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[2016] ZAKZDHC 21
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Lobelia Investments (Pty) Ltd v RTT Group (Pty) Ltd (9837/2014) [2016] ZAKZDHC 21 (23 May 2016)
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU NATAL LOCAL DIVISION,
DURBAN
CASE NO. 9837/2014
DATE: 23 MAY 2016
In the matter between:
LOBELIA INVESTMENTS (PTY)
LTD
............................................................................
PLAINTIFF
And
RTT GROUP (PTY)
LTD
.................................................................................................
DEFENDANT
J
U D G M E N T
STEYN J
[1] The
plaintiff, a private company, seeks damages from the defendant
pursuant to, what it alleges to be a breach of the lease
agreement
between the parties. The plaintiff is the landlord and the defendant
the tenant.
[2] The
plaintiff claimed the following relief:
2.1
Judgment against the defendant for payment of arrear rental of R356
090.40;
2.2 Interest on the aforegoing amount at the
prescribed rate of 15,5% per annum
a
tempora morae
, until date of payment.
2.3
Judgment against the defendant for damages in the sum of R127 005,57.
2.4
Interest thereon at the prescribed rate
a
tempora morae
until date of payment.
2.5
Costs of suit on a scale as between attorney and client.
[3] It
has been averred that on or about 20 December 2013, the plaintiff
entered into a contract of lease with the defendant, which
was partly
oral and partly in writing. The plaintiff was represented, at
all material times, by Mr Benjamin Van Luyk in his
capacity as an
estate agent and the defendant was represented by Mr Jason Niemann,
the general manager of the defendant for the
region of KZN.
3. In terms
of the agreement, the plaintiff leased to the defendant the premises
which formed a subdivided portion of Unit E2, in
extent approximately
1370m², at the rate of R38/m² excluding VAT. The unit
was a sectionalised portion of the first
floor of a warehouse at Old
Mutual Centre, Outer Circuit Road, Prospecton Industrial, Durban.
3.2 The material terms of the oral part of the
lease were to the effect that:
3.2.1
the defendant agreed to extend the occupation date from 1 January
2014 to 1 February 2014.
3.2.2
the defendant agreed to commence paying rental on 1 February 2014.
3.2.3
the defendant agreed that the escalation rate for January 2015,
February 2015 and March 2015 would be 7% per annum.
The
plaintiff tendered unconditional occupation of the premises on 1
February 2014.
[4] The
defendant has defended the action and alleged in its plea that it
cancelled the agreement because the property was not ready
for
occupation. Most importantly the defendant placed reliance on
clause 27 of the lease agreement that reads:
‘
27.1
The landlord agrees to section the warehouse accordingly with
cladding at his own costs.
27.2 The
landlord agrees to secure the windows with cladding at his own costs.
27.3 The
landlord to install a new pedestrian door at his own cost.
27.4 The
landlord to install electricity and water meters at his own cost.
27.5
The landlord is willing to grant the Tenant access to the unit for
the month of December 2013 rental for which will be calculated
on a
pro-rata basis.’
The
lease agreement attached to the particulars of claim contains a
breach clause (clause 10) and a non-variation clause (clause
14).
The defendant has pleaded that the escalation reflected in the
schedule to the agreement was never signed by the defendant
and as a
consequence it only amounted to a proposal which was never accepted.
[5] The
trial commenced on 7 August 2015. On behalf of the plaintiff
Messrs Van Luyk, Mohammed and Moosa testified. On behalf
of the
defendant Mr Niemann and Ms Moopanar testified.
[6] The
following issues were raised and need to be determined:
6.1
Did the parties conclude a valid agreement of lease;
6.2
If so, was the agreement validly cancelled on 3 February 2014.
6.3 Was the defendant’s purported
cancellation of the lease agreement a repudiation of the lease
agreement, and if so, was
the plaintiff entitled to claim specific
performance and thereafter change its mind and cancel the agreement.
6.4 Was the plaintiff’s letter dated 18
August 2014 a valid cancellation of the lease agreement, and
6.5 Is the plaintiff entitled to damages given the
circumstances.
The Evidence
[7] Mr
Van Luyk’s evidence on behalf of the defendant, in my view, is
central to the plaintiff’s claim since he was
the
de
facto
negotiator on behalf of the
plaintiff and acted as mediator between the parties. What is
clear from his evidence is that
the plaintiff undertook to make
certain changes to the rental property, such changes are stipulated
in clause 27 of the agreement.
From 23 December 2013 until 13
January 2014 the work that had to be done had been listed in far
greater detail. Mr Van Luyk
wrote to the plaintiff and informed
him as follows:
‘
We
suggest that we amend the Lease Agreement to show the updated date of
occupation and also the work needed.
Please note that
RTT need the following work still to be done.
-
Exclusive
entrance via roller shutter into the warehouse.
-
Toilets
on the left to be opened up top make way for the roller shutter door.
-
Secure
the louver (sic) windows in the ceiling.
-
Water
meter
-
Electricity
meter
-
Secure
the pedestrian doors.
We
look forward to your comments and instructions.’
[1]
[8] Mr
Van Luyk however received correspondence from Mr Niemann on 16
January 2014 that stipulated that the defendant was not prepared
to
wait until the end of January to occupy the premises and accordingly
would no longer lease the property. It is clear from
Mr Van
Luyk’s evidence that he was astounded since the defendant was
informed on 8 January 2014 of the date of occupation,
i.e. 1 February
2014 and had agreed to the date. He forwarded the cancellation
letter of the defendant to the plaintiff,
who demanded that the
defendant perform and comply with its obligations. What is
evident is that Mr Niemann and other individuals
came to inspect the
premises on 21 January 2014. Without any further arrangements
being made he received a call from the
defendant’s
representative on 1 February 2014 who wanted the keys to the property
and access. He requested Mr Niemann
to directly liaise with the
landlord since no arrangements were made with him.
[9] Mr
Ebrahim Mohammed is employed by Mr Moosa. He was tasked with the
alterations at the premises. He considers himself
as an
all-rounder handyman/builder with 45 years’ experience.
He is however not a qualified electrician. He conceded
that he
was not given a copy of the agreement. In fact he had acted on
instructions that were given to him.
[10] Mr
Shokat Allie Moosa is a director of Lobelia Investments (Pty) Ltd and
handles the letting and administration of the company.
He
stated that he received a duly signed written agreement from Mr van
Luyk and had noticed that the lease made provision for a
further
three months, albeit without a concomitant provision for an
escalation of the rental. Mr Moosa effected handwritten
changes
to the document (exhibit “A”, page 3) and accordingly
signed it and returned the document to Mr van Luyk.
According
to him the defendant kept shifting the goal posts.
[11] It
is common cause that van Luyk forwarded the lease agreement to the
defendant whereupon the defendant responded per the written
email of
Ms Moopanar dated 24 December 2013, the important part reads:
‘
I
asked if the initial period could be extended and you did not at the
time advice of the escalation in the rental. This has
not been
agreed by the business and unfortunately we cannot accept the
escalation being added after signature by us.
Most
of the directors are on leave and I will only be in a position to
raise this with them in the new year.’
[2]
[12] Mr
van Luyk responded and informed the defendant that no agreement had
been concluded until the plaintiff had signed the defendant’s
proposed lease agreement. Once more Ms Moopanar responded and
stated:
‘
We
only signed once the terms were agreed between both Parties.
With respect we did not unilaterally extend the term but requested
if
the added period was in order before signing. As the Landlord’s
gent (sic), you had agreed to it prior to signature.
It is not
okay for the Landlord to unilaterally add a material term to the
Agreement after the terms were agreed.
I
cannot guarantee that the Directors would agree to the escalation nor
that they would countersign the changes made. I can
only give
you clarity in the second week of January 2014 when they are all
back.
Be
that as it may, we do not wish this to become a matter of contention
going forward. In the event that the business does
agree to an
escalation (and this can only be confirmed in January), and from what
we generally agree to in respect of our other
lease agreements, it
would be more likely that they would agree to 7% rather than 8%.
I
will advise as soon as the directors are back and have made a
decision in this regard.
’
[3]
[13] Mr
Niemann on 27 December 2013 responded in an email to Mr van Luyk and
stated:
‘
The
initial lease has been signed, it is just the extension that needs to
be approved. Please check with landlord in the interim
if he
will agree to 7% escalation so that it aligns with my current
escalation.
Please
ensure that the premises is ready for move-in as discussed for the
04
th
Jan ’14 latest.’
[4]
[14] As
much as it was common cause that the lease provided for occupation on
1 January 2014 it also provided for the specific alterations,
stipulated in clause 27.
[5]
It is common cause that the premises were not ready for occupation on
1 January 2014. Important to the issues is the
fact that the
roller shutter door was a major requirement for the defendant and it
was not installed by January 2014. This
door was however not
specified amongst the specified alterations listed in terms of the
lease agreement. Mr Niemann identified
the door as per exhibit
“B”, page 15.
[15] Mr
Niemann testified and stated that when the property was inspected the
plaintiff did not affix cladding over the windows,
save for the
louvre windows and had failed to install an electricity meter for the
defendant at Unit E2. Plaintiff had failed
to comply with
clauses 27.2 and 27.4. It is this failure to perform that
resulted in the defendant cancelling the lease in
the following
terms:
‘
We
refer to the above matter and the discussions between yourself and
the writer and confirm that the above premises is not ready
for
occupation.
Unfortunately,
RTT cannot wait until the end of January 2014 in order to relocate
its customer’s goods to the premises.
The delay will have
a negative impact on our business operations and on our customer.
In the
circumstances, RTT will not be leasing the above premises.
We
trust that you find the above in order.’
[6]
[16]
The defendant’s legal advisor, Ms Reshma Moopanar, testified
that she placed in perspective the amendments to the lease
and
whether the defendant agreed to the escalation in rent.
Importantly she explained why she was not prepared to give an
undertaking to the plaintiff when it was sought from the defendant.
[17] In
my view it is unnecessary to resolve this matter by making
credibility findings.
[18]
The consequences of a material breach of the agreement was provided
for in terms of clause 10, importantly clause 10.5 which
reads:
‘
The
provisions of this clause 10 shall apply
mutatis
mutandis
to the LANDLORD in the event of a breach by the LANDLORD of any of
its obligations in terms of this lease or otherwise provided
for in
clause 10.’
Clause 10.3.1 provides for notice in terms of any breach. It
reads:
‘
Within
fourteen (14) days after written notice has been given by the
LANDLORD to the TENANT to remedy such breach where it is one
which is
capable of being remedied within such period.’
[19]
Repudiation
In
Datacolor International (Pty) Ltd v
Intamarket (Pty) Ltd
[7]
Nienaber JA succinctly defined repudiation as follows:
‘
Repudiation
has sometimes been said to consist of two parts; the act of
repudiation by the guilty party evincing a deliver a deliberate
and
unequivocal intention no longer to be bound by the agreement, and the
act of his adversary, ‘accepting’ and thus
completing the
breach. So for example Winn LJ remarked in
Denmark
Productions v Boscobel Productions Ltd
[1969]
1 QB 699
at 731F-732A:
Where
A and B are parties to an executor contract, if A intimates by word
or conduct that he no longer intends, or is unable, to
perform it, or
to perform it in a particular manner, he is in effect making an offer
to B to treat the contract as dissolved or
varied so far as it
relates to the future. If B elects to treat the contract as
thereby repudiated, he is deemed according
to the language of many
decided cases, to ‘accept the repudiation and is thereupon
entitled (a) to sue for damages in respect
of any earlier breach
committed by A and for damages in respect of the repudiation, (b) to
refrain from himself performing the
contract any further.’ (At
287G-I.)
[28]
The innocent party to a breach of contract justifying cancellation
exercises his right to cancel it a} by words or conduct
manifesting a
clear election to do so b} which is communicated to the guilty
party. Except where the contract itself otherwise
provides, no
formalities are prescribed for either requirement. Any conduct
complying with those conditions would therefore
qualify as a valid
exercise of the election to rescind. In particular the innocent
party need not identify the breach or
the grounds on which he relies
for cancellation. It is settled law that the innocent party,
having purported to cancel on
inadequate grounds, may afterwards rely
on any adequate ground which existed at, but was only discovered
after the time (cf
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd and other related cases
1985 (4) SA 809
(A) at 832C-D).’
In
Erasmus v Pienaar
1984
(4) SA 9
(T) the court held:
‘
The
test as to whether conduct amounts to such a repudiation is whether,
fairly interpreted, it exhibits a deliberate and unequivocal
intention no longer to be bound.”
Die
toets is ‘n objektiewe een. Nienaber
Anticipatory
Repudiations in English and South African Law of Contract, A
Comparative Study
(‘n ongepubliseerde proefskrif, Desember 1961) konstateer op
267 die volgende:
‘…
it
would seem as if the test applied in South Africa in order to
determine whether certain conduct constitutes a repudiation, is
the
same as that applied in England, viz culpable conduct of such a
nature as to lead a reasonable person to believe that an actual
breach would be committed.’
[20] As
much as the plaintiff has argued that a repudiation has been
established, I am of the view that the conduct of the defendant,
fairly interpreted, shows that the defendant still considered itself
bound to the agreement. The defendant, represented by Mr Niemann
and
two directors, conducted an inspection of the unit on 21 January
2014. It is irrelevant whether Mr Moosa was aware of
the
inspection since Mr Van Luyk who acted as his agent was aware of the
meeting and present. What is far more problematic
is whether
the defendant validly cancelled the lease. I shall now deal
with all the issues raised during argument.
[21]
Issues raised
21.1Did the parties conclude a valid agreement of
lease?
When all the evidence and facts are considered
then it is clear that the parties undoubtedly concluded a valid lease
agreement.
Both parties elected to amend the written agreement,
partly oral and partly in writing. Mr Niemann added a specific
requirement,
i.e. the roller shutter door and Mr Moosa effected
changes to the lease without it being countersigned by the
defendant.
The conduct of both parties show that they were in
agreement of the terms during January 2014. The defendant in
its pleadings
admitted that annexure “A”, annexed to the
particulars of claim constitutes the sole and entire agreement
concluded
between the parties.
21.2
Having found that the lease was valid, the
question remains whether the defendant could validly cancel the lease
on 3 February 2014.
The defendant placed reliance on the
plaintiff’s breach to fulfil the terms as per clause 27 of the
agreement. More
specifically the defendant relied on a letter
dated 3 February 2014 that was sent to the plaintiff, it reads:
‘
We
confirm that the landlord has not completed the renovations as listed
in the abovementioned clause.
The
premises was due to be available for occupation on 1 January 2014.
RTT agreed to an extension on the occupation date and
same was moved
to 1 February 2014.
The
premises was, again, not ready for occupation on 1 February 2014 and
the renovations not completed as agreed.
’
(My emphasis.)
This letter was sent by Ms Meyer from the
defendant’s legal department. It appears that the
defendant was of the view
that it was placing the plaintiff
in
mora
because the premises were not
ready for occupation on that date.
21.3 In my view the written lease agreement
provided for a breach and stipulated what ought to be done.
Clause 10 of the agreement
ought to have been enforced. The
defendant through its own witnesses never placed any evidence before
this court that it
had performed in terms of clause 10. In my
view clause 20.3 under the heading of Miscellaneous should not be
read in isolation
but considered in the context of the entire
agreement. Mr Saks, on behalf of the defendant, argued clause
20.3 afforded the
defendant a specific remedy in the event that the
premises were not ready for occupation. As much as clause 20.3
does not
refer to a notice period, clause 10 does and accordingly it
should have been adhered to. Regrettably I am unable to agree
with Mr Saks’ line of reasoning.
[22]
For ease of reference I consider it necessary to quote clause 20.3,
it reads
:
’
20.3
Should the LEASE PREMISES not be ready for occupation by the TENANT
upon the commencement date by reason of building operations
not
having been completed; or
20.3.1
their being in a state of disrepair; or
20.3.2
the failure of the previous tenant to vacate; or
20.3.3
any other cause whatsoever;
Then
the
TENANT
shall have a claim for cancellation of this lease and for damages or
other right of action against the LANDLORD. Should
the TENANT
agree and undertake to take occupation of the LEASED PREMISES
upon
a later date, the LANDLORD shall ensure that the LEASED PREMISES will
be available for occupation by the TENANT on such later
date and the
lease shall commence on such date as agreed between the parties and
shall,
mutatis
mutandi
continue
thereafter for the period set out in clause 4 of the SCHEDULE with
the date of termination being extended accordingly.’
[23] I
agree with Mr Omar, appearing on behalf of the plaintiff, that the
lease agreement relied upon contains a
lex
commissori
a and accordingly the
provisions embodied in clause 10 are enforceable. The defendant
failed to prove that the contractual
obligations of the
lex
commissoria
have been complied with.
The cancellation of the lease was invalid and accordingly the
defendant is liable for the arrear
rental of R356 090.40 for the
period February 2014 to July 2014 since the lease remained valid
until terminated with effect
on 31 July 2014.
[24] Is the
plaintiff entitled to damages?
The evidence
before court showed that the plaintiff on 18 August 2014 had
cancelled the lease and informed the defendant that a
new tenant
would lease the property from 1 July 2014 until 31 January 2015. The
plaintiff based its claim of damages on the fact
that the defendant
would be liable for damages for the months February and March 2015.
In deciding upon the issue of damages,
it is necessary to consider
the content of a letter that was addressed to the defendant on 18
August 2014 by the plaintiff’s
legal representative. I
shall quote only from the relevant paragraphs of the letter:
‘
3.
Our client hereby cancels the lease entered into with you, such
cancellation to take effect from the 31
st
July 2014.
4.
You are accordingly liable for arrear rental for the months of
February 2014 to July 2014 (inclusive) in the total sum of
R356 090.40
(inclusive of VAT).
5.
Please ensure that the arrear rental is paid into our trust account
by no later than close of business, Thursday, 21
st
August
2014, failing which, our instructions are to institute proceedings in
the High Court for recovery of same, together with
other appropriate
relief, including interest and a punitive order of costs.
6.
Please
note
that the RTT Group is also liable for damages in an amount equivalent
to the rent for the outstanding period of the lease,
namely February
and March 2015, in the total sum of R127 005.57
.
This amount must also be paid forthwith.’
[8]
(My
emphasis.)
[25]
The plaintiff, given the facts, is entitled to the damages suffered
for the months February and March when no rental was paid
by the
defendant. It is not necessary to decide on quantum since it
was never disputed.
[26]
Costs should follow the result, however the plaintiff has sought
costs on an attorney and client scale. Costs remains
discretionary and the lease agreement, by way of clause 5.20, does
not provide for costs on attorney and client scale, nor am I
convinced that costs on an attorney and client scale should be
awarded.
[27]
Accordingly the following order is granted:
1.
Judgment
against the defendant for payment of arrear rental of R356 090.40;
2
Interest on the aforegoing amount at the prescribed rate of 15,5% per
annum
a tempora morae
,
until date of payment.
3.
Judgment against the defendant for damages in the sum of R127 005,57.
4.
Interest thereon at the prescribed rate
a
tempora morae
until date of payment.
5.
Costs of suit.
STEYN
J
Trial
completed on : 25 November 2015
Counsel
for the plaintiff : Mr MS Omar
Instructed
by : MS Omar & Associates
Counsel
for the defendant : Mr DJ Saks
Instructed
by : Woodhead Bigby Inc
Judgment
handed down on : 23 May 2016
[1]
See page 35 of Bundle.
[2]
See page 25 of exhibit “A”.
[3]
See page 27 of exhibit “A”.
[4]
See page 29 of exhibit “A”.
[5]
See para 4
supra
for the specific alterations.
[6]
See page 37 of exhibit “A”.
[7]
2001 (2) SA 284 (SCA).
[8]
Pages 56 and 57 of exhibit “A”.