037-NLR-NLR-V-55-A.-A.-JAFFERJEE-et-al.-Appellants-and-CYRIL-DE-ZOYSA-Respondent.pdf
124
GRATIAEiST J.—Jafferjee v. Cyril de Zoysa
19BSPresent: Gratiaen J. and H. A. de Silva J.
A. A. JAFFERJEE etal., Appellants, and CYRIL DE ZOYSA,
Respondent
8. C. 238—D. C. Colombo, 5430/L
Lessor and lessee—Improvements effected by lessee—Compensation.
Under the general law, and subject to any agreement to the contrary,a lessee who has erected buildings with the lessor’s consent or acquiescencehas, upon the expiration of the lease, the option either of removing the materialsaffixed to the soil or of permitting ownership in them to pass to the owner of theland ; in the latter event, he must be compensated for the loss of his materials.
Under the terms of a contract of lease the lessee was entitled at hisdiscretion to erect buildings on the leased property, and he agreed in that event“ to yield up and surrender ” such buildings to the lessor at the determinationof the lease. The contract did not stipulate for the payment by the lessor ofcompensation for the buildings.
Held, that, at the determination of the lease, the lessor was entitled to takepossession of the property, including the buildings, without payment ofcompensation. The lessee had in effect renounced his option (under the generallaw) either of removing the materials or of claiming compensation for them.
.^^.PPEAL from a judgment of tlie District Court, Colombo.
iS. J. V. Ghelvanayakam, Q.C., "with. N. Samarakoon, I. Perera andG. Candappa, for the plaintiffs appellants.
H. V. Perera, Q.C., with B. W. Jayewardene and D. R. P. Gooneiilleke,for the 2nd defendant respondent.
Cur. adv. vult.
October 29, 1953. Gratiaen J.—
The appellants are the executors and trustees of the late AbdulhusseinJafferjee who died on 1st September, 1946. By an indenture of leasePI dated 13th November, 1937, Jafferjee had leased an allotment of rbare land situated in Galle Road, Colombo, to the Shell Company ofCeylon, Ltd., for a period of ten years commencing on 1st November, 1937.It is quite evident from the terms of the lease that the erection ofsubstantial buildings on the land at the lessee’s expense (but entirely athis discretion) was within the contemplation of both parties. In thatconnection, the lessee undertook inter alia :
“3. To pay the cost and charges for gas incandescent and/or for otherilluminant used or consumed in the buildings that may be erectedon the demised premises and to pay the water rate levied in respectof the said buildings.^
“ 4. Not to sell or dispose of any earth cabook clay gravel or sandfrom the said demised premises -nor to excavate the same exceptso far as may be necessary for the erection of the said buildings.
“ 5. From time to time well and substantially to repair and clean all newbuildings structures and erections which may at any time duringthe said term be erected on the said demised premises.
OiRATIAEX J.—Jafferjee v. Cyril de Zoysa
125
“7. At all times to observe fulfil and comply with the laws bye-lawsrules and regulations of the Municipal Council of Colombo inrespect of the sanitation of the City of Colombo and all theother requirements in regard to the occupation and use of thedemised premises and the said buildings to be erected thereon andto keep the Lessor at all times indemnified against all prosecutionsand fines for the breach of or non-compliance with any of thelaws bye-laws or regulations of the said Municipal Council.
“9. At the determination of the tenancy to. yield up and surrender to thesaid Lessor the demised premises with all the buildings that may beerected on the said demised premises and all the permanent fixturesthat may be affixed thereon during the said term in good andtenantable repair and condition in accordance with the covenantshereinbefore contained. ”
By a contemporaneous indenture of lease P2 (attested by the same notary)the lessee, with the lessor’s consent, sublet the land to the respondent forthe full term of the lease. P2 conferred and imposed on the respondentin respect of “ the buildings that may be erected ” rights and obligationsprecisely similar to those contained in PI which I have previously quoted.
The respondent was placed in occupation of the land as sub-lessee, andfrom time to time erected fairly substantial buildings on it. At a laterstage he himself sublet the property to various persons on the termsof monthly sub-tenancies, and at the time of the expiry of the main lease,the 3rd and 4th defendants to this action were the tenants in occupationon that basis.
On 29th July, 1948, the appellants instituted this action against theShell Company (as 1st defendant), the respondent (as 2nd defendant) andthe 3rd and 4th defendants, claiming (a) a declaration that they wereentitled to the leased premises and all the buildings and fixtures standingthereon without payment of compensation, (b) for ejectment, damages andcontinuing damages.-
On 15th November, 1949, while the action was still pending, a partialadjustment of the dispute between the parties was arrived at whereby the3rd and 4th defendants attorned to the appellants and continued there-after to occupy the premises as their monthly tenants at an agreed rental;the respondent undertook to pay to the appellant the arrears of rent (ormore strictly, the damages) for the period 1st November, 1947, to 30thNovember, 1949—this amount being subsequently fixed by agreement atRs. 4,465 ; and the 1st, 3rd and 4th defendants were discharged from theaction.
The only dispute which remained for adjudication was the questiofiwhether the appellants were entitled, as lessors under the original leasePI, to take over the buildings erected on the land without payment ofcompensation (as they contended) or on payment of compensation to therespondent (as he alleged). Nor the purposes of this dispute the otherdefendants—i.e., tbe original lessee and the subsequent sub-lessees—-expressly ceded to the respondent such rights, if any, to compensation asthey enjoyed against the appellants.
2*—J. N. B 29786 (10/53)
126
GEATIAEN J.—Jcvfferjee v. Cyril da Zoyaa
The learned District Ju dge held that the provisions of Pi and P2 did notoperate as<a surrender of the right of either lessee (under the'general law)to recover compensation for improvements effected by him during theperiod of the lease. He accordingly decided that the appellants wereliable to pay compensation which he assessed at Rs. 20,000. On thisbasis, a decree was entered in favour of the respondent for Rs. 15,535(i.e., Us. 20,000 less the agreed amount representing accrued rent ordamages). The present appeal is from this decision.•
Mr. Chelvanayakam abandoned in the course of his argument theobjections raised in the petition of appeal to the quantum of compensationpayable by the appellants in the event of their liability being established.We need only decide, therefore, whether, in the circumstances of this case(i.e., upon the true construction of the indentures of lease or, alternatively,under the general law), the appellants are liable to pay compensation to therespondent for the improvements effected by him during the currency ofthe lease.
It is convenient, I think, to inquire in the first instance whether theappellants would have been liable under the general law—and without anyreference to the terms of the contracts PI and P2—to pay compensationfor the buildings erected by the respondent (and eventually “ yielded upand surrendered ’ ’ to them after the determination of the lease). We shallthen be in a better position to judge the extent, if any, to which the rightsand obligations of one party or the other have been enlarged or reducedby agreement..
According to the Roman-Dutch common law a bona fide possessor wasentitled, to claim compensation for necessary and useful expenses and toretain possession until compensated—see Grotius : Introduction toRoman-Dutch Laio 2.10.8, Muttiah v. Clements 1, Mudianse v. Sellandyar 1 2 3(both cases of occupiers—in one case occupying in expectation of gettinga lease, in the other occupying under a planting agreement—who weretreated as being on the footing, not of lessees, but of bona fide possessors);cf. Soysa v. Mohideen 3. A mala fide possessor, on the other hand, wasgenerally entitled (on the view which has prevailed in Ceylon) to necessaryexpenses only, and (subject to certain exceptions) he has no right ofretention—General Ceylon Tea Estates Co., Ltd. v. Pulle 4.
As regards lessees, Grotius said (2.10.8) that they were entitled tocompensation for improvements in the same way as bona fide possessors.In Ceylon, however, as far back as 43 years ago, the principle was laiddown in Punchirala v. Mohideen 5 that the claim to compensation of alessee, who is technically in the eye of the law not a “ possessor ” at all,depends on special considerations. The principles laid down in this caseas regulating a lessee’s right to compensation were said to be based onVan Der Keessel’s Select Theses and on a passage in Maasc^orp’s Institutesof Cape Law which was “ derived from the ruling in the South Africancase of De Beers Consolidated Mines v. London & S. African ExplorationCo.6 quoted by Sir. Walter Pereira in his little book on the Right ofCompensation for Improvements ”. As the principles laid down in
1(1900) 4 N. L. B. 158.4 (1906) 9 N.'L. B. 98.
2 (1907) 10 N. L. B. 209.5 (1910) 13 N. L. B. 193.
3 (1914) 17 N. L. B. 279 at 281-2 and 284-5.6 (1893) 10 S. C. 359.
GRATIAEN J.—Jqfferjee v. Cyril de Zoysa
127
Punchirala v. Mohideen (supra) have been uniformly accepted and appliedin subsequent cases—see, e.g., Soysa v. Mohideen 4, Saboor v. Appuhamy2,Silva v. Banda 3, Alles v. Krishnan4—it is necessary to consider theprinciples expounded in the classic judgment of De Villiers C.J. inDe Beers’ case cited in Punchirala v. Mohideen (supra) and expresslyapproved by the Privy Council in appeal (1895) 12 S. C. 107.
De Villiers C.J. explains that the Roman and Dutch jurists, in dealingwith the case of one person building on theproperty of another, reconciledas far as possible the rigours of the ancient maxim that “ everythingbuilt on the soil accedes to it ” with the more liberal maxim that “ no oneshould gain profit to the detriment of another He then comes toconsider improvements made by a lessee which, as mentioned above, aregoverned by special considerations. He points out that such cases weregoverned by a Placaat of 26th September, 1658, Articles 10 to 12 of which,says the Chief Justice (at p. 370), are treated by Van der Keessel “ as havingbeen incorporated into the common law of Holland and Friesland relatingto landlord and tenant ”.
De Villiers C.J. sets out the provisions of these articles of the Placaat’the effect of which were to give a lessee who has built structures with thelessor’s consent a claim to what the materials would be worth if de-molished and removed (the claim being enforceable only after vacatingpossession), and to give even those lessees who built without the lessor’sconsent a right of removing the materials before the expiry of the lease.
* In his judgment, the learned Chief Justice shows how the Roman-Dutch law, in relation to those improvements to which the Placaat applies,modified the maxim “ whatever is affixed to the soil accedes thereto ” byapplying the principle prohibiting unjust enrichment. “ The Dutchlaw …. gives the tenant an opportunity during his tenancy ofpreventing the rigid application of Hie more ancient maxim and, if itdeprives him after the expiration of his .term of the ownership in thematerials affixed by him, it allows him to recover the cost of those materialsif they had been affixed with the landlord’s consent ”.
These principles were doubtless influenced in certain respects by theterms of the Placaat of 26th September, 1658. The question may beasked whether it is proper to regard any part of that enactment as havingbeen incorporated in the general law of Ceylon. No submissions weremade to us either way upon this point, but the answer, I think, admits oflittle difficulty. The Roman-Dutch Law was first introduced into Ceylonin 1656, and prima facie a Placaat enacted subsequently would have noapplication in this country in the absence of clear proof that it has, eitherby custom or by binding judicial interpretation, become incorporatedat some stage in our legal system. Karonchihamy v. Angohamy5cf. Lee : Introduction to Roman-Dutch Law (5th Edn-.) p. 7, Estate Heine-mann v. Heinemann 6. Applying this test, I am perfectly satisfied that,as far as a lessee’s right to compensation is concerned, the rules enunciatedby De Villiers C.J. in De Beers’ case (supra) have for over forty yearsbeen accepted and consistently acted upon in this country ever since their
{1914) 17 N. L. R. at 286.« (1952) 54 N. L. R. 154 at pp. 156-7.
(1916) 2 C. W. R. 186 at 187.6 (1904) 8 N. L. R. 1.
(1924) 26 N. L. R. 97 at 100.6 (1919) S. A. A. D. 99 at 114.
128
GRATIAEjST J. — Jafferjee v. Cyril de Zoysa
adoption, in Punchirala v. Mohideen (supra). In these circumstances, theextent to which they were originally influenced by articles 10 to 12 of thePlaeaat is at this stage only of academic interest : it is too late now tochallenge the irrevocable incorporation of the rules themselves into ourgeneral law. [On issues affecting the quantum of compensation, however,file development of our law need not be examined in connection withthis appeal.]
"'~~Let me attempt to summarise, for the purposes of the present appeal,what has been accepted by the Courts in this country as the basis ofa lessee’s right to compensation for buildings erected with the lessor’sconsent or acquiescence. He is presumed, in the absence of an agreementto the contrary, to have effected these improvements only “ for the sake oftemporary and not perpetual use ” ; he is accordingly regarded asretaining the ownership of the materials affixed to the soil throughoutthe period of his tenancy, and, at the expiration of that term, he has theoption either of removing what is in truth his own property or of permittingownership in them to pass to the owner of the land ; in. the latter event,hemust be compensated for the loss of his materials which, by operationof law, passed to the lessor.
^lt logically follows that, if the terms of the contract between the partiesshow that the building improvements were effected not only for the lessee’stemporary use, but also for the lessor’s future benefit, he has in effect renouncedthe option (which he would otherwise have had under the general law) eitherof removing the materials or of claiming compensation for them. In otherwords, the maxim quidquid inaediftcatur solo, cedit solo is not temperedin such a case by the application of the rule against unjust enrichment,so that the lessor cannot claim compensation unless he has expresslystipulated for its payment.-
The extent and limits of the right of a lessee to claim compensation forbuildings erected on the leased premises are now made clear, and I do notdoubt that, unless this right had been renounced “ by special agreement ”(either expressly or by necessary implication) in the present case, therespondent’s claim would be irresistible. For it is admitted that thebuildings had all been erected with JafFerjee’s consent (antecedentlygiven upon the execution of the document PI).
now proceed to examine the indentures of lease PI and P2. Underneither contract was the lessee obliged to erect any buildings on the land,but, if he did so, he undertook at all times to maintain them in goodcondition ; and he unequivocally agreed, at the determination of thelease, to “ yield up and surrender ” (the significance of these words mayfairly be emphasised) the buildings “ in good and tenantable repair andcondition in accordance with the covenants hereinbefore contained ”. Theseclauses, I am convinced, can only lead to one conclusiqn : they veryclearly rebut the presumption that the materials affixed by the lesseeto the lessor’s soil wTere intended to be fixed exclusively for the sake of histemporary use ; they were affixed and maintained in good repair for thelessor’s future benefit as well; the ownership of “ any buildings to beerected ” therefore vested immediately in the lessor ; in other words, thelessee had by necessary implication given up his right under the general
GRATIAEN J.—Jafferjee v. Cyril da Zoyaa
129
law to remove the materials during the pendency of the lease—indeed,they were not his to remove in the circumstances of this particular caseafter they became affixed to the lessor’s soil. For the same reason, therewas—in the absence of agreement to that effect—no legal foundation • forthe exercise of the alternative right to be compensated for the loss ofthe improvements after the lease had expired.-
It is true that, in certain contexts, the renunciation of one of twoalternative courses of action need not be construed as an implied renun-ciation of the other. But if two alternative remedies are based upona single right, the renunciation of that right necessarily extinguishesevery remedy that flows from it.'
Tt> the present case, no provision has been made in the indentures oflease for the payment of any compensation, and the respondent hastherefore not established a cause of action either under the general lawor under the terms of a contract. The issue of “ hardship ” is irrelevantand merely introduces dangerous opportunities for speculation. Therespondent was free to regulate his affairs as sub-lessee as he thoughtwould be most advantageous to his own interests ; after all, he was underno duty to erect any buildings on the land. There are cases in whichthe law does allow a person to be enriched at another’s expense withoutmaking compensation. “ Enrichment is not without cause (unjustified) ifit is permitted (or) when it is the consequence of a contract, no matter howdisadvantageous it may be to one or other of the parties ”—Lee :Introduction (5th Edn.) at pp. 347—8 ; cf. Uriel v. Jacobs L
The judgments of Garvin J. in Appuhamy v. Dolosivala Tea & Rubber■Co. and of Bertram C. J. in Silva v. Banda 3 have not, in my opinion,laid down any principle contrary to the views which I have here expressed.Without doubt, a lessee can maintain his right to compensation underthe general law “ where the contract is silent ”, but to my mind thecontracts Pi and P2 are far from “ silent ” on the questions arising on thisappeal. Silva v. Banda (supra) deals with a very different situation.A lessee who had improved the leased premises had stipulated that,in lieu of compensation which he expressly waived, he should have theoption of renewing his lease for a further period of ten years. After theimprovements had been completed, it was discovered that the lessor(who was a trustee) had no right to lease out the property at all, and the•option of renewal was therefore of no avail. Bertram C.J. held that inthe circumstances the lessor could not refuse the renewal of the lease andinsist at the same time on the lessee’s renunciation of his right to com-pensation. In the present case, by way of contrast, the appellants havenot repudiated the contractual obligations in any respect.
We were referred during the argument to a passage in Wille : Landlordand Tenant (4th Edn.) p. 271 quoting Bennet tfe Tatham v. Koovdrjee andKasaiv 4. This report was unfortunately not available in Ceylon, but 1
1(1920) C. P. D. at 493.
(1923) 25 N. L. R. 267.
(1924) 26 R7. L. R. 97.
* (1906) 27 RTotal L. R. 110.
130
Swami Sivagnananda v. The Bishop of Kandy
after I had prepared my judgment, Mr. Chelvanayakam was able to obtainfor me an authenticated copy of the opinion there expressed by Bale C. J.A clause in the contract of lease in that ease was to the following effect:
“ 10. The said tenant shall give up possession of the land granted,with any improvements and all standing crops, and all fruit trees andplants thereon, on the day of the expiration of the tenancy ”, (at p. 113).
The Supreme Court of Natal held that, upon the termination of the lease,(whether by effluxion of time or upon prior forfeiture), the terms of thecontract “ clearly entitled the lessor to take possession of the property,including the improvements, without paying any compensation I amfortified by this decision in the view which I had independently reached.Wille regards the case as providing an example of an implied contractualrenunciation of a lessee’s right to be compensated under the general lawfor improvements effected by him.
I would set aside the judgment appealed from. The respondent’scounter-claim for compensation must be dismissed, and a decree enteredagainst him in favour of the appellants for his admitted liability in thesum of Rs. 4,465. The respondent will also pay to the appellants theircosts in both Courts.
H. A. de Silva J.—I agree.
♦
Appeal allowed-