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[2011] ZASCA 8
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Socratous v Grindstone Investments 134 (Pty) Ltd (149/10) [2011] ZASCA 8; 2011 (6) SA 325 (SCA) (10 March 2011)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no: 149/10
SAVVAS SOCRATOUS
..............................................................................................
Appellant
and
GRINDSTONE INVESTMENTS 134 (PTY)
LTD
.....................................................
Respondent
________________________________________________________________
Neutral citation:
Socratous
v Grindstone Investments
(149/10) [2011] ZASCA 8 (10 March
2011)
CORAM:
Navsa, Ponnan and Shongwe JJA
HEARD:
22 February 2011
DELIVERED:
10 March 2011
SUMMARY:
Cancellation of lease agreement ─ proliferation of litigation
concerning cancellation on alternative bases ─
defence of
lis
alibi pendens
wrongly
rejected by court below ─ courts are a public resource under
severe pressure ─ congested court rolls prejudiced
by repeated
litigation involving the same parties, based on the same cause of
action and related to the same subject matter ─
court ought not
to have decided the merits.
______________________________________________________________
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
Eastern Cape
High Court (Mthatha) (Dukada AJ sitting as court of first instance).
1. The appeal is upheld with costs on
the attorney and client scale.
2. The order of the court below is set
aside in its entirety and substituted as follows:
‘
a. The
applicant’s application to strike out succeeds with costs.
b. The proceedings are stayed pending
the determination of either case 464/08 in the Magistrates’
Court for the district of
Mount Currie or case 522/09 in this court.
c. The applicant is to pay the
respondent’s costs of these proceedings on the attorney and
client scale.’
________________________________________________________________
JUDGMENT
________________________________________________________________
NAVSA JA (Ponnan and Shongwe JJA
concurring)
[1] This is an appeal against a
judgment of the Mthatha High Court (Dukada AJ), in terms of
which it granted an order confirming
the cancellation of a lease
agreement in respect of commercial property and ordered the
appellant’s eviction from the premises.
The appellant was
ordered to pay the costs of the application on an attorney and client
scale. The appeal is before us with the
leave of the Mthatha High
Court.
[2] In November 2006 the respondent
company, Grindstone Investments 134 (Pty) Ltd (Grindstone), concluded
a lease agreement with
the appellant, Mr Savvas Socratous (Mr
S), in terms of which it let to him, for a period of twelve years,
certain premises
situated at 107 York Road, Mthatha. The property was
used to conduct a supermarket business under the style of a national
supermarket
chain. Clause 14 of the agreement provides that in the
event of the destruction of or damage to the property to the extent
that
it was ‘untenantable’, either party was entitled to
declare the lease cancelled by giving written notice to the other
to
that effect by pre-paid registered post within 30 days.
[3] Clause 18 of the agreement
provides that in the event of the lessor cancelling the agreement and
the lessee disputing the cancellation
and remaining in occupation,
the lessee shall, pending the resolution of the dispute by litigation
or otherwise, continue to pay
to the lessor an amount equivalent to
the monthly rental. Clause 23 of the agreement provides that in the
event of the rental or
any other amount remaining unpaid the lessor
shall be entitled, after giving notice to remedy the breach, to
cancel the lease forthwith
and retake possession of the property,
without prejudice to its right to claim arrear rentals and any
damages it might have sustained
as a result of the lessee’s
breach. The agreement provides that in the event of legal action
being taken against the lessee
the latter shall be liable for costs
on the attorney and client scale. Importantly, clause 18 provides
that in the event that the
dispute is resolved in favour of the
lessor the amounts paid by the lessee shall be deemed to be amounts
suffered by the lessor
on account of damages suffered by it as a
result of cancellation of the lease and/or the unlawful holding over.
[4] It is undisputed that during
September 2008 a fire broke out at the premises. Whilst the parties
agreed that the damage caused
by the fire was extensive they
disagreed on whether the premises were, as a result, ‘untenantable’.
On 28 September
2008 Grindstone purported to cancel the lease
agreement on the basis that the property had been destroyed and was
‘untenantable’.
The response by Mr S to the cancellation
was that the premises could still be partially used and the lease
agreement provided that
in those circumstances it was not liable to
be cancelled.
[5] This dispute precipitated much
litigation. During March 2009 Grindstone instituted action against Mr
S in the Mthatha High Court,
in terms of which it sought an order
declaring the lease agreement cancelled by virtue of the notice given
in terms of clause 14
of the lease, referred to in para 2 above.
Grindstone also sought the eviction of Mr S. It did not in that
action claim any amount
for arrear rental or for holding over.
[6] On 3 April 2009 Grindstone wrote
to Mr S demanding payment of arrear rental in an amount of R262 020
for the period March 2008
to September 2008, when the fire broke out.
It also claimed an amount of R439 692 for the period September 2008
to April 2009 on
the basis that Mr S continued in occupation after
the cancellation referred to in paragraph 4. Grindstone stated that
in the event
of these amounts not being paid it would cancel the
lease agreement in terms of clause 23. That demand went unheeded.
During May
2009 Grindstone brought the application that led to this
appeal. In its founding affidavit it relied for its right to cancel
on
the destruction of the property and for failure to pay arrear
rental and the amounts it considered due to it for the continued
occupation by Mr S after the fire and subsequent to the cancellation.
Significantly, in its founding affidavit, Grindstone referred
to the
action instituted by it, referred to in para 5 above, and stated the
following:
‘
There
is accordingly pending litigation between the parties to determine
the right of the applicant to cancel the lease.’
[7] Mr S opposed the application on
several bases. First, that at the time that it had brought the
application Grindstone had unlawfully
resorted to self-help and had
physically retaken possession of the property. Thus, Mr S contended,
the application for eviction
was misconceived. The spoliation by
Grindstone had caused Mr S, in separate proceedings, to apply to the
High Court on an urgent
basis for the restoration of the property.
The accusation by Mr S of spoliation on the part of Grindstone is
unchallenged.
[8] Furthermore, Mr S brought it to
the attention of the court below that during June 2008, before any
high court proceedings had
been instituted, Grindstone had commenced
litigation in the Magistrates’ Court for the district of Mount
Currie for an order
cancelling the lease agreement and his eviction.
Grindstone’s response to this disclosure by Mr S was to submit
that those
proceedings related to arrear rentals due at that time and
it should be considered to be distinct from the application
proceedings
leading up to the present appeal, which was for
cancellation based on non-payment of rental for a different period
and on the destruction
of the property. If this litigation cocktail
has not yet had a dizzying effect, there is more. It appears that as
early as March
2008 there had been litigation between Grindstone and
Mr S in relation to the lease and that it involved the alleged
failure to
pay stamp duties and the provision of a bank guarantee. At
the time that the application in the court below was heard all these
proceedings had not been disposed of and were still pending. It was
contended by Mr S that all those proceedings were between the
same
parties based on the same cause of action and related to the same
subject matter. Put simply, Mr S raised the defence of
lis alibi
pendens
.
[9] On the merits of the application
in relation to the damage or destruction of the property Mr S relied
on the provisions of clause
14, which, over and above the provisions
referred to above, states that in the event of the lessor failing to
give notice to cancel
it would be obliged to proceed expeditiously
with rebuilding the premises and for the period that the premises are
‘untenantable’
the lessee would not be liable for rental.
Clause 14 also provides that in the event that the premises are
partially tenantable
the rental would be abated pro-rata to the
beneficial use. In his opposing affidavit, Mr S states
contradictorily, that since the
fire the premises are tenantable and
that he has been ‘forced to close the doors’. Clause 14
provides that when a dispute
arises concerning the extent of the
abatement of rental the dispute should be settled by arbitration. Mr
S contended that the application
by Grindstone was premature. Mr S
also relied on a counterclaim he instituted against Grindstone which
is the subject of the proceedings
in the action instituted by the
latter in the high court. In the counterclaim Mr S sought to hold the
lessor liable for the national
supermarket chain withdrawing its
franchise rights from him.
[10] In deciding the matter in the
court below Dukada AJ was dismissive of the spoliation complaint. He
stated that Mr S had retaken
possession of the premises and that if
the court held the basis for cancellation to be well-founded the
eviction order could be
executed. The learned judge went on to
consider the requirements for a successful plea of
lis pendens
,
namely, that there must be litigation pending between the same
parties based on the same cause of action and in respect of the
same
subject matter. He rightly discounted the action in the magistrates’
court relating to unpaid stamp duties and the failure
to provide a
bank guarantee. Dukada AJ had regard to the submission on behalf of
Grindstone, that cancellation on the basis of
clause 23 of the lease
agreement for failing to pay the rental, after Mr S remained in
occupation subsequent to the fire,
was a separate and distinct cause
of action. Thus, he considered the proceedings in the magistrates’
court for the district
of Mount Currie to be based on a different
cause of action. He reached the same conclusion in relation to the
high court action.
He took the view that even if he had erred in
relation to the question of
lis pendens
he had a residual
discretion which he would have exercised in favour of Grindstone.
[11] Having dismissed the points
in
limine
the court below went on to decide the merits against Mr S.
In respect of the allegations by Mr S concerning his counterclaim the
court below decided to grant Grindstone’s application to strike
them out on the basis that they were irrelevant. The court
below
confirmed the cancellation of the lease agreement and ordered the
eviction of Mr S. The court appears to have held that the
cancellation was justified on the basis of both the destruction of
the property as well as for the non-payment of rental. It should
be
borne in mind that the litigation in the court below did not involve
a determination of the amount owing in respect of the arrear
rental
or continued occupation after the fire or cancellation.
[12] It is necessary to record certain
events that unfolded subsequent to the judgment of the court below
which are matters of concern.
By the time the application for leave
to appeal was argued in the court below the eviction order had
already been executed. It
appears that the court below was not
informed of this fact. Furthermore, pending the appeal, the buildings
on the property had
been rebuilt by Grindstone and let to someone
else. We were informed by counsel representing Grindstone that this
was done against
his advice. He rightly accepted that this conduct
was deserving of censure. He assured us that since the premises in
question were
let to a fully owned subsidiary a decision of this
court in favour of Mr S could be executed. These are troubling
aspects to which
I will return.
Conclusions
[13] It is necessary to consider the
underlying principle of the defence of
lis alibi pendens
. In
Nestle (South Africa) (Pty) Ltd v Mars Inc
2001 (4) SA 542
(SCA) para 16 this court said the following:
‘
The
defence of
lis
alibi pendens
shares
features in common with the defence of
res
judicata
because
they have a common underlying principle, which is that there should
be finality in litigation. Once a suit has been commenced
before a
tribunal that is competent to adjudicate upon it, the suit must
generally be brought to its conclusion before that tribunal
and
should not be replicated (
lis
alibi pendens
).
By the same token the suit will not be permitted to revive once it
has been brought to its proper conclusion (
res
judicata
).
The same suit between the same parties, should be brought once and
finally.’
This principle has
been stated and repeated by the authorities over a period of more
than a century.
1
[14] The
proceedings in the Magistrates’ Court at Mount Currie,
instituted in June 2008, indisputably concerned cancellation
of the
lease agreement based on non-payment of rental. The action instituted
in the high court which preceded the application which
is the subject
of the present appeal was based on the destruction of the premises.
The application that is the subject of this
appeal was based on both.
It is no answer to the defence of
lis
pendens
in
this case
to
say that part of the claim for arrear rental is for non-payment of
rental for the period after the fire and that it is regulated
by
clause 23, the relevant parts of which are set out in para 3 above.
It misconceives clause 23 and the effect of a prior cancellation
for
non-payment of arrear rental with amounts that may be due because of
continued occupation. Clause 23 does not have the effect
of reviving
a prior cancellation and the court below was wrong to accept the
submission that this distinguished the present litigation
from the
preceding litigation. Importantly, as pointed out in para 6 above,
the claim for cancellation in the application that
is the subject
matter of the present appeal is based on non-payment of rental for a
period that overlaps with the period on which
the claim for
cancellation was based in the Mount Currie proceedings.
[15] There can, of course, be no doubt
that the high court action sought confirmation of a cancellation
based on the destruction
of the property, which is one of the bases
advanced in the application. One might rightly ask how many times a
cancellation must
occur to take effect. It is disingenuous to suggest
that the litigation is distinguished on the basis that cancellation
is sought
on the basis of non-payment of arrear rental for a
different period. Had the Mount Currie litigation been allowed to run
to its
conclusion the cancellation of the lease and its termination
would have been decided. Likewise, if the high court action had
proceeded
to a conclusion it would have decided whether the lease had
rightly been terminated. These are the same two questions the court
below was asked to consider. As stated in para 6 above, Grindstone,
in its founding affidavit, itself stated that there is pending
litigation in the high court concerning its right to cancel the lease
agreement.
[16] Courts are
public institutions under severe pressure. The last thing that
already congested court rolls require is further
congestion by an
unwarranted proliferation of litigation. The court below erred in not
holding that against Grindstone when it
dismissed the defence of
lis
pendens
without
due regard to the facts and on wrong principle. The court below ought
not to have proceeded to consider the merits. Furthermore,
in my
view, Grindstone’s failure to disclose in its founding papers
that it had despoiled Mr S and to fully disclose all
of the other
litigation referred to above was deserving of censure, at least to
the extent of a punitive costs order (see
Trakman
NO v Livshitz & others
).
2
It had come to
court with unclean hands. The court below ought to have taken a dim
view of that fact.
[17] The failure by each counsel
representing the respective parties to inform the court below at the
time that the application
for leave to appeal of the execution of the
eviction order is baffling. I have little doubt that had the high
court been appraised
of that fact it would have refused the
application. Grindstone’s conduct before and subsequent to
judgment in the court below
makes it liable to a punitive costs order
on appeal. The same applies to its conduct in bringing the
application in the court below.
One final aspect remains. Strictly
speaking the allegations struck out by the court below were
irrelevant.
[18] The following order is made:
1. The appeal is upheld with costs on
the attorney and client scale.
2. The order of the court below is set
aside in its entirety and substituted as follows:
‘
a. The
applicant’s application to strike out succeeds with costs.
b. The proceedings are stayed pending
the determination of either case 464/08 in the Magistrates’
Court for the district of
Mount Currie or case 522/09 in this court.
c. The applicant is to pay the
respondent’s costs of these proceedings on the attorney and
client scale.’
_________________
M S NAVSA
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: A R Duminy
Instructed
by
Elliot
& Walker Kokstad
Naudes
Inc Bloemfontein
For
Respondent: T J M Paterson SC
Instructed
by
Bate
Chubb & Dickson Inc East London
Honey Inc Bloemfontein
1
Voet
45.2.7 Gane’s translation vol 6 at 560:
‘
Exception
of
lis
pendens
also
requires same persons, thing and cause.
The
exception that a suit is already pending is quite akin to the
exception of
res
judicata
,
inasmuch as, when a suit is pending before another judge, this
exception is granted just so often as, and in all those cases
in
which, after a suit has been ended there is room for the exception
res
judicata
,
in terms of what has already been said. Thus the suit must already
have started to be mooted before another judge between the
same
persons, about the same matter and on the same cause, since the
place where a judicial proceeding has once been taken up
is also the
place where it ought to be given its ending.’
2
1995
(1) SA 282
(A) at 288E-H.