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[2012] ZAKZDHC 97
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Arbour Town (Pty) Ltd v Sunny Skies Investments CC t/a Chimney & Sabah Collection (aka Pearl of India) and Another (5066/2012) [2012] ZAKZDHC 97 (12 December 2012)
13
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
CASE NO: 5066/2012
In the matter between:
ARBOUR TOWN (PTY)LTD
...........................................................................
Plaintiff
and
SUNNY SKIES INVESTMENTS CC T/A
COPPER
CHIMNEY & SABAH COLLECTION
(aka PEARL OF INDIA)
.
...................................................................
First
Defendant
ADIL RAZA MOHAMED SULEMAN SHAIKAH
..........................
Second
Defendant
JUDGMENT
SISHI J
Introduction
[1] This is an opposed application for
summary judgment. The plaintiff’s claim against the defendants
is for an amount due
in terms of a written lease agreement. The
plaintiff alleges that the first defendant breached the lease
agreement by failing to
pay an amount equivalent to the sum of rental
and other charges amounting to R263 683, 57, for the months of
February, March, April,
and May 2012.
[2] The claim against the second
defendant is based on a deed of suretyship executed by the second
defendant in favour of the plaintiff
in terms of which the second
defendant secured the first defendant’s obligations to the
plaintiff in terms of the lease agreement.
Background Facts
[3] The plaintiff and the first
defendant concluded a written agreement of lease on 17 March 2010. On
the same day, the second defendant
bound himself, jointly and
severally in favour of the plaintiff as surety and co-principal
debtor with the first defendant for
all amounts which the latter may
then or thereafter have owed the plaintiff.
[4] In terms of the lease, the first
respondent hired from the plaintiff certain business premises, being
shop No.S21 and S22, the
Galleria, corner of Moss Kolnick and Arbour
Roads, Umbogintwini, for a period of 5 years commencing on 1 December
2009 and terminating
on 30 November 2012.
[5] On 27 May 2012, and as a result of
the first defendant’s breach of the lease, the plaintiff
cancelled the agreement of
lease by service of summons in the
magistrate’s court under case No.2856/2012. The first defendant
disputed the plaintiff’s
entitlement to cancellation by failing
to vacate the premises. The first defendant is currently holding over
the premises.
[6] The terms of the written lease
agreement included a non-variation clause. Clause 26.1 provides:
“
This
agreement of lease constitutes the whole agreement between the
parties and no warranties or representations of whatsoever nature
whether express or implied shall be binding on the parties other than
as recorded herein. Any agreement to vary this agreement
shall be in
writing and signed by the parties…”
[7] The terms of the lease agreement
also included a term prohibiting a set-off. Clause 4.6 provides:
“
All
rental and other amounts payable by the tenant in terms of this
agreement of lease shall be made without demand, free of exchange
and
without any deduction or set off whatsoever”
[8] The defendant’s case is that
a valid agreement of compromise was entered into between the parties
and subsequently reduced
to writing in compliance with the written
agreement of lease.
[9] In addition to the defence of
compromise, the defences of set-off and breach on the part of the
plaintiff giving rise to a claim
for damages are also raised by the
defendants.
[10] In this judgment the plaintiff
will be referred to as the applicant and the defendants as
respondents.
Compromise
[11] Compromise, or
transactio
,
is the settlement by agreement of disputed obligations whether
contractual or otherwise
1
.
[12] The purpose of
a
transactio
is not only to put
an end to existing litigation but also to prevent or avoid
litigation
2
.
[13] The applicant contended that the
written lease agreement contains a non-variation clause providing
that any agreement to vary
it had to be reduced to writing and signed
by the parties.
[14] The relevant clause fully set out
provides as follows:
“
26.1 This
agreement of lease constitutes the whole agreement between the
parties and no warranties or representations of whatsoever
nature,
whether expressed or implied shall be binding on the parties other
than as recorded herein. Any agreement to vary this
agreement shall
be in writing and signed by the parties. No relaxation or indulgence
which the landlord may show to the tenant
shall in anyway prejudice
the landlord’s rights hereunder. An acceptance of payment of
rental and other charges or any other
payment shall not prejudice the
landlord’s right or operate as a waiver or abandonment thereof
or estop it from exercising
any right enjoyed by it hereunder by
reason of any subsequent payment not being made strictly on due
dates”
3
.
[15] In clause 1.7
of the definition section of the lease agreement, the phrase “in
writing” is defined as follows
4
:
“
In
writing” shall mean a written communication and shall include a
letter, a notice, a telegram, but shall exclude an electronic
mail
and facsimile transmission”.
[16] The applicant contended that in
the opposing affidavit respondents rely on a compromise agreement
concluded when the offer
was sent by fax and acceptance thereof
emailed. The applicant accordingly submitted that in terms of the
lease agreement there
has been no valid compromise or varying of the
written lease agreement.
[17] The respondents on the other hand
contended that they do not owe the amount claimed as the written
lease agreement between
the parties had been replaced with an
agreement of compromise.
[18] In the opposing affidavit,
respondents make the following averments regarding an agreement of
compromise:
“
The
agreement of compromise was entered into between the parties on or
about 27/28 February 2012. The agreement was subsequently
reduced to
writing on or about 1 March 2012. The agreement of compromise, which
is annexure “A” to the opposing affidavit
was sent to the
respondents on Friday, 2 March 2012 at approximately 17h00. An
attempt was made earlier at about 11h47, to send
it but was not
received by the respondent. It was re-sent to him at approximately
17h00. When the agreement arrived, the deponent
had already left the
premises. The deponent says that he was thus unable to respond by the
close of business day on 2 March 2012
as it is stipulated in the
final paragraph of the agreement. The deponent returned to the
premises on Monday, 5 March 2012, and
he responded to the agreement
by writing the word “accept” thereon, signing it and
emailing it back to the applicant.
According to the respondent, it
was reasonable for them to return the signed agreement on the next
business day which was on Monday,
5 March 2012”.
[19] The respondents contended that
the non-variation clause of the lease agreement has been satisfied as
the agreement of compromise
had been signed by both parties.
[20] It is contended on behalf of the
respondents in the opposing affidavit that clause 1.7 of the written
lease agreement defining
the words “in writing” that they
shall mean written communication should include letter, has also been
fulfilled in
that the agreement of compromise is indeed a letter.
[21] It is necessary in the
circumstances to quote verbatim this alleged agreement of compromise
dated 1 March 2012, addressed to
the first respondent and to the
attention of Adil Shaikh.
“
Dear Sir,
Galleria Shopping Centre : Sunny
Skies Investments CC: Shops 21 and 22.
With reference to your recent meeting
with Mr Holger Pins, we hereby make the following without prejudice
offer:
Your basic rental be reduced to
R200.00 per sqm with effect from 1 March 2012;
We will waive rental for the outside
sitting;
All other charges are to remain as
per current lease agreement;
The arrears to date are the sum of
R176 843, 95. You will pay R80 000.00 in lieu of the arrears, which
is to be paid in 6 equal
instalments over and above the normal
monthly rental and other charges. The first instalment will be
payable on 1 May 2012 and
thereafter on or before first of every
month;
All changes to Sabar and to Alfredo’s
to be agreed in writing by the landlord prior to any changes taking
place –
architectural plans to be submitted.
You will be given one months
beneficial’s occupational rental from 1 April 2012 to 30 April
2012 to refix shop S21, and
no rental will charged on this shop, S21
over 40 square metres for beneficial occupation period only. Shop
S22 is to remain open
for trade during this time.
This final offer is open for
acceptance by close of business 2
nd
March 2012 failing
which the offer will lapse and legal proceedings shall continue”.
The letter is signed by Barbara
Parker, the general manager of Arbour Town (Pty) Ltd.
[22] The offer was accepted and signed
on behalf of the respondents as indicated above.
Was there a valid compromise
agreement between the parties?
[23] It is clear from the document
that it is indeed a letter in writing which had been signed on behalf
of both parties. It is
clear from the contents of the letter dated 1
March 2012 that it deals with rights and obligations of both parties
and intended
to vary the terms of the original lease agreement. The
respondents also contended that this agreement was not a fax or an
email,
in itself, it was merely an attachment to same. This was
indeed an offer from the applicant for acceptance by the respondents.
It is therefore clear that if the document was sent by an electronic
mail or fax, it does not comply with clause 1.7 of the written
lease
agreement. The respondents contended that the attachment sent via
electronic mail fulfils the criteria of being reduced to
writing.
[24] What is important with this
document is that it was an offer which was open for acceptance by
close of business on 2 March
2012, failing which the offer was going
to lapse. It is clear from the respondents’ opposing affidavit
that this offer was
only accepted by the respondents on 5 March 2012
and not on 2 March 2012 for reasons set out in para 18 of this
judgment. In the
circumstances of this case as the offer was not
accepted by 2 March 2012, there is no valid agreement between the
parties. The
fact that the applicant always communicated with the
respondents in business dealings via email or fax does not detract
from what
is contained in clause 1.7 of the lease agreement.
Furthermore, the compromise agreement between the parties is not
valid as it
was faxed and emailed between the parties contrary to
clause 1.7 of the lease agreement.
[25] The defence of compromise
agreement can therefore not succeed.
The defence of set off.
[26] Clause 4.6 of the lease agreement
provides that all rental and other amounts payable by the tenant in
terms of this agreement
of lease shall be made without demand, free
of exchange and without any deduction or set off whatsoever. It is
clear that the parties
contracted out of the respondents’
common law right to rely on set-off.
[27] Agreements to
contract out of the operation of set-off are binding. Where the
parties have agreed that rental due is payable
without deduction or
set-off, set-off does not operate automatically
5
.
[28] The claim of R144 438.00 claimed
by the respondents in the affidavit as set-off, arises out of the
lease agreement as the respondents’
contribution to costs of
fitting a ceiling in the shop; effecting improvement on the shop
front; for plastering and painting the
premises; and installing the
electrical wiring and plug points. Respondents have demanded this
amount of money but the applicant
has refused to pay it. Furthermore,
the applicant asked the respondents to effect improvement to the
exterior of the shop on behalf
of the applicant in that he required
the respondents to tile the fore-court area for which the applicant
undertook to pay the respondent
for financial outlay occasioned
thereby. He has, however, been unable to find invoice in respect
thereof. The respondents contend
that the compromise agreement does
not exclude set-off, whether it is a claim against the applicant.
[29] It has been pointed out above
that in terms of the lease agreement, the amounts of rental owed,
could not be set off in any
manner.
[30] I have already indicated above
that annexure “A” to the respondent’s opposing
affidavit does not constitute
an agreement of compromise. In the
absence of the valid compromise agreement which has the effect of
replacing the terms and conditions
of the main lease agreement, then
all the defences raised by the respondents based on compromise cannot
be sustained.
[31] In the alternative, the plaintiff
has contended that the opposing affidavit is contradictory to the
extent that it cannot be
said that the defence is
bona fide.
[32] It was
submitted on behalf of the plaintiff that the defence must be put up
in such a way that it can be said to be put up
honestly, i.e.
bona
fide
defence,
the Court held
6
:
“
The
defendant must consequently put up a defence honestly, disclose fully
the nature and grounds of it and in so far as he relies
upon facts
lay before the Court, facts which if proved will be a good defence.”
[33] It will
suffice if the defendant swears to a defence, valid in law in a
manner which is not inherently and seriously unconvincing
7
.
[34] The applicant contends that the
facts alleged in the opposing affidavit are contradictory. On the one
hand, deponent states
that the agreement of compromise was concluded
“On or about 27/28 February 2012, and subsequently reduced to
writing on 1
March 2012” as seen in annexure “A” to
the opposing affidavit.
[35] However, the
annexure relied on does not constitute and agreement but an offer.
Furthermore, the deponent goes on to say that
annexure “A”
was signed on 2 March 2012 and the acceptance of that offer was
communicated on 5 March 2012. On the latter
version, the compromise
agreement would have been concluded on 5 March 2012 which contradicts
earlier statement on that it was
concluded on or about 27 or 28
February 2012. The applicant submits that the version is full of
contradictions that it cannot be
said to be a
bona
fide
defence.
In my view, there are no contradictions in what is set out in the
opposing affidavit. This simply means that the agreement
was entered
into on 27/28 February 2012, subsequently reduced to writing on 1
March 2012 and sent to the deponent on 2 March 2012
and, was signed
by respondents on 5 March 2012 when the offer was accepted. In my
view, the applicant’s submission in this
regard has no
substance.
Material breach of the agreement
[36] The respondents alleged that the
applicant committed a material breach of the agreement in that it
failed to effect repairs
to the ceiling of the shop when the roof of
the building leaked so badly that the rain poured into the restaurant
and onto the
customers food on many occasions, causing customers to
become disillusioned with the restaurant and thereby causing harm to
first
respondents reputation. Eventually the ceiling became so sadden
with rain water that the entire ceiling fell down during the Easter
holiday season of 2012, resulting in huge loss of income for the
respondents.
[37] The applicant, despite numerous
requests refused to effect the necessary repairs for many weeks. The
respondents eventually
effected the repairs in terms of clause 21.1.2
of the written lease agreement in the amount of R18 900.00 which
amount the applicant
is liable. But despite demand the applicant has
failed or neglected to pay. No invoice has, however, been annexed to
the affidavit
in support of this claim.
[38] The respondents contended that
there is nothing preventing the respondents from using defences of
“set-off” and
“breach” of the agreement as
the parties are governed by the compromise agreement which does not
exclude same.
[39] The applicant submitted,
correctly in my view that the defences of “set-off” and
breach of the agreement do not
form part of the written lease
agreement and therefore not valid defences against its claim.
[40] I have already made a finding
that there was no valid compromise agreement between the parties. In
the absence of a valid compromise
agreement between the parties, the
relationship between them is governed by the original lease
agreement.
[41] It is correct
as the respondents contended that a compromise agreement operates in
the fashion that it is not affected by the
invalidity of the original
contract nor it is affected in any manner by the original contract as
it stands as an entirely new and
separate agreement to which each
party is bound as if the original contract never existed
8
.
[42] It is also
true that a compromise has the effect of res judicata and is an
absolute defence to an action on the original contract
9
.
[43] In the absence of a valid
compromise agreement the defence of breach the agreement is no
defence at all to the applicant’s
claim.
[44] In the absence of a valid
compromise, varying the terms of the lease agreement, it cannot be
said that the defendant has a
valid defence in law or a bona fide
defence. The plaintiff is accordingly entitled to summary judgment.
Application to strike out
[45] The causes of complaint referred
to in the application to strike out had been removed prior to the
hearing of this application.
A properly commissioned affidavit had
been substituted for the original. The causes of the complaint had,
in my view, been removed.
[46] In the circumstances, the
application to strike out cannot succeed. In my view, each party
should be ordered to pay its own
costs in the application to strike
out.
[47] In the result, the following
order is made:
Summary judgment is
granted against the first and second defendant’s jointly and
severally, the one paying the other to be
absolved, for:
1. Payment of the
sum of R263, 683. 57;
2. Interest thereof at the rate of
15,5% a
tempora morae
from the date of judgment to the date of
final payment.
3. Costs of suit on the attorney and
client scale.
Application to strike out
(1) The application to strike out is
dismissed.
(2) Each party to pay its own costs in
this application.
________
SISHI J
APPEARANCES
Date of hearing : 12 September 2012
Date of judgment : 12 December 2012
Counsel for the Plaintiff : M Bingham
Plaintiff’s Attorneys :
GIDEON
PRETORIUS INC
8
th
Floor Old Mutual
Building
300 Anton Lembede Street
DURBAN
Ref: Abri Kritzinger/Galleria/0019
Counsel for the Respondent : J Gates
1
st
& 2
nd
Respondent’s Attorneys :
D.K. SINGH, VAHED & PARTNERS
88 Harvey Road
Morning side
DURBAN
(Ref: Mr Archary/zh/SUN4/0003
1
Christie:
The Law of Contract in South Africa 6
th
edition,
page 475.
2
Gollach
& Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co
(Pty) Ltd & Others
1978 (1) SA 914
(A) at 921.
3
Lease
Agreement para 26.1, p 40 papers.
4
Lease
Agreement para 1.7 Definition Section p 22 papers
.
5
Herrigel
NO v Bon Raods Construction Co (Pty) Ltd and Another
1980 (4) SA 669
(SWA) and also Altech Data (Pty) Ltd v M B Technologies (Pty) Ltd
1998 (3) SA 748
(W) at 760I – and 761D-G.
6
Soorju
v Pillay 1962(3) SA 906 NPD at 908H
7
Breitenbach
v Fiat SA (EDMS) BPK
1976 (2) SA 226
(T) at 228 B.
8
Dennis
Peters Investments (Pty) Ltd v Ollerenshaw 1977(1) SA 197 (W) at 202
G-H.
9
Dennis
Peters investments supra at 202 E to F: Van Zyl v Niemann 1966(4) SA
661(A)