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[2019] ZAECPEHC 63
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John Michael (Pty) Ltd v Bex Hotel (Pty) Ltd (2335/19) [2019] ZAECPEHC 63 (19 September 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
Case
No: 2335/19
In the matter between:
JOHN MICHAEL (PTY)
LTD
Applicant
v
BEX HOTEL (PTY)
LTD
Respondent
Neutral citation
:
Coram
:
Swanepoel
AJ
Heard
:
13 September 2019
Judgment
delivered
: 19 September
2019
JUDGMENT
[1]
The
applicant is a private company, John Michael (Pty) Ltd, which is the
registered owner of certain immovable property more fully
described
as Erf 2399 Summerstrand, Nelson Mandela Bay Municipality, Eastern
Cape (“
the
property
”)
[1]
.
The respondent concluded a lease with the applicant on 3 December
2015 at Port Elizabeth, and carried on the business of
a hotel from
the property, known as the Summerstrand Hotel.
[2]
In this application, the applicant seeks the ejectment of the
respondent
from the property and of all those holding occupation
under it, following the cancellation of the lease. The applicant
avers that
the respondent had committed material instance of breach
of the lease, which entitled the applicant to cancel the lease and to
retake possession of the property.
[3]
The respondent opposes the relief sought, contending that the parties
never intended to hold each other to the terms of the admittedly
concluded lease and asserting further, somewhat inconsistently,
that
the monthly rental as stipulated was not the actual rental and was
only supposed to cover the amount of a bond repayment to
Nedbank in
respect of the property.
[4]
In the respondent’s heads, the issue to be determined is
identified
as being “
whether the parties intended the
written lease, and in particular the payment of the rental, to be
binding on them
”.
[5]
The
respondent contends that the parties “
never
intended that the relationship between them would be a commercial one
in the sense that applicant would lease the premises
to the
Respondent for profit
”.
[2]
At the end of the financial year there would be a balancing of the
books, as it were, and the respondent was “
never
expected to actually comply with the terms of the written lease, nor
did it
”.
[3]
[6]
The question posed in paragraph 17 of the respondent’s heads:
“
what was the nature of the contract and what were the
terms
”, is answered by reference to paragraph 5 (on page
103) of respondent’s answering affidavit as follows:
“
The
two entities existed for tax efficient reasons and were never
intended to be lessor and lessee, the reference to a “lease”
being a misnomer
”.
[7]
With
reference to a preceding oral lease which had been in place from 1995
to 2015, with terms allegedly “
not
detailed by either party (probably because there was never any
agreement in this regard)
”,
it is argued
[4]
that “
had
it not been for the Nedbank mortgage bond, the so-called oral lease
would probably have continued to this day
”.
It is further suggested in respondent’s heads,
[5]
that “
what
was probably intended by the persons who thought up the scheme (in
1995) was a partnership
”.
[8]
Applicant’s registered ownership of the property and the
conducting
of the business of a hotel; the conclusion of the written
lease; its duration (with a renewal period of 10 years from 1
December
2015), as well as the rental as stipulated in writing, are
all admitted.
[9]
The
duration period,
[6]
as well as
the rental for the period commencing 1 December 2015 of R380 354.18
per month, to be paid free of deduction or
set-off as required on the
due date, was specified in annexure “A” to the lease
(record page 53 read with clauses 3
and 4 on pages 31 and 32).
[10]
Of
relevance to the contentions of the respondent are the following
admitted provisions of the lease, namely clauses 18.1 to 18.4:
[7]
“
18.1
This lease constitutes the whole agreement between the parties and no
warranties or representations, whether
express or implied, not stated
herein shall be binding on the parties.
18.2
No agreement at variance with the terms and conditions of this
agreement and no consensual cancellation
hereof or any of the terms
hereof shall be binding on the parties unless reduced to a written
agreement signed by or on behalf
of the parties.
18.3
No relaxation or indulgence which the Lessor may show to the Lessee
shall in any way prejudice or be
deemed to be a waiver of its rights
hereunder, and in particular, no acceptance by the Lessor of rent
after due date (whether on
one or more occasions) nor any other act
or omission by the Lessor or its servants shall preclude or estop it
from exercising any
rights enjoyed by it hereunder by reason of any
subsequent payment not being made strictly on due date or by reason
of any subsequent
breach by the Lessee.
18.4
Unless otherwise stated by the Lessor in writing, the receipt by the
Lessor or its agent of any rent
or other payment shall in no way
whatsoever prejudice or operate as a waiver, rescission or
abandonment of any cancellation or
rights of cancellation effected or
acquired prior to such receipt
”.
[11]
Accordingly, the lease contains an integration provision, an
entrenched non-variation clause
requiring writing and provisions
expressly excluding reliance on waiver or estoppel. When a contract
is reduced to writing, the
writing is in general regarded as the
exclusive memorial of the transaction. In a suit between the parties
to such a contract,
no evidence to prove its terms may be given save
the document or secondary evidence of its contents, nor may the
contents of such
document be contradicted, altered, added to or
varied by parol evidence.
Vide
:
Union Government v Vianini
Ferro-Concrete Pipes (Pty) Ltd
1941 AD 43
at 47.
[12]
The respondent’s contentions to suggest that the lease is
something other than a
lease, attracts a substantive
onus
:
Vasco Dry Cleaners v Twycross
1979 (1) SA 603
(A)
at 615 to
616;
Michau v Maize Board
2003 (6) SA 459
(SCA)
at 464 E.
[13]
In motion proceedings, a party such as the respondent
in casu
,
which has admitted the conclusion of a written lease, will be faced
with considerable difficulty to acquit itself of the onus
to persuade
a court that the lease is not a lease, but something different.
(Compare
Michau v Maize Board
,
supra
, at 464 D). The
well-known approach to disputes on affidavits, as enunciated in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3)
SA 623
(A)
, presents a major evidential hurdle to the respondent.
[14]
As a matter
of substantive law, the validity of
Shifren
-clauses
[8]
is beyond doubt – contracting parties may validly agree in
writing to an enumeration of their rights, duties and powers in
relation to the subject-matter of a contract, which they may alter
only by again resorting to writing.
Vide
:
Brisley
v Drotsky
2002 (4) SA 1
(SCA)
at
paragraph [89], per Cameron JA.
[15]
The parties have
in casu
recorded their lease agreement in a
document which they themselves have described as their “
whole
agreement
”. Consequently, the respondent’s contention
that it is not a “commercial” lease and supposedly not a
binding
document, amounts to evidence being tendered on affidavit
which contradicts or modifies the meaning of the lease. This amounts
to tendering inadmissible evidence:
Johnson v Leal
1980 (3) SA 927
(A)
at 943 B.
[16]
Evidence of the intention of the parties relating to negotiations or
understandings prior
to the conclusion of the lease, are also
inadmissible:
Van Wyk Rottcher’s Saw Mills (Pty) Ltd
1948
(1) SA 983
(A)
at 991;
Van Aardt v Galway
2012 (2) SA 312
(SCA)
at paragraph [9];
The City of Tshwane Metropolitan
Municipality v Blair Atholl Homeowners Association
2019 (3) SA 398
(SCA)
at paragraphs [76] and [77].
[17]
The
respondent asserts correctly that an established exception to the
parol evidence rule
[9]
relates
to proof of a simulated contract, with reference to
Kilburn
v Estate Kilburn
1931 AD 501
at 507. That may be so, but the respondent, which has not brought any
counter-application, merely asserts that an arrangement was
concluded
between the shareholders of the applicant and the shareholders of the
respondent to the effect that the respondent would
be responsible for
the day-to-day affairs of the hotel business, with the respondent
“
intended
to be the income generating entity and the property company (the
applicant) to build asset value
”.
[10]
[18]
It is
vaguely asserted that this arrangement was suggested by the auditors
of two companies, for “
fiscal
”
reasons, and that “
[I]n
short, the lease between the applicant and the respondent was never
intended to be a commercial transaction in terms of which
the
applicant made a profit
”.
[11]
[19]
However, it
is expressly asserted in the respondent’s answering affidavit
that a Nedbank loan secured by a mortgage bond registered
over the
property was
inter
alia
conditional “
on
there being a written lease agreement between the applicant and the
respondent
”
(in place).
[12]
In the
replying affidavit, this is confirmed:
“
It
furthermore required that this lease agreement be ceded to it as
security. Nedbank, being the bankers of both the applicant and
the
respondent, conducted a due diligence enquiry before agreeing to the
loan and satisfied itself that payments were being made
between the
two entities in respect of rental. Should this not have been the
case, Nedbank would not have granted the loan as the
applicant would
not have had the means to service the monthly mortgage bond
repayments
”.
[20]
That
payments had been made by the respondent to the applicant; that the
applicant’s primary source of income was rental from
the lease
and that the loan from Nedbank to the applicant was granted on the
basis that it would receive such income, are not in
dispute.
[13]
The averments that “
such
rental that was payable
”
(paragraph 5.18, paragraph 107) “
was
dealt with by the auditors by way of authorized loan account book
entries
”,
if anything affirm the existence of a lease.
[21]
The history relating to disputes between the deponent’s own
sister (Inge), leading
to the deponent being declared a delinquent
director, does not change the material facts. However,
en
passante
, on 10 April 2018 this Court per Majiki J, did declare
the respondent’s deponent, Mark Keiser Hartmann, a delinquent
director
in terms of
section 162
(5)(c) of the
Companies Act 71 of
2008
, and removed him as a director. However, Hartmann applied for
leave to appeal, which application effectively suspended the court
order (paragraph 5.23 of the answering affidavit, record page 108).
[22]
Applying
Plascon-Evans
, and having regard to:
(1)
the admitted, common cause or undisputed facts;
(2)
the
onus
resting on the respondent,
I
find that the respondent has failed to show that the lease admittedly
concluded (“TJH1”, record pages 27 to 57), is
not valid,
or is anything other than a lease in respect of the property.
[23]
Has the applicant showed that the lease has been validly cancelled,
entitling the applicant
to re-take possession of the property
qua
owner? The applicant established that:
(a)
respondent failed to pay the rental due and remained in default for
seven days after written
notice duly delivered in the manner
stipulated by clause 17.1.1 of the lease (record page 45) –
respondent itself avers that
it only paid “
a round figure of
R200 000 per month
” (paragraph 13.3 on page 113);
(b)
the respondent as lessee “
repeatedly breached
” a
term of the lease (by short-paying or by not paying as stipulated);
(c)
Nedbank took judgment against the respondent for a total sum of
R10 478 995
(see paragraph 14.1, page 115 read with the
founding papers, paragraph 9.2, pages 11 and 12);
(d)
another company, Kallvest (Pty) Ltd t/a Kallvest Security, also
obtained default judgment
against the respondent in the sum of
R299 261.73 together with interest and costs, on 31 July 2009
(paragraph 9.3 on page
12, which is not denied in paragraph 15 of the
answering papers on page 116).
[24]
Although the respondent seeks to challenge the applicant’s
legal entitlement to have
cancelled the lease, the existence of the
demand of 1 April 2019 and of the applicant’s notice of
cancellation of 31 July
2019 are not denied.
[25]
The applicant merely has to establish one legally valid ground for
cancellation of the
lease. Non-payment of the stipulated rental is
not disputed and the receipt of the cancellation letter is also not
disputed. That
Nedbank has taken judgment against the respondent for
a significant amount in excess of R10 million, is further undisputed.
Respondent
contends that the judgment relates to the respondent’s
liability as surety, but the lease does not preclude cancellation if
judgment was taken for this purpose.
[26]
The primary basis on which the respondent seeks to disavow any
liability under the lease,
namely that the admittedly concluded lease
was not an enforceable agreement, because it was not a “
commercial
”
lease or was more indicative of a partnership agreement, has not been
established by the respondent.
[27]
The evidence tendered by respondent’s deponent as to what the
lease really was, or
was meant for, or what it was not meant for, is
inadmissible. See further:
KPMG Chartered Accountants (SA) v
Securefin Ltd and Another
2009 (4) SA 399
(SCA)
at paragraph
[39].
[28]
The respondent has not acquitted itself on motion of the
onus
to establish simulation.
[29]
If follows that the applicant should be successful in obtaining an
order against the respondent
and those occupying under it, to vacate
the applicant’s property.
[30]
During argument, the respondent belatedly sought to rely on an
arbitration clause contained
in the selfsame lease of which the
validity is being challenged. However, an immediate response to this
approach is that it amounts
to approbating and reprobating, or viewed
differently, of a guilty contracting party inadmissibly seeking
compliance by the innocent
party with a term of the agreement (in
this instance, an agreement disputed by the respondent). This is
legally unsound. The respondent
cannot have it both ways. He has made
his bed (pertinently challenging and in effect repudiating the
validity and enforceability
of the lease) – now the respondent
must lie in its bed (it cannot seek to hold applicant to a term of
the very agreement
the respondent itself has repudiated). Compare:
Janowsky and Others v Payne
1989 (2) SA 562
(CPD)
at 564 I to
J, referring to
Ross T Smyth & Co Ltd v T D Bailey, Son &
Co
[1940] 3 All ER 60
(HL)
;
Vromolimnos (Pty) Ltd and Another
v Weichbold and Another
1991 (2) SA 157
(C)
at 163 C to D;
CB
Bradfield
:
Christie’s Law of Contract
,
Seventh
Edition
, LexisNexis, 612. Respondent’s short-payment is
moreover, undisputed. Performance being tendered substantially
inconsistent
with such party’s actual obligations constitutes
material breach, entitling the counterparty to resile from the
agreement.
[31]
From the bar, another arrow was added to the respondent’s
weakening bow. It was contended
that in the event of the Court
finding that the lease was a lease and enforceable at that, the
applicant should have referred the
matter to arbitration. The
respondent now tried to raise this as a defence. But this again
amounts to the respondent seeking to
have it both ways. In any event,
such a referral to arbitration was never pertinently and procedurally
correctly pleaded, probably
by reason of its inherent inconsistency
with the primary defence raised.
[32]
Even if the severability principle is accepted (
Wayland v Everite
Group
1993 (3) SA 946
(W)
;
Cool Ideas 1186 CC v Hubbard and
Another
2014 (8) BCLR 869
(CC)
, paragraph [46], footnotes 39 and
129) and one takes account of the fact that vitiation of the lease as
a whole – by fraud
or otherwise – is not in issue
(
Northwest Provincial Government and Another v Tswaing Consulting
and Others
2007 (4) SA 452
(SCA)
at paragraph [13]), the dispute
resolution clause does not anticipate arbitration to resolve the
validity of the lease itself.
The clause does not even refer to “
any
question as to the enforceability of this lease
”, which
is often used to allow and anticipate such an arbitrable dispute
(compare:
North-East Finance (Pty) Ltd v Standard Bank of South
Africa Ltd
[2013] 3 All SA 291
(SCA)
). The clause
in casu
(clause 23, record pages 48 and 49) refers to questions of
interpretation; implementation; rights and obligations; termination
and also to rectification. The dispute resolution clause as contained
in the lease, was
not
intended to cover the validity or
enforceability of the lease itself.
[33]
It does not suffice to merely refer during argument to the existence
of an arbitration
clause in this manner:
PCL Consulting (Pty) Ltd
t/a Phillips Consulting SA v Tresso Trading 119 (Pty) Ltd
2009 (4) SA
68
(SCA)
at 72. No arbitrable dispute was ever correctly and
pertinently identified:
Telecall (Pty) Ltd v Logan
[2000] ZASCA 97
;
2000 (2) SA 782
(SCA)
, paragraphs [11] and [12] and in any event, no stay of the
proceedings was applied for as envisaged by
section 6
of the
Arbitration Act 42 of 1965
.
[34]
That was then the penultimate attempt of respondent’s
representative to ward off
the inevitable. The last one was a request
for a referral to oral evidence, but it was not put forward with
persuasion. Mr Mullins
conceded that in the event of a finding
against the respondent on the main issue, i.e. whether the lease was
anything other than
a lease and whether same was enforceable, it
would serve no purpose to refer the matter to oral evidence. In my
view, respondent’s
ship has sunk and cannot be salvaged by this
procedural mechanism.
[35]
The urgency aspect has largely become academic. A degree of urgency
clearly attached to
the matter, heads were delivered and the matter
was properly argued.
[36]
ACCORDINGLY, THE FOLLOWING ORDER IS MADE
:
(1)
The applicant’s cancellation of the written Agreement of Lease
dated 3 December 2015,
marked “TJH1” to the founding
papers, is declared to be valid;
(2)
The Respondent and all those who hold occupation under it are
directed to vacate Erf 2399
Summerstrand, Nelson Mandela Bay
Municipality (“
the property
”) within a period of 7
(seven) calendar days from date of service of this order on the
respondent;
(3)
In the event of the respondent and those holding occupation under it
failing to comply with
the terms of paragraph (2) of this order, the
sheriff of this Court is hereby authorised, upon being provided with
a Writ of Ejectment
to be procured by the applicant from the
Registrar, to enforce compliance with this court order by evicting
the respondent and
all those holding occupation under it, from the
property;
(4)
The respondent is directed to pay the applicant’s costs of
suit.
________________
Swanepoel
AJ
APPEARANCES
:
FOR
THE APPLICANT: ADV
JG RICHARDS instructed by Kaplan
Blumberg
Attorneys, PORT ELIZABETH
FOR
THE RESPONDENT: ADV
NJ MULLINS SC instructed by Lexicon
Attorneys,
PORT ELIZABETH
[1]
Applicant’s
ownership of the property is not in dispute.
[2]
Respondent’s
heads, paragraph 16.
[3]
Ibid
.
[4]
In paragraph
17 of respondent’s heads.
[5]
Paragraph 18.
[6]
Which also
refers in annexure “A” to the preceding period
from 1995
to 2015 (record page 53).
[7]
Record page
47.
[8]
Derived from
the decision in
SA
Sentrale Ko-Op Graanmaatskappy Bpk v Shifren
1964 (4) SA 60
(A)
.
[9]
Johnson
v Leal
,
supra
.
[10]
Record pages 103
and 104.
[11]
Paragraph 5.6 on
page 105 of the record.
[12]
Answering
affidavit, paragraphs 5.11 and 5.12 on page 106.
[13]
Record page 106.