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[2013] ZAKZPHC 58
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Instand Trade 110 CC v Lewis and Others (AR 247/13) [2013] ZAKZPHC 58 (25 October 2013)
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL DIVISION, PIETERMARITZBURG
CASE NO: AR 247/13
In the
matter between:
INSTAND
TRADE 110 CC
.................................................................................
Appellant
and
EILEEN
LEWIS
......................................................................................
First
Respondent
EMIL
ALEXANDER LEWIS
.............................................................
Second
Respondent
WESTPORT
PROPERTIES (PTY) LIMITED
.......................................
Third
Respondent
J U D G M E N T
___________________________________________________________________
KOEN
J
:
INTRODUCTION
:
[1] This is an appeal against a judgment by Ploos van Amstel J
discharging a rule
nisi
1
issued
by Radebe J, with costs.
BACKGROUND
:
[2] The First Respondent is the registered owner of the immovable
property situated at Lot 1953, Pinetown, situate at 54 Glenugie
Road,
Pinetown. The Second Respondent is her husband.
[3] On 28 June 1999 the Second Respondent, describing himself as ‘the
Landlord’,entered into a written ‘AGREEMENT
OF
LEASE’(‘the lease’) with George Michael
Mouzouris(‘Mr Mouzouris’) in respect of the property.
This lease commenced on 1 August 1999 and continued until 30 July
2004,and contained the following option to renew in clause 4
of the
agreement:
‘
4.1
The tenant, being in compliance with all his obligations hereunder,
shall have the option to renew this lease for a period of
four (4)
years and eleven (11) months upon the same terms and conditions as
are contained in this lease excepting this clause and
clause 5 as to
the amount of rental provided however that the option shall be
exercised by notice in writing delivered to the landlord
before
February 1 2004.’
[4] Material to the present application is clause 18:
‘
18.
RIGHT
OF FIRST REFUSAL
18.1 While the tenant occupies
the premises in terms of this lease (including the option period
referred to in 4 but only if the
option is exercised) the tenant
shall have a right of first refusal to purchase the property;
18.2 The terms and conditions
applicable to such right of first refusal are as follows –
18.2.1 The Landlord shall give
notice in writing to the tenant of the terms and conditions upon
which he is prepared to sell the
property or of any offer to purchase
the property as the case may be;
18.2.2 Within three (3) days
after receipt by the tenant of such notice, the tenant shall give
notice in writing to the Landlord
of his intention to exercise the
right of first refusal;
18.2.3 If the tenant does not
give notice of his intention to exercise the right of first refusal
within the aforesaid period of
three (3) days, the said right of
first refusal shall lapse’.
[5] On 28 February 2001, during the initial period of the lease, the
Second Respondent, the tenant Mr Mouzouris and the Appellant
concluded a written ‘DEED OF ASSIGNMENT OF LEASE: FOUR WAYS
KWIKSPAR’ (‘the assignment’). The effective
date of
this agreement was 2April 2001. The operative part of the agreement
provided:
‘
5.1
With the effect from the EFFECTIVE DATE, Mouzouris cedes, assigns and
makes over to the ASSIGNEE all of Mouzouris’s rights
and
obligations as tenant under the LEASE AGREEMENT and the ASSIGNEE
accepts such assignment;
5.2 The Landlord hereby consents
to the assignment as provided for in 5.1’.
[6] The ‘LEASE AGREEMENT’ was defined in the assignment
to mean the above ‘written lease agreement which was
concluded
between MOUZOURIS and the LANDLORD on 28 June 1999 in respect of
which MOUZOURIS leases the PREMISES, a copy of which
lease agreement
is attached hereto marked “A”’. The ‘ASSIGNEE’
was defined to mean the Appellant.
[7] Pursuant to the lease and assignment, the Appellant has occupied
the property and is still in occupation.
[8] No notice in writing to renew the lease for a further period of 4
years and 11 months was given before 1 February 2004, or
at all. The
original lease, as assigned, accordingly expired by effluxionof time
on 30 July 2004.
[9] On 12 August 2004, after the lease had expired, the Appellant and
the Second Respondent concluded an ‘ADDENDUM TO LEASE’
(‘the addendum’). This document is not a model of
clarity. It provides:
‘
The
attached document titled, “PROPOSAL FOR ADDENDUM TO LEASE”
is to form an addendum to the lease between Emil Alexander
Lewis and
George Michael Mouzouris with regards to the premises at 54 Glenugie
Road, Pinetown.
As detailed in this addendum the
ADDENDUM TO LEASE is to be accompanied by the assignment of the lease
and as such Mr David Buckingham
2
has effected this ADDENDUM to
LEASE.
PROPOSAL FOR ADDENDUM TO
LEASE
The following to capture the
renewed lease pertaining to the property (54 Glenugie Road, Pinetown)
as described in the AGREEMENT
OF LEASE between EMIL ALEXANDER LEWIS
and GEORGE MICHAEL MOUZOURIS and act as an addendum thereto.
ASSIGNMENT OF LEASE to be
signed by all three parties;
PERIOD OF LEASE to commence on
1 August 2004 and terminate on 31 July 2009;
RENTAL
2.1 To be R27 728,59
inclusive of VAT per month for the period of 1 August 2004 to 31 July
2005;
Escallationto be 7% as of 1
August 2004 per annum.
OPTION TO RENEW
An option to renew the lease for
a further five (5) years upon the same terms and conditions contained
within the amended lease.
With the proviso for the rental and
escalation to be adjusted to market related figures.
OPTION TO PURCHASE THE PREMISES
It is the intention of the
TENANT Mr David Buckingham to secure an option to purchase the
building at an agreed price should the
LANDLORD choose to dispose of
such. The price or an acceptable formula for defining a price to be
agreed by both parties and written
into the addendum.
(Below the above typing on the
addendum, inserted in manuscript, appear the words ‘at a market
related price’).
MAINTENANCE ISSUES:
……’
[10] Although this addendum was not signed in any special designated
place indicated for the tenant, Mr Buckley did sign the addendum,at
a
placewhere provision was made for witnesses to sign.
3
Nothing
was made of this fact in argument.
[11] The legal position thus is that the original lease,as assigned,
came to an end at midnight on 30 July 2004. The Appellant
remained in
occupation for 31 July 2004,seemingly without there being any formal
lease arrangement in place. From 12 August 2004,
retrospective to 1
August 2004 the Appellant’s occupation has been governed by the
terms of the addendum.
[12] Before 31 July 2009, and more specifically during the period
from January to March 2009, written notice was given by the Appellant
of its intention to renew the lease for a further five (5) year
period to expire on 31 July 2014. This notice,
ex facie
the
papers, was conveyed in letters addressed by the Appellant’s
attorneys to the First and/Second Respondents attorneys,
GDLK on 20
January 2009 and 25 March 2009. It appears from this correspondence
that the First andSecond Respondents might have
disputed the right of
the Appellant to extend the lease after the end of July 2009. But be
that as it may, the factual reality
is that the Appellant remained in
occupation throughout and is still in occupation. On the
probabilities this is because the lease
was renewed for a further
period pursuant to the terms of the addendum. Facts pointing to that
probability include the allegation
in the founding affidavit that the
First Respondent accepted payment of the rental arising from the
Appellant’s continued
occupation of the property without
protest, which allegation, properly construed, appears to relate to
rentals paid after 31 July
2009. This allegation has not been
disputed on the papers. Further, in a letter dated 13 December 2010
referring to some incident
which occurred at the Appellant’s
business premises involving their son, the Second Respondent wrote:
‘
regarding
the sale of your business you need my permission. Please take note of
the building is definitely not going to be sold
ever. July 2014
cannot come soon enough’.
4
[13] On 1 June 2012 the Third Respondent and the First Respondent
concluded a written agreement of sale in terms whereof the property
was sold by the First Respondent for a purchase price of R8 million.
This agreement
inter alia
provides:
‘
16.
SPECIAL CONDITIONS
Subject to the purchasers being
afforded a 28 day due diligence study;
…
Subject to purchasers giving
confirmation of the sellers receiving full rental from existing
tenant up until the date of transfer.’
[14] It is the discovery of the existence of this sale which prompted
the application in the court
a quo.
In that application, the
Appellant relying on what it maintains is an enforceable right of
first refusal, sought the following
relief:
‘
1.
That a rule
nisi
do
hereby issue calling upon the Respondents to show cause on September
2012 why the following orders should not be granted:
That the Applicant be and is
hereby directed to institute an action against the First Respondent,
within 21 days of the grant
of this order, claiming the relief set
out in paragraph 43 of the founding affidavit;
5
That First Respondent be and is
hereby interdicted by effecting transfer of the immovable property
described as Lot 1953, Pinetown,
to the Third Respondent;
That the relief in paragraphs
1(b) hereof shall operate pending the outcome of the action to be
instituted in terms of paragraph
1 (a) hereof;
That the First Respondent and
any other Respondent opposing this application pay the Applicant’s
costs of suit.
2.
That the relief set out in
paragraph (1)(b) above operate as interim relief with immediate
effect pending the outcome of this application’.
[15] On 7 September 2012 Radebe J granted the rule
nisi
returnable on 28 September 2012 with the interim relief as prayed.
[16] In a letterdated 27 September 2012 from Dickenson and
TheunissenIncorporated, the attorneys for the First and Second
Respondents,addressed
to the Appellant’s attorneys it was
indicated that the First and Second Respondents
‘…
consent
to the order as set out in paragraph (1) (a) (b) of the Notice of
Motion dated 4 September 2012 … (and)… we
confirm
further that we agree that the question of costs would be reserved
for the trial court’.
[17] The Third Respondent opposed the application. It did not dispute
any of the factual allegations in the founding affidavit
but
insteadfiled a notice in terms of rule 6(5)(d)(iii) raising certain
legal defences. In essence these were that insofar as the
Appellant
relied on the ‘option to renew’ and a ‘right of
first refusal’ in the lease, the right of first
refusal
constituted an unenforceable
pactum de contrehendo
(alternatively
was void for vagueness); that insofar as it may be considered that
the right of first refusal was enforceable at
law, that it was only
capable of being exercised during the option period (that is the
period after the expiry of the initial lease
period on the 30 July
2004) if written notice was delivered to the Landlord before 1
February 2004, and that this was not done;
that it had lapsed by
effluxionof time on 30 July 2004 and is no long of force and effect
at law. The notice continued that insofar
as the Appellant relies on
the addendum and the ‘option to purchase the premises’
contained in clause 5 thereof, this
provision equally constituted an
unenforceable
pactum de contrehendo
(alternatively was void
for vagueness); alternatively insofar as it may be found that the
option to purchase the premises was enforceable,
any option to
purchase the premises lapsed on the 31
st
July 2009.
Accordingly, the contention was that the Appellant had not
established that it had any right (
prima facie
or
otherwise)warranting the grant of the interim interdictory relief
pending the outcome of an action to be instituted.
[18] The matter was argued as an opposed application before Ploos van
Amstel J. After the matter had been argued he addressed an
email to
the counsel acting for the Appellant and Third Respondent stating:
‘
When
this matter was argued nothing was said about the fact that the First
Respondent against whom the interdict is sought, is
ex
facie
the lease agreement not a party to it. What exercises my mind is the
following:
The Second Respondent does not
purport to act on behalf of the First Respondent in the lease
agreement. The fact that he does
not own the property does not
preclude him from being landlord.
There is no admissible evidence
that the Second Respondent represented the First Respondent as an
undisclosed principle. Even
if he did, was a written authority not
required to make the right of first refusal binding on her?
If the First Respondent was not
a party to the agreement which contains the right of first refusal,
on what basis can she be interdicted
from selling the property, of
which she is apparently the sole owner?
The parties are invited to
address these issues by way of written argument to be delivered by
the first Friday in February 2013’.
[19] Pursuant to this invitation a supplementary affidavit was filed
by the Appellant’s attorney Ms Anderson. The contents
of her
affidavit were in turn confirmed by confirmatory affidavits by Mr
David Buckingham and a Mr James Crawford.
6
In
these affidavits it was contended that the Second Respondent at all
material times acted for and on behalf of the First Respondent
as
undisclosed principal.
THE JUDGMENT OF THE COURT
A QUO:
[20] In his judgment the learned Judge
inter alia
commented:
‘
[9]
Whether or not the second respondent acted as agent for the first
respondent when the lease agreement was concluded is a question
of
fact. If he did not, and acted in his personal capacity, the further
issues in the case become academic. …
[10] A landlord does not have to
be the owner of the property which he lets, just as a seller does not
have to own what he sells.
The mere fact that the first respondent
owned the property does not warrant an inference that the second
respondent acted on her
behalf … It is also not unlikely that
the second respondent contracted in his personal capacity because he
dealt with the
property as if it was his, although legally it was
not.
[11] There is no direct evidence
before me that the second respondent acted on behalf of the first
respondent as undisclosed principal
when the lease was concluded. In
the founding affidavit Mr Buckingham makes a number of assertions in
this regard. In para 11 he
says “In concluding that lease
agreement the Second Respondent represented the First Respondent and
acted as a Landlord”.
In para 12 he says “All my dealings
in respect of the property were with the Second Respondent. It was
clear to me that the
First Respondent left all negotiations about the
property to her husband”. There are similar assertions
regarding the assignment
of the lease and the addendum which renewed
the lease. On Mr Buckingham’s own evidence he did not know at
the time that the
second respondent was not the owner of the
property. He had no reason to think that he was acting on behalf of
his wife. The assertions
in the founding affidavit is not evidence of
the fact that the Second Respondent was acting as his wife’s
agent.
[12] …
[13] I do not consider that the
Applicant has made out a case for an interdict
pendent
lite
against the First
Respondent. There is no basis on the evidence before me for a finding
that she is bound by the right of first
refusal on the lease
agreement, not even
prima
facie
though open to
some doubt’.
[21] In the light of the conclusion to which he came, he did not deal
with any of the legal issues raised in the rule 6(5)(d)(iii)
notice.
DISCUSSION:
[22] In the Court
a quo,
the Appellant was simply seeking an
interim interdict pending the action. It is trite that to succeed
with such an application,
the Appellant had to demonstrate:
(a) A clear right, or, if not clear, is
prima facie
established,
though open to some doubt;
(b) A well grounded apprehension of irreparable harm if the interim
relief is not granted and the ultimate relief is eventually
granted;
(c) The absence of any other satisfactory remedy;
(d) That the balance of convenience favoured the granting of such an
interim interdict.
7
[23] The factual allegations advanced by the Appellant, particularly
those relating to the deponent’s belief as to who the
Second
Respondent represented in concluding the assignment and the addendum,
the existence of the imminent threat of transfer of
the property to
the Third Respondent and the allegations in support of the contention
that the balance of convenience favoured
the Appellant, all stood
entirely un-contradicted. The deponent’s unchallenged factual
evidence was that in all his dealings
with the Second Respondent,he
thought it clear that the ‘First Respondent left all
negotiations about the property to her
husband’, that when the
written assignment of the lease was concluded the ‘Second
Respondent again acted as the First
Respondent’s agent’.
Allegations that there were negotiations during June to July 2004 in
regard to
inter alia
‘the extension by the First
Respondent of a right of first refusal in respect of the property’,
and that the addendum
was considered by the ‘Second Respondent
on behalf of the First Respondent’, stand un-contradicted.
Similarly, the
allegations in the supplementary affidavits
8
that
at all material times to the conclusion of the assignment and
addendum neither Mr Buckingham nor Mr Crawford were aware that
the
First Respondent indeed owned the property until much later after the
conclusion thereof, and that the position is in fact
that, in acting
as he did, the Second Respondent at all material times acted as an
agent for the First Respondent as undisclosed
principal, remain
un-contradicted.
[24] It is correct that
ex facie
the agreements, the Second
Respondent did not purport to act on behalf of the First Respondent.
It is also correct, as the learned
Judge concluded, that whether or
not the Second Respondent acted as agent for the First Respondent is
a question of fact. The Appellant’s
witnesses under oath
alleged that the First Respondent was the undisclosed principal of
the Second Respondent.
[25] Those allegations were not disputed by the Third Respondent, nor
for that matter, were they disputed by the First and Second
Respondents in the application. It was simply not raised as an issue
by the Third Respondent.
9
Before us it was conceded by the Third Respondent that the issues
properly raised for determination before the court
a quo
were
those identified in the rule 6(5)(d)(iii) notice and those only.
[26] However, as much as the question of what authority a purported
agent might have to represent another is a factual issue, the
conclusion whether such authorisation as might be proved in a
particular factual scenario amounts to the authority required to
validly conclude a particular legal act, is a conclusion of law.
[27] Where there is no factual basisadvanced in a founding affidavit
that an agent acted for and on behalf of an undisclosed principal,
on
which an Applicant can base the relief it claims, or the factual
basis contended for is so absurd as to be highly improbable,
it would
no doubt be correct that relief can and should be refused by the
Court even if this particular issue was not specifically
challenged
by any of the other parties to the litigation. This is probably what
the learned judge had in mind.But I am respectfully
of the view that
he erred in not concluding that at least a
prima facie
case,
even if open to some doubt, had been made out on oath that the Second
Respondent had indeed acted on behalf of the First
Respondent as
undisclosed principal.
[28] My reasons for that conclusion include
inter alia
the
following:
The question of agency was, on the allegations by the deponents to
the affidavits on oath, a matter of undisputed fact. The effect
of
the judgment in the court
a quo
is that these statements under
oath had to yield
in toto
to inferences arising from general
legal principles, notably, the principle that in our law a lessor
may validly conclude a lease
in respect ofa property he does not
own. That is a trite principle of law. But it cannot
per se
negate
the weight of sworn evidence by a witnesswho states that the Second
Respondent acted on behalf of the First Respondent
as undisclosed
principal, unless perhaps the surrounding circumstances are such as
to make that belief on the part of the witness
so absurd and
ridiculous that it can be rejected summarily. The present case was
not such an instance. One must appreciate that
a litigant in the
position of the Appellant would hardlyever have direct evidence of
the relationship between an agent and his/her
undisclosed
principal,because if such relationship was disclosed, the situation
would probably not be one of an undisclosed principal.
The First,
Second and Third Respondent’s did not dispute factuallythat
the First Respondent was an undisclosed principal.
In the context of
adjudicating this application, their failure to do so was telling.
In
HasselbacherPapier Import and Export (Body Corporate) and
another v M V
Stavroula
10
it
was held
inter alia
that even when an applicant’s case
was based on hearsay evidence, a respondent’s failure to deny
any of the facts
alleged, made it hardly likely that the hearsay
evidence was untrue. A respondent’s failure to reply to
allegations, although
not itself proving the applicant’s case,
had to be taken with the evidence provided by the applicant together
with considerations
as to whether or not the relevant information
was readily available to the applicants or respondent in deciding
whether an evidentiary
onus has been discharged.
In
Wightman t/a J W Construction v Headfour (Pty) Ltd and
another
11
Heher
JA said that:
‘
[a]
real, genuine and bona fide dispute of fact can only exist where the
court is satisfied that the party who purports to raise
the dispute
has in his affidavit seriously an unambiguously addressed the facts
said to be disputed. There will of course be instances
where a
baredenial meets the requirement because there is no other way open
to the disputing party and nothing more can therefore
be expected of
him. But even that may not be sufficient if the fact averred lies
purely within the knowledge of the averring party
and no basis is
laid for disputing the veracity or accuracy of the averment. When the
facts averred are such that the disputing
party must necessarily
possess knowledge of them and be able to provide an answer or
(counterveilingevidence) if they be not true
or accurate but, instead
of doing so, rests his case on a bare or ambiguous denial the court
will generally have difficulty in
finding that the test is satisfied.
I say “generally” because the factual averments seldom
stand apart from a broader
matrix of circumstances all of which needs
to be born in mind when arriving at a decision. A litigant may not
necessarily recognise
or understand the nuances of a bare or general
denial as against a real attempt to grapple with all relevant factual
allegations
made by the other party. But when he signs the answering
affidavit, he commits himself to its contents, inadequate as they may
be, and will only in exceptional circumstances be permitted to
disavow them. There is thus a serious duty imposed upon a legal
adviser who settles an answering affidavit to ascertain and engage
with facts which his client disputes and to reflect such disputes
fully and accurately in the answering affidavit. If that does not
happen it should come as no surprise that the court takes a robust
view of the matter’.
Here there was not even a bare denial of the undisclosed principal
relationship from the respondents.
But the court
a quo
was also not simply confronted with the
Appellant’s
ipse dixit
as to the undisclosed principal
relationship between the First and the Second Respondents. The
appellant’s sworn evidence
also included allegations that the
First Respondent had accepted the payment of rental in respect of
the property without protest.
That positive factual allegation
stands un-contradicted. Although the specific rentals received were
not identified, in the chronology
in which the statement appears in
the founding affidavit, the statement appears, at least
prima
facie,
to relate to rentals received pursuant to the conclusion
of the addendum. The significance of this positive allegation lies
in
the First Respondent receiving rentals in respect of her
property. The rhetorical question irresistibly arising, is on what
basis
the First Respondent would accept these rentals, unless she
knew it was in terms of the lease assigned and renewed in terms of
the addendum? If it is on any other basis then she has not disclosed
it. This also,
prima facie
at least, points to an undisclosed
principal relationship existing between the First and Second
Respondents.
Further, in the sale agreementbetween the First Respondent and the
Third Respondent, clause 16.3 expressly provided that both
parties
were aware that rental was being received in respect of the
property. The clause also confirmed that the tenant, which
could
only be the Appellant, would continue paying rental to the First
Respondent as ‘sellers’ until the date of
transfer. This
clearly, and certainly
pima facie
points to knowledge on the
part of the First Respondent of a rental arrangement giving rise to
the payment of rent to her, which
on the uncontested evidence,
before the court, could only have been pursuant to the lease,
assignment and addendum.
The inference to be drawn from the First Respondent receiving the
rentals and acknowledging that they would be continued to be
received until transfer, is more probable and consistent with her
acknowledging her rights and obligations in terms of the lease,
the
assignment and/or addendum, than the Second Respondent, calling
himself the landlordin respect of a property he does not
have to
own, gives rise to any inference that he was not acting on behalf of
the First Respondent as an undisclosed principal.
The inference the court
a quo
drew that the Second Respondent
was acting in his personal capacity, could not contradict the
evidence at a
prima facie
level that he had acted on behalf
of the First Respondent as his undisclosed principal. In any event
also, that inference was
not the only inference or the most probable
inference to be drawn from at least two, but possibly a greater
range of possible
inferences which could arise.
In the final analysis, the correct approach is to consider, with
reference to all the evidence adduced, whether
prima facie
,
even if maybe open to some doubt, the most probable inference to be
drawn is whether the Second Respondent acted for the First
Respondent as his undisclosed principal, or not. In my view, the
probabilities clearly favour the conclusion that the First
Respondent not only knew of the lease
12
but indeed had made the benefits (the rental payable in terms
thereof) and accordingly also the concomitant obligations therein
(such as any right of first refusal), her own.
Accordingly, even if the question of the First Respondent’s
representation was properly an issue to be considered by the
court
a
quo
, it, with respect, erred in concluding that at a
prima
facie
level there was not proof that the Second Respondent acted
on behalf of his wife as undisclosed principal.
[29] It is trite that the Appellant, on discovering that there was
such an undisclosed principal in the background, was entitled
to
elect to hold the undisclosed principalinstead of the Second
Respondent as intermediary liable.
13
WAS THERE A VALID RIGHT OF FIRST REFUSAL THAT COULD BE
ENFORCED?
[30] Having dealt with the authority issue and whether the First
Defendant is bound by terms of the lease agreement, assignment
and
addendum, the issues properly raised in the Third Respondent’s
rule 6(5)(d)(iii) notice now need to be considered. Particularly,
the
issues arising are whether the right of first refusal in clause 18 of
the lease was revived after it lapsed when the lease
lapsed by
effluxion of time on 30 July 2004, and whether the right of first
refusal contained therein is enforceable.
[31] This calls for an examination of the terms of the addendum.
[32] In paragraph 14.6 of its heads of argument, the Third Respondent
argues that:
‘
At
best for the Appellant a fresh lease agreement was, on or before the
12
th
August
2004, concluded between himself and the First Respondent on the same
terms and conditions as those contained in the assigned
Lease
Agreement save for those Clauses pertaining to the period of the
lease, the rental and escalation’s payable, the “option
to renew” and the “option to purchase the premises’.
[33] The Appellant’s counsel has maintained that not much turns
on whether one views the addendum as a separate ‘fresh’
lease agreement incorporating by reference the terms of the original
lease, or simply as an addendum to the original lease agreement.
These are two possible constructions to be placed on the addendum. A
possible third construction that could be contended for is
that the
addendum was a separate agreement standing independent and entirely
divorced from the lease agreement.
[34] Starting with the last possible construction first, in order to
be a separate self-contained agreement, the terms of the addendum
had
to cover the
essentialia
for a lease namely the rental to be
paid, the lease period and the identity of the property. These terms
are all present in the
addendum document. However, if the addendum
was to be a separate self- standing agreement, then the references to
it:
(a) being an addendum to the original lease between the Second
Respondent and Mouzouriswhich was assigned to the Appellant; and
(b) acting ‘… as an addendum thereto’
wouldbe superfluous, which would offend against the basic principle
of interpretation that every word in the document is assigned
a
meaning. I therefore do not view the addendum as a separate
self-contained agreement.
[35] At the time of the conclusion of the addendum, the lease
agreement had elapsed by effluxion of time. What the addendum,
ex
facie
its wording, patently sought to achieve was a renewal of
the lease, which, possibly unbeknown to the parties, had at that
point
already come to an end, or alternatively a fresh lease with the
rental period commencing from 1 August 2004. The addendum was drafted
very inelegantly. Giving business efficacy thereto however, the
probabilities favour an interpretation that it sought to ensure
the
Appellant’s continued occupation of the property on the basis
of the agreement of lease originally concluded between
the Second
Respondent and Mouzouris and assigned to the Appellant, with the
addendum acting as an addendum thereto, save that the
period of the
lease, the rental and the option to renew previously provided for in
the lease, would now be different and relate
to different periods.
[36] It seems to me that the Third Respondent is correct that the
addendum was a fresh lease agreement concluded between the Appellant
and the First Respondent
14
on
the same terms and conditions as those contained in the assigned
lease agreement, save for those pertaining to the period of
the
lease, the rental and escalations payable and the option to renew.
[37] In referring to the original lease agreementin the addendum, it
seems clear that the intention of the parties was that the
terms of
the lease were to apply to the new periods for which the lease was to
be in place in terms of the addendum. At a
prima facie
level I
respectfully disagree with the submission that the clauses in the
original lease relating to the right of first refusal
were not
revived on the same conditions which previously applied. These
conditions included that when exercised, the tenant had
to occupy the
premises, whether it being during the initial period of the lease
from 1 August 2004 to 31 July to 2009 or then during
‘the
option period referred to in 4 but only if the option is exercised’.
The Appellant, whilst in occupation of the
premises seeks to exercise
that right of first refusal during the further ‘5 years’
renewal period referred to in paragraph
4 of the addendum. That it is
entitled to do.
[38] Clause 5 of the addendum is a curious provision. It seems to me
to be irrelevant to the present application. Its exact effect
is
uncertain. It might very well be an unenforceable
pactum de
contrehendo
as it appears to express only an intention on the
part of the tenant, wrongfully identified to be Mr Buckingham as
opposed to the
Appellant, ‘to secure an option to purchase the
building at an agreed price should the Landlord choose to dispose of
such’.
It cannot be a valid option to purchase the premises as
it does not identify the purchase price. At best, it is probably
unenforceable
or otherwise void for vagueness. It was however argued
that its existence, or the existence of an option to purchase,would
be inconsistent
with the continued existence also of a right of first
refusal as contained in clause 18.
[39] The short answer to that question is that clause 5 does not
contain a valid and enforceable option. But in any event, even
assuming clause 5 to somehow contain a valid option, there appears to
be no reason why a valid option to purchase and a valid right
of
first refusal cannot co-exist in the same agreement. More
specifically, if a valid option exists, it does not mean that there
can be no valid right of first refusal or right of pre-emption.
[40] In
Soteriou v RetcoPoyntons (Pty) Ltd
15
the
distinction between a right of pre-emption and an option was clearly
explained at 932 B-E as follows:
‘
A
right of first refusal is well known in our law. In the context of
sale it is usually called a right of pre-emption. The grantor
of such
a right cannot be compelled to sell the property concerned. But if he
does sell, he is obliged to give the grantee the
preference of
purchasing, and consequently he is prevented from selling to a third
person without giving the first refusal …So,
a right of
pre-emption involves a negative contract not to sell the property to
a third person without giving the grantee the first
refusal; and the
grantee has the correlative legal right against the grantor that he
should not sell. This is a right which is
enforceable by appropriate
remedies.
In the case of an option, the
grantor has made an offer which the grantee can accept without more,
upon which a contract of sale
is complete. In the case of a right of
pre-emption, there is no offer at the time of the grant, and the
grantor is not obliged
to make an offer unless and until he wishes to
sell the property”.
[41] If that distinction is kept in mind, there is no reason why a
lease agreement cannot contain an option exercisable at the
election
of the tenant to compel the sale of the leased property to the tenant
at a predetermined price, and a right of pre-emption
which would
require the Landlord should it decide to sell the property, at any
time and in circumstances where the option had not
yet been exercised
by the tenant, and possibly even at a price lower than the price
stipulated in the option, to first offer it
to the tenant on those
same terms and conditions.
[42] At a
prima facie
level, clause 18 of the original lease
agreement was included by reference in the addendum and is
enforceable by the Appellant
against the First Respondent as
undisclosed principal at the election of the Appellant.
[43] The existence of such a right of first refusal would also not
fall foul of any formalities legislation, as this right of first
refusal does not entail an interest in land for the purposes of the
Alienation of Land Act 68 of 1981
.
16
COSTS:
[44] What appears to me, and ought, with respect, have appeared to
the court
a quo,
was that a
prima facie
case even if
open to some doubt was established, justifying the grant of the
relief claimed. With the rule
nisi
being confirmedit might, in
the action foreshadowed in the relief and which has been instituted,
nevertheless not be established
on a balance of probability. Although
the court
a quo
ought to have confirmed paragraphs (a), (b) and
(c) of the rule nisi, the correct costs order would have been to
reserve the costs
of the application for determination by the trial
court. The trial court will be in a much better position after
hearing all the
evidence, to determine whether the Appellant in fact
had a right entitling it to claim transfer of the property pursuant
to the
exercise of the right of pre-emption.
[45] The judgment by the court
a quo
discharging the rule
nisi
with costs falls to be set aside and to be substituted with an order
confirming paragraphs 1(b) and (c) of the rule
nisi,
together
with an order that the costs relating to the application including
all costs of opposition be reserved for determination
by the trial
court.
[46] The Appellant has been successful in this appeal and there is no
reason why the costs of the appeal should not follow the
result. Both
the Appellant and the Third Respondent employed two counsel. The
Third Respondent did not dispute the Appellant’s
claim for the
costs of two counsel should costs be awarded in favour of the
Appellant.
THE ORDER
:
[47] The following order is granted:
1. The appeal succeeds with costs, such costs to include the costs
consequent upon the employment of two counsel.
2. The order of the court
a
quo
in terms whereof the rule
nisi
was discharged with costs including those occasioned by the
employment of two counsel, is set aside and substituted with the
following
order:
(a) Paragraphs 1(b) and (c) of the rule
nisi
issued on 7 September 2012 are confirmed.
(b) The costs of the application are reserved for
determination by the trial court.
_________________________
VAHED
J
:
_________________________
NKOSI
J
:
_________________________
Date of hearing: 27/9/2013
Date of Judgment: 25/10/2013
APPELLANT’S COUNSEL: A M ANNANDALE SC with C NEL
APPELLANT’S ATTORNEYS: LISTER & CO.
c/o DAWSONS INC.
Ref: Mr Dawson/Rabia/
THIRD RESPONDENT’S COUNSEL: D A GORDON SC with M E STEWART
THIRD RESPONDENT’S ATTORNEYS: PIENAAR & PRETORIUS
1
Pending
the return date, an interim order interdicted the transfer of the
immovable property described as Lot 1953, Pinetown from
the First
and Second Appellants to the Third Appellant.
2
Mr
Buckingham, the deponent to the Appellant’s founding affidavit
and a confirmatory affidavit, is the sole member of the
Appellant.
3
Although
the addendum referred to Mr Buckingham having effected his signature
to the addendum, it is clear that he had done so
on behalf of the
Appellant. Paragraph 44 of the founding affidavit in any event
foreshadowed that rectification of the agreement
would be claimed in
the respects set out in the founding affidavit where incorrect
designations were used. Nothing accordingly
turns on the error
either.
4
This
statement clearly recognises the Appellant’s continued
occupation until 31 July 2014, which would be consistent with
a
renewal of the lease pursuant to the addendum.
5
We
were advised during argument that the action has now been instituted
in the Durban High Court under Case No 11688/2012. The
relief
claimed in paragraph 1(a) of the Notice of Motion has accordingly
become academic.
6
He
is the author of the addendum.
7
Webster
v Mitchell
1948 (1) SA 1186
(W); L F Boshof Investments (Pty) Ltd v
Cape Town Municipality
1969 (2) SA 256
© at 267A-F; PrestThe
Law and Practice of Interdicts page 51.
8
These
are confirmed by Mr Buckingham.
9
It
is a factual and not a legal issue. The Third Respondent only raised
legal issues.
10
1987
(1) SA 75
(C).
11
[2008] ZASCA 6
;
[2008
2 All SA 512
(SCA) at para 13.
12
This
knowledge on its own, might also not necessarily have been
sufficient.
13
O’
Leary v Harbord
(1887) 5 HCG 1;
Chappell v
Gohl
1928
CPD 47
and BP Wanda (original text updated by JC De Wet) ‘Agency
and Representation’ in
LAWSA
2ed vol 1 (January 2003)
atpara232.
14
As
undisclosed principal.
15
1985
(2) SA 922
(A).
16
Rodgers
v Phillips
1985 (3) SA 183
(E) at page 187 where it was held
that: ‘One must consider the true nature of a right of
pre-emption…It is a right
which the grantee has that the
grantor shall not sell a particular thing before the grantee has
been afforded the election to
buy at a price which is fixed or
objectively determinable…”The grant of a right of
pre-emption does not compel the
grantor to sell; it only compels him
to give to the grantee the preference in case he sells at all.”
In my view this right
cannot be said to be an interest in land’.