Brief Summary

Lease — Eviction — Breach of lease agreement — Applicant sought eviction of Respondent for failure to pay rent and alleged breach of lease terms — Respondent contended it was not given vacant possession due to prior tenant's occupation and sought to suspend rental payments due to COVID-19 — Court held that Respondent had effective control of the premises and was liable for rental payments from the lease commencement date; eviction granted.

Comprehensive Summary

Summary of Judgment

1. Introduction

This was an opposed application for eviction (ejectment) brought in the KwaZulu-Natal High Court, Pietermaritzburg. The applicant was The South African National Roads Agency SOC Limited (SANRAL), the owner and lessor of the property. The respondent was Archiways Skye (Pty) Ltd, trading as Hayfields Service Station (Engen), being the lessee of the premises under a written lease agreement. A further entity, Camry Trading Enterprises (Pty) Ltd, was drawn into the proceedings as a purported third party by way of a third party notice delivered by the respondent.

The procedural posture was shaped by two related components. First, SANRAL sought eviction relief against the respondent following an alleged cancellation of the lease due to non-payment of rental. Second, the respondent sought to involve Camry through a third party notice, contending that questions and issues between respondent and Camry were substantially the same as those in SANRAL’s eviction application and should be determined together. The third party notice was itself opposed by Camry and also opposed by the respondent in parts (as reflected in the papers), and SANRAL opposed the joinder-type attempt on the basis that the dispute with Camry was collateral to SANRAL’s claim.

The general subject-matter of the dispute concerned a commercial lease concluded after a tender process, the respondent’s failure to pay rental, and the respondent’s attempt to justify non-payment on the footing that it allegedly did not receive vacant possession (because Camry continued to operate a Kwik Spar outlet on the premises) and that the lease allegedly only commenced when certain trading licences were in place. The matter also implicated whether the respondent could use third party procedure to secure relief against Camry within the eviction application.

2. Material Facts

SANRAL was the owner of the premises described as erf 3045 Pietermaritzburg FT, situated at 101 New England Road, Hayfields, Pietermaritzburg, KwaZulu-Natal, measuring approximately 1,376 hectares. In 2019 SANRAL called for tenders to lease the property. The respondent submitted a tender that was accepted by SANRAL.

SANRAL and the respondent concluded a written lease agreement (reflected as signed on 31 July 2020, though it was alleged in the papers that it was in fact signed in November 2020). The lease recorded a commencement date of 1 August 2020, an initial duration of nine years, and a termination date of 30 June 2030. The lease provided for monthly rental payable in advance, escalating annually, in the amount of R528 000.00 plus VAT (total R607 200.00). It also contained a litigation costs clause on an attorney and client scale.

It was common cause that the premises were used for multiple operations, including a filling station and a Kwik Spar outlet operated by Camry, along with other businesses. The lease permitted the respondent to sublet, subject to certain conditions, including that subleases had to be subject to a three-month termination clause.

SANRAL’s case was that it had complied with its obligations and had given the respondent possession of the premises, but that the respondent failed to pay any monthly rental as required. SANRAL issued a demand on 30 November 2020, claiming that R1 925 964.99 was overdue. Extensions were granted, and by a subsequent notice the arrears exceeded R3 000 000.00. The respondent made only limited payments (recorded as R230 000.00 on 1 and 2 February 2021, with SANRAL also contending that total payments amounted to R345 000.00), and otherwise remained in occupation without paying the contractual rental.

The respondent’s explanation for non-payment rested primarily on two asserted impediments. The first was that SANRAL allegedly failed to give vacant possession because Camry remained in occupation of the Kwik Spar portion. The second was that, on the respondent’s version, the lease commencement (and thus the obligation to pay rental) was linked to the date when all trading licences were in place. The respondent further relied on commercial impacts of COVID-19 as part of its narrative for seeking rental relief or reduced rental, although the court treated the determinative issues as contractual rather than discretionary hardship relief.

A significant factual feature relied upon by the court was the respondent’s conduct consistent with accepting Camry’s continued presence on the premises. Documentation placed before the court included a meeting minute (2 June 2020) reflecting handover arrangements and the continued operation of the Kwik Spar without recorded objection by the respondent’s representatives, as well as correspondence and a draft lease between the respondent and Camry. The respondent also issued monthly invoices to Camry for rental and accepted rental payments from Camry and other subtenants for a period, which SANRAL contended showed the respondent had treated Camry as a subtenant rather than as an unlawful occupier whose presence defeated the lease.

In addition, the court relied on the respondent’s own affidavit material regarding licensing. A director of the respondent (Mr Reddy) attached a letter dated 24 March 2020 stating that the Controller of Petroleum Products had approved the application for a Retail New (change of hands) Licence under the Petroleum Products Act 1977. This was treated as inconsistent with the respondent’s contention that licensing was only obtained during November 2020 and that rental was therefore not yet due.

An important procedural fact forming part of the background was that there had been an interim application before Seegobin J under case number 6971/2021, in which an order was granted (pending finalisation of the main matter) directing that rentals paid by Camry and other businesses be paid over to SANRAL. The present court treated that prior decision as relevant to the respondent’s claim that it lacked the full use and benefit of the premises and to the continued obligation to pay rental.

3. Legal Issues

The court identified two principal clusters of issues.

The first cluster concerned the eviction application itself. The central questions were whether SANRAL was entitled to eviction relief flowing from cancellation of the lease, which required determination of whether the respondent was in breach through non-payment of rental, and whether any defence justified non-payment. Within this, the court was required to determine when the lease came into operation (including whether the respondent could rely on tender documentation or licensing-related provisions to postpone commencement), and whether the respondent’s defence based on vacant possession (and, relatedly, the exceptio non adimpleti contractus) could succeed.

The second cluster concerned the respondent’s third party notice against Camry. The court had to determine whether the third party procedure under Rule 13 was properly invoked on the basis that questions and issues in the main application were substantially the same as those between the respondent and Camry, and whether it was competent or appropriate in this application to seek substantive eviction-type relief against Camry via that mechanism.

The dispute required determination of the application of legal principles to largely common cause facts, with limited scope for true factual dispute resolution. To the extent there were disputes (such as the practical implications of Camry’s occupation and the asserted licensing timeline), the matter remained in application proceedings and thus the court approached disputed aspects in line with motion-proceedings principles referenced in the judgment.

4. Court’s Reasoning

On the third party notice, the court began by setting out the requirements of Uniform Rule 13, emphasising that the notice must state the nature and grounds of the claim, the question or issue to be determined, and the relief claimed, and that the procedure is primarily designed for action proceedings. The court noted that the third party notice delivered by the respondent did not strictly comply with Rule 13, including that it referred to an annexure which was not attached. While the court was prepared to treat the affidavit attached to the notice as setting out the relief claimed, the substantive requirement remained whether the issues were in fact “substantially the same” as those in SANRAL’s eviction application.

The court held that they were not. It reasoned that the tender documentation made plain that the premises comprised a filling station, a Kwik Spar, and other businesses, meaning that any tenderer would understand that the leased premises included portions then occupied by those businesses. Against that background, the respondent’s own conduct—issuing invoices to Camry for rental, receiving payments, negotiating about lease arrangements and possible purchase of the Kwik Spar operation—was treated as demonstrating that the respondent accepted Camry as a subtenant. On that factual footing, the court concluded that Camry’s occupation was not an issue that SANRAL was required to resolve for purposes of SANRAL’s claim against the respondent; rather, any dispute about Camry’s continued presence was a private dispute between the respondent and Camry. The court therefore found that the issues between SANRAL and the respondent (cancellation and eviction due to non-payment) were not substantially the same as issues between the respondent and Camry (occupation and alleged entitlement to remain), and dismissed the third party proceedings with costs.

Turning to SANRAL’s eviction claim, the court dealt first with the respondent’s defence that SANRAL had failed to give vacant possession because Camry remained in the Kwik Spar portion. The court rejected this defence as having “no basis” in the circumstances, because the tender documentation disclosed that the property included the Kwik Spar and other businesses and the respondent tendered on that basis. The court treated the respondent’s subsequent invoicing of Camry and acceptance of rental as further confirmation that the respondent had accepted Camry’s presence as part of the leased commercial arrangement.

The court then addressed the respondent’s contention that rental only became payable once the respondent had obtained all necessary licences. The court relied on the respondent’s own affidavit evidence attaching the 24 March 2020 letter recording approval of the petroleum licence. On that evidence, the licensing justification for withholding rental was undermined. The court also emphasised that, irrespective of the licensing debate, it was common cause that the respondent had remained trading from the premises and had not paid rental to SANRAL.

A central feature of the court’s reasoning was the application of the principle articulated in Tudor Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd, namely that where a lease provides for rental to be paid in advance, the lessee’s obligation to pay rental is not reciprocal to the lessor’s obligation to afford beneficial occupation of the entire premises, and suspension of rental (including via the exceptio non adimpleti contractus) is contractually excluded. The court regarded the facts as materially similar to Tudor Hotel: rental was payable monthly in advance, and even if there had been an argument about full beneficial occupation, the lease structure meant the respondent could not withhold rental on that basis. The court also referred to Seegobin J’s earlier interim judgment, which had applied Tudor Hotel and held that the respondent had to continue paying rental in terms of its contractual obligation.

The respondent further attempted to rely on a clause in the tender document (clause 3.1 in section 4) which provided, in effect, that if the lessor could not give occupation on the commencement date (including where an existing lessee had not vacated), the lessee would accept occupation and commence paying rental on a later date when the property became available. The respondent argued that this tender clause governed and could not be deleted from the final signed lease, and that altering tender terms was contrary to procurement legality principles (with reference to cases addressing state decision-making and section 217 of the Constitution).

The court rejected this submission on the basis that the tender pack contained a draft lease, and the final lease signed by the respondent differed from that draft. The court held that the respondent had ample time to consider the final lease and raise objections before signing. The respondent’s claim that it signed without reading because it assumed the lease mirrored the tender documentation was found to have “no legal foundation”, and the court treated the respondent as bound by the signed agreement. On that approach, the court found the procurement legality authorities relied upon by the respondent to be inapplicable to the present contractual dispute as pleaded and argued.

Having rejected the vacant possession defence, the licensing-based postponement defence, the exceptio defence, and the tender-variation argument, the court concluded that the respondent had failed to pay rental as required, that SANRAL was entitled to cancel, and that SANRAL was entitled to the eviction relief sought.

5. Outcome and Relief

The court dismissed the respondent’s third party application/proceedings against Camry, and ordered the respondent to pay the costs associated with that third party component.

On the main application, the court granted SANRAL relief in terms of paragraphs 1, 2 and 3 of the notice of application, which (as described in the judgment) comprised an order directing the respondent to vacate the specified premises and restore vacant and unrestricted access within three days, and authorising the Sheriff (and if necessary the South African Police Service) to take steps necessary to give effect to the vacation of the premises and unrestricted access. The judgment recorded that SANRAL had sought costs on an attorney and client scale, but the final order in the judgment was expressed as granting paragraphs 1 to 3 of the notice of motion, without separately restating a costs order in the text of the judgment for the main eviction relief.

Cases Cited

Tudor Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd (793/2016) [2017] ZSCA 111 (20 September 2017).

Edwards v FirstRand Bank Limited t/a Wesbank (20734/14) [2016] ZSCA 114 (30 September 2016).

MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd t/a Rye and Lazer Institute 2014 (3) SA 481 (CC).

Altech Radio Holdings (Pty) Ltd and Others v Tshwane City 2021 (3) SA 25 (SCA).

Govan Mbeki Municipality v New Integrated Credit Solutions (Pty) Ltd 2021 (4) SA 436 (SCA).

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A).

Seegobin J, KwaZulu-Natal High Court, Pietermaritzburg, case number 6971/2021 (as referenced in the judgment).

Legislation Cited

Petroleum Products Act 1977.

Constitution of the Republic of South Africa, 1996 (section 217, as referenced in argument).

Occupational Health and Safety Act 85 of 1993 (referred to in the lease discussion as “Occupation and Health Safety Act”).

Rules of Court Cited

Uniform Rules of Court, Rule 13.

Held

The court held that the respondent’s attempt to invoke third party procedure against Camry did not meet the requirements of Rule 13 and, in any event, the issues between SANRAL and the respondent were not substantially the same as any issues between the respondent and Camry. The dispute between the respondent and Camry was treated as collateral and not determinative of SANRAL’s contractual claim for cancellation and eviction. The third party proceedings were therefore dismissed with costs.

On the merits of the eviction, the court held that the respondent’s defences to non-payment of rental were unsustainable. It found that the respondent tendered for and leased premises which, on the tender documentation, included the Kwik Spar and other operating businesses, and the respondent’s conduct (including invoicing and receiving rental from Camry) demonstrated acceptance of that state of affairs. The court further relied on the respondent’s own evidence regarding licensing and treated the lease as operative such that rental was due. Applying the principle from Tudor Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd, the court held that where rental is payable in advance, the respondent could not withhold rental on the basis of alleged non-performance by the lessor, and the exceptio non adimpleti contractus did not avail the respondent on the contract as construed and applied.

The court accordingly granted SANRAL’s eviction relief as set out in paragraphs 1 to 3 of the notice of motion and dismissed the third party proceedings with costs.

LEGAL PRINCIPLES

The judgment applied the principle that where a lease stipulates that rental is payable in advance, the lessee’s obligation to pay is not necessarily reciprocal to the lessor’s obligation to provide beneficial occupation of the entire premises, with the consequence that the lessee may be precluded (on the wording and structure of the contract) from suspending rental payments under the exceptio non adimpleti contractus. This was applied through reliance on the reasoning in Tudor Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd.

The judgment further applied the principle that a party who signs a written agreement is generally bound by its terms, and a contention that the signatory did not read the document, or assumed it would reflect earlier drafts associated with a tender pack, did not provide a legally sustainable basis to escape the consequences of the signed contract on the facts as presented.

In relation to third party procedure, the judgment applied Uniform Rule 13 as requiring that a third party notice properly disclose the nature and grounds of the claim, the question or issue to be determined, and the relief sought, and that it must genuinely raise an issue substantially the same as that in the main proceedings if it is to be determined together. Where the third party dispute is collateral and does not overlap substantially with the main dispute, the third party procedure is not appropriate and the third party proceedings fall to be dismissed.

South African National Roads Agency SOC Limited v Archiways Syke (Pty) Ltd and Another (5302/2021P) [2022] ZAKZPHC 51 (15 September 2022)