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[2021] ZAGPJHC 504
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Pellow N.O. v Improvon Property Fund 2 (Pty) Ltd and Others (26568 / 2018) [2021] ZAGPJHC 504 (7 October 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED.
DATE:
7 October 2021
Case No: 26568 / 2018
In
the matter between:
ALLAN
DAVID PELLOW
NO
Plaintiff
and
IMPROVON
PROPERTY FUND 2 (PTY) LTD
First Defendant
ACUCAP
INVESTMENTS (PTY) LTD
Second Defendant
CAPITAL
PROPFUND (PTY)
LTD
Third Defendant
JUDGMENT
WILSON
AJ
:
1
The plaintiff (“Mr. Pellow”)
is the liquidator of Angel Lifestyle (Pty) Ltd (“Angel”),
a company in liquidation.
The defendants are Angel’s erstwhile
landlords. They leased to Angel the business premises at ERF 1944
Kosmosdal Extension
7 (“the property”). The first
defendant (“Improvon”) entered into the lease with Angel
on its own behalf,
and as the agent of the second and third
defendants.
2
Clause 8.3 of the lease required
that Angel pay Improvon rent and other charges due under the lease
monthly in advance on the first
day of every calendar month. As
security for the performance of its obligations under the lease, and
for any damage beyond fair
wear and tear that might be done to the
property during Angel’s occupation, Angel provided to Improvon
a bank guarantee to
the value of R1 516 860-00 (“the bank
guarantee”). The guarantee was held at Standard Bank and could,
in terms
of clause 6.2 of the lease, be drawn upon to defray unpaid
rent or other charges due under the lease; any “reinstatement
works” necessary as a result of Angel’s occupation; and,
importantly for this case, “any other liability”
for
which Angel was responsible under the lease.
3
The lease commenced on 1 September
2012. On 8 April 2015, Angel went into liquidation, having neglected
to pay the amounts due on
1 April 2015. The amount due on 1 April
2015 was R225 906-49. On 2 April 2015, Improvon cancelled the lease
and drew down the full
amount of the bank guarantee.
4
The question in the main claim,
brought by Mr. Pellow, is whether Improvon was entitled to do this,
or whether it was limited to
drawing down only the amounts that were
left unpaid by Angel on 1 April 2015. If Improvon was entitled to
draw down the full amount
of the guarantee, the main claim fails. If
Improvon was only entitled to draw down the amount Angel was actually
in default of
its obligations, then the difference between this
amount and the full value of the bank guarantee – R1 290 953-51
– ought to have fallen into the insolvent estate, and is due to
Mr. Pellow in his capacity as liquidator of that estate.
The main
claim is for payment of that amount.
5
After Angel went into liquidation,
Mr. Pellow entered into a new lease agreement with Improvon, which
was backdated to commence
on 3 April 2015. The purpose of the
agreement was to preserve and store various assets of Angel which
remained at the property.
The agreement was partly written and partly
oral. Improvon contends that the agreement was that Mr. Pellow would
pay rent in the
sum of R200 000 per month
plus
VAT. Mr. Pellow states that the agreement was, in fact, that Improvon
would be paid R200 000 per month
including
VAT. Improvon counterclaims for the amount due in terms of the new
lease agreement it contends for.
6
Although evidence was led, and
witnesses for both parties were cross-examined, the facts are really
common cause. Cross-examination
consisted, in the main, of each party
putting their legal position to the other. This was unfortunate.
Cross-examination is about
facts, not legal conclusions. The point is
to test a witness’ account of the facts in light of the
circumstances of the case
as a whole, and the factual version
advanced by the cross-examining party. Since the parties’
contentions in this case are
all about the interpretation of the two
lease agreements in light of the applicable law, they would have been
better advised to
proceed by way of a stated case, or on motion. Had
that been done, the essential disputes between the parties would have
emerged
sooner, and the matter could have been disposed of in less
than one court day, instead of the three days that it eventually took
up.
7
I say this to emphasise the need for
more effective trial preparation and case management. I suspect that
the parties were keen
to play their cards so close to their chests
that the real issues emerged only at the last possible moment –
to the detriment
of the court, and ultimately to no real advantage to
either party. Legal representatives who are responsible for preparing
a matter
for trial ought to recognise that there is a balance to be
struck between whatever tactical considerations that may weigh on
them,
and the need to identify the true ambit of the dispute between
the parties as early as possible. In this case, it seems to me that
balance could have been better struck than it was.
The
main claim
8
The bank guarantee was for the
payment of a deposit. It is in the nature of a deposit that the
deposit amount is not due to the
landlord unless and until the right
to draw on it is triggered by some event defined in the lease itself.
This is usually, but
need not be, the failure of the tenant to meet
their payment obligations under the lease.
9
The question in this case is
whether, when and to what extent Improvon’s right to draw down
the lease was triggered. There
is no genuine dispute that Improvon
was entitled to draw down at least the amounts on which Angel had
defaulted on 1 April 2015.
10
But what, if anything, triggered its
right to draw on the bank guarantee beyond that? Ms. Daniels, who
appeared for the defendants,
submitted that the relevant triggering
event was Improvon’s cancellation of the lease on 2 April 2015.
At that point, Ms.
Daniels submitted, Improvon suffered damages at
the very least in the amount of rent that would have been due for the
remainder
of the lease term. This amount was substantially more than
the value of the bank guarantee, and it fell due at the point of
cancellation.
Given that the lease entitles Improvon to apply the
guarantee to “any” liability arising under the lease,
Improvon
was entitled to the full value of the guarantee at the point
that it drew that amount down. Ms. Daniels also drew attention to
clause 18.3 of the lease, which allows Improvon to “appropriate
any other amounts received from the Lessee towards the payment
of any
cause debt or amount owing by the Lessee”. There was some
debate in argument about whether the deposit was truly an
“amount
received” by Improvon, but that does not seem to me to matter.
Whether in terms of clause 6.2 or 18.3, a debt
due under the lease is
a debt to which the deposit can be applied. The question is really
what was due on 2 April 2015.
11
In support of the proposition that
it was not only the arrear rentals and other charges, but all of
Improvon’s contractual
damages that fell due on 2 April 2015,
Ms. Daniels relied on the decision of the Supreme Court of Appeal in
Monyetla Property Holdings (Pty) Ltd v
IMM Graduate School of Marketing (Pty) Ltd
2017 (2) SA 42
(SCA) (“Monyetla”). There, the Supreme
Court of Appeal had to decide when a claim for damages on a lease
prescribed.
That, in turn, rendered it necessary to decide when those
damages had fallen due.
12
Leach JA, writing for a unanimous
court, held that the damages due to a landlord on the cancellation of
a lease fall due on the
date of cancellation. Those damages are
generally the amount that would have been collected had the lessee
performed their obligations
for the remainder of the lease term, less
whatever amounts the landlord receives in mitigation of the loss (see
paragraphs 16 to
17 and 19 to 21).
13
It follows from this that, in this
case, Improvon sustained its damages – being the amounts
payable for the remainder of the
lease term – on 2 April 2015.
The damages were due and payable on cancellation, and were clearly a
“liability”
arising under the lease. When it drew down
the full amount of the guarantee, Improvon was effectively mitigating
its losses, which
is the very purpose of a rental deposit and is
perfectly consistent with the terms of the lease.
14
Given that there is no meaningful
basis on which this case can be distinguished from
Monyetla
,
and that the
Moyetla
decision is otherwise binding on me, it follows that the main claim
must fail. Improvon was entitled to cancel the lease and draw
down
the full value of the bank guarantee when it did.
The
counterclaim
15
There is no dispute that R200 000
per month in rent is due to Improvon in terms of the agreement it
reached with Mr. Pellow.
The only dispute is whether the amount due
is inclusive or exclusive of Value Added Tax.
16
Improvon’s lease with Angel
charged rent, services and other amounts due under the lease
separately from the Value Added Tax
due on them. Both parties,
however, accepted that Mr. Pellow’s lease with Improvon was
separate and distinct from Angel’s
lease with Improvon.
Critically, Mr. Pellow did not simply step into Angel’s shoes
and agree to discharge its obligations.
An entirely new lease was
entered into.
17
Ms. Daniels submitted that there was
a tacit term, or at the very least an implied term, in the new lease,
to the effect that rent
would exclude Value Added Tax. The first
problem with this submission is that no tacit term was formulated and
pleaded in the counterclaim,
and no evidence was led on the nature of
the tacit term. There was no exploration, in evidence or argument, of
the well-known tests
to be applied in ascertaining whether a tacit
term exists. Given that the defendants bear the onus to prove the
tacit term they
contend for (see
Wilkins
v Voges NO
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 136H
to 137B), I do not think that I can find, in these circumstances,
that such a term ever came into existence.
18
The second problem with Ms. Daniels’
submission is that the implied term contended for in the alternative
conflicts with existing
law. As Ms. Kabelo, who appeared for Mr.
Pellow, pointed out, section 64 of the Value Added Tax Act 89 of 1991
(“the VAT
Act”) deems any price charged for a taxable
good or service to include the tax, whether or not the vendor
explicitly separates
out the Value Added Tax portion. The effect of
this is that all prices for taxable goods and services include Value
Added Tax unless
the parties specifically agree to separate out the
Value Added Tax portion from the rest of the price.
19
It is in the nature of an implied
term that it binds the parties to a contract as a matter of law or
public policy. It follows that
there can be no term implied in a
contract that contradicts existing law. But that is the nature of the
term for which Improvon
contends. The implied term advanced assumes
that section 64 of the VAT Act says the opposite of what it actually
provides.
20
In these circumstances, Improvon’s
claim for rent exclusive of Value Added Tax must fail. However, its
claim for rent
simpliciter
must succeed. It was conceded on Mr. Pellow’s behalf that the
value of this claim is R715 680-00.
Order
21
The defendants have been
substantially successful, both in defending the main claim and in
advancing their counterclaim. The defendants
are, accordingly,
entitled to their costs.
22
For all of these reasons, I make the
following order –
1.
The plaintiff’s claim is dismissed.
2.
The defendants’ counterclaim succeeds
to the extent that the plaintiff is directed to pay the defendants
R715 680-00,
plus interest at 10% per annum
a
tempore morae
to date of final payment.
3.
The plaintiff is directed to pay the
defendants’ costs in the main claim and in the counterclaim.
S
D J WILSON
Acting
Judge of the High Court
This
judgment was prepared and authored by Acting Judge Wilson. 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. The date for hand-down
is deemed to
be 7 October 2021.
HEARD
ON:
24 and 26 August 2021
DECIDED
ON: 7 October
2021
For
the Plaintiff: S
Kabelo
Instructed
by KWA Attorneys
For
the Defendants: N
Daniels
Instructed by Shaban
Clark Coetzee Attorneys