IFI Furnishers Limited v Bashir Ahmed Yousuf Ali Patel (APPEAL NO 222/2019) [2021] ZMCA 277 (12 July 2021)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA ( Civil Jurisdiction) APPEAL N0.~/2019 IN THE MATTER OF IN THE MATTER OF THE LANDLORD AND TENANT ACT (BUSINESS CHAPTER 193 OF THE LAWS OF ZAMBIA PREMISES) AN APPLICATION FOR A NEW TENANCY IN RESPECT OF THE PROPERTY KNOWN AS STAND No. 8240,RHODESPARK,LUSAKA BETWEEN: IFI FURNISHERS LIMTED / / , I \ APPELLANT AND BASHIR AHMED YOUSUF ALI PATEL I ./ --- RESPONDENT Coram: Kondolo, Makungu and Majula, JJA On the 26th day of March, 2021 and on the 12th day of July, 2021 For the Appellant: Mr. M. Tembo - Messrs G. M. Legal Practitioners For the Respondent: Ms. K. Tembo - Messrs Milner & Paul Legal Practitioners. JUDGMENT MAKUNGU, JA delivered the Judgment of the Court. Cases referred to: 1. Emmy Dry Cleaners v. National Pension Scheme Authority and Masautso Banda (2016) 2 ZR 169 2 . Masala Mantra Restaurant v. Bruce Inambao Mwala (2015) 2 ZR 241 3. Nkhata and Others v. The Attorney General (1966) Z. R. 124 4. Wilheim Roman Buchman v. Attorney General (1993-1994) Z. R. 131 5. Wilson Masauso Zulu v. Avondale Housing Project Limited (1982) Z. R. 172 Legislation referred to: 1. The Landlord and Tenant (Business Premises) Act Chapter 193 of the Laws of Zambia. 2. Court of Appeal Act, No 7 of 2016 1.0 INTRODUCTION 1.1 This appeal is against the judgment of Mrs. Justice S. K. Newa dated 26 th June, 2019 in which she dismissed the appellant's application for a new tenancy. 2.0 BACKGROUND 2.1 The appellant commenced an action against the respondent by way of Originating Notice of Motion seeking the following reliefs: 1) An order for a new 20 year tenancy in respect of the property known as Stand No. 8240, Rhodespark Residential Area, Lusaka; 2) An order setting aside the purported notice of termination of the tenancy dated 1st December, 2017; -J2- 3) An order of injunction restraining the respondent and his agents from evicting the applicant from the property known as Stand No. 8240, Rhodespark Residential Area, Lusaka; 4) Costs of the action; and SJ Any other relief that the court may deem fit. 2.2 In the affidavit in support of the application, the appellant disclosed that a lease agreement was executed by the parties on 23 rd May, 2015 in respect of property known as Stand No. 8240, Rhodespark Residential Area, Lusaka. The rent was set at K12, 000.00 per month. The lease was for a period of one year with verbal assurances by the respondent that an eight year lease would be executed. 2.3 On 8 th June, 2015, the appellant and respondent executed an addendum to the lease for the renovation of the demised premises, costs of which would be met by both parties. 2.4 The appellant's evidence was that it carried out the renovations at its own cost. In March, 2017 the respondent made an undertaking to reconcile the accounts in order to ascertain what was due to the appellant. -J3- 2.5 By letter dated 10th August, 2017, the appellant complained to the respondent about the failure to execute the eight year lease. On 16th August, 2017 the appellant formally applied to court for a new lease for twenty years. The application was made by originating notice of motion pursuant to the Landlord and Tenant (Business Premises) Act Chapter 193 of the Laws of Zambia (the Act). In response, the respondent by letter dated 1st December, 2017 gave the appellant three months' notice to vacate the premises. 2.6 The respondent's contention was that a new twenty year tenancy would be excessive given the fact that the appellant initially agreed to a tenancy for eight years. The respondent further contended that the appellant has been adequately compensated 1n rentals and could find alternative accommodation as opposed to the respondent who cannot find an alternative place of business like the one in issue. 2.7 Per contra, the respondent denied promising the appellant an eight year lease agreement. The respondent stated that the one year lease was subject to renewal and that an addendum for renovations was executed in which it was agreed that the -J4- appellant would use its own resources to do the renovations, and would be refunded by the respondent. 2.8 The respondent averred that the appellant was in arrears of rent for the period March, 2016 to February, 2017 and that a reconciliation of the account was made. The rent arrears were offset against the renovation costs. The respondent denied receiving a prior request for a new tenancy. 2.9 The respondent averred that the appellant undertook the renovations to suit its business without his consent or approval. He disputed the cost analysis report of all expenses incurred by the respondent in carrying out the renovations in the sum of K308, 114.33 because the report contains amounts that cannot be accounted for as well as double entries. A reconciliation of the report by the parties brought the cost down to K255, 295.12 of which the respondent converted his 50% thereof; K127,647.56 into rentals. 2.10 The appellant insisted on the respondent meeting the entire cost of renovations and stopped paying rent from August 201 7. 2.11 The respondent opposed the appellant's application for a new tenancy for a period of twenty years as being excessive and unreasonable. He avowed that he intended to occupy the -JS- premises as he was no longer accommodated by his employer and was renting a house. 3.0 DECISION OF THE COURT BELOW 3. 1 The learned Judge considered the evidence before her and found that the parties entered into a lease agreement on 26 th May, 2015 for a period of one year effective 1st July, 2015 at K12, 00.00 per month. There was also an addendum to the lease under which the demised premises were to be renovated, and that the renovations were carried out. 3.2 The addendum of 8 th June, 2015, provided for extensive alterations to be carried out by the tenant with the full consent of the landlord. On the other hand, the landlord was to install an electric fence to the premises; clean up the premises; remove any valuable items from the premises for storage elsewhere and perform all external plumbing and electrical connections to the premises. The addendum further provided that the tenant shall not make any further alterations to the premises without prior written consent from the landlord or his duly authorized agent. The tenant was to recover the costs of the renovations over time. -J6- 3.3 The lower court found that in the initial report presented by the appellant, the cost of renovations was set at K308, 114 .33. The respondent disputed this amount leading to a reconciliation that put the cost at K255, 295.12 and it was agreed that each party would to bear half the cost, being K127, 647.56. The reconciliation statement further showed that the applicant owed rent arrears in the sum of K144, 000.00 for the period March, 2016 to February, 2017. K36, 000.00 was subsequently paid leaving a balance of K108, 000.00. Upon taking into account the sum of K127, 647.56, the appellant owed the respondent K33, 414.00 for the period March, 2016 to February, 2017. 3.4 The lower court rejected the appellant's new figure of K354, 331.00 on the basis that the appellant could not unilaterally vary the reconciled sum. Since, the appellant met the full cost of the renovations in view of the lack of funds by the respondent to meet his part of the bargain, the lower court ruled that the appellant must be reimbursed the amount of K127, 647.56. 3.5 The court below further noted that as the rent became due in June 2017, the appellant was in rent arrears and the respondent therefore, issued a notice of termination of the lease. -J7- 3.6 The learned Judge further found that the lease executed by the parties was for one year, subject to renewal with a rental increment of 10% every two years. At the end of the year, the parties did not execute another lease but the appellant remained in possession of the premises. Predicated on the cases of Emmy Dry Cleaners v. National Pension Scheme Authority and Masautso Banda' 11 and Masala Mantra Restaurant v. Bruce Inambao Mwala,'21 the court found that a tenancy from year to year was created which was determinable at any time on six months' notice. The respondent's argument that the tenancy had come to an end by effluxion of time was rejected as the appellant continued to occupy the premises and the respondent offset the rent due from the cost of renovations. 3. 7 Judge Newa further considered the provisions of sections 4 and 5 of the Act, and came to the conclusion that the notice to terminate the lease agreement given by the respondent did not comply with section 5 of the Act, and was therefore a nullity. 3 .8 The learned Judge then considered the appellant's application for a new tenancy: she opined that under section 6 of the Act, the tenant may apply to the landlord for a new tenancy in the prescribed form. In this case, the tenant had made such an -JS- application. However, the respondent denied having received it. The court found that the application was served on the respondent's agents who acknowledged receipt. Therefore, the appellant did request for a new tenancy pursuant to section 6 of the Act before the respondent gave notice terminating the lease. 3.9 With respect to the formal application for a new tenancy, the learned Judge found that in terms of section 10 of the Act, the application was made outside the stipulated period of not less than two months and not more than four months after giving the landlord notice requesting a new tenancy. However, she proceeded to consider the application in the exercise of her discretion pursuant to section 10(4) of the Act as it was made only four days late. 3.10 The lower court noted that the appellant sought a new tenancy on grounds that it renovated the premises to suit its business and obtained goodwill from its customers as a result of operating from the premises. While the respondent did not indicate that he would oppose the application in terms of Section 11 of the Act, the lower court noted that in his affidavit in opposition to the Originating Notice of Motion, he stated that -J9- he intended to repossess the premises for his own occupation. This ground was found to be permissible in terms of section 11 of the Act. 3. 11 In determining the application for a new tenancy, the court below noted that though the applicant had entirely borne the burden of the renovations and thereby enhancing the value of the property, it had also been in arrears of rent. K29, 666.52 had been paid into court covering the remainder of June, 2017 to August, 2017. From September, 2017 to date of judgment a period of 22 months was not paid for and so the respondent counter claimed K264,000.00. The court took the view that even though the appellant had borne the entire cost of renovations, there was need for it to continue paying rent. 3.12 Further, the court found that the appellant had lumped the entire renovation cost on the respondent without paying rent, which act was inequitable as it was contrary to the agreement of the parties. Consequently, she declined to grant the application for a new tenancy as the appellant had not come to equity with clean hands. 3.13 It was finally ordered that the appellant remains in occupation of the property for six months while paying the monthly rent of -JlO- K12, 000.00 three months in advance, after which it should vacate. That the outstanding rent be paid within 90 days of the judgment, failing which, the respondent shall be at liberty to distrain for the rent. 4.0 GROUNDS OF APPEAL 4. 1 The appellant has raised two grounds of appeal couched as follows: 1) The learned High Court Judge erred in law and fact when she failed to award the appellant the remainder of the initial eight year tenancy despite evidence to the effect that the eight year tenancy was agreed upon; and 2) The learned High Court Judge erred in law and fact when she ordered that the appellant owed the respondent rent arrears of K226, 000.00 when there was evidence that the said rentals would be offset against the cost of renovations. 4.2 At the hearing of the appeal, learned counsel for the appellant, Mr. Tembo abandoned the first ground of appeal as the -Jll- appellant had already vacated the premises. Therefore , the appeal is based only on one ground. 5.0 APPELLANTS ARGUMENTS 5.1 The appellant filed heads of argument dated 16th December, 2020. It was submitted that the email exchanges between the parties show that the initial agreement was for the appellant and respondent to share the cost of renovations which was confirmed by the respondent in his further affidavit in opposition where he admitted that he agreed to cover 50% of the renovations. However, the respondent breached the agreement, which resulted in the appellant enduring hardship in sourcing for funds to pay for the renovations. 5.2 The appellant contended that since the respondent unilaterally varied the contract, he cannot seek to enforce the recovery of the rent arrears as doing so would amount to an unfair advantage. That, since the respondent unilaterally varied the contract, whatever renovations were effected by the appellant had to be reimbursed in full by the respondent. 5.3 The appellant's counsel further submitted that the respondent did confirm in his affidavit in opposition that the appellant had -J12- taken the position that it would not pay rentals until November 2018, and that monies spent on renovations by the appellant would be recovered over a period of time as per the addendum agreement. 5.4 At no time did the respondent make any demand for rent arrears. Therefore , the claim for rent arrears was an afterthought which arose when the respondent realized that it had breached the eight year lease agreement. The appellant stated that the schedule for monthly recoveries of rentals prepared by the appellant showed that it would recover the cost of renovations by not paying rent up to November 2018, which was never challenged by the respondent. 5.5 Citing the case of Nkhata and Others v. The Attorney General, 131 we were urged to reverse the finding of the court below highlighted in the sole ground of appeal. Counsel contended that the finding was based on erroneous considerations. 6.0 RESPONDENT'S ARGUMENTS 6.1 In opposing the appeal, the respondent filed heads of argument dated 16 th January, 2020 in which he submitted that the -J13- appellant's contention that the respondent was in breach of paying 50% of the cost of the renovations is a new allegation which is being sneaked into the appeal, and was never raised at trial. This was described as being highly irregular and prejudicial to the respondent who was never given an opportunity to defend himself against the allegation. Citing the case of Wilheim Roman Buchman v. Attorney General, 141 it was submitted that this court has no jurisdiction to determine issues that were not raised in the lower court. 6.2 The respondent further submitted that the trial judge went to great lengths in her judgment to show how and why the appellant was owing the respondent rent arrears. It was not in contention that the parties were to share the cost of renovations at 50/50. Since the respondent was unable of pay the cost upfront, the parties agreed that the cost of renovations incurred by the respondent be offset from the rent due. Once the said costs were fully offset, the appellant was under an obligation to start paying rent to the respondent according to the terms of the lease. 6.3 Since the respondent being financially incapable of paying its 50% of the renovation costs upfront, the parties put a condition -J14- in the addendum that the appellant would recover its money over a period of time. Therefore, the respondent was not 1n breach of his obligations to pay his share of the costs of renovation as the parties had reached an agreement in this respect. 6.4 The respondent submitted that in fact the appellant is owing in rentals, and as a defaulting party, cannot simply be entitled to a new tenancy; for equity cannot aid one with unclean hands. The appeal was said to be frivolous and a clear indication that the appellant intended to lump all the renovation costs on the respondent contrary to the agreement of the parties and to inflate the costs. 6.5 The assertion that the respondent had never made a demand for rentals owing was denied in view of the letter from the respondent's agent demanding for payment of rent arrears and a reconciliation of the account. Further, it was argued that the fact that the respondent did not include a demand for payment of rent arrears in the notice of termination, does not mean that the respondent is estopped from claiming what is due to him. 6.6 The prayer that the recovery of costs be deemed to have been completed as at November, 2018 was objected to as it is based -J15- on tabulations showing that the respondent is owing K354 , 331 .48 which was not the case . From May 2017, the appellant has not been remitting any rent. The appellant contends that a determination that rent be deemed to have started running in November, 2018 would be contrary to the agreement and result in unjust enrichment of the appellant. 6. 7 We were urged to dismiss the appeal for lack of merit as it is frivolous and intended to be a tool to avoid liability for the payment of rent arrears. Citing the case of Wilson Masauso Zulu v. Avondale Housing Project Limited 151 to the effect that an appellate court cannot overturn findings of the trial court unless the findings are perverse or not based on any evidence, the respondent's counsel submitted that the lower court's findings were based on the evidence on record and should not be upset. 7.0 OUR DECISION 7. 1 We have read the record of appeal and considered the arguments made by both counsel. 7.2 It is not in dispute that on 8 th June, 2015, the parties executed an addendum to the one year tenancy agreement in which the -Jl6- appellant was given consent to make internal alterations to the demised premises. The addendum also provided that the respondent would carry out some works at his own cost. The parties further agreed to share the cost of the renovations at 50% each. It is not in dispute that the appellant performed its part of the bargain singlehandedly as the respondent had financial challenges. Subsequently, the appellant presented a 'detailed cost analysis' of the renovations indicating that the total cost of renovations was K354, 331.48. 7.3 According to the letter dated 3 rd March, 2017, the parties held a meeting on 27 th February, 2017 during which a joint reconciliation of the cost was done; they further agreed that the cost of maintenance and construction be shared and resolved as follows: 1) That rent arrears from March, 2016 to February, 2017 stood at K144, 000.00 less K36, 000.00 paid leaving a balance of K108, 000.00; 2) The total cost of shared works stood at K255, 295.12, half of which is K 127, 64 7. 56 to be settled by each party; 3) From the K127, 647.56 owed by the respondent, the sum of K108, 000.00 as rent arrears was deducted leaving a balance -J17- .. I • of K19,647.56 to which K13,767.00, spent on construction of the outside storage by the appellant was added; which meant that the respondent's account was debited by K33, 414.56. 7. 4 The court below found that the respondent opted to settle the K33, 414.56 in kind by offsetting the same against rent due. Thus, the appellant would occupy the premises for two and a half months against the K33, 414.56 after February 2017 to about June 201 7 as testified by the respondent. This effectively meant that the respondent had liquidated his share of the cost of the renovations. 7.5 There was evidence on record that K29, 666.52 was paid into court as rent as per the affidavit in opposition to the notice of motion for committal proceedings dated 29 th October, 2018. This nearly covered the rent from June, 2017 to August, 2017 as rent for 3 months at K12,000.00 per month amounts to K36,000.00 and not K29,666.52. However, from September, 2017 to the date of judgment, the appellant was in arrears of rent for 22 months amounting to K264,000.00. This is the amount that the lower court awarded to the respondent as whatever the respondent owed the appellant in costs of -J18- f t \ renovation had been offset against the rent due. We find no reason to upset the findings of the court below as regards the amount owed by the appellant to the respondent. 8.0 CONCLUSION 8.1 We find no merit in the sole ground of appeal and accordingly dismiss the appeal with costs while upholding the award made by the court below. c~ .................................. M. M. KONDOLO COURT OF APPEAL JUDGE C. K. MAKUNGU COURT OF APPEAL JUDGE B. M. AJULA COURT OF APPEAL JUDGE -J19-