Brief Summary

Eviction — Standing to evict — Applicant seeking eviction of respondents from commercial premises — Respondents contending applicant lacked standing due to cession in mortgage bond — Court held that applicant retained standing to evict based on ownership rights, and re-cession agreement legitimized prior proceedings — Lease agreement between parties deemed to have terminated by effluxion of time, with no valid renewal — Respondents ordered to vacate premises by specified date.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application for eviction brought in motion proceedings in the High Court of South Africa, Western Cape Division, Cape Town. The applicant was Pacific Paramount Properties (Pty) Ltd (“Pacific”), the registered owner of certain commercial premises in Camps Bay. The respondents were Michael Adrian Burchell t/a Top Wash and Terence Michael Antony Burchell t/a Top Wash, who (in partnership) operated a car wash business known as Top Wash from the premises.

The application was heard on 13 September 2018 and judgment was delivered on 19 September 2018 by Rogers J. Although various points were raised on the papers, the oral argument was confined to two issues: whether Pacific lacked locus standi because of a cession clause in a mortgage bond in favour of Nedbank Ltd, and (if standing existed) whether the lease had terminated by effluxion of time.

The general subject-matter of the dispute was whether the respondents’ continued occupation of the commercial premises after the alleged expiry of the written lease was lawful, and whether the owner (Pacific) was entitled to seek eviction notwithstanding the bond’s cession provisions.

2. Material Facts

Pacific became the owner of the property in December 2013, when a mortgage bond in favour of Nedbank Ltd in the amount of R20 million was registered over the property. Clause 8 of the bond provided for a cession in favour of Nedbank of Pacific’s rights to rentals and other revenues, and also conferred powers expressed as being “irrevocable and in rem suam”, including the power to institute proceedings for the recovery of unpaid rentals and/or eviction from the mortgaged property. The clause further contained a proviso that the cession, transfer, assignment, and related “authorities and powers” would not be acted upon without the mortgagor’s consent unless there had been a breach.

It was common cause that the respondents signed the written lease attached to the founding affidavit. The schedule to that lease reflected an inconsistency: it stated the period as “12 months” but recorded commencement and termination dates of 1 March 2016 and 28 February 2018, which reflected 24 months. Pacific treated the lease as a 24-month lease ending 28 February 2018. In the schedule’s “Option to renew” block, the entry “N/A” appeared, and the lease contained a clause (clause 40.2) requiring that any renewal or exercise of an option had to be in writing and signed by both parties. The respondents did not allege that a written renewal agreement was concluded.

After February 2018, the respondents remained in occupation. The respondents’ opposition relied, in substance, on the contention that the written lease annexed to the founding affidavit was not the “true” agreement because (according to the first respondent’s deponent) there had been discussions at the time of contracting about a lease of two years with an option to renew for a further two years, and he had a “vague recollection” that “N/A” may have been scratched out on one of the documents and replaced with “YES” or “Y”, initialled by the respondents. The respondents did not, however, produce a signed alternative lease document.

The papers also recorded that Pacific wrote to the respondents on 24 April 2017 stating that the lease had expired on 28 February 2017 and was running month-to-month, and offering a “one year lease at renewal” due to redevelopment. The respondents said this letter prompted a call to a Pacific representative who confirmed (according to the respondents) the earlier date. Pacific disputed aspects of these assertions in reply.

In reply, Pacific attached a re-cession agreement executed on 20 August 2018, by which Nedbank purported to re-cede to Pacific, retrospectively with effect from 20 October 2017, the “Ceded Claims” in relation to the lease, and to transfer back “all of its right, title and interest” in those claims to Pacific. The respondents argued that this re-cession was directed at contemplated future litigation, pointing to a summons Pacific issued on 31 August 2018 claiming arrear rent and eviction, but Pacific contended the re-cession was unrestricted and intended to regularise standing retrospectively.

3. Legal Issues

The central questions for determination were, first, whether the cession clause in the mortgage bond deprived Pacific of standing to institute eviction proceedings at the time it launched the application, given the bond’s cession of rights and powers to Nedbank and the proviso regarding enforcement.

Second, the court had to determine whether the lease between the parties had in fact terminated by effluxion of time on 28 February 2018, or whether there was a genuine dispute that the agreement included an enforceable option to renew or had otherwise been extended.

The dispute involved questions of law (the effect of the mortgage bond cession on standing, and whether a later re-cession could cure standing), questions of fact (whether there was a genuine dispute that a different lease or renewal option existed), and questions of application of law to fact (whether the respondents’ allegations were sufficient in motion proceedings to resist eviction on the basis of an alleged renewal mechanism, and whether any alleged option would be enforceable).

4. Court’s Reasoning

On standing, the court approached clause 8 of the mortgage bond with reference to binding authority. The clause was described as materially similar to the cession considered in Picardi Hotels Ltd v Thekwini Properties (Pty) Ltd, where it was held that the proviso did not suspend the operation of the cession. The court noted academic criticism of Picardi but treated it as binding precedent, and held that differences in language did not warrant a different result on the point addressed in Picardi.

However, the court distinguished between a personal right to claim rentals (capable of cession) and the right to evict unlawful occupiers where eviction is pursued as an incident of ownership rather than as a contractual claim for redelivery. The bond’s language granting Nedbank an “irrevocable right in rem suam” to evict was described as resembling a mandate (authority/power) rather than a pure transfer of a right by cession. The wording of the proviso, which referred not only to “cession, transfer [and] assignment” but also to “authorities and powers”, supported the view that the eviction-related content could operate as a conferral of authority rather than as a transfer depriving the owner of its own entitlement to sue.

The court reasoned further that, if Nedbank’s position were properly characterised as mandatee, it would ordinarily act by causing proceedings to be instituted in the mandator’s name, rather than in its own name. In that setting, if the respondents intended to challenge whether Pacific’s attorneys were authorised to institute proceedings because Nedbank had not authorised them, the appropriate procedural mechanism would have been a rule 7 challenge to authority, as recognised in Ganes v Telecon Namibia Limited and Unlawful Occupiers School Site v City of Johannesburg.

In any event, the court treated the attached re-cession agreement as decisive in practical terms. It rejected the respondents’ attempt to confine the re-cession to future litigation by reliance on the recordal in clause 1.4. The operative provisions (including the retrospective date in clause 1.5 and the cession provision in clause 2) were read as unrestricted, and the retrospective effect suggested an intention to regularise past as well as future proceedings. Even if Nedbank had been unaware of the present application, the court held that it had nonetheless re-ceded the claims without limitation.

The court then addressed whether a litigant who lacked locus standi at the time of institution could be cured by a later re-cession. It relied on Pangbourne Properties Ltd & another v Your Life (Pty) Ltd & another, where it was held that in “special and unusual circumstances” a court may allow standing to be cured in this way. The court found such circumstances present: Pacific acted in good faith as owner and contracting party; clause 8 was likely overlooked; clause 8’s effect on eviction (as opposed to rent collection) was not clear; and requiring Pacific to start afresh would waste costs and permit continued occupation for further months if the lease had expired. The court considered this unjust, and therefore rejected the standing challenge.

On the expiry of the lease, the court emphasised that the only signed lease evidenced on the papers was the document attached to the founding affidavit, and the respondents admitted signing it. The lease’s “Important Note” and the respondents’ signed certificate confirming they had read and understood the terms (annexure F) were treated as relevant to the weight to be attached to the written instrument.

The respondents’ version was found not to raise a genuine dispute of fact about the contract’s terms. Their account was framed as a “vague recollection”, and they could not clearly explain when and why a later different version would have been signed, particularly given that the respondents signed on 22 February 2016 while Pacific only countersigned on 14 April 2016, which the court regarded as inconsistent with the emergence of a different updated agreement in the interim.

The court also took into account objective indications inconsistent with the alleged two-year renewal option. When the respondents attempted in April 2017 to sell the business, the sale agreement included a suspensive condition referring to the conclusion of a 12-month lease ending 30 April 2018, which was inconsistent with a lease capable of extension to February 2020. The court also noted that if the respondents believed they had an option to renew, one would have expected them to exercise it before the end of February 2018. Their failure to give notice exercising an option counted strongly against their version, and their post-expiry correspondence did not rely on an exercised option but rather on assertions that Pacific had been willing to renew and on intended reliance on provisions of the Consumer Protection Act.

The court further reasoned that even if an option to renew existed, it would still require exercise to extend the lease, as recognised in Mittermeier v Skema Engineering (Pty) Ltd. The respondents did not allege that they exercised such an option. In addition, the respondents did not plead the terms of the alleged option with sufficient clarity, particularly regarding the rental during the renewal period. The court observed that an option left open for later negotiation on essential terms, such as rent, would be unenforceable, with reference to South African Reserve Bank v Photocraft (Pty) Ltd and Southernport Developments (Pty) Ltd v Transnet Ltd. This was especially significant because the premises had been substantially redeveloped and the renewal rent would not necessarily track the initial rent.

In dealing with the motion-proceedings context, the court reiterated that genuine disputes of fact cannot be decided on a balance of probability in motion proceedings, but adopted the “more robust” modern approach articulated in Fakie NO v CCII Systems (Pty) Ltd to prevent unmeritorious factual challenges from depriving an applicant of motion proceedings’ utility. Applying that approach, the court concluded that the respondents’ assertions lacked sufficient substance to prevent eviction relief.

On costs, although the lease provided for attorney-and-client costs, the court exercised its discretion not to award punitive costs. It noted that the claim was framed as a rei vindicatio (ownership-based), and it accepted that the respondents may have perceived Pacific’s conduct as harsh or unfair, without deciding that broader dispute.

5. Outcome and Relief

The court granted an eviction order directing the respondents and all persons occupying through them to vacate the premises known as 2A Rontree Avenue, Bakhoven, Western Cape by 30 September 2018, failing which the sheriff was authorised to evict them.

The respondents were ordered to pay the costs of the application jointly and severally, the one paying the other to be absolved. The court declined to award costs on the punitive attorney-and-client scale despite a contractual provision to that effect.

Cases Cited

Picardi Hotels Ltd v Thekwini Properties (Pty) Ltd (citation not provided in the judgment text).

Natal Bank Ltd v Natorp & Registrar of Deeds 1908 TS 1016.

Ward v Barrett NO & another 1962 (4) SA 732 (N).

Waikiwi Shipping Co Ltd v Thomas Barlow & Sons (Natal) Ltd & another 1978 (1) SA 671 (A).

Myburgh v Walters NO 2001 (2) SA 127 (C).

Ganes v Telecon Namibia Limited 2004 (3) SA 615 (SCA).

Unlawful Occupiers School Site v City of Johannesburg 2005 (4) SA 199 (SCA).

Pangbourne Properties Ltd & another v Your Life (Pty) Ltd & another [2013] 4 All SA 719 (GSJ).

Mittermeier v Skema Engineering (Pty) Ltd 1984 (1) SA 121 (A).

South African Reserve Bank v Photocraft (Pty) Ltd 1969 (1) SA 610 (C).

Southernport Developments (Pty) Ltd v Transnet Ltd 2005 (2) SA 202 (SCA).

Fakie NO v CCII Systems (Pty) Ltd [2006] ZASCA 52; 2006 (4) SA 326 (SCA).

Legislation Cited

Consumer Protection Act (full citation not provided in the judgment text).

Rules of Court Cited

Uniform Rules of Court, Rule 7.

Held

The court held that the respondents’ locus standi challenge failed. Even assuming the mortgage bond clause had deprived Pacific of standing when the application was launched, the later re-cession by Nedbank (expressly retrospective) could, in the special circumstances, cure any defect so as to avoid injustice and wasted costs.

The court further held that the lease had terminated by effluxion of time on 28 February 2018, and that the respondents’ allegations of an agreed renewal option or alternative version of the lease did not raise a genuine dispute of fact sufficient to defeat eviction in motion proceedings. The respondents were therefore unlawful occupiers vis-à-vis the owner’s claim to possession.

LEGAL PRINCIPLES

The judgment applied the principle that a mortgage bond clause framed as a cession of claims (and associated powers) may, depending on its proper construction and binding authority, have the effect that the cedent lacks standing in relation to ceded personal rights, while eviction based on ownership may stand on a different footing and may be linked to authority/mandate rather than a transfer of the owner’s incidents of ownership.

It applied the procedural principle that challenges to an attorney’s authority to institute proceedings should, where applicable, be raised through Rule 7, rather than being advanced indirectly in a way that does not properly engage the mechanism designed for that purpose.

The judgment endorsed that, in special circumstances, a lack of locus standi at the time proceedings are instituted may be cured through a subsequent re-cession, particularly where the applicant acted in good faith and where insisting on fresh proceedings would cause unnecessary delay and cost and produce an unjust practical outcome.

On lease renewal, the judgment applied the principle that an option to renew must be exercised to extend a lease, and that an alleged option must be sufficiently certain and enforceable on its terms, including in relation to essential terms such as rent. In motion proceedings, it applied the robust approach permitting a court to reject insubstantial or unmeritorious factual disputes that are not capable, on the papers, of credibly displacing the applicant’s entitlement to relief.

Pacific Paramount Properties (Pty) Ltd v Burchell t/a Top Wash and Another (8418/2018) [2018] ZAWCHC 124 (19 September 2018)