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Chow v Podaru [2010] SBHC 44; HCSI-CC 125 of 2010 (3 August 2010)

IN THE HIGH COURT OF SOLOMON ISLANDS
Civil Jurisdiction

BETWEEN:

MARY CHOW
Claimant

AND:

AGGIE PODARU
(representing herself or trading as La Tortilla)
Defendant

Dates of Hearing: 27 July 2010
Date of Decision: 3 August 2010

Mr. M. Tagini for claimant
Mr. G. Fa'aitoa for defendant

DECISION ON TRIAL

Cameron PJ:

1 This case concerns a tenancy dispute in which the claimant as the owner of premises seeks the eviction of the occupier on the grounds that the tenancy ended on 31 March 2010.

2 The premises concerned are known as Amy's Building, situated at Point Cruz, Honiara. It is common ground that the defendant's tenancy with the claimant commenced on 4 August 2007, that it was for a period of two years, and that the rental was $35,000 per month, payable in advance each month. From the premises the defendant ran a food bar known as a kai bar, under the trade name of La Tortilla Cafe.

3 What is at issue is whether the rental of $35,000 a month was fixed for the whole 2 year period, or was subject to increase during that term. The claimant says that it was a term of the arrangement that the rental could be increased during that term, and that the level of such increase was to be agreed between the parties. The defendant says the rent was fixed for the two years.

4 There was no written tenancy agreement, signed by both parties, tendered in evidence. The claimant says that this was because the entire agreement was oral. The defendant says that the parties did sign a written agreement, but that she cannot now locate her copy of it.

5 In deciding these issues, it is relevant to note what subsequently occurred. It is common ground that in March 2008 the claimant advised the defendant that a third party was prepared to pay a higher rental than $35,000 for the premises (there is a dispute as to whether the higher rental said to be offered by the third party was $45,000 a month or $60,000 a month), and sought an increase in rental from the defendant accordingly. It is also common ground that as a result of this approach, the defendant increased the rental she was paying to $40,500.

6 It is also undisputed that in October 2008 the rent payable was again increased to a level of $45,000 per month, which increase the defendant then commenced to pay on a monthly basis.

7 On 1 July 2009, just before the expiry of the 2 year term on 3 August 2009, the defendant wrote to the claimant to the effect that she had budgeted to increase the rent to $55,000 per month from the end of August 2009. As to any renewed term, the claimant's evidence was that it was verbally agreed that the tenancy be renewed for 1 year until 2 August 2010, whereas the defendant says that the agreed renewal was until the claimant developed the building (which the defendant says the claimant told her was anticipated to occur in December 2010).

8 Following the expiry of the initial term of 2 years, the defendant fell into significant arrears in the payment of monthly rental, and by notice the claimant sought to determine the tenancy and evict her as at 31 March 2010. The defendant refused to leave and remains in the premises operating her business to this day, notwithstanding that she has paid no rental since 10 March 2010.

9 The essential position of the defendant is this. She says that the plaintiff had no right to in effect force her to pay an increased rental of $40,500 from March 2008, and then a further increased rental of $45,000 from August 2008. She says that what she overlooked in agreeing to pay the higher rentals was the fact (as asserted by her) that the rent was fixed for 2 years at $35,000 per month. She also says that she was pressured into paying the higher sums by the claimant in effect under threat of eviction if she did not do so.

10 Having heard the evidence, I have no doubt that the claimant, an experienced business person, did exert considerable pressure on the defendant to pay those increases. However, the defendant was an experienced business person as well, and made conscious decisions to do so based on her circumstances at the relevant times.

11 I am not satisfied that a written tenancy agreement, signed by both parties, ever existed in this case. Neither party produced any such agreement, and indeed the claimant asserts that no such agreement existed. I prefer the evidence of the claimant on this point, and find that the arrangement between the parties was an oral one. I am satisfied that it was understood by both parties from the outset that the rental could be the subject of an increase during the initial 2 year term. The defendant was establishing a new service business with turnover no doubt expected to increase as the business became more established, and in this situation it would not be unusual for rent to be reviewable during the term of the tenancy. I also consider that if it was understood that the rent was fixed at $35,000 for the entire period, then the defendant as an experienced business person would have rejected the request for an increase in March 2008 and then again in August 2008.

12 In any event, irrespective of whether the rent was fixed or reviewable, the fact remains that the defendant agreed to an increase in rental both in March and August 2008. As earlier stated, I am satisfied that this was a conscious choice by the defendant, if you like a calculated business decision, faced with the circumstances that then existed. I do not accept that she overlooked at those times that the arrangement (as asserted by her) meant that legally the claimant was not entitled to demand the increase. In so agreeing, I find that the monthly rental was varied to those respective amounts for the ensuing periods. I note that in a letter dated 23 October 2008 from the defendant to the claimant, the defendant referred to the increase of rental to $45,000, and stated:

"I prefer that any increase in rent be kept out of formal agreements which will leave some space to adjust if the going gets tough."

While this may have been an attempt by the defendant to classify the increase as voluntary and non binding, I do not accept that this was the legal effect of it. I find that it amounted on both occasions to an agreement to pay the increased rental rate thereafter.

13 Significantly, it was common ground that on 3 February 2010 the defendant signed a spreadsheet which calculated rental arrears at $153,000. The defendant's evidence is that the claimant visited her and requested that she create a computer spreadsheet showing existing arrears. The defendant stated that she already had such a spreadsheet prepared, that she and the claimant then talked about it, that they then both signed it, but that she did not realise it would be later used in a Court case against her.

14 I am quite satisfied that by signing that spreadsheet, the defendant was acknowledging that it accurately reflected the rental arrears outstanding as at that date, namely 3 February 2010. She acted consistently with that state of mind when on 25 February 2010 she sent a text to the claimant's mobile phone saying she would send her SBD$120,000 from the sale of her Pajero motor vehicle (which sale she said in court never eventuated). During cross examination the defendant stated that when she signed the spreadsheet on 3 February 2010, she had not even then realised that (on her version of events) the claimant had no right to demand rental increases during 2008. For reasons already given, I do not accept that this was the defendant's state of mind at the time. I also note her letter to the claimant dated 23 September 2009 states:

"You will see that for the past 12 months (since March 2008) I have done my absolute best in keeping you well financed given the fact that only $35,000 was the actual rent per contract."

This demonstrates that well before February 2010 the defendant was well aware that the rental figure under the agreement at its inception was $35,000 per month.

15 As to whether the tenancy was renewed, in a letter to the claimant dated 25 May 2009 the defendant expressed interest in retaining the premises and sought an early decision on the question from the claimant. The claimant then handwrote a note at the top of that letter:

"The best I can offer is a 12 month contract."

The defendant denies agreeing to any such proposal, asserting the arrangement was that she was to remain until the claimant redeveloped the building (which she acknowledged was dependent on the claimant borrowing $8 million from the bank).

16 I do not accept that there was any binding agreement with the defendant that she could remain in the premises until such redevelopment occurred. No sensible business person would make such an open ended arrangement with a tenant. In addition, it is apparent from the handwritten note that the claimant was only prepared to renew the arrangement for 12 months. However, I am not satisfied that the terms of a renewal were agreed between the parties - there is simply a lack of satisfactory evidence that this was the case.

17 I therefore find that the tenancy continued from 3 August 2009 as a periodic tenancy, on the same terms and conditions as the first tenancy, but with no fixed duration (section 154(1) of the Land and Titles Act).

18 I am not satisfied that the defendant's solicitor's letter of 18 March 2010, which gave the defendant until 31 March 2010 to pay the arrears or vacate the premises, operated to validly determine the periodic tenancy. The defendant was in occupation of the premises, and refused to vacate, and so it was necessary for the claimant to seek a High Court order as to his right to forfeit the periodic tenancy (section 155(2)(b) of the Land and Titles Act). Accordingly, the periodic tenancy remains until an order of forfeiture is made by this court. I am quite satisfied, however, that an order for forfeiture of the lease is appropriate on the grounds of non-payment of rental.

19 On the question of damages, the defendant acknowledged arrears of rental owed, as at 3 February 2010, of $153,000. Since then, it would appear two payments of $15,000 (paid 10/2/10) and $13,000 (paid 10/3/10) have been made (p.140 Casebook). That reduces those arrears to $125,000. However, since 3 February 2010 rental payments of $45,000 per month have accrued for the 5 months March to July 2010 inclusive, making further arrears of $225,000, and total arrears to 2 August 2010 of SBD$350,000.

20 Finally, I have not found it necessary to deal specifically in this decision with the evidence relating to the Golden Scoutees (the claimant's previous tenants), or the evidence given by various deponents other than the plaintiff and the defendant. That evidence has not been overlooked, but does not have a direct bearing on the findings I have made or the conclusions I have come to.

21 I make the following orders:

(a) An order declaring that the periodic tenancy of the defendant relating to Amy's Building, Point Cruz, Honiara, being the claimant's property contained in parcel no. 191-020-93 ("the property"), is forfeited from the date of this order.

(b) An order granting possession of the property to the claimant from and including 3 August 2010.

(c) An order that the defendant, her servants, agents, invitees or any other person occupying the property under her authority or purported authority vacate the property immediately.

(d) An order that upon vacating the property the defendant is entitled to remove her personal property and all her trade fixtures, provided those trade fixtures are capable of being removed without causing irreparable damage to the property.

(e) An order that judgment be entered for the claimant against the defendant for damages in the amount of $350,000, being the amount of the rental arrears.

(f) An order that the defendant pay the claimant's costs on a standard basis, such amount to be agreed or taxed and in any event to be paid within 28 days of this order.

BY THE COURT

__________________________
Justice IDR Cameron
Puisne Judge