The tale of an elephant in the room, by the supreme court of Seychelles

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In November 2016, the government of Seychelles awarded Dorrine Monthy a 60-year lease on a property where she wanted to operate a day-care centre. She followed all the proper steps to covert if from a residential building to the day-care centre. But three months after the lease was finalised she received a letter from the government informing her that the lease was being ‘terminated’ as it was needed for military purposes, and that she would be reimbursed for any improvements she may have made to the property.

Monthy took no notice of the letter, other than to have her lawyers write to the government saying that the reason given for ending the lease was ‘invalid and unlawful’ as it was not one of the ‘permitted grounds’ for cancellation.

After a complicated dance through various courts, testing whether the Planning Authority (PA) had lawfully issued her a stop notice, the PA gave its approval to change the premises to a day-care centre on 24 November 2017.

Infringed

A month later the matter was in the high court, with the government claiming she had infringed the terms of the lease by not submitting plans for her proposed development to the PA. Monthy denied this was so, saying she had submitted plans for her proposed development. She claimed that the government’s ‘purported termination’ of the lease was invalid and breached the terms of the lease. Finally, she filed a counterclaim for damages she incurred for alterations to the property, salaries so far paid to staff, as well as loss of earnings and moral damages.

The high court found in favour of the government and ordered her to leave the property. Monthy then appealed to the supreme court. In the middle of December, while many courts were already on holiday, the supreme court delivered its decision, this time finding for Monthy.

Monthy’s counsel argued that the issue was ‘permeated with bad faith’ on the part of the government in the way it dealt with ending the lease. Among other instances where bad faith could be seen, counsel mentioned the first termination notice claiming to end the lease because the property was needed for military purposes.

Awkward

Then the Minister for Habitat, Infrastructure and Land Transport, apologised when he told Monthy that the lease ‘would have to be terminated’. Counsel also mentioned a meeting Monthy had with President Danny Faure during which he confirmed that the lease would have to be cancelled ‘because of awkward questions being asked by the leader of the opposition in the Assembly’.

Counsel concluded that the lease was not cancelled because planning approval for the access drive had not been sought, and that there had been ‘bad faith’ by government that the trial judge ought to have considered.

Government’s legal team denied bad faith and said Monthy had ‘no corroboration’ of what she had been told by the Minister and the President.

Potential inequalities

The court considered what the law and precedent had to say about good faith and bad faith and concluded that ‘agreements … and specifically leases … have to be executed fairly, judiciously and with good faith to balance any potential inequalities in the contract.’

Against this background, government’s actions ‘can only be viewed in a negative light,’ said the court. ‘It is clear that the breach of the lease relied on for termination was contrived. First the initial notice … purportedly was for … military purposes. When it was pointed out that this was not legally provided for in the lease agreement, it quickly changed tack.’

Then, the government interfered with the PA’s functions to stymie the purpose of the lease.

Manufactured

Other indicators included Monthy’s meeting with the President, ‘where he informed her that because of awkward questions from the leader of the opposition in the National Assembly, the lease would have to be terminated.’

Combined, they led to just one conclusion: that the breach of the lease was ‘manufactured so as to cause its termination’. It would not do to claim that Monthy’s evidence was ‘uncorroborated’. She had testified, her evidence was not challenged in this respect and there was no suggestion that she was not a credible witness.

The trial judge ought to have considered these and other indicators in deciding whether the government had acted in bad faith and unfairly.

Bulwarks

Then comes a crucial passage:

‘The elephant in the room was the politics in this case. Whether the Government had been criticised for allowing the conclusion of a lease with … Monthy through nepotism or favouritism is neither here nor there. While contracts can be vitiated for many reasons and it certainly was an avenue open to the Government for the cancellation of the lease to argue that the lease had not been negotiated fairly, this was neither pleaded nor [was] evidence of this nature adduced in the present case.  Our courts are courts of law and justice and not arenas of political discussions. We are the bulwarks against the exercise of the autocratic, capricious and arbitrary will of the Government. We have to rise up to our duties in the respect of the rule of law.’

The court concluded that there was ‘clearly bad faith and unfairness on the part of the government’ and that the appeal should thus succeed.

What about Monthy’s counterclaim? During the hearing of the appeal Monthy’s legal team made it clear to the court that she was seeking damages (and no longer restoration of the lease).

Photographs

The supreme court found that Monthy had spent money on the leased property. She had signed the lease for the express purpose of operating a day-care centre, and clearly expecting that this purpose would be realised, she ‘carried out works’.

She showed undisputed evidence of the cost of the works, along with photographs of the upgraded premises. She claimed costs incurred for alterations, out of pocket expenses, staff salaries, loss of earnings and moral damage.

The court examined the proof she produced of her claims. In relation to costs incurred for alterations to the property the invoices and receipts showed the amount spent, and this was not contested. Similarly, her out of pocket expenses for toys, books and other material to be used at the day-care centre were also receipted and proven.

Salaries

Monthy did not, however, show proof of salaries paid to staff and thus she could not be awarded anything under this heading.

The court worked out her loss of earnings and allowed about half of what was claimed. The court also awarded ‘moral damages’, given the ‘obvious prejudice suffered, the stress and harassment by the actions of the government’.

In all, therefore, Monthy was awarded about USD 250,000, with interest and costs. Dated 17 December 2021, this would have been a tidy little Christmas present for the no-doubt disappointed would-be owner of a day-care centre.