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[2016] ZAGPPHC 1044
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Wonderpark Handelaars CC v Kanonkop Stainless (Pty) Limited and Another (70923/2015) [2016] ZAGPPHC 1044 (15 December 2016)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 70923/2015
DATE:
15/12/2016
IN
THE MATTER BETWEE N
:
WONDERPARK
HANDELAARS
CC
Applicant
And
KANONKOP
STAINLESS (PTY)
LIMITED
1
ST
Respondent
ENGEN
PETROLEUM
LIMITED 2
nd
Respondent
JUDGMENT
KOLLAPEN
J:
1.
The applicant seeks the following relief as
against the first respondent in these proceedings:
i.
That it be declared that the Respondent's
reliance on clause 19.4 of the agreement of lease between the parties
is unconstitutional
and not countenanced by the Court
ii.
That it be declared that the said agreement of
lease has been duly extended to 30 June 2025.
iii.
That the Respondent be ordered to pay the costs
of the application.
2.
The first respondent opposes the relief sought
and has launched a counter application in which it seeks the
following relief:
i.
That the lease agreement concluded between the
applicant and the respondent on 5 August 2005 for the property known
as [...] S.
Street Kanonkop, Erf [...], Middelburg Ext 4,
Registration Division JS, Province of Mpumalanga be declared to have
been terminated
on 31 July 2015.
ii.
That the applicant and all persons holding under
it, be declared to be in unlawful occupation of [...] S. Street
Kanonkop, Erf [...],
Middelburg Ext 4, Registration Division JS,
Province of Mpumalanga.
iii.
That the applicant and all persons holding under
it, be evicted from the property known as [...] S. Street Kanonkop,
Erf [...],
Middelburg Ext 4, Registration Division JS, Province of
Mpumalanga.
iv.
That the applicant be directed to vacate the
aforesaid property within 30 days from the Honourable Court granting
an order in terms
of this counter-application, failing which, the
sheriff of the area within which the property is situated be
authorised to evict
the applicant and all persons holding under it.
3.
The following factual background serves as the
background to the determination of the relief sought:
3.1.The Kanonkop
Service Station was developed primarily by the second respondent
('Engen') in 1983, after an operating lease had
been entered into
between Mobil Oil South Africa (Pty) Limited, as Engen was then
known, and the present shareholders of the first
respondent, the
deponent to the affidavits on behalf of the first respondent, Isak
Andries Mey, his father-in-law, F Gomes, and
his brother-in-law, P P
Lindenbaum, trading in partnership at the time.
3.2.The first
respondent was registered in 1994, and it is common cause that the
first respondent is the owner of the Kanonkop Service
Station.
3.3.After 21 years
of trading, the Kanonkop Service Station was leased in 2004 to an
entity known as Martiq 307 CC, who on-sold
the business of the
service station to the applicant.
3.4.A lease
agreement was entered into between the first respondent, represented
by Mr Mey in his capacity as a director of the
first respondent as
lessor, and the applicant, represented at the time by a certain Du
Plooy and Erasmus. Relevant terms of the
lease agreement were:
3.4.1.
The Kanonkop Service Station wa. leased by the
first respondent to the applicant, represented at the time by a
certain Du Plooy
and Erasmus
3.4.2.
Clause 5 dealt with the duration of the lease and
stipulated:
5 DURATION
This lease shall
come into operation
notwithstanding the
date of signature hereof on
r 1
September 2005 and shall subsist for 9 years and 11
months from that date.
3.4.3.
Clauses 6 to 18 dealt with the standard terms
oflease agreements of immovable property relating to rent, insurance,
the duties of
the parties, maintenance and alterations to the
premises, indemnities and default by the applicant as lessee.
3.4.4.
Section 19 dealt under the heading
'OPTION
OF RENEWAL'
with the lessee's right to renew
the lease, and stipulated:
19.1.
The Lessee shall have the right to renew
this lease upon the terms and subject to the conditions set out
below.
19.2.
The period for which this lease may be so
renewed is 9 (nine) years and 11 (eleven) months, commencing
immediately following the
date of expiry of the initial term of this
lease.
19.3.
All the terms of this lease shall continue
to apply during the renewal period.
19.4.
The right of renewal shall be exercised by
notice in writing from the Lessee to the Lessor given and received
not later than 6 (six)
months prior to the date on which the renewal
period is to commence, and shall lapse if not so exercised.
19.5.
If the right of renewal is duly exercised,
this lease shall be renewed automatically and without the need for
any further act of
the parties.
19.6.
The lessee may not however, exercise the
right of renewal while in breach or default of any of the terms of
this lease.
4.
It is common cause that the applicant did not
give the written notice to the first respondent as was contemplated
in clause 19.4
of the lease agreement as a result of which the first
respondent took the stance that the lease having not been renewed,
lapsed
upon the expiration of the original term.
5.
The second respondent, Engen Petroleum Limited,
played a key role in the running of the service station and the lease
agreement
provided that the lessee (the applicant) would only
purchase oil products, petrol and diesel from Engen. Thus while the
agreement
provided for the use of the premises for the sale of petrol
and other petroleum products, its operations were inextricably linked
to Engen as supplier of such products.
6.
That being the case Engen initiated discussions
with the applicant and the first respondent in 2012 with regard to
the creation
of a new leasing regime as well as the upgrading of the
service station. Engen proposed that the applicant sign a lease
agreement
and operation of service station document which would
terminate on the 31st of December 2013 with an option to renew for a
period
of 5 years from 1 January 2014. The applicant was not amenable
to this suggestion and indicated as much to Engen. The first
respondent
also took issue with the stance of Engen and in a letter
dated the 19th of October 2012 its attorneys indicated that the first
respondent sought a long-term relationship between itself, the
applicant and Engen.
7.
What is clear from the aforegoing is that in
2012, the parties were committed to what has been described as a
'long term relationship'.
Discussions with regard to the upgrading of
the service station and the parties' respective financial
contribution to this process
continued and the stance of Engen with
regard to the terms and conditions of a lease agreement and operation
of service station
did not change. By November 2012 it persisted in
its view that it proposed a lease agreement that would expire in
December 2013
with an option to renew for 5 years from 1 January
2014.
8.
It appears that nothing of substance transpired
from late 2012 to about July/August 2014 except for a meeting that
was held between
the applicant and representatives from Engen when
Engen had made available architect's plans for the upgrading of the
service station.
9.
The parties (the applicant, first respondent and
Engen) met in August 2014 and the discussions held centred around the
upgrade,
the time that the service station would be rendered
inoperative, as well as the financial impacts of closure.
10.
It
appears the discussions
did not revisit the stance of Engen with regard to the lease regime
it had proposed (the December 2013 expiry
with a 5 year renewal
afterwards).
11.
The applicant contends that this meeting was
conducted on the 'common understanding ...9 years plus 11 months' and
further contends
that during this period the respondent brought the
applicant under the impression that the lease 'would obviously be
extended for
a further period of 9 years and 11 months' and is
therefore precluded by virtue thereof from relying on the provision
of clause
19.4 of the lease agreement. The applicant argues that the
first respondent was required to act in good faith and its conduct
evidenced
bad faith and opportunism.
12.
In opposing the relief sought the first
respondent's stance is that the parties should be held to the terms
of the contract they
entered into and in particular that the
formalities they agreed upon with regard to the renewal of the lease
were arrived at by
consensus and are accordingly binding on them.
13.
In addition the first respondent's stance is that
the lease periods were not a matter that fell within the exclusive
contractual
preserve of the applicant and first respondent but that
Engen (even though not a party to the lease between the applicant the
first
respondent) was nevertheless an important player whose attitude
would be important in the kind of, and the duration of, the future
relationship between the applicant and the first respondent.
14.
It is on this basis
inter
alia
that the first respondent contends that
given that Engen was only willing to conclude a lease for 5 years
from 1 January 2014, that
the suggestion by the applicant that there
was a common understanding that the lease would be renewed for 9
years and 11 months
is misplaced and at odds with the facts (in
particular the stance of Engen).
The
law
15.
As I understand it the applicant does not suggest
that clause 19.4 is objectionable or constitutionally unsound. Its
complaint rather
is that the manner in which it has been
operationalised and in particular the first respondent's reliance on
it, is unconstitutional.
16.
In this regard our Courts have indeed
distinguished between situations where a contract or term may be
innocuous but its effect
in particular circumstances may offend the
public interest. (See
Nyandeni Local
Municipality v Hlazo
2010 (4) SA 261
(ECM)
where the Court stated the following at
2771:
'Although the
principle that contracts which offend public policy are unenforceable
dates back to time immemorial, the concept of
'public policy' is
today rooted in our Constitution and the fundamental values it
enshrines. These values not only include human
dignity, equality and
fairness, but also the substantive right to fairly resolve
justifiable disputes (s 34). This also recognised
by the Supreme
Court of Appeal.'
The
court added at 278F to 278H:
'Our courts have
over many years developed guidelines to determine whether or not a
contract offends public policy. The constitutional
imperatives and the determination of public policy,
with reference to the constitutional values and norms, have not, I
believe,
imperilled those guidelines. I will refer only to those I
believe are relevant to this case.
First it must be
determined whether the contract or term challenged is per se contrary
to public policy; or whether it is its operation
in the prevailing
circumstances and facts of the case which renders it contrary to
public policy. A contract, or a term thereof,
may very often appear
innocuous, but its effect in particular circumstances may very well
offend public interest.
The test in a
contract said to be contrary to public policy per se is often, but
not always, to determine its tendency at the time
the contract is
concluded, rather than the time of its proved results."
17.
In this regard our courts while in broad terms
recognising the principle of contractual freedom and the consequences
that ordinarily
go with it, have also cautioned against what is
termed the excesses of contractual freedom.
18.
In
BRISLEY v DROTSKY
2002 (4) SA 1
(SCA)
the Court remarked (at 36A) that 'the Constitution requires that its
values be employed to achieve a careful balance between the
unacceptable excesses of contractual 'freedom', and securing a
framework within which the ability to contract enhances rather than
diminishes our self-respect and dignity.'
19.
Finally in
EVERFRESH
MARKET VIRGINIA (PTY) LTD v SHOPRITE CHECKERS (PTY) LTD
2012
(1) SA 256
(CC)
the court in the same vein
referred to the need for the development of a new constitutional
contractual order:
'Indeed it is
highly desirable and in fact necessary to infuse the law of contract
with constitutional values, including values
of Ubuntu,
which inspire much of our constitutional compact. On
a number of occasions in the past this court has had regard to the
meaning
and content of the concept of Ubuntu. It emphasizes the
communal nature of our society and 'carries in it the ideas of
humaneness,
social justice and fairness ' and envelopes the 'key
values of group solidarity,
compassion,
respect, human dignity, conformity to basic norms and
collective unity'. '
20.
Arising from the above I must therefore conclude
that notwithstanding the fact that the parties may well have
concluded a contract
whose terms are neither constitutionally
objectionable nor contrary to public policy, it may still be open to
the Court to conclude
that the operation of a term or its reliance in
this case having regard to the facts and circumstances, renders it
contrary to
public policy.
Analysis
21.
What then falls to be determined is not whether
clause 19.4 passes the muster of constitutionality viewed through the
prism of public
policy but rather whether the respondent's reliance
on it in concluding that the option to renew was not exercised, thus
bringing
the lease to an end, is an exercise in bad faith, precluding
it from relying on its provisions.
22.
In this context it is clear and hardly in dispute
that the parties had embarked on negotiations that were underpinned
by a mutual
desire to achieve a 'long term relationship'.
23.
However the nature of the form of this
relationship was not articulated but if one has regard to the
undisputed facts then clearly
it was not contemplated that this long
term relationship would be left entirely within the preserve of the
applicant and the first
respondent. If indeed that was the case the
discussions with Engen and the mutual concern of the parties with
regard to the terms
of the lease as proposed by Engen would hardly
have been elevated to a significant feature as it was in the
deliberations and discussions
between the applicant, first respondent
and Engen as well as in the correspondence exchanged between these
entities.
24.
If the renewal of the lease for 9 years and 11
months was the common understanding between the parties, it would
mean that the stance
of Engen was an irrelevant consideration in this
process. The facts however compellingly prove that the views of Engen
and the
ability of the parties to convince Engen to commit to a
longer period than it was willing to do, would be a very significant
factor
in how the relationship between the applicant and first
respondent would unfold and in particular what the lease period would
be.
25.
Under those circumstances it is then difficult to
accept the applicant's assertions that the parties had a common
understanding
that the lease would be renewed for 9 years and 11
months. The only understanding that was common in my view was the
parties' commitment
to a 'long term relationship'. That in my view
represents the high water mark of what both the applicant and the
first respondent
intimated to Engen in the later part of 2012.
26.
It would in my view require a significant leap to
then suggest that a long term relationship would be in the form of
the renewal
of the lease for 9 years and 11 months. As indicated the
stance of Engen was, to the knowledge of the parties, a pivotal
feature
of what the long term relationship would look like and by the
end of 2014 the stance of Engen had not shifted in putting forward
a
lease that would expire at best in December 2019.
27.
That being the case it can hardly then be
permissible to suggest that on the facts a renewal of 9 years and 11
months was what the
parties shared as a common understanding. If that
was the case there would have been no need for the extensive
involvement of Engen
in the discussion around a lease and a simple
written exercise of the option to renew would have sufficed.
28.
The Court has to act with restraint in not making
a contract for the parties which they have not reached consensus on.
My conclusion
is accordingly that for the reasons given it cannot be
said that there was a common understanding that the lease would be
renewed
for 9 years and 11 months. At best there may have been a
common understanding that the lease would continue beyond its expiry
date
(July 2015) for a further period whose term would be dependent
on what the parties were able to agree on with Engen.
29.
To that extent and in the absence of the written
exercise of the option to n:new and in the absence of a common
understanding to
renew the lease for 9 years and 11 months, it can
hardly be said that the reliance by the first respondent on clause
19.4 is unconscionable,
opportunistic or contrary to public policy.
In this regard and for the sake of completeness, the first respondent
commenced the
operation of the Kanonkop Service Station in 1983 and
ran and built the business for some 21 years before it concluded the
lease
with Martiq 307 CC, and then the applicant. Thus the goodwill
that the business has developed has occurred through the endeavours
of both the applicant and the first respondent and it would be an
over-simplification of matters to characterise the conduct of
the
first respondent as seeking to 'reap what it has not sown'.
30.
In all the circumstances and for the reasons
given, the application must fail and it must follow that the
counter-application must
be upheld.
ORDER
31.
I make the following order:
I.
The application is dismissed with costs,
including the costs of senior counsel.
II.
The lease agreement concluded between the
applicant and the respondent on 5 August 2005 for the property known
as [...] S. Street
Kanonkop, Erf [...], Middelburg Ext 4,
Registration Division JS, Province of Mpumalanga is declared to have
been terminated on
31 July 2015.
III.
The applicant and all persons holding under it,
is declared to be in unlawful occupation of [...] S. Street Kanonkop,
Erf [...],
Middelburg Ext 4, Registration Division JS, Province of
Mpumalanga.
IV.
The applicant and all persons holding under it,
are hereby evicted from the property known as [...] S. Street
Kanonkop, Erf [...],
Middelburg Ext 4, Registration Division JS,
Province of Mpumalanga.
V.
The applicant is directed to vacate the aforesaid
property within 30 days from the Honourable Court granting an order
in terms of
this counter-application, failing which, the sheriff of
the area within which the property is situated is authorised to evict
the
applicant and all persons holding under it.
VI.
The applicant is to pay the costs of the
counter-application including the costs of senior counsel.
N
KOLLAPEN
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
HEARD
ON: 31 October 2016
&
14
November 2016
APPEARANCES
FOR
THE APPLICANT: Adv. J P VORSTER SC
INSTRUCTED
BY: Van Zyl le Roux Inc. (ref.: A van Velden/AD/MAT72785)
_________________________
FOR
THE 1
sT
RESPONDENT: Adv. J P
VORSTER SC
INSTRUCTED
BY: Christo Coetzee Attorneys (C Coetzee/wr/SK0010)