SAVAGE vs. GHANA INDUSTRIAL HOLDING CORPORATION [1973] 2 GLR 242

CASES REFERRED TO

(1) Davis (W.)& Son v. Lancashire and Yorkshire Bank [1914] 1 Ch. 522; 83 L.J. Ch. 577; 110 L.T.

571; [1914-1915] All E.R. Rep. 851, C.A.

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(2) Cadby v. Martinez (1840) 11 Ad. & El. 720; 9 L.J.Q.B. 281; 4 J.P. 105; 113 E.R. 587.

(3) Hankey v. Clavering [1942] 2 K.B. 326; [1942] 2 All E.R. 311; 111 L.J.K.B. 711; 167 L.T. 193, C.A.

(4) Karam & Sons v. Wassiamal Brothers, High Court, 5 February 1963, unreported, affirmed by Supreme Court, 17 February 1966, unreported.

NATURE OF PROCEEDINGS

ACTION by the plaintiff for arrears of rents under a lease for a fixed period and for general damages for breach of the lease. The facts are fully set out in the judgment.

COUNSEL

T. A. Mensah with him Sekyi-Hughes for the plaintiff.

E. V. A. Adjetey for the defendants.

JUDGMENT OF EDUSEI J.

The plaintiff is the owner of premises situate on Liberation Avenue, Takoradi, and popularly known as the “Windsor Hotel.” Some time in 1969 the defendants came to the plaintiff at Takoradi to negotiate for the rental of a part of the Windsor Hotel. The negotiations concerned the ground floor rooms consisting of eight-door stores and a flat on the first floor.

A lease was subsequently executed and this is exhibit A. Rents for six months were paid to the plaintiff, and when the next six months’ rent became due the plaintiff made a demand for it but was put off with various excuses. It must be stated that it was an agreed term of exhibit A that rent was payable quarterly in advance.

However, by exhibit E dated 17 April 1970, the defendants terminated the lease, exhibit A, on the ground that the then general manager of the Meat Products Division of GIHOC had no authority to execute exhibit A. The plaintiff through his solicitor sent a reply to the defendants pointing out the consequence of their breach of exhibit A if they persisted. The reply is exhibit F dated 8 May 1970. The refusal of the defendants to abide by the terms and conditions of exhibit A provoked this action.

The original defence put up by the defendants was that the then general manager, Dr. Agyekumhene, had no authority to execute exhibit A. This defence was in line with what was stated in exhibit E, the letter of termination. However, by an amended statement of defence, the defendants averred that it was rather the plaintiff who breached the tenancy agreement by his failure to hand over the keys of the stores to them. The issue as I see it, therefore, is whether or not possession of the rooms mentioned in the lease, exhibit A, was given to the defendants. It is the case for the plaintiff that possession was given whereas the defendants deny ever taking possession because the keys to the rooms were not handed over to them. The evidence from the plaintiff is that on signing exhibit A at Takoradi he handed over the keys to Owusu Antwi, [p.244] of [1973] 2 GLR 242 the then area manager, and Otto, the German engineer, both of GIHOC. The plaintiff in proof of having given the keys to the defendants through their representatives further stated that the defendants subsequently gave him a plan and one of the keys to the eight-door stores on the ground floor of the Windsor Hotel to enable him to open the place for prospective contractors to inspect it. The plan, exhibit C, shows the alterations to be carried out on the ground floor to meet their requirements for the preservation and sale of meat and meat products. Exhibit C was prepared by Otto on behalf of the defendants. The one key allegedly given to the plaintiff is exhibit B.

The plaintiff’s first witness, Dr. Agyekumhene, the general manager of the Meat Products Division of GIHOC, at the material time, also testified that it was upon the recommendations of Messrs. Owusu Antwi and Otto that the Meat Products Division of GIHOC rented the said rooms in Windsor Hotel. He further said that he then asked the two gentlemen mentioned to prepare engineering drawings for the meat shop and this was done. Exhibit C was the outcome. Again he said:

“It never came to my knowledge that the plaintiff refused to hand over the keys of the stores to the defendants because the defendants had declined to pay a year’s rent. As the general manager, it would have been reported to me if the plaintiff had refused to hand over the keys of the premises to the defendants.”

Under cross-examination the plaintiff’s first witness further stated thus:

“After the payment of the first six months’ rents the plaintiff approached me when the next six months’ rents were due. I was not informed that the plaintiff insisted on a year’s rent before handing over the keys. I would have known if the keys had not been handed over to the defendants, and I say therefore that the keys were handed over to the defendants. The defendants paid rent because we had access to the premises. It is not correct that the plaintiff insisted on a year’s rent before handing over the keys to us.”

Against this evidence Mr. Owusu, who alone gave evidence for the defendants, told the court that the plaintiff did not hand over the keys of the premises to the defendants. It came from this witness also that, “after the execution of exhibit A, the then managing director, Mr. Ackom-Mensah, raised an objection that Dr. Agyekumhene had no power to execute exhibit A.”

If possession of the bargained portion of the Windsor Hotel was not given to the defendants, I ask why did they pay the first six months’ rents on 28 June 1969 when the lease was executed on 12 May 1969 and it was made to take effect from 1 May 1969? How did Owusu and Otto get into the rooms to take measurements of the ground floor of the Windsor Hotel to prepare exhibit C? And for what purpose did they give exhibit C to the plaintiff? There was also the letter, from the

[p.245] of [1973] 2 GLR 242 defendants, exhibit D, in which a cheque for six months’ rent was enclosed and sent to the plaintiff. The last paragraph of that letter stated that the defendants looked forward to doing business with the plaintiff. If, indeed, by 28 June 1969 the defendants had not got possession of the premises I fail to appreciate their stand in paying six months’ rent and not making any mention of the fact in the letter that possession had not been given to them. It is interesting also to note that in that letter there was an apology by th defendants for the delay in sending the cheque to the plaintiff. The only reasonable inference from the matters in evidence is that the defendants were given possession of the premises by the delivery of the keys to them on signing exhibit A, and in this respect I accept the evidence of the plaintiff and his first witness, Dr. Agyekumhene and find as a fact that the keys to the eight-door stores and a flat in the Windsor Hotel were given to Messrs. Owusu and Otto for the defendants. I find also that it was the defendants who gave exhibits B and C to the plaintiff so that he could open the stores to contractors who would wish to tender for the work, i.e. the alterations shown on exhibit C to be done in order that they might inspect the place of work and the plan. On the evidence I decide therefore that possession of the premises – the eight-door stores on the ground-floor and a flat on the first floor of the Windsor Hotel was given to the defendants. In this case the lease which was executed on 12 May 196, was to take retrospective effect from 1 May 1969 and this is generally known as a lease in possession.

If I may venture to say so, I think there are two real reasons for the termination of the tenancy agreement by the defendants. The first reason was the objection raised by the then managing director, Mr. Ackom-Mensah, that Dr. Agyekumhene had no authority to execute exhibit A. The other reason, I suppose, is that Mr. Ackom-Mensah changed his mind about the Takoradi operations and wanted the meat shop to be opened at Cape Coast. It was afterwards, perhaps, that the defendants realised that the plea of lack of authority on the part of Dr. Agyekumhene would not avail them when they shifted their defence to the alleged failure of the plaintiff to give them possession of the premises. This latter defence appeared in their amended statement of defence. But on the evidence this latter defence has not availed them either.

Mr. Adjetey, the defendants’ counsel, frankly admitted in the course of his address to the court, and I am in agreement with him that exhibit E dated 17 April 1970 terminated the lease, exhibit A, and there can be no doubt that, in view of my findings, the defendants were in breach of their contract with the plaintiff since the lease was to run for fifteen years, or at least eight years, provided a certain condition was fulfilled.

The claim of the plaintiff is for arrears of rents and for general damages for breach of the lease, exhibit A, which in effect is a claim for rents for the unexpired term of the lease. In order to assess correctly the damages it is proper to refer to certain portions of exhibit A. The “premises” and “habendum” clauses run as follows:

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“This agreement made the 12th day of May 1969 between Samuel Kobina Savage of Sekondi-Takoradi in the Western Region of the Republic of Ghana (hereinafter called the ‘lessor’) of the one part and Meat Products Division of Ghana Industrial Holding Corporation whose head office is situate at Bolgatanga in the Northern Region of Ghana of the Republic of Ghana (hereinafter called the ‘lessees’) of the other part.

Now this indenture witnesseth that in consideration of the rents hereby reserved and of the covenants herein contained and on the part of the lessees to be observed and performed the lessor hereby demises unto the lessees all that eight doors stores on the ground floor and a three (3) room flat on the first floor of the premises formerly known as ‘The Windsor Hotel’ situate at the junction of Liberation Avenue, Takoradi hereinafter called the ‘Premises’ with all the rights, easements and appurtenances thereto belonging to the lessor to hold the same unto the lessees for a term of fifteen years certain from the 1st May 1969 with an option for another fifteen years upon the terms hereinafter provided at the annual rent of N¢2,640.00 payable quarterly in advance.”

Clause 4 (a) also is stated thus:

“If the lessees shall after the expiration of the first eight (8) years so created, desire to determine the present demise they shall give to the lessor six months, notice in writing of such desire and immediately at the expiration of any such notice [the] said term hereby created shall absolutely cease and determine but without prejudice to the lessor for any breach of the lessee’s covenants herein contained.”

It is quite plain that the lease was to run for a fixed period of fifteen years from 1 May 1969, but if the defendants had been in occupation of the premises for the first eight years and they had wished to terminate the lease, they could give six months’ notice to the plaintiff, the lessor. But if, the condition stipulated in the lease (that is to say the defendants must stay in the premises for the first eight years) is not complied with then the lease must continue for the full period of fifteen years. I have it on authority of Megarry and Wade in their book, The Law of Real Property (3rd ed.), p. 659, that:

“A lease or tenancy for a fixed period cannot be determined by notice unless this is expressly agreed upon.

Thus a lease for a substantial term such as 21 years often contains provisions enabling the tenant to determine it, e.g. at the end of the seventh or fourteenth year, in which case the length of the notice required, the time when it is to be given, and other matters of this kind, depend on the terms of the lease. In the absence of any such provision the lease will continue for the full period.”

Again in Cheshire’s Modern Real Property (10th ed.) at p. 207, it is stated that: “Since the notice is a unilateral act performed in the

[p.247] of [1973] 2 GLR 242 exercise of a contractual right, it must conform strictly to the terms of the contract. The onus of proving its validity lies upon the person by whom it is given.”

In this case there were at least two ways in which the lease, exhibit A, could have been terminated: either (a) by an effluxion of time or (b) by notice to quit in terms of clause 4 (a) of exhibit A, the lease. As a general rule there is no need for a notice to quit in the case of a lease for a definite term, fifteen years as in this case, since the tenancy terminates automatically upon the expiration of the agreed period. The other way to terminate the lease is by notice to quit as stipulated in clause 4 (a) of exhibit A, i.e. the six months’ notice required can only be operative if the defendants had stayed on the premises for eight years.

Counsel for the defendants invited the court to hold that the lease exhibit A is doubtful as to the duration of time it has to run since the periods of fifteen years and eight years appear therein. He further submitted that as the plaintiff was made aware on 17 April 1970 that the defendants were not interested in the contract the amount of damages, in case the court should hold there was a breach, must be the rents from 1 May 1969 to 17 April 1970 less the six months’ rents already paid. I do not and cannot accept counsel’s submissions in the face of the express terms of exhibit A which I have set out in extenso in this judgment.

Since the defendants terminated the lease before the first eight years had run out, it must therefore continue for the whole period of the stipulated period of fifteen years from I May 1969. The notice to terminate the lease, exhibit A, on 17 April 1970 was unlawful and therefore the defendants were in clear breach of their contract with the plaintiff. Thus in Davis (W.) & Son v. Lancashire and Yorkshire Bank [1914-1915] All E.R. Rep. 851 at p. 852 a lease for five years contained a provision that:

“after the expiration of the first three years of the term . . . if the lessees shall desire to determine this lease and shall give to the lessors six calendar months’ previous notice in writing of such their desire, such notice to determine on any quarter day, . . .” the lease should determine on the expiration of such notice. It was held that no valid notice could be given until the expiration of the first three years and the lease could not therefore be determined until the expiration of a further six months.

Again I refer to Cadby v. Martinez (1840) 11 Ad. & El. 720. a case of the highest authority in these matters. There, in a lease for 21 years from Michaelmas 1823, there was power to the tenant to determine at the end of the first fourteen years on giving six calendar months’ previous notice in writing. Six months before the June preceding the expiration of the first fourteen years the tenant gave notice that he would quit on 24 June 1837. As the notice could only be a notice to determine at Michaelmas 1837, he put in a wrong date. There was evidence that the landlord understood the notice to refer to Michaelmas, but it was held

[p.248] of [1973] 2 GLR 242 that the question of whether or not he so understood it could not be put to the jury because it was irrelevant. However he understood the document it was not that instrument which, according to the terms of the lease, was required to be brought into existence to terminate the demise. Lord Denman who delivered the judgment said at p. 726 that: “We . . . are of the opinion that the covenant to pay rent during the whole term cannot be got rid of by any notice to quit which is not in accordance with the proviso introduced into the lease for the purpose.” See also Hankey v. Clavering [1942] 2 K.B. 326, C.A. Similarly, in the instant case and in terms of clause 4 (a) of the lease, exhibit A, there was a power to the tenants, the defendants herein, to determine it at the end of the first eight years on giving six months’ notice to the plaintiff but the notice in exhibit E which terminated the lease on 17 April 1970 (when the lease had not even run for one year) was not in accordance with the proviso introduced into the lease for the purpose. The defendants did not stay on the premises for eight years.

There is no doubt whatsoever in my mind that the defendants were in breach of their contract, and what are the consequences? The plaintiff, in my judgment is entitled to the rents for the whole of the unexpired term as damages. For in Karam & Sons v. Wassiamal Brothers, High Court, 5 February 1963, unreported, where the defendants terminated a tenancy agreement before it had run for the whole period of three years, Djabanor J. held that the plaintiffs were entitled to the rents for the whole of the unexpired term. An appeal by the defendants to the then Supreme Court was dismissed on 17 February 1966.

In the instant case rents were paid for six months, i.e. from 1 May 1969 to 30 October 1969 and the plaintiff is therefore entitled to arrears of rents for six months from 1 November 1969 to 30 April 1970 (since the breach occurred on 17 April 1970) and this works out to ¢1,320.00. He is also entitled to rents for the unexpired term of fourteen years as damages, i.e. from 1 May 1970 to 30 April 1984 when the lease would have expired, and this amounts to ¢36,960.00.

I therefore give judgment for the plaintiff against the defendants for ¢38,320.00 with ¢1,000.00 costs.

DECISION

Judgment for the plaintiff with costs.

S.E.K.