Barakatliullu r. H inniappuhamx (Rodrigo. J >
SAMARAKOON, C.J., WANASUNDERA, J.. AND COIIN I HOME. J.S.C. 17/82.
CA/LA 6/82; C.A.(S.C.)71/75(F).
D.C. MT. LAVINIA 2501/ZL.
OCTOBER 27, 1982.
Landlord and tenant – Lease of business – Whether really lease','of premises -Evidence Ordinance, section 92 – Admissibility of parol evidence – Illegal c&nil’dH- Whether payment of excess rent can be -recovered-, j
• ,J( C'i;s'v*i ,;yi V »•- -v •, .. f i i'j'-•
By Indenture of Lease (P4) the plaintiff leased a business called Modern' DraperyStores to the respondent for a period of 3 years. The plaintiff sued the ‘respondentfor failure to pay the rent for 3 consecutive months and sub-lctting/assignihg/partingwith possession of the said premises Snd praying inter alia for cancellation ofthe lease, ejectment of the. respondent and restoration of the premiseg^and jhebusiness along with certain movables alleged to have been handed over with thebusiness. The respondent iti the answer denied the plaintiffs claims and allegedthat P4 was a camouflage in order to recover rent in excess of the authorisedrent and therefore claimed, in reconvention, the excess refit and deposit that hadalready been paid. The learned District Judge held that . P4 was a camouflageand really was a lease of the premises and therefore dismiAed the plaintiffsaction and gave the respondent judgment in reconventiori in the sum recoveredin excess of the .authorised rent. The appellant appealed unsuccessfully. to. theCourt of Appeal and from the order of that court to the Supreme Court. Theappellant had earlier conducted a business in groceries and provisions in thepremises referred to in P4 under the name Ratna Stores. He leased the businessalong with the equipments one T. and later to the respondent. On 17.6.1969the appellant registered a new business under the name Modern Drapery. Storesas being run in these premises although he had truly not run such a- business.
Sri Lanka Law Reports
(1982) 2 S I. R
Thereafter on P4 he purported to lease the business with only some of themovables of the "business of Ratna Stores which could be used for a draperystore to the respondent.
The lease P4 was a sham and an attempt to evade the punitive provisionsof the Rent Restriction Act: There was in fact no agreement as was recitedin (P4). Parol evidence to prove such a fact is admissible and is not barredby s.92 of the Evidence Ordinance.
As the excess rent was paid to the appellant on an illegal contract – illegals to the knowledge of both the respondent and the appellant the respondent
is not entitled to recover the sum paid in excess of the authorised rent.
■Case referred to:
(1) Vitharne v. De Zylva (1954) 56 N.L.R.57APPEAL from judgment of Court of Appeal.
Nimal Senanayake, S.A., with K.P. Cuneratna, Mrs. S.M.Senaratrte, B. Jayamanneand Miss A.D.D.N. Telespha for plaintiff-appellant.
Defendant-respondent absent and unrepresented.
November 10, 1982.
The appellant complained that by Indenture of Lease No. 849dated 26.6.1969 (marked P4) he Had leased a business called andknown as Modern Drapery Stores carried on.iby him at No.S, HighStreet (now W.A.De Silva Mawatha), Colombo 6 to the respondentfor a period of . 3 years at a'monthly rental of Rs’ 275/- but thatthe respondent had in -.contravention of the express terms of theagreement sublet and/or assigned and/or parted wjth possession ofthe said premises to one Mohideen. He also complained that therespondent failed to pay rents for three consecutive months ending31.03.1971. He therefore prayed for the cancellation of the lease,for the ejectment of the respondent, for restoration of the premisesand the business and for the return of the movables set out in thesecond schedul# to the plaint to the value of Rs.3,625/-. He also,claimed the return of the movables set out in the third schedule tothe plaint or the payment of their value of .Rs.6,596/-. The respondentin his answer denied liability on the lease and alleged that it was asubterfuge or a camouflage to cloak the recovery of rent in excessof the authorised rent of the premises. He claimed, in reconventiona sum of Rs. 11,421/30 being excess rent recovered during the period
.VC*Wickraiforatne v. Thavnuirantjah (Sa/ruirako<m. C.J. i481
September 1966 to February 1972 and a further sum of Rs. 2,694/15deposited by him in excess of the three months’ deposit of Rs. 305/89which the appellant was entitled to in law. The learned District Judgeheld that the lease P4 was a subterfuge and a camouflage and thatit only let the premises to the respondent at Rs., 275/- per mensem.There was no dispute in regard to the authorised rent of the premisesand on that basis the District Judge gave the respondent judgmentin a sum of Rs. 6,046/62 recovered by the appellant in excess duringthe period July 1969 to 31st July 1974. He dismissed the appellant'saction. The appellant appealed unsuccessfully to the Court of Appeal.Hence this appeal to this Court.
Counsel for the appellant contended that the learned District Judgemisconstrued the evidence. He referred us to the cailn r documentsrelating to leases of the business at these premises ami argued thatthey showed that,P4 was a genuine lease, The burden, of his songwas that the appellant had fallen into a. trap cleverly set by therespondent. A close scrutiny of the documents becomes necessary.The Certificate of Registration (PI) issued under the Business Names.Ordinance (Cap. 149) date^ 04.09.1958 shows that the appellant hadcpmmenced a business in Groceries and Provisions under the name"Ratna Stores” at the said preipises from 1st September 1958. ByIndenture of Lease No.355 dated 7th November 1964(P2) he leasedthe business of “Ratna Stores” for a period of 3 years commencing1st November 1964 to one ,S. Thedchanamoorthy. This lease was dueto expire on 31.10.1967. Before this . lease expired the appellantentered into another lease of the said business by Indenture of LeaseNo.558 dated 16th September 1966(P3) whereby he leased the saidbusiness to the respondent for a period of 3 years commencing 16thSeptember 1966. This lease was due to expire on l6ih September1969. The Schedule to each of the leases P2 and FM describe thebusiness and the movables belonging to the business. They areidentical. By Indenture No.791 dated 21st Novemlx i 1968 (P9) itwas agreed between the parties that upon the expiration of the leaseP3 the lease would continue for a further period of 4 ycai*. commencing17th September 1969. The Schedule describing the business and itsmovables is identical with the Schedules in P2 and P3. Then comesa significant change. A business by the name of Modern DraperyStores was registered on the 17th June 1969 (P5). This business isstated to have been commenced by the appellant at the said premiseson the 13th December 1968. The appellant then enters into anIndenture of Lease No.849 dated 26th June 1969(P4) whereby he
Sri Lanka Law Reports
(M2) 2 S.L.R
leased the business of Modern Drapery Stores carried on at the saidpremises to the respondent for a period. o,f 3, years,commencing 1stJune 1969. The, Schedule to P4 describes the busmens.,and only someof the movables of the business of, Ratna. §tQf,es which obviouslycould be used for.a Drapery Store. They consisted of two large showcases, one small show case and a .glass fronted almirah. All the othermovables which, were usefuj.for a grocery store were described in aseparate Jlist .(marked P6), signed by the respondent whereby heacknowledged that he held them for and on behalf of the appellant.The conclusion is obvious. The respondent had ceased to carry, onthe grocery business of Ratna Stores and had commenced the businessof Modern Drapery Stores. Therefore the lease had to be renewedand for that purpose the business of Modern Drapery Stores had tobe registered in the appellant’s name. Otherwise the lease wouldhave to be purely a lease of the premises. Herein lies the shamtransaction. This conclusion is further strengthened by the appellant'sadmission in evidence that he did not at any time carry on thebusiness of Modern Drapery Stores. It was indeed a camouflage.The true agreement was not in it. and was otherwise. It was asubterfuge and it was an attempt to evade the punitive provisionsof the Rent ■ Restriction Act. It was a concerted effort of bothappellant and respondent to evade the law. They were both culpable- each for his own part in the ciricumvention of the rigours of theStatute. The resulting position is that there was in fact no agreementas is recited in P4. It was a sham from beginning to end. The proofof such a fact is not precluded by the provisions of section 92 ofthe Evidence Ordinance. Parol evidence js admissible to prove suchfact. “All that this section excludes is oral evidence to contradict,vary, add to or subtract from .the terms pf the contract which hasbeen reduced into writing. It does not preclude a party from showingthat the writing was not really the contract, between the parties butwas only a fictitious of colourable device which cloaked somethingelse”. (Woodroffe & Ameer Ali’s Law of Evidence, Eleventh Edition,page 1m9).) The appellant’s action was therefore rightly dimissed.
The learned District Judge has entered judgment for the respondentin a sum of Rs. 6,046/62 being excess rent paid to the appellant.This was money recovered on an illegal contract. It was given colourof legitimacy by a lease of a business in terms of P4. The respondenthas acquiesced in this mode of recovery and thereby colluded withand assisted the appellant in his attempt to evade the law andpunishment thereunder They were bp^ aware that it was an offerer
SCWickramunUnr i'. Thtiivmlrariifnh tSqmiinikmm. < / >483
for the appellant to receive and for the respondent to pay any sumexceeding the authorized rent. It is an illegal contract in that it wasas much an offence to give as to -receive-. The Court cannot- helpthe respondent to recover monies paid under such circumstances.Vitharne vs. De Zylva. (1) I would therefore set aside the decreeentered in favour of the respondent in the said sum of Rs. fV.046/62.
The Court of Appeal has ordered the respondent to deliver tothe appellant the movaibies set out in Schedule 2 to the plaint andordered the appellant to refund a security deposit of Rs. 3,000/- tothe respondent on such return, the appellant being entitled to deductfrom this sum the value of any article not returned. The Court hasalso ordered the respondent to return the movables set out in thelist P6 and on his failure to return any article on or before a datestipulated by the District Judge he will pay its yajue.to the appellant.These two.orders will stand. Subject to this the .appeal is dismissedwithout costs.
WANASUNDERA, j; – I agree.
COLIN-THOM6, J. – 1 agree.
Decree varied andappeal dismissed.