About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2023
>>
[2023] ZAFSHC 383
|
|
Stassen N.O and Others v Chemaly N.O and Others (5526/222) [2023] ZAFSHC 383 (6 October 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN THE HIGH COURT
OF SOUTH AFRICA
FREE STATE
DIVISION, BLOEMFONTEIN
CASE
No.:
5526/2022
Reportable:
YES/NO
Of Interest to other
Judges: YES/NO
Circulate to
Magistrates:
YES/NO
In
the matter between:
JACOBUS
JOHANNES HERCULES STASSEN N.O.
First
Applicant
DONALD
LAAS
N.O.
Second Applicant
ADRIAAN
JOHANNES VAN JAARSVELDT N.O.
Third Applicant
ELIZE
BERNADETTE DAVIDS N.O.
Fourth
Applicant
ABRAHAM
HERMANUS LEACH
N.O.
Fifth Applicant
MARTHINUS
THEUNISSEN KRIEL N.O.
Sixth
Applicant
LEHANDRI
VAN JAARSVELDT
N.O.
Seventh Applicant
[In
their capacity as trustees for the time being of the
SKOUGRONDE
ONTWIKKELINGS TRUST TMP 2799(B)]
and
JOSEPH
REYNOLDS CHEMALY N.O.
First
Respondent
MICHAEL
NICOLAS GEORGIOU N.O.
Second Respondent
ADRIANA
GEORGIOU
N.O.
Third Respondent
[In
their capacity as trustees for the time being of the
MICHAEL
FAMILY TRUST TMP 2502
]
MANGAUNG
METROPOLITAN MUNICIPALITY
Fourth Respondent
FIRSTRAND
BANK
LIMITED
Fifth Respondent
JUDGMENT
BY:
VAN RHYN, J
HEARD
ON:
10 AUGUST 2023
DELIVERED
ON:
6
OCTOBER 2023
INTRODUCTION.
[1]
The first to seventh applicants are the trustees of the Skougronde
Ontwikkelings
Trust, Number TMP 2799(B) (the “Applicant
Trust”). Mangaung Metropolitan Municipality, is the owner of
the immovable
property known as the Bloemfontein Showgrounds. During
1998 the Applicant Trust obtained a cession of a notarial lease of
the said
property. A certain section of the property undergone
commercial development. This section of the Bloemfontein Showgrounds
is known
as the Showgate Shopping Centre. The Applicant Trust
concluded a notarial sub-lease (the “Sub-Lease”), ending
in 2049,
with Monema Properties CC pertaining to the Showgate
Shopping Centre. It is this specific section of the property
that forms
the subject of this application.
[2]
The Sub-Lease of the Showgate Shopping Centre was registered in the
Deeds
Office, Bloemfontein, as a Notarial Deed of Cession of a
Sub-Lease under registration number K 138/1999L on 22 February 1999.
On
22 August 2006 Monema Properties CC ceded its right, title and
interest in terms of the Sub-Lease to the Michael Family Trust,
Number TMP2502 (the “Respondent Trust”). The first,
second and third respondents are cited in their capacity as the
trustees of the Respondent Trust.
[3]
The fourth respondent is the Mangaung Metropolitan Municipality,
against
whom no relief is sought. The fourth respondent did not
partake in this application.
[4]
The fifth respondent is FirstRand Bank Limited with registration
number
1929/001225/06 (“FirstRand Bank”) On 28 June 2018
the Respondent Trust and FirstRand Bank conclude a facility agreement
(“the facility agreement”) in terms whereof FirstRand
Bank undertook to make a loan facility available to the Respondent
Trust, subject to the fulfilment of various conditions precedent. It
was a condition precedent of the facility agreement,
that the
Applicant Trust needed to consent,
inter alia
, to the
registration of a mortgage bond and a security cession over the
Sub-Lease. The Respondent Trust and FirstRand Bank opposes
the relief
sought by the Applicant Trust.
THE CONTRACTUAL
RELATIONSHIP.
[5]
It is the Applicant Trust’s case that it was entitled to cancel
the Sub-Lease agreement concluded between it and the Respondent Trust
on seven days’ written notice and that it, in fact,
afforded
the Respondent Trust more than 30 days’ notice to remedy its
default thereof. The Applicant Trust moves for
a declaratory
order in the following terms:
“
5.1
It be declared that the Notarial Sub-Lease under registration
numberK138/1999L, as amended by the Notarial Addendum thereto
dated
17 August 2006 under registration number K968/2006S and the Agreement
of Sub-Lease dated 21 February 2008 with its addendum
dated 18 August
2014 between the Skougronde Ontwikkelings Trust, number TMP2799(B)
and the Michael Family Trust, number TMP2502,
are cancelled.
5.2
The First- to Third Respondents (The Michael Family Trust) be ordered
to forthwith vacate,
which shall include the performance of all
actions germane to relinquishing effective control over the property,
whether as sub-lessee,
sub-sub-lessor, lessor, beneficial occupier or
account holder
vis a vis
the Fourth Respondent, and including
taking any and all necessary steps to cause the cancellation of the
sub-sub lease agreements
they have concluded with any third party, in
respect of the property defined as the “Premises” in the
Notarial Sub-Lease
under a registration number K138/1999L and the
subsequent Agreement of Sub-Lease dated 21 February 2008 and defined
as “additional
premises” in the addendum dated 18 August
2014 to the latter to agreement.
5.3
The First- to Third Respondents (The Michael Family Trust), be
ordered to pay
the costs of this application on attorney and client
scale.”
[6]
The Applicant Trust and the Respondent Trust were, from 5 September
2006,
contractual counterparts in terms of the Sub-Lease.
The lease period would endure until the date, one day prior to the
date of commencement of the lease in the year 2049, on which date the
Sub-Lessee undertakes to vacate the premises and hand undisturbed
occupation and possession thereof to the Sub-Lessor, the Applicant
Trust. The Sub-Lease was amended, to include an extension
of
the parking areas. The amendments to the Sub-Lease
are not material to the present application.
[7]
The monthly rental was agreed to be the sum of R17 000.00 plus
Value
Added Tax thereon for the first period of 12 months where after
the monthly rental shall increasing by 10% for the first ten-year
period of the lease. The rate of escalation after the expiry of
the first ten-year period, was to be agreed upon between
the parties.
From the numerous statements appended to the founding affidavit it is
evident that, at the relevant time, the monthly
rental amounted to R
131 491.00 and rent for parking to the sum of R 23 394.35.
[8]
The rental was payable monthly in advance, the first payment to be
made
on the date of commencement of the lease and all subsequent
payments were to be made on or before the same day of each of every
subsequent month. The Respondent Trust was required to pay all
rates, taxes, charges and levies payable by the Applicant
Trust to
the lessor in respect of the premises. The Respondent Trust
would be required to pay all municipal charges, including
any
deposits, in respect of water and/or electricity and/or sewerage
and/or storm water and/or refuse removal in respect of the
premises
and will, upon demand, refund to the sub-lessor any amounts paid by
the sub-lessor in advance of the date of commencement
of the
Sub-Lease in respect of such items.
[9]
In the event of breach, clause 12.1.1 of the Sub-Lease agreement
provided
that in the event that the Respondent Trust fails to carry
out or comply with any of the terms or conditions of the Sub-Lease
and
persists with such failure for thirty (30) days after written
notice requiring such default to be remedied; or, in terms of the
provisions of clause 12.1.2, the Respondent Trust fails to make any
of the payments required, including payment in full of the
rental and
persists with such failure for seven (7) days after written notice
requiring such default to be remedied, then and in
such event the
Applicant Trust will be entitled forthwith and without any
prior notice to terminate the Sub-Lease by a written
notice to the
Respondent Trust without prejudice to all rights of the Applicant
Trust or to sue for and recover any payment of
monies due or damage
for breach of contract or otherwise howsoever.
[10]
The Sub-Lease also contains the following entrenched formalities
clauses: The provisions
of the Sub-lease will continue to be of full
force and effect and binding on both parties notwithstanding any
indulgence, extension
of time, relaxation of latitude shown, which
may be shown or given by one party to the other party, and no such
indulgence will
constitute a waiver of any of the rights of neither
of the parties (as per clause 14). No variation or amendment of
the Sub-Lease
or addition thereto or consensual cancellation thereof
will have any force or effect unless reduced to writing and signed by
the
Applicant Trust and the Respondent Trust or the agents acting
under written authority (as per clause 15).
[11]
Clause 16 provides that no waiver of any of the terms and conditions
of the Sub-Lease
will be binding for any purpose unless expressed in
writing and signed by the parties, and any such waiver will be
effective only
in the specific instance and for the purpose given.
No failure or delay on the part of either party in exercising any
right,
power or privilege will operate as a waiver, nor will any
single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege.
[12]
The Sub-Lease also provided that any dispute arising from or in
connection with the
Sub-Lease shall be finally resolved in accordance
with the rules of the Arbitration Foundation of Southern Africa.
Even though
the Respondent Trust, in their answering affidavit,
sought to stay this application in terms of the provisions of section
6(2)
of the Arbitration Act
[1]
pending the outcome of arbitration proceedings, the Respondent Trust
abandoned any reliance upon the provisions of the arbitration
clause.
[13]
On 29 June 2018 the Respondent Trust and FirstRand Bank concluded a
facility agreement
(‘the facility agreement”) in terms of
which FirstRand Bank undertook to make a loan facility available to
the Respondent
Trust. The Applicant Trust consented to the
registration of a first covering mortgage bond and to the conclusion
of a deed
of cession
in securitatem debitii
over the Sub-Lease
in favour of FirstRand Bank. It was in the Respondent Trust’s
interests and benefit that it secures
this loan and to achieve this
to ensure that the conditions precedent to the facility agreement
were all fulfilled.
[14]
In order to secure appropriate undertakings from the Applicant Trust,
FirstRand Bank
furnished the Respondent Trust with a draft letter of
undertaking. The second respondent, Mr. Michael Georgiou
instructed
Ms Lindie Koupis of E G Cooper Majiedt Attorneys to assist
the Respondent Trust in obtaining the undertakings from the Applicant
Trust. In an endeavour to negotiate an acceptable notice period
Ms Koupis addressed an email to Mr Emile Els, the Applicant
Trust’s
attorney of record at McIntyre Van der Post Incorporated, proposing
that the Respondent Trust would be afforded a
further period of 45
days to remedy a breach of the Sub-Lease after the expiry of the
initial notice period.
[15]
This additional notice period of 45 days was not acceptable to the
Chief Executive
Officer of the Applicant Trust, Ms Elsje Prinsloo.
Mr. Michael Giorgiou, with the assistance of Ms Lindie Koupis,
negotiated
an acceptable notice period with Ms Elsje Prinsloo and
subsequent to confirmation from FirstRand Bank’s
representative, Ms
Ruth Boake, the Applicant Trust furnished an
undertaking in terms whereof the curtailed further notice period was
agreed upon.
The undertaking is recorded in annexure “FA10”
to the founding affidavit. The relevant provisions of the undertaking
(“FA10)”) provide as follows:
“
2.
We hereby consent, to the extent required in terms of the SubLease,
to:
2.1
the conclusion of the Cession by the SubLessee;
2.2
the registration of the Mortgage Bond by the SubLessee over the
SubLease (and
undertake, if applicable, to sign any documentation or
consents required by the applicable Deeds Registry to procure such
registration).
3.
We further undertake, in favour of the Lender, that:
3.1
for as long as the SubLessee is indebted to the Lender under and in
terms of
the Mortgage Bond, the SubLessor shall not be entitled to
cancel the SubLease in consequence of default by the SubLessee
unless:
3.1.1
the SubLessor has given the Lender notice of the default in question
and its intention to cancel
the SubLease as a consequence thereof;
3.1.2
a reasonable period of time, being not less than twenty (20) days,
has passed subsequent to:
3.1.2.1
the date of delivery at the abovementioned address (being the
Lender’s chosen domicilium citandi et executandi
for purposes
hereof) by the Lender of such notice; or
3.1.2.2
the expiry of the period stated in any notice to the Lessee, a copy
of which shall be simultaneously provided (as
stipulated in 3.1.2.1)
to the Lender, within which the SubLessee is required to remedy the
default; whichever is the later date,
within which to procure that
such default is a remedied:
3.2
for as long as the SubLessee is indebted to the Lender under and in
terms of
the Mortgage Bond, any purported cancellation or termination
of the SubLease by either party thereto which is contrary to the
provisions
of this clause will be invalid and of no force or effect
whatsoever.”
[16]
It is common cause that it routinely occurred that the Respondent
Trust failed to
pay the rental due to the Applicant Trust in terms of
the Sub-Lease on the first day of each month. The Respondent
Trust’s
continual failure to pay the rental amounts timeously,
resulted in the Applicant Trust’s attorneys having to, almost
on a
monthly basis, address a letter of demand where after the
Respondent Trust would then either rectify its breach or request an
extension
of time, to which the Applicant Trust had acceded on
numerous occasions.
[17]
Each of the invoices issued to the Respondent Trust for payment of
rental recorded
that payment thereof was due on the seventh day of
the month and interest would be charged from the fifteenth day of the
month.
Notwithstanding the terms of the Sub-Lease, the
Respondent Trust accordingly did not pay the rental on the first day
of the month.
The Respondent Trust contends that it applied the
payment terms recorded in the invoices rendered to it by the
Applicant Trust.
[18]
During October 2020 the Applicant Trust appointed McIntyre Van der
Post Inc. attorneys
to assist with the collection of rentals from the
Respondent Trust. Several letters of demand by McIntyre van der
Post Inc.
were addressed to the Respondent Trust to demand payment of
arrear rental and other charges. On 7 June 2022 a letter of demand
was addressed to the Respondent Trust. On 24 June 2022, E G
Cooper Majiedt Inc., the attorneys on behalf of the Respondent
Trust,
formally requested and indulgence. The request for an indulgence was
met on 27 June 2022 by an email in reply that the Applicant
Trust was
not prepared to grant the Respondent Trust an extension. On behalf of
the Respondent Trust reliance is placed on the
fact that, for the
first time since the inception of the parties’ business
relationship, the request for an indulgence was
denied.
[19]
On 26 July 2022 a demand for payment of the rental and other amounts
due for July
2022 was addressed to the Respondent Trust.
Notwithstanding the terms of the Sub-Lease, that the period of seven
days was
applicable to remedy a breach, the Applicant Trust afforded
the Respondent Trust a period of 20 days to pay the arrear amounts.
On 11 August 2022 Mr Els of McIntyre van der Post addressed an email
to E G Cooper Majiedt to remind the Respondent Trust that
payment of
the July rental and other amounts was due on or before 15 August 2022
in terms of the demand dated 26 July 2022.
[20]
On 15 August 2022, E G Cooper Majiedt requested an extension to pay
the July amounts by
2 September 2022. The following day, 16
August 2022 McIntyre van der Post granted the requested extension
subject to the
Respondent Trust also paying legal costs in the amount
of R20 297.50. On 24 August 2022 McIntyre van der Post
addressed
a letter of demand to the Respondent Trust for payment of
the rental amount, electricity consumption, municipal rental and
water
consumption within 20 days from the date thereof, failing which
the Applicant Trust intended to cancel the Sub-lease.
[21]
On 13 September 2022 the time period afforded to the Respondent Trust
in terms of
the letter of demand dated 24 August 2022 expired.
The Respondent Trust failed to pay the August 2022 rental amount that
was due on or before 1 August 2022. On 15 September 2022 the
Respondent Trust queried the municipal rental amounts where after
Mr
Els responded that such queries should be addressed to the
municipality directly. On 27 September 2022 the Applicant
Trusts, through McIntyre van der Post, addressed a letter to the
Respondent Trust cancelling the Sub-lease. On 30 September
2022
the Respondent Trust paid the arrear amounts and was, according to
its contention, no longer in breach of the Sub-lease.
ARGUMENTS ON BEHALF OF
THE APPLICANT TRUST.
[22]
Counsel on behalf of the Applicant Trust, Mr Grobler SC (appearing
with Mr Van der
Merwe) argued that the only true question in this
application, having regard to the constitutional imperatives of
Ubuntu, fairness
and reasonableness infused into the common law,
under the circumstances of this matter and the defence advanced by
the Respondent
Trust, is whether or not the enforcement of the
contractual terms of the Sub-lease will be against public policy. In
essence
the Applicant Trust’s case is that it lawfully and
validly cancelled the Sub-Lease agreement and that the application
concern
questions of law and the interpretation of the provisions of
the agreement(s) concluded between the parties.
[23]
Mr Grobler SC argued that, on the basis that the Respondent Trust and
FirstRand Bank
rely upon FA10 given by the Applicant Trust to
FirstRand Bank as the basis for the contention that the Sub-lease was
not lawfully
cancelled, it will be imperative for the court to find
that FA10 amounted to a valid amendment of the Sub-Lease. It is
however
the Applicant Trust’s case that FA10 does not
constitute an agreement nor do the provisions contained therein
amount to a
variation of the terms of the Sub-Lease.
[24]
The Applicant Trust provided its consent to the Respondent Trust to
ceded its rights,
title and interest in and to the Sub-Lease to
FirstRand Bank as security for the Respondent Trust’s
obligations
vis-à-vis
FirstRand Bank and to register a
bond over the Sub-Lease. Furthermore, the Applicant Trust
undertook, in favour of FirstRand
Bank, for as long as the Respondent
Trust is indebted to FirstRand Bank in terms of the said mortgage
bond, not to cancel the Sub-lease
unless it has given reasonable
notice of at least 20 days of the Respondent Trust’s default
and the Applicant Trust’s
intention to cancel the Sub-Lease.
[25]
However, the Applicant Trust is not a party to the mortgage bond and
in as far as
FirstRand Bank has acquired real rights under the
mortgage bond, such rights,
ex facie
the mortgage bond, do not
include any right to notice as a pre-requisite for cancellation of
the Sub-Lease. The mortgage bond was
registered without the Applicant
Trust being a party thereto. The mortgage bond specifically does not
provide for a right to enforce
or impose upon the Applicant Trust a
specific notice period which must be complied with
vis a vis
the Respondent Trust as a pre-requisite to cancellation of the
Sub-lease.
[26]
The Respondent Trust is not a party to FA10, nor was the undertaking
as per FA10
directed to the Respondent Trust. Neither the Respondent
Trust nor FirstRand Bank signed FA10. The Respondent Trust has not
required
any rights in terms of FA10. During argument Mr Grobler SC,
with reference to appendix 8, appendix 9 and appendix 10 to the
facility
agreement (appended to the answering affidavit), contended
that the capital repayment schedule indicate that the first repayment
by the Respondent Trust was scheduled to commence on 1 November 2018
with the final repayment to be effected on 1 October 2021.
[27]
FA10 provided that any purported cancellation or termination of the
Sub-Lease by
either party which is contrary to the provisions of FA10
will be of no force or effect for as long as the Respondent Trust is
indebted
to FirstRand Bank under and in terms of the mortgage bond.
The cancellation of the Sub-Lease occurred on 26 September 2022, a
date
subsequent to the final repayment date, namely 1 October 2021,
with the result that FirstRand Bank’s and the Respondent
Trust’s
reliance upon the provisions of clause 3.2 of FA10 do
not hold water.
[28]
On behalf of the Applicant Trust it is contended that neither
FirstRand Bank nor
the Respondent Trust addressed the issue whether
the provisions of the facility agreement have been complied with or
not. The Applicant
Trust is not privy to the information and as a
result of the Respondent Trust’s failure to grapple with the
amount due, if
any, in terms of the mortgage bond, so the argument
goes, the contention that the Applicant Trust was obliged to adhere
to the
time period as per FA10 did not come out of the starting
blocks.
[29]
The Applicant Trust provided the Respondent Trust, in a show of good
faith, with
a period of 27 days to rectify its failure to pay the
rental and other amounts whereas only a period of 7 days as agreed
upon in
terms of the Sub-Lease would have been sufficient. No
variation, by way of an addendum of the Sub-Lease agreement occurred.
The
Respondent Trust and FirstRand Bank have therefore failed to
advance a defence valid in law. The application thus stands to be
granted with costs.
THE ARGUMENTS ON
BEHALF OF THE RESPONDENT TRUST AND FIRST RAND BANK.
[30]
Mr Symon SC, counsel on behalf of the respondents, argued that the
Applicant Trust
furnished express undertakings recorded in annexure
FA10 that it would not cancel the Sub-Lease unless it afforded the
Respondent
Trust an additional notice period of 20 days after the
expiry of the initial notice. The Applicant Trust did not comply with
the
undertaking as set out in FA10 and its cancellation of the
Sub-Lease is accordingly of no force and effect. The Applicant Trust
attempts to avoid the undertaking on the basis of a technical
argument that the Sub-Lease includes a non-variation clause requiring
that any amendment thereto must be reduced to writing and signed by
both parties.
[31]
Mr. Symon SC argued that the Applicant Trust’s reliance on the
non-variation
clause embodied in the Sub-Lease is untenable. On a
proper construction of the undertaking, it is a
stipulatio
alteri
and the non-variation clause does not apply thereto. In any
event, and with reference to
Gray
v Waterfront Auctioneers (Pty) Ltd
[2]
a contracting party may not rely on a non-variation clause in bad
faith.
[32]
Even if the undertaking is not a
stipulatio alteri
or the
Sub-Lease was not varied to include the terms of FA10, the Applicant
Trust’s reliance upon strict terms of the Sub-Lease,
contrary
to the provisions of FA10 to justify its cancellation of the
Sub-Lease cannot be countenanced on the grounds of public
policy.
The Applicant Trust never previously insisted that the Respondent
Trust must strictly comply with the terms of the
Sub-Lease and it
granted the Respondent Trust indulgences on numerous occasions
regarding non-compliance with the provisions of
the Sub-Lease.
Furthermore, the correspondence addressed on behalf of the Applicant
Trust prior to cancellation of the Sub-Lease,
created the impression
that the Applicant Trust did not seriously intend to cancel the
Sub-Lease. As a result, the application
stands to be dismissed with
costs.
APPLICABLE LEGAL
PRINCIPLES AND THE APPLICATION THEREOF TO THE FACTS.
[33]
The principle that the courts will enforce contracts, expressed as
pacta sunt servanda
, is obviously necessary as a general
principle. The general rule that parties to an agreement are as free
to vary or discharge
the contract as they were to make it, is subject
to limitations. When the parties impose restrictions on their
own power
of subsequent variation or cancellation of their contract
they will incorporate a non-variation clause in their contract.
[34]
On the one hand it limits contractual freedom by curtailing the
parties’ ability
to change their minds and alter the contract,
but on the other hand, this limitation is in itself a manifestation
of the parties’
contractual freedom pursuant to which they, by
prior agreement, agreed to this limitation in order “…to
enhance certainty
in their future dealings and to minimise disputes
between them”
[3]
. A
situation in which the same argument of freedom of contract or
pacta
sunt servanda
may lead to two opposite conclusions is possible when a non-variation
clause appears in a contract.
[35]
The Appellate Division, in the judgment of
SA
Sentrale Ko-op Graanmaatskappy Bpk v Shifren en Andere
[4]
favoured the position where the original contract must be
respected and a subsequent agreement, that is not in writing, must
be
ignored. An attempt to agree informally on a topic covered by a
non-variation clause, including cancellation and an extension
of time
for payment, or to vary informally a contract containing a
non-variation clause must therefore fail.
[36]
The Shifren principle certainly has its worth. It has thus been
consistently reaffirmed
by the courts. However, the Shifren principle
remains controversial. This is because in practice, its application
frequently leads
to harsh and unfair results as it allows a party to
go back on his or her word, notwithstanding the other party’s
good faith
reliance upon it. The Supreme Court of Appeal introduced a
proviso that, because a non-variation clause curtails common law
freedom
to contract, it must be restrictively interpreted.
[5]
[37]
In
Brisley
v Drotsky
[6]
,
the Supreme Court of Appeal had to consider the question how the
courts ought best to mitigate the Shifren principle’s
frequently inequitable effects. The majority dismissed the view
of Olivier JA in
Eerste
Nasionale Bank van Suidelike Afrika Bpk v Saayman
[7]
to develop the concept of good faith in the law of contract and
held that the lack of good faith could not be accepted as
an
independent basis for setting aside or not enforcing contractual
provisions. However, through the separate concurring judgment
of
Cameron JA (as he then was), the door was opened to the possibility
of loosening the “Shifren shackle”
[8]
.
[38]
In
South
African Forestry Co Ltd v York Timbers Ltd
[9]
Brand JA, with reference to
Brisley
v Drotsky
and
Afrox
Healthcare Bpk v Strydom
[10]
held as follows:
“
In
addition, it was held in
Brisley
and
Afrox
Healthcare
that – within the protective limit of public policy that the
courts have carefully developed, and consequent judicial control
of
contractual performance and enforcement – constitutional values
such as dignity, equality and freedom require that courts
approach
their task of striking down or declining to enforce contracts that
parties have freely concluded, with perceptive restraint”.
[11]
Cameron JA predicted that
the appropriate tool to mitigate potential hardship caused by the
Shifren principle would be the age-old
doctrine of public policy. He
formulated this prediction as follows in
Brisley v Drotsky
:
“
It
is not difficult to envisage situations in which contracts that
offend these fundamentals of our new social compact will be struck
down as offensive to public policy. They will be struck down because
the Constitution requires it, and the values it enshrines
will guide
the courts in doing so.”
[12]
[39]
In
Barkhuizen
v Napier
[13]
the foundations were laid as to the approach with regard to
constitutional challenges to contractual terms and to ensure
that “… the common law, under the impulse of the values
of our new constitutional order is called upon to shoulder
the burden
of grappling in its own quiet and incremental manner with appropriate
legal regulation to ensure basic equity in the
daily dealings of
ordinary people.
[14]
Since
then the courts have refused to enforce a non-variation clause on the
basis that enforcement of the Shifren principle
would offend
public policy.
[15]
[40]
In the matter at hand, it routinely,
since 2011, occurred that the Respondent Trust did not pay the
rentals due to the Applicant
Trust in terms of the Sub-Lease on the
first day of each month, and most often not even on the seventh day
of each month as per
the invoices submitted by the Applicant Trust to
the Respondent Trust. Mr Grobler SC mentioned that, as a result
of the continued
habitual breach, “an automatic repeat
function” of the breach letter issued by the attorney’s
acting on behalf
of the Applicant Trust, “would have come in
handy”.
[41]
A
fundamental point of departure in this matter is the undertaking
contained in FA10 and its interpretation. The approach to
interpretation is succinctly summarised in
Natal
Joint Municipal Pension Fund v Edumeni Municipality
[16]
which held as follows:
“
The present state
of the law can be expressed as follows: Interpretation is the process
of attributing meaning to the words used
in a document, be it
legislation, some other statutory instrument, or contract, having
regard to the context provided by reading
the particular provision or
provisions in the light of the document as a whole and the
circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light of the
ordinary rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed
and the material known to those
responsible for its production. Where more than one meaning is
possible each possibility
must be weighed in the light of all these
factors. The process is objective, not subjective. A
sensible meaning is
to be preferred to one that leads to insensible
or unbusiness-like results or undermines the apparent purpose of the
document.
Judges must be alert to and guard against, the
temptation to substitute what they regard as reasonable, sensible or
businesslike
for the words actually used. To do so in regard to
a statute or statutory instrument is to cross the divide between
interpretation
and legislation; in a contractual context it is to
make a contract for the parties other than the one they in fact made.
The
‘inevitable point of departure is the language of the
provision itself’, read in context and having regard to the
purpose
of the provision and the background to the preparation and
production of the document…”
[17]
[42]
It is evident that the Applicant Trust accepted the terms of FA10 as
legally binding
on it. The Applicant Trust was assisted by its
attorney to finalise the terms thereof. Furthermore, the
Applicant Trust knew
that FirstRand Bank would rely on the
undertaking sought to advance a loan facility to the Respondent Trust
and consented to the
registration of the mortgage bond over the
Sub-Lease in favour of FirstRand Bank.
[43]
FA10 was furnished to First Rand Bank almost five years prior to the
hearing of this
matter. During this period, the Applicant Trust
did not raise a dispute or concern that the terms of FA10 were
nugatory and
effectively serve no purpose. The stance that the
terms of FA10 are effectively meaningless was adopted for the first
time
in this application. Notwithstanding the Applicant Trust’s
contentions, it not only agreed with the terms of FA10 but
also
complied with the contents thereof by notifying FirstRand Bank that
the Respondent Trust had breached the provisions of the
Sub-Lease and
were afforded 20 days (instead of seven days as per the Sub-Lease) to
remedy its beaches of the Sub-Lease.
[44]
However, from the contents of the founding affidavit deposed to by Ms
Elsje Prinsloo
on behalf of the Applicant Trust, it is evident that
an error or misunderstanding regarding the interpretation of FA10
occurred.
In the founding affidavit it is stated that on request of
FirstRand Bank, the Applicant Trust provided consent to the
Respondent
Trust to cede its rights, title and interest in and to the
Sub-Lease to FirstRand Bank, provided consent to register a mortgage
bond and undertook in favour of FirstRand Bank that:
“…
for as
long as the Respondent Trust is indebted to FNB in terms of the said
bond, that the Trust would not cancel the sub-lease,
unless it has
given reasonable notice of at least twenty (20) days of the
Respondent Trust’s default and the Applicant Trust’s
intention to cancel at FNB’s chosen
domicilium
address,
being [...] M[...] Place, [...] F[...] Drive, Sandton.”
[45]
What is quoted above is not a true reflection of the contents of
FA10. FA10, in simple
terms, recorded the undertaking by the
Applicant Trust in favour of FirstRand Bank as follows: for as long
as the Respondent Trust
is indebted to the Lender (FirstRand Bank) in
terms of the mortgage bond, the Applicant Trust shall not be entitled
to cancel the
Sub-Lease in consequence of default by the Respondent
Trust unless-
1. the
Applicant Trust has given FirstRand Bank notice of the default (by
the Respondent Trust) and its intention
to cancel the Sub-lease; and
2. a
reasonable period of time, being not less than
20 days has passed
subsequent to:
2.1
the date of delivery to FirstRand Bank at its
domiciluim
address of such
notice; or
2.2
the
expiry of the period stated in a notice (letter of demand) to
the Respondent Trust
, a copy of which notice shall simultaneously
be provided to FirstRand Bank, within which the Respondent Trust is
required to remedy
the default;
-
whichever is the
later date
, within which to procure that such default is
remedied. (emphasis added)
[46]
On 24 August 2022 the Respondent Trust was afforded 20 days, in terms
of the demand,
to remedy its breach of the sub-Lease. On 27 September
2022 the Applicant Trust’s attorneys addressed a letter to the
Respondent
Trust cancelling the Sub-Lease. On a proper reading of
FA10, the Applicant Trust furnished an express undertaking that it
would
not cancel the Sub-Lease unless it afforded the Respondent
Trust an additional period of 20 days after the expiry of the period
stated in the notice. In the notice of demand, the period is not
stated as 7 days as per the Sub-Lease, but 20 days. Therefore,
the
Applicant Trust was only entitled to cancel the Sub-Lease in
consequence of default of the Respondent Trust subsequent to the
expiry of 20 days (in accordance with FA10) after the lapse of the
20- day period stated in the notice dated 24 August 2022.
The
initial 20-day period expired on 13 September 2022. The additional
20-day period expired on 3 October 2022.
[47]
On its own version, and as Mr Grobler SC contended, in a show of good
faith, the
Applicant Trust afforded the Respondent Trust 13 days more
than it could have done to remedy its breach of the Sub-Lease. The
Respondent
Trust contends, on various grounds, that the purported
cancellation is not valid. One reason being that the cancellation is
premature.
The day for payment of the monthly rental and other
amounts was concluded to be the first day of every month. However,
the invoices
issued by the Applicant Trust indicated the date for
payment to be the 7
th
day of each month.
[48]
The Sub-Lease lays down a procedure for the cancellation hereof. The
Applicant Trust
did not follow the procedure in respect of the time
period within which the Respondent Trust had to be afforded to comply
with
the Sub-Lease. The letters of demand appended to the founding
affidavit all provide for 20 days to rectify the breach, not 7 days
as per the Sub-Lease. In my view the Applicant Trust cannot rely
solely on this fact to validly cancel the Sub-Lease. In order
for the
Applicant Trust to succeed in this regard it had to show that it
complied strictly with the peremptory provisions of the
Sub-Lease. On
its own version, the Applicant Trust did not comply with the time
period to be afforded to the Respondent Trust.
The Applicant Trust
now falls back on the non-variation clause. The Applicant
Trust’s conduct prior to its purported
cancellation of the
Sub-Lease contradicted its demand for strict compliance with the
terms of the Sub-Lease.
[49]
The Applicant Trust contends that the Respondent Trust and FirstRand
Bank have not
made the point clear in their answering affidavits that
enforcement of the right to cancel the Sub-Lease would be against
public
policy. I do not agree with this contention. Under the heading
“Public Policy” the point that the Applicant Trust’s
belated reliance on the strict terms of the Sub-Lease on only 7 days’
notice in an attempt to cancel it, is contrary to public
policy. The
reasons for this contention is addressed in not less than 3 pages. On
behalf of the Respondent Trust and First Rand
Bank it is therefore
argued that the facts and circumstances of this matter justify a
departure from the Shifren principle.
[50]
The Applicant Trust’s reliance on the non-variation clause to
defeat the undertaking
contained in FA10 is misplaced as it does not
accord with the proper interpretation thereof. In
Grey
v Waterfront
[18]
the court summarised the limitations to the Shifren principle
as follows:
Even if the
non-variation clause had been relevant because the parties’
conduct amounted to a variation of the lease, the
applicant may well
have been precluded from praying it in aid because, as it is put by
Christie in The Law of Contract in South
Africa 2
nd
ed at
535, ‘a party whose conduct is “fraudulent, or
unconscionable, or a manifestation of bad faith”(referring
to
Resisto Dairy (Pty) Ltd v Auto Protection Insurance Co Ltd
1962 (3)
SA 565
(C) at 571 F per Rose-now J) ‘will not be
permitted to rely on a non-variation clause (referring to Leyland (SA
(Pty)
Ltd v J Rex Evans Motors (Pty) Ltd
1980 (4) SA 271
(W) at
272H-273A).
[51]
The basic idea is that parties must be bound by the contracts they
enter into.
This concept results in the principal that
non-contracting parties, in no way connected to the contract, are not
bound by the terms
thereof. The doctrine of privity of contract
means that parties who are not privy to a contract cannot sue or be
sued on
it. It is against the background of privity of contract
that the value of a contract for the benefit of a third party, or
stipulatio alteri
(
or ius quaesitum tertio)
can be
appreciated.
[52]
A
stipulatio
alteri
has various constructions depending on the circumstances in which it
is concluded and the intention of the parties. The conclusion
that a contract for the benefit of a third party is really a misnomer
was drawn by Schreiner JA in his dissenting judgment in
Crookes
v Watson
[19]
where it was held as follows:
“…
what is
not very appropriately styled a contract for the benefit of a third
party is not simply a contract designed to benefit a
third person; it
is a contract between two persons that is designed to enable a third
person to come in as a party to a contract
with one of the other
two.”
[53]
What is referred to as the intention to
benefit a third party is not actually an intention
to enrich the
third party, but an intention to empower the third party to adopt and
become a party to the contract if he so wishes.
[20]
In
McCullough
v Fernwood Estate Ltd
[21]
Innes
CJ described a
stipulatio
alteri
in
the following terms:
“
An
agreement for the benefit of a third person is often referred to in
the books as a stipulation. This must not be taken, however,
in the
narrow meaning of the Civil law, for in that sense the stipulatio did
not exist in Holland. It is merely a convenient
expression to denote
that the object of the agreement is to secure some advantage for the
third person. It may happen that the
benefit carries with it a
corresponding obligation. And in such a case it follows that the two
would go together. The third person
could not take advantage of one
term of the contract and reject the other. The acceptance of the
benefit would involve the undertaking
of the consequent obligation.
The third person having once notified his acceptance and thus
established a
vinculum juris
between himself and the
promisor would be liable to be sued, as well as entitled to sue. If,
for instance, the stipulated
benefit took the form of an option to
purchase specified property at a certain price, the acceptance of the
offer would involve
a liability to pay the price which could be
legally enforced. Otherwise the third person would be in the position
of being able
to sue upon a contract involving reciprocal obligations
without being liable to an action if he refused to discharge his part
of
them.”
[54]
Acceptance
by the third party may be express or implied and, where the contract
is a beneficial one, will not require strong evidence
to support
it.
[22]
In
the matter at hand, the Respondent Trust (stipulator) negotiated the
terms of FA10 with the Applicant Trust (promisor) for the
benefit of
FirstRand Bank, which benefit FirstRand Bank accepted. No
further formalities were prescribed for the conclusion
of the
stipulatio
alteri.
[55]
The Sub-Lease itself does not disclose any intention to include
FirstRand Bank as
a party thereto. FA10 however complies with the
basic requirements of a
stipulatio
alteri
in
favour of FirstRand Bank and that, as a result thereof, a contractual
right to comply with the notice period ensued. Consequently,
FirstRand Bank became a party
[23]
to the Sub-Lease with the result that the Applicant Trust was obliged
to comply with the terms of FA10 as between it and FirstRand
Bank
before it could cancel the Sub-Lease. The
vinculum
iuris
or legal bond created upon acceptance of the benefit by FirstRand
Bank is between the third party and the promisor.
[24]
[56]
In amplification of FA10, a mortgage bond was registered over the
Sub-Lease in favour
of FirstRand Bank. FirstRand Bank’s rights
in terms of the mortgage bond accordingly became fused with the terms
of the Sub-Lease.
[25]
For the
registration of a notarial bond, specially hypothecating a registered
lease or sublease, the deed of lease or sublease
shall be endorsed by
the Registrar of the Deeds Office in terms of the provisions of
section 82 of the Deeds’ Registries
Act
[26]
(the “ Deeds Act”)
[57]
The Respondent Trust and FirstRand Bank as well as the Applicant
Trust approved of
the additional notice period as per FA10. It
is a preclusion from acting contrary to a firm written commitment
which was
accepted by all the parties. The attack by the
Applicant Trust on the basis that the schedule of payments, appended
to the
answering affidavit, indicates that the loan amount should
have been settled by the time of the purported cancellation, cannot
be sustained in the face of the unequivocal allegation by Ms Boake of
FirstRand Bank confirming an ongoing debt, at all material
times,
which is substantial.
[58]
This application is opposed by FirstRand Bank on the grounds that it
is the holder
of both the mortgage bond and the security cession over
the Sub-Lease. The security cession agreement was signed on 29
June
2018 and the mortgage bond was registered during November 2018.
From the answering affidavit deposed to by Ms Boake it is
evident
that “…the indebtedness at present, is well in excess of
the amounts secured in respect of the mortgage bond.”
The
argument raised on behalf of FirstRand Bank is that the registration
of the mortgage bond affords FirstRand Bank real rights
over the
Sub-lease in terms of,
inter alia
, the provisions of the Deeds
Act.
[59]
Mr Rudolph (appearing with Mr Symon SC) argued that the Applicant
Trust is obliged
to comply with the provisions of the Deeds Act
before it may cancel the Sub-Lease. In terms of the provisions of
section 82(3)
of the Deeds Act the provisions of section 56(1) shall
apply
mutatis mutandis
in respect of any mortgage bond
registered over a lease as opposed to a mortgage bond registered over
immovable property.
In turn, section 56(1) provides that no
transfer of mortgaged land shall be attested or executed by the
Registrar and no cession
of a mortgaged lease of the immovable
property, or of any mortgaged real right in land, shall be registered
until the bond has
been cancelled or the land, lease, or right has
been released from the operation of the bond with the consent in
writing of the
holder thereof.
[60]
Section 78(1) of the Deeds Act provides,
inter alia
, for the
cancellation of a lease or sub-lease upon termination. This
section is silent on the situation where a mortgage
bond has also
been registered over the sub-lease that is the subject matter of an
application in terms of section 78 for the cancellation
of the lease
or sub-lease. On behalf of the Respondent Trust and FirstRand
Bank it is submitted that before a party may make
application in
terms of the provisions of section 78 of the Deeds Act, the mortgage
bond must first be cancelled or the lease or
sub-lease, as the case
may be, must first be released from the operation of the mortgage
bond.
[61]
This, Mr Rudolph argued, creates
tension between the rights of a lessor (or sub-lessor)
as opposed to
a bondholder as to whose rights should take precedence. Normally, if
a registered lease or sub-lease terminates by
the effluxion of time,
it would be uncontroversial for the land owner or leaseholder to
obtain the consent of the bondholder to
release the registered lease
from the operation of the mortgage bond. However, if a party
wishes to terminate a registered
lease due to a breach thereof, that
party would have to obtain the written consent of the bondholder to
release it from the operation
of the bond.
[62]
FirstRand Bank opposes the relief claimed by the Applicant Trust and
is not prepared
to consent to the cancellation of the Sub-Lease, the
mortgage bond and the security cession, and will only do so after the
full
balance owed to it by the Respondent Trust is settled. Even if
the Applicant Trust was entitled to cancel the Sub-Lease, its
purported
cancellation thereof would only be effective once the
Sub-Lease, together with the mortgage bond is lawfully and validly
cancelled
in accordance with the provisions of the said Deeds Act.
FirstRand Bank is therefore still vested with its rights and is thus
entitled to exercise all of those rights in terms of the mortgage
bond and/or the cession including, but not limited to, the right
to
sell its rights in execution, purchase, realise or transfer the
Sub-Lease.
[63]
On behalf of the Applicant Trust is was submitted that there is no
provision in the
mortgage bond providing for any notice period
pertaining to the cancellation of the Sub-lease. FA10, approved to by
all the parties,
cannot be seen as an alteration of the terms of the
mortgage bond. Cancellation of the Sub-Lease is an indivisible and
unitary
act. If it is accepted that FA10 precludes a cancellation of
the Sub-Lease in respect of FirstRand Bank, it also precludes a
cancellation
against the Respondent Trust. The cancellation of the
Sub-Lease cannot simultaneously be ineffective against FirstRand Bank
but
effective against the Respondent Trust.
[64]
The Applicant Trust, by seeking to cancel the Sub-Lease, is acting
contrary to and
thus in breach of FA10. FirstRand Bank, in
opposition, has set out how its security would be endangered. In
Beadica
231 CC and Others v Trustees, Oregon Trust
[27]
it was held that:
“ …
contractual
relations are the bedrock of economic activity and our economic
development is dependent, to a large extent, on the
willingness of
parties to enter into contractual relationships. If parties are
confident that contracts that they enter into
will be upheld, then
they will be incentivised to contract with other parties for their
mutual gain. Without this confidence,
the very motivation for
social coordination is diminished. It is indeed crucial to
economic development that individuals
should be able to trust that
all contracting parties will be bound by obligations willingly
assumed.”
[28]
In
Beadica
,
the Constitutional Court furthermore held that “…
our constitutional project will be imperilled if courts denude
the
principle of
pacta
sunt servanda
.
[29]
Pacta
sunt servanda
therefore continues to play a crucial role in the judicial control of
contracts.
[65]
It was accordingly reasonable for FirstRand Bank to have expected
that the Applicant
Trust, and the Respondent Trust, would comply with
the terms of FA10. Apparently the Applicant Trust endeavoured to
comply with
the terms of FA10. It afforded the Respondent Trust a
period of twenty days to remedy its breaches of the Sub-Lease and
every notice
furnished to the Respondent Trust was also furnished to
FirstRand Bank. However, a misinterpretation of the terms provided in
FA10
led to the understanding that the Applicant Trust afforded the
Respondent Trust a period of more than 27 days to rectify its breach,
whereas on a proper construction of the period as per clause 12.1.2
of the Sub-Lease read with the terms of FA10, the Respondent
Trust
should have been afforded a period of 40 days to rectify its
breach(s). This is as a result of a period of 20 days and not
7 days
afforded in the letter of demand.
[66]
On behalf of the respondents it is therefore argued that it would be
untenable to
disregard the facts underlying this application. It is
trite law that the factual issues (to the extent that they are
disputed)
must be determined on the respondents’ version.
[30]
The question therefore is: would public policy countenance an
arrangement to give an additional notice period to effect an
indivisible
cancellation of the Sub-Lease and then fall back on the
Shirfen-principle to deny it?
[67]
A further argument advanced on behalf of the Respondent Trust is the
Applicant Trust’s
failure to demand strict compliance with the
terms of the Sub-Lease and to indulge the late performance by the
Respondent Trust
for more than a decade. On 24 June 2022 the
Respondent Trust requested a further indulgence, which on 27 June
2022 was refused.
The Applicant Trust, however already by that time,
was indulging late performance. On 26 July 2022 a demand to comply
with the
terms of the Sub-Lease on threat of cancellation was issued.
In this demand 20 days to comply, contrary to the 7 days of the
Sub-Lease,
was afforded. This period is an indication that the
Applicant Trust was once again prepared to indulge the Respondent
Trust’s
defective performance.
[68]
On 11 August 2022 the Respondent Trust sought a further indulgence to
comply with
the demand of 26 July 2022. Contrary to the stance
adopted by the Applicant Trust during June 2022, a further indulgence
was granted.
This, as contended by the Respondent Trust, is an
indication that the threat of cancellation was not seriously
intended. On 15
August 2022 the Respondent Trust sought a further
indulgence to pay the amounts demanded on 26 July 2022. The following
day (16
August 2022) the request for a further indulgence was
granted.
[69]
On 24 August 2022 a demand, reserving the right to cancel the
Sub-Lease in the event
of non-compliance, in terms of which the
Respondent Trust was again afforded 20 days (not 7 days in terms of
the Sub-Lease) to
rectify its breaches was issued. The 20- day period
expired on 13 September 2022. In an email dated 20 September, the
attorneys
on behalf of the Applicant Trust did not refer to any
intention to cancel the Sub-Lease. The Respondent Trust therefore
finds further
support for its argument that the Applicant Trust
lulled the Respondent Trust into a sense of false security, in the
Applicant
Trust’s continued indulgences and failure to take a
firm stance regarding the Respondent Trust’s non-compliances
with
the terms of the Sub-Lease.
[70]
On 27 September 2022 the cancellation letter to the Respondent Trust
was issued.
In
Edward
L Bateman Ltd v Combined Metal and Wire Works (Pty) Ltd
[31]
the
question whether a creditor who has acquiesced, expressly or by
implication and without complaint, to a long series of defective
performances by his debtor, was to be precluded from invoking the
late payments as a ground for cancellation of the agreement
between them was adjudicated. Colman J held that, having regard of
the particular facts and circumstances of the case, it
was
clear that the period of indulgences had come to an end, as had the
cordial or sympathetic or co-operative relationship, which
had given
rise to the indulgences.
[32]
[71]
Colman J, with reference to
Garlick
Ltd v Phillips
[33]
concluded that it is not every prior indulgence by a creditor which
will be recognised as a basis for the application of the principle
applied in the
Garlick-
matter. What is required is “… a long continued
course of conduct consisting of the defective performance by
one
party acquiesced in by the other.”
[34]
A single defective performance by a debtor will not suffice.
Nor will the mere acceptance of two defective performances suffice.
The surrounding circumstances, including the relationship between the
parties, are often to be relevant. An indulgence or
series of
indulgences granted during a period of cordiality will not support
and entitlement to expect similar indulgences.
[72]
The rule in
Garlick
is an equitable principle resting upon the
injustice of the consequences that may follow if a creditor were
allowed to lull his
debtor into the belief that strict performance
was not required and then, without warning, to demand the full
contractual relief
provided for as a consequence of defective
performances. From the facts in the matter at hand it is clear
that the Applicant
Trust acquiesced to the defective performances of
the Respondent Trust for more than a decade. As Mr Grobler SC
mentioned, a repeat
function of the demand letter would have come in
handy. For an extended period of time the Applicant Trust
did not
demand strict compliance with the terms of the Sub-Lease.
The Applicant Trust created the impression that it was prepared
to
accept the Respondent Trust’s late performance and lulled the
Respondent Trust into a sense of security that such performance
remains acceptable.
[73]
Furthermore, for a considerable time, not only once or twice, but for
many months,
the Applicant Trust created the impression by
representations made in the letters of demand that it accepted the
terms of FA10
by providing the additional time period of twenty days
within which the Respondent Trust had to comply with the terms of the
Sub-Lease.
A clear and unambiguous representation was made through
the letters of demand and the subsequent conduct of the Applicant
Trust,
by accepting late payment of rentals and other amounts.
Obviously, the Respondent Trust relied upon the representations and
conduct
of the Applicant Trust, which now appears to have been to
their detriment.
CONCLUSION.
[74]
In
Barkhuizen v Napier
it was held that a party who seeks to
avoid the enforcement of a contractual term is required to
demonstrate good reason for failing
to comply with the term. The
rational for this is:
“
For all we know he
may have neglected to comply with the clause in circumstances where
he could have complied with it. And
to allow him to avoid its
consequences in these circumstances would be contrary to the doctrine
of
pacta
sunt servanda
.
This would indeed be unfair to the respondent.”
[35]
The Constitutional Court
resolved the role of public policy in the enforcement of contract in
Beadica
and held that
Barkhuizen
remains the leading
authority regarding the role of public policy in contracts.
Barkhuizen
enunciated a two- stage approach in determining
whether a contractual provision is contrary to public policy. In the
first stage
it is determined whether the provision is
per se
contrary to public policy. The Respondent Trust does not
challenge clause 12.1.2 of the Sub-Lease on the basis that it is
per
se
contrary to public policy. The Respondent Trust’s
challenge is focussed on the second stage of the
Barkhuizen
inquiry, that if the clause is consistent with public policy, whether
it should be enforced taking into consideration the relevant
circumstances.
[75]
Having regard to the circumstances of the matter at hand the
Applicant Trust’s
conduct is wholly inconsistent with an
intention to carry out the strict terms of the Sub-Lease and reflects
a clear indication
of a commitment to comply with the provisions of
FA10. The Applicant Trust allowed the extended period of 20 days,
albeit not as
the parties intended per FA10, but by providing an
additional period within which the Respondent Trust is to rectify its
breaches
of the Sub-Lease. I am of the view that the application
should be dismissed, firstly on the basis that the computation of the
period
provided to the Respondent Trust and also to FirstRand Bank,
namely 32 days, does not comply with the time period provided to the
Respondent Trust as per the letter of demand read with the additional
time per FA10. On a correct interpretation of the letter
of demand
and FA10, the Respondent Trust was afforded 40 days to rectify its
breaches. On this basis alone, the cancellation is
premature and of
no force and effect.
[76]
Secondly, the Applicant Trust’s reliance on the non-variation
clause embodied
in the Sub-Lease is untenable on the basis that FA10
complies with the basic requirement of a
stipulation alteri.
The
Applicant Trust expressly affirmed therein that it would not attempt
to cancel the Sub-Lease contrary to the terms of FA10.
The Shifren
clause contained in the Sub-Lease does not apply to FA10. In any
event the principle of
pacta sunt servanda
equally applies to
FA10.
[77]
Furthermore, if the Applicant Trust’s cancellation of the
Sub-Lease is allowed
contrary to FA10, it would negate FirstRand
Bank’s real rights registered over the Sub-Lease. FirstRand
Bank did not provide
its written consent for the release of the
Sub-lease from the operation of the mortgage bond in terms of the
provisions of section
56(1) of the Deeds Act. The Applicant Trust did
not seek any relief in this regard in its notice of motion.
[78]
In the event that this court is wrong in finding that FA10 amounts to
a
stipulatio alteri
, it amounts to a recording of the terms
that supplemented or added to the provisions of the Sub-Lease
governing the procedure for
cancellation thereof. To enforce the
contractual terms of the Sub-Lease would, having regard to all the
facts and circumstances
of this matter, be unfair, unreasonable or
unduly harsh upon the Respondent Trust and FirstRand Bank. In all the
circumstances
of this matter, it would be contrary to public policy
to cancel the Sub-Lease and to enforce the cancellation clause in
that it
would be unreasonable, unfair and untenable to disregard FA10
under circumstances where the Applicant Trust agreed to FA10 and
implemented the terms thereof.
[79]
The Constitutional Court held that the impact of the Constitution on
the enforcement
of contractual terms through the determination of
public policy, is profound.
[36]
The public policy imperative to enforce contractual
obligations that have been undertaken on a voluntarily basis
recognises
the autonomy of contracting parties. In
Beadica
the public policy imperative was explained as follows:
“
This imperative
provides the requisite legal certainty to allow persons to arrange
their affairs in reliance on the undertakings
of the other parties to
a contract, and to coordinate their conduct for their mutual benefit.
While the explanation provided is
not the only relevant
consideration, it is critical in the overall assessment of whether
enforcement would be contrary to public
policy in all the particular
facts and circumstances of a case.”
[37]
[80]
The facts of this matter indicate that the Applicant Trust did not
strictly comply
with the terms and provisions of the Sub-Lease.
Numerous indulgences were afforded to the Respondent Trust over an
extended period
of time, regarding non-compliance with the Sub-Lease.
The Respondent Trust displayed a long continued course of conduct
consistent
of defective performance of the Sub-Lease acquiesced in by
the Applicant Trust. The Applicant Trust’s reliance upon
the cancellation clause in the Sub-Lease, alternatively upon the
Applicant Trust’s interpretation of how the extended time
period should be calculated as per the terms of FA10 and the letter
of demand, is unconscionable having regard to all the circumstances
of this matter.
[81]
The Respondent Trust and FirstRand Bank submit that the enforcement
of the strict
terms of the Sub-Lease in respect of the cancellation
thereof, would be contrary to public policy. I am satisfied that the
respondents
provided a sufficient and adequate explanation how the
enforcement of the terms of the Sub-Lease and the Applicant Trust’s
reliance upon the non-variation clause, would be contrary to public
policy. The respondents have succeeded in discharging the onus
resting on them to demonstrate that, in the circumstances of this
case, the enforcement of the cancellation of the Sub-Lease would
be
contrary to public policy. There is no reason that cost should
not follow the result.
[82]
ORDER
:
1.
The application is dismissed with costs, including the costs of two
counsel.
I
VAN RHYN
JUDGE
OF THE HIGH COURT,
FREE
STATE DIVISION, BLOEMFONTEIN
On
behalf of the Applicant:
ADV.
S GROBLER SC
ADV.
R VAN DER MERWE
Instructed
by:
McINTYRE
VAN DER POST INC
BLOEMFONTEIN
On
behalf of the Respondents:
ADV.
SYMON SC
ADV.
E RUDOLPH
Instructed
by:
EG
COOPER MAJIEDT INC ATTORNEYS
BLOEMFONTEIN
[1]
Act 42 of 1965.
[2]
1996 (2) SA 662
(W) at 668.
[3]
Brisley v Drotsky
2002 (4) SA 1
(SCA) para 89.
[4]
1964 (4) SA 769 (A).
[5]
Randcoal Services Ltd v Randgold and Exploration Co Ltd
[1998] ZASCA 45
;
1998 (4) SA
825
(SCA) at 841E- 842D.
[6]
2002
(4) SA 1
(SCA) paras 88-95.
[7]
1997 (4) SA 302 (A) 318.
[8]
Nyandeni Local Municipality v Hlazo
2010 (4) SA 261
(ECM) para1.
[9]
2005 (3) SA 323 (SCA).
[10]
2002 (6) SA 21
(SCA).
[11]
At [27].
[12]
At [92].
[13]
2007 (5) SA 323 (CC).
[14]
At [184].
[15]
Nyandeni Local Municipality v Hlazo
2010 (4) SA 261
; Steyn v Karee
Kloof Melkery (Pty) Ltd unreported case no
2009/45448 [2011]
ZAGPJHC 228 (30 November 2011).
[16]
2012 (4) SA 593 (SCA).
[17]
At [18].
[18]
(supra) at 668H.
[19]
1956 (1) SA 277
(A) at 291C.
[20]
Bursey v Bursey
[1997] 4 All SA 580
(E) 592F.
[21]
1920
AD 204
at
page 205 – 206.
[22]
Estate
Greenberg v Rosenberg and Greenberg
1925 TPD 924 930.
[23]
Joel Melamed & Hurwitz v Cleveland Estates; Melamed &
Hurwitz v Vorner Investments (Pty) Ltd
[1984] ZASCA 4
;
1984 (3) SA 155
(A) at 172A
[24]
Eldacc (Pty) Ltd v Bidvest Properties (Pty) Ltd 682/10) [2011]
ZASCA144 (26 September 2011).
[25]
Standard Bank of South Africa Ltd v Saunderson and Others
2006 (2)
SA 264
(SCA) at [2].
[26]
Act 47 of 1937.
[27]
2020 (5) SA 247 (CC).
[28]
Beadica at [84].
[29]
Beadica at [85].
[30]
Plascon-Evans Paints (TVL) Ltd v Van Riebeeck Paints (Pty) Ltd 1984
(3) SA 623 (A).
[31]
1975 (3) SA 497 (W).
[32]
Bateman (supra) at 501H.
[33]
1949 (1) SA 121
AD
[34]
Garlick (supra) p131.
[35]
Barkhuizen (supra) at para 85.
[36]
Beadica (supra) at [71].
[37]
Beadica (supra) at [92].