Labasa Town Council v Morris Hedstrom Limited [1992] FJLawRp 10; [1992] 38 FLR 153 (3 August 1992)

[1992] 38 FLR 153

HIGH COURT OF FIJI

Civil Jurisdiction

LABASA TOWN COUNCIL

v

MORRIS HEDSTROM LIMITED

Scott J

3 August 1992

Landlord and tenant - statutory control of rentals - whether pre-existing agreements subject to new Regulations - whether Regulations ultra vires the Act - Counter Inflation Act (Cap 73), Sections 12 & 13.

The tenant contended that Regulations and Orders made under the Counter Inflation Act did not apply to pre-existing private rental agreements or alternatively were ultra vires the Act and therefore null and void. The High Court examined the meaning and effect of the Regulations, upheld their validity and gave judgment for the Plaintiff in a much reduced sum.

Cases cited:

20 Cannon Street Ltd v Singer Ltd [1974] 2 All ER 577
Allen v Thorn Electrical [1967] 2 All ER 1137
Avenue Properties (St. John's Wood) Ltd v Aisinzon [1976] 2 All ER 177

Dr. M.S.D. Sahu Khan for the Plaintiff
H. Lateef for the Respondent

Scott J.:

The Plaintiff is the lessor and the Defendant the lessee of a piece of land at Labasa upon which is situated the Mobil Service Station.

The lease which is dated 30 January 1974 and which was computed to commence; from 1 July 1969 contains in clause 1 the following provision for the payment of rent:-

"The lessee shall pay rent in respect of the said land calculated at the rate of 6 per centum of the rating valuation of the said land as fixed by the lessor upon the valuation for the time being affecting the said land which valuation shall be made and reassessed at 6 yearly intervals as is the practice of the lessor provided that notwithstanding any such valuation the lessee shall pay a minimum rent of $900 (NINE HUNDRED DOLLARS) per annum in the event that such computation of rent as aforesaid shall be less then the said sum of $900 per annum."

On about 16 January 1987 the Plaintiff advised the Defendant that a revaluation of the land had been carried out pursuant to the Local Government Act and that the unimproved capital value of the land had increased from $51,000 to $310,000 effective from 1 January 1987. The Plaintiff further advised the Defendant that it had sought the approval of the Prices and Incomes Board to increase the rental to $18,600 with effect from the same date, 1 January 1987. In fact the Plaintiff did not apply to the P.I.B. until 3 February 1987.

On 24 July 1987 the P.I.B. advised the Plaintiff that the rent could not be increased because of the Public Emergency (Rent Increase Prohibition) Regulations 1987.

The Court is grateful to Counsel for filing minutes of a pre-trial conference containing agreed facts and issues. Two bundles of correspondence were also filed and marked "Set A" and "Set B".

The two issues between the parties are (1) whether the Plaintiff is restricted from implementing the provisions of reassessment of rent as contained in Clause 1 of the lease having regard to the provisions of the Counter Inflation Act and the Regulations and Orders made thereunder and (2) whether the Counter Inflation Regulations and/or Orders were validly made.

The relevant legislation is:-

(a) The Counter Inflation Act - Cap.73 and in particular sections 12 and 13.

(b) The Counter Inflation (Notification of Proposed Increases in Rent) Order 1981 (LN 136/81).

(c) The Counter Inflation (Rents) (Control) Order 1986 (LN 10/86).

(d) The Public Emergency (Rent Increase Prohibition) Regulations 1987 (LN 49/87).

It will be seen from paragraph 7 of the Statement of Claim and paragraph 10 of the Minutes that the Plaintiff is claiming the balance of rent due following under payments for the period 1 January 1985 to 11 August 1989.

For the period 1 January 1985 to 31 December 1985 the Defendant relies on paragraph 2 of the 1981 Order. There is no dispute that the Plaintiff never gave the P.I.B. notice of intention to increase the rent either 1985 or 1986. It is therefore submitted that the Plaintiff had failed to comply with a condition precedent to its being able to increase the rent. It also appears from the second document contained in the bundle of documents "Set A" an undated letter from the Labasa Town Council, that prior to 1 January 1987 there had been some form of price freeze but no such freeze was pleaded or referred to by Counsel and I am therefore unable to take it into account.

The next period is 1 January 1986 to 1 May 1987. The latter date is the date upon which the 12 week period laid down by paragraph 2 of the 1981 Order expired after the notice given by the Plaintiff to the P.I.B. dated 3 February 1987 already referred to. In respect of this period the Defendant relies on paragraphs 2 and 3 of the 1981 Order. It also relies of paragraph 3 of the 1986 Order. It is submitted that no increase was permissible until 3 February 1987 because the condition precedent laid down by paragraph 2 of the 1981 Order had not been complied with. Further, no increase was permissible until 1 May 1987 because the 12 week period had not expired and therefore paragraph 3 of the 1981 Order applied.

For the period 2 May 1987 to 23 July 1987 the Defendant relies on paragraph 3 of the 1986 Order. It submits that all the Plaintiff was allowed to increase the rent by was 2.25% over that obtaining on 1 January 1985 i.e. by $68.85 from $3,060 to $3,128.85.

Finally, for the period 23 July 1987 to 10 August 1989 the Defendant relies on the 1987 Regulations. Alternatively it relies on paragraph 2 of the 1981 Order, it not being disputed that no notification of an intention further to increase the rent was ever given to the P.I.B. after that given on 3 February 1987, already referred to.

The Plaintiffs contentions are in marked contrast to those of the Defendants. Dr. Sahu Khan's main submissions may be summarised as follows:-

(a) The 1981 Order does not apply to private rental agreements in existence before its commencement date.

(b) Paragraph 3 of the 1986 Order does not apply to rents such as the one in question which are calculated by a formula based on a rate which is itself not increased.

(c) The increase of 2:25% referred to in paragraph 3 of the 1986 Order is an increase to which a lessor is entitled as of right and are not conditional upon a prior notice having been issued under the provisions of paragraph 2 of the 1981 Order.

(d) If the P.I.B. fails to act within the 12 week period stipulated by section 13 (1) of the Act and paragraph 2 of the 1981 Order then a lessor becomes entitled to raise the rent. Furthermore, the lessor is entitled to raise the rent by the full sum requested whether or not that sum results in the 2.25% rate laid down in paragraph 3 of the 1986 Order being exceeded.

(e) The 1987 Regulations are unconstitutional, ultra vires, null and void.

In support of (a) Dr. Sahu Khan pointed out that unlike the 1986 Order, in paragraph 4 of which specific mention of contracts is made, no such mention occurs in the 1981 Order. Relying on Allen v. Thom Electrical [1967] 2 All ER 1137 he submitted that if the P.I.B. had wanted to interfere with existing contracts then it should specifically have so stated in the 1981 Order.

With respect, I cannot agree. Allen's case is authority for the well known proposition that contractual rights cannot be taken away upon an ambiguity in a statute, but I do not find either the Act or the Order in the slightest degree ambiguous. Section 13 of the Act gives the P.I.B. power to require any person to give notice of any proposed increase in any rent. Paragraph 2 of the 1981 Order is in similar all-encompassing terms. Finding no ambiguity I find no reason not to include pre-existing contracts within the ambit of the legislation.

In support of (b) Dr. Sahu Khan relied on two English authorities 20 Cannon Street Limited v. Simmer Limited [1974] 2 All ER 577 and Avenue Properties (St. Johns Wood) Limited v. Aisinzon [1976] 2 All ER 177. At this point I must confess that I had great difficulty in clearly understanding Dr. Sahu Khan's point and more particularly the applicability of the two authorities cited to it. 20 Cannon Street appears to deal with principles of statutory construction which have no relevance to the issues now before me. Insofar as the case deals with the word "rate" then that word is part of the expression "standard rate" which though occurring in the English 1972 Counter-Inflation (Business Rents) Order, does not appear in Fiji's Act or subsidiary legislation. Avenue Properties if anything would appear to assist the P.I.B. since it widens the meaning of the term "rents". Try as I may I really could not see how either of these authorities assisted the Plaintiff.

As I understand it Dr Sahu Khan's contention was that the word "rate" in paragraph 3 of the 1986 Order refers only to the word "rate" when it occurs in an agreement such as that between the parties (see paragraph 1 of the lease, bundle of documents "Set A" Page 2). In my view this approach does a quite unnecessary and unreasonable violence to the plain language of paragraph 3 of the 1986 Order. Dr. Sahu Khan himself admitted that agreements of the type now under consideration were most unusual. Why then should they be specifically mentioned in the Order? Counsel further urged that because of the pre-existing formula there was actually no increase in rent at all. Increases, he argued, were built into the original formula which itself had not changed and therefore was not caught by the Act. That, it seems to me is a bit like saying that because as a baby he was genetically pre-determined to grow to 6 foot 6 inches, a man by the time he reaches that height has not grown at all. The Act defines "rents" to mean "any sum payable to a person under that tenancy". The Plaintiff is claiming the right to be paid a rent which had increased from the sum of $3,060 to the sum of $18.600 per annum. In my opinion Paragraph 3 of the 1986 Order applied to those increases.

No authorities were cited in support of (c). In my view the restriction imposed by paragraph 3 of the 1986 Order is absolute. I can find nothing in the Act or the Order to support the view that a lessor ever had any right to increase the rent by 2.25%. If indeed he had such a right then he could increase the rent whenever he wanted to and so drive a coach and horses through the Act. Furthermore, paragraph 6 of the 1986 Order specifically saves the 1981 Order. In my view a landlord wishing to increase his rent even only by 2.25% must, under the Act and the Orders thereto first give notice under the provisions of B paragraph 2 of the 1981 Order.

As to (d) it seems to me that the purpose of the 1981 Order is as set out in section 13 (1) of the Act namely to give the P.I.B. an opportunity to consider whether to exercise its power to restrict the proposed increase. Because of paragraph 3 of the 1986 Order that increase cannot in any event exceed 2.25%. If the Board fails to exercise its powers within the specified period then a lessor is free to increase the rent up to a maximum 2.25%. This restriction of course only applies to rents caught by the provisions of the 1986 Order.

Imposing the above findings on the agreed facts and particularly bearing in mind (it) that the 1987 Regulations only purported to prevent increases beyond the rent payable on 14 May 1987 (ii) that the 12 week period beginning on 3 February 1987 expired on 1 May 1987 and (iii) that there was no subsequent application to increase the rent, it is clear that the 1987 regulations have no application to the computation of the rent due by the Defendant to the Plaintiff and accordingly it does not fall to me to decide their validity. I would however refer in passing to Section 168 of the present Constitution and to the fact that the 1987 Regulations did not purport to replace either the 1981 or the 1986 Orders.

I have set out in detail the Plaintiffs submissions as to the effect of the Act and the Orders on the rental agreement between the parties, With the exception of the period 23 July 1987 to August 1989 where I exclude the 1987 Regulations from the reckoning I accept those submissions as being correct and therefore do not propose to repeat them.

The answer to the first issue is yes, with the exception of an increase of 2.25% with effect from 1 May 1987. The answer to the second issue is that the Orders were validly made but that the validity of the 1987 Regulations does not affect the matters in dispute between the parties.

The result of my findings is that the Defendant owes the Plaintiff increased rent of $68.85 per annum for the period 2 May 1987 to 11 August 1989. This I calculate to be approximately ($68.85 x 2) + ($68.85 ÷ 4) = $154.91. There will be judgment for the Plaintiff in that amount or such more accurate calculation of the sum due on the basis set out above as Counsel may agree.

(Judgment for the Plaintiff)