Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd (214/2008) [2009] ZASCA 70; 2010 (2) SA 1 (SCA); [2009] 4 All SA 417 (SCA) (1 June 2009)

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Spearhead Property Holdings Ltd v E & D Motors (Pty) Ltd (214/2008) [2009] ZASCA 70; 2010 (2) SA 1 (SCA); [2009] 4 All SA 417 (SCA) (1 June 2009)

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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case number: 214/2008
In the matter between:
SPEARHEAD PROPERTY HOLDINGS LTD
Appellant
and
E & D MOTORS (PTY) LTD
Respondent
Neutral citation:
Spearhead
Property Holdings Ltd v E & D Motors (Pty)Ltd
(214/2008)
[2009] ZASCA 70
(1 June 2009)
Coram: MPATI P, MTHIYANE, LEWIS, MAYA JJA and HURT AJA
Heard: 17 MARCH 2009
Delivered: 1 JUNE 2009
Summary: Lease – whether an option to purchase leased
property is binding on a lessor’s successor-in-title by virtue of
the rule
‘
huur gaat voor koop
’
– whether lease agreement ought to be rectified.
_____________________________________________________________
ORDER
On
appeal from:
Cape of Good Hope Provincial
Division (Zondi J sitting as court of first instance).
The appeal is allowed with costs, such costs to include
the costs of two counsel.
The order of the court below is set aside and the
following order substituted therefor:
‘
The plaintiff’s claim is dismissed with costs, such
costs to include the costs of two counsel.’
JUDGMENT
MAYA
JA (Dissenting)
[1] This appeal turns on the enforceability of an option
to purchase business premises situate at Shop 1, Ottery Hypermarket
Shopping
Centre, Ottery, Cape Town (the premises) which was granted
to the respondent as lessee by its erstwhile lessor, Quantum Leap
Investments
230 (Pty) Ltd (Quantum) in terms of a lease agreement
concluded on 19 February 2003.
[2] During October 2002, Mr M S Adams and his wife, Mrs
N Adams, negotiated to hire premises from Quantum on behalf of a
company
named Expectra 534 (Pty) Ltd (Expectra). Mr Adams was
Expectra’s managing director. Pursuant to the negotiations, Quantum
and Expectra
concluded an ‘offer to lease’ which was to remain
binding until substituted by a standard lease agreement. To that end,
Clause 10(b) of the Offer to
Lease provided:
‘
On acceptance of this Offer the Lessor’s
standard Agreement of Lease will be prepared and signed by both
parties in substitution
of this Agreement within 30 days of date
hereof. In the event that both or either of the parties refuse or
fail to sign such standard
Lease Agreement, then this Agreement shall
continue to bind both parties.’
[3]
By agreement initiated by Mrs Adams
between Quantum and Expectra, the respondent, a Toyota car franchise
with, incidentally, the same
three directors as Expectra, substituted
the latter as the tenant in the final lease agreement (the lease
agreement). The respondent
signed it on 19 November 2002 and
commenced building alterations to the premises to suit its trading
specifications. It took occupation
of the premises in February 2003.
[4] Both the offer to lease and the lease agreement
granted the respondent an option to purchase the premises. Clause
16.1 of the
offer to lease provided:
‘The landlord will provide the tenant with an option to purchase
the property for R2 000 000.00 excluding VAT for a 24-month period
from date of occupation, subject to approval from Pick `n Pay [the
landlord’s anchor tenant], approval from the City Council for
sub-division and approval from Quantum Leap Investments 230 (Pty) Ltd
for reciprocal access and parking agreement (See plan attached).’
These provisions were replicated in Clause 7 of the
lease agreement, albeit without the conditions relating to VAT and
the various
forms of approval from Pick `n Pay, the City Council and
Quantum (I shall deal with the omission of the conditions later) and
read:
‘Area of Leased Premises:
7.1 This lease automatically entitles the tenant with the first
option to purchase the said property as per annexure “E” [the
site plan] within 2 years of date of signature hereof, the property
totalling 3445sqm i.e. 1779sqm in addition to the leased premises.
7.2 The said property referred to in 7.1 above, shall constitute the
entire area leased in terms hereof i.e. 847sqm plus an additional
529sqm for the extension and 290sqm for the undercover vehicle
display, totalling 1666sqm.
7.3 It is further hereby expressly agreed that the tenant will be
entitled to upon signature hereof also utilize the additional
space
referred to above (819sqm) which is situated at the front of the
leased premises.’
[5] A few days after Quantum signed the lease
agreement, on 25 February 2003, it sold the entire shopping centre to
the appellant
which took transfer on 15 June 2003. It is clear from
the relevant deed of sale concluded by Quantum and the appellant that
the latter
had notice of the respondent’s option at the time of
purchase as clause 6.4.2, one of its warranty provisions, provides:
‘The Seller [Quantum] warrants and undertakes to the Purchaser [the
appellant] … no agreements have been entered into by the
Seller
whereby any restrictive conditions or servitudes or other real rights
attach to the property or in terms of which any person,
natural or
corporate, is entitled to obtain any real rights to the property,
save for existing tenant, Ottery Toyota, [the respondent] who have
limited rights to purchase their section subject to a subdivision
of
the land
.’ (My emphasis.)
[6] Shortly after transfer, during June or July 2003
according to the pleadings, the respondent sought to exercise the
option against
the appellant by way of an undated letter. In
correspondence that followed, the appellant pointed out that the
respondent’s option
was subject to the conditions reflected in the
offer to lease. This was denied by the respondent. The final letter
from the appellant’s
attorneys, dated 28 October 2004, reads:
‘Our client considers that it is bound by the option agreement but
that due to an error common to the parties, the three conditions
contained in the offer to rent were not carried forward into the
ultimate lease agreement and that the lease agreement accordingly
falls to be rectified.’
[7] The respondent had, in the meantime, obtained a
written undertaking from Pick `n Pay that the latter did not object
to the respondent’s
contemplated purchase of the premises. More
correspondence flowed between the parties but the impasse remained.
Consequently, the
respondent instituted action proceedings against
the appellant in the Cape High Court. The basis of its claim, which
was pursued
in this court, was that the appellant substituted Quantum
and was bound by the option, which was an integral part of the lease
agreement,
as Quantum’s rights and obligations concerning that
agreement were assigned to it through the purchase and that the
appellant had
accepted and implemented such assignment. It was
alternatively contended that the appellant had acknowledged the
option’s existence
and exercise albeit in different terms. The
assignment therefore arose from the rule ‘
huur
gaat voor koop
’ – hire takes precedence
over sale – alternatively clause 6.4.2 of the deed of sale and the
appellant’s letters acknowledging
the option.
[8] The appellant raised various defences, including
that it had not become party to the option the purported exercise of
which it
contended was, in any event, invalid for failure to comply
with the provisions of s 2(1) of the Alienation of Land Act 68 of
1981
(the Act).
1
It also counterclaimed for rectification of the lease agreement to
incorporate the disputed conditions in the event that a finding
was
made in the respondent’s favour.
[9] The matter was heard by Zondi J, who, on the
strength of the respondent’s submissions, ordered the appellant to
procure the
approval of the Cape Town City Council for the
subdivision of the premises and effect transfer to the respondent,
but dismissed its
counterclaim for rectification. The learned judge
then granted the respondent leave to appeal to this court only in
respect of the
validity of the option. Upon further application to
this court, the appellant was granted leave to appeal against the
dismissal of
its counterclaim and a directive was issued for all the
issues to be determined simultaneously.
[10] The issues on appeal
2
are (a) whether the option became binding upon the appellant as a
result of its purchase of the premises by virtue of either the
operation of the rule ‘
huur gaat voor koop’
or on any other legal basis; (b) whether the respondent’s exercise
of the option against the appellant gave rise to a valid agreement
of
sale which met the requirements of the Act notwithstanding the
absence of a new written deed of sale; and, if the answer to (a)
and
(b) is ‘Yes’, (c) whether the terms of the option ought to be
rectified as claimed by the appellant in its counterclaim.
[11] In sum, the appellant’s contentions before us
were (a) that the operation of the rule ‘
huur
gaat voor koop
’ does not, as a matter of
law, result in the transfer from the original lessor to the new owner
of the rights and obligations contained
in an option to purchase
immoveable property reflected in a lease agreement upon the sale of
the property; (b) that the said rights
and obligations are not
incidents of the lease which can be transferred to the new owner, and
thus remain effective only between
the lessee and the original
grantor of the option; and (c) that the option must be signed by
both the grantor and the grantee to
amount to a written deed of
alienation as envisaged by s 2(1) of the Act – one signed by both
parties or their agents acting on
their written authority – to be
enforceable.
[12] In considering whether the ‘
huur
gaat voor koop
’ rule is relevant to the
resolution of the issues it is necessary to examine briefly its
source and the development of the principles
which relate to it. In
that regard, the following may be gleaned from various texts on our
law and decisions of our courts.
3
In Roman law a lessee did not have a real right in the leased
property, but merely enjoyed a personal right against the lessor on
the lease contract. If the lessor sold the property the buyer could
generally evict the lessee as he had no duty to recognise the
lessee’s rights of occupation under the lease, unless he had
undertaken to do so.
[13] As a result of the lessee’s untenable situation
and a need to cure the inequity, the rule evolved from local customs
and legislation
relating to the lease of land and housing in parts of
the Netherlands and Holland as an equitable measure to give the
lessee security
of tenure where the leased property was alienated. It
became part of Roman-Dutch law and, ultimately, South African law in
that form.
4
The rule therefore has its origins in equitable principles and, apart
from the fact that it applies to agreements of the letting
and hiring
of land and buildings, has never been clearly defined regarding its
precise scope and consequence.
[14] This much is, however, settled in our law:
successors in title to owners of leased property are bound to
recognise the existence
of the lease and an
ex
lege
substitution of the purchaser for the
lessor-seller takes place in the lease upon sale of such property.
Thus, the rule relieves
the seller of all rights and obligations
flowing from the lease which are transferred to the buyer on
transfer.
5
This view found expression in the
Mignoel
Properties
6
decision on which the respondent heavily
relied. There, this court said:
‘[O]nce the lessee elects to remain in the leased premises after a
sale, the seller
ex lege
falls out of the picture and his
place as lessor is taken by the purchaser. No new contract comes into
existence; all that happens
is that the purchaser is substituted for
the seller as lessor without the necessity for a cession of rights or
an assignment of obligations.
On being so substituted for the seller,
the purchaser acquires all the rights which the seller had in terms
of the lease, except,
of course, collateral rights unconnected with
the lease.’
This position has been endorsed in later decisions of
this court:
Gennae-Wae Properties
7
and
SA Breweries Ltd v
Van Zyl
.
8
[15] A question arises whether it can be accepted on
the basis of these principles that in stepping into Quantum’s shoes
in terms
of the lease agreement, the appellant also acquired the
obligation relating to the respondent’s option as its counsel urged
upon
us. An apparent difficulty which presents is that the case
raises a novel issue as none of our courts, and certainly none of the
authorities referred to above, have ever pertinently determined the
extent of the effect of the ‘
huur gaat voor
koop
’ rule on a lease agreement containing
an option to purchase leased immovable property. By and large, our
courts have considered
the relevance of the rule in the context of
options to renew, rights of pre-emption and cession.
[16] There is, nevertheless, persuasive authority to
the effect that an option to purchase may, in appropriate
circumstances, be
binding on a new owner. Authors W E Cooper
9
and A J Kerr
10
are of the view that
the
proper approach in determining the applicability of the ‘
huur
gaat voor koop
’
rule
is to ask whether or not the option is an integral part of the
agreement, such as where it was an inducement to contract or its
presence had a bearing on the rent agreed upon, unless it is
supplementary to the main agreement – the question whether the
option
is separate from the lease agreement largely depending on the
interpretation of the contract as a whole.
11
The authors’ reasoning is that if the option impacts on the
determination of the rental to which the new owner is entitled, it
must then follow that such new owner is bound by it as he becomes the
lessee’s debtor
in toto
,
12
unless the option forms a separate contract.
[17] In counter – and I shall deal incrementally with
each leg of the argument outlined in para 11 as it developed –
counsel
for the appellant started with the submission that only the
incidents of the direct relation of the lessee and lessor ie those
arising
in relation to occupation, and not those that may relate to
dominium of the property, such as an option to purchase, are
transferred
in terms of the ‘
huur gaat voor
koop
’
rule.
He relied for this contention on
Shalala &
another v Gelb
13
and
Hirschowitz v
Moolman & others
.
14
The gist of the remarks of the provincial courts in these decisions,
made in passing as the appellant properly acknowledges, is that
an
option to purchase is a collateral obligation undertaken by the
original lessor and that the rule has no application as between
competitors for dominium.
[18] With respect, I do not agree with this approach.
It is similar to Prof De Wet’s view,
15
which, as is pointed by Cooper,
16
is based on the premise that a new owner does not become the lessee’s
debtor and is obliged only to suffer the lessee’s rights
of use,
contrary to the decisions of our courts that a new owner is bound by
all the material terms of the lease and upon transfer
of ownership
the lessor is divested of his obligations to the lessee. This view
was roundly rejected by this court in
Mignoel
Properties
.
17
There, Friedman AJA reiterated the view expressed in
Kessoopersahd
18
that the rule, being a creature of practical
considerations of fairness, is
sui generis
in
nature and is not subject to a strict application of the law of
contract, a factor which he said De Wet overlooked.
[19] But, despite my disagreement with Ogilvie Thompson
J’s view in the
Shalala v Gelb
decision
19
that options to purchase are not protected by the ‘
huur
gaat voor koop
’ rule, I nonetheless find
his comments on the scope of the tenant’s right to renew the lease
instructive. The learned judge found
that considerations of principle
and convenience and our courts’ interpretation of the rule dictated
that the renewal period provided
for in a lease, even one of which
the purchaser was ignorant, falls to be included in the protection
that the rule accorded to the
tenant.
[20] The basis of this finding – which was limited to
the right to renew a lease because it ‘is an extension of the
duration of
a tenant’s right of occupation… which the rule … is
designed to protect’ and ‘forms a very material part of his
interest
in the land’ – is expressed in the following remarks:
20
‘As regards the conditions of the existing lease, the purchaser is
… admittedly bound – virtually in the position of the landlord
vis-à-vis
the tenant … Since the tenant must pay his rent
to the purchaser, the original landlord’s right to claim rent in
consideration
of the tenant’s occupation is gone; and there is thus
much to be said, both on grounds of convenience and of equity, for
the view
that the obligation to recognize a renewal of the lease
should likewise pass from the original landlord to the purchaser. The
alternative
is to leave the tenant with an action for damages for
breach of contract against his original landlord: but it was to avoid
that
very result that the Roman-Dutch Law departed from the Roman Law
whereunder the tenant had only a personal right … and applied
the
doctrine of huur gaat voor koop to the tenant’s right of
occupation.’
[21] The learned judge further took the view that ‘[i]f
the innocent purchaser is to be held bound by the existing lease
because,
had he enquired, he would have ascertained that there was a
tenant in occupation of the premises under a lease, the same reason
exists
for holding him bound by a right of renewal of that lease
which right, had he made a proper enquiry, would have been revealed
to
him.
21
[22] I see no reason why these considerations should not
apply to an option to purchase, which is a material component of and
was
a key motivating factor in the conclusion of the lease agreement.
Our courts have made it clear that if an option to purchase is
incorporated in a lease, principles similar to those on options to
renew apply.
22
This view was expressed by this court in
Mittermeier
v Skema Engineering (Pty) Ltd
,
23
where Smuts AJA had to decide the longevity of an option to buy
leased premises contained in an agreement of lease which did not
state when it was to be exercised. He said:
‘It appears to me that where one finds an option to buy leased
premises conferred on a lessee in an agreement of lease, with no
mention of the period within which it is to be exercised, the
agreement
prima facie
, and in the absence of contrary
indications, means that the option is to be exercised before the
expiration of the lease. That is
the way in which leases containing a
right of renewal without a clear statement of the period within which
the option to renew is
to be exercised, have been interpreted in the
past … There appears to be no reason why an option to buy the
leased premises should
be placed on a different footing.’
[23] Another example is
Banket
Holdings v Levy
24
in which Murray CJ relied on the judgment of Wessels CJ in
Uys
& another v Sam Friedman Ltd
25
f
or
his dictum that a determination whether or not an option to purchase
is collateral to the lease depends on the interpretation of
all the
terms of the agreement.
In
Uys
,
the court considered whether the lease
conferred upon the lessee an option of renewal which had influenced
the rental and said:
‘If the option to renew a lease is a term or condition of the
lease, as indeed in law it is, then it is difficult to see how it
can
be regarded as severable from the lease more than any other term of
the contract. Indeed the right to renew on the part of the
lessee may
be a most important consideration and may very materially affect the
rent payable, as we see at once when we consider
the case of a shop
where the right to carry on trade in a particular locality is an
important part of the goodwill. The right to
renew a lease which may
form so important a part of the contract is no different from any
other term or condition of the lease.’
26
[24] My view is further, fortified by Broome J’s
skepticism of the notion that options to purchase are collateral to a
lease, expressed
in
Archibald & Co v
Strachan & Co
27
as follows:
‘The proposition that an option to purchase is not incident to the
relation of lessor and lessee may, for what it is worth, be
accepted
as in accordance with our law. But the contracting parties may insert
in their contract what terms they please, and those
terms, whether or
not they are incident to the relation of lessor and lessee, are
manifestly incident to the contract itself, for
the parties have so
made them.’
[25] I can articulate my conviction that no inequity
arises from extending the protection afforded by the rule no better
than was
done by Greenberg JP in
Boshoff v
Theron
.
28
In that case the issue was whether a seller of leased premises was
divested of his obligation to provide his tenant with a power
of
attorney to enable him to draw water for watering his crops after the
sale of the property. The court held:
‘It does not seem a harsh provision that, in return for protection
afforded him by the maxim, he should be required to look to
the
purchaser, in place of the seller, for performance of the lessor’s
obligations. In the ordinary obligations owed by a lessor
… it can
make little difference to the lessee who his lessor is, in so far as
his legal rights are concerned … [because] as regards
the lessor,
there is ordinarily no
delectus personae
; the property itself
generally affords the lessee sufficient security for the performance
of the lessor’s obligations. The position
may be different where
the lease provides for an obligation on the lessor which calls for
some special quality on his part … It
is clear … that the
purchaser is bound by all the “material” terms of a contract of
lease entered into by his predecessor
in title.’
[26] To further bolster the appellant’s contention,
an attempt was made to conflate the option to purchase with the right
of pre-emption.
It was argued that transfer of rights and obligations
ex lege
cannot take
place in the case of an option to purchase for the same reason that
the new owner would not automatically be substituted
for the original
lessor in relation to obligations arising from the right of
pre-emption.
[27] I find no merit in this submission because it
ignores the fundamental difference between the two rights. As was
pointed out
by the respondent the right of pre-emption must be
offered to the lessee and exercised before a sale of the leased
property to a
third party. Where the lessee declines to purchase the
property, the owner may then sell to a third party. This means that
by the
time the third party comes on to the scene the pre-emptor has
already disappeared. The right has been extinguished. There is
therefore
no room for a substitution and there is no one to replace.
[28] Neither am I persuaded by the contention that the
approach advocated by Cooper and Kerr, whether or not an option falls
within
the ambit of the ‘
huur gaat voor
koop
’ rule,
must
depend upon the facts of each case and on the severability or
otherwise of the right from the main agreement, was wrong because
(a)
it improperly sought to import principles applicable to options to
renew a lease contract to options to purchase and (b) would
result
in uncertainty contrary to the objectives of s 2(1) of the Act.
Examples given in support of the latter submission were that
a
determination of questions whether the grant of the option influenced
the fixing of the rent and the identity of the party against
whom the
option could be exercised had the potential of creating disputes of
fact and conflicting interpretations.
[29] As I have said, I have no difficulty with the
impugned approach. Reference must again be made to the
sui
generis
nature of the rule and the fact that
our courts accepted, early on, that the rule was not invariable in
its operation and did not
produce the same result wherever it was
applied.
29
[30] I have attempted to show in paragraph [22] that
the first concern has no basis as principles relating to options to
renew are
equally applicable to options to purchase. The perceived
risk of uncertainty is, in my view, similarly baseless. The
exclusion in
Mignoel Properties
30
of ‘collateral rights unconnected with the lease’ from the rule’s
protection, without specifying what those rights are, indicates
a
determination of those rights on a case by case basis. And the
relevance of s 2(1) of the Act needs first to be established before
its requirements are imposed on the case. In any event, our courts
have the means and are capable of resolving disputes of fact wherever
they arise.
[31] Mindful of the dangers of arguing by way of
analogy, I nevertheless find resonance in the remarks of Corbett CJ
in
Administrator, Transvaal v
Traub
.
31
The remarks
related to the doctrine of
legitimate expectation which, albeit a different concept from the
‘
huur gaat voor koop’
rule
existing in a
different legal sphere, similarly evolved as a concept based on
equitable principles, to promote procedural fairness
in
administrative decision-making, from ‘judicial attempts to mediate
between individual interests and collective demands in the
modern
administrative state’.
32
Notably, t
he
learned chief justice expressed no qualms with the fact that the
concept, which is not well defined, is applied on a case by case
basis and merely sounded this caution:
33
‘[W]hereas the concepts of liberty, property and existing rights
are reasonably well defined, that of legitimate expectation is
not.
Like public policy, unless carefully handled it could become an
unruly horse. And, in working out, incrementally, on the facts
of
each case, where the doctrine of legitimate expectation applies and
where it does not, the Courts will, no doubt, bear in mind
the need
from time to time to apply the curb.’
[32] In sum, I consider that the answer lies in whether
the respondent’s option was a material part of the lease agreement.
There
is evidence available, which was adduced at the trial, from
which the parties’ intention in this regard may be ascertained. I
may
just point out that the court below had made adverse credibility
findings against the appellant’s witness, Mr Codron, who had
represented
Quantum both in the lease negotiations and the subsequent
sale transaction.
[33] There was, happily, no controversy regarding the
evidence relevant for this part of the enquiry. It seems to me that
this issue
may be disposed of shortly by reference to a portion of
Codron’s testimony-in-chief. He was examined as follows:
‘Do you recall when the reference to an option to purchase was
first raised?
Prior to signing the offer to lease the issue was raised because of
the substantial amount of money being put in by [the respondent].
…
And it was raised in what context?
If we would consider selling [the respondent] the property in future.
…
And what was your response to the proposal with regard to an option?
I discussed it with my partner who viewed it favourably as long as
certain conditions were adhered to.
Firstly, how did you arrive at the [option] price?
We projected the rental going forward for twenty-four months. That
was the R18 000,00 a month [rental] escalating – I can’t recall
what the escalations were – but escalating over twenty-four months.
And then applying a rate of capitalization on the asset at
that
point. That came to – we were satisfied with R2m plus VAT at that
point … amenable to granting an option, but subject to
conditions.’
[34] It is clear from this evidence that the
substantial improvements that were going to be effected by the
respondent on the premises
directly influenced the amount of rental
that was to be paid therefor and vice versa. It further provides
ample support for the respondent’s
version testified to by one of
its directors, Mr Karriem, that without the grant of the option it
would not have expended R2m towards
improving premises that did not
belong to it which it could not recoup at the expiry of the lease,
and that without the option there
would have been no lease. Without a
shadow of doubt, the option was intended to be an integral, material
part of the lease agreement.
34
In my view, it is binding on the appellant.
[35] It is binding for another reason too. The
appellant agreed to clause 6.4.2 in the deed of sale and, upon
transfer, engaged in
correspondence with the respondent acknowledging
the option. It was, however, argued on its behalf that the clause was
merely intended
to put it on guard that Quantum owed an obligation to
the respondent in order to protect it from a claim for damages in the
event
that the respondent sought to enforce the option against it;
that it was, in any event, vague and did not indicate which agreement
it referred to, alternatively that it referred to the offer to lease
to which the respondent was not party, because of its mention
of
‘subject to subdivision’.
[36] I find no ambiguity in the clause. It is so that
it does not expressly refer to any specific agreement. It must,
however, be
considered that in terms of clause 10(b) of the offer to
lease, Quantum’s ‘standard Agreement of Lease would be prepared
and
signed by both parties
in substitution
’
thereof on acceptance of the offer. The lease agreement therefore
superceded the offer to lease as it had been signed when the
deed of
sale was concluded and was the only agreement in existence at the
material time. It is only reasonable to assume that that
fact would
have been brought to the appellant’s attention or that it would
have itself discovered it in its due diligence exercise
specified in
the deed of sale.
[37] In any event, the clause refers to ‘the existing
tenant, Ottery Toyota’. That is the respondent’s trading name.
The reference
to it excludes any possibility that the clause could
refer to Expectra, the lessee in the offer to lease which exited the
scene when
the lease agreement was concluded. I also think that
nothing turns on the reference to the subdivision of the premises
which was
reflected only in the offer to lease. Such condition is, in
any case, implied by law, and it should be noted that the other
disputed
conditions (included in the offer to lease but not in the
lease itself) are not mentioned in clause 6.4.2, which points to a
reference
to the lease itself.
[38] I am satisfied in the circumstances that the
appellant accepted the validity of the option and its binding effect
upon itself
albeit, perhaps,
35
subject to the disputed conditions. On the assumption that the
finding of an
ex lege
substitution of the appellant as lessor in Quantum’s place is not
sufficient to meet the requirement of a written option to purchase
signed by its grantor in terms of the provisions of s 2(1) of the
Act, my view is that Clause 6.4.2 fulfils such requirement.
[39] In the premises, I find that a valid option
agreement exists which was capable of being exercised and was in fact
validly exercised
by the respondent. These findings dispense with the
need to consider a further string to the appellant’s bow, that
there is an
array of remedies available to a lessee that it can
invoke against the original lessor to protect its interests, such as
a claim
for specific performance or damages or an interdict which
divests from the respondent any need for the protection offered by
the
‘
huur gaat voor koop
’
rule.
[40] It now remains to consider the appellant’s
counterclaim for rectification. The appellant seeks rectification of
the option
agreement by the insertion of the words ‘excluding VAT’
after the option price and, at the end thereof, the phrase ‘subject
to approval from Pick `n Pay, approval from the City Council for
sub-division of the property and approval from Quantum to a
reciprocal
access and parking agreement’.
[41] There was conflicting oral evidence regarding the
omission of the disputed conditions in the lease agreement. According
to Karriem,
the respondent successfully negotiated the exclusion of
the conditions through the Adamses and the lease agreement was
accordingly
prepared by the appellant to reflect the changes. Codron,
on the other hand, denied any agreement to omit the conditions. He
testified
that the lease agreement was a different document from that
drawn by the appellant’s agent and furnished to the respondent for
signature, presumably amended unilaterally by the respondent’s
attorneys. He noticed the omission before signing the lease agreement
and contacted Mrs Adams to enquire about the unauthorized changes.
Mrs Adams acknowledged the mistake and they agreed to an addendum
to
be drawn by the appellant rectifying the situation. In the meantime,
he signed the lease agreement in its unchanged form to accommodate
the respondent which needed it urgently to secure finance.
Inexplicably, the addendum was never signed and he did not know what
finally
happened to it. The court below dismissed Codron’s
testimony in this regard as improbable.
[42] It was argued before us that the basis for the
appellant’s claim for rectification set out in its pleadings, a
bona fide common
error, was not established by the evidence and that
the addendum referred to by Codron was similarly not pleaded by the
appellant.
Parties should, of course, define the issues in their
pleadings so that they each know what case they have to meet
36
and should, therefore, be limited to such pleadings.
37
However, it is equally trite that since pleadings are made for the
court and not the court for the pleadings, it is the duty of the
court to determine the real issues between the parties, and provided
no possible prejudice can be caused to either, to decide the
case on
those real issues.
38
[43] Thus, whilst there may be merit in the
respondent’s contentions in this regard, I do not consider myself
bound to decide the
issue on the basis of the inconsistent evidence.
The reason is that the parties’ intention regarding the terms of
the lease is
readily ascertainable from the option granted by Quantum
to the respondent. I believe that it would be remiss of this court to
ignore
such clear, objective evidentiary material which was fully
canvassed at the trial where none of the parties can claim to have
been
misled by the state of the pleadings.
[44] The validity of the offer to lease in which the
disputed conditions were contained was not brought into question. As
stated
above, in terms of its clause 10, the signed offer had the
status of a binding lease until substituted by a standard lease
agreement.
Significantly, in the event that a standard lease
agreement did not come into being, the offer to lease would continue
to bind the
parties. It could be no clearer from the plain language
of this clause that the intention of the contracting parties was that
the
provisions of the offer would be transposed to the lease
agreement in their entirety, failing which they would remain bound by
its
terms. That being so, it must be accepted that the disputed
conditions were intended to be part of the lease agreement and that
their
omission from this document was an error. The appellant is,
therefore, entitled to rectification in the terms it proposes.
[45] In the result, I would dismiss the appeal but order
rectification of the lease agreement as prayed in the counterclaim;
each
party to pay its own costs at both tiers of the proceedings in
view of the substantial success which they have both enjoyed.
___________________
MML MAYA
JUDGE OF APPEAL
________________________________________________________________________
JUDGMENT
HURT AJA (MPATI P, MTHIYANE, LEWIS JJA concurring):
[46] I have had the benefit of reading the judgment
prepared by my colleague, Maya JA. Unfortunately, I find myself in
respectful
disagreement with her conclusion that a valid agreement of
sale resulted from the exercise of the option.
[47] The background facts have been set out in detail by
Maya JA, but it is convenient to recount those which I regard as
particularly
pertinent to the view which I take. For ease of
identification I shall refer to the parties as follows: the original
owner of the
leased property with which this appeal is concerned will
be referred to as 'Quantum', the appellant as 'Spearhead' and the
respondent
as 'E and D Motors'. In October 2002 Quantum let premises
in a shopping centre to a company called Expectra 534 (Pty) Ltd. The
written
lease agreement contained a provision to the effect that the
tenant was granted an option to purchase the leased premises plus an
additional area in the shopping centre, within two years, at a price
of R2 million, subject to certain conditions. It was agreed
that this
lease agreement was in provisional form and was to remain in force
pending the conclusion of a 'final agreement'. [49]
In February 2003
the 'final agreement' was signed, but, in the interim, it had been
agreed that E and D Motors would be substituted
as lessee (E and D
Motors having the same directors and shareholders as Expectra 534
(Pty) Ltd). The existence of the option was
confirmed in this lease
agreement (this time the grant being in favour of E and D Motors) and
a plan of the shopping centre was annexed
to the lease showing the
area which was to be subject to the option (and which was
approximately twice the size of the premises actually
leased by E and
D Motors). No reference was made in this version of the option to the
conditions previously stipulated in the lease
signed by Expectra.
Shortly after this 'final lease' was concluded, Quantum sold the
shopping centre to Spearhead. The contract of
sale contained a
reference to the existence of the option in terms which will be set
out later. At some time shortly after transfer
of the property to
Spearhead, E and D Motors exercised the option in a signed letter
addressed to Spearhead, tendering to pay the
purchase price of R2
million. After certain correspondence was exchanged, Spearhead
adopted the stance that it was not obliged to
honour the option. E
and D Motors then instituted the action for specific performance, ie
transfer of the property to them against
their tender of payment.
[48] In the court below, Zondi J held that Spearhead had
purchased the shopping centre with knowledge of the existence of the
option
in favour of E and D Motors. He placed emphasis on
correspondence by Spearhead's attorney after E and D Motors'
purported exercise
of the option, in which it was stated that
Spearhead was 'bound' by the exercise.
39
As to the contention that there was no compliance with the
formalities required for a valid alienation of immovable property,
the
learned judge held, as I understand his judgment, that the
principle of
huur gaat voor koop
had
the effect,
ex lege
,
of substituting Spearhead for Quantum for all purposes of the lease
agreement. These 'purposes' included the grant of the option
and, I
presume, the legal consequence of the substitution was that Spearhead
was to be regarded as the grantor of the option and
Quantum's
signature of the lease was to be regarded as that of Spearhead once
the property had been transferred to Spearhead.
40
If my interpretation of the findings of the court below is correct,
then I consider that the learned judge overstated the law as
it
currently stands with regard to the consequences of the
huur
gaat voor koop
principle.
[49] In argument before us, the primary contention by Mr
Mullins, for Spearhead, was that his client was not bound by the
option to
purchase. He submitted that the obligations in respect of
the option were not transferred to Spearhead when it took transfer of
the
property pursuant to the sale. He further contended that no valid
'deed of alienation', complying with the formalities prescribed
by
the Alienation of Land Act 68 of 1981 ('the Act'), had come into
being as a result of the cumulative transactions between the
parties
and that the claim for specific performance of a contract of sale by
Spearhead to E and D Motors must accordingly fail. Mr
van Riet, for E
and D Motors, based his claims to validity of the exercise of the
option on two contentions. The first was that the
transfer of rights
and obligations pursuant to the
huur gaat voor
koop
rule occurred
ex
lege
and, as such, the substitution of
Spearhead for Quantum was automatic. Accordingly, so the contention
ran, the option which had been
granted and signed by Quantum must be
treated as an option signed by Spearhead, so that the exercise by E
and D Motors must, in law,
bring into being a valid contract of sale
by Spearhead to E and D Motors. Mr van Riet's
second contention was that the written lease
by Quantum to E and D Motors, which had been signed by both of them,
and the contract
of sale signed by Spearhead, obliged Spearhead to
honour the option if exercised by E and D Motors. The exercise of
this option by
the signature and transmission of the letter from E
and D Motors to Spearhead, he contended, would in any event bring
into existence
a contract complying with the formalities prescribed
by the Act.
[50] Two comparatively recent decisions by this court
have restated the basic principles upon which the
huur
gaat voor koop
rule is to operate. The first
is
Mignoel Properties (Pty) Ltd v Kneebone
1989 (4) SA 1042
(A),
in
which Friedman AJA
held
that:
41
'. . . once the lessee elects to remain in the leased
premises after a sale, the seller
ex lege
falls out of the picture and his place as lessor is taken by the
purchaser. No new contract comes into existence; all that happens
is
that the purchaser is substituted for the seller as lessor without
the necessity for a cession of rights or an assignment of
obligations.
On being so substituted for the seller, the purchaser
acquires all the rights which the seller had in terms of the lease,
except,
of course, collateral rights unconnected with the lease.'
The second decision is
Genna-Wae
Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd
[1995] ZASCA 42
;
1995
(2) SA 926
(A) at 939, where Corbett CJ
extended the principle stated in
Mignoel
by confirming that the lessee does not have an election whether to
proceed with the lease – he is bound, just as the purchaser
is, to
the terms of the lease as they stood between him and the original
lessor. Apart from this gloss, the decision in
Genna-Wae
endorsed the principle quoted above from
Mignoel
.
'Collateral rights unconnected with the lease.'
[51] The authors Cooper
42
and Kerr
43
suggest that the question of what are 'collateral rights unconnected
with the lease' must be decided on a casuistic basis, dependent
upon
the intention of the parties as gleaned from a consideration of the
contract as a whole (or possibly the contractual matrix,
where more
than one contract is involved). Options to renew present no
difficulty. It has long been the position that such options,
constituting, as they do, obligations due by the landlord in his
capacity as such, are a fundamental part of the lease arrangement
and
should not be regarded as 'collateral' or 'unconnected with the
lease'.
44
It is the authors' approach to options to purchase with which I have
difficulty. Stating that options to purchase 'present a more
difficult problem', Kerr
45
refers to the decisions in
Ginsberg v Nefdt
(1908) (25) SC 680
and
Archibald & Co Ltd
v Strachan & Co Ltd
1944 NPD 40
as
examples (as I understand the learned author) of cases in which
huur
gaat voor koop
operated in favour of a lessee
who had an option to purchase and, accordingly, against the
prospective purchaser. After then referring
to the apparently
contrary decision by Ogilvie Thompson J in
Shalala v Gelb
the learned author states:
'With The Hon Mr Justice Cooper it is thought that the
correct approach is to enquire whether the option to purchase was an
integral
part of the original lease or not; if it was, as for example
where it was an inducement to contract, or its presence had a bearing
on the rent agreed upon, then it is protected by the rule
huur
gaat voor koop;
if it was not, as for example
when it is clearly supplementary to the main agreement, then it is
not protected.'
I very much doubt that the test thus proposed will
assist in dealing with the difficulty.
[52] It must be borne in mind that the principle of
huur
gaat voor koop
operates in regard to the
purchaser of leased property regardless of whether he has notice of
the existence or the terms of the prior
lease.
46
The object of the rule is an equitable one, namely to protect the
right of the lessee to continued occupation of the property. It
is
perhaps not surprising that such a rule, which does not have its
origins in one or other of the recognized principles of contract,
should give rise to vigorous debate about its effects and its
limits.
47
But it can hardly be equitable to bind an innocent purchaser to an
option to purchase which may well be for a price less than that
which
he has just paid to acquire the property, simply because the option
forms an 'integral part' of the lease to which he has succeeded.
In
my view, the problem must be approached from an objective point of
view which keeps in focus the basic object of
huur
gaat voor koop
. On this approach, the
question is simply whether the 'collateral right' (or the collateral
obligation) relates to the lessee's real
right of occupation
as
lessee
. It seems to me that this question can
hardly ever be answered in the affirmative when it relates to the
rights and obligations flowing
from an option to purchase. The
guarded statement by Ogilvie Thompson J in
Shalala,
to the effect that the maxim
huur
gaat voor koop
has no application as between
competitors for dominium
48
has been criticized by the writers to whom I have made reference
earlier, but in my view it encapsulates a legal conclusion which
fits
very comfortably into the scheme of application of the
huur
gaat voor koop
rule.
[53] An option to purchase incorporates a
pactum
de contrahendo
in which the grantor
undertakes irrevocably to keep an offer to sell open, usually for a
specified or determinable period. The grant
may be subject to certain
contingencies and/or conditions.
49
The rights conferred by it are purely personal to the grantee.
Assuming that the option is granted in respect of the leased property
(for, if it is not, then it can hardly be regarded as part of the
landlord's obligations to his tenant
'as
lessor'
), then the anomalous situation arises
that, by selling to the purchaser, the landlord jeopardizes the
pactum
. The common law
in this situation (quite apart from the
huur
gaat voor koop
rule) is clear. If the
purchaser had notice of the existence of the option prior to
purchasing, he must be taken to have bought the
property subject to
the lessee's personal right against the landlord to exercise it. If
the purchaser did not have notice of the
option, there is no rule in
the common law (again apart from the possible application of
huur
gaat voor koop
) which would render the
purchaser bound to an obligation of which he was unaware. The
question is whether the development of the
huur
gaat voor koop
principle in our law has
included, or should include, the
ex lege
transfer of obligations arising out of an
option to purchase, granted by the original landlord,
to the purchaser of leased property.
Certainly, an examination of the reported decisions concerning
options to purchase in this context
does not reveal any such
development.
The Case Law on the Exercise of Options to Purchase
.
[54] There are three reported cases in which the
exercise of an option to purchase, granted to a lessee, occurred
after the original
landlord had sold the leased property.
50
The first such decision is
Ginsberg v Nefdt
(1908) 25 SC 680.
The
lease in this matter included the grant to the lessee of an option to
purchase the leased property. The landlord sold the property
to a
third party during the currency of the lease. The lessee applied to
interdict the transfer of the property to the purchaser.
The
purchaser agreed to be bound by the lessee's option but, for some
reason which is not clear, the court granted the interdict
to protect
the lessee's option. It appears that the option had not been
exercised at the time when the matter came to court, nor
is there any
indication as to whether the option was to be exercised against the
original landlord or the purchaser. Given that an
interdict against
the purchaser was granted, though, it seems that the parties
contemplated that the option was to be exercised against
the former.
[55] The second case is
Archibald
& Co Ltd v Strachan & Co Ltd
1944 NPD
40.
Insofar as they
relate to the issues in this matter, the facts are briefly that the
landlord had granted the lessee an option to purchase
the leased
property, such option being incorporated in the agreement of lease.
The landlord subsequently sold the property but, for
reasons which
are not recorded, transfer of the property was not passed to the
purchaser. Nearly 18 months after the conclusion of
the contract of
sale, the lessee exercised his option by directing a written
acceptance of it to the original landlord. The landlord
thereupon
notified the purchaser that the sale to him had 'fallen away' by
virtue of the lessee's decision to exercise the option.
The purchaser
sought an order of specific performance against the landlord but his
application was dismissed. The court held that
the purchaser had
concluded the contract of sale in the full knowledge of the existence
of the option and was accordingly bound to
recognize the lessee's
entitlement to exercise it. Here again, the lessee had exercised the
option against the original landlord
and not against the purchaser.
[56] In
Van der Pol v Symington
1971 (4) 472 (T), the original lessor (who had granted the lessee an
option to purchase) had died during the currency of the lease
and the
property was transferred to her son by her executor. The lessee
exercised the option against the son. The court held that
the son was
bound by the option, regardless of whether he had knowledge of the
lease before he took transfer, on the basis that he
was a gratuitous
successor to the original lessor. The question whether, by exercising
the option, the lessee had brought into being
a written contract
between himself and the son was not considered. Nor was this an
application of the principle of
huur gaat voor
koop
because the son had not purchased the
property but had acquired his title as an heir.
51
[57] A significant feature of both
Ginsberg
and
Archibald
is
that the option was exercised against the grantor and not the
purchaser and the court, in each case, applied the doctrine of notice
as the basis for finding that the prior right of the lessee under his
option prevailed over the subsequent right of the purchaser
to
transfer of the property.
52
Nor, in either of the two cases, had there been transfer to the
purchaser, and although there was a passing reference in
Ginsberg
to the 'well known proposition . . . that
lease goes before sale', the court appeared to be applying the
principles of a 'double sale',
and not
huur
gaat voor koop.
The result is that there is no
reported decision in our case law to the effect that the obligations
arising out of an option to purchase
are transferred
ex
lege
and without express or tacit assignment,
to the purchaser of leased property. Nor, on the basis of what I have
set out above, is
there any reason to extend the effects of the
huur
gaat voor koop
rule to include such a
transfer.
[58] I have already indicated that such an extension
would operate unfairly against an 'innocent purchaser' (ie one who
purchases
the leased property in ignorance of the terms of the
agreement between the landlord and the tenant). As to the 'purchaser
with notice',
the doctrine of notice, in my view, provides adequate
protection to the tenant in respect of his rights in terms of the
option, as
is apparent from the decisions referred to in para 57,
above. The situation of the tenant who invokes the doctrine of notice
against
a purchaser of the leased property in these circumstances has
recently been clarified by this court in
Bowring
NO v Vrededorp Properties CC
2007 (5) SA 391
(SCA), particularly in paras 17 and 18. In that case the respondent
had purchased a portion of a property on the basis that the portion
was to be subdivided and transferred to the respondent together with
the registration of a servitude which was to give the respondent
access to the subdivision. Before transfer or registration of the
servitude, the owner of the property had been liquidated. The
liquidator
sold the whole property to Investec Bank, the contract of
sale making express reference to the uncompleted sale to the
respondent
and specifically recording that the property being sold
did not include the portion sold to the respondent. Investec Bank
later sold
the whole property to the appellant. The contract between
Investec Bank and the appellant made no mention of the prior sale of
portion
of the property to the respondent, but it was common cause
that the appellant was aware of the respondent's right to claim
transfer
of, and have the servitude registered in favour of, the
portion of the property.
[59] The respondent had sued the appellant for transfer
of the portion of the property to it and for an order that the
appellant do
whatever was necessary to register the servitude over
the remainder of the property in favour of the respondent. The
appellant had
contended that the respondent had no right to claim
transfer from it, but that the doctrine of notice required the
respondent first
to set aside the sale to the appellant and then to
claim transfer from Investec Bank. This defence had failed in the
court of first
instance, nor did it succeed before this court. After
a careful examination of the consequences of 'double sales' to
purchasers with
notice, Brand JA said:
53
'(I)n the case of a servitude, application of the
doctrine of notice does not require that the transfer of the property
to the purchaser
be set aside so as to enable the beneficiary under
the servitude agreement first to claim registration of the servitude
against the
seller before the property is retransferred to the
purchaser subject to the registered servitude. The beneficiary's
claim is allowed
directly against the purchaser (see eg
Grant
and Another v Stonestreet and Others
54
(supra)
7). That there is no privity of
contract between the beneficiary and the purchaser is not seen as an
insurmountable hurdle. Why then,
it may in my view rightfully be
asked, should the position be any different when the same doctrine is
applied in the instance of
double sales?
My suggestion is not that in the successive-purchaser
situation B (the first buyer) should always be allowed to claim
transfer directly
from C (the second). The doctrine of notice is an
equitable remedy and its manner of application should be determined
largely by
what is considered to be equitable to all concerned in the
circumstances of the particular case. Where the whole property is
first
sold to B and then to C, the most equitable solution will
probably be to restore A and C to their former position – by
ordering
cancellation of the transfer and repayment of the purchase
price – before A is ordered to transfer the property to B. But in
this
case the position is substantially different. (The respondent)
claims transfer of . . . portion of the railway siding only.
Cancellation
of the successive transfers of the whole property to
Investec and the (appellant) will therefore require that the
remainder of the
property be retransferred first to Investec and then
to the (appellant). . . . No reason has been suggested, and I can
think of none,
why this cumbersome and wasteful process would be in
anybody's interest.'
[60] It seems to me that, in general, the equitable
process of rearrangement contemplated in this judgment will be
applicable to a
situation where a lessee seeks to enforce his right
to delivery pursuant to the exercise of his option against the
original lessor,
regardless of whether the option related to the
whole of the property sold or to only a portion of it. The fact is
that there is
no 'equitable need' to postulate an
ex
lege
transfer of the obligations arising out
of the option to the purchaser in order to protect the lessee's
option against a purchaser
with notice.
[61] I conclude, therefore, that the obligations arising
from an option to purchase the leased property, granted by the
lessor, are
not, by the operation of the rule
huur
gaat voor koop,
transferred
ex
lege
to the purchaser of the property. It
follows that a lessee, seeking to exercise such an option (always
assuming, of course, that
the relevant contracts do not constitute an
assignment of the lessor's obligations to the purchaser) must do so
as against the grantor
and not against the purchaser. Where, however,
there has been a transfer of the property to a purchaser with notice
of the option,
the lessee, having thus exercised his option, will
generally be able to claim transfer of the property from the
purchaser. The submissions
on behalf of E and D Motors to the effect
that it was entitled to exercise the option against Spearhead merely
by operation of the
huur gaat voor koop
rule
must, in my view, fail.
[62] That leaves the contention by the respondent that
the lease, the contract of sale to Spearhead and the letter from E
and D Motors
to Spearhead purporting to exercise the option, read
together, constitute a written deed of alienation complying with the
provisions
of the
Alienation of Land Act 68 of 1981
. There is no
doubt that the grant of the option in the written lease by Quantum to
E and D Motors constituted an offer to sell complying
with the
requisite formalities.
55
The fact that the written offer and the written acceptance may be
embodied in different documents is not a bar to compliance with
the
Act.
56
The question is whether the agreement of sale from Quantum to
Spearhead can be construed as an assignment of Quantum's obligations
in terms of the option to Spearhead, complying with the statutory
formalities. The only mention, in the contract of sale, of the
option
granted to E and D Motors is to be found in clause 6.4, which reads:
'6.4 The Seller warrants and undertakes to the Purchaser
–
6.4.1 the Seller is the owner of and has the absolute
right to dispose of the property to the Purchaser in accordance with
the provisions
of this agreement;
6.4.2 no agreements have been entered into by the Seller
whereby any restrictive conditions or servitudes or other real rights
attach
to the property or in terms of which any person, natural or
corporate, is entitled to obtain any real rights to the property,
save
for the existing tenant, Ottery Toyota,
57
who have limited rights to purchase their section subject to a
subdivision of the land;
6.4.3 no notice has been received by the Seller of the
intention of any authority to expropriate the property or any portion
thereof
nor is the Seller aware of any intention to expropriate the
property or any portion thereof by any such authority;
6.4.4 as far as the Seller is aware the current use of
the property and buildings by the existing tenants is lawful and is
not in
contravention of any applicable zoning scheme and/or
conditions of title;
6.4.5 as far as the seller is aware no building
encroaches over any boundary or building line or similar restriction;
6.4.6 as far as the Seller is aware no building or
improvement on any adjoining property encroaches onto the property.'
[63] I have purposely quoted the clause in full to set
clause 6.4.2 in its context. I do not think that the clause can, by
the furthest
stretch of imaginative interpretation, be construed as
an assignment by Quantum to Spearhead of any obligations, let alone
the obligations
arising out of the option. Nor is it couched as an
offer by Spearhead to endorse the option in favour of E and D Motors.
What the
seller is saying in this clause is plainly along the
following lines: 'Take notice that there is an option which entitles
Ottery
Toyota to purchase a portion of the property if the land is
appropriately subdivided'. The sale of the subdivision to E and D
Motors
would not be frustrated by the fact that Quantum was no longer
the owner and, indeed, the tenor of the stipulation is simply that,
if the option is exercised (against Quantum), Spearhead may later be
required to transfer the subdivision to E and D Motors. It
is a
classic situation where the doctrine of notice would apply. But that,
to my mind, is as far as the clause can be taken.
[64] It follows that, in my view, the appeal should
succeed. The following order is made:
1 The appeal is allowed with costs, such costs to
include the costs of two counsel.
2 The order of the court below is set aside and the
following order substituted therefor:
'The plaintiff's claim is dismissed with costs, such
costs to include the costs of two counsel.'
________________________
NV HURT
ACTING
JUDGE OF APPEAL
Appearances:
For Appellant: S Mullins SC
A D Brown
Instructed by
Bernadt Vukic Potash & Getz; Cape Town
Lovius Block, Bloemfontein
For Respondent: R S Van Riet SC
Instructed by
Harmse Kriel Inc; Cape Town
Rossouws Attorneys, Bloemfontein
1
Section 2(1) of the Act provides: ‘No
alienation of land after the commencement of this section shall,
subject to the provisions
of section 28, be of any force or effect
unless it is contained in a deed of alienation signed by the parties
thereto or by their
agents acting on their written authority.’
2
Some of the issues argued in the court below and raised in the
appellant’s heads of argument in this court as grounds of appeal
were correctly abandoned at the commencement of argument before us.
3
Scrooby v Gordon & Co
1904 TS 937
;
Boshoff
v Theron
1940 TPD 299
;
Archibald v Strachan
1944 NPD 40
;
J C De Wet ‘“Huur gaat voor koop” and the Proviso to Section 2
of the General Law Amendment Act, No 50 of 1956’
(1970) 87
SALJ
137
;
J C
De Wet
(1944) 8
THRHR
74
;
W E Cooper ‘
Landlord And Tenant’
2 ed p 274; A J Kerr
‘
The Law of Sale and Lease
’ (1984) p 277;
De Jager v
Sisana
1930 AD 71
;
De Wet v Union Government
1934 AD 59
;
Thipa v Subramany
1954 (4) SA 126
(N);
Kessoopersadh en `n
ander v Essop en ‘n ander
1970 (1) SA 265
(A);
Mignoel
Properties (Pty) Ltd v Kneebone
1989 (4) SA 1042
(A);
Gennae-Wae
Properties (Pty) Ltd v Medio-Tronics (Natal) (Pty) Ltd
[1995] ZASCA 42
;
1995 (2)
SA 926
(A).
4
Graham v Local & Overseas Investments (Pty) Ltd
1942 AD
95.
5
See also 14
LAWSA
2
ed para 45.
6
At 1050J-1051A.
7
[1995] ZASCA 42
;
1995 (2) SA 926
(A) at 937B.
8
2006 (1) SA 197
(SCA) para 7.
9
Landlord and Tenant
2ed (1994) at 300-302.
10
The Law of Sale and Lease
3ed (2004)
at 42.
11
Banket Holdings (Pty) Ltd v Levy
1955 (4) SA 74
(SR) at 76;
Uys and
another v Sam Friedman Ltd
1935 AD 165
at 166
.
12
Scrooby v Gordon & Co
(supra)
at 945;
De Jager v Sisana
(supra)
at 82;
De
Wet v Union Government
(supra) at 63;
Kessoopersadh v Essop
(supra) at
282-3;
Creeser v Smit
1948 (4) SA 302
(T);
Boshoff v Theron
(supra) at 305.
13
1950 (1) SA 851
(C) at 865.
14
1983 (4) SA 1
(T).
15
(8)
1944
THRHR
74
; De Wet & Van Wyk
Die
Suid-Afrikaanse Kontraktereg en Handelsreg
4ed
(1978).
16
Landlord and Tenant
2ed (1994) at 302.
17
At 1049B-F.
18
1970 (1) SA 265
(A) at 283B-C.
19
1950 (1) SA 851
(C).
20
At 862.
21
At 864.
22
14 LAWSA 2ed para 55.
23
1984 (1) SA 121
(A) at 126D-G.
24
1955 (4) SA 74
(SR).
25
1935 AD 165
at 166.
26
At 166. See also
Transvaal Mortgage Loan and Finance Co Ltd v
Aronson
1904 TS 864
at 866-867.
27
1944 NPD 40
at 43.
28
1940 TPD 299
at 303-304.
29
See
Graham v Local
and Overseas Investments (Pty) Ltd
1942
AD 95
at 111.
30
At 1051A.
31
[1989] ZASCA 90
;
1989 (4)
SA 731
(A).
32
Prof Robert E Riggs (1988) 36
American
Journal of Comparative Law
at 395.
33
At 761E-G.
34
There is another debate relating to the view that a new owner is
bound by ‘all the material terms’ of the lease or ‘terms
integral’ to the lease. Authors such as W E Cooper
Landlord
and Tenant
2ed (1994) pp 297 – 300; A S
Mathews 1966
Annual Survey
116, De Wet (whose views relating to the scope of the maxim, have
nevertheless, since been dismissed by this court as indicated)
(1944) 8
THRHR
241
have, for a variety of reasons, criticized the view. The reasons
include that it may be difficult to determine which terms are
material or non-material and that as the lessor’s substitute, the
new owner should be bound by all the terms of the contract.
I do not
propose to engage in the debate as none of these concerns arise in
the present case.
35
I deal more fully with the fate of the disputed
conditions hereinbelow.
36
See, for example,
Robinson v Randfontein
Estates GM Co Ltd
1925 AD 173
at 178.
37
Imprefed (Pty) Ltd v National Transport
Commission
1993 (3) SA 94
(A) at
107G-H
.
38
Collen v Rietfontein Engineering Works
1948
(1) SA 413
(A);
Middleton v Carr
1949
(2) SA 374
(A);
Shill v Milner
1937
AD 101.
39
It should be noted that the attorney was not authorized in writing
to write this letter to E and D Motors.
40
This is my interpretation of the learned judge's approach from the
following passage in para 39 of his judgment, in which he dealt
with
the contention that there was no compliance with the statutory
formalities: 'The option agreement in the present matter was
transferred by virtue of the principle
huur gaat voor koop
from Quantum Leap to the defendant [Spearhead] which entitled the
plaintiff [E and D Motors] to exercise its rights as against
the
defendant directly. The option which the plaintiff seeks to exercise
is contained in the lease agreement which it concluded
with Quantum
Leap. In other words the defendant was substituted
ex lege
for Quantum Leap (the original lessor) and the latter fell out of
the picture. On being substituted the defendant acquired by

operation of law all the rights and obligations of Quantum Leap
under the lease.'
41
At 1050I ─ 1051A.
42
Landlord and Tenant
(2 ed) p 303.
43
The Law of Sale and Lease
(3 ed) p 442 and also writing in 14
(2) Lawsa (2
nd
reissue) para 46.
44
Shalala & another v Gelb
1950 (1) SA 851
(C) at 856 to
864.
45
Op cit
pp 441 ─ 442.
46
Shalala at
862.
47
See
Kessoopersadh v Essop
1970 (1) SA 265
(A) at 282 ─ 283.
48
At 865.
49
Hirschowitz v Moolman
1985 (3) 739 (A) at 765 ─ 766.
50
These are, as far as I have been able to ascertain, the only three
cases in which this aspect has been dealt with.
51
There is one other decision in which an option to purchase leased
property was considered in this particular context, namely
Shalala
v Gelb
1950 (1) SA 851
(C)
at p 862. However, it was
considered only for the purpose of differentiating it from an option
to renew the lease and although Ogilvie
Thompson J made a statement
to the effect that the principle
huur gaat voor koop
does not
apply to options to purchase, the
dictum
was plainly
obiter
and has been treated as such in subsequent cases.
52
The remaining cases cited by Kerr in this context, viz
Levy v
Banket Holdings (Pvt) Ltd
1956 (3) SA 558
(FC) and
Sandmann v
Schaefer
1969 (4) SA 524
(SWA), deal with the question of
'collateral terms' in a lease and not with the application of
huur
gaat voor koop
.
53
Paras 17 and 18.
54
1968 (4) SA 1
(A).
55
Venter v Birchholtz
1972 (1) SA 276
(A) at 283 ─ 284.
56
Johnston v Leal
1980 (3) SA 927
(A) at p 937H;
Hirschowitz
p 758B to C.
57
The trade name of E and D Motors.