Brief Summary

Lease Agreement — Ejectment and Deposit Recovery — Applicant sought ejectment of the first respondent from leased premises and payment of a deposit following cancellation of the lease due to non-payment. The first respondent admitted inability to pay the deposit but occupied the premises until keys were returned. The court held that the applicant was entitled to retain the deposit until the first respondent's obligations under the lease were fully discharged, including claims for unlawful holding over and restoration costs. The late filing of affidavits by the respondents was deemed not to prejudice the applicant, allowing the court to exercise discretion in considering the matter.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned two motion applications brought in the South Gauteng High Court, Johannesburg, in which Pangbourne Properties Ltd (the applicant and lessor) sought relief arising from the cancellation of a reinstatement agreement that revived a previously cancelled lease. The relief initially included the ejectment of Pulse Moving CC (the first respondent and lessee) from certain premises, and the recovery of monies associated with a R200 000 deposit provided for in the written agreement. Stephanus Petrus Bronkhorst (the second respondent) was cited as surety for the first respondent’s obligations.

Procedurally, the dispute was enrolled on motion and was complicated by the late filing of affidavits. The answering affidavit was filed outside the time periods contemplated by the Uniform Rules, and the replying affidavit was filed approximately ten months after service of the application. Neither party brought a formal condonation application, and the respondents did not invoke Rule 30 to set aside the alleged irregular step. The court was therefore required to determine, as a preliminary procedural question, whether it should have regard to the late-filed affidavits, and thereafter to decide the merits of the contractual and monetary claims.

The general subject-matter of the dispute was the enforcement of contractual consequences flowing from non-payment of an instalment deposit secured by post-dated cheques, the applicant’s cancellation of the reinstated lease, the respondents’ liability for holding over, and the applicant’s entitlement to retain or recover monies connected to the deposit pending final determination of restoration damages in separate proceedings.

Material Facts

A written lease agreement between the parties had previously been cancelled. Thereafter, the applicant and first respondent concluded a written reinstatement agreement (referred to in the judgment as “the lease agreement”), in terms of which the first respondent was to pay a deposit of R200 000 in four instalments of R50 000 each. These instalments were to be secured by four post-dated cheques, dated 1 July 2009, 30 July 2009, 1 September 2009, and 10 October 2009 respectively. The agreement further provided that if any instalment was not paid on due date, the full deposit would immediately become due and payable in a single sum.

The respondents did not dispute the conclusion of the reinstatement agreement or its terms. The first respondent furnished the four post-dated cheques and then took occupation of the premises.

Before the first instalment fell due, the first respondent informed the applicant that it was not financially able to honour the first cheque and acknowledged that it could not comply with its deposit obligation. The applicant nevertheless presented the first cheque for payment on the due date, 1 July 2009, and it was dishonoured. Under the agreement’s acceleration clause, the full deposit of R200 000 became due and payable on 1 July 2009.

Because the first respondent failed to pay the R200 000, the applicant exercised a contractual right to cancel and cancelled the agreement on 22 July 2009. The cancellation was communicated by service of the application. The first respondent thereafter vacated the premises, so that ejectment relief became unnecessary. However, there was a dispute about when vacation occurred: the first respondent alleged it vacated on 14 August 2009. The court treated legal possession as continuing while the first respondent retained the keys. The keys were handed to the applicant on 1 September 2009, with the result that the first respondent was held liable for occupation during August 2009.

The agreement contemplated that the deposit would be available to the applicant to recover amounts including rental, costs of reinstating the premises, damages for holding over, and other charges. The applicant reduced the amount it sought in these applications to sums less than the R200 000 deposit. The relief pursued included (i) an amount corresponding to holding over for August 2009 in the sum of R45 951,32, and (ii) payment of R64 879,04 into an interest-bearing trust account pending determination of a restoration-damages claim in a separate action (case number 2010/04459).

On the papers and in argument, the court treated the claim for R45 951,32 not as contractual “rental” accrued under the (cancelled) lease as at the date of cancellation, but as a claim for damages for unlawful holding over after cancellation, quantified by reference to amounts equivalent to the former rental and charges.

Legal Issues

The court was required to determine procedural and substantive issues.

On procedure, the central question was whether affidavits filed out of time (both the answering and replying affidavits) were “before the court” and should be considered in deciding the matter, in circumstances where there was no formal condonation application and no Rule 30 application to set aside irregular steps. This involved the application of procedural rules and the court’s discretion, informed by considerations of prejudice and the interests of justice.

On the merits, the principal legal questions were whether the applicant was entitled to cancel the reinstated lease agreement following non-payment of the deposit instalment, whether the reinstatement agreement was subject to a suspensive condition that was not fulfilled (and, if so, whether the condition should be deemed fulfilled), and whether the applicant could claim payment of amounts linked to the deposit and holding over after having elected to cancel. These questions concerned the application of contractual principles to largely common-cause facts, together with interpretation of the agreement and evaluation of the respondents’ defences.

The court also had to consider ancillary defences raised by the respondents, including an alleged counterclaim and an assertion that the relief sought would cause undue hardship, which called for an evaluative assessment on the papers as to whether these defences were substantiated and legally relevant.

Court’s Reasoning

Procedural treatment of late affidavits

The court approached the objection to the late replying affidavit as an objection grounded in technical procedure. It distinguished between (i) affidavits that constitute an additional set outside the usual founding, answering, and replying sequence (which typically require leave under Rule 6(5)(e)), and (ii) affidavits that are within the usual sequence but are filed late. The court considered the respondents’ reliance on authority concerning additional affidavits to be misplaced to the extent that it was used to argue that a late replying affidavit is not “before the court” at all.

The court rejected an approach that would automatically exclude late affidavits without more. It emphasised that many matters in the Division involve parties agreeing to timelines convenient to them, and that each matter must be dealt with on its own facts. The judgment identified two routes by which late affidavits may nonetheless properly be before the court: by agreement between parties (with reference to Rule 27(1)), and where the interests of justice require the affidavit to be taken into account.

In evaluating whether to entertain the late affidavits, the court treated prejudice as the overriding factor. The respondents had been in possession of the replying affidavit for months and did not object until oral argument. They also had themselves delivered their answering affidavit late. The respondents failed to articulate any concrete prejudice arising from the delayed reply, and they had not utilised Rule 30 to set aside the alleged irregular step within the timeframe contemplated. Against this background, the court held that refusing to consider the affidavits would be unduly formalistic and would likely result in futile duplication of proceedings, increased costs, and delay, contrary to the purpose of procedural rules and the administration of justice.

Accordingly, the court admitted both the late answering and replying affidavits (to the extent such admission was necessary within the court’s discretion), and proceeded to decide the matter on its merits.

Cancellation and the effect of non-payment

On the substantive defences, the court noted that the first respondent’s answering affidavit originally asserted that cancellation was invalid because the applicant had not placed the first respondent in mora by giving an opportunity to remedy the breach. The court reasoned that this overlooked the contractual provision permitting immediate cancellation for non-payment of amounts due, while providing a seven-day rectification period only for other types of breach. This defence was not pursued in argument.

The primary defence advanced in argument was that the reinstatement agreement was subject to a suspensive condition in clause 3.1, which contemplated reinstatement “upon signature of the last party” and “against delivery of the amounts” referred to elsewhere. The respondents contended that because the deposit was not in fact paid, the “amounts” were not delivered and the agreement never became operative, with the consequence that the deposit never became due.

The court held that this defence could not succeed on either of two bases. First, it accepted that the clause could sensibly be read as referring to delivery of the four cheques, and on that interpretation the condition was satisfied because the cheques were in fact delivered. Second, even if the respondents’ interpretation were adopted (that the condition required actual payment of the amounts), the failure was caused by the first respondent’s own non-performance; the first respondent could not rely on its own conduct to avoid the contract. In that event, the condition would be regarded as fulfilled by operation of the relevant principle.

Accrued rights and claims after cancellation

A further defence asserted that the applicant, having cancelled, could not seek specific performance of a term of the agreement. The court reasoned that the defence misunderstood the distinction between enforcing the executory portions of a contract after cancellation and enforcing rights that accrued before cancellation. Relying on the principle articulated in authority, the court held that accrued rights survive termination. On the facts, the contractual right to payment of the full deposit accrued on 1 July 2009 upon dishonour of the first cheque and activation of the acceleration clause. Cancellation occurred later, on 22 July 2009. The applicant was therefore entitled to enforce that accrued right.

In addressing confusion about “rental” for August 2009, the court held that contractual rent for August had not “accrued” as at cancellation because the agreement was cancelled before August rental became due. However, that did not defeat the applicant’s claim because (i) the deposit had already accrued in July, and (ii) after cancellation the applicant could claim damages for unlawful holding over. The court treated the amount claimed under the second application as a holding-over claim, not as rent claimed by way of specific performance. It further referred to the contractual clause that, if the tenant remained in occupation after cancellation, it would continue to pay amounts equivalent to the rental and other charges; the court used this to support the quantification of holding-over damages by reference to the lease amounts.

The court also dealt briefly with a purported counterclaim raised by the respondents. It noted that this had been addressed in the replying affidavit in the relevant application and that the applicant had allowed a credit of R12 774,75. The court found that the respondents did not pursue the counterclaim convincingly, and it did not constitute a defence to the relief sought.

Finally, the respondents’ contention that the relief would cause undue hardship was not pressed and was unsupported by facts or legal argument. The court was not able to uphold it.

Costs

The court had regard to contractual terms providing for attorney-and-client costs where the applicant instituted proceedings to enforce its rights under the agreement, and a similar cost provision in the suretyship binding the second respondent. This underpinned the punitive costs order, subject to a limitation on counsel’s fee for a particular appearance.

Outcome and Relief

The court held that the respondents’ procedural objection to the late replying affidavit was overly technical and unsupported by prejudice, and it admitted the late answering and replying affidavits in order to determine the real merits.

On the merits, the court found that the applicant was entitled to cancel following non-payment, that the agreement was operative (and in any event the respondents could not rely on their own non-performance to avoid it), and that the applicant could enforce accrued rights, including the deposit becoming due on 1 July 2009. The respondents’ defences failed.

The court granted relief ordering the respondents, jointly and severally, to pay R64 879,04 to the applicant’s attorneys to be held in an interest-bearing trust account pending final determination of separate proceedings under case number 2010/04459. It also ordered the respondents, jointly and severally, to pay the applicant R45 951,32, together with interest at 15,5% per annum calculated from 4 September 2009 to date of payment.

The respondents were ordered, jointly and severally, to pay the applicant’s costs of both applications (case numbers 2009/30282 and 2009/37649) on the attorney-and-client scale, with the qualification that counsel’s fee for the appearance on 4 November 2010 was limited to a single appearance fee on that scale.

Cases Cited

Alphedie Investments (Pty) Ltd v Greentops (Pty) Ltd 1975 (1) SA 161 (T).

Anglo Operations Ltd v Sandhurst Estates (Pty) Ltd 2007 (2) SA 363 (SCA).

Bangtoo Bros and Others v National Transport Commission and Others 1973 (4) SA 667 (N).

Basson v Bester 1952 (3) SA 578 (C).

Beinash v Wixley [1997] ZASCA 32; 1997 (3) SA 721 (SCA).

Brenner’s Service Station and Garage (Pty) Ltd v Milne and Another 1983 (4) SA 233 (W).

Cohen NO v Nel and Another 1975 (3) SA 936 (W).

Federated Trust Ltd v Botha 1978 (3) SA 645 (A).

Hart and Another v Nelson 2000 (4) SA 368 (ECD).

Hessel’s Cash and Carry v SA Commercial Catering and Allied Workers Union 1992 (4) SA 593 (E).

Hudson v Hudson and Another 1927 AD 259.

James Brown and Hamer (Pty) Ltd (previously named Gilbert Hamer Co Ltd) v Simmons NO 1963 (4) SA 656 (A).

Joseph and Jeans v Spitz and Others 1931 WLD 48.

Khunou and Others v M Fihrer and Son (Pty) Ltd and Others 1982 (3) SA 353 (W).

L F Boshoff Investments (Pty) Ltd v Cape Town Municipality (2) 1971 (4) SA 532 (C).

Malan v Dippenaar 1969 (2) SA 59 (O).

Matyeka v Kaaber 1960 (4) SA 900 (T).

McDuff and Co Ltd (In Liq) v Johannesburg Consolidated Investment Co Ltd 1924 AD 573.

McGill v Vlakplaats Brickworks (Pty) Ltd 1981 (1) SA 637 (W).

Moluele and Others v Deschatelets NO 1950 (2) SA 670 (T).

Ncoweni v Bezuidenhout 1927 CPD 130.

National Director of Public Prosecutions In Re: An Application for the Issuing of a Letter of Request (North Gauteng High Court, case no 3771/07, 14 September 2007) (unreported).

Republikeinse Publikasies (Edms) Bpk v Afrikaanse Pers Publikasies (Edms) Bpk 1972 (1) SA 773 (A).

Rieseberg v Rieseberg 1926 WLD 59.

SOS Kinderhof International v Effie Lentin Architects 1993 (2) SA 481 (Nm).

Sealed Africa (Pty) Ltd v Kelly and Another 2006 (3) SA 65 (W).

Standard Bank of SA Ltd v Sewpersadh and Another 2005 (4) SA 148 (C).

Szedlacsek v Szedlacsek and Others 2000 (4) SA 147 (E).

Trans-Africa Insurance Co Ltd v Maluleka 1956 (2) SA 273 (A).

Transvaal Government v The Standerton Farmers’ Association 1906 TS 21.

Transvaal Racing Club v Jockey Club of South Africa 1958 (3) SA 599 (W).

Venter v Van Wyk (North Gauteng High Court, case no 30323/04, 27 June 2005) (unreported).

Viljoen v Federated Trust Ltd 1971 (1) SA 750 (O).

Vitorakis v Wolf 1963 (3) SA 928 (W).

Walker’s Fruit Farms Ltd v Sumner 1930 TPD 394.

Waltloo Meat and Chicken SA (Pty) Ltd v Silvy Luis (Pty) Ltd [2008] ZAGPHC 136; 2008 (5) SA 461 (T).

Wolf v Zenex Oil (Pty) Ltd 1999 (1) SA 652 (W).

Legislation Cited

Supreme Court Act 59 of 1959, section 43.

Rules of Court Cited

Uniform Rules of Court, Rule 6(5)(e).

Uniform Rules of Court, Rule 27(1).

Uniform Rules of Court, Rule 30.

Held

The court held that the late answering and replying affidavits should be admitted and considered because the objection was highly technical, no prejudice was shown, and refusing to consider the affidavits would be inconsistent with deciding the dispute on its real merits and would likely generate wasteful duplication of proceedings.

It held that the reinstatement agreement was operative; the respondents’ reliance on an alleged suspensive condition failed because the condition was either satisfied by delivery of the post-dated cheques or deemed fulfilled where non-fulfilment was caused by the first respondent’s own non-performance. The applicant’s right to the full deposit accrued when the first cheque was dishonoured and the acceleration clause operated on 1 July 2009, and this accrued right was enforceable notwithstanding later cancellation on 22 July 2009.

It held that the applicant’s claim for August 2009 was properly characterised as damages for unlawful holding over rather than rent claimed by way of specific performance. The respondents’ remaining defences, including a counterclaim and undue hardship, were rejected on the papers and in light of the manner in which they were pursued.

LEGAL PRINCIPLES

A court retains a discretion, guided primarily by prejudice and the interests of justice, to admit and consider affidavits that are filed out of time, particularly where parties have not invoked available procedural remedies to set aside irregular steps and where exclusion would elevate technicality over the determination of disputes on their merits.

Procedural rules are instruments to secure the inexpensive and expeditious completion of litigation and are not an end in themselves. In the absence of prejudice, technical objections to imperfect procedural steps should not obstruct the resolution of the substantive dispute.

A party who cancels a contract cannot enforce the executory portion of the contract after cancellation, but may enforce rights that accrued prior to cancellation. Where a contractual right to payment has accrued before the election to cancel, cancellation does not extinguish that accrued right.

A contracting party cannot rely on the non-fulfilment of a condition where that non-fulfilment was caused by that party’s own conduct; in such circumstances, the condition may be treated as fulfilled for purposes of enforcing the agreement.

Where a tenant remains in legal possession after cancellation, including by retaining keys, the landlord may claim damages for holding over, which may be quantified by reference to amounts equivalent to the former rental and contractual charges where the agreement so provides.

Pangbourne Properties Ltd v Pulse Moving CC and Another (2009/30282, 2009/37649) [2010] ZAGPJHC 121; 2013 (3) SA 140 (GSJ) (19 November 2010)