094-NLR-NLR-V-56-MRS.-D.-E.-C.-JAYASINGHE-Appellant-and-F.-GOOLAM-HUSSEIN-et-al-Respondents.pdf
381
DE BHiVA "3.-—Jayaainrjhe v. Hussein
19§5Present : de Silva J.MRS. D. E. Cl. JAYASINGHE, AppeUant, and F. GOOLAMHUSSEIN et al., Respondents
S. C. 151—0. R. Colombo, 38,628
Jlent Restriction Act, No. 29 of 1948—Section 9 (1 and 2)—‘‘Sub-letting"—Appli-cability of the term to transfer of a business for a stipulated period.
Where a teiuuit who carries on a business in the rented premises transferstho business to n. third party for a stipulated period without obtaining thelandlord's consent in writing, suoh transfer does not amount to sub-lottingwitliin the meaning of section 9 of "the Rent Restriction Act if the possessionof the premises by the transferee is only incidental to the transaction relutingto the business.•
^^.PPKATj from a judgment of the Court of Requests, Colombo.
H. V. Pere.ru, Q.C., with H. W. Jayetvardene, Q.C., and D. It. P.Cloonetilleke, for the 1st defendant appellant.
R. R. Crossette-Thambiah, Q.C., with H. W. Tambiah and N. C. J.Rtuslomjee, for the plaintiffs respondents.
Cur. adv. vult.
February 16, 1955. DE SfLVA J.—-
In this action, the plaintiffs who are the landlords of premises bearingNo. 151, 5th Cross Street, Colombo, sought to eject the two defendantson tho ground that their'tenant, the 1st defendant, had sub-let thepromises on the notarial agreement P4 dated 11th June, 1951, to the2nd defendant without obtaining their consent in writing, in contraven-tion of the provisions of Section 9 (I and 2) of the Rent Act of 1948.They also contended that the 1st defendant was a non-occupying tenantand was therefore not projected by the relevant provisions of the RentAct. The 1st defendant ffted answer denying that she had sub-let thopremises to the 2nd defendant. She also denied the truth of the avermentthat she was a non-occupying tenant. The 2nd defendant resisted thoclaim of the plaintiffs on the same grounds and maintained that therewas a misjoinder of parties.'and causes of action. The learned Commis-sioner of Requests held in^aypur (if the 1st defendant on the question ofnon-occupancy. He, howqyer, • bold that the 1st defendant had sub-letthe premises to the 2nd defendant qn P4 and that therefore the plaintiffswere entitled to eject the- 1st defendant. The issue relating to the mis-joinder of parties and causq§ of action was answered in the affirmative,hut the learned Commisgiojler gating that he was entitled to deletethe name of the 2nd defeR^nt proceeded to consider the case as againstthe 1st defendant only. ^KMrdix^ly he entered judgment for the plain-tiffs against the 1st defendjmt aejjjffiyed for on the ground of sub-lotting.From this judgment the l^Wen^EUit has appealed.
The 1st defendant’s husband – Carried on a grocery business in thopromises in question under the nanfie and stylo of “ R. Jaglas Fernando &
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DE SILVA J.—Jayasinghe v. Hussein
Sons”. Ho died in the year 1930 and thereafter his widow, Dio 1st,defendant, continued the business in the same premises and under thesame business name. The plaintiffs became the owners of these premisesin or about the year 1948, and the 1st defendant became their tenantfrom that time at a monthly rental of Its. 175'42. The 1st plaintiff hasstated that when ho came to know that the 1st defendant had sub-letthe premises to the 2nd defendant on P4 he gave notice on 14.3.’52 tothe 1st defendant terminating the lease.
Tho main question for determination is as to whether or not P4 is ineffect a letting and hiring of the premises in suit, By this documentthe 1st defendant claiming to be the owner and proprietor of the businesscarried on under the name, style, and firm “ R. Jaglas Fernando & Sons ”of No. 141, 5th Cross Street, Colombo, purported “ to sell and deliver ”to the 2nd defendant “ the goodwill of the said business together withthe furniture and fittings appertaining thereto and in tho schedule heretofully and particularly described ”, for a period of 5 years commencingfrom 1.6. ’50 for a consideration of a monthly payment of Rs. 600 whichis described as “ a commuted sharo of the profits ” subject, inter alia,to tho following conditions :—
{a) If the purchaser failed to pay to the vendor the monthly paymentof Rs. 600 for 3 consecutive months or he committed a breachof any of the other conditions the vendor reserved the rightto cancel tho agreement after giving notice, and take over thebusiness.
Tho vendor was to pay regularly and punctually the house rentin respect of the promises No. 141 “ and shall assure unto thesaid purchaser the quiet and vacant possession of the saidpremises ” during the said period of 5 years.
Tho vendor shall not be liable for any debts or liabilities incurred
by the purchaser in respect of the business.
“ The said purchaser binds himself and his aforewritten to carry
on the said business under the aforesaid name of ‘ R. JaglasFernando & Sons’ and under no other name nor shall the saidpurchaser assign these presents to any person or persons whom-soever without the written consent thereto of the said vendorfirst had and obtained. ’’
At the end of the said period of 5 years the purchaser was to ro-
convey and deliver the goodwill of the said business with thofurniture, fittings, &c.
(/) If the purchaser failed to rcconvey and deliver the goodwill of thobusiness and the furniture, fittings and movables as agreedhe was to pay the vendor at the rate of Rs. 100 per day as liqui-dated damages until “thesaid goodwill, the furniture, fittingsand other movables are re-conveyed and delivered and vacantand quiet possession of the said premises No. 141….
are given to the said vendor. ” If the purchaser was not ableto carry on the business he was entitled to terminate theagreement by giving 6 months notice to the vendor.
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" DE fdl.VA J.^-^Jayaainghe v. Hussein
“According to the defendants'the agreement F4 is not a sub-lease ofthe premises but a transaction- relating to the business “ R. JaglasFernando & SonsWhat'matters is not the label that parties assign
to a document but its reaT nature which can be gathered from its contentsand the attendant circumstances; The 1st defendant states that sheentered into the agreement P4 as Bhe found that it was not possibleto carry on the businesssingle-handed. Prior to the agreement her twosons were helping her in conducting the business but she lost their servicesabout this time as one of them proceeded to England and the other starteda business of his own. She waa also medically advised not to strainherself too much. It is for these reasons she says that she entered intothe agreement P4. Her explanation is reasonable and appears to betrue.
■.* . • –
This agreement P4 onthefacp xjf it is a transfer of the business for astated period subject to dbpditiQpq and covenants some of which I havoset out earlier. But, Dptf£. W.yjThambiah for the appellants submitsthat it is in fact a tcnancyagreepiejjit in the guise of a sale of the business.In support of this agreement hfiton the covenant by which vacantpossession is assured to th^pUTGffi&er and also on the undertaking of thelatter to give over possession, of f he premises on the termination of theagreement. On tiie other hand there are several other covenants whichgo to show that this is a genuine transaction relating to the business inwhich the possession of th$ premises is involved only incidentally. Hr.Thambiah’s submission that the sale of the business is a mere blind toconceal the letting and hiring of-the premises is not borne out by thofacts, if tikis was in fact ft-contract of tenancy one would have thoughtthat the purchaser would he entitled to make use of the premises for anykind of business at his option. In this instance the purchaser is notvested with any such right. According to the terms of the agreementit is obligatory on the purchaser to carry on the identical grocery businessunder the name “ R. Jaglas Fernando & Sons A breach of thatobligation would immediately entitle the vendor to terminate the agree-ment and take over the business.:, It is not suggested that the purchaseris carrying on any other bpsiness in these premises. The vacant possession that has been assured tcf.the purchaser is what was necessary to giveeffect to the main object of.the agreement, namely, the conduct of thebusiness by the purchaser during the stipulated period. It is in evidencothat even after this agreement was entered into the 1st defendant iscontinuing to have her notarial office in the premises. It has not beensuggested to the 2nd defendant in cross-examination that she is havinglior office there on an independent agreement with the 2nd defendant.The fact that the 1st defendant still has her office in this building isproof that the 2nd defendant was given vacant possession only to theextent necessary for him to carry on the business. In these circumstunccsit is not unreasonable to hold that the 1st defendant has not in factgiven over exclusive possession of tije entire premises or a definite portionof it to the 2nd defendant. A fundamental requirement of a tenancyis that the tenant must have the exclusive possession of the premises lot.In this case that condition has not been satisfied. It was also arguedthat the fact that according to'thd agreement the 1st defendant was not
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UE SILVA J.—Jayasinghe v. Hussein
to share the losses incurred in the business is an indication that thistransaction was a mere contract of tenancy. That does not necessarilyfollow. It may well bo that the business is a flourishing one and the2nd . defendant was satisfied that he would be able to earn a handsomeprofit from it. The agreement describes the sum of Rs. G50 payablemonthly to tho 1st defendant as a commuted share of the profit s. Thereis no material to warrant the inference that this is a mis-descriptionof tho amount payable. The suggestion that tho sum in question isonly black-market rent has no foundation.
If P4 created a contract of tenancy the 2nd defendant would be entitledto the protection of the Rent Restriction Act and refuso to vacate thopremises, if he so wishes, at the termination of the agreement. But isthe 2nd defendant in fact entitled to sot up such a claim ? In my viewhe is not entitled to do so. On this point the judgment of Nagaling&mS. P. J. in Charles Appuhamy v. Abeyesekera1 is relevant. The plaintiffin that case “ let, demised and leased ” on the document PI of 1950to one Edwin Silva the hotel and tea kiosk known as the “ Kandy Res-taurant ” carried on in the premises No. 39, Brownrigg Street, Kandy,for a period of 3 years. Edwin Silva with the consent .of the plaintiffassigned his rights to the defendant. At the end of the period of 3 yearsthe defendant failed to give over the “ Kandy Restaurant ” to tho plain-tiff who then sued the defendant. The defendant then took up the positionthat he was a tenant of the promises and claimed the protection of thoRent Restriction Act. In rejecting this claim Nagalingam S. P. J.held that PI was not a contract of tenancy but an agreement relatingto the management, control and conduct of a business. It is true thatin the agreement PI relied on in that case no vacant possession of thopremisos was specifically assured to the lessee but that such possessionwas contemplated is clear from the terms of the agreement and posses-sion was in fact delivered to him. In that case the delivery of possessionof the premises to tho lessee was considered to be ancillary to the agree-ment relating to the business. In the inBtant case too it is clear thatpossession of the premises was given to the 2nd defendant merely for thepurpose of running the business in terms of the agreement P4, for thomutual benefit of the two defendants. The 1st defendant handed overtho business to the 2nd defendant as a going concern and the latter wasto give it back to the former on the termination of the agreement in asimilar condition. To achieve this object the 2nd defendant had toobtain possession of tho promises, but, such possession was not givento him on the basis of a tenancy. He is occupying the premisos onlyas a licensee to enable him to conduct the business during the stipulatedperiod. The issues regarding sub-letting must therefore be answeredin the negative.
Accordingly I allow tho appeal and dismiss the plaintiffs’ action. The1st defendant is entitled to costs in both Courts.
Appeal allowed.
i (1954) 56 N. L. B. 243.