Sri Lanka Law Reports
SAMERAWICKRAME, J., ISMAIL, AND WANASUNDERA. jj.S. C. APPEAL No. 40/80- D. C. NEGOMBO 347/RE.JANUARY 15,1981.
Lease—Whether letting of business or of premises—Defendant not tenant of premisesbut a licenced—Whether letting is of the business only—Errors in typing of prayer toamended plaint—Plaintiff not to be denied relief in such circumstances.
The plaintiff sued the defendant on the basis that he had leased to the defendant by adocument marked "A" a business of a hotel and bakery and that the defendantwrongfully continued to carry on business after the expiry of the lease The defendant,inter alia, pleaded that he was sub-tenant under the plaintiff of the premises in suitand was protected by the provisions of the Rent Act. In regard to the plaintiff's rightto obtain a decree for ejectment, the defendant further relied on the Fact that theamended plaint filed by the plaintiff had omitted to include <j prayer for ejectment,although in the body of the amended plaint it was pleaded, as it had been in the originalplaint, that a cause of action had accrued to the plaintiff for ejectment.
On the evidence and a construction of the lease agreement, the plaintiff only letthe business carried on by him in the premises to the defendant. Possession of thepremises by the defendant was therefore not on the basis of a tenancy hut only aslicencee tu enable Inm m conduct rhe business during the stipulated period.
12) The finding of the Court of Appeal thai ilie omission in the prayer to the amendedplaint filed by the plaintiff, of a prayer for ejectment, was a typist's error, must on anexamination of the circumstances of the case be affirmed. The plaintiff is thereforeentitled to a decree for ejectment.
Cases referred to
Nicholas Hamy v. James Appuhamy, 11950) 52 N.L.R. 137.
Andiris Appuhamy v D. B. M. Kuruppu. (1963) 65 N.L.R. 21.
Abdul Latifv. Seyed Mohamed, (1967) 72 N.L R. 20.
Charles Appuhamy v. Abeysekera, (1954) 56 N.L.R. 243
Jayasinghe v. Goolam Hussein, (1955) 56 N.L.R. 381.
Devairakkam v. Samarasmghe, (1962) 65 N.L.R 18.
Sadiris Singho v. Wijesinghe, (1965) 70 N.L.R. 185.
APPEAL from a judgment of the Court of Appeal.
E. D. Wickremanayake, with O. S. Wijesmghe, for the defendant-appellant.J. W. Subasinghe, with J. C. Nilanduwa, for the plaintiff respondent.
Cur. ads. suit.
Abeypala v. Abeyakirthi (Ismail, J.l
The plaintiff has filed this action on the basis that he bad beencarrying on the business of hotel and bakery known as Sri LankaHotel and Bakery in the lands and premises rented out by him ona monthly tenancy as described in schedule “X" to the plaintfrom about the year 1967. He further avers that by written leaseagreement of 13th September, 1971, marked "A" he had leasedthe above business, including the management and control, andthe right to carry on the business and enjoy the goodwill andprofits and the right to use movable property and accessoriesancillary to the said business to the value of Rs. 8,341/21 to thedefendant for a period of one year from the date of the lea**;agreement “A" at a monthly rental of Rs. 400. According to thisdocument the defendant had also undertaken to pay the dues inrespect of the electricity supplied to the premises in the name ofthe plaintiff. In consequence of the lease agreement the defendanthad beer, placed in possession. The plaintiff had averred that afterthe expiry of the lease on 14th September, 1972, the defendantmaliciously, wrongfully and unlawfully continued in occupationof the said lands and premises and continued to use the saidmovable properties and accessories and to have carried pn the saidbusiness, enjoyed the goodwill and profits and had refused tohand over possession of the business and the premises to theplaintiff though demand had been made.
The defendant in his answer while admitting the execution ofthe lease agreement “A” takes up the position that firstly, theplaintiff had represented to him that he was the owner of thepremises where the business was carried on, and that after he hadcarried on the business for some time he became aware of the factthat the plaintiff was not the owner of the premises in suit butonly the tenant of these premises, and that the owner of thepremises was one Mrs. V. Beatrice Fernando who had institutedthe action D. C. Negombo 297/RE and secondly, he takes up theposition that the lease agreement 'A' is illegal and unenforceableand the plaintiff has accepted him as a sub-lessee, he cannot evicthim and that he is protected by the provisions of the Rent Act.
With regard to the first of the grounds set up in the answer it isclear that even at the execution of the document "A", which isalso marked P1, in paragraph 4 it is stated that if there is any rent
Sri Lanka Lam Reports
owing to the landlord the party of the first part shall pay thesame, which clearly indicates that it was within the knowledge ofboth the plaintiff and the defendant at the execution of thisdocument "A" that the plaintiff was only a lessee of the premisesin question and that the defendant was aware of this fact.Therefore the defendant's averment in his answer that he becameaware of the fact that the plaintiff was a lessee only after theexecution of the document “A” is manifestly untruthful and mustaffect his credibility.
After the trial had been proceeded with and the evidence of theparties had been fully led it was discovered by the plaintiff thatthe premises in question had been incorrectly described sincethere had been an alteration in the assessment number of thepremises. For that specific purpose counsel for plaintiff hadapplied to Court for permission to amend the plaint. There hadbeen no objection raised by the defendant to the application andthe application had been allowed. Subsequently amended plainthad been filed dated 25.10.74. In the original plaint one of thereliefs asked for was for ejectment of the defendant from thepremises in suit. This particular paragraph in the prayer had notbeen reproduced in the amended plaint but there is the avermentin paragraph (7) of the amended plaint that a cause of action hadaccrued to the plaintiff to eject the defendant from the lands andpremises in which the said business was heing carried on and forthe restoration to the plaintiff of peaceful possession of thesaid lands and premises, etc. Further, issue No. 7 which had beenraised by the plaintiff as to whether the plaintiff was entitledto eject the defendant from the premises in which the businesswas carried on remained on the record and was not deleted inconsequence of the plaint being amended. I
I am of the view that the reasons advanced in the judgment ofthe Court of Appeal which indicated that the omission in theplaint of the prayer for ejectment is an error by the typist is amplysubstantiated and appears to me to be the correct assessmentin respect of this matter. As stated in the judgment the wholepurpose of the plaintiff's action was to get these premises backand a mere declaration that he is entitiled to the business andmovable property would not be of much benefit to the plaintiff.Further the numbering of the several paragraphs of the prayer tothe amended plaint as (a), (b), (c), (e) and (f) and the omission ofparagraph (d) clearly indicates that this is an inadvertent omission,
Abeypala v. Abeyakirthi (Ismail. J.)
otherwise the paragraphs would have been marked as (a), (b),
, (d), and (e) in that order and not as (a), (b), (c), (e), and (f),omitting (d) in that sequence. I am therefore of the opinion thatthe Court of Appeal judgment making order that the plaintiff isentitled to decree for ejectment is correct.
The next matter that arises for consideration is whether bythis document the plaintiff had really leased the business carriedon in these premises to the defendant, the occupation of thepremises therefore being ancillary to the carrying on of thebusiness, or whether by this document the plaintiff had soughtto circumvent the provisions of the Rent Act and it in reality wasa lease of the premises to the defendant.
Both the original Court and the Court of Appeal on aconsideration of the facts before them had arrived at theidentical conclusion that by document "A" the plaintiff hadonly leased the business carried on on these premises to thedefendant and that the occupation of the premises by thedefendant was in order to carry on this business and that theplaintiff had therefore not surrendered his right to occupy thepremises to the defendant.
Several cases were cited to us and I shall refer briefly to thosecases. What emerges on a consideration of these severalauthorities is that one has to examine the documents by whichpossession had been handed over in order to determine whetherthere has been a letting or sub-ietting of premises or whetherthe lessee was merely permitted to occupy the premises as alicencee for the sole purpose of carrying on the business untilthe business was handed back to the lessor. I shall now referto these cases.
In the case of Nicholas Hamy v. James Appuhamy (1) thefacts indicate that the defendant had taken charge from theplaintiff a "workshop" called "The City Engineering Works",together with certain tools, machinery and implements. Thedefendant undertook to pay a sum of Rs. 160 per mensem "forthe above workshop until such time as I am in occupation". Thedefendant also agreed to quit on receiving three months' notice.It was held that what was let was a building and not a "a business"and that the agreement contained all the ingredients necessaryto constitute a valid letting of "premises" within the meaningof the Rent Restriction Ordinance.
Sri Lanka Law Reports
In the case of Andiris Appuhamy v. D. B. M. Kuruppu (2)where a tenant who carried on a business in a portion of rent-controlled premises purported to lease out the "business" toa third party but, according to the evidence, the transaction wasin reality sub-letting of a distinct portion of the premises, itwas held that the landlord was entitled to eject the tenant andsub-tenants on the ground of sub-letting.
In the case of Abdul Latif v. Seyed Mohamad (3) the factsindicated that the tenant of a rent controlled premises had enteredinto what was stated to be in the document a partnershipagreement but the facts indicated that this agreement was onlya plan to cover the sub-letting of premises. It was held thatthe tenant and the sub-tenant were liable to be ejected by thelandlord, if the landlord had not given his written consent toto the agreement In the course of the judgment in that case thedictum of Nagalingam, S.P.J. in Charles Appuhamy v. Abeysekera
at 244, was quoted with approval. "The mere affixing of alabel to a transaction by the parties or by their legal advisersdoes not control or govern the true nature of the rightsand liabilities created which have to be determined by anexamination of the terms and conditions of the instrument itself."In that reported case where a business of the nature of a hoteland tea kiosk was "leased" by A to B and, under the contract,A gave over to B the management, control and conduct of thebusiness for a term of years. It was held that at the end of thisspecific period B was not entitled to the protection of the RentRestriction Act with regard to the premises in which the businesswas carried on. In the course of that judgment Nagalingam, S. P. J.examined the document PI in that case and came to theconclusion that it cannot probably be said that there was a lettingof immovable property to which the provisions of the RentRestriction Act apply. On a consideration of the documentP1 in that case he further stated: "On a proper reading of thedocument P1, it is impossible to resist the conclusion that thetransaction entered into between the parties was one not of lettingany immovable property for the purpose of enabling one partyto carry on a business, nor the letting of the building to that partywith the option to him to carry on or not the business previouslycarried on there, but of placing the "lessee" in charge of a businessthat had been and was being carried on for the sole purposeof its being continued as a going concern and with a view to itsbeing delivered back as such going concern together with the
Abeypala v. Abeyakirthi (Ismail, J.)
goodwill and the improvements and the advantages gained oraccrued thereto in the meantime; and as ancillary to the objectwhich the parties had in contemplation, it was that possessionof the premises was delivered. The defendant's position was nomore that that of a licencee and is far removed from that of atenant."
In the case reported in 56 N.L.R. page 381 (5) it was held wherea tenant who carries on a business in the rented premises transfersthe business to a third party for a stipulated period withoutobtaining the landlord's consent in writing, such transfer does notamount to sub- letting within the meaning of section 9 of the RentRestriction Act if the possession of the premises by the transfereeis only incidental to the transaction relating to the business.
In the case of Devairakkam v. Samarasinghe, (6) the factsindicate that where a tenant of rent-controlled premises, whocarried on a business therein leased the business to another personand moved to other premises, where he opened a new business, itwas held that the lease of the business did not amount tosub-letting nf the premises in which the business was carried on.
In the case of Sediris Singho v. Wijesinghe (7) the facts indicatethat the plaintiff leased to the defendant for a period of threeyears the business of a hotel carried on at certain premises,together with goodwill, shop fittings, furniture, utensils andand implements of trade. At the expiry of the period of threeyears the defendant was to yield up peaceful possession of thebusiness and premises to the plaintiff. The defendant claimed thatwhat was leased to him was a furnished apartment and that itwas governed by the Rent Restriction Act. It was held that thetransaction between the parties was not a lease of a buildingbut of a business. The defendant's position while he was inoccupation of the premises was no more than that of a licencee.The Rent Restriction Act, therefore, had no application to thecase.
Therefore when one considers the facts of the present case,the construction of the document "A" and the circumstancesindicated in the evidence clearly establish that what the plaintiffdid was merely to let the business carried on by him to thedefendant and therefore there is no sub-letting. The plaintiffhad handed over the business to the defendant as a going concernand the defendant had to give it back to the plaintiff on the
Sri Lanka Lam Raports
(1981) 1 S.L.R.
termination of the agreement in similar conditions. In order toachieve this object the defendant had been given possession ofthe premises but such possession had not been given on the basisof a tenancy. The defendant was only occupying the premises as alicencee enabling him to conduct the business during thestipulated period. The clause in the agreement "A" that thedefendant was to pay the electricity bills in this case in the nameof the plaintiff is clearly indicative of the fact that the defendantwas only in the premises as a licencee of the plaintiff. Clause 4 ofthe agreement further indicated that if there were any rents dueto the landlord it was the party of the first part, that is theplaintiff who shall pay the same. Further the clause 6 of theagreement indicates that it was the plaintiff who had to fulfilall the requirements in connection with the buildings of thisbusiness and the defendant had agreed not to come to anyagreement with the owners of the building. The stipulations inthe agreement clearly indicate that occupation of the premisesin suit by the defendant was in the nature of a licensee underthe plaintiff and does not confer any tenancy rights in respectof these premises to the defendant.
i am therefore of the view that the Court of Appeal has cometo the correct finding in respect of matters in issue in this caseand the defendant's appeal in this case must necessarily fail. Iaccordingly dismiss the appeal with costs.
SAMERAWICKRAME. J. – I agree.
WANASUNDERA, J.-l agree.