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[2009] ZAGPJHC 81
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Bedford Square Properties (Pty) Ltd v Liberty Group Limited and Others (41748/09) [2009] ZAGPJHC 81; 2010 (4) SA 99 (GSJ) (10 December 2009)
IN THE HIGH COURT OF
SOUTH AFRICA
SOUTH GAUTENG HIGH COURT
JOHANNESBURG
CASE No. 41748/09
REPORTABLE
In the matter between:
BEDFORD
SQUARE PROPERTIES (PTY LTD
Applicant
and
LIBERTY
GROUP LIMITED
First
Respondent
ERF
179 BEDFORDVIEW (PTY) LIMITED
Second
Respondent
WOOLWORTHS
LIMITED
Third
Respondent
SUPER
GROUP LIMITED t/a MICA HARDWARE
Fourth
Respondent
BODY
CORPORATE BEDFORD
Fifth
Respondent
BODY
CORPORATE VILLA ABROSIA APARTMENTS
Sixth
Respondent
BODY
CORPORATE VILLA ABROSIA
Seventh
Respondent
THE
REGISTRAR OF DEEDS, JOHANNESBURG
Eighth
Respondent
JUDGMENT
WILLIS
J:
[1] This is an
application for a declaratory order that the enforcement of a
servitude created by contract, is contrary to public
policy and
unenforceable and for consequential cancellation of the registration
of the servitude.
[2] The applicant and the
first and second respondent entered into a “notarial deed of
restraint” on or about 21 June
2001. At that time, the
applicant was the registered owner of erf 39 Bedford gardens
Township, Registration Division IR, Gauteng
Province, the first
respondent the owner of several properties on which, collectively,
the Eastgate shopping centre is situated,
and the second respondent
the owner of several properties on which, collectively, the shopping
centre known as Village View is
situated. In terms of this “deed
of restraint” the applicant undertook that it and its
successors in title and assigns
would not, for a period of 11 years
from 4 November 2003, conclude a lease agreement in terms of which
the rental space of the
applicant’s property would be let to
“Woolworths or Mica Hardware”. The deed provided that the
restraint was
enforceable by the first and second respondents and
their successors and assigns. The deed provided that this restraint
could be
registered as a servitude on all the properties concerned.
These servitudes were registered on or about 12 December 2004.
[3] Since then there has
been no change in the ownership of the properties owned by the second
and the third respondents. Erf 39
has, however, been divided into
portions 3 and 4, leaving a remaining extent. Portions 3 and 4 have
been sold to third party developers
who established sectional title
schemes thereon. The bodies corporate of those schemes have been
joined as the sixth and seventh
respondents respectively. The
applicant developed the remaining extent and established thereon a
“mixed use” sectional
title scheme, the body corporate of
which is the fifth respondent. The applicant retained ownership of
all the retail and commercial
sections of this scheme. It is the
registered owner of five sections therein: sections 48, 49, 50, 51
and 52. In respect of these
sections the applicant conducts the
business of a landlord of retail shopping centre and commercial and
office space. The applicant
now wishes to conclude a lease agreement
with Woolworths as a tenant in its shopping centre. This gives rise
to the present application.
The only opposition comes from the second
respondent. The rest of the respondents agree to abide the
decision of the court
provided there is no costs order made against
them.
[4] The applicant has
fairly and correctly conceded that it has to straddle the first
hurdle of the a notarial deed being found
to be contrary to public
policy before there can be any consideration of the second aspect of
the relief sought,
viz
. the cancellation of the servitudes
which restrict leases being entered into with Woolworths and Mica
Hardware respectively.
In other words, whether or not it is
apprpriate for servitudes to be registered in such terms does not
arise for purposes of this
application if it is found that the
applicant remains contractually bound by the terms of the notarial
deed.
[5] The second respondent
has raised the following points in opposition to the application:
(i) the applicant has no
locus standi
to bring the application because of the
subsequent subdivision of erf 39, Bedford Gardens Township;
(ii) No cause of action
has been disclosed because the law of restraint of trade does not
apply to agreements of this nature (i.e.
it applies between employers
and employees and between business partners but not between property
owners);
(iii) The proper
fora
for disputes of this nature are the Competition Tribunal and the
Competition Appeal Court established in terms of the
Competition Act,
No. 89 of 1998
;
(iv) The agreement was
not and is not contrary to public policy.
[6]
Counsel for the contending parties both relied on
Venter
v Minister of Railways
,
[1]
Strathsomars
Estate Co Ltd v Nel
,
[2]
Magna
Alloys and Research (SA) Pty) Ltd v Ellis
,
[3]
Sunshine
Records (Pty) Ltd v Frohling
,
[4]
Basson
v Chilwan
,
[5]
and
Reddy
v Siemens Telecommunications (Pty) Ltd
[6]
to advance their respective positions. The starting point, it seems
to me, is
pacta
sunt servanda
.
[7]
This maxim
is generally translated into English as meaning “agreements
must be observed”. As a general rule, the courts will hold
parties to their contractual obligations. The applicant and the
second respondent entered into this agreement. Mr
Peter
,
who appears for the applicant, accepted that the applicant is bound
by it, unless, in this case, the court can find that it is
contrary
to public policy. Even if the ordinary rules in regard to agreements
in restraint of trade were to apply where two or
more property
developers enter into such an agreement, in order for the
applicant to be successful, this would entail a finding
that:
(i)
the second respondent does not have an interest deserving of
protection; and/or
(ii)
a weighing of the respective interests of the parties cannot justify
it; and/or
(iii)
the agreement is inherently unreasonable; and/or
(iv)
the imbalance in the respective bargaining position of the parties
raises a cause for concern akin to the oppression of one
by the
other.
[8]
[7]
None of these considerations appears inherent in the fact-complex
before me. Instead, it has been alleged, in broad terms, in
the
applicant’s founding affidavit, that the public have been
denied the freedom of choice, that “the restraint provisions
would serve merely to protect a monopolistic interest” of the
second respondent, that the “restraint does not serve
to
protect any legitimate, commercial or other interest”, and is a
“naked restraint inhibiting free and fair competition”.
Mr
Unterhalter
who, together with Mr
Wilson
,
appears for the second respondents, sought to educate me about the
design and tenancy of shopping centres being a science as well
as an
art. He stressed that there are important concepts such as “anchor
tenancy agreements” and so on which are well-recognised
as
being a legitimate part of commercial life in this country. He need
not have taken so much trouble. It is indeed well-known
that it is a
regular feature of commercial life that, when it comes to shopping
centres, there are restrictions as to who may or
may not be tenants
in particular buildings. It is also well-known that certain tenants
are attracted by the presence or absence
of other tenants.
These are legitimate concerns for a landlord such as the second
respondent. It has a legitimate interest
in taking steps to protect
these concerns. I do not profess any skills in the fascinating world
of the marketing commercial buildings
and, in any event, it would be
wrong for me to take too much judicial notice of the intricacies of
this world. Nevertheless,
in broad outline, the practice of
carefully crafted commercial tenancy agreements is a well-established
feature of our commercial
landscape. I do not intend to upset the
apple-cart. The parties to the agreement were both landlords and not,
in their relationship
with one another, employers or employees or
business partners. The applicant, as a landlord, is not, in general
terms, restricted
in its business of leasing out it premises. It is
free to do so. It is restricted merely in leasing its premises to
certain named
tenants for a limited period of time. Besides, the
well-established principle, of general application, set out in
Sasfin
(Pty) Ltd v Beukes
must
surely apply:
[9]
The
power to declare contracts contrary to public policy should, however,
be exercised sparingly and only in the clearest of cases,
lest
uncertainty as to the validity of contracts result from an arbitrary
and indiscriminate use of the power. One must be careful
not to
conclude that a contract is contrary to public policy merely because
its terms (or some of them) offend one’s individual
sense of
propriety and fairness. In the words of Lord Atkin in
Fender v St
John-Mildmay
1938 AC 1
(HL) at 12:…
“
the
doctrine should only be invoked in clear cases in which the harm to
the public is substantially incontestable and does not depend
upon
the idiosyncratic inferences of a few judicial minds…”.
In
grappling with this often difficult problem it must be borne in mind
that public policy generally favours the utmost freedom
of contract,
and requires that commercial transactions should not be unduly
trammelled by restrictions on that freedom.
As
the Supreme Court of Appeal (“the SCA”) has noted in
Afrox
Healthcare Bpk v Strydom
,
[10]
this
principle has repeatedly been confirmed in the SCA over recent years.
As it is quite clear that the court cannot set aside
the agreement on
the grounds that it is contrary to public policy, I need not consider
the other points raised by counsel for the
respective parties.
[8]
Mr
Unterhalter
submitted that, by reason of the huge potential
commercial importance of this case, it would be appropriate to allow
the costs
of two counsel. I agree.
[9] The following is the
order of the court:
The application is
dismissed with costs, which costs are to include the costs of two
counsel.
DATED AT JOHANNESBURG
THIS 10th DAY OF DECEMBER, 2009
N.P.
WILLIS
JUDGE
OF THE HIGH COURT
Counsel
for the Applicant:
Adv.
J. Peter
Counsel
for the Second Respondent:
Adv.
D.N. Unterhalter
SC (with him,
J. Wilson
)
Attorneys
for the Applicant:
Vining
Camerer Inc
Attorneys
for the Second Respondent:
Rothbart
Inc
Date
of hearing: 04 December 2009
Date
of judgment: 10 December 2009
[1]
1949
(2) SA 178 (E)
[2]
1953
(2) SA 254 (E)
[3]
1984
(4) SA 874 (A).
[4]
1990
(4) SA 782 (A)
[5]
1993
(3) SA 742 (A)
[6]
2007
(2) SA 486 (SCA)
[7]
Reddy
v Siemens
(
supra
)
at para [15]
[8]
Basson
v Chilwan
(
supra
)
at 767G-H;
Reddy
v Siemens
(
supra
)
at para [16]
[9]
1989
(1) SA 1
(A) at 9B-F
[10]
2002
(6) SA 21
(A) at para [8]