REPUBLIC OF SOUTH AFRICA
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case Number : 428 / 2003
In the matter between
PLATINUM HOLDINGS (PTY) LIMITED 1st Appellant
UNITRADE 1152 CC t/a JENNI BUTTON 2nd Appellant
PLATINUM CLOTHING WATERFRONT 267269 CC
t/a ACA JOE 3
rd Appellant
PLATINUM CLOTHING WATERFRONT 229 CC
t/a HILTON WEINER 4
th Appellant
and
VICTORIA AND ALFRED WATERFRONT (PTY) LTD 1
st Respondent
V & A WATERFRONT PROPERTIES (PTY) LTD 2nd Respondent
Coram : HOWIE P, SCOTT, NUGEN T, CONRADIE JJA and PONNAN AJA
Date of hearing : 7 MAY 2004
Date of delivery : 28 MAY 2004
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SUMMARY
Respondents obtaining declaratory order that second, third and fourth appellants vacate leased premises –
oral agreements concluding new leases alleged – such allegation not sust ainable in light of contemporary
correspondence – alternative defences based on Competition Act – necessary factual substratum lacking – no
relief granted by Competition Tribunal would impact on order given by court a quo – refusal to refer matter
to Competition Tribunal upheld.
__________________________________________________________________
J U D G M E N T
______________________________________________________________________________
2
CONRADIE JA
[1] The second respondent owns all the fixed properties at the Victoria and
Alfred Waterfront in Cape Town. It took transfer of them from their previous
owner, the Transnet Pension Fund, on 7 February 2001. The first respondent
manages and develops the Waterfront. Its managing director is Mr J F van der
Merwe. One of the proper ties owned by the second respondent for the letting of
which the first respondent is responsible is the Victoria Wharf, a large shopping
complex. Lordland Property Developmen ts CC (‘Lordland’) is the first
respondent’s sub-contractor for negotiating leases with prospective tenants. Its
managing member is Mr Adam Blow. Th e respondents' separa te identities are of
no consequence in these proceedings so I do not distinguish between them.
[2] The second, third and fourth appellants (the le ssees) sell designer clothes
from shops in the Victoria Wharf in terms of leases entered in to with the Transnet
Pension Fund. Their affair s are conducted by the first appellant whose managing
director is Mr Marcel Joubert.
[3] Each lease provided that it comm enced on 1 April 1999 and expired four
years later on 31 March 2003; there was no right of renewal but generally speaking
shop keepers' leases in the Victoria Wh arf were rene wed if agreement could be
reached on the terms of a new lease. The respondents' contention is that no
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agreement on new leases could be reache d so that the lesse es were obliged to
vacate the premises on the expiry of th eir leases. The appellants' principal
contention on appeal is that Joubert had, on behalf of each of them, orally agreed
an extension of its lease. If this conten tion fails, its second argument, in reliance
upon certain provisions of the Competition Act 89 of 1998, is that the lessees could
not be made to give up occupation of th eir premises pending adjudication by the
Competition Tribunal of their claims that the respondents had contravened certain
provisions of the Competition Act. These issu es are before us with the leave of the
court a quo.
[4] An evaluation of the cogency of the appellants' contentions regarding the
oral leases requires a brief exposition of the history of the litig ation. In June 2002
the respondents sounded out th e appellants on whether th e lessees would wish to
conclude new leases to take effect when their existing leases expired in March of
the following year. In the course of me etings between the parties thereafter it
became apparent, according to the respondents, that the negotiators could not reach
agreement on the terms for new leases. For the respondents a troubling feature of
the negotiations was that Joubert on seve ral occasions asserted that the lessees
enjoyed what he called 'constitutional prot ection' and could therefore not be made
to vacate the premises after the expira tion of the leases. There was also an
intimation from the appellants’ attorney at the time that they might seek to rely on
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the provisions of the Prevention of Illegal Eviction From and Unlawful Occupation
of Land Act 19 of 1998. Given what the respondents regarded as the lessees’
evident strategy to hold over, they applie d for declaratory relief with a view to
resolving those issues before the expiry of the leases.
[5] The respondents' applica tion, brought as a semi-urgent matter, was served on
18 December 2002. The first response from the appellants was on the morning of
the hearing, six weeks later. They then delivered an affidavit by Joubert setting out
certain of the appellants' contentions but also asking for more time. One of these
contentions was that the lessees and the respondents had concluded oral leases for
the period after 31 March 2004. Supplementary answering affidavits were served a
day or two before the date scheduled fo r the resumed hearing. The defence based
on the Competition Act was now also raised . A counter application for an order
directing the respondents to negotiate in good faith towards new lease agreements
had also seen the light of day. No appe al has been noted against the dismissal of
the counter application by the court a quo.
[6] In view of its importance not only to th is issue but to the next, it is necessary
to quote a letter dated 20 November 2001 a ddressed by Joubert to Van der Merwe
and annexed by the former to the appellants’ answering affidavit:
'I refer to our characteristically enjoyable meeting this morning and further thereto
attach copies of the original corresponde nce from Adam [Blow] that led to our
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good faith inclusion of the Jenni Button, Hilton Weiner, and Aca Joe Waterfront
stores in our 25 store rollout program . As you can see from the correspondence
the 8 week rent-free period and further 50% of refurbishment rental re-scheduling
proposed by yourselves at the time differ quite considerably from the zero rent-
free period and paltry 15% refurbishment rental rescheduling put forward in our
meeting with Adam and Willem [Dreyer - Executive Manager: Property
Management] this morning. We are theref ore, quite understanda bly, more than a
little dismayed at this sea-change in thinking, particularly in view of the good
faith reliance we placed on the initial pr oposals, including th e Waterfront, in our
refurbishment program, however misguided that may have been.
Whilst we readily concede that the propo sals put forward by Adam in July were
never consummated – with us in fact re questing 3 months rent free and further 5
year option periods – we cannot help fee ling a little put out that our good faith
reliance on these proposals, in including th e stores in our refurbishment program,
appears to have been so ill-founded.
This is all the more so in [the] light of the excellent relationship enjoyed between
our respective companies in the recent past, the stimulating conversations with
Adam, yourself and others in regard to exciting new gain-sharing paradigms and,
perhaps more importantly, the ultra cons ervative nature of the July proposals
themselves – especially when compar ed to the numerous far more generous
proposals on offer from competing centres , such as for example a full 100% R1
million per store refurbishment costs, plus full five years absolutely rent free,
from certain of your very close competito rs, in whose centres we are currently
enjoying considerably improved trading de nsities, of a magnitude comparable to
that in your own centre.
With all due respect to the total “pac kage” on offer from the Waterfront, we
cannot help feeling that same pales in comparison to the “package” on offer from
other leading centres and that you may ther efore be at some risk of losing prime
concepts to competing centres if you do not raise your total offerings to
comparable levels. However much we may like the Waterfront, and however
much your trading densities may be of the better ones in the country, the
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“package” on offer by yourselves does not come close to those on offer from
Mutual, Liberty, Monex and Pareto, making it most difficult for us to include your
centre in our refurbishment program, however much we may like to do so.
I am therefore most concerned that the Wa terfront is at risk of missing a golden
opportunity to procure world-class, ne w-generation, cutting-edge, icon flagship
concepts, not to mention the vastly impr oved income stream flowing from these
highly successful concepts. We would ha te to see this happen through lack of
vision, lack of understanding or lack of communication and therefore urge you to
apply your mind to finding ways to resurrect the July proposals so that we may all
share in the upside of rolling out these world beating concepts to your centre now,
while we have the opportunity to do so, thereby continuing an excellent
association which we hope will endure for years to come.'
P S For the avoidance of all doubt, I would stress th at the objective is not to
decrease the rand value of your income st ream over a five year period, but rather
to increase same by a significant proporti on and we therefore believe there is
compelling logic in your initial July proposals, in line with the win-win paradigms
discussed so many times between us. We th erefore trust that we will be able to
resurrect this opportunity for the benefit of all concerned.'
[7] The appellants have not sought to qualify or explain the contents of this
letter. It must accordingl y be taken as an accurate rendition of what was in
Joubert’s mind at the time. It relates th at the appellants a nd the respondents had
entered into negotiations, that Blow had made certain attractive proposals and that
these had subsequently fallen away. The ap pellants were anxious to persuade the
respondents to reinstate them by emphasizi ng the benefits which would accrue to
the respondents from doing so. The responde nts were not sorely tempted. On 22
November 2001 Van der Merwe wrote to Joubert reminding him that 'all
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discussions were in proposal form made by Adam Blow, subject to ratification by
our board' and pointing out that a revamp of the lessees' premises should have been
undertaken a long time before, that 'the desperation of other landlords have
necessitated very generous installation costs to yourselves’ and that ‘demand for
space at the Victoria Wharf continues to be exceptionally strong'.
The letter ends on what the writer calls 'a positive note':
'…should you avail yourself of the proposal made to you by Willem [Dreyer] and
Adam [Blow] on the 19th instant [the da y before Joubert’s letter] we would
certainly extend the termination date of the current leases and allow the
renovations to proceed and therefore gi ve you a longer period to amortize the
investment. You would be i nvesting in one of the count ry’s prime locations and I
am sure your investment would be greatly worthwhile.'
[8] Each of the writers is attempting to persuade the other that it would be
advantageous for those whom they repres ent to enter into ne w leases; they are ad
idem that the negotiations have broken down; they are in agreement on the fact that
there have been no renewals. The appella nts are angry and disappointed that the
July proposals are no longer open for acc eptance. The respondents are determined
not to go back to the July proposals which in any event were not primarily
concerned with a renewal of the leases in due course but rather with a promise of
early renewals of the leases (from Ma rch 2002 and not from April 2003) provided
the shops were refurbished before a certain deadline.
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[9] In his first answering affidavit Jouber t states that he had on behalf of the
lessees 'by our conduct and our actions consummated various verbal and written
proposals made by the Applicant, in term s of which the existing leases would each
be renewed from 1 April 2003 for a period of 5 years, against which the Second to
Fourth Respondents [the lessees] would re novate and upgrade their stores.' The
'consummation' was the approval of plan s by the respondents for the refurbishing
of the stores (or at any rate of some of them). This ‘consummation’, says Joubert,
made him believe that new lease contracts had been c oncluded. This, as we have
seen, is not what emerge s from the correspondence the tenor of which remains
unchallenged.
[10] In Joubert’s second, main, answeri ng affidavit there emerges for the first
time reliance on a second oral agreemen t, supposedly concluded telephonically
between him and Blow some time after negotiations for new leases had been
proposed by the respondents in June 2002. It is the re spondents' policy to approach
sitting tenants well before the expiration of their leases to find out whether and, if
so, on what terms, they would wish to enter into new leases. Letters were written to
the appellants and several meetings were held from July 2002 onwards at which
the question of new leases was discussed. When Joubert finally put pen to paper in
a letter to Van der Merwe on 14 October 2002, his recordal of what had transpired
up to then was inconsistent with a ny contention that an agreement had been
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reached. Instead, he expressed the hope that 'we will be able to thrash out mutually
acceptable parameters for governing ou r ongoing relationship quickly and
amicably.'
Two further meetings were held on 23 October and 8 Novemb er 2002 at which no
progress towards the new l eases was made but at which talk of constitutional
protection which the lessees supposedly en joyed by having built up proprietary
interests in their location in the Victor ia Wharf made the respondents realise that
no agreement was likely, and sufficiently al armed them to instruct their attorneys
to write to the appellants terminati ng negotiations while at the same time
reminding them that the lessees were oblig ed to vacate their premises on 31 March
2003.
[11] The attorneys' letter provoked a v ituperative reply from Joubert to them
dated 27 November 2002. In it Joubert sp eaks of being 'anxious to resolve this
matter as quickly as possible', of havi ng 'bent over backwards to finalize these
lease renewals', and of wan ting to 'far rather finalize mutually acceptable terms on
a fair and reasonable basis for all concer ned…'. Instead, Joube rt maintains, the
appellants' efforts at renewa l were 'obstructed by an astonishing display of heavy
handed, bullying, intimidating, coercive , extortionary tactics from your clients,
[which] contrived to extort blatantly unreasonable, inequitable, unfair and
iniquitous terms from us by openly mani pulating threat of destruction of our
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considerable accumulated interest in the sites if we do not accept patently
unreasonable terms…'
This is not the language of agreement.
[12] As in the case of the 2001 correspon dence, neither the writing of the letters
nor their content is in dispute. It is not suggested that anything that was written by
the parties misstated anything in their co rporate minds. In particular there is no
reason to doubt that the letters correctly reflected the state and progress of the
negotiations as the parties perceived them at the time.
[13] It is also common cause that th e appellants did not in any of the
correspondence put forward the contenti on that the existing leases had been
extended or that new leases had been concluded. The obvious response to the
attorneys' letter, that the lessees were contractually entitled to remain where they
were, was not made. That such a respons e was not made is common cause; that it
was the obvious response and that it woul d have been made had the appellants
believed the lessees to be c ontractually entitled to remain in their premises, is not
common cause. But since they acted in such marked cont rast to what the ordinary
course of human experience sugge sts they would have done under the
circumstances now stated by Joubert to ha ve existed, they needed to offer an
explanation for this strange and unusual omission. Their failure to do so leads one
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to strongly suspect that the conclusi on of the oral leases was a defence
manufactured shortly before the first hearing of the application.
[14] The appellants' case is that there was insufficien t evidence for the court a
quo to have come to a conclusion on whet her there had been a renewal of the
leases or not and that in the absence of a request by the respondents that the matter
be referred to oral evidence the applica tion ought to have been dismissed. I agree
with the judge a quo that the application was cap able of being decided on the
papers. No conflict of fact emerges fro m the correspondence between the parties.
There are inconsistencies in the eviden tial material but they only arise because
Joubert’s view of the situation at the time he deposed to his affidavits was different
to that at the time he wrote the letters referred to above. In consistencies on paper
between earlier and later versions of the same litigant are not necessarily fatal to
his case: An explanation of the discre pancy may or may not prompt a court to
order further investigation into the trut h of the explanation using the techniques
developed in the hearing of oral eviden ce. In the absence of any explanation by
Joubert for the divergence between his stat ements in the correspondence and in the
affidavits, there was nothing to refer for further exploration by cross-examination.
[15] Peterson v Cuthbert & Co Ltd 1945 AD 420 is a case in which a tenant
wrote a letter promising to vacate premises let to him by the respondent. Later, in
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an answering affidavit, he contended th at the lessor's agent had given him oral
permission to remain in the premises. He was required to offer an acceptable
explanation of the discrepancy between wh at he had promised in his letter and
what he averred in his affida vit. Watermeyer CJ at 428 set out the rule that has so
frequently been applied:
'In every case the Court must examine the alleged dispute of fact and see whether
in truth there is a real issue of fact which cannot be satisfactorily determined
without the aid of oral evidence;'
Although the tenant alleged that he had been given pe rmission to stay in the
premises his earlier promise to vacate, it was held, made the dispute of fact
'immaterial.' The same conclusion must be inevitably drawn here: The unexplained
letters written by Joubert undermined his testimony under oath to the point where,
in the context of deciding on the advisability of further exploration of the issues,
the conflict between that a nd contrary facts testified to by the respondents became
'immaterial'.
[16] The appellants' next de fence, a dilatory one, was also dismissed by the court
a quo . It refused to refer to the Competiti on Tribunal in terms of s 65(2) of the
Competition Act issues 'concerning conduct that is prohibited in terms of this Act.'
Section 62(2) prohibits a civil court from considering the merits of a competition
issue; it must refer it to the Competition Tribunal provided that it is satisfied that
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the issue has not been raised frivolously or vexatiously and that the outcome of the
action depends on the resolution of the co mpetition issue. It is clear that the
prohibition against consideration of th e merits of a competition issue does not
mean that a court can give no consideration to the issue at all. It merely means that
it may not attempt to resolve the issue; but the question whether the competition
issue is frivolous or vexatious is an i ssue for the court, not for the Competition
Tribunal.
[17] The appellants contend that the re spondents are guilty of two restrictive
practices outlawed by the Competition Act: In violation of s 9, as a 'dominant firm,'
practising price discrimination and, in viol ation of s 8, abusing their dominance in
the market in which they conduct business.
[18] The first contention in this regard is that the respondents’ conduct in
refusing to renew the lease agreements other than on terms determined by
themselves constituted anti-competitive pri ce discrimination (in violation of s 9 of
the Act) in that the terms demanded by the respondents as dominant firms for a
renewal of the lease agreements were si gnificantly more onerous than the terms
provided by the respondents to major retailers in equivale nt transactions in respect
of retail space at Victoria Wharf.
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[19] In prohibiting price discriminati on by a dominant firm, s 9 of the Act
provides that –
'(1) An action by a dominant firm, as the seller of goods and services, is prohibited
price discrimination, if –
(a) it is likely to have the effect of substantially preventing or lessening competition;
(b) it relates to the sale, in equivalent transa ctions, of goods or services of like grade
and quality to different purchasers; and
(c) it involves discriminating between those purchasers in terms of –
(i) the price charged for the goods or services;
(ii) …
(iii) …
(iv) …'
[20] An action by a dominant firm cannot be price discrimination unless it relates
to sales in what are called 'equivalent tr ansactions', of goods or services of like
grade and involves discrimina ting between purchasers in terms of price. There is
no evidence suggesting that the leases to major retailers at the Victoria Wharf are
transactions that could in any relevant wa y be regarded as equivalent to the leases
for the kind of small shops occupied by the appellants.
[21] Moreover, the appellant s, in the half-hearted comparison they sought to
draw between the rental levels for major tenants and for other, smaller, retailers
only brought into the comparison the basic monthly rent per s quare metre paid by
each category of trader without any indi cation of what a major tenant's turnover
rental might be. Even if leases with major stores were to be re garded as equivalent
15
to leases with shops occupying one hundr ed square metres or so, there is no
evidence of what total rent al income per square metr e the respondents derive from
each and therefore no hope that on these facts any kind of price discrimination
might be demonstrated.
[22] The appellants also contend that the lessees were, in defiance of the
provisions of s 8(a) of the Competition Act, charged an 'excessive price' to the
detriment of consumers by the dominant res pondent firms. Section 8(a) prohibits a
dominant firm from charging an excessive price to the detriment of consumers.
[23] Assuming the respondents to be domin ant firms within the meaning of the
Competition Act and assuming the expressi on ‘excessive price’ in the Act to
include an excessive rental, there is no evidence that the rental suggested by the
respondents for the new leases fell within the purview of the definition of this
expression in the Act. An excessive pri ce is a price for a ‘good or service’ that
bears no reasonable relation to its economic value. There is no evidence of what
the economic value of the lessees' premis es was. It is thus completely unknown
what relation the proposed rental bore to such value.
[24] The indications on the papers are th at the appellants did very well out of
their tenancy of premises in the Vict oria Wharf. According to Joubert the
Waterfront stores have enjoyed 'spectacular growth in trading results over the last
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six years in particular.' They were, again according to Joubert, 'generating
significant "turnover rental" for the app licants over and above the considerable
base rentals already paid.' The increase in percentage rental proposed by the
respondents over the previous lease period was 2%, up from 8% to 10% of
turnover, rising to 12% if turnover ex ceeds R4 500 per square metre per month.
There is no evidence on record that an increase of this order would have made the
rental excessive in the sense that it fa iled to bear a reasonable relation to the
economic value of the premises.
[25] The appellants' contention that the lessees were (to the detriment of
consumers) being charged ex cessive base rentals is every bit as unsubstantiated.
Having regard to the lack any evidence ot her than that of a dramatic improvement
in the lessees' turnover, it is fanciful to suggest that the increased rent bore no
reasonable relation to the economic value of the premises. It is no wonder that in
the discussions that followed the respondents' proposals for new leases, Joubert did
not complain about the rent but complain ed instead that the lessees would not be
able to operate from premises as small as those that the respondents were prepared
to let to them.
[26] As would have appeared from the discussion above, the appellants’ case on
the competition issues is hopeless. There is authority for the proposition, which I
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endorse, that one who conducts a hopeless case acts frivolously. In S v Cooper
1977 (3) SA 475 (T) at 476D-G Boshoff J remarked in the context of an
application for a special entry on the record that –
' ... the word "frivolous" in its ordinary and natural meaning connotes an
application characterized by lack of seri ousness, as in the case of one which is
manifestly insufficient, and the word "a bsurd" connotes an application which is
inconsistent with reason or common sense and unworthy of serious consideration.
These words have been used accordi ng to the decided cases in respect of
pleadings and actions which were obvi ously unsustainable or manifestly
groundless, or utterly hopeless and wit hout foundation…. In order to bring an
application within this description, th ere should be present grounds upon which
the Court could found an opinion that the application is clearly so groundless that
no reasonable person can possibly expect to obtain relief from it. The Court
should be slow in coming to such a conc lusion, and this quality must therefore
appear as a certainty and not merely on a preponderance of probability.'
[27] The court a quo found that the late raising of the competition issues did not
lead to the inference that they had been raised frivolous ly or vexatiously. It seems
to have overlooked the fact that the test is also objective and that an issue can be
said to have been raised in a frivolou s and vexatious manner if it is clearly
groundless or insufficient. No facts have been alleged by the appellants that might
have supported a referral to the Compe tition Tribunal: In the circumstance no
reasonable person could possibly have e xpected to obtain any relief from that
tribunal.
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[28] There is another reason for this conclusion, correctly relied upon by the
court a quo. Prayer 3 of the notice of motion s ought a declarator that the lessees
'have no right of continued occupation of the said premises after 31 March 2003.'
An order was granted in those terms. Ev en if the Competition Tribunal could, as
submitted, require the parties to negotia te towards leases giving occupation with
effect from that date, the appellants would have no right to further occupation until
the conclusion of such leases. No order of the Competition Tribunal could undo the
effect of the order of the high court. Th ere was accordingly no impediment to the
court a quo granting the requested declaratory order. To put it differently: No order
of the Competition Tribunal was, in the words of s 65(2)( b)(ii) of the Competition
Act, 'required to determin e the final outcome of the action'; the final outcome of
the application was and, in the light of the relief sought could only be, determined
by the high court.
The appeal is dismissed with costs that include the costs of two counsel.
J H CONRADIE
JUDGE OF APPEAL
CONCURRING:
HOWIE P
SCOTT JA
NUGENT JA
PONNAN AJA