KASSIM MANJI & SONS LTD v FARID AL-MAARY & another [2009] KEHC 190 (KLR)

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT MOMBASA Civil Case 252 of 2005

KASSIM MANJI & SONS LTD ………….………PLAINTIFF/APPELLANT

-VERSUS-

1. FARID AL-MAARY

2. MWARA INVESTMENTS LTD. …....DEFENDANTS/RESPONDENTS

RULING

The plaintiff came before the Court by Chamber Summons application dated 28th November, 2005 and brought under Order XXXIX, rules 1, 2, 3 and 9 of the Civil Procedure rules. The main prayer was thus set out:

“THAT the defendants by themselves, their agents and/or employees be restrained from removing and/or selling the plaintiff’s goods proclaimed on 24th November, 2005 and/or proceeding with further acts of distress against the plaintiff until [the] hearing and determination of the suit herein”.

The general grounds founding the application were stated as follows: 1st defendant instructed 2nd defendant to levy distress for rent against the plaintiff for no-existent rent arrears; the plaintiff has paid rent in respect of the suit premises for the period up to and including 31st December, 2005; 1st defendant relied on a defective notice to effect increment of rent against the plaintiff; the notice to alter the terms of tenancy against the plaintiff was premature, and void; the plaintiff has established aprima faciecase, with high chances of success; damages would not be sufficient to compensate the plaintiff if the distress for rent is allowed to proceed – as the plaintiff would lose its goodwill established over a long duration; allowing 2nd defendant to proceed with the distress would amount to aiding an illegality.

The evidence is set out in the supporting affidavit sworn byAjitsinh Dayalon 28th November, 2005. The deponent, one of the directors of the plaintiff company, depones that the plaintiff is a statutory tenant on Plot No. Mombasa/Block XX/83 & 84 belonging to 1st defendant, paying a monthly rent of Kshs.6,374/= for one shop and store (the suit premises). The plaintiff had received a notice from former landlords, dated 18th August, 1999 to terminate and/or alter the terms of tenancy to increase monthly rent to Kshs.111,922/=. This notice occasioned a reference of the matter by the plaintiff to the Business Premises Rent Tribunal (Tribunal Case No. 157 of 1999), and the Tribunal dismissed the notice with costs on26th March,2003. The deponent believes his counsel’s advice, that following the dismissal of the notice, no further notice was capable of being given in respect of the suit property until after the expiry of a period of two years, as from the date of dismissal of the notice. The 1st defendant issued another notice on29th May, 2003; but the plaintiff through advocates asked for a withdrawal of this notice because it was defective – failing which a reference to the Tribunal would have to be made. Indeed, 1st defendant’s advocates formally withdraw the notice. But on29th January, 20041st defendant issued yet another notice, and the deponent’s advocates advised him that this was another defective notice – for a period of two years had not yet elapsed since the previous tribunal determination. The plaintiff’s advocates sent letters to 1st defendant on 20th September and 8th November, 2005 informing 1st defendant of the irregularity of the rent-increase notices which 1st defendant had been sending out. But 1st defendant continued to demand increased rent, and treated rent-monies paid by the plaintiff as being in payment towards a clearing of arrears. The deponent deponed that the plaintiff had duly paid rent for the suit property for the period up to and including31st December, 2005– and he annexed to his affidavit the relevant payment receipts.

The deponent deponed that the 1st defendant still proceeded to instruct 2nd defendant to levy distress against the plaintiff, for arrears of rent purportedly owing, in the sum ofKshs.1,821,574/=; and 2nd defendant (auctioneers), in pursuance of the said instructions, issued a proclamation of attachment.

The deponent believes that unless this Court issues a restraining order against the defendants, the plaintiff’s goods are threatened with illegal removal and sale.

The deponent swore a supplementary affidavit on 21st March, 2006, in which he stated that the plaintiff had been dissatisfied by a ruling of the Business Premises Rent Tribunal made on 16th February, 2006, and as a result the plaintiff had filed an application forjudicial review, in High Court Application No. 277 of 2006 – and the High Court on 17th March, 2006 granted stay of the said Tribunal order.

The 1st defendant, on 1st December, 2005 swore a replying affidavit in which he avers as follows. The rent-increase notice of28th January, 2004was duly served upon the plaintiff on29th January, 2004, but the plaintiff neither replied,nor did they file a reference on the matter: and hence that notice has become effective. The deponent denies having been party to BPRT No. 157 of 1999. The deponent annexes to his affidavit (Exh. FAM2) a copy of an order made by the Tribunal in BPRT

No. 77 of 2002 between himself and the plaintiffs: as a consequence, the earlier notice dated 28th August, 2002 was withdrawn, and costs of Kshs.86,491/40 were awarded to the plaintiff.

The 1st defendant depones that the suit premises is“in[an] up-market commercial area opposite Castle Hotel and the rent of Shs.6,375/= is unrealistic”.The deponent attaches a valuer’s report recommending a rent level ofKshs.135,000/=(Exh. FAM3). He further states that if the tenant (plaintiff) cannot afford to pay the market rent, then he is at liberty to vacate the premises“since there is no lease and his is a monthly tenancy”.

The 1st defendant depones that since t he plaintiff is a limited liability company, if it should be wound up, then this would cause substantial loss to 1st defendant.

On 15th March, 2006 the deponent swore a supplementary affidavit. The deponent depones that he believes the Business Premises Rent Tribunal’s order of 26th March, 2005did not dismiss the landlord’s rent-increase notice. He depones that he had made a successful application to that Tribunal,“to revoke and/or correct the order issued on 17th April, 2003”– the revocation being done in the Tribunal ruling of22nd February, 2006.

Learned counselMr. Hamza, for the plaintiff, submitted that whereas the plaintiff was not disputing the fact that it was served with a rent-increase notice on 29th January, 2004, he was disputing thevalidityof the notice. The validity question, it was urged, arose from the terms of the Landlord and Tenant (Hotels, shops and Catering Establishments) Act (Cap. 301, Laws of Kenya, s. 9 (3), (c) and (b), which provide:

“(3)where a Tribunal has made a determination upon a reference, no further tenancy notice shall be given in respect of the premises concerned, which is based on any of the matters affected by the determination –

(a)in the case of an assessment of rent, until after the expiration of two years; or

(b)in any other case, until after the expiration of twelve months”.

It was urged that in the instant case, the plaintiff was served with a notice to increase rent which was dismissed by the Court in its order of 17th April, 2003.

Counsel considered the 1st defendant’s reply that he was not a party to the proceedings in BPRT No. 157 of 1999 and so the order does not affect him. Counsel urged that the said order will affect 1st defendant, because s. 9 (3) of the governing Act provides: “Where a Tribunal has made a determination upon a reference no further tenancy notice shall be given in respect of the premises concerned …..” So, it was urged, s. 9 (3) of the Act is concerned withthe premises, but not theparty.There is an order in existence dismissing the notice dated 18th August, 1999 in respect of Plot No. Mombasa/block XX/83 and 84 (dated 26th March, 2003); and before the expiry of the statutory period of two years, another notice was issued in respect of the same premises.

Counsel submitted that the rent-increase notice dated28th January, 2004was irregularlygiven, and wasa nullity. Hence there was no requirement that a reference be filed against this notice of 28th January, 2004.

Counsel urged that, as at28th January, 2005old rent was not disputed; and since the notice of29th January, 2004that sought to increase rent was a nullity, the distess for rent based on the increased rent is “irregular and/or unlawful”.

Counsel called in aid the authority ofMunaver N. Alibhai T/A Diani Boutique v. south Coast Fitness & Sports Centre Limited, Civil Appeal No. 203 of 1994. The following passage in that judgment is relevant:

“The [trial] Judge … was of the view that the notice, strictly construed, did not comply with the requirements of the Act, but having so found, he went on to uphold the magistrate on the ground that the appellant had not reacted to the invalid notices sent to him. The Judge thought the appellant was bound to react to the invalid notices by, for example, making a reference to the Tribunal, so as to be able to claim the protection afforded to it by the Act. There can be no doubt that both the Judge and the Magistrate were clearly wrong ….

“The Act lays down clearly and in detail, the procedures for the termination of a controlled tenancy ….

“… The notice of termination given by the respondent was clearly void and had no effect in law on the appellant’s tenancy and the appellant was under no duty, legal or otherwise to react to it”.

Counsel contested the 1st defendant’s claim that the Tribunal decision of 26th March, 2003 had not been against 1st defendant, and that it had merely been held that the Tribunal reference was overtaken by events: By s. 9 of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, the courses of action open to the Tribunal are specified:

“(1) Upon a reference a Tribunal may, after such inquiry as may be required by or under the Act, or as it deems necessary -

(a)approve the terms of the tenancy notice             concerned, either in its entirety or subject to such amendment or alteration as the Tribunal thinks just having regard to all the circumstances of the case; or

(b)order that the tenancy notice shall be of no effect; and in either case

(c)make such further or other orders as it thinks appropriate”.

Counsel urged that the Tribunal haddismissedthe rent-increase notice.

Learned counsel submitted that the distress for rent levied against the plaintiff by 2nd defendant on 24th November, 2005 was illegal – because it was based on an unlawful rent-claim.

Counsel urged that as the premises in question is for business, “the levying of the illegal distress will clearly expose the plaintiff to irreparable loss ….”

Mr. Kasmanifor the 1st defendant submitted that an order made by the Tribunal would not be binding on a party not appearing before it – and so the first refusal to approve rent-increase was not binding on 1st defendant. It was urged that the 2nd Tribunal Order too was not binding on 1st defendant – because it wasrevokedby a subsequent order of the Tribunal – and the said revocation of the Tribunal Order was not stayed by High Court Orders on the plaintiff’s judicial review application; because the stay order obtained by the plaintiff who was the applicant, “was obtained on anex parteapplication and the Court has not heard both sides”. Counsel urged that the fate of the judicial review matter remained uncertain, and the Tribunal’s revoking order could remain in place – in which case the plaintiff “has no case at all”. Counsel urged: “the applicant is relying on [the] first order to say [the rent-increase] notice was dismissed, which order is now revoked”.

Mr. Kasmanisubmitted that it was not the law that “the new landlord cannot serve another notice for increase or for … any variation for two … years”.

Counsel urged that the plaintiff had failed to show any irreparable damage that they would suffer if the orders sought are not granted.

Counsel relied on a Court of Appeal authority,Jitendra Mathurdas Kanabar & 2 Others v. Fish and Meat Limited,Civil Appeal No. 267 of 1996 which appears not to be on all fours with the earlier decision of the same Court,Munaker N. Alibhai T/A Diani Boutique v. South Coast Fitness & Sports Centre Ltd., Civil Appeal No. 203 of 1994. A reading of the two cases shows the earlier one to be the more detailed, on the relevant point here. The relevant passage in the later decision thus reads:

“…once a reference in accordance with section 6 (1) of the Act has not been made to the Tribunal and a tenancy notice to terminate the tenancy has taken effect from the date specified therein in terms of section 10 of the Act, the landlord/tenant relationship comes to an end. Thereafter, one can no longer talk of the existence of a controlled tenancy in terms of section 2 of the Act without which the Tribunal under the Act has no jurisdiction. In the instant appeal, the respondent’s failure to refer the appellant’s tenancy notice to the Tribunal in accordance with section 6 (1) of the Act resulted in the cessation of its tenancy of the appellants’ godown/warehouse with effect from 1st June, 1995 in terms of section 10 of the Act.”

On the basis of theJitendra Mathurdascase, counsel urged that the rent-increase notice issued by 1st defendant was “now effective”.

Counsel doubted that the balance of convenience was in favour of the plaintiff, but urged that if the Court were to find in favour of the application, then the plaintiff should give security for orders granted; and counsel here relied on the Court of Appeal decision inE.A. Building Society Limited v. A.C.A.d’ Souza & Another, Civil Appeal No. 124 of 1997. It was held in that case, which was of the samegenreas the instant one, that –

“… the interests of justice would be m et by ordering the tenants to deposit into a joint account in the names of the advocates of the parties, the difference between the original and the assessed rent. Such deposit plus future extra rent must be made within the next sixty days ….”

The issues for determination in this matter have emerged clearly enough. As between the plaintiff and its previous landlord, the landlord had, on18th August, 1999issued a notice to terminate protected tenancy status by raising the level of rent from Kshs.6,374/= per month to Kshs.111,922/= per month. The plaintiff objected, by filing a reference before the Business Premises Rent Tribunal; and the outcome was that on17th April, 2003,the Tribunal allowed the reference, and dismissed the landlord’s notice.

In the meantime, ownership of the suit premises passed on to the 1st defendant herein; and 1st defendant, on29th January, 2004(just under a year since the earlier order of the tribunal) issued yet another notice, seeking to raise rent and to put the plaintiff outside the category of protected tenant.

The issue arising out of the foregoing facts is: was the new landlord (1st defendant) bound by the Tribunal’s order of 17th April, 2003? By s. 9 (3) (a) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, if the 1st defendant was subject to the said Tribunal Ruling, then he could not give another rent-raise notice until a period of two years had elapsed.

The 1st defendant contended that he was not bound by the Tribunal’s order of 17th April, 2003 because he was not a party to the proceedings; but the plaintiff raised the riposte that the Tribunal’s orders attach not to parties alone but also tosuit premises; and therefore, the 1st defendant was bound, and could not have served upon the plaintiff the notice of 29th January, 2004. The relevant provision of the law is s. 9 (3) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, which specifies that:“where a Tribunal has made a termination upon a reference no further tenancy notice shall be given in respect of the premises concerned ….”.

Such a state of the law and the pertinent state of fact, it is my understanding, would be material details such as ought to feature in negotiations and sale, of the kind that applied in the case of the suit property herein. On that principle, I would consider a Tribunal decision such as that of17th April, 2003to be in the first place attachedto the property itself(a decisionin rem), and therefore binding on whosoever comes to hold the title to the suit property.

By a letter dated 7th November, 2005 the landlord (1st defendant) was demanding in arrears a revised rent of Kshs.96,800/= per month, which was said to have taken effect fromApril, 2004, and the alleged arrears of rent now stood at Kshs.1,821,574/=. It is on that basis that 2nd defendant, under instructions from 1st defendant, issued a proclamation of attachment of the plaintiff’s goods.

M/s.Yasmin Abdulkarim AliAdvocates wrote to 1st defendant’s advocates,K.A. Kasmani & Co. Advocateson20th September, 2005 stating that the landlord could not increase rent, because two years had not elapsed since the rent Tribunal’s order of26th March, 2003which was issued on17th April, 2003.

The 1st defendant believed the tribunal’s order issued on 17th April, 2003 to be incorrect; so he applied to the Business Premises Rent tribunal which on22nd February, 2006made an orderrevokingthe said order.

However, the plaintiff then moved the High Court, seeking leave (operating as stay) to apply for the judicial review order of certiorari to remove the proceedings and order of the Business Premises Rent Tribunal into the Court for the purpose of being quashed. The application was granted; but up to now the substantive motion has not yet been heard and disposed of.

Counsel for the 1st defendant submitted that since the judicial review matter has yet to be disposed of, the plaintiff is not in a position to say whether or not he will be required to pay the arrears of rent being demanded, and therefore, there is no basis for allowing the instant application.

The judicial review application which has not yet been disposed of, is the basis ofvalid orders of the High Court made on an interim basis, and these ordersinclude an order of stay, in relation to the orders of the Business Premises Rent Tribunal which revoked earlier orders of 26th March, 2003.

In law, therefore, 1st defendant’s rent-increase notice could not take effect, and so, cannot be used as a basis for the computation of rents payable by the plaintiff. Such calculations of increased rent as 1st defendant has done, thus, become just an expression ofintent for the future.

Has the plaintiff made aprima faciecase, with a probability of success, justifying the grant of an injunctive order? I believe so. For, not only did 1st defendant not comply with the statutory requirements of rent-increase notice, but the respondent went further and secured a proclamation by an auctioneer, on the applicant’s named effects. It falls within the balance of convenience that such effects be not disposed of in the manner intended by 1st defendant, until the rights of the parties have been fully determined.

Consequently I now make orders as follows:

(a)The plaintiff/applicant’s prayers set out

in the Chamber Summons application of 28th November, 2005 are allowed.

(b)The defendants/respondents shall bear

the costs of this application.

DATEDandDELIVEREDatMOMBASAthis 14th day of December, 2009

J.B. OJWANG

JUDGE

Coram: Ojwang, J.

Court clerk: Ibrahim

For Plaintiff/Applicant: Mr. Hamza

For Defendants/Respondents: Mr. Kasmani