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[2021] ZAGPJHC 400
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Stand 59 Chamdor Properties (Pty) Ltd v De Heus (Pty) Ltd (20/41712) [2021] ZAGPJHC 400 (3 August 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNEBSURG
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED:
YES
DATE:
3 AUGUST 2021
Case number: 20/41712
In the matter between:
STAND
59 CHAMDOR PROPERTIES (PTY)
LTD
Applicant
and
DE
HEUS (PTY)
LTD
Respondent
JUDGMENT
SLON AJ
1.
The
applicant seeks in this application payment by the respondent of the
sum of R2 680 046.39 with interest calculated at the prime
rate
[1]
from 25 October 2019 to date of payment, and costs on the scale as
between attorney and client.
2.
The claim arises from the provisions of a
written lease, concluded between the applicant, as landlord, and the
respondent, as tenant,
in respect of certain industrial premises
situate in Roodepoort Gauteng. The lease commenced on 1 January 2014
and terminated by
effluxion of time on 31 December 2018.
3.
In terms of the lease, the respondent was
obliged monthly to pay, either to the applicant or to the local
authority direct (but
nothing seems to turn on this), the cost of
electricity consumed on the premises, in addition to other amounts
which are not germane
to this matter.
4.
The lease provided in this regard that:
‘
7.5
If there is any dispute as to the Tenant’s liability for the
payment of any of such items referred to in this
clause [including,
at clause 7.1.1, ‘the cost of all electricity, including but
not limited to the electricity maximum demand
charges consumed by
[the Tenant] on the Leased Premises’] or to the amount and
extent of such liability, the Landlord’s
auditors shall
determine the quantum, nature and extent of the Tenant’s
liability.
7.6 The
Tenant shall then be obliged to pay the amounts so established to the
Landlord.’
5.
After the termination of the lease, a
dispute arose between the parties as to the amount, if any, payable
by the respondent to the
applicant for the former’s consumption
of electricity while in occupation of the premises during the
currency of the lease.
6.
In terms of clause 7.5 of the lease, the
matter was referred for determination to the applicant’s
auditors, Madhi Meyer Stein
Chartered Accountants Inc (‘MMS’).
The latter presented a report concluding that the amount payable by
the respondent
was the sum now claimed by the applicant herein.
7.
The respondent disputes that that amount is
owing.
8.
The applicant, ably represented by Mr Iles,
makes out a simple case: that a dispute as to the quantum of the
liability in respect
of the electricity consumption arose, that the
quantum was then determined by MMS in terms of the lease, and,
accordingly, that
amount is payable to it by the respondent under
clause 7.6 of the lease.
9.
The respondent, ably represented by Mr
Saks, raises the following defences:
9.1.
The dispute resolution provision contained
in clause 7.5 of the lease terminated with the expiry of the lease
itself, and, accordingly:
9.1.1.
any purported determination by MMS under
the lease is of no force or effect;
9.1.2.
the applicant is therefore obliged to
prosecute its claim in the ordinary manner by instituting action
should it so wish.
9.2.
If, however, it is found that clause 7.5
survived the expiry of the lease, the respondent disputes the
correctness of the purported
determination by MMS, and is at this
stage entitled to avoid the effect thereof on the grounds that:
9.2.1.
the determination by MMS was not in fact
any determination at all by MMS since it relied upon the report of a
company by the name
of E
nergi Concepts (Pty) Ltd
(‘Energi’) whose business it is to investigate the
correctness of charges made by the
local authority for electricity
consumption; the latter, argues the respondent, usurped the agreed
function of MMS which merely
‘rubber-stamped’ Energi’s
report;
9.2.2.
there are several material errors in the
calculations of MMS such that prior payments by the respondents were
not taken into account
and that a portion of the debt had become
prescribed.
9.3.
In any event, the disputes of fact are so
far-reaching that the matter is incapable of resolution on motion and
ought to be referred
to trial.
10.
The determination of this application, if
indeed it can be determined on the papers, must, in my view, depend
in the first instance
on whether or not the contention by the
respondent that the clauses in question did not survive the expiry of
the lease is correct,
and if they did, in the second instance, on the
meaning and effect to be attributed to clauses 7.5 and 7.6 of the
lease. The intended
meaning and effect of those clauses must be
determined primarily within the four corners of the lease as a whole.
11.
The
agreement to refer any dispute about the ‘quantum, nature and
extent’ of the respondent’s liability for the
electricity
costs to MMS was, in my view of the probabilities, not intended to be
an arbitration clause. Neither party contends
to the contrary. The
mere nomenclature which contracting parties may attach to such a
clause is not definitive of its nature
[2]
,
even though there is none here; and nor are there any procedural or
other prescriptions in the lease as to the manner in which
this
clause is to be implemented, although this, too, is not a sole
determinative factor. I agree with the submissions of both
parties
that the most probable inference from the terms of the lease (or lack
thereof) is that the parties intended this question
to be determined
by the nominated referee in a summary and speedy procedure.
12.
A referee in that position acts in effect
as an expert. It is his or her duty, in the words of Boruchowitz J
(speaking for the Full
Court of the then Witwatersrand Local Division
and referring to an expert valuer, a distinction on which nothing
turns for present
purposes) –
‘
to
hear and determine a dispute but to decide the questions submitted to
him by the exercise of his judgment and skill without a
judicial
inquiry. He does not exercise a quasi-judicial function. The valuer
is not required to hear or receive submissions from
either party. All
that is required is that he exercise an honest judgment, the
arbitrium boni viri
.
…. An expert, unlike an arbitrator, is not bound to receive
submissions from either party … The material upon which
an
expert generally bases his decision is described by Ronald Bernstein
in his work
Handbook of Arbitration
Practice
2nd ed (1993) at 2.4.1 in the
following terms:
'Where
a dispute is resolved by a third person acting as an expert, the
primary material on which he acts is his own knowledge and
experience, supplemented if he thinks fit by (i) his own
investigations; and/or (ii) material (which need not conform to rules
of ''evidence'') put before him by either party. An arbitrator on the
other hand, acts primarily on material put before him by
the
parties.'’
[3]
13.
It
goes without saying that the very purpose of such a clause is to
divest a Court from exercising that power: the parties have
elected
to place the dispute in that hands of another party in the place of
the Court for reasons best known to themselves and
to be bound
thereby, whether the decision be right or wrong.
[4]
14.
For this reason, I do not agree with Mr
Saks that a Court has the power to determine the dispute, if of
course it is found that
the dispute resolution clauses survive the
determination of the lease. Even, therefore, if the applicant’s
claim for payment
is denied in this application, it would not, upon
the aforegoing finding, be open to me to disregard the terms of the
lease by
referring the matter to trial, or, for that matter, to
evidence for the determination of any more discreet question of the
true
quantum of the applicant’s claim, if any.
15.
Merely because the agreement containing
such a clause may not prescribe procedural other provisions for the
manner in which the
expert is to proceed, does not mean that the
expert is obliged to act in a vacuum, albeit that the procedure in
this matter was
obviously intended to be informal, it being up to the
referee himself or herself to determine the procedure to be adopted.
Again,
I understand both parties to be
ad
idem
in this regard.
16.
I
find persuasive the view expressed in an Australian case of
Triano
Pty Limited v Triden Contractors Limited
[5]
which,
in my view, is consonant with our law, and in which it was held by
Cole J that –
‘
If
the parties have not by their deed agreed the procedures to be
followed upon an expert determination
,
that is not a void the Court can fill. There is no reason to imply a
term that the Court will determine procedures.
It
is a matter for either agreement between the parties, or
determination by the independent experts as to the procedures to be
followed.
’
[6]
17.
In the absence of agreement as to such
procedures, in my view, therefore, they are matters within the
purview of the expert’s
function and task, and are to be
decided upon by him or her, with or without such submissions as he or
she may deem necessary or
desirable to call for from the parties as
to this question.
18.
Firstly, then, I turn to consider the
question of whether or not clauses 7.5 and 7.6 survived the expiry of
the lease.
19.
It
has been authoritatively held that an arbitration clause survives the
termination of the agreement in which it appears, save
in
circumstances more fully referred to below. In
Atteridgeville
Town Council v Livanos
[7]
such
a clause was classified as a ‘secondary obligation’ which
is not
ipso
facto
terminated
with the primary obligations under the agreement.
20.
Mr Saks submits, firstly, that that case is
distinguishable in one respect and, secondly, submits that this
matter falls into a
species of exception referred to therein.
21.
His argument is that:
21.1.
it is not an arbitration clause under
scrutiny in this case and that it is therefore distinguishable from
the
Atteridgeville Town Council
case;
21.2.
even
if it is not, it falls within the purview of a dictum by Smalberger
JA in that judgment as follows:
[8]
‘
Where
a contract is dissolved or cancelled by mutual consent, any
submission to arbitration contained in the contract must, generally
speaking, also be taken to have been dissolved or cancelled. …
This is in keeping with the principle enunciated in
Heyman
and Another v Darwins Ltd
[1942] 1
All ER 337
(HL) at 346A (per Lord MacMillan):
'It is clear, too, that
the parties to a contract may agree to bring it to an end to all
intents and purposes and to treat it as
if it had never existed. In
such a case, if there be an arbitration clause in the contract, it
perishes with the contract. If the
parties substitute a new contract
for the contract which they have abrogated, the arbitration clause in
the abrogated contract
cannot be invoked for the determination of
questions under the new agreement.'
The reason for this is
that mutual agreement to cancel a contract (or consensual
cancellation) is a contract whereby another contract
is terminated …
This brings to an end the rights and obligations of both parties to
the earlier contract, and there is no
longer any debt or right of
action in existence. Neither is left with any claim against the other
arising from the earlier contract
…’.
22.
As to the first basis, I can no reason in
law or logic why the type of an alternative dispute resolution
clause, whether, that is,
it is an arbitration clause or one
referring a dispute to an expert referee, makes any difference. The
nature
of
the procedure to be adopted for the purposes of alternative dispute
resolution, excluding by agreement the auspices of an ordinary
Court,
can surely make no difference to the principle enunciated in the
Atteridgville Town Council
case. I accordingly reject that contention.
23.
As to the second basis, I find that the
lease in this matter expired simply by the effluxion of time. Toward
the end of the lease
period, the respondent gave notice that it would
not exercise an election to renew the lease in accordance with a
provision of
the lease to that effect. I leave aside the debate
concerning the mostly factual question of whether a renewal of a
lease, some
of the terms of which may require further negotiation,
would constitute an entirely fresh agreement, or merely the
continuation
of an existing agreement. The submission by Mr Saks,
however, that the respondent’s notice of non-renewal, if I may
call
it that, comprised a consensual termination of the lease, and as
such falls to be dealt with at law according to the
dictum
of Smalberger JA quoted above, seems to me on any basis misconceived
and cannot seriously be entertained for all its apparent ingenuity.
24.
In
any event, the further finding of Smalberger JA, then relying on
venerable authority, puts paid to this argument:
[9]
The
present matter is in principle on all fours with the case of
Scriven
Bros v Rhodesian Hides & Produce Co Ltd and Others
1943 AD 393
, where it was held that repudiation of
a contract does not destroy the efficacy of an arbitration clause in
such contract. In this
regard the remarks of Tindall JA at 401 are
apposite, where he said:
'But
the heads of argument of Mr De Villiers, who appeared for Scrivens in
this Court, make the point that the company repudiated
the contract
in toto and was therefore not entitled to avail itself of the
arbitration clause, the claim and the counterclaim going
to the root
of the contract. The fallacy underlying this contention is the
assumption that a repudiation of a contract (in the
sense of a
refusal to continue performance under it) by one party puts the whole
contract out of existence. It is true that a repudiation
of a
contract by one party may relieve the other party of the obligation
to carry out the other terms of the contract after the
date of
repudiation, but the repudiation does not destroy the efficacy of the
arbitration clause.
The real object
of that clause is to provide suitable machinery for the settlement of
disputes arising out of or in relation to
the contract, and as that
is its object it is reasonable to infer that both parties to the
contract intended that the clause should
operate even after the
performance of the contract is at an end.
If,
for example, this contract had come to an end on a date stipulated
for its termination, I do not think that it could have been
contended
successfully that the arbitration clause was no longer operative.
'
25.
Lastly,
the invitation from the respondent on 7 February 2019 (dealt with
further below) that the applicant should act by referring
the dispute
to the referee suggests that it understood that clauses 7.5 and 7.6
survived the termination of the lease, regardless
of how that
termination was brought about. That is not, of course, definitive
since, as a matter of law, evidence of the parties’
understanding of an agreement is not relevant to the objective
construction of its meaning; but their conduct in performing it
may
indeed be relevant in some circumstances.
[10]
26.
I find, accordingly, that clauses 7.5 and
7.6 survived the expiry of the lease.
27.
The next question for determination is
whether or not the respondent’s objections to the MMS
determination are such that it
is entitled at this stage to avoid the
effect of thereof.
28.
I revert briefly to the facts.
29.
On 29 January 2019 the applicant’s
attorneys made demand upon the respondent for payment of an amount of
R7 178 573.65 in
respect of electricity consumed on the premises on
the strength of an invoice in that amount from the City of
Johannesburg.
30.
On 7 February 2019, the respondent’s
attorneys replied to that letter in which they:
30.1.
stated that the respondent was satisfied
that it owed no further monies as regard any of the utility costs to
the applicant;
30.2.
invited the applicant to invoke the dispute
resolution mechanism of clause 7.5 of the agreement in order to
obtain a determination
by the applicant’s auditors;
30.3.
stated, in addition, that they had advised
their client that ‘it would not be bound to accept such
determination, and [it]
therefore reserves the right to deal with the
auditors’ determination in the appropriate manner and forum
should it be necessary
to do so.’
31.
On 26 February 2019 the applicant’s
attorneys advised the respondent’s attorneys that they would
accede to that invitation.
32.
At no time did either of the parties enter
into any discussions, either
inter se
or with the referee, about any procedure to be adopted to enable or
assist MMS in making its determination; save that the applicant
at
some stage procured the Energi report which was then made available
to MMS.
33.
It would appear that, primarily on the
strength of that report, MMS reached its determination which led to
the quantification of
the amount claimed in this application.
34.
The respondent points to several alleged
inaccuracies and inconsistencies in the MMS determination of varying
degrees of significance
and effect. It points, among other things, to
a disclaimer by MMS that to ‘rebill’ the electricity
account would be
a task beyond its capabilities, and contends on that
basis that MMS itself did not in effect make the determination as
required
by the lease; and that the report was consequently so wrong
and to such a degree wide of the mark that, on a proper computation
of the account, it is the applicant which is in fact liable to the
respondent for monies over-paid by the latter.
35.
It is noteworthy that the respondent did
not, when it invited the applicant to resort to clause 7.5 of the
lease, suggest any means
by which the parties should be heard by MMS
prior to its conclusion of the determination. It did not submit any
documents to MMS
to support its case, much less call for consent to
make submissions or to hold a hearing.
36.
This fact bears pertinently on one of the
questions posed by the respondent at paragraph 7.5.1 of the parties’
joint practice
note as one for determination in this application. It
evidences that the respondent appears a little belatedly to have
become more
conscious of the consequences of its conduct at a time
prior to the finalization of the dispute by MMS. The question is
this: ‘Was
the respondent entitled to be afforded the
opportunity of making representations to the expert before they
finalized their determination
of the quantum?’
37.
In my view, there is no reason why a party
to such a clause, represented, as here, by attorneys who ought to
have been aware of
the legal position, and who were certainly
au
fait
with the facts of the matter, and
therefore of the consequences of the clause in both respects, should
not at the first opportunity,
before
the determination be made, and regardless of any view of the expert
as to the procedure to be adopted, have sought to make itself
heard
as to the manner in which it desired that the determination should
proceed and, where necessary, to have reached agreement
with the
referee and its opposing party in that regard.
38.
The crucial point is that there is nothing
in the lease to suggest that such an approach would have been
contrary to the intention
of the parties as expressed therein, silent
as it may be in that regard. There is no evidence before me that
either of those parties
refused, or would have refused, any request
from the respondent that it be permitted to make submissions.
39.
The question posed by the respondent,
quoted above, accordingly prompts the further question: what, then,
if it wished to make representations,
did the respondent do about it?
40.
It did nothing. It remained supine. The
inference on the facts before me seems clear: the respondent accepted
that the determination
may indeed be arrived at without the referee’s
necessarily having to entertain the submissions or documents of
either party
as to what was already then the vexed question of the
quantum, if any, outstanding in favour of the applicant.
41.
It goes even a little further. The
statement by the respondent, at the stage that the invitation under
clause 7.5 was issued to
the applicant, that it did not consider
itself bound by the determination once made, and then even without
stating any reasons
at all as to why that was so, cannot advance the
respondent’s case at this stage. If anything, this statement
suggests (and
one needs put it no higher) firstly, quite apart from
anything else, a repudiation the provisions of clause 7.6 of the
lease, and,
secondly, a waiver by the respondent of any rights it may
have had to participate, or at least to seek to participate, in one
or
another manner, at the crucial time
prior
to the determination having been handed down. In effect, having
declined without any stated reason even to attempt to make itself
heard prior to the determination, it purported to reserve its rights
to object to the determination after it should be concluded
and
handed down. Repudiation and waiver aside, there can be little doubt
that such an approach is inimical to the intention expressed
by the
parties in the lease as to the manner in which such a dispute should
be determined.
42.
That is so even if the respondent’s
attorneys’ statement is capable of an interpretation that the
respondent merely
reserved its rights to bring the determination
under a review of some sort, presumably in terms of rule 53 –
for which, in
any event, it hardly needed to reserve its rights in
the first place. At all events, that is a step which the respondent
has not
taken either independently or in the form of a
counter-application, and has not stated (thus far, at any rate) that
it intends
to take, and which may have led to a request to stay the
determination of this application.
43.
After the determination was made, the
respondent then waxed vocal about its objections to the
determination, first in a letter and
then in more detail in its
answering affidavit in this application from which the complexity of
its complaints appears in great
detail. One rather wonders, in the
light of this, how conceivably the respondent could have imagined in
good faith that
any
determination acceptable to it could have been possible without any
attempt by it to place information or documents before the
expert
prior to the determination’s having been handed down. It is a
case of too little (or perhaps, in these circumstances,
too much) too
late.
44.
That
said, it is true that some of the criticisms of the respondent
directed at the MMS determination indeed give rise to considerable
discomfort as to the correctness thereof. The respondent has not
demonstrated on the papers before me, however, that MMS’s
alleged failings were of such a magnitude that it can be said not to
have exercised in good faith ‘an honest judgment, the
arbitrium
boni viri
’,
or that its means of determination or the determination itself was
such that the intention of the parties under the lease
was thereby
violated, with the result that the determination is of no force or
effect. If there are any disputes of fact as to
the correctness of
the calculation of the amount awarded by the expert, those disputes,
as I have said, are not for the Court to
adjudicate. The respondent’s
predicament, as Mr Iles correctly points out, bears the hallmarks of
what the then Appellate
Division was concerned with in a slightly
different factual context in
Ocean
Diners (Pty) Ltd v Golden Hill Construction CC
.
[11]
45.
MMS was entitled, in my view, and in
accordance with the
dicta
quoted above, to rely on the Energi report and on any other evidence
it believed to be relevant, rightly or wrongly so, and this
too in
the face of the silence of the respondent as to any contribution it
might have wished to make, or any assistance it might
have rendered,
to the efforts of the expert prior to the determination being handed
down. If MMS arrived at the wrong result, that,
in itself, and in the
absence of a successful review of the determination, (which, as I
have said, it has elected not to seek under
the different constraints
pertaining to such a review, which I need not adumbrate here but
which are set out in the
Ocean Diners
case already mentioned), is not sufficient for me
now to unsuit the applicant.
46.
To do so would subvert the plain meaning
and effect of clauses 7.5 and to substitute the Court as the arbiter
of the dispute. The
effect of clause 7.6 is, in my view, that the
determination by MMS is final and binding, since no other reasonable
meaning suggests
itself in this regard, and Mr Saks suggested none
other. This Court cannot now come to the rescue of the respondent
thus belatedly
and, as it were, through the back door.
47.
The application must therefore succeed.
48.
I am satisfied that the interest claimed
and costs on the scale as between attorney and own client are
provided for in the lease,
and I see no reason to depart therefrom.
49.
An order is granted in terms of prayers 1
and 2 of the Notice of Motion dated 3 December 2020, as encapsulated
in paragraph 1 hereof.
B M SLON
Acting Judge of the High
Court
Gauteng Local Division,
Johannesburg
This judgment was
prepared and authored by Acting Judge Slon. It is handed down
electronically by circulation to the parties or
their legal
representatives by email and by uploading it to the electronic file
of this matter on Caselines.
HEARD
ON:
2 August 2021
DECIDED AND HANDED DOWN
ON:
3 August
2021
For the Applicant:
Mr K Iles
Instructed
by:
Werksmans Attorneys
For the First
Respondent: Mr D J Saks
Instructed by:
Woodhead Bigby Inc
1]
The ‘prime’ rate defined at clause 1.3.7 of the lease is
‘the publicly quoted basic rate of interest at which
the
Standard Bank of South Africa Limited will lend funds on overdraft’.
[2]
Perdikis
v Jamieson
2002
(6) SA 356
(W) at para [5]
[3]
Perdikis
v Jamieson
(
ibid:
supra
)
[4]
‘Unlike an arbitrator, a valuer does not perform a
quasi-judicial function but reaches his decision based on his own
knowledge, independently or supplemented if he thinks fit by
material (which need not conform to the rules of evidence) placed
before him by either party. Whenever two parties agree to refer a
matter to a third for decision, and further agree that his
decision
is to be final and binding on them, then, so long as he arrives at
his decision honestly and in good faith, the two
parties are bound
by it.’
Lufuno
Maphaphuli & Associates (Pty) Ltd v Andrews
[2007] ZASCA 143
;
2008 (2) SA 448
(SCA) at 455 para [22]
[5]
(1992) 8 BCL 305
[6]
at
307; my emphasis
[7]
[1991] ZASCA 139
;
1992 (1) SA 296
(A) at 303I-306C
[8]
At
304H
[9]
At
305C-F (my emphasis)
[10]
Capitec
Bank Holdings Limited & Another v Coral Lagoon Investments 194
(Pty) Ltd & Others
– unreported (470/2020)
[2021] ZASCA 99
(9 July 2021); at para
[54]
[11]
[1993] ZASCA 41
;
1993
(3) SA 331
(A)