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Prices and Income Board v Kelton Investment Ltd [2009] FJMC 2; Criminal Case 1510.2006 (20 July 2009)

IN THE RESIDENT MAGISTRATES COURT
CENTRAL DIVISION, SUVA

Criminal Case No. 1510 of 2006

BETWEEN:

PRICES AND INCOME BOARD
COMPLAINANT

AND:

KELTON INVESTMENT LIMITED a limited liability company having its registered office at 51 to 55 Foster Road, Walu Bay, Suva.
ACCUSED

Prosecution: Mr S Raikanikoda
Accused: Mr I Fa & Ms A Tavo, Fa & Company

Date of Hearing: 02 October, 2007 & 14 January 2009
Date of Judgment: 20 July 2009

JUDGMENT

[1] The Complainant, the Prices and Income Board, has charged the Accused, Kelton Investment Limited, with failing to give 12 weeks written notice to the Prices and Income Board [hereinafter referred to as the "PIB"] of a proposed increase in rent in respect of the letting of certain commercial premises at 25 Gladstone Road, Suva, contrary to Clause 2 of the Counter-Inflation (Notification of Proposed Increase in Rent) Order 1996 (Legal Notice 63/96) and Sections 30(1) and 32 of the Counter-Inflation Act (Cap 73 of the Laws of Fiji).

[2] This matter first came for hearing before Magistrate J Waqaivolavola on 2nd October, 2007. The Complainant called its witnesses to give evidence, after which Counsel for the Accused, Mr Fa, made a submission of no case to answer.

[3] The Court ruled on 2 October 2007 that the prosecution had established the charge on a prima facie basis, and adjourned the matter to another date for continuation of hearing.

[4] After several adjournments, this matter finally proceeded with continuation of hearing on 14 January 2009. At the end of the hearing counsel were ordered to file submissions and the matter was adjourned to 10 February 2009 for judgment.

[5] On 10 February, 2009, the matter was adjourned to 24 February 2009 and on that date the Court adjourned the matter further for judgment on notice.

[6] Mr Wagaivolavola’s appointment as a Resident Magistrate was revoked on 10th April 2009 by the Revocation of Judicial Appointments Decree 2009 without judgment having been given in this matter.

[7] The matter has been assigned to this Court under s 47 of the Magistrates Court Act, which provides that where a Magistrate has ceased to act as magistrate, proceedings may be heard, determined or carried to completion by his or her successor. Section 196 of the Criminal Procedure Code allows a magistrate to conclude criminal proceedings begun by another magistrate.

[8] Given that the trial had been concluded and the material evidence is contained in lease documents, receipts and correspondence, the Court does not consider resummoning the witnesses to be necessary to do justice in this matter.

[9] The Court has therefore prepared Judgment on the basis of the pleadings, the exhibits submitted by the Complainant and the Accused at trial [there are two different sets, one from each hearing date], the submissions filed by both parties and the transcript of the Judge’s Notes from the hearing.

[10] Except where otherwise indicated, references to exhibits will be to the Defendant’s bundle of exhibits provided by the Accused’s solicitors on the second hearing date.

The Background to the Complaint

[11] The premises in question at 25 Gladstone Road, Suva were leased by I. Naiveli & Co., Chartered Accountant, [hereinafter referred to as the tenant] from the Accused as landlord.

[12] The Lease Agreement is Exhibit 1, it is dated 30 March, 2000, it commenced on 1 April 2000 and expired on 1 April 2003, and the monthly rent thereunder is $1,125.00 VIP.

[13] The Lease contains the following provisions at clause 7 thereof:

"LESSEE’S RIGHTS TO RENEW LEASE

[a] The Lessee may, by notice in writing to the Lessor at least three (3) months before the expiration of the term hereby created, provided that at that time there is no existing breach or non-observance of any of the covenants on the part of the Lessee hereinbefore contained, require the Lessor to Grant the Lessee a lease of the demised premises for a further three (3) years from the expiration of the term of this present Lease at a rental to be mutually agreed upon between the parties [and failing agreement, to be fixed by arbitration as provided herein] and otherwise containing the like covenants and provisos as are herein contained, this covenant for a further renewal excluded.

[b] If the Lessee fails to provide notice of its intention to renew the lease as provided for in clause 7[a], then it is mutually agreed by the parties that the lease will be automatically renewed for a further term of three (3) years on the same terms and conditions as provided for herein."

[the emphasis is the Court’s]

[14] Exhibit 2 is copy of letter dated May 20, 2003 from the landlord to the tenant, stating as follows:

"Your lease of 30th March 2000 has now expired and under the terms of the lease agreement clause 7(a) you were to give us 3 months notice of your intention to renew.

It appears you do not wish to renew; therefore could you please confirm this within 7 days."

[15] Exhibit 6 is a copy of letter dated August 27, 2004 from James M Ah Koy, Group Executive Chairman of the Accused, to the tenant stating as follows:

"1. You have been occupying those premises without a lease for over 16 months at the old rate, and you did not bother to renew the lease because it was to your advantage, despite the fact that you were advised months before your lease expired. Is that how a Christian brother should behave? I let you remain precisely because I am a Christian.

2. So in fact you don’t have a lease because you let it lapse 16 months previously at the time we signed a new lease.

3. It was only when I told you that you don’t have a lease and that we wanted to occupy the space ourselves for an office, that you begged me to stay. It was my Christian consideration for you that allowed you to stay and to protect you, I insisted that you take out a new lease because you didn’t have a lease at the time.

4. In cases where no lease exist, as such in your case, then negotiation for a new lease and its rental do not come within the bailiwick of the Prices and Income Board.

5. Your lease is considered an entirely new lease."

[16] Exhibit 4 is the Lease Agreement dated 14th July 2004 between landlord and tenant, under which the tenant is required to pay monthly rent of $1,866.67 plus VAT.

[17] Exhibit 8 is a letter dated 19th April 2005 from the PIB to the landlord, referring to the landlord’s application notifying the PIB of proposed increase in rental, and informing the landlord that the PIB had made an order restricting the rental.

The Landlord’s Defence

[18] The Accused as landlord has denied that it was required to give 12 week’s notice of rent increase under Clause 2 of the Counter-Inflation (Notification of Proposed Increase in Rent) Order 1996 (Legal Notice 63/96) prior to increasing the rent on the grounds that it entered into an entirely new lease with the tenant that did not constitute a continued letting of the premises within the meaning of the said Order and said Act.

The Counter-Inflation Act

[19] The Counter-Inflation (Notification of Proposed Increase in Rent) Order 1996 (Legal Notice 63/96) requires that at least 12 weeks’ written notice be given to PIB of any proposed increase in any rent in respect of the letting or continued letting of any premises to any person under any tenancy to which the Counter-Inflation Act applies.

[20] Sections 12 and 13 of the said Act give the PIB broad powers to restrict increases of rent.

[21] The Act does not define "letting" or "continued letting" or "tenancy".

[22] The Prosecution cited Surend Pal Nandan v Prices and Income Board, 29 FLR 159 (Court of Appeal) in support of its case in its submissions.

[23] In that case the Court of Appeal had dismissed a charge under paragraph 2 of the Counter-Inflation Act because the rent alleged to have been increased was under a tenancy that expired prior to the effective date of the relevant Order. The premises were not let again until some six years later when a new tenancy commenced with a different tenant. The Court of Appeal held that the relevant Order did not have retrospective effect.

[24] The Court of Appeal clarified the application of the Counter- Inflation Act at p.162 as follows:

"The intention of the act and the orders made under it, is clear. Existing rents, payable at the date of the order, are "frozen". If there is no such rent then payable but a tenancy is thereafter created, that rent is "frozen". Such rents will be referred to as "base rents". The orders do not, by reason of what we have earlier said, have retrospective effect. They control as on and from the date when promulgated, only base rents, and of course, any permitted increase thereof. Any subsequent increase of a base rent is an offence unless the requisite notice has been given."

[the emphasis is the Court’s]

[25] Here the relevant Order is the Counter-Inflation (Notification of Proposed Increase in Rent) Order 1996 (Legal Notice 63/96), which would have come into effect prior to the tenant’s first Lease dated 30th March 2000.

[26] The case of Surend Pal Nandan v Prices and Income Board [supra] was followed by the Magistrates Court in PIB v Narayan, [2007] FJMC25, Criminal Case No. 1158 of 2006 (30 August 2007).

[27] The 1996 Order was applied in that case to a landlord who let premises to a new tenant at a rental higher than that charged to the previous tenant. The Court found that the letting to the new tenant at a higher rental did require the 12 weeks’ notice to PIB of rent increase.

[28] The Court notes that the decision of the High Court in Ambika Prasad Sharma v. P.I.B. Suva Cr. App. 92/76 was apparently overruled by the Fiji Court of Appeal. See Chand v Sharma, [1979] FJSC 70, High Court of Fiji Action No. 212 of 1978 (12 October 1979)

[29] The Court has no information as to the letting of the premises at 25 Gladstone Road prior to 1 April, 2000, but on that date they were let to I. Naiveli & Co., Chartered Accountants, at a rent of $1,125.00 per month VIP, per Lease Agreement dated 30th March 2000.

[30] Base rent for those premises was therefore set by the Lease Agreement dated 30th March 2000 at $1,125.00 per month VIP.

[31] Any increase in the base rent for those premises, whether for the same tenant or a new tenant, required prior notice to PIB according to the Court of Appeal’s decision in Surend Pal Nandan v Prices and Income Board, [supra].

[32] The Accused has admitted that it did not file the required notice prior to the said rent increase in paragraph 6.3 of the Closing Submissions for the Accused.

[33] It relies solely on the expiry of one Lease Agreement and the effluxion of time before the signing of a new Lease Agreement with the same tenant to support its contention that there was an entirely new letting, as distinguished from a current letting or continued letting.

[34] The weakness in the Accused’s defence is that clause 2 of the said Order refers to "letting" and "continued letting", therefore an "entirely new letting" as alleged by the Accused is caught by the terms of the said Order as a "letting".

[35] Further, the tenant remained in those premises after the expiry of the first Lease Agreement until the execution of the second Lease Agreement.

[36] This holding over was permitted under clause 7 (b) of the said Lease Agreement, which provided for automatic renewal for a further term of 3 years on the same terms and conditions if the tenant failed to give notice to renew.

[37] The argument that there was no letting or continued letting between the two Lease Agreements appears disingenuous to this Court.

[38] It is not necessary to have a written lease agreement to have a tenancy or a letting.

[39] Halsbury’s Laws of England, Fourth Edition, Volume 27(1), describes a tenancy as follows in paragraph 2 thereof:

"Tenancy by contract. A contract of tenancy may be created by writing or orally by any words which express the intention of entering into legal relations and which grant exclusive possession for a fixed or periodic term, or by conduct."

[40] Lease, however, is defined in paragraph 73 as follows:

"Leases. An instrument in proper form by which the conditions of a contract of letting are finally ascertained, and which is intended to vest the right of exclusive possession in the tenant, either at once, if the term is to commence immediately, or at a future date, if the term is to commence subsequently, is a lease which takes effect from the date fixed for the commencement of the term without the necessity of actual entry by the tenant."

[41] Clearly there are other forms of tenancies than leases.

[42] Mr Ah Koy admitted in his own letter to the tenant that the tenant continued to occupy those premises for 16 months at the old rent rate after the Lease Agreement dated 30th March 2000 expired [Exhibit 6, para 1].

[43] I. Naiveli & Co. may not have had a written Lease Agreement at that time, but they certainly occupied those same premises as a tenant of the Accused for those 16 months.

[44] The landlord cannot avoid the provisions of the said Order simply by waiting several months between the expiry of one written lease and the execution of a further lease with the same tenant for the same premises.

[45] Further, the landlord has not given any authority for its position that an entirely new lease of the premises is not subject to the Act.

[46] The Order applies to "letting" as well as continued letting, and the second Lease Agreement was a letting of the premises. Since there was a base rent established by the prior Lease during the term of the Order, the Court finds that the second Lease Agreement is subject to the Order, and that the Accused failed to comply with the requirement of 12 week’s written notice to PIB of the rent increase under clause 2 of the said Order.

[47] The Court therefore finds that the Accused is guilty as charged of the offence of failing to give twelve weeks written notice to the Prices and Income Board for the Proposed Increase in Rent contrary to clause 2 of the Counter-Inflation (Notification of Proposed Increase in Rent) Order 1996 (Legal Notice 63/96) and sections 30(1) and 32 of the Counter-Inflation Act.

Dated this 20th day of July, 2009

Mary L Muir
RESIDENT MAGISTRATE
SUVA