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[2016] ZAWCHC 55
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Hencetrade 15 (Pty) Ltd v Tudor Hotel Brasserie & Bar (Pty) Ltd (15275/2015) [2016] ZAWCHC 55 (20 April 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case number: 15275/2015
DATE: 20 APRIL 2016
In the matter between:
HENCETRADE 15
(PTY)
LTD
...............................................................................................
Applicant
And
TUDOR HOTEL BRASSERIE & BAR (PTY)
LTD
..........................................................
Respondent
Before: The Hon. Mr Justice Binns-Ward
Hearing: 18 April 2016
Judgment delivered: 20 April 2016
JUDGMENT
BINNS-WARD J:
[1]
The
applicant has applied for an order authorising the eviction of the
respondent company and all those holding occupation under
it from
certain premises situate at 153 Longmarket Street, Cape Town.
[2]
The
respondent took occupation of the premises pursuant to the conclusion
by it of a lease agreement with the applicant. The
property let
in terms of the lease comprised all the buildings and improvements
situate on Erf 2665, Cape Town, known as the ‘The
Tudor Hotel’
(excluding the penthouse) and the third floor of the adjoining
building, known as the ‘Huys Heeren XVII’
building.
The lease period commenced on 1 July 2012 and (subject to a right of
renewal) was due to expire on 20 June 2022.
The lease provided,
in terms of clause 10.1 of Annexure B thereto, that ‘all [rent]
payments in terms of [the] lease [had
to be] made by the tenant to
the landlord …on or before the first day of each month without
demand, free of exchange, bank
charges and without any deductions or
set-off whatsoever’. Clause 21.1.3 of the said Annexure
furthermore provided
that ‘[t]he tenant shall not be entitled
to withhold or defer payment of any amounts due in terms of this
lease for any reason
whatsoever’. The lease was subject
to a sole memorial clause (clause 28.1 of Annexure B thereto), which
also provided
that no alteration, cancellation, or variation of the
lease would be of any force or effect unless it were reduced to
writing and
signed by both the parties.
[3]
The
premises were let for use as a hotel. The terms of the lease
provided that the lessee would refurbish the existing premises,
which
in the Tudor Hotel building were already equipped for the operation
of a hotel. The third floor of the Huys Heeren
XVII, however,
was just ‘an empty shell’ without even so much as a
proper ceiling in place.
[4]
When
the respondent was given occupation of the let premises at the
commencement of the lease period, the applicant retained an
area on
the third floor of Huys Heeren XVII in which it stored certain
property. The area in question comprised approximately
one
third of the floor space on the third floor. The third floor
constituted 19,3 per cent of the total floor space that
was let in
terms of the lease agreement. The respondent took occupation of
the let premises, with the exception of the aforementioned
space used
by the applicant for storage purposes.
[5]
It
seems, however, that the respondent did not at any stage take the
third floor area into use for the purposes of its hotel business.
In April 2015, the parties entered into a written agreement,
confirming an oral agreement made earlier, that the third floor of
Huys Heeren XVII was to be excluded from the lease with effect from
the end of April 2014. The written agreement contained
no
provision for a consequential adjustment of the rent determined in
terms of the lease.
[6]
The
applicant alleged that it had cancelled the lease on 14 August 2015
because the respondent had fallen into arrears with the
rental
payments and had failed to purge its default after having been given
the opportunity prescribed in terms of the lease to
do so.
[7]
The
respondent denied that it was in arrears. It maintained that
for the period between the commencement of the lease until
the end of
April 2014 (to which I shall refer as ‘the first period’),
it had not been given the full use and enjoyment
of the let premises
by reason of the applicant’s use of portion of the third floor
of the Huys Heeren XVII for storage purposes.
It alleged that
in the circumstances of the applicant’s deficient performance
of its obligation to make the entire area of
the let premises
available, the latter had not been entitled to any rental during that
period. It alleged further that it
had been a tacit term of the
agreement in terms of which the respondent had given up any right to
the use and enjoyment of the
third floor that the agreed rental in
terms of the lease would be reduced pro rata the diminished floor
area, that is by 19,3 per
cent, for the remainder of the lease period
commencing 1 May 2014 (‘the second period’).
[8]
The
respondent, which had paid a substantial part of the rental in terms
of the lease during the first period, contended that it
was entitled
to have those payments credited against its allegedly reduced rental
liability during the second period. It
alleged that an
allocation of the payments it had made since the commencement of the
lease on the basis just described demonstrated
that it was in point
of fact substantially in credit in respect of the rent that had been
due when the applicant purported to cancel
the lease.
[9]
The
respondent’s approach to the issue of its liability to have
paid rental for the premises during the first period runs
counter to
a line of authority established in a line of reported judgments
commencing with that of Van Winsen J in
Arnold
v Viljoen
1954 (3) SA 322
(C).
See also
Marcuse v Cash Wholesalers
(Pvt) Ltd
1962 (1) SA 705
(FC);
Bourbon-Leftley v Turner
1963
(2) SA 104
(C);
Appliance Hire
(Natal)(Pty) Ltd v Natal Fruit Juices (Pty) Ltd
1974 (2) SA 287
(D);
Basinghall
Investments (Pty) Ltd v Figure Beauty Clinics (SA) (Pty) Ltd
1976
(3) SA 112
(W) at 121F;
Greenberg v Meds
Veterinary Laboratories (Pty) Ltd
1977
(2) SA 277
(T), and
Parekh v Shah Jehan
Cinemas (Pty) Ltd and Others
1980 (1)
SA 301
(D) at 310G-H. In terms of that line of authority, a
lessee who takes occupation of premises which are deficient in any
respect
is obliged, while it remains in occupation, to pay the full
rental stipulated in terms of the lease. Its remedy is to claim
compensation by way of an abatement of rental and/or damages. A
lessee who, having taken occupation, fails to pay the full
rental is
exposed to the cancellation of the lease for non-payment.
[10]
The
line of authority founded in the relevant respect on
Arnold
v Viljoen
has been disapproved in
Steynberg v Kruger
1981 (3) SA 473
(O) and
Ntshiqa v
Andreas Supermarket (Pty) Ltd
1997 (3)
SA 60
(Tk), and doubted in
Nedcor Bank
Ltd v Withinshaw Properties (Pty) Ltd
2002 (6) SA 236
(C) and
Thompson v
Scholtz
[1998] ZASCA 87
;
1999 (1) SA 232
(SCA). It
has also been widely criticised by academic writers; see the writings
referred to in
Thompson
supra, at p.246E. I am bound to follow it, however, unless I am
able to hold that it is clearly wrong. While I find
the
criticism that has been directed at
Arnold
v Viljoen
persuasive, I do not think
that it is open to me to depart from it in the circumstances;
particularly in view of my understanding
of the effect of the
judgment in
Ethekwini Metropolitan
Unicity Municipality v Pilco Investments CC
[2007] SCA 62.
[11]
Pilco
Investments
also concerned a situation
in which the lessor had failed to make the entire let premises
available to the lessee, which had then
occupied that part that was
available. Mrs Justice van Heerden, writing for the
Supreme Court of Appeal, described the
position of a lessee in such a
situation to be as follows, at para 22 of the judgment:
It follows
that, upon taking occupation of the property in late 1994, the
plaintiff [lessee] became obliged to pay rent to the defendant
[lessor], as stipulated in … the lease. Of course, because the
plaintiff was, until early June 1997, deprived of the use
of that
portion of the property which was being used by [a third party], the
plaintiff would be entitled to a remission of rent
over the period in
question, proportional to its reduced use and enjoyment of the
property.
If the amount to be remitted was capable of prompt
ascertainment, the plaintiff could have set this amount off against
the defendant’s
claim for rent; if not, the plaintiff was
obliged to pay the full rent agreed upon in the lease and could
thereafter reclaim from
the defendant the amount remitted.
(Emphasis supplied.)
[12]
The
learned judge of appeal cited A.J. Kerr,
The
Law of Sale and Lease
3ed at p. 350
as authority for the proposition that set-off could be applied if the
amount of rent to be remitted was capable
of prompt ascertainment,
but not otherwise. In the passage cited, Professor Kerr states
‘If the amount remitted is
not capable of prompt ascertainment
the lessee is technically obliged to pay the stipulated rent and may
thereafter reclaim the
amount remitted’.
Lester
Investments (Pty) Ltd v Narshi
1951 (2)
SA 464
(C) at 468E and
Bhima v Proes
Street Properties (Pty) Ltd
1956 (1) SA
458
(T) especially at 460 are given by Kerr as authority in support
of the proposition. Neither of those judgments appears to
me to
be in point, save in respect of set-off of mutual liquidated claims.
Both cases concerned the question whether a tenant
could offset
expenditure incurred in respect of repairs to the leased property
against the rental. They answered the question
affirmatively in
favour of the lessee.
[13]
Whatever
the rationale for the emphasised sentence in the extract from
Pilco
Investments
quoted above, however, Mr
O’Dowd, the attorney who appeared for the respondent, conceded,
as he had to, that I was bound
by the legal position stated in para
22 of the appeal court’s judgment. It follows that unless
the abatement in rent
to which the respondent might have been
entitled in respect of the part of the third floor of Huys Heeren
XVII not made available
by the applicant was capable of prompt
ascertainment, the respondent was obliged to have paid the full
rental during the first
period.
[14]
Mr
van Dugteren
,
counsel for the applicant, submitted that the amount of any remission
to which the respondent might have been entitled during
the first
period was not capable of prompt ascertainment. I think he was
correct. Indeed, I did not understand Mr O’Dowd
to
contend to the contrary. It would not be appropriate to
calculate the amount of the remission on the basis of prorating
the
area of floor space that was not made available against the floor
space of the entire let premises. As mentioned, the
third floor
was just an empty shell in which the respondent would have to
undertake considerable furbishment to render it fit for
use, whereas
the remainder of the let premises were already equipped for the
purpose of operating a hotel. In any event,
it is the value of
the diminished use and enjoyment, rather than the diminished extent
of the let premises, that is relevant to
the calculation of a
remission in rent. That is certainly not capable of prompt
ascertainment.
[15]
Thus,
applying the approach stated in
Pilco
Investments
, I am obliged to reject the
respondent’s contention that it was not obliged to have paid
rental during the first period.
It follows that it was not
entitled to apply the rental that it did pay during that period in
reduction of the amount that it was
liable to pay during the second
period, when the applicant was no longer in breach of the lease
agreement.
[16]
The
respondent’s alleged entitlement to pay a reduced rental in the
second period depends on whether the lease agreement was
amended to
provide as much. The respondent’s attorney argued that it
had been a tacit term of the written agreement
in terms whereof the
respondent gave up any entitlement to the third floor that the rental
would adjusted downwards in acknowledgement
of the reduced size of
the let premises. The obvious difficulty with that submission
is that it fails to define the content
of the term. It
conceptualises a premise, rather than defining how the premise is to
be realised. By how much was the
rental to be reduced?
One does not know.
[17]
For
the reason discussed earlier, a reduction in the rental in direct
proportion to the reduction in the floor space would not make
commercial sense, having regard to the very different character of
the third floor of Huys Heeren XVII compared to that of the
area
leased in the Tudor Hotel Building. It may well be that the
parties contemplated a reduction in the rental to complement
their
agreement on the reduction in the floor space, but it is evident that
they failed to conclude any agreement in that respect.
The
result was that the lease was amended in respect of the definition of
the let premises, but remained unaltered in respect of
its provisions
as to the determination of rental.
[18]
In
the result it is evident from the respondent’s own rental
payment reconciliation schedule (annexure MS2 to the answering
affidavit) that it was several hundred thousand rand in arrears in
respect of the rental it had been obliged to pay in terms of
the
lease when the applicant exercised its right to cancel the
agreement. In the circumstances it is not necessary to consider
the non-deduction and exclusion of set-off effects of the provisions
in clauses 10.1 and 21.1.3 of Annexure B to the lease agreement.
[19]
The
following order is made:
(a)
The
respondent and all those who hold occupation under it are directed to
vacate the premises situated at 153 Longmarket Street,
Cape Town,
within 10 days of the service upon the respondent of this order.
(b)
In
the event of the respondent and all those holding under it failing to
comply with the terms of paragraph (a) of this order, the
Sheriff is
hereby authorised, upon being provided with a writ of ejectment to be
procured by the applicant from the registrar,
to compel compliance by
evicting the respondent and all those holding under it from the
premises.
(c)
The
respondent shall pay the applicant’s costs of suit on the scale
as between attorney and client.
A.G.
BINNS-WARD
Judge of the
High Court