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Singh v Pratap [2005] FJHC 632; HBC0389.1993 (29 July 2005)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

ACTION NO. HBC0389 OF 1993

BETWEEN:

JAI PRAKASH SINGH and
SANJAY PRAKASH SINGH
PLAINTIFFS

AND:

SHARAT CHAND PRATAP
DEFENDANT

Mr M S Sahu Khan for the Plaintiffs
Mr S. Verma for the Defendant

Date of Hearing: 4 July 2005
Date of Judgment: 29 July 2005

JUDGMENT OF FINNIGAN J

In this 1993 Action the Plaintiff claims $24,300.00 being lost rental at $1,500.00 per month after credit for $7,700.00 that has been paid. The Defendant counter-claims $67,200.00 as lost profits being 12 months’ profits at $5,600.00 per month. The Plaintiff was landlord and the Defendant was tenant of some buildings in Sigatoka. Their business relationship came to an end towards the end of 1992. The Plaintiff demanded vacant possession of the leased premises so he could re-let at a higher rental and the Defendant claimed a right of renewal of his tenancy.

The Evidence

The case falls to be decided largely by the facts that I find established in the evidence. One witness gave evidence for each party. I observed them both. Where there is conflict, I unhesitatingly accept that of the Defendant. From the evidence of both an objective account of the facts emerged clearly enough, despite the 12 ½ years that has elapsed. The Plaintiff’s witness was a trustee in the estate which owned the building. On 14 August 1987 the estate had entered a written Tenancy Agreement with the Defendant. Clause 1 was as follows:

“WHEREBY IT IS AGREED AS FOLLOWS:-

I THE tenancy shall commence on the 1^st day of January, 1988 and shall be for the for a term of five [5] years from that date with an option for renewal for a further to term of five [5] years provided that if the tenant desires to exercise the option he shall give notice thereof to the landlord at least three [3] months before the expiry date And Further Provided that the tenant has complied with all the provisions, terms and conditions of this Agreement.

The rent shall be $150 [One Hundred Fifty Dollars] for the shop three [3] Building No 3 per month and $100 [One Hundred Dollars] per month for flat two [2] and shop three [3] Building No 1 the rental payable in advance on the first day of each calendar month subjected to the covenants and stipulations herein contained”.

Three months before the expiry date was 30 September 1992. On 19 September 1992 the Plaintiff, through his solicitors, wrote to the Defendant a letter containing the following:

“You have been occupying 2 flats and 2 shops in the said building as monthly tenants. Our clients say that you have not been looking after the premises occupied by you properly and as good tenants. Also our clients have been offered rental of $1,500.00 per month for the shops alone and they wish to rent out the same from the 1^st day of November, 1992.

Accordingly we have been instructed to demand, and which we hereby do, that you do give vacant [possession] of the two shops and flats occupied by you by 31^st day of October, 1992.”

As the letter shows, by the time it was written the premises occupied by the Defendant had increased from the 2 shops and 1 flat in the Tenancy Agreement to 2 shops and 2 flats. The Defendant said the second shop was offered and occupied when it became available in a new building. He also said and I accept that the rental had steadily increased. From the original $250.00 per month it went to $350.00 per month. From there it had gone to $850.00 per month then $1,052.00. Finally it had gone to $1100 per month and that was being paid before the above letter was written. The reference to monthly tenancy was not referred to or explained at the hearing. It is however the only basis on which the Plaintiff could claim to terminate the tenancy before 31 December.

The Plaintiff tried to increase the rent to $1500, saying that another person called Reddy [as I understood it] was prepared to pay that much for the two shops. The Defendant asked for some written evidence of this, it was not produced. The Defendant wanted to retain the premises because his business was lucrative. In his counter-claim he claimed nett profits of $67,200.00 per year. He was prepared to pay the increased rentals but saw no reason to go to $1500.

The Defendant says he verbally exercised his right of renewal in conversation with the Plaintiff’s witness in July, August or September 1992. I accept that his profits alone warranted it. After receiving the letter dated 19 September 1992 he sent a formal notice exercising his right of renewal on 22 September. He faxed this to an employee for delivery to the Plaintiff’s witness who not surprisingly denies receiving it. He paid no rent for October and November then in December sent a cheque for $3,300.00 being rental up to and including December 1992. This was accepted by the Plaintiff’s witness who gave a formal receipt on behalf of the estate.

The Defendant by this time had commenced his own proceedings against the Plaintiff. On 9 December 1992 the Defendant obtained ex parte an injunction preventing the Plaintiff from levying distress on the rented premises and from interfering with his peaceful use occupation and enjoyment of them and from attempting to evict him.

The Plaintiff at about this time erected posts blocking vehicle access to the premises used by the Defendant for his export business. Thus vehicles bringing boxes of fresh vegetables for the Defendant to purchase and for shipping of vegetables to overseas customers began to suffer. On 15 July 1993 nonetheless the Defendant sent $5,500.00 for the 5 months January to May 1993 and this was receipted by the Plaintiff’s solicitors without prejudice. On 6 & 7 December 1993 the solicitors accepted a further $2,200.00 on the same basis for June and July 1993. The Defendant remained in occupation until September 1994. The injunction was discharged on 15 September 1994. By then he had paid for October 1992 onwards a total of $11,000. Since the end of the 5 year term [31 December 1992] he had paid $7,700.00.

The Submissions

Counsel for the Defendant sought to amend his counter-claim to include $3,500.00 for an allegation of services rendered by the Defendant as Accountant and Manager which had been pleaded in the counter-claim but are admitted from the prayer. I reserved that point. On the claim, he submitted that all rental increases had been illegal because they had not been approved by the Prices and Incomes Board under the Counter Inflation Act. Counsel for the Plaintiff argued that he had not pleaded and could not raise that. Counsel for the Defendant replied that it was a point of law which he did not need to plead. Neither Counsel made any submission about the effect on the written agreement of the parties’ conduct whereby they added another flat during the 5 year term. About the increases of rent, Defendant’s Counsel argued that they were not only illegal but were paid because of undue pressure applied by the Plaintiff. He submitted that the rent should be calculated at the $250.00 per month provided in the agreement. Thus he submitted that the Defendant had paid rental until he vacated in September 1994 and is actually due for a refund.

Counsel for the Plaintiff submitted that the Defendant’s counter-claim had no support whatever in the evidence. He submitted also that the purported option to renew had no validity at law because it contained no basis for the determination of new rental. He pointed to the Defendant’s evidence that rental after the renewal was left for negotiation and agreement. He submitted the law is very clear that there must be certainty of terms if any option is to be valid. There been no machinery provided, no arbitration or other means of fixing a new rental by negotiation agreement or otherwise, the purported option was invalid and worthless.

Apart from one case cited by Counsel for the Defendant about approval for rental increases, neither Counsel cited any authorities for legal principles.

Decision

I shall deal first with the argument that the option to renew is invalid and worthless because it contains no basis for determination of the new rental. The principle Counsel relies on is that there must be certainty of terms if any option is to be valid and he says this option is uncertain. He cited no authorities. Regrettably I am not so well informed that I can accept that proposition without authority and so I went into the matter using the books available to me. In 1971 Megarry J. wrote a wide-ranging judgment on the topic in Brown –v- Gould & Others [1972] 1 Ch. 53. Underlying the basic uncertainty principle is a fundamental one, that the Courts are always loath to hold a clause invalid for uncertainty if a reasonable meaning can be given to it. Absence of a machinery to determine a new rental is only a factor. If the parties’ intention can be discerned from some other evidence then the Courts will discern and determine that intention. In Brown’s case Counsel for the landlord advanced the same argument as was advanced to me. In that case there was a provision for determining a new rent which was related to market value of the premises and any increase in value of the premises attributable to structural improvements made by the tenant. The present case does not have that indicator, but it does have one. The rental provision in the original lease was not regarded by either party as binding and the tenant simply accepted the situation each time the landlord increased the rent. This situation was helped by the inclusion of a new shop outside the terms of the original lease. It was an attempt by the landlord to increase the rent yet again which put the parties at loggerheads and caused the landlord’s purported notice to terminate. They had been negotiating rent, when that was not permitted by the lease. Clearly, rent was something that they did vary from time to time during the original term and it was something they would clearly have negotiated again had the lease flowed through to its 5-year renewal.

At this point I go back to basics. What is an option of renewal? I find a definition in Gilbert J. McCaul [Aust] Pty Ltd –v- Pitt Club Ltd (1957) 59 SR (NSW) 122 (Supreme Court of New South Wales). In the judgment of Owen J, Roper CJ in Eq. and Herron J I find the following passage;

“In order to determine the validity of the submissions which were made to us it is necessary first to consider what is an option of renewal. It is no more than an offer to make a contract. If, as here, it is under seal or if it be given for consideration it is a contractual offer and cannot be revoked. Nevertheless it is no more than an offer.”

The lease in that case contained a term, as in the present one, for an option of renewal “provided that the tenant has complied with all the provisions, terms and conditions of this Agreement”. In that case the tenant had not complied and the question was whether he could exercise the option without behaving as in the proviso. The Court held he could not, because he was in fact offering a renewal on different terms from those contained in the written option. The Plaintiff herein may have intended to cover that point when it said in the letter giving Notice of Termination that the Defendant had not been a good tenant. However, that point was not pursued in evidence, it is unsupported and I find as a fact that the Defendant had complied with the proviso in the present case. It was the Plaintiff that did not comply, when it put up the rents. I think both parties were satisfied with the adequacy of the provision they had made for the option because of the way they had acted under the contract. The option for these reasons appears to me to be clear and certain enough for the parties. I hold it was a valid option.

So many provisions of the written agreement appeared to have been varied during the first 5-year term that a person could be forgiven for raising the question whether it continued in force at all. That question was not raised and again I am satisfied it did because the parties were satisfied with the document and continued to act under it despite the variations they had made. The very issues raised in the claim and the counter-claim are based on the written agreement.

Among the terms of the written agreement is Clause 4 [g], which provides for a refundable deposit of $1,000.00. This was not mentioned in evidence. One has to assume it was paid at the commencement of the period. It was provided specifically for the event that rent might fall into arrears or that the Defendant might damage the premises. The Plaintiff appears to have made no allowance for this in his claim. Under Clause 2[g] the Defendant undertook “to use the demised premises for Business purposes only”, but part of the demise premises is described as “flats” and I take the unchallenged evidence of the Defendant to mean that his wife and children live there and he stay there when he was in Fiji.

Under Clause 4[g] there was a provision for immediate termination of the agreement if the Defendant left Fiji to settle in another country. This may be another term which the parties have disregarded, but the evidence is not conclusive.

There may be another ground for holding the option to be valid. I raise one further point from McCaul’s case. The written agreement, unless I am to be advised to the contrary, seems to me to be under seal. Stamps on it appear to indicate that stamp duty has been paid. If so I need to take account of a further dictum in the judgment which is as follows:

“......An option for which consideration is given, or which is under seal, is a contract, but it is also an offer which, when accepted, will create another contract or a sale. If no consideration is given for an option it is merely a revocable offer. [Williston on Contracts Revised Ed, Vol. 1, s 25].”

Therefore, following the further statements of principle in that case, I am led to conclude that the lessor irrevocably offered to grant a new lease. Its offer prescribed the manner for acceptance. Once the lessee had performed the conditions prescribed it could accept the offer and the result would be an agreement for a new lease.

My conclusion is that the option was valid and that it was not open to revocation by the lessor before the lessee/tenant had exercised his option. I hold that the purported notice of termination was itself of no effect and that the Defendant was entitled to give notice in the terms of the document that he prepared and faxed to his employee before 30 September 1992.

There is a gap in the evidence about service of that notice by his employee on the Plaintiff. Either that gap cannot be crossed in which case I must hold that notice was not given, or by inference I may conclude that notice was given in all the circumstances as laid before me in the evidence. In that case the Defendant had validly exercised the option.

From the demeanour of the Plaintiff and from the burden of his evidence, as well as from the demeanour of the Defendant and the burden of his evidence, I feel no hesitation in making the inference that the employee was loyal and did serve the notice.

From that conclusion it follows that the Plaintiff’s attempt to terminate the tenancy at the end of October 1992 was premature and ineffective. I hold that the option was validly exercised and the Plaintiff’s primary claim must therefore fail. It is however entitled to rental at the last agreed figure, $1100 per month for the period August 1993 till September 1994, perhaps 15 September the day when the Defendant’s injunction was dissolved. I fix this as being one year. The amount is $13,200.00. I am not prepared to entertain the new matter introduced at the trial so put aside the brief submissions about the Counter Inflation Act.

On the counter-claim the Defendant’s application to amend and include a further claim is permissible in principle, and the evidence supports it, though only barely. That application therefore is allowed and the amount claimed I find to be reasonable on the evidence. I allow $3,500.00. The original claim for lost profits does have more substance, but the evidence here also is not much more then anecdotal. It may not be the Defendant’s fault entirely that he was unprepared for the hearing but that is the fact of the matter. His memory after 12 ½ years was sound enough but the detailed records which he needed to sustain his claim were not in Court and I gather they had been destroyed. I had the impression that he had long ago moved on from the disagreeable end to his business relationship with the Plaintiff and left it behind him. I make no award under that head.

I now come to the money that the Defendant paid. He paid it as rent, he intended it to be rent, the Plaintiff should have accepted it as rent and may do so now. This is in addition to the $13,200.00 above. I give judgment to the Plaintiff for $13,200.00.

On the counter-claim I have awarded the Defendant $3,500.00. Judgment is entered for the Plaintiff for $13,200.00 on the claim and for the Defendant for $3,500 on the counter-claim. The Plaintiff has partially succeeded and so has the Defendant. The balance of fairness dictates that the costs lie where they fall. I make no order.

D.D. Finnigan
JUDGE

At Lautoka
29 July 2005