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[2015] ZAKZDHC 59
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Peen N.O and Others v Westville Country Club (9308/2014) [2015] ZAKZDHC 59 (30 July 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, DURBAN
CASE
NO: 9308/2014
DATE:
30 JULY 2015
In the matter
between:
EDWARD JOHN
WILLIAM PEEN
N.O
......................................................................
First
Applicant
BRETT DENIS
BERRIMAN
N.O
..............................................................................
Second
Applicant
ALAN DAVID ERNEST
WELLS
N.O
.........................................................................
Third
Applicant
FREDERICK JOHAN
RIEKERT
N.O
......................................................................
Fourth
Applicant
And
THE WESTVILLE
COUNTRY
CLUB
...............................................................................
Respondent
JUDGMENT
CHETTY, J:
[1] The applicants
are the Trustees of the Indigo Dawn Trust, which occupies certain
premises in terms of a sub-lease with the respondent,
the Westviile
Country Club. The applicants in their capacity as Trustees brought an
application for a declarator that the Trust
is not required to pay to
the respondent, for the duration of its sub-lease in respect of the
premises situated at Remainder of
Lot 1700, Westville and more fully
depicted on diagram SG 2758/1993, any amount as may be billed by the
Ethekwini Municipality
to the respondent as a rental for the said
premises.
[2] The application
was opposed, with the respondent essentially contending that the
amount which it invoices the Trust each month
is a charge that it is
entitled to levy against the Trust in terms of the notarial deed of
sub-lease. As will appear from what
follows, the decision I reach
hinges on the interpretation to be placed on two agreements, one
being an agreement of sub-lease
with the previous tenant of the
premises, and the other described as a ‘Permit to sub-lease’
entered into between the
respondent and the Ethekwini Municipality.
[3] The brief
background to the matter is that in 1994 the respondent concluded a
99-year lease with the Town Council of the Borough
of Westville,
which now forms part of the Ethekwini Municipality. In June 2007 the
respondent entered into an agreement of sub-lease
with Proproyale
Developments CC in terms of which it leased certain premises on the
property for a period of 40 years. At the time
when Proproyale
entered Into the lease agreement, the premises were in the process of
being constructed. It is not in dispute that
Proproyale expended an
amount of R1,8 million on the construction of the upstairs portion of
the premises in respect of which the
sub-lease was concluded. This is
the section that is currently occupied by the Trust. The Trust
contends that these costs were
absorbed by Proproyale in exchange for
a beneficial rental agreement. At the conclusion of the 40 year lease
agreement, the respondent
will benefit from the constructed premises,
without having contributed to its development
[4] In October 2011,
after construction on the premises had been completed, Proproyaie
concluded an agreement of cession with the
Trust in terms of which it
ceded and assigned to the latter all its rights and obligations in
terms of its sub¬lease with the
respondent. As a requirement for
the agreement of sub-lease with the Trust, the permission of the
Municipality had to be obtained.
A Permit to sub¬lease was
concluded between the Municipality and the respondent. In terms of
the sub-lease, the Trust is obliged
to pay certain amounts on a
monthly basis to the respondent. These amounts include rental for the
premises as well as certain charges
in respect of services supplied
by the Municipality, as well as a membership fee, which the Trust is
contractually obliged to pay
to the respondent.
[5] As from October
2011, the respondent has been invoicing the Trust an amount which it
described on the invoices as “rates”.
In the belief that
these amounts were due and payable, the Trust has from inception to
date paid such amounts in the bona fide
belief that these were
contractually due. These amounts approximated R2 570 per month.
Typically in a month the Trust would be
invoiced for insurance,
electricity and water, subscription fees in terms of membership of
the Country Club, rent, and an amount
in respect of “rates”.
A copy of one such invoice was attached to the founding papers as
‘EP4.1’. It is
the payment of this latter amount that has
resulted in the Trustees bringing this application in which it
contends that the respondent
has imposed payment of this amount on
the Trust, whereas in terms of the Permit to sub-lease, these amounts
are due and payable
by the respondent to the Municipality..
[6] Matters came to
a head when the Trust received a letter addressed by the Municipality
to Proproyale in August 2013. The letter
indicated that Proproyale
had been in arrears with its rates to the Municipality for the past
six years. Mr Peen, a Trustee and
the deponent to the founding
affidavit, stated that when he came across the letter he considered
it to be an error as the Trust
had been billed on a monthly basis for
rates by the respondent, and that these amounts had been duly paid.
The Trust forwarded
the letter to the respondent for attention and
payment. Subsequently the Trust was advised by the Chairperson of the
Country Club
that the Trust was liable for payment of rates, and that
the Trust should take up the matter directly with the Municipality.
The
amount claimed was in the region of R24 000 equating to a monthly
rates instalment of R422.48. It was at this stage, according to
Mr
Peen, that the Trust realised that the amounts which were being
charged by the Municipality to the respondent as a rental in
terms of
a Permit to sub-lease was in fact being billed, impermissibly, by the
respondent to the Trust. In essence, instead of
paying an amount of
approximately R422.48 per month, the Trust was being billed amounts
of approximately R2255 to R2570 per month
under the guise that these
were due as “rates”. The Trust considered such actions on
the part of the respondent to
be fraudulent and a misrepresentation
of its obligations under the agreement of sub-lease.
[7] Upon the Trust
taking up the issue with the respondent, in which it contended that
it had been overcharged for rates and had
paid an amount of
approximately R138 000 since inception, no response from the
respondent was received until 30 May 2014 when the
respondent took
the view that such payments were justified in terms of the agreement
of sub-lease. In a letter from its attorney
dated 30 May 2014 the
following averments are made:
‘At the outset
our client denies overcharging your client. Your client at present is
indebted to our client in an amount equivalent
to the cumulative sum
of the unpaid municipal rental invoices to our client which are in
accordance with the sublease of which
your client has taken cession.
Rental charged by the municipality to our client constitutes a charge
over municipal land which
is in accordance with the sublease
agreement passed on your client.
In terms of clause
10.2 of the sublease it is liable for the municipal rates and charges
to the municipality over and above the
rental due in of the lease.
Rates are not applicable as it is a lease agreement over municipal
land. A charge on the land is levied
by the municipality which is in
accordance with the sublease passed on to your client, which is due
and payable by your client
to our client. Of relevance is that the
invoice which your client now disputes is expressly marked “PRT
OF PREMISES SU-LEASED
TO PROPROYALE DEV” whether your client
was under the impression that it was a rates charge is for purposes
of clause 10.2
irrelevant’
[8] Accordingly the
Trust seeks a declaratory order that it is not obliged to pay these
monthly rental amounts which the respondent
contends is due to it. It
further contends that if such relief is so granted, that as a
consequence thereof it will not be liable
to pay to the respondent
these rental amounts, and that any future liability incurred by the
Trust in terms of the agreement, be
set off from amounts already paid
to the Country Club. Put differently, the Trust alleges that it has
overpaid the respondent an
amount of R138 000 in respect of rates
that were not due. If the application is upheld, the Trust contends
that its further liability
under the sub-lease (whether in respect of
services, rental or membership fees) be set off from the R138 000.
[9] In my
assessment, the determination of this application hinges on the
interpretation to be accorded to certain provisions of
the notarial
deed of sub-lease between the respondent and Proproyale, and the
Permit to sub-lease entered into between the Municipality
and the
respondent.
[10] One of the
preliminary issues raised by the respondent is whether a dispute of
fact exists on the papers, and if so, whether
on this ground alone
the applicants should be denied the relief they seek. In Room Hire Co
(Pty) Ltd v Jeppe Street Mansions Ltd
1949 (3) SA 1155
(T), it was
decided, as a general rule, that the choice between action and motion
procedures depends on whether a bona fide material
dispute of fact
should have been anticipated by the party launching the proceedings.
When such a dispute is anticipated, a trial
action should be
instituted.
At 1161 Murray AJP
stated:
‘...There are
certain types of proceeding (e.g., in connection with insolvency) in
which by Statute motion proceedings are
specially authorised or
directed... There are on the other hand certain classes of case (the
instances given...are matrimonial
causes and illiquid claims for
damages) in which motion proceedings are not permissible at all. But
between these two extremes
there is an area in which...according to
recognised practice a choice between motion proceedings and trial
action is given according
to whether there is or is not an absence of
a real dispute between the parties on any materia! question of fact’.
[11] Accordingly, a
court will be less inclined, when there are genuine disputes of fact
on material issues, to decide the matter
on motion on a mere balance
of probabilities, as would be ordinarily done in an action. If during
an application, a dispute of
facts arises, the court must exercise a
discretion in terms of Rule 6(g) of the Uniform Rules, to either
dismiss the application
or refer the dispute to oral evidence or to
trial. This discretion must be exercised judiciously.
[12] In
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA
623
(A) at 634 Corbett JA stated:
‘...where in
proceedings on notice of motion disputes of fact have arisen on the
affidavits, a final order, whether it be
an interdict or some other
form of relief, may be granted if those facts averred in the
applicant’s affidavits which have
been admitted by the
respondent, together with the facts alleged by the respondent,
justify such an order.’
In Room Hire supra
at 1162, the Court held that:
‘Or the
application may even be dismissed with costs, particularly when the
applicant should have realised when launching
his application that a
serious dispute of fact was bound to develop.’
See too Lombaard v
Droprop CC & others
2010 (5) SA 1
(SCA) and Fakie NO v CCil
Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA). in National Director of
Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 26, Harms DP
said:
‘Motion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause
facts. Unless the
circumstances are special they cannot be used to resolve factual
issues because they are not designed to determine
probabilities. It
is well established under the Plascon-Evans rule that where in motion
proceedings disputes of fact arise in the
affidavits, a final order
can be granted only if the facts averred in the applicant's (Mr
Zuma’s) affidavits, which have
been admitted by the respondent
(the NDPP), together with the facts alleged by the latter, justify
such order. It may be different
if the respondent’s version
consists of bald or uncreditworthy denials, raises fictitious
disputes of fact, is palpably implausible,
far-fetched or so clearly
untenable that the court is justified in rejecting them merely on the
papers’.
[13] In my view,
having considered the papers and the submissions of the respective
counsel, I am satisfied there is no dispute
of fact which arises in
this matter which requires this Court to refer the matter to oral
evidence or to trial.
[14] A further issue
arose when the respondent’s attorneys, in refuting the
contention that the respondent was liable to refund
the rental
charges for which it had been invoicing the Trust, suggested that in
light of the dispute as to the interpretation of
clause 10.2 of the
sub-lease, that the Trust approaches the court to rectify the
agreement. In their letter of 30 May 2014 the
respondent’s
attorney noted that:
‘Should your
client wish to rectify the agreement your client will need to bring a
rectification action, and in doing so persuade
the court that it was
the common intention of the parties that your client receive the
benefit of the premises at a rental of approximately
R750,00
(R3500.00 as per clause 4.1, less the amount disputed by your client)
to the Westville country club. This was clearly not
the understanding
of the initial sublease whose rights and obligations were ceded to
your client as each and every payment was
timeously made. Pending the
rectification of the agreement your client stands liable for payment
in terms of the lease agreement.’
The position adopted
by the Trust in these proceedings is that there is no need for
rectification as the agreement is abundantly
clear that the
obligation to pay rental for the premises falls on the respondent.
Conversely, the respondent in its opposing papers
seeks a
rectification of the agreement entered into between the parties to
have it conform with their common intention. In light
of the
conclusion I reach, rectification is not necessary.
[15] In Coopers &
Lybrand & others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 768, Joubert JA
held that in interpreting contracts, one must have regard to various
factors such as the context in which
the word or phrase is used; the
background circumstances to explain the purpose of the contract and
extrinsic evidence regarding
the surrounding circumstances when the
language of the document is on the face of it ambiguous, by
considering subsequent conduct
of the parties showing the sense in
which they acted on the document, save direct evidence of their own
intention. This distinction
between context, background and extrinsic
evidence has been rejected by the Supreme Court of Appeal in KPMG
Chartered Accountants
(SA) v Securefin Ltd & another
2009 (4) SA
399
(SCA) para 39, where Harms DP held that:
‘First, the
integration (or parol evidence) rule remains part of our law.
However, it is frequently ignored by practitioners
and seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence
may not
contradict, add to or modify its meaning .... Second, interpretation
is a matter of law and not of fact and, accordingly,
interpretation
is a matter for the court and not for witnesses .... Third, the rules
about admissibility of evidence in this regard
do not depend on the
nature of the document, whether statute, contract or patent ....
Fourth, to the extent that evidence may be
admissible to
contextualise the document (since ‘context is everything’)
to establish its factual matrix or purpose
or for purposes of
identification, ‘one must use it as conservatively as possible’
.... The time has arrived for us
to accept that there is no merit in
trying to distinguish between ‘background circumstances’
and ‘surrounding
circumstances’. The distinction is
artificial and, in addition, both terms are vague and confusing.
Consequently, everything
tends to be admitted.’
[16] In so far as
context is concerned, the respondent contends that the interpretation
sought to be placed by the Trust on the
amount to be paid by it in
respect of the rental, in terms of the notarial deed of sub-lease
read together with the Permit to sub-lease,
leads to a conclusion
which does not make business sense. In this regard the respondent
alludes to the example of another tenant,
namely the Olive & Oil
restaurant, which currently pays a rental of approximately R180 per
square metre. On the other hand,
if the applicants’ version is
to prevail, the rental to be paid by the Trust would equate to
approximately R22 per square
metre. Mr Hoar, who appeared for the
applicants, submitted that this comparison is misplaced, and that the
interpretation contended
for by the applicants must be seen in the
context of the Trust having paid Proproyale R1,8 million in
consideration for the constructed
premises which it moved into. On
the other hand, the Olive and Oil restaurant have not contributed in
any way to the development
of the infrastructure, which forms part of
the overall premises of the Country Club and from which the Club will
benefit after
the lease has run its course.
[17] In deciding
whether the relief sought by the applicants may be granted, regard
must be had to the relevant provisions of the
notarial deed of lease
between the respondent and Proproyale, and the Permit to sub-lease
between the respondent and the Municipality.
Clause 4 of the
sub-lease dealing with rental states that:
‘1. The rental
payable by the subleasee to the lessee in consideration for the hire
of the premises for the first year shall
be the sum of three thousand
five hundred rand (R3500.00) plus VAT, per month payable In advance
on the first day of each and every
month commencing on the effective
date. The rental for the first month shall be adjusted pro rata
should the effective date not
be on the first of a month. All and any
payments shall be made to the lessee at 1 Link Road, Westville.
2. The rental shall
be subject to an annual minimum increment of 8% which interest rate
shall, in addition also increase from time
to time in line with the
CPI increase above the foregoing 8%
3. The cost of all
building additions / alterations / improvements / upgrading as set
out in the plan marked “A” annexed
shall be borne by the
sub lessee.’
[18] Clause 10 of
the sub-lease states the following:
'1. The sub lessee
shall, during the continuance of this lease, punctually pay all
charges levied by any competent authority for
electric current, water
and all other municipal services for the premises. The sub-lessee
shall at its costs install separate metres
for these purposes.
2. The sub lessee
shall be responsible for the payment of all municipal rates and
charges payable to the local authority in respect
of the premises
over and above the rental due in terms of this lease agreement.
Should the rates or charges due in respect of the
premises not be
identified separately by the local authority, the sub-lessee shall
pay a proportionate share of such rates on a
pro rata basis in the
same proportion that the area of the premises bears in the total area
of the main clubhouse situated on the
property from time to time
equal monthly instalments.’
(My underlining)
[19] At the time
when Proproyale entered into the above-mentioned sub-lease, annexed
to that was the Permit to sub-lease, entered
into between the
respondent and the Municipality, being the owner of the property on
which the Club is situated.
The preamble to the
Permit to sub-lease is worded in a manner that describes the
respondent as the ‘lessee’, which seeks
to lease a
portion of land, approximately 350 m2 to the Trust for the purposes
of a health and wellness centre. The consent of
the Municipality was
made subject to certain conditions, the following of which, listed as
5, states as follows:
‘The lessee
shall pay as consideration to the municipality in respect of the
sublease, a ground rental of two thousand and
eighty eighty rands
(R2088,Q0) per month with effect from 25 January 2011 until 31
October 2011, escalating thereafter by 8% per
annum for the ensuing
two years of the sublease period, which rental shall be payable in
advance on or before the seventh day of
each and every month at the
offices of the Deputy city manager (Treasury) or at such other place
he may nominate. For clarification
purposes, it is recorded that
reference to “ground rental’ in this permit to sublease
means the rental payable in respect
of vacant land only and that no
direct or indirect rental shall be due and payable for any buildings,
structures and/or other improvements
elected on the sublease area.’
[20] As set out
earlier, the Trust contends that the respondent has since 2011 been
billing it for rentals which the respondent
is liable, in terms of
clause 5 of the Permit to sub-lease, to pay to the Municipality. This
billing, it is common cause, has taken
place under the heading of
“rates”, which the Trust contends was misleading and
created the impression that such amounts
were legitimately due and
payable to the respondent. Accordingly the Trust contends that in
terms of the Permit to sub¬lease,
it is clear that the obligation
to pay rental, falls on the "lessee”. The preamble to the
agreement defines the “lessee”
as the Westville Country
Club. In addition, the Permit to sub-lease states that the “ground
rental” payable by the
respondent to the Municipality is with
reference to “vacant land” upon which the building
stands. The Trust occupies
the upper floor of the building while the
lower or ground floor has been let out to tenants, from whom the
respondent also draws
a monthly rental.
[21] Counsel for the
applicants submitted that the Trust does not dispute or deny that it
is liable for rental in the amount of
R3500 per month together with
charges for services as provided for by the local authority, together
with monthly fees in respect
of subscriptions for membership to the
Westville Country Club. Beyond that, it submits there are no further
obligations in respect
of payment to the respondent which emerge from
the contract of sub-lease.
[22] Counsel for the
respondent, Ms Konigkramer, submitted that the rental obligation
referred to in clause 5 of the Permit to sub-lease
must be
interpreted as a “charge” contemplated in terms of clause
10 of the notarial deed of sub-lease. As such, the
obligation in the
notarial deed in clause 10.1 to pay “all charges” must be
interpreted to include rental which the
respondent is obliged to pay
in terms of clause 5 of the Permit to sub-lease. Counsel further
contended that this interpretation
is fortified by the distinction
drawn in the wording of clause 10.2 of the sub-lease between
“municipal rates” on the
one hand, and the reference to
“charges" payable to the local authority over and above
rental due in terms of the agreement.
[23] I am not
persuaded that the reference in the Permit to sub-lease of a “ground
rentaf' can be interpreted as being a “service”
or a
“charge” within the wording of clause 10 of the
sub-lease. The respondent was unable to provide any explanation
as to
why the invoicing to the Trust reflected rental under the heading of
“rates". Counsel for the respondent submitted
that it did
not matter under what category the amount was invoiced. Mr Hoar
however contended that any obligation to pay rates
can never be
construed as a charge, as by definition, it is a tax levied by the
local authority. It was further submitted that
the obligation of the
Trust to pay rates was an amount of approximately R422.00 per month.
It is clear that the respondent was
not billing the Trust for rates,
as the amount charged on a monthly basis significantly exceeded the
average amount of the rates
payable for the premises. It must follow
therefore that the amount invoiced to the Trust could only be the
rentals referred to
in clause 5 of the Permit to sub-lease.
[24] The respondent
attempted to build a case against the interpretation contended for by
the Trust by alluding to the alleged financial
distress of the Trust,
and their desperation in wanting to lease the premises to a church.
This proposal was rejected by the respondent,
on the basis that such
use would be inconsistent with the terms and conditions of the main
lease agreement entered into between
the respondent and the
Municipality. The Trusts’ submission is firstly that these
allegations are based on hearsay evidence,
and further that there is
no truth to the allegation that the Trust is in financial crisis.
This argument emanates from the contention
of the respondent that the
Trust has since 2013 been paying the rentals, for which it was billed
on a monthly basis, and has only
recently sought to dispute this
obligation. The respondent contends that this resistance to paying
the rental emanates from the
worsening financial predicament of the
Trust The respondent further pointed out that Proproyale also paid
these rental amounts,
without any demure.
[25] I am not
persuaded that it is necessary for me to make any findings or to
consider the allegations of financial distress made
by the respondent
Whether the premises can be let to a church or not is outside the
scope of this application. Interpretation of
contractual provisions
is a matter of law. In my view, it is clear from the wording of the
agreements that the obligation to pay
rental in clause 5 of the
Permit to sub-lease is one which clearly falls on the “lessee”,
being the respondent. I can
find no basis to infuse that obligation
into the obligations on the Trust in terms of clause 10 of the
agreement of sub-lease.
[26] It was argued
that I should Interpret the agreements in accordance with the ratio
laid down in Natal Joint Municipal Pension
Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA) para 18:
‘Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory
instrument, or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of
the document as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration
must be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision
appears; the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more
than one meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not
subjective. A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent
purpose of the document Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable,
sensible or businesslike for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide
between interpretation and
legislation; in a contractual context it is to make a contract for
the parties other than the one they
in fact made. The ‘inevitable
point of departure is the language of the provision itself, read in
context and having regard
to the purpose of the provision and the
background to the preparation and production of the document.’
[27] After
considering the above dictum, I reach the view that the rental
obligation contemplated in clause 5 of the Permit to sub-lease
is an
obligation that falls on the respondent alone. There is no basis,
contractual or otherwise, which allows the respondent to
pass on this
obligation to the Trust. ! am unable to find any basis for clauses 4
and 10 of the notarial deed of sub-lease to be
interpreted in a
manner that allows the rental obligation in terms of clause 5 of the
permit to sub-lease to be read as a “charge”
for
services. I am furthermore unable to find that the interpretation
sought for by the Trust would lead to an insensible or unbusinesslike
approach as referred to in Natal Joint Municipal Pension Fund v
Endumeni Municipality,(supra), or that such an interpretation would
undermine the purpose of the agreement to sub-lease.
[28] As set out
earlier, in interpreting agreements one must also have regard to
context. An important factor in arriving at the
conclusion that the
respondent is not permitted to pass on payment of the rental
obligation to the Trust is the investment of R1,8
million which the
Trust paid to Proproyale at the time when it entered into the cession
of the sub-lease, in exchange for the investment,
which would
ultimately benefit the respondent, the Trust could not have been
expected to pay its rental of R3500 plus rates, services
such as
electricity and water, membership fees to the Club as well as the
amounts billed to it as “rates”. If the result
is that
the Trust is charged a significantly lesser amount for its lease of
the premises in comparison to other tenants, this must
be seen in the
context of its payment to Proproyale. Otherwise, the Trust would have
simply sought to occupy one of the other premises
without outlaying
any amounts.
[29] In the result I
make the following order:
1. It is declared
that the Indigo Dawn Trust is not required to pay to the respondent,
for the duration of the sub-lease with the
latter in respect of the
premises situated at Remainder of Lot 1700, Westville and depicted on
the Surveyor General’s diagram
No. 2758/1993, any such amount
as may be billed by the Ethekwini Municipality to the respondent as a
rental for the said premises.
M R CHETTY Judge
of the High Court
Appearances:
For the
Applicant: Adv S Hoar
Instructed by
Lister & Company
For the
Respondent: Adv M A Konigkramer
Instructed by
Andrew & Associate, Durban
Date of hearing:
18 March 2015
Date of judgment:
30 July 2015