Nisthar v Gurusamy and Another
GURUSAMY AND ANOTHERSUPREME COURTYAPA, J.
DE SILVA, J. ANDJAYASINGHE, J.
S.C. APPEAL NO. 57/2002
A. NO. 322/94(F)
C. COLOMBO CASE NO. 7608/RE8 AUGUST AND 26 AUGUST 2003
Landlord and Tenant – Business premises – Determination of premises asbusiness premises – Section 48 of the Rent Act and Regulation 3 in the sched-ule to that section – Test for determining the year in which premises becomeexcepted premises.
The plaintiff instituted action against the 1st and 2nd defendants for theirejectment from the premises in suit on the grounds of arrears of rent, sublet-ting and the deterioration of the premises in suit. On 27.4.94, the District Judgeheld against the plaintiff on the said grounds but gave judgment in his favouron the ground that the said premises was excepted premises and hence theRent Act had no application.
Under section 48 of the Rent Act ("the Act") residential premises meansany premises for the time being occupied wholly or mainly for the purposes ofresidence.
Business premises means any premises other than residential premises.Regulation 3 in the schedule to section 48 of the Act provides that the annualvalue of business premises should be determined on the basis of annual valuefixed by the local authority (where the premises is situated) as in 1968 or theannual value for that year.
The premises in suit is described from 1953 to 1971 as a house; from1972 to 1987 it is described as office and house but the annual value appear-ing in the register of the Colombo Municipal Council had not reached therequired amount for purposes of exception. However from 1988 to 1991 thepremises is described as a store and the annual value is fixed at Rs.24,000/ -viz. above the requisite value in Regulation 3, for the Colombo MunicipalCouncil.
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In considering whether the premises is excepted business premises ora residential premises when it is claimed to have been first assessedas business premises the use to which the premises is put into and theannual value should both be taken into account.
Applying that test and the evidence in the case, the premises in suitbecame business premises for the first time in 1988. It was, therefore,excepted premises in terms of Regulation 3 in section 48 of the Act, asfrom 1988.
Cases referred to:
Atapattuv Wickramasinghe (1986) II C.A.L.R. 289
Nalini v Gunawardana Sri Skantha's L.R. Vol II 143
Aloysius v Pillaipody (1982) 2 Sri LR 762
Jinasena v The Commercial Investment and Finance Co.Ltd (1985) 1Sri LR 238
APPEAL from the judgment of the Court of Appeal
L.C. Seneviratne, P.C. with Rohan Jayawardana for 1st defendant-appellant
A.K. Premadasa, P.C. with C.E. de Silva for substituted plaintiff-respondent
October 23, 2003
YAPA, J.In this case the plaintiff instituted action against the 1st defen- idant-appellant-petitioner-appellant (hereinafter referred to as theappellant) and the 2nd defendant-respondent-respondent-respon-dent (hereinafter referred to as the 2nd defendant) for ejectment,recovery of arrears of rent and damages. The action was based onthe grounds of arrears of rent, subletting and deterioration of thepremises in suit. The appellant and the 2nd defendant filed answerdenying the averments in the plaint and moved for dismissal of theaction.
It is seen that the case had proceeded to trial on twenty six 10issues and at the end of the trial the learned District Judge on27.04.1994, had held against the plaintiff with regard to arrears ofrent, subletting and deterioration of the premises in suit but decid-
Nisthar v Gurusamy and Another
ed the case in favour of the plaintiff on the ground that the premis-es in suit is excepted premises and therefore the Rent Act has noapplication.
Thereafter, the appellant appealed against the said judgment ofthe District Judge to the Court of Appeal. Pending this appeal theplaintiff died and in his room the present substituted plaintiff-respondent-respondent (hereinafter referred to as substituted 20plaintiff-respondent) was substituted. When the appeal was takenup for hearing before the Court of Appeal both counsel for theappellant and the substituted plaintiff-respondent agreed to confinetheir arguments to the question whether the premises in suit isexcepted premises or not. The issue No.7 before the District Courtalso related to the same question. Accordingly counsel beforeCourt of Appeal made oral and written submissions on this questionand thereafter the Court of Appeal on 24.05.2002, delivered itsjudgment dismissing the appellant's appeal with costs.
Aggrieved by the said judgment of the Court of Appeal, the 30appellant made an application for special leave to appeal to thisCourt and on 06.09.2002, special leave to appeal was allowed onthe following questions of law.
Whether the definition of "business premises" in the interpre-tation section of the Rent Act 1972 as amended, applies tothe premises in suit ?
If so, has the Court of Appeal erred in law in its considerationof the said definition of the instant matter ?
Have the premises-in-suit been used wholly as business
premises from 1985?40
If so, should the annual value of the premises-in-suit in theyears 1985,1986 and 1987 be applied to determine whetherthe premises-in-suit is excepted or not ?
In determining the premises as residential or business shouldthe Court apply the "user test" or content itself by the meredescription of the premises in the assessment extract ?
To determine whether business premises are excepted ornot, should the annual value of the premises when it com-menced to be used as business premises be applied or the
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annual value of the premises described in the assessmentextract irrespective of the "use" to which the premises havebeen put into be applied ?
It would appear that having regard to the questions of law raisedin this appeal, the main issue to be decided in this case would be,as to when the premises in suit became business premises and ifso whether it is excepted premises. The contention of the learnedcounsel for the appellant was that the premises in suit was usedmainly as business premises by the plaintiff from the year 1958 to1983 and thereafter the appellant used it wholly as businesspremises from 1985. However counsel submitted that both the orig-inal Court and the Court of Appeal, having accepted the positionthat to determine the question whether the premises in suit is busi-ness or residential premises the "user test" as highlighted in thecase of Atapattu v Wickramasinghd1) should be applied, over-looked the fact that the premises had been used wholly for busi-ness purposes from 1985. Hence, counsel contended that bothCourts failed to take into account the annual value in the assess-ment extracts for the year 1985, and wrongly applied the annualvalue for the year 1988, on the basis that the premises in suit wasassessed for the first time as business premises only from the year1988. In these circumstances, learned counsel for the appellantsubmitted that from the year 1985, the premises in suit had beenused as business premises and therefore the annual value for theyears 1985, 1986 and 1987 namely Rs.2770/- should have beenapplied to determine the question whether the premises in suit isexcepted premises or not. Thus, if the annual value of the premis-es for the said period 1985-1987 was applied, the premises in suitwould be governed by the Rent Act, since the annual value duringthis period was below Rs.6,000/- as set out in Regulation 3 of theSchedule to the Rent Act. On the other hand, learned counsel forthe substituted-plaintiff-respondent argued that the premises in suithad been assessed from the year 1988 as a "store" at an annualvalue of Rs.24,000/- and that the assessment in 1988, being theassessment made for the first time as business premises, thepremises in question would be excepted premises in terms of thesaid Regulation 3 of the Schedule to the Rent Act.
According to the interpretation in section 48 of the Rent Act,No.7 of 1972 "business premises" means any premises other than
Nistharv Guruswamy and Another
residential premises as hereinafter defined. "Residential premises"means any premises for the time being occupied wholly or mainlyfor the purpose of residence. According to Regulation 3, framedunder the Rent Act as amended by Act, No.55 of 1980, any busi-ness premises situated in any area specified in Column I, shall beexcepted premises for the purposes of this Act if the annual valuethereof as specified in the assessment made as business premis-es for the purposes of any rates levied by any local authority underany written law and in force on the first day qf January 1968, orwhere the assessment of the annual value thereof as businesspremises is made for the first time after the first day of January1968, the annual value as specified in such assessment, exceedsthe amount specified in the corresponding entry in Column II.According to Columns I & II of the Schedule to Regulation 3, of theRent Act, in the Colombo municipal area, if the annual valueexceeds Rs.6,000/- premises are business premises. There is nocontroversy with regard to the fact that the premises in question issituated in the Colombo municipal area. As stated above, the sub-mission of learned counsel for the substituted-plaintiff-respondentwas that the premises in suit was assessed as business premisesfor the first time in 1988, at an annual value of Rs.24,000/- andtherefore the premises in suit became excepted premises.Whereas, it was the case of the appellant that since, the premisesin suit from the year 1985, was used as business premises and theassessed annual value then was less than Rs.6,000/-, the Rent Actapplied as the premises in suit was not excepted premises. In sup-port of this submission, learned counsel for the appellant relied onthe decision in the case of Atapattuv Wickramasinghe where it washeld by Sharvananda, C.J. that one should not go by description ofthe premises given in the assessment register but should considerthe use to which the premises have been put into, in order to decidethe question whether the premises are residential or businesspremises.
To consider these arguments, it would be useful to examine theprevious assessments of the premises in question by the ColomboMunicipality. The plaintiff (deceased) had placed this material whenhe gave evidence before the District Court by producing the rele-vant assessment extracts. According to the assessment extractsthe premises were described and assessed for the various periodsin the following manner.
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1972-1975Office & HouseRs.1051/-P22
1980-1982Office & HouseRs.1380/-P23
1983-1987Office & HouseRs.2770/-P24
According to the assessment extracts it would appear that fromthe year 1953 to 1971 premises in question had been described asa "house". From the year 1972 to 1987 it is described as an "officeand house" and from the year 1988 to 1991 it has been describedas a "store". Further it is seen that the assessed annual value hasgradually increased from Rs.460/- in the year 1953 to Rs.2770/- inthe year 1987. Thereafter there has been a very substantialincrease in the assessed annual value from Rs.2770/- in 1987, toRs.24,000/-in the year 1988.iso
It is to be noted that the learned counsel for the appellant soughtto argue that the premises in question became "business premis-es" even during the period when the plaintiff was using it from theyear 1958 to 1983. His argument was based on the evidence givenby the plaintiff who had on one occasion stated that during this peri-od he used only 1/3 of the premises as his residence and used 2/3of the premises for his business as an accountant. However, it is tobe observed that the evidence on this matter is not very clear andconvincing for the reason that the plaintiff had also given evidencesaying that he used 2/3 of the premises as his residence and used 160only 1/3 of the premises for his business. On a careful examinationof the evidence available in this case, what is clear is that from theyear 1953 till the time of the communal disturbances in the year1983, the plaintiff, his family members and some of his close rela-tions were residing in the premises in question. This evidence hasnot been challenged by the appellant. The description of the
Nistharv Gurusamy and Another
premises in the Assessment Register as an "office and house" fromthe year 1972 should be considered with the aforesaid evidence. Inthe case of Nalini v Gunawardanap) where the premises weredescribed as an “Ayurvedic dispensary and house" in the assess-ment sheet, Samarakoon, C.J. held that such a description isequivocal, in the absence of evidence to show that the premiseswere mainly occupied for the purpose of residence. In this casehowever, there is clear evidence that the premises in question wasused for the purpose of residence. Hence, there is no difficulty inconcluding that the premises in question was occupied wholly ormainly as a residence. In other words the plaintiff and the membersof his family used the premises as their residence during this peri-od and the plaintiff carried on his business as an accountant fromthis residence.
Further, it was submitted by learned counsel for the appellantthat the premises in suit was rented out to the appellant in July1985, for the purpose of carrying on a business of selling emptygunny bags and for packing of soap for sale. The evidence of theplaintiff, his witness Podiappuhamy and the evidence of the appel-lant supported this position that the premises in suit was used fromJuly 1985 for business purposes. Therefore, learned counsel con-tended that the annual value for the period 1985, 1986 and 1987i.e. Rs.2770/- should have been considered by the District Courtand the Court of Appeal, since the premises were used by theappellant wholly as business premises. However, this submissionmade on behalf of the appellant, should be examined in the light ofthe submission made by learned counsel for the substituted-plain-tiff-respondent that the premises in question was assessed as busi-ness premises namely as a "store" for the first time in 1988, andtherefore the annual value for the year 1988, should be consideredto decide whether the premises are excepted premises. In this caseit is common ground that the premises in suit was rented out to theappellant for the purpose of carrying on a business. Further, con-sequent to an application made by the appellant to the Registrar ofCompanies Western Province to register his business, a Certificateof Registration was issued in the name of Javed Enterprise, (videP43 & V10). According to the Certificate of Registration the appel-lant and his wife were the partners in the said business. Then on21.08.1987, the appellant had made an application to the ColomboMunicipal Council seeking a licence in the name of Javed
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Enterprise for the year 1987, to store empty gunny bags, (videP40). Further on 04.11.1987 the Colombo Municipal Council hadissued a licence for the year 1987, in the name of Javed Enterprisefor storing old metal, (vide P39). All this material therefore, goes to 210show that the appellant was carrying on a business of storing andsale of empty gunny bags, old metal and soap. The oral and otherdocumentary evidence coming from the plaintiff, his witnessPodiappuhamy and the appellant further support this position.Hence, there is no controversy about this matter. But, the questionis, when did the Colombo Municipal Council come to assess thepremises in suit as business premises for the first time ?
It is of interest to note that in the assessment register, thepremises in suit has been described as a "store" for the first time inthe year 1988. Until then, it had been described as a “house" till 2201971, and “office and house" till 1987. Further, the assessed annu-al value which was Rs.2,770/- in the year 1987, had beenincreased to Rs.24,000/- in the year 1988. What is the value onecould attach to the material stated in the assessment register? Ithas been held in the case of Aloysius v Pillaipody (3) that thedescription of property entered in the assessment register affordsprima facie evidence as to whether the property has beenassessed as residential premises or business premises. A similarview was expressed in the case of Jinasena v The CommercialInvestment and Finance Co. Ltd.^ As referred to above, there is no 230doubt that the premises in question had been rented out to theappellant to be used as business premises since July 1985.However, the substituted plaintiff-respondent relied on the changein the entry made in the assessment extract for the year 1988. Thatis, the premises which was earlier described as an "office andhouse" for the first time was described as a "store" and the annualvalue had been increased from Rs.2,770/- to Rs.24,000/-. Thismaterial is recorded in the assessment register which is maintainedin terms of section 235 of the Municipal Councils Ordinance. Thesection relates to the valuation of property. When an assessment is 240made of the annual value of any premises, that assessment hasnecessarily to be based on the character of the premises namelyresidential or business premises. Therefore, the description of theproperty whether as residential or business premises in the assess-ment register would be closely linked or connected with the assess-ment of annual value. In the present case, the change in the
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description of the premises from "office and house" in 1987, to a"store" in 1988, and the variation of the annual value respectivelyfrom Rs.2,770/- to Rs.24,000/- is very significant and has to begiven some meaning. Further according to the definition of “annualvalue" in section 48 of the Rent Act, it means the annual value ofsuch premises assessed as residential or business premises, asthe case may be, for the purpose of any rates levied by any localauthority under any written law. The written law in this case wouldbe the Municipal Councils Ordinance, which makes provision for anowner or occupier of any house or building to' furnish returns toenable the Municipal Council to assess the annual value, (videsection 234). It is on this information that the Municipal Council ismade aware of the character of the premises to assess the annualvalue. If the correct information is not furnished or a change in thecharacter of the premises from residential premises to businesspremises is not brought to the notice of the Municipal Council, theCouncil would not be in a position to assess the annual value ofsuch premises correctly. In these circumstances the annual valueentered in the Assessment Register has a close link or connectionto the description of the property. Therefore, the description of theproperty entered in the Assessment Register cannot be totally dis-regarded, since the Rent Act has to be construed having regard tothe assessment of annual value made by the Municipal Council.
In the present case, the change in the description of the proper-ty to a "store" in the year 1988, with a very substantial increase inthe annual value from Rs.2,770/- to Rs.24,000/- appears very sig-nificant. It would mean that the premises in suit was assessed bythe Colombo Municipal Council for the first time in 1988, as busi-ness premises. User of the premises in suit by the appellant forbusiness purposes and the request he made to the ColomboMunicipality on 21.08.1987 for a licence in the name of JavedEnterprise for storing of empty gunny bags and old metal etc. asthe occupier of the premises, may have been the information onwhich the change in the assessment took place for the first time in1988. In these circumstances, learned District Judge and the Courtof Appeal rightly held that the premises in suit is excepted premis-es and the Rent Act does not apply. Therefore, I see no reason tointerfere with their finding. Hence the questions of law raised in thisappeal are answered as follows. Question No. (i) is answered in theaffirmative. Questions Nos. (ii), (iii) and (iv) are answered in the
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negative since the premises were not assessed as businesspremises. Question No. (v) should be answered on the basis thatthe use and the annual value of the premises when it came to befirst assessed as business premises should be applied. Accordingly 290the appeal is dismissed with costs fixed at Rs.5,000/-.
DE SILVA, J.I agree.
JAYASINGHE, J.I agree.