Yarram Trading CC t/a Tijuana Spur v Absa Bank Ltd (625/05) [2006] ZASCA 132; 2007 (2) SA 570 (SCA) (30 November 2006)

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[2006] ZASCA 132
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Yarram Trading CC t/a Tijuana Spur v Absa Bank Ltd (625/05) [2006] ZASCA 132; 2007 (2) SA 570 (SCA) (30 November 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
REPORTABLE
Case number : 625/05
In the
matter between :
YARRAM
TRADING CC
t/a
TIJUANA SPUR APPELLANT
and
ABSA BANK LTD RESPONDENT
CORAM : MPATI DP, MTHIYANE, BRAND JJA, MALAN
et
THERON
AJJA
HEARD : 22 NOVEMBER 2006
DELIVERED : 30 NOVEMBER 2006
Neutral citation: This judgment may be referred to as
Yarram Trading v Absa
[2006] SCA 160 (RSA)
SUMMARY
:
Collective Investment Schemes Control
Act 45 of 2002
– immovable property registered in name of trustee
for collective scheme –
locus standi
of trustee to seek
ejectment of lessee from the property – authority of trustee or
manager of scheme to demand rental and cancel
lease – whether
factual disputes regarding alleged breach of lease determinable on
the papers – application of Shifren clause.
JUDGMENT
_____________________________________________________
BRAND JA
/
BRAND JA
:
[1] The
appellant conducts a restaurant under the name Tijuana Spur from
leased premises on the first floor of the Bryanston Shopping
Centre
('the property') in the province of Gauteng. The respondent is the
registered owner of the property. Its case is that the
lease had been
duly cancelled for the appellant's breach of its terms. The appellant
disputed the validity of the cancellation, which
resulted in an
application for its eviction in the Johannesburg High Court. In
response to the application the appellant raised a
number of
defences, all of which were dismissed by the court
a quo
(Willis J). Consequently, the eviction order sought was granted. The
appeal against that order is with the leave of the court
a quo
.
[2] Of the various defences raised in the court
a
quo
, the appellant persisted in only three on appeal. They were:
(a) The respondent had no
locus standi
to bring
the eviction application.
(b) The
lease agreement had not been validly terminated in that the letters
of demand and cancellation, which were written by attorneys,
had not
been authorised by the proper authority.
(c) There
were disputes of fact concerning the appellant's alleged breach of
its obligations in terms of the lease agreement, which
rendered the
matter incapable of being decided on its merits in motion
proceedings.
[3] The issues arising from these three defences will
best be understood against the following background. The lease
agreement was
concluded on 29 June 2003 with 1 November 2003 as its
commencement date. The original parties to the agreement were the
appellant,
as lessee, and Bryanston Hobart (Pty) Ltd who was the
owner of the property at the time, as the lessor. On 29 August 2003
and pursuant
to an agreement of sale between Bryanston Hobart and the
respondent, transfer of the property was registered in the name of
the latter,
according to the deed of transfer, in its capacity as
'the trustees for the time being of the Allan Gray Property Trust
Collective
Investment Scheme, in terms of the provisions of the
Collective Investments Schemes Control Act, No 45 of 2002'.
[4] The parties to the lease agreement contemplated the
property being sold. In that event, clause 21.01 provided, '
the
lessee shall not be entitled to elect not to be bound to the new
lessor and this lease shall continue in full force and effect,
binding the lessee to the new lessor
'. The terms of the lease, at
least
prima facie
, therefore created a contractual link
between the appellant and the respondent when the latter became the
owner of the property.
One of the disputes raised by the appellant
was that the respondent did not become the lessor. As it turned out,
however, this dispute
is not of any consequence. The respondent's
case is that the appellant had breached the lease agreement between
them in two respects:
(a) by failing to pay rental due, and
(b) by failing to submit statements of its monthly
turnover, as it was obliged to do.
[5] Clause 22.01 of the lease provided that, if the
lessee should commit any breach of its terms and fail to remedy that
breach within
seven days after being called upon to do so, the lessor
would be entitled to cancel the lease and to seek eviction of the
lessee
from the premises. Pursuant to these provisions, a firm of
attorneys, Christelis Artemides ('the attorneys') wrote a letter to
the
appellant on 15 July 2004 demanding that it should remedy the two
breaches complained of within seven days. The appellant's response
to
the letter, in a way similar to its answer in the eviction
application, consisted mainly of a denial that it was in breach of
the lease in any respect. I will return to the resulting factual
disputes presently. The consequence of the appellant's attitude
was,
however, that on 2 August 2004 the attorneys wrote a further letter
to the appellant in which they formally cancelled the lease.
[6] I now turn to the facts that are pertinent for
considering the appellant's first defence, based on the respondent's
alleged lack
of
locus standi
. The Allan Gray Property Trust
Collective Investment Scheme ('the scheme'), for which the respondent
acts as trustee, is a collective
investment scheme in property as
envisaged in the Collective Investment Schemes Control Act 45 of 2002
('the Act'). The Act provides
that such a scheme should have both a
'manager' and a 'trustee'. The manager of the scheme is Allan Gray
Property Trust Management
Ltd ('Allan Gray'). As prescribed by s 97
of the Act, the relationship between the respondent as trustee and
Allan Gray as manager,
is governed by a written agreement described
in the Act as 'a Deed'.
[7] According to its original formulation the
appellant's attack on the respondent's
locus standi
was based
on the proposition that the appellant was not the owner of the
property, as it professed to be. According to this proposition
the
real owners of the property are the investors in the scheme. That
proposition turned out to be ill-founded. The property was
registered, in accordance with a long-standing practice in the Deeds
Office, in the name of 'the trustee for the time being' of the
particular trust. In such event, it has been held, ownership of the
trust property depends on the terms of the trust instrument (see
Mkangeli v Joubert
2002 (4) SA 36
(SCA) para 9; Honoré's
South African Law of Trust
5ed (by Cameron, De Waal &
Wunsh) 274). In the present context the trust instrument, in my view,
comprised of the Deed and the
relevant provisions of the Act.
[8] The Deed is quite clear. Clauses 1.3 requires the
manager to 'deposit' the underlying assets of the scheme which, by
definition,
includes immovable property, with the trustee. The
trustee is then required, by clause 1.4, to take custody of these
assets and to
hold them on behalf of the investors in the scheme by
virtue of clause 24. Clause 2.1.29 pertinently provides that the
trustee will
acquire 'legal ownership' of the underlying assets of
the scheme. The interest of the investors, on the other hand, is
governed by
clause 38.3. They do not acquire ownership in any of the
underlying assets of the scheme, but of a participatory interest in
an investment
portfolio.
[9] What the appellant in effect contended for, is that
this pattern is disturbed by the provisions of the Act. Support for
this argument
was sought in s 71 of the Act, which incorporates by
reference, the provisions of the
Financial Institutions (Protection
of Funds) Act 28 of 2001
. The provisions of the last mentioned Act
particularly relied upon by the appellant were ss 4(4) and 4(5). In
terms of s 4(4) the
trustee is obliged to keep trust property
separate from its own assets in its books of account while s 4(5)
provides that trust
property does not form part of the assets of the
trustee.
[10] I do not think that these sections purport to
change the law relating to ownership of immovable property held in
trust. On the
contrary, in my view they are to be understood with
reference to common-law principles. Thus construed, s 4(4) – which
mirrors
s 11 of the Trust Properties Control Act 57 of 1988 – is
based on the common-law premise that trust assets form a separate
estate
in the hands of the trustee, provided they are identified as
trust property and kept separate from the trustee's personal assets
(see Honoré
supra
para 353 at 571). Section 4(5) –
which mirrors s 12 of the Trust Properties Control Act – in turn
confirms the common-law rule
with reference to ownership – trusts
that the trustee is not the beneficial owner of trust assets. His
title is usually described
as 'bare ownership' ('
nudum dominium
')
– sometimes also called 'legal ownership' – while 'beneficial
ownership' ('
utile dominium
') is said to vest in the
beneficiaries of the trust (see eg
The Master v Edgecombe's
Executors and Administrators
1910 TS 263
at 274-275;
Braun v
Blann and Botha NNO
[1984] ZASCA 19
;
1984 (2) SA 850
(A) 859-860; Honoré
op
cit
para 170 at 288). In short, the provisions of the Act and the
Deed are, in my view, quite clear: upon registration in its name,
qua
trustee, the respondent became the 'legal owner' of the property and
holds it in trust for the investors as 'beneficial owners'.
[11] During the course of the appellant's argument in
this court, it somehow changed its focus. The different proposition
then contended
for was that, even if the respondent can be said to
have acquired ownership of the property, it was deprived of all the
normal incidents
of ownership, including the authority to seek the
appellant's eviction, by the provisions of the Act and the Deed. In
support of
this contention the appellant primarily relied on ss 2, 4
and 5 of the Act which impose the duty on the manager to 'administer'
the
collective scheme to the exclusion of everyone else. This, the
appellant pointed out, is to be read with the wide definition of
'administration'
which essentially includes every aspect of control
of the scheme. As far as investment schemes in property are
concerned, so the
appellant argued, the principle is underscored by s
48 of the Act, which renders it an offence for anybody other than the
registered
manager or its authorised agent to administer the scheme.
[12] The position of the trustee, on the other hand, the
appellant's argument proceeded, is no more than that of a watchdog.
According
to this argument, it is particularly apparent from a proper
analysis of s 70 of the Act that the trustee has no power of control
over the assets of the scheme. It merely holds these assets in order
to protect the interests of the individual participants. This
division of duties provided for in the Act, the argument continued,
is followed through in the Deed. Thus, clauses 15.1, 15.5 and
22
provide that Allan Gray,
qua
manager, is to administer the
property held by the respondent as trustee, while the latter is again
relegated to the position of a
watchdog protecting these assets, in
terms of clauses 23 and 24.
[13] This line of argument should, in my view, again be
considered in the light of the common-law. One of the common-law
incidents
of ownership is that the owner 'may claim his property
wherever found from whomsoever holding it' (see eg
Chetty v Naidoo
1974 (3) SA 13
(A) 20A-E). This applies even where the owner only
holds legal ownership or bare dominium in the property. A trustee in
whom ownership
vests accordingly has standing to apply for ejectment
and to vindicate the property even though it is not beneficially
interested
therein (see
Moluele v Deschatelets
NO
1950 (2) SA
670
(T) at 678). In fact, this holds true, so it seems, even where
the trustee is not entitled to retain possession of the property at
all, but seeks to vindicate it or eject the lessee solely in order
that he may put the beneficiaries in possession of it (see
Mackenzie
NO v Basha
1950 (1) SA 615
(N) at 620; Honoré
supra
para 163 at 270).
[14] It is clear that the provisions of the Act and the
Deed do not expressly deprive the trustee of its common-law
locus
standi
to vindicate the property held by it in trust. In
accordance with the presumption against alteration of the common-law,
the question
is therefore whether these provisions must be understood
to do so by necessary implication (see eg
Casserley v Stubbs
1916 TPD 310
at 312;
Stadsraad van Pretoria v Van Wyk
1973 (2)
SA 779
(A) at 784D-H). I think the answer is no. I agree that the
provisions of the Act and the Deed relied upon by the appellant
confer
exclusive power of control over the property of the scheme on
the manager. I do not believe, however, that exclusive control of the
property by the manager is incompatible with the trustee's
locus
standi
to recover possession of the property – by way of
vindication or ejectment – from a third party, albeit for the sole
purpose
of restoring it to the manager's control.
[15] I believe this is borne out by clause 23 of the
Deed which imposes the duty on the trustee 'to exercise all the
powers necessary
to protect the interests of investors'. This seems
to indicate that, however wide the powers of control conferred upon
the manager
may be, the trustee did retain at least some of the
common-law powers associated with ownership. Having regard to the
trustee's duty
to protect, I think the most prominent among these
retained powers would be the power to vindicate the property from the
unlawful
possession of third parties. It follows, in my view, that
the appellant's first defence was rightly dismissed by the court
a
quo
. In consequence, it is not necessary to consider the
respondent's further argument that,
qua
lessor, it in any
event derived
locus standi
from the lease agreement itself to
seek the appellant's eviction from the property.
[16] The second defence persisted in on appeal is based
on the proposition that the letters of demand and cancellation –
respectively
dated 15 July and 2 August 2004 – had not been
mandated by the proper authority. It is not in dispute that these
letters were
written by the attorneys on the instructions of Broll
Management (Pty) Ltd who acted as managing agent of the property.
Broll contends
that it received its mandate to give these
instructions from Allan Gray, who in turn relies on authority
conferred upon it by certain
individuals acting on behalf of the
respondent.
[17] Based on these facts, the appellant raised a
twofold argument in the alternative. Its main argument departed from
the premise
that if the respondent is found to have had the power to
evict, it must also have been the proper authority to demand the
rental
and to cancel the lease. For the next step in its argument,
the appellant relied on what it contended to be a proper analysis of
the facts presented by the respondent, including the various
resolutions annexed to the respondent's papers, from which it
appears,
so the appellant contended, that those who professed to have
mandated Allan Gray, were not properly authorised by the respondent
to do so. The appellant's alternative argument was that, if Allan
Gray,
qua
manager, is held to have been the proper authority
to demand the rental and to cancel the lease, its instructions to the
attorneys
–
via
Broll – were invalid because it acted
qua
representative of the respondent and not
qua
manager of the
scheme when it issued those instructions.
[18] The respondent's first answer to both the main and
the alternative argument was that clause 20.08 of the lease precludes
any
reliance by the appellant on any lack of authority on the part of
Broll. This clause provides:
'The parties hereby acknowledge that Broll . . . is the
agent of the lessor for the purposes of this lease and that Broll
and/or its
duly authorised employees may exercise on behalf of the
lessor all the lessor's legal rights and claims in terms of this
lease.'
[19] What is more, the respondent pointed out, the
appellant's whole defence on the merits depends – as will presently
appear from
my discussions under that rubric – on an oral agreement
between it and Broll. In these circumstances, the respondent's
argument
concluded, Broll's authority cannot be raised as an issue
between the parties.
[20] I agree with the respondent's answer. I also hold
the view that Broll's authority had been established, both by prior
agreement
and by the subsequent conduct of both parties. However, I
believe in any event, that there is no merit in this defence. The Act
and
the Deed conferred control of the property on Allan Gray,
qua
manager, or its duly appointed agent. That must include the power
to demand payment of rental and to cancel the lease. The contention
that, if the respondent retained the power to evict, it must be the
only authority that could cancel the lease, amounts to a
non-sequitur
. As I have said before, I find no inherent
conflict in the notion that the owner retains its common-law power to
vindicate, despite
the fact that control of the property is vested in
someone else. On the common cause facts, Allan Gray then appointed
Broll to administer
the property on its behalf. That is the end of
the matter. The fact that Allan Gray may have thought that it acted
qua
representative of the respondent when it instructed Broll
is, in my view, of no consequence.
[21] The third defence persisted in on appeal is based
on the proposition that the disputes of fact concerning the
appellant's alleged
breach of the lease agreement rendered the matter
incapable of being decided in motion proceedings. For purposes of
this defence
I revert to the facts. The first breach relied upon by
the respondent was that the appellant had been in arrears with the
payment
of rental. With regard to the amount of rental due, it was
common cause that when the lease was entered into, the premises
consisted
only of an inside seating area. An outside seating area
was, however, also contemplated. The monthly rental provided for in
the lease
started at R23 000 for the inside and R10 000 for
the outside seating area. Clause 14 stipulated, in effect, that
failure
to complete the construction of the outside area by 1 October
2003, which was one month before the commencement of the lease
period,
would render the lessor liable for a penalty of approximately
R12 000 per month.
[22] It is common cause that the construction of the
outside seating area had not been satisfactorily completed by the
stipulated
date. It is likewise common cause that on 13 February 2004
there was an oral agreement between the appellant and the managing
agent,
Broll, that the penalty in clause 14 would be increased for
the period after the end of February 2004 during which the outside
seating
area was not available for occupation. A further fact which
is not in dispute is that since the commencement of the lease on 1
November
2003 until the end of July 2004, the appellant made only two
rental payments in a total amount of less than R50 000.
[23] Apart from this limited area of agreement, there
are numerous factual disputes on the papers regarding the appellant's
liability
for rental. The end result is quite dramatic. On the
respondent's version, the appellant's indebtedness as at the end of
July 2004
amounted to R293 916,14. The appellant's version, on
the other hand, is that it is not indebted to the respondent at all.
In
fact, it averred that having regard to the accumulation of
penalties orally agreed upon, it has a counter-claim against the
respondent
for nearly R70 000.
[24] It is clear that the exact amount of rental owing
by the appellant cannot be established on the papers. Equally
apparent, however,
is that for present purposes the exact amount need
not be determined. As long as the respondent succeeded in
establishing that some
rental had been owing, it was entitled to
cancel the lease. The respondent's contention that it has discharged
this onus, turns on
the oral agreement of 13 February 2004. Though
the conclusion of this agreement is not in dispute, the conflicting
versions regarding
its terms cannot be resolved. If the respondent's
version is to be accepted, it is clear that some rental was owing at
the cancellation
date. This is even more so if no regard is had to
the oral agreement at all, because even on the respondent's version
the appellant
was entitled to some increased penalty. The
respondent's argument that the oral agreement should indeed be
disregarded, is based
on a non-variation clause in the agreement of
lease. It essentially provides that no variation of the agreement
shall be of any force
and effect unless it is recorded in writing and
signed by both parties. This type of clause has become known in our
law as a Shifren
clause. The name derives from
SA Sentrale Ko-op
Graanmaatskappy Bpk v Shifren
1964 (4) SA 760
(A) in which this
court held that, as a matter of policy, a non-variation clause should
in principle be recognised as enforceable
and that it effectively
entrenches both itself and all the other provisions of the contract
against oral amendment (see also eg
Brisley v Drotsky
2002 (4)
SA 1
(SCA) paras 6-9;
Telcordia Technologies Inc v Telcom SA Ltd
[2006] SCA 139 (RSA) para 11).
[25] Alive to the problem created by the Shifren clause,
the appellant attempted to construct a written amendment from the
correspondence
between it and Broll. This attempt must, in my view,
be marked unsuccessful. What the correspondence shows is that while
the existence
of an oral agreement was common cause, the terms of
this agreement were never confirmed. On the contrary, from the very
first letter
they were in dispute. Other attempts by the appellant to
circumvent the effect of the Shifren clause – by relying on waiver,
estoppel
etc –
fell foul of other clauses in the lease
precluding reliance on these defences.
[26] In this court, counsel for the appellant also
relied on the judgment of Harms JA in
Telcordia (supra)
which
he admittedly had not seen before. I cannot find any statement in
Telcordia
that supports the appellant's case at all. What
Harms JA said (in para 12) with regard to the Shifren principle, is
that :
'The principle does not create an unreasonable
straitjacket because the general principles of the law of contract
still apply, and
these may release a party from its workings. One of
these would, for instance, be the rule that a party may not approbate
and reprobate.
This would mean . . . that a party may not rely on a
non-compliant variation (for instance, in its pleadings) and
subsequently invoke
the non-variation term in order to avoid the
effect of the amendment.'
[27] The situation referred to by Harms JA never arose
in this matter. At no time did the respondent rely on the oral
agreement as
part of its case. On the contrary, its stance from the
outset was that any reference to the terms of the oral agreement
would be
precluded by the Shifren clause. The purpose for which the
clause is relied upon by the respondent in this case is one which was
expressly sanctioned as a legitimate object in
Shifren
(at
776H), namely, to avoid disputes of fact regarding the terms of an
oral agreement which are difficult to resolve and which, I
may add,
in a case such as this, can be drawn out indefinitely while the
tenant stays in occupation of the leased premises.
[28] Therefore, ignoring any reference to the terms of
the oral agreement as we must, it has been established on the facts
which are
common cause, that the appellant was in arrears with its
rental on the cancellation date. It follows, that the respondent was
entitled
to cancel the lease. This conclusion renders any reference
to the appellant's further breach relied upon by the respondent of no
consequence. Nevertheless, I hold the view that the respondent had
succeeded in establishing that breach as well. In the circumstances,
I will motivate this conclusion only in the broadest outlines.
[29] The second breach relied upon by the respondent was
based on the appellant's alleged failure to provide Broll with a
monthly
statement reflecting its turnover during the preceding month,
as it was required to do in terms of the lease. Since the letter of
demand was written on 15 July 2005, the only relevant dispute is that
which relates to the statement for June 2004. In its founding
affidavit, the respondent contended that the appellant had never
provided Broll with the June statement. In the appellant's answering
affidavit this was denied. A factual dispute thus arose which, on the
face of it, appears incapable of resolution on the papers.
However,
in response to the letter of demand, the appellant had written on 27
July 2004 that 'turnover figures for the months January
to May 2004
were provided to your client on 30 June 2004'. This is corroborative
of the respondent's version that no statement had
been provided for
the month of June. But this is not the end of the matter. On 1
September 2004 appellant's attorneys responded as
follows to the
letter demanding turnover statements:
'Our client provided such figures incorporating up until
May 2004, as the turnover figures, a copy of which we have on file.
Should
your offices require a copy same can be transmitted to [you].'
[30] As appears from the well known statement by Corbett
JA in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) 634E-635C, there are recognised exceptions to the
general rule that essentially favours acceptance of the respondent's
version
in a factual dispute, where final relief is sought in motion
proceedings. As an example of such exception, Corbett JA gave the
following
(at 635C):
'Where the allegations or denials of the respondent are
so far-fetched and clearly untenable that the court is justified in
rejecting
them merely on the papers.
'
The appellant's denial of the allegation that it had
failed to furnish the June 2004 statement, in my view, qualifies for
this exception.
In the light of the correspondence I have referred
to, this denial is so far-fetched and clearly untenable that it can
be rejected
merely on the papers. In consequence, it must be accepted
that the appellant never provided the June statement which entitled
the
respondent to cancel the lease as and when it did.
[31] As to the matter of costs, the lease agreement
provides that in the event of litigation resulting from the
appellant's breach
of its terms the appellant will be liable for
costs on the attorney and client scale. On the basis of this clause,
the respondent
submitted that its costs of appeal should be awarded
on that higher scale. The appellant's counsel expressly conceded that
he had
no answer to this submission.
[32] In the result, the appeal is dismissed with costs.
These costs are to include the costs of two counsel and shall be on
the scale
as between the attorney and client.
.................................
F
D J BRAND
JUDGE
OF APPEAL
Concur:
Mpati
DP
Mthiyane
JA
Malan
AJA
Theron
AJA