Civil Suit 306 of 2021) [2024] UGCommC 225 (19 June 2024)

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# **IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA**

# **(COMMERCIAL DIVISION)**

Reportable CIVIL SUIT No. 0306 of 2021

In the matter between

## **GOD IS ABLE GRAPHIC DESIGNERS AND SUPPLIERS LIMITED**

**And**

# **DAMANICO PROPERTIES LIMITED**

**Heard: 15 August, 2023.**

**Delivered: 19 June, 2024**

*Breach of contract — Termination of a tenancy— A claim for arrears of rent being a claim for special damages, the law is that not only must they be specifically pleaded but they must also be strictly proved — If a tenant remains in possession of the rented premises after the tenancy has expired, but with the implied or express consent of the landlord, the inference sensibly and reasonably to be drawn is that the parties intended to create a periodic tenancy on the same terms as those of the expired agreement. — The periodic tenancy continues under the same terms that applied to the fixed term agreement except for the end date, which is not specified in a periodic agreement, but is superseded by a new month-to month basis.*

*Burden of proof of payment of a debt — When the existence of a debt is fully established by the evidence, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such defence to the claim of the creditor. The debtor has the evidential burden of showing with legal certainty that the obligation has been discharged by payment.*

#### **JUDGMENT**

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#### **STEPHEN MUBIRU, J.**

#### Introduction:

- [1] The defendant is the proprietor of property comprised in Centre Point Arcade, Plot 27 Luwum Street in Kampala. By a tenancy agreement dated 1st January, 2014 the plaintiff rented Shop No. B11 situated on that property for a period off twelve months, at a monthly rent of shs. 700,000/= payable monthly in advance. The plaintiff operated the business of the printing of invitation cards. Sometime before the month of December, 2015, the plaintiff defaulted on its rent payments, prompting the defendant to close the shop on 17th November, 2015. It is the plaintiff's claim that the although the rent in arrears was far less than what is claimed by the defendant, the defendants' agents and/ or employees thereafter broke into the shop on 3rd December, 2015, destroyed and stole some of the plaintiff's property situate therein, valued at shs. 200,000,000/= in addition to causing a loss of earnings from the closed business, hence the suit. - [2] By its written statement of defence, the defendant denied liability for the claim. The defendant contends that as early as March, 2014 the plaintiff had begun defaulting on its rental obligations and by 17th November, 2015 the outstanding amount was shs. 6,640,000/= This prompted the defendant to close the shop on that day. In a bid to mitigate its loses, the defendant on or about 3rd December, 2015 in the presence of the police and the local civic leaders, removed the defendant's property from the premises and stored it elsewhere where it has since incurred storage charges of shs. 54,150,000/= after failing to trace the whereabouts of the plaintiff's directors. None of the plaintiff's property, valued at shs. 28,915,050/= was destroyed or lost during that exercise. Instead, the defendant counterclaims

against the plaintiff, general damages for breach of contract, recovery of the sum of shs. 6,640,000/= in outstanding rental arears, interest and costs.

#### The Plaintiff's evidence:

- [3] P. W.1 Ms. Jennifer Baijuka Tukesiga Asiimwe, testified that she was paying shs. 100,000/= on a weekly basis to the defendant's Manager, who never remitted the money to the defendant company. When the defendant discovered this around July – August, 2014 it directed the plaintiff to pay the arrears which covered three or four months. The plaintiff issued cheques dated 5th December, 2014 for shs. 993,700/=, 21st November, 2014 for shs. 993,700/= and 28th December, 2014 for shs. 993,800/= hence a total of shs. 2,981,200/= as security which they were not supposed to bank. She paid cash to redeem them. She testified that she was not given prior notice of the intention to lock-up the premises; she was surprised when she turned up on that day only to find the premises locked. Locking the premises without permitting the plaintiff any form of access. - [4] The plaintiff also relied only on exhibit P. Ex.1 and exhibit P. Ex.3 (the defendant's ledger opening on 1st January and closing on 15th June, 2015 in respect of the plaintiff's rent account) with an outstanding debit balance of shs. 9,325,000/= as at 15th June, 2015.

#### The Defendant's evidence:

[5] D. W.1 Ms. Hema Damani testified that the shop was locked on 17th November, 2015 and the re-opening of the shop, allowing therefore the tenant to take its property out would be after clearing the rent arrears. Defendant exhibited D. Ex.3, an L. C.1 inventory to show that the L. C.s were present at the eviction and that they could not involve P. W.1 in the eviction since she was nowhere to be found.

#### Arguments of Counsel for the plaintiff:

[6] Counsel for the plaintiff submitted that the defendant did not produce any documentary evidence to support its claim of rent arrears. Although D. W.1 made reference to a ledger, none was tendered in Court. P. W.1 testified that by the time the shop was closed, the plaintiff had reduced the debt substantially by making weekly payments of shs. 100,000/= The plaintiff paid a total of shs. 18,160,000/= covering the period from 2nd November, 2013 to 5th November, 2015 thereby clearing the entire debt. Clause 5 (iv) of the tenancy agreement required the defendant to engage an advocate or bailiff/debt collector in the event of having to evict the plaintiff. The inventory exhibits as D. Ex.3 has a list of the plaintiff's items taken by the defendant from the premises. The eviction and taking custody of the property contrived that clause in the tenancy agreement. The plaintiff tendered in court a valuation report establishing the value of the items at shs. 28,918,050/= The plaintiff is entitled to an award of shs. 45,000,000/= as general damages for the unlawful eviction and destruction of its property.

#### Arguments of Counsel for the defendant:

[7] Counsel for the defendant submitted that the plaint does not include a claim for damages for destruction and loss of property. The tenancy agreement required the plaintiff to pay rent monthly in advance. By March, 2014 the plaintiff had failed to meet that obligation. The receipts adduced in evidence relate to the period before execution of the tenancy agreement. The fact that the plaintiff knew it was indebted is corroborated by the fact that it issued five post-dated cheques after closure of the shop. The plaintiffs claim that they war issued as security is false since there was no such requirement in the agreement. A bill of exchange constitutes prima facie evidence that the amount of money printed on it is due to the person in whose favour it is drawn. The plaintiff did no adduce documentary proof of the alleged payments. The sum of shs. 18,160,000/= itemised in counsel for the plaintiff's final submissions does not form part of the evidence before court. When the defendant closed the shop on 17th November, 2015 the plaintiff's director became evasive in a bid to avoid the obligation to pay the outstanding rent. The defendant was forced to re-enter on 3rd December, 2015 and removed the plaintiff's items in the presence of the police and the local civic authorities. The defendant kept safe custody of the property at Shop No. B24 where it has bene kept for over seven years, at a monthly cost of shs. 500,000/= As a result the defendant has lost income that would have ben generated from letting out Shop No. B24, which instead served as store for the plaintiff's property, thereby accumulating a cost of shs, 54,150,000/= as at 25th March, 2021. The plaintiff eventually collected the property on 18th May, 2022. The items missing at that time, in comparison to the inventory of 3rd December, 2015, have a total value of shs. 960,000/= which should be offset from the defendant's counterclaim.

## The issues for determination;

- [8] At the scheduling conference conducted on 14th April, 2022, the parties agreed on the following issues for the Court's determination, namely; - 1. Whether either of the parties breached the tenancy agreement. - 2. Whether the plaintiff's eviction from the premises was lawful. - 3. What remedies are available to the parties?

#### The decision;

[9] In all civil litigation, the burden of proof requires the plaintiff, who is the claimant, to prove to court on a balance of probability, the plaintiff's entitlement to the relief being sought. The plaintiff must prove each element of its claim, or cause of action, in order to recover. In other words, the initial burden of proof is on the plaintiff to show the court why the defendant liable for the relief claimed. Generally, the plaintiff in the instant suit must show: (i) the existence of a contract and its essential terms; (ii) a breach of a duty imposed by the contract; and (iii) resultant damages. As regards the counterclaim, the defendant bears the burden of proving the same elements in order to succeed.

# **First issue;** whether either of the parties breached the tenancy agreement. **Second issue;** whether the plaintiff's eviction from the premises was lawful.

[10] For reasons of convenience and because they are intertwined, the first two issues will be considered concurrently. It is common ground between the parties that the periodic tenancy executed between them on or about 1st January, 2014 was terminated by the defendant's re-entry on17th November, 2015. Whereas the plaintiff contends the defendant's re-entry and distraint of its property was in breach of the agreement, the defendant instead contends that the re-entry was lawful and that it never distrained the plaintiff's property on the premises; the plaintiff abandoned the property. A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract, and this includes circumstances where an obligation that is stated in the contract is not completed on time. It is a failure, without legal excuse, to perform any promise that forms all or part of the contract. The Court has to determine whose conduct constituted s breach of the contract.

#### i. The alleged breach by default on monthly rent payments.

[11] The defendant counterclaims against the plaintiff, general damages for breach of contract, recovery of the sum of shs. 6,640,000/= in outstanding rental arears, interest and costs. A claim arrears of rent being a claim for special damages, the law is that not only must they be specifically pleaded but they must also be strictly proved (see *Borham-Carter v. Hyde Park Hotel [1948] 64 TLR*; *Masaka Municipal Council v. Semogerere [1998-2000] HCB 23* and *Musoke David v. Departed Asians Property Custodian Board [1990-1994] E. A. 219*). Special damages compensate the plaintiff for quantifiable monetary losses such as; past expenses, lost earnings, out-of-pocket costs incurred directly as the result of the breach. Unlike general damages, calculating special damages is much more straightforward because it is based on actual expenses. It is trite law though that strict proof does not necessarily always require documentary evidence (see *Kyambadde v. Mpigi District Administration, [1983] HCB 44; Haji Asuman Mutekanga v. Equator Growers (U) Ltd, S. C. Civil Appeal No.7 of 1995* and *Gapco (U) Ltd v. A. S. Transporters (U) Ltd C. A. Civil Appeal No. 18 of 2004*).

- [12] In paragraph 15 (c) of the amended counterclaim, the defendant sought recovery of the sum of shs. 6,640,000/= in outstanding rental arears. It its defence to the counterclaim, the plaintiff stated that "the rent in arrears was far less than what is claimed by the defendant." This constitutes a general and vague denial which did not deal specifically with the material facts raised in the counterclaim as required by Order 6 rules 8 and 10 of *The Civil Procedure Rules*. Such a defence precludes the right to call evidence to controvert the specific claim (see *Weitherger v. Englis (1916) ALLER Rep. 843*; *Pinson v. Lloyds and National Provincial Foreign Bank Ltd. [1941] 2 ALL ER 636*; *Joshi v. Uganda Sugar Factory [1968] EA 570* and *Ben Byabashaija and another v. Attorney General, H. C. Civil Suit No. 134 of 1991*). By virtue of rule 10 thereof, if it is alleged that he or she owes a certain sum of money, it is not be sufficient to deny that he or she owes that particular amount, but he or she must deny that he or she owes that sum or any part of it, or else set out how much he or she owes. The implication is that where a material averment is passed over without specific denial, it is taken to be admitted. An evasive or non-specific denial therefore constitutes an implied admission in a judicial proceeding of a civil nature. - [13] That aside, D. W.1 Ms. Hema Damani testified that the plaintiff defaulted within three months of the agreement and this is evidenced by exhibit P. Ex.3 (the defendant's ledger opening on 1st January and closing on 15th June, 2015 in respect of the plaintiff's rent account) which shows the rent of February, 2014 was paid in March, 2014 since default is failure to pay a month in advance and at times she was not paying in full. She testified further that it was the defendant company

policy that payments of rent were to be made at the bank. There were outstanding arrears of shs. 6,640,000/= derived from the tax ledger kept on the defendant's computerised system. The figure was arrived by offsetting all credits against the debits.

- [14] Although jurisprudence abounds that, in civil cases, one who claims has the burden of proving it however the general rule is that a party is not called upon to prove his negative averments, even when they may be necessary to his pleading. It is often impracticable to prove a negative with satisfactory evidence, hence a party should not be required to prove a negative. Consequently, the evidential burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Where the creditor introduces some evidence of the debt establishing a *prima facie* case, the burden of going forward with the evidence, as distinct from the general burden of proof, shifts to the debtor, who is then under a duty of producing some evidence to show payment. The law is that where a party alleges that it paid the other and the other denies receipt of the payment, the burden is on the party who alleges payment to prove it (see *Global Forwarders & Clearing Ltd v. Henry Mugenyi t/a Kifaru High Court Bailiffs and Auctioneers, H. C. Civil Suit No. 188 of 2002*). When the existence of a debt is fully established by the evidence, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such defence to the claim of the creditor. The debtor has the evidential burden of showing with legal certainty that the obligation has been discharged by payment. - [15] In the instant case, the formal tenancy agreement executed on 1st January, 2014 was for a period of twelve months which expired on 31st December, 2014, yet the plaintiff continued in her occupation of the premises. When a tenant who does not have a right to renew, or where it has a right to renew its tenancy but has not yet committed to the renewal, continues to occupy a property after its tenancy has expired, this is known as "holding over." Holding over may create a new tenancy, or it may be considered a trespass. If the tenant has stayed in occupation and paid

rent after the tenancy has expired, the parties create an implied periodic tenancy. The assent of the landlord to the continuance of the tenancy by accepting or receiving of amounts equivalent to rent, after the determination of the tenancy creates a new tenancy. Holding over while the terms of a new tenancy are being negotiated creates a tenancy-at-will which is an open-ended property tenure that has no written tenancy agreement and can be terminated at any time by either the landlord or tenant. In such cases, the landlord can hold the tenant to the terms of the old tenancy and collect rent payments for the time overstayed.

[16] Otherwise, in the absence of any other relevant circumstance, if a tenant remains in possession of the rented premises after the tenancy has expired, but with the implied or express consent of the landlord, the inference sensibly and reasonably to be drawn is that the parties intended to create a periodic tenancy on the same terms as those of the expired agreement. The periodic tenancy continues under the same terms that applied to the fixed term agreement except for the end date, which is not specified in a periodic agreement, but is superseded by a new monthto month basis (see *Richardson v. Langridge (1811) 4 Taunt 128,131*; *Ladies Hosiery & Underwear Ltd v. Parker [1930] 1 Ch. 304; [1929] All ER 667, (1929) 46 TLR 171; Javad v. Aqil [1991] 1 WLR 1007; London Baggage Co Ltd v. Railtrack Plc [2000] L & TR 439* and *Adler v. Blackman [1953] 1 KB 146*; *[1953] 1 QB 146*). The next day after the expiry of the fixed-term tenancy is taken as the commencement of the periodic tenancy. The period of the tenancy is determined by reference to when the rent is paid. So, if rent is paid weekly, there is a weekly periodic tenancy, monthly rent is a monthly periodic tenancy, and so on. Therefore, despite the tenancy agreement having expired on 31st December, 2014 the fact that the defendant allowed the plaintiff to remain in occupation, a a monthly periodic tenancy commenced under the same terms that applied to the fixed term agreement, except for the end date. The plaintiff was thus obliged to continue paying the monthly rent of shs. 700,000/= payable monthly in advance, onto the defendant's stipulated bank account. - [17] To the contrary, P. W.1 Ms. Jennifer Baijuka Tukesiga Asiimwe, testified that she was paying shs. 100,000/= on a weekly basis to the defendant's Manager, who never remitted the money to the defendant company. When the defendant discovered this around July – August, 2014 it directed the plaintiff to pay the arrears which covered three or four months. The plaintiff issued cheques dated 5th December, 2014 for shs. 993,700/=, 21st November, 2014 for shs. 993,700/= and 28th December, 2014 for shs. 993,800/= hence a total of shs. 2,981,200/= as security which they were not supposed to bank. She paid cash to redeem them. The cheques were returned unpaid with the endorsement "dormant account," and therefore are not reflected on the defendant's bank statement. - [18] Payments to the defendant's property manager instead of the defendant's bank account, was clearly in breach of the agreed mode of payment. By clause 3 of the tenancy agreement, the plaintiff was required to deposit the monthly rent payments onto the defendant's specified bank account with M/s Crane Bank Limited, and not with the property manager who had neither express nor ostensible authority to receive the payments. Ostensible authority or apparent authority is the power of an agent to legally bind its principal with a third party, which arises from conduct of a principal, by permitting the agent to make contracts of a particular kind on its behalf. Some representation must have been made by the principal which suggests that the agent has that power, and there is no evidence on record to that effect. - [19] The rule on ostensible authority is designed for the protection of those who are entitled to assume, just because they cannot know, that the person with whom they deal has the authority which he claims. By virtue of clause 3 of the tenancy agreement, the plaintiff had express notification that the defendant's property manager had no authority to receive payment on its behalf. The law is that if a person dealing with an agent knows or has reason to believe that the transaction is contrary to the express authority of the agent's principal, it is likely to be very difficult for that person to assert with any credibility that he believed that the agent

had apparent authority, and lack of such a belief would be fatal to a claim that he did (see *Criterion Properties plc v. Stratford UK Properties LLC [2004] UKHL 28; [2004] 1 WLR 1846*). All payments the plaintiff claims to have made to the defendant's property manager therefore cannot be attributed to the defendant.

- [20] From 1st January, 2014 to 15th November, 2015 when the contract was terminated is a period of 23 months. During that period, the plaintiff was obliged to pay a total of shs. 16,100,000/= at the rate of shs. 700,000/= per month, out of which the defendant acknowledges receipt of shs. 9,460,000/= leaving an outstanding balance of 6,640,000/= Since clause 3 of the arrangement between the parties required the plaintiff to deposit the monthly rent payments onto the defendant's specified bank account with M/s Crane Bank Limited, proof of payment is by production of deposit slips adding up to that total. In her evidence, the plaintiff relied only on exhibit P. Ex.1 and exhibit P. Ex.3 (the defendant's ledger opening on 1st January and closing on 15th June, 2015 in respect of the plaintiff's rent account) with an outstanding debit balance of shs. 9,325,000/= as at 15th June, 2015. The difference of shs. 2,685,000/= is unaccounted for by either party. - [21] What is not in doubt though is that the plaintiff has not presented any credible proof of having discharged the debt of shs. 9,325,000/= reflected on that ledger. On the other hand, by reason of section 114 of *The Evidence Act* which prohibits any person who by his or her declaration, act or omission, has intentionally caused or permitted another person to believe a thing to be true and to act upon that belief, from denying the truth of that thing in any suit or proceeding between himself or herself and that person or his or her representative, the defendant is precluded from claiming more than the sum specified in the counterclaim. On that account I find that the defendant has proved on the balance of probabilities that the plaintiff breached its contractual obligations when it failed to pay the outstanding rent arrears by reason of which it owes the defendant a sum of shs. 6,640,000/=.

## ii. The alleged breach by wrongful re-entry.

- [22] The "right of re-entry" or "forfeiture right" is a landlord's unilateral right to bring a periodic tenancy to an end in the event of a breach by the tenant. If a periodic tenancy is successfully forfeited, then all interests created out of it will also come to an end. A periodic tenancy may be determined by the re-entry of the landlord, i.e. the landlord may peaceably and lawfully recover possession of the rented premises if the tenant breaks any of the covenants specified in the tenancy, e.g. non-payment of rent. A proviso for re-entry on non-payment of rent or nonperformance of covenants is applicable to a tenancy by implication by the tenant holding over and paying rent after the expiration of the tenancy (see *Thomas v. Packer (1857) 1 N & H 669; 156 E. R. 1370*). - [23] With the exception of breach by default on rent, a landlord cannot terminate an implied periodic tenancy without notice, so it may not be able to get the property back when it wants. A landlord must serve a notice to quit or vacate, expiring at the end of the relevant period (a tenant can do the same). At common law, notice is not required for re-entry based on default in the payment of rent. A right of reentry for breach of other covenants is not enforceable unless and until the landlord serves notice of the breach and allows the tenant a reasonable time in which to remedy. The notice must be at least equal to the period of the tenancy and expire at the end of the relevant period. Therefore, with an implied monthly periodic tenancy, the landlord must give at least one month's notice, expiring on the last day of the period. - [24] The "peaceable" aspect simply means that the landlord re-enters the property without requiring a formal court order or eviction notice. Peaceable re-entry is the act of physically turning up at the property, re-possessing, and securing it. This repossession commonly occurs during after-hours by changing the locks so that the tenant cannot enter. The periodic tenancy must also not include a clause that states the landlord needs to issue a formal demand before they can peaceably re-

enter the property. If there is such a clause, the landlord needs to make a formal demand, with a visit on the final day the tenant can repay their debts, before the landlord has the right to forfeit. Peaceable re-entry is a self-help remedy which takes effect from the date of re-entry.

- [25] Although the landlord has an obligation to the tenant not to interfere with a permissible use of the premises, it is implied in every tenancy that the landlord has the power, in case the rent or any part of it is in arrear for the space of thirty days, although no legal or formal demand has been made for payment of that rent, the landlord or his or her transferees may re-enter upon and take possession of the rented property. What distinguishes non-payment of rent as a ground for re-entry from other breaches is that there is no need for the landlord to give any notice to the tenant prior to forfeiting the tenancy. In any event clause 5 (iii) of the agreement expressly conferred that right without the need to give notice. The landlord can forfeit by peaceably re-entering the premises. A formal demand for payment of rent is not required in order to forfeit; all that is required is that payment has become due. For the re-taking of possession to constitute an exercise of the "right of reentry" or "forfeiture right" there has to be a clear physical act which is meant to put an end to the possession. - [26] There must be some final and unequivocal act by the landlord to constitute the exercise of actual physical control to use it as owner (a manifestation of *animus domini* - the visible act of intention or disposition which would normally be found in the owner of the property), accompanied by an intention to forfeit (actions, statements or declarations indicating an intention to bring the periodic tenancy to an end). Any degree or form of intended use, however limited in extent or in duration, may, if exclusive for the time being, be sufficient to constitute possession. - [27] Acts of the landlord which amount to protecting or preserving the property, such as taking security measures or doing necessary repairs, will not in itself give rise to a re-entry because such self-help, necessary to preserve the landlord's interest in the value of his property, is a reasonable response to the tenant's evinced

intention not to perform the obligations of the tenancy (see *Padwick Properties Ltd v. Punj Lloyds Ltd [2016] EWHC 502*). Taking possession does not constitute a reentry to the extent that it is not inconsistent with holding the defaulting tenant to performing the tenancy. The landlord need not evict the tenant; he simply has to re-enter. In every case the question to be asked is whether the landlord went beyond the protection of its interests, and demonstrated taking possession, to the exclusion of the tenant, with an intention to determine the tenancy.

- [28] Intention to forfeit is inferred from the specific plan or goal a person has in mind when they take an action, while motive refers to the underlying reason or drive behind the action. An intended action is a decision that is made with full awareness and understanding of the consequences of the action, while motive is the underlying reason or drive for doing something. A motive is an explanation of a person's actions while intention is a willingness to act; a conscious decision to carry out a specific act. Locking up premises occupied by a tenant entitled to elusive possession of premises is a specific act of re-taking possession, hence a re-entry where the tenant's possession is as a consequence terminated. - [29] The tenancy agreement between the landlord and tenant is terminated by the landlord's re-entry for clear breaches of covenants by the tenant (see *Lugogo Coffee Company Limited v. Singo Combined Growers Limited [1976] HCB 92; Executrix of the Estate of the Late Tebajjukira and another v. Stanzi, S. C. Civil Appeal No. 2 of 1988* and *Erukana Kuwe v. Vasrambhai Damji Vader [2003] 1 EA 117*). Termination may be achieved by taking physical possession of the property, or by putting a tenant in possession thereof, thereby taking constructive possession of the property; what matters is that the tenant is thereby put out of possession of the property and no longer enjoys the right of exclusive possession and occupation. - [30] Taking possession, to the exclusion of the tenant, will be deemed to have been undertaken with an intention to determine the tenancy, where the nature of the

possession practically shuts down the business operations of the tenant by denying the tenant access to the premises, in circumstances where it is not clearly set out that the denial of access to the premises is temporary and is only intended to distrain the goods left at the premises; and that although the locks have been changed, the tenant would be provided with access to the premises whenever asked for, under the landlord's supervision. Remedies such as terminating utilities, changing the locks, removing doors or windows, or removing the tenant's property, in order to end the tenant's occupancy, will be deemed to be intended to terminate the tenancy.

[31] D. W.1 Ms. Hema Damani testified that the shop was locked on 17th November, 2015 and the re-opening of the shop, allowing therefore the tenant to take its property out would be after clearing the rent arrears. P. W.1 Ms. Jennifer Baijuka Tukesiga Asiimwe, testified that she was not given prior notice of the intention to lock-up the premises; she was surprised when she turned up on that day only to find the premises locked. Locking the premises without permitting the plaintiff any form of access, including supervised access thereafter, is an act inconsistent with the continuation of the landlord-tenant relationship, since it deprives the tenant of future access to the premises. It was an unequivocal action by the defendant that manifested the termination of the tenancy, despite the defendant's motive to use that action as a mechanism for collection of rental arrears. The action had the requisite finality and intention to constitute a re-entry, even if that was not the desired outcome. By locking the premises, the defendant for all practical purposes terminated the tenancy and the plaintiff rightly believed its tenancy had been constructively terminated. The termination by re-entry, though without notice, did not constitute a breach of the periodic tenancy, since it was premised on the plaintiff's default on payment of the outstanding arrears of rent in the sum of shs. 6,640,000/=

## iii. The alleged breach by wrongful distraint of the plaintiff's property.

- [32] A landlord owed arrears in rent has traditionally had two remedies available to collect from a delinquent tenant. The tenant could be sued for the arrears in an action for rent. Alternatively, the landlord could levy distress by seizing and selling the tenant's goods to recover the arrears. Distress for rent is the seizure of a tenant's goods for failure to pay rent with a view of selling them to recover the outstanding rent arrears. It is "the seizure of someone's property in order to obtain payment of rent or other money owed" (see *Walsh v. Lonsdale (1882), 21 Ch. D. 9*). *The Distress for Rent (Bailiffs) Act* and *The Distress for Rent (Bailiffs) Rules* provide the legal framework for the distress for rent process. Under section 2 of that Act, a landlord in person, his or her attorney or the legal owner of a reversion, or a bailiff may levy distress. For that reason, any provision in the contract requiring distress to be undertaken by a bailiff was inoperable. - [33] Distress for rent is a self-help remedy by which landlord may enter the rented premises if rent is in arrears and confiscate any goods found on the premises of the value of outstanding rent (see *Musumba Joseph v. Haji M. Kasaka and Mbarara Auction Mart (1971) 1 ULR 222; [1971] HCB 143*). The right only accrues where rent is in arrears. It is only applicable where the landlord does not intend to terminate the tenancy. A landlord cannot terminate the tenancy and distrain the tenant's goods at the same time. Once the tenancy is terminated, the subsequent distress is unlawful (see *Owiafe v. Zubriski, 2006 MBQB 209 (CanLII)* and *Delane Industry Co. Ltd. v. PCI Properties Corp. 2014 BCCA 285*). After termination of the tenancy, the landlord's only remedy is a suit for damages and for arrears of rent. - [34] In order for the remedy of distress to be available, there must be a legal relationship of landlord and tenant (see *Souza Figueiredo & Co. Ltd. v. George and others [1959] E. A. 756; Joy Tumushabe and another v. M/s Anglo Africa Ltd and another S. C. Civil Appeal No. 7 of 1999* and *Male H. Mabirizi K. Kiwanuka and another v. Owere Franco and three others, H. C. Misc. Application No. 2763 of 2014*). It is

unavailable after the termination of the tenancy. If the tenancy is terminated, there is no such relationship, so the remedy of distress is not available to a previous landlord after termination of a tenancy. Distress and termination are mutually exclusive remedies that cannot be exercised concurrently. In other words, a landlord cannot distrain and terminate the tenancy at the same time. Nor can a landlord terminate the tenancy and then distrain, since distress is only available while the tenancy is alive. In *Delane Industry Co. Ltd. v. PCI Properties Corp., 2013 BCSC 1397*, as appealed to *2014 BCCA 285*, the parties entered into a subtenancy, which included the following provision dealing with cumulative remedies:

- [35] No remedy conferred upon or reserved to the Landlord herein, or by statute or otherwise, will be considered exclusive of any other remedy, but the same will be cumulative and will be in addition to every other remedy available to the Landlord and all such remedies and powers of the Landlord may be exercised concurrently and from time to time and as often as may be deemed expedient by the Landlord. - [36] The tenant stopped paying rent due to a dispute with its landlord. The landlord commenced distress proceedings and sold the tenant's goods. The landlord alleged there was unpaid rent and, after giving the required notice (the "Demand Notice"), it chose to exercise the remedy of distress. The seized goods were sold but there remained a balance owing to the landlord. Later that same day, the landlord delivered a subsequent notice to terminate the subtenancy, effective immediately (the "Notice of Termination"). The sale proceeds were not sufficient to satisfy the rent arrears, so the landlord terminated the tenancy for nonpayment of rent immediately after the sale, relying on a notice of default delivered to the tenant during the distress proceedings. The tenant brought an action against the landlord for, among other things, a declaration that the landlord illegally terminated the tenancy. The court held that the landlord had not effectively terminated the subtenancy.

- [37] The Court began with the proposition that a landlord cannot levy distress against a tenant's property and terminate the tenancy at the same time (as these remedies are mutually exclusive). The Court noted that since termination is fundamentally inconsistent with distress, the two remedies cannot be exercised concurrently. The Court also held that the "cumulative remedies" clause in the tenancy could not be extended to permit concurrent remedies that are, by definition, mutually exclusive. The Court found that in order to terminate the tenancy, the landlord was required to provide the tenant with a fresh notice of default and opportunity to cure after the distress was completed. The Court noted that "distress is an unequivocal election to continue the landlord and tenant relationship and any subsequent forfeiture for the same breach is illegal." - [38] A landlord who has elected distress may not terminate the tenancy on the basis of the same breach on which the distress was founded. That is not to say that a landlord is without a remedy for the recovery of the prior rental arrears. However, a landlord cannot rely on notice of default given while distress is ongoing to terminate the tenancy immediately upon completion of the distress. A new notice of default is required after a fresh default has occurred in order to claim rental arrears that pre-dated the distress proceeding. That is, a landlord may not rely on rental arrears that accrued prior to the completion of the distress as the basis for terminating a tenancy. The Court of Appeal noted that in order to terminate the tenancy, a fresh default, unrelated to the breach that led to the distress, would be necessary. Such new notice of default must be based on a new default or breach by the tenant and the landlord must comply with the requirements in the tenancy, such as notice and cure periods, for termination by the landlord. All in all, an election between two mutually exclusive remedies is irrevocable, and once the election is made, the other remedy is unavailable. Moreover, a "cumulative remedies" clause in a tenancy will not alter this outcome. - [39] Therefore, if a tenant fails to pay rent, the landlord has a decision to make: whether to terminate the tenancy and sue for the unpaid rent and for future rent, or to continue the tenancy and distrain on the tenant's goods. It is an illegal and blatant abuse of process for a landlord to just take the law into their hands and lock-up premises that has been contractually handed over to a tenant, just to intimidate or coerce the tenant into paying rent (see *Sophie Nakitende v. Mabu Commodities Limited, H. C. Civil Suit No. 117 of 2016; Komakech Sam and seven others v. Ayaa Corina and another, H. C. Civil Appeal No. 0028 of 2016* and *Gusii Mwalimu Investment Co. Ltd and others v. Mwalimu Hotel Kisii Ltd, [1995–1998] 2 EA 100)*. An illegal distress is one that is wrongful from the start.

- [40] At common law, virtually any goods or chattels found on the tenant's premises were subject to distraint. Once a chattel has been "affixed" to the land, it loses its character as personalty and becomes part of the realty. Since fixtures are no longer chattels, it is not surprising that they are exempt from distress at common law. Chattels are items which have not been affixed to the land or which are so loosely fixed as not to be regarded as fixtures. They continue to belong to the tenant even after the periodic tenancy comes to an end, and the tenant has left anything behind, the landlord should make a careful inventory and the tenant should always be given an opportunity to come and collect them. - [41] A landlord may enter on the rented premises, so long as no breach of the peace is occasioned, and no more damage is done than is necessary to remove the goods being seized. No door, lock or window may be broken by a landlord to enter a residence (see *Semayne's Case (1604), 77 E. R. 194, 5 Co. Rep. 91a*). Through distress, the landlord can raise the rent owing by sale of the tenant's goods. The distrained goods may either be impounded on the premises and sold from there, or removed to a place of safe custody off the premises. Notice of the distress must be left at a conspicuous place on the premises and at least five days must elapse before distrained goods may be sold. The notice must contain a statement of the fact that distress has been made, the time when the rent and other charges must be paid to avoid sale of the distrained goods, the amount of arrears due, and the place where the goods are impounded.

- [42] When chattels remain on the premises following forfeiture, they remain the tenant's property and the landlord has certain obligations, including not to deliberately or recklessly damage or destroy them. If, following a landlord taking back possession of premises (by peaceable re-entry, court order or upon determination of the periodic tenancy by effluxion of time or break notice etc) the former tenant has left any goods at the premises, in the absence of any express terms in the periodic tenancy dealing with this scenario, the landlord will become involuntary bailee of the goods and could be liable in conversion if they sell the goods and offset them against arrears, or for damages if they dispose of the goods. - [43] In the instant case, P. W.1 Ms. Jennifer Baijuka Tukesiga Asiimwe, testified that she was still interested in the premises and not interested in removing her items. She did not demand to remove her property from the custody of the defendant. When she later went to where the property was stored, she found some broken and others missing and she could not take them without getting justice. The eviction was 3rd December, 2015 and the valuation was done two months later on 20th February, 2016. The valuer found the value of the property taken to be shs. 28,915,000/= By the time the valuer came in much of the property had been damaged by pests and some had been stolen. The defendant claimed the eviction was in the presence of the L. C and the police. The manager called that when they tried to contact her but they could not get her. She obtained a copy of the inventory from the L. C.1 Chairman but it had only a few items. - [44] D. W.1 Ms. Hema Damani testified that re-opening the shop and the tenant taking the property would be after clearing the rent arrears. The defendant never engaged a bailiff in the exercise of re-entry. The L. C.1 inventory, D. Ex.3 shows that the L. C.s were present at the eviction. The property was carried out by the defendant's staff and the L. C.s only witnessed. They could not involve P. W.1 in the eviction since she was nowhere to be found. The defendant could not find the plaintiff for a long time but when they found her, they asked her to take her goods.

- [45] Under the common law, a tenancy cannot be terminated at the same time as distraining for rent. In other words, distress proceedings and termination are mutually exclusive remedies and the landlord must only choose one. While the defendant in this case had the right to sue the plaintiff for the outstanding arrears that remained following re-entry, consistent with the termination of the tenancy implicit in the re-possession, it could not exercise the right to distress for rent on the basis of the same breach on which the re-entry was founded. Once the defendant locked the premises on 17th November, 2015 with the intention of denying the plaintiff access thereto until full payment of the outstanding rental arrears, the defendant effectively impounded the plaintiff's goods, since the plaintiff was henceforth unable to use any of the goods in the premises or to trade from the premises. - [46] There was no legal basis for the defendant's taking possession of the plaintiff's property. Thet unlawful detainer continued until sometime between 3rd December, 2015 when they were moved into storage and two months later on 20th February, 2016 when the valuation was done. It appears that although initially the defendant had intended to retain the property until the plaintiff had cleared the outstanding rent, by 20th February, 2016 P. W.1 Ms. Jennifer Baijuka Tukesiga Asiimwe had taken the decision not to take back the property "without getting justice." Henceforth the plaintiff retained custody of the property only because the plaintiff was unwilling to take it. The implication is that the defendant's unlawful retention of the goods began on 17th November, 2015 and ended sometime before 20th February, 2016, a period of approximately three months. Thereafter, the property remained in custody of the defendant only because the plaintiff was unwilling to do so until over six years later, on 18th May, 2022 when its director was more or less coaxed by Court into mitigating the plaintiff's loss by receiving the property. - [47] The law is clear that when a tenant defaults in the obligation to pay rent, the landlord has two mutually exclusive legal remedies, and must elect which remedy to pursue. The landlord can elect to enter the premises and distrain the goods

owned by the tenant for purposes of satisfying the debt owed by way of rent, but with a view to continuing the tenancy. Alternatively, the landlord can elect to retake possession of the premises and terminate the tenancy, and potentially pursue other additional remedies. Where the landlord elects forfeiture, a simultaneous distress is illegal and will result in the landlord being liable to the tenant for the full extent of the tenant's damages. The defendant wrongfully detained the plaintiff's property for a period of three months for which reason the plaintiff is entitled to general damages.

- [48] The general rule as regards general damages is that the court should award the injured party such sum of money as will put him in the same position as he would have been if he had not sustained the injuries, which in cases of this nature are the earnings which have actually been lost, or expenses which have actually been incurred up to the date of the trial (see *Robert Cuossens v. Attorney General, S. C. Civil Appeal No. 8 of 1999*). Damages are said to be "at large," that is to say the Court, taking all the relevant circumstances into account, will reach an intuitive assessment of the loss which it considers the plaintiff has sustained. The award of general damages is in the discretion of court in respect of what the law presumes to be the natural and probable consequence of the defendant's act or omission (see James *Fredrick Nsubuga v. Attorney General, H. C. Civil Suit No. 13 of 1993* and *Erukana Kuwe v. Isaac Patrick Matovu and another, H. C. Civil Suit No. 177 of 2003*). A plaintiff who suffers damage due to the wrongful act of the defendant must be put in the position he or she would have been if she or he had not suffered the wrong (See *Hadley v. Baxendale (1894) 9 Exch 341*; *Charles Acire v. M. Engola, H. C. Civil Suit No. 143 of 1993* and *Kibimba Rice Ltd v. Umar Salim, S. C. Civil Appeal No. 17 of 1992*). - [49] General damages are the direct natural or probable consequence of the wrongful act complained of and include damages for pain, suffering, inconvenience and anticipated future loss (see *Storms v. Hutchinson [1905] AC 515; Kabona Brothers Agencies v. Uganda Metal Products & Enamelling Co Ltd [1981-1982] HCB 74* and

*Kiwanuka Godfrey T/a Tasumi Auto Spares and Class mart v. Arua District Local Government H. C. Civil Suit No. 186 of 2006*). As a general rule, a person who has suffered loss as a result of another's breach of contract is entitled to be restored to the position that the person would have occupied had the breach not occurred. In special circumstances where the loss did not arise from the ordinary course of things, general damages are awarded only for such losses of which the defendant had actual knowledge (see *Hungerfords v. Walker (1989) 171 CLR 125*).

- [50] The plaintiff has shown that the actions of the defendant in wrongfully withholding its equipment paralysed its operations which caused it loss of business income and reputation. Being a claim by the cooperation, the mental anguish and psychological harm of its directors cannot be recovered. Similarly, the claim for loss and damage to the gods is unsustainable since it was never pleaded. - [51] In the absence of proof one way or the other of the profitability of the enterprise, it is to be assumed against the wrongdoer that the enterprise would at least have broken even, that is, that the expenses would at least have been covered by revenue. Without proof of actual loss or damage, courts usually award nominal damages. In *Alaka and Company Advocates v. Metropolitan Properties Ltd, H. C. Civil Suit No. 621 of 2007*, a law firm sued its landlord for the wrongful impounding of its business assets in a misconceived distress for rent, as a result of the plaintiff's failure to give the defendant a three months' notice before terminating their tenancy with the defendant. The property impounded included chairs, desks, law books, computers, important documents such as court files, wills and even their professional attire, which property was retained as security for the payment of a sum of Shs. 6,729,000/= in lieu of the notice to terminate the tenancy. As general damages for the ninety days for which the items were wrongfully impounded, by a judgment delivered on 24th April 2012 the court awarded the plaintiff shs. 60,000,000/= as general damages to atone for such a prolonged disruption, professional embarrassment, humiliation and general inconveniences.

- [52] In *Power and City Contractors Ltd v. LTL Projects (PVT) Ltd, H. C. Civil Suit No. 24 of 2012*, in a judgment delivered on 11th September 2015, the court awarded shs. 80,000,000/= as general damages for the wrongful seizure and detention of a Pajero Station Wagon, a self-loader lorry, a Tipper and a compressor belonging to the plaintiff. The defendant had directed the police to detain the plaintiff's property resulting in a six months' long, wrongful detention of the chattels. - [53] The broad general rule is that damages which are uncertain, contingent and speculative in their nature cannot be made a basis of recovery; but this rule against recovery of uncertain damages is directed against uncertainty as to cause rather than as to the extent or measure. The fact that it is difficult to calculate damages is not a reason not to calculate them. Where it is clear that the wrongful distraint caused loss to the claimant but it is very difficult to quantify that loss, the difficulty in assessing damages is not a basis for refusal to make an award in the claimant's favour. One of the frequent difficulties in assessing damages is that the claimant is unable to prove loss of a definite benefit but only the "chance" of receiving a benefit had the wrongful distraint not occurred. In those circumstances, rather than refusing to award damages, the courts have attempted to estimate the value of the lost chance and awarded damages on a proportionate basis (see for example *Sigrist et al. v. Keri McLean et al., 2011 ONSC 7114 (CanLII*). - [54] In the case at hand, Counsel for the plaintiff proposed a sum of shs. 45,000,000/= as general damages. Taking into account the fact that the plaintiff had at the time fallen behind in the payment of its rent being an indication that it was struggling to run the business profitably, let alone break even, I am inclined to award the plaintiff the equivalent of three months' rent as general damages for lost income, hence sum shs. 2,100,000/=

## **Third issue;** what remedies are available to the parties.

[55] If the landlord terminates the tenancy by re-entry or accepts a surrender (whether impliedly or deliberately), the tenant will be released from performing the rest of the periodic tenancy covenants in the future. The tenant will still be liable for rent already due and any other existing breaches. The landlord may be able to pursue the tenant for unpaid rent and other breaches. Under common law the damages that a landlord is able to claim for breach of such a fixed term contract, is limited to the amount still due for the remainder of the period of the contract.

### a. Arrears of rent.

- [56] Section 61 (1) of *The Contracts Act*, 7 of 2010, provides that where there is a breach of contract, the party who suffers the breach is entitled to receive from the party who breaches the contract, compensation for any loss or damage caused to him or her. Compensation is awarded for the personal inconvenience suffered by a party by reason of the breach, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract to be likely to result from the breach of it. For a loss arising from a breach of contract to be recoverable, it must be such as the party in breach should reasonably have contemplated as not unlikely to result. The precise nature of the loss does not have to be in his or her contemplation, it is sufficient that he or she should have contemplated loss of the same type or kind as that which in fact occurred. There is no need to contemplate the precise concatenation of circumstances which brought it about (see *The Rio Claro [1987] 2 Lloyd's Rep 173*). - [57] A claim for arrears of rent being a claim for special damages, the law is that not only must they be specifically pleaded but they must also be strictly proved (see *Borham-Carter v. Hyde Park Hotel [1948] 64 TLR*; *Masaka Municipal Council v. Semogerere [1998-2000] HCB 23* and *Musoke David v. Departed Asians Property Custodian Board [1990-1994] E. A. 219*). Special damages compensate the plaintiff

for quantifiable monetary losses such as; past expenses, lost earnings, out-ofpocket costs incurred directly as the result of the breach. Unlike general damages, calculating special damages is much more straightforward because it is based on actual expenses. It is trite law though that strict proof does not necessarily always require documentary evidence (see *Kyambadde v. Mpigi District Administration, [1983] HCB 44; Haji Asuman Mutekanga v. Equator Growers (U) Ltd, S. C. Civil Appeal No.7 of 1995* and *Gapco (U) Ltd v. A. S. Transporters (U) Ltd C. A. Civil Appeal No. 18 of 2004*).

[58] When resolving the first issue, I found that the defendant had pleaded and proved on the balance of probabilities that the plaintiff breached its contractual obligations when it failed to pay the outstanding rent arrears by reason of which it owes the defendant a sum of shs. 6,640,000/=. The defendant is entitled to the recovery of that sum from the plaintiff.

#### b. The cost of storage;

- [59] Following a successful re-entry and eventual termination of a tenancy, the landlord may store the tenant's property in any reasonably secure place, including the premises. If the landlord is unable to re rent the unit and it is sitting idle and unrented with the former tenant's belongings in it, the landlord can charge the rent as storage costs. After proper notice to the tenant, the landlord may place it in a safe storage facility and charge the cost for moving and storing it. The landlord is required to inventory and store all abandoned personal property of the tenant that the landlord reasonably believes is valuable in a place of safekeeping and to exercise reasonable care for the property. The landlord is not responsible for any loss to the tenant resulting from storage unless the loss is caused by the landlord's purposeful or negligent act. - [60] Property so stored is returned to the tenant after the tenant has paid the actual or reasonable storage costs, whichever is less. The landlord may charge a

reasonable storage and labour charge if the property is stored by the landlord, plus the cost of removal of the property to the place of storage. Reasonable storage costs are allowed a landlord who stores the property, and actual storage costs are allowed a landlord who stores the property in a commercial storage facility. The cost of storage usually is the fair rental value of the space reasonably required for that storage for the term of the storage. In the instant case, the plaintiff's property was in the defendant's storage in shop No. B24 from 3rd December, 2015 until 18th May, 2022, a period of six (6) years and five (5) months (a total of 77 months). It was the testimony of D. W.1 Ms. Hema Damani that the fair rental value of that unit was shs. 500,000/= per month, hence making a total of shs. 38,500,000/= in storage charges.

# c. Lost income from the wrongfully distrained property.

[61] When resolving the first issue, I found that the plaintiff is entitled to the equivalent of three months' rent as general damages for lost income, hence sum shs. 2,100,000/=The plaintiff is entitled to the recovery of that sum from the defendant.

### i. The duty to mitigate.

[62] The doctrine of mitigation of damages, the contract rule of avoidable consequences, holds that a party who suffers damage as a result of a breach of contract has a duty to take reasonable steps to mitigate those damages; to prevent an increase or extension of the injury, and will not be able to recover for any losses which could have been avoided. The plaintiff is bound to act not only in his own interests, but in the interests of the party who would have to pay damages, and keep down the damages, so far as it is reasonable and proper, by acting reasonably in the matter (see *African Highland Produce Ltd v. Kisorio [2001] 1 EA 1*). If any part of his (the plaintiff's) damage was sustained by reason of his own negligent or unreasonable behaviour, the plaintiff will not be recouped as to that part. Landlords cannot simply sit back and wait and let conditions or circumstances increase or extend the scope of the injury or loss, then sue the tenant. In other words, the landlords must act to ensure that they are not deliberately exacerbating the tenant's damages. If the tenant can prove that the landlord failed to mitigate its damages, such as failing to secure a new tenant, then the damages paid to the landlord can be reduced.

- [63] Landlords must take reasonable steps to re-let the premises and, if they are successful in re-letting, credit the rent received from the new tenant to the unutilised period of the exiting tenant (see *Thompson Holdings Ltd. v. Haztech Fire and Safety Services, 2016 SKQB 294* and *F. M. v. D. D. A. and S. K.,2017 CanLII 60075*). Following the landlord's termination of a tenancy by re-entry, the landlord's claim is one for money damages, and not for rent since the tenant no longer has a right to possession. The landlord's right to collect damages must be governed by contract law principles. As a result, if a landlord terminates a tenancy, or accepts a surrender of possession of the premises, it has a duty to use reasonable efforts to mitigate damages. - [64] Landlords must take reasonable steps to re-let, not heroic ones. Toward that end, landlords are expected to retain a real estate broker or property manager to market to new tenants; work with the tenant to find a replacement tenant or subtenant; resist unreasonable rejection of a potential subtenant; and be flexible about tenancy terms and tenant improvement requests. The question what is reasonable for the plaintiff to do in mitigation of damages is not a question of law, but one of fact in the circumstances of each particular case. The landlord is not required to do anything other than in the ordinary course of business. When determining the reasonableness of the effort, the Court will consider; - whether the landlord searched for tenants using appropriate means; whether the landlord unreasonably delayed their search, though landlords are not expected to start their search the day after termination; whether the geographic scope of the search was reasonable; whether the tenant provided any assistance and whether the landlord made use of

the assistance provided; where the landlord chooses to remodel the premises, whether the remodelling is reasonable in the circumstances.

- [65] Landlords do not have to give special priority to a unit in order to re-let it, nor do they have to lower the rent for the unit. Landlords do not have to accept any applicant who walks in the door. Instead, landlords attempting to mitigate their damages need only to apply the same application criteria they used when they rented to the original tenant. In all cases, the Landlord's recovery will be limited to damages that would have been incurred by a landlord who took all reasonable steps to mitigate losses. A landlord is able to recover damages for unpaid future rent only if it acted reasonably and in a good-faith effort to mitigate the damages. - [66] Additionally, the landlord required to mitigate by taking reasonable steps to mitigate the harm caused by the tenant is also entitled to seek reasonable costs incurred in the effort to mitigate; and accordingly, when a tenant improperly vacates, or fails to occupy, and the landlord is required to take reasonable steps to source a substitute tenant, the tenant may be found liable for advertising, brokers' commission, the cost of preparing a new tenancy agreement including legal costs, among other reasonable expenses incurred by the landlord. - [67] When a landlord terminates the tenancy and claims for damages under the law of contract, Courts have generally assumed an obligation on the landlord to mitigate its damages by finding a new tenant and offsetting the amount owing by the tenant by the amount it receives from the new tenant. Under this concept, a landlord cannot simultaneously collect unpaid rent owed for the remainder of the tenancy term as damages from the original tenant and monthly rent from a new tenant. Therefore, once the landlord re-lets the property to a new tenant, the original tenant's rent owed under the tenancy stops accruing. - [68] The landlord cannot allow the property to remain empty and unpaid rent to continue to accrue each month and then sue the tenant for the full amount of unpaid rent

under the tenancy (see *Kiddle v. Yajm [2022] QDC 82*). Instead, the landlord must affirmatively take reasonable measures to mitigate those damages. The duty does not require one to act in a commercially unsound fashion (see *Deer Valley Shopping Centre Ltd. v. Sniderman Radio Sales and Services Ltd [1989] A. J. No. 305*). The amount of time it would take a landlord acting reasonably to find a new tenant. Whether a landlord's efforts at mitigation are "reasonable" depends on the circumstances. Reasonable efforts are those steps that the landlord would have taken to rent the premises if they had been vacated in due course, provided that those steps are in accordance with local rental practice for similar properties. Generally, reasonable efforts at re-letting a commercial property and finding a replacement tenant include activities such as advertising the property for rent by posting signs or advertisements online or other relevant publications, engaging local brokers of the vacancy, and so on.

[69] In discharging its duty to mitigate, a landlord is not required to go above and beyond what a reasonable but conservative person would do in like circumstances. The landlord carries the ultimate burden to prove, on a balance of probabilities, that it discharged this duty. However, if the tenant contends that the loss proved by the landlord could have been minimised or avoided altogether by the taking of some step which the landlord could reasonably have taken but did not take, the onus is on the tenant to make out that contention on the evidence. The burden is on the tenant to prove failure to mitigate or that the efforts made were not reasonable. If a reasonable but conservative person in the shoes of the landlord, knowing only the facts then known, might have made the same choices and taken the same steps as the landlord did, there is no failure to mitigate. If the landlord fails to exert reasonable diligence to re-let the premises, the tenant's liability for rent after re-entry is reduced by the amount which the landlord could have earned by reasonable efforts to re-let. A tenant ought not to be penalised beyond the damages that his default sparking off the re-entry makes difficult to avoid.

- [70] Once the plaintiff has made out a *prima facie* case of damages, actual or prospective, to a given amount, the burden lies upon the defendant to prove circumstances whereby the loss could have been diminished (see *Janiak v. Ippolito, [1985] 1 S. C. R. 146; Halsbury's Laws of England*, 3rd ed. vol. 11, par. 477, p. 290 and *Buczynski v. McDonald (1971), 1 S. A. S. R. 569*). The defendant bears the onus of proving, on a balance of probabilities, that the plaintiff failed to make reasonable efforts to mitigate and that mitigation was possible. Not only must the defendant discharge the onus of showing that the plaintiff could have mitigated his loss if he had reacted reasonably, but he must also show how and to what extent that loss could have been minimised. If a tenant wishes to set up a positive case that the landlord has failed to mitigate its loss, the tenant must plead the allegation with particulars specifically in its defence. A landlord that unreasonably fails to mitigate their losses reduces the quantum of damages to the extent that mitigation would have avoided the loss. In the instant case the defendant did not allow its loss of rent accumulate but mitigated it when it relet the unit sometime after 3rd December, 2015. in reletting the property within a month of terminating the plaintiff's tenancy, the defendant acted reasonably and in a good-faith effort to mitigate the damages. - [71] However, with regard to the costs of storage, the landlord ought to make a reasonable attempt to notify the tenant in writing that the property must be removed from the place of safekeeping by sending a notice with a certificate of mailing or by registered mail to the last-known address of the tenant, stating that at a specified time, after mailing the notice, the property will be disposed of if not removed. The landlord ought not to allow the cost of storage or sale exceed the reasonable value of the property. The landlord may dispose of the property after seeking a court order authorising; (i) selling all or part of the property at a public or private sale; or (ii) destroying or otherwise disposing of all or part of the property, if the landlord reasonably believes that the value of the property is so low that the cost of storage or sale exceeds the reasonable value of the property.

- [72] The onus then was on the defendant not only to show that the plaintiff could have mitigated its loss if it had reacted reasonably, but also show how and to what extent that loss could have been minimised. The defendant ought to adduce evidence establishing, on a balance of probabilities, the following: (i) steps the plaintiff could have taken in mitigation; (ii) the reasonableness of pursuing those steps; and (iii) the extent, that is, in actual percentage terms, to which the loss would have thereby have been avoided. - [73] It was the plaintiff's evidence that by virtue of a valuation undertaken on 20th February, 2016. The valuer found the value of the property taken to be shs. 28,915,000/= Considering that the outcome of that valuation has ben known to the defendant since then, it ought to have dawned on it that four (4) years and eight (8) months after the property was moved into storage, hence after 20th August, 2019, the cost of storage would have exceeded the value of the property. The defendant should have sought the intervention of Court sometime before August, 2019 for appropriate order to be made regarding the disposal of that property. I ma therefore inclined to to consider a sum of shs. 15,000,000/= representing four and a half years of storage, as the reasonable storage costs. - [74] On the other hand, considering that the general principle is that the aggrieved party has a duty to mitigate damages, the tenant too should act in a manner intended to minimise its losses. Instead, the plaintiff chose to abandon its property with the defendant for nearly seven years. There is no evidence of any step taken by the plaintiff to mitigate its losses.

## ii. Offsets between landlord and tenant cross-claims.

[75] The equitable right of set-off allows the tenant to offset the damages claim against the rent. Set-off is essentially a defence, or excuse, for non-payment. For equitable set-off to take place, the cross-claims must be connected, it being unjust to grant the claimant the benefit of his claim without giving credit for the defendant's crossclaim (see *Federal Commerce & Navigation Co Ltd v. Molena Alpha Inc (The Nanfri) [1978] QB 927, 981; [1978] 2 Lloyd's Rep 132, 144*). Where they both arise from a single contract, such as a tenancy agreement, the right to set-off will arise, for example as in this case, a tenant owes rent to the landlord but also has a claim for damages against the landlord (see *Emomeri Julius v. Shell (U) Ltd [1997] HCB 58; BICC Plc v. Burndy Corp [1985] Ch 232; Muscat v. Smith [2003] EWCA Civ 962; [2003] 1 WLR 2853* and *Fearns (t/a "Autopaint International") v. Anglo-Dutch Paint & Chemical Company Ltd and others [2010] EWHC 2366*). For the rent due to be offset against the damages awarded, the court would have to: - establish the amount of the arrears, establish the validity of the cross-claim, and the amount due as damages, calculate interest on both and offset one against the other.

### a. The awards in favour of the defendant.

[76] This Court has found that the defendant had pleaded and proved on the balance of probabilities that the plaintiff breached its contractual obligations when it failed to pay the outstanding rent arrears by reason of which it owes the defendant a sum of shs. 6,640,000/=. It has also found that the defendant is entitled to the recovery of a sum of shs. 15,000,000/= representing four and a half years of storage, as the reasonable storage costs. The defendant's total proven claim under the counterclaim is therefore shs. 21,640,000/=

### b. The awards in favour of the plaintiff.

[77] When resolving the first issue, this Court found that the plaintiff is entitled to the equivalent of three months' rent as general damages for lost income, hence a sum shs. 2,100,000/=. Therefore, from the sum of shs. 21,640,000/=due to the defendant on the counterclaim, will be deducted the shs. 2,100,000/= due to the plaintiff for loss of business. This leaves a net balance in the defendant's favour in the sum of shs. 19,540,000/=.

# c. The costs of the suit and the counterclaim.

- [78] According to section 27 (2) of *The Civil Procedure Act,* costs of any action, cause or matter follow the event unless Court for good cause orders otherwise. The defendant being the successful party in this case is therefore entitled to costs of the suit and the counterclaim. For the foregoing reasons, the suit is dismissed and Judgment is instead entered for the defendant against the plaintiff on the counterclaim, in the following terms; - a) Arrears of rent and costs of storage in the sum of shs. 19,540,000/= - b) Interest on the award in (a) above at the rate of 15% p.a. from the date of filing the counterclaim, hence 2nd June, 2016 until payment in full. - c) The costs of the suit and of the counterclaim.

| ……Stephen Mubiru………… | |----------------------| | Stephen Mubiru | | Judge, | | 19th June, 2024 | | |

#### Appearances

For the Plaintiff : M/s Volen Advocates and Solicitors. For the Defendant : M/s M/s HNK Advocates.