Tecla Investments Limited v Trustees of the Examination Council of Zambia Pensions Scheme (APPEAL NO. 116/2017) [2019] ZMCA 413 (19 November 2019)

• IN THE COURT OF APPEAL APPEAL NO. 116/2017 HOLDEN AT LUSAKA (Civil Jurisdiction) -7'7- - ~C'-aJ\J\,,; '?· c,o\.lR1 or= APPfA BETWEEN: TECLA INVESTMENTS LIMITE· AND ;:; '1 l ' ) ., i:]•J .. 1 n . -"'--... ~~-.. __ ,~;;:,,.-• 'I hi=G!STRY 2 , _.-~~y~ APPELLANT THE TRUSTEES OF THE EXAMINATION COUNCIL OF ZAMBIA PENSIONS SCHEME RESPONDENT CORAM: MAKUNGU, KONDOLO SC AND MAJULA JJA On 28th March, 2018 and 19th November, 2019 For the Appellant : Mrs. 0. Chinua of Messrs Ranchod Chungu Advocates For the Respondent : Messrs Sharpe & Haward Legal Practitioners JUDGMENT KONDOLO SC, JA delivered the Judgment of the Court LEGISLATION & TEXT REFERRED TO: 1. The Landlord and Tenant (Business) Premises Act, Chapter 193, Laws of Zambia 2. The Halsbury's Laws of England Vol 28, 3 rd Edition J2 of 13 CASES REFERRED TO: 1. Attorney General v Marcus Kapumba Achiume (1983) ZR 1 2. Valentine Kayope v Attorney General SCZ/ 18/2011 3. Kajimanga v Chilemya (Appeal No. 50/2014) [2016] ZMSC 189 This appeal emanates from an Originating summons in which the Respondent sought possession of its property from the Appellant and demanded mesne profits from 1st August, 2012 to the date of the Summons. The Parties entered into a lease agreement relating to Stand No. 3878, Lusaka situate at Kwacha Road, Olympia Park for a period of 5 years commencing on 11 th May, 2006. The Appellant continued operating from the premises after the lease expired and alleges that it continued paying the same rent on the same conditions of the expired Lease. On 13th January, 2012, the Respondent issued a Statutory Notice terminating the tenancy on grounds that the Respondent intended to carry out substantial construction work on the premises which would only be possible if the Appellant yielded possession. The Appellant resisted and the Respondent decided to commence the action which is the subject of this Appeal. J3 of 13 .. In its affidavit in opposition, the Appellant held a strong view that the purported works could still be done whilst it was in occupation of the premises. It was also attested that the Respondent had been looking for a way to evict the Appellant from the premises and had in fact advertised the premises for prospective tenants . It was further deposed that the Respondent had not undertaken any works on the property as it claimed and that it was in fact the Appellant who had solely maintained the premises because the Respondent had resisted any requests to effect repairs. The Respondent stated that the Appellant had in fact, transmitted a new Lease Agreement which the Appellant approved, executed and sent to the Respondent for finalising but the Respondent didn't return the copies. It instead informed the Appellant that the Lease Agreement had expired and the real issue was that it wished to carry out substantial works which required the Appellant to vacate the premises. Lastly it was deposed that the Appellant had, throughout the term of the lease, consistently paid rentals promptly. It it's Judgment, the lower Court found that the notice to terminate the tenancy was in the correct form and met all the statutory requirements . She further found that the reason given for possession of the property was in compliance with Section 1 l(l)(f) of Landlord and Tenant (Business) Premises Act . The learned trial Judge also found that the Appellant failed to oppose the J4 of 13 • termination in the manner prescribed by section 6(3) by not duly notifying the Respondent that it was not willing to give up the premises and as such, going by the provision of the law under Section 10(2), an application to oppose the termination, by a Tenant who fails to notify the landlord as required, could not be allowed . The trial Judge therefore granted vacant possession to the Respondent and ordered that the Appellant be given an interim tenancy of three months, to wind up its affairs, on terms to be agreed with the Landlord. The lower Court granted the relief for mesne profits and interest as prayed. Lastly, the trial Judge made an Order that monies owed to the Appellant for repairs, be deducted and that interest be applied on the balance. The Appellant then launched an Appeal assailing the Judgment of the lower Court on 3 grounds, namely: 1. The Learned Judge erred in law when she made the determination that the Appellant did not notify the Respondent, as Landlord, that it intended to oppose the Notice to terminate the Tenancy when the Court was fully aware that the legality and validity of the Tenancy was itself a matter that was a subject of contention under cause 2008/HP/1072 before another Judge. 2. The Learned Judge erred in law and fact in the determination that the Respondent had sufficiently shown that the premises situate JS of 13 Stand No. 3878 Lusaka needed "substantial work or construction" in the absence of evidence to support that determination. 3. The Learned Judge erred in law in awarding mesne profits and interest (from 1st August 2012 to date) to the Respondent when the Appellant had been paying the amount that represented rentals (ZMW134,500 per month) as stated in the Lease Agreement for the occupation of the property at Stand No. 3878, Lusaka. Both parties filed heads of argument. On ground 1, learned counsel for the Appellant submitted that on account of constant threats by the Respondent that the Appellant vacate the property, the Appellant commenced a suit under Cause No. 2008/HP / 1072 asking the court to determine the legality and validity of the tenancy. That the trial judge was aware that matter was presently before the Supreme Court as it was contained in the summons in support of the application for Review at page 81 of the Record of Appeal. With regard to ground 2 the Appellant submitted that this Court has the power to reverse findings of fact where the Court below has made an unbalanced evaluation of the evidence before it and cited the case of Attorney General v Marcus Kapumba Achiume (1l. It was in that vein argued that the court did not properly evaluate the evidence when in the absence of any evidence it found that the Respondent had sufficiently shown that the premises needed substantial work or construction. J6 of 13 It was further argued that the Court should have considered the Appellant's evidence that after the lease was signed contrary to the Appellants expectations, the premises were in a state of disrepair and the parties agreed that the Appellant would carry out the necessary works and the cost would be deducted from the rentals. The sum total of the rest of the arguments on this ground was that the premises are actually tenantable and in a good state of repair. We were urged to uphold this ground of appeal. On ground 3, Counsel for the Appellant submitted that when awarding the Respondents mesne profits, the lower Court overlooked the evidence of the Appellant that rentals had been paid as agreed in the lease agreement and which rentals were accepted by the Respondent. The rental statement was exhibited and the Respondent conceded that the rental statement it had prepared had incorrect figures therefore the Court erred in awarding mesne profits . In response to ground 1, learned Counsel for the Respondent submitted that Cause 2008 /HP/ 1072 which was now under consideration by the Supreme Court under Cause No. SCZ/8/093/2012 has no bearing on the proceedings before this Court. That the trial Court was on firm ground when it ruled that the Appellant slept on its rights, if any, by failing to legally oppose the Notice of Termination and for that reason this ground ought to be dismissed. J7 of 13 Under Ground 2, it was argued that the Appellant failed to demonstrate how the evidence in support of the finding that substantial works needed to be carried out, was not sufficient. It was submitted that the affidavit in support clearly stated that the there was a need to carry out substantial works on the property and issued the Appellant with a statutory notice which the trial court found to have been properly issued and unopposed . It was further submitted that the Affidavit in opposition to the Originating Summons only spoke of repairs that were undertaken before the Appellant occupied the property. Counsel contended that the Respondent did indicate in the Notice of Termination the purpose of the said termination and that, in any event, given the fact that the Respondent has taken possession of the property, upsetting the findings of the lower Court would have no practical effect on the parties. The gist of the argument in response to ground 3, was that the Respondent complied with the law on taking possession of its property by issuing a notice to terminate the tenancy and seeking an order of possession from the court. The Appellant failed to give up possession and as such is liable to pay mesne profits as was decided in Kayope v Attorney General 121. JS of 13 Learned Counsel for the Respondent filed a notice of non-appearance and was thus absent at the hearing. Mrs. Chirwa attended on behalf of the Appellant and in reply to the Respondent's arguments, submitted that the lower Court erred when it accepted that the Respondent issued the notice to terminate the tenancy because it intended to effect substantial repairs. The gravamen of her argument was that as shown at page 348 of the Record of Appeal, under cross examination, the Appellants witness PWl accepted that the notice to terminate was issued after the Respondent had advertised for expressions of interest in the property to members of the public. She opined that the reason given was therefore just an excuse to get the Respondent off the property. We noticed that the exhibit referred to in the affidavit in opposition was a copy of the advert but was not on the record of appeal. We further observed that none of the exhibits referred to in the affidavit in opposition had been produced in the record of appeal. Counsel admitted the error but offered no solution to the problem. She repeated her submissions in relation to the Tenancy being subject of another case which fact the lower Court should have considered i.e. that once the notice to vacate was issued, the Appellant commenced proceedings under cause 2008/HP/ 1072 which matter was now before the Supreme Court pending determination as Cause No. SCZ/8/093/2012 and the outcome of which, according to her, would have a direct bearing on any proceedings in relation to the subject property. Counsel, however, admitted that the Appellant did not Ir challenge the notice to vacate as provided by the Act but she nonetheless insisted that the issue was sufficiently challenged in the litigation pending determination in the Supreme Court. J9 of 13 In response to Ground 3, she stated that the Court erred in ordering the payment of mesne profits when throughout the proceedings it was accepted that the Appellant had continued paying rentals and at page 350 of the Record of Appeal, the Respondent contended that the rental statement was incorrect. We have considered the Record of Appeal and the submissions by Counsel and shall proceed by dealing with grounds 1 and 2 together and address ground 3 on its own. Grounds one and two are in relation to the validity or legality of the tenancy and the manner in which the tenancy was terminated. The Court in the case under Cause No. 2008/HP / 1072 found that the Lease commenced on 11 th May, 2006 and was to run for a duration of 5 years, terminating on 11 th May, 2011. That is the Judgement the Appellant contends is subject of an Appeal yet to be determined by the Supreme Court. The issues in that cause were that the lease was not duly perfected by registering it at the Lands and Deeds Registry and the other issue was with regard to the proposed increase in rentals. In the Judgment, at page 94 of the Record of Appeal, Musonda J, as he then was, found that JlO of 13 • despite the delay in registration of the lease, the Lease was valid for a duration of 5 years . This fact is supported by th e Appellant's own Affidavit in Support of their application to Review the lower Court's Order of Possession, at page 75 of the Record of Appeal. Elliot Goledema deposed to t h e Affidavit and stated as follows : "The said Tenancy Agreement was for a period of five (5) years and was due to terminate on 10th May, 2011. On that date the Applicant remained in occupation but without a formal lease in place because the Respondent refused to execute a further Agreement." Despite the Appellants assertion that after the lease expired it had executed another lease sent to it by the Respondent and was waiting for the return of its copy, the fact remains that the Appellant opted to issue a notice to terminate, on 13th January, 2013 and the Appellant did nothing to oppose the notice. The Appellant holds the view that the lease, being subject of an Appeal, could not be terminated in the way it was done by the Respondent. We note from the Record that there was no application to stay the Judgment that validated the lease and the Appellant remained in possession of the premises thereby being a Jll of 13 • de facto tenant. This being a tenancy for business premises, it fell squarely within the ambit of the The Landlord and Tenant (Business) Premises Act and the Respondent opted to issue a Statutory Notice of Termination giving the Appellants 6 months to vacate. It was at this crucial moment that the Appellant ought to have opposed the termination in the manner prescribed by the Act. The trial court found that the statutory notice to terminate the lease issued by the Appellant complied with the prescribed form under the Act, as well as with all the relevant provisions with regard to terminating the lease. The trial court reproduced the provisions of the Act and her reasoning is found on pages J 17 to J2 l. The trial Court further observed that the Appellant had failed to respond to the statutory notice as provided by section 6 (3) of the Act. The said section provides tenants with an avenue for challenging a statutory notice to terminate a tenancy. The trial Judge correctly noted that in the face of failing to comply with section 6 (3) aforesaid, opposing the termination in an affidavit in opposition, as done by the Appellant did not serve much purpose. It was also observed that, in any event, the Respondent had, in its affidavit in reply, opposed the allegations raised by the Appellant. In view of the fact that the statutory notice was not challenged, we cannot fault the trial judge for accepting the reason provided by the Respondent for terminating the tenancy and she was on firm ground when she ordered that the .. J12 of 13 • Appellant yield vacant possession of the premises to the Respondent. Grounds one and two are accordingly dismissed. With regard to ground 3, the Supreme Court considered the issue of mesne profits in the case of Kajimanga v Chile mya(3l in which they cited Halsburys Laws of England, Volume 27, 4th Edition at parargraph 258 as follows; "The Landlord may recover in an action for mesne profits the damages he has suffered through being out of possession of the land, or if he can prove no actual damage caused to him by the defendants trespass, the landlord may recover as mesne profit, the amount of the open market value of the premises for the period of the Defendants wrongful occupation. In most cases, the rent paid under the expired tenancy will be strong evidence as to the open market value. Mesne profits being a type of damage for trespass can only be recovered in respect of the Defendants continued occupation after the expiry of his legal right to occupy the premises. The landlord is not limited to a claim for the profits which the defendant has received from the land, or those which he himself has lost." The Appellant continued in occupation of the premises after receiving the statutory notice of termination of tenancy on 31 st July, 2012. The Respondent is • t . t Jl3 of 13 therefore entitled to mesne profits equivalent to the monthly rent for each month that the Appellant remained in occupation of the premises from 1st August, 2012 until the date vacant possession was yielded to the Respondent and we so order. Any rent paid during that period ought to be offset against this award. All three grounds of appeal are dismissed with costs to the Respondent. The matter is referred to the Deputy Registrar for assessment of outstanding rentals and mesne profits. The amount found due shall attract interest at the average short-term bank deposit rate from date of writ to date of Judgment and thereafter at the current bank lending rate as determined by Bank of Zambia until date of payment. COURT OF APPEAL JUDGE M. M. KONDOLO SC COURT OF APPEAL JUDGE B. M. MAJULA COURT OF APPEAL JUDGE