Brief Summary

Lease — Summary judgment — Application for payment of arrear rental and ejectment — Applicant, a Close Corporation, sought summary judgment against the trustees of the Pieter van der Merwe Family Trust for unpaid rental under a long-term lease agreement — Respondents contended that the lease was validly amended by a resolution and minutes of a trustees' meeting, despite the non-variation clause requiring written amendments signed by both parties — Court held that the resolution and minutes did not constitute a valid amendment to the lease agreement as the applicant was not a party to these documents, and thus the Trust was obliged to pay the monthly rental as per the original agreement.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings took the form of an application for summary judgment in the High Court of South Africa, Free State Division, Bloemfontein. The applicant, 412 Brandfort CC, sought final relief against the first to third respondents in their capacities as trustees of the Pieter van der Merwe Familie Trust (“the Trust”). The fourth respondent was the Registrar of Deeds, Bloemfontein, cited for purposes connected to the registration and cancellation of a notarial long-term lease.

Procedurally, the matter came before the court as a summary judgment application launched on 17 January 2023, following the institution of action by the applicant for arrear rental and ejectment. The respondents opposed summary judgment by advancing defences including an alleged variation of the lease, estoppel, waiver, and prescription in respect of part of the claim.

The dispute concerned the consequences of alleged non-payment under a notarial long-term lease agreement registered against the title deed of a farm property, and whether the Trust remained bound to pay monthly rental in cash (together with agreed pecan nut income provisions), or whether that obligation had been validly altered by trustee resolutions and related documents.

Material Facts

The applicant was a close corporation and the registered owner of the immovable property described as Farm Franz Hoek No. 412, District Brandfort, Free State Province, held under a specified title deed. A written long-term lease agreement was concluded on 2 March 2018 between the applicant (as lessor) and the Trust (as lessee). The lease was executed before a notary public and was registered in the Deeds Registry against the property’s title deed.

The Trust took occupation of the property during October 2016 and remained in occupation at the time of the proceedings. Under clause 2 of the lease, the parties agreed to a monthly rental of R6 000, subject to an annual escalation of 8%, and an additional component of 70% of the net income of the pecan nuts harvested on the property. The lease also contained an entire agreement provision, a non-variation clause requiring amendments to be in writing and signed by the parties, and a clause providing that indulgences would not amount to waiver or novation.

On 26 April 2022, the applicant gave notice of cancellation of the lease on the basis that the Trust had not made monthly rental payments as agreed. The applicant’s case for summary judgment proceeded on the footing that the Trust was in arrears and that cancellation and ejectment were justified.

A central area of factual dispute, as framed in the opposing affidavit, concerned the respondents’ assertion that the monthly rental obligation in clause 2.1 had been amended after conclusion of the lease. The respondents relied on a resolution dated 9 April 2018 adopted by the trustees of the De Beers Trust (linked to the applicant’s sole membership at the time, via the late Mr de Beer), and minutes of a trustees’ meeting of the Trust dated 29 April 2018, which purportedly recorded acceptance of the arrangement. The respondents alleged that the rental would be paid via premiums on a Discovery policy on the life of Mr Pieter Nicolaas van der Merwe (referred to as “van der Merwe Senior”), with the policy amount stated to be R6 000 000, and that in certain circumstances rent would be deemed paid until 30 June 2037.

The respondents also raised that the pecan harvest first produced in 2022 yielded a small amount which was paid to the De Beers Trust, allegedly accepted on behalf of the applicant, and they pleaded prescription in respect of a portion of the arrear rental claim (quantified as R203 130.88) said to fall outside a three-year period.

In addition, the respondents contended that the second respondent had been incorrectly cited as a trustee at the time action was instituted, although the court noted documentary material showing his prior authorisation and participation in Trust minutes that were relied upon in the defence.

Legal Issues

The principal legal question identified by the court was whether the Trust remained obliged to pay the monthly rental to the applicant in accordance with clause 2.1 of the registered notarial lease.

That question required determination of issues concerning the application of law to fact, particularly whether the respondents’ documents and allegations disclosed a legally recognisable defence capable of defeating summary judgment. This included whether the purported variation complied with the lease’s non-variation clause, and whether doctrines such as estoppel or waiver could operate to prevent the applicant from enforcing the written terms.

A further legal issue concerned the summary judgment standard under Rule 32, namely whether the opposing affidavit disclosed fully the nature and grounds of the defence and the material facts relied upon, and whether the alleged defences were bona fide and good in law, either to the whole claim or a part thereof.

Finally, the court had to address the effect of the issue raised about the citation/joinder of the second respondent as trustee, and the extent to which the defence of prescription warranted leave to defend part of the claim notwithstanding the grant of summary judgment on the balance.

Court’s Reasoning

The court approached the matter against the background that summary judgment is an extraordinary and stringent remedy, granted only where the plaintiff’s case is effectively unimpeachable and the defendant’s defence is not genuinely triable. The court referred to authority emphasising that summary judgment should be granted only where the court has no reasonable doubt that the plaintiff is entitled to judgment, and that the defendant must disclose in the opposing affidavit the nature and grounds of the defence and the material facts relied upon to show a bona fide defence.

On the alleged variation, the court applied the principle that a non-variation clause entrenches the written contract against informal variation, as developed in SA Sentrale Ko-op. Graanmaatskappy Bpk v Shifren en Andere and reaffirmed in Brisley v Drotsky. While the respondents sought to rely on authority recognising that contractual requirements of writing and signature need not necessarily be embodied in a single document (invoking Trever Investments (Pty) Ltd v Friedhelm Investments (Pty) Ltd), the court’s reasoning turned on a more fundamental point: the documents relied upon did not objectively evidence a contractual amendment between the applicant and the Trust.

In particular, the court accepted the applicant’s argument that, on the objective facts, the applicant was not a party to the resolution and the minutes relied upon. The court reasoned that neither document demonstrated the existence of an agreement between the contracting parties to the lease to amend clause 2.1. The court further reasoned that the resolution could not be characterised as an offer by the applicant intended to create a binding amendment upon acceptance, and that even if it were treated as such, the Trust minutes did not constitute an acceptance when regard was had to the contents of the resolution. On this basis, the asserted variation failed to constitute a defence that was both bona fide and good in law for purposes of summary judgment.

The court also considered the respondents’ reliance on section 29 of the Close Corporations Act 69 of 1984, which regulates when a trustee may hold a member’s interest. The judgment referred to authority explaining that where a trust has multiple trustees, a trustee must be appointed as representative to hold membership, and the member is the representative trustee rather than the trust itself. The court cited this framework in addressing the respondents’ attempt to link the late Mr de Beer’s capacities to the alleged amendment, and it noted that the statute provides that, as between member and corporation, the member personally has obligations and rights, and the corporation is not obliged to observe trust provisions or agreements.

On estoppel, the respondents alleged that the late Mr de Beer negligently misrepresented that the lease had been amended and that he had authority to conclude such amendment on behalf of the applicant. The court accepted the general proposition that estoppel may bar a representor from reverting to the true position, but emphasised that estoppel cannot operate where it would bring about a result not permitted by law, including circumventing entrenched non-variation requirements. The court relied on the reasoning in HNR Properties CC v Standard Bank of South Africa Ltd and Nyandeni Local Municipality v MEC Local Government and Traditional Affairs and Another, which caution against using estoppel to undermine the Shifren principle. The court also reasoned that it was not suggested the trustees of the Trust were unaware that variation had to be in writing and signed by both parties, and accordingly found the estoppel defence misplaced and unsustainable in law.

On waiver, the respondents alleged that the applicant’s conduct amounted to a waiver of clause 2.1. The court rejected this defence with reference to the lease provisions confirming that the agreement was entire and that indulgences or relaxations would not constitute a waiver of rights. The court concluded that the waiver defence, as raised, did not amount to a bona fide defence good in law for purposes of resisting summary judgment.

Regarding the point that the second respondent was incorrectly cited, the court noted that the Master’s letter of authority reflected that the second respondent had been authorised to act as trustee at some point, and that his role was also reflected in the minutes that formed part of the respondents’ own defence. The court reasoned that, in any event, the issue did not invalidate the summons because the other trustees were properly before court. It accepted that the applicant sought to cure any defect by amendment and, relying on Standard Bank of South Africa Ltd v Roestof, treated the error as a technical defect causing no prejudice where the opposing papers showed the respondents understood the case they had to meet.

Ultimately, the court concluded that, save for prescription, the respondents had not raised defences that were good in law to justify refusal of summary judgment. The prescription defence, however, warranted leave to defend a quantified portion of the arrear rental claim, resulting in a split outcome: final relief for part of the monetary claim, with the remainder to proceed in the ordinary course.

On costs, the court applied the general rule that costs follow the result and held that the applicant had substantially succeeded, justifying a costs order in its favour.

Outcome and Relief

The court granted summary judgment substantially in favour of the applicant and confirmed the cancellation of the notarial long-term lease agreement concluded on 2 March 2018.

The court ordered the first and third respondents, in their capacities as trustees, to pay the applicant arrear rental of R390 565.38, together with interest at 15.5% per annum a tempore morae from date of judgment to date of payment.

The court granted the first and third respondents leave to enter defence in respect of the portion of the arrear rental claim quantified at R203 130.88, based on the defence of prescription.

The court directed the fourth respondent, the Registrar of Deeds, to cause the cancellation of the registration of the notarial long-term lease agreement (under the referenced registration number) against the title deed of the farm.

The Trust was ordered to vacate the farm property within 14 days of the order.

Costs were awarded against the first and third respondents, to be paid jointly and severally, the one paying the other to be absolved.

Cases Cited

Maharaj v Barclays National Bank Ltd 1976 (1) SA 418 (A)

Tesven CC v South African Bank of Athens 2000 (1) SA 268 (A)

Edwards v Menezes 1973 (1) SA 299 (NC)

SA Sentrale Ko-op. Graanmaatskappy Bpk v Shifren en Andere 1964 (4) SA 760 (A)

Brisley v Drotsky 2002 (4) SA 1 (SCA)

Johnston v Leal 1980 (3) SA 927 (A)

Trever Investments (Pty) Ltd v Friedhelm Investments (Pty) Ltd 1982 (1) SA 7 (A)

Vermeulen & Another v Mellet N.O. & 2 others [2021] ZAFSHC 141; [2021] 4 All SA 281 (FB) (27 May 2021)

Tumileng Trading CC v National Security & Fire (Pty) Ltd [2020] ZAWCHC 28; 2020 (6) SA 624 (WCC)

Joob Joob Investments (Pty) Limited v Stocks Mavundla Zek Joint Venture [2009] ZASCA 23; 2009 (5) SA 1 (SCA); [2009] 3 All SA 407 (SCA) (27 March 2009)

Van Rooyen v Minister van Openbare Werke en Gemeenskapbou 1978 (2) SA 835 (A)

HNR Properties CC and Another v Standard Bank of South Africa Ltd [2003] ZASCA 135; 2004 (4) SA 471 (SCA); [2004] 1 All SA 486 (SCA)

Nyandeni Local Municipality v MEC Local Government and Traditional Affairs and Another [2009] ZAECMHC 28; 2010 (4) SA 261 (ECM)

Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA)

Standard Bank of South Africa Ltd v Roestof 2004 (2) SA 492 (W)

Legislation Cited

Close Corporations Act 69 of 1984, section 29 (including section 29(1A))

Prescription Act 68 of 1969, section 11

Alienation of Land Act 68 of 1981

Rules of Court Cited

Uniform Rules of Court, Rule 32 (including Rule 32(2)(b) and Rule 32(3)(b))

Held

The court found that the respondents’ reliance on trustee resolutions and minutes did not disclose a valid amendment of the lease agreement’s monthly rental clause, because the documents did not evidence a written and signed agreement of variation between the contracting parties as required by the entrenched non-variation clause.

The court found that the respondents’ defences of estoppel and waiver were not sustainable in law in the circumstances, particularly given the operation of the Shifren principle and the lease provisions excluding informal variation and waiver by indulgence.

The court held that the issue raised regarding the second respondent’s citation as trustee did not warrant refusal of summary judgment, as the defect was curable and caused no prejudice, and the other trustees were before court.

The court held that, apart from the defence of prescription (in respect of a quantified portion of the arrear rental claim), the respondents failed to disclose defences that were bona fide and good in law, and summary judgment was therefore appropriate for the balance of the claim, together with cancellation-related and ejectment relief.

LEGAL PRINCIPLES

A non-variation clause in a written contract is enforceable and entrenches both itself and the other contractual terms against informal variation, in accordance with the principle developed in SA Sentrale Ko-op. Graanmaatskappy Bpk v Shifren en Andere and reaffirmed in Brisley v Drotsky. In applying this principle, a party alleging a variation must show compliance with the contractual formalities for amendment.

Although contractual requirements of writing and signature may, depending on context, be satisfied by more than one document read together, the documents relied upon must still objectively evidence an amendment agreement between the contracting parties. Documents internal to one side, or not demonstrating offer and acceptance as between the parties to the contract, do not constitute a valid variation for purposes of resisting enforcement of the written terms.

In summary judgment proceedings under Rule 32, the defendant’s opposing affidavit must disclose fully the nature and grounds of the defence and the material facts relied upon, and the court assesses whether the defence appears to be bona fide and good in law. Summary judgment remains a stringent remedy granted only where the plaintiff’s entitlement to relief is sufficiently clear and the defences raised do not disclose a genuine triable issue.

The doctrine of estoppel cannot be used to achieve a result not permitted by law, including circumventing entrenched contractual formalities that give effect to the Shifren principle, as reflected in decisions such as HNR Properties CC and Another v Standard Bank of South Africa Ltd and Nyandeni Local Municipality v MEC Local Government and Traditional Affairs and Another.

A defence of waiver may be undermined where the contract expressly provides that no indulgence or relaxation will constitute a waiver of contractual rights, and where the alleged waiver would effectively contradict entrenched formal requirements for variation.

Technical defects in papers, including issues related to citation or joinder, may be treated as curable where they cause no prejudice and the opposing party clearly understands the case it must meet, consistent with the approach in Standard Bank of South Africa Ltd v Roestof.

412 Brandfort CC v Van Der Merwe N.O. and Others (4463/2022) [2023] ZAFSHC 261 (30 June 2023)