BP Nairobi Service Station Ltd v BP Kenya Ltd

High Court, at Nairobi

April 27, 1989

Muthoga CA

Civil Case No 3424 of 1982

Landlord and Tenant – tenancy - mere exclusive possession alone no longer  proof of tenancy – Landlord and Tenant (Shops Hotels and Catering Establishments) Act (cap 301).

Landlord and Tenant – licence or tenancy – court to regard the substance of the transaction in distinguishing licence from tenancy.

Landlord and Tenant – parties entering into a petroleum dealers agreement without signing standard operators agreement – whether their relationship should be governed by standard operators agreement.

The plaintiff sued the defendant seeking among other remedies, an order for injunction restraining the defendant from interfering with its quiet possession of the suit premises which it alleged had been leased to it. The plaintiff further sought damages and costs of the suit.

The plaintiff’s predecessors, who were members of the same family, entered into an operator’s agreement with the defendant permitting them to operate a petrol station upon terms contained in the agreement.

According to the agreement, however, the defendant reserved the right to exercise control and possession over the petrol station and equipment so that the plaintiff’s predecessors were not at liberty to open and close as they wished.

The plaintiff’s predecessors subsequently incorporated the plaintiff as a limited liability company and sought the defendant’s permission to continue operating the station under the new entity which request the defendant did not refuse provided the consent did not prejudice covenants and agreements with the plaintiff’s predecessors.

The defendants sought to terminate the agreement and evicted the plaintiff from the suit premises. The plaintiff therefore sought the court’s intervention contending that they were protected tenants and could not be removed otherwise than as provided under Landlord and Tenant (Shops Hotels and Catering Establishments) Act (cap 301).

It was the plaintiff’s contention that it had exclusive possession of the suit premises and that it paid rent to the defendant. The plaintiff however did not plead how it had come to be in exclusive possession of the premises and the amount of the agreed rent.

The main issue for determination was whether the plaintiff was a tenant or a mere licencee of the defendant.

Held:

1. The nature of the relationship between the parties was to be determined on a full examination of their dealings. It did not depend solely on the interpretation of any agreement between them or on the payment or otherwise of any rent or other consideration. It also did not depend merely on having or not having exclusive exclusive possession.

2. Whether a transaction constitutes a license or a tenancy the court is not to have regard to the label which parties give to the document or to the formal language but to the substance of the transaction.

3. It is not clear whether both parties were aware of the terms of the operators agreement. It was clear however that both intended that their relationship should be governed by the standard operators agreement.

4. On the evidence, th eplaintiff did not enjoy exclusive possession of the premises and such possession as it enjoyed was limited by the substantial degre eof control that the defendant continued to exercise on the station and the premises.

5. The ‘agreement’ dated 24th June, 1968 was the document evidencing the relationshop between the parties and governing their conduct. That agreement contained terms which clearly suggested that it was intended to create a licence rather than a contractual tenancy.

6. The relationship of the plaintiff and the defendant was therefore one of Licensor and Licensee and not of Landlord and Tenant and is accordingly not governed by the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (cap 301). That licence had been properly terminated by the defendant.

Suit dismissed.

Cases

1. Shell Mex & BP Ltd v Manchester Garages Ltd [1971] 1 All ER 841, 1WLR 612

2. Errington v Errington [1952] 1 All ER 149

3. Omar bin Mohamed al Hatim v Mohsin bin Saleh Alkhlagy [1957] EA486

4. Street v Mountford [1985] 2 All ER 289; [1985] AC 809; [1985] 2WLR 877, HL

Statutes

Landord and Tenant (Shops, Hotels and Catering Establishments) Act(cap 301) sections 2, 4