[2012] UKPC 14
Privy Council Appeal No 0066 of 2011
JUDGMENT
Lamusse Sek Sum & Co
v
Late Bai Rehmatbai Waqf
From the Supreme Court of Mauritius
before
Lord Hope
Lord Brown
Lord Mance
Lord Dyson
Lord Sumption
JUDGMENT DELIVERED BY
LORD HOPE
ON
23 May 2012
Heard on 29 March 2012
Appellant
Ghansiamdas Bhanji
Soni
R Saha
Y Moonshiram
S Gigabhoy
(Instructed by S B Solicitors)
Respondent
Anwar Moollan
Kamlesh Domah
(Instructed by Streathers Solicitors LLP)
LORD HOPE
1. This
case raises a short but important point about the meaning and effect of the
Second Schedule to the Landlord and Tenant Act 1999, as amended by section 11
of the Landlord and Tenant (Amendment) Act 2005. That section repealed the Second Schedule to
the principal Act and enacted in its place the Second Schedule set out in the
Schedule to the 2005 Act. The effect of
this amendment was to replace the formula which could be used to determine the
amount of the increase of rent permitted by section 9(4) of the principal Act
with a new formula. It also added a
provision as to the date when any increase in rent resulting from its
application was to take effect. The
dispute between the parties is as to the meaning of the words in the Schedule
which identify the date as from which the increased rent becomes payable.
2. Section
9(4), as amended by the 2005 Act, provides:
“Where any business premises were let to a tenant on
or before 1 July 2005, the landlord shall be entitled to and may increase the
rent payable by an amount determined in accordance with the Second
Schedule.”
3. The
Second Schedule to the 1999 Act, as amended, is in these terms:
“1. For the purpose of section 9(4), the rent may be
increased every year, starting from the date of the request for increase of
rent up to 30 June 2012, in the amount calculated as follows –
Amount of increase = 15% x (A – B)
2. In paragraph 1 of this Schedule -
“A” means
(a) the
market rent of the business premises as agreed upon by the landlord and the
tenant; or
(b) where
there is no agreement under paragraph (a), the market rent of the business
premises as determined by the Fair Rent Tribunal; and
“B” means the rent payable under the existing tenancy
as at the date of the agreement on, or determination of, the market rent, as
the case may be.
3. The rent may be increased, in accordance with the
formula set out in paragraph 1, every year, starting from the date of the
agreement on, or determination of, the market rent, as the case may be, up to
30 June 2012.”
The proceedings
4. The
appellant is the tenant of business premises at 2 Farquhar Street, Port Louis,
owned and let by the respondent. Prior
to 1 July 2005 the monthly rent payable by the appellant was Rs 3,861
(excluding VAT). By letter dated 12
August 2005 the respondent informed the appellant that it had decided to
increase the monthly rent to Rs 16,145 on the basis that the market rental for
the premises was Rs 85,760 per month.
Reference was made to the provisions of the 2005 Act which, it was said,
permitted this increase. The appellant
did not agree with the amount of the market rent as assessed by the respondent,
so the respondent applied to the Fair Rent Tribunal for the determination of
the market rent.
5. On 11
March 2008, while the application for the determination of the market rent was
still under consideration by the Tribunal, the respondent lodged a plaint in
the District Court of Port Louis in which it claimed arrears of rent due from 1
August 2005 to the date of the plaint amounting to Rs 724,756 with interest to
the date of payment and repossession of the premises for non-payment and or
irregular payment of rent. In its plea
in reply the appellant denied that the sum claimed was due and submitted that
the action was premature. It explained
that it had not paid the sum claimed as the rent was disputed and as a case for
the determination of the market rent was presently pending before the Fair Rent
Tribunal. Evidence was led before HH
Mrs Jannoo-Jaunbocus. After the
appellant’s case was closed counsel for both parties sought a postponement as
the case pending before the Fair Rent Tribunal was nearly over. The magistrate granted the postponement. The
Fair Rent Tribunal delivered its findings on 15 October 2009. It fixed the market rental value of the
premises at Rs 60,000 and recommended that the parties apply the Second
Schedule to the Act.
6. The
magistrate delivered her judgment on 4 December 2009. She said that there were two issues to be
determined: as from what date did the increase operate, and whether it was
reasonable to make the order prayed for.
She held that the increased rent was payable from the date when it was
claimed by the landlord. The tenant
could not ignore section 11(4) of the 1999 Act and say that it would pay only
from the date of the determination. The
power to order a refund in section 11(5) confirmed this interpretation, as
there would be no need of such a provision if the tenant was asked to pay only
the rent he was actually paying pending the determination. As the rent due had not been paid, there had
been a breach of the obligation and it was reasonable to make a possession
order.
7. Section
11 of the 1999 Act sets out the jurisdiction and powers of the Fair Rent
Tribunal. Subsections (4) and (5) are in
these terms:
“(4) Notwithstanding the lodging of an application
before the Tribunal, the tenant shall pay the rent claimed by the landlord.
(5) The Tribunal may, on making the determination,
order that any amount in excess of the fair rent paid by a tenant shall be –
(a) refunded
to him by the landlord; or
(b) applied
in satisfaction of rent payable in the future at such rate and over such period
as it thinks fit.”
8. The
appellant appealed against the decision of the magistrate to the Supreme Court. On 15 July 2010 the Supreme Court (Chui Yew
Cheong and Beesoondoyal JJ) dismissed the appeal. It held that sections 11(4) and (5) of the
1999 Act showed that it was the clear intention of the legislature that the
increase to which the landlord was entitled in accordance with the prescribed
formula was payable from the time when the request for the increase was
made. Reference was made in support of
this interpretation to a statement by the Minister of Housing and Lands when
introducing the Landlord and Tenant (Amendment) Bill at Second Reading in the
Legislative Assembly. In his opening
statement he said that the increase would start from the date of the request
for the increase. The court acknowledged
that a first reading of paragraph 3 of the Second Schedule would tend to
support the view that the increase would take effect from the determination of
the fair rent by the Tribunal. But in
its view that interpretation would be contrary to the general scheme of the
Act, so it should be restricted to situations where the parties are agreed that
the increase should be dependent upon the determination of the Tribunal. As for the issue of reasonableness, the court
held that the magistrate should have exercised her discretion to allow the
appellant the opportunity to pay the arrears.
It substituted an order ordering the appellant to quit the premises
unless an amount representing the increase in rent for the period from July
2005 to October 2009 was paid by the end of July 2010.
9. The
appellant has appealed as of right against that decision to the Judicial
Committee. The Board was told that the
amount referred to in the judgment of the Supreme Court has now been paid and
that the issue of repossession does not now arise. It was however addressed by counsel on the
issue as to the date as from which the increase claimed by the landlord become
payable. As can be seen from the
foregoing narrative, the courts below accepted the argument for the respondent
that the answer is to be found in the provisions of section 11(4) and (5) of
the 1999 Act. It is however necessary to
look beyond those provisions to understand the part they now play in the system
for permitted increases in rent as a result of the amendments which were made
by the 2005 Act.
The old system
10. The
effect of the amendments made by the 2005 is best seen in the context of the
provisions regulating the old system which they replaced. Part III of the 1999 Act set out a system of
rent control. In simple terms, the rent
payable was to be a fair rent for the premises let by the landlord. Section 6 provided that, until and unless it
was varied by an increase permitted by section 9 or by a determination of the
Tribunal, it was, in the case of premises such as those in this case which were
let on or before 15 August 1999, the rent agreed upon by the landlord and the
tenant (see the definition of “rent” in section 2) which was lawfully due or
actually paid as rent at that date. The
only increases that were permitted were those set out in section 9. The relevant provision for present purposes
was that set out section 9(4), which provided:
“(4) Where any business premises, other than
industrial premises, were let to a tenant on or before 15 August 1999, the
landlord shall be entitled to and may increase the rent payable by an amount
determined in accordance with the formula set out in the Second Schedule.”
11. The
Second Schedule set out the following formula to determine the increase in rent
permitted by section 9(4):
“1. For the purpose of section 9(4), the formula shall
be –
10%
x A x B
2. In paragraph 1 of this Schedule –
“A” means –
(a) the
rent payable on 1 December 1993; or
(b) in the
case of a letting which started after 1 December 1999, the rent payable at the
date of the commencement of the letting;
“B” means the
number of years of tenancy which shall not exceed 5.”
It should be noted that no reference was made in this
formula to the market rent for the premises.
The effect of the Second Schedule was that the amount of the permitted
increase could be determined by means of a simple arithmetical calculation
based on facts that were readily ascertainable without the need to apply for a
determination by the Fair Rent Tribunal.
12. As already
noted, the jurisdiction and powers of the Fair Rent Tribunal are set out in
section 11 of the Act. Under the old
system its jurisdiction was confined to the determination of a fair rent for
the premises. Section 11(1) provided:
“(1) The Tribunal shall, notwithstanding any other
enactment, have exclusive jurisdiction, on an application made to it by a
landlord or a tenant, to –
(a) determine
the fair rent of any premises let after 15 August 1999;
(b) subject
to section 14, review, maintain, vary or set aside any determination made under
paragraph (a); and
(c) subject
to section 4, review, maintain, vary or set aside any agreement referred to in
that section in so far as it relates to any matter provided for in this Part.”
The only place where expression “market rent” appeared
in the 1999 Act under the old system was in section 13(f), where one of the
circumstances that the Fair Rent Tribunal could take into account in
determining the fair rent of any premises was the market rent of similar
premises in the neighbourhood. Section
14 provided that, subject to certain exceptions, the Tribunal was not to review
a determination made by it until the lapse of three years after it was made. Section 4 provided that nothing in the Act
was to prevent the landlord and the tenant from entering into a written
agreement and that any rent so agreed was to be deemed to be the fair rent for
the premises.
13. Section
11(3)(b) gave power to the Tribunal to order that the rent of any premises was
to gradually increase over a period not exceeding 48 months from the date of
its determination in order not to cause excessive hardship to the tenant. The implication of this provision was that,
unless an order to that effect was made, the whole amount of any increase was
payable as from the date of the determination.
Sections 11(4) and (5) were in the terms set out in para 7, above. Section 11(4) laid down a rule of general
application that, notwithstanding the lodging of an application before the
Tribunal to determine the fair rent of the premises, the tenant was to pay the
rent claimed by the landlord. Section
11(5) provided for what was to be done if the fair rent determined by the
tribunal was less than the amount paid by the tenant in accordance with section
11(5).
14. The
main point to notice about these provisions is that they were all designed to
fit in with the jurisdiction of the Fair Rent Tribunal which, under the old
system, was to determine the fair rent for the premises.
The new system
15. As has
already been seen, the 2005 Act replaced the formula set in the Second Schedule
of the 1999 Act with a new formula which introduced a new concept that had not
previously been used as the yardstick for the determination of permitted
increases in the rent payable for business premises. This was the concept of the market rent. Section 9(4) was amended so that it now
reads:
“(4) Where any business premises were let to a tenant
on or before 1 July 2005, the landlord shall be entitled to and any increase
the rent payable by an amount determined in accordance with the Second
Schedule.”
Section 11(1)(a) was also amended, so that it now
reads:
“(1) The Tribunal shall, notwithstanding any other
enactment, have exclusive jurisdiction, on an application made to it by a
landlord or a tenant, to –
(a) determine
the fair rent of any premises let after 15 August 199; or the market rent of
business premises let on or before 1 July 2005.”
Section 11(3)(b) was amended by excluding business
premises from the power to order that the rent was to increase gradually. Section 11(5), which enabled an amount paid
in excess of the fair rent to be recovered, was not extended to include cases
where an amount was paid in excess of that which was recoverable by way of an
increase calculated by reference to the market rent under the new formula. No change was made to section 13(f), which
continues to provide that the market rent of similar premises in the
neighbourhood is one of the factors among several that may be taken into
account in the determination of a fair rent.
Discussion
16. The
differences between the old system and the new that this survey reveals are of
critical importance for a proper understanding of what is meant by paragraph 3
of the Second Schedule under the new system.
Paragraph 3 provides that the rent may be increased in accordance with
the formula every year “starting from the date of the agreement on, or
determination of, the market rent, as the case may be.” As already noted, the Supreme Court
recognised that a first reading of those words would tend to support the view
that, in the absence of agreement, the increase takes effect from the date of
the determination of the market rent by the Tribunal. It was diverted from this conclusion because
it appeared to the court that such an interpretation would be contrary to the
general scheme of the Act, and in particular from the scheme indicated by
section 11(4) and section 11(5). For the
following reasons, the Board has concluded that the Supreme Court’s
interpretation of the general scheme of the Act was mistaken. Far from being contrary to the meaning that a
first reading of the words in paragraph 3 tended to indicate, the general
scheme of the Act, as amended, is entirely consistent with it.
17. First,
the amended provisions must be read in the light of the fact that the
expressions “fair rent” and “market rent” mean different things. The fair rent is a creature of statute, to be
determined by the Tribunal on an application made to it under section 11. The market rent, as section 13(f) indicates,
is one of the circumstances that may be referred to in the determination of the
fair rent. It will be an important
factor in determining what is fair as between the landlord and the tenant, and
if the premises to which it relates are truly comparable it may be taken to be
the best evidence. But the use of these
two expressions in the same section indicates that they must not be taken, for
the purposes of the statute, to mean the same thing.
18. Second,
the fact that they must not be taken to mean the same thing is confirmed by
section 11(1)(a), which uses both expressions in the same paragraph. The reason for this is that they refer to two
different exercises. On the one hand,
there is the determination of the fair rent of any premises, which is to be
done by applying the principles set out in section 13. On the other, there is the determination of
the market rent of business premises for the purposes of the Second Schedule,
to which the principles set in section 13 do not apply. As the words of section 13 indicate, those
principles apply to the first exercise, not the second. It may be that the Tribunal will wish to
apply the same principles when it is carrying out the second exercise. But it is not required by the words of the
statute to do so.
19. Third,
section 11(4) must be read in the context of the amended provisions of the
Act. Account must also be taken of the
fact that section 11(5) was not amended to include a reference to the
determination of market rent for the purposes of the Second Schedule. Taken together, these subsections are concerned
only with the situation where an application is made to the Tribunal for the
determination of a fair rent for the premises.
In that situation section 11(4) operates as a holding provision. The tenant must pay the rent claimed by the
landlord, even if he claims that it is more than the fair rent. He has his remedy under section 11(5) if it
turns out that he was right and he has been paying an amount in excess of the
fair rent.
20. If
paragraph 3 of the Second Schedule is given the meaning that the Supreme Court
was inclined to give to it before it was diverted from this by what it regarded
as the general scheme of the Act everything falls into place. Any increase in rent produced by an
application of the formula will become payable from the date of the agreement,
if the matter is agreed, or from the date of the determination of the market
rent if it is not. In the meantime the
tenant is not required to pay any increase on the amount previously
payable. Section 11(4) must be taken not
to apply, because it was designed for use only in cases where there is an
application for the determination of a fair rent for the premises. Section 11(5) plainly does not apply, because
it refers only to the payment of an amount in excess of the fair rent and
because, if paragraph 3 is given its natural meaning, the situation to which it
refers cannot arise in cases where the increase in rent is determined in
accordance with the Second Schedule.
21. If
confirmation is needed that this is what paragraph 3 of the Second Schedule was
intended to mean, reference may be made to the way the matter was dealt with by
the Minister of Housing and Lands in the legislative assembly. Glover J observed in Madelen Clothing Co Ltd
v Termination of Contracts of Service Board [1981] MR 284, 287 that Mauritian
law has always permitted reference to debates before the legislature as travaux
préparatiores to determine the intention of the legislator. His prediction that the English Courts will
gradually adopt a more flexible approach on this subject by extending it to
enactments generally, not just to those giving effect to an international
treaty, has now been realised. But the
rules laid down in Pepper v Hart [1993] AC 593 are less flexible that the
approach which Mauritian law favours which is derived from French law, and it
is the Mauritian approach which the Board would apply in this context. Glover J was careful to add at p 288 that
this approach should be used only where the law is ambiguous or
self-contradictory and then only with the utmost circumspection. The controversy that has given rise to this
case has been sufficiently acute to justify its use here. As for the requirement of utmost
circumspection, it can be met by paying more careful attention to the way the
debates progressed as the Bill received its second reading and progressed to
the committee stage than appears to have happened when the Minister’s words
were examined in the Supreme Court.
22. The
Supreme Court quoted, in support of its conclusion, words used by the Minister
when opening the debate at second reading when the wording of the second
Schedule was not yet in its final form.
He said then that the increase would start from the date of the request
for the increase. But at the end of what
had been a vigorous debate he indicated that he had changed his mind. He said this:
“As for the amendment that I am going to propose,
previously we had ‘from the date of the request for increase’. We believe that it is very fair that we
replace it by ‘from the date of the agreement on or determination of the market
rent’.”
An amended version of the Second Schedule which
included these words in paragraph 3 was brought forward as promised, and it was
approved when the Bill was considered at the committee stage. That is the version of it that passed into
law when the Bill was enacted. It is
plain that the intention that had been expressed previously was departed from
in favour of the words that are now to be found in the Schedule which is now in
force. The Minister’s explanation of
what his intention was are entirely consistent with the meaning that, for the
reasons set out above, the Board would give to the words used in paragraph 3.
23. The
Board appreciates of course that, just as this interpretation favours the
tenant, it will be seen to be unfair to the landlord who will not be able to
obtain the benefit of any increase until the Tribunal has been able to
determine the market rent for the premises.
The problem is one of delay.
Among the amendments that the 2005 Act made to the 1999 Act was the
addition to section 12 of a new subsection (10), which provides that the
Tribunal shall make a determination not later than 12 weeks after the start of
the hearing of an application to it under section 11. This amendment recognised the need, in
fairness to landlords, for the determination of fair rents and market rents to
be dealt with as soon as possible. But
it did not address the delays in getting a Tribunal hearing in the first
place. It may be that any solution to
the problem requires more resources to be provided to enable the Tribunal to
hear the applications that are made to it more quickly. If so, that is a matter requiring urgent
attention.
24. This
observation must not be read in any way as a criticism of the Tribunal. The fact is that the effect of the 2005 Act
was greatly to increase the work it has to do with regard to business premises
as the new formula cannot be made to work, if there is no agreement, without
the determination of the market rent.
This is in addition to the Tribunal’s responsibility to respond as
quickly as it can to requests for the determination of a fair rent for all manner
of premises. It is to be hoped that due
account will be taken of the effect of this judgment as soon as possible by
providing more money for it to do its work, and if necessary by increasing the
membership of the Tribunal so that it can handle this much increased workload.
Conclusion
25. For
these reasons the appeal will be allowed, the order made by the Supreme Court
set aside and the respondent’s action dismissed. The respondent must pay the costs in the
courts below and of the appeal to the Board.
