Court dismisses plaintiff's possession claim against statutory tenants under Rent Control Law 1975.

[*321] 1976 December .4

(STYLIANIDES , P . D . C& ARTEMIDES,D.J.)

IN THE DISTRICT COURT OF NICOSIA

Maroulla Ermou HadjiKyriakou,

Plaintiff,

and.

FINA (Cyprus) Limited,

Defendants.

(Action No. 1843/75).

Contract - Privity of contract - Contract of lease of land - Owners transferring land to plaintiff - Lessees had only a contractual right against the other contracting party - They did not acquire and had no right or interest in land - No privity of contract between lessees and plaintiff - They had no right and their possession ceased to be lawful.

Estoppel - Contract of lease of land

- Owners transferring land to plaintiff - Who knew that lessees were in occupation as tenants - But she was unaware of any of the terms of the tenancy agreement - No statement made by plaintiff - And she is not guilty of any negligence or conduct on which the lessees acted in such a way as to be entitled to raise defence of estoppel.

Rent Control Law, 1975 (Law 36 of 1975) – Constitutionality Of .

Landlord and tenant - Lessees entered the premises under a lawful lease and were in occupation by virtue of this lease at the day of the coming into operation of the Rent Control Law, 1975 (Law 36 of 1975) - They were made statutory tenants or that day - Landlord has to establish any of the grounds set out in section 16(1) of the Law in order to succeed in a claim for recovery of possession. [*322]

K.C. Talarides, for the Plaintiff.

L. Demetriades, for the Defendants.

JUDGMENT

The following judgment was delivered by:-

STYLIANIDES, P.D.C.: The plaintiff [*323] by this action claims possession of a piece of land situated at Ayios Antonios Quarter of Nicosia, Archbishop Makarios III avenue, plot number

650 Block "A" sheet XXI, plan 55.1. Ill, registered in her name under title number A,749 and mesne profits at the rate of £3OO,- per month from 6.9.74 until delivery of possession.

The plaintiff is the daughter of Vasos and Yianoulla Lytra of Nicosia, hereinafter referred to as "the parents", who were the owners of the said property under registration number A. 749.

By a contract of lease, dated 10.4.

63 (Exhibit 2) the parents, owners of the said property, let same to the defendants for a period of 15 years up to 14.4.78, By virtue of the last clause of the said contract option is given to the defendants to extend the period of the lease for another ten years.

The defendants by virtue of the contract, Exhibit 2, took possession of the property and made structural works and or erected premises, thereby turning the aforesaid land into a petrol filling station with a washing bay.

The plaintiff, upon her marriage in 1969 was endowed with properties not including the subject matter of this action. Her only brother was in France. This site was intended for the brother. Early in September 1974, after the Turkish invasion, as the brother settled in France, for certain family reasons, the parents/owners transferred the property in the name of the plaintiff by declaration 1003/74. On 6.9.74 the title-deed was issued [*324] in the name of the plaintiff covering the subject property.

On 11 .9.74, by letter (Exhibit 7) plaintiff’s father informed the defendants of the transfer by gift in the name of his daughter/plaintiff. On 3.10.74 the defendants instructed their bankers to transfer the sum of £250,- to the account of plaintiff's father, for the quarterly rent 15.10.74-15.1.75. Copy of this instruction was sent to Mr. and Mrs. Lytras (Exhibit 8). On 12.10.74, Mr. Talarides, on behalf of the plaintiff sent to the defendants (Exhibit 3), whereby he informed them that as from 6.9.74, the plaintiff was the registered owner of the property in question. He further wrote "my client does not consider herself bound by any contract of lease in which you may have entered into with her predecessors in title".

"She therefore considers that you are in possession of the said premises without her consent and legally your possession amounts to trespass".

"I am therefore further instructed to inquire of you as to when would you be in a position to vacate the said premises and deliver to my client vacant possession thereof".

On the same day the same advocate addressed another letter to the defendants on behalf of the parents, stressing that his clients were no longer the owners of the property and they could not accept any money; he asked the defendants to cancel the instructions to their bankers for the payment of the £250.- purporting to be [*325] the rent for the period 15.10.74-14.1.75. On 18.10.74, Mr. Demetriades for the defendants addressed letter (Exhibit 4) to Mr. Talarides in reply to the letter (Exhibit 9), sent on the instructions of the parents and the plaintiff. He contended that the plaintiff received the property in full knowledge of the existence of the lease agreement or at least of the fact that on the said land the defendants had that petrol station and, therefore, had lawful possession of the land and were entitled to use same for a certain lawful purpose. The defendants continued in occupation of the said immovable.

On 18.4.75, plaintiff’s advocate addressed to defendants' advocate letter (Exhibit 5) whereby Mr. Demetriades was informed that as his clients were not prepared to vacate the said land and deliver possession of same to the plaintiff, instructions were given for an action against the defendants. On 24.4.75, this action was instituted.

The defendants continued regularly to advise their bankers to remit the parents an amount equal to the rent stipulated in the contract (Exhibit 2), and the parents continued to refuse that they were entitled to receive any amount. Exhibits 11-16, inclusive refer to this exchange between the defendants and the parents, and or their advocates with regard to the insistence by the defendants to pay what they described as rent.

The defendants in their Statement of

Defence and Counterclaim contended that the plaintiff acquired legal [*326] ownership in the land in question, subject to the equities attached

to such land and to the rights of the defendants to possess the land until the expiration of the lease of 10.4.63. That they erected the petrol filling station which they used in connection with their business and the plaintiff is liable to unjust enrichment for the increased value of such land. And that they are protected by Law 36/75 and no order for the recovery of possession can be issued against them. These they claim by way of Counterclaim. It is further contended that the plaintiff is estopped from claiming that she is entitled to vacant possession of the said land. An allegation for conspiracy and or inducement of breach of contract is set out, but is not pursued, as the defendants ''fully reserve" their rights. (See para. 11 of the Statement of Defence and Counterclaim).

A. What is the nature of the contract of lease, Exhibit 2? The Immovable Property (Tenure, Registration and Valuation) Law Cap. 224 as amended by Laws 3/60, 78/65, 10/66, 75/68, 51/71 governs immovables in this country.

As from the enactment of this Law in 1946, the Ottoman Land Code has ceased to apply. In Agni Kontou v. Maria Parout1, 19 C.L.R. 172, Hallinan C.J. in delivering the unanimous judgment said that "with the abolition of the categories Of immovable property contained in the Ottoman Land Code, the combined effect of the Immovable Property Law and the Courts of Justice Law might well be that, since the law of the Ottoman Land Code has ceased to apply, and as no other provision has been made, [*327] the path is clear for the application of the common law. At common law, any person holding an absolute interest in land is entitled to carve out and transfer to another limited estates such as a leasehold chattel interest or an estate for life".

In less than a month from the pronouncement of this judgment, Law 8/53 was speedily enacted by the legislative authority, whereby the provisions of the Common Law and the doctrines of equity, as far as immovable property is concerned were excluded. Law 8/53 was subsequently amended by Law 3/60. The material part of the relevant section reads:

"3.A.(1) Notwithstanding anything contained in paragraph (c) of sub-section (1) of section 28 of the Courts of Justice Law or in any Law amending or replacing the same, and subject to the provisions of this section, the law relating to trusts, the law relating to vakfs and the provisions of any other Law in force for the time being, no estate, interest, right privilege, liberty, easement or any other advantage whatsoever in, on or over any immovable property shall subsist or shall be created, acquired or transferred except under the provisions of this Law".

In Cyprus a lease does not create an estate in land vested in the lessee but only a contractual right. (Cyprus

Cinema & Theatre Co. Ltd., v. Christodoulos Karmiotis (1967) 1 C.L.R. 42 at p. 56; Aspasia Millingon Ward v. [*328] Chloi Roubina (1970) 1 C.L.R. 88 pp. 102, 103; see also Mavrides v. Municipal Committee of

Nicosia, (1976) 3 J.S.C.P. 453).

The economic advancement of the country is in some way hindered by the state of our Law with regard to leases, especially long leases, and in order to remedy this unsatisfactory situation, Bill 4/74 for the Registration of Leases was introduced. We hope that the urgent need for the amendment of the Law will be met by the enactment of the Bill.

B. As the defendants had only a contractual right can they enforce this against the transferee, plaintiff, is their possession lawful or are they trespassers?

The matter is governed by the Contract Law. As a general rule, a contract cannot confer rights or impose obligation on stragers to it, that is, persons who are not parties to it. (Halsbury’s Laws of England 4th edition vol. 9, paras. 329 and 331). In De Mattos v. Gibson (1858) 4 De G & J 276, an application for an interlocutory injunction to prevent the mortgagee of a ship (c) from disregarding the rights of the charterer (B); (the injunction was later refused on the grounds that there had been no interference with B’s rights), Knight Bruce L.J. said (at 282):

"Reason and Justice seem to prescribe that, at least as a general rule, where a man by gift or purchase acquires property from another, with knowledge of a previous contract lawfully and for valuable consideration made by him with a third person to use and employ the property [*329] for a particular purpose in a specified manner, the acquirer shall not, to the material damage of the third person, in opposition to the contract and inconsistently with it, use and employ the property in a manner not allowable to the giver or seller".

In London County Council v. Allen (1914-15) All E.R. Rep. 1008, Buckley, L.J. said:-

"Notwithstanding what was said by Knight Bruce, L.J. in De Mattos v. Gibson, it is not true as a general proposition that a purchaser of property with notice of a restrictive covenant affecting the property is bound by the covenant".

In Lord Strathcona Steamship Co., Ltd, v. Dominion Coal Co., Ltd

(1925) All E.R. Rep. p. 88, it was held that if a person acquired from another rights in a ship which was already under charter, with notice of rights which required the ship to be used for a particular purpose, he was in the position of a constructive trustee with obligations which a court of equity would not permit him to violate the remedy was not by way of an order for specific performance, but by an injunction against acts inconsistent with the provisions of the charter.

In that case, however, the position was that the appellants were possessed of a ship with regard to which a long running chartered party was current, the existence of which was fully disclosed together indeed with an obligation which the appellants appeared to have accepted, to [*330] respect and carry out. The Strathcona case was a Privy Council decision. The English Courts refused to follow it.

In Clore v. Theatrical Properties, Ltd., and Westby & Co. , Ltd (1936)3 All E. R. 483, it was held that an indenture was not a lease but a licence, and being a personal contract, it could only be enforced by persons between whom there was privity of contract, and this was so even if it was a restrictive covenant.

Lord Wright, M.R. , said at p. 489

"Words which include in the term ’lessee, his executors, administrators and assigns' are not prima facie applicable when what is dealt with is a personal contract or a mere licence. I cannot attach to these words any meaning which would import the sense that what was being transferred was an interest in land. I think, on the contrary, that this is not a document which creates an estate in land, but merely one which is a personal contract between the parties named therein and is only enforceable among parties between whom there is privity of contract ........”

“There was one other argument; that was on the basis that this document did not create an estate in land but merely gave personal rights as between the parties, and as the plaintiff purchased the lease in 1931 he is not entitled to say that he is not bound by the indenture of [*331] 1899 even, though he was not a party nor privy to it and even though it did not create an interest in land. In support of this contention great reliance was placed upon the decision in the case of Lord Strathcona Steamship Co. V. Dominion Coal Co. (1926) A.C. 108. I do not think that it is necessary to examine in detail the decisions in that case. It is a decision of the Privy Council and not binding upon us, although we will have the greatest respect for any decision of that court. The decision does not lay down any other principle than that laid down in De Mattos v. Gibson (1838) 4 De G. &

J. 276 which was a case which dealt with the purchase of a vessel under a long-term charterparty. Knight Bruce, L. J. held that in

the circumstances the purchaser was bound in equity to fulfil the terms of the charterparty in this sense, that the court would restrain him

from using the vessel in a way contrary to the purpose of the charterparty. How far Knight Bruce, L.J., intended to lay down any general principle is discussed by Buckley, L.J., in the case of London County Council v. Alien

(1914) 3 K.B, 642 at pp. 658, 659, in which he said:”

“’Notwithstanding what was said by Knight Bruce, L.J. in De Mattos v. Gibson (1858) 4 De G. & J.

276. it is not true as a general proposition [*332] that a purchaser of property with notice of a restrictive covenant

affecting the property is bound by the covenant, This may be illustrated by the cases relating to the sale of chattels, such as Taddy & Co. v. Sterious & Co. (1904) 1 Ch. 354 and McGruther v. Pitcher (1904) 2 Ch. 306'”.

"These are both cases in the Court of Appeal which would bind this court if there were any , variance between the Privy Council and the Court of Appeal. I do not think it necessary to examine the obvious distinction between Tulk v. Moxhay (1848) 2 Ph. 774 and the present case. All I need say, accepting what was said by Buckley, L.J. in the London County Council case is that I do not think that the reasoning in the Strathcona case, applying as it did to the very special case of a ship under a charterparty, can be relied on in the present case. I do not think that a personal covenant as in the present case can be binding on a third party with notice, and this appeal must fail".

In Greenhalgh v. Mallard and others (1943) 2 All E.R. Ρ. 234 Lord Green, M.R. (judgment concurred in by Luxmoore L.J. and Goddard L.J.) was clearly of opinion that the Strathcona case was wrongly decided.

In Port Line Ltd., v. Ben Line Steamers Ltd.,

(1958) 2 Q.B. 146 the Strathcona case was not followed. Diplock J. had this to say (at p. 165). [*333]

'"It may be relevant to note that in the Strathcona case the buyers of the vessel subject to the time charter in favour of the plaintiffs had express notice of the terms of the charter, and had covenanted with the sellers to perform and accept all responsibilities under it. It was, as the Board said, not a mere case of notice of the existence of a covenant affecting the use of the property sold, but a case of acceptance of the property expressly sub conditione. The initial emphasis on this, and the reference at a later stage to the possibility that a shipowner might declare himself a trustee of his obligations under a charterparty so as to bind his assignee might suggest as a possible ratio decidendi that the Strathcona case was one where either the purchaser used expressions which amounted to a declaration of trust in favour of the charterers, or the vendor himself accepted the benefit of the covenant as trustee for the charterers".

At p. 168

"It seems, therefore, that it is in this

case for the first time after more than 30 years that an English court had to grapple with the problem of what principle was really laid

down in the Strathcona case, and whether that case was rightly decided. The difficulty I have found in ascertaining its ratio decidendi, the [*334] impossibility which I find of reconciling the actual decision with well-established principles of Law, the unsolved and, to me, insoluble problems which that

decision raises combine to satisfy me that it was wrongly decided. I do do not propose to follow it. I naturally express this opinion with great diffidence, but having reached a clear conclusion it is my duty to express it".

Section 2 of the Contract Law, Cap. 149, provides that it shall be interpreted in accordance with the principles of legal interpretation obtaining in England.

The defendants in the present case had only a contractual right against the other contracting party - plaintiff's parents -. They did not acquire and had no right or interest in land. In the contract, Exhibit 2, "owner" includes the administrators heirs, assignees, those who acquired title from the owners; clause 10 provides that the owner expressly undertakes during the period of the lease, not to sell transfer, mortgage or in any other way alienate or charge the property without the written consent of the lessee. We are of the view that the definition of the term "owner" does not impose any obligation on the plaintiff. Clause 10 is an obligation cast by the contract on the landlords/parents and does not create any right in favour of the lessee against the person who contrary to the provision of this clause acquired the property. There is no privity of contract between the defendants and the plaintiff. They [*335] had no right, and their possession ceased to be lawful.

C. Estoppel.

The defendants alleged that the plaintiff is estopped from claiming that she is entitled to vacant possession because the plaintiff well knew or ought to know that the said piece of land was and still is lawfully possessed by the defendant, by virtue of the said lease of 10.4.63. It emerged from the evidence, that the plaintiff knew that the defendants were in occupation as tenants, but she did not know any of the terms and conditions of the said tenancy agreement. The plaintiff made no actual statement and she is not guilty of any negligence or conduct on which the defendants acted in such a way as to be entitled to raise the defence of estoppel. The plaintiff on the contrary acted through her advocate promptly and objected to the defendants continuing in occupation as tenants.

With regard to the averment of conspiracy and unlawfully causing breach of contract, suffices to say that the defendants simply reserved their rights and no more. Therefore it is not necessary for us to embark on an inquiry regarding the aforesaid torts.

D. Are the defendants protected by The Rent Control Law 1975 (No. 36/75)?

The immovable in question is admittedly situated within the municipal limits of Nicosia town which is a controlled area under the Law. (See order of the Council of Ministers dated 7.8.75, Subsidiary Legislation, 1975, Part I, p. 379). [*336]

It was submitted by Mr. Talarides for the plaintiff that the defendants are not protected by the Law, as they were not tenants at the time of the coming

into operation of the Law (7.8.75), or on 31.12.74 and that the immovable in question is not shop within the statutory

definition.

The immovable is within a controlled area, and it has been let for the first time long before 31.12.74. On this immovable there are buildings erected by the tenants. The immovable is used by the defendants for their trade or business. In our view it satisfies the requirements of the definition of "shop”· as set out in the Law.

The Rent Restriction Law, 1975, (36/75), is an amending and codifying Law. The main objects of the legislature were to prevent the raise of rents, to empower the Court to adjust the rents having regard to all the circumstances of each particular case, and to protect the tenant from being turned out, though his tenancy by agreement had expired, so long as he was willing to pay the rent authorized by the Statute. It prevents the issue of ejectment orders or judgments for recovery of possession unless the landlord brings his case within any of the specified circumstances enumerated in section l6. Section 16, sub-s. 1, reads:-

"No judgment or order for the recovery of possession of any dwelling house or shop, to which this Law applies, or for the ejectment of a tenant there from, shall be given or made, except in the following cases". [*337]

The provision is identical to the provisions of section 10(1) Law 17/61 and section 18 of Cap. 86 and section 5, sub-s. 1 , of the English Increase of Rent and Mortgage Interest (Restrictions) Act, 1920.

Section 21(1) is a reproduction of

the provisions of section 15(1) of Law 17/61 and of section 23(1) of Cap. 86, and of section 15, subsection 1, of the Increase of Rent and

Mortgage Interest (Restrictions) Act 1920. The object of legislature was not to protect only those who were contractual tenants at the time of the coming into operation of the Law for any particular area. Had it been otherwise, the intention of the Law would have been defeated, and a great number of persons in occupation of premises in controlled areas whom the law intended to protect would have been turned out of the shops or the dwelling houses. And we refer to those who were no contractual ''tenants” on the material date: Those who held over as statutory tenants under the Laws repealed by Law 36/75. They were not stricto sensu "tenants", as a statutory tenancy is not a tenancy at all but merely a compendious expression to describe the right of a tenant of protected premises to remain in possession of those premises, notwithstanding the determination of the contractual interest. (Dudley and District Benefit Building Society v. Emerson (1949) Chancery 707 at 717; Marcroft Wagons v. Smith (1951) 2 All E.R. 271).

The tenants of premises - dwelling houses and shops - not controlled under the previous legislation whose tenancy expired or was determined would also be excluded. [*336] In our view the protection of the Law extends to all those who entered the immovable-shop or dwelling house - under a lawful lease and were in occupation, in virtue of the lease or even wrongly, at the time of the coming into operation of this Law. On that day they were by force of the Law made statutory tenants and a lardlord to succeed in a claim for recovery of possession he has to establish any of the grounds set out in section 16(1) of the Law. The words "let" (enikiazomenon) in the definition of "shop" and "dwelling house" and "tenant" (enikiastis) in sections 16 and.21 are simply descriptive and should not be given narrow literal interpretati on.

The case of Remon v. City of London Real Property Company Ltd., (1921) 1 K.B. 49, is almost on all fours

with the present case. Two rooms, before the passing of the Increase of Rent Act, 1920, were let to the plaintiff on a

quarterly tenancy to be surrendered four clear days before the quarter day for which any notice to quit might be given. The plaintiff received notice to quit "on June 24 next or at the expiration of the year of your tenancy which shall expire next after the end of a half year from the delivery of this notice". The plaintiff did not yield up the premises but wrongly and against the will and objection of the landlord remained in possession until the 2, July, 1920, the date of the passing of the Act of 1920. Then the landlords entered the premises and retook possession. It was held by the Court of Appeal that although the agreement of tenancy had come to an end by the notice to quit, the rooms were "let" within the meaning of section 12 subsection 2 [*339] and the, plaintiff was a tenant who by virtue of the provisions of the Act retained possession within the meaning of section 15, subsection 1 of the Act, and that the landlords could not lawfully disturb him in his possession.

In Gilbert v. Jordan

(1920) W.N. 309 K.B., the defendant became tenant to the plaintiff’s predecessor in title of a dwelling house, on May 9, 1916, in a term of three years, and was not within the protection of the Increase of Rent, etc, (War Restriction) Acts, then in force. On March 15, 1920, the plaintiff purchased the house and wrote to the defendant asking him, if he was arranging to vacate the premises when his tenancy expired as the plaintiff was offering the freehold for sale with possession on completion. The defendant replied that the premises would be given up at the time and to the person legally entitled on June 24. The plaintiff agreed by letter to the defendant remaining till that date. The defendant, however, later refused to give up possession upon the ground that he could not find another house. On July 2, the Increase of Rent (Restrictions) Act, 1920, was passed. It was contended by the plaintiff that the Act did not apply as the house was not "let" within the meaning of section 12, subsection 2, at the date when the act was passed, inasmuch as the defendant by retaining possession after his term had expired and after possession had been demanded was a trespasser and not a tenant. Lawrence J., inclined to the view that the case was one to which the Act applied.

As the plaintiff failed to satisfy the Court by evidence - even there is no averment in the Statement of Claim - that her case comes within any of the specified [*340] circumstances empowering the Court under section 16(1) of the Rent Restriction Law, 1975, to issue an ejectment order or an order for recovery of possession, this action fails.

The defendants are statutory tenants. If the plaintiff is aggrieved as to the amount of rent payable, her remedy is to resort to the Court for adjustment of same under section 7.

E. Unconstitutionality of The Rent Restriction Law, 1975.

Mr. Talarides in his address and simply in passing submitted that this Law is unconstitutional. He failed to formulate his objection of unconstitutionality and to state against which provision of the constitution the Rent Control Law, 1975 or any part thereof is repugnant. The judgment in

Constantinos Himonides v. Evanthia K. Manglis (1967) 1 C.L.R. 125, where it was held that the Depressed Tenants Relief Law, 1965 (Law No. 19/65) is not repugnant to articles 23 and 26 of the

Constitution is a complete answer to this submission.

In view of the result of the action on the issue of possession, we consider it undesirable to embark on the mesne profits the plaintiff would have been entitled had she been successful, as such an inquiry might prejudice the parties in any future application for adjustment of the rent.

In the result, the action is dismissed. Judgment is given on the counterclaim in the following terms: Declaration that no order for recovery of possession or

ejectment from the immovable/shop described in para. 1 , of the Statement of Claim can be issued against the defendants,

except as by Law 36/75 is provided. [*341]

Having regard to the provisions of section 26 of Law 36/75 for pending actions and the fact that had it not been for the passing of this Law the plaintiff would have been successful, we order the defendant to pay the costs of the plaintiff until the date of the commencement of the hearing of this action. Such costs to be assessed by the Registrar.

We make no order for costs in the Counterclaim.

Action dismissed.

Judgment on the Counterclaim

as above Order for Costs as

aforesaid.