(COURT OF APPEAL)

GEORGE HILAL v. AHMED TALLAT

AC-REV-40-1958

 Principles

·  Equity—Equitable estoppel—Landlord accepting reduced rent—Element of mutual benefit

A tenancy agreement for a period of one year contained the following clause:
with the understanding that if neither par notifies two months before expiration of the first or the following year of his intention to the contrary, the lease shall be considered as renewed for a further period of one year.” The court construed this clause to make it impossible to extend the tenancy beyond the third year. The tenancy was not automatically renewable every year if no notice was given, and therefore the tenancy was a statutory and not a contractual one.
Upon the tenant’s alleging that a reduced rent which he was paying to the landlord should be taken as the rent legally due under the doctrine of equitable estoppel.
Held: The doctrine of equitable estoppel applies where both parties benefit from the arrangement, but not, as here, where there is no element of mutual benefit.

Judgment

Babiker Awadalla J. July 14, 1958:- this  is an application against the decision of the judge of the High Court, Khartoum, dated February 25, 1958, dismissing summarily an application for revision of the decree of the District Judge, Khartoum, dated December 16, 1957, ordering applicant to pay to respondent a sum of £S.138.400m/ms and to vacate and deliver possession  of house ii, Block 43, Khartoum, to respondent forthwith.

The house in question is owned by respondent but was let out to applicant under a written tenancy agreement dated November 1, 1953, for a period of one year ‘with the understanding that if neither party notifies two months before expiration of the first or the following year of his intention to the contrary, the lease shall be considered as renewed for a further period of one year.” The rent payable under the agreement was £S.13.500m/ms but it seems that applicant paid at that rate until March  1954 and then reduced his monthly payments to £S.10.500m/ms, apparently under the impression that the latter sum was the standard rent allowable under the Rent Restriction Ordinance.

At the time of the institution of the suit the respondent (plaintiff in the action) v a Government official at Atbara and due to retire a few months after. He brought this action for arrears of rent (being the difference between £S.13.500m/ms and £S.10.500m/ms. for more than three years) and also for eviction on the ground that he (respondent) now requires the house for his own occupation.

At the hearing, applicant asserted that the standard rent is only £S.l0 and the two important questions for consideration by the courts were:

(a) the standard rent payable in accordance with the provisions of the Rent Restriction Ordinance, and (b) whether the landlord was entitled to recovery of possession on the ground that he required the house for his own occupation.

The second point above need no longer trouble us as we are told the premises have already been vacated by applicant and possession thereof delivered to respondent.

As regards the first point, the learned District Judge found in favour of respondent that the rent due and payable under the Rent Restriction Ordinance was the original rent provided for in the tenancy agreement. He says that because no evidence was adduced to prove that the standard rent was either £S.13.500m/ms as claimed by respondent or £S.10.500m/ms. as alleged by applicant, then the standard rent should be deemed to be the contractual rent.

The grounds of this application put forward on behalf of applicant so far as we can make them, are as follows:

(i) that the learned District Judge was wrong in law in not calling upon respondent to produce a certificate by an architect as required by Rent Restriction Ordinance, s. 17, and

(ii) that if the contractual rent is to be deemed to be the standard rent, then the figure should be £S.10.500m/ms because that is the contractual rent.

Both parties were represented by advocates, applicant by advocate Henry Riad and respondent by advocate Rashid El Tahir. Advocate Riad contends that respondent had already been called upon in February 1954 to comply with the provisions of Rent Restriction Ordinance s. 17, but he failed and that it was only by reason of that failure that applicant started paying at the reduced rate which, in his opinion, is the standard rent. He further submits, in support of (ii) above, that as respondent had accepted payment at the lower figure for so long a time, that figure becomes the contractual rent for all intents and purposes. He cites Woodfall, Landlord and Tenant 547, where it says: “But where a landlord makes a promise to a tenant to accept a lower rent while certain Conditions subsist, intending thereby to create legal relations between them, and the landlord knows the promise will be acted on and it is in fact acted on by the tenant, the landlord will not be allowed to act inconsisently with the promise, which may for the period in question be relied on as a defence to a claim for rent at the original rate even though it was not made for consideration and even though the effect of the arrangement made is to vary the terms of a contract under seal by one of less value.”

On behalf of the respondent it was contended as regards (i) above that section 17 can only be invoked by a tenant and not by the court, and if the landlord fails to comply with the requirements of that section, he may be committing an offence, but he cannot be precluded from giving his own sworn statement in proof of the standard, nor should he be confronted by adverse presumptions by reason of such failure.

As regards (ii) that the figure of £S.10.500m/ms cannot be taken to be the rent payable in as much as even if it were agreed to by respondent the absence of consideration for accepting such a lower sum will render the agreement not binding upon respondent and the full rent will still be recoverable.

We regret to say that this case is much too simple and ought not to have given rise to any confusion in the judge’s mind. It rests wholly on the Rent Restriction Ordinance the provisions of which are clear and comprehensive. We believe that the difficulty which beset this case arises from a failure to appreciate the true nature of the tenancy agreement. Both the learned District Judge and counsel for both parties were under a misconception as to the true interpretation of the proviso to clause 1 of the tenancy agreement quoted above. The important words in that proviso are “if neither party notifies (the other) two months before the expiration of the first or the following year.” This makes it impossible to extend the tenancy beyond the third year even if none of the parties gives notice of termination at any time. The reason for this is that such clause is operative during the first and second years only and if at the end of the .second year no notice is given, then the tenancy will terminate at the end of the third year by effluxion of time, being renewable for one year only. In other words it is not automatically renewable every year if no notice is given. The tenancy is therefore a statutory and not a contractual one and there is therefore no need for us to go into the contention of applicant’s advocate regarding the lower rent, which contention is only applicable to contractual tenancies, nonetheless we would like to point out that the citation from Woodfall is in fact the ratio decidendi in Central London Property Trust Ltd. v. High Trees House Ltd. [1947] 1 K.B. 130  and the proper meaning of the quotation from the said authority will not be appreciated unless the facts of that case are given.

In that case, by a lease under seal dated September 24, 1937, the plaintiffs let to defendants a block of flats for ninety-nine years at a ground rent of £S.2,500m/ms a year. Owing to war considerations and lack of tenants the defendants were unable to pay the rent and it was agreed that the ground rent be reduced to half its amount. By 1945 business flourished and the flats were all again occupied and the plaintiffs claimed the original rent. It was held that the agreement of 1940 was binding but that it only remained operative so long as the conditions giving rise to it subsisted and that on their ceasing to do so in 1945 plaintiffs were entitled to recover the ground rent claimed at the rate reserved by the lease.

Denning J. said that as the special circumstances showed that the plaintiffs intended to be bound by that promise and as the defendants relied on this fact, then the plaintiffs were in equity so bound. We think that if the agreement in Central London Property Trust Ltd. v. High Trees House Ltd. is closely examined, it would be seen that the reduction was in fact made for the benefit of both parties and that plaintiffs in that case would certainly never have agreed to a reduction were it not for the lack of demand for a house in London in 1940. It was that element of mutual benefit which in our view distinguishes that case from the present one. That disposes of the basis of applicant’s contention to the effect that the rent actually paid has now become the rent legally due and should, in the absence of evidence to the contrary, be deemed to be the standard rent.

I have dealt with this question at length for the purpose of disposing of the contention of applicant as regards the reduced rent. On the question of the standard rent, it would certainly make not the slightest difference whether the tenancy is contractual or statutory and increases over the standard rent are, by the provisions of Rent Restriction Ordinance, s.10 irrecoverable notwithstanding any agreement to the contrary. The provisions of the Rent Restriction Ordinance are therefore paramount and no contracting out of them can be allowed.

It is therefore the duty of the court to proceed to ascertain the standard rent in accordance with the criteria provided for in section 4 of the Ordinance. Section 17 does not preclude the court from obtaining technical evidence of the value of the property if the party on whom the onus lies fails to produce such evidence. A court can always appoint a commission under Rent Restriction Ordinance, Ord. XVIII, r. 3. for ascertaining the value of the premises in question for the purpose of the Rent Restriction Ordinance. In the present case, as the tenancy is a statutory one and as the rent actually paid is £S.100.500m/ms the onus is certainly on the respondent (plaintiff) to prove that the standard rent is £S.13.500m/ms As respondent has now failed to produce such evidence, we are of opinion that the case be referred back for rehearing with a view to obtaining such evidence.

This application is therefore allowed with costs and the decree of the District Judge hereby reversed and case returned back for rehearing.

M. A. Abu Rannat C.J. July 14. 1958 :—I concur.