This case heard in the Supreme Court involves a dispute between tenants and a company regarding the application of the Ceiling on Housing Property Law (CHP Law) to residential units within a commercial building.
The Companyinvolved in this case owned a five-story building in Colombo Fort. It had a commercial area (head office) and several residential apartments. The appellants and some respondents (4th to 6th) were tenants occupying these apartments.
The CHP Law (No. 1 of 1973) came into effect on January 13, 1973. Part I of this law regulated how many houses a person or entity could own.
Counsel for the Company argued that the apartments didn’t fall under the definition of “houses” or “flats” as per the CHP Law (Section 47). They claimed these units lacked features of a typical house (e.g., separate living areas, bedrooms on different floors, car parking in the basement, etc.).
The Commissioner of National Housing (1st respondent) disagreed. They determined the apartments were residential units under the CHP Law and required the Company to declare them.
Allowed number of houses
The Company submitted a declaration but contested the classification. The Commissioner insisted the apartments were covered by the law.The Commissioner informed the Company of the allowed number of houses they could own (excluding those rented to non-employees as per Section 2(3)(C) of the CHP Law). This included the apartments occupied by the tenants in this case.
The Company appealed this decision to the Board of Review.The Board of Review included the tenants in the appeal proceedings. The Company objected to their involvement, arguing they had no standing. The Review Board overruled the objection, allowing the tenants (appellants) to participate.
The Company challenged this decision in the Court of Appeal but lost. They were unsuccessful in obtaining a Writ to remove the tenants from the proceedings.The Board of Review dismissed the Company’s appeal on November 9, 1985.
The company challenged this decision again in the Court of Appeal but the case was still pending.A stay order was put in place which was in operation at the time of this Supreme Court hearing, preventing the implementation of the Board of Review’s decision.
The Supreme Court judgment focused on the interpretation of the Ceiling on Housing Property Law (the Law) and the rights of tenants in “excess houses” owned by corporations. Specifically, it addresses when a tenant should apply to purchase an “excess house”, whether tenants have rights to become owners, notice requirements for divesting ownership, proper timing of divestment orders etc. which were all issues that the court of appeal had considered.
The Ceiling on Housing Property Law limits the number of houses corporations can own.”Excess houses” beyond the permitted number are deemed to vest in the government (1st respondent). The appellants (tenants) and other respondents occupied houses owned by the Company, the 3rd respondent.The Company exceeded the permitted number of houses.
Divested ownership
The crux of the issue was that the government i.e: the Commissioner of National Housing, had divested ownership of these houses to the Company without notifying the tenants (Divesting Order X8).The appellants challenged that order of divesting in C.A. Application No. 33/92 and asked for a Writ of Certiorari to quash it, but lost the case. It’s how the current case under review came to be heard by the Supreme Court, as the losing applicants in Appeal Court appealed the judgment in the Supreme Court. (Desmond De Perera and Others v. Karunaratne, Commissioner For National Housing – SLR – 148, Vol 1 of 1997 [1994] LKSC 14; (1997) 1 Sri LR 148 (14 July 1994).)
The various sections of the CHP such as Section 2(3) are pertinent. This section, as stated, sets a maximum number of houses a corporation can own for employees, and Proviso (C) to Section 2 for instance excludes houses rented to non-employees from the permitted number.
Cruicially, section Section 9 allows tenants of “surplus houses” to apply for purchase within four months of the Law’s commencement.
The judgment criticized the appellants’ argument that tenants must wait for the owner to complete Section 8 procedures before applying to purchase under Section 9. The Court emphasized the plain language of Section 9, stating tenants can apply within four months of the Law’s commencement regardless of Section 8’s timeline. Additionally, however, the court mused that the government’s failure to notify tenants about the divestment order (X8) potentially violated principles of natural justice.
The judgment didn’t explicitly address whether tenants have a legal right to purchase, but it acknowledges potential “expectant rights” or “legitimate expectations”. The Court further questioned the timing of the divestment order (X8) issued before the conclusion of a relevant Court case. This raised concerns about potential prejudice to the tenants’ interests. Was the divestment power was exercised improperly (mala fide) or in accordance with the Law, was what the Supreme Court set out to decide.
Counsel for tenants argued that CHP Law offered a “legitimate expectation” to purchase if they applied within four months. The Divestment order was unfair, disregarded natural justice principles (no notice or hearing), and happened while a stay order was in effect, they submitted.
Proper ministerial approval
State Counsel for respondent Commissioner of National Housing argued appellants never submitted applications to purchase within the timeframe. On the other hand the divestment order occurred after the application deadline and with proper ministerial approval.No evidence of bad faith or disregard for legal procedures was ever adduced.
The reasonsfor divestment (management problems, security concerns) were justified, they also submitted.
The judgement held that CHP Law offered a potential opportunity to purchase, but only if tenants applied within four months. None of the tenants submitted applications within the timeframe. Court agreed with the Respondent Commissioner that the divestment order occurred after the application deadline and with proper ministerial approval.
There’s no evidence of bad faith or disregard for legal procedures.The reasons for divestment (management problems, security concerns) seem justified, it was held.
Court’s reasoned that tenants failed to comply with the law by not submitting applications to purchase within the required timeframe.
The divestment order did not violate any legitimate expectation since the tenants never initiated the process by applying to purchase.
The Court of Appeal decision in C.A. 194/80, which allowed tenant participation in proceedings, was deemed irrelevant as it didn’t address Section 9 regarding application deadlines.The stay order obtained by the company challenging the number of houses they could own (C.A. Application 1460/85) didn’t affect the divestment order because it concerned a separate issue.
The tenants’ claims of a secret divestment and disregard for natural justice were rejected due to a lack of evidence and the existence of proper approvals.The Court found the government’s reasons for divestment (management issues, security concerns) to be justified.
The appeals by the tenants were dismissed. It was held that the divestment order stands because the tenants failed to comply with the law by not submitting applications to purchase within the required timeframe.Costs were ordered against the appelants.
