059-SLLR-SLLR-2004-V-3-MUTHUKUMARANA-v.-SIRISENA-AND-ANOTHER.pdf
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Muthukumarana v Sirisena and another
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MUTHUKUMARANAv
SIRISENA AND ANOTHERSUPREME COURTSARATH N. SILVA, C.J.
WIGNESWARAN, J.
TILAKAWARDANE, J.
SC 53/2002CA 850/94 (F)
DC HAMBANTOTA 169/REJANUARY 26, 2004FEBRUARY 26, 2004MARCH 10, 2004
Rent Act No. 7 of 1972 – Sections 10(5), 22(b), 22(1) – Section 31 -Contract of tenancy – Rights of a sub-tenant – Lease – Could the lesseebe evicted after the period of lease? – Is he a statutory tenant – Locatioconductii rei – Is there a privity of contract between landlord and sub-tenant? – Who acquires the status of a statutory tenant? Waiver of rightto sue – Subletting without consent – Fatal? – Prevention of FraudsOrdinance – Section 2.
The plaintiff filed action against the 1st and 2nd defendants for ejectment.The plaintiff's mother leased the premises to the 1st defendant in 1974 fora period of 15 years on a notarially executed agreement. When the leasewas subsisting she gifted the premises to the plaintiff-daughter – after theperiod of lease was over the plaintiff served a notice to quit on bothdefendants on the ground that the premises have been sublet by the 1stdefendant to the 2nd defendant without the prior consent of the plaintiff.
The 1st defendant filed answer stating that he handed over possessionto the owner after the 15 year period. The 2nd defendant contended thathe carried on business with the 1st defendant in the premises from 1974-1979, and thereafter the 1st defendant left selling the business to himand that thereafter he paid rent to the plaintiff as a statutory tenant.
The trial Court held with the plaintiff on the basis that when it is admittedthat the plaintiff is the landlord and the 1st defendant is the tenant, the2nd defendant could plead the protection of the Rent Act only if he could
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establish that there was a fresh contract of tenancy – since he failed toestablish that, he was liable to be ejected. The Court of Appealoverturned the judgment of the District Court, holding that, as the plaintiffwas aware from about 1981 that the premises have been sublet to the2nd defendant and as such has waived the right to sue for ejectment onthe ground of unauthorized subletting-plaintiffs action was dismissed.
On appeal –
Held:
Under our common law a lease of property is a special contractcoming within the broad heading of hire-/ocaf/'o conducti rei. Acontract of letting and hiring cannot arise except by agreement ofparties. A tenancy by contract can arise where the parties are ad idemas to its essential particulars.
All leases whether it be notarially executed for a specified period orterminable at will in respect of premises situated in an area in whichthe Rent Act operates, other than premises excluded in terms ofsection 2(4) would be subject to the provisions of the Rent Act.
Per Sarath N. Silva, C.J.
"On the basis of the common law and the statute law applicable, it wouldbe seen that the lessee (tenant) would be entitled to the benefit of thelease as well as the provisions of the Rent Act and could not in any eventbe ejected even after the period of the lease, except on a groundspecified in the Rent Act".
A person could acquire the status and be described as a statutorytenant only if that person was in the first instance a lessee or a tenantunder a contract entered into with the landlord.
As regards the position of a subtenant – whether it be under thecommon law or the Rent Act, the categorical position is that there isno privity of contract between a landlord and a sub-tenant. In view ofSection 22(1) (2), it is the contractual tenant who acquires the statusof a statutory tenant. The protection if any of the sub-tenant issubscribed within the rights of the tenant who alone has privity ofcontract with the landlord.
Per Sarath N. Silva, C.J.
"Section 10(5) which provides for ejectment on the ground of sublettingwithout prior consent in writing of the landlord envisages a relationshipbetween the landlord and the tenant and of a cause of action primarilyagainst the tenant. If the cause of action is established against the tenant- the subtenant is necessarily ejected."
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The 2nd defendant who raised issues on the basis that he was thesubtenant has no independent right to remain in occupation – he hasno contractual relationship with the landlord which could give him aright to be in occupation under the common law. Nor is he protectedfrom ejectment by the provisions of the Rent Act – as the 2nddefendant is in unlawful and forcible occupation of the premises heis liable to be ejected.
APPEAL from the judgment of the Court of Appeal.
Cases referred to:
Kurukulasuriya v Ranmenika – 1 Sri LR 331 at 339.
Fernando v Samaraweera.
Scrutton 1922 1KBD at 438 at 448.
tV. Dayaratne for plaintiff-respondent-appellant.
Hemasiri Withanachchi for 2nd defendant-appellant-respondent.
Cur.adv.vult.
September 8, 2004SARATH N. SILVA, C.J.
The plaintiff filed this action on 6.2.1991 against the 1st and2nd defendants for ejectment, restoration of possession anddamages, in respect of a two storied business premiseslocated along Ridiyagama Road, Ambalantota. It is admittedthat the plaintiff's mother being the owner, leased the premisesto the 1st defendant on 9.9.1974 for a period of 15 years on anotarially executed agreement. When the lease was subsistingshe gifted the premises to the plaintiff being her daughter. Afterthe period of the lease was over, on 28.9.1990 the plaintiffserved a notice to quit on both defendants on the ground thatthe premises have been sublet by the 1st defendant to the 2nddefendant without the prior consent in writing of theplaintiff.
The 1st defendant filed answer stating that he handed overpossession to the owner and has not been in possession of thepremises from 9.10.1990. He took no part in the proceedingsthereafter.
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The 2nd defendant filed answer stating that he carried onbusiness with the 1st defendant in the premises from 1974 to1979. Thereafter the 1st defendant left selling the business tohim. He remained in the premises as tenant paying rent to theplaintiff and after termination of the period of the lease on9.9.1989 became a statutory tenant.
At the commencement of the trial admissions wererecorded as to the lease for a period of 15 years in favour ofthe 1st defendant and the plaintiff's ownership of the premises.Admission No. 3 is that the 1st defendant is the tenant of theplaintiff. The plaintiff only raised issues as to whether the 2nddefendant is in unlawful occupation of the premises and isliable to be ejected.
The 2nd defendant raised issues 4, 5 and 6 as to sub-tenancy, on the basis that from 1979 he has been inoccupation of the premises as sub-tenant with knowledge ofthe landlord who has thereby waived the right to sue forejectment on the ground of sub-letting. Issue 7 is on the basisthat after the termination of the period of the lease he becamethe statutory tenant and is entitled to remain in possession byvirtue of the Rent Act.
The District Judge held with the plaintiff on the basis thatupon an admission being recorded that the plaintiff is thelandlord and 1st defendant is the tenant, the 2nd defendantcould plead the protection of the Rent Act if he would establishthat there was a fresh contract of tenancy with him or that heacquired rights of tenancy by operation of law. Since he failedto establish a right of occupation on either basis, it was heldthat he was liable to be ejected.
It is to be noted that although in paragraph 11 of the answerthe 2nd defendant stated that from 1979 upto 9.7.1989 (end ofthe period of the lease) he was the tenant of the plaintiff andthereafter became the statutory tenant, he raised issues on thebasis that he became the sub-tenant from 1979 and after thetermination of the lease became the statutory tenant. The 2nddefendant had to change his stance in this manner probably
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due to the evidence he was intending to adduce. He stated inevidence that rent was paid by him to the plaintiff but all thereceipts produced by him acknowledge the receipt of rent inrespect of the lease in favour of the 1st defendant. No rentshave been paid or received after the period of the lease ended.
The Court of Appeal adopted a different line of reasoningfrom that of the District Judge and held that the plaintiff wasaware from about 1981 that the premises have been sublet tothe 2nd defendant and as such has waived the right to sue forejectment on the ground of unauthorized sub-letting. On thatbasis it has ordered that the action be dismissed.
Thus the two Courts have adopted different lines ofreasoning. Terms, such as, tenant, sub-tenant and statutorytenant have been used and interchanged in a confusedmanner in the pleadings and issues. It is therefore necessaryto examine the questions that arise for consideration in theirproper perspective.
Under our Common-Law a lease of property is a specialcontract coming within the broad heading of hire (locatioconducti rei). Basnayake J. (as he then was) articulated thebasic proposition as to the formation of a tenancy with strikingsimplicity as follows:
A contract of letting and hiring cannot arise except byagreement of parties. A tenancy by contract can arisewhere the parties are ad idem as to its essentialparticulars."
At common law parties are free to agree on the terms andconditions of the lease including the period and the rentpayable. In the absence of an agreement to the contrary thecommon law recognized certain basis duties on the part of thelessee respectively. (Roman Dutch Law by R.W. Lee 5thEdition page 300 and 301). A lease is terminable by effluxionof time or by notice and the landlord is entitled to instituteproceedings for ejectment after the termination of the lease. Tothis broad framework of the common law statutoryrequirements and limitations have been added resulting in
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what has been described by the Supreme Court as, “twostreams of law which will operate in all areas where there is noconflict." (Vide: Kurukulasuriya v Ranmenike 0) at 339).
The Prevention of Frauds Ordinance enacted as far back as1840 introduced a requirement as regards the formation of alease in respect of immovable property. Section 2 provides thatlease of immovable property "other than a lease at will or forany period not exceeding one month” shall not be of force oravail in law, unless it is notarially executed. The Ordinancethus recognized a distinction between a lease for a specifiedperiod on the one hand and a lease at will, better known as amonthly tenancy, on the other. The latter could be terminatedby giving one month's notice. The lease referred to in thepresent case has been notarially executed and valid for theperiod of 15 years provided therein. However, all leaseswhether it be notarially executed for a specified period orterminable at will, in respect of premises situated in an area inwhich the Rent Act is in operation, other than premisesexcluded in terms of Section 2(4), would be subject to theprovisions of the Act. The Act contains restrictions inter alia asto the rent that is recoverable and the grounds on which atenant could be ejected.
On the basis the common law and the statute law areapplicable to the facts of this case, it would be seen that thelessee (tenant) would be entitled to the benefit of the lease aswell as the provisions of the Rent Act and could not in anyevent be ejected even after the period of the lease, except ona ground specified in the Rent Act.
I would now deal with the use of the terms tenant andstatutory tenant. In our law a lease for a period of a monthlytenancy is created by a contract entered into by the parties andwhere the rent Act applies, would be subject to its provisions.The Rent Act describes the person entitled to occupy premiseson a contract of letting and hiring, as tenant. The statutoryprotection given to the tenant by the Act will ensure to hisbenefit even upon the effluxion of the period of the lease or its
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termination by notice. After the period of the lease or itstermination, the continuance in occupation is not on the basisof the lease or contract of tenancy but on the basis of theprotection given by the statute and he is then described as astatutory tenant.
In the case of Fernando v SamaraweeraW at 281Basnayake J, has summed up the genesis of the concepts ofstatutory tenant and statutory tenancy, with reference to theobservations of Judges in England, as follows:
"It appears from the foregoing that a landlord who hasterminated the contract of tenancy through a desire to getback his premises but is unable to satisfy the aboverequirements has to submit to the continued occupationof his premises by a person whom he does not want therebut whom the statute will not permit him to ejecttherefrom by process of law. Such a person cannot bedescribed as a trespasser for his occupation of thepremises is not unlawful. He is, since the termination ofthe tenancy, under no contractual relationship with thelandlord.
This creature of the statute whose counterpart is tobe found in England has been called the “statutory tenant"by Lord Justice ScruttonP) who also described him asthat anomalous legal entity who would not ordinarilybe described as a tenant. Lord Coleridge describedthe resulting legal relationship as a "statutorytenancy”.
Basnayake, J. has gone on to itemise the rights andobligations of the statutory tenant and the landlord.
Therefore a person could acquire the status and bedescribed as a statutory tenant only if that person was in thefirst instance a lessee or a tenant under a contract entered intowith the landlord. In certain situations it provides for thecontinuance of a relationship that was in operation but theinitial relationship should necessarily have been brought about
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by a contract entered into by the parties. It is noted thatSection 22(1) of the Rent Act in respect of premises where thestandard rent does not exceed Rs. 100/- and Section 22(2) inrespect of premises where the standard rent is above Rs. 100/,protection from ejectment is afforded to a tenant meaningthereby a contractual tenant. After the termination of the leaseor the tenancy and during the pendency of the proceedings forejectment he acquires the status of a statutory tenant and if theaction is dismissed the original contract of tenancy is revived.This position is clearly stated in Section 31 of the Rent Actwhich reads as follows:
"Where an action for ejectment of any person from anypremises occupied by him as a tenant is dismissed by anycourt by reason of the provisions of this Act, hisoccupation of those premises for any period prior orsubsequent to the dismissal of such action shall, withoutprejudice to the provisions of this Act, be deemed to havebeen or to be under the original contract of tenancy."
I have to now deal with the position of a sub-tenant. Theposition of a sub-tenant (sub lessee) in relation to the landlord(lessor) is clearly stated in the following passage by R.W. Lee,where it is contrasted with that of assignment –
"The interests of the lessor and lessee respectively areassignable by act of party. The effect of assignment by alessee is to substitute the assignee (cessionary) in theplace of the original lessee, who thereupon ceases to bebound or entitled under the contract. A sub lease has nosuch effect. It is a contract whereby the original lesseelets the property to a third party for the whole or for a partof the unexpired term of the original lease. As betweenlessee and sublessee there is a cession of the lessee'srights of use and enjoyment; but the lessee does notcease to be liable to the lessor, nor does the sublesseebecome liable to, or acquire any rights against, the lessor.As between lessor and sublessee there is no privity ofcontract."
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(An Introduction to Roman Dutch Law, R. W. Lee – 5th Ed.P.301).
The contractual relationship in regard to a sub-letting thusdescribed under the common law, is restated in Section 10(8)of the Rent Act as follows:
"Where any premises are sublet by a tenant in whole orin part the tenant shall in relation to the subtenant or eachof the subtenants be deemed for all purposes of this Actto be the landlord of the premises and the otherprovisions of this Act shall apply accordingly."
Hence whether it be under the common law or the Rent Act,the categorical position is that there is no privity of contractbetween a landlord and a sub-tenant. The position taken up bythe 2nd defendant in the issues raised by him that he was sub-tenant and after the effluxion of the period of lease became thestatutory lessee, is untenable in law.
As pointed out above it is the contractual tenant who isafforded statutory protection from ejectment. The provisions inSection 22(1) and (2) are couched in the following terms-
"Notwithstanding anything in any other law no action orproceedings for the ejectment of the tenant
shall be instituted in or entertained by any
Court unless where"
In view of this protection it is the contractual tenant whoacquires the status of a statutory tenant. The protection, if anyof the sub-tenant is subsumed within the rights of the tenantwho alone has privity of contract with the landlord.
Section 10(5) which provides for ejectment on the ground ofsub-letting without the prior consent in writing of the landlord,envisages a relationship between the landlord and the tenantand of a cause of action primarily against the tenant. If thecause of action is established against the tenant, the sub-tenant is necessarily ejected. Therefore it is the tenant, if at allwho could plead a waiver of the cause of action that accrues
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against him. In this case the tenant has not disputed the causeof action against him and has specifically pleaded in theanswer that he yielded possession of the premises to thelandlord on 9.10.1990. The 2nd defendant who raised issueson the basis that he was the sub-tenant has no independentright to remain in occupation of the premises. As revealed inthe preceding analysis, he has no contractual relationship withthe landlord which would give him a right to be in occupationunder the common law nor is he protected from ejectment bythe provisions of Rent Act.Therefore Issues 1 and 2 raised bythe plaintiff that the 2nd defendant is in unlawful and forcibleoccupation of the premises and is liable to be ejected mustnecessarily be answered in favour of the plaintiff. Accordingly,I allow this appeal and set aside the judgment dated
of the Court of Appeal. The judgment and decree ofthe District Court will stand. The 2nd defendant will paya sum of Rs. 25,000/- as costs of this appeal to thepetitioner.
WIGNESWARAN, J.-I agree.
TILAKAWARDENA, J.-I agree.
Appeal allowed.
Judgment and Decree of District Court to stand.