Shell South Africa Marketing (Pty) Ltd v H L Hall & Sons (Group Services) (Pty) Ltd and Others (89496/2014) [2015] ZAGPPHC 1154 (22 May 2015)

57 Reportability
Land and Property Law

Brief Summary

Lease Agreements — Right of Pre-emption — Applicant Shell South Africa Marketing (Pty) Ltd sought to enforce its right of pre-emption regarding a property leased from the First Respondent, H L Hall & Sons (Group Services) (Pty) Ltd. The First Respondent had entered negotiations with the Second Respondent for the sale of the property but failed to provide proper notification of the terms of the proposed sale as required by the lease agreement. The Applicant contended that the notification did not trigger the 30-day period to exercise its right of pre-emption. The Court held that the Applicant was not properly informed of the sale terms, and thus the right of pre-emption was validly exercised upon receipt of the final contract. The Court ordered that the Applicant step into the shoes of the Second Respondent as purchaser of the property.

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[2015] ZAGPPHC 1154
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Shell South Africa Marketing (Pty) Ltd v H L Hall & Sons (Group Services) (Pty) Ltd and Others (89496/2014) [2015] ZAGPPHC 1154 (22 May 2015)

IN
THE
HIGH
COURT
OF
SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO.: 89496/2014
DATE:
22/05/2015
In
the matter between:
SHELL
SOUTH
AFRICA
MARKETING (PTY)
LTD
Applicant
and
H
L
HALL
&
SONS (GROUP SERVICES)
(PTY)
LTD
First
Respondent
K2014/49699/07
t/a TIEKIEDRAAI EIENDOMME  (PTY)
LTD
Second Respondent
REGISTRAR
OF DESOS, PROVINCE  OF MPUMALANGA
Third Respondent
JUDGMENT
BERTELSMANN
J:
[1]
The Applicant is Shell  South Africa Marketing (Pty)  Ltd
(previously  known
as
Shell South Africa (Pty) Ltd), a company with limited liability duly
registered and incorporated
as such  according  to. the company laws,
of
South
Africa
with
registration number 61/00645/07 and its principal place of
business  and registered head office situated at Twickenham
Building,
The  Campus,  57 Sloane Street, Bryanston,
Johannesburg.
[12]
The  First  Respondent  is  H  L Hall
and
Sons  (Group
Services)  (Pty)
Ltd,
a
company with limited liability duly registered  and
incorporated  as  such according to the company laws
of
South Africa with registration number 1921/006878/07, having its
registered address situated at KPMG  Forum,  33
Van
Ransburg Street,
Nelspruft.
[3]
The Second Respondent is K2014/49699/07 t/a Tiekledraai Eiendomme
(Pty)
Ltd In the
agreement (a company to
which
only
a registration number
can
be allocated as to date)  which Is a company  with limited
liability
duly
registered
and incorporated as such according  to  the  company
Jaws  of South Africa, having its
registered address situated at
Halls Gateway, Mataffin, Nelspruit, Mpumalanga.
[4]
The Third Respondent
is   the  Registrar   of
Deeds
for
the  province of Mpumalanga,
with
its business address
situated at 25 Bel, Street, Nelspruit.
[5]
The Applicant  leased  from  the  First
Respondent  during  November  1991 a
portion
of Portion 13 of the farm Riverside. The leased property is described
in a written agreement of lease which
the
parties
entered into as
"that portion of the property measuring
±
6550 (six thousand five hundred and fifty) square metres, more
fully described on the plan annexed hereto, marked “A”,

together with the buildings and improvements to be erected thereon in
accordance with the plans and specifications annexed hereto,
marked
"B",
agreed
between Shell and the Lessor (comprising a garage, filling and
service  station)''.
[6]
The lease provides
that
the Applicant shall have beneficial
occupation of the premises for an Initial period of 20 years, with an
option to further renew
the lease
for
a further 10
years.
[7]
Clause 21, headed
"
SALE"
provides
for
a right of
pre-emption,  granted  by
the Lessor, the First
Respondent,  to the Applicant as
Lessee:
(p.58) "At any
time  during  the  currency  of  this
lease  or  any  extension
thereof the Lessor
undertakes that  it  will  not  sell,  or
otherwise dispose of, the
premises or any portion thereof, to
any   third party without first having offered to Shell to
sell or dispose of it,
or the relevant portion thereof, to Shell, on
the identical terms and conditions in all respects upon which the
Lessor was prepared
to sell · or dispose of it, or the
relevant portion thereat, to the third party, and to this end the
Lessor further undertakes
-
21.1
that it  will,  before  selling  or ,otherwise
disposing  of the premises
or any portion thereof to any third
party, first of offer to sell  or dispose  of its;, or
the portion  thereof
in  question, to Shell in
writing on  the identical  terms and  conditfanc1 in
all respects upon which
ii is prepared or is desirous of selling or
disposing thereof  to the third party
21.2
in the offer referred to  in 21.1, furnish the terms and
conditions in all respects upon
which it  is  prepared
or is desirous of selling or disposing thereat to the third party,
save that it shall not
be obliged to disclose to Shell the name, and
address
of the third party;
21.3.
the offer referred to in 21 and 21.1 shall remain open for a period
of 30 days, [thirty], from
the date of receipt thereof by Shell;
21.4.
should Shell decline the setoff, or not accept it within the said
period  of  30,
[thirty]  days,  the
Lessor  will  not thereafter dispose of the premises, or
the portion thereof in
question, to the said third party or at a
price lower or on terms and/or conditions more favourable in anyway
at all, to such third
party,  the price,  terms and
conditions  upon which the offer was made to Shell in terms of
21.1.
21.5.
failure on Shell's part to accept any offer made to it in terms of
the aforegoing shall
entitle the Lessor to dispose of the premises,
or the relevant portion thereof, to the third party in question,
but no one
else,  upon  terms not more favourable to
such third party than  the  last  offer  refused
by Shell,
upon condition that any such sale or disposal shall
not be concluded without first binding the third party to the terms
and
conditions of this lease. Failure on Shell's part to accept any
such offer shall in no way affect the obligations undertaken by
the
Lessor as set forth elsewhere herein.''
[8]
It  is  this  right  of  pre-emption
that   the  Applicant   seeks
to
enforce  in this application,  which is  opposed
by the First  and Second Respondents.
Clause 21 and
21.1 clearly
determine
that Shell is entitled to be aware
of
all  clauses
of a
proposed
purchase
agreement the
First
Respondent as
owner
intends
to
enter into  with
the intending  purchaser  before  it is obliged
to consider  whether to
exercise  its  right of
pre-emption.    Strong  support  for
this conclusion  is
found
in  the  use  of
the words “identical terms and conditions in all respects”
upon which the seller, First
Respondent, is prepared to sell.
[9]
When   the First  Respondent   entered  into
negotiations    with
the  Second
Respondent during October
2014  for  the  safe of  the  premises
it  sent the
following message to Shell at page 84 and 85
of the papers from Hubert De Haas, with his address, dated 28 October
2014 to H L Hall
and Sons [Ply] Ltd for the attention of Mr Craig
Lewis. In other words, this is the
offer
which was received
from the second respondent by the first respondent of which a copy
was then sent to the applicant:
"Mr Lewis,
BE: OFFER·
TO PURCHASE: PORTION 1 OF ERF
49
,
MATAFFIN TOWNSHIP
The purpose of this
letter is to confirm the recent discussions relating to the purchase
of the above properly,
We hereby confirm:
1.
That the subdivision of Erf 49 has been approved.
2.
That the filing station FS is erected upon portion 1 of Erf 49
and which is presently leased to Shell in terms of a notarial

long term lease.
3.
That your company has indicated that it is prepared to accept offers
for the purchase of portion 1 of Erf 49, Matafan Township.
4.
That Shell has the right of first refusal.
5.
That  an  offer  of  R17  million,
[Seventeen  million rand] with \/AT  going  zero

rated,  is  hereby made to your company for the purchase
of:
5.1.
Portion 1 of Erf 49 whereupon  a Shell filling  station
is erected;
5.2.
The notarial long term lease agreement concluded with Shell;
5.3.
The site license.
6.
That the offer as set out herein is subject
to:
6.1.
The terms and conditions of the bond granted by Nedbank, a
financial   institution, subject to the normal lending
criteria
for commercial loans of a similar nature;
6.2.
The purchase price in point 5 is the full purchase price with
the exception of transfer and conveyancing costs;
6.3.
That the offer is made in capacity as director of
Tiekiedraai
Eiendomme [Pty] Ltd, registration number 2014/49699/07;
6.4.
That   an   order   for
the   sale   to   be  zero rated
Tiekiedraai must be VAT registered;
6.
5.
That the offer as contained herein will be referred to Shell to
enable them to exercise their right of  first refusal;
6.5.
That in   the event of Shell failing to exercise its-first
right
of a refusal to purchase, will a formal sale agreement be concluded
upon acceptance of the offer as set out herein;
6.
7.
That   the   further terms and conditions
to
be incorporated in the Sale Agreement to be agreed
upon.
Kindly acknowledge
receipt.
Yours faithfully,
HUBERT DE HAAS
(ln my capacity
as
director and duly authorised thereto)".
[11]
This  notification
did
not comply with clause 21
and 21.1 and  expressly recorded
that
the
full and complete  terms
of
the intended contract
had
not
yet
been defined. Consequently, the
fact that  the Applicant  was  Informed of the
existence of the as yet uncompleted
and stiff
to
be finally
negotiated  draft agreement  between   the First
and  Second  Respondents on
30 September
2014
did not trigger the commencement of the 30 day period within which
the
applicant had to exercise its pre-empted option. That this
was the Applicant's view, is clear from the email messages that
passed
between Mrs Ryder  on  behalf of the Applicant and
Lewis  on behalf  of the First Respondent  on pages

86 to 92 of
the
papers.
[121
The First Respondent's re/lance on
the
email of 30 October as
having given proper notification to the Applicant to place it
on
terms to exercise its right of
pre-emption   within 30  days  of that
date  is  misplaced. First
Respondent's
argument
that it contained  all that was necessary  to inform
the Applicant of the
intended
transaction  is incompatible
with  the
express  words
of
clause
21
and
21.1.
[13]
The Second Respondents argument that the message of 30 October
constituted substantial compliance with the clauses I have quoted

must founder on the same rock. The first time there 30 October
constituted substantial compliance with the c1auses I have quoted·

must founder on the same rock. The first time there was compliance
with
these
clauses was 5 December
2014
when
the
final contract signed
by
the first and Second Respondents
was sent to Mr Ryder.  The Applicant immediately exercised its
right of pre-emption upon receipt
thereof.
[14]
It follows that
the
Applicant must succeed. The order that was proposed, namely, that the
Applicant will step into
the
shoes of the Second Respondent is
not controversial and was not contested
in
argument.
[15]
An order is consequently made
in
terms of the draft order
dated 20 May 2015
which
reads as follows:
"Having read the
papers and heard counsel in the matter an order is made in the
following terms:
1.
It Is declared that the agreement, RS15, to the founding affidavit,
is deemed
to  have  been  concluded  between the
First  Respondent as
the seller and the
Applicant as purchaser;
2.
The First Respondent is ordered  to  take  all
necessary
steps  to ensure transfer of the property into
the name of the   Applicant;
3.
In  the  event  of  the First
Respondent  failinn to take  all necessary
steps  within 10
days from demand by the Applicant of the First Respondent  to
take such steps,  then
and in  that  event  the
deputy Sheriff  is  authorised  to  sign
all  necessary
documents  for  and  on
behalf of the First Respondent to ensure that the property, Portion
1  of Erf 49 Mataffan
Township is transferred into the name of
the Applicant;
4.
Costs  of  the  Applicant  to  be
paid  by the  Respondent  jointly and severely

the one  to pay  the  other  to be absolved, the
cost of the application will include the  costs of both
parts
A and  B  of the application and the appearances associated
therewith."
Signed
at Pretoria on this_ day of
2015.
____________________________
E
B.ERTELSMANN
Judge
of the High
Court