Weerasena V. A.D.R. Perera
SUPREME COURTBANDARANAYAKE , J.
FERNANDO, J. ANDDHEERARATNE J.
S.C. APPEAL 42/90; CA 281/88 (F) D.C, MOUNT LAVINIA 1351/RE.
JANUARY 16 AND 22, 1991.
Rent and Ejectment – One contract of letting – Excepted premises – Sub-division for ratingpurposes – Whether sub-divided portion falls within Rent Act.
The Plaintiff let premises No. 97, Stanley Tillakeratne Mawatha, Nugegoda, to theDefendant in 1972, which premises were excepted premises. The rear portion of thepremises, a store room was later separately assessed as 978. The Plaintiffs action forejectment failed as premises No. 97B was alleged to be covered by the Rent Act andthere being no valid termination. The Court of Appeal reversed the judgment and directedejectment from the full premises.
Where there has been one contract of letting, the mere assessment and sub-divisionof a part of that premises does not give rise to a separate letting or give birth toa new premises, when the sub-division is an adjunct of the former.
The entity of protection is not the premises, but the contract – Imbuldeniya V.de Silva (4) applied.
Applying the test in Ansar v. Hussein (8), in the absence of any physical alterationto the premises 97B it cannot be said that a new premises has come into existence.
Cases referred to:
Rohan Pieris v. Edirisinghe (1986) Sri L.R. 147.
Plate v.Ceylon Theatres Ltd. 75 N.L.R. 128.
Hemachandra v. Hinni Appuhamy (1982) 2 Sri L.R. 433.
Imbuldeniya v. de Silva (1987) 1 Sri L.R. 367.
Chettinad Corp. Ltd. v. Gamage 62 NLR 86.
Sally Mohamed v. Seyed 64 N.L..R. 486.
Premadasa v. Attapattu 71 N.L.R. 62.
Ansar v. Hussein (1986) CALR vol. 1 365.
Hewavitharana v. Rathnapala (1988) 1 Sri L.R. 240.
APPEAL from judgment of the Court of Appeal
A.K. Premadasa, PC with T.B. Dillimuni and G.H.S. Suraweera for thedefendant – appellant.
P.A.D. Samarasekera, PC with D.J.C.Nillinduwa for plaintiff – respondent
Cur. adv. vult
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(1991) 1 Sri L.R.
24 May 1991
This appeal relates to a novel problem which has cropped up in thefield of landlord and tenant calling for a reconciliation of the commonlaw with the statutory provisions of the Rent Act No. 7 of 1972.
The plaintiff-respondent let to the defendant-appellant premises bearingAssessment No. 97A, Stanley Tillekeratne Mawatha, Nugegoda situatedwithin the Urban Council limits of Kotte, an area in which the Rent Actis in operation. The tenancy commenced in June 1972, and the premises,being business premises assessed for the first time at an annual valueof over Rs. 2000/- was admittedly excepted premises within the meaningof Regulation 3 of the Schedule to the Rent Act. The tenant ran a draperystores in the premises. After the tenant went into occupation in July 1972a rear room of premises No. 97A, designed to be a storeroom, wasseparately assessed as premises No. 97B at an annual value of Rs.500/- and was then described as a tailor's shop. The separate assessmentevoked no protest from the landlord and the legal machinery availableto him to challenge this separate assessment was not set in motion.The remaining and larger portion of the premises continued to bearassessment No. 97A, carrying an annual value which still exceeded Rs.2000/-. Meanwhile the parties continued to treat the tenancy as one,the tenant paying a single monthly rent and receiving therefor one receipt.Disputes between the landlord and tenant arose when the tenant fellinto arrears of rent from 1.12.1979 and by letter dated 5.08.1980, thelandlord gave the tenant notice of termination of the tenancy, describingthe premises as "97A (presently 97A and 97B)" and requiring the tenantto quit and deliver possession of the premises on or before 30th September1980. The notice to quite was followed by this action filed on 5.02.1981for ejectment of the tenant on the basis that the premises was exceptedpremises.
The learned trial judge came to the finding that premises No. 97A wasexcepted premises whereas 97B was not, and proceeded to dismissthe plaintiff's action on the ground that there was no valid terminationof the tenancy in respect of the premises in suit. One can find no rationalexplanation as to why at least in respect of premises 97A the noticewas found to be ineffective, and why an order of ejectment should nothave been issued against the tenant in respect of that premises. SeeRoshan Peirisv. Edirisinghein. The Court of Appeal reversed the findings
Weerasena V. A.D.B. Perera (Dheeraratne, J)
of the original Court and entered Judgment for the plaintiff-respondentas prayed for primarily on the basis that both the landlord and the tenanthad acted on the footing that there was one unit of letting and one tenancy.
Submissions made on behalf of the defendant-appellant in order topersuade us to interfere with the Judgment of the Court of Appeal weresolely directed to avoid him being ejected from the separately assessedpremises No. 97B. The principal submission made was that the separateassessment of 97B has given birth to new premises which instantlyattracts the provisions of the Rent Act, and that where the statute stepsin the contract must yield to the statute. On the other hand, it is contendedforthe plaintiff-respondent that premises No. 97B is not the subject matterof a separate letting and since it is the entire business premises thatis the subject matter of the tenancy, the whole premises falls outsidethe Rent Act as excepted premises.
If the submission of learned Counsel for the defendant-appellant i:correct, the separate assessment of 97B, from the point of time of sue'assessment has the effect of breaking one tenancy into two, the commoilaw continuing to govern the contractual relationship of landlord andtenant in respect of the excepted premises No. 97A and the statutegoverning the relationship in respect of the premises No. 97B which isan adjunct of the former.
Reliance was placed on behalf of the defendant-appellant on certainobservations made by Samarawickrame, J. in Plate v. Ceylon TheatresLtd (2> which read:-
"The scheme of the Act suggests that it was intended that the criterionfor deciding whether premises were excepted premises was to bethe amount of the annual value assessed by the local authority. Oncea premises was excepted premises on the application of that testthere is no support to be found in the Act for the position that apart of this premises could be premises to which the Rent Act appliesunless that part was separately assessed."
"Learned Counsel for the defendant-appellants submitted that forthe purpose of the Act it was the unit of letting that should be thepremises. The definition of residential and business premises show
(1991) 1 Sri L.R.
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that the nature of the occupation is relevant and is to be taken intoaccount. There is nothing in the Act to suggest that the unit of lettingis to be the premises. On the other hand the reference in section7 and 9 to the premises let in parts or in part suggests otherwise."
The problem in the Plate case (supra) was whether a tenant of anunassessed part of an excepted premises was entitled to claim theprotection of the Rent Restriction Act when he was sued in ejectment.The argument put forward on his behalf was that because that part ofthe excepted premises he was occupying as a tenant carried no annualvalue, it was not excepted premises and that such premises beingsituated in an area to which the Rent Restriction Act applied, he wasprotected by the provisions of that Act. Cutting out a portion for separateassessment from one excepted premises, the whole of which is coveredby one tenancy, was no doubt furthest from the mind of Samarawickreme,J and his observations must be understood as restricted to a newassessment being given to a portion of an excepted premises, whichportion is already the subject matter of a separate letting. That exactlyis the situation which arose in Hemachandra v. Hinni Appuhamy (3).
Learned Counsel forthe defendant-appellant drew our attention to Rydeon Rating (11th Edition) page 34, in which recognized ingredients ofrateable occupation are explained as follows
"First, there must be actual occupation,or possession;
Secondly, it must be exclusivefortheparticularpurpose of possessor;Thirdly, the possession must be of some value or benefit for thepossessor; and
Fourthly, the possession must not be for too transient a period."
The submission made was that the ratiRg authorities applied those criteriain making a separate assessment forthe purpose of rating which instantlygave birth to new premises. The evidence in this case reveals that theseparate assessment was made in consequence of the defendant-appellant who ran a drapery stores converting the Storeroom of the rentedpremises to his tailoring unit. If the second ingredient plays such adominant part in the assessment of any particular portion of rentedpremises as separate premises, we would perhaps have to sympathizewith a landlord who lets an excepted business premises to a tenant whothereafter decides to run a department store, thus paving the way for
Weerasena VA D R Pemra (Dheeraratne, J)
several rent controlled premises to spring up in place of one exceptedpremises.
The cornerstone of the argument for the defendant-appellant is section2(4) of the Rent Act which enacts that so long as that Act is in operationin any area, the provisions of that Act shall apply to all premises in thatarea, other than the 5 categories of premises mentioned therein. Thusassuming that separate assessment of premises No. 97B per se gavebirth to new premises, it is submitted on behalf of the defendant-appellant,that the provisions of the Rent Act instantly become applicable. It iscontended that the Rent Act applies to premises not to persons, andthat it operates in rem and not in personam.
If the above submission is correct the Rent Act will also apply to premisesoccupied by owners, licensees and untenanted premises. It seems tome that it is the relationship of landlord and tenant in respect of premisesfalling within the Rent Act that attracts its provisions. The preamble tothe Rent Act No. 7 of 1972 reads:
"an Act to amend and consolidate the law relating to RentRestriction", and the preamble to its legislative ancestorthe Rent RestrictionOrdinance No. 60 of 1942 reads, "an Ordinance to restrict the increaseof rent and to provide for matters incidental to such restrictions.” So itis the restriction of rent which is the principal purpose of the Act andwhere there is no incidence of rent, the provisions of the Act have noapplication. The contention that the entity of protection granted by theRent Act No. 7 of 1972 is the premises and not the contract of tenancy,was rejected in the Divisional Bench case of Imbuldeniya v. de Silva
and learned Counsel for the defendant-appellant has not been ableto persuade us to take a different view, Therefore, I am unable to holdthat as long as one tenancy subsists for the whole premises the mereassessment of a part of that premises which is not the subject matterof a separate letting, gives birth to new premises, especially when theevidence discloses that the latter 'premises' is an adjunct of the former.
The problem may also be approached differently by examining theapplication of regulation No. 3 of the schedule to the Rent Act to premisesNo. 97B. It may be asked whether the assessment of the annual valuein force in January 1968 or the assessment made in July 1972 is
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(1991) 1 Sri L.R.
applicable. On this question, it appears to me that the decided authoritieshave taken three different approaches. The first, was to give prominanceto the original assessment, paying little attention to the transformationthe premises has undergone subsequently attracting separate newassessments. This approach is reflected in the cases of ChettinadCorporation Ltd. v. Gamage(5) and Sally Mohamed v. Seyed m. Thesecond was to grant almost absolute sanctity to a new assessment madeby rating authorities and to treat that as giving birth to new premisesin place of the old, as reflected in the case of Premadasa v.Atapattu(7). The third, is that reflected in the judgment of Wanasundera,J in Ansar v. Hussain (8> a via media, through which the Court will notonly look at the mere fact of a separate assessment, but also, at theextent and significance of the change involved and the impact of thatchange on the valuation and assessment. This last approach, commendsitself to me as a safeguard both against capricious assessments madeby rating authorities affecting rights of parties to the letting and alsoagainst possible manipulations of the assessments by interested partieswith intent to give undue advantages either to landlords or to tenants,(see for example Hewavitharana v. Rathnapalai9).)
"Premises" is defined in s.48 to mean "any building or part of a buildingtogether with the land appertaining thereto". A room in a building, suchas a bedroom, a kitchen or a storeroom is "part of a building", butobviously, in the context of the Act, would not be "premises" unless itis physically a distinct part, capable of separate possession. The Platecase (supra) establishes that if such a part of a building separately let,is not separately assessed it would be "excepted premises" if the entirebuilding is "excepted premises" (and vice versa). The appellant's contentionrequires that definition to be read as if either a building (or a part) wouldfall within it only if assessed or a part of a building would automaticallycome within it if separately assessed. This cannot be accepted as thedefinition refers to the building (and its parts) as physical entities, andmakes no reference to how it is treated for rating purposes. Prior to theseparate assessment of Nos. 97A and 97B when regulation 3 wasapplied, No. 97A was "business premises"; it's annual value as specifiedin 1968 assessment exceeded the specified amount; therefore No. 97Awas "excepted premises". The second limb of regulation 3 refers to asubsequent "assessment of the annual value thereof, "meaning the"business premises" referred to in the first line of regulation 3. Unlesspremises No. 97A by reason of some significant physical change, hadbecome two distinct premises, the use of the word "thereof" indicates.
National Lotteries Board V.
Kulatunga, Labour Officer, Colombo South
that the subsequent assessment would have no effect. Hence regulation3 covers primarily cases where premises are originally assessed as"residential" but in or after 1969 are assessed as "business". It also coverscases where premises initially assessed as "business" are thereafterphysically converted into two or more distinct premises, and assessedas such for the first time after 1968. The second limb of regulation 3has no application to a case such as the present where there was nophysical conversion into two or more premises, but only a notionalconversion for the purpose of assessing and recovering rates.
Considering the absence of any physical alterations whatsoever madeto premises No. 97B, I am unable to hold that new premises have comeinto existence. The original assessment in force as at January 1968 willcontinue to govern the entire premises. This situation no doubt willchange if the separately assessed premises becomes the subject matterof a separate letting.
For the above reasons the appeal is dismissed and the judgment ofthe Court of Appeal is affirmed. The plaintiff-respondent will be entitledto costs of this appeal and to costs in all Courts below.
BANDARANAYAKE, J. – I agree
FERNANDO, J. – I agree