EL BESHIR AHMED EL MEDANI, Applicant-Plaintiff-v. OSMAN ZA YY AD, Respondent-Defendant
Landlord and tenant-Improvements to property-Lease by mortgagee to mort-
gagor-Action for rent and set-of] by tenant for expenditures on property
Mortgage and charge-Mortgagee in possession-Status as landlord-Ac-
count-When taken-Purpose of statutory provision
1. Where a mortgagee in possession has let the mortgaged property to
the mortgagor, an action by the lessor against the lessee for rent and a
set-off by the lessee for an indemnity in respect of expenditures must be
determined by the law of landlord and tenant, and the situation is not al-
tered by the fact that the parties are also mortgagee and mortgagor.
2. In an action for rent due the mortgagee-lessor the mortgagor-lessee
may set-off against the claim for rent any sums expended on the property
which by the terms of his tenancy he is entitled to recover from the land-
lord.
3. The provisions of section 123 of the Civil Justice Ordinance 1929,
providing for an account to be taken between a mortgagee in possession
and the mortgagor, do not apply until the termination of the mortgage.
4. The purpose of section 123 of the Civil Justice Ordinance requiring
an account to be taken between a mortgagee in possession and the mort-
gagor is to prevent the mortgagee from making a larger profit on the trans-
action than the permissible rate of interest.
Civil Justice Ordinance 1929, s. 123.
Review
The Province Judge, Blue Nile Province, applied for leave to
review a decree in an action for rent where the tenant (the defendant)
had been permitted to set-off certain expenses incurred by him on
the property. The defendant's right to do this was questioned be-
cause he was in fact also the owner of the property. He had become
a tenant by having mortgaged the property to the plaintiff, who at
some point became a mortgagee in possession, and then leased the
property back to the defendant.
June 2, 1934. Owen C.l.: I cannot give you leave to review.
Please see section 123 of the Civil Justice Ordinance. The account
that is taken between mortgagor and mortgagee is taken only to
prevent the mortgagee in possession from making a larger profit on
the transaction than the rate of interest allowed by the court. It
* Court: Owen CJ.
does not and cannot affect the capital sum until it is found that the
net profits exceed that rate of interest. The mere fact that a
mortgagee in possession has got to account for certain things does not
mean that he has got to pay them. or that he can recover them from
his mortgagor.
He is therefore entitled to rent from his tenant, whether that
tenant is his mortgagor or not. In the same way, if the tenant has
expended certain sums in such circumstances that under the terms of
his tenancy he has the right to be indemnified by his landlord, the
fact that his landlord happens to be his mortgagee makes no difference.
All it means is that when the account under' section 123 comes to
be taken, the mortgagee can set-off against the rents he has received
the amount he has to pay by way of repairs and taxes in order to
arrive at his net profits throughout the period of his possession.
The whole case depends upon the terms of the tenancy between
the landlord (the mortgagee) and the tenant (the mortgagor). This
is an action between landlord and tenant; it has nothing to do with the
account called for under section 123 of the Civil Justice Ordinance.
Leave to review refused