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[2019] ZAGPJHC 1
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Violetshelf Investments (Pty) Ltd v Chetty (24858/18) [2019] ZAGPJHC 1; [2020] 4 BLLR 401 (GJ) (28 January 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, JOHANNESBURG)
Case no: 24858/18
In
the matter between:
VIOLETSHELF
INVESTMENTS (PTY)
LTD
Applicant
and
VINESH
CHETTY
Respondent
Case
Summary:
Contract
– Lease – Business Premises - Option given to lessee to
extend the lease for a further period ‘provided
that the
parties agree in writing to the rental, conditions and provisions of
the proposed lease’ - no deadlock breaking
mechanism should the
parties fail to reach agreement – unenforceable – lessor
not obliged to extend or renew lease.
Lease
agreement had expired by effluxion of time - valid termination of
lessee’s right to possess the leased premises.
Eviction
ordered.
JUDGMENT
MEYER
J
[1]
The applicant, Violetshelf Investments (Pty) Ltd (Violetshelf), is
the owner of an immovable property, namely Noordwyk Shopping
Centre,
516 Lever Road, Noordwyk, Midrand, in which a shop - no. 005 - had
been let to the respondent, Mr Vinesh Chetty, from where
he has been
conducting the business of a liquor store under consecutive
agreements of lease since 2002. The last agreement
of lease
between Violetshelf and Mr Chetty was concluded on 30 April 2013.
It provides, inter alia, for a lease period of
five years commencing
on 1 June 2013 and expiring on 31 May 2018, and incorporates a term
giving Mr Chetty the following option
to lease the premises for a
further period:
‘
1.5 The
Lessor is prepared to let the leased premises to the Lessee for a
further period after the expiry date of this lease,
provided
that the parties agree in writing to the rental, conditions and
provisions of the proposed lease
at least 3 (three) months before such expiry date. If the
Lessee wishes to extend the lease as aforesaid, he must notify
the
Lessor of his intention to do so in writing at least 3 (three) months
before the expiry date of this lease, failing which it
shall be
deemed that he does not wish to renew the lease.’
(Emphasis
added.)
[2]
Mr Chetty, it is common cause, did not notify Violetshelf of his
intention to extend the lease three months before the expiry
date of
the lease on 31 May 2018. Primo Negotium Holdings (Pty) Ltd
(Primo), the managing agent of the shopping center owned
by
Violetshelf, by letter dated 24 April 2018, notified Mr Chetty as
follows:
‘
N
OTICE
TO VACATE IN RESPECT OF AGREEMENT OF LEASE BETWEEN VIOLETSHELF
INVESTMENTS (PTY) LTD AND VANESH CHETTY T/A LIQUORLAND IN RESPECT
OF
PREMISES IN THE PROPERTY KNOWN AS NOORDWYK CENTRE.
We act on behalf of Violetshelf
Investments (Pty) Ltd.
This letter serves to notify you that
your lease agreement expires on 31
st
May 2018. You
therefore need to vacate Shop 005, Noordwyk Shopping Centre, 516
Lever Road, Noordwyk, Midrand, by no later
than 31
st
May
2018.
Kindly ensure that the shop is left in
a neat and tidy condition and hand in the keys for the premises to
the Primo Offices situated
at 587 Makou Street, Monument Park,
Pretoria by no later than Friday 1
st
June 2018.
The owner, nor its agent Primo
Properties, or any of its employees will not be responsible for any
items of whatsoever nature left
in the shop after keys of the
premises have been returned.’
[3]
Mr Chetty’s subsequent attempts to convince Violetshelf to
nevertheless extend the lease for a further period after its
expiration, were to no avail. Violetshelf, for reasons that are
not presently relevant, does not want to have Mr Chetty as
a tenant
any longer. Thus, the present application in which Violetshelf
seeks an order for the eviction of Mr Chetty from
the premises.
[4]
Mr Chetty raises the doctrine of estoppel by representation as a
defence to Violetshelf’s claim for his eviction.
He
relies on certain representations that were made by Violetshelf or
its agents through their conduct, which representations,
according to
him, he reasonably believed to mean that the lease agreement would be
renewed on its expiration without him having
to exercise the option
in accordance with clause 1.5 of the agreement of lease. The
factual grounds which allegedly support
Mr Chetty’s
justification to invoke the defence of estoppel against Violetshelf
are essentially twofold: First, he
states that the series of
lease agreements concluded with him during the past 18 years ‘were
on the basis of Applicant’s
agents offering to conclude further
lease agreements without holding [him] to a term that requires [him]
to indicate [his] intention
to renew the lease agreement, three
months prior to its expiry’. He states that it ‘simply
became customary that
Applicant or its agents would remind [him] that
the lease is about to expire and enquire if [he] wanted to renew the
lease as they
were still happy to have [him] as a tenant’.
Second,
during 2017 Mr Chetty undertook renovations and improvements to the
premises amounting to just over R 220 000 to which Violetshelf
or its
agent consented. He states that ‘it must have been clear
to Applicant and/or their agents that he intended to
enjoy the
benefits of the refurbishments for at least another 5 years’.
[5]
The view I take of the matter, however, renders it unnecessary to
consider Mr Chetty’s defence of estoppel. Even
if it is
assumed (and I make no finding in this regard) that Violetshelf is
precluded, i.e. estopped, from relying on Mr Chetty’s
failure
to have exercised the option to extend the lease timeously and in
accordance with clause 1.5 of the lease agreement, the
offer to
extend the lease, on acceptance, would not have brought about a
renewal of the lease. The offer to extend the lease
subject to
the parties reaching agreement in writing on ‘the rental,
conditions and provisions of the proposed lease’,
is not
definite and complete and will not on acceptance effect a renewal or
extension of the lease.
[6]
In
Makete v Vodacom Ltd
2016 (4) SA 121
(CC) paras 95-103,
Jafta J sets out the current legal position regarding agreements to
agree, which are considered a species of
the
pacta de contrahendo
(agreements to agree), thus:
‘
[97]
Therefore, currently the position in our common law is that an
agreement to negotiate in good faith is enforceable if
it provides
for a deadlock-breaking mechanism in the event of the negotiating
parties not reaching consensus. The position
was reaffirmed by
the Supreme Court of Appeal in
Southernport
Developments
[
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005
(2) SA 202
(SCA) ([2005]
2 All SA 16
;
[2004] ZASCA 94].
In that case parties to a lease agreed to enter into good faith
negotiations in respect of certain specified properties.
The
agreement provided that if the parties were unable to agree on any of
the terms of the yet to be negotiated lease, the dispute
would be
referred to an arbitrator whose decision would be final and binding.’
[98]
When the defendant refused to negotiate, the plaintiff instituted
action, seeking an order directing the defendant to
negotiate in good
faith. This was met with an exception grounded on the
contention that the agreement to negotiate in good
faith, on which
the plaintiff relied, was not enforceable. Following
Firechem
Free State
[
Premier, Free State, and others v Firechem Free
State (Pty Ltd
2000 (4) SA 413
(SCA) ([2000]
3 All SA 247
;
[2000]
ZASCA 28)]
the High Court upheld the exception and dismissed
the claim. The Supreme Court of Appeal in
Firechem Free
State
had declared that-
‘
an agreement
that parties will negotiate to conclude another agreement is not
enforceable, because of the absolute discretion vested
in the parties
to agree or to disagree . . .’.
[99]
In
Southernport Developments
the court distinguished
Firechem
Free State
on the basis that the agreement in
Firechem Free
State
had no deadlock-breaking mechanism. In rejecting the
argument that the agreement was not enforceable Ponnan AJA stated:
‘
I can
conceive of no reason why the principle that
Letaba
Sawmills
[
Letaba
Sawmills (Edms) Bpk v Majovi (Edms Bpk
[1992] ZASCA 195
;
1993
(1) SA 768
(A)] so firmly establishes should be circumscribed to the
determination solely of the rental in a contract of lease. The
flexibility that
Letaba
Sawmills
introduces
must logically extend to other terms as well as the formulation of
which the parties to a contract may have chosen to
delegate to a
third party.’
[100]
Whether an agreement to negotiate in good faith is enforceable where
there is no deadlock-breaking mechanism remains
a grey area of our
law. This is because
Firechem
suggests that it is not
enforceable, while
Everfresh
[
Everfresh Market Virginia
(Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC)
(2012 BCLR 219
;
[2011] ZACC 30]
suggests otherwise. In
Everfresh
Moseneke DCJ saud:
‘
Were a court
to entertain Everfresh’s argument, the underlying notion of
good faith in contract law, the maxim of contractual
doctrine that
agreements seriously entered into should be enforced, and the value
of ubuntu, which inspires much of our constitutional
compact, may
tilt the argument in its favour. Contracting parties certainly
need to relate to each other in good faith.
Where there is a
contractual obligation to negotiate, it would be hardly imaginable
that our constitutional values would not require
that the negotiation
must be done reasonably, with a view to reaching agreement in good
faith.
[101] Happily, here the
agreement to negotiate in good faith the amount of the compensation
payable contained a deadlock-breaking
mechanism. . . . ‘
(Footnotes
omitted.)
[7]
The
general rule applicable to an agreement that the parties will
negotiate to conclude another agreement was also in a recently
reported judgment of the Supreme Court of Appeal in
Roazar
CC v The Falls Supermarket CC
2018 (3) SA 76
(SCA) para 13, reaffirmed. There, the appellant
also claimed the eviction of the respondent from a shopping centre
after
the lease had terminated through effluxion of time despite the
fact that the respondent timeously exercised an option to renew the
lease, which option entitled the respondent, as lessee, to renew the
lease on the same terms and conditions as contained in the
lease,
‘save that the rental for the renewal period shall be . . .
negotiated at the stipulated time’. The lessee
contended
‘that until the good faith negotiations have been undertaken,
the existing lease agreement should be allowed to
continue’ and
that ‘the common law should be developed to recognize the
validity of an agreement to negotiate in circumstances
where there is
no deadlock-breaking mechanism.
[8]
Tshiqi JA, who wrote the unanimous judgment for the Supreme Court of
Appeal, referred to the general rule as follows:
‘
As a general
rule an agreement that the parties will negotiate to conclude another
agreement is not enforceable because of the absolute
discretion
vested in the parties to agree or disagree (see
Premier,
Free State, and Others v Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA) ([2000]
3 All SA 247
;
[2000] ZASCA 28)
para 35;
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005 (2) SA 202
(SCA) ([2005]
2 All SA 16
;
[2004] ZASCA 94)).
However, the courts have been prepared to enforce the terms of
a contract that require parties to negotiate in good faith
in
instances where there is a deadlock breaking mechanism.’
[9]
The invitation by counsel for the lessee ‘that the common law
should be developed to recognize the validity of an agreement
to
negotiate in circumstances where there is no deadlock-breaking
mechanism’, was declined. Tshiqi JA referred inter
alia
to the complications in developing the common law thus as highlighted
in
Bredernkamp & others v Standard Bank of South Africa Ltd
2010 (4) SA 468
(SCA), by Carole Lewis in ‘
The uneven
journey to uncertainty in contract’
(2013) 76 THRHR 80
and
by the facts of the
Roazar
case, and concluded as follows
(paras 19-24):
‘
. . . I find
myself in agreement with Roazar that it would be against public
policy for a court to coerce a lessor to conclude an
agreement with a
tenant whom it does not want to have as a tenant any longer. In
instances of breach, there are adequate
legal remedies available.
It is difficult to conceive how a court, in a purely business
transaction, can rely on ‘ubuntu’
to import a term that
was not intended by the parties, to deny the other party the right to
rely on the terms of the contract to
terminate it.’
[10]
Here, the option given to Mr Chetty in clause 1.5 of the lease
agreement concluded between the parties on 30 April 2013 to
extend
the lease for a further period ‘provided that the parties agree
in writing to the rental, conditions and provisions
of the proposed
lease’ has no deadlock breaking mechanism and is, therefore,
unenforceable. Violetshelf is not obliged
to extend or renew
the lease. The agreement of lease had expired by effluxion of
time on 31 May 2018, and there was a valid
termination of Mr Chetty’s
right to possess the premises.
[11]
In the result the following order is made:
1. The respondent and all
persons occupying Shop No. 005, Noordwyk Shopping Centre, 516 Lever
Road, Noordwyk, Midrand (the premises),
are evicted from the
premises.
2. The respondent shall
vacate the premises on or before 28 February 2019, failing which the
Sheriff for the area within which the
premises are situated is
authorised to evict the respondent and all persons occupying the
premises through and under him.
3. The respondent shall
pay the costs of the application on the attorney and client scale.
________________________________
P.A. MEYER
JUDGE OF THE HIGH
COURT
Date
of hearing: 4 December 2018
Date
of judgment: 28 January 2019
Counsel
for the Applicant: RH Wilson
Instructed
by: Saleem Ebrahim Attorneys Inc. Newtown, Johannesburg
Counsel
for Respondent: B Lesomo
Instructed
by: Seokane Lesomo Inc. Norwood, Johannesburg