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[2017] ZASCA 111
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Tudor Hotel Brasserie and Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd (793/2016) [2017] ZASCA 111 (20 September 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 793/2016
In
the matter between:
TUDOR
HOTEL BRASSERIE & BAR (pTY)
LTD
APPELLANT
and
HENCETRADE
15 (PTY)
LTD
RESPONDENT
Neutral
citation
:
Tudor
Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd
(793/2016)
[2017] ZASCA 111
(20 September 2017)
Coram
:
Navsa
ADP, Leach and Swain JJA and Molemela and Mbatha AJJA
Heard
:
4 September 2017
Delivered:
20
September 2017
Summary:
Lease – agreement
to pay rental in advance without deduction – exclusion of
reciprocity – landlords failure to
grant full beneficial
occupation of entire leased premises – tenant obliged to pay
rent.
Order
On
appeal from:
Western
Cape Division of the High Court, Cape Town
(
Binns-Ward
J,
sitting as court of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Swain JA (Navsa ADP,
Leach JA, Molemela and Mbatha AJJA concurring):
[1]
The
respondent, Hencetrade 15 (Pty) Ltd, successfully brought an
application before the Western Cape Division, Cape Town (Binns-Ward
J) for the eviction of the appellant, Tudor Hotel Brasserie & Bar
(Pty) Ltd, from premises located at 153 Longmarket Street,
Cape Town,
used by the appellant to conduct the business of a hotel.
[2]
The right
to occupation of the premises by the appellant was based upon a
written lease agreement concluded between the parties
on 29 June
2012. The eviction was granted on the basis that the respondent had
validly cancelled the lease after the appellant
had fallen into
arrears with the rental payments. Despite the respondent having
afforded the appellant the requisite notice to
cure its default, it
had failed to do so.
[3]
The
appellant admitted that it had not paid the rental in terms of the
lease agreement, but denied that any was due, on the basis
that its
obligation to make payment was suspended as a result of the failure
by the respondent to afford to the appellant, ‘vacant
occupation or beneficial use of the entire leased premises’. It
was common cause that at the time that the appellant was
given
occupation of the premises, the respondent had retained a portion of
the third floor to store property.
[4]
The legal basis for the argument of the appellant was the
exceptio
non adimpleti contractus.
(the ‘
exceptio’
).
The appellant submitted that this raised the legal question of
whether the
exceptio
was available to a lessee who received
only partial occupation of leased premises, but did not cancel the
lease.
[5]
The court a quo pointed out that the appellant's approach to the
issue of its liability to make payment of the rental ran counter
to a
line of authority commencing with
Arnold v Viljoen
1954 (3) SA
322
(C) and stated (at para 9) that:
‘
In
terms of that line of authority, a lessee who takes occupation of
premises which are deficient in any respect is obliged, while
it
remains in occupation, to pay the full rental stipulated in terms of
the lease. Its remedy is to claim compensation by way of
an abatement
of rental and/or damages. A lessee who, having taken occupation,
fails to pay the full rental is exposed to the cancellation
of the
lease for non-payment.’
[6]
The court a quo then referred to the decision in
Ethekwini
Metropolitan Unicity Municipality (North Operational Entity) v Pilco
Investments CC
[2007] ZASCA 62
; [2007] SCA 62 (RSA) para 22,
where the following was stated:
‘
It
follows that, upon taking occupation of the property in late 1994,
the plaintiff became obliged to pay rent to the defendant,
as
stipulated in clause 1 of the lease. Of course, because the plaintiff
was, until early June 1997, deprived of the use of that
portion of
the property which was being used by the person making pre-cast
fencing, the plaintiff would be entitled to a remission
of rent over
the period in question, proportional to its reduced use and enjoyment
of the property. If the amount to be remitted
was capable of prompt
ascertainment, the plaintiff could have set this amount off against
the defendant's claim for rent; if not,
the plaintiff was obliged to
pay the full rent agreed upon in the lease and could thereafter
reclaim from the defendant the amount
remitted.’
[7]
The court a quo applied this principle and concluded in para 13 that:
‘
.
. . unless the abatement in rent to which the respondent might have
been entitled in respect of the part of the third floor of
Huys
Heeren XVII not made available by the applicant was capable of prompt
ascertainment, the respondent was obliged to have paid
the full
rental during the first period.’
Finding
that any remission in rental to which the appellant might have been
entitled was not capable of prompt ascertainment, the
court a quo
decided that the appellant was in arrears in respect of the payment
of rental, when the respondent validly exercised
its right to cancel
the agreement. An order evicting the appellant from the leased
premises was accordingly granted.
[8]
The respondent by way of supplementary heads of argument, relied upon
the unreported decision in
Baynes Fashions (Pty) Ltd t/a Gerani v
Hyprop Investments (Pty) Ltd
[2005] JDR 1382 (SCA), for the
submission that an interpretation of the provisions of clauses 10.1
and 21.1.3 of the lease agreement
is dispositive of the appeal. The
court a quo found it unnecessary to consider the effect of these
clauses upon the right of the
appellant to withhold payment of the
rental.
[9]
In
Baynes Fashions
at para 4 the following relevant clauses in
the lease agreement provided as follows:
‘
6.2
All rentals payable by the TENANT in terms hereof shall be paid
monthly in advance without any deduction or set-off . . .
.
. .
25.4
The TENANT shall have no claim against the LANDLORD for compensation,
damages, or otherwise by reason of any interference with
his tenancy
or his beneficial occupation of the premises occasioned by any . . .
repairs or building works as herein before contemplated.
. .’
[10]
With regard to the interpretation of these clauses, the following was
stated at para 5:
‘
[7]
With respect to clause 6.2 it is contended on behalf of the
appellants that the word "payable" confers a right on
the
lessor to claim payment only when it has performed in terms of the
contract by granting beneficial occupation to the lessee.
As the
respondent has failed to grant beneficial occupation to the first
appellant, thereby failing to perform in terms of the
contract, so
the argument proceeded, the rent was not "payable".
[8]
There is no warrant for this construction. The clause imposes an
obligation on the lessee to make payment of rent "in advance".
This means that the payment of rent by the lessee is not contingent
upon prior performance by the lessor. In any event, the first
appellant continues to trade and therefore does have beneficial
occupation of the premises. The appellants’ real complaint
is
that the renovations effected by the respondent have interfered with
the first appellant's right to occupy the premises beneficially
in a
manner that has led to the first appellant suffering a substantial
loss to its monthly turnover. This loss, contends the appellants,
entitles the first appellant to deduct the rent which is "payable"
to the respondent. The simple answer to this complaint
is that clause
25.4 in express terms, precludes the reduction of rent in these
circumstances.
[9]
It can hardly be clearer that clauses 6.2 and 25.4 are intended to
prevent any deduction of rent by the lessee where the renovations
that are undertaken by the landlord in terms of clause 25.1
interferes with the lessee's right of beneficial occupation. The
appellants
signed the agreement that contained these clauses and
cannot now seek to extricate themselves from its consequences.’
[11]
The agreement that the rent was payable ‘monthly in advance’
had the effect of altering the usual position, that
in the absence of
contractual provisions, rent is payable in arrear at the end of each
period in the case of a periodical lease,
after the lessor has
fulfilled his obligation.
[1]
The
lease agreement therefore altered the reciprocal nature of the
obligations of the lessor and the lessee. The obligation of
the
lessee to make payment of the rent was no longer reciprocal to the
obligation of the lessor to grant beneficial occupation
of the
premises to the lessee.
[12]
The application of the principle of reciprocity to contracts is a
matter of interpretation. It has to be determined whether
the
obligations are contractually so closely linked that the principle
applies. Put differently, in cases such as the present
the
question to be posed is whether reciprocity has been contractually
excluded.
[2]
[13]
In
Baynes Fashions
, the interpretation the court placed upon
the provision that the rent was payable ‘in advance’,
namely that ‘payment
of rent by the lessee is not contingent
upon prior performance by the lessor’, necessarily involved a
finding that the principle
of reciprocity was excluded by the terms
of the lease.
[14]
The conclusion in
Baynes Fashions
that the lessee was not
entitled to a ‘reduction of rent’, caused by interference
with the lessee's right of beneficial
occupation, was based upon the
provisions of clause 6.2 that the rent was payable ‘without any
deduction or set-off’,
and clause 25.4 that the tenant would
not have any claim against the landlord ‘by reason of any
interference with his tenancy
or his beneficial occupation of the
premises’, caused by repairs or building works.
[15]
The relevant clauses in the present lease agreement must be
interpreted against the background set out above. Clause 10.1
provides that:
‘
All
payments in terms of this lease to be made by the tenant to the
landlord shall be made on or before the first day of each month
without demand, free of exchange, bank charges and without any
deductions or set off whatsoever – ’
[16]
Clause 21 of the lease agreement provides for the ‘Landlords
Limitation of Liability’ in the following terms:
‘
21.1
The tenant shall –
21.1.1
. . .
21.1.2
not have any claim of any nature whatsoever against the landlord
whether for damages, remission of rent or otherwise, for
any failure
of or interruption in the amenities and services provided by the
landlord, any local authority and/or other service
provider to the
leased premises, building and/or property unless such failure or
interruption is caused by the negligent or wrongful
act or omission
by the Landlord or its agent or representative, notwithstanding the
cause of such failure or interruption;
21.1.3
not be entitled to withhold or defer payment of any amounts due in
terms of this lease for any reason whatsoever;’
[17]
The provision that the rental was to be paid ‘on or before the
first day of each month’ had the effect that it
was to be paid
in advance by the appellant. The obligation of the appellant to pay
the rental was accordingly not reciprocal to
the obligation of the
respondent to provide beneficial occupation of the entire premises.
Additionally clause 21.1.2 precluded
the withholding of rental as
a result of a ‘failure of or interruption in the amenities and
services provided by the
landlord.’
[18]
The terms of the lease therefore precluded suspension of the payment
of rental by the appellant, as a result of the failure
by the
respondent to afford the appellant beneficial use of the entire
leased premises. As a result, the cancellation of the lease
by the
respondent was justified, the appellant being in arrears with the
rental payments.
[19]
Counsel for the appellant, however, referred to the following dictum
in
Poynton
v Cran
1910 AD 205
at 227-228, in support of his submission that the
appellant was entitled to withhold payment of the rent, as a
consequence of the
failure of the respondent to grant beneficial
occupation of the entire premises to the
appellant:
‘
It
remains to consider whether the evidence discloses any circumstance
which would deprive the tenant of the legal right which he
exercised.
I do not think that the clause in the lease providing for the payment
of rent on a certain day "without any deduction
whatever"
has that result. That provision cannot relieve the landlady of her
obligation to place the leased property in repair,
or deprive the
tenant of the remedy, which the law gives him in respect of her
initial default. That default afforded
pro
tanto
a defence to the claim for rent. And I entirely agree with the
learned Judge when he says that "
it
is only the rent due which can be stipulated to be paid without
deduction
.’
(Emphasis
added.)
[20]
In
Poynton
the plaintiff let a hotel to the defendant for a
year and 11 months at a rental of £540 per annum ‘without
any deduction
whatever’, with certain rights of renewal. The
plaintiff sued the defendant for £90 being two months arrears
of rent.
The defence was that the plaintiff had failed to put the hot
water apparatus in proper repair and that after due notice to the
plaintiff, the defendant had effected the repairs himself, the cost
of which he set off against the rent due. The highlighted portion
of
the judgement that, ‘it is only the rent due which can be
stipulated to be paid without deduction’, must be read
in the
context of the absence of any reference in the judgement to the
monthly rental being payable by the defendant on the first
of the
month, ie in advance. The usual position accordingly prevailed and
the rent was payable by the defendant, as the tenant,
in arrear at
the end of each month, after the plaintiff, as the landlady, had
performed her obligations. On this basis the rent
only became ‘due’
and therefore payable by the defendant, after the plaintiff had
performed her reciprocal obligations.
It was only at this stage that
the defendant was obliged to make payment of the rent ‘without
deduction’ to the plaintiff.
The case is accordingly
distinguishable on the facts from the present case where the rental
was payable in advance. Moreover it
does not appear that there was a
clause such as clause 21.1.2.
[21]
The appeal against the order of the court a quo evicting the
appellant from the premises must accordingly fail. This conclusion
renders it unnecessary to deal with the statement by the court a quo,
that any abatement in rent to which the appellant may have
been
entitled was not capable of prompt ascertainment, with the result
that the appellant was obliged to make payment of the full
rental.
[22]
The following order is granted:
The
appeal is dismissed with costs.
K G B Swain
Judge of Appeal
Appearances:
For
the Appellant:
S Rosenberg SC
Instructed by:
Jason Freel Attorneys,
Cape Town
McIntyre
& Van der Post Attorneys, Bloemfontein
For the Respondent:
P White
Instructed by:
Herold Gie Attorneys,
Cape Town
Webbers Attorneys,
Bloemfontein
[1]
A J Kerr
The
Law of Sale and Lease
4ed
(2014) at 427;
Ebrahim, N O
v Hendricks
1975 (2) SA 78
(C) at 81E-F.
[2]
BK Tooling (Edms) Bpk v Scope
Precision Engineering (Edms) Bpk
1979
(1) SA 391
(A) at 418B-D.