(COURT OF APPEAL)

AMIN EL SAYED ABBAS v. ABDEL HAMID ALl IDRIS

AC-REV-437-1968

Principles

Landlord and Tenant—Standard rent—Landlord has the right to increase the contractual rent to standard rent upon termination of the contractual tenancy—Rent Restriction Ordinance, s. 19 (2)

  Landlord and Tenant—Eviction—No eviction when there is a genuine and honest dispute about the standard rent—Rent Restriction Ordinance, s. 11 (a)

(i) According to Rent Restriction Ordinance, s. 11 (a), the landlord is entitled, on terminating the contractual tenancy, to give notice raising the contractual rent to the standard rent.

(ii) Where there is a genuine and honest dispute about the standard rent, an order of eviction ought not to be granted, because the tenant has to pay the standard rent after being declared. Therefore the difference between the contractual rent and the standard rent declared is not rent lawfully due within the meaning of Rent Restriction Ordinance, s. 11 (a).

Advocates:  Salah Marhoum for the applicant

Suleiman Dahab for the respondent

Judgment

Mahdi Mohamed Ahmed J. April 15, 1970:—Respondent-plaintiff instituted CS/1136/1967 against applicant-defendant for the recovery of arrears of rent and eviction. The facts of the case were briefly as follows:

Applicant is the tenant of the ground floor of respondent’s house at a monthly contractual rent of £S.33.000m/ms. On January 24, 1967, respondent served notice on applicant of increase of rent to £S.49.950m/ms. as from March 1, 2967. The new increased rent was alleged to be the standard rent. Applicant refused to pay the increase and continued to pay the contractual rent. Respondent thereupon sued for the recovery of the increase as arrears and eviction The points for determination at the trial court were to ascertain the standard rent and to pronounce upon respondent’s right to increase the rent The trial court found that the standard rent of the premises is £S.47.o88m/ms. and held that respondent is entitled by notice to increase the rent to that figure. The application to the Province Judge against such holding was summarily dismissed. Hence the present application.

In my opinion the point whether the landlord is entitled to increase the contractual rent if it turned out to be less than the standard rent is a point of law which would have disposed of the dispute and therefore ought to have been tried first. I therefore propose to deal with this point first.

The lower courts proceeded on the principle of reciprocity. If the tenant is empowered to reduce the contractual rent to the standard rent, a fortiori the landlord is entitled to increase it, as equality is equity. But the lower court lost sight of the object of the Rent Act which is the protection of the tenant and not the landlord. In protective legislation there is no scope for the application of the concept of reciprocity.

Again the Rent Restriction; Ordinance, s. 19 (1), provides that, where a contractual tenancy is converted by the operation of the statute into a statutory one, the tenant is entitled to the benefit of all the terms and conditions of the original contractual tenancy so far as the same are consistent with the provisions of the said Ordinance. The fact that the contractual rent is less than the standard rent does not render the stipulation contrary to the provisions of the Ordinance as section 5 prescribes the maximum rent payable. Hence applicant is entitled to the benefit of the term in the contractual tenancy which fixes the monthly rent at £S.33.000m/ms. and respondent is not entitled to modify it unilaterally.

Furthermore, the Ordinance gave the landlord freedom to contract up to the standard rent, and if he contracted for less he is deemed to have waived the right to demand the whole of the standard rent and he is estopped from making such a demand subsequently.

As the cause for eviction is based on such increases which are not rent due, it is my opinion that this application should be allowed and respondent’s suit be dismissed with costs.

Respondent should also bear the costs of this application.

Salah Eddin Hassan J. April 15, 1970 : —I have the misfortune to disagree with my learned colleague Mahdi Mohamed Ahmed J.

Applicant is the tenant of respondent’s ground floor at a monthly rent of £&33.000m/ms. per month. On January 24, 1967, respondent served a notice on applicant to in the rent to £S.49.950m/rns. as from March 1, 1967, being the standard rent of the said premises. Applicant refused to pay the alleged standard rent and continued to pay the contractual rent. Hence respondent brought this case in the District Court claiming arrears and eviction. The main points in issue were the quantum of the standard rent and whether the landlord is entitled to increase the contractual rent to the standard rent limit.

The District Court found the standard rent to be £S.47.088m/ms. and gave judgment in favor of respondent for arrears and eviction. This decision was upheld by the Province Judge hence this application.

Of course every statutory tenancy presupposes the existence of a contractual tenancy. It is clear from the facts and evidence that this tenancy started as a contractual tenancy for six months and was further renewed for another six months and then it automatically became a statutory tenancy as the tenant continued to occupy the premises and the landlord continued to receive the rent.

Judge Mahdi is of the opinion that the landlord cannot increase the contractual rent even if the tenancy is converted into a statutory tenancy. He mainly relies on the Rent Restriction Ordinance, s. 19, which says:

"a tenant who under the provisions of this Ordinance retains possession of any premises shall, so long as he so retains possession, observe and be entitled to the benefits of all the terms and conditions of the original contract of tenancy so far as the same are consistent with the provisions of this Ordinance, etc."

My learned colleague ruled that applicant is entitled to the benefit of the term in the contract of tenancy which fixes the monthly rent. He further goes on to say that accepting a rent less than the maximum is not inconsistent with the provisions of the Ordinance. This argument sounds logical but it defeats the object of the Ordinance. A very relevant case in point is the case of Phillips v. Copping [1935] 1 K.B. 15 in which section 15 (1) of the 1920 Act, which is identical to the Rent Restriction Ordinance, s. 19, has been interpreted. The relevant part of this section says:

"a person who retains possession as statutory tenant must observe and is entitled to the benefit of all the terms and conditions of the original contract of tenancy so far as they are consistent with the provisions of the Act."

In the above quoted case the Court of Appeal decided that

"where a dwelling-house has been let at a rent lower than the standard rent a landlord is entitled, on terminating the tenancy, to give notice raising the rent to the standard rent,"

and Scrutton L.J. said in this case:

“I came to the conclusion that there is nothing in the Act prohibiting a landlord making changes in the rent which may result in his being able to recover the standard rent."

In my opinion the Rent Restriction Ordinance, s. 19, can never mean that a tenant is entitled to hold the premises at a rent lower than the standard rent. In Blundell and Wellings, Complete Guide to the Rent Acts (1958) p. 192, it was said, commenting on the equivalent of the Rent Restriction Ordinance, s. 19:

"The ‘original’ tenancy was that under which the tenant was holding immediately before he became a statutory tenant. Thus an obligation on the part of the landlord to do any repairs, which was a term of the contractual tenancy, will be also a term of the statutory tenancy, likewise an obligation on the part of the landlord to supply hot water or central heating, etc…"

But the statutory tenant is liable to pay the full rent limit subject to proper notice of increase being given and any provisions of the contract providing for payment of a lesser rent are superseded by the statutory obligation.

As I see it the finding of the court below that the standard rent is £S.47.000m/ms. cannot be disturbed. Moreover there was proper notice to increase the contractual rent up to the standard rent limit; but one main point has been ignored by the court below, i.e. that there was in fact a genuine dispute based fundamentally upon a legal point concerning the amount of the rent to be paid which point gave the Court of Appeal some uneasy time. In such circumstances an order of eviction ought not to have been granted. Accordingly, I am of opinion that the decision of the District Court should be upheld in so far as the declaration of the standard rent and arrears and costs below, and should be set aside as far as the order of eviction is concerned, with no order as to costs.

Osman El Tayeb C.J. July 13 , 1970: —The facts of this case are simple. Applicant, as a tenant, and respondent. as landlord, entered into a contractual tenancy with respect to Plot No. 68 BK. 1.2. B.C. East Khartoum, for a period of six months renewable with consent. There were changes of reduction in the contractual rent from period to period, until for the last period it was £S.33.000m/ms. per month. As it seems that the last contractual period would be ending in February 1967 the landlord, who was unhappy about the reduction of the contractual rent, thought of determining the contractual tenancy, exercising the right given to him by the contract. For this purpose he gave a written notice to applicant on January 24, 1967 claiming what he alleged to be the standard rent as from March 1, 1967. By his notice respondent claimed that he was entitled to that rent by virtue of the Rent Restriction Ordinance, S. 19. Applicant replied denying the claim and applied for a declaration of the standard rent under the Rent Restriction Ordinance, s. 17.

In May 1967 respondent instituted a suit praying for a declaration of the standard rent to be £S.49.950m/ms. monthly, the recovery of arrears for March and April amounting to £S.66.900m/ms. representing the difference for those two months, and recovery of possession. The claim was amended to include the rent of May and June.

There were two main issues before the District Court, the first was whether the landlord can claim the standard rent if it happened to be more than the contractual rent, and the second was as to what was the standard rent.

The standard rent was declared to be £S.47.088 m/ms. per month. It is more than the contractual rent by £S. 14.088m/ms. The learned District Judge decided that respondent is entitled to claim the standard rent as established, and that applicant has failed to pay that difference for four months, and an order for recovery of possession was made.

The issue for our consideration is whether the landlord, whose premises were subject to a contractual rent (the contract being terminated and the tenancy turned to be statutory) can, under the provisions of the Ordinance, claim the standard rent—which is more than the contractual rent. The argument was focused on the meaning of the Rent Restriction Ordinance, S. 19. It is clear in that it gives the statutory tenant the benefits of all terms and conditions of the contract that had existed between him and the landlord, and that was terminated; such terms and conditions that were consistent with the provisions of the Ordinance. The crucial point is whether the claim and imposition of the standard rent would be deprivation of the statutory tenant of the benefit of a term of the contract consistent with the provisions of the Ordinance. In other words whether the imposition on the statutory tenant of the standard rent would be inconsistent with the provisions of the Ordinance. In my opinion the answer must be in the negative. The contractual rent as fixed by the contract was a term of the contract, and it remained to be so for so long as the contract subsisted; but once the contract was terminated, it should have gone away with it, and it could no longer be described as a term of the contract which the statutory tenant could claim to have the benefit of. The standard or the statutory rent is the creation of the Ordinance and fixed by it, and its imposition on the statutory tenant cannot be anything inconsistent with the provisions of the Ordinance; it is rather the very thing that is consistent with Ordinance. As I see it the Rent Restriction Ordinance, s. 19, does not mean by a term or condition consistent with the Ordinance, to include the contractual rent, it means other terms that the Ordinance did not regulate but left the parties free to provide in their contract. For example terms as to waste, repairs, fixtures, etc.; these can be described as being consistent with the provisions of the Ordinance, and the tenant is entitled to have their benefit.

The section does not only care about the benefit of the tenant, but it also included his obligation under the contract, as it provided that he should “observe and be entitled . . .": that he should observe those terms that may not be to his benefit.

This understanding can be found in the Ordinance. It provides in the Rent Restriction Ordinance, s. 19 (2), that the statutory tenant should pay the standard rent including any permitted increases at the periods fixed by the contract, or if no period is fixed then monthly in arrears. This subsection is sufficiently clear in showing the intention of the Ordinance, which is that the statutory tenant shall pay the standard rent and any permitted increases. Again in subsection (4) of the same section this intention has been shown; which provided that the lawful subtenant in a contractual tenancy who becomes a statutory tenant has to pay no less than the maximum rent for the premises.

I need not say that I agree with my learned brother Salah Hassan J. in the authority he found in the English law, explaining the relevant section of the English Rent Act, which is identical with section 19 of same Ordinance. I have nothing useful to add to what he has written.

As to whether respondent is entitled to recovery of possession, I am of the opinion that he is not. It is clear that there was a genuine and honest dispute about the rent that applicant has to pay. As far as I can see, the point in dispute in this suit has arisen in the court for the first time, and it is only now that a decision is made about it. Applicant may have been of the opinion that after being a statutory tenant he was not bound to pay more than the contractual rent, and he genuinely and honestly resisted the respondent’s claim. In addition to that, applicant continued to pay the contractual rent, which shows that he had the honest belief that he was not bound to pay more rent than that. Furthermore his honest dispute extended to the amount of the standard rent.

It has been decided as settled law that a tenant cannot be made bound to pay the standard rent before it has been declared; and in this case a legal point has been decided for the first time that a statutory tenant is not entitled to insist on the contractual rent but he has to pay the standard rent, of course, after being declared. The conclusion is that the difference between the contractual rent and the standard rent is not rent lawfully due within the meaning of the Rent Restriction Ordinance, s. 11 (a).

For these reasons the decree of the District Judge has to be affirmed as to the declaration of the amount of the standard rent, and as to the sum of money to be paid by the defendant to the plaintiff including costs, and the order of possession be set aside.

As the revision succeeded in part and failed in part there should be no order as to costs.