MS Advocates LLP v China Wu Yi (Kenya) Company Limited & another [2022] KEBPRT 749 (KLR)

MS Advocates LLP v China Wu Yi (Kenya) Company Limited & another (Tribunal Case 869 of 2020) [2022] KEBPRT 749 (KLR) (Civ) (16 September 2022) (Ruling)

Neutral citation: [2022] KEBPRT 749 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Civil

Tribunal Case 869 of 2020

Andrew Muma, Vice Chair

September 16, 2022

Between

MS Advocates LLP

Tenant

and

China Wu Yi (Kenya) Company Limited

Landlord

and

Dollar Auctioneers

Auctioneer

Ruling

Parties and Representatives 1. The applicant Ms Advocates is the tenant and rented space on the suit property on suite a1, first floor, Wu Yi Plaza,Nairobi. (hereinafter known as the ‘tenant’)

2. The firm of Ms Advocates LLP represent the applicant/tenant in this matter. info@mslaw.co.ke

3. The 1st respondent China Wu Yi is the landlord and rented out space for the business in the suit property situated on Suite A1,first floor, Wu Yi plaza,Nairobi. (hereinafter known as the ‘landlord’)

4. The firm of Wambugu & Muriuki advocates represent the landlord in this matter.wakili@wmklaw.co.ke

The Dispute Background 5. The landlord and the tenant entered into a tenancy agreement in January 2016 that was for a period of two years and renewed the same in 2018 and further in 2020. Upon the lapse of the same, the parties did not formally extend the lease but instead entered into negotiations to convert the same to a sale and purchase agreement.

6. The sale and purchase agreement did not take off and thereafter the landlord demanded for rent arrears from the tenant. Additionally, the landlord served the tenant with a notice to terminate tenancy dated August 27, 2020.

7. In opposition to the above notice the tenant moved this tribunal by way of a reference dated September 20, 2020 and a notice of motion application under certificate of urgency dated February 18, 2021.

The tenant’s claim 8. The tenant filed a reference dated September 20, 2020 in opposition to a notice to terminate tenancy served upon them by the landlord.

9. The tenant filed an application dated February 18, 2021 seeking that the landlord be restrained from levying distress for rent through a proclamation notice issued by the landlord.

The landlord’s claim 10. The landlord has filed a replying affidavit dated February 26, 2021 in opposition to the reference by the tenant.

List of issues for determination 11. It is the contention of this tribunal that the issues raised for determination are as follows;I.Whether there are arrears owed by the tenant to the landlord and if so how much?II.Whether the sale agreement between the parties affected the tenancy relationship?III.Whether the rent value as assessed by the landlord is the rightful market value?

Analysis and findings Whether there are arrears owed by the tenant to the landlord and if so of how much? 12. It is clear that in exercising the powers conferred under the landlord and tenant (Shops, Hotels and Catering Establishments) Act, this honourable court must restrict itself to the powers conferred to it under section 12 of the said Act.

13. Section 12 (1)(b) of the landlord and tenant (Shops, Hotels and Catering Establishments) Act clearly stipulates as follows:12. A tribunal shall, in relation to its area of jurisdiction have power to do all things which it is required or empowered to do by or under the provisions of this act, and in addition to and without prejudice to the generality of the foregoing shall have power—(b)to determine or vary the rent to be payable in respect of any controlled tenancy, having regard to all the circumstances thereof;

14. In the present case, one of the main issues in contention is on the arrears owed by the tenant to the landlord. The landlord and the tenant had at some point in the course of the tenancy relationship intended that the tenancy be converted to a sale and purchase of the premises. The tenant alleges that there was an agreement between them that rent would not be paid during the subsistence of the sale and purchase agreement.

15. The landlord has in opposition to the above averred that the agreement was under negotiation and as such it was non-binding on the parties. This then should not be used as a reason for them not to pay the rent amount seeing as the tenant was still in occupation of the premises.

16. The main question before the tribunal in determining the arrears owed by the tenant is whether the intended sale agreement between the parties affected the tenancy relationship and as such whether the tenant was entitled to a rebate during the negotiations for the sale.

17. In determining this issue the tribunal wishes to rely on the case ofHoward & Company (Africa) Ltd vs Burton (supra as was cited in the case ofLucy Njeri Njoroge v Kaiyahe Njoroge[2015] eKLR where the court sated that;“We are thus left with the simple test that a situation must arise which renders performance of the contract ‘a thing radically different from that which was undertaken by the contract’: see Davis; per Lord Radcliffe. To see if the doctrine applies, you have first to construe the contract and see whether the parties have themselves provided for the situation that has arisen. If they have provided for it then the contract must govern. There is no frustration. If they have not provided for it, then you have to compare the new situation with the old situation which they did provide. Then you must see how different it is. The fact that it has become more onerous or more expensive for one party than he thought, is not sufficient to bring about frustration. It must be positively unjust to hold the party bound.”

18. The above case allows for consideration of circumstances under which the terms of an existing agreement may be varied or frustrated due to unforeseeable situations that necessitate the same. In this case, when the parties entered into the tenancy agreement it is unlikely that they reasonably foresaw that the same would be at some point be converted to a sale and purchase agreement. The same had not been provided for in the existing tenancy agreement and arose in the course of it.

19. This then puts to question the fairness in expecting both parties to carry out their obligations as per the agreement despite the substantive deviation from the same. The tribunal is of the opinion that expecting the tenant to pay rent during the negotiation period would be an injustice to them and should not be occasioned on the mere fact that the agreement did not materialize. The parties reasonably believed that the tenancy was to convert to a sale and purchase agreement.

20. Additionally, the tenant has represented that the parties had entered into a gentleman’s agreement in which the landlord had agreed to the tenant not paying rent for the period during which the sale and purchase negotiations were ongoing. The tenant has demonstrated that the landlord did not demand for rent payment during this period and only proceeded to demand the same upon the collapse of the negotiations. They have further shown that it was due to this representation by the landlord that they did not make any rent payments during this period.

21. In the case of Benjamin Airo Shiraku v Fauzia Mohammed HCC 272 of 2011 Justice Havelock (as he then was) it was stated that“Where one party by his words of conduct made to the other a promise or an assurance which was intended to affect their legal relations and to be acted on accordingly then once the other party has taken him at his work and acted on it. The one who gave the promise or assurance cannot afterwards, be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him.But he must accept the legal relations subject to the qualification which he himself has so introduced even though it is not supported in point of law by consideration but only his word.”

22. The above case prevents the landlord from going back on their agreement with the tenant. The tenant placed reliance on the same to not pay the rent for the sale and purchase negotiation period.

23. The above notwithstanding, the tribunal acknowledges the fact that the tenant paid the arrears owed to the landlord at the rate of 50% since they had filed a reference before this tribunal requesting for a reassessment of the rent value. The landlord avers that the same should have been cleared in full since the tribunal had not pronounced itself with regards to the reassessment.

24. This tribunal finds that institution of a claim before the tribunal should not serve as an impediment to parties in a tenancy relationship fulfilling their obligations. in this case, the tenant’s reference did not serve as a reason for them not meeting their obligations to pay rent or clear the arrears. The arrears accrued had been accrued as per the terms of the tenancy and the same accrued before the institution of the proceedings at the tribunal. As a result, the tenant did not have the authority to accord themselves the 50% rebate on their outstanding arrears. Any rebate or reduction would have been applicable upon a favorable determination by the tribunal of the same.

25. In relation to the payable rent as per the market rate, the Tribunal has perused the two valuation reports as presented by the tenant and the landlord as well as the examination of the valuers in court. The tribunal has assessed the same and is persuaded that there were inconsistencies in the testimony by the landlord’s valuer. The main issue being that the valuer did not access the suit property prior to conducting the valuation, as such they did not have a depiction of the said premises while finding comparable premises.

26. The tenant has raised the issue of costs incurred while they were acting in their capacity as advocates for the landlord both during the sale and purchase negotiations as well as during previous transactions. They have additionally filed a bill of costs to be assessed. The tenant intended that the rent arrears owed to the landlord if any be offset by the legal fees owed to them by the landlord.

27. As stated above, in dispensing off its obligations this tribunal must limit its actions to the powers conferred upon it bycap 301under section 12. A perusal of the same clearly shows that the tribunal does not have the jurisdiction to address the issue of legal fees as incurred between and advocate and their client. In the same light since the tribunal cannot assess the said costs an order that the rent be offset from the same would be futile and amount to the tribunal acting ultra vires. The same should be forwarded to the rightful forums for assessment.

28. In addition to the foregoing, the tribunal acknowledges that the relationship between the parties has since terminated and the tenant vacated in July 2021. This then questions whether the tribunal can pronounce itself on the issue of arrears. It is my finding that since the same accrued during the subsistence of the tenancy, the landlord is entitled to the same.

Ordersa.The upshot is that the tenant’s reference dated September 20, 2020 and application dated February 18, 2021 is hereby allowed in the following terms;b.Rent arrears to be paid as per the tenant’s valuation report at the rate of Kshs 140,245. 00/=c.No rent shall be payable from the date of signing the sale agreement to the date the negotiations for sale collapsed being from November 30, 2019 to August 24, 2020. d.The tenant vacated the premises, as a result the landlord shall file a claim for damages in the correct forume.Each party shall bear their own costs.

HON A. MUMAVICE CHAIRBUSINESS PREMISES RENT TRIBUNALRULING DATED, SIGNED AND DELIVERED VIRTUALLY BY HON A. MUMA THIS 16TH DAY OF SEPTEMBER, 2022 IN THE ABSENCE OF THE PARTIES.HON A. MUMAVICE CHAIRBUSINESS PREMISES RENT TRIBUNAL