About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2018
>>
[2018] ZASCA 9
|
|
Ocean Echo Properties 327 CC and Another v Old Mutual Life Assurance Company (South Africa) Limited (288/2017) [2018] ZASCA 9; 2018 (3) SA 405 (SCA) (1 March 2018)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 288/2017
In
the matter between:
OCEAN
ECHO PROPERTIES 327 CC
FIRST APPELLANT
ANGELO
GIANNAROS
SECOND APPELLANT
and
OLD
MUTUAL LIFE ASSURANCE COMPANY
(SOUTH
AFRICA)
LIMITED
RESPONDENT
Neutral
citation:
Ocean Echo Properties 327
CC v Old Mutual Life Assurance Company (South Africa) Limited
(288/2017)
[2018] ZASCA 09
(01 March
2018)
Bench:
Ponnan and Willis and Saldulker JJA and
Mothle and Hughes AJJA
Heard:
22 February 2018
Delivered:
01 March 2018
Summary:
Exception to plea – upholding an
exception disposes of the pleading, not the action or defence –
ordinarily therefore
the court should grant leave to amend and not
dispose of the matter – an excipient has a duty to persuade the
court that
upon every interpretation which the plea can bear no
defence is disclosed - tacit agreement pleaded constitutes a
termination of
the written agreement, not a variation
thereof.
ORDER
On
appeal from
:
Western
Cape Division, Cape Town (Hlophe JP, Henney & Cloete JJ sitting
as full court):
(1)
The appeal succeeds with costs.
(2)
The order of the full court is set aside and replaced by:
‘
(a)
The appeal succeeds with costs.
(b)
The order of the court below is set aside and substituted with:
“
The
exception is dismissed with costs.”’
JUDGMENT
Ponnan
JA (Willis and Saldulker JJA and Mothle and Hughes AJJA concurring):
[1]
This is an appeal against a judgment granted in the
Western
Cape Division of the High Court, Cape Town
by
Le
Grange J
against the appellants,
Ocean Echo
Properties 327 CC (Ocean Echo)
and Mr
Angelo
Giannaros,
in favour of the respondent,
Old
Mutual Life Assurance Company (South Africa) Ltd (Old Mutual),
in an action brought by the latter
,
as
plaintiff, against
Ocean Echo,
as the first
defendant and Mr
Giannaros
, as the second.
[2]
Old Mutual’s case was founded against:
(a)
Ocean Echo upon a written agreement of lease concluded on 11 November
2008 in terms of which
Old Mutual let to Ocean Echo business premises
described as Shop 3 Cartwrights Corner, situated at the corner of
Darling and Adderley
Streets, Cape Town (the premises); and
(b)
Mr Giannaros upon a deed of suretyship executed by him on 29 October
2008 in terms of which
he ‘bound himself as surety and
co-principal debtor . . . to [Old Mutual] for the due and proper
fulfilment of all the obligations
of [Ocean Echo]’ under the
lease agreement.
[3]
Asserting that Ocean Echo was in arrears in respect of payments due
under the lease agreement, Old Mutual caused summons to
be issued
against both appellants. The plea raised by the appellants to the
summons was, inter alia, that:
‘
The
[Defendants] admit having entered into the lease; however aver that
the lease was tacitly terminated upon the Defendant’s
vacating
the [premises] in December 2011, at which time the [Defendants] were
not in arrears in respect of rent, rates or any other
charges. The
Plaintiff was well aware that the [Defendants] had vacated the
[premises], as the Plaintiff began receiving rental,
rates and other
expense payments from the new tenant, Nandipha Solomon. The Plaintiff
no longer sent the Second Defendant rental
statements, but sent such
statements to Solomon. By allowing Solomon occupancy and use of the
[premises] and by receiving rental,
rates and other payments from
Solomon, the Plaintiff acknowledged a tacit lease between itself and
Solomon.
.
. .
The
[Defendants] were neither tenants nor occupants of the [premises]
during the period for which the alleged arrears are claimed.
The
tenant during this period, Nandipha Solomon is liable for the
arrears, as per her tacit lease with the Plaintiff.
.
. .
The
Second Defendant admits having signed the surety as averred, however
points out that the suretyship terminated upon tacit termination
of
the lease agreement in December 2011.
.
. .
Neither
the First nor Second Defendant can be held liable for Solomon’s
obligations as per the tacit lease with the Plaintiff.’
[4]
The plea was met with the following exception:
‘
1.
The Plaintiff’s claim against the First Defendant is for arrear
rental and other
charges (‟the Arrears”) due to the
Plaintiff by the First Defendant in terms of a written agreement of
lease (‟the
Lease”).
2.
All of the Arrears arose during the period of the Lease.
3.
The Lease contains, inter alia, the following provisions:
3.1
The First Defendant is precluded from giving up possession of the
leased premises, or any
part thereof, without the Plaintiff’s
prior written consent (clause 13.1).
3.2
The Lease contains all of the terms and conditions of the agreement
between the Plaintiff
and the First Defendant and there are no
understandings, representations, promises, warranties or the like
between the Plaintiff
and the First Defendant relating to the leased
premises (clause 22.1).
3.3
No alteration, variation of or addition to the Lease shall be of any
force or effect unless
it is reduced to writing and signed by both
the Plaintiff and the First Defendant (clause 22.2).
3.4
No relaxation or indulgence which the Plaintiff may show the First
Defendant shall in any
way prejudice the Plaintiff’s rights in
terms of the Lease, nor shall any acceptance of payment of any amount
due to the
Plaintiff in terms of the Lease prejudice the Plaintiff’s
rights or operate as a waiver or abandonment of such rights or estop
the Plaintiff from exercising any rights enjoyed by the Plaintiff in
terms of the Lease (clause 22.3).
4.
The Defendants, in terms of the Plea –
4.1
Aver that the First Defendant vacated the leased premises; and
4.2
Rely on alleged tacit termination of the Lease.
5.
The alleged vacation of the leased premises is subject to the
provisions of clause
13.1 and requires the Plaintiff’s written
consent.
6.
The alleged tacit termination of necessity amounts to an alteration
or variation
of the Lease, specifically the period of the Lease and,
as such, is subject to the provisions of clause 22.2 of the Lease.
7.
The purported tacit
termination is accordingly contrary to the express provisions
of the
Lease.
8.
In the circumstances the Defendants’ Plea is excipiable in that
it fails
to disclose any defence to the Particulars of Claim.’
[5]
Le Grange J:
(1)
upheld the exception;
(2)
struck out the appellants’ plea; and
(3)
granted judgment in favour of Old Mutual against the
appellants jointly and severally for payment of
the
sum of R457, 816.07 together with interest at the rate of two per
cent per month from 1 August 2013 to date of final payment
and costs
on the scale as between attorney and client
.
[6]
The learned judge thereafter filed written reasons for judgment. In
sum, those were:
‘
[2]
The Plaintiff took exception to the above mentioned Plea, on the
basis that it was bad in
law as the tacit cancellation was contrary
to the terms of the written Lease Agreement which contained the
non-variation clause.
[3]
At the hearing on 28 April 2015, the Defendants’ legal
representative failed
to appear. The contention, in essence, was that
the [Defendants] would not be able to lead any testimony at the Trial
in support
of the Plea. In the absence of the [Defendants] and their
legal representative, the excipient demonstrated that no defence was
therefore disclosed. In the result, Judgment was granted against the
[Defendants] in which the exception was upheld and the defence
struck
out.’
Le
Grange J subsequently granted leave to both appellants to appeal to
the full court of that division.
[7]
The appeal was dismissed with costs by the full court. Henney J
(Hlophe JP and Cloete J concurring) held:
‘
[27]
An informal vacating of the premises without prior written consent is
not a cancellation of the agreement,
but a variation of the
prohibition of the conduct described in clause 13.1. I once again
agree, because no prior written consent
was given by the Respondent
before the Appellants gave up occupation or possession. This fact is
not in dispute. Vacating the property
or giving up occupation or
possession without written consent translates into an alteration or
variation of the agreement that
itself shall not be of any force or
effect unless it is reduced to writing and signed by both the
Respondent and the Appellants
as required by clause 22.2.
[28]
Furthermore, I also agree that any acceptance of payment of rental,
rates and other payments
from Solomon does not constitute
acknowledgement by the Respondent of a tacit lease with Solomon.
Clause 22.3 of the lease expressly
states that the acceptance of
payment by the Respondent of amounts due under the lease shall not
prejudice the Respondent’s
rights or operate as a waiver or
abandonment of such rights or estop the Respondent in exercising any
rights enjoyed by the Respondent
in terms of the lease. I agree,
because even though it had been proven that the Respondent has
accepted payment from another party
other than the Appellants, such
payments in terms of clause 22.3 would not affect the rights of the
Respondent.’
[8]
Preliminarily, it is necessary to observe that it is unclear upon
what basis Le Grange J dealt with the case in the manner he
did.
Having upheld the exception and struck out the plea he proceeded to
enter judgment for Old Mutual, instead of granting leave
to the
appellants, if so advised, to amend their plea.
[1]
The
upholding of an exception disposes of the pleading against which the
exception was taken, not the action or defence.
[2]
An unsuccessful pleader is given the opportunity to amend the plea,
even when the plea has been set aside because it does not disclose
a
defence.
[3]
The rationale for this seems to be that although the defence
contained in the pleading may be bad the pleading as such continues
to exist.
[4]
Ordinarily therefore the court should grant leave to amend and not
dispose of the matter. Leave to amend is not a matter of an
indulgence; it is a matter of course unless there is a good reason
that the pleading cannot be amended.
[5]
No ‘good reason’ was evident or asserted in this case. In
those circumstances, counsel for Old Mutual conceded that,
irrespective of the merits of the exception, Le Grange J ought not to
have proceeded to enter judgment against the appellants.
It follows
that paragraph 3 of his order cannot stand and accordingly falls to
be set aside.
[9] Since
these are proceedings on exception, Old Mutual has the duty as
excipient to persuade the court that upon every interpretation
which
the plea can reasonably bear, no defence is disclosed.
[6]
The main purpose of an exception is to avoid the leading of
unnecessary evidence.
[7]
By the nature of exception proceedings the correctness of the facts
averred in the plea must be assumed.
[8]
Because Old Mutual chose the exception procedure – instead of
having the matter decided after the hearing of evidence at
the trial
- it had to show that the plea is (not may be) bad in law.
[9]
[10] In
the view that I take of the matter, Le Grange J may have been
justified in declining to decide the matter on exception.
It is
neither necessary nor desirable that I come to a final conclusion on
the matter. It suffices for present purposes to say
that I am driven
provisionally to accept that Ocean Echo has surpassed the threshold
set on exception. It may be that at the trial
stage the court, from
such evidence as to context (
KPMG
Chartered Accountants
v
Securefin Ltd and another
2009
(4) SA 399
(SCA) at paragraph 39)
[10]
as is permissible to be adduced, may be in a better position than I
am to finally determine the matter. In my view the plea, although
elliptic, is reasonably capable of an interpretation that sustains a
defence.
[11] A
useful starting point is the observation by Botha JA (
Ferreira &
Another v SAPDC (Trading) Ltd
[1983] 3 All SA 346
(A) at 356)
that:
‘
From
Neethling's
case
I venture to abstract this principle: while an oral agreement varying
(at least materially) the terms of a contract of the
kind in question
is not permissible, there is no objection to allowing proof of an
oral agreement relating to the cancellation
of the contract by which
its terms as such are not placed in issue’.
Accordingly,
what is before us on appeal is one question, and one question only;
whether the tacit agreement as pleaded constitutes
a cancellation of
the lease agreement or merely a variation thereof. If the latter, it
would be ineffective according to our law
by reason of it not having
been reduced to writing and duly signed. Both courts below approached
the matter on the basis that the
plea is an ineffective (in law)
verbal variation of the lease agreement. In that, I remain far from
persuaded that they were correct,
for I conceive that they may have
mischaracterised the nature and effect of the tacit agreement raised
by the plea.
[12]
Ferreira
was concerned with whether an oral agreement as
pleaded constituted a cancellation of a suretyship undertaking or
merely a variation
of its terms. Botha JA stated (at 358):
‘
.
. . the true view, I consider, would be that the oral agreement
terminated the operation of the contract, with all its terms,
in
futurum
,
so as to preclude the coming into being of any further obligations,
while leaving intact obligations that arose from the past
operation
of the contract, with all its terms. In other words: the oral
agreement would have extinguished the contract as a source
of future
obligations while keeping alive obligations already accrued by virtue
of its operation in the past. This would not in
any way involve a
variation of the terms of the contract. Consequently the oral
agreement as interpreted in the Court
a
quo
would
not offend against s 6 of Act 50 of 1956’
.
[11]
[13]
Those observations are particularly pertinent to a contract that
gives rise to continuing obligations. The agreement of lease
in the
present case is such a contract. When such a contract is cancelled by
agreement, the cancellation more often than not operates
in
futurum
only, ie
obligations already accrued remain enforceable, but the operation of
the contract ceases as far as future obligations are
concerned. To
allow evidence of such an agreement does not open the door to let in
any dispute as to the terms of the original
contract; these
remain certain and unaffected by any possible dispute as to the fact
or the contents of the subsequent oral
agreement. The effect of the
oral agreement is to keep alive an obligation already incurred,
whilst terminating the operation of
the contract in respect of
obligations that would otherwise have arisen in the future. To that
extent it is an agreement for the
cancellation of the contract
in
futurum
only, and not a
cancellation
ab initio
.
Such an agreement does not constitute a variation of the terms of the
contract, as such, and accordingly it is valid and can be
proved
without doing violence to the requirements of the original
contract.
[12]
[14]
Moreover, our law recognizes that agreements can be concluded tacitly
to replace previous agreements.
[13]
The non-variation clauses on which reliance was placed by Old Mutual,
do not preclude the application of this principle. As Harms
JA put it
in
Telcordia Technologies
Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) para 12.
‘
[T]he
principle [that is of the effect of a non-variation clause in a
contract] 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.’
It
follows that a contracting party, when faced with a breach of the
contract by the other party, must elect whether to terminate
or to
enforce the contract. Once an election is made, the party is bound by
it.
[14]
Whether or not there has been such an election to cancel is a factual
issue.
[15]
[15] I
thus consider that the effect of the tacit agreement pleaded by the
appellants in this case, would have the effect of terminating
the
operation of the contract
in futurum
, so as to preclude the
coming into being of any further obligations, while leaving intact
obligations that arose from the past
operation of the contract, with
all its terms. In other words: the tacit agreement if proved would
have extinguished the contract
as a source of future obligations
whilst keeping alive obligations already accrued by virtue of its
operation in the past. This
would not in any way involve a variation
of the terms of the original lease agreement. I thus conceive that
the tacit agreement
so interpreted would not offend against the
non-variation clauses in the lease agreement.
[16] I
stress that these are not firm findings. Much will depend on the
acceptability and admissibility of the evidence. But that
will only
be known once the appellants have been given an opportunity to adduce
evidence. By allowing the exception Le Grange J
deprived them of that
opportunity. In short, it may not have been an issue that readily
lent itself to fair resolution by way of
exception.
[17] In
the result:
(1)
The appeal succeeds with costs.
(2)
The order of the full court is set aside and replaced by:
‘
(a)
The appeal succeeds with costs.
(b)
The order of the court below is set aside and substituted with:
“
The
exception is dismissed with costs.”’
_________________
V
M Ponnan
Judge
of Appeal
APPEARANCES:
For
Appellants:
P J Tredoux
Instructed
by:
J
M B Gillan Attorneys, Cape Town
Webbers
Attorneys, Bloemfontein
For
Respondent:
H
Murray SC
Instructed
by:
Walkers
Inc. Attorneys, Cape Town
Claude
Reid Attorneys, Bloemfontein
[1]
Group
Five Building Ltd v Government of the RSA
[1993] ZASCA 4
;
1993
(2) SA 593
(A) at 601H-604A. D R Harms SC, Civil Procedure in the
Superior Courts (looseleaf) issue 54 at B23.11
[2]
Group
Five
at
601H-604A.
[3]
Constantaras
v BCE Foodservice Equipment (Pty) Ltd
2007
(6) SA 338
(A) para 32.
[4]
Constantaras
para
32.
[5]
Harms
supra
fn 1.
[6]
Picbel Groep Voorsorgfonds
(in liquidation) v Somerville and other related matters
[2013] 2 All SA 692
(SCA) para 7;
Lewis
v Oneanate
(
Pty
)
Ltd and another
[1992] ZASCA 174
;
1992
(4) SA 811
(A) at 817F–G.
[7]
Dharumpal
Transport (Pty) Ltd v Dharumpal
1956
(1) SA 700
(A) at 706D-E.
[8]
Trustees, Two Oceans
Aquarium Trust v Kantey &
Templer (Pty) Ltd
2006 (3)
SA 138
(SCA) paras 3 -10;
Stewart
& another v Botha & another
[2008] ZASCA 84
;
2008
(6) SA 310
(SCA) para 4
[9]
Trustees, Bus Industry
Restructuring Fund v
Break
Through Investments CC & others
2008
(1) SA 67
(SCA) para 11;
Vermeulen
v Goose Valley Investment (Pty) Ltd
[2001]
3 All SA 350
(A) para 7.
[10]
Also reported at [2009] 2 All SA 523 (SCA).
[11]
Section
6 of Act 50 of 1956 provides:
‘
No
contract of suretyship entered into after the commencement of this
Act, shall be valid, unless the terms thereof are embodied
in a
written document signed by or on behalf of the surety...’
[12]
Stadium
On Main Investments (Pty) Limited v Dr A Ahmad
WCHC
case number 3742/2010 11 May 2010.
[13]
Klub
Lekkerrus/Libertas v Troye Villa (Pty) Ltd and others
[2011] 3 All SA 597
(SCA) at 598.
[14]
Klub
Lekkerrus/Libertas v Troye Villa
para 27.
[15]
Peters &
others NNO v Schoeman & others
[2000] ZASCA 152
;
2001
(1) SA 872
(SCA) para 12.