About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2018
>>
[2018] ZAGPJHC 567
|
|
Mawenzi Resources and Finance Company (Pty) Limited and Others v Nestlife Assurance Corporation Limited and Another (A5028/17) [2018] ZAGPJHC 567 (18 October 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
APPEAL
CASE NO. A5028/17
In
the matter between:
MAWENZI
RESOURCES AND FINANCE COMPANY
(PTY)
LIMITED (IN
LIQUIDATION)
First
Appellant
VAN
DEN HEEVER, THEODORE WILHELM
N.O.
Second
Appellant
MOTSHEKGA,
MATHOLE SEROFO
N.O.
Third
Appellant
and
NESTLIFE
ASSURANCE CORPORATION LIMITED
First
Respondent
SITHOLE,
HENDRICK
VUSUMUZI
Second
Respondent
JUDGMENT
Van
Vuuren AJ (Opperman J and Petersen AJ concurring):
Introduction
[1]
The appellants, the liquidators of Mawenzi
Resources and Finance Company (Pty) Limited (in liquidation)
(“
Mawenzi
”)
appealed against the judgment and order of Keightley J arising
from a claim instituted by Nestlife Assurance Corporation
Limited
(“
Nestlife
”)
and Mr Hendrick Vusumuzi Sithole (“
Mr Sithole
”)
for
inter alia
:
repayment of the purchase price of a property in Chislehurston,
Sandton (“
the property
”);
the value of Nestlife’s bargain in the value of the property;
and for repayment of payments made by Mr Sithole under
his suretyship
undertaking to Standard Bank of South Africa (“
the
Bank
”) to which the property was
bonded. Mawenzi counterclaimed for unpaid rental due under an
alleged tacitly relocated
lease between it and Nestlife. All
but an initial three of Mawenzi’s bond instalments to the Bank
were paid by Nestlife
over the period 2001 to 2014. The
characterisation of these bond payments was at the heart of the
dispute
a quo.
[2]
Nestlife and Mr Sithole contended that a
valid agreement of sale was concluded in terms whereof Nestlife
acquired the property from
Mawenzi in 2005 (the “
Agreement
of Sale
”), that the Agreement of
Sale had been revived by a written addendum in August 2007 (the
“
Addendum Agreement
”)
and was extant as at 21 January 2011, the date of Mawenzi’s
liquidation. They contended that the relevant bond
payments
were made in consideration of the purchase price of the property.
[3]
Mawenzi was wound up in 2011. Several
years later, during November 2014, Mawenzi’s liquidators
communicated their election
not to be bound by the Agreement of
Sale. During that time Nestlife continued to pay the
outstanding bond on the property
and in so doing had paid the full
purchase price. It had also paid the rates and taxes as they
fell due and had maintained
the property as purchaser.
[4]
Mawenzi and the liquidators claimed that
the Agreement of Sale had lapsed and had not subsequently been
revived. Mawenzi contended
that a tacitly relocated lease came
into being upon the lapse of the Agreement of Sale and remained
extant until Nestlife vacated
the property in 2014. Keightley J
upheld Nestlife’s and Mr Sithole’s claims and dismissed
Mawenzi’s counterclaim.
[5]
To contextualise these disputes, it is
necessary to provide a brief history of its evolution.
[6]
The property concerned was thought to be a
business opportunity between two friends in 2001. This
investment project over
time however evolved into various disputes in
part attributable to a degree of informality in the business
arrangements of Mr Mzilikazi
Khumalo and Mr Sithole through
Mawenzi and Nestlife, the entities they respectively represented.
The property was acquired
by Mawenzi on 17 April 2001 and paid with a
loan secured by a mortgage bond with the Bank registered over the
property.
[7]
The
Bank required both a lease agreement to be concluded in respect of
the property and for a suretyship to be signed in respect
of
Mawenzi’s indebtedness under the loan. Mr Sithole
provided surety in favour of the Bank for Mawenzi’s obligations
and to comply with the Bank’s requirements, Mawenzi
[1]
concluded a
written 5 year Lease Agreement with Nestlife (the “
Lease
Agreement
”).
[8]
The Lease Agreement was concluded on 27
June 2001 and provided for monthly payments commencing at R60 000
in the first year
increasing to R87 846 in the fifth year.
The 5 year Lease Agreement would terminate on 31 May 2006.
[9]
Nestlife only took occupation of the
property some 2 years later, in April 2003. This initial period
was later defined by
the parties as “
the
pre-occupation period
”.
[10]
The existence of the written 5 year Lease
Agreement is relevant to two subsequent events: (i) the Agreement of
Sale (in terms whereof
Mawenzi entered into a written agreement for
the sale of the property to Nestlife); and (ii) the alleged tacit
relocation of the
Lease Agreement for Nestlife’s occupation of
the property for the period 31 May 2006 to 2014 when Nestlife vacated
the property.
Nature of the Lease Agreement
[11]
The court
a
quo
classified the written Lease
Agreement concluded between Nestlife and Mawenzi as one which
functioned within the context of the
broader underlying investment
project – it was not a stand-alone lease divorced from the
investment project. The lease
was necessitated by a requirement
from the Bank upon granting a loan against the bond over the property
and was not intended to
be a self-standing commercial arrangement in
its own right.
[12]
What at the time motivated Nestlife to pay
the bond instalments was Mawenzi’s failure to honour its
obligations to the Bank
as purchaser of the property, and in
particular, the suretyship obligations for Mawenzi’s
liabilities to the Bank. Mawenzi,
in its 2008 rental action
averred that an oral agreement in 2005 gave rise to Nestlife’s
obligation to effect the bond payments.
No 2005 oral agreement
in terms whereof Nestlife was to make Mawenzi’s bond payments
in lieu of rental was proven.
The underlying motivation for Nestlife
paying Mawenzi’s bond is central to the dispute between the
parties.
[13]
Mawenzi only paid the first three bond
payments. It was not disputed
a
quo
that all subsequent bond payments
were paid by Nestlife with the final payment in 2014.
Nestlife’s case was that the
latter constituted payment of the
purchase price of the property whilst Mawenzi sought to typify such
payments as payments under
a tacitly relocated lease. These
competing contentions are considered below.
Nestlife sought to protect its
position
[14]
This investment was at the time not
achieving its aim by reason of the failure of Mawenzi to honour its
obligations to the Bank
leading to the directing minds of the
entities agreeing that Nestlife would acquire the property. It
was the party to the
initial investment idea to have made significant
payments towards the acquisition and retention of the property.
Accordingly,
and as Mr Sithole of Nestlife grew wary of the business
relationship he, on behalf of Nestlife, sought it prudent to approach
Mawenzi
to enter into an Agreement of Sale of the property as a
method of protecting Nestlife’s position in circumstances where
it
had been paying Mawenzi’s bond payments and in respect of
which obligations Mr Sithole had signed as surety in his personal
capacity.
[15]
The parties concluded the Agreement of Sale
of the property to Nestlife which took the payments that Nestlife
made on behalf of
Mawenzi into account.
The Agreement of Sale
[16]
The written Agreement of Sale in respect of
the property was concluded on 28 March 2005. Mawenzi was
represented by Mr
S Mkwanazi, a director, and Nestlife, by Mr
Sithole, its managing director. At this time the written Lease
Agreement was
extant with 14 months of the 5 year term remaining to
29 May 2006. Terms and conditions of relevance include the
following:
Payment of the purchase price
[17]
The purchase price of the property was
R7,800,000 exclusive of Value Added Tax. Payment by Nestlife
was to be made as follows:
“
5.2.1 The
value of improvements done by the purchase[r] to the value of
R2,409,938.87 … is to form part of the payment;
5.2.2 A deposit
of R2 million … already paid by the purchaser is to form
part of the payment;
5.2.3 The
balance of the purchase price … shall be secured by a bank
guarantee in favour of the seller or its nominee payable
free of
exchange at Johannesburg. Such guarantee shall be delivered to
the conveyancer within 45 days from the signature
date
.”
Transfer of the property
[18]
Transfer of the property would be effected
“
within
a reasonable time after the purchaser
has complied with all of its obligations in terms of this agreement.
”
[19]
The agreement recognised that Nestlife was
“
already in occupation of the
property in terms of a lease agreement
”.
The Agreement of Sale’s
effect on the Lease Agreement
[20]
Clause 7.2 of the Agreement of Sale reads:
“
7.2.1 The
purchaser and seller concluded a Lease Agreement on or about 27
th
June 2001 in terms of which the purchaser leased the property from
the seller with effect from 1 June 2001;
7.2.2 The
purchaser however, took occupation of the property in April 2003 and
the seller agreed to waive VAT inclusive lease rentals
in respective
of pre-occupation period amounting to R1 347 480.00 …
and instead charged the purchaser a R943 909.00
… VAT
inclusive rental on 1 April 2003;
7.2.3 As at 7
July 2005 the VAT inclusive lease instalments due by the purchaser to
the seller after taking into account the waived
pre-occupation rental
and the special rental amounted to R1,406.050.68 … This
total amount is, in addition to the
purchase price, also due in terms
of clause 5.2.3 of this agreement and the Lease Agreement
”
[21]
The Agreement of Sale thus recognised that
Nestlife only took occupation of the property in April 2003 (despite
the conclusion of
the Lease Agreement with effect from 1 June
2001) and waived Nestlife’s pre-occupation lease liability to
Mawenzi of
R1,347,480 and instead charged Nestlife a sum of R943,909
as at 1 April 2003 for the pre-occupation period.
[22]
This meant, so they agreed, that as at 7
July 2005, the lease instalments due by Nestlife to Mawenzi amounted
to a total of R1,406,050.68
which was due in addition to the purchase
price (R7.8 million) of the property.
[23]
It is necessary to consider the status of
the Lease Agreement in the Agreement of Sale before turning to the
particular suspensive
conditions contained in clauses 16.1 and 16.2
of the Agreement of Sale.
[24]
Clause 16.3 of the Agreement of Sale reads:
“
16.3
should the purchaser fail to fulfil the above suspensive conditions
after all reasonable extensions have been granted, the
Lease
Agreement mentioned in 7.2.1 above will continue to operate as
originally signed after taking into account clause 7.2.2 above.
”
[25]
On a plain reading of this clause the
written Lease Agreement terminated on 31 May 2006 if the
suspensive conditions (16.1
and 16.2 to which I refer below) were not
fulfilled.
The other suspensive conditions
[26]
The suspensive conditions in 16.1 and 16.2
recorded that the agreement would be of no force or effect unless:
“
16.1 The
board of directors of
[Nestlife]
approves the acquisition of the property
and takes a formal resolution to that effect. Should this
condition not be fulfilled
within 10 days of the signature date …
this agreement shall lapse. …”
“
16.2
[Nestlife]
is
granted a loan by a financial institution for an amount not less than
the amounts due in terms of 5.2.3 and 7.2.3” i.e.
R……
and R……“Should this condition not be fulfilled
within 30 days from the signature date …
this agreement shall
lapse
. …”
[27]
It was common cause
a
quo
that neither a formal resolution by
the board of directors of Nestlife was taken nor was a loan granted
by a financial institution
within a period of 30 days and thus that
neither of these suspensive conditions were met at the time.
[28]
In consequence the Agreement of Sale lapsed
and the written 5 year Lease Agreement remained extant until 31 May
2006.
[29]
In practical terms though, Nestlife
continued to service the monthly bond payments, payment of utility
bills to the City and expending
on maintenance and improvements of
the property. Nestlife made these payments at all relevant
times: both before conclusion
of the Agreement of Sale; and
thereafter, beyond its lapse; beyond expiry of the written Lease
Agreement on 31 May 2006; and after
signature of the Addendum
Agreement on 31 August 2007.
The interregnum between the lapse
and revival of the Agreement of Sale
[30]
Mr Sithole, the controlling mind of
Nestlife, was the only witness who testified to the events giving
rise to the Agreement of Sale
and the nature of the relationship
between Mawenzi and Nestlife during the period between the lapse of
the Agreement of Sale and
conclusion of the Addendum Agreement on
31 August 2007. Mr Sithole testified that as between
Mawenzi and Nestlife there
was an agreement for the sale of the
property to Nestlife which endured throughout, aptly described as a
putative agreement by
the court
a quo
.
Mr Sithole’s evidence, despite rigorous
cross-examination, was held to be plausible and I find no reason to
disturb that finding.
[31]
It was only when KPMG, auditors of
Nestlife, advised that in order to give effect to the Agreement of
Sale an addendum would be
required to achieve its revival, that this
feature was formally addressed. This was of course necessary
from both statutory
and contractual perspectives.
The Addendum Agreement –
revival of the Agreement of Sale
[32]
Following the advice received from KPMG, Mr
Sithole on behalf of Nestlife approached Mr Khumalo regarding the
formalisation of the
revival of the Agreement of Sale. Mr
Khumalo told Mr Sithole that he should contact Mawenzi’s
Mr Mkwanazi in this
regard.
[33]
On 31 August 2007, Nestlife, represented by
Mr Sithole and Mawenzi, represented by Mr Mkwanazi (as was the case
when the Agreement
of Sale was concluded) entered into an agreement
which later became known during the trial as the “
addendum
”.
The Addendum Agreement provides as following:
“
This
document confirms that the Agreement of Sale of the immovable
property at 17 Acacia Road, Chislehurston, Sandton, by Mawenzi
Resources (seller) to NestLife Assurance (purchaser)
is
still in force
and
will
remain so until the agreed upon purchase price has been settled
by NestLife Assurance.
”
[2]
[34]
The
Addendum Agreement aimed at revival of the Agreement of Sale complied
with the non-variation, amendment or cancellation clauses
contained
in the Agreement of Sale.
[3]
The effect of the Addendum
Agreement
[35]
The court
a
quo
held that in consequence of the
conclusion of the Addendum Agreement on 31 August 2007, the Agreement
of Sale for Nestlife’s
purchase of the property was revived and
thus remained extant as at the date of the
concursus
creditorum
forming in the liquidation
of Mawenzi.
[36]
A ground of appeal raised by Mawenzi and
its liquidators was that the court
a quo
“
should have found that the
addendum did no more than revive the sale agreement in its express
terms
”.
[37]
During argument, counsel for the appellants
clarified that they do not contest the conclusion of the Addendum
Agreement or Mr Mkwanazi’s
authority to have done so. The
argument was instead that the revived Agreement of Sale
self-destructed at the moment of conclusion
of the Addendum Agreement
for want of fulfilment of the suspensive conditions contained in
clauses 16.1 and 16.2 of the Agreement
of Sale. Counsel for the
appellants asserted that in the absence of compliance with the
suspensive conditions at the time
(a board resolution within 10 days
and a loan granted within 30 days from 28 March 2005 – the
signature date of the Agreement
of Sale) the Agreement of Sale, so it
was argued, would effectively self-destruct immediately upon its
revival for want of fulfilment
of the suspensive conditions
ex
tunc
.
[38]
This line of reasoning furthermore was
necessary to enable argument in support of Mawenzi and the
liquidators’ counterclaim
for the tacitly relocated lease.
In this regard it is both significant and relevant that no evidence
was led in support of
the appellants’ claim or defence.
Neither Mr Khumalo nor Mr Mkwanazi, the controlling minds
of Mawenzi, were called
to testify. Their evidence would have
been instrumental to the alleged tacitly relocated lease. I
will return to a
known external manifestation by Mr Mkwanazi,
signatory to both the Agreement of Sale and Addendum Agreements on
Mawenzi’s
behalf. There was thus no evidence led to
contradict the testimony of Mr Sithole.
[39]
A tacitly relocated lease, as an
explanation of how the bond payments paid by Nestlife ought to be
typified for the period post
31 May 2006 upon expiry of the written 5
year lease, cannot co-exist with Nestlife’s contention that the
bond payments made
by Nestlife were made towards the purchase price
under the revived Agreement of Sale.
[40]
The appellants advanced in argument that Mr
Sithole’s evidence on trial was contradicted by certain
circumstantial evidence
on how the bond payments ought to be typified
– i.e. whether as rental payments or as purchase consideration.
Their
reasoning
inter alia
included: (i) in Nestlife’s 2007 annual financial statements
(for the year ended 31 March 2007) certain expenses were described
as
“
leasehold improvements
”;
and (ii) in the action for arrear rental instituted by Mawenzi during
2008 (which it did not pursue to finality), Nestlife,
in its plea,
referred to a “
lease agreement
”.
[41]
In response, respondents’ counsel
argued that the annual financial statements of Nestlife do reflect an
extant agreement of
sale (the putative agreement described by the
court
a quo
).
The notes to the annual financial statements for the year ended 31
March 2007 contain the following narrative which confirms
Nestlife’s
position through its director, Mr Sithole:
“
27.
CAPITAL COMMITMENT
The company has
entered into an agreement to purchase the property, which it
currently rents and on which it has raised leasehold
improvements,
for an amount of R7 800 000. The amount of R2 409 939
relating to the cost of leasehold
improvements will be set-off
against the purchase price. At year end an amount of R1 545 854
has been paid as a
deposit on the property. The balance of
R3 844 207 will be financed by the company from its own
resources
.”
[42]
Counsel for the appellants also referenced
a note in Nestlife’s annual financial statements for the year
ended 31 March 2008:
“
7.
PROPERTY AND EQUIPMENT
The land and
buildings consist of an office building at 17 Acacia Road,
Chislehurston, Sandton. The property was acquired
in the
current year. The purchase transaction has not, however, been
finalised and at the approval date of the annual financial
statements, the transfer has not registered yet
.”
[43]
The amounts previously under “
leasehold
improvements
” in the 2007 AFS had
since been moved to “
buildings
”
in Nestlife’s 2008 AFS.
[44]
The notes in the respective annual
financial statements are accordingly not inconsistent with a putative
agreement found to have
been in existence subsequent to the lapse of
the Agreement of Sale during the interregnum prior to conclusion of
the 31 August
2007 Addendum Agreement. Nestlife’s
position, through Mr Sithole, was thus that it had “
entered
into a purchase agreement
” in
respect of the property. Mr Sithole testified that it was only
upon KPMG’s advice that the Addendum Agreement
between Nestlife
and Mawenzi (drawn up by KPMG), was signed by Mr Sithole and Mr
Mkwanazi.
Mawenzi’s
conduct with reference to a tacitly relocated
lease
[45]
As stated, neither Mr Khumalo nor Mr
Mkwanazi were called to testify. I express no view on whether either
were available or willing.
Mawenzi’s defence and
counterclaim premised on the averred tacitly relocated lease was
instead pursued by the liquidators
upon such documents as were
available to them.
[46]
In order for the appellants to succeed in
their defence to Nestlife’s and Mr Sithole’s claims,
and to succeed in
its counterclaim, it was necessary for the
appellants to argue that the Agreement of Sale had lapsed and that,
despite the conclusion
of the Addendum Agreement in August 2007, the
revived Agreement of Sale lapsed immediately upon its conclusion for
want of fulfilment
of the suspensive conditions. This approach
appears to be one of necessity viewed from the liquidators’
perspective.
Mr Mkwanazi’s letter –
15 April 2008
[47]
An important external manifestation on the
part of Mawenzi is Mr Mkwanazi’s 15 April 2008 letter.
[48]
Mawenzi and the liquidators’ approach
appears inconsistent with the contemporaneous letter of demand by
Mawenzi to Nestlife
under signature of Mr Mkwanazi as its then
executive director. Contrary to the conclusion sought to be
advanced by appellants
Mr Mkwanazi, as at 15 April 2008, seven months
after conclusion of the Addendum Agreement, and during which time
Nestlife’s
bond payments to the Bank continued, wrote a letter
of demand to Nestlife.
[49]
Mr Mkwanazi’s letter is premised upon
an extant Agreement of Sale. Significantly, Mr Mkwanazi places
no reliance on
the non-fulfilment of any suspensive conditions which
were to have been fulfilled within 10 and 30 days respectively of the
conclusion
date of the Agreement of Sale at the time.
Mr Mkwanazi’s letter is consistent with the revival and
continued force
of the Agreement of Sale, which of necessity can no
longer be conditional upon suspensive conditions for which the time
of performance
had come and gone prior to the conclusion of the
Addendum Agreement.
[50]
This breach notice, to the contrary, and in
recognition of the revival of the Agreement of Sale sought to demand,
within 14 days:
(i) The provision of a bank guarantee; (ii) That
transfer be effected within a reasonable time; and (iii) That
Nestlife should
pay Mawenzi the instalments due in terms of the Lease
Agreement concluded in 2001 (the written 5 year Lease Agreement)
after taking
into account the waived pre-occupation rental as
described in clause 7.2.2 of the Agreement of Sale.
[51]
Mawenzi’s demand further records the
following, which is a manifestation of Mr Mkwanazi and thus Mawenzi’s
position
in relation to the sale of the property:
“
We record
that various meetings have taken place between you in you
[r]
capacity as a Nestlife representative
and Mr Mzilikazi Khumalo and the writer of this letter in our
capacity as representatives
of Mawenzi in which amongst other things
we discussed:
·
Mawenzi’s concerns about
Nestlife’s failure to implement the sale agreement in light of
changing conditions in the property
market.
·
Mawenzi’s position that Nestlife
should settle the outstanding bond balance as at the date of
concluding the Agreement of
Sale. The concluded sale agreement
is currently silent on this matter.
I hope this
letter clearly sets out Mawenzi’s position on the Agreement of
Sale. All our rights in terms of sale agreement
[sic]
and the lease agreement referred to
above are reserved.
”
[52]
At least three conclusions can be drawn
from Mr Mkwanazi’s 15 April 2008 letter: (i) Mawenzi regarded
the Agreement of Sale
as extant; (ii) The Lease Agreement referred to
by Mr Mkwanazi was the written 5 year Lease Agreement identified and
defined by
Mr Mkwanazi as the “
lease
agreement concluded on or about 27 June 2001
”;
and (iii) Mawenzi, as was argued on behalf of Nestlife, expected that
payment of the purchase price in terms of the Agreement
of Sale would
be performed by Nestlife who “
should
settle the outstanding bond balance”
- which payments it is common cause Nestlife made.
[53]
This letter concludes with the following:
“
I hope this letter clearly sets
out Mawenzi’s position on the Agreement of Sale
”.
It is informative that Mr Mkwanazi does not reference any
tacitly relocated lease in the letter.
[54]
The appellants in their grounds of appeal
accepted that the Addendum Agreement revived the Agreement of Sale.
The evidence
and subsequent conduct of Mr Mkwanazi went further
and was not only consistent with the conclusion of the Addendum
Agreement but
also its effective revival of the Agreement of Sale -
for if the revival was not effective, no breach notice and threat of
cancellation
would have been required.
[55]
Nestlife executed its obligations in terms
of the revived Agreement of Sale with the same understanding.
Nestlife made all
bond payments subsequent to the conclusion of the
Agreement of Sale and in so doing discharged its payment obligations
thereunder.
Mawenzi’s 2008 rental action
- first mention of a tacit lease
[56]
In the rental action against Nestlife
instituted during 2008, Mawenzi
inter
alia
premised its claim upon an alleged
oral
agreement
concluded in July 2005 after the Agreement of Sale had lapsed. The
oral agreement, so the pleadings allege, obliged
Nestlife to make the
bond payments in lieu of rental due to Mawenzi. It was pleaded
that “
during or about July 2005 …
the parties … concluded an oral agreement in terms of which
[Nestlife]
would
settle the bond instalments on the property on behalf of
[Mawenzi]
due to Standard Bank … in
reduction of the rental due and payable by
[Nestlife]
to
[Mawenzi]
(“the oral agreement”)
.”
Nestlife denied such an agreement and no oral agreement was
proven in the present action.
[57]
In its particulars of claim in the rental
action, Mawenzi defined the written 5 year Lease Agreement as “
the
lease agreement
”. This is
relevant to the admissions made in Nestlife’s plea in that
action. Appellants argued that Sithole’s
oral evidence in
the action
a quo
was inconsistent with the plea filed on Nestlife’s behalf in
the rental action. Counsel for Nestlife argued to the
contrary
and pointed to the context within which reference to the
lease
agreement
as defined in that action was
made. The plea filed on Nestlife’s behalf in the rental
action cannot be construed as
an admission of any tacitly relocated
lease.
[58]
The pleadings in the rental action do
accordingly not support the contention that the court
a
quo
ought to have found Mr Sithole’s
oral evidence inconsistent with Nestlife’s plea in the rental
action.
Conclusions in respect of the
rental recovery action
[59]
The concept of a tacitly relocated Lease
Agreement first received mention in Mawenzi’s 2008 rental
recovery action.
It is common cause that Mawenzi did not pursue
that action – nor did the liquidators subsequently appointed
elect to do so.
[60]
The written 5 year Lease Agreement
contained a non-variation clause requiring amendments, variations or
consensual cancellation
to have been recorded in writing and signed
on behalf of Mawenzi and Nestlife. An oral variation as pleaded
by Mawenzi in
its rental action in terms whereof, so it alleged,
Nestlife was to effect payment of Mawenzi’s bond in lieu of
rent is inconsistent
with the non-variation clause in the written 5
year Lease Agreement.
[61]
Nestlife denied any alleged
tacit
agreement
of lease averred to have
commenced upon termination of the written Lease Agreement on 31 May
2006. Curiously, and contrary
to its case
a
quo,
the tacit agreement alleged in the
rental action was said to have been on the same terms as the 5 year
written Lease Agreement.
[62]
Counsel for the appellants argued that
reference to the Lease Agreement in Nestlife’s plea in the
rental recovery action stood
to contradict Mr Sithole’s oral
evidence. On an analysis of the pleadings in the rental action
it is however apparent
that the lease agreement referenced in
Nestlife’s plea relates to the written Lease Agreement which
terminated on 31 May
2006. The written Lease Agreement was only
amended by virtue of the provisions of the Agreement of Sale which,
conditionally,
affected its terms for the period that it (the
Agreement of Sale) remained extant. It is on this basis that
the court
a quo
held that Nestlife failed in its Claim C. The latter was
a claim for repayment of instalments to the Bank in the period
between the conclusion of the Agreement of Sale and the termination
of the written Lease Agreement on 31 May 2006.
Admission by Nestlife of a Rental
Agreement?
[63]
A ground of appeal relied upon by Mawenzi
and its liquidators was that, in the rental recovery action
instituted by Mawenzi, Nestlife,
so the ground reads, admitted that
arrear rentals were owed. It was put to Mr Sithole that
this was effectively an admission
that
outstanding
rentals
were due under a tacitly
relocated lease.
[64]
I agree with the court
a
quo
’s conclusion that on a proper
construction of the pleadings in that action,
outstanding
rentals
was a reference to outstanding
rental payable under clause 7.2.3 of the Agreement of Sale. The
court
a quo
correctly held that this did not amount to an admission that any
rentals were due under a tacitly relocated lease. (The 2005
Agreement of Sale was concluded whilst the written Lease Agreement
was extant – which on its terms would have lapsed by 31
May
2006).
The court
a quo
’s
findings on the suspensive conditions (16.1 and 16.2) in the
Agreement of Sale
[65]
Central to the matter are the findings by
the trial court in relation to the effect of the addendum in reviving
the Agreement of
Sale and, in particular, the effect of the revival
agreement on the suspensive conditions. It was reasoned by the
learned
trial judge that the time for compliance with the suspensive
conditions had long since expired whilst, in terms of the addendum,
the parties recorded that the Agreement of Sale was still in effect.
[66]
On a proper interpretation, this means that
the consensus of the parties was that they placed no reliance on the
suspensive conditions
and that, as such, they were not revived with
the addendum. The Court held that the addendum effectively
constituted an amendment
to the Agreement. The conduct of the
parties (and one may add the conduct in particular of Mr Mkwanazi in
his August 2008
letter) supports the intended continuation of the
Agreement of Sale.
[67]
The court
a
quo
held that, on a balance of
probability, Nestlife established that the effect of the addendum was
to reinstate the Agreement of
Sale without the suspensive conditions,
fulfilment of which would have been impossible within the time limits
stipulated
ex tunc
.
Counsel for the respondents argued that the conditions in clauses
16.1 and 16.2 were, at the time of conclusion of the addendum,
no
longer relevant nor was the period for the fulfilment thereof.
I agree with their submission that the probability is that
the
parties intended by the addendum to reinstate the agreement without
these conditions. This accords with the finding of
the court
a
quo
. Further, this finding by the
court
a quo
accords with the manner in which the parties conducted themselves and
continued in their relationship both prior to and following
the
Addendum Agreement up to the time of Mr Mkwanazi’s breach
letter and Nestlife’s responses thereto. The revival
of
the agreement and that it was properly regarded as having continued
in operation throughout is consistent with the words of
the addendum
“…
is still in force
and
will remain so
...
”.
It accordingly follows that the bond payments made by Nestlife to the
Bank were made towards the purchase consideration
in terms of the
Agreement of Sale.
[68]
Accordingly, the payments made towards the
purchase consideration under the Agreement of Sale as revived, is
inconsistent with the
existence of a tacitly relocated lease.
Mr
Sithole’s evidence
[69]
Appellants’ counsel invited us to
depart from the court
a quo
’s
assessment of Mr Sithole’s evidence in various respects.
In my view, the trial court appropriately considered
and dealt with
the evidence of Mr Sithole. His evidence corroborated the
central matters for adjudication before the
trial court which related
to the question whether or not the Agreement of Sale was revived and
remained extant and that, in terms
thereof, bond instalment payments
made to the Bank were paid in lieu of the purchase price paid by
Nestlife for the property. I
am not convinced that any reason
exists to depart from the findings regarding Mr Sithole’s
evidence
a quo
.
Did
a tacitly relocated lease come into being?
[70]
In
the usual course, a tacitly relocated lease would occur where a
lessee, after termination of an initial Lease Agreement merely
remains in occupation of the property and continues to pay rent
whilst both occupation and rental is accepted by the lessor.
[4]
In the
present instance the appellants sought to contend that, by virtue of
Nestlife’s continued possession of the property
and its
continued payments of Mawenzi’s bond obligations to the Bank, a
tacitly relocated lease had come into existence.
[71]
In contrast, Mawenzi had never acted
consistent with that of a landlord under any alleged tacitly
relocated lease agreement as was
averred on its behalf.
[72]
The liquidators of Mawenzi bore the onus of
establishing a tacit relocation of the Lease Agreement alleged to
have existed after
31 May 2006 in order to succeed with their
counterclaim. The onus on Mawenzi and its liquidators could
only be discharged
if a conclusion of the existence of a tacit
agreement could be drawn from all relevant facts.
[73]
Harms
JA in
Golden
Fried Chicken
[5]
stated and
applied the principle in respect of establishing a tacit relocation
as follows:
“
Taken
together, those facts establish a tacit relocation of a franchise
agreement (comparable to a tacit relocation of a lease)
…
(
Shell South Africa (Pty) Ltd v
Bezuidenhoud and Others
1978 (3) SA 981
(N) at 984B-E).
”
The
Court continued:
“
A tacit
relocation of an agreement is a new agreement and not a continuation
of the old agreement (
Fiat SA v Kolbe
Motors
1975 (2) SA 129
(O) at 139D-E;
Shell
at
985B-C). … in determining whether a tacit contract was
concluded a court has regard to the external manifestations and
not
the subjective workings of minds. (
Fiat
SA
at 138H – 139D).
”
[74]
A further principle referred to by the
learned Judge of Appeal was as follows:
“
My
reference to the ‘same terms’ does not imply that each
and every term of the initial agreement forms part of the
tacit
contract (
cf
Dollhouse Refreshments (Pty) Ltd v O’Shea and Others
1957
(1) SA 345
(T)).
”
[6]
[75]
To prove a tacit agreement, as the
appellants set out to do, it had to prove facts from which it could
be inferred, unequivocally,
from the conduct of both parties that a
tacitly relocated lease had come into existence after termination of
the 5 year Lease
Agreement. The appellants thus bore the
onus to prove, on balance of probability, unequivocal conduct on the
part of both
parties capable of no other reasonable interpretation
than that they in fact did contract as the appellants aver.
[76]
Corbett JA, in
Ocean
Commodities
set out the requisites for
establishing a tacit agreement as follows:
“
In order
to establish a tacit contract it is necessary to show, by
preponderance of probabilities, unequivocal conduct which is
of no
other reasonable interpretation than that the parties intended to,
and did in fact, contract on the terms alleged. It must
be proved
that there was in fact
consensus ad idem.”
[7]
[77]
The onus to prove unequivocal conduct of
both parties on balance of probability capable of no other reasonable
inference applies
equally to establish a tacitly relocated lease.
[78]
To consider whether or not a tacitly
relocated lease can be held to have existed it is necessary to refer
to some particular facts
and circumstances of relevance: (i) Neither
Mr Khumalo nor Mr Mkwanazi was called to testify to advance the
appellants’
cause of action. (ii) Mr Sithole testified that no
tacitly relocated lease was entered into. (iii) Mr Sithole testified
that the
continued occupation of Nestlife of the property was
pursuant to the Agreement of Sale - although putative at that time
because
the parties conducted themselves consistent with an extant
Sale Agreement. (iv) The evidence does not support that Mawenzi, at
any stage after termination of the written Lease Agreement, conducted
itself as lessor of the property. (v) A tacitly relocated
lease
for the period 2006 to 2014 in the context of the present matter is
inconsistent with the existence of the Addendum Agreement
and
consequently the revival of the Agreement of Sale.
[79]
It is further relevant to consider when, on
the evidence, Mawenzi first sought to allege the existence of a
tacitly relocated lease.
[80]
The Addendum Agreement concluded on 31
August 2007 does not recognise or reference any tacitly relocated
lease. The Addendum
Agreement was followed by Mawenzi’s
15 April 2008 letter written by Mr Mkwanazi which demanded compliance
from Nestlife with
its obligations in the Agreement of Sale.
This letter does not reference any tacitly relocated lease. To
the contrary,
it confirms the existence of the Agreement of Sale and
called for payment of the outstanding balance of the bond. This
is
inconsistent with bond payments being made in lieu of a lease.
In response, and consistent with an extant Agreement of Sale,
Nestlife on 29 April 2008 through its then attorneys issued a
guarantee and tendered compliance for purposes of registration of
transfer of the property into its name. By 16 May 2008 Mawenzi
had not responded and Nestlife called for transfer of the
property.
This evidence does not support an inference of a tacitly
relocated lease between the parties.
[81]
It was only once Mawenzi instituted the
rental claim that it was first alleged that “
the
parties conducted themselves as before and in accordance with the
terms of the Lease Agreement
” and
“
as if a Lease Agreement, with the
terms set out
[in the written Lease
Agreement]
existed.
”
Although the latter allegation in the rental action points to a
tacit agreement, it differs materially from the tacitly
relocated
lease contended for
a quo
and on appeal before us.
[82]
It was argued on behalf of Nestlife that
there was no evidence from which an inference could be drawn that the
parties intended
to conduct themselves in accordance with the written
Lease Agreement. This is relevant because in the rental action
Mawenzi
contended that all the terms incident upon the relationship
of landlord and tenant contained in the Lease Agreement were renewed
as part of the alleged tacit relocation.
[83]
Nestlife correctly argued that there are a
number of features of the parties’ relationship that was
inconsistent with a tacitly
relocated lease having been concluded on
similar terms to the initial written Lease Agreement. These
include: (i) Utility
costs such as electricity, water etc. which were
paid by Nestlife directly to the City - and not to Mawenzi; (ii)
Mawenzi was required
to collect VAT on lease payments and
consequently to submit VAT returns and reconciliations to SARS –
there was no evidence
that it did; (iii) Nestlife would have had to
obtain Mawenzi’s written consent in order to effect structural
alterations
and additions to the premises - there was no evidence
that Mawenzi exercised this right; and (iv) Mawenzi was entitled to
make
rules and regulations in relation to common facilities, parking,
fire protection and emergency procedures – there was no
evidence that it did so.
[84]
Moreover, (i) There was no evidence of
rental invoices issued by Mawenzi or demands for rental payments made
by it; (ii) At no time
was payment for any rental made by Nestlife to
Mawenzi (nor was there any collection of rental by Mawenzi); (iii)
There was no
evidence of payment by Mawenzi of VAT on any alleged
rental to SARS; and (iv) Mawenzi did not assert any right to consent
to the
structural adjustments to the property carried out by Nestlife
after May 2007.
[85]
The parties never conducted themselves “
in
accordance with the terms of the
[written]
Lease Agreement during the period
following 31 May 2006.
” To
the contrary, both Mawenzi and Nestlife conducted themselves in
accordance with the Agreement of Sale. The
appellants failed to
discharge their onus to prove unequivocal conduct of both parties to
show a tacitly relocated lease and the
only reason for effecting the
bond payments during the relevant period are those advanced by
Nestlife and Mr Sithole.
[86]
I accordingly agree with the court
a
quo
’s reasoning in concluding
that no tacitly relocated lease was established on the evidence by
Mawenzi and its liquidators.
Mawenzi and its liquidators have
failed to discharge its onus in connection with its claim in relation
to the alleged tacitly
relocated lease.
Conclusion and order
[87]
In the circumstances, the 2005 Agreement of
Sale, revived by the 2007 Amendment was extant at the time of the
concursus creditorum
forming in the liquidation of Mawenzi. No tacitly relocated
lease came into being as was contended for by the appellants.
These findings were correctly made by the court
a
quo
and it follows that the appeal
stands to be dismissed.
[88]
I accordingly make the following order:
(a)
The appeal is dismissed with costs
including those consequent upon the employment of two counsel, which
costs shall include the
costs of the application for leave to appeal.
E van Vuuren
Acting Judge of the High Court
Gauteng Division, Johannesburg
I agree,
_____________________
Ingrid Opperman
Judge of the High Court
Gauteng Division, Johannesburg
I agree
________________
AH Petersen
Acting Judge of the High Court
Gauteng
Division, Johannesburg
APPEARANCES
Counsel for the appellants : EL Theron
SC
J Heher
Instructed by: Alant, Gell &
Martin Attorneys
Counsel for the respondents: A Subel
SC
D Vetten
Instructed by: John Joseph Finlay
Cameron
Date of hearing: 12 September 2018
Date of judgment: 18 October 2018
[1]
At the time
named
Interstaff
Services (Pty) Limited
[2]
My emphasis
[3]
SA Sentrale Ko-op
Graanmaatskappy Bpk v Shifren en Andere
1964 (4) SA 760
(A) 766G-H
[4]
Nedcor Bank Ltd v
Withinshaw Properties (Pty) Ltd
2002 (6) SA 236C
at [32]
[5]
Golden Fried Chicken (Pty)
Ltd v Sirad Fast Foods CC and Others
2002 (1) SA 822
[6]
Golden Fried Chicken
at [4] to [5]
[7]
Standard Bank of SA Ltd v
Ocean Commodities Inc
1983
(1) SA 276
(AD) 292B