1-BENET P. MEDONZA v. TISSA E. DE SILVA

005-SLLR-SLLR-1986-V-1-BENET-P.-MEDONZA-v.-TISSA-E.-DE-SILVA.pdf


CA
Wickremasinghe v.,Atapattu (G. P. S. De Silva. J.)
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BENETT P. MEDONZA
>
v.
TISSA E. DE SILVA
SUPREME COURT.
SHARVANANDA. C.J., WANASUNOERA. J. AND COLIN-THOME. J.
S C. APPEAL No. 23/85 – C.A. No. 285/80 (F).
D. C. COLOMBO No. 2558/RE.
NOVEMBER 6. 1985.
Landlord and Tenant – Rent Act No. 7 of 1972 – Determination of receivable rentunder section 7(1) and (2) – Whether these sections are retrospective in operation -Special tax.
Held –
The provisions of section 7(1) (a) and (b) of the Rent Act can operate conjointly. Whenthe Rent Board exercises its power initially under section 7 (1) (a) of determining thereceivable rent it can also at one and the same inquiry in a fit- case go into the questionof adequacy Of the rent under section 7 (1) (b) and fix it accordingly. Whether thereceivable rent so fixed would operate retrospectively is both a legal and factualquestion which must be determined by looking at the Act itself and the relevantevidence.
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In the instant case the determination of the Board (under s. 7 (1) (£>)) that the receivablerent of Rs. 180 (as found under section (1) (a)) should, owing to its inadequacy beraised to Rs. 675 was correctly held by the District Court to be retrospective for thepurpose of deciding the question of arrears and recoveries of the special tax and rightlyupheld by the Court of Appeal.
Cases referred to :
Ranasinghe v. Fernando (1951) 53 NLR 163.
William v. Somasunderam (1968) 71 NLR 459.
Ranasinghe v. Jayatilleke (1969) 7.2 NLR 126.
Ex parte Wier (1871) LR 6 Ch. App. 875.
APPEAL from judgment of the Court of Appeal.
H. L. De Silva. P.C.. with S. C. Crossette Tambiah for defendant-appellant.
Nimal Senanayake, P.C.. with P. A. D. Samarasekera. P.C.. J. 8. Puvimanasinghe andMiss S. M. Senaratne for plaintiff-respondent.
Cur. adv. vult.
November 28, 1985.
WANASUNDERA, J.
The only question before us is the correct interpretation of section7(1) and (2) of Rent Act, No.7 of 1972, and more particularlywhether or not, as contended by the plaintiff-respondent (hereinafterreferred to as the plaintiff), these provisions are retroactive inoperation, resulting in the defendant-appellant (hereinafter referred toas the defendant) being in arrears of.rent and at fault. The basic factsare not in dispute. The premises concerned are situated at the junctionof Bullers Road and Reid Avenue, Colombo. It is a large house of afloor area of 441 9 square feet with six rooms and appurtenances in agarden of 40 perches of land. The premises were "exceptedpremises" and were not rent controlled under the Rent Restriction Act.
The plaintiff and defendant were not only good friends but also areclosely connected to each other by marriage. It is in evidence that theplaintiff lacked business acumen unlike his distinguished father andwas indifferent to his interest, and was in addition a sick man withserious drinking problems and constantly in and out of hospital. Thedefendant is a director of a number of companies and a well-to-dobusinessman.-Their relationship in regard to the letting of this housedoes not appear to have been an ordinary businesslike transaction.
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and the defendant seems to have taken advantage of the plaintiff'sweaknesses. For it is quite apparent that the premises could havefetched a much higher rental than the amount paid by the defendant.The defendant rented the premises in 1952 at a rental of Rs. 180 permonth and continued as tenant paying the same rent till 1 967, whenthe parties entered into a lease agreement for a period of ten yearswith an option to the tenbnt to renew it on the same terms for a furtherperiod of ten years. The rent remained the same at Rs. 180 per month.Although the agreement did not mention as to who should pay thetaxes, the defendant has in fact paid the taxes which amount toRs.450 per quarter. The defendant has in addition on certainoccasions made an ex gratia payment of Rs.100 per month to theplaintiff, which is admittedly in the nature of an illegal payment.
In 1973, by letter dated 1.12.73 (D 9), the plaintiff's lawyerinformed the defendant that the Municipal Council had called upon theplaintiff to pay the "Special Tax" as provided in Rent Act No. 7 of1972, which amounted to Rs. 2,171/83 for the year 1972 andRs. 2,606/20 for the year 1973. This had been computed by thelocal authority on a "receivable rent" or as a provisional "receivablerent” of Rs. 800 per month. The concept of a "receivable rent" was anew idea introduced by the Rent Act and a special tax or levy wascomputed on the basis of the receivable rent. By this letter thedefendant was requested to pay a sum of Rs. 9.870, being theshortfall in the rent for the past period and which was legally payableby him. The defendant was'also requested to pay the rent of Rs. 800per month from then on, namely from December 1973. In his replyD 10 dated 28.1 2.73, the defendant disputed the computation of therent and stated that according to the relevant legal provisions it shouldbe calculated on the basis of the highest rent paid during the period oftwo years immediately preceding the date of the coming intooperation of the Rent Act. He also added that the provisions of section7 (2) under which the computation has been made operatedprospectively and not retroactively. The defendant accordingly deniedliability and informed the plaintiff that he would continue to pay the oldrent until the matter is clarified.
Thereafter, both the defendant and the plaintiff applied to the RentBoard for a determination of the rent payable and a computation of thereceivable rent respectively. The Rent Board took up for considerationthe defendant's application and on the agreement of the parties by its
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order D. 23 dated 19.2.76 determined the receivable rent at Rs. 675.the standard rent at Rs. 550, and the authorised rent at Rs. 613. Onthe basis of this settlement the plaintiff's application to the Board wasconsequently withdrawn.-It may be noted that this determination ofthe Rent Board would constitute that initial determination which theBoard is enjoined to make under section 7(1) to determine thereceivable rent. It would also be observed that the Board went on toincrease the receivable rent from the previous sum of Rs. 180 to thenew sum of Rs. 675.
Consequent on this order, the plaintiff's attorney informed thedefendant that the defendant was liable to pay a sum of Rs. 1 7,200.being the shortfall of the rent at the rate of Rs. 675 from 1.3.1972.The defendant however denied the claim for outstanding rent and senta cheque for Rs. 675 for March 1976 and continued thereafter to paythis same amount. By letter dated 17.9.76 the defendant was givennotice to quit and vacate the premises on or before 31.12.76. Thiswas coupled with a demand for the payment of a sum of Rs. 1 7,220as arrears of rent.
The present action for ejectment was filed on 12.9.77 on theground of arrears of rent for over one month after it has become due interms of section 22 (2) of the Rent Act and for the recovery of thesum of Rs. 1 7,895 being arrears of rent and damages up to 31.8.77.The basis for the action was that the receivable rent of Rs. 675 fixedby the Board was payable by the defendant and was operative from1.3.72, the date of the coming into operation of Rent Act, No. 7 of
The defendant in his answer took up the position that the orderof the Board of Review was prospective in operation and operated onlyfrom 1.3.76 and that accordingly he was not in arrears of rent.
The trial judge has held that tjae defendant was in arrears of rent andgave judgment for the plaintiff. The Court of Appeal has affirmed thejudgment of the lower court. The only matter before us is whether ornot the provisions of section 7 (1) and (2) of the Rent Act wereretrospective in operation. If it was retroactive, then the defendantwould be in arrears of rent and his appeal fails.
Section 7 of the Rent Act which relates to receivable rent is, asstated earlier, a new concept that was not found in the earlier law. Itdeals only with residential premises which had been exempted and notcontrolled by the Rent Restriction Act (Cap. 274). Many suchresidential premises had been let at high rents. The provision did not
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seek to interfere with those lettings. It actually sanctioned suchlettings. The Rent Act however provided for the local authorities tolevy a "special tax" amounting to 75% of the difference between thereceivable rent and the authorised rent of such premises – section7 (3) – and to obtain a benefit from such lettings. This specialtax.hasto be remitted by the local authorities to the Commissioner of NationalHousing, who has to credit it to the Repairs Fund'established by theAct to be administered by the Commissioner. Section 7 (3) (c) statesthat the imposition and recovery of Jhe special tax by the localauthorities will be governed, by the existing laws under which suchlocal authorities impose and recover rates and taxes.
Section 7 (1) of the Rent Act, which is material for this discussion,is worded as follows
"7. (1) In the case of any residential premises the firstassessment of the annual value of which was made prior to the dateof commencement of this Act and the annual value of which, asspecified in the assessment in force on the first day of January,1969, or if the assessment of the annual value of such premises ismade for the first time after such day, as specified in such firstassessment, exceeds one hundred and fifty per centum of therelevant amount, the receivable rent per month of the premisesmeans -■
(a) where the premises have been let to a tenant, the highestamount established to the satisfaction of the board ashaving been received by the landlord by way of rent inrespect of such premises for any month during the periodof two years immediately preceding the date ofcommencement of this Act ; or
(fc>) where the premises have not been let to a tenant or wherethe rent referred to in paragraph (a) is in the opinion of theboard low, and in all other circumstances not provided forin paragraph (a), such amount as may be determined by theboard:".
Mr. Senanayake for the plaintiff has referred us to certain otherprovisions of the Rent Act and to certain regulations enacted under theAct. Under section 7 (1), it would appear that it is the Rent Board thathas to be satisfied or has to make a determination of the receivablerent. Section 37 enjoins the Board to maintain a Rent Register.Section 37 (2) states that in respect of premises let prior to the
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commencement of the Act. the landlord shall within three months ofthat date send by registered post to the tenant and also to the Board adetailed statement relating to the tenancy. This statement must giveparticulars of 13 indicated matters, one (h) being the receivable rent ofthe premises. Section 37 (5) states that in the event of a disputebetween the landlord and the tenant regarding any of theaforementioned particulars, the Board shall make a decision after dueinquiry. Such decision shall be final and conclusive.
Part III of the Regulations framed under the Act and which isintended to be complementary to the main Act also indicates that theproper authority to determine the receivable rent is the Board. Whenthe landlord and the tenant are not at issue on this matter, apparentlythe authorities would go by the amount mentioned by the landlord inhis return. When there is a dispute, other considerations would apply.But whatever the position be, the proper legally receivable rent cannotbe ascertained until it has been passed upon by the Board. It is alsoapparent that in all these matters the local authorities and the Boardact in conjunction.
Part II of the Regulations contain provisions for the levy andcollection of the special tax by the local authorities. Regulation 24requires the local authorities to maintain a Receivable Rent Register.Regulation 25 states that the special tax "shall be collected by eachlocal authority for the month of March 1 972 and quarterlythereafter…" This indicates that the tax would be operative from thedate of the coming into operation of the Rent Act. In the case of anyobjection to the notice of assessment of the special tax, the localauthority must refer the matter for decision by the Board-regulation27. Regulation 28 provides for cases of excess payment or shortfalland for refund or recovery as the case may be, clearly indicative of aprovisional levy pending the determination by the Board.
The main submission by counsel for defendant-appellant was thatsection 7 (1) (a) and (b) cannot be applied conjointly because theydeal with two separate situations. Mr. de Silva's submission was thatsection 7(1 )(a) deals with the determination of the receivable rent bythe Board and was retroactive, but when one comes to the fixing ofrent as in section 7 (1) (b) the decision must operate prospectively. Herelied on Ranasinghe v. Fernando (1), William v. Somasunderam (2)and Ranasinghe v. Jayatilleke (3).
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Even if we accept the analysis of the law submitted by Mr.de Silvaas a general proposition, I cannot see why the provision of section 7(1)(a)- and (b) cannot operate conjointly in an instance such as thisWhen the Board exercises its power initially of determining thereceivable rent, cannot it also at one.and the same inquiry in a fit casego into the question of the inadequacy of the rent. Apart fromadministrative convenience, the non-duplication of work and theabsence of delay and other benefits resulting from such a course ofaction, it seems to-me that in the performance of its functions in theinitial determination of the receivable rent, which is a revenuemeasure, the Board would be making a determination which isincomplete and lacking in fulness if it did not also at the same timeconsider whetheror not the rent of the premises was too low if thatissue is also raised before them at the time of such determination. Thewording of section 7(1) (i>) linking it with (a) also suggests thisinterpretation. That is exactly what happened in this case and further,everything that transpired before the Board had the consent of bothpartieg.
Mr. de Silva also criticised the trial judge for interpreting theprovisions of section 7 by resort to the regulations. It will be observedthat I have myself referred to the machinery for the imposition andrecovery of the special tax contained in the regulations to show thecomprehensiveness of the taxing provisions which are supplementaryto the provisions of the Act. Maxwell in his 12th Edition onInterpretation of Statutes states-at page 74 that it is not possible toderive any settled principles from recent cases as regards resort tostatutory instruments in the interpretation of a statute, but adds that inthe present state of the law the Court of Appeal (U.K.) might stillchoose to follow the opinion of James and Mellish, L.JJ. in Ex ParteWier, (4) where the court had resort to the regulations.
But the operation of the special tax from the date of the enactmentof the Rent Act or its retroactivity from the date of the determinationby the Board is not in dispute in this case. This has been conceded byMr. de Silva. What is before us is a somewhat different question.When the Board in the initial exercise of determining the amount of thereceivable rent also considers and determines in one and the sameproceedings the raising of the existing re it as being too low, doessuch a determination also operate retroai ively ? This is both a legal
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and (actual question. This question has to be determined by looking atthe Act itself and the relevant evidence. The regulations have littlebearing on this matter as my own reasoning set out earlier wouldindicate.
For these reasons I would affirm the judgment of the Court ofAppeal and dismiss this appeal with costs.
SHARVANANDA, C. J. – I agree.
COLIN-THOME, J. -1 agree.
Appeal dismissed.