Khunaif Trading Co Limited v Total Kenya Limited [2021] KEBPRT 204 (KLR) | Controlled Tenancy | Esheria

Khunaif Trading Co Limited v Total Kenya Limited [2021] KEBPRT 204 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE BUSINESS PREMISES RENT TRIBUNAL

TRIBUNAL CASE NO. 306 OF 2020 (MOMBASA)

KHUNAIF TRADING CO. LIMITED.................................................APPLICANT/TENANT

VERSUS

TOTAL KENYA LIMITED................................................................................LANDLORD

JUDGMENT

Parties and their Representative

1. The TenantKhunaif Trading Co. Limited(hereinafter referred to as the “Tenant”) through Ms. Jeizan entered into a licence agreement with Total Kenya Limited for Restaurant operation at Sparki Total Service Station.

2.  The firm of Anaya & Company Advocates represent the Tenant.

(Email Address: anaya.advocate@gmail.com)

3.  The Respondents Total Kenya Limited the Landlords of the suit premises rented out to the Tenant.

4.  The Firm of V.N Okata & Co. Advocates represent the Landlord.

(Email Address: info@okataadvocate.co.ke)

The Background of the Dispute

5.   The dispute arises from a license Agreement entered into on 1st July 2014for the Tenant to run a Restaurant at Sparki Total Service Station.

6.   The Tenant filed a Reference and an Application dated 4th December 2020 under Certificate of Urgency seeking orders the following orders;

I.  That the application be certified urgent and service of the same be dispensed with in the first instance.

II.  This Honourable Court be pleased to issue stay of execution of the Notice of termination of the Tenancy by the Landlord pending hearing and determination of the Application.

III.  This Honourable Court be pleased to issue stay of execution of the Notice of Termination of Tenancy by the Landlord pending hearing and determination of the Reference

IV.  Costs of the Application be provided for.

7.  On 17th December 2020, the Tribunal issued an order allowing prayer II of the Application

Summary of Proceedings

8.   The Tenant filed a Reference dated 14th December 2020 and an Application dated 4th December 2020seeking to move this Honourable Tribunal under a Certificate for orders hereinabove.

9.   On 17th December 2020, the Tribunal certified the Application as urgent and allowed prayer II of the Application on the face of it.

10. On13th January 2021, the matter was mentioned and both parties were represented by Advocates. The Tenant introduced her case. It was agreed that the matter proceeds to the Reference. The Tribunal ordered that the Landlord would go first ad that each party to prepare comprehensive witness statements. With documents attached.

11. On 22nd January 2021, the matter came up for hearing. The Tribunal proceeded to witness hearing from both sides. The Tribunal has read the testimony of parties and cross examination respectively and will rely on the proceedings in the court record and the same are briefly stated in the submissions herein under. Each party filed submissions.

12. Even though the proceedings were before Hon Lorot parties consented to the judgment being written by myself

Jurisdiction

13. The jurisdiction of this tribunal is not in dispute.

Issues for Determination

I.    Whether the termination notice was Valid?

II.   Whether the Applicant/Tenant’s reference has merit?

III. Whether the Tenant is entitled to any compensation?

Tenant’s Submissions

14. The Tenant called one witness and later filed submissions in support of its reference dated 14th December 2020. The Tenant submitted that she has been running a restaurant business at the licenced property and that the business had greatly been affected by Covid 19 pandemic since it was forced to close down in March 2020 in compliance with the government directive. On 12th May 2020, the Tenant wrote to the Landlord seeking waiver of rent payment. The Landlord responded on 6th January 2021 after the commencement of the proceedings. The Tenant submitted that they have since resumed operations and has paid rent up to June 2021. The Tenant submitted that the notice of termination of the licence agreement was issued in bad faith during a pandemic. She submitted that the Landlord was moved by vendetta and decided to use the woes bedeviling the Tenant during the pandemic to evict her. The Tenant submitted that she has always been willing to negotiate with the Landlord on the modalities of settling the arrears including being given waivers, despite attempts to settle the matter without litigation process, the Landlord declined the Tenant’s request necessitating to the Tenant filing a Reference. As a result, the Tenant prays to be awarded costs.

Landlord’s/Respondents’ Submissions

15. The Landlord called one witness and filed their submission in support of their case. The Landlord admitted to have issued a termination notice dated 14th October 2020 to terminate the tenancy agreement under section 4(2) of the Landlord and Tenant (shops, Hotels and Catering Establishment Act). In reply to the termination notice, the Tenant filed a Reference opposing the Landlord’s notice to terminate the tenancy. Upon receipt of the termination notice, the Tenant rushed to pay rent of Ksh. 100,000. 00. At the time, the Tenant was in arrears of Ksh. 180,000. 00. the Landlord submitted that the Tenant was a perpetual rent defaulter and has on separate occasions filed suits to circumvent any rental payments. The Landlord further relied on Article 5 of the tenancy agreement which he submits that it does not obligate the Landlord to compensate the Tenant on any costs incurred to set up structures. The Landlord relied on the cases of ELCA No. 147 of 207 Mombasa Charles Okoth vs. Abdulrahman Hamuny and in ELCA No. 49 of 2017, the New Calabash Ltd vs Eng. Joseph Odero.

Analysis and Determination

16. I have carefully considered the Court proceedings, witness testimonies and submissions of the parties together with all the documents filed in this Tribunal for consideration. Existence of a tenancy agreement between the parties is not in dispute. Having carefully considered the submissions, I have come to the following analysis and determination on the issues in dispute.

I.  Whether there was breach of Tenancy Agreement.

17. It is trite law that parties are bound by their Agreement. The parties in this suit are bound by their tenancy agreement which places different obligations to each party. The termination notice dated 14th October 2020 is premised on the ground that the Tenant had failed to pay monthly rent as per the tenancy agreement from the month of February 2020. The Tenant has an obligation to pay monthly rent of Ksh. 20,000. 00 failure of which it will be held to be in breach. Upon perusal of documents filed by parties, I find that the Tenant was in arrears of Ksh. 180,000. 00 equivalent to 9 months. Upon being served with the termination notice, the Tenant proceeded to pay Ksh. 100,000. 00 being rent payment for the months of February to June 2020.

18. On cross-examination of James Muasya, Tenant’s witness, he stated that the Tenant had only paid Ksh. 100,000. 00 as from the month of February to October, a calculation which does not conform with the agreed monthly payment of Ksh. 20,000. 00. Although he said that the money covered up to October 2020, he admitted that he had not attached receipts showing payment up to October 2020. I am convinced that the payment of Ksh. 100,000. 00 did not settle the arrears in full. On 21st October, 2020, the Landlord further wrote to the Tenant indicating intention to proceed with the termination of the tenancy agreement, the Tenant quickly filed a reference and an application dated 4th December 2020.

19. The Tenant relied on Article 14 of the Tenancy Agreement to state that their failure to pay the monthly was resulted from Covid 19 which resulted to a government directive to clause the business. I have reviewed the said Force majeure clause and found that clause 14. 3 excludes applicability the Force Majeure clause from liability for failure to make payment required under the Agreement. Nonetheless, the Tenant only states that as a result of Covid 19, the business was closed but has not demonstrated how the business was impacted to the extent of failing to pay rent.

20. Similarly, Article 14. 6 of the agreement requires that a party affected by an event of force majeure shall notify in writing to the other party of such event as soon as possible, and in any event not later than 5 days following the occurrence of such event, providing evidence of the nature and cause of such event. The evidence adduced by the parties indicate that the Tenant defaulted payment of rent from the month of February 2020, covid hit the country in March 2020 while the first notice from the Tenant to the landlord was vide letter dated 12th May 2020 seeking a consideration for rent reduction or waiver until the situation gets better. I have considered the fact that the Tenant made attempts to find an amicable solution to the dispute owing to effects of covid 19 but the same was not done as per the Contract. The Tenant has not succeeded in attempts to rely on force majeure Clause as per the contract to justify its breach of contract.

II.  Whether the Termination Notice was Valid

21. The genesis of this suit roots from the Landlord’s notice of termination dated 14th October 2020. The Tenant responded by filing a reference and an application dated 4th December 2020 to stay execution of the termination notice. The Court heard the application on a certificate of urgency and granted orders of stay of execution pending hearing and determination of the Application.

22. It is not in dispute that the Tenant had an obligation to pay a monthly rent of Ksh. 20,000. 00. The Tenant defaulted to pay from the month of February to October resulting a total arrears of Ksh. 180, 000. 00. it is a result of the accumulated arrears that the Landlord issued a termination notice dated 14th October 2020 seeking to terminate the tenancy agreement. On the other hand, the Tenant submitted that they have been paying rent save for the circumstances that resulted to closure of the restaurant in compliance with the Government directive in bid to curb the spread of covid 19 pandemic.

23. The Landlord issued the termination notice pursuant to section 4(2) of the of the Landlord and Tenant (shops, Hotels and Catering Establishment) Act and pursuant to Article 12. 2 of the tenancy agreement which provides for a termination clause. The said Section 4(2) states as follows:

“A Landlord who wishes to terminate a controlled tenancy, or to alter, to the detriment of the Tenant, any term or condition in, or right or service enjoyed by the Tenant under, such a tenancy, shall give notice in that behalf to the Tenant in the prescribed form.”

24. This position of the law on the issue of a termination notice is now settled as can be seen in the case of Manaver N. Alibhai T/A Diani Boutique vs. South Coast Fitness & Sports Centre Limited, Civil Appeal No. 203 of 1994, the court stated that: -

“The Act lays down clearly and in detail, the procedure for the termination of a controlled tenancy.  Section 4(1) of the Act states in very clear language that a controlled tenancy shall not terminate or be terminated, and no term or condition in, or right or service enjoyed by the tenant of, any such tenancy shall be altered, otherwise than in accordance with specified provisions of the Act.  These provisions include the giving of a notice in the prescribed form.  The notice shall not take effect earlier than 2 months from the date of receipt thereof by the tenant.  The notice must also specify the ground upon which termination is sought. The prescribed notice in Form A also requires the landlord to ask the tenant to notify him in writing whether or not the tenant agrees to comply with the notice.”

25. Article 12 of the tenancy agreement provides for the instances when a termination notice may be issued. It is clear that a termination notice may be issued upon either party breaching the terms of the tenancy agreement. It is not in dispute that the Tenant had been in arrears from the month of February 2020 until the time that the notice was issued.  Through a letter dated 6th October 2020, the Tenant confirmed that they were in arrears as alleged by the Landlord.

26. I have considered whether the termination notice dated 14th October 2020 and issued by the Landlord met the required threshold. First it is in the prescribed form A, second it has disclosed the reasons for termination being in default to pay rent, third the notice required the tenant to notify the Landlord in writing whether or not the Tenant agrees to comply with the notice, lastly, the notice would take effect after two months. The notice was dated 14th October 2020 and was received by the Tenant’s Advocates on the same 14th October 2020, further the Notice stated that the termination would take effect from 1st January 2021 which is after two and half months.

27. It is my finding that the termination notice issued by the Landlord had legal basis and meet the required threshold under the law. It was therefore properly issued and it is legal.

III.       Whether the Applicant/Tenant’s Reference has merit

28. To sufficiently rule on the reference by the Tenant and after a thorough scrutiny of the parties’ submissions and evidence I am guided by the principles of equity that he who comes to equity must come with clean hands. A critical look at the witness testimonies and submissions reveal that this is not the first case arising from the tenancy relationship. In 2015, the Landlord had issued a termination notice which resulted to the Tenant filing a suit CMCC 823 OF 2015 Mombasa. The Tenant obtained a Court order and stopped paying rents until the matter was determined two years later. After a judgment was entered in favour of the Tenant, the Landlord attempted to distress for rent causing the Tenant to sue the Landlord again for contempt of Court. A ruling was issued on 10th November 2018 stating that the Tenant had an obligation to pay rent and clear legitimate arrears. The Court clarified that it had not absolved the Claimant from paying lawful rent or any arrears that may be owing. The total amount owing was 656,084. 00 which the Landlord stated that the Tenant has been paying in installments.

29. The Landlord has sufficiently proved that the termination notice was as a result of the Tenant defaulting to pay rent amounting to breach of contract, it was also demonstrated that the Tenant has had a record of defaulting rent payment and therefore has not approached this Tribunal with clean hands. From the foregoing, I find that the Tenant’s reference lack merit.

30. Whether the Tenant is entitled to Compensation for the structures

The Tenant’s Advocates vide letter dated 26th October 2020 wrote to the Landlord’s Advocates stating that the termination notice dated 14th October 2020 had not factored the property the Tenant had constructed in accordance with the tenancy agreement. In response, the Landlord submitted that according to the agreement, the Tenant cannot claim any payments from the Landlord for the structures. I am guided by Article 5(d) of the Tenancy Agreement which states as follows:

That in consideration of the grace period accorded to the licensee with regard to payment of rent, the restaurant structure and any other structure that the Licensee may construct with total’s approval shall after expiry or otherwise termination of this Agreement, revert to Total and the Licensee shall not lay any claim to any such structures.

The provision above denies the Tenant any claim over the structures built on the rented property. The failure by the landlord to clarify how the compensation shall be done does not invalidate the Landlord’s termination notice.

31.   In view of the above findings and considerations, I hereby make the following ordersand directions:

a)   The Tenants reference dated 14th December 2020 lack merit and is hereby dismissed

b)   The Tenant’s notice of motion date 4th December 2020is hereby dismissed and any consequential orders set aside.

c)   The Landlord’s termination notice dated 14th October 2020 is lawful and enforceable.

d)  The Tenant shall have 60 days within which to provide vacant possession upon payment of 2 months’ rent within 7 days, in default the landlord will be at liberty to commence eviction.

e)  The Tenant to clear all pending arrears.

f)  Owing to the circumstances of the case, each party shall bear its costs

HON. A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

JUDGEMENT DATED, SIGNED AND DELIVERED VIRTUALLY BY HON A. MUMA THIS 6TH DAY OF OCTOBER 2021 IN THE PRESENCE OF GANZALA FOR OKATA FOR THE LANDLORD AND IN THE ABSENCE OF THE TENANT.

HON. A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL