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Present: Earl Loreburn, Lord Atkinson, Lord Soott DiokBon,and Sir Arthur Channell.
COLOMBO HOTELS CO., LTD. v. MOTOOMULL et al.
, Agreement to enter into a lease when new buildings are completed—
Outside evidence led to show what was meant by new buildings—
Evidence Ordinance, e. 98.
Theplaintiffsentered intoanagreementwith thedefendants by
whichthe defendantsagreedtoaccept alease ofa shop. The
period of lease was tocommence “ fromthe date whenthenew.
buildings are completed and the shop is occupied.” The plaintiffs”resolvedtorebuildthe hotel inthree sections, and the shopin
question was in section No. 2. The defendants entered into occupa-tion ofthe shop sometimeafterit wascompleted,but thereafter
the plaintiffs intimatedthat theyhaddefinitely abandonedthe
erectionofsectionNo. 3. Thedefendants when called uponto
enter into the lease refused to do so as the new buildings had notbeen completed.
Theplaintiffssuedfor damages. The Court allowed evidence to
be led to explain whatwas meantby“ new buildings, ”andon
the evidence it was held. that thewords“ new buildings” meant
the entire buildings, and not only section No. 2.
The facts appear from the judgment.
June 10, 1918. Delivered by Lord Soott Dickson: —
The plaintiffs (respondents) in this -case are the owners of theGrand Oriental Hotel, Colombo. The defendants (appellants) areshopkeepers in Colombo, who for many years before the presentdispute arose occupied as tenants -business premises in the saidhotel.
In 1910 the respondents resolved to rebuild their whole hotel, andthey approached the appellants with the view of their taking alease of premises in the new hotel buildings about to be erected.
After somewhat protracted negotiations the parties signed anagreement dated March 3, 1913, by which the appellants agreed toaccept a lease of the shop therein described on the terms and for theperiod therein set forth.
By that agreement the period of the lease (12$ years) was tocommence “ from the date when the new buildings are completedand the shop is occupied ” by the appellants, two events”beingthus stipulated for as conditions of the commencement of. the lease.
ColomboHotels Co.,Ltd. v.Motoomu ll
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The solution of the controversy between the parties depends onthe interpretation which is to be put on the words “ the new build-ings.”
The respondents resolved to proceed with the re-erection of theirhotel in three sections, the shop in question being in section No. 2.When that section was completed, the respondents called upon theappellants to enter into occupation of the stud shop, and ultimatelythe appellants did so in December, 1918.
The parties are at issue as to the terms upon which such possessionwas taken. The respondents maintain that it was because “ thenew buildings ” in the sense of the agreement had been completed,and when the appellants, therefore, were bound to take possession,and did take possession, in terms of that agreement. The appellants,on the other hand, maintain that they took possession before theywere bound to do so in terms of a special arrangement between themand the respondents.
Thereafter the respondents intimated that they were not goingto proceed with the erection of section No. 3 of the proposed newbuildings and the rebuilding of that section has been definitelyabandoned. In the plaint the respondents sued the appellants fordamages in respect of their refusal to enter into a lease in terms ofthe said agreement. In their answer the appellants maintained thatthey were not bound to enter into such a lease, as the new buildingshad never been completed.
The District Court Judge dismissed the action, with costs. Onappeal the Supreme Court reversed the decision of the DistrictCourt Judge, and gave decree against the appellants for damagesand expenses. The present appeal has been taken to set aside thejudgment of the Supreme Court and to restore that of the DistrictCourt.
The first and main question is what is the meaning of ‘‘ newbuildings ” in the said agreement.
Issues having been framed, evidence was led, and both the DistrictCourt and the Supreme Court were of opinion that outside evidencewas admissible.
From the evidence it appears that when the negotiations wereopened in 1910, Mr. Moore, the respondents’ then secretary, toldthe appellants that the whole hotel was to be pulled down andrebuilt, and he showed them the photograph D 1, which containeda picture of the whole of the proposed new building, the whole ofthe old buildings having substituted for them to new building.Nothing was then said or appeared to the appellants to the effectthat the new building was to be erected in sections; and theappellants never heard of these sections till after the parties werein Court. The respondents only produced the plan P 1 showingthe three sections in the course of the proceedings in the action.
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What, then, is the proper interpretation of the words “ the newbuildings ” occurring in the agreement?
The agreement recites that the landlord is erecting certainbuildings on the said premises (i.c., the premises called and knownas the “ Grand Oriental Hotel ”), including a row of shops in theground floor thereof.
To the appellants, who knew the existing hotel premises and thepicture D 1, which was submitted to them as representing the newbuildings as a whole without any indication of sections, this musthave been understood as referring to the whole of the new buildingsso pictorially represented, and could not have been regarded asreferring only to the portion or section which was then actually incourse of erection, apart from what was to be proceeded with in orderto finish the rebuilding.
The only other plan which was shown to the appellants is thatreferred to in the agreement. That, however, was only a groundplan of the shop, and does not assist in interpreting the phrase”the new buildings.”
On the evidence their Lordships are of opinion that the DistrictCourt Judge was right when he found that the words “ when thenew buildings are completed ” meant the entire buildings, and notonly section No. 2.
If that finding be accepted as correct, the other findings of thelearned Judge as to the plaintiffs’ contentions necessarily follow.
The Judges in the Supreme Court do not proceed on any direct orimmediate interpretation of the agreement itself, but on reasoningderived from certain letters, and particularly the letter of January17, 1913, F 9, and on the subsequent conduct of the parties. Manyof these letters were prior in date to the signing of the agreement.They related, primarily at least, not to the commencement of thelease, but to the terms on which, as a temporary arrangement, theappellants were to enter into immediate possession of the shop orpart thereof. The proposal as to this, as originally made by therespondents on August 30, 1912, was that the appellants shouldoccupy a part of the shop which was expected to be ready in April,1913. This was referred to by Mr. Moore, the respondents’ secre-tary, as ” temporary accommodation until construction of shops iscompleted.”
The appellant and the first respondent are the heirs at law of oneportion of the shop referred to, saying that they did not “ requirethe same until the whole building be completed. ” F 6. The res-pondents replied to this that they would arrange to give theappellants the occupation of the whole shop from the end of May,1913, but that they could not agree to the appellants “ not occupyingthe shop until the whole building was completed.” F 7. The appel-lants still adhered to their position that they should not be askedto occupy the shop “ until the whole buildings be completed.” F 8.
ColomboHotels Co.,Ltd. v.MotoomuU
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ColomboHotels Oo.,Ltd. v.liotoomuU
Then followed, the letter founded on specially by Mr. Justice Shaw,dated January 17, 1918, in which the respondents insisted thatthey cohid not comply with the suggestion that the appellantsshould not occupy “ their new shop or a portion thereof until thewhole complete extensions are ready,” and intimated that, unlessthe appellants were “ prepared to sign the agreement and takeoccupation of the shop or the portion thereof allotted to ” them,the existing arrangements would be cancelled and another tenantgot. P 9.
The agreement was thereafter signed on March 3, 1913. In it thetwo conditions for the commencement of the lease were set forth,viz., completion of the new buildings and occupation of the shop.Further correspondence followed, in which the terms on which theappellants were to enter into occupation were further discussed.In the course of that correspondence the appellants on December 13,1913, P 21, wrote: ‘‘ We have to pay the rent in full for the shopwe would occupy when the new buildings are completed.” Bothparties are agreed in the evidence that this expression “ the newbuildings ” meant the whole “ of the new buildings ” record, p. 15,line 6, and p. 19, line 27. Ultimately the appellants entered intopossession of the shoji on December 6, 1913. At that time, however,even section No. 2 of the new buildings had not been completed,and it was agreed that the appellants should not pay the full rentstipulated for in the agreement, but 20 per cent, less, and the fullrent was never paid by the appellants.
This correspondence had, it thus appears, relation to the terms onwhich the appellants were to enter into occupation of the shop at atime when admittedly even section No. 2 had not been completed. Itregulated, in their Lordships’ opinion, only the terms on Which thatoccupation was to be enjoyed, and it provided for a reduced rentjust because the buildings were not completed. In their Lordships’opinion it was not intended to alter, and ought not to be acceptedas altering, the interpretation of the phrase “ the new buildings ”occurring ^in the agreement, and accordingly that interpretationwas left as the District Judge found it to be, viz., the whole buildingsas shown on the picture D 1.
In the argument before the Board great weight was attached tothe word “ is ” in the sentence in the preamble of the agreement:“ and whereas the said landlord is erecting certain buildings,” &c.,and it was contended that as at that time, viz., the date of theagreement, the only section then actually in course of constructionwas section No. 2, the words “ the new buildings ” must be understoodas confined to section No 2. In the opinion of their Lordships thisargument seeks to attach a significance to the word “ is ” which itwill not bear. The use of the word “ is ” seems to their Lordshipsquite insufficient to displace the other evidence as to what “ the newbuildings ” referred to in the agreement really were.
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Upon the whole, their Lordships are of opinion that the properconstruction of the words ** the new buildings,” occurring in theagreement, is that adopted by the learned District Judge. Theywill, therefore, humbly advise THs Majesty to reverse the decision ofthe Supreme Court and to restore the judgment of the DistrictJudge.
The respondents must pay the costs of the appeal to the SupremeCourt and also the costs of this appeal.
. Lobd Scot*.-Digksok.
Colombo*Holds Oo.r. Ltd. v.MotoomuU