[1950] EACA 35

## H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR NEWNHAM WORLEY (President), BACON, Justice of Appeal, and DE LESTANG, J. (Kenya)

## MOTEL SCHWEITZER, Appellant (Original Plaintiff)

## ('1) THOMAS EDWARD CUNNINGHAM, (2) MARIUS LEON ESTIENNE, Respondents (Original Defendants)

## Civil Appeal No. 92 of 1954

(Appeal from the decision of H. M. Supreme Court of Kenya, Hooper, J.)

Landlord and Tenant—Furnished premises—Whether "standard rent" includes an element for furniture—Whether land held under Crown lease is "rented"— Assignment of lease with lessor's consent—Whether original lessee released— Whether privity of contract between lessor and assignee—Kenya Increase of Rent (Restriction) Ordinance, 1949, sections 1 (2), 2 (1), 5 (1), 19 (1) and 24.

By an agreement of lease, the appellant leased certain furnished premises to W. who undertook not to assign the same without the appellant's consent. The contractual rent was Sh. 26,400 per annum. W. applied to the Rent Control Board which fixed the standard rent of the premises at Sh. 705 per month plus an allowance in respect of furniture not exceeding Sh. 150 per month.

W, assigned the lease to the respondents and the appellant signified his consent by joining in the assignment.

The respondents tendered the standard rent as fixed by the Board and the appellant sued for the contractual rent and for possession alleging that by virtue of the assignment the respondents had become the tenants of the appellant. The trial Judge held that the sum fixed by the Board for furniture did not form part of the standard rent. The respondents denied that they were the tenants or lessees of the appellant or that there was any privity of contract between them and claimed that the premises were subject to the Increase of Rent (Restriction) Ordinance and that the rent as assessed by the Board was the correct rent. It was also submitted for the respondents that as the premises were leasehold under a Crown lease for 99 years they were "rented" within the meaning of that term in section 1 (2) (a) (i) of the Ordinance.

*Held* (9-12-55).—(1) By section 2 (1) (b) of the Ordinance, where premises are let furnished, the element for furniture is part of the standard rent.

(2) The standard rent was over Sh. 10,000 per annum and as the premises had not been let prior to 1949 the premises were not controlled and the correct rent was the contractual rent.

(3) "Rented" in section 1 (2) (a) (i) of the Ordinance means rented by the landlord for the time being of the premises, the expression "rented" and "let" as used in the Ordinance being construed as rented from a landlord as defined or let to a tenant as defined.

(4) There was no privity of contract between the appellant and the respondents.

Appeal dismissed.

Case referred to: Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd., 1902, 2 K. B. D. 660.

Schermbrucker for appellant. Kean for respondents.

DE LESTANG, J.—This is an appeal and a cross-appeal from a judgment of the Supreme Court of Kenya in the following circumstances:—

The appellant, who was the plaintiff in the court below, became the "owner" of certain premises known as the Westlands Hotel, by virtue of an agreement of sale dated 22nd September, 1940. On 31st December, 1951, the plaintiff agreed to lease the premises to a Mr. Woodruff for a period of five years commencing on 16th August, 1951, at an annual rental of Sh. 26,400, payable quarterly in advance. Under this agreement of lease Mr. Woodruff undertook not to assign the "demised premises" without the previous consent in writing of the appellant.

On 27th August, 1953, Mr. Woodruff, with the consent of the plaintiff, assigned his rights and obligations under the agreement of the lease to the respondents, who were the defendants in the Supreme Court. Prior to the assignment, Mr. Woodruff had applied to the Central Rent Control Board, hereinafter referred to as the Board, to fix the standard rent of the premises, and on 10th November, 1953, the Board decided that the standard rent of the premises was Sh. 705 per month, plus an allowance in respect of furniture not exceeding Sh. 150 per month. Thereafter the respondents refused to pay the rent reserved under the agreement of lease and tendered the standard rent as determined by the Board. Whereupon the appellant instituted proceedings in the Supreme Court against the respondents to recover both the rent due under the agreement of lease, and possession of the premises, alleging that by virtue of the assignment the respondents had become, and were, the tenants or lessees of the appellant.

By their defence the respondents, inter alia, denied that they were the tenants or lessees of the appellant, or that there was any privity of contract between them. They also contended that the premises were subject to the Increase of Rent (Restriction) Ordinance, 1949, and that the rent, as assessed by the Board, was the correct rent. Section 1 (2) of the Increase of Rent (Restriction) Ordinance, 1949, provides that the Ordinance does not apply to premises of which the standard rent is in excess of Sh. 10,000 per annum and which were not rented at the commencement of the Ordinance and have not been rented between that date and 31st December, 1949.

In order, therefore, to ascertain whether the premises were controlled or not, it was necessary for the learned trial Judge to decide, in the first instance, whether the sum allowed by the Board in respect of the furniture formed part of the standard rent of the premises. Only if it did could the premises in the instant case be excluded from the provisions of the Ordinance, since the standard rent would then be over Sh. 10,000 per annum. The learned Judge, in a long and considered judgment, came to the conclusion that the sum fixed by the Board in respect of furniture, did not form part of the standard rent. It is against this finding of the learned Judge that the appellant appeals.

Mr. Kean, on behalf of the respondents, has not sought to support this finding and, with respect, I agree with learned counsel on both sides that it is wrong. I need say no more about this matter, but as I am differing from the learned Judge, I shall state my reasons for so doing briefly.

The expression "standard rent" is defined in section 2 (1) of the Ordinance as follows: $\overline{\phantom{a}}$

"standard rent" means-

(a) in respect of unfurnished premises: —

(i) . . . . . . . . . . . . . . . . . . . (ii) . . . . . . . . . . . . . . . . . . (b) in respect of furnished premises: $-$

the standard rent which would be applicable to the premises if such premises were let unfurnished, plus a sum not exceeding fifteen per centum of the value, as determined by the Board, of the furniture (exclusive of the soft furnishings, linen, cutlery, kitchen utensils, glassware and crockery), and a sum not exceeding twenty-five per centum of the value, as determined by the Board, of such soft furnishings, linen, cutlery, kitchen utensils, glassware and crockery, if any.

On the face of this clear definition, it seems to me to be doing violence to the language used to say that in determining the standard rent of furnished premises the sum determined by the Board to be payable in respect of furniture should be excluded. In my view, the definition says exactly the opposite. In other words, the section, in effect, provides that the standard rent of furnished premises shall consist of two elements $x + y$ , and yet, if the learned Judge were right, it should not consist of both elements but of $x$ alone. The fallacy is, in my view, self-evident. Moreover, I can see nothing in the rest of the Ordinance to support the learned Judge's reasoning; on the contrary, such portions of the Ordinance as were relied on by the learned Judge, e.g. section 5 (1), section 19 (1) and section 24, point to the contrary view. In section 5, it is clearly stated that payment in respect of services is in addition to the standard rent; if the legislature had intended to treat furniture in the same way as services, surely it would not have failed to do so in as clear terms? Section 19 (1), in my opinion, reiterates that standard rent of furnished premises includes payment in respect of furniture, and so does with still greater force section 24 (3). That latter section states that when furniture is, with the consent of the Board, removed from the premises let, the standard rent shall be reduced. If standard rent did not include any payment in respect of furniture, no question of reduction could possibly arise. I think this will suffice to show that the learned Judge erred in holding that payment in respect of furniture does not form part of the standard rent of furnished premises.

Mr. Kean has, however, contended that the learned Judge was nevertheless right to hold that the premises were controlled because in order to exclude the premises in the instant case from the operation of the Ordinance, it was not sufficient to show that the standard rent should exceed Sh. 10,000 per annum, but it was also necessary to bring them within paragraph (i) of section 1 (2) (a) of the Ordinance. He submitted that the burden of proving that the premises came within that sub-paragraph was upon the appellant, and that he had failed to discharge that burden.

The learned Judge having made no finding on this point, learned counsel have agreed that as all the evidence is on the record, and as nothing turns on the credibility of the witnesses, this Court should give its decision on it.

The question is were the premises not rented at the commencement of the Ordinance (6th September, 1949) and have they not been rented between that date and 31st December, 1949? Mr. Kean has argued that as the premises are leasehold property under a Crown lease for 99 years from 1st April, 1904, they are in a continual state of being "rented" within the meaning of that term in the sub-paragraph. I think that this argument ignores the object and scheme of the Ordinance and is fallacious. In my view "rented" in the sub-paragraph in question can only mean rented by the landlord for the time being of the premises. Any other construction would lead to absurd results.

The evidence as to whether the premises were rented or not in that sense is as follows:-

Between 15th May, 1946, and 29th September, 1950, the landlord of the premises was a Mrs. Le Roux who ran it as a boarding-house. Mr. Brookes testified that he lived in Mrs. Le Roux's boarding-house from August, 1946, until March or April, 1951, and that throughout that time Mrs. Le Roux was running the premises as a boarding-house. Not only was this evidence not contradicted, but one of the recitals of the agreement of lease between the appellant and Mr. Woodruff tends to support it. I am satisfied that the only reasonable conclusion to be drawn from the evidence on the record is that the premises were being used throughout the revelant period as a boarding-house by the then landlord and were, therefore, not rented. That being so, it is not necessary for me to decide on whom the burden of proof lay.

I now pass to the cross-appeal by the respondents. They appeal against the finding of the learned Judge that there was privity of contract between the appellant and the respondents. The learned Judge dealt with this point in a ruling which he gave at the close of the plaintiff's case. Aften setting out the contentions of the parties and after holding that the appellant had approved of the assignment to the respondents he said this: —

"I have now to consider the terms of the assignment made on 27th August, 1953. The assignment is, of course, between Mr. Woodruff on the one hand and Messrs. Cunningham and Estienne on the other and by this document Mr. Woodruff assigned to Messrs. Cunningham and Estienne the benefit of the whole agreement and of all remedies for enforcing the same; and Messrs. Cunningham and Estienne agreed to perform and observe the covenants and conditions contained in the agreement which were to be performed and observed by the lessee, and to indemnify him in respect to all actions, claims and demands on account of the same. It therefore seems to me that the assignment operated as a substitution of Messrs. Cunningham and Estienne for Mr. Woodruff as from the date of the assignment. This assignment could not become effective without the consent of the plaintiff. Mr. Schweitzer, in virtue of paragraph $4$ (N) of the agreement of lease.

That Messrs. Cunningham and Estienne willingly agreed to perform and observe all the covenants and conditions contained in the agreement cannot be doubted since their signatures are on the deed of assignment; and, indeed, they have tendered payment of rent, though at the assessed rate, to the plaintiff. In these circumstances I fail to see how it can be argued that the three signatories to the deed of assignment, that is to say the minds of Mr. Woodruff (the lessee), Messrs. Cunningham and Estienne (the assignees) and Mr. Schweitzer were not completely *ad idem* when they all affixed their signatures to the deed of assignment; and that in point of fact they all regarded the benefits of the agreement of lease as being transferred from Mr. Woodruff to Messrs. Cunningham and Estienne who stood henceforth, as it were, in the shoes of Mr. Woodruff in their relations to Mr. Schweitzer the lessor. This appears to me, in the absence of any evidence to the contrary, to establish privity of contract as between Mr. Schweitzer and Messrs. Cunningham and Estienne."

The plaintiff-appellant's case in the Supreme Court rested entirely on the assignment of the agreement of lease, his contention being as stated in paragraph 3 of his plaint that by reason of the fact that the assignment was made with the consent and concurrence of the appellants the respondents "became and are the tenants or lessees of the plaintiff". It was never the appellant's case that the respondents had become his tenants by virtue of any implied contract having come into existence subsequently to the assignment. That being the position, I understand the learned Judge's decision to mean in short that as the appellant gave his written consent to the assignment on the deed of assignment itself, he thereby became a party to the assignment, the effect of which was to release Mr. Woodruff from all his obligations under the agreement of lease and to create direct contractual relations between the appellant and the respondents.

With respect 1 am unable to agree with this conclusion, which appears to me to lose sight of the fact that the consent of the appellant was a condition precedent to any valid assignment. In point of fact it is common ground that the appellant gave his written consent to the assignment before it was actually executed by the respondents and Mr. Woodruff. In my view, taking the assignment by itself, the signature of the appellant thereon means no more than that he was permitting the assignment and not that he was entering into a new contract with the respondents.

Moreover, the position in law is that there could be no privity of contract between the appellant and the respondents without the release of Mr. Woodruff. As Collins, M. R., said in Tolhurst v. Associated Portland Cement Manufacturers, (1900), Ltd. 1902, 2 K. B. D. 660 at page 668, "a debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to someone else; this can only be brought about by the consent of all three and involves the release of the original debtor". Thus to establish privity of contract it was necessary for the appellant, respondents and Mr. Woodruff to have entered into a new contract by which in consideration of the appellant releasing Mr. Woodruff from his obligation under the agreement of lease, the respondents assumed responsibility for its performance. I can see nothing in the deed of assignment from which such a contract can be reasonably inferred. On the contrary, both the form and contents of the deed of assignment point the other way. As regards the form, the assignment is expressed to be made between Mr. Woodruff as vendor and the respondents as purchasers, and the appellant comes into the picture as landlord merely to give his consent to the transaction between those two parties. The contents of the assignment itself show that under it the respondents agreed to indemnify the vendor from any breach of the agreement of lease, the subject of the assignment. Had a new contract been contemplated, there would have been no necessity for that indemnity.

It has been argued that the circumstances leading up to and following the assignment show that it was the intention of the parties to release Mr. Woodruff and substitute the respondents in his place. I am unable to agree. It is, no doubt, true that the appellant accepted rent from the respondents and had no further dealings with Mr. Woodruff, but this would not be sufficient to release Mr. Woodruff from his obligations under the agreement of the lease.

This may possibly amount to recognition of the respondents as the appellant's tenants. Such relationship, if any, would not, however, flow directly from the assignment, but impliedly from the subsequent conduct of the appellant and the respondents. But as I have said before, this was not an issue in the case. Even if it were possible to imply from the conduct of the parties an intention to release Mr. Woodruff no such inference can, however, be drawn in the present case as there is clear evidence of a contrary intention. On 8th June, 1953, Mr. Woodruff's advocates wrote to the appellant requesting his consent to the assignment of the agreement of lease, to which the appellant replied on 11th June, 1953, that he had no intention of releasing Mr. Woodruff from his obligations under the agreement for lease but that he would, nevertheless, consider the request for his consent to the assignment as soon as Mr. Woodruff would have paid the arrears of rent. He also asked for full particulars of the proposed assignee and

offered to see the gentleman in question to discuss the matter with him. This, in my view, shows that the appellant did not contemplate releasing Mr. Woodruff at all. For these reasons neither the deed of assignment itself, nor the surrounding circumstances establish an intention on the part of the appellant to release Mr. Woodruff from his obligations, and it follows that there was no privity of contract between the appellant and the respondents, and that the learned Judge was wrong to find that there was. Nevertheless, in the result his decision dismissing the appellant's suit was right, except that the respondents ought to have been allowed the costs of the whole trial.

I would, therefore, dismiss the appeal with costs and allow the cross-appeal also with costs, I would maintain the Supreme Court's decision except that part of it giving the costs of the preliminary objection to the appellant, which I would order the appellant to pay the respondents.

WORLEY, President.—The relevant facts and the issues in this appeal are sufficiently set out in the judgment which has been prepared by de Lestang, J., and I do not propose to repeat them.

The first question which had to be answered in the trial of this matter was whether the suit premises were within the protection of the Increase of Rent (Restriction) Ordinance, 1949. They were let as furnished premises and the learned trial Judge was persuaded that the sum fixed by the Central Board in respect of the furniture had not to be taken into account in arriving at the "standard rent"; he therefore found that the standard rent was below the prescribed figure of Sh. 10,000 a year. This contention appears to have been first put forward by Messrs, Sirley & Kean, advocates for the respondents in the correspondence and was argued by Mr. Kean at the trial of the suit. Before us, however, he conceded that it was mistaken and fallacious: indeed it is hard to see how it could ever have been put forward as a serious argument. The learned trial Judge appears to have been misled not only by Mr. Kean's argument but also by the practice of the Central Board (page 38 of the record). He also, with respect, appears to me to have confused the rent paid in respect of furniture with the amount chargeable in respect of services. It is quite evident that the practice of the Board in regarding the sum fixed in respect of furniture as not forming part of the "standard rent" is erroneous and steps will be taken to bring this judgment to the notice of the Board immediately.

Having been obliged to abandon his first argument, Mr. Kean fell back on a highly artificial and equally fallacious argument that because the land on which the suit premises stand is held on a Crown lease, the premises must be held to be "rented", presumably from the Crown. This, of course, is not so. The expressions "rented" and "let" as used in the Ordinance are to be construed as rented from a landlord, as defined, or let to a tenant as defined, and by no stretch of ingenuity could it reasonably be held that in the circumstances of this case the Crown is the landlord within the statutory definition.

It follows, therefore, that the premises are not controlled premises and that the proper rent to be paid is the contractual rent and not the standard rent. To this extent the appeal succeeds, but the respondents in their cross-appeal contend that the decree passed in the Supreme Court should be confirmed in so far as it ordered the dismissal of the plaintiff-appellant's suit with costs, but varied in so far as it reduced these costs by the costs awarded to the plaintiff on the hearing of a preliminary objection.

On this aspect of the case, I have little to add to what has been said by my brother, de Lestang. Mr. Schermbrucker expressly disclaimed any claim to privity of estate between the appellant and respondents, but rested his case on privity

of contract only. I agree that it has not been established that there was any intention on the part of the appellant to release Mr. Woodruff from his obligations and, therefore, no privity of contract existed between the appellant and the respondents. On this aspect of the matter, therefore, the cross-appeal must succeed, and I agree with the orders proposed by de Lestang, J.

There is one further matter relating to costs to which I should refer. On 22nd April, 1955, this Court (then composed by Sir Barclay Nihill, President, myself as Vice-President, and Sir Enoch Jenkins, J. A.) overruled preliminary objections to the form of the appeal record raised by the respondents but said: "As regards costs we are not prepared to allow the appellant the costs relative to the hearing of the objection... As to whether the appellant should be required to pay their (i.e. the respondents') costs, we prefer to reserve our order until the appeal has been determined. In any event, however, the respondents will not be required to pay the appellant's costs occasioned by the proceedings relative to the hearing of the objection. . . " The only outstanding question, therefore, as to the costs attributable to those preliminary objections is whether or not the respondents should have their costs. No application was made for them at the conclusion of the hearing of the appeal and no order was made, although there was some discussion on the question of orders for costs. For my part I should not care to make any order without further consideration.

During the hearing of the appeal, we were informed by Mr. Schermbrucker, and I accept it, that the dispute between the parties originated in the quantum of rent properly payable and that the question of their relationship *inter se* and vis-à-vis Mr. Woodruff is an excrescence which has grown upon the matter in the course of the litigation. It has now been made clear that the proper rent payable is the contractual rent and that the premises are not within the orbit of the rent restriction legislation. I trust it is not too much to hope that the parties will now act as reasonable men and avoid further litigation.

BACON, J. A.—I have had the advantage of reading the judgments prepared by my lords and I agree with them and have nothing to add. I concur with the orders proposed to be made.