Meralli and Company Limited v Parker, Togossoff and Company Limited (Civil Suit No. 1542 of 1953) [1956] EACA 19 (1 January 1956)

### ORIGINAL CIVIL

#### BEFORE RUDD, J.

### MERALLI AND COMPANY LIMITED, Plaintiff

v

# PARKER, TOGOSSOFF AND COMPANY LIMITED, Defendant

## Civil Suit No. 1542 of 1953

$\mathcal{L} = \mathcal{L}^{\mathcal{L}}$

Landlord and Tenant-Crown Lands-Condition in Crown lease against subletting or parting with possession without Governor's permission—Permission to sublet refused unless the rent did not exceed £500 a year—Subtenant in possession under verbal agreement to sublet to him for two years at £60 per month rent-Claim for rent at £60 per month-Effect of unregistered agreement for sublease when Governor's permission refused. Transfer of Property Act, 1882, sections 106, 107, 116—Crown Lands Ordinance, sections 126, 127, 129—Acceptance of cheques tendered for rent at the rate of £500 a year coupled with refusal to sublet at less than $£60$ a month—Whether estoppel—Subtenant allowed to remain in possession and to pay rent after notice to quit by landlord—Application by landlord after serving notice to quit for reconsideration of refusal of permission to sublet and for permission to sublet to defendant at £60 a month-Waiver of notice to quit.

The plaintiff company was the grantee from the Crown of a building lease or grant under the Crown Lands Ordinance of a plot of land to be used for the purposes of a garage, subject to a condition that the plaintiff was not to sublet or part with the possession of the land without the previous written permission of the Governor. Under section 7 of the Crown Lands Ordinance Cap. 155, the Commissioner of Lands was empowered to act for the Governor. The building conditions having been duly complied with the plaintiff and defendant verbally agreed that the premises should be let to the defendant for two years with the option of renewal at a rent of £60 per month subject to the necessary permission to sublet being given and the defendant paid six months rent in advance at the rate of £60 per month and was let into possession as from 1st November, 1951. At this stage, the Commissioner for Lands refused to give permission for a sublease unless the rent did not exceed £500 a year and the plaintiff refused to sublet at less than £60 a month, but the defendant remained in possession and tendered cheques for such amounts as to bring the total paid to the plaintiff for rent as up to 31st March, 1953, to the amount that would have been payable if the rent had been £500 a year. The plaintiff accepted these cheques but always refused to agree to any subletting to the defendant at less rent than £60 a month. When the Commissioner of Lands appeared to be adamant in refusing to give the Governor's permission to such a subletting the plaintiff gave the defendant notice to quit expiring on 3rd December, 1952, but the defendant stayed on and further negotiations took place between the parties and the Commissioner of Lands in which the defendant strongly urged the<br>Commissioner to give permission for a sublease at £60 a month rent. Eventually as a result of an application made by the plaintiff at the suggestion of the defendant the Commissioner of Lands agreed to permit a subletting at a rent of £60 a month and informed the defendant that this permission operated as from 1st April, 1953. The defendant paid rent, as from 1st April, 1953, at the rate of £60 a month, until 31st August, 1953, and vacated the premises, on 4th September, 1953, under a notice to quit, which he had given expiring on 31st August, 1953, The plaintiff claimed the balance of rent due as from 1st

November, 1951, to the date upon which the defendent gave up possession as at the rate of $£60$ a month.

Held (26-7-56).—(1) The condition requiring the previous written permission of the Governor<br>for a subtenancy was not a limitation and did not invalidate the subletting which was<br>capable of existing and continuing until the breach by forfeiting the Crown lease which it had not done.

(2) There is no statutory prohibition in Kenya against assignment in breach of condition so as to make such an assignment unenforceable as between the parties to it.

(3) The fact that a sublease had not been registered did not defeat the plaintiff's claim. There had been such an oral agreement coupled with delivery of possession as to constitute a tenancy for one year continuing thereafter in this case as a tenancy from month to month in accordance with sections 106, 107 and 116 of the Transfer of Property Act, 1882. Section 126 of the Crown Lands Ordinance does not require registration of such a tenancy.

(4) The plaintiff's notice to quit had been waived.

(5) The acceptance of the cheques tendered for rent as up to 31st March, 1953, did not estop the plaintiff from claiming the balance of the rent as at the rate of £60 a month for the period 1st November, 1951, to 31st March, 1953.

Cases cited: Jagat Singh v. Ishmael Mohamed Chogley, (1949) 16 E. A. C. A. 27.

Authorities cited: Foa. General Law of Landlord and Tenant, 6th ed., 366; Halsbury, Laws of England, 2nd ed., Vol. 20, 344; Mulla, Commentary on the Code of Civil Procedure, 3rd ed., 637.

Nazareth, $Q. C.$ , for plaintiff company.

Kean for defendant company.

JUDGMENT.—I have no difficulty in deciding the facts of this case.

The plaintiff company is the grantee from the Crown of a building lease issued under the Crown Lands Ordinance of Plot 209/2849 in the Inoffensive Factory Area, Nairobi, for 99 years from 31st January, 1949. The plot is required by the lease to be used for garage purposes and contains a condition in the following terms: -

"The grantee shall not assign, sublet or otherwise dispose of or part with possession of the said land or any part thereof without the previous written consent of the Governor."

The Commissioner of Lands is empowered by section 7 of the Ordinance to give such consent for and on behalf of the Governor.

After the plaintiff had performed its building obligation under the lease it agreed with the defendant company to sublet the plot to the defendant for two years from 1st September, 1951, at a rent of £60 a month, with an option to extend the period of the lease at the same rent. This agreement was a verbal one which was never reduced to a written document signed by the parties and it was subject to consent by the Commissioner of Lands. When the Lands Department was applied for consent to the sublease it refused to consent to the proposed sublease unless the rent did not exceed £500 a year, inclusive of Government's contribution in lieu of rates, rates and rent for the land. The question of the rent was made the only obstacle to the consent that was required.

The plaintiff refused to agree to any less rent than £60 a month and while the defendant at first was anxious to take advantage of the lower rent proposed by the Commissioner of Lands as a condition of the Governor's consent, it did not object to paying rent at £60 a month on any other basis than that to do so would be contrary to the decision of the Commissioner of Lands in the matter. When the plaintiff was adamant that it would not sublet at less than the agreed rent, the defendant's lawyers forwarded letters to the Department of Lands in an effort to induce consent to be given to the agreed terms. The defendant had been allowed to go into possession as from 1st November, 1951, on payment of a deposit of Sh. 7.200, i.e. the agreed rent for six months, but when the attitude of the Commissioner of Lands became clear that consent would only be given if the rent did not exceed £500 a year, further payments of rent were paid or tendered so as to cover rent at £500 a year up to 31st March, 1953, and at Sh. 1,200 a month thereafter up to 31st August, 1953.

The reason for the increase to Sh. 1,200 a month as from 1st April, 1953, was due to a change of view by the Commissioner of Lands who as a result of pressure from the defendant and a renewed application by the plaintiff made at the suggestion of the defendant, wrote to the plaintiff on 15th April, 1953, stating that "permission is given" to sublet the plot at the net monthly rental of £60. The defendant then refused to pay the rent of £60 a month retrospectively and obtained a letter from the Commissioner of Lands which stated that the rent of £60 was payable as from 1st April, 1953, but this was not notified by the department to the plaintiff.

The plaintiff refused to accept rent except on the basis that the proper rent was £60 a month as from 1st November, 1951. Eventually the defendants gave notice to quit as at 31st August, 1953, but they did not deliver the key of the premises until 4th September, 1953. The plaintiff now claims the balance of rent due up to 4th September, 1953, as at the rate of $£60$ a month from 1st November, 1951.

The defendant put forward the case that the original agreement was not for a lease at a rent of £60 a month, but for a lease at such rent as would be approved by the Lands Department, and that the plaintiff falsely represented that the Department had sanctioned a rent of £60 a month. I am satisfied that that case is not true on the facts, and that the agreement was for a lease of £60 a month subject to consent by the Commissioner of Lands. Nothing could be clearer on the evidence than that the plaintiff would not agree and did not agree to a rent of less than £60 a month. Rather than do that plaintiff wrote to the defendant that he was at liberty to leave the premises. Later plaintiff actually gave notice to quit. On each of these occasions the defendant refused to comply and even made efforts to get the consent of the department to a rent of £60 a month.

It is stated in evidence that a draft lease was prepared for signature, that it was for £500 a year as rent, that that was the first intimation the defendant had of the department's attitude, and that defendant's representatives were offered execution of that lease provided that they paid first in cash, not by cheque, the difference for two years between the rent received and £60 a month.

I do not believe that this evidence is true. It is well known that such practices have been adopted in order to evade rent restriction even though they are illegal and punishable under the Increase of Rent (Restriction) Ordinance, 1949. It is clear that the possibility occurred or was suggested to the witness Togossoff and was communicated to Mr. Firminger of the Department of Lands to induce him to obtain sanction for a lease at £60 a month. But I am not at all satisfied that the suggestion was made as suggested in evidence for the defence. I think it very unlikely that it would be made suddenly and at the time when the draft was to be signed. If spot cash was required it would have to be paid before execution of the lease or else it might never be paid and a warning to bring it would have been previously given. I don't accept it that the suggestion was made as defendant suggests, and, what is perhaps more important, it was never put into effect and so is really immaterial.

It was argued that the special condition requiring consent and the absence of consent complying with that condition renders any tenancy or agreement for tenancy unenforceable for illegality. There is no substance in this argument. The legal position is well settled. Such a covenant or condition in a lease does not invalidate a subtenancy created in breach of the condition and as between the parties to the subtenancy. The subtenancy may be determined if the head landlord can enforce the condition by forfeiture, but until that is done the subtenancy is not unlawful and is valid as between the parties to it. As the incidents of such conditions in England have been changed since The Landlord and Tenant Act, 1927, I will refer to an earlier text book. In Foa's General Law of Landlord and Tenant, 6th ed. at page 366, the learned author distinguishes a limitation from a condition. Each is of course dependant upon the occurrence of a contingency, but in the case for a limitation, the estate determines upon the happening of the contingency simpliciter without any further action being necessary, but as regards a condition the position is otherwise. "An estate upon condition endures beyond the time such contingency happens unless advantage be taken of the breach to make an entry or avoid the estate". Authority for the proposition is well settled and, according to Foa, goes back to 2 Blackstone 2 Commentaries at 166.

There is no statutory prohibition against assignment in breach of condition. If there had been as there is in Ireland under The Landlord and Tenant Act, 1860, the position would probably be different, but in this case there is merely a condition in the lease.

The fact that the registration is imposed by condition rather than by covenant does not prevent a subtenancy arising. This is clear from the extract from Foa, already cited and is very well settled. Instead of quoting from the many decided cases I will content myself with an extract from Halsbury (Hailsham ed.) Vol. 20 pp. 334 and 345.

"Such restraint may be created either by conditions making the lease void in those events or by covenant not to assign or under let. Whichever form the restraint takes an assignment in breach of the condition or covenant is not void. It is effectual to vest the term in the assignee but the lessor can treat the assignment as a cause of forefeiture provided, in the case of a covenant against assignment, that it is accompanied by a proviso for re-entry."

I consider that the earlier refusal of consent in this case merely on the question of the quantum of rent and in an attempt to enforce and create a form of rent control when there was no legal liability to rent control, was quite unjustified and was unreasonable. However, it is not necessary to consider whether the fact would have prevented a forfeiture, if a forfeiture had been sought or whether it would have justified a relief from forfeiture. The crucial fact is the fact that no forfeiture was applied or attempted to be applied during the occupation by the defendant.

It was argued that in as much as section 107 of The (Indian) Transfer of Property Act, 1882, requires that a lease of immovable property from year to year or for any time exceeding one year or reserving a yearly rent shall be made by a registered instrument, the plaintiff could not prove such a lease in the absence of a registered document. That proposition is entirely correct, but the section does not prevent the plaintiff from proving another lease. The section actually further provides, "All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession". Mulla's Commentary on Code of Civil Procedure, p. 657, delivery of possession". Mulla's Commentary on Code of Civil Procedure, 3rd ed. p. 657, says, "An oral agreement of lease accompanied by delivery of possession, if for more than one year is valid by delivery of possession for the first year and thereafter the lessee continuing in possession with the assent of the lessor becomes a tenant by holding over under section 116 of this Act". Section 116 provides, "If a lessee or underlessee of property remains in possession thereof after the determination of the lease granted to the lessee and the lessor or his legal representative accepts rent for the lessee or underlessee or otherwise assents to his continuing in possession, the lease is in the absence of an agreement to the contrary, renewed from year to year or from month to month according to the purpose for which the property is leased, as specified in section 106".

Section 106 so far as is material to the point provides: "In the absence of $\tilde{a}$ contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable on the part of either lessor or lessee by six months expiring with the end of the year of the tenancy; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month terminable on the part of either lessor or lessee, by fifteen days' notice expiring with the end of the month of the tenancy."

The extract which I have cited from *Mulla's Commentary* is in accordance with the decision of de Lestang, J, in this Court in Civil Appeal No. 22 of 1948, which was affirmed by the Court of Appeal in Jagat Singh Bains v. Ishmail Mohamed Chogley, (1949) 16 E. A. C. A. 27. The point raised by the defence therefore fails. It was argued that section 126 of the Crown Lands Ordinance Cap. 155 avoided any tenancy in this case. The section reads: "All transactions entered into affecting or conferring or purporting to confer, declare limit or extinguish any right, title, or interest, whether vested or contingent to, in or over land registered under this Part (other than letting for one year only or for any term not exceeding one year) and all mutations of title by succession or otherwise shall be registered under this Part."

The section does not apply to a letting for one year only or for any term not exceeding one year. It therefore does not apply to the facts in this case. The plaintiff could not establish a tenancy for more than a year, but the section does not prevent him from establishing a tenancy for a year under section 107, continued under sections 116 and 106 of The (Indian) Transfer of Property Act, 1882.

Reliance was placed by the defendant upon section 127 of the Crown Lands Ordinance, Cap. 155, but that section does not apply to a tenancy for one year only or for any time not exceeding one year, vide section 129 of the same Ordinance. In my opinion the effect is that while evidence cannot be given to prove a lease for more than a year, evidence can be given to prove an agreement for a lease and the effect of that agreement coupled with possession is to create a tenancy or as the Act and Ordinance call it a lease for one year only in the first instance continued under sections 116 and 106 of the Act as either tenancy from month to month or for successive single years according to the purpose of the original tenancy. In this case I think the continuance would be on a monthly basis under section 106 of the Act, and this appears to have been the view of each of the parties having regard to the terms of their notices to quit.

The plaintiff gave notice to quit as at the end of December, 1952, obviously because the Commissioner of Lands appeared to be at that time quite adamant that consent would not be given to the subletting at any rent exceeding £500 a year, and also because the defendant was tendering rent at that rate instead of at £60 a month. The defendant refused to accept the notice to quit and refused to vacate. Now it is contended that the plaintiff cannot sue for rent after the end of December, 1952, and that he can only sue for compensation for use and occupation. It is clear that the plaintiff could waive that notice and that it was prepared to do so if the defendant would pay the rent of £60 a month which the plaintiff alleged, and I have found, to be the rent that was agreed.

Thus at the suggestion of the defendant the plaintiff subsequently applied again to the Land Office for consent and this time consent was given and this was due to action taken by the defendant with the object of influencing the Commissioner of Lands to consent to a sublease at £60 a month. The real question between the parties was what was the rent agreed between the parties and what was the rent recoverable up to the 1st April, 1953,

I have found that the answer to both these questions is £60 a month and that the plaintiff never agreed to accept a rent of £500 a year. Throughout this period the defendant claimed to be a tenant and paid or tendered cheques as rent. The only possible rent, on my finding, that was agreed was £60 a month. The plaintiff showed its willingness to continue to have defendant as its tenant at that rent by applying for consent to a sublease at that rent after the date of the expiration of its notice to quit. That constitutes a waiver and the defendant by staying on and continuing to claim to be a tenant cannot now claim that there was no tenancy after 31st December, 1952.

Finally on the point of the rate of the rent, the defendant submits that the plaintiff is estopped from claiming more than Sh. 833/33 a month up to 31st March, 1953. I have shown that the absence of consent by the Commissioner of Lands does not prevent a higher rent being payable. This estoppel is claimed on another basis, but it appears to me that no basis for estoppel has been properly pleaded—a mere statement that the defendant will contend that the plaintiff is estopped from claiming more rent than Sh. 833/33 for the period under dispute is not adequate pleading of estoppel. I am under the impression that this matter was referred to at the first hearing and that I made a statement on the matter which was accepted by the parties. The statement was taken down by a shorthand writer but is not on the file.

The facts which are relied on as founding an estoppel appear to be that the defendant sent cheques to the plaintiff for rent up to the end of December, 1952, at the rate of Sh. $833/33$ a month and the plaintiff cashed or lodged the cheques. The plaintiff never admitted that the rent was Sh. 833/33 and not Sh. 1,200 a month, and though asked for receipts for the rent the plaintiff never gave them. Subsequently he returned cheques for rent at Sh. 833/33 a month for the period after 31st December, 1953. It is clear to me that this claim for estoppel must fail. I cannot see that plaintiff ever represented that the rent was Sh. 833/33, or that he was prepared to accept such a rent. On the contrary it is clear that the plaintiff never agreed to less that Sh. 1,200 or represented that it would accept less than that. It follows that I can find no evidence that the defendant acted on a representation by the plaintiff to that effect, and that such action was to his detriment.

There is dispute as to the date up to which rent is payable by the defendant who claims to have given up possession on 31st August, 1953, while the plaintiff claims that possesion was not given up until 4th September, 1953. Certainly the key was not returned to plaintiff until 4th September, 1953. It was posted on 3rd September, 1953, and received on 4th September. I find that possession was retained by the defendant up to and including the whole of 3rd September, 1953, and that it was given back to plaintiff early on the 4th September, 1953.

I find the account between the parties to be as follows: $-$

| Rent due from 1-11-51 to 4-9-53<br>Less paid $\cdots$ $\cdots$ $\cdots$ | | | | $Sh$ .<br>26,520 00<br>14.046 72 | cts. | |-------------------------------------------------------------------------|--|--|--|----------------------------------|------| | Leaving a balance due to plaintiff of | | | | $\therefore$ Sh. 12,373 28 | |

There will be judgment for plaintiff accordingly with costs and interest as prayed.